We could not find any results for:
Make sure your spelling is correct or try broadening your search.
Register for Free to get streaming real-time quotes, interactive charts, live options flow, and more.
| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Loudwater | LSE:LWT | London | Ordinary Share | GG00B1LT5C96 | ORD NPV |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 2.55 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Jun 2019 to Jun 2024
TIDMLWT
RNS Number : 6002E
Loudwater Trust Limited
13 May 2013
Loudwater Trust Limited ('the Company')
Annual Report & Accounts as at 31(st) December 2012
The Company is pleased to announce the publication of its Annual Report & Accounts for the year ended 31(st) December 2012.
The Annual Report & Accounts will be posted to shareholders shortly and can be downloaded from the Company's website at www.loudwatertrust.com.
Highlights from the Annual Report & Accounts as at 31(st) December 2012:
-- Net Asset Value of GBP21.5 million, or 35.7p per share.
-- GBP27.8 million of cash returned to shareholders during the year, equivalent to 46p per share
-- Completed the sale of its shareholding in AgraQuest Inc. to Bayer Cropscience LLC, a subsidiary of Bayer AG, for initial cash consideration of approximately GBP27.3 million, which compared to the Company's carrying value for this investment as at 31 March 2012 of GBP6.8 million and an investment cost of GBP4.8 million.
-- Remaining portfolio consists of three portfolio company investments, of which these account for approximately 57% of the NAV, two of which have achieved significant revenue growth and are working towards IPO's or trade sales targeted to occur within the next one to two years.
-- One portfolio company (Antenova) which has sold its principal trading business shortly after the year end and is due to return cash to the Company by March 2014.
-- Residual earn-outs (estimated outcomes), loan-type instruments and amounts held in escrow accounts represent approximately 28% of NAV.
-- To date the Company has returned GBP45.9 million of capital to shareholders, equating to a total value as at 31 December 2012, for NAV plus cash returned of GBP67.4 million or 89.89p per share, based on 75,000,000 shares issued on admission to trading on AIM in January 2007.
-- No assets have been written up in value. The Investment Advisor is, however, greatly encouraged by the progress made by remaining investee companies.
For further information
Loudwater Investment Partners Limited Edward Forwood +44(0)20 3372 6400 Panmure Gordon (UK) Limited Andrew Potts +44(0)20 7459 3600
SUMMARY OF INVESTMENT OBJECTIVE
The Company was established to provide Shareholders with an attractive rate of return on their investment, primarily through investing in companies which were likely to achieve an IPO or a sale within a short term time horizon and through a small number of investments in companies that were already listed.
In September 2008, the Company announced that, in the light of the then deteriorating economic environment and the lack of a visible time frame for exits, it would return some capital to Shareholders by way of a tender offer and would make appropriate changes in the Company's structure and investing policy as described below.
SUMMARY OF INVESTING POLICY
As part of the 2008 Tender Offer, the Company adopted a new investing policy of not making investments in new companies. If the Board, advised by its Investment Advisor, considers that it will be attractive to recapitalise the Company and make new investments, the Board will seek Shareholder approval to amend the investing policy.
For the Company's full Investing Policy please see pages 9 - 11.
PERFORMANCE STATISTICS
Hot Features
Premium
Date Net Asset Value Cash Returned Net Asset Value + Cash Returned
GBP PPS* GBP GBP PPS**
29 January 2007 74,250,000 99.00 - 74,250,000 99.00
31 March 2007 74,732,000 99.64 - 74,732,000 99.64
30 June 2007 75,462,000 100.62 - 75,462,000 100.62
30 September 2007 75,269,000 100.36 - 75,269,000 100.36
31 December 2007 73,767,000 98.36 - 73,767,000 98.36
31 March 2008 73,959,000 98.61 - 73,959,000 98.61
30 June 2008 69,581,000 92.78 - 69,581,000 92.77
30 September 2008 70,324,000 93.77 - 70,324,000 93.77
31 December 2008 53,985,000 89.63 13,847,000 67,832,000 90.44
31 March 2009 54,303,000 90.16 13,847,000 68,150,000 90.87
30 June 2009 49,331,000 81.90 13,847,000 63,178,000 84.24
30 September 2009 48,198,000 80.02 13,847,000 62,045,000 82.73
31 December 2009 45,242,000 75.11 13,847,000 59,089,000 78.79
31 March 2010 42,330,000 70.28 13,847,000 56,177,000 74.90
30 June 2010 42,506,000 70.57 13,847,000 56,353,000 75.14
30 September 2010 40,641,000 67.47 13,847,000 54,488,000 72.65
31 December 2010 40,382,000 67.04 13,847,000 54,229,000 72.31
31 March 2011 39,351,000 65.33 13,847,000 53,199,000 70.93
30 June 2011 35,037,000 58.17 18,063,000 53,100,000 70.80
30 September 2011 32,842,000 54.52 18,063,000 50,905,000 67.87
31 December 2011 32,211,000 53.48 18,063,000 50,275,000 67.03
31 March 2012 27,076,000 44.95 22,418,000 49,494,000 65.99
30 June 2012 48,480,000 80.49 22,418,000 70,898,000 94.53
30 September 2012 24,180,000 40.14 45,909,000 70,089,000 93.45
31 December 2012 21,504,000 35.70 45,909,000 67,413,000 89.89
*Pence per Ordinary Share; note that number of Ordinary Shares in issuance was reduced from 75,000,000 to 60,232,855 following the Ordinary Share buy-back in November 2008.
**Pence per Ordinary Share; this assumes that the number of Ordinary Shares in issuance is held constant at 75,000,000.
CHAIRMAN'S STATEMENT
Year ended 31 December 2012
I am pleased to report on the performance of Loudwater Trust Limited (the "Company" or Loudwater") for the year ended 31 December 2012.
The Company continues to manage the orderly realisation of its investment portfolio with the aim of maximising the return of invested capital to shareholders within a reasonable timeframe, in accordance with the investment objective adopted by the Company in November 2008.
The highlight of the year was the sale by the Company in August 2012 of its shareholding in AgraQuest Inc. to Bayer Cropscience LLC, a subsidiary of Bayer AG, for initial cash consideration of approximately GBP27.3 million, which compared to the Company's carrying value for this investment as at 31 March 2012 of GBP6.8 million and an investment cost of GBP4.8 million. Following this event, the Company returned a further GBP23.5 million or 39.0 pence per share to shareholders in September 2012.
Earlier in the year the Company sold its investment in City Financial, its remaining equity interest in Corero Networks and a minority interest in Somethin' Else Sound Directions Limited.
Shortly after the year end the Company announced the disposal by one of its investments, Antenova, of its core business to a large US software company. The Company's share of these proceeds will be some GBP1 million. Because of standard warranty provisions, this cash is not likely to be returned to the Company prior to March 2014. The Company is also expecting the sale of the residual business of Antenova which may lead to a further modest uplift in NAV.
The board is cognisant of the fantastic job done by the Investment Advisor, Loudwater Investment Partners Limited, on the portfolio and the excellent exit obtained by them for our shareholding in Agraquest (which was sold far in excess of the company's then carrying value). The board is also aware that no new incentive arrangements were put in place to incentivise the Investment Advisor at the time that the Company changed its investment policy to one of realising assets and returning cash to shareholders. Under the existing Investment Management Agreement, which carries a stiff hurdle rate and typical high water mark provisions, no performance fee is payable. Nevertheless, the board wishes to propose at the forthcoming AGM that shareholders approve a one-off bonus payment of GBP250,000 to the Investment Advisor in recognition of their efforts and success particularly in connection with the Agraquest exit. Damille Investments Limited, of which Brett Miller and myself are the executive directors, intends to vote in favour of this resolution in respect of the 17,650,000 ordinary shares held by them.
The total amount of cash returned to shareholders in the year to 31 December 2012 amounts to GBP27.8 million. To date the Company has returned GBP45.9 million of capital to shareholders, or 61.2 pence per share, based on 75 million shares issued on admission to trading on AIM in January 2007. The total of NAV plus cash returned is GBP67.4 million or 89.9 pence per share, calculated on the same basis. This has fallen from 94.5p as at 30 June 2012, resulting principally from the write down in the carrying value of a UK based investment. The Company's Net Asset Value ("NAV") was GBP21.5 million or 35.7 pence per share as at 31 December 2012. The NAV at 31 March 2013 is expected to be announced within 14 days.
The Board proposes to return a further 1.5p per share by way of a bonus issue of B shares to shareholders pro rata to shareholders' existing holdings of ordinary shares in the capital of the Company. The B shares will be issued to shareholders on the Company's register on the record date of 24 May 2013 and will have an ex-date of 22 May 2013.
Following their issue, the Directors are expected to consider the redemption of the issued B shares on or around 28 May 2013. A subsequent announcement will then be released confirming the decision of the Board.
Following the approval of Shareholders at an extraordinary general meeting on 5 November 2008, there will be a continuation vote at the annual general meeting of the Company to be held to consider the financial statements for the financial period ended 31 December 2013 (or any accounting period substituted for it). This is expected to take place in May 2014. Accordingly, the Board of Directors and the Investment Adviser are considering options to enable the sale of the remaining portfolio and return of the proceeds to shareholders. Discussions are taking place with a number of parties with a view to a sale of the remaining assets, but there can be no assurance at this stage that these discussions will lead to a disposal.
The Board of Directors continues to work closely with the Investment Advisor to maximise further realisations. Discussions in relation to further realisations are on-going and we look forward to announcing further realisations and returning further funds to shareholders in due course.
Rhys Davies
Chairman
Loudwater Trust Limited
10 May 2013
INVESTMENT ADVISOR'S REPORT
Year ended 31 December 2012
Overview
In the period under review, we successfully achieved substantial disposals of investments in three portfolio companies and a partial disposal of an investment in a fourth. A total of GBP27.4 million was returned to shareholders during the year.
We were pleased to announce in August 2012, that Bayer Cropscience LLC, a subsidiary of Bayer AG, completed the acquisition of AgraQuest, Inc. for a total purchase price of US$425 million plus milestone payments. For our shareholding in the company we received initial cash consideration of approximately GBP27.3 million, following which a further GBP23.5 million or 39.0 pence per share was returned to shareholders in September 2012.
The purchase of AgraQuest by Bayer for up to $425 million is the most significant transaction to date in the emerging bio-agriculture industry. AgraQuest, as a division of Bayer, is likely to become the global market leader in providing biological alternatives to chemical pesticides and herald a significant beneficial change in world food production.
The NAV was GBP21.5 million or 35.7 pence per share as at 31 December 2012. To date the Company has returned GBP45.9 million of capital to shareholders, or 61.2 pence per share, based on 75 million shares issued on admission to trading on AIM in January 2007. The total of NAV plus cash returned is GBP67.4 million or 89.9 pence per share, calculated on the same basis.
This represents a cumulative, after cost performance of -5% over the life of the Company to date, compared to a fall of 20% in the FTSE Small Cap (excluding investments trusts) index over the same period.
We continue to work with our portfolio companies with the objective of achieving the orderly realisation of the investment portfolio within a reasonable timeframe.
The timing and feasibility of exits are, of course, highly dependent on market conditions which, at this time, remain poor and particularly hard to predict. In light of these conditions and in line with fair value estimation as further explain in the notes to the financial statements, the Company will not write up the value of any assets, unless there is a clear basis for doing so, evidenced, for example, by the announcement of a binding offer from either an acquirer or a new investor.
Disposals and other events
In the period under review, the following disposals took place:
-- In January 2012, the sale of the Company's investment in City Financial Investment Company for consideration of GBP2.75 million, comprising cash proceeds of GBP2.5 million and preferred ordinary shares valued at GBP250,000.
-- In March 2012, the sale of the Company's equity interest in Corero Network Security Plc, comprising approximately 4.4 million ordinary shares sold for cash proceeds of GBP1.9 million.
-- In May 2012, the sale of a substantial minority equity interest representing part of the Company's shareholding in Somethin' Else Sound Directions Limited to the management team for cash consideration of GBP450,000.
-- In August 2012, Bayer Cropscience LLC, a subsidiary of Bayer AG, completed the acquisition of AgraQuest, Inc. for a purchase price of US$425 million plus milestone payments. For its shareholding in AgraQuest, the Company received an initial cash consideration of approximately GBP27.3 million. This compared to the Company's carrying value for this investment as at 31 March 2012 of GBP6.8 million and an investment cost of GBP4.8 million.
Of the initial cash consideration, approximately GBP3.3 million is currently held in escrow for a period against potential indemnification claims. Of this amount, approximately GBP1.8 million is currently held in escrow against future indemnification claims up to February 2014 and a further GBP1.5 million up to April 2016. In addition to the initial cash consideration, there is contingent consideration payable should AgraQuest achieve certain performance milestones in future years. The final potential payment is in respect of the financial year ending December 2016. The maximum contingent consideration that could be due to the Company is GBP3.5 million.
We are very pleased to be able to report the success of this investment to shareholders, as it represents an important milestone for the Company. Compared to an investment cost of GBP4.8 million, the initial cash consideration represents return on investment of approximately 570% and an IRR of 45%.
-- In November 2012, City Financial redeemed the outstanding GBP250,000 preference shares and the Company received GBP250,004 in cash.
These disposals amount to a total of GBP31 million (based on our estimate of fair value) for the year with GBP27.1 million in cash and the balance expected to be received in escrow amounts and earn-outs.
Following the year end, the following has taken place:
-- In January 2013, we announced the sale by one of our portfolio companies, Antenova, of its principal trading business to a major US software business. This should result in the return of in excess of GBP1m in the first half of next year, the return of cash being the result of an extended warranty period. This investment was valued at GBP340,000 in the previous NAV. Management of this company are in the process of examining options with respect to the disposal of its remaining business activity. It is likely that this will take place within the next six months and such disposal may result in a modest further uplift in NAV.
-- Glimmerglass elected to repay a two year note early. The Company, therefore, received $700,000 in principal and interest of US$153,831 in May 2013. As part of the loan consideration, the Company acquired warrants which carry the right to purchase US$350,000 of further shares at a price which is some 10% higher than the current carrying value of this investment.
-- Terms have been agreed to lend GBP500,000 to one of our portfolio companies. This loan is secured on substantial assets, carries a 9% coupon and on maturity returns the coupon and two times the principal. The IRR on this loan is some 30%.
Returns of Capital
In the year to 31 December 2012, the Company made the following returns of cash to shareholders:
-- In February, the return of GBP2.5 million or 4.15 pence per share. -- In March, the return of GBP1.855 million or 3.08 pence per share. -- In September, the return of GBP23.49 million or 39.0 pence per share.
These further distributions brought the total cash returned by the Company to a total of GBP45.9 million or 61.2 pence per share based on 75 million shares issued on admission to trading on AIM in January 2007.
Portfolio Update
The Company has a NAV of GBP21.5 million as at 31 December 2012 or 35.7 pence per share. This NAV is comprised as follows:
-- Three portfolio company investments (representing approximately 58% of NAV). Of these, two are substantial investments in companies, both of which have achieved significant revenue growth since the time of the Company's investment, are operating profitably and are working towards either IPO's or trade sales that are targeted to occur within the next one to two years. The other one is a smaller investment, which is in an exit process.
-- One portfolio company (Antenova) which has sold its principal trading business shortly after the year end and is due to return cash to the Company by March 2014 (representing approximately 5% of NAV).
-- Residual earn-outs (estimated outcomes), loan-type instruments and amounts held in escrow accounts represent approximately 28% of NAV. These are amounts remaining from the sale of previously held Company investments, including contingent earn-out payments and escrow amounts from AgraQuest carried at an estimation of fair value and a secured loan earning 8% interest with a maturity date of March 2014 held in a subsidiary of Corero Network Security Plc.
-- Cash, net of accrued costs, represents some 9% of the portfolio.
We have decided to write down the value of one of the portfolio companies by some GBP1.65m to reflect the difficult trading environment in which this company operates. However we are hopeful that a recovery in this environment will result in an uplift before this investment is realised.
As the portfolio has developed to a stage where, at any one time, one or more companies are likely to be in discussions with potential acquirers, merger partners or investors, the Investment Advisor considers that it is not in the best interests of the Company or shareholders to disclose individual holding values or the percentage ownership of portfolio companies.
Whilst the economic climate of the past few years has been a difficult one in which to build businesses, we are encouraged by the progress that that our remaining portfolio companies have made. Further details are provided in the next section.
Portfolio Companies
Antenova Limited (Cambridge, UK) - www.antenova.com
Antenova announced in January 2013, the sale of its principal business of designing and manufacturing under contract antennae for mobile handsets, portable devices and laptop computers. The proceeds of this sale for Loudwater are likely to exceed GBP1m compared to the previous carrying value of GBP340,000, but proceeds are not likely to be distributed by Antenova prior to March 2014, because of an extended warranty which formed part of the business sale agreement.
The remaining business is small and the board of Antenova are considering a number of alternatives with regard to its future. This may result in modest further proceeds for Loudwater in due course.
The Engine Group Limited (London, UK) - www.theenginegroup.com
Engine is a substantial marketing and communications group based in the UK. The company is led by WCRS co-founder Peter Scott, who established Engine following the management buyout of WCRS from Havas in 2004. The group is comprised of eleven partner companies in the UK, two in the US and one in Asia. Engine provides services spanning across advertising agency, PR, brand consultancy, direct marketing and digital consultancy and serves a host of blue chip clients.
Engine continued to feel the effect of poor economic conditions in the UK in 2012, but still grew revenues by 8.5% to GBP90.8 million. Adjusted EBITDA was flat at GBP11.3 million. 2013 has started on a more optimistic note as evidenced by the strong share price performance of its listed peer group. Trading is on budget in the first quarter of 2013 and a return to the company's trend growth level is forecast.
Glimmerglass Networks Inc. (Hayward, California) - www.glimmerglass.com
Glimmerglass is the market leader in the design and supply of intelligent optical systems, based on large scale MEMs (Micro-Electro-Mechanical) switching technology, for fibre optic networks. Whilst Glimmerglass's principal focus has been the supply of large switches to telecoms carriers and ISP's, an increasing development focus has been on the Company's new "CyberSweep" solution.
"CyberSweep(TM) enables Cyber Security organizations to extract actionable information from the flood of data on persons of interest, known and unknown targets, anticipated and known threats. The rapid adoption of new media and social networking applications elevates the challenge to effectively and efficiently capture and deliver Actionable Information."
Glimmerglass experienced good revenue growth in 2012 and had its first full year of profitability.
Somethin' Else Limited (London, UK) - www.somethinelse.com
Somethin' Else is cross-platform media production company and the largest independent radio producer in the UK with programmes such as Jazz on 3, Gardeners' Question Time and the '606' Programme. The company is a growing producer of digital media and manages performers such as Jeremy Kyle and JK & Joel through its talent management agency. The company has won many distinctions including Bafta and Sony Radio Academy awards.
The company achieved modest revenue growth in 2012, with margin pressure reducing profits by some 10%. The company is forecasting further modest growth in 2013.
In April 2013, the company achieved the sale and leaseback of its trading premises. This leaves the company with a substantial cash balance.
Other Investments
AgraQuest Inc. (Davis, California) - www.agraquest.com
In August 2012, the Company sold its shareholding in AgraQuest to Bayer Cropscience LLC, a subsidiary of Bayer AG, for initial cash consideration of GBP27.3 million. Of this amount, approximately GBP1.8 million is currently held in escrow against future indemnification claims up to February 2014 and a further GBP1.5 million up to April 2016.
In addition there is contingent consideration payable should AgraQuest achieve certain performance milestones in future years, at certain periods up to the financial year ending December 2016. The maximum contingent consideration that could be due to Loudwater is GBP3.5 million.
Corero Network Security Plc (Rickmansworth, UK) - www.corero.com(acquirer of Top Layer Networks)
Corero is an AIM listed network security business that acquired Top Layer Networks from the Company and another investor in March 2011. In consideration for its share of the business, the Company received approximately US$7.5 million, comprised of 4.4 million Corero shares (US$3.1 million at 45p per share), loan notes with a value of US$2.7 million and cash of US$1.7 million.
In February 2012, the Company's shares in Corero were placed as part of an equity fundraising by Corero for 43 pence per share or GBP1.9 million in aggregate.
The Company continues to hold loan notes with original face value of US$2.7 million, generating interest at 8% per annum which is accrued and added to the principal amount on a bi-annual basis. The consideration loan notes are repayable in March 2014 but can be repaid prior to the repayment date without penalty at the election of Corero.
Though loss making, Corero is making good progress in both of its divisions and in February 2013 raised a further GBP4 million through the issue of new shares.
City Financial Investment Company Limited (London, UK) - www.cityfinancial.co.uk
City Financial a London based fund management firm that is responsible for a portfolio of funds including multi-manager absolute return, strategic fixed income and UK equity funds.
In January 2012, the Company sold its investment, which represented a non-controlling equity interest, to City Financial itself, for consideration of GBP2.75 million. Loudwater received cash proceeds of GBP2.5 million, together with preferred ordinary shares valued at GBP250,000. These were redeemed in November 2012 for cash at face value.
Richard Wyatt & Edward Forwood
Loudwater Investment Partners Limited
10 May 2013
INVESTING POLICY
Investment Objective
The Company's investment objective on admission to trading on AIM in January 2007 was to provide Shareholders with an attractive rate of return on their investment, primarily through investing in companies which were likely to achieve an initial public offering ("IPO") or a sale within a short term time horizon, and through a small number of investments in companies that were already listed.
Following the approval of Shareholders at an extraordinary general meeting on 5 November 2008, the Company made the following key changes to its investment objective:
-- The Company will not make any new investments other than follow-ons. Remaining capital will be reserved for follow-on investments in existing portfolio companies where the Investment Advisor believes further funding is required.
-- Cash proceeds from realisations in full following the exit of a portfolio investment will be distributed to Shareholders, subject to the retention of sufficient cash for follow-on investments in existing portfolio companies where the Investment Advisor believes further funding is required.
New Investments
The Company will not make any investments in new portfolio companies, apart from follow-on investments in existing portfolio companies.
Whether investments will be active or passive investments
Investments in portfolio companies are passive in nature but managed on an active basis.
The Investment Advisor formally monitors each of the Company's investments on an ongoing basis. Whilst the Company would usually require a right to a board seat or observer status, this right would generally only be exercised in the event of problems in the investee company or if the Company owns a significant equity holding in the investee company.
Holding period for investments
At admission to trading on AIM in January 2007, the Company's policy was to invest in companies which were likely to achieve a listing or realisation within six to twenty-four months. Furthermore, the Company wished to invest in businesses which would achieve an acceptable level of market capitalisation if they were listed on a public market. As such the Company's policy was not to invest in early stage or start-up situations, and instead it would focus on investing in companies which had achieved suitable levels of revenues and were either profitable or close to achieving profitability at the time of investment.
In light of the deteriorating economic environment towards the end of 2008, the Board, as advised by the Investment Advisor, believed that exit timeframes for potential new investments and the existing portfolio would be longer than previously envisaged. Moreover, whilst attractive returns were anticipated from the existing investment portfolio, some were likely to need further funding before an exit could be achieved. As a result, the investment objective and policy of the Company was amended and approved by Shareholders in November 2008.
Spread of investments and maximum exposure limits
On admission to trading on AIM in January 2007, it was the Company's intention to use the net proceeds of the placing of circa GBP74 million to build an initial portfolio of investments in at least 15 companies.
The Company also stated that it would not seek to invest (or commit to invest) more than 10 per cent. of the Company's gross assets in any single investment at the time of investment (or commitment), although such limit was able to be exceeded in certain cases where the Board deemed it appropriate on the advice of the Investment Advisor.
Typically, investments in pre-IPO opportunities were to be made by way of a convertible loan note that would convert on an exit event at a discount to the relevant exit price. The loans may also have an attached equity interest in the form of a warrant or option over shares. However, a proportion, not envisaged to exceed 25 per cent. of the net asset value of the portfolio, would be in investments made at a fixed price. This was necessary in order to capture attractive pre-IPO opportunities that are not available with a loan note security.
In addition, the Company was able to invest in companies that were already listed. These investments were to be made on an opportunistic basis and were expected to represent a small number of the Company's transactions, not exceeding 15 per cent. of the total net asset value of the Company. As investee companies achieve successful listings, however, the net asset value attributable to holdings in listed companies may be substantial.
The Shareholders resolved at an extraordinary general meeting on 5 November 2008 that the Company would not make investments in any new portfolio companies, and that funds would be reserved for follow-on investments in existing portfolio companies. Accordingly, the Company will not be able to increase the spread of investments beyond its investment in 4 investee companies as at 31 December 2012 (31 December 2011: 8 investee companies).
Policies in relation to gearing and foreign currency hedging
The Directors may exercise the powers of the Company to borrow money and to give security over its assets.
The Company may borrow funds secured on its investments if the Board, as advised by the Investment Advisor, considers that satisfactory opportunities for follow-on investment arise at a time when the Company is close to being fully invested. In any event, borrowings will be limited to 50 per cent. of the value of the Company's investments at the time of draw down.
The Company may be indirectly exposed to the effects of gearing to the extent that investee companies have outstanding borrowings. The Company may use currency hedging to reduce the impact of currency fluctuations of assets held in currencies other than sterling. However, given the stage of the Company's investments, this is highly unlikely.
The Company may invest a proportion of its assets in underlying investments denominated in currencies other than sterling. In an attempt to reduce the impact on the ordinary shares of currency fluctuations and the volatility of returns which may result from such currency exposure, the Company will have the flexibility to hedge the appropriate proportions of the Company's assets against sterling through the use of foreign exchange transactions and currency derivatives. Currency hedging will be for the purposes of efficient portfolio management only and the Company has no intention of using currency hedging for the purposes of currency speculation for its own account.
Policy in relation to cross-holdings
The Company does not have a formal policy on cross-holdings. However, the Company's policy is not to make any investments in new portfolio companies, apart from follow-on investments in existing portfolio companies.
The Company's policy for investments in companies that are already listed, which include closed-ended investment funds, is that they will be made on an opportunistic basis and are expected to represent a small number of the Company's transactions, not exceeding 15 per cent. of the total net asset value of the Company. As investee companies achieve successful listings, however, the net asset value attributable to holdings in listed companies may be substantial.
Investing Restrictions
Following the approval of Shareholders at an extraordinary general meeting on 5 November 2008, the Company no longer intends to make any investments in new portfolio companies. Remaining capital will be reserved for follow-on investments in existing portfolio companies where the Investment Advisor believes further funding is required.
Whilst there are no restrictions on the ability of the Company to take controlling stakes in portfolio companies, the Company ensures that there is sufficient separation between the Company and each portfolio company through the right to a Board seat or Board observer status in only a non-executive capacity.
In addition, the Company also ensures that there is sufficient separation between each portfolio company by ensuring that there is no:
-- cross-financing, including the provision of undertakings or security for borrowings from one portfolio company to another;
-- common treasury functions; or
-- sharing of operations.
Other than these restrictions set out above, and the requirement to invest in accordance with its investing policy, there are no other investing restrictions.
Returns and Distribution Policy
It is anticipated that returns from the Company's investment portfolio will be in the form of capital upon realisation or sale of its investee companies, rather than from dividends.
At the extraordinary general meeting on 5 November 2008, it was resolved that the cash proceeds of realisation in full following the exit of a portfolio investment would be returned to Shareholders, subject to the retention of sufficient cash for follow-on investments in existing portfolio companies where the Investment Advisor believes that further funding is required. Whilst it is not possible to determine the timing of exits, the Board, advised by the Investment Advisor, will seek to return capital to Shareholders when appropriate.
Life of the Company
The Company was established with an indefinite life. Following the approval of Shareholders at an extraordinary general meeting on 5 November 2008, there will be a continuation vote at the annual general meeting of the Company to be held to consider the financial statements for the financial period ended 31 December 2013 (or any accounting period substituted for it). It is further proposed that if any such continuation vote is passed, that a similar continuation vote will be proposed at every second annual general meeting thereafter. If at any time a continuation vote is not passed, the Directors will be required to formulate proposals to wind up the Company.
BOARD OF DIRECTORS
The Directors of the Company, all of whom are non-executive, are as follows:
Rhys Davies (Chairman) is a general partner of Damille Partners, which he established in October 2008 with Brett Miller (with each holding a 50 per cent. partnership interest).Rhys is also an executive director of Damille Partners Limited, Damille Investments Limited and Damille Investments II Limited. He also presently serves as the non-executive chairman of EIH plc, an AIM quoted Isle of Man registered investment company. Rhys also presently serves as the executive chairman of China Growth Opportunities Limited, an AIM quoted Guernsey registered investment company. Rhys has served on the Board of the Company since May 2011.
Christopher Fish is a resident of Guernsey and is a director of four UK listed funds as well as three Guernsey based financial companies. During the past 35 years he has held executive positions as director of the Royal Bank of Canada (Channel Islands) Limited and as the Americas Offshore Head of Coutts where he was responsible for the Bahamas, Bermuda, Cayman and Uruguay offices. In 1997 he was appointed the Senior Client Partner for Coutts Offshore before taking up the position of Managing Director of Close International Private Banking in 1999 from where he retired in 2005. Chris has served on the Board of the Company since its flotation on AIM in January 2007.
Brett Miller is a general partner of Damille Partners, which he established in October 2008 with Rhys Davies (with each holding a 50 per cent. partnership interest). Brett is also an executive director of Damille Partners Limited, Damille Investments Limited and Damille Investments II Limited. Brett also presently serves as a non-executive director of EIH plc, an AIM quoted Isle of Man registered investment company and of Pactolus Hungarian Property PLC, an AIM quoted property fund. Brett has served on the Board of the Company since May 2011.
REPORT OF THE DIRECTORS
The Directors of Loudwater Trust Limited ("the Company") are pleased to present their annual report and audited financial statements for the year ended 31 December 2012.
The Company
The Company is a Guernsey closed-ended investment company, registered with limited liability incorporated in Guernsey on 11 January 2007 and is governed by the provisions of the Companies (Guernsey) Law, 2008. The Company commenced business on 29 January 2007 when the Ordinary Shares of the Company were admitted to trading on AIM.
The Company is an Authorised Closed-ended Investment Scheme and is subject to the Authorised Closed-ended Investment Scheme Rules 2008.
Investment Objectives and Policy
The Company's investment objectives and policy are detailed on pages 9 - 11.
Results and Dividends
The results for the year are set out in the Statement of Comprehensive Income on page 23.
The dividend policy of the Company is disclosed in note 17 to the financial statements. The Directors do not recommend the payment of a dividend for the year ended 31 December 2012 (31 December 2011: GBPnil).
Non Consolidation of Glimmerglass and Somethin' Else Financial Statements
Under IFRS, the Group is required to consolidate the results and financial position of the two controlled investments in these financial statements. However, following discussions with the Group's advisors, the Directors have chosen not to present consolidated statements, but to carry the holding as an investment at fair value through profit or loss. This decision has been taken as it is the Directors' opinion that consolidating and presenting results of a technology design and supply company and a media production company would not be useful or meaningful to current investors, and that non consolidation would avoid both delay and an increase in the cost of accounting and auditing.
The effect of non consolidation results in the auditor's opinion of these financial statements being qualified for this reason.
Future of the Company and going concern
In accordance with Article 128(c) of the Company's Articles of Incorporation, at the annual general meeting of the Company to be held to consider the accounts for the financial period ending 31 December 2013 an ordinary resolution shall be proposed that the Company shall continue in existence. If that resolution is not passed, the Directors are required to formulate proposals to be put to members to wind up the Company. If the resolution to continue in existence is passed, a similar ordinary resolution will be proposed at every second annual general meeting thereafter.
While the Directors cannot be certain what the results of the vote on the above detailed resolution will be or on the timeframes on portfolio investment exits and subsequent distributions to Shareholders, the financial statements are prepared on a going concern basis supported by the Directors' current assessment of the Company's ability to pay its debts as they fall due for the foreseeable future and ongoing shareholder interest in the continuation of the Company.
In line with the Investment Objective, detailed on pages 9-11, as approved by Shareholders at an extraordinary general meeting on 5 November 2008, the Company will not make any new investments other than follow-on investments where appropriate. The Board and the Investment Advisor will be committed to distributing as much of the available cash to Shareholders following realisations in full on the exit of portfolio investments.
Business Review
A review of the business and prospects is contained in detail in the Investment Advisor's Report on pages 5 to 8.
Annual General Meeting
The notice for the Annual General Meeting of the Company, which is to be held on 20 June 2013 at 10am, along with the Form of Proxy for use at the meeting is enclosed with this document.
Members of the Board will be in attendance at the AGM and will be available to answer shareholder questions.
Buy Back of Ordinary Shares and Authority to Buy Back Ordinary Shares
By way of an ordinary resolution passed at the Annual General Meeting of the Company on 20 June 2012, the Company took authority to make market purchases of Ordinary Shares of no par value ("Ordinary Shares"), provided that the maximum number of Ordinary Shares authorised to be purchased shall be 14.99 per cent of the issued Share Capital of the Company. Unless previously varied, revoked or renewed such authority will expire on 31 December 2013 or, if earlier, at the conclusion of the Annual General Meeting of the Company in 2013, save that the Company may prior to such expiry, enter into a contract to purchase Ordinary Shares pursuant to any such contract.
The minimum price which may be paid for an Ordinary Share pursuant to such authority is one penny and the maximum price which may be paid for an Ordinary Share is 105 per cent of the average of the middle market quotations (as derived from the Daily Official List) of the Ordinary Shares for the five business days immediately preceding the date on which the Ordinary Share is purchased.
The Company did not acquire or cancel any Ordinary Shares during the year ended 31 December 2012 (31 December 2011: nil).
At the Annual General Meeting on 20 June 2011, the Shareholders approved the Capital Return Scheme, whereby a bonus issue of new, fully paid, redeemable B Shares ("B shares") is issued to Shareholders pro rata in proportion to Shareholders' existing holdings of Ordinary Shares on the relevant record date. These B shares are expected to be redeemed by the Company shortly after they are issued with the redemptions paid in cash as a return of capital. See note 13 in these financial statements for further details.
During the year ended 31 December 2012, the capital returned to Shareholders through the Capital Return Scheme was approximately GBP27.8 million (31 December 2011: GBP4.2 million).
Substantial Shareholdings
As of 25 April 2013, being the latest practicable date prior to the publication of these Financial Statements, the Company has been notified of the following shareholdings in excess of 5% of the issued Share Capital:
31 December 2012
Name No. of Ordinary Shares Percentage
------------------------------- ----------------------- -----------
Damille Investments 17,650,000 29.30%
Weiss Asset Management 16,288,000 27.04%
Moore Capital Management 5,925,000 9.84%
Lansdowne Partners 5,920,002 9.83%
Fidelity Worldwide Investment 3,701,400 6.15%
Directors
The Directors, all of whom are non-executive Directors, are as listed on page 12. Mr Brett Miller and Mr Rhys Davies were appointed on 20 May 2011, all other Directors were appointed on incorporation. On 27 April 2012, Lord Flight, Edward Forwood, Robert Fearis and Roger Le Tissier resigned from the Board of Directors with immediate effect.
None of the Directors has a service contract with the Company and no such contracts are proposed. Details of the Directors' fees are shown in note 5.
Directors' interests
As at 31 December 2012, the interests of the Directors who held office during the year and their families are set out below:
31 December 2012 31 December 2011
Ordinary Shares Ordinary Shares
------------------ -----------------
Brett Miller - -
Rhys Davies - -
Christopher Fish - -
Lord Flight* N/A 80,000
Edward Forwood* N/A 400,000
Roger Le Tissier* N/A -
Robert Fearis* N/A -
*Resigned 27(th) April 2012
There were no changes in the interests of the Directors since the year end to the date of this report.
Statement of Directors' Responsibilities
The Companies (Guernsey) Law, 2008 requires Directors to prepare financial statements for each financial year which 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 and are in accordance with applicable laws. In preparing these financial statements the Directors are required to:
-- Select suitable accounting policies and 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 a 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 to enable them to ensure that the financial statements have been prepared in accordance with the Companies (Guernsey) Law, 2008 and the Company's principal documents. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors confirm that they have complied with these requirements in preparing the financial statements.
So far as the Directors are aware, there is no relevant audit information of which the Company's auditor is unaware, having taken all steps the Directors ought to have taken to make themselves aware of any relevant audit information and to establish that the Company's auditor is aware of that information.
The Investment Advisor
Loudwater Investment Partners Limited was appointed Investment Advisor to the Company pursuant to an Investment Advisory Agreement dated 24 January 2007 (the "Investment Advisory Agreement"), between the Company and the Investment Advisor. Under this agreement the Investment Advisor is responsible for sourcing, evaluating, negotiating, completing and monitoring investments on behalf of the Company, subject to overall supervision of the Company's Directors. The Investment Advisor also advises the Board on the proposed divestment of investments and gives effect to their implementation.
The Investment Advisory Agreement shall continue in force until the Annual General Meeting of the Company to be held to consider the accounts for the financial period ended 31 December 2013 (or any accounting period substituted for it) at which point there will be a continuation vote to consider whether to increase the life of the Company. If any such continuation vote is passed the Investment Advisory Agreement is then renewable by continuation vote on every anniversary of the date of execution of the Investment Advisory Agreement. The Investment Advisory Agreement may be terminated earlier upon certain breaches of the Investment Advisory Agreement or the insolvency or receivership of either party or if the Investment Advisor ceases to be qualified to act as such.
The Administrator
Praxis Fund Services Limited has been appointed Administrator to the Company pursuant to an Administration Agreement dated 24 January 2007 (the "Administration Agreement"), between the Administrator and the Company. The Administrator has also been appointed to act as Secretary of the Company. Under this agreement the Administrator will be responsible for certain administrative duties in accordance with the Administration Agreement.
The Administration Agreement may be terminated by either party on not less than 3 months written notice, or earlier upon certain breaches of the Administration Agreement or the insolvency or receivership of either party or if the Administrator ceases to be qualified to act as such.
Status of Taxation
The Income Tax Authority of Guernsey has granted the Company exemption from Guernsey income tax under the Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989 and the income of the Company may be distributed or accumulated without deduction of Guernsey income tax. Exemption under the above mentioned Ordinance entails payment by the Company of an annual fee of GBP600. 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 is zero per cent. Tax Exempt status continues to exist and the Company has been granted this status for 2012 and 2013.
The Company has not suffered any withholding tax in the year (31 December 2011: GBPnil).
Corporate Governance
Compliance
The Board note and have considered the principles and recommendations of the Finance Sector Code of Corporate Governance issued by the Guernsey Financial Services Commission (the "Guernsey Code"), which became effective on 1 January 2012, the principles and recommendations of the UK Corporate Governance Code issued by the Financial Reporting Council in September 2012 and applicable for accounting periods beginning on or after 1 October 2012 (the "UK Code"), and the principles and recommendations of the AIC Code of Corporate Governance issued by the AIC in October 2010 (the "AIC Code").
As a Guernsey incorporated company, which is also governed by the AIM Rules for Companies, it is not a requirement for the Company to comply with the UK Code. However, the Directors place a high degree of importance on ensuring that high standards of corporate governance are maintained and have considered the principles and recommendations of the AIC Code by reference to the AIC Corporate Governance Guide for investment companies ("AIC Guide"). The AIC Code, as explained in the AIC Guide, addresses all the principles set out in the UK Code and Guernsey Code. Furthermore, the Directors have considered the effectiveness of their corporate governance practices and are satisfied with their degree of compliance with the principles laid out in the AIC Code in the context of the nature, scale and complexity of the Company's business.
As at 31 December 2012, the Company complied substantially with the relevant provisions of the AIC Code (save with regard to the following provisions listed below) and it is the intention of the Board that the Company will comply with those provisions (save with regard to the following provisions listed below) throughout the year ending 31 December 2013:
-- The role of the Chief Executive: The Board considers that the post of chief executive officer is not relevant for the Company as this role has effectively been delegated to the Investment Advisor under the terms of the Investment Advisory Agreement.
-- The appointment of a Senior Independent Director: Following the board restructuring that took place on 27 April 2012, Christopher Fish has been appointed the Senior Independent Director.
-- Executive Directors' remuneration: As the Board has no executive Directors, it is not required to comply with the principles of the Code in respect of executive Directors' remuneration and does not have a Remuneration Committee.
-- Establishment of Nomination Committee: Since all of the Directors are non-executive, the Board does not consider it necessary to establish a Nomination Committee. The Board as a whole monitors performance and plans for succession of the Board, either through Board meetings or, if appropriate, through the use of an appropriately constituted committee.
-- Role of the Chairman: As a representative of the Company's Substantial Shareholder, Damille Investments Limited ("Damille"), Rhys Davies is considered not to be independent.
-- Independence of Directors: Representing Damille, Brett Miller and Rhys Davies are considered not to be independent. Damille has entered into a relationship agreement with the Company such that at all times the Company is capable of acting independently of Damille and/or its directors and that any transactions between themselves and any member of the Company are at arm's length and on a normal commercial basis.
-- Internal audit function: The Board has reviewed the need for an internal audit function, as recommended by the Code. Due to the size of the Company and the delegation of day-to-day operations to regulated service providers, an internal audit function is not considered necessary. The Directors consider annually whether a function equivalent to an internal audit is needed and will continue to monitor its systems of internal controls in order to provide assurance that they operate as intended.
The Board
As at 31 December 2012, the Board consisted of three members, all of whom are non-executive.
The Directors recognise the importance of succession planning for company boards and review the composition of the Board annually. However, the Board is of the view that length of service will not necessarily compromise the independence or contribution of directors of an investment company where continuity and experience can be a benefit to the board. Furthermore, the Board agrees with the view expressed in the AIC Code that long serving Directors should not be prevented from forming part of an independent majority or from acting as Chairman. Consequently no limit has been imposed on the overall length of service of the Directors.
With the exception of Mr Miller and Mr Davies, all other Directors, who held office during the year, were initially appointed to the Board on 11 January 2007 and a third of them retired, and sought reappointment at each annual general meeting ("AGM"). At the AGM held on 20 June 2012, Mr Fish retired by rotation under the articles of incorporation, and was then re-elected by Shareholders. On 27 April 2012, Lord Flight, Edward Forwood, Robert Fearis and Roger Le Tissier resigned from the Board of Directors with immediate effect. As a result, the remaining Directors are Christopher Fish, Brett Miller and Rhys Davies. Mr Davies was appointed non-executive Chairman, replacing Lord Flight on 27 April 2012. As Mr Miller and Mr Davies are representatives of Damille Investments Limited, as at 31 December 2012 a 29.8% Shareholder in the Company, they are not deemed to be independent directors. The Board as a whole is therefore not deemed to be independent of Damille Investments Limited. At the Company's next AGM, an ordinary resolution will be proposed to seek the reappointment of Mr Davies to retire by rotation, under the articles of incorporation.
The Directors believe that the Board has a balance of skills and experience which enable it to provide effective strategic leadership and proper governance of the Company.
The Board has contractually delegated external agencies for the management of the investment portfolio, the custodial services and the day to day accounting and company secretarial requirements. Each of these contracts was only entered into after proper consideration by the Management Engagement Committee or the Board.
Although no formal training is given to Directors, the Directors are kept up to date on various matters such as Corporate Governance issues through bulletins and training materials provided from time to time by the Company Secretary, the AIC and other professional firms.
The Directors meet on a quarterly basis ("Management" meetings per the table below) and at other unscheduled times ("Ad hoc" meetings per the table below) when necessary to assess Company operations and the setting and monitoring of investment strategy and investment performance. At such meetings, the Board receives from the Administrator and Investment Advisor a full report on the Company's holdings and performance. The Board gives directions to the Investment Advisor as to the investment objectives and limitations, and receives reports in relation to the financial position of the Company and the custody of its assets.
Directors' and Officers' Liability Insurance
The Company maintains insurance in respect of directors' and officers' liability in relation to their acts on behalf of the Company. Suitable insurance is in place, having been renewed on 2 March 2012 and subsequently renewed on 2 March 2013.
Board Committees
Audit Committee
An Audit Committee has been appointed and is responsible for reviewing and monitoring internal financial control systems and risk management systems on which the Company is reliant, considering the annual financial statements and audit report, considering the appointment and remuneration of the Company's auditor and monitoring and reviewing annually their independence, objectivity, effectiveness and qualifications. The Audit Committee has performed reviews of the internal financial control systems and risk management systems during the year. The Audit Committee is satisfied with the internal financial control systems of the Company. The Audit Committee ordinarily meets at least twice a year. Following the Board restructuring on 27 April 2012, the Board as a whole will be responsible for the functions and duties of the Audit Committee.
Management Engagement Committee
The Management Engagement Committee has been formed to review the performance of the Investment Advisor in relation to the provision of management services to the Company and to ensure that the terms of the Investment Advisory Agreement are competitive and sensible for Shareholders. The duties of the Management Engagement Committee also include reviewing the performance of the Nominated Advisor, the Administrator and the Registrar and ensuring the terms of their remuneration remain competitive and sensible for Shareholders. Following the Board restructuring on 27 April 2012, the Board as a whole will be responsible for the functions and duties of the Management Engagement Committee.
Remuneration and Nomination Committees
Since all of the Directors are non-executive, the Board does not consider it necessary to establish remuneration or nomination committees.
Meetings
The table below, details the attendance at Board and Committee meetings during the year:
Board*
Management Ad hoc
Rhys Davies 2 8
Christopher Fish 2 7
Brett Miller 2 7
Lord Flight** 1 1
Edward Forwood** 1 1
Robert Fearis** 2 3
Roger Le Tissier** 1 1
*10 Board meetings have been held during the year ended 31 December 2012
** Resigned on 27 April 2012.
Internal controls
The Directors are responsible for overseeing the effectiveness of the internal financial control systems of the Company, which are designed to ensure proper accounting records are maintained, that the financial information on which the business decisions are made and which is issued for publication is reliable, and that the assets of the Company are safeguarded. Such a system of internal financial controls can only provide reasonable and not absolute assurance against misstatement or loss.
The Board has reviewed the Company's internal control procedures. These internal controls are implemented by the Company's two main service providers, the Investment Advisor and the Administrator. The Company contacts each service provider on an annual basis to seek confirmation that each service provider had effective controls in place to control the risks associated with the services that they are contracted to provide to the Company. The Board is satisfied with the internal controls of the Company.
The Board does not consider it appropriate to directly implement social, ethical and environmental policies within an investment company investing in financial instruments. However, the Board acknowledges that in addition to financial, legal and market due diligence, the Investment Advisor's investment appraisal includes a rigorous assessment of a potential Investee Company's social, ethical and environmental policies, and therefore the Investment Advisor monitors such policies and practices following any investment.
The Board has considered non-financial areas of risk such as disaster recovery and investment management, staffing levels within the service providers and considers adequate arrangements to be in place.
Anti-bribery and corruption
The Board acknowledges that the Company's international operations may give rise to possible claims of bribery and corruption. In consideration of the recently enacted UK Bribery Act, at the date of this report the Board had conducted an assessment of the perceived risks to the Company arising from bribery and corruption to identify aspects of business which may be improved to mitigate such risks. The Board has adopted a zero tolerance policy towards bribery and has reiterated its commitment to carry out business fairly, honestly and openly.
Shareholder views
The Board regularly monitors the Shareholder profile of the Company. All Shareholders have the opportunity, and are encouraged, to attend the Company AGM at which members of the Board are available in person to meet Shareholders and answer questions. In addition, the Company's Investment Advisor and Corporate Broker maintain regular contact with major Shareholders and report regularly to the Board on Shareholder views.
Auditor
BDO Limited were appointed as auditor of the Company and are eligible for re-appointment at the forthcoming Annual General Meeting.
On behalf of the Board of Directors
Director: Brett Miller
10 May 2013
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OFLOUDWATER TRUST LIMITED
We have audited the financial statements of Loudwater Trust Limited for the year ended 31 December 2012 which comprise the Statement of Financial Position, the Statement of Comprehensive Income, the Statement of Changes in Equity, the Statement of Cash Flows and the related notes 1 to 20. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRS) as adopted by the European Union.
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 is 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.
Respective responsibilities of the Directors and Auditor
As explained more fully in the Directors' Responsibilities Statement within the Directors' Report, the Directors are responsible for the preparation of the financial statements and for being satisfied that they 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.
We believe that the audit evidence that we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion.
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 annual report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent misstatements or inconsistencies we consider the implications for our report.
Basis for qualified opinion on the financial statements
As explained in note 2(a)(i) to the financial statements, the company has accounted for the controlled investments at fair value through profit or loss, instead of consolidating them in accordance with IAS 27 "Consolidated and Separate Financial Statements". The effect of not consolidating the two controlled investments has not been determined.
Qualified opinion on financial statements
In our opinion, except for the effects of the matter described in the Basis for Qualified Opinion paragraph, the financial statements:
-- give a true and fair view of the state of the company's affairs as at 31 December 2012 and of its profit for the year then ended;
-- have been properly prepared in accordance with IFRS as adopted by the European Union; and -- have been properly prepared in accordance with the Companies (Guernsey) Law, 2008.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies (Guernsey) Law, 2008 requires us to report to you if, in our opinion:
-- proper accounting records have not been kept by the company; or -- the financial statements are not in agreement with the accounting records; or
-- we have failed to obtain all the information and explanations, which, to the best of our knowledge and belief, are necessary for the purposes of our audit.
CHARTERED ACCOUNTANTS
BDO Limited
Place du Pré
Rue du Pré
St Peter Port
Guernsey, GY1 3LL
10 May 2013
STATEMENT OF FINANCIAL POSITION
As at 31 December 2012
Notes 31 December 2012 31 December 2011
----------------------------------------------------- ----- ---------------- -----------------
GBP GBP
Non-current assets
Investments at fair value through profit or loss 8 10,290,730 25,968,530
Other receivables 10 5,674,509 2,355,083
15,965,239 28,323,613
---------------- -----------------
Current assets
Investments held for sale 9 2,705,150 2,000,000
Other receivables 10 780,952 160,118
Cash and cash equivalents 11 2,109,461 1,762,408
---------------- -----------------
5,595,563 3,922,526
---------------- -----------------
Total Assets 21,560,802 32,246,139
---------------- -----------------
Liabilities
Financial liabilities measured at amortised cost
Other payables 12 56,410 34,851
Total net assets 21,504,392 32,211,288
================ =================
Represented by equity attributable to equity holders
Share capital 13 - -
Distributable reserve 13 28,444,336 56,289,984
Revenue reserve 14 (6,939,944) (24,078,696)
Total equity 21,504,392 32,211,288
================ =================
Net asset value per Ordinary Share (GBP) 15 0.3570 0.5348
================ =================
The financial statements on pages 22 to 43 were approved by the Board of Directors and authorised for issue on 10 May 2013. They were signed on its behalf by:
Director: Brett Miller
The notes on pages 26 to 43 form an integral part of these financial statements.
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2012
Year ended Year ended
Notes 31 December 2012 31 December 2011
----------------------------------------------------------------------- ------- ----------------- -----------------
GBP GBP
Income
Interest income from cash and cash equivalents 7 25,082 17,983
Total income 25,082 17,983
----------------- -----------------
Expenses
Investment Advisor's fee 4 659,731 738,060
Administration fee 4 51,248 65,840
Directors' fees and expenses 5 123,752 116,439
Auditor's remuneration 25,900 27,800
Legal and professional 20,028 105,947
Other professional advisers 54,417 51,227
Other expenses 18,110 46,819
Total expenses 953,186 1,152,132
----------------- -----------------
Net loss before investment result (928,104) (1,134,149)
Net gains/(losses) on investments at fair value through profit or loss 8 18,035,176 (1,374,253)
Movement in net unrealised losses on investments held for sale at fair
value through profit
or loss 9 - (1,350,000)
Interest on loan notes 7 205,378 196,219
Net foreign exchange losses 2b (173,698) (62,264)
Bad debt expense - (229,614)
Profit/(loss) for the financial year 14 17,138,752 (3,954,061)
----------------- -----------------
Other comprehensive income - -
Total comprehensive income/(loss) for the year 17,138,752 (3,954,061)
================= =================
Earnings/(loss) per Ordinary Share (GBP) 6 0.2845 (0.0656)
================= =================
The results from the current and prior years are derived from continuing operations.
The notes on pages 26 to 43 form an integral part of these financial statements.
STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2012
Share Distributable Revenue Total
Notes capital reserve reserve Equity
---------------------------------------- ----- ------- ------------- ------------ ------------
GBP GBP GBP GBP
For the year ended 31 December 2012
At 31 December 2011 - 56,289,984 (24,078,696) 32,211,288
Profit for the year - - 17,138,752 17,138,752
Other comprehensive income - - - -
Total comprehensive income for the year - - 17,138,752 17,138,752
------- ------------- ------------ ------------
Transactions with owners
Capital distributions paid in the year 13 - (27,845,648) - (27,845,648)
Total transactions with owners - (27,845,648) - (27,845,648)
------- ------------- ------------ ------------
At 31 December 2012 - 28,444,336 (6,939,944) 21,504,392
======= ============= ============ ============
Share Distributable Revenue Total
capital reserve reserve Equity
--------------------------------------- ----- ------- ------------- ------------ -----------
Notes GBP GBP GBP GBP
For the year ended 31 December 2011
At 31 December 2010 - 60,506,329 (20,124,635) 40,381,694
Loss for the year - - (3,954,061) (3,954,061)
Other comprehensive income - - - -
Total comprehensive loss for the year - - (3,954,061 (3,954,061
------- ------------- ------------ -----------
Transactions with owners
Capital distributions paid in the year 13 - (4,216,345) - (4,216,345)
Total transactions with owners - (4,216,345) - (4,216,345)
------- ------------- ------------ -----------
At 31 December 2011 - 56,289,984 (24,078,696) 32,211,288
======= ============= ============ ===========
The notes on pages 26 to 43 form an integral part of these financial statements.
STATEMENT OF CASH FLOWS
For the year ended 31 December 2012
Year ended Year ended
Notes 31 December 2012 31 December 2011
----------------------------------------------------- ------- ----------------- -----------------
GBP GBP
Cash flows from operating activities
Net loss before investment result (928,104) (1,134,149)
Adjusted for:
Bank interest receivable (25,082) (17,983)
(Increase)/decrease in other receivables (2,158) 24,132
Increase/(decrease) in other payables 21,559 (199,657)
Purchase of other short term investments (2,688,002) (624,204)
Proceeds from sale of investments 31,963,594 2,710,588
Bank interest received 24,592 17,246
Net cash from operating activities 28,366,399 775,973
----------------- -----------------
Cash flows used in financing activities
Capital distributions paid 13 (27,845,648) (4,216,345)
Net cash used in financing activities (27,845,648) (4,216,345)
----------------- -----------------
Net increase/(decrease) in cash and cash equivalents 520,751 (3,440,372)
Cash and cash equivalents at the start of the year 1,762,408 5,265,044
Effect of exchange rate changes during the year (173,698) (62,264)
----------------- -----------------
Cash and cash equivalents at the end of the year 11 2,109,461 1,762,408
================= =================
The notes on pages 26 to 43 form an integral part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2012
1. The Company
The Company is a Guernsey closed-ended investment company and was registered with limited liability in Guernsey on 11 January 2007. The Company commenced business on 29 January 2007 when the Ordinary Shares of the Company were admitted to trading on AIM.
The Company is an Authorised Closed-Ended Investment Scheme and is subject to the Authorised Closed-Ended Investment Scheme Rules 2008.
The Company was established to provide Shareholders with an attractive rate of return on their investment, primarily through investing in companies which were likely to achieve an IPO or a sale within a short term time horizon and through a small number of investments in companies that were already listed. Refer to pages 9 to 11 for full details of the Company's investing policy.
2. Significant Accounting Policies
The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the Company's financial statements:
(a) Basis of preparation
(i) Statement of compliance
The financial statements of the Company have been prepared in accordance with International Financial Reporting Standards ("IFRS") as endorsed by the European Union, except that the Company has accounted for two controlled investments at fair value through profit or loss, instead of consolidating these investments as required by IAS 27 Consolidated and Separate Financial Statements. If consolidated, the financial statements would present financial information about the company and its controlled investments as a single economic entity to show the economic resources controlled by the group, the obligations of the group and the results the group achieves with its resources. IFRS include standards and interpretations approved by the International Accounting Standards Board ("IASB"), and International Accounting Standards ("IAS") and Standing Interpretations Committee interpretations approved by the International Accounting Standards Committee ("IASC") and adopted by the European Union that remain in effect.
The financial statements of the Company have been prepared under the historical cost convention modified by the revaluation of investments and assets and liabilities at fair value through profit or loss, and in accordance with IFRS, except non consolidation, and the Companies (Guernsey) Law, 2008.
(ii) IFRS
New accounting policies effective and adopted
There are no new standards effective for the current year which are relevant to the Company's operations.
At the date of approval of these financial statements, the following standards and interpretations, which have not been applied in these financial statements, were in issue but not yet effective:
-- IFRS 10, "Consolidated Financial Statements" (effective for periods commencing on or after 1 January 2013);
-- IFRS 11, "Joint arrangements" (effective for periods commencing on or after 1 January 2013);
-- IFRS 12, "Disclosure of Interest in Other Entities" (effective for periods commencing on or after 1 January 2013);
-- IFRS 13, "Fair Value Measurement" (effective for periods commencing on or after 1 January 2013);
-- IFRS 9,"Financial Instruments - Classification and Measurement" (effective for periods commencing on or after 1 January 2015);
The board is currently considering the impact of the above standards.
(b) Foreign Currency
(i) Functional and presentation currency
The Company's investors are mainly from the UK, with the share price of the Ordinary Shares denominated in Sterling. The primary activity of the Company is to offer UK investors an attractive return on their investment, primarily through investing in companies which are likely to achieve an IPO or a sale within a short term time horizon and through a small number of investment companies that are already listed. The performance of the Company is measured and reported to investors in sterling. The Directors consider sterling to be the currency that most faithfully represents the economic effects of the underlying transactions, events and conditions. The financial statements are presented in sterling, which is the Company's functional and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in Statement of Comprehensive Income.
(c) Financial instruments
Financial assets and financial liabilities are recognised in the Company's Statement of Financial Position when the Company becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are only offset and the net amount reported in the Statement of Financial Position and Statement of Comprehensive Income when there is a currently enforceable legal right to offset the recognised amounts and the Company intends to settle on a net basis or realise the asset and liability simultaneously.
(d) Financial assets
The classification of financial assets at initial recognition depends on the purpose for which the financial assets were acquired and their characteristics.
All financial assets are initially recognised at fair value. Financial assets are recognised on the Company's Statement of Financial Position when the Company becomes party to the contractual provisions of the financial asset.
The Company's financial assets are categorised as investments at fair value through profit or loss and loans and receivables. Unless otherwise indicated the carrying amounts of the Company's financial assets approximate to their fair values.
A financial asset (in whole or in part) is derecognised either:
-- When the Company has transferred substantially all the risk and rewards of ownership;
-- When it has not retained substantially all the risk and rewards and when it no longer has control over the asset or a portion of the asset; or
-- When the contractual right to receive cash flow has expired.
(e) Investments
(i) Classification
Investments have been designated as fair value through profit or loss in accordance with IAS 39 (Revised) "Financial Instruments: Recognition and Measurement". Investments include quoted investments and unquoted investments.
Investments designated at fair value through profit or loss at inception are those that are managed and their performance evaluated on a fair value basis in accordance with the Company's documented investment strategy. The Company's policy is for the Investment Advisor and the Board of Directors to evaluate the information about these investments on a fair value basis together with other related financial information.
Warrant investments meet the definition of "Derivatives" under IAS 39 and have been designated as held for trading in accordance with IAS 39 (Revised) "Financial Instruments: Recognition and Measurement". They are accounted for at fair value through profit or loss.
(ii) Measurement
Investments 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 investments at fair value through profit or loss are measured at fair value. Realised and unrealised gains and losses arising on 'investments at fair value through profit or loss' are presented in the Statement of Comprehensive Income in the period in which they arise. Interest income from debt investments at fair value through profit or loss is recognised in the Statement of Comprehensive Income within interest income using the effective interest method. Dividend income from equity investments at fair value through profit or loss is recognised in the Statement of Comprehensive Income within dividend income when the Company's right to receive payments is established.
(iii) Classification of fair value measurements
IFRS 7 requires the Company to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:
-- Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
-- Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2); and
-- Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).
The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, the measurement is a level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement considering factors specific to the asset or liability.
The determination of what constitutes "observable" requires significant judgement by the Company. The Company considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.
(iv) Recognition/derecognition
Purchases and sales of investments are recognised on trade date - the date on which the Company commits to purchase or sell the investment. Investments are derecognised when the rights to receive cash flows from the investments have expired or the Company has transferred substantially all risks and rewards of ownership.
(v) Fair value estimation
Fair value estimation is derived in accordance with the International Private Equity and Venture Capital valuation guidelines ("IPEV valuations"). A summary of the more relevant aspects of IPEV valuations is set out below:
Quoted (listed) investments - where an active market exists for the security, the value is stated at the bid price on the last trading day in the period. Marketability discounts should generally not be applied unless there is some contractual, governmental or other legally enforceable restriction preventing realisation at the reporting date.
Unquoted investments - are carried at such fair value as the Directors and investment Advisor consider appropriate given the performance of each investee company and after taking account of the effect of dilution, the exercise of ratchets, options or other incentive schemes. Methodologies used in arriving at the fair value include prices of recent investment, discounted cost, earnings multiples, net assets, discounted cash flows analysis and industry valuation benchmarks.
(v) Fair value estimation (continued)
Notwithstanding the above, the variety of valuation basis adopted and quality of management information provided by the underlying investee company means there are inherent difficulties in determining the value of these investments. Amounts realised on the sale of these investments will differ from the values reflected in these financial statements and the difference may be significant.
(vi) Investments held for sale
Investments held for sale must be available for immediate sale in its present condition; management must be committed to and have initiated a plan to sell the asset (and such a plan is unlikely to have significant changes made to it or be withdrawn); an active programme to locate a buyer has been initiated; the asset is being marketed at a reasonable price in relation to its fair value, and the asset is expected to sell within twelve months. Investments that are classified as held for sale are measured at fair value.
(f) Loans and receivables
Loans and receivable assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They principally comprise trade and other receivables, but also incorporate other types of contractual monetary assets. They are initially recognised at fair value plus transaction costs that are directly attributable to the acquisition and subsequently carried at amortised cost plus using the effective interest rate method, less provisions for impairment. The effect of discounting on these financial instruments is not considered to be material.
(g) Cash and cash equivalents
Cash and cash equivalents are defined as cash in hand, demand deposits having a original maturity of less than 3 months 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 in hand, deposits in bank which have an original maturity of less than 3 months and overdrafts.
(h) Impairment of loans and receivables
Financial assets are assessed at each reporting date to determine whether there is any objective evidence that they are impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset.
An impaired loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate.
Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.
All impairment losses are recognised in the Statement of Comprehensive Income.
An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. The reversal is recognised in the Statement of Comprehensive Income.
(i) Financial liabilities
The classification of financial liabilities at initial recognition depends on the purpose for which the financial liability was issued and its characteristics.
All financial liabilities are initially recognised at fair value net of transaction costs incurred. All purchases of financial liabilities are recorded on trade date, this being the date on which the Company becomes party to the contractual requirements of the financial liability. Unless otherwise indicated the carrying amounts of the Company's financial liabilities approximate to their fair values.
Financial liabilities include other payables.
A financial liability (in whole or in part) is derecognised when the Company has extinguished its contractual obligations, it expires or is cancelled. Any gain or loss on derecognition is taken to the Statement of Comprehensive Income.
(j) Other payables
Other payables are initially recognised at fair value and subsequently carried at amortised cost.
(k) Equity
An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Equity is recorded at the proceeds received, net of issue costs.
(l) Income
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the asset's net carrying amount.
(m) Expenses
All expenses are accounted for on an accruals basis and are presented as revenue items except for expenses that are incidental to the disposal of an investment which are deducted from the disposal proceeds.
(n) Determination and presentation of operating segments
IFRS 8 requires a "management approach", under which segment information is presented on the same basis as that used for internal reporting purposes.
The key measure of performance used by the Board in its capacity of Chief Operating Decision Maker ("CODM") is to assess the Company's performance and to allocate resources based on the total return of each individual investment within the Company's portfolio, as opposed to geographic regions. As a result, the Board is of the view that the Company is engaged in a single segment of business, being investment in companies which were likely to achieve an IPO or a sale within a short term time horizon and through a small number of investments in companies that were already listed. Therefore, no reconciliation is required between the measure of gains or losses used by the Board and that contained in these financial statements.
The Company receives no revenues from external customers.
3. Critical Accounting Judgements and Estimates
The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results could differ from such estimates.
The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate was revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.
Critical judgements in applying accounting policies:
(a) Investments
The value of the Company's investments are based on the value of the investee companies as determined by the Investment Advisor. When valuing the investee companies, the Investment Advisor reviews information provided by the underlying investee companies and applies widely recognised valuation methods such as price of recent investment, discounted cost, earnings multiple analysis, discounted cash flow method and third party valuation to estimate a fair value as at the date of the Statement of Financial Position. The variety of valuation bases adopted, quality of management information provided by the underlying investee companies and the lack of liquid markets for the investments mean that there are inherent difficulties in determining the fair value of these investments that cannot be eliminated. Therefore the amounts realised on the sale of investments will differ from the fair values reflected in these financial statements and the differences may be significant.
(b) Investment held for sale
The Board determines that an investment is held for sale if it is available for immediate sale in its present condition; there is a plan to sell the asset; an active programme to locate a buyer has been initiated; the asset is being marketed at a reasonable price in relation to its fair value, and the asset is expected to sell within twelve months.
(c) Sales proceeds receivable
These represent receivables for securities sold that have been contracted for but not yet settled. These are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method less provision for impairment. In August 2012, the Company sold its shareholding in AgraQuest for initial cash consideration of GBP27.3 million. Under the terms of the sale agreement, the maximum additional consideration the Company could receive is GBP6.6 million based on outcomes of certain milestones and escrow terms. However the Board have estimated the expected cashflows and have provided for approximately GBP1.8 million held currently held in escrow against future indemnification claims up to February 2014 and a further GBP1.5 million up to April 2016.
(d) Recoverability of loan notes
The Board and investment advisor have undertaken an impairment review of these loans and, taking into consideration the performance, financial position and subsequent ability of the associated companies to settle the loans and interest payments as they fall due and have determined no impairment is required.
(e) Going concern
The financial position of the Company and its cash flows are set out on pages 22 to 25 of the Financial Statements. Note 16 to the financial statements includes the Company's policies and process for managing its capital and its financial risk management objectives in accordance with the Companies investment objectives. Exposure to credit risk and liquidity risk are also disclosed.
As detailed in the Report of the Directors, at the annual general meeting of the Company to be held to consider the accounts for the financial period ending 31 December 2013 an ordinary resolution shall be proposed that the Company shall continue in existence. If that resolution is not passed, the Directors are required to formulate proposals to be put to members to wind up the Company. If the resolution to continue in existence is passed, a similar ordinary resolution will be proposed at every second annual general meeting thereafter.
(e) Going concern (continued)
In line with Investment Objective, detailed on page 9, as approved by Shareholders at an extraordinary general meeting on 5 November 2008, the Company will not make any new investments other than follow-on investments where appropriate. The Board and the Investment Advisor will be committed to distributing as much of the available cash to Shareholders following realisations in full on the exit of portfolio investments.
While the Directors cannot be certain what the results of the vote on the above detailed resolution will be or on the timeframes on portfolio investment exits and subsequent distributions to Shareholders, the financial statements are prepared on a going concern basis supported by the Directors' current assessment of the Company's ability to pay its debts as they fall due for the foreseeable future and on-going shareholder interest in the continuation of the Company.
4. Related Parties
Robert Fearis, a former Director of the Company, is a shareholder in, and a director of, Praxis Holdings Limited, the holding company of the Administrator. Roger Le Tissier, a former Director of the Company, is a director of Capita Registrars (Guernsey) Limited, the Company's Registrar, and a partner in Ogier, the Guernsey Advocate to the Company. Edward Forwood, a former Director of the Company, is a shareholder in, and the Managing Director of the Investment Advisor. Brett Miller and Rhys Davies are Directors of the Company and shareholders in, and directors of, Damille Investments Limited, as at 31 December 2012 a 29.3% Shareholder in the Company.
Christopher Fish is an independent Director.
The Company is responsible for the continuing fees of the Investment Advisor, Administrator and the Registrar in accordance with the Investment Advisory, Administration and Registrar Agreements dated 24 January 2007.
Investment Advisory Agreement
Pursuant to the provisions of the Investment Advisory Agreement, the Investment Advisor is entitled to receive a management fee during the year at 2.0% per annum of the net asset value of the Company, payable quarterly in advance. As at 31 December 2012, the Investment Advisory fee payable was GBPnil (31 December 2011: GBPnil). For the year ended 31 December 2012, the investment advisory fee expense was GBP659,731 (31 December 2011: GBP738,060).
The Investment Advisor is also entitled to a performance fee calculated by taking an amount equal to 20% of the adjusted closing net asset value (NAV) per Ordinary Share over the opening NAV per Ordinary Share, (where the adjusted NAV is the NAV of the Company excluding any liability for accrued performance fees and after adding back any dividends or distributions of capital declared or paid during the performance period), such that the Company and the Investment Manager share all profits in the ratio of 80% and 20% respectively. The Investment Advisor will become entitled to a performance fee in respect of a performance period only if the adjusted closing NAV per Ordinary Share at the end of the relevant performance period exceeds the opening NAV per Ordinary Share at the start of the relevant period increased by a hurdle amount of 7.5% and if the adjusted closing NAV exceeds the "High Watermark". The High Watermark is the highest previously recorded Opening NAV as reduced by the sum of all dividends and distributions per share since such highest opening NAV per share was established, but not reduced by dividends and distributions of capital made in the current performance year.. The first performance period began on Admission and ended on 31 December 2007. Each subsequent performance period is a period of one financial year
City Financial Limited
On 30 November 2009, Loudwater Investment Partners Limited was appointed to manage City Financial's UK Select Alpha Fund (now renamed City Financial UK Equity Income Fund). Assets under management are GBP18.9 million and Loudwater Investment Partners Limited receives a fee of 0.75% of AUM per annum for this service. The Company's interest in City Financial Limited was disposed of during the year ended 31 December 2012.
Administration Agreement
Pursuant to the provisions of the Administration Agreement, Praxis Fund Services Limited is entitled to receive a standard administration fee of GBP26,250 per annum together with a fee for company secretarial services charged on a time basis. As at 31 December 2012, the administration fee payable was GBP7,710 (31 December 2011: GBP13,451). For the year ended 31 December 2012, the administration fee expense was GBP51,248 (31 December 2011: GBP65,840).
Registrar Agreement
Pursuant to the provisions of the Registrar Agreement, Capita Registrars (Guernsey) Limited is entitled to a standard fee of GBP3,500 per annum together with a per deal fee per Shareholder transaction. As at 31 December 2012, the registrar fee payable was GBP2,000 (31 December 2011: GBP1,764). For the year ended 31 December 2012, the registrar fee expense was GBP24,417 (31 December 2011: GBP11,227).
Nominated Advisor & Broker Fees
Pursuant to the provisions of the Engagement Letter dated 9 November 2007, as subsequently amended, Panmure Gordon (UK) Limited is entitled to a standard fee of GBP30,000 per annum for acting as nominated advisor and broker.
As at 31 December 2012, the Nominated Advisor and Broker fee payable was GBPnil (31 December 2011: GBPnil). For the year ended 31 December 2012, the Nominated Advisor and Broker fee expense was GBP30,000 (31 December 2011: GBP40,000).
5. Directors' Fees & Interests
Each of the Directors who served during the year had entered into an agreement with the Company providing for them to act as a non-executive Director of the Company. Their annual fees, excluding all reasonable expenses incurred in the course of performing their duties which will be reimbursed by the Company, are as follows:
31 December 2012 31 December 2011
Annual Fee Actual Fee Annual Fee Actual Fee
----------- ----------- ----------- -----------
GBP GBP GBP GBP
Rhys Davies** 30,000 19,500 9,000 5,500
Christopher Fish 18,000 18,000 18,000 18,000
Brett Miller** 18,000 13,500 9,000 5,500
Lord Flight* 30,000 17,500 30,000 30,000
Edward Forwood* Nil Nil Nil Nil
Roger Le Tissier* 18,000 10,500 18,000 18,000
Robert Fearis* 18,000 10,500 18,000 18,000
*resigned 27 April 2012
**Increase in annual fee effective 1 July 2012.
In addition to the above GBP34,252 (31 December 2011: GBP21,439) of expenses, including D&O insurance, were paid in relation to the Directors.
The total Directors' fees and expenses charged to the Statement of Comprehensive Income during the year was GBP123,752 (31 December 2011: GBP116,439) of which GBP23,943 remained outstanding at 31 December 2012 (31 December 2011: GBPnil).
The interests of the Directors and their families who held office during the year are set out below:
31 December 2012 31 December 2011
Ordinary Shares Ordinary Shares
------------------ -----------------
No. No.
Rhys Davies - -
Christopher Fish - -
Brett Miller - -
Lord Flight N/A 80,000
Edward Forwood N/A 400,000
Roger Le Tissier N/A -
Robert Fearis N/A -
There were no other changes in the interests of the Directors prior to the date of this report.
On 27 April 2012, Lord Flight, Edward Forwood, Roger Le Tissier and Robert Fearis resigned as Directors of the Company. Rhys Davies was also appointed as non-executive Chairman of the Company, replacing Lord Flight on the same date.
6. Basic and Diluted Earnings/(Loss) per Ordinary Share
Basic and diluted earnings/(loss) per Ordinary Share is based on the income for the year and on a weighted average number of Ordinary Shares in issue during the year.
31 December 2012 31 December 2011
---------------- ----------------
Number of Number of
Ordinary Shares Ordinary Shares
Weighted average number of Ordinary Shares 60,232,855 60,232,855
---------------- ----------------
Total comprehensive income/(loss) 17,138,752 (3,954,061)
---------------- ----------------
Basic and diluted earnings/(loss) per Ordinary Share 0.2845p (0.0656)p
---------------- ----------------
The weighted average number of Ordinary Shares as at 31 December 2012 is based on the number of Ordinary Shares in issue during the year under review, as detailed in note 13.
There are no instruments in issue that could potentially dilute earnings per Ordinary Share in future years.
7. Net Gains and Losses on Loans and Receivables
31 December 2012 31 December 2011
----------------- -----------------
GBP GBP
On cash and cash equivalents 25,082 17,983
On loan notes 205,378 196,219
----------------- -----------------
Total interest income 230,460 214,202
----------------- -----------------
Bad debt expenses - (229,614)
Net gains/(losses) on loans and receivables 230,460 (15,412)
================= =================
8. Investments at Fair Value Through Profit or Loss
31 December 2012 31 December 2011
------------------ ------------------
GBP GBP
Listed investments - 1,891,953
Unlisted investments 10,290,730 24,076,577
10,290,730 25,968,530
================== ==================
Year ended Year ended
31 December 2012 31 December 2011
------------------ ------------------
GBP GBP
Movement in unrealised (losses)/gains on investments (791,405) 6,638,569
Realised gains/(losses) on investments 18,826,581 (8,012,822)
------------------ ------------------
Net gains/(losses) on investments held at fair value through profit or
loss 18,035,176 (1,374,253)
================== ==================
9. Equity Investment Classified as Held for Sale
31 December 2012 31 December 2011
------------------ ------------------
GBP GBP
Equity investments held for sale 2,705,150 2,000,000
2,705,150 2,000,000
================== ==================
Movement in net unrealised gain/(loss) on investments held for sale at 1 January 2012 1 January 2011
fair value through To To
profit or loss: 31 December 2012 31 December 2011
------------------ ------------------
GBP GBP
Movement in unrealised loss on equity investment held for sale - (1,350,000)
------------------ ------------------
- (1,350,000)
================== ==================
At the year end there are two investments held for sale. Firstly, an investment with a carrying value of GBP1,155,000 which was sold in January 2013. The carrying value has been derived based on the expected sales proceeds taking into account amounts held in escrow and subject to certain conditions.
The second investment is where the Investment Advisor is working with the management team of the portfolio company to develop a structure for a phased buyout of the Fund's investment in its entirety. A portion was sold during 2012 with the remainder expected during 2013.
Movement on held for sale investments are detailed within note 16 on page 42.
10. Other Receivables
31 December 2012 31 December 2011
----------------- -----------------
GBP GBP
Current
Investment sales proceeds 263,268 -
Loan note 430,637 -
Loan note interest 76,856 -
Other debtors - 152,577
Bank interest receivable 1,427 936
Prepayments 8,764 6,605
----------------- -----------------
780,952 160,118
----------------- -----------------
Non-current
Investment sales proceeds 3,725,590 -
Loan note 1,684,374 2,211,897
Loan note interest 264,545 143,186
----------------- -----------------
5,674,509 2,355,083
----------------- -----------------
Total receivables 6,455,461 2,515,201
================= =================
The investment sales proceeds are based on the Directors best estimate of outcome of certain escrow events and milestones being met (note 3c). The Directors have also reviewed the carrying value of loan notes for impairment based on future recoverability (note 3d).
The Directors consider that the carrying amount of other receivables approximates fair value. The Company's exposure to credit risk related to other receivables is disclosed in note 16.
11. Cash and Cash Equivalents
31 December 2012 31 December 2011
----------------- -----------------
GBP GBP
Cash at bank 2,109,461 1,762,408
2,109,461 1,762,408
================= =================
The Company's exposure to interest rate risk and sensitivity analysis for financial assets and liabilities are disclosed in note 16.
12. Other Payables
31 December 2012 31 December 2011
----------------- -----------------
GBP GBP
Directors' fees and expenses 23,943 -
Audit fee 17,375 17,200
Administration fee 7,710 13,451
Registrar's fee 2,000 1,764
Sundry 5,382 2,436
----------------- -----------------
56,410 34,851
================= =================
The Company's exposure to liquidity risk related to other payables is disclosed in note 16.
The Directors consider that the carrying amount of other payables approximates fair value.
13. Share Capital & Distributable Reserve
31 December
2012
Authorised Share Capital &
31 December
2011
------------
GBP
Unlimited Shares of no par value
that may be issued as Ordinary Shares -
============
1 January 2012 1 January 2011
To To
Share Capital 31 December 2012 31 December 2011
----------------- -----------------
Allotted, issued and fully paid Shares:
Brought forward & carried forward GBP- GBP-
================= =================
Ordinary Shares brought forward and carried forward 60,232,855 60,232,855
================= =================
1 January 2012 1 January 2011
To To
Distributable Reserve 31 December 2012 31 December 2011
----------------- -----------------
GBP GBP
Brought forward 56,289,984 60,506,329
Capital distributions paid (27,845,648) (4,216,345)
----------------- -----------------
Carried forward 28,444,336 56,289,984
================= =================
The authorised share capital of the Company on incorporation was divided into an unlimited number of Shares of no par value which upon issue, for cash or otherwise, the Directors may categorise as Ordinary Shares or otherwise. The Company's Articles of Association confer pre-emption rights to Shareholders in the event of any issue of shares which would increase the issued share capital by 25 per cent. or more.
Subject to the provisions of the Law and without prejudice to any rights attaching to any existing Shares or to the provisions of the Articles, any share in the Company may be issued with or have attached thereto such preferred, deferred, conversion or other special rights, or such restrictions whether in regard to dividend, return of capital, voting, conversion or otherwise as the Company may from time to time by ordinary resolution determine or, subject to or in default of any such direction, as the Directors may determine.
The Company may issue fractions of shares and any such fractional shares shall rank pari passu in all respects with the other shares issued by the Company.
The initial offering of the Ordinary Shares was at a price of GBP1.00 per Ordinary Share.
On 16 January 2007, the holders of the Ordinary Shares in the Company passed a written resolution approving the cancellation of the entire amount which stood to the credit of the share premium account immediately after the Placing, conditionally upon the issue of the Shares and the payment in full thereof and with approval of the Royal Court. The cancellation was confirmed by the Royal Court on 27 April 2007. The cancelled share premium was transferred to the Distributable Reserve.
The Distributable Reserve may be applied in any manner in which the Company's profits available for distribution are able to be applied, including purchase of the Company's own Shares and the payment of capital distributions through the Capital Return Scheme as detailed below.
At the Annual General Meeting on 20 June 2011, the Shareholders approved the Capital Return Scheme whereby, a bonus issue of new, fully paid, redeemable B Shares ("B shares") is issued to Shareholders pro rata in proportion to Shareholders' existing holdings of Ordinary Shares on the relevant record date. These B shares are expected to be redeemed by the Company shortly after they are issued with the redemptions paid in cash as a return of capital. Whilst it is not possible to determine the timing of exits, the Board, advised by the Investment Advisor, will seek to return capital to Shareholders through the Capital Return Scheme when appropriate upon the realisation of investments.
During the year 2011, the Company made a capital return by way of bonus issue of B shares. The capital returned to Shareholders was GBP4.2 million, equating to approximately 7.0 pence per B share, and included the cash element received from the disposal of Top Layer Networks.
On 10 February 2012, by way of bonus issue of B shares, the Company made a capital return of GBP2.5 million to Shareholders, equating to approximately 4.15 pence per B share held. This capital return was made following the sale of the Company's investment in City Financial Investment Company Limited.
On 30 March 2012, by way of bonus issue of B shares, the Company made a capital return of GBP1.9 million to Shareholders, equating to approximately 3.08 pence per B share held. This capital return was made following the sale of the Company's listed shares in Corero Network Security Plc.
On 10 September 2012, by way of bonus issue of B shares, the Company made a capital return of GBP23.49 million to Shareholders, equating to 39.0 pence per B share held. This capital return was made following the sale of the Company's shares in AgraQuest, Inc.
14. Revenue Reserve
1 January 2012 1 January 2011
To To
31 December 2012 31 December 2011
----------------- -----------------
GBP GBP
Retained revenue reserve brought forward (24,078,696) (20,124,635)
Total comprehensive income/(loss) for the year 17,138,752 (3,954,061)
----------------- -----------------
Retained revenue reserve carried forward (6,939,944) (24,078,696)
================= =================
15. Net Asset Value per Ordinary Share
The net asset value per Ordinary Share is based on the net assets attributable to equity Shareholders of GBP21,504,392 (31 December 2011: GBP32,211,288) and on the year end number of Ordinary Shares in issue of 60,232,855 (31 December 2011: 60,232,855).
16. Financial Risk Management
Strategy in using Financial Instruments
The Company's activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The Company's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Company's financial performance.
The Company's investment objective was to provide Shareholders with an attractive return on their investment, primarily through investing in companies which were likely to achieve an IPO or a sale within a short term time horizon and through a small number of investment companies that were already listed.
Categories of financial instruments 31 December 2012 31 December 2011
---------------- ----------------
GBP GBP
Financial assets
At fair value through profit or loss ("FVTPL")
* Investments 10,290,730 25,968,530
* Held for sale 2,705,150 2,000,000
Loans and receivables
* Other receivables (excluding prepayments) 6,446,697 2,508,596
* Cash and cash equivalents 2,109,461 1,762,408
---------------- ----------------
Total assets 21,552,038 32,239,534
================ ================
Financial liabilities
Financial liabilities at amortised cost
* Accruals and other payables 56,410 34,851
---------------- ----------------
Total liabilities 56,410 34,851
================ ================
Market Price Risk
All securities investments present a risk of loss of capital. The Investment Advisor moderated this risk through a careful selection of securities and other financial instruments within specified limits. The maximum risk resulting from financial instruments is determined by the fair value of the financial instruments. The Company's portfolio and investment strategy is reviewed continuously by the Investment Advisor and on a quarterly basis by the Board.
The Company's exposure to market price risk arises from uncertainties about future prices of its investments. This risk is managed through diversification of the investment portfolio. Generally the Company will seek not to invest (or commit to invest) more than 10% of the Company's gross assets to any single investment at the time of investment (or commitment), although such limit may be exceeded in certain cases where the Board deems appropriate on the advice of the Investment Advisor. Typically, investments in pre-IPO opportunities will be made by way of a convertible loan note that will convert on an exit event at a discount to the relevant exit price. The loans may also have an attached equity interest in the form of a warrant. However, a proportion of investments will be made at a fixed price. This is necessary in order to capture attractive pre-IPO opportunities that are not available with a loan note security. In addition, the Company may invest in companies that are already listed. These investments will be made on an opportunistic basis and are expected to represent a small number of the Company's transactions not exceeding 15% of the net asset value of the Company. As investee companies achieve successful listings, however, the net asset value attributable to holdings in listed companies may be substantial.
At 31 December 2012, the Company's market risk is affected by three main components: changes in actual market prices, interest rate and foreign currency movements. Interest rate and foreign currency movements are covered below. A 25% increase in the value of investments, with all other variables held constant, would bring about a GBP3,248,970 or 15.11% (31 December 2011: GBP6,992,133 or 21.71%) increase in net assets attributable to equity Shareholders. If the value of investments had been 25% lower, with all other variables held constant, net assets attributable to equity Shareholders would have fallen by GBP3,248,970 or 15.11% (31 December 2011: GBP6,992,133 or 21.71%).
Interest Rate Risk
The Company is exposed to risks associated with the effects of fluctuations in the prevailing levels of market interest rates on its financial instruments and future cash flows. The table below summarises the Company's exposure to interest rate risk by the earlier of contractual maturities:
At 31 December WAEIR* Less than 3 months 1 - 3 years 3 - 5 years No fixed maturity Total
2012 1 month - 1 year
------------------------ ------- ---------- ---------- ------------ ------------ ------------------ -----------
% GBP GBP GBP GBP GBP GBP
Assets:
Fixed interest
rate loan notes 8.81 - 507,493 1,948,919 - - 2,456,412
Fixed interest
rate sales
proceeds 0.00 - - 2,824,283 1,164,575 - 3,988,858
Floating interest
rate cash at bank 0.78 2,109,461 - - - - 2,109,461
Non-interest
bearing - 1,427 - - - 12,995,880 12,997,307
---------- ---------- ------------ ------------ ------------------ -----------
Total assets
excluding
prepayments 2,110,888 507,493 4,773,202 1,164,575 12,995,880 21,552,038
========== ========== ============ ============ ================== ===========
Liabilities:
Non-interest
bearing - 56,410 - - - - 56,410
---------- ---------- ------------ ------------ ------------------ -----------
Total liabilities 56,410 - - - - 56,410
========== ========== ============ ============ ================== ===========
At 31 December 2011 WAEIR* Less than 1 month 3 months 1 - 3 years No fixed maturity Total
- 1 year
------------------------------ ------- ------------------ ---------- ------------ ------------------ -----------
% GBP GBP GBP GBP GBP
Assets:
Fixed interest rate loan
notes 8.79 - - 2,355,083 - 2,355,083
Fixed interest rate
other receivables 0.00 - 152,577 - - 152,577
Floating interest rate
cash at bank 0.62 1,762,408 - - - 1,762,408
Non-interest bearing - 938 - - 27,968,530 27,969,468
------------------ ---------- ------------ ------------------ -----------
Total assets excluding
prepayments 1,763,344 152,577 2,355,083 27,968,530 32,239,536
================== ========== ============ ================== ===========
Liabilities:
Non-interest bearing - 34,851 - - - 34,851
------------------ ---------- ------------ ------------------ -----------
Total liabilities 34,851 - - - 34,851
================== ========== ============ ================== ===========
*Weighted average effective interest rate
The sensitivity analyses below have been determined based on the Company's exposure to interest rates for interest bearing assets and liabilities (included in the interest rate exposure table above) at the period end date and the stipulated change taking place at the beginning of the financial period and held constant through the reporting period in the case of instruments that have floating rates.
A 250 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management's assessment of the possible change in interest rates.
If interest rates had been 250 basis points higher, for assets and liabilities as at 31 December 2012 that are subject to changing interest rates, and all other variables were held constant, the Company's increase in net assets attributable to equity holders for the year ended 31 December 2012 would have been an increase of GBP52,737 (31 December 2011: GBP44,060) due to the increase in the interest earned on the Company's cash balances.
At 31 December 2012, as the weighted average effective interest rate for assets and liabilities as at 31 December 2012 that are subject to changing interest rates was at 0.78% (31 December 2011: 0.62%) the maximum that interest rates could reduce is by 78 basis points (31 December 2011: 62 basis points). Therefore if interest rates had been 78 basis points lower (31 December 2011: 62 basis points), for assets and liabilities as at 31 December 2012 that are subject to changing interest rates, and all other variables were held constant, the Company's increase in net assets attributable to equity holders for the year ended 31 December 2012 would have been a decrease of GBP16,454 (31 December 2011: GBP10,927) due to the decrease in the interest earned on the Company's cash balances.
Foreign Currency Risk
Foreign currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.
The Company's assets may be invested in securities and other investments that are denominated in currencies different to the reporting currency. Accordingly, the value of an investment may be affected favourably or unfavourably by fluctuations in exchange rates. The Company may, through forward foreign exchange contracts, hedge its exposure back to sterling but has not done so during the financial period.
Currency Exposure
A significant proportion of the net assets of the Company are denominated in currencies other than sterling. The carrying amounts of these assets and liabilities are as follows:
Assets Liabilities
31 December 31 December
2012 2012
----------- -----------
GBP GBP
Sterling 6,206,295 56,410
US Dollars 15,354,507 -
Equity attributable to Ordinary
Shareholders 21,560,802 56,410
=========== ===========
Assets Liabilities
31 December 31 December
2011 2011
----------- -----------
GBP GBP
Sterling 12,454,676 34,851
US Dollars 19,791,463 -
Equity attributable to Ordinary
Shareholders 32,246,139 34,851
=========== ===========
The Company is exposed to US Dollar currency risk.
The sensitivity analysis below has been determined based on the sensitivity of the Company's outstanding foreign currency denominated financial assets and liabilities to a 25% increase / decrease in the Sterling against US Dollar, translated at the period end date.
25% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management's assessment of the possible change in foreign exchange rates.
As at 31 December 2012, if Sterling had weakened by 25% against the US Dollar, with all other variables held constant, the increase in net assets attributable to equity Shareholders would have been GBP3,838,627 or 17.80% (31 December 2011: GBP4,947,866 or 15.36%) higher. Conversely, if Sterling had strengthened by 25% against the US Dollar, with all other variables held constant, the increase in net assets attributable to equity Shareholders would have been GBP3,838,627 or 17.80% (31 December 2011: GBP4,947,866 or 15.36%) lower.
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 maximum exposure to credit risk that the Company faces is equal to the fair value of the financial instruments held by the Company.
The Company manages the credit risk of third party borrowers by regularly reviewing their underlying performance.
Liquidity Risk
Liquidity risk is the risk that the Company will encounter in realising assets or otherwise raising funds to meet financial commitments. Refer to the interest rate risk table for a detailed maturity analysis of the Company's assets and liabilities. All the fixed deposits held by the Company mature within 1 year.
The Investment Advisor regularly monitors the Company's liquidity position, and the Board of Directors reviews it on a regular basis. The Company maintains a significant cash and cash equivalents balance in order meet on-going financial commitments as they fall due and as per the Statement of Financial Position current assets are significantly higher than current liabilities.
Classification of Fair Value Measurements
The following table analyses, within the fair value hierarchy, the Company's financial assets (by class) measured at fair value at 31 December 2012:
Fair Value as at 31 December
2012
Level Level Level Total
1 2 3
------- ------- ----------- -----------
GBP GBP GBP GBP
Designated at fair
value through profit
or loss upon initial
recognition:
Investments - - 10,290,730 10,290,730
Held for sale investments - - 2,705,150 2,705,150
------- ------- ----------- -----------
- - 12,995,880 12,995,880
======= ======================================= =========== ===========
Fair Value as at 31 December
2011
Level Level Level Total
1 2 3
---------- ------ ----------- -----------
GBP GBP GBP GBP
Designated at fair
value through profit
or loss upon initial
recognition:
Investments 1,891,952 - 24,076,678 25,968,630
Held for sale investments - - 2,000,000 2,000,000
---------- ------ ----------- -----------
1,891,952 - 26,076,678 27,968,630
========== ====== =========== ===========
The table below provides a reconciliation from brought forward to carried forward balances of financial instruments categorised under level 3:
1 January 2012 To 31 December 2012
Assets at Fair Value categorised as Level 3: Investments Held for sale investments Total
------------- -------------------------- -------------
GBP
Fair value brought forward 24,076,578 2,000,000 26,076,578
Purchases or conversions - -
Sales or conversions (30,884,158) (449,850) (31,334,008)
Net gain on fair value through profit or loss
investments 18,253,310 - 18,253,310
Transfers (1,155,000) 1,155,000 -
------------- -------------------------- -------------
Fair value carried forward 10,290,730 2,705,150 12,995,880
============= ========================== =============
1 January 2011 To 31 December 2011
Assets at Fair Value categorised as Level 3: Investments Held for sale investments Total
-------------- -------------------------- --------------
GBP
Fair value brought forward 29,699,646 - 29,699,646
Purchases or conversions - - -
Sales or conversions (846,920) - (846,920)
Net gain on fair value through profit or loss
investments (1,426,148) (1,350,000) (2,776,148)
Transfers (3,350,000) 3,350,000 -
-------------- -------------------------- --------------
Fair value carried forward 24,076,578 2,000,000 26,076,578
============== ========================== ==============
Capital Management
The Company monitors "adjusted capital" which comprise all components of equity (i.e. Distributable and Revenue reserves). The Company's objectives when maintaining capital are:
-- to safeguard the Company's ability to continue as a going concern, so that it can continue to provide returns for Shareholders and benefits for other stakeholders; and
-- to provide an adequate return to Shareholders by pricing products and services commensurately with the level of risk.
The Directors set and manage the amount of capital required in proportion to risk. The Directors may exercise the powers of the Company to borrow money and to give security over its assets. The Company may borrow funds secured on its investments if the Board (with the advice the Investment Advisor) considers that satisfactory opportunities for investment arise at a time when the Company is close to being fully invested. In any event, borrowing will be limited to 50 per cent. of the Company's investments at the time of draw down. The Company may also be indirectly exposed to the effects of gearing to the extent that investee companies have outstanding borrowings.
The Company has been granted authority to make market purchases of up to 14.99% of its own Ordinary Shares.
As at 31 December 2012 and 31 December 2011, the Company had no borrowings and held none of its own shares in treasury.
In accordance with the Company's Investing Policy, cash proceeds from realisation in full following the exit of a portfolio investment are returned to Shareholders, subject to the retention of sufficient cash for follow-on investments in existing portfolio companies where the Investment Advisor believes that further funding is required and operating expenses of the Company. At the Annual General Meeting on 20 June 2011, the Shareholders approved the Capital Return Scheme whereby, a bonus issue of new, fully paid, redeemable B Shares ("B shares") are issued to Shareholders pro rata in proportion to Shareholders' existing holdings of Ordinary Shares on the relevant record date. These B shares are expected to be redeemed by the Company shortly after they are issued with the redemptions paid in cash as a return of capital. Whilst it is not possible to determine the timing of exits, the Board, advised by the Investment Advisor, will seek to return capital to Shareholders through the Capital Return Scheme when appropriate upon the realisation of investments.
16. Dividends
Following the approval of Shareholders at an extraordinary general meeting on 5 November 2008, the Directors intend to distribute cash proceeds of realisations in full following disposals of portfolio investments, subject to the retention of sufficient cash for follow-on investments in existing portfolio companies and after taking into account all costs, liabilities and expenses of the Company. Such distributions shall be made by share buy-back or dividend from time to time as the Directors consider economic and appropriate.
For the year ended 31 December 2012, the realised gains of the Company that had physically been received were as follows:
1 January 1 January
2012 2011
To To
31 December 31 December
2012 2011
------------- --------------
GBP GBP
Total comprehensive income/(loss)
for the year 17,138,752 (3,954,061)
Add/(less):
Movement in net unrealised
losses/(gains) 787,623 (4,298,902)
Adjusted realised gains/(losses)
for distribution for the
year 17,926,375 (8,252,963)
============= ==============
The Directors do not recommend the payment of a dividend for the year ended 31 December 2012 (31 December 2011: GBPnil).
During the year capital distributions were paid to Shareholders totalling GBP27,845,648 (31 December 2011: GBP4,216,345).
17. Taxation
The Income Tax Authority of Guernsey has granted the Company exemption from Guernsey income tax and the income of the Company may be distributed or accumulated without deduction of Guernsey income tax. The exemption mentioned above entails payment by the Company of an annual fee of GBP600. 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 is zero per cent. Tax Exempt status continues to exist and the Company has been granted this status for 2012 and 2013.
The Company has not suffered any withholding tax in the year (31 December 2011: GBPnil).
18. Contingent liabilities
The Company has no contingent liabilities at the reporting date.
19. Post Year End Events
Please refer to the Investment Advisor's Report (page 6) for a summary of the post year end events.
There were no other significant post year end events that require disclosure in these financial statements other than those listed on page 6.
DIRECTORS & ADVISORS
Directors:
Rhys Davies (appointed non-executive Chairman on 27 April 2012)
Christopher Fish
Brett Miller
Lord Flight (Chairman) (resigned on 27 April 2012)
Robert Fearis (resigned on 27 April 2012)
Edward Forwood (resigned on 27 April 2012)
Roger Le Tissier (resigned on 27 April 2012)
Administrator, Designated Manager, Secretary, Praxis Fund Services Limited Tel: +44 (0)1481 737 600
Provider of Safe Custody & Registered Office: Sarnia House Fax: +44(0)1481 749 829
Le Truchot www.pfs.gg
St Peter Port
Guernsey, GY1 4NA
Registrar: Capita Registrars (Guernsey) Limited
2(nd) Floor, No.1 Le Truchot
St Peter Port
Guernsey, GY1 4AE
Investment Advisor & Promoter: Loudwater Investment Partners Limited Tel: +44 (0)20 3372 6400
Little Tufton House Fax: +44(0)20 7222 2991
3 Dean Trench Street
London, SW1P 3HB www.loudwaterpartners.com
Share dealing:
Ordinary Shares can be purchased or sold through your usual stockbroker.
Sources of further information:
The Company's Ordinary Shares are quoted on the AIM market of the London Stock Exchange. Information updates are available on the Company from the Investment Advisor's website www.loudwaterpartners.com.
Key Dates:
Company's year end 31 December 2012 Annual results announced By 31 May 2013 Company's half-year 30 June 2013 Interim results announced By 30 September 2013
Frequency of NAV publication:
The Company's net asset value is released to the Stock Exchange quarterly.
Auditor: BDO Limited
PO Box 180, Place du Pré
Rue du Pré, St Peter Port
Guernsey, GY1 3LL
Nominated Advisor & Broker: Panmure Gordon (UK) Limited
One New Change
London, EC4M 9AF
Guernsey Advocates: Ogier
Ogier House
St Julian's Avenue
St Peter Port
Guernsey, GY1 1WA
Bankers: Lloyds TSB Offshore Limited
Corporate Banking
PO Box 123
Sarnia House
Le Truchot
St Peter Port
Guernsey, GY1 4EF
Barclays Private Clients International Limited
PO Box 41
Le Marchant House
St Peter Port
Guernsey, GY1 3BE
English Solicitors: Berwin Leighton Paisner LLP
Adelaide House
London Bridge
London, EC4R 9HA
Company Number: 46213 (Registered in Guernsey)
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR NKNDPPBKDNPD
1 Year Loudwater Chart |
1 Month Loudwater Chart |
It looks like you are not logged in. Click the button below to log in and keep track of your recent history.
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions
