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| Name | Symbol | Market | Type |
|---|---|---|---|
| Rolls-royce Fp | LSE:RRF | London | Right |
| Price Change | % Change | Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 88.50 | 82.00 | 95.00 | 0 | 01:00:00 |
From May 2019 to May 2024
TIDMRRF
RNS Number : 7357M
Rapid Realisations Fund Limited
20 September 2012
20 September 2012
Rapid Realisations Fund Limited
Interim Results for the six months ended 30 June 2012
Rapid Realisations Fund Limited (the "Company" or "Rapid") today announces its unaudited interim results for the six months ended 30 June 2012.
Chairman's Statement, Rhys Davies
"I am pleased to report on the performance of Rapid Realisations Fund Limited (the "Company" or "RRF") for the 6 month period ended 30 June 2012.
In line with the investment objective and policy adopted following the acquisition of a 17.33% stake by Damille Investments Limited in May 2010 the Company continues to manage the orderly realisation of its investment portfolio with the objective of maximising the return of invested capital to shareholders during the period ending on 30 September 2013.
In the period to 30 June 2012, the Company has continued to make good progress against this investment objective having fully exited 2 investments and partially exiting 3 others. The proceeds from these realisations have been used to fund the continued return of capital to shareholders; during the period under review a further circa GBP6.9 million was returned to shareholders, equivalent to 12p per Ordinary Share, with an additional circa GBP1.1 million, equivalent to 2p per Ordinary Share being returned since the period end.
To date, in excess of GBP40 million has been returned to shareholders and the Board of Directors continues to work closely with fund manager HLFM Limited ("HLFM") to maximise further realisations. HLFM are in discussions in relation to a number of additional realisations and we look forward to returning further funds to shareholders in due course.
The NAV per Ordinary Share as at 30 June 2012 was 10.8p."
Enquiries:
Singer Capital Markets Limited James Maxwell
+44 (0)203 205 7500
Rapid Realisation Fund Limited Rhys Davies
+41796200215
Unaudited Statement of Financial Position
As at 30 June 2012
Hot Features
Premium
Notes Unaudited Audited Unaudited
30 June 2012 31 December 2011 30 June 2011
--------------------------------------------- ----- ------------- ----------------- -------------
GBP GBP GBP
Investments 2 & 6
Fair value through profit or loss 2,965,036 3,770,652 5,530,222
Loans and receivables 2,291,800 5,225,132 12,202,100
------------- ----------------- -------------
Total investments 5,256,836 8,995,784 17,732,322
------------- ----------------- -------------
Current assets
Current Investments:
Loans and receivables 6 - 3,240,114 2,414,174
Other receivables 7 130,796 924,180 1,292,861
Cash and cash equivalents 8 866,872 1,503,134 2,113,503
-------------
997,668 5,667,428 5,820,538
------------- ----------------- -------------
Current liabilities
Other payables 9 25,252 34,617 19,061
-------------
25,252 34,617 19,061
------------- ----------------- -------------
Net current assets 972,416 5,632,811 5,801,477
------------- ----------------- -------------
Total net assets 6,229,252 14,628,595 23,533,799
============= ================= =============
Equity attributable to Ordinary Shareholders
Reserves 6,229,252 14,628,595 23,533,799
Total Equity 6,229,252 14,628,595 23,533,799
============= ================= =============
Net asset value per Ordinary Share 11 0.1080 0.2535 0.4079
The accompanying notes form an integral part of these financial statements.
Unaudited Statement of Total Comprehensive Income
For the period ended 30 June 2012
Notes 1 January 1 January
2012 2011
To To
30 June 2012 30 June 2011
--------------------------------- ----- ------------- -------------
GBP GBP
Income 2
Finance income 4,989 4,085
Loan note interest (23,151) 809,672
Dividend income - 12,612
Net realised losses
on fair value through
profit or loss investments 6 (490,003) (355,055)
Net realised foreign
exchange gains on loan
repayments 6 128,566 42,708
Net realised losses
on loan restructure 6 (453,392) -
Movement in net unrealised
losses on fair value
through profit or loss
investments 6 (1,015,614) (1,368,732)
Movement in impairment
charge on loans 6 682,438 (200,000)
Movement in net unrealised
foreign exchange (losses)/gains
on loan investments 6 (295,455) 506,790
Loan note interest gain
re restructure/sale 230,226 -
Foreign exchange gains/(losses) 12,825 (1,675)
------------- -------------
Total deficit (1,218,571) (549,595)
Expenses
Investment management
fee 3 102,079 248,509
Administration fee 3 30,425 30,868
Custodian fee 3 7,500 10,369
Loan note interest written
off 13 14,798 21,472
Transaction expenses 16,195 33,035
Directors' fees and
expenses 4 32,555 33,414
Auditor's remuneration 21,650 19,135
Legal and professional
fees 12,500 12,500
Withholding tax on dividend
income - 27,215
Other expenses 14,576 248,509
Total expenses 252,278 436,517
Net deficit from operations
for the period (1,470,849) (986,112)
------------- -------------
Total comprehensive
deficit for the period (1,470,849) (986,112)
============= =============
Deficit per Ordinary
Share 5 (0.0255) (0.0171)
The results for the current and prior periods are derived from continuing operations.
The accompanying notes form an integral part of these financial statements.
Unaudited Statement of Changes in Equity
For the period ended 30 June 2012
Revenue Distributable Reserve Total
Notes Reserve Reserves
------------------------------------------- ------- ------------- --------------------- -------------
GBP GBP GBP
Balance brought forward (8,228,768) 22,857,363 14,628,595
Total comprehensive deficit for the period (1,470,849) - (1,470,849)
Capital distributions 10 & 15 - (6,928,494) (6,928,494)
Balance carried forward (9,699,617) 15,928,869 6,229,252
============= ===================== =============
For the period ended 30 June 2011
Revenue Distributable Reserve Total
Notes Reserve Reserves
------------------------------------------- ------- ------------- --------------------- ------------
GBP GBP GBP
Balance brought forward (3,530,406) 32,666,433 29,136,027
Total comprehensive deficit for the period (986,112) - (986,112)
Capital distributions 10 & 15 - (4,616,116) (4,616,116)
Balance carried forward (4,516,518) 28,050,317 23,533,799
============= ===================== ============
The accompanying notes form an integral part of these financial statements.
Unaudited Statement of Cash Flows
For the period ended 30 June 2012
Notes 1 January 1 January
2012 2011
to to
30 June 2012 30 June 2011
---------------------------- ----- ------------- -------------
GBP GBP
Cash flows from/(used
in) operating activities
Loan note interest received 469,333 397,206
Dividend income received - 12,612
Other investment income - 46,783
Operating expenses paid (265,031) (483,069)
Net cash from/(used in)
operating activities 204,302 (26,468)
------------- -------------
Cash flows from/used
in) investing activities
Amounts paid for purchases
of investments - (47,740)
Amounts received from
sales of investments 50,000 4,102,838
Amounts received on loan
repayments 6,020,525 -
Net cash from investing
activities 6,070,525 4,055,098
------------- -------------
Cash flows from/(used
in) financing activities
Bank interest received 4,581 4,085
Capital distribution (6,928,494) (4,616,116)
Net cash used in financing
activities (6,923,913) (4,612,031)
------------- -------------
Net decrease in cash
and cash equivalents (649,086) (583,401)
Cash and cash equivalents,
start of period 1,503,133 2,698,579
Effect of foreign exchange
rate changes on cash
and cash equivalents 12,825 (1,675)
Cash and cash equivalents,
end of period 8 866,872 2,113,503
============= =============
Cash and cash equivalents
comprise the following
amounts:
Bank deposits 866,872 2,113,503
------- ---------
866,872 2,113,503
======= =========
The accompanying notes form an integral part of these financial statements.
1. The Company:
The Company is a closed-ended investment company and was registered with limited liability in Guernsey on 12 July 2007. The Company commenced business on 2 August 2007 when the Ordinary Shares of the Company were admitted to trading on AIM. The Company is a Guernsey Authorised Closed-ended Investment Scheme and is subject to the Authorised Closed-ended Investment Scheme Rules 2008.
The Company is currently focusing on realising the investments that have been made to date. These investments were made in line with the Company's previous stated investment policy.
2. Principal Accounting Policies:
The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the Company's interim Financial Statements (the "Financial Statements"):
(a) Basis of Preparation:
(i) General
The Financial Statements of the Company have been prepared in accordance with IAS 34 (as adopted by the EU) "Interim Financial Reporting" and comply with the Companies (Guernsey) Law, 2008 and the Listing Rules of the UK Listing Authority.
The Financial Statements of the Company have been prepared under the historical cost convention modified by the revaluation of investments and derivative financial instruments at fair value through profit or loss.
The preparation of Financial Statements in conformity with IFRS requires management to make 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. Actual results could differ from such estimates.
(ii) Going concern:
Based on the consideration of assets and the business nature of the Company the Directors, following enquiry, believe the Company has adequate resources to continue in operational existence for the foreseeable future. For this reason, they consider it appropriate to adopt the going concern basis of preparation for these financial statements.
(b) Income:
Bank interest income is classified as finance income in the Unaudited Statement of Total Comprehensive Income and is recognised on an accruals basis at the gross amount receivable. Other investment income, commission income, dividend income are included in the financial statements on an accruals basis.
Interest on loans receivable is recognised in the Unaudited Statement of Total Comprehensive Income based on coupon interest rates which were determined to approximate market interest rates.
(c) Foreign Currency:
(i) Functional and Presentation Currency
The Company's investors are mainly from the UK, with the subscriptions and redemptions of the Ordinary Shares denominated in sterling. The primary activity of the Company is to manage the realisation of the Company's investment portfolio and to maximise the return of invested capital to shareholders during the period ending on 30 September 2013. The performance of the Company is measured and reported to investors in sterling. The Directors consider sterling as the currency that most faithfully represents the economic effects of the underlying transactions, events and conditions. The financial statements are presented in sterling, which is the Company's functional and presentation currency.
(ii) Transactions and Balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Unaudited Statement of Total Comprehensive Income. Translation differences on non-monetary financial assets and liabilities such as equities at fair value through profit or loss are recognised in the Unaudited Statement of Total Comprehensive Income. The Company holds investments denominated in Euro and Australian Dollars at the reporting date, and may enter into forward foreign currency contracts to hedge the exchange rate risk arising from future cash flows on these investments. For the period ended 30 June 2012 there were no outstanding forward foreign currency contracts.
(d) Financial Instruments:
Financial assets and financial liabilities are recognised in the Unaudited Statement of Financial Position when the Company becomes a party to the contractual provisions of the instrument.
(i) Financial Assets
The classification of financial assets at initial recognition depends on the purpose for which the financial asset was acquired and its characteristics.
All financial assets are initially recognised at fair value. All purchases of financial assets are recorded at trade date, being the date on which the Company became party to the contractual requirement of the financial asset.
The Company's financial assets are categorised as financial assets at fair value through profit or loss. Unless otherwise indicated the carrying amounts of the Company's financial assets approximate to their fair values. Gains and losses arising from changes in the fair value of financial assets classified as fair value through profit or loss are recognised in the Unaudited Statement of Total Comprehensive Income.
A financial asset (in whole or in part) is derecognised either:
-- when the Company has transferred substantially all the risk and rewards of ownership;
-- when it has not retained substantially all the risk and rewards and when it no longer has control over the asset or a portion of the asset; or
-- when the contractual right to receive cash flow has expired.
(ii) Financial Liabilities
The classification of financial liabilities at initial recognition depends on the purpose for which the financial liability was issued and its characteristics.
All financial liabilities are initially recognised at fair value net of transaction costs incurred. All purchases of financial liabilities are recorded on trade date, being the date on which the Company becomes party to the contractual requirements of the financial liability. Unless otherwise indicated the carrying amounts of the Company's financial liabilities approximate to their fair values.
Financial liabilities measured at amortised cost include other short-term monetary liabilities, which are initially recognised at fair value and subsequently carried at amortised cost using the effective interest rate method.
A financial liability (in whole or in part) is derecognised when the Company has extinguished its contractual obligations, it expires or is cancelled. Any gain or loss on derecognition is taken to the Unaudited Statement of Total Comprehensive Income.
(e) Investments:
The Company's investments comprise loans, equities and convertible loan notes.
(i) Classification
Equities have been designated as fair value through profit or loss in accordance with IAS 39 (Revised) "Financial Instruments: Recognition and Measurement".
Investments in convertible loans have been designated as loans and receivables and are carried at amortised cost in accordance with IAS 39.
(ii) Measurement
Equities are initially recognised at fair value. Transaction costs are expensed in the Unaudited Statement of Total Comprehensive Income. Subsequent to initial recognition, equities are measured at fair value. Realised gains and losses on disposal of investments, where the disposal proceeds are higher/lower than the book cost of the investment are presented in the Unaudited Statement of Total Comprehensive Income in the period in which they arise. Unrealised gains and losses arising on the fair value of investments are presented in the Unaudited Statement of Total Comprehensive Income in the period in which they arise. Dividend income, if any, from equity investments is recognised in the Unaudited Statement of Total Comprehensive Income within dividend income when the Company's right to receive payments is established.
Convertible loan notes are initially recognised at fair value less any directly attributable transaction cost. Subsequent to initial recognition, loans are measured at amortised cost using the effective interest rate method.
(iii) Fair Value Estimation
Quoted investments at fair value through profit or loss are valued at the bid price on the relevant stock exchange and discounted, where necessary, to reflect any legal restrictions.
Unquoted investments are valued in accordance with the International Private Equity and Venture Capital valuation guidelines. Typically investments in unquoted companies are made by way of a package of instruments, for example a convertible loan note or outright purchase of shares which also has an attached equity interest in the form of a warrant or option of shares. In these circumstances the Directors are of the opinion that it is not possible to attribute a fair value to the warrant or option of shares components of the investment in that company and therefore the Directors fair value the investment package as a whole.
The determination of fair value for financial assets and liabilities for which there is no observable market price requires the use of valuation techniques as described above, such as earning multiples, break up basis valuation, analysis of recent fund raising and recent investment transactions in the investee companies and comparison to similar instruments for which observable prices exist. Assumptions and inputs used in valuation techniques include estimating discount rates, bond and equity prices and expected price volatilities. The objective of the valuation techniques is to arrive at a fair value determination that reflects the price of the financial instruments at the reporting date that would have been determined by market participants acting at arm's length. The valuation techniques applied are consistent with accepted economic methodologies for pricing financial instruments.
Loans are valued at amortised cost and reviewed for impairment in accordance with IAS 39.
(iv) Recognition/derecognition
All regular way purchases and sales of investments are recognised on trade date - the date on which the Company commits to purchase or sell the investment. Investments are derecognised when the rights to receive cash flows from the investments have expired or the Company has transferred substantially all risks and rewards of ownership.
(f) Impairment of Financial Assets:
Financial assets are assessed at each reporting date to determine whether there is any objective evidence that they are impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset.
An impaired loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate.
Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.
All impairment losses, if any, are recognised in the Unaudited Statement of Total Comprehensive Income.
An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. The reversal is recognised in the Unaudited Statement of Total Comprehensive Income.
(g) Expenses:
Expenses are accounted for on an accruals basis.
(h) Cash and Cash Equivalents:
Cash and cash equivalents are defined as cash in hand, demand deposits and highly liquid investments readily convertible to known amounts of cash and subject to insignificant risk of changes in value. For the purposes of the Unaudited Statement of Cash Flows, cash and cash equivalents consist of bank deposits, overdrafts and money market equivalents.
(i) Non-Consolidation of Investments:
IAS 27 "Consolidated and Separate Financial Statements" requires a company to prepare and present a set of consolidated financial statements for a group of entities under the control of a parent. Ordinarily control is the legal power to govern the financial and operating policies of an underlying investment company so as to obtain benefits from its activities.
In assessing control, the Company has taken into consideration the following:
-- potential voting rights that currently are exercisable;
-- whether the remaining voting rights are spread across numerous other shareholdings/few significant shareholdings;
-- ability of the Company to exercise significant influence over an underlying investment company; and
-- whether or not the Company and an underlying investment company have common key management personnel.
(j) Non-Consolidation of Investments, continued:
The Company has two investments where the Company has significant equity holdings (circa 49%), however the shareholder base of these investments is made up of very few other shareholders. In the Directors' opinion the Company does not have legal control of the underlying investment companies and therefore has not consolidated the results of these investments into the results of the Company.
(k) Determination and Presentation of Operating Segments:
The Company has adopted IFRS 8 as of 1 January 2009, which requires a "management approach", under which segment information is presented on the same basis as that used for internal reporting purposes.
The Board has considered the requirements of IFRS 8. The Board, as a whole, has been determined as constituting the chief operating decision maker ("CODM") of the Company.
The Board is charged with setting the Company's investment strategy in accordance with the Prospectus. They have delegated the day to day Investment Management of the Company to the Investment Manager, under the terms set out in the Investment Management Agreement, but the Board retains the responsibility to ensure that adequate resources of the Company are directed in accordance with their decisions. All investment recommendations made by the Investment Manager are reviewed by the Board for compliance with the policies and legal responsibilities of the Directors and the provisions of the Prospectus. Only after such reviews have been satisfactorily conducted will the Board approve the investment recommendations. The Board therefore retains full responsibility for the allocation decisions made on an ongoing basis. Pursuant to the terms of the Investment Management Agreement the Investment Manager is obliged to comply with the investment strategy detailed in the Prospectus. This strategy sets out guidelines for proposed investments and the procedures that the Investment Manager is required to follow in dealing with the Company's assets. These guidelines and procedures are regularly reviewed and can be altered by the Board if it considers it appropriate to do so.
The key measure of performance used by the Board in its capacity as CODM, is to assess the Company's performance and to allocate resources based on the total return of each individual investment within the Company's portfolio, as opposed to geographic regions. As a result, the Board is of the view that the Company is engaged in a single segment of business, being investment in companies in "pre-IPO" and other late stage situations with a view to arbitraging differences in public and private company valuations. Therefore, no reconciliation is required between the measure of gains or losses used by the Board and that contained in these financial statements.
Information on realised gains and losses derived from sales of investments are disclosed in note 6.
The Company is domiciled in Guernsey. All of the Company's income from investments is from underlying companies that are incorporated in the United Kingdom, Ireland, Switzerland and Australia.
The Company has a highly diversified portfolio of investments and, with the exception of investments, has no other assets classified as non-current assets.
The Company also has a highly diversified shareholder population however three individual investors own more than 10% of the issued capital of the Company.
3. Related Parties & Material Agreements:
The Company is responsible for the continuing fees of the Investment Manager, Administrator, Registrar and the Custodian in accordance with the Investment Management, Administration, Registrar and Custodian Agreements.
Investment Management Agreement
Pursuant to the provisions of the Investment Management Agreement, the Investment Manager is entitled to receive an advisory fee during the period at 1.0% per annum of the net asset value ("NAV") of the Company, increasing to 2.0% per annum when 50% of the net proceeds of the Placing have been invested (this threshold was reached on 23 September 2008). This fee is paid quarterly in advance based on the prior quarter end NAV, with a top up payment payable in arrears once the current quarter end NAV is finalised. For the period ended 30 June 2012, the investment management fee expense was GBP102,079 (30 June 2011: GBP248,509). As at 30 June 2012, the investment management fee creditor was GBPnil (31 December 2011: GBPnil & 30 June 2011 GBPnil).
The Investment Manager is also entitled to a performance fee for a relevant accounting period when the following two tests are met:
-- If the adjusted closing NAV per Ordinary Share (where the adjusted NAV is the NAV of the Company excluding any liability for accrued management and performance fees and after adding back any dividends declared or paid during the performance period) exceeds the opening NAV per Ordinary Share by a hurdle rate equivalent to 7.5% per annum (the "Hurdle NAV per Ordinary Share"); and
-- If the adjusted closing NAV per Ordinary Share is higher than the highest previously recorded opening NAV per Ordinary Share as reduced by the sum of all dividends and distributions per Ordinary Share (including distributions of capital) since the date such highest opening NAV per Ordinary Share was established (the "High Watermark").
Once entitled to a performance fee for a relevant accounting period the fee is payable, in arrears, by reference to the amount the adjusted closing NAV per Ordinary Share exceeds either (i) the opening NAV per Ordinary Share, (where the adjusted NAV is the NAV of the Company excluding any liability for accrued performance fees and after adding back any dividends declared or paid during the performance period), or (ii) where the High Watermark exceeds the Hurdle NAV per Ordinary Share for the relevant accounting period.
The performance fee is calculated by taking an amount equal to 20% of the NAV increase per Ordinary Share in that relevant accounting period, multiplied by the time weighted average of the total number of Ordinary Shares in issue for the relevant accounting period. The first performance period began on Admission and ended on 31 December 2007. Each subsequent performance period is a period of one financial year. For the period ended 30 June 2012, the performance fee expense was GBPnil (30 June 2011: GBPnil). As at 30 June 2012, the performance fee creditor was GBPnil (31 December 2011: GBPnil & 30 June 2011: GBPnil).
Administration Agreement
Pursuant to the provisions of the Administration Agreement, Praxis Fund Services Limited is entitled to receive an administration fee during the period of 0.15% per annum of the net asset value of the Company, subject to an annual minimum of GBP60,000 applied on a quarterly basis, calculated and paid quarterly in arrears. For the period ended 30 June 2012, the administration fee expense was GBP30,425 (30 June 2011: GBP30,868). As at 30 June 2012, the administration fee creditor was GBPnil (31 December 2011: GBPnil & 30 June 2011: GBPnil).
Registrar Agreement
Pursuant to the provisions of the Registrar Agreement, Capita Registrars (Guernsey) Limited is entitled to a fee of GBP5,000 per annum together with a per deal fee per shareholder transaction. For the period ended 30 June 2012, the registrar fee expense was GBP8,451 (30 June 2011: GBP17,739). As at 30 June 2012, the registrar fee creditor was GBP1,989 (31 December 2011: GBP2,017 & 30 June 2011: GBP1,995).
Custodian Agreement
Pursuant to the provisions of the Custodian Agreement, Cenkos Channel Islands Limited is entitled to receive a custodian fee during the period of 0.03% per annum of the net asset value of the Company, subject to an annual minimum of GBP15,000 applied on a quarterly basis. For the period ended 30 June 2012, the custodian fee expense was GBP7,500 (30 June 2011: GBP10,369). As at 30 June 2012, the custodian fee creditor was GBP3,750 (31 December 2011: GBP3,750 & 30 June 2011: GBPnil).
Directors' Interest
None of the Directors, who held office during the period or their families, hold any interest in the Company.
There were no changes in the interests of the Directors prior to the date of this report.
No Director, other than those listed above, and no connected person of any Director has any interest, the existence of which is known to, or could with reasonable diligence be ascertained by that Director, whether or not held through another party, in the share capital of the Company.
Rhys Davies and Brett Miller are directors of Damille Investments Limited which holds 10,000,000 Ordinary Shares, representing 17.33% of the issued share capital of the Company.
4. Directors' Fees:
Each of the Directors has entered into an agreement with the Company providing for them to act as a non-executive director of the Company. Their annual fees, pro-rata for periods less than one year, excluding all reasonable expenses incurred in the course of their duties which will be reimbursed by the Company are as follows:
31 December 31 December
30 June 2012 30 June 2012 2011 2011 30 June 2011 30 June 2011
Annual Fee Actual Fees Annual Fee Actual Fees Annual Fee Actual Fees
--------------- --------------- --------------- --------------- --------------- ---------------
GBP GBP GBP GBP GBP GBP
Rhys
Davies 20,000 10,600 20,000 21,200 20,000 10,600
Brett
Miller 15,000 8,100 15,000 16,200 15,000 8,100
David
McHugh 15,000 8,100 15,000 16,200 15,000 8,100
Rhys Davies and Brett Miller Director fees are paid to Damille Investments Limited.
With effect from 6 August 2010, the Directors also became entitled to a communication expense of GBP100 per month.
5. Deficit per Ordinary Share:
Deficit per Ordinary Share for the period ended 30 June 2012 was 2.55p (30 June 2011: deficit per Ordinary Share 1.71p). Deficit per Ordinary Share is based on the net deficit from operations for the period of GBP1,470,849 (30 June 2011: deficit of GBP986,112) and on a weighted average of 57,701,445 (30 June 2011: 57,701,445) Ordinary Shares in issue during the period.
6. Investments:
Fair Value Through Profit or Loss Investments: 1 January 2012 1 January 2011 1 January 2011
To To To
30 June 2012 31 December 2011 30 June 2011
--------------- ------------------ ---------------
GBP GBP GBP
Investments listed on recognised investment exchanges 312,500 937,500 1,425,000
Unlisted investments 2,652,536 2,833,152 4,105,222
--------------- ------------------ ---------------
2,965,036 3,770,652 5,530,222
=============== ================== ===============
Book cost brought forward 12,969,928 15,708,192 15,708,192
Purchases/transfers 750,000 - -
Sales (50,000) (2,117,209) (1,949,209)
Net realised loss on fair value through profit or loss
investments (490,002) (621,055) (355,055)
--------------- ------------------ ---------------
Book cost carried forward 13,179,926 12,969,928 13,403,928
Net unrealised losses on fair value through profit or
loss investments brought forward (9,199,276) (6,504,973) (6,504,973)
Movement in net unrealised losses on fair value through
profit or loss investments (1,015,614) (2,694,303) (1,368,733)
--------------- ------------------ ---------------
Net unrealised losses on fair value through profit or
loss investments carried forward (10,214,890) (9,199,276) (7,873,706)
Fair value carried forward 2,965,036 3,770,652 5,530,222
=============== ================== ===============
Loans and Receivables: 1 January 2012 1 January 2011 1 January 2011
To To To
30 June 2012 31 December 2011 30 June 2011
--------------- ------------------ ---------------
GBP GBP GBP
Loans > 1 year 2,291,800 3,240,114 12,202,100
Loans < 1 year - 5,225,132 2,414,174
--------------- ------------------ ---------------
2,291,800 8,465,246 14,616,274
=============== ================== ===============
Book cost brought forward 12,339,999 18,147,254 18,147,254
Loan advanced - - 47,740
Payment in kind interest capitalised 534,922 100,722 -
Loan repayments (6,770,525) (5,996,776) (1,909,277)
Net realised foreign exchange gains on loan repayments 128,566 88,799 42,708
Net realised losses on loan sales** (453,392) - -
--------------- ------------------ ---------------
Book cost carried forward 5,779,570 12,339,999 16,328,425
Net unrealised losses on loans investments brought
forward (3,874,753) (2,018,941) (2,018,941)
Movement in impairment charge on loans 682,438 (1,699,998) (200,000)
Movement in net unrealised foreign exchange
(losses)/gains on loans investments (295,455) (155,814) 506,790
--------------- ------------------ ---------------
Net unrealised losses on loans investments carried
forward (3,487,770) (3,874,753) (1,712,151)
Amortised cost carried forward 2,291,800 8,465,246 14,616,274
=============== ================== ===============
Total Investments: 1 January 2012 1 January 2011 1 January 2011
To To To
30 June 2012 31 December 2011 30 June 2011
--------------- ------------------ ---------------
GBP GBP GBP
Investments listed on recognised investment exchanges* 312,500 937,500 1,425,000
Unlisted investments 2,652,536 2,833,152 4,105,222
Loans 2,291,800 8,465,246 14,616,274
--------------- ------------------ ---------------
5,256,836 12,235,898 20,146,496
=============== ================== ===============
Book cost brought forward 25,309,927 33,855,446 33,855,446
Purchases/transfers 750,000 - -
Loans advanced - - 47,740
Payment in kind interest capitalised 534,922 100,722 -
Sales of investments (50,000) (2,117,209) (1,949,209)
Loan repayments (6,770,525) (5,996,776) (1,909,277)
Net realised loss on fair value through profit or loss
investments (490,002) (621,055) (355,055)
Net realised foreign exchange gains on loan repayments 128,566 88,799 42,708
Net realised losses on loan sales** (453,392) - -
--------------- ------------------ ---------------
Book cost carried forward 18,959,496 25,309,927 29,732,353
Net unrealised gains on investments brought forward (13,074,029) (8,523,914) (8,523,914)
Movement in net unrealised losses on fair value through
profit or loss investments (1,015,614) (2,694,303) (1,368,733)
Movement in impairment charge on loans 682,438 (1,699,998) (200,000)
Movement in net unrealised foreign exchange
(losses)/gains on loans investments (295,455) (155,814) 506,790
--------------- ------------------ ---------------
Net unrealised losses on fair value through profit or
loss investments carried forward (13,702,660) (13,074,029) (9,585,857)
Investments carried forward 5,256,836 12,235,898 20,146,496
=============== ================== ===============
*representing 5.01% (31 December 2011: 6.41% & 30 June 2011: 6.06%) of Total Net Assets
**As a result of a loan sale to third party
7. Other Receivables:
30 June 2012 31 December 2011 30 June 2011
------------- ----------------- -------------
GBP GBP GBP
Loan note interest receivable* 87,675 899,597 976,391
Investment sales receivable - - 300,000
Prepayments 42,518 24,387 16,470
Bank interest receivable 603 196
------------- ----------------- -------------
130,796 924,180 1,292,861
============= ================= =============
*Loan note interest receivable is shown net of accrued loan interest written off amounting to GBP14,798 (31 December 2010: GBP272,568 & 30 June 2011: GBP21,472).
The Directors consider that the carrying amount of other receivables approximates fair value.
8. Cash and Cash Equivalents:
30 June 2012 31 December 2011 30 June 2011
------------- ----------------- -------------
GBP GBP GBP
Cash at bank 866,872 1,503,134 2,113,503
============= ================= =============
9. Other Payables:
30 June 2012 31 December 2011 30 June 2011
------------- ----------------- -------------
GBP GBP GBP
Custodian fee 3,750 3,750 -
Audit fee 19,250 28,500 16,663
Registrar's fee 1,989 2,016 1,995
Other payables 263 351 403
------------- ----------------- -------------
25,252 34,617 19,061
============= ================= =============
The Directors consider that the carrying amount of other payables approximates fair value.
10. Share Capital:
30 June 2012,
31 December
2011
&
30 June 2011
-------------
Authorised Share Capital GBP
Unlimited Shares of no par value that
may be -
issued as Ordinary Shares
-------------
-
=============
No allotted, issued and fully paid shares were issued or paid for during the period ended 30 June 2012 (30 June 2011: GBPnil).
On 18 July 2007, the holders of the Subscriber Shares, Praxis Nominees Limited and Praxis Fund Services Limited, passed a written resolution approving the cancellation of the entire amount which stood to the credit of the share premium account immediately after the Placing, conditionally upon the issue of the Ordinary Shares and the payment in full thereof and with respect to any further issue of Ordinary Shares. The cancellation was confirmed by the Royal Court on 23 November 2007. The cancelled share premium of GBP57,677,695 was transferred to the distributable reserve.
By a resolution dated 18 July 2007 the holders of the Subscriber Shares in the Company granted the Company the authority to make market purchases of up to 14.99% of its own issued Ordinary Shares following the conclusion of the Placing. This authority expired at the earlier of the date 18 months following the passing of such resolution and the conclusion of the first annual general meeting of the Company. A renewal of the authority to make purchases of Ordinary Shares was passed at the last annual general meeting, held on 14 September 2010, and will be sought from Shareholders at each subsequent annual general meeting of the Company. As at 30 June 2012, the Company held none (31 December 2011: none & 30 June 2011: none) of its own Ordinary Shares in treasury with all 57,701,445 Ordinary Shares remaining in the market (31 December 2011: 57,701,445 & 30 June 2011: 57,701,445).
At the annual general meeting of the Company held 14 September 2010, the Company passed a resolution approving a scheme for returning capital to shareholders by way of a bonus issue of new B Shares. See note 15 for further details on the return of capital to shareholders.
11. Net Asset Value per Ordinary Share:
The net asset value per Ordinary Share as at 30 June 2012 is 10.80p (31 December 2011: 25.35p & 30 June 2011: 40.79p). The net asset value per Ordinary Share is based on the net assets attributable to equity Ordinary Shareholders of GBP6,229,252 (31 December 2011: GBP14,628,595 & 30 June 2011: GBP23,533,799) and on the period end number of Ordinary Shares in issue of 57,701,445 (31 December 2011: 57,701,445 & 30 June 2011: 57,701,445).
12. Financial Instruments:
(a) Significant accounting policies:
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of its financial assets, including convertible loan notes, and financial liabilities are disclosed in note 2 to these financial statements.
(b) Categories of financial instruments:
Financial instruments comprise equities, convertible loan notes and cash and cash equivalents. Investments in convertible loan notes have been classified as loans and receivables. All other financial instruments have been classified as fair value through profit or loss. As at 30 June 2012, the fair value of the Company's financial assets was GBP6,123,708 (31 December 2011: GBP13,739,032 & 30 June 2011: GBP22,259,999). This was 98.31% (31 December 2011: 93.93% & 30 June 2011: 94.59%) of net assets attributable to Ordinary Shareholders.
At 30 June 2012: Fair Value Percentage of
net assets attributable
to holders of
Ordinary Shares
---------------------------------------- ------------ -------------------------
Assets GBP %
Financial assets at fair
value through profit or
loss:
Listed equity securities 312,500 5.02
Unlisted equity securities 2,652,536 42.58
------------ -------------------------
2,965,036 47.60
Loans and receivables*:
Loans 2,291,800 36.79
Cash and cash equivalents 866,872 13.92
------------ -------------------------
6,123,708 98.31
============ =========================
At 31 December 2011: Fair Value Percentage of
net assets attributable
to holders of
Ordinary Shares
---------------------------------------- ------------ -------------------------
Assets GBP %
Financial assets at fair
value through profit or
loss:
Listed equity securities 937,500 6.41
Unlisted equity securities 2,833,152 19.37
------------ -------------------------
3,770,652 25.78
Loans and receivables*:
Loans 8,465,246 57.87
Cash and cash equivalents 1,503,134 10.28
------------ -------------------------
13,739,032 93.93
============ =========================
* Amortised cost is not considered to be materially different from fair value.
At 30 June 2011: Fair Value Percentage of
net assets attributable
to holders of
Ordinary Shares
---------------------------------------- ------------ -------------------------
Assets GBP %
Financial assets at fair
value through profit or
loss:
Listed equity securities 1,425,000 6.06
Unlisted equity securities 4,105,222 17.44
------------ -------------------------
5,530,222 23.50
Loans and receivables*:
Loans 14,616,274 62.11
Cash and cash equivalents 2,113,503 8.98
------------ -------------------------
22,259,999 94.59
============ =========================
* Amortised cost is not considered to be materially different from fair value.
There are no financial liabilities.
Fair values versus carrying amounts
The Directors consider that the carrying amount of financial instruments is equal to fair value.
Classification of Fair Value Measurements
The Company adopted the amendment to IFRS 7, effective 1 January 2009. This requires the Company to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:
-- Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
-- Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2); and
-- Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).
The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, the measurement is a level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability.
The determination of what constitutes "observable" requires significant judgement by the Company. The Company considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.
The following table analyses within the fair value hierarchy the Company's financial assets (by class) measured at fair value at 30 June 2012:
Fair Value as at 30 June
2012
Level Level Level Total
1 2 3
--------- ------ ---------- ----------
GBP GBP GBP GBP
Fair value through
profit or loss 312,500 - 2,652,536 2,965,036
312,500 - 2,652,536 2,965,036
========= ====== ========== ==========
Fair Value as at 31 December
2011
Level Level Level Total
1 2 3
---------- ------- ----------- -----------
GBP GBP GBP GBP
Fair value through
profit or loss 937,500 - 2,833,152 3,770,652
937,500 - 2,833,152 3,770,652
========== ======= =========== ===========
Fair Value as at 30 June
2011
Level Level Level Total
1 2 3
---------- ------ ---------- ----------
GBP GBP GBP GBP
Fair value through
profit or loss 1,425,000 - 4,105,222 5,530,222
1,425,000 - 4,105,222 5,530,222
========== ====== ========== ==========
Investments whose values are based on quoted market prices in active markets, and therefore classified within level 1, include active listed equities. No adjustments are made to the quoted price for these instruments.
Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within level 2. As level 2 investments may include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information. None of the Company's current investments are level 2 investments.
Investments classified within level 3 have significant unobservable inputs, as they trade infrequently. Level 3 instruments include corporate compound debt instruments and unquoted equity instruments which the Company values in accordance with the International Private Equity and Venture Capital valuation guidelines. The Company considers liquidity, credit and other market risk factors.
The table below provides a reconciliation from brought forward to carried forward balances of financial instruments categorised under level 3:
1 January 2012 to 30 June
2012
Assets at Fair Value based Equity investments
on Total
Level 3:
------------------- ------------
GBP GBP
Fair value brought forward 2,833,151 2,833,151
Conversion to equity 750,000 750,000
Sales (50,000) (50,000)
Net realised gains on
fair value through profit
or loss investments (490,002) (490,002)
Movement in net unrealised
gains on fair value through
profit or loss investments (390,613) (390,613)
------------------- ------------
Fair value carried forward 2,652,536 2,652,536
=================== ============
1 January 2011 to 31 December
2011
Assets at Fair Value Equity investments
based on Total
Level 3:
------------------- --------------
GBP GBP
Fair value brought forward 4,391,489 4,391,489
Sales (300,000) (300,000)
Net realised gains on
fair value through profit
or loss investments 50,000 50,000
Movement in net unrealised
gains on fair value
through profit or loss
investments (1,308,338) (1,308,338)
------------------- --------------
Fair value carried forward 2,833,151 2,833,151
=================== ==============
1 January 2011 to 30 June
2011
Assets at Fair Value Equity investments
based on Total
Level 3:
------------------- -----------
GBP GBP
Fair value brought forward 4,391,489 4,391,489
Sales (300,000) (300,000)
Net realised gains on
fair value through profit
or loss investments 50,000 50,000
Movement in net unrealised
gains on fair value
through profit or loss
investments (36,267) (36,267)
------------------- -----------
Fair value carried forward 4,105,222 4,105,222
=================== ===========
(c) Net gains and losses on financial assets:
Period ended 30 Movement in net unrealised Movement in net unrealised Net realised (losses on
June 2012 losses impairment disposals
---------------------------- ---------------------------- ---------------------------- ----------------------------
GBP GBP GBP
Financial assets
at fair value
through profit
or loss:
Listed equity (625,000) -
securities -
Unlisted equity
securities (390,614) - (490,002)
---------------------------- ---------------------------- ----------------------------
(1,015,614) - (490,002)
Loans and
receivables:
Loans - 386,983 (324,826)
---------------------------- ---------------------------- ----------------------------
(1,015,614) 386,983 (814,828)
============================ ============================ ============================
Year ended 31 Movement in net unrealised Movement in net unrealised Net realised gains/(losses)
December 2011 losses impairment on disposals
---------------------------- ---------------------------- ---------------------------- ----------------------------
GBP GBP GBP
Financial assets
at fair value
through profit
or loss:
Listed equity
securities (1,385,965) - (671,055)
Unlisted equity
securities (1,308,337) - 50,000
---------------------------- ---------------------------- ----------------------------
(2,694,302) - (621,055)
Loans and
receivables:
Loans - (1,669,998) 88,799
---------------------------- ---------------------------- ----------------------------
(2,694,302) (1,669,998) (532,256)
============================ ============================ ============================
Period ended 30 Movement in net unrealised Movement in net unrealised Net realised gains/(losses)
June 2011 gains/(losses) impairment on disposals
---------------------------- ---------------------------- ---------------------------- ----------------------------
GBP GBP GBP
Financial assets
at fair value
through profit
or loss:
Listed equity
securities (1,332,465) - (405,055)
Unlisted equity
securities (36,267) - 50,000
---------------------------- ---------------------------- ----------------------------
(1,368,732) - (355,055)
Loans and
receivables:
Loans 506,790 (200,000) 42,708
---------------------------- ---------------------------- ----------------------------
(861,942) (200,000) (312,347)
============================ ============================ ============================
(d) Derivatives:
In accordance with the Company's scheme particulars the Company may invest in derivatives or forward foreign exchange contracts for the purpose of efficient portfolio management.
No derivatives were held at the period end (31 December 2011: nil & 30 June 2011: nil).
13. Financial Risk Management:
Strategy in Using Financial Instruments:
The Company's activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The Company's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Company's financial performance.
The Company is currently focusing on realising the investments that have been made to date. These investments were made in line with the Company's stated investment policy.
Market Price Risk:
Market price risk results mainly from the uncertainty about future prices of financial instruments held. It represents the potential loss the Company may suffer through holding market positions in the face of price movements and changes in interest rates or foreign exchange rates, with the maximum risk resulting from financial instruments being determined by the fair value of the financial instruments.
All securities investments present a risk of loss of capital. The Investment Manager moderates this risk through a careful selection of securities and other financial instruments within specified limits. The maximum risk resulting from financial instruments is determined by the fair value of the financial instruments. The Company's portfolio and investment strategy is reviewed continuously by the Investment Manager and the Investment Manager and on a quarterly basis by the Board.
The Company's exposure to market price risk arises from uncertainties about future prices of its investments. This risk is managed through diversification of the investment portfolio. Generally the Company will seek not to invest (or commit to invest) more than 15% of the Company's net assets in any single investment at the time of investment (or commitment), or more than 15% of the Company's net assets in special situations (such as investments in companies already listed) at the time of investment (or commitment), although such limit may be increased to 30% in certain cases where the Board deems appropriate on the advice of the Investment Manager.
At 30 June 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 shown below. A 10% increase in the value of investments, with all other variables held constant, would bring about a 8.44% (31 December 2011: 8.36% & 30 June 2011: 8.56%) increase in net assets attributable to Ordinary Shareholders. If the value of investments had been 10% lower, with all other variables held constant, net assets attributable to Ordinary Shareholders would have fallen by 8.44% (31 December 2011: 8.36% & 30 June 2011: 8.56%).
Interest Rate Risk:
The Company is exposed to risks associated with the effects of fluctuations in the prevailing levels of market interest rates on its financial instruments and future cash flows. The Company is exposed to interest rate risk as its cash and cash equivalents are invested at short term rates. All the Company's loan instruments have fixed rate coupons and therefore are not exposed to risks associated with the effects of fluctuations in the prevailing levels of market interest rates. The Investment Manager manages the Company's exposure to interest rate risk daily in accordance with the Company's investment objectives and policies. The Company's overall exposure to interest rate risk is monitored on a quarterly basis by the Board of Directors.
The table below summarises the Company's exposure to interest rate risks:
30 June 2012 31 December 2011 30 June 2011
WAEIR* Total WAEIR* Total WAEIR* Total
--------------------------------------- --------- ------------ --------- ------------ ------------ -------------
GBP GBP GBP
Assets
Fixed interest rate unquoted
debt securities 10.46% 2,291,800 10.46% 8,465,246 10.47% 14,616,274
Cash at bank 0.80% 866,872 0.14% 1,503,134 0.37% 2,113,503
Non-interest bearing - 3,095,832 - 4,694,832 - 6,823,083
------------ ------------ -------------
Total assets 6,254,504 14,663,212 23,552,860
============ ============ =============
Liabilities
Non-interest bearing - 25,252 - 34,616 - 19,061
------------ ------------ -------------
Total liabilities 25,252 34,616 19,061
============ ============ =============
* weighted average effective interest rate
The sensitivity analyses below have been determined based on the Company's exposure to interest rates for interest bearing assets and liabilities (included in the interest rate exposure table above) at the period end date and the stipulated change taking place at the beginning of the financial period and held constant through the reporting period in the case of instruments that have floating rates.
A 50 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management's assessment of the possible change in interest rates.
If interest rates had been 50 basis points higher and all other variables were held constant, the Company's net assets attributable to Ordinary Shareholders for the period ended 30 June 2012 would have increased by GBP4,334 (31 December 2011: GBP7,515 & 30 June 2011: GBP10,568) due to the increase in the interest earned on the Company's cash balances.
If interest rates had been 50 basis points lower and all other variables were held constant, the Company's net assets attributable to Ordinary Shareholders for the period ended 30 June 2012 would have decreased by GBP4,334 (31 December 2011: GBP2,104 & 30 June 2011: GBP7,820) due to the decrease in the interest earned on the Company's cash balances.
The Company's sensitivity to interest rates has decreased during the current period as the Company has continued its Capital Return Scheme thereby reducing its cash balances that are interest bearing.
Foreign Currency Risk:
Foreign currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.
Accordingly, without foreign currency hedging in place, the Company is at high risk that the value of an investment portfolio may be significantly affected favourably or unfavourably by fluctuations in exchange rates. The Company has the ability to manage this risk through forward foreign exchange contracts to hedge its exposure back to sterling (see note 12(d) for details of currency hedging in place as at 30 June 2012).
Some of the net assets of the Company are denominated in currencies other than Sterling. The carrying amounts of these assets and liabilities are as follows (these assets and liabilities do not include amounts receivable/payable on open forward foreign currency contracts and are pre currency hedging exposures):
30 June 2012
Assets Liabilities Net
GBP GBP GBP
Australian
Dollar 717,539 - 717,539
British Pound 5,519,634 (25,252) 5,494,382
Euro 17,331 - 17,331
--------- ----------- ---------
6,254,504 (25,252) 6,229,252
========= =========== =========
31 December 2011
Assets Liabilities Net
GBP GBP GBP
Australian
Dollar 723,148 - 723,148
British Pound 7,609,215 (34,617) 7,574,598
Euro 6,330,849 - 6,330,849
---------- ----------- ----------
14,663,212 (34,617) 14,628,595
========== =========== ==========
30 June 2011
Assets Liabilities Net
GBP GBP GBP
Australian
Dollar 735,222 - 735,222
British Pound 12,016,551 (19,061) 11,997,490
Euro 10,801,087 - 10,801,087
---------- ----------- ----------
23,552,860 (19,061) 23,533,799
========== =========== ==========
The Company is exposed to Euro and Australian Dollar currency risk. The Company has the ability to manage this risk through forward foreign exchange contracts to minimise the impact of any currency movements. As at 30 June 2012, the Company had no open forward foreign exchange contracts.
The sensitivity analysis below has been determined based on the sensitivity of the Company's outstanding foreign currency denominated financial assets and liabilities to a 20% increase / decrease in the Sterling against Australian Dollar and Euro, translated at the period end date.
The following details the Company's sensitivity to a 20% increase / decrease in foreign currency rates. 20% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management's assessment of the possible change in foreign exchange rates.
As at 30 June 2012, if sterling had weakened by 20% against the Australian Dollar and Euro, with all other variables held constant, the increase in net assets attributable to Ordinary Shares would have been 2.36% (31 December 2011: 9.64% & 30 June 2011: 9.80%) lower. Conversely, if Sterling had strengthened by 20% against the Australian Dollar and Euro, with all other variables held constant, the decrease in net assets attributable to Ordinary Shareholders would have been 2.36% (31 December 2011: 9.64% & & 30 June 2011: 9.80%) higher.
Liquidity Risk:
Liquidity risk is the risk that the Company will encounter in realising assets or otherwise raising funds to meet financial commitments.
It is the aim of the Company to manage the realisation of the Company's investment portfolio and to maximise the return of invested capital to shareholders during the period ending on 30 September 2013.
Maturity Analysis:
The table below shows the maturity analysis of the Company's assets and liabilities as at 30 June 2012:
At 30 June 2012 Less than 1 month 1-12 months 1-2 years No fixed maturity Total
---------------------------------------- ------------------ ------------ ---------- ------------------ ----------
GBP GBP GBP GBP
Assets
Fixed interest rate unquoted debt
securities - - 2,125,000 166,800 2,291,800
Cash at bank 866,872 - - - 866,872
Non-interest bearing 43,121 52,000 - 3,000,711 3,095,832
------------------ ------------ ---------- ------------------ ----------
Total assets 909,993 52,000 2,125,000 3,167,511 6,254,504
================== ============ ========== ================== ==========
Liabilities
Non-interest bearing - - - 25,252 25,252
------------------ ------------ ---------- ------------------ ----------
Total liabilities - - - 25,252 25,252
================== ============ ========== ================== ==========
At 31 December 2011 Less than 1 month 1-12 months 1-2 years No fixed maturity Total
--------------------------------------- ------------------ ------------ ---------- ------------------ -----------
GBP GBP GBP GBP
Assets
Fixed interest rate unquoted
debt securities 71,931 4,271,294 3,939,621 182,400 8,465,246
Cash at bank 1,503,134 - - - 1,503,134
Non-interest bearing 760,691 135,010 - 3,799,131 4,694,832
------------------ ------------ ---------- ------------------ -----------
Total assets 2,335,756 4,406,304 3,939,621 3,981,531 14,663,212
================== ============ ========== ================== ===========
Liabilities
Non-interest bearing - - - 34,616 34,616
------------------ ------------ ---------- ------------------ -----------
Total liabilities - - - 34,616 34,616
================== ============ ========== ================== ===========
At 30 June 2011 Less than 1 month 1-12 months 1-3 years 3-5 years No fixed maturity Total
-------------------------- ------------------ ------------ ---------- ---------- ------------------ ------------
GBP GBP GBP GBP GBP
Assets
Fixed interest rate
unquoted debt
securities - 2,414,174 7,903,746 4,298,354 - 14,616,274
Cash at bank 2,113,503 - - - - 2,113,503
Non-interest
bearing 812,085 480,776 - - 5,530,222 6,823,083
------------------ ------------ ---------- ---------- ------------------ ------------
Total assets 2,925,588 2,894,950 7,903,746 4,298,354 5,530,222 23,552,860
================== ============ ========== ========== ================== ============
Liabilities
Non-interest
bearing - - - - 19,061 19,061
------------------ ------------ ---------- ---------- ------------------ ------------
Total liabilities - - - - 19,061 19,061
================== ============ ========== ========== ================== ============
Credit Risk:
Credit risk is the risk that an issuer or counterparty will be unable or unwilling to meet a commitment that it has entered into with the Company.
To the extent that the Company invests in customised financial instruments or non-UK securities, the Company takes the risk of non-performance by the other party to the contract. This risk may include credit risk of the counterparty and the risk of settlement default. This risk may differ materially from those entailed in UK exchange-traded transactions which generally are supported by guarantees of clearing organisations, daily marking-to-market and settlement, and segregation and minimum capital requirements applicable to intermediaries. Transactions entered directly between two counterparties generally do not benefit from such protections and expose the parties to the risk of counterparty default. In addition, there are risks involved in dealing with the custodians or brokers who settle trades particularly with respect to non-UK investments.
At the reporting date financial assets exposed to credit risk include loan instruments and derivatives disclosed in note 12 to these financial statements. It is the opinion of the Board of Directors that the maximum exposure to credit risk that the Company faces is equal to the carrying value of these financial instruments held by the Company.
The loan instruments are private loans with the underlying counterparties and as such do not have associated agency credit ratings. To mitigate the credit risk on these loan instruments the Directors consider impairment on an ongoing basis also taking into consideration the results of any reviews performed by the Investment Manager. As at 30 June 2012, GBP682,438 unrealised gain on impairment (31 December 2011: GBP1,699,997 & 30 June 2011: GBP200,000) have been recognised in the Unaudited Statement of Total Comprehensive Income (see note 2(f)).
The credit risk on cash transactions and transactions involving derivative financial instruments is mitigated by transacting with counterparties that are regulated entities subject to prudential supervision, or with high credit-ratings assigned by international credit-rating agencies.
In accordance with the investment restrictions as described in its Placing Document, the Company will generally not invest more than 15% of its total net assets in any one underlying company (calculated at the time of any relevant investment being made).
As at 30 June 2012, the following amounts on debt instruments were past due:
30 June 2012 31 December 2011 30 June 2011
------------- ----------------- -------------
GBP GBP GBP
Interest default* 14,799 272,568 21,472
*As at 30 June 2012, 31 December 2011 and 30 June 2011 the interest owed on debt instruments that was either past due or not considered recoverable and had been written off as "loan interest receivable written off" in the Unaudited Statement of Total Comprehensive Income.
Concentration Risk
Concentration risk may arise if the Company's investments are concentrated in a low number of investments each representing a relatively large percentage of the Company's net assets. At times the Company may hold a relatively small number of investments each representing a relatively large portion of the Company's net assets. Losses incurred in such investments could have a materially adverse effect on the Company's overall financial condition. Whilst the Company's portfolio is diversified in terms of the companies in which it invests, the investment portfolio of the Company may be subject to more rapid change in value than would be the case if the Company were required to maintain a wider diversification among types of securities, countries and industry groups.
In line with the Company's new investment objectives, the concentration risk of the Company will naturally increase upon the managed realisation of the Company's investment portfolio and the subsequent return of invested capital to shareholders.
14. Dividend:
The Directors do not recommend the payment of a dividend for the period ended 30 June 2012 (31 June 2011: GBPnil).
15. Return of Capital:
At the Annual General Meeting of the Company held 14 September 2010, the Company passed a resolution approving a scheme for returning capital to shareholders by way of a bonus issue of new B Shares (the "Capital Return Scheme"). A resolution was also passed for the adoption of amended and restated articles of incorporation which allow the Board to capitalise, by the issue of B Shares, amounts standing to the credit of the Company's Distributable Reserve and which represent the capital returns from the realisation of investments by the Company.
Capital returns to Ordinary Shareholders entail the Company making a bonus issue of new B Shares which are immediately redeemed by the Company on a pro-rata basis.
On 28 September 2010, in accordance with the Company's Capital Return Scheme authorised at the Annual General Meeting on 14 September 2010, the Company returned to Ordinary Shareholders 23p per Ordinary Share by the way of a bonus issues of B Shares to Ordinary Shareholders on the Company's register on the record date of 14 September 2010. Following their issues the B Shares were On 26 November 2010, in accordance with the Company's Capital Return Scheme, the Company paid to Ordinary Shareholders a return of capital of 11p per B Share, amounting to GBP6.3 million in aggregate.
On 17 December 2010, in accordance with the Company's Capital Return Scheme, the Company paid to Ordinary Shareholders a return of capital of 5p per B share, amounting to GBP2.9 million.
On 9 February 2011, in accordance with the Company's Capital Return Scheme, the Company paid to Ordinary Shareholders a return of capital of 5p per B share, amounting to GBP2.9 million.
On 5 May 2011, in accordance with the Company's Capital Return Scheme, the Company paid to Ordinary Shareholders a return of capital of 3p per B share, amounting to GBP1.7 million.
On 17 July 2011, in accordance with the Company's Capital Return Scheme, the Company paid to Ordinary Shareholders a return of capital of 6.5p per B share, amounting to GBP3.8 million.
On 24 October 2011, in accordance with the Company's Capital Return Scheme, the Company paid to Ordinary Shareholders a return of capital of 2.5p per B share, amounting to GBP1.4 million.
On 24 January 2012, in accordance with the Company's Capital Return Scheme, the Company paid to Ordinary Shareholders a return of capital of 4p per B share, amounting to GBP2.3 million.
On 23 May 2012, in accordance with the Company's Capital Return Scheme, the Company paid to Ordinary Shareholders a return of capital of 8p per B share, amounting to GBP4.6 million.
16. Taxation:
The Income Tax Authority of Guernsey has granted the Company exemption from Guernsey income tax under the Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989 and the income of the Company may be distributed or accumulated without deduction of Guernsey income tax. Exemption under the above mentioned Ordinance entails payment by the Company of an annual fee of GBP600 each. It should be noted, however, that interest and dividend income accruing from the Company's investments may be subject to withholding tax in the country of origin.
The Company has not suffered any withholding tax during the period (30 June 2011: GBPnil).
17. Capital Management:
The Directors may exercise the powers of the Company to borrow money and to give security over its assets. The Company may borrow funds secured on its investments if the Board (with the advice of HLFM Limited) considers that satisfactory opportunities for investment arise, however in view of the new investment objective policy there are no plans to borrow any such funds. In any event, borrowing will be limited to 25 per cent. of the Company's last announced NAV at the time of draw down. The Company may also be indirectly exposed to the effects of gearing to the extent that investee companies have outstanding borrowings.
18. Post Period End Events:
On 12 July 2012, the Company sold its entire shareholding of 413,395 Ordinary Shares in Take 2 Film Holdings Limited ("Take 2"), one of the largest independent suppliers of motion picture, digital camera and lighting equipment in the UK, for 78.6 pence per Ordinary Share, equivalent to GBP325,000 in total and also received repayment in full, at par of the outstanding balance of GBP875,000 on two loans provided to Take 2 by the Company. The total consideration for the transaction is GBP1,200,000.
As announced, the Company returned to Shareholders 2 pence per Ordinary Share by way of a bonus issue of B Shares to all Shareholders on the Company's register on the record date of 27 July 2012. Following their issue, on 2 August 2012 the B Shares were immediately redeemed by the Company on a pro rata basis.
There are no other significant post period end events that require disclosure in these financial statements.
This information is provided by RNS
The company news service from the London Stock Exchange
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