REG-BACIT Limited: Half-yearly Report <Origin Href="QuoteRef">BACT.L</Origin> - Part 1
22/11/2016 07:05
BACIT LIMITED
INTERIM REPORT AND UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS TO 30 SEPTEMBER 2016
The Company has today released its Interim Unaudited Financial Report for the
period ended 30 September 2016. The Interim Unaudited Financial Report will
shortly be available from the Company's website www.bacitltd.com.
SUMMARY INFORMATION
Structure
BACIT Limited (the “Company”) is incorporated in Guernsey as a registered
closed-ended investment company. The Company’s Ordinary Shares were listed
on the premium segment of the London Stock Exchange (“LSE”) on 26 October
2012 when it commenced its business.
The Company makes its investments through BACIT Investments LP Incorporated
(the “Partnership”), in which the Company is the sole limited partner. The
general partner of the Partnership is BACIT GP Limited (the “General
Partner”), a wholly-owned subsidiary of the Company. It also invests in
BACIT Discovery Limited, a wholly-owned subsidiary of the Partnership. BACIT
Limited and BACIT GP Limited are collectively referred to as the “Group”.
The Company has raised the following share capital:
£
Capital raised at launch of the Company 206,734,775
Capital raised since launch of the Company to 30 September 2016* 206,177,252
Total Capital raised by the Company (excluding share issue costs) 412,912,027
Shares in issue at 30 September 2016
Number of shares
Ordinary shares at launch of the Company 206,734,775
Ordinary shares since launch of the Company to 30 September 2016* 179,404,010
386,138,785
*During October 2013, the Company raised £200 million gross from the issuance
of C Shares. These shares were subsequently converted into the Company’s
Ordinary Shares effective 31 December 2013. Ordinary Shares issued during the
years 2014, 2015 and 2016 relate to the 2014, 2015 and 2016 scrip dividends,
respectively.
Investment Objective and Policy
The Group’s investment objective is to deliver superior returns from
investments in leading long-only and alternative investment funds across
multiple asset classes and targets an annualised return per Share in the range
of 10% to 15% per annum on the issue price of the Shares. Investments, except
in CRT Pioneer Fund LP (the “Pioneer Fund”), will only be made in cases
where the relevant investment manager provides investment capacity on a
‘‘gross return’’ basis, meaning that the Group does not bear the
impact of management or performance fees on the relevant investment. This is
achieved by the relevant manager or fund agreeing with the Group not to charge
management or performance fees, by rebating or donating back to the Group any
management or performance fees charged or otherwise arranging for the Group to
be compensated so as effectively to increase its investment return on the
relevant investment by the amount of any such fees.
The Group intends to achieve the investment objective primarily through
investments in long-only funds, hedge funds, private equity funds and real
estate funds. The Group is permitted to borrow and invest in long and short
positions in quoted and unquoted equities, fixed income securities, options,
warrants, futures, commodities, currency forwards, over the counter derivative
instruments (such as swaps), securities that lack active public markets,
private securities, repurchase agreements, preferred stocks, convertible bonds
and other financial instruments or real estate as well as cash and cash
equivalents. The Group may invest on a global basis.
The Group makes a Charitable Donation, in arrears, of one-twelfth of 1% of the
total NAV of the Company as at each month-end during the year to charities.
Half is donated to The Institute of Cancer Research (“the ICR”) and half
donated to The BACIT Foundation for onward distribution among other charities
in proportions which are determined each year by the Shareholders. Please
refer to note 6 for details.
In addition to the Charitable Donation, the Group intends to invest up to 1%
of NAV each year to acquire interests in drug development and medical
innovation projects undertaken by the ICR or its subsidiaries which have the
potential for ICR Projects. To the extent that less than 1% of NAV is
allocated to ICR Projects in any given year, the amount available for
investment in such projects as and when appropriate opportunities become
available in subsequent years may be increased by such a proportion.
The Group has entered into a framework agreement with the ICR effective
1 October 2012, not to knowingly make any investment (directly or indirectly)
which contravenes the tobacco restriction contained in the investment policy
of the ICR and not to promote any relationship with any other cancer charity
other than the ICR, except to the extent relevant to The BACIT Foundation.
The Group has invested in the Pioneer Fund as if it were an ICR Project, save
that the Group can make up to a maximum capital commitment of £20 million,
notwithstanding that the Group is required to bear management and performance
fees, in the form of a general partner’s share and carried interest, in
respect of its investment.
The amount that the Group may contribute to drawdowns of the Pioneer Fund in
any one calendar year will not be subject to the one per cent. of net asset
value cap otherwise applicable to investments in ICR Projects.
Investment Manager
The investment portfolio is managed by BACIT (UK) Limited (the “Investment
Manager”), which is authorised by the Financial Conduct Authority.
Following the Extraordinary General Meeting (“EGM”) held on 11 December
2015, Shareholders approved a change in expense arrangements of the Group and
with effect from 1 January 2016, the amended Expenses Deed Agreement (the
“Deed”) entered into between the Company, the General Partner and Farla
Limited, a company controlled by Thomas Henderson, was terminated.
Prior to 1 January 2016, Farla Limited provided office space and equipment
for, and either paid directly or reimbursed the Group in respect of
out-of-pocket expenses of, the team managing the investment portfolio.
With effect from 1 January 2016, the operating expenses of the Investment
Manager, including those previously covered by the Deed, are covered by the
Management Expense Contribution, payable by the Company to the Investment
Manager equal to 0.19% of NAV per annum, payable in monthly instalments by
reference to the most recent month-end NAV. The Group also directly bears
certain other expenses of the Investment Manager up to an amount equal to two
per cent. of the NAV of the prior year end.
Full details were set out in the Circular dated 24 November 2015 which is
available on the Company’s website.
Alternative Investment Fund Managers Directive (“AIFMD”)
The Company has appointed as its Alternative Investment Fund Manager, BACIT
(UK) Limited, which is authorised and regulated by the Financial Conduct
Authority. This was a response to the fact that the structure within the BACIT
Limited group of companies is likely to fall within the definition of an
alternative investment fund as set out in the UK rules that give effect to the
AIFMD.
Ongoing Charges
Ongoing Charges are calculated based on weighted average Net Asset Value
(“NAV”). The Ongoing Charges ratio of BACIT Limited and BACIT GP Limited
(together, the “Group” or “BACIT”) and BACIT Investments LP
Incorporated (the “Partnership”) for the period ended 30 September 2016
was 0.21% (30 September 2015: 0.26%) excluding charitable donations and 0.72%
(30 September 2015: 1.26%) including charitable donations. Ongoing charges
include the fee paid to the Investment Manager but do not include any other
net management fees and performance fees, as there are no such fees payable by
the Group and the Partnership (other than those fees paid to CRT Pioneer Fund
LP (“the Pioneer Fund”)). Other operating costs are also charged by the
underlying funds. However these are immaterial and are therefore also excluded
in the calculation of Ongoing Charges.
Rebates and Donations
Substantially all investments made by the Partnership either (a) are not
subject to any management or performance fees or (b) are made on the basis
that the Group is effectively reimbursed the amount of any such fees by
rebate, donation back to the Group or other arrangements. The Group has,
however, made an investment in The Pioneer Fund, which is not made on a
fee-free basis.
At the period end the uncrystallised performance fee rebates included as
receivables within the Partnership’s financial assets at fair value through
profit or loss amounted to £28,000 (30 September 2015: £445,000).
During the period, rebates and donations earned by the Partnership amounted to
£914,000 (30 September 2015: £993,000), of which £329,000 remained
receivable at 30 September 2016. Of the 32 underlying funds in the
Partnership’s Portfolio Statement, 22 of these underlying funds are invested
in a fee-free share class and the remaining 10 apply rebates or donations.
Going Concern
The Company has been established with an indefinite life. However, the
Company’s Articles provide that Shareholders will be entitled to vote on the
discontinuation of the Company every five years, starting with the Annual
General Meeting in 2017. The vote will require more than 50% of the votes cast
on the resolution to be in favour to require the Directors to formulate
proposals, to be put to Shareholders within six months of such resolution
being passed, for the reorganisation or reconstruction of the Company. These
proposals may or may not involve winding up the Company or liquidating all or
part of the Company’s then existing portfolio and there can be no assurance
that a discontinuation vote will necessarily result in the winding up of the
Company or liquidation of all or some of its investments. A special resolution
of the Shareholders with 75% or more of the votes cast being in favour of the
resolution is required to wind up the Company.
As described in note 19, the Company is bringing forward the discontinuation
vote that would otherwise have been proposed at its Annual General Meeting in
2017. In current circumstances the Directors do not expect that this vote will
be carried, and therefore they have considered the ability of the Company to
continue in operation past this period.
The Group’s assets currently consist mainly of securities held through the
Partnership amounting to £482,727,000 (31 March 2016: £460,418,000) of
which 51% are readily realisable in three months and the Group has limited
liabilities, amounting to £2,587,000 (31 March 2016: £4,885,000).
Accordingly, the Group has adequate financial resources to continue in
operational existence for 12 months following the approval of the financial
statements. Hence the Directors believe that it is appropriate to continue to
adopt the going concern basis in preparing the Unaudited Condensed
Consolidated Financial Statements.
Expansion of Investment Policy and Other Proposals
As described in note 19, the Company is publishing a shareholder circular and
prospectus containing details of the proposed expansion of its investment
policy, proposed acquisition of Syncona LLP (“Syncona”), founded by
Wellcome Trust, which owns an existing portfolio of life science investments
and either all or a majority of the interest in the CRT Pioneer Fund currently
held by Cancer Research UK, revisions to the Company’s investment management
arrangements, changes to the Board and raising of capital. These proposals are
all subject to shareholder approval.
CHAIRMAN'S STATEMENT
Dear Shareholder,
In the six months to 30 September 2016, BACIT’s NAV total return was 4.82%.
The NAV per share rose from 122.29 pence to 125.88 pence and a dividend of 2.2
pence per share was paid in August. The share price moved from 131.50 pence to
126.00 pence. Since inception in October 2012 the annualised NAV total return
has been 8.13%.
The main market event during the period was the UK referendum, which led to a
sharp fall in sterling although the long term implications are unclear. Within
our portfolio most of our long equity and equity hedge holdings did well but
several credit and macro funds had a more difficult time. Details of our
performance and portfolio positioning are set out in the Investment
Manager’s report.
On 7 November, we announced our plans to transform BACIT into a life sciences
investment champion. If approved by shareholders on 15 December, the change in
policy will be implemented gradually so the current funds’ portfolio and any
additions to it will be the main determinant of performance in the rest of
this financial year and possibly for several years to come.
Jeremy Tigue
Chairman
21 November 2016
REPORT OF BACIT (UK) LIMITED
During the six months to 30 September 2016, the NAV total return of BACIT
Limited (the “Company”) was 4.82%, including the 2.2p dividend paid out on
19 August 2016. The Net Asset Value (“NAV”) increased by 2.94% from
122.29p to 125.88p, while the FTSE All-Share (£) Total Return Index rose by
12.85%. Over the period, the Company’s share price fell from 131.50p to
126.00p.
The Company started the financial period 97.5% invested, and ended it with
99.3% deployed across 32 investments. Between the CRT Pioneer Fund through
BACIT Discovery Ltd, Chenavari European Deleveraging Opportunities,
InfraCapital II and Permira V, undrawn commitments now total 9.2% of NAV.
Since inception the Company has endeavoured to use modest leverage to achieve
its aims, and ended the period with Gross exposure in Net Equity Equivalents
estimated at 105% and Net exposure at 49%, in the middle of each range since
launch (63-173% and 37-57%).
The increase in the Company’s Net exposure during the period has occurred
almost entirely as a result of underlying managers changing their portfolio
holdings, rather than changes at the Company level.
The Company’s aims are to capture 70% of the upswing the FTSE All Share TR
(£) and not more than 40% of their downdrafts, with rather less volatility.
During the Company’s first forty-seven months, we are pleased to report that
it has captured 84% of the benchmark’s return, with a volatility of 5.7%
versus the market’s 10.0%.
This skew is down to the portfolio owning assets that should, even in a
crisis, ‘point different ways’: specifically, short as well as long,
through derivatives and multiple asset classes, both private and listed. At 30
September, the portfolio consisted of 60% hedge funds and 10% in unlisted
assets.
As we have described previously, the unlisted assets element of the portfolio
is important as it disproportionately represents the disrupting,
digitally-based incarnations of industries, which are growing and
cannibalising the old. Their established and fundamentally analogue
predecessors are being visibly disintermediated and so struggling to hold
market share with all the negative operational gearing effects that that has.
These companies dominate the listed exchanges, in the eighth year of a bull
market, which are two more reasons for the portfolio to contain its long
market exposure.
Finally, and importantly, we also use US Dollar exposure to mute portfolio
volatility: as the world’s reserve currency it tends to be inversely
correlated to risk assets in times of stress.
The period was dominated by market surprise at the UK’s vote for Brexit, and
the consequent devaluation of Sterling, from almost $1.50/£ to around
$1.30/£ during the period. This had the immediate effect of increasing the
Sterling value of 33% of the portfolio which is held in unhedged US Dollar
denominated share classes, and the US Treasury Inflation Protected (TIPs)
portfolio which is sterling denominated, but unhedged.
The portfolio’s Sterling gain was curtailed by a risk reduction exercise
undertaken in late February 2016. At that time we hedged a little under half
the portfolio’s exposure to the US Dollar at 1.394: the Company’s average
‘in’ cost was above $1.60 and the 24 month trading range had been
$1.70-$1.40. The goal was to mitigate the impact of any sharp exchange rate
move back to, or beyond, fair value, at the time believed to be above
$1.50/£. The opportunity cost to the portfolio during the period was
approximately 3% of NAV.
During the period we added one fund to the portfolio, the aforementioned
Chenavari European Deleveraging Opportunities which exposes the Company to the
credit of small and medium sized companies in Continental Europe. These are
typically conservatively run but have nevertheless struggled to access the
credit markets since the Financial Crisis. These risk-reward characteristics
are attractive from a lender’s perspective, but changes in regulations
around bank capital risk weightings are forcing at least some of those
historic lenders to pass on the contracts to unlevered parties, such as this
fund.
Equity Funds (22.7% at 30 September 2016 vs. 22.7% at 31 March 2016)
The five funds in this group returned 12.3% during the period, with equities
recovering on a 16% rise in the oil price which drove Russian equities higher,
and the devaluation of Sterling against all major currencies, which boosted UK
equities. Both Japanese managers outperformed their indices, one
significantly.
Equity Hedge Funds (35.1% at 30 September 2016 vs. 32.9% at 31 March 2016)
The eleven funds in this group expose the Company to Europe, sub-Saharan
Africa and the broader Emerging Markets, as well as to gold miners. Their NAVs
collectively rose 9.9%, taking the 12 month contribution to 13.2%. Africa and
Emerging Markets remained challenging, as did some European elements, but
these were more than offset by contributions from elsewhere in Europe and the
gold miners, the latter being noteworthy for the lack of volatility of
returns.
Commodity Funds (4.9% at 30 September 2016 vs 5.7% at 31 March 2016)
These managers expose the Company to globally traded agricultural commodities;
European and North American power, natural gas, coal and oil; and Australasian
power. The asset prices in this subset are volatile and these funds’ risk
management is of critical importance. The managers’ performances are
uncorrelated to one another and to the wider market. This was a difficult
period for the funds which gave up much of the gains of the last 12 months.
Fixed Income and Credit Funds (14.4% at 30 September 2016 vs. 16.0% at
31 March 2016) (Undrawn commitment: 3.0% of NAV)
The seven funds in this group had diverging experiences. The US Treasury
index-linkers benefited from rising inflation expectations, European small and
mid-cap credit performed solidly, as did our convertible arbitrage manager.
The credit positions relating to property, both securitised and private, had a
tougher time, though the former recovered strongly in the second half, and the
latter position is almost fully harvested.
Global Macro Funds (13.1% at 30 September 2016 vs. 12.4% at 31 March 2016)
This group includes three funds which pursue global macro opportunities, and
whose trademarks include profiting from bursting bubbles. Themes they are
expressing include the QE bubble through airline over-extension, China
slowdown recommencing, and Central Banks’ growing credibility challenge. One
made a small profit and two a small loss during the period.
Other Strategies (9.2% at 30 September 2016 vs 7.8% at 31 March 2016) (Total
undrawn commitments 6.2% of NAV)
This group includes commitments to four longer-life opportunities. Amongst
these is BACIT’s commitment to the CRT Pioneer Fund, the vehicle through
which the Company is investing in early drug discovery and medtech candidates
with a pipeline deal with Cancer Research UK, and listed in the table as
“BACIT Discovery”. Although just 29% drawn, CRT Pioneer has now made nine
investments. As the fund announced during the period, they have commenced
clinical trials with one drug, which has been optioned by a North American
biotech company.
Since the Period End
Additional drawdowns took the private equity investments to just under half
called in the case of Infracapital II, and 82% called by Permira V. There have
been no divestments or new investments.
The geopolitical risks we described twelve months ago have grown, and with
them the likely volatility of markets. It is too soon after the UK Referendum
and Donald Trump’s election to be definitive as to the probable impact on
asset prices, but the policies he has revealed thus far support an increase in
our base case assumptions for inflation and interest rates.
The end of October marked BACIT’s fourth anniversary. Against a rising VIX
(up almost 30%), the underlying performance for the funds during the month was
strong, with most funds outperforming their benchmarks. A further devaluation
of Sterling from ~$1.30/£ to below $1.22/£ at the month end created a
further currency translation benefit of around 1.5%.
Sincere Thanks
None of this could have been achieved without the unstinting support of the
managers. We are immensely grateful for the trust placed in us by them and the
Company’s investors alike, and look forward to 2017.
BACIT (UK) Limited
21 November 2016
PRINCIPAL RISKS AND UNCERTAINTIES
The Group’s assets held through the Partnership comprise mainly investments
in long-only funds, hedge funds, private equity funds and real estate funds.
Its principal risks are therefore economic, performance-driven and financial
in nature.
The principal risks can be divided into various areas as follows:
- Investment risks;
- Operational risks;
- Legal and regulatory risks; and
- Financial risks.
These risks, and the way in which they are managed, are described in more
detail under the heading “Principal Risks and Uncertainties” within the
Directors’ report in the Group’s Annual Report for the year ended
31 March 2016. The Group’s principal risks and uncertainties have not
changed materially since the date of that report and are not expected to
change materially for the remainder of the Group’s financial year, except as
a result of the proposals being put to shareholders, as set out in note 19.
STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
We confirm to the best of our knowledge:
- the Condensed set of Financial Statements have been prepared in accordance
with International Accounting Standard 34, “Interim Financial Reporting”
as adopted by the European Union;
- the Chairman’s Statement and the Report of BACIT (UK) Limited meet the
requirement of an interim management report, and include a fair review of the
information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication
of important events that have occurred during the first six months of the
financial year and their impact on the condensed set of financial statements;
and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party
transactions that have taken place in the first six months of the current
financial year and that have materially affected the financial position or
performance of the entity during that period; and any changes in the related
party transactions described in the last annual report that could do so.
Signed on behalf of the Board by:
Jeremy Tigue
Chairman
Nicholas Moss
Director
21 November 2016
BACIT INVESTMENTS LP INCORPORATED PORTFOLIO STATEMENT (UNAUDITED)
As at 30 September 2016
% of Total % of Total
NAV of NAV of
Fair Value Partnership Partnership
£'000 as at as at 31.03.16
30.09.16
Equity Funds
Majedie UK Equity UK equities 28,717 5.9
Man GLG Pan-European Growth European high growth equities (Long bias) (Long; mandate permits Short) 9,784 2.0
Polar Capital Japan Alpha Japanese large and mid cap equities 29,679 6.2
Prosperity Russia Domestic Russian equities with a domestic focus 7,104 1.5
Russian Prosperity Russian equities 13,184 2.7
The SFP Value Realization Small and mid-cap Japanese equities 21,658 4.4
110,126 22.7 22.7
Equity Hedge Funds
ARG Value (formerly Argenta Value) European equities (Long/Short) 8,379 1.7
Maga Smaller Companies UCITS European equities (Long/Short) 24,538 5.1
Polygon European Equity Opportunity European event-driven equities (Long/Short) 31,783 6.5
Polygon Mining Junior gold miners, hedged with commodities, indices and large caps 21,717 4.5
Portland Hill Event-driven equity investments (Long/Short) 20,898 4.3
SW Mitchell Emerging European Emerging European equities (Long; mandate permits Short) 2,130 0.4
SW Mitchell European European equities (Long/Short) 21,650 4.4
Tower South African listed equities (Long/Short) 24,854 5.1
Tower GEM UCITS EM equities, primarily sub-Saharan Africa (Long/Short) 3,453 0.8
Zebedee Growth European equities (Long/Short) 11,297 2.3
170,699 35.1 32.9
Commodity Funds
Cumulus European, Australasian and US power; oil, natural gas, coal (Long/Short) 14,046 2.9
The AlphaGen Long Short Agriculture Global exchange traded agricultural commodities (Long/Short) 9,431 2.0
23,477 4.9 5.7
Fixed Income and Credit Funds
CG Portfolio Dollar US TIPs (inflation linked government bonds) 18,106 3.7
Chenavari European Deleveraging Opportunities Synthetic and cash credit portfolios sold by UK and European banks 2,464 0.5
Chenavari EU Real Estate European real estate debt, through private and public transactions 596 0.1
Chenavari EU Regulatory Capital European corporate credit through private transactions 8,960 1.9
Polygon Convertible Opportunity US and European convertible arbitrage 12,876 2.7
WyeTree European Recovery European residential mortgage-backed securities 15,754 3.2
WyeTree RRETRO US subprime mortgage-backed securities 11,176 2.3
69,932 14.4 16.0
Global Macro Funds
Parity Value Discretionary global macro (Long/Short) 23,937 4.9
Seia Global Macro Discretionary global macro (Long/Short) 15,905 3.3
Sinfonietta Equities, rates, FX and commodities, with an Asian focus (Long/Short) 23,970 4.9
63,812 13.1 12.4
Other Strategies
BACIT Discovery Oncology-related drug & medtech 10,631 2.2
Bridge 140 AB Private equity, early growth investments in Northern Europe 2,294 0.5
Infracapital Partners II Private investments in European infrastructure 15,567 3.2
Permira V Private equity, mid to large cap European buyouts 16,189 3.3
44,681 9.2 7.8
Total Investments 482,727 99.4 97.5
Cash and cash equivalents 16,567 3.4
Trade and other receivables 329 0.1
Unrealised losses on forward currency contracts (11,296) (2.4)
Trade and other payables (2,462) (0.5)
3,138 0.6 2.5
Total Value of the Partnership 485,865 100.0 100.0
INDEPENDENT REVIEW REPORT TO THE MEMBERS OF BACIT LIMITED
We have been engaged by the Company to review the condensed set of
consolidated financial statements in the interim financial report for the six
months ended 30 September 2016 which comprises the Condensed Consolidated
Statement of Comprehensive Income, the Condensed Consolidated Statement of
Changes in Net Assets Attributable to Holders of Ordinary Shares, the
Condensed Consolidated Statement of Financial Position, the Condensed
Consolidated Statements of Cash Flows and related notes 1 to 19. We have read
the other information contained in the interim financial report and considered
whether it contains any apparent misstatements or material inconsistencies
with the information in the condensed set of financial statements.
This report is made solely to the Company in accordance with the International
Standard on Review Engagements (UK and Ireland) 2410 “Review of Interim
Financial Information Performed by the Independent Auditor of the Entity”
issued by the Auditing Practices Board. Our work has been undertaken so that
we might state to the Company those matters we are required to state to it in
an independent review 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, for our review work, for this report, or for the conclusions
we have formed.
Directors’ responsibilities
The interim financial report is the responsibility of, and has been approved
by, the directors. The directors are responsible for preparing the interim
financial report in accordance with the Disclosure and Transparency Rules of
the United Kingdom’s Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the Group are
prepared in accordance with International Financial Reporting Standards
(“IFRSs”) as adopted by the European Union. The condensed set of financial
statements included in this interim financial report has been prepared in
accordance with International Accounting Standard 34, “Interim Financial
Reporting,” as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the interim financial report based on our
review.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 “Review of Interim Financial Information
Performed by the Independent Auditor of the Entity” issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the interim
financial report for the six months ended 30 September 2016 is not prepared,
in all material respects, in accordance with International Accounting Standard
34 as adopted by the European Union and the Disclosure and Transparency Rules
of the United Kingdom’s Financial Conduct Authority.
Deloitte LLP
Chartered Accountants and Statutory Auditor
St Peter Port
21 November 2016
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months to 30 September 2016
Unaudited
01.04.16 to
30.09.16
Notes Revenue Capital Total
£'000 £'000 £'000
Investment income
Other income 4 10,183 - 10,183
Total investment income 10,183 - 10,183
Net gains on financial assets at fair value through profit or loss 5 - 13,571 13,571
Total gains - 13,571 13,571
Expenses
Charitable donation 6 2,381 - 2,381
Administration fee 7 83 - 83
Management expense contribution 13 449 - 449
Directors' fees 12 35 - 35
Other expenses 14 306 - 306
Total expenses 3,254 - 3,254
Profit for the period 6,929 13,571 20,500
Earnings per Ordinary Share 11 1.80p 3.52p 5.32p
The Total column of this statement represents the Group's Condensed
Consolidated Statement of Comprehensive Income, prepared in accordance with
International Financial Reporting Standards (“IFRS”) as adopted by the
European Union (“EU”) and interpretations adopted by the International
Accounting Standards Board (“IASB”). Whilst the Company is not a member of
the Association of Investment Companies, the supplementary revenue and capital
columns are both prepared under guidance published by the Association of
Investment Companies.
The Profit for the period is the "total comprehensive income" as defined by
IAS 1. There is no other comprehensive income as defined by IFRS.
All the items in the above statement derive from continuing operations.
The notes form an integral part of these financial statements.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months to 30 September 2015
Unaudited
01.04.15 to
30.09.15
Notes Revenue Capital Total
£'000 £'000 £'000
Investment income
Other income 4 8,809 - 8,809
Total investment income 8,809 - 8,809
Net losses on financial assets at fair value through profit or loss 5 - (21,804) (21,804)
Total losses - (21,804) (21,804)
Expenses
Charitable donation 6 2,383 - 2,383
Administration fee 7 83 - 83
Directors' fees 12 50 - 50
Other expenses 14 435 - 435
Total expenses 2,951 - 2,951
Profit/(loss) for the period 5,858 (21,804) (15,946)
Earnings/(loss) per Ordinary Share 11 1.53p (5.69)p (4.16)p
The Total column of this statement represents the Group's Condensed
Consolidated Statement of Comprehensive Income, prepared in accordance with
IFRS as adopted by the EU and interpretations adopted by the International
Accounting Standards Board (“IASB”). Whilst the Company is not a member of
the Association of Investment Companies, the supplementary revenue and capital
columns are both prepared under guidance published by the Association of
Investment Companies.
The Profit/(loss) for the period is the "total comprehensive income" as
defined by IAS 1. There is no other comprehensive income as defined by IFRS.
All the items in the above statement derive from continuing operations.
The notes form an integral part of these financial statements.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS
ATTRIBUTABLE TO HOLDERS OF ORDINARY SHARES
For the six months to 30 September 2016
Share
Capital Capital Revenue Unaudited
Account Reserves Reserves Total
Notes £'000 £'000 £'000 £'000
Balance at the beginning of the period 406,208 66,037 - 472,245
Total Comprehensive income
for the period - 13,571 6,929 20,500
Transactions with Shareholders:
Distributions 3 - (1,533) (6,929) (8,462)
Issuance of shares 11 1,800 - - 1,800
Balance at the end of the period 408,008 78,075 - 486,083
For the six months to 30 September 2015
Share
Capital Capital Revenue Unaudited
Account Reserves Reserves Total
Notes £'000 £'000 £'000 £'000
Balance at the beginning of the period 403,987 75,077 - 479,064
Total Comprehensive (loss)/income
for the period - (21,804) 5,858 (15,946)
Transactions with Shareholders:
Distributions 3 - (2,182) (5,858) (8,040)
Issuance of shares 11 2,221 - - 2,221
Balance at the end of the period 406,208 51,091 - 457,299
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 September 2016
Unaudited Audited
30.09.16 31.03.16
Notes £'000 £'000
ASSETS
Non-current assets
Financial assets at fair value through profit or loss 8 485,865 472,294
Current assets
Bank and cash deposits 320 41
Trade and other receivables 9 2,485 4,795
Total assets 488,670 477,130
LIABILITIES AND EQUITY
Current liabilities
Trade and other payables 10 2,587 4,885
Total liabilities 2,587 4,885
EQUITY
Share capital account 11 408,008 406,208
Distributable Reserves 78,075 66,037
Total equity 486,083 472,245
Total liabilities and equity 488,670 477,130
Total net assets attributable to holders of Ordinary Shares
486,083 472,245
Number of Ordinary Shares in Issue 11 386,138,785 384,665,158
Net assets attributable to holders of
Ordinary Shares (per share) £1.26 £1.23
The Unaudited Condensed Consolidated Financial Statements were approved on
21 November 2016 and signed on behalf of the Board of Directors by:
Jeremy Tigue
Chairman
Nicholas Moss
Director
The notes form an integral part of these financial statements.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months to 30 September 2016
Unaudited Unaudited
01.04.16 to 01.04.15 to
30.09.16 30.09.15
Note £'000 £'000
Cash flows from operating activities
Profit/(loss) for the period 20,500 (15,946)
Adjusted for:
(Gains)/losses on financial assets at fair value through profit or loss (13,571) 21,804
Operating cash flows before movements in working capital 6,929 5,858
Decrease in other receivables 2,310 2,018
Decrease in other payables (2,298) (2,046)
Net cash generated from operating activities 6,941 5,830
Cash flows from financing activities
Distributions 3 (6,662) (5,819)
Net cash used in financing activities (6,662) (5,819)
Net increase in cash and cash equivalents 279 11
Cash and cash equivalents at beginning of period 41 23
Cash and cash equivalents at end of period 320 34
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the six months to 30 September 2016
1. BASIS OF PREPARATION AND ACCOUNTING POLICIES
The following accounting policies have been applied consistently in dealing
with items which are considered to be material in relation to the Group’s
financial statements:
The Annual Report and Audited Financial Statements of the Company are prepared
in accordance with IFRS as adopted by the EU. The Condensed Set of Financial
Statements included in this Interim Financial Report have been prepared in
accordance with International Accounting Standard 34 – Interim Financial
Reporting (“IAS 34”) as adopted in the European Union.
A copy of the statutory accounts for the year ended 31 March 2016 has been
delivered to the Shareholders. The auditor’s report on those accounts was
unmodified.
The accounting policies have been applied consistently in dealing with items
which are considered to be material in relation to the Group's Unaudited
Condensed Consolidated Financial Statements (the “Financial Statements”).
The accounting policies applied by the Group in these Financial Statements are
consistent with those applied by the Group in its financial statements for the
year ended 31 March 2016.
The Company meets the definition of an investment entity under IFRS 10
‘Consolidated Financial Statements’ and as such does not consolidate the
Partnership. The Partnership is valued at fair value through profit or loss as
described in note 1 of the annual financial statements for the year ended
31 March 2016. The General Partner continues to be consolidated as it does
not meet the definition of an investment entity.
Going Concern
The Company has been established with an indefinite life. However, the
Company’s Articles provide that Shareholders will be entitled to vote on the
discontinuation of the Company every five years, starting with the Annual
General Meeting in 2017. The vote will require more than 50% of the votes cast
on the resolution to be in favour to require the Directors to formulate
proposals, to be put to Shareholders within six months of such resolution
being passed, for the reorganisation or reconstruction of the Company. These
proposals may or may not involve winding up the Company or liquidating all or
part of the Company’s then existing portfolio and there can be no assurance
that a discontinuation vote will necessarily result in the winding up of the
Company or liquidation of all or some of its investments. A special resolution
of the Shareholders with 75% or more of the votes cast being in favour of the
resolution is required to wind up the Company.
As described in note 19, the Company is bringing forward the discontinuation
vote that would otherwise have been proposed at its Annual General Meeting in
2017. In current circumstances the Directors do not expect that this vote will
be carried, and therefore they have considered the ability of the Company to
continue in operation past this period
The Group’s assets currently consist mainly of securities amounting to
£482,727,000 (31 March 2016: £460,418,000) of which 51% are readily
realisable in three
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