Interim Results

RNS Number : 6595S

Rapid Realisations Fund Limited

14 September 2010

 

 

14 September 2010

 

Rapid Realisations Fund Limited

 

Interim Results for the six months ended 30 June 2010

 

Rapid Realisations Fund Limited (the "Company" or "Rapid") today announces its unaudited interim results for the six months ended 30 June 2010.

 

Chairmans Statement, Rhys Davies:

"I am pleased to report on the performance of Rapid Realisations Fund Limited (the "Company" or "RRF") for the period ended 30 June 2010.

 

On 26 May 2010 Damille Investments Limited acquired a shareholding of 17.33% in the Company. This acquisition was the catalyst to bring about a number of material changes including:

 

·; The resignation of Peter Tom, Susie Farnon and Bob Holt and the appointment of Rhys Davies, Brett Miller and David McHugh as Directors of the Company

·; The amendment of the investment objective and policy of the Company; "the Company will not make any new investments, will manage the realisation of the Company's investment portfolio and will maximise the return of invested capital to shareholders during the period ending on 30 September 2013." 

·; The reduction in the maximum aggregate fees payable to the Directors of the Company to £80,000 and the reduction of the maximum fees payable to any one Director to £15,000 per annum with the exception of the Chairman whose remuneration was reduced to a maximum of £20,000 per annum.

·; The change of the Company's broker.

·; The return of £13.85 million to shareholders equivalent to 24p per share announced today.

With the implementation of these changes the Company is focused on the realisation of the current investment portfolio over the course of the next 3 years. Cenkos Fund Managers ("CFM") remains the Company's investment manager and the Board of Directors continues to work closely with CFM to maximise realisations.

 

During the period under review and prior to the implementation of the changes outlined above, the Company did however make 6 follow on investments totalling circa £5.0 million. Whilst we will not be making any further investments the Company does have a commitment to provide additional funding of £0.5 million to an investee company. We expect that this funding will be drawn before the end of the year.

 

In addition to the follow on investments outlined above the Company also received repayment of a loan made to an investee company of circa £0.75 million during the period and has realised approximately £0.55 million from the sale of shares in one of its listed investee companies. I expect that we will make further realisations before the end of the year. Further details in relation to the investment portfolio are contained within the Investment Manager's Report.

 

Following the changes to the Board, which included my appointment as Chairman, we have reviewed the carrying value of the Company's investments on a line by line basis. As a result of this work, and in conjunction with CFM, we have reduced the accounting "Fair Value" of a number of the Company's investments, which, when combined with adverse currency movements in the period, has resulted in a reduction of the NAV per share to 94.02p. This is a reduction of 9.25% since the last published NAV per share as at 31 March 2010.

 

Whilst we believed it appropriate to reduce the accounting "Fair Value" of some of the Company's investments as at 30 June 2010, we believe that there is potential additional value to be unlocked from a number of the existing investee companies. We are committed to working with CFM to unlock this value for the benefit of all shareholders."

 

Investment Overview

 

As previously reported we have been focused on positioning the investee companies to facilitate an exit of the Company's investments for some time now. During the six months under review we continued this work and feel that a number of the investments are capable of being exited within the next 12 months. The changes to the Company's board and investment policy has not altered our strategy for realising the current investments and we are confident that the communicated 3 year period over which the investments will be realised is sufficient to ensure that value is maximised at the point of exit.

 

 

Financial Highlights

 

·; Net Asset Value per share at 30 June 2010 of 94.02p 

·; Cash and cash equivalents as at 30 June 2010 of circa £14.9 million

·; Realised circa £1.2 million from loan repayments and share sales

·; Completed 6 follow on investments totalling circa £5.0 million

·; Follow on commitments of £0.5 million

 

Since the Period End

 

·; Realised circa £0.2 million from the exit of one investment and further reduction in RRF's holding in a listed investee company

 

Investment Portfolio Activity	New Investments	Sales Proceeds	Net outflow
Period	£'m	£'m	£'m
5 months to 31 Dec 2007	(3.0)	-	(3.0)
12 months to 31 Dec 2008	(29.6)	0.4	(29.2)
12 months to 31 Dec 2009	(6.4)	-	(6.4)
6 months to 30 June 2010	(5.0)	1.2	(3.8)
Total	(44.0)	1.6	(42.4)

 

Investment Highlights

 

During the period to June 2010 RRF made 6 follow on investments totalling circa £5.0 million in existing investee companies;

 

Barburrito Ltd, a Mexican fast-casual food business, opened 2 new restaurants during the period under review and plans to open 2 additional restaurants before the end of the year. RRF's investment has been used to support the expansion of the business and currently £0.5 million remains undrawn.

 

DDM Group AG, purchaser of distressed debt in Eastern Europe, has continued to make excellent progress during the 6 months to 30 June 2010 and has acquired a number of new portfolios during the period. The company drew down funds from the facility provided by RRF to support these acquisitions.

 

Information Prophets Ltd, continues to develop new modules for their specialist energy compliance software platform to cater for the increasing reporting demands and compliance requirements in this rapidly developing sector. RRF's investment has been used to support the working capital requirements of the development of these additional modules.

 

Service Solutions Group Ltd, a provider of insurance claims management services and building repairs, has continued to invest in and develop a number of new revenue streams during the period under review. RRF's investment has supported the development of theses revenue streams which are expected to contribute to the profitability of the group during H2 2010.

 

Taylormade Betting Ltd, an independent bookmaker chain in the North West of England, continue to look at additional expansion opportunities and have also been focused on improving the performance of the existing estate during the period under review. RRF's investment is in place to fund the continued expansion of the business.

 

WD Scott Ltd, a specialist performance improvement consultancy business, successfully concluded the restructuring of its business during the 6 months to June 2010. The restructuring included the reduction of debt using the proceeds of a business sale, the strengthening of its European operation via the acquisition of a business and the strengthening of the balance sheet via the conclusion of a rights issue. RRF participated in the rights issue but did not take up its full entitlement.

 

During the 6 months to June 2010 RRF also realised circa £1.2 million as a result of loan repayments and sale of shares in one of its listed investee companies:

 

Enegi Oil Plc. Shares in Enegi Oil Plc rallied during the 6 months to 30 June 2010 and traded volumes have been solid. RRF has taken the opportunity to reduce its holding in this company during the period.

 

Green Compliance Plc, has made excellent progress during the period as it pursues its buy and build strategy in the blue collar compliance market focusing on sectors including water hygiene, pest control and fire protection. The company has completed multiple acquisitions since the turn of the year, raised further funds from the market, agreed a bank funding line and has also repaid the loan provided by RRF in 2009.  

 

In addition to the 8 companies highlighted above where RRF either made or realised an investment during the period under review, as at 30 June 2010 RRF had a further 9 investee companies, the activities of which are summarised in the Company's 2009 year end accounts.

 

As highlighted in the Chairman's statement the new Board of RRF has reviewed the accounting "Fair Value" of all investments on a line by line basis. This review resulted in a reduction in the carrying value of a number of RRF's investments. We have set out in the table below a summary of the investment portfolio segmented by valuation basis as at 30 June 2010.

 

Investment Valuation by Category	Number of Investments	Valuation £'m	% of portfolio by value
Unquoted investments at Directors' valuation		£'m
Earnings multiple	6	19.2	49.4%
Price of recent fundraise	2	0.9	2.3%
Net assets	4	11.8	30.3%
Quoted investments at market value (bid price)
Quoted market price	2	2.6	6.7%
Discount to quoted market price	3	4.4	11.3%
Total	17	38.9	100.0%

 

Since the period end

Since 30 June 2010 RRF has realised circa £0.4 million.

 

Daily Internet Plc. We have now exited this investment.

 

Enegi Oil Plc.Prices and traded volumes have remained firm post 30 June 2010 and we have taken the opportunity to further reduce RRF's holding.

 

 

Enquiries:

 

 

Philip Secrett

Grant Thornton Corporate Finance +44 (0) 20 7383 5100

Nominated Adviser

 

James Maxwell / Nick Donovan Singer Capital Markets Limited +44 (0)20 3205 7500

Broker

 

 

 

Statement of Financial Position

 

As at 30 June 2010

 

	Notes	Unaudited 30 June 2010	Audited 31 December 2009	Unaudited 30 June 2009
		£	£	£
Investments	2 & 6
Fair value through profit or loss		17,612,115	22,499,107	19,257,259
Loans and receivables		17,219,066	17,353,653	18,036,173
Total investments		34,831,181	39,852,760	37,293,432
Current assets
Current Investments:
Loans and receivables	6	4,095,000	1,955,000	-
Other receivables	7	886,509	579,884	913,691
Cash and cash equivalents	8	14,913,726	18,364,927	22,517,971
Amounts receivable on open forward foreign exchange contracts	12(d)	-	407,340	923,970
		19,895,235	21,307,151	24,355,632
Current liabilities
Other payables	9	475,764	382,634	484,710
Amounts payable on open forward foreign exchange contracts	12(d)	-	316,860	-
		475,764	699,494	484,710
Net current assets		19,419,471	20,607,657	23,870,922
Total net assets		54,250,652	60,460,417	61,164,354
Equity attributable to Ordinary Shareholders
Reserves		54,250,652	60,460,417	61,847,604
Treasury Shares	10	-	-	(683,250)
Total Equity		54,250,652	60,460,417	61,164,354
Net asset value per Ordinary Share	11	0.9402	1.0478	1.0334

 

 

 

 

 

 

 

The accompanying notes form an integral part of these financial statements.

 

Statement of Comprehensive Income

 

For the period ended 30 June 2010

 

	Notes	Unaudited 1 January 2010 To 30 June 2010		Unaudited 1 January 2009 To 30 June 2009
		£		£
Income	2
Finance income		36,130		225,050
Commission income		17,000		39,900
Loan note interest		1,220,635		979,839
Dividend income		28,136		27,368
Other investment income		116,710		54,482
Net realised losses on fair value through profit or loss investments	6	(508,241)		-
Movement in net unrealised loss on fair value through profit or loss investments	6	(3,891,782)		(830,943)
Movement in impairment charge on loans	6	(1,240,000)		-
Movement in net unrealised foreign exchange losses on loan investments	6	(1,142,444)	-	(1,070,849)
Movement on net unrealised (loss)/gain on open forward foreign currency contracts	12(d)	(90,480)		923,970
Foreign exchange gains/(losses)		126,401		(228,568)
Total income		(5,327,935)		120,249
Expenses
Investment management fee	3	567,174		600,367
Administration fee	3	52,240		46,271
Custodian fee	3	8,467		9,179
Loan note interest written off	13	80,743		-
Transaction expenses		51,494		49,016
Directors' fees and expenses	4	54,332		53,857
Auditor's remuneration		20,267		26,556
Legal and professional fees		33,336		15,853
Other expenses		13,777		15,058
Total expenses		881,830		816,157
Net loss from operations		(6,209,765)		(695,908)
Total Comprehensive net loss for the period		(6,209,765)		(695,908)
Loss per Ordinary Share	5	(0.1076)		(0.012)

 

 

 

 

 

 

 

 

The results from the current and prior periods are derived from continuing operations.

 

The accompanying notes form an integral part of these financial statements.

 

 

Statement of Changes in Equity

 

For the period ended 30 June 2010

 

		Unaudited 1 January 2010 To 30 June 2010
		Reserves
	Notes	Revenue Reserve	Distributable Reserve	Treasury Shares	Total
		£	£	£	£
Balance brought forward		4,713,406	55,747,011	-	60,460,417
Total comprehensive net loss for the period		(6,209,765)	-	-	(6,209,765)
Balance carried forward		(1,496,359)	55,747,011	-	54,250,652

 

 

For the period ended 30 June 2009

 

		Unaudited 1 January 2009 To 30 June 2009
		Reserves
	Notes	Revenue Reserve	Distributable Reserve	Treasury Shares	Total
		£	£	£	£
Balance brought forward		4,879,443	57,664,069	(139,600)	62,403,912
Total comprehensive net loss for the period		(695,908)	-	-	(695,908)
Transaction with owners, recorded directly in equity:
Repurchase of Ordinary Shares - held as Treasury Shares	10	-	-	(543,650)	(543,650)
Balance carried forward		4,183,535	57,664,069	(683,250)	61,164,354

 

 

 

 

 

The accompanying notes form an integral part of these financial statements.

 

 

Statement of Cash Flows

 

For the period ended 30 June 2010

 

	Notes	Unaudited 1 January 2010 To 30 June 2010		Unaudited 1 January 2009 To 30 June 2009
		£		£
Cash flows from/(used in) operating activities
Commission received		17,000		39,900
Loan note interest received		1,289,639		610,307
Dividend income received		28,136		27,368
Other investment income		211,624		7,373
Operating expenses paid		(1,401,772)		(1,563,318)
Net cash from/(used in) operating activities		144,627		(878,370)
Cash flows used in investing activities
Amounts paid for purchases of investments		(4,963,463)		(4,654,145)
Amounts received from sales of investments		1,197,450		-
Net cash used in investing activities		(3,766,013)		(4,654,145)
Cash flows from/(used in) financing activities
Bank interest received		43,784		296,359
Repurchase of Ordinary Shares - held as Treasury Shares		-		(543,650)
Net cash from/(used in) financing activities		43,784		(247,291)
Net decrease in cash and cash equivalents		(3,577,602)		(5,779,806)
Cash and cash equivalents at start of period		18,364,927		28,526,345
Effect of foreign exchange rate changes on cash and cash equivalents		126,401		(228,568)
Cash and cash equivalents, end of period	8	14,913,726		22,517,971

 

 

Cash and cash equivalents comprise the following amounts:
Bank deposits		14,913,726		22,517,971
		14,913,726		22,517,971

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes form an integral part of these financial statements.

 

 

Notes to the Financial Statements

Period ended 30 June 2010

 

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.

 

NEW INVESTMENT OBJECTIVE POLICY - effective 14 September 2010

On 25 June 2010, the Board announced that it has resolved to adopt the following policies which were proposed to the shareholders and accepted by the shareholders as an ordinary resolution at the Company's AGM held on 14 September 2010:

 

§ The investment objective and policy of the Company be amended 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. During this period the Company shall not make any new investments.

OLD INVESTMENT OBJECTIVE POLICY - ceased 14 September 2010

The Investment Manager believes that a large number of private companies can be successfully prepared for IPO or trade sale by investing time, financial expertise and money.

 

It is the Company's policy to invest in companies that are profitable or close to profitability. These companies will also typically need capital for one or more of the following reasons:

 

§ to finance a roll out strategy;

§ to finance a consolidation strategy;

§ to finance the recruitment of new employees;

§ to replace a retiring owner-manager, or early stage investors; and/or

§ where a company has failed to float because of timing.

 

Each business in which the Company invests will, in the opinion of the Investment Manager, be capable of achieving a realisation either through a sale or by listing of its shares on a stock exchange within 6 to 36 months of an investment by the Company.

 

Unless the Board otherwise determines, there will be no geographical or sectoral restrictions upon the Company's investments, save that the prior consent of the Board will be required before investments will be made outside the UK. Generally, the Company will seek not to invest more than 15 per cent. of the Company's NAV in any single investment, or more than 15 per cent. of the Company's NAV in special situations (such as investments in companies that are already listed), in each case at the time of investment, although such limits may be increased to 30 per cent. in certain cases where the Board deems appropriate on the advice of Cenkos Fund Managers.

 

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 Cenkos Fund Managers) considers that satisfactory opportunities for investment arise at a time when the Company is close to being Fully Invested. In any event, borrowings will be limited to 25 per cent. of the Company's last announced NAV at the time of draw down.

 

The Directors intend to generate returns for Shareholders through both capital appreciation and dividend income growth. The amount of any dividend will be determined by the Board, which will aim to distribute such funds as are considered to be surplus to the Company's requirements, having regard for the investment opportunities available (and after taking into account all costs, liabilities and expenses of the Company, including accrued performance fees of Cenkos Fund Managers). Distributions to Shareholders will usually take the form of dividends, although they may also take the form of a tender offer by the Company for Ordinary Shares.

 

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 financial statements:

 

(a) Basis of Preparation:

The interim financial statements of the Company have been prepared in accordance with IAS 34 (as adopted by the EU) "Interim Financial Reporting".

 

The financial statements of the Company have been prepared under the historical cost convention modified by the revaluation of investments and assets and liabilities at fair value through profit or loss, in accordance with IFRS and The Companies (Guernsey) Law, 2008.

 

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.

 

(b) Income:

Bank interest income is classified as finance income in the 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 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 offer UK investors an attractive return on their investment, primarily through investing in companies which are likely to achieve an IPO or a sale within a short term time horizon and through a small number of investment companies that are already listed. The performance of the Company is measured and reported to investors in sterling. The Directors consider sterling 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 year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the 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 Statement of Total Comprehensive Income. The Company holds investments denominated in Euro 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. The fair value of the forward foreign currency contracts are included in amounts receivable on open forward foreign currency contracts in the Statement of Financial Position and is shown in detail in note 12(d) to these financial statements.

 

(d) Financial Instruments:

Financial assets and financial liabilities are recognised in the 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 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 trade payables and 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 Statement of Total Comprehensive Income.

 

(e) Investments:

The Company's investments comprise loans, equities, warrants 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".

 

Warrant investments meet the definition of "Derivatives" under IAS 39 and have been designated as held for trading in accordance with IAS 39 (Revised) "Financial Instruments: Recognition and Measurement". They are accounted for as fair value through profit or loss.

 

Investments in convertible loan notes have been designated as loans and receivables in accordance with IAS 39 (Revised) "Financial Instruments: Recognition and Measurement".

 

(ii) Measurement

Equities and warrants are initially recognised at fair value. Transaction costs are expensed in the Statement of Total Comprehensive Income. Subsequent to initial recognition, equities and warrants 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 Statement of Total Comprehensive Income in the year in which they arise. Unrealised gains and losses arising on the fair value of investments are presented in the Statement of Total Comprehensive Income in the year in which they arise. Dividend income, if any, from equity investments is recognised in the 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.

 

Classification of Fair Value Measurements

The Company has 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.

 

(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 each of the separate components of the total investment in that company and therefore the Directors fair value the investment package as a whole.

Warrant values are calculated using the International Private Equity and Venture Capital valuation guidelines.

 

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 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 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 Statement of Cash Flows, cash and cash equivalents consist of bank deposits, overdrafts and money market equivalents.

 

(i) Treasury Shares:

Where the Company purchases its own Ordinary Share capital, the consideration paid, including any directly attributable incremental costs is deducted from equity attributable to the Company's equity holders until the shares are cancelled, reissued or disposed of. Where such shares are subsequently sold or reissued, any consideration received, net of any directly attributable incremental transaction costs, are included in equity attributable to the Company's equity holders.

 

(j) 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.

 

The Company has three investments where the Company has significant equity holdings (circa 49%), however the shareholder base of these investments are 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 IFRS8. 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.

 

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 year 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 2010 the investment management fee expense was £567,174 (period ended 30 June 2009: £600,367). As at 30 June 2010 there was an investment management fee prepayment of £25,252 (31 December 2009: £38,029 creditor & 30 June 2009: £nil).

 

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 2010 the performance fee expense was £nil (period ended 30 June 2009: £nil). As at 30 June 2010 the performance fee creditor was £nil (31 December 2009: £nil & 30 June 2009: £231,000).

 

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 £60,000 applied on a quarterly basis, calculated and paid quarterly in arrears. For the period ended 30 June 2010 the administration fee expense was £52,240 (period ended 30 June 2009: £46,271). As at 30 June 2010 the administration fee creditor was £20,453 (31 December 2009: £22,884 & 30 June 2009: £23,131).

 

Registrar Agreement

Pursuant to the provisions of the Registrar Agreement, Capita Registrars (Guernsey) Limited is entitled to a fee of £5,000 per annum together with a per deal fee per shareholder transaction. For the period ended 30 June 2010 the registrar fee expense was £3,957 (period ended 30 June 2009: £6,003). As at 30 June 2010 the registrar fee creditor was £1,995 (31 December 2009: £2,016 & 30 June 2009: £2,247).

 

Custodian Agreement

Pursuant to the provisions of the Custodian Agreement, Cenkos Channel Islands Limited is entitled to receive a custodian fee during the year of 0.03% per annum of the net asset value of the Company, subject to an annual minimum of £15,000 applied on a quarterly basis. For the period ended 30 June 2010 the custodian fee expense was £8,467 (ended 30 June 2009: £9,179). As at 30 June 2010 the custodian fee creditor was £4,058 (31 December 2009: £4,577 & 30 June 2009: £4,626).

Susie Farnon, a former Director of the Company is also a non-executive director of the Custodian.

 

Loan Arrangement and Management Fees

The Company has provided a loan facility to one investee company of up to EUR9,500,000. As at 30 June 2010 the Company had lent EUR9,500,000 (31 December 2009: EUR5,500,000 & 30 June 2009: EUR4,500,000) in four tranches. At the time of providing each tranche of funding, the Company received an arrangement fee equating to 5% of the loan principal. For the period ended 30 June 2010 the arrangement fee received was £13,443 (period ended 30 June 2009: £17,775) The Company also receives an annual Management Fee in advance of 2%.

 

Change of Directors

On 25 June 2010, Rhys Cathan Davies and Brett Lance Miller were appointed as non-executive directors of the Company. Robert Holt resigned as director of the Company.

 

On 13 July 2010, Peter Tom and Susie Farnon resigned as directors of the Company and David McHugh was appointed as an independent non-executive director of the Company.

 

Directors' Interest

The interests of the Directors, who held office during the period, and their families are set out below:

 

	30 June 2010	31 December 2009	30 June 2009
	Ordinary Shares	Ordinary Shares	Ordinary Shares
Peter Tom	50,000	50,000	50,000
Robert Holt	50,000	50,000	50,000
Susie Farnon	*62,500	*100,000	*100,000
Rhys Cathan Davies	-	-	-
Brett Lance Miller	-	-	-

 

*nil (31 December 2009 & 30 June 2009: 50,000) of which are held by the executors of an estate of which Susie Farnon is one of several ultimate beneficiaries. Susie Farnon is also an executor of the estate.

 

There were no changes in the interests of the Directors prior to the date of this report.

 

Rhys Cathan Davies and Brett Lance 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.

 

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.

 

.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:

 

	30 June 2010	31 December 2009	30 June 2009
	Annual Fee	Annual Fee	Annual Fee
	£	£	£
Peter Tom	50,000*	50,000	50,000
Robert Holt	25,000	25,000	25,000
Susie Farnon	25,000*	25,000	25,000
Rhys Cathan Davies**	20,000	-	-
Brett Lance Miller	15,000	-	-

 

* reduced to £15,000 with effect from 25 June 2010

** elected Chairman on 25 June 2010

 

On 25 June 2010, the Board agreed to propose a resolution to shareholders that the maximum aggregate fees payable to directors is reduced to £80,000 per annum and no director will receive more than £15,000 per annum with the exception of the chairman whose remuneration shall be limited to a maximum of £20,000 per annum. The directors agreed to the proposed reduced fees.

 

5. Loss per Ordinary Share:

Loss per Ordinary Share for the period ended 30 June 2010 was 10.8p (period ended 30 June 2009: deficit per Ordinary Share 1.2p). Loss per Ordinary Share is based on the net deficit from operations for the period of £6,209,765 (period ended 30 June 2009: deficit of £695,908) and on a weighted average of 57,701,445 (period ended 30 June 2009: 59,652,139) Ordinary Shares in issue.

 

6. Investments:

Fair Value Through Profit or Loss Investments:	1 January 2010 To 30 June 2010	1 January 2009 To 31 December 2009	1 January 2009 To 30 June 2009
	£	£	£
Investments listed on recognised investment exchanges	6,947,340	7,092,221	5,008,171
Unlisted investments	10,664,775	15,406,886	14,249,088
	17,612,115	22,499,107	19,257,259
Book cost brought forward	22,238,901	18,828,176	18,828,176
Purchases	60,606	3,410,725	1,001,497
Sales	(547,575)	-	-
Net realised losses on fair value through profit or loss investments	(508,241)	-	-
Book cost carried forward	21,243,691	22,238,901	19,829,673
Net unrealised gains on fair value through profit or loss investments brought forward	260,206	258,529	258,529
Movement in net unrealised gains on fair value through profit or loss investments	(3,891,782)	1,677	(830,943)
Net unrealised (losses)/gains on fair value through profit or loss investments carried forward	(3,631,576)	260,206	(572,414)
Fair value carried forward	17,612,115	22,499,107	19,257,259

 

Loans and Receivables:	1 January 2010 To 30 June 2010	1 January 2009 To 31 December 2009	1 January 2009 To 30 June 2009
	£	£	£
Loans > 1 year	17,219,066	17,353,653	17,236,174
Loans < 1 year	4,095,000	1,955,000	800,000
	21,314,066	19,308,653	18,036,174
Book cost brought forward	18,326,833	13,761,085	13,761,085
Loan advanced	5,142,857	4,765,748	3,652,207
Loan repayments	(755,000)	(200,000)	-
Book cost carried forward	22,714,690	18,326,833	17,413,292
Net unrealised gains on loans investments brought forward	981,820	1,693,730	1,693,730
Movement in impairment charge on loans	(1,240,000)	-	-
Movement in net unrealised foreign exchange losses on loans investments	(1,142,444)	(711,910)	(1,070,849)
Net unrealised (losses)/gains on loans investments carried forward	(1,400,624)	981,820	622,881
Fair value carried forward	21,314,066	19,308,653	18,036,173
Total Investments:	1 January 2010 To 30 June 2010	1 January 2009 To 31 December 2009	1 January 2009 To 30 June 2009
	£	£	£
Investments listed on recognised investment exchanges*	6,947,340	7,092,221	5,008,171
Unlisted investments	10,664,775	15,406,886	14,249,088
Loans	21,314,066	19,308,653	18,036,173
	38,926,181	41,807,760	37,293,432
Book cost brought forward	40,565,734	32,589,261	32,589,261
Purchases of investment	60,606	3,410,725	1,001,497
Loans advanced	5,142,857	4,765,748	3,652,207
Sales of investments	(547,575)	-	-
Loan repayments	(755,000)	(200,000)	-
Net realised losses on fair value through profit or loss investments	(508,241)	-	-
Book cost carried forward	43,958,381	40,565,734	37,242,965
Net unrealised gains on investments brought forward	1,242,026	1,952,259	1,952,259
Movement in net unrealised (losses)/gains on fair value through profit or loss investments	(3,891,782)	1,677	(830,943)
Movement in impairment charge on loans	(1,240,000)	-	-
Movement in net unrealised foreign exchange losses on loans investments	(1,142,444)	(711,910)	(1,070,849)
Net unrealised (losses)/gains on fair value through profit or loss investments carried forward	(5,032,200)	1,242,026	50,467
Fair value carried forward	38,926,181	41,807,760	37,293,432

*representing 13.27% (31 December 2009: 11.73% & 30 June 2009: 8.19%) of Total Net Assets

 

All warrant investments, classified as "Held for Trading Investments", are value at nil cost in accordance with IAS 39.

 

7. Other Receivables:

	30 June 2010	31 December 2009	30 June 2009
	£	£	£
Bank interest receivable	-	7,653	10,758
Loan note interest receivable	734,561	565,255	875,551
Investment sales receivable	105,125	-	-
Prepayments	46,823	6,976	27,382
	886,509	579,884	913,691

 

*Loan note interest receivable is shown net of Accrued loan interest written off amounting to £559,053 (31 December 2009: £478,310 & 30 June 2009: £nil).

 

The Directors consider that the carrying amount of other receivables approximates fair value.

 

8. Cash and Cash Equivalents:

	30 June 2010	31 December 2009	30 June 2009
	£	£	£
Cash at bank	14,913,726	18,364,927	22,517,971

Of the cash and cash equivalents £nil (31 December 2009: £2,940,322 & 30 June 2009: £5,128,684) is held with Goldman Sachs deposits and money market funds. The full amount is available on demand.

9. Other Payables:

	30 June 2010	31 December 2009	30 June 2009
	£	£	£
Management fee	-	38,029	3,064
Performance fee	-	-	231,000
Fees received in advance	373,202	278,288	183,576
Administration fee	20,288	22,884	23,131
Custodian fee	4,058	4,577	4,626
Brokers fees and commissions	-	-	6,233
Legal and professional	17,231	-	-
NOMAD fee	10,000	-	6,147
Audit fee	18,224	35,000	17,436
Directors' fees	24,519	-	6,250
Registrar's fee	1,995	2,016	2,247
Other payables	6,247	1,570	1,000
	475,764	382,634	484,710

 

The Directors consider that the carrying amount of other payables approximates fair value.

 

10. Share Capital:

	30 June 2010 31 December 2009  & 30 June 2009
Authorised Share Capital	£
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 2010 (period ended 30 June 2009: £nil)).

 

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 £57,677,695 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 July 2009, and will be sought from Shareholders at each subsequent annual general meeting of the Company. As at 30 June 2010 the Company held none (31 December 2009: none & 30 June 2009: 810,000) of its own Ordinary Shares in treasury with 57,701,445 Ordinary Shares remaining in the market (31 December 2009: 57,701,445 & 30 June 2009: 59,845,000).

 

	1 January 2010 To 30 June 2010	1 January 2009 To 31 December 2009	1 January 2009 To 30 June 2009
Treasury Shares	£	£	£
Brought forward	-	139,600	139,600
Repurchases of Treasury Shares	-	1,777,458	-
Cancellations of Treasury Shares	-	(1,917,058)	-
Carried forward	-	-	139,600

 

11. Net Asset Value per Ordinary Share:

The net asset value per Ordinary Share as at 30 June 2010 is 94.02p (31 December 2009: 104.78p & 30 June 2009: 103.34p). The net asset value per Ordinary Share is based on the net assets attributable to equity ordinary shareholders of £54,250,652 (31 December 2009: £60,460,417 & 30 June 2009: £61,164,354) and on the period end number of Ordinary Shares in issue of 57,701,445 (31 December 2009: 57,701,445 & 30 June 2009: 59,190,000).

 

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, warrants, convertible loan notes and cash and cash equivalents. The warrants are derivative instruments and have been classified as held for trading and are accounted for as fair value through profit or loss. 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 2010, the fair value of the Company's financial assets was £53,839,906 (31 December 2009: £60,172,687 & 30 June 2009: £37,293,432). This was 99.33% (31 December 2009: 99.52% & 30 June 2009: 60.97%) of net assets attributable to equity shareholders.

 

At 30 June 2010:	Fair Value	Percentage of net assets attributable to holders of Ordinary Shares
Assets	£	%
Financial assets at fair value through profit or loss:
Listed equity securities	6,947,340	12.81
Unlisted equity securities	10,664,775	19.66
	17,612,115	32.47
Loans and receivables*:	21,314,066	39.29
Loans
Cash and cash equivalents	14,913,726	27.48
	53,839,907	99.24

 

At 31 December 2009:	Fair Value	Percentage of net assets attributable to holders of Ordinary Shares
Assets	£	%
Financial assets at fair value through profit or loss:
Listed equity securities	7,092,221	11.73
Unlisted equity securities	15,406,886	25.47
	22,499,107	37.20
Loans and receivables*:
Loans	19,308,653	31.94
Cash and cash equivalents	18,364,927	30.38
	60,172,687	99.52

 

At 30 June 2009:	Fair Value	Percentage of net assets attributable to holders of Ordinary Shares
Assets	£	%
Financial assets at fair value through profit or loss:
Listed equity securities	5,008,171	8.19
Unlisted equity securities	14,249,087	23.30
	19,257,258	31.49
Loans and receivables*:
Loans	18,036,173	29.49
Cash and cash equivalents	22,517,971	36.81
	59,811,402	97.79

 

* 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 2010:

 

	Fair Value as at 30 June 2010
	Level 1	Level 2	Level 3	Total
	£	£	£	£
Fair value through profit or loss	6,928,340	19,000	10,664,775	17,612,115
Held for trading	-	-	-	-
Loans and receivables	-	-	21,314,066	21,314,066
	6,928,340	19,000	31,978,841	38,926,181

 

	Fair Value as at 31 December 2009
	Level 1	Level 2	Level 3	Total
	£	£	£	£
Fair value through profit or loss	7,052,221	40,000	15,406,886	22,499,107
Held for trading	-	-	-	-
Loans and receivables	-		19,308,653	19,308,653
	7,052,221	40,000	34,715,539	41,807,760

 

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.

 

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 2010 To 30 June 2010
Assets at Fair Value based on Level 3:	Equity investments	Loan  investments	Total
	£	£	£
Fair value brought forward	15,406,886	19,308,653	34,715,539
Purchases	60,606	-	60,606
Loans advanced	-	5,142,857	5,142,857
Loan repayments	-	(755,000)	(755,000)
Movement in net unrealised foreign exchange (losses)/gains on loans investments	-	(2,382,444)	(2,382,444)
Movement in net unrealised gains on fair value through profit or loss investments	(4,802,717)	-	(4,802,717)
Fair value carried forward	10,664,775	21,314,066	31,978,841

 

	1 January 2009 To 31 December 2009
Assets at Fair Value based on Level 3:	Equity investments	Loan  investments	Total
	£	£	£
Fair value brought forward	13,041,177	15,454,815	28,495,992
Purchases	1,355,725	-	1,355,725
Loans advanced	-	4,765,748	4,765,748
Loan repayments	-	(200,000)	(200,000)
Movement in net unrealised foreign exchange (losses)/gains on loans investments	-	(711,910)	(711,910)
Movement in net unrealised gains on fair value through profit or loss investments	1,009,984	-	1,009,984
Fair value carried forward	15,406,886	19,308,653	34,715,539

 

(c) Net gains and losses on financial assets: 

 

Period ended 30 June 2010	Movement in net unrealised gains	Net realised gains on disposals
	£	£
Financial assets at fair value through profit or loss:
Listed equity securities	910,935	(508,241)
Unlisted equity securities	(4,802,718)	-
	(3,891,783)	(508,241)
Loans and receivables:
Loans	(2,382,444)	-
	(6,324,227)	(508,241)

 

Period ended 30 June 2009	Movement in net unrealised gains	Net realised gains on disposals
	£	£
Financial assets at fair value through profit or loss:
Listed equity securities	(1,772,253)	-
Unlisted equity securities	941,410	-
	(830,843)	-
Loans and receivables:
Loans	(1,070,849)	-
	(1,901,692)	-

(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.

 

Warrants

The following table details the Company's investments in warrant derivative contracts, by maturity, outstanding as at 30 June 2010:

 

	30 June 2010		31 December 2009		30 June 2009
Maturity	No. Held	Fair Value	No. Held	Fair Value	No. Held	Fair Value
		£		£		£
< 1 year	-	-	2	-	3	-
Total	-	-	2	-	3	-

 

A warrant is a derivative financial instrument which gives the right, but not the obligation to buy a specific amount of a given stock, at a specified price (strike price) on a specific date. The fair value of the warrants, classified as financial assets at fair value through profit or loss, are disclosed in note 12 (b) above. The warrants for underlying unlisted equities are valued in accordance with the International Private Equity and Venture Capital valuation guidelines.

 

Forward foreign currency swaps

 

As at 30 June 2010, the Company had no open forward foreign currency contracts.

 

At 31 December 2009

 

Purchase Currency	Contractual Amount	Sale Currency	Contractual Amount	Maturity Date	Fair Value
					£
GBP	13,716,000	EUR	15,000,000	1/4/2010	407,340
EUR	15,000,000	GBP	13,626,000	1/4/2010	(316,860)
					90,480

 

At 30 June 2009

 

Purchase Currency	Contractual Amount	Sale Currency	Contractual Amount	Maturity Date	Fair Value
					£
GBP	13,716,000	EUR	15,000,000	1/4/2010	923,970

 

In accordance with the Company's scheme particulars the Company may invest in forward foreign exchange contracts for the purpose of efficient portfolio management. As there is no assurance that these hedges will be effective in achieving offsetting changes in the cash flows attributable to the currency risk on these specific foreign currency payments it is the policy of the Company not to apply hedge accounting.

 

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 Adviser 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 Adviser 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. It is the Company's intention to build a portfolio of investments which is diversified by both sector and stage of development. 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 2010, 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 7.18% (31 December 2009: 6.91% & 30 June 2009: 6.10%) increase in net assets attributable to equity shareholders. If the value of investments had been 10% lower, with all other variables held constant, net assets attributable to equity shareholders would have fallen by 7.18% (31 December 2009: 6.91% & 30 June 2009: 6.10%). Whilst these sensitivity percentages show the Company's overall sensitivity to price movements, it does not reflect the leveraged nature of the derivative financial instruments held by the Company. Warrants by their nature will be disproportionately sensitive to changes in the value of the underlying equity instrument and therefore a 10% increase / decrease in the value of the equity instrument could result in a significantly greater than 10% increase / decrease in the value of the respective derivative instrument.

 

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 2010		31 December 2009		30 June 2009
	WAEIR*	Total	WAEIR*	Total	WAEIR*	Total
		£		£		£
Assets
Fixed interest rate unquoted debt securities	12.72%	21,314,066	11.94%	19,308,653	11.41%	18,036,173
Cash at bank	0.40%	14,913,726	0.40%	18,364,927	0.70%	22,517,971
Non-interest bearing	-	18,498,624	-	23,486,331	-	21,094,919
Total assets		54,726,416		61,159,911		61,649,063
Liabilities
Non-interest bearing	-	475,764	-	699,494	-	484,710
Total liabilities		475,764		699,494		484,710

* - 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 year 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 2010 would have increased by £37,284 (31 December 2009: £91,825 & 30 June 2009: £56,295) 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 2010 would have decreased by £29,827 (31 December 2009: £73,460 & 30 June 2009: £56,295) 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 invested its capital into its investments 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 31 December 2009).

 

Currency Exposure:

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 2010
	Assets	Liabilities	Net	Hedge	Net Hedged
	£	£	£	£	£
Australian Dollar	618,812	-	618,812	-	618,812
British Pound	36,313,018	(102,563)	36,210,455	-	36,210,455
Euro	17,794,586	(373,202)	17,421,384	-	17,421,384
	54,726,416	(475,765)	54,250,651	-	54,250,651

 

	31 December 2009
	Assets	Liabilities	Net	Hedge*	Net Hedged
	£	£	£	£	£
Australian Dollar	415,960	-	415,960	-	415,960
British Pound	40,690,776	(104,346)	40,586,430	-	40,586,430
Euro	19,645,835	(278,288)	19,367,547	-	19,367,547
	60,752,571	(382,634)	60,369,937	-	60,369,937

 

*Although the Company hedged its exposure to Euro during 2009, as at 31 December 2009 the Company had closed out this hedge resulting in a net unhedged exposure as detailed above. As a result of closing out the hedge the Company realised a gain of £90,480. This gain crystalised on 1 April 2010.

 

	30 June 2009
	Assets	Liabilities	Net	Hedge	Net Hedged
	£	£	£	£	£
Australia Dollar	1,225,010	-	1,225,010	-	1,225,010
British Pound	45,830,319	(301,134)	45,529,185	-	45,529,185
Euro	14,593,735	(183,576)	14,410,159	(13,716,000)	694,159
	61,649,064	(484,710)	61,164,354	(13,716,000)	47,448,354

 

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.

 

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 2010 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 6.65% (31 December 2009: 6.54% & 30 June 2009: 0.63%) 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 Shares would have been 6.65% (31 December 2009: 6.54% & 30 June 2009: 0.63%) 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 invest in companies which are likely to achieve a listing or realisation within six to thirty-six months.

 

Maturity Analysis:

The table below shows the maturity analysis of the Company's assets and liabilities as at 30 June 2010:

 

At 30 June 2010	Less than 1 month	1-12 months	1-3 years	3-5 years	No fixed maturity	Total
		£	£	£	£	£
Assets
Fixed interest rate unquoted debt securities*	-	4,095,000	5,639,460	11,579,606	-	21,314,066
Cash at bank	14,913,726	-	-	-	-	14,913,726
Non-interest bearing	706,318	180,191	-	-	17,612,115	18,498,624
Total assets	15,620,044	4,275,191	5,639,460	11,579,606	17,612,115	54,726,416
Liabilities
Non-interest bearing	-	-	-	-	475,765	475,765
Total liabilities	-	-	-	-	475,765	475,765

 

At 31 December 2009	Less than 1 month	1-12 months	1-3 years	3-5 years	No fixed maturity	Total
		£	£	£	£	£
Assets
Fixed interest rate unquoted debt securities*	-	1,955,000	5,676,275	11,677,378	-	19,308,653
Cash at bank	18,364,927	-	-	-	-	18,364,927
Non-interest bearing	443,942	543,282	-	-	22,499,107	23,486,331
Total assets	18,808,869	2,498,282	5,676,275	11,677,378	22,499,107	61,159,911
Liabilities
Non-interest bearing	-	-	-	-	699,494	699,494
Total liabilities	-	-	-	-	699,494	699,494

 

At 30 June 2009	Less than 1 month	1-12 months	1-3 years	3-5 years	5-10 years	No fixed maturity	Total
	£	£	£	£		£	£
Assets
Fixed interest rate unquoted debt securities*	-	800,000	4,895,000	8,504,529	3,836,644	-	18,036,173
Cash at bank	19,789,190	2,728,781	-	-	-	-	22,517,971
Non-interest bearing	22,175	1,460,623	327,481	-	-	19,284,641	21,094,920
Total assets	19,811,365	4,989,404	5,222,481	8,504,529	3,836,644	19,284,641	61,649,064
Liabilities
Non-interest bearing	-	-	-	-	-	484,710	484,710
Total liabilities	-	-	-	-	-	484,710	484,710

 

*Although the convertible loan note has an indicated redemption date written into the loan agreements, this redemption date is based on the planned event date. The actual event date is not known, therefore for maturity analysis purposes the convertible loan has been categorised as "No fixed maturity".

 

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 2010, no impairment charges (period ended 30 June 2009: £nil) had been recognised in the 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 2010, the following amounts on debt instruments were past due:

 

	30 June 2010	31 December 2009	30 June 2009
	£	£	£
Principal default	-	-	-
Interest default*	80,743	478,310	-

 

*As at 30 June 2010 and 31 December 2009 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 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. While the Investment Manager will attempt to spread the Company's assets among a number of investments in accordance with the investment policies adopted by the Company, 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.

 

14. Dividend:

The Directors do not recommend the payment of a dividend for the period ended 30 June 2010 (period ended 30 June 2009: £nil).

 

15. 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 £600 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 suffered £nil withholding tax during the period (period ended 30 June 2009: £nil).

16. 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 Cenkos Fund Managers Limited) considers that satisfactory opportunities for investment arise. 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.

 

The Company has the ability to apply to the UK Listing Authority for a Placing and Offer to increase the size of the Company through further share issuance.

 

17. Post Period End Events:

On 13 July 2010, Peter Tom and Susie Farnon resigned as directors of the Company and David McHugh was appointed as a non-executive director of the Company.

 

As announced on 6 August 2010, and then subsequently approved by the shareholders at the Company's AGM, held on 14 September 2010, the Company has implemented a Capital Return Scheme whereby the Directors' have resolved to return to shareholders 24p per Ordinary Share in cash by way of a bonus issue of B Shares to shareholders on the Company's register on the record date as at 14 September 2010. Following their issue the B Shares were immediately redeemed by the Company on a pro rata basis and cash was distributed to shareholders.

 

At the Company's AGM, held on 14 September 2010, the shareholders approved the Company's new investment objective policy (as disclosed in note 1) by ordinary resolution.

 

There are no other significant post period end events that require disclosure in these financial statements.

 

Copies of the interim report will be sent to shareholders shortly and will be available at the Company's website www.rapidrealisations.com.