PRIVATE EQUITY INVESTOR PLC
ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED 31 MARCH 2015
INVESTMENT OBJECTIVE AND POLICY
Investment Objective
The objective of the Company has been to provide shareholders
with long-term capital growth. The Company is not making
investments in new private equity funds but is managing its
existing investments with a view to making periodic returns of
capital to shareholders.
Investment Policy
Risk Diversification
The Company has invested in and maintains a broad portfolio of
US-based venture capital and buyout funds (the “Funds”), managed by
a number of different management groups, and focused on various
stages of growth so as to obtain exposure to a diversified
underlying portfolio of investments primarily in private companies
in the technology sector. Through the Funds, the Company has
exposure to a diverse portfolio of underlying companies.
No New Fund Investments
It is the policy of the Company not to make new fund investments.
However, the Company will continue to meet existing capital
commitments to the Funds and may on occasion support follow-on
commitments in existing Funds or affiliated annex funds.
No Overcommitment; Ring-fenced Accounts
Overcommitment is the practice of making commitments to funds which
exceed the cash available for investment. The Company has a policy
not to be overcommitted. All amounts required to fund existing
capital commitments to the Funds are held in ring-fenced
accounts.
Distributions Received From the Funds
The managers of the Funds invest principally in unlisted technology
companies based in the US. After the flotation or sale of their
investments, the Funds may distribute cash or securities to the
Company. As a result, the Company may from time to time hold listed
securities. It is the policy of the Company to sell listed
securities received as distributions from the Funds within a short
period of time unless the stock price has decreased meaningfully,
in which case the Company may hold these securities for a longer
period of time until favourable selling conditions exist. The
listed securities received as distributions from the Funds
typically do not represent a significant part of the Company’s
overall investments.
Liquidity
The Company may hold substantial cash balances due to existing
capital commitments to the Funds, due to the receipt of cash
distributions from the Funds, or due to cash realised upon the sale
of listed securities received from the Funds as distributions.
These cash balances are principally in open-ended investment funds
pending capital call requests from the Funds used for
corporate purposes or for distribution to shareholders.
Return of Capital to Shareholders
The Company proposes to make periodic returns of capital to
shareholders from the proceeds of distributions received from the
Funds. As the timing and amount of distributions from the Funds
fluctuates and is not known, the Company cannot predict when a
return of capital to shareholders may be made, or the amount.
Gearing
In normal circumstances the Company does not expect to borrow. The
Company’s Articles of Association limit borrowing to an amount
broadly equal to its capital and reserves. Some investments made by
the Funds may be geared but the Company does not review the level
of gearing of these underlying investments.
Derivatives
The Company does not make use of financial derivatives and does not
hedge against currency fluctuations.
Dividends
The Funds provide little income. Income may be generated from
liquid funds and the Company may be required to pay dividends to
continue to qualify as an Investment Trust. Such dividends are,
however, likely to be small and irregular.
SUMMARY OF RESULTS AND FINANCIAL
HIGHLIGHTS
|
31 March 2015 |
31 March 2014 |
% change |
|
Group |
Group |
|
|
|
|
|
| Net assets and shareholders’
funds |
£35,339,000* |
£42,699,000 |
(17.2) |
| Net assets per Ordinary Share |
238.7p |
228.4p |
4.5 |
| Net assets and shareholders’ funds
in US$ |
$52,461,000* |
$71,186,000 |
(26.3) |
| Net assets per Ordinary Share in
US$ |
354.4c |
380.8c |
(6.9) |
| Mid-market price per Ordinary
Share |
194.5p |
182.5p |
6.6 |
| Discount to NAV |
18.5% |
20.1% |
|
| Net revenue loss after taxation |
£(532,000) |
£(781,000) |
|
| Net total return/(loss) |
£1,188,000 |
£(367,000) |
|
| Total return/(loss) per Ordinary
Share |
7.7p |
(1.9)p |
|
| Exchange rate at year end
(US$/£) |
1.48450 |
1.66715 |
11.0 |
| Number of Ordinary Shares in
issue |
14,805,508 |
18,694,757 |
|
| Ongoing charges (Company
only)** |
1.4% |
1.7% |
|
| Ongoing charges (Group)** |
1.6% |
2.0% |
|
| Cumulative cash returned to
shareholders through tender offers*** |
£70,150,000 |
£61,650,000 |
|
* Following the tender offer completed in May 2014 when £8.5 million was returned to
Shareholders.
** Ongoing charges at both the Company and Group level are
included. The Company’s ongoing charges are calculated excluding
subsidiary expenses. Group ongoing charges include subsidiary
expenses.
*** A tender offer for £6.7 million took place after the year
end on 22 April 2015. This brings the
cumulative cash returned to shareholders through tender offers to
£76,850,000.
CHAIRMAN’S STATEMENT
I am pleased to present the results for Private Equity Investor
PLC (“PEI” or “the Company”) for the year ended 31 March 2015.
Results
The Company’s Net Asset Value (“NAV”) per share at 31 March 2015 was 238.7p, compared with 228.4p a
year earlier, an increase of 4.5%. The NAV per share in dollars
decreased by 6.9% from 380.8c per share to 354.4c per share,
reflecting a decrease in the valuation of the Company’s fund
investments (individually a “Fund” and collectively the “Funds”).
However, the fall in Dollar value of the portfolio was more than
offset by the strengthening of the Dollar against Sterling from
$1.67 to $1.48.
The Company’s share price increased by 6.6% during the year,
from 182.5p to 194.5p. The discount at 31
March 2015 was 18.5%, compared with 20.1% a year
earlier.
No dividend is proposed for the period (2014: nil).
Tender Offers
During the year, on 29th May 2014,
the Company completed a tender offer to shareholders of £8.5
million, with 3,889,249 shares being purchased for cancellation at
a price of 218.5455p per share. After the year end, on 22 April 2015, the Company completed a further
tender offer to shareholders of £6.7 million, with 2,859,989 shares
being purchased for cancellation at a price of 234.2590p per
share.
The Company has now made seven Tender Offers since December 2007, returning a total of £76.85
million to shareholders. Following the latest tender offer, there
are now 11,945,519 shares in issue. The Company will continue its
policy of returning capital as and when cash resources reach an
appropriate level. The Company also retains the right to buy back
shares in the market.
Distributions and Calls from Fund
Investments
In the twelve months ended 31 March
2015, the Company received cash and stock distributions from
the Funds totalling $11.4 million,
compared with $13.5 million in the
twelve months ended 31 March 2014 and
$14.0 million in the twelve months
ended 31 March 2013. Of the
$11.4 million received during the
period, cash distributions amounted to $7.5
million and stock distributions amounted to $3.9 million. The largest distribution received
by the Company was a distribution of Twitter stock with a value of
$1.9 million from Institutional
Venture Partners XII.
During the period, two Funds called capital from the Company in
the amount of $1.1 million (2014:
$0.7 million). Ten of the original
commitments have been fully drawn down but an aggregate of
$4.2 million (£2.8m) in uncalled
commitments remains outstanding in ten partnerships. These funds
are held in ring-fenced accounts in accordance with an obligation
given to the Court during the conversion of the Company’s Share
Premium Account.
Portfolio Review
The Company’s Investments have all been in limited life funds,
with initial fund terms that ranged from five to thirteen years.
After the expiration of the initial fund terms, funds typically
have, or are granted, the right to extend their terms by two to
three years and most funds seek further extensions. After a fund’s
initial term and when all extensions have expired, the fund will
typically enter a winding-down period. During this period the fund
will seek to realise its remaining investments and distribute the
remaining cash and assets. Once a fund has been fully liquidated,
any uncalled commitment to that fund will be released and credited
to the Company. At 31 March 2015, of
PEI’s twenty Funds, five were still in their initial fund terms,
nine were in term extensions and six were in the process of
winding-down.
As at 31 March 2015, the Company
held investments, through the Funds, in 281 private and 42 public
companies. At that date, 25 underlying portfolio investments (22
private, 3 public), with a value of $16.3
million, accounted for 48% of the Funds’ total value. The
twelve months under review saw the Initial Public Offerings
(“IPOs”) of six underlying portfolio companies (2014: seven).
On 9 December 2014, the Company
sold its interest in Crescendo IV for net proceeds (after
transaction expenses) of $1.27
million. The Company’s capital account interest in Crescendo
IV was valued at $1.48 million as of
30 June 2014. The net proceeds to the
Company represented a discount of 13.9% to the Company’s capital
account interest in the Fund as of 30 June
2014. This discount compared favourably to the discount to
Net Asset Value at which the Company’s shares were trading at the
time of the sale.
On 30 June 2014, APV Technology
Partners III (“APV III”) was wound-up. The Company received a final
distribution from APV III of $209,747
on 15 May 2014.
The Company has made regular efforts to increase the pace of
distributions from the Funds to the Company. For example, several
of the 1999/2000 vintage Funds continue to have uncalled capital
commitments. The Company, through its investment advisor, has
requested certain of these Funds to release the Company from its
uncalled capital commitments. These requests have been denied by
the Funds typically on the basis that the Fund may need to call
additional capital to participate in future portfolio company
financings or for Fund expenses. In cases where a Fund continues to
hold shares of technology companies long after a portfolio company
has held its initial public offering, the Company has encouraged
the Funds to distribute these shares to the Fund’s limited
partners. The Funds may be reluctant to distribute these public
securities on the basis that the Fund believes that the stock price
will appreciate or that the stock is restricted by the Fund’s
ownership position. The Company will continue to encourage Funds to
make distributions to limited partners as soon as practicable.
US Venture Capital Industry Update
The following is an update of US initial public offering (“IPO”)
and mergers & acquisition (“M&A”) activity of venture
capital-backed companies in calendar 2014 and the first quarter of
2015.
Liquidity – Venture-Backed Mergers
& Acquisitions
Venture-backed M&A activity in the US picked up
substantially in 2014. During the year, there were 479 M&A
deals with a reported aggregate value of $47.6 billion, compared with 393 M&A deals
with a reported aggregate value of $16.9
billion in 2013, according to Thomson Reuters and the
National Venture Capital Association (“NVCA”)1. This
level marks a 22% increase by number of M&A deals and an
impressive 182% increase by reported aggregate value compared to
2013.
Venture-backed M&A activity, however, slowed in the first
quarter of 2015. During the quarter, 86 M&A deals had an
aggregate transaction value of $2.1
billion, compared with 115 M&A deals with a reported
aggregate value of $7.6 billion in
the first quarter of 2014. This represents a 25% decrease by number
of deals and a 73% decrease by reported aggregate value in the
first quarter of 2014. This was the slowest quarter by disclosed
transaction value since the first quarter of 2013. The largest
venture-backed M&A transaction in the first quarter of 2015 was
the acquisition of Myfitnesspal by Under Armour for $475 million. Myfitnesspal has developed a health
and fitness mobile application.
1Thomson Reuters and NVCA press release dated
6 April 2015. Aggregate transaction
value reflects disclosed values only.
Liquidity – Venture Backed IPOs
In 2014, 116 venture-backed companies raised a total of
$15.4 billion through IPOs, compared
with 81 venture-backed companies raising $11.1 billion through IPOs in 2013, according to
Thomson Reuters and the National Venture Capital Association
(“NVCA”)2. The IPO activity in 2014 represents a 43%
increase in the number of completed IPOs and a 39% increase in
amount raised from 2013.
In the first quarter of 2015, there were 17 IPOs of
venture-backed companies raising $1.4
billion, compared with 37 IPOs raising $3.4 billion in the first quarter of 2014. This
represents a 58% decrease by amount raised and a 54% decrease in
numbers of IPOs compared to the first quarter of 2014. The largest
IPO of the first quarter of 2015 was that of Box, Inc. (NYSE: BOX),
which raised $201 million in its IPO.
Box, Inc. is a Los Altos, CA-based
provider of cloud platform services.
2 Thomson Reuters and NVCA press release dated
6 April 2015.
Board Changes
David Quysner, who joined the Board in 2004, retired at the 2014
Annual General Meeting (“AGM”). He was replaced by Julian Cazalet as Chairman of the Audit,
Remuneration, Nomination and Management Engagement Committees.
Ongoing Charges Ratio
The ongoing charges ratio for the Company for the year ended
31 March 2015 was 1.4% (2014: 1.7%).
As the Company returns cash to shareholders and the Company’s NAV
decreases, the percentage of expenses to net assets is likely to
increase. During the period the Company has worked to reduce the
Group’s costs, these efforts have included:
- Key suppliers’ fees have been, and continue to be, negotiated
down.
- The number of Directors on the PEI Board has been reduced from
four to three and their salaries reduced by 10% from 1 April 2015.
- Not renewing the Company’s membership of the AIC in
October 2014.
Continuation Vote
Last year the Board amended its Articles of Association in order
for shareholders to consider the continuation of the Company as an
investment trust annually rather than every five years. The Board
believes strongly that continuation of the Company as an investment
trust is in the best interests of shareholders. The alternative to
a continuation of the Company would be to seek an immediate sale of
the assets or to appoint a liquidator to realise the assets over
time. The Board has considered and continues to explore ways to
realise the Fund investments through “secondary sales” but the
discounts to NAV at which such proposals have so far been priced,
other than that achieved through the sale of Crescendo IV, have
been unattractive. The appointment of a liquidator would place the
assets at the disposal of someone without deep knowledge, of or
experience with, the assets and might result in selling Funds at a
substantial discount to NAV and in the loss of quotation of the
Company’s shares.
The Board believes that an annual continuation vote is in the
best interests of shareholders, but notes that several Funds are
still in their initial terms, which expire from 2016 to 2018. It is
probable that it will take some time after the expiration of these
initial terms for these Funds to be fully wound down. As a result,
the Board believes that an orderly winding down of the Company
could take some time but will pursue all attractive opportunities
to accelerate this process while maximising shareholder value.
Outlook
The Funds and their underlying investments continue to mature.
The 1999/2000 vintage Funds are mostly in extension or in a
wind-down phase, whilst the 2004-2007 vintage Funds have mainly
completed the investment stage and have entered the realisation
phase of their initial fund term.
As the Company’s Fund portfolio matures, the Funds themselves
may experience a reduction in net asset values, but will continue
to have ongoing expenses, including in many cases management fees.
As these Funds age, particularly the Funds of the 1999/2000
vintage, the proportion of expenses to net asset value is likely to
increase. This could have a negative impact on the performance of
the Funds, which in turn could have a negative impact on the
Company’s performance.
The Company believes that the Funds of the 1999/2000 vintage
portfolios are generally seeking ways to obtain liquidity for their
underlying investments. There are, however, a number of underlying
portfolio companies that may have diminished prospects going
forward. If the Funds are forced or decide to sell these
under-performing companies, they may receive a consideration that
is less than their carrying value. As a result, some Funds may
elect to continue to support some of these companies for a period
of time rather than liquidate their investments at a reduced price.
Some of the 1999/2000 vintage Funds may seek additional term
extensions.
The timing of realisations by the Funds will continue to depend
on factors that include underlying portfolio company performance,
the IPO and M&A environment as well as on more general market
and economic conditions, while the timing of distributions to the
Company will depend on the practices and policies of individual
Funds. Given the age profile of the portfolio, we expect that the
overall pace of realisations, and hence distributions received by
the Company, will slow, but it remains our policy to seek to make
periodic returns of capital to shareholders in a cost-effective
way.
PETER DICKS
Chairman
29 July 2015
PORTFOLIO OF FUNDS
Investment portfolio as at 31 March
2015
|
|
|
|
% of |
% of |
|
Total |
Fair* |
Fair* |
net |
net |
|
commitment |
value |
value |
assets |
assets |
|
US$’000 |
US$’000 |
£’000 |
2014 |
2013 |
| Unquoted Funds |
|
|
|
|
|
| Dawntreader Fund II |
30,000 |
1,934 |
1,303 |
3.7 |
3.9 |
| Draper Fisher Jurvetson
ePlanet Ventures |
30,000 |
6,043 |
4,071 |
11.5 |
12.5 |
| Draper Fisher Jurvetson Fund VI |
2,000 |
688 |
464 |
1.3 |
1.2 |
| Draper Fisher Jurvetson Fund
VII |
5,000 |
2,827 |
1,904 |
5.4 |
5.3 |
| Draper Fisher Jurvetson
Gotham Venture Fund |
3,300 |
873 |
588 |
1.7 |
1.1 |
| Focus Ventures II |
30,000 |
1,175 |
791 |
2.2 |
2.7 |
| Francisco Partners II |
5,000 |
2,562 |
1,725 |
4.9 |
4.8 |
| Institutional Venture Partners
XII |
5,000 |
2,666 |
1,796 |
5.1 |
9.6 |
| New Enterprise Associates 9 |
5,000 |
743 |
501 |
1.4 |
1.2 |
| New Enterprise Associates 10 |
10,000 |
3,229 |
2,175 |
6.1 |
4.5 |
| New Enterprise Associates 12 |
3,000 |
1,988 |
1,339 |
3.8 |
3.4 |
| Oak Investment Partners X |
10,000 |
3,309 |
2,229 |
6.3 |
5.6 |
| Sprout Capital IX |
3,750 |
102 |
69 |
0.2 |
0.3 |
| TCV IV |
25,000 |
96 |
65 |
0.2 |
0.5 |
| Vanguard VII |
3,000 |
564 |
380 |
1.1 |
0.9 |
| VantagePoint Venture
Partners 2006 |
5,000 |
2,281 |
1,536 |
4.3 |
3.6 |
| VantagePoint Venture Partners
IV |
10,000 |
1,838 |
1,238 |
3.5 |
4.4 |
| Vector Capital IV |
4,000 |
3,515 |
2,368 |
6.7 |
3.4 |
| Zone Venture Fund II |
10,000 |
616 |
415 |
1.2 |
0.7 |
| Zone Venture Fund II Annex |
400 |
45 |
30 |
0.1 |
0.1 |
|
|
|
|
|
|
| Total Unquoted
Funds |
199,450 |
37,094 |
24,987 |
70.7 |
69.7 |
|
|
|
|
|
|
| Open-ended Investment
Funds |
|
|
|
|
|
USD
BlackRock ICS Institutional USD Liquidity Fund |
- |
2,000 |
1,347 |
3.8 |
3.4 |
| JP Morgan USD Liquidity
Premier Distribution Fund |
- |
2,100 |
1,415 |
4.0 |
3.7 |
| RBS Global Treasury Funds Plc USD
Money Fund Distributing |
- |
100 |
67 |
0.2 |
0.6 |
|
|
|
|
|
|
| GBP |
|
|
|
|
|
| RBS Global Treasury Funds Plc GBP
Money Fund Distributing |
- |
150 |
101 |
0.3 |
13.9 |
|
|
|
|
|
|
| Total Open-ended
Investment Funds |
- |
4,350 |
2,930 |
8.3 |
21.6 |
|
|
|
|
|
|
Other Investments
held directly by the Company
Common Stock |
|
|
|
|
|
| Marketo Inc |
- |
- |
- |
- |
0.3 |
| Total Other
Investments |
- |
- |
- |
- |
0.3 |
|
|
|
|
|
|
| Total Investments |
199,450 |
41,444 |
27,917 |
79.0 |
91.6 |
|
|
|
|
|
|
| Net current assets |
|
11,018 |
7,422 |
21.0 |
5.9 |
|
|
|
|
|
|
| Net assets |
|
52,462 |
35,339 |
100.0 |
97.5** |
* Of remaining investment.
**During the year APV Technology Partners III was liquidated and
the Company sold its interest in Crescendo IV.
Portfolio Funds – by Fair Value as at
31 March 2015
Fund |
Sectors |
Stages |
Fair value
US$’000 |
% of Fund
Portfolio |
|
|
|
|
|
| Draper Fisher Jurvetson ePlanet
Ventures |
Tech |
Early, Growth |
6,043 |
16.3 |
| Vector Capital IV |
Tech |
Buyout |
3,515 |
9.5 |
| Oak Investment Partners X |
Tech, Life Science,
Consumer |
Early, Growth |
3,309 |
8.9 |
| New Enterprise Associates 10 |
Tech, Life Science |
Early, Growth |
3,229 |
8.7 |
| Draper Fisher Jurvetson
Fund VII |
Tech |
Early, Growth |
2,827 |
7.6 |
| Institutional Venture Partners
XII |
Tech |
Growth, Late |
2,666 |
7.2 |
| Francisco Partners II |
Tech |
Buyout |
2,562 |
6.9 |
| VantagePoint Venture Partners
2006 |
Tech, Life Science,
Energy |
Early, Growth |
2,281 |
6.1 |
| New Enterprise Associates 12 |
Tech, Life Science |
Early, Growth |
1,988 |
5.4 |
| Dawntreader Fund II |
Tech |
Early |
1,934 |
5.2 |
| VantagePoint Venture Partners
IV |
Tech, Life Science,
Energy |
Early, Growth |
1,838 |
4.9 |
| Focus Ventures II |
Tech |
Early |
1,175 |
3.2 |
| Draper Fisher Jurvetson Gotham
Venture Fund |
Tech |
Early |
873 |
2.4 |
| New Enterprise Associates 9 |
Tech, Life Science |
Early, Growth |
743 |
2.0 |
| Draper Fisher Jurvetson Fund VI |
Tech |
Early, Growth |
688 |
1.8 |
| Zone Venture Fund II |
Tech |
Early |
616 |
1.7 |
| Vanguard VII |
Tech |
Early |
564 |
1.5 |
| Sprout Capital IX |
Tech, Life Science |
Early |
102 |
0.3 |
| TCV IV |
Tech |
Growth |
96 |
0.3 |
| Zone Venture Fund II Annex |
Tech |
Early |
45 |
0.1 |
|
|
|
|
|
|
|
|
37,094 |
100.0 |
Summary of Individual Funds
Investments:
|
|
|
|
31 March |
|
|
|
|
2015 |
|
|
|
|
Total |
|
Vintage |
Fund
size |
PEI
commitment |
called capital |
| Name |
|
US$(m) |
US$ |
US$ |
|
|
|
|
|
| Dawntreader Fund II |
2000 |
204 |
30,000,000 |
30,000,000 |
| Draper Fisher Jurvetson
ePlanet Ventures |
1999 |
646 |
30,000,000 |
29,550,000 |
| Draper Fisher Jurvetson Fund VI |
1999 |
379 |
2,000,000 |
2,000,000 |
| Draper Fisher Jurvetson Fund
VII |
2000 |
643 |
5,000,000 |
5,000,000 |
| Draper Fisher Jurvetson
Gotham Venture Fund |
1999 |
94 |
3,300,000 |
3,112,200 |
| Focus Ventures II |
2000 |
425 |
30,000,000 |
28,650,000 |
| Francisco Partners II |
2006 |
2,300 |
5,000,000 |
4,655,000 |
| Institutional Venture Partners
XII |
2007 |
606 |
5,000,000 |
5,000,000 |
| New Enterprise Associates 9 |
1999 |
880 |
5,000,000 |
4,900,000 |
| New Enterprise Associates 10 |
2000 |
2,323 |
10,000,000 |
9,850,000 |
| New Enterprise Associates 12 |
2006 |
2,525 |
3,000,000 |
2,955,000 |
| Oak Investment Partners X |
2000 |
1,616 |
10,000,000 |
10,000,000 |
| Sprout Capital IX |
2000 |
1,082 |
3,750,000 |
3,750,000 |
| TCV IV |
2000 |
1,625 |
25,000,000 |
24,400,000 |
| Vanguard VII |
2000 |
210 |
3,000,000 |
3,000,000 |
| VantagePoint Venture Partners
2006 |
2006 |
1,003 |
5,000,000 |
4,750,000 |
| VantagePoint Venture Partners
IV |
2000 |
1,399 |
10,000,000 |
10,000,000 |
| Vector Capital IV |
2007 |
1,224 |
4,000,000 |
3,271,421 |
| Zone Venture Fund II |
1999 |
99 |
10,000,000 |
10,000,000 |
| Zone Venture Fund II Annex |
2004 |
4 |
400,000 |
400,000 |
|
|
|
|
|
| Total Unquoted Funds |
|
|
199,450,000 |
195,243,621 |
|
|
|
|
|
APV Technology Partners III was liquidated on 30 June 2014.
Crescendo IV was sold on 9 December
2014 for proceeds of $1,284,000 (£818,000).
Other
Information
Company Activities and Status
The Group comprises the Company and its wholly-owned subsidiary,
Campton Group, Inc. (“Campton”), a California corporation. Campton acts as a
non-discretionary investment adviser to the Company.
The Company is an investment company as defined under Section
833 of the Companies Act 2006 (“the Companies Act”), and was
incorporated and registered in England and Wales on 19 January
2000 with Company Number 3912487. Its shares are listed on
the London Stock Exchange under the ticker PEQ.
The Company has received written approval from HM Revenue and
Customs as an authorised investment trust under Section 1158 of the
Corporation Tax Act 2010 (“CTA”). The Company will be treated as an
investment trust company for each subsequent accounting period,
subject to there being no serious breaches of the conditions. In
the opinion of the Directors, the Company has directed its affairs
so as to enable it to continue to qualify for such approval. The
Articles of Association provide for shareholders to consider the
continuation of the Company as an investment trust at the AGM to be
held on 28 September 2015.
The Company’s shares qualify as investments in ISAs.
Company Objectives and Business
Model
The principal activity of the Company is to carry on business as
an investment trust in accordance with its Investment Objective and
Policy. The Company has a portfolio of Funds to which it has made
capital commitments, some of which remain to be drawn down. The
Company will honour these remaining commitments and expects to
continue to receive distributions in cash and in shares from its
portfolio of Funds. The Company does not, however, intend to enter
into any new commitments and expects to continue making periodic
returns of capital to shareholders when sufficient monies are
received from the Funds.
Investment Objective
The objective of the Company has been to provide shareholders
with long-term capital growth. The Company is not making
investments in new private equity funds but is managing its
existing investments with a view to making periodic returns of
capital to shareholders.
Investment Policy
The Company has invested in the Funds, which are managed by a
number of different management groups, and focused on various
stages of growth so as to obtain exposure to a diversified
underlying portfolio of investments primarily in private companies
in the technology sector. Through the Funds, the Company has
exposure to a diverse portfolio of underlying companies.
It is the policy of the Company not to make new fund
investments. However, the Company will continue to meet existing
capital commitments to the Funds and may on occasion support
follow-on commitments in existing Funds or affiliated annex
funds.
The full Investment Policy is set out on the inside front cover
of the full Annual Report.
Net Asset Valuation
The NAV per Ordinary Share at 31 March
2015 was 238.7p (2014: 228.4p).
The Funds are stated at Directors’ valuation, which is normally
based on the valuations provided by the managers of those Funds,
which are received by the Company quarterly. The valuation
methodology normally used by these Funds is that the underlying
investments are valued at fair value, which is in accordance with
IFRS 13.
In the case of marketable securities, funds in the US typically
value on a mark to market basis. In the case of these securities,
funds in the US typically value these securities in accordance with
the Financial Accounting Standards Board’s Statement No.157, which
is broadly comparable to the International Private Equity and
Venture Capital (“IPEVC”) guidelines.
Results and Dividends
The results for the year are set out in the consolidated
statement of comprehensive income below. The Directors are not
recommending the payment of a dividend for the year ended
31 March 2015.
Key Performance Indicators
(“KPIs”)
The Board reviews the performance of the Funds at its meetings
by reference to a number of KPIs and receives monthly update
reports from Campton, its investment advisor. The Board considers
that the most relevant KPIs are those that communicate the
financial performance and strength of the Company as a whole,
being:
• the NAV performance;
• discount to NAV; and
• ongoing charges ratio.
The financial performance of the Company is set out below:
|
Year Ended
31 March 2015 |
Year Ended
31 March 2014 |
| Net assets and shareholders’
funds |
£35,339,000* |
£42,699,000 |
| Net assets per Ordinary Share |
238.7p |
228.4p |
| Discount to NAV |
18.5% |
20.1% |
| Ongoing charges (Company
only)** |
1.4% |
1.7% |
| Ongoing charges (Group)** |
1.6% |
2.0% |
*Following the tender offer completed in May 2014 when £8.5 million was returned to
shareholders.
** Ongoing charges at both the Company and Group level are
shown. The Company’s ongoing charges are calculated according to
the AIC guidance and, as such, exclude subsidiary expenses. Group
ongoing charges are calculated on the same basis, but include
subsidiary expenses.
Ongoing Charges Ratio
The Directors endeavour to run the Company efficiently and
monitor its operational expenses on an ongoing basis. The ongoing
charges ratio for the Company for the year ended 31 March 2015 was 1.4% (2014: 1.7%) and was 1.6%
for the Group (2014: 2.0%). As the Company returns cash to
shareholders and the Company’s NAV decreases, the percentage of
expenses to net assets is likely to increase. Efforts have been
made to reduce costs, for example not renewing the Company’s
membership of the Association of Investment Companies (“AIC”),
negotiating down key supplier’s fees, reducing the number of
Directors and their fees.
Due to these efforts, the ongoing charges ratio has decreased
slightly during the year despite the reduction in overall net
assets of the Company following the tender offers.
Principal Risks
and Uncertainties and their Mitigation
A risk assessment and a review of internal controls are
undertaken annually by the Board in the context of the Company’s
overall investment objective. The review covers the key business,
operational, compliance and financial risks facing the Company.
Full details of how the Board fulfils this role are shown in the
Corporate Governance statement in the full Annual Report.
The principal risks and uncertainties identified by the Board
are discussed below, together with an outline of how the Board
recognises and seeks to control these risks. Mitigation of the
principal risks is sought and achieved as far as possible. Further
information regarding financial risks is set out in Note 18 to the
Financial Statements below.
Stock Market Performance Risk
The Funds in which the Company is invested typically seek to
realise their own investment objectives by selling, recapitalising
or floating their investee companies. Consequently a proportion of
the Company’s underlying investments is in publicly quoted stocks
(listed primarily on the NASDAQ Stock Market and NYSE) – typically
as a result of IPOs or as a result of trade sales in which the
consideration has been by way of listed equity in the acquirer.
When such shareholdings are distributed, it is the Company’s
normal policy to sell them, ideally close to or above the
distribution price, as soon as possible. There may be instances
where the Company continues to hold distributed shares, in an
effort to obtain a higher price. However, this practice exposes the
Company to market risk. The Company did not directly hold any
publicly quoted investments at 31 March
2015.
Company and Fund Performance Risk
By their nature, investments in new and unlisted companies often
present greater risk than those in more established enterprises. In
addition, the Funds may make poor investments. The Company has
sought to mitigate this risk through the diversification of its
investment across a range of Funds (currently 20), which are
themselves invested in 323 underlying investments.
As PEI’s portfolio of Funds matures and winds down, the
Company’s investment portfolio will experience greater
concentration risk.
Regulatory Breach Risk
Relevant legislation and regulations which apply to the Company
include the Companies Act 2006, the CTA and the Listing Rules of
the Financial Conduct Authority (“FCA”). The Company has noted the
recommendations of the UK Corporate Governance Code. Its statement
of compliance appears below. A breach of CTA could result in the
Company losing its status as an investment trust company and
becoming subject to capital gains tax, whilst a breach of the
Listing Rules might result in censure and/or a fine by the FCA. At
each Board meeting the status of the Company is considered and
discussed, so as to ensure that all regulations are being adhered
to by the Company and its service providers.
To the knowledge of the Directors there have been no breaches of
laws or regulations during the period under review and up to the
date of this announcement.
Discount
The Directors regularly monitor the level of discount at which
the Group’s shares are trading. On 31 March
2015 the Group’s share price stood at a discount of 18.5% to
NAV, compared to 20.1% 12 months earlier.
The Directors have considered the introduction of a discount
protection mechanism, whereby the Company might purchase shares in
the market at a stated minimum discount to NAV. Unlike many other
investment trusts, however, the Company does not hold readily
marketable investments from which such purchases might be funded.
Moreover, it has already indicated that it will make periodic
tender offers to return the proceeds of distributions from its
portfolio to shareholders. In these circumstances, the Directors do
not consider that a formal discount protection mechanism is
appropriate, however, they continue to seek authority annually to
exercise their ability to buy back shares.
Investment Trust Status
The Board also regularly reviews the share register to confirm
that the Company is not a close company (as defined in the CTA),
however, the Board acknowledges that it has no control over
shareholders purchasing shares nor their concentration on the share
register. Being a close company would breach the CTA rules and the
Company would be likely to lose its investment trust qualification,
as further discussed under “Regulatory Breach Risk” above.
The Company monitors the significant shareholder positions on an
on-going basis and where the Company receives or is made aware of
information from significant shareholders in relation to their
shareholdings and voting rights, the Company investigates as
appropriate the disclosures that have been made and considers their
impact so as to ascertain whether or not there is any impact on the
Company’s close company status for the relevant financial
period.
Fund Term Risk
When a venture capital or buyout firm reaches the end of its
term (including extensions), the fund manager typically engages in
an orderly winding-down of the Fund. During this winding-down
period, which can last several years, the manager of the Fund
attempts to exit the remaining investments while maximising value
for the Fund’s investors. There is a risk, however, that a Fund in
wind-down may realise proceeds on the sale of investments at less
than reported fair value. If this happens, it could adversely
impact the value of interests in the Fund held by investors. In
addition, a Fund in wind-down will incur expenses (and possibly
management fees) during this period, which could also adversely
impact the value of investors’ interests in the Fund. Nine of the
Company’s twenty funds are in term extensions and six are in the
process of winding down.
Valuation Risk
The Directors are, to a significant extent, reliant on the
accuracy and timeliness of the financial information provided to
them by the General Partners of the Funds in which the Company has
invested. The Company receives valuations on a quarterly basis and
there is typically a time delay in the valuations being reported to
the Company and reflected in its NAV. The valuation of investments
held in the Funds is undertaken by the General Partner on a
quarterly basis and is reviewed annually by the Funds’ auditors
during the annual audit. Annual accounts and quarterly reports are
reviewed by PEI and discussed by the Board.
Market Operation Risk
The Company is reliant on the efficient operation of markets to
provide an exit route from investments held within the Funds. Exits
are typically achieved through trade sales, recapitalisations or
the sale of stocks following an IPO of an underlying company. In
periods of uncertain markets, exits can be delayed and the Company
may see a decrease in distributions received.
Exchange Rate Risk
The majority of the Company’s assets are held in US dollar
denominated securities and, since the Company’s shares are quoted
in sterling, shareholders are exposed to currency fluctuations
between these currencies. It is not the Company’s policy to hedge
against currency fluctuations.
Alternative Investment Fund Managers’
Directive (“AIFMD”)
AIFMD was conceived by European Union legislators to address a
perceived regulatory gap to protect investors and is intended to
provide a harmonised regulatory and supervisory framework
throughout the European Union for regulating Alternative Investment
Funds.
AIFMD was implemented by the UK on 22
July 2013, and existing companies had until 22 July 2014 to register their manager and comply
with the Directive. The Board has been appointed as the Alternative
Investment Fund Manager of the Company.
Future Outlook
The Company’s portfolio of Funds has delivered periodic cash and
stock distributions to the Company, and this is expected to
continue. As the underlying portfolio matures, it is expected that
the pace and amount of distributions from the Funds will slow. The
timing and level of distributions will also depend on the state of
capital markets as well as economic and other factors. It is the
Company’s stated policy not to make new fund investments, however,
the Company will continue to meet existing capital commitments to
the Funds and may on occasion support follow-on commitments in
existing Funds or affiliated annex funds.
Campton
Campton, the Company’s wholly-owned subsidiary, provides the
Company with non-discretionary investment advice and portfolio
monitoring services relating to the Company’s investment
portfolio.
Employees, Environmental, Human Rights
and Community Issues
The Company has one employee, the office manager of its
London office, and Campton has one
part-time employee based in San
Francisco.
The Board is composed entirely of non-executive Directors. The
Company was fully aware of each General Partner’s investment policy
at the time it committed to each new Fund. Limited Partners such as
the Company, however, are not consulted on individual investments
made by the General Partner in their particular funds. In light of
this, the Company attempts to conform to best practice on
environmental and other social responsibility issues. The Company
itself has no environmental, human rights, or community policies.
In carrying out its activities and in relationships with suppliers,
the Company aims to conduct itself responsibly, ethically and
fairly.
Stewardship
The Company has noted the principles of the UK Stewardship Code.
As a result of its investment objectives it does not often hold
stocks directly other than for short periods and therefore does not
normally have opportunities to vote at general meetings. In
conjunction with its investment adviser, Campton, the Company
maintains an open dialogue with the Funds and typically
participates in any investor actions when it is appropriate to do
so.
Contractual Arrangements Essential to
the Business of the Company
Other than the administration agreement described below, there
are no contractual arrangements that are considered essential to
the business of the Company.
Gender Diversity
During the year, the Board of Directors comprised four male
directors (three male directors following the resignation of David
Quysner). Appointments to the Board are made according to a
person’s existing knowledge and expertise taking into account the
Company’s strategic priorities. The Company has one female employee
and Campton has one part-time male employee.
On behalf of the Board
PETER DICKS
Chairman
29 July 2015
EXTRACTS FROM THE DIRECTORS’ REPORT
Capital Structure
In May 2008, shareholders approved
the cancellation of the Company’s Share Premium Account which,
following the necessary court approval obtained on 29 October 2008, permitted the creation of a
special distribution reserve. This enabled the Company to make
further returns of capital to shareholders. Since that time, the
Company has made six tender offers, returning a total of £70.15
million to shareholders and has made selected open market purchases
of its shares. On 22 April 2015, the
Company made a further tender offer of £6.7 million, bringing the
total returned to £76.85 million. No further shares were purchased
in the market during the year. No shares were held in, or issued
from, Treasury during the year.
At the year-end, the Company had an issued share capital of
14,805,508 Ordinary Shares of 0.01p each. Following the seventh
tender offer of £6.7 million completed on 22
April 2015 and at the date of this announcement, the Company
has an issued share capital of 11,945,519 Ordinary Shares of 0.01p
each. Each share is entitled to one vote on a poll at general
meetings.
Going Concern
The Company’s Articles of Association currently require a
continuation vote to be proposed at this year’s AGM and at every
AGM thereafter. In the event that any continuation vote is not
passed, the Directors shall be required to bring forward proposals
for the voluntary liquidation, unitisation or other reorganisation
or reconstruction of the Company.
The Directors have considered the application of the Statement
of Recommended Practice for Financial Statements of Investment
Trust Companies and Venture Capital Trusts, which states that, even
if an investment company is approaching a wind-up and shareholders
have yet to vote on the issue and provided that the Board has not
concluded that there is no realistic alternative to winding up the
company, it will usually be more appropriate for the financial
statements to be prepared on a going (rather than non-going)
concern basis.
In assessing the Company’s ability to continue as a going
concern, the Directors have had regard to the Company’s Investment
Objective and Policy and they have reviewed the principal risks and
uncertainties facing the Company (as stated above) together with
the Company’s commitments and contingent liabilities (note 17
below) and the Company’s cash and readily realisable investments
required to meet its investment obligations and expenditure. In
addition, the Directors have considered the Company’s investment
performance and the ongoing interest of investors in the
continuation of the Company, including feedback from conversations
with shareholders.
Based on their assessment and considerations, the Directors have
concluded that they should continue to prepare the financial
statements on a going concern basis and the financial statements
have been prepared accordingly.
STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE
FINANCIAL STATEMENTS
The Directors are responsible for preparing the Annual Report
and the Group and Company financial statements in accordance with
applicable United Kingdom law and
those International Financial Reporting Standards (“IFRS”) adopted
by the European Union.
Under Company law, the Directors must not approve the Group and
Company financial statements unless they are satisfied that they
present fairly the financial position, financial performance and
cash flows of the Group for that period. In preparing the Group and
Company financial statements, the Directors are required to:
• select suitable accounting policies in accordance with IAS 8:
Accounting Policies, Changes in Accounting Estimates and Errors and
then apply them consistently;
• present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
• provide additional disclosures when compliance with the
specific requirements in IFRS is insufficient to enable users to
understand the impact of particular transactions, other events and
conditions on the Group’s and Company’s financial position and
financial performance;
• state that the Group and Company have complied with
International Financial Reporting Standards subject to any material
departures disclosed and explained in the financial statements;
• make judgements and estimates that are reasonable and prudent;
and
• prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping proper accounting
records that are sufficient to show and explain the Group’s and
Company’s transactions and disclose with reasonable accuracy, at
any time, the financial position of the Group and Company and
enable them to ensure that the Group and Company financial
statements comply with the Companies Act 2006 and Article 4 of the
IAS Regulations. The Directors are also responsible for ensuring
that the Strategic Report and Directors’ Report is prepared in
accordance with Company Law in the United
Kingdom and that the Annual Report includes information
required by the Listing Rules of the Financial Conduct Authority.
They are also responsible for safeguarding the assets of the Group
and Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company’s website. The work carried out by the Auditor does not
include consideration of the maintenance and integrity of the
website and accordingly, the Auditor accepts no responsibility for
any changes that have occurred to the financial statements when
they are presented on the website. Visitors to the website need to
be aware that legislation in the United
Kingdom governing the preparation and dissemination of
financial statements may differ from legislation in other
jurisdictions.
The Directors confirm that, to the best of their knowledge:
• the financial statements, which have been prepared in
accordance with UK Generally Accepted Accounting Practice, give a
true and fair view of the assets, liabilities, financial position
and net return of the Company;
• the Strategic Report and the Directors’ Report include a fair
review of the development and performance of the business and the
position of the Company, together with a description of the
principal risks and uncertainties it faces; and
• the Annual Report and financial statements, taken as a whole,
are fair, balanced and understandable and provide the information
necessary for shareholders to assess the Company’s performance,
business model and strategy.
For and on behalf of the Board
PETER DICKS
Chairman
29 July 2015
NON-STATUTORY ACCOUNTS
The financial information set out below does not constitute the
Company’s statutory accounts for the year ended 31 March 2015 and the year ended 31 March 2014 but is derived from those accounts.
Statutory accounts for 2014 have been delivered to the Registrar of
Companies, and those for 2015 will be delivered in due course. The
Auditor has reported on those accounts; their report was (i)
unqualified, (ii) did not include a reference to any matters to
which the Auditor drew attention by way of emphasis without
qualifying their report and (ii) did not contain a statement under
Section 498 (2) or (3) of the Companies Act 2006. The text of the
Auditor’s report can be found in the Company’s full Annual Report
and Accounts at www.peiplc.com.
CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
for the year ended 31 March 2015
|
|
Year
ended 31 March 2015 |
Year
ended 31 March 2014 |
|
|
Revenue |
Capital |
|
Revenue |
Capital |
|
|
|
return |
return |
Total |
return |
return |
Total |
|
Notes |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
| Gains on investments at fair
value through profit and loss |
9 |
- |
1,793 |
1,793 |
- |
659 |
659 |
| Exchange gains/(losses) on other
items |
9 |
- |
35 |
35 |
- |
(141) |
(141) |
|
|
- |
1,828 |
1,828 |
- |
518 |
518 |
|
|
|
|
|
|
|
|
| Operating income |
|
|
|
|
|
|
|
| Investment income |
|
11 |
- |
11 |
12 |
- |
12 |
| Other operating income |
|
4 |
- |
4 |
3 |
- |
3 |
|
|
|
|
|
|
|
|
| Total operating income |
2 |
15 |
- |
15 |
15 |
- |
15 |
|
|
|
|
|
|
|
|
| Operating expenses |
|
|
|
|
|
|
|
| Administrative expenses |
3 |
(547) |
(108) |
(655) |
(796) |
(104) |
(900) |
|
|
|
|
|
|
|
|
| Operating return/(loss) |
|
(532) |
1,720 |
1,188 |
(781) |
414 |
(367) |
|
|
|
|
|
|
|
|
| Return/(loss) before tax |
|
(532) |
1,720 |
1,188 |
(781) |
414 |
(367) |
| Tax |
5 |
- |
- |
- |
- |
- |
- |
| Return/(loss) after
tax |
|
(532) |
1,720 |
1,188 |
(781) |
414 |
(367) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other comprehensive income |
|
|
|
|
|
|
|
| - exchange differences
on translation of foreign operations |
|
- |
11 |
11 |
- |
(34) |
(34) |
|
|
|
|
|
|
|
|
| Total comprehensive income/(loss)
for the year |
|
(532) |
1,731 |
1,199 |
(781) |
380 |
(401) |
|
|
|
|
|
|
|
|
| Attributable to: |
|
|
|
|
|
|
|
| Equity holders of the parent |
|
(532) |
1,731 |
1,199 |
(781) |
380 |
(401) |
|
|
|
|
|
|
|
|
| Earnings/(loss) per share |
|
|
|
|
|
|
|
| Basic |
8 |
(3.5)p |
11.2p |
7.7p |
(4.0)p |
2.1p |
(1.9)p |
The total column of this statement represents the Group’s
Statement of Comprehensive Income, prepared in accordance with
IFRS. The supplementary revenue return and capital return columns
are both prepared under guidance published by the AIC. All items in
the above statement derive from continuing operations. The Company
has elected to take the exemption in Section 408 of the Companies
Act 2006, not to present the Company’s Statement of Comprehensive
Income.
The notes form part of these financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY
for the year ended 31 March 2015
|
|
|
Capital |
|
Currency |
|
|
|
Share |
Special |
redemption |
Capital |
translation |
Retained |
|
|
capital |
reserve |
reserve |
reserve |
reserve |
earnings |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
| Year ended 31 March 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| As at 1 April 2014 |
2 |
44,062 |
3 |
4,541 |
2 |
(5,911) |
42,699 |
| Total comprehensive income for the
year |
- |
- |
- |
1,720 |
11 |
(532) |
1,199 |
| Tender offer |
(1) |
(8,500) |
1 |
- |
- |
- |
(8,500) |
| Tender offer expenses |
- |
(59) |
- |
- |
- |
- |
(59) |
|
|
|
|
|
|
|
|
| As at 31 March 2015 |
1 |
35,503 |
4 |
6,261 |
13 |
(6,443) |
35,339 |
|
|
|
|
|
|
|
|
| Year ended 31 March 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| As at 1 April 2013 |
2 |
52,772 |
3 |
4,127 |
36 |
(5,130) |
51,810 |
| Total comprehensive income for the
year |
- |
- |
- |
414 |
(34) |
(781) |
(401) |
| Tender offer |
- |
(8,650) |
- |
- |
- |
- |
(8,650) |
| Tender offer expenses |
- |
(60) |
- |
- |
- |
- |
(60) |
|
|
|
|
|
|
|
|
| As at 31 March 2014 |
2 |
44,062 |
3 |
4,541 |
2 |
(5,911) |
42,699 |
The notes form part of these financial statements.
COMPANY STATEMENT OF CHANGES IN
EQUITY
for the year ended 31 March 2015
|
|
|
Capital |
|
|
|
|
Share |
Special |
redemption |
Capital |
Retained |
|
|
capital |
reserve |
reserve |
reserve |
earnings |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
| Year ended 31 March 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| As at 1 April 2014 |
2 |
44,062 |
3 |
4,489 |
(5,857) |
42,699 |
| Total comprehensive income for the
year |
- |
- |
- |
1,728 |
(529) |
1,199 |
| Tender offer |
(1) |
(8,500) |
1 |
- |
- |
(8,500) |
| Tender offer expenses |
- |
(59) |
- |
- |
- |
(59) |
|
|
|
|
|
|
|
| As at 31 March 2015 |
1 |
35,503 |
4 |
6,217 |
(6,386) |
35,339 |
|
|
|
|
|
|
|
| Year ended 31 March 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| As at 1 April 2013 |
2 |
52,772 |
3 |
4,168 |
(5,135) |
51,810 |
| Total comprehensive income for the
year |
- |
- |
- |
321 |
(722) |
(401) |
| Tender offer |
- |
(8,650) |
- |
- |
- |
(8,650) |
| Tender offer
expenses |
- |
(60) |
- |
- |
- |
(60) |
|
|
|
|
|
|
|
| As at 31 March 2014 |
2 |
44,062 |
3 |
4,489 |
(5,857) |
42,699 |
|
|
|
|
|
|
|
The notes form part of these financial
statements.
CONSOLIDATED BALANCE SHEET
as at 31 March 2015
|
|
|
|
|
|
31 March |
31 March |
|
|
2015 |
2014 |
|
Notes |
£’000 |
£’000 |
| Non-current assets |
|
|
|
| Investments at fair value through
profit or loss |
9 |
27,917 |
40,171 |
|
|
|
|
| Current assets |
|
|
|
| Trade and other receivables |
11 |
71 |
404 |
| Cash and cash equivalents |
15 |
7,425 |
2,212 |
|
|
|
|
|
|
7,496 |
2,616 |
|
|
|
|
| Total assets |
|
35,413 |
42,787 |
|
|
|
|
| Current liabilities |
|
|
|
| Trade and other payables |
12 |
74 |
88 |
|
|
|
|
| Net assets |
|
35,339 |
42,699 |
|
|
|
|
| Capital and reserves |
|
|
|
| Share capital |
13 |
1 |
2 |
| Special reserve |
14 |
35,503 |
44,062 |
| Capital redemption reserve |
14 |
4 |
3 |
| Capital reserve |
14 |
6,261 |
4,541 |
| Currency translation reserve |
14 |
13 |
2 |
| Retained earnings |
14 |
(6,443) |
(5,911) |
|
|
|
|
| Shareholders’ funds |
|
35,339 |
42,699 |
|
|
|
|
| Total equity |
|
35,339 |
42,699 |
|
|
|
|
| Net asset value per
ordinary share |
16 |
238.7p |
228.4p |
|
|
|
|
The Group’s financial statements were approved by the Board of
Directors on 29 July 2015 and were
signed on its behalf by:
PETER DICKS
Chairman
Company Registered Number: 3912487
The notes form part of these financial statements.
COMPANY BALANCE SHEET
as at 31 March 2015
|
|
|
|
|
|
31
March |
31 March |
|
|
2015 |
2014 |
|
Notes |
£’000 |
£’000 |
| Non-current assets |
|
|
|
| Investments at fair value through
profit or loss |
9 |
27,917 |
40,171 |
| Investment in subsidiary |
10 |
26 |
65 |
Current assets |
|
|
|
| Trade and other receivables |
11 |
61 |
395 |
| Cash and cash equivalents |
15 |
7,407 |
2,147 |
|
|
|
|
|
|
7,468 |
2,542 |
|
|
|
|
| Total assets |
|
35,411 |
42,778 |
|
|
|
|
| Current liabilities |
|
|
|
| Trade and other payables |
12 |
72 |
79 |
|
|
|
|
| Net assets |
|
35,339 |
42,699 |
|
|
|
|
| Capital and reserves |
|
|
|
| Share capital |
13 |
1 |
2 |
| Special reserve |
14 |
35,503 |
44,062 |
| Capital redemption reserve |
14 |
4 |
3 |
| Capital reserve |
14 |
6,217 |
4,489 |
| Retained earnings |
14 |
(6,386) |
(5,857) |
|
|
|
|
| Shareholders’ funds |
|
35,339 |
42,699 |
|
|
|
|
| Total equity |
|
35,339 |
42,699 |
|
|
|
|
| Net asset value per
ordinary share |
16 |
238.7p |
228.4p |
|
|
|
|
The Company’s financial statements were approved by the Board of
Directors on 29 July 2015 and were
signed on its behalf by:
PETER DICKS
Chairman
The notes form part of these financial statements.
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 March 2015
|
|
Year ended |
Year ended |
|
|
31 March 2015 |
31 March 2014 |
|
Notes |
£’000 |
£’000 |
|
|
|
|
| Cash flows from operating
activities |
|
|
|
| Consolidated net return/(loss)
before tax |
|
1,188 |
(367) |
|
|
|
|
| Adjustments to reconcile net
return/(loss) before tax to net cash flows from operating
activities: |
|
|
|
| Gains on investments |
|
(1,793) |
(659) |
| Exchange (gains)/losses |
|
(19) |
128 |
| Costs related to tender offer |
|
102 |
104 |
| Decrease in trade and other
payables |
|
(14) |
(277) |
| Decrease/(increase) in trade and
other receivables |
|
7 |
(7) |
| Purchase of investments |
|
(5,503) |
(5,781) |
| Sale of investments |
|
15,263 |
9,981 |
| Cash distributions |
|
4,613 |
6,534 |
|
|
|
|
| Net cash flows generated from
operating activities |
|
13,844 |
9,656 |
|
|
|
|
| Financing |
|
|
|
| Ordinary Shares purchased |
|
(8,559) |
(8,710) |
| Costs related to tender offer |
|
(102) |
(104) |
|
|
|
|
| Net cash used in financing
activities |
|
(8,661) |
(8,814) |
|
|
|
|
| Net increase in cash and cash
equivalents |
|
5,183 |
842 |
|
|
|
|
| Cash and cash equivalents at
beginning of year |
|
2,212 |
1,532 |
| Effect of foreign exchange rates on
cash and cash equivalents |
|
30 |
(162) |
|
|
|
|
| Cash and cash equivalents at end
of year |
15 |
7,425 |
2,212 |
|
|
|
|
The notes form part of these financial statements.
COMPANY CASH FLOW STATEMENT
for the year ended 31 March 2015
|
|
Year ended |
Year ended |
|
|
31 March 2015 |
31 March 2014 |
|
Notes |
£’000 |
£’000 |
|
|
|
|
| Cash flows from operating
activities |
|
|
|
| Company net return/(loss) before
tax |
|
1,199 |
(401) |
|
|
|
|
| Adjustments to reconcile net
return/(loss) before tax to net cash flows from operating
activities: |
|
|
|
| Gains on investments |
|
(1,793) |
(659) |
| Exchange (gains)/losses |
|
(27) |
221 |
| Costs related to tender offer |
|
102 |
104 |
| Impairment of Campton |
|
47 |
284 |
| Receipt of written down
receivable |
|
- |
401 |
| Decrease in trade and other
payables |
|
(6) |
(278) |
| Decrease/(increase) in trade and
other receivables |
|
7 |
(5) |
| Purchase of investments |
|
(5,503) |
(5,781) |
| Sale of investments |
|
15,263 |
9,981 |
| Cash distributions |
|
4,613 |
6,534 |
|
|
|
|
| Net cash flows generated from
operating activities |
|
13,902 |
10,401 |
|
|
|
|
| Investing activities |
|
|
|
| Investment in subsidiary |
|
- |
(1,019) |
| Redemption of loan notes |
|
- |
598 |
|
|
|
|
| Net cash used in investing
activities |
|
- |
(421) |
|
|
|
|
| Financing |
|
|
|
| Ordinary Shares purchased |
|
(8,559) |
(8,710) |
| Costs related to tender offer |
|
(102) |
(104) |
|
|
|
|
| Net cash used in financing
activities |
|
(8,661) |
(8,814) |
|
|
|
|
| Net decrease in cash and cash
equivalents |
|
5,241 |
1,166 |
|
|
|
|
| Cash and cash equivalents at
beginning of year |
|
2,147 |
1,109 |
| Effect of foreign exchange rates on
cash and cash equivalents |
|
19 |
(128) |
|
|
|
|
| Cash and cash equivalents at end
of year |
15 |
7,407 |
2,147 |
|
|
|
|
|
The notes below form part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
at 31 March 2015
1 ACCOUNTING POLICIES
Accounting Convention
Private Equity Investor PLC is a company incorporated in
Great Britain and registered in
England and Wales under the Companies Act 2006. The
consolidated financial statements for the Group for the year ended
31 March 2015 comprised the results
of the Company and its wholly-owned subsidiary, Campton (together
referred to as the “Group”). For further details see Basis of
Consolidation below. The Company is registered as a public limited
company and is an investment company as defined by section 833 of
the Companies Act 2006. Campton acts as a non-discretionary
investment adviser to the Company.
Basis of Accounting
The consolidated annual financial statements of the Group have
been prepared under International Financial Reporting Standards
(“IFRS”), which comprise standards and interpretations approved by
the International Accounting Standards Board (“IASB”). The annual
financial statements of the Company have been prepared in
accordance with IFRS as adopted by the European Union, and as
applied in accordance with the provisions of the Companies Act
2006. The financial statements have also been prepared in
accordance with the Statement of Recommended Practice (“SORP”)
(issued January 2009) for Investment
Trust Companies and Venture Capital Trusts except to any extent
that it conflicts with IFRS.
The accounting policies that follow set out those policies which
apply in preparing the financial statements for the year ended
31 March 2015. There are no
differences between the accounting policies applied to the Group
and the Company.
The Group and Company financial statements are presented in
Sterling and all values are rounded to the nearest thousand pounds
(£’000) except when indicated otherwise.
Basis of Consolidation
The consolidated financial statements incorporate the financial
statements of the Company and Campton, its wholly-owned
subsidiary.
All profits and losses of Campton are attributable to the
Company.
The financial statements of Campton are prepared for the same
reporting year as the Parent Company, using consistent accounting
policies. All intercompany balances and transactions, including
unrealised profits arising from them, are eliminated.
Segmental Reporting
The Directors are of the opinion that the Group is engaged in a
single segment of business, being investment business. Accordingly
a segmental reporting note is not presented. The results of Campton
are immaterial for segmental reporting purposes.
Income Recognition
Dividends receivable on quoted equity shares and debt securities
are included in the financial statements when the investments
concerned are quoted ‘ex-dividend’. Dividends receivable on equity
shares where no ex-dividend date is quoted are brought into account
when the Group’s right to receive payment is established. The fixed
return on a debt security is recognised on a time apportionment
basis so as to reflect the effective yield on the debt security.
Interest receivable is included on an accruals basis.
Expenses
All expenses are accounted for on an accruals basis and are
charged through the revenue column of the Statement of
Comprehensive Income, except for expenses which are incidental to
the sale or purchase of an investment or related to tender offers,
which are charged through the capital column of the Statement of
Comprehensive Income. Stamp duty and commission related to tender
offers are charged to the special reserve.
Investments at Fair Value Through
Profit or Loss
Investments where a purchase or sale is under a contract whose
terms require delivery within the timeframe established by the
market concerned are recognised and derecognised on the trade
date.
All investments held by the Company are designated upon initial
recognition as held at fair value through profit or loss.
Investments are measured at fair value, with unrealised gains and
losses on investments and impairment of investments recognised in
the Statement of Comprehensive Income and allocated to capital.
Realised gains and losses on investments sold are calculated as the
difference between sales proceeds and cost.
The Funds are stated at Directors’ valuation, which is normally
based on valuations provided by the managers of those funds which
are received by the Company at least quarterly. The valuation
methodology used by these Funds is that the underlying investments
are valued at fair value in accordance with Financial Accounting
Standard 157 (“FAS 157”) which is broadly comparable to
International Private Equity and Venture Capital (IPEVC)
guidelines.
For investments actively traded in organised financial markets,
fair value is generally determined by reference to Stock Exchange
quoted market bid prices at the close of business on the Balance
Sheet date, without any deduction for transaction costs necessary
to realise the asset.
Capital distributions received from investments are accounted
for on a reducing cost basis. Cash and stock distributions received
are first applied to reducing the base cost of an investment. A
realised gain will be recognised only when the cost has been
reduced to nil.
Judgements and Estimates
The preparation of financial statements requires management to
make judgements, estimates and assumptions that affect the amounts
reported in the financial statements. However, the nature of
estimation means that actual outcomes could differ from those
estimates. The Directors consider the available observable inputs
when making these judgements. The Group primarily invests in
private equity via limited partnerships or other fund structures.
Such vehicles are typically unquoted and in turn invest in unquoted
securities. The Group’s investment portfolio is recognised in the
Balance Sheet at fair value, in accordance with IPEV Valuation
Guidelines and IFRS.
Fair value is based on the Company’s share of the net asset
value of the Fund, as determined by the general partner of such
funds.
Updated net asset values are received for each Fund on a
quarterly basis. The net asset value of a Fund is calculated after
determining the fair value of a Fund’s investment in any investee
companies.
Adjustments to net asset value may be considered, for example,
where:
- There has been significant elapsed time between the net asset
value calculation date and the Company’s Balance Sheet date.
- There have been material movements in quoted prices between the
net asset value calculation date and the Company’s Balance Sheet
date.
- The Company has agreed a sale of its holding in a fund interest
at a price other than net asset value.
- net asset value is not derived from the fair value of
underlying portfolio companies.
The valuations of publicly traded securities held by these Funds
are also affected by discounts, estimated for any legal or
contractual restrictions on sale.
Foreign Currency Translation
The functional and presentational currency of the Company is
Sterling. Transactions in currencies other than Sterling are
recorded at the rates of exchange prevailing on the dates of the
transactions. At each Balance Sheet date, monetary assets and
liabilities that are denominated in foreign currencies are
re-translated at the rates prevailing on the Balance Sheet date.
Gains and losses arising on re-translation are included in the
Statement of Comprehensive Income and are allocated either to
revenue or capital, as appropriate.
The assets and liabilities of foreign operations are translated
into sterling at the rate of exchange ruling at the Balance Sheet
date. Income and expenses derived from foreign operations have been
translated at the rates of exchange prevailing on the date of
transaction. The resulting exchange differences are recognised in
Other Comprehensive Income and shown in the Currency Translation
Reserve. On disposal of a foreign investment, the cumulative amount
recognised in Other Comprehensive Income relating to that
particular foreign operation is recycled through the Income
Statement.
Investments in Subsidiary
The investment in Campton is stated in the Company’s Balance
Sheet at cost less a provision for impairment. Impairment is
recognised when the carrying amount of an asset exceeds its
recoverable amount. The recoverable amount is the higher of the
asset’s fair value less cost of disposal and its value in use. The
Company bases the recoverable amount of Campton on the fair value
less cost of disposal. The Directors consider that the best
estimate of fair value of Campton is its net assets attributable to
the Group and the cost of disposal is considered to be
negligible.
Taxation
Deferred tax is recognised in respect of all temporary
differences at the Balance Sheet date where transactions or events
have occurred that result in an obligation to pay more, or the
right to pay less tax in the future. This is subject to deferred
tax assets being recognised only if it is considered more likely
than not that there will be suitable profits from which the future
reversal of the temporary differences can be deducted.
Current tax is expected tax payable on the taxable income for
the period, using tax rules at the Balance Sheet date and any
adjustment to tax payable in respect of previous years. The tax
effect of different items of income/gain and expenditure/loss is
allocated between revenue and capital on the same basis as the
particular item to which it relates, using the marginal method.
Dividends Payable to Shareholders
Dividends to shareholders are recognised as a liability in the
period in which they have been declared and paid.
Any final dividend proposed by the Board is not declared until
approved by the shareholders at the Annual General Meeting
following the year end.
Cash and Cash Equivalents
Cash and cash equivalents in the Statement of Financial Position
comprise cash in hand and short-term deposits in banks that are
readily convertible to known amounts of cash and which are subject
to an insignificant risk of changes in value, with original
maturities of three months or less.
Leases
Leases where the lessor retains substantially all the risks and
benefits of ownership of the assets are classified as operating
leases.
New Standards and Interpretations Not
Applied
The IASB have issued the following relevant standards and
interpretations which are not effective for the year ended
31 March 2015 and have not been
applied in preparing these financial statements.
|
New/Revised International Financial Reporting Standards |
Issued |
Effective
Date |
| IFRS 7 |
Financial Instruments:
Disclosures – Amendments requiring disclosures about the initial
application of IFRS 9 |
December 2011 |
1 January 2015 (or
otherwise when IFRS 9 is first applied) |
| IFRS 9 |
Financial
Instruments |
July 2014 |
1 January 2018 |
The Directors do not anticipate that the initial adoption of the
above standards will have a material impact in the period of
initial application.
The Group applies, for the first time;
IFRS 10 Consolidated Financial
Statements.
The Board considers PEI to qualify as an investment entity in
accordance with IFRS 10 paragraph 27 as the Company obtains funds
for the purpose of providing investors with investment management
services, invests funds solely for returns from capital
appreciation and/or investment income; and measures and evaluates
the performance of substantially all of its investments on a fair
value basis.
Under adoption of IFRS 10 the Board has concluded that as
Campton provides non-discretionary investment advisory services, it
falls under the key exception to the mandatory requirement to
account for Subsidiaries at fair value through profit or loss, and
therefore continues to produce consolidated financial
statements.
IFRS 12 Disclosure of Interests in
Other Entities
This includes the disclosure requirements for all forms of
interests in other entities. This standard builds on existing
principles by identifying the concept of control as the determining
factor in whether an entity should be included within the
consolidated financial statements. The standard provides additional
guidance to assist in determining control where this is difficult
to assess.
2 OPERATING
INCOME
|
2015 |
2014 |
|
Group |
Group |
|
£’000 |
£’000 |
|
|
|
| Income from
investments: |
|
|
| Interest from
open-ended investment funds |
11 |
12 |
|
|
|
|
11 |
12 |
|
|
|
| Other income: |
|
|
| Deposit interest |
4 |
3 |
|
|
|
| Total operating
income |
15 |
15 |
|
|
|
| Total income
comprises: |
|
|
| Interest |
15 |
15 |
|
|
|
3 OPERATING EXPENSES
|
2015 |
2014 |
|
Revenue |
Capital |
|
Revenue |
Capital |
|
|
return |
return |
Total |
return |
return |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
|
|
|
|
|
|
|
| Secretarial
services |
114 |
- |
114 |
113 |
- |
113 |
| Investment advisor
employee retention fee |
- |
- |
- |
(42) |
- |
(42) |
| Auditor’s remuneration
for: |
|
|
|
|
|
|
| - audit |
25 |
- |
25 |
29 |
- |
29 |
| - other
services* |
- |
10 |
10 |
- |
11 |
11 |
| Directors’
remuneration |
89 |
- |
89 |
100 |
- |
100 |
Other expenses:
- fundraising services |
- |
- |
- |
18 |
- |
18 |
| - legal and
professional fees** |
27 |
6 |
33 |
80 |
- |
80 |
| - office
expenditure |
16 |
- |
16 |
39 |
- |
39 |
| - rent and rates |
23 |
- |
23 |
32 |
- |
32 |
| - staff costs (see note
4) |
184 |
- |
184 |
234 |
- |
234 |
| - subscriptions |
10 |
- |
10 |
19 |
- |
19 |
| - travel |
- |
- |
- |
24 |
- |
24 |
| - health insurance |
2 |
- |
2 |
11 |
- |
11 |
| - tender offer
expenses*** |
- |
92 |
92 |
- |
93 |
93 |
| - other expenses |
57 |
- |
57 |
139 |
- |
139 |
|
547 |
108 |
655 |
796 |
104 |
900 |
|
|
|
|
|
|
|
*Relating to the tender offer.
**Capital expense relating to the sale of Crescendo IV.
***Stamp duty and commission have been charged against the special
reserve.
4 STAFF COSTS
|
2015 |
2014 |
|
Group |
Group |
|
£’000 |
£’000 |
|
|
|
| Salaries and other
payments |
168 |
213 |
| Social security
costs |
16 |
21 |
|
|
|
|
184 |
234 |
|
|
|
With the exception of the Directors, whose remuneration is shown
in the Directors’ Remuneration Report in the full Annual Report,
the Group employed two members of staff during the year (2014: two
members of staff).
5 TAXATION ON ORDINARY ACTIVITIES
|
2015 |
2014 |
|
Revenue
return |
Capital
return |
Total |
Revenue return |
Capital return |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
|
|
|
|
|
|
|
| UK corporation tax at 21% (2014:
23%) |
- |
- |
- |
- |
- |
- |
The Group is subject to corporation tax at 21% (2014: 23%). As
at 31 March 2015 the total taxation
charge in the Group’s revenue account is lower than the standard
rate of corporation tax in the UK (21%). The differences are
explained below:
|
|
|
|
2015 |
2014 |
|
Revenue |
Capital |
|
Revenue |
Capital |
|
|
return |
return |
Total |
return |
return |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
|
|
|
|
|
|
|
| Net return before finance costs and
taxation |
(532) |
1,720 |
1,188 |
(781) |
414 |
(367) |
|
|
|
|
|
|
|
| Theoretical tax at UK corporation
tax rate of 21% (2014: 23%) |
(112) |
361 |
249 |
(180) |
95 |
(85) |
|
|
|
|
|
|
|
| Effects of: |
|
|
|
|
|
|
| - expenses disallowed for taxation
purposes |
- |
23 |
23 |
3 |
24 |
27 |
| - losses in Campton not carried
forward as excess management expenses |
11 |
- |
11 |
79 |
- |
79 |
| - gains on investments and exchange
losses on capital items |
- |
(384) |
(384) |
- |
(119) |
(119) |
| - excess management expenses |
101 |
- |
101 |
98 |
- |
98 |
|
- |
- |
- |
- |
- |
- |
At 31 March 2015, the Group had no
unprovided deferred tax liabilities (2014: £nil). At that date,
based on current estimates and including the accumulation of net
allowable management expenses deriving from its partnership
interests in its Funds, the Group had surplus management expenses
of approximately £20,694,000 (2014: £19,754,000). A deferred tax
asset of £4,139,000 has not been recognised because the Group is
not expected to generate sufficient taxable income in future
periods in excess of the available deductible expenses and
accordingly, the Group is unlikely to be able to reduce future tax
liabilities through the use of existing surplus expenses.
Due to the Group’s status as an investment trust, and the
intention to continue meeting the conditions required to obtain
approval in the foreseeable future, the Group has not provided
deferred tax on any capital gains and losses arising on the
revaluation or disposal of investments.
6 DIVIDENDS
No distribution is proposed for the
year ended 31 March 2015.
7 PROFIT
As permitted by Section 408 of the Companies Act 2006, the
Statement of Comprehensive Income of the Company is not presented
as part of these financial statements. The consolidated net profit
after taxation for the financial year includes £1,199,000 (2014:
£401,000 loss) which is dealt with in the financial statements of
the Company.
8 RETURN PER ORDINARY SHARE
|
2015 |
2014 |
|
Revenue |
Capital |
|
Revenue |
Capital |
|
|
return |
return |
Total |
return |
return |
Total |
|
pence |
pence |
pence |
pence |
pence |
pence |
|
|
|
|
|
|
|
| Return per Ordinary Share |
(3.5)p |
11.2p |
7.7p |
(4.0)p |
2.1p |
(1.9)p |
|
|
|
|
|
|
|
Revenue return per Ordinary Share is based on the net loss on
ordinary activities after taxation of £532,000 (2014: net loss of
£781,000), and on 15,423,526 (2014: 19,302,241) Ordinary Shares,
being the weighted average number of Ordinary Shares in issue
during the year.
Capital return per Ordinary Share is based on the net capital
gain for the year of £1,720,000 (2014: net gain of £414,000), and
on 15,423,526 (2014: 19,302,241) Ordinary Shares, being the
weighted average number of Ordinary Shares in issue during the
year.
Total return per Ordinary Share is based on the net profit for
the year of £1,188,000 (2014: net loss of £367,000), and on
15,423,526 (2014: 19,302,241) Ordinary Shares, being the weighted
average number of Ordinary Shares in issue during the year.
9 INVESTMENTS
|
2015 |
2014 |
|
£’000 |
£’000 |
|
|
|
| Group and Company |
|
|
| a) Investment portfolio
summary |
|
|
|
|
|
| USA |
|
|
| Listed investments |
|
|
| - common stock |
- |
135 |
| Unlisted Funds |
24,987 |
30,807 |
|
|
|
| Other investments |
|
|
| - open-ended Investment Funds |
2,930 |
9,229 |
|
|
|
|
27,917 |
40,171 |
|
|
|
A full listing of the investment portfolio is provided
above.
|
|
Quoted |
|
|
|
|
open-ended |
|
|
|
Listed |
investment |
Unlisted |
|
|
equities |
funds |
Funds |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
| b) Analysis of investment
portfolio movements |
|
|
|
|
|
|
|
|
|
| Opening book cost |
19 |
8,924 |
34,908 |
43,851 |
| Opening unrealised
appreciation/(depreciation) |
116 |
305 |
(4,101) |
(3,680) |
|
|
|
|
|
| Opening valuation |
135 |
9,229 |
30,807 |
40,171 |
|
|
|
|
|
| Movement in the year: |
|
|
|
|
| Purchases at cost |
- |
4,817 |
- |
4,817 |
| Calls from Funds at cost |
- |
- |
686 |
686 |
| Sales |
|
|
|
|
| - proceeds |
(2,665) |
(11,454) |
(818) |
(14,937) |
| - realised gains /(losses) on
sales |
1,934 |
80 |
(133) |
1,881 |
| Book cost adjustments from capital
distributions |
|
|
|
|
| - cash distributions |
- |
- |
(4,613) |
(4,613) |
| - cash distributions realised
gains |
- |
- |
2,105 |
2,105 |
| - stock distributions |
596 |
- |
(596) |
- |
|
|
|
|
|
| Unrealised
appreciation/(depreciation) |
- |
258 |
(2,451) |
(2,193) |
|
|
|
|
|
| Closing valuation |
- |
2,930 |
24,987 |
27,917 |
| Closing book cost |
- |
2,367 |
25,747 |
28,114 |
| Closing unrealised
appreciation/(depreciation) |
- |
563 |
(760) |
(197) |
|
- |
2,930 |
24,987 |
27,917 |
The Company is required 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).
• 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, is determined on the basis of the
lowest level input that is significant to the fair value of the
investment.
The Company considers observable data for investments actively
traded in organised financial markets, with fair value determined
by reference to Stock Exchange quoted market bid prices at the
close of business on the balance sheet date, without adjustment for
transaction costs necessary to realise the asset. The following
table analyses within the fair value hierarchy the Fund’s financial
assets and liabilities (by class) measured at fair value at 31
March.
Financial instruments at fair value
through profit and loss
| 2015 |
Level 1 |
Level 2 |
Level 3 |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
|
|
|
|
|
| Open-ended investment funds |
2,930 |
- |
- |
2,930 |
| Unlisted Funds |
- |
- |
24,987 |
24,987 |
|
|
|
|
|
|
2,930 |
- |
24,987 |
27,917 |
| 2014 |
Level 1 |
Level 2 |
Level 3 |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
|
|
|
|
|
| Open-ended investment funds |
9,229 |
- |
- |
9,229 |
| Listed equities |
135 |
- |
- |
135 |
| Unlisted Funds |
- |
- |
30,807 |
30,807 |
|
|
|
|
|
|
9,364 |
- |
30,807 |
40,171 |
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 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 based on available market information.
Investments classified within level 3 have significant
unobservable inputs. Level 3 instruments include private equity and
corporate debt securities. As observable prices are not available
for these securities, the Company has used valuation techniques to
derive the fair value. In respect of unquoted instruments, or where
the market for a financial instrument is not active, Funds based in
the United States typically value
portfolios in accordance with FAS 157 which defines fair value,
establishes a framework for measuring fair value and expands
disclosures about fair value measurements. FAS 157 is broadly
comparable to IPEVC guidelines.
The following table presents the movement in level 3 instruments
for the period ended 31 March 2015 by
class of financial instrument.
| Group |
|
|
Unlisted |
|
Funds |
|
£’000 |
|
|
| Opening balance |
30,807 |
| Calls |
686 |
| Distributions |
(4,613) |
| Sales |
(818) |
| Transfers from level 3 to level
1* |
(596) |
| Total losses for the year included
in the statement of comprehensive income |
(479) |
|
|
| Closing balance |
24,987 |
* Following flotation of an investee company, shares in such a
company may be directly distributed to PEI. The book cost
associated to these shares is transferred out of level 3
investments and transferred to level 1. It is the Company’s normal
policy to sell these shares within a short period of time unless
the stock price has decreased meaningfully, in which case the
Company may hold these securities for a longer period of time until
favourable selling conditions exist.
Significant unobservable inputs for
level 3 valuations
The Funds are stated at Directors’ valuation, which is normally
based on valuations provided by the managers of those Funds which
are received by the Company at least quarterly.
Fair value is based on the Company’s share of the net asset
value of the Fund, as determined by the general partner of such
Funds.
Further information with regards to level 3 valuations is set
out in the accounting policies above.
The range of net asset values for the 10 largest Funds, which
have an aggregate valuation of 81.8% of the Unlisted Funds
portfolio, can be seen in the table below.
Top 10 Largest Portfolio Funds
| As of 31 March 2015 |
Total commitment
US$’000 |
Net asset value
US$’000 |
Net asset value
£’000 |
% of net assets
2015 |
| Draper Fisher Jurvetson ePlanet
Ventures |
30,000 |
6,043 |
4,071 |
11.5 |
| Vector Capital IV |
4,000 |
3,515 |
2,368 |
6.7 |
| Oak Investment Partners
X |
10,000 |
3,309 |
2,229 |
6.3 |
| New Enterprise Associates
10 |
10,000 |
3,229 |
2,175 |
6.1 |
| Draper Fisher Jurvetson Fund
VII |
5,000 |
2,827 |
1,904 |
5.4 |
| Institutional Venture Partners
XII |
5,000 |
2,666 |
1,796 |
5.1 |
| Francisco Partners II |
5,000 |
2,562 |
1,725 |
4.9 |
| VantagePoint Venture Partners
2006 |
5,000 |
2,281 |
1,536 |
4.3 |
| New Enterprise Associates
12 |
3,000 |
1,988 |
1,339 |
3.8 |
| Dawntreader Fund II |
30,000 |
1,934 |
1,303 |
3.7 |
|
|
|
|
|
| Largest 10 unlisted funds |
|
|
20,446 |
57.8 |
It is recognised that the valuations of these Funds are
sensitive to movements in the values of the underlying investments.
The 10 largest underlying investments of the Funds include both
quoted and unquoted investments and represented 24.2% of the value
of the total Fund portfolio. At 31 March
2015, 8.3% of aggregate value of the 10 largest underlying
investments was derived from quoted prices and 91.7% represented
unquoted valuations.
For unquoted underlying investments, significant judgement is
applied by the Fund Managers when calculating fair value. For the
purpose of sensitivity analysis, a 10% adjustment to those unquoted
investments that are in the 10 largest underlying investments would
result in a 1.6% movement in the value of the Company’s total net
assets.
|
2015 |
2014 |
|
£’000 |
£’000 |
| c) Analysis of capital gains and
losses |
|
|
|
|
|
| Gains on sales |
1,881 |
1,111 |
| Decrease in unrealised capital
appreciation |
(2,193) |
(2,691) |
| Gains on unlisted Funds
realisations |
2,105 |
2,239 |
|
|
|
| Gains on investments |
1,793 |
659 |
|
|
|
| Realised exchange gains/(losses) on
sales |
16 |
(13) |
| Exchange gains/(losses) on
investment holding gains |
19 |
(128) |
|
|
|
| Exchange gains/(losses) on capital
items |
35 |
(141) |
d) Significant holdings
The Company holds 15% and 10% of the total capital account
balances of the Funds in Dawntreader Fund II and Zone Ventures Fund
II respectively.
e) Transaction costs
During the year the Company incurred no transaction costs (2013:
£nil) in relation to purchases of investments and £4,000 (2014:
£9,000) in relation to sales of investments. These amounts are
included within gains and losses on investments at fair value
within the statement of comprehensive income.
$10,000 (£6,000) legal costs were
incurred in relation to the sale of Crescendo IV, this amount is
included within the capital administrative expense within the
statement of comprehensive income.
10 INVESTMENT IN SUBSIDIARY
|
2015
Company
£’000 |
2014
Company
£’000 |
|
|
|
| Investment in Campton, opening balance |
65 |
423 |
| Investment in year |
- |
1,019 |
| Repayment of inter-company debt |
- |
(1,094) |
| Foreign currency movements |
8 |
1 |
| Impairment |
(47) |
(284) |
|
|
|
|
26 |
65 |
11 TRADE AND OTHER RECEIVABLES
|
2015 |
2014 |
|
Group |
Company |
Group |
Company |
|
£’000 |
£’000 |
£’000 |
£’000 |
|
|
|
|
|
| Sales for future settlement |
46 |
46 |
372 |
372 |
| Prepayments and other debtors |
22 |
12 |
30 |
21 |
| Accrued income |
3 |
3 |
2 |
2 |
|
|
|
|
|
|
71 |
61 |
404 |
395 |
|
|
|
|
|
12 TRADE AND OTHER PAYABLES
|
2015 |
2014 |
|
Group |
Company |
Group |
Company |
|
£’000 |
£’000 |
£’000 |
£’000 |
|
|
|
|
|
| Other payables |
74 |
72 |
88 |
79 |
|
|
|
|
|
|
74 |
72 |
88 |
79 |
|
|
|
|
|
13 SHARE CAPITAL
|
2015 |
2014 |
|
£’000 |
£’000 |
|
|
|
| Allotted, called up and fully
paid: |
|
|
14,805,508 (2014:
18,694,757)
Ordinary Shares of 0.01p each |
1 |
2 |
|
|
|
14 RESERVES
|
|
|
|
Capital |
|
|
|
|
|
|
reserve |
|
|
|
|
Capital |
Capital |
investment |
Currency |
|
|
Special |
redemption |
reserve |
holding |
translation |
Retained |
|
reserve |
reserve |
realised |
losses |
reserve |
earnings |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
| Group |
|
|
|
|
|
|
|
|
|
|
|
|
|
| At 1 April 2014 |
44,062 |
3 |
8,826 |
(4,285) |
2 |
(5,911) |
| Net gains on sale of
investments |
- |
- |
3,986 |
- |
- |
- |
| Holding losses on investments |
- |
- |
- |
(2,193) |
- |
- |
| Exchange gains |
- |
- |
16 |
19 |
- |
- |
| Exchange gains on retranslation of
net assets of subsidiary |
- |
- |
- |
- |
11 |
- |
| Shares purchased for
cancellation |
(8,559) |
1 |
(102) |
- |
- |
- |
| Legal fees paid in relation to sale
of LP |
- |
- |
(6) |
- |
- |
- |
| Net loss for the year |
- |
- |
- |
- |
- |
(532) |
|
|
|
|
|
|
|
| At 31 March 2015 |
35,503 |
4 |
12,720 |
(6,459) |
13 |
(6,443) |
|
|
|
|
|
|
|
|
|
|
|
Capital |
|
|
|
|
|
reserve |
|
|
|
Capital |
Capital |
investment |
|
|
Special |
redemption |
reserve |
holding |
Retained |
|
reserve |
reserve |
realised |
losses |
earnings |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
| Company |
|
|
|
|
|
|
|
|
|
|
|
| At 1 April 2014 |
44,062 |
3 |
8,732 |
(4,243) |
(5,857) |
| Net gains on sale of
investments |
- |
- |
3,986 |
- |
- |
| Holding losses on investments |
- |
- |
- |
(2,193) |
- |
| Exchange gains |
- |
- |
16 |
27 |
- |
| Shares purchased for
cancellation |
(8,559) |
1 |
(102) |
- |
- |
| Legal fees paid in relation to sale
of LP |
- |
- |
(6) |
- |
- |
| Net loss for the year |
- |
- |
- |
- |
(529) |
|
|
|
|
|
|
| As at 31 March 2015 |
35,503 |
4 |
12,626 |
(6,409) |
(6,386) |
15 RECONCILIATION OF NET CASH FLOW TO
MOVEMENT IN CASH AND CASH EQUIVALENTS
|
2015 |
2014 |
|
Group |
Company |
Group |
Company |
|
£’000 |
£’000 |
£’000 |
£’000 |
|
|
|
|
|
| Increase in cash in the year |
5,183 |
5,241 |
842 |
1,166 |
| Effect of foreign exchange rate
movements |
30 |
19 |
(162) |
(128) |
|
|
|
|
|
| Movement in cash and cash
equivalents |
5,213 |
5,260 |
680 |
1,038 |
| Cash and cash equivalents at
beginning of the year |
2,212 |
2,147 |
1,532 |
1,109 |
|
|
|
|
|
| Cash and cash equivalents at end of
the year |
7,425 |
7,407 |
2,212 |
2,147 |
|
|
|
|
|
Cash and cash equivalents are comprised as follows:
|
2015 |
2014 |
|
Group |
Company |
Group |
Company |
|
£’000 |
£’000 |
£’000 |
£’000 |
|
|
|
|
|
| Cash in hand at bank |
7,425 |
7,407 |
2,212 |
2,147 |
|
|
|
|
|
16 NET ASSET VALUE PER ORDINARY
SHARE
The Group net asset value per Ordinary Share is based on net
assets of £35,339,000 (2014: £42,699,000) and on 14,805,508 (2014:
18,694,757) Ordinary Shares, being the number of shares in issue at
the year end.
The Company net asset value per Ordinary Share is based on net
assets of £35,339,000 (2014: £42,699,000) and on 14,805,508 (2014:
18,694,757) Ordinary Shares, being the number of shares in issue at
the year end.
17 COMMITMENTS AND CONTINGENT
LIABILITIES
At 31 March 2015 there were
financial commitments outstanding of $4.2
million (£2.8 million) (2014: $5.3
million) (£3.2 million) in respect of outstanding call
commitments to funds. These calls, if made, will be financed
through cash and easily liquidated assets, which are currently held
in ring-fenced accounts.
18 ANALYSIS OF FINANCIAL ASSETS AND
LIABILITIES
As detailed above, the investment objective of the Company has
been to provide shareholders with long-term capital growth. The
Company is generally not making investments in new private equity
funds but is managing its existing investments with a view to
making periodic returns of capital to shareholders.
The Company and Group’s financial instruments comprise
securities and other investments and bank deposits which are held
to achieve its investment objective, as well as debtors and
creditors that arise from its operations, for example sales and
purchases of securities awaiting settlement and debtors for accrued
income.
The principal risks the Company and Group face through the
holding of financial instruments are:
• liquidity/marketability risk, i.e. the risk that the Company
or Group has difficulty in realising assets or otherwise raising
funds to meet commitments associated with financial
instruments;
• interest rate risk;
• credit risk;
• market price risk, i.e. movements in the value of investment
holdings caused by factors other than interest rate or currency
movement; and
• foreign currency risk.
As required by IFRS 7: Financial Instruments: Disclosure and
Presentation an analysis of financial assets and liabilities, which
identifies the risk to the Company of holding such items, is given
below.
Financial assets
A summary of the Company’s investment portfolio is given on page
10 of the Annual Report and Accounts. The method of valuing the
fixed asset investments is discussed in the accounting policies of
the Company in Note 1 above. Cash and debtors arising from the
operations of the Company as at 31 March
2015 amounted to £7,407,000 (2014: £2,147,000) and £61,000
(2014: £395,000) respectively. Cash and debtors arising from
operations of the Group as at 31 March
2015 amounted to £7,425,000 (2014: £2,212,000) and £71,000
(2014: £404,000) respectively. There were no material differences
between the fair values of the investments and cash and debtors as
at 31 March 2015 and 31 March 2014 and the values attributable to
those investments within the accounts.
Maturity analysis
The Company does not have any assets or liabilities maturing in
more than one year.
Liquidity risk
The nature of the Company’s investment policy of investing in
specialist US Funds means that a large proportion of the securities
which it owns are less readily marketable than, for example,
‘blue-chip’ UK equities.
The Company currently has outstanding commitments of
$4,206,000 (£2,833,000) (2014:
$5,324,000 (£3,193,000)) to the
Funds, which will be financed through cash and easily liquidated
assets, which are currently held in ring-fenced accounts.
The Board manages liquidity risk by regularly reviewing its
easily liquidated assets, which mainly comprise open-ended
investment funds. Commitments to such fund investments are reviewed
and approved by the Board. In order to reduce risk, research and
due diligence work is performed before any commitment is made to
such a fund manager.
Interest rate risk
The Company’s revenue may be affected by changes in prevailing
interest rates since a large portion of its income ordinarily
derives from money market funds and bank interest.
The Company’s objective is to achieve capital returns from its
investments and, as such, the main exposure to interest rate risk
is indirect, through its impact on the valuation of the private
equity funds, although it is not possible to quantify such effects.
Interest rates are one of the key determinants of economic growth.
At a more specific level, interest rates and credit spreads also
have an important role in the ability of private equity funds to
secure profitable deals, as some transactions are partly financed
by debt. The effect of interest rate changes on the valuation of
investments and debt forms part of valuation risk, which is
considered separately.
At 31 March 2015, the Company held
investments in AAA-rated money market funds valued at £2,930,000
(2014: £9,229,000), earning cash dividends at market rates. The
money market funds are redeemable on less than 24 hours' notice.
Other floating rate financial assets comprised cash at bank.
As at 31 March 2015, the average
interest rate profile of the Company’s financial assets was as
follows:
|
|
|
Non |
|
|
Non |
|
Fixed |
Floating |
interest |
Fixed |
Floating |
interest |
|
rate |
rate |
bearing |
rate |
rate |
bearing |
|
Group |
Group |
Group |
Company |
Company |
Company |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
|
|
|
|
|
|
|
| Open-ended investment funds |
- |
2,930 |
- |
- |
2,930 |
- |
| Quoted equities |
- |
- |
- |
- |
- |
- |
| Unlisted funds |
- |
- |
24,987 |
- |
- |
24,987 |
| Cash |
- |
7,425* |
- |
- |
7,407* |
- |
| Other current assets |
- |
- |
61** |
- |
- |
51** |
|
|
|
|
|
|
|
| As at 31 March 2015 |
- |
10,355 |
25,048 |
- |
10,337 |
25,038 |
|
|
|
|
|
|
|
* Exposure to floating interest rate risk is based on an
adjusted London Interbank Offered Rate (“LIBOR”).
** Other current assets exclude prepayments which under IFRS7
are not classified as financial assets.
The Board manages interest rate risk by placing cash deposits in
short-term maturity investments such as money-market funds, but
does not consider that the Company or Group has material exposure
to interest rate risk.
Credit risk
The Company is exposed to credit risk in the following
areas:
- Failure by counterparties to return cash deposits
Cash deposits (money market funds and cash at bank) are placed
with counterparties with a minimum credit rating of AA or
equivalent. In addition, a range of counterparties is used to
further diversify the risk.
- Failure by counterparties to deliver cash or securities
through trading activities
Transactions in listed securities are settled against delivery
using approved brokers. The risk of default is considered
minimal.
The maximum exposure to credit risk at 31
March 2015 is £10,355,000 (2014: £11,813,000).
Market price risk
Private equity investments are not immediately sensitive to
market movements. However, over the medium/long term, the valuation
multiples applied to private equity will be affected by significant
changes in the listed equity markets.
The Company’s portfolio consists of US dollar investments, which
are affected by movements in the sterling/dollar exchange rate
(refer to foreign currency risk below).
At 31 March 2015, a 10% movement
in the valuation of the Group’s aggregate investments designated as
fair value through profit or loss, would result in a 7.9%
(£2,792,000) change in shareholders’ funds.
The method of valuing the investments is discussed in the
accounting policies note above.
Foreign currency risk
The Company is exposed to currency risk directly since the
majority of its assets and commitments are denominated in US
dollars and their sterling value can be significantly affected by
movements in foreign exchange rates. The Company does not, nor does
it intend to, hedge against foreign currency movements affecting
the value of its investments.
The Company settles its transactions from its bank accounts at
an agreed rate of exchange on the date on which any bargain was
made. For the year ended 31 March
2015, realised exchange losses of £76,000 (2014: gain of
£272,000) and unrealised gains relating to currency of £19,000
(2014: losses of £128,000), have been taken to the capital
reserve.
Details of the foreign currency exposure are detailed in the
table below.
At 31 March 2015
|
|
Other |
|
|
Other |
|
Investment |
|
current |
Investment |
|
current |
|
portfolio |
Cash |
assets |
portfolio |
Cash |
assets |
|
Group |
Group |
Group |
Company |
Company |
Company |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
|
|
|
|
|
|
|
| USA |
27,816 |
413 |
56 |
27,816 |
395 |
46 |
| UK |
101 |
7,012 |
5 |
101 |
7,012 |
5 |
|
|
|
|
|
|
|
|
27,917 |
7,425 |
61 |
27,917 |
7,407 |
51 |
|
|
|
|
|
|
|
| At 31 March 2014 |
|
|
|
|
|
|
Investment
portfolio |
Cash |
Other
current
assets |
Investment
portfolio |
Cash |
Other
current
assets |
|
Group |
Group |
Group |
Company |
Company |
Company |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
|
|
|
|
|
|
|
| USA |
34,241 |
1,733 |
381 |
34,241 |
1,668 |
372 |
| UK |
5,930 |
479 |
3 |
5,930 |
479 |
3 |
|
|
|
|
|
|
|
|
40,171 |
2,212 |
384 |
40,171 |
2,147 |
375 |
|
|
|
|
|
|
|
If the US$/£ exchange rate had strengthened by 10% from the rate
at 31 March 2015, it would have had
the effect, with all other variables held constant, of increasing
the equity shareholders’ funds by £3,142,000 (2014:
£4,031,000).
If the US$/£ exchange rate had weakened by 10% it would have had
the effect of decreasing the equity shareholders’ funds by
£2,571,000 (2014: £3,298,000).
The calculations are based on the investments held at fair value
through profit or loss and the exchange rate of 1.4845 US$: £ as at 31
March 2015 and these may not be representative of the year
as a whole.
Financial liabilities
The Company finances its operations primarily through equity and
retained revenue although trade creditors and accruals arise from
its operations. At 31 March 2015 and
31 March 2014, all financial
liabilities were due within one year. Other financial liabilities
amounted to £74,000 (2014: £88,000) resulting from operating
activities.
There were no borrowing facilities either drawn or undrawn at
any time during the year.
Managing Capital
The Group’s equity is analysed into its various components in
notes 13 and 14. The Company manages its investments so as to
maximise the return to shareholders while maintaining a capital
base to allow the Company to operate effectively. Strong
realisations from the investment portfolio in recent years have
facilitated the return of capital to shareholders. This has been
achieved through the buy back of shares through tender offers.
The Group’s capital requirement is reviewed regularly by the
Board of the Company.
19 RELATED PARTY TRANSACTIONS
During the year Peter Dicks,
Chairman of the Company, rented office space from the Company, for
a consideration of £10,000, which has been accounted for against
the rent expense. (2014: £10,000).
In the year ended 31 March 2015,
total fees and expenses of £49,000 (2014: £225,000) were paid to
Campton by the Company.
The remuneration of the Directors, who are the key management
personnel of the Company, is set out in the Directors’ Remuneration
Report in the full Annual Report. Full details of Directors’
interests in the ordinary shares of the Company are also set out
the Directors’ Remuneration Report. At 31
March 2015, £7,000 was due to the Directors from the
Company.
ANNUAL GENERAL MEETING
The Company’s Annual General Meeting will be held on
28 September 2015 at 10.30am at the offices of the SGH Martineau, One
America Square, Crosswall, London,
EC3N 2SG.
The notice of this meeting can be found in the Annual Report and
Financial Statements at http://www.peiplc.com/.
National Storage Mechanism
A copy of the Annual Report and Financial Statements will be
submitted shortly to the National Storage Mechanism (“NSM”) and
will be available for inspection at the NSM, which is situated at
www.morningstar.co.uk/uk/NSM
29 July 2015
END
Neither the contents of the Company’s website nor the
contents of any website accessible from hyperlinks on this
announcement (or any other website) is incorporated into, or forms
part of, this announcement.
