UKRAINE OPPORTUNITY TRUST PLC (THE) – Annual Financial Report.
, Ukr. Ukraina, republic (2005 est. pop.
Opportunity Trust PLC
Annual Financial Report for the year ended 31
The full Annual Report and Financial Statements can be accessed via
the Company’s website at www.ukrotrust.co.uk or by contacting the
Company Secretary on 01392 412122.
The Company The Ukraine Opportunity Trust PLC ("UKRO") was incorporated on 16 August 2005. All of the Company's Ordinary Shares were admitted to the official list of the London Stock Exchange and commenced trading on 4 November 2005. The Company's Articles of Association contain provisions designed to ensure that, unless the Company is wound up earlier, it will be wound up on 30 September 2020. Furthermore, the Directors may, at their discretion, convene a General Meeting of the Company in 2015 for the purpose of winding-up the Company and the Articles contain provisions designed to ensure that a Special Resolution to wind up the Company proposed at that meeting will be passed.
The Company’s share capital consists of Ordinary Shares of
US$0.01 each (the “Ordinary Shares”).
The number of Ordinary Shares in issue as at 31 December 2012 was
4,554,381 (2011: 4,554,381), of which 900,000 (2011: 900,000) were held
in Treasury and 3,654,381 were in circulation.
2. One’s legal residence.
v. dom·i·ciled, dom·i·cil·ing, dom·i·ciles
in, or whose businesses are
primarily carried on in Ukraine (including the non-Ukrainian holding
companies of any such companies). Investments may be made in private
equity, listed shares and money market investments.
The Company seeks to achieve long-term capital growth through
investment in selected listed equities (including pre-IPO and
transactions), private equity, money market investments and fixed income
securities. Fixed income securities are held principally for liquidity
The Company may invest in companies incorporated, resident or domiciled outside Ukraine that directly or indirectly invest in, or that have a substantial link with Ukraine, and may invest up to 15 per cent of the portfolio in companies incorporated, headquartered or domiciled in, or whose businesses are primarily carried on in other eastern European countries. It is expected that the Company's portfolio will comprise at least ten investments and that investment will be diversified across industries and sectors exposed to the Ukraine marketplace. In addition the Company will seek diversification in terms of the capitalisation size of the investments in which it participates. The Company does not currently hedge its exposure to changes in the US Dollar/ Hryvnia exchange rate but has the power to do so. However hedging will only take place if the Directors, on the recommendation of the Investment Manager, consider this to be in the Company's interests. The Company has the ability under its Articles of Association to borrow up to 30 per cent of its net assets. Examples of when the Directors may exercise the power to borrow include where necessary to make an investment where disposable proceeds from a realisation have not been received or where the Company wishes to purchase its own Shares. Investment Process The investment approach is bottom-up, founded largely on sector-based company analysis. The Investment Manager will continue to procure extensive research based on reliable local sources. Regular company visits are and will be made in order to understand the management objectives and to seek to establish the quality of the assets. In Ukraine, factors such as corporate governance, management, economic instability and institutional reform continue to need to be given greater prominence in reaching an investment decision and give rise to greater risks in comparison to more developed markets. The investment process for the Company's private equity investments may involve deal origination and due diligence carried out by the Investment Manager. Once a final private equity proposal has been agreed by the Investment Manager, it will be presented to the Board for review and, if thought fit, approved. The Investment Manager has discretionary authority to invest and divest in respect of all non private equity investments but remains subject to the ultimate supervision and control of the Directors at all times.
The Investment Manager has the discretion to make equity investments
and disposals involving less than 2.5 per cent (subject to an aggregate
maximum of 10 per cent) of the Company’s gross assets without prior
reference to the Board.
Investment objective and policy Presented above. Management Company FPP Asset Management LLP. Assets attributable to Shareholders US$20,238,000 as at 31 December 2012. Market capitalisation US$7,583,000 as at 31 December 2012. Capital structure Presented above. Management fee US$400,000 (2 per cent of Net Asset Value of the Company). Performance fee US$nil (20 per cent of increase in the Net Asset Value of the Company since the performance period when such fee was last earned). Ongoing Charges 4.6 per cent (based on average Net Assets throughout the year). ISA status The Company is fully eligible for inclusion in ISAs. AIC The Company is a member of the Association of Investment Companies. Summary of Results As at As at 31 December 2012 31 December 2011 Assets attributable to Shareholders US$20.24m US$19.95m Net Asset Value per Ordinary Share US$5.54 US$5.46 Mid market Ordinary Share price US$2.08 US$2.25 Discount to diluted Net Asset Value 62.55% 59.31% Mid market Warrant price N/A* US$0.10 Dividend declared Nil Nil
* The Warrants
v. ex·pired, ex·pir·ing, ex·pires
1. To come to an end; terminate:
in April 2012 and were delisted in June
Year to Year to 31 December 2012 31 December 2011 Total earnings per Ordinary Share: US$0.0775 US$(0.2111) basic and diluted Chairman's Statement Having re-read my 2011 statement, sadly there is little to add in 2012. The Ukranian stock market fell by almost 40 per cent again, reflecting ongoing concerns about the political situation, lack of progress with the International Monetary Fund ("IMF"), the problematic gas contract with Gazprom and domestic gas price subsidies. The Hryvnia has been fixed at 8 to 1 USD since the end of 2008, and there are concerns whether or not this level can be maintained in light of the above and some commentators are suggesting a possible 20 per cent devaluation. Ukraine's dispute with Gazprom began in 2005 and continued after 2009 when a 10-year contract was negotiated. There have been significant (sometimes total) supply restrictions to Ukraine every year. In January 2013 Ukraine announced a deal to develop the country's major shale gas reserves with Royal Dutch Shell plc. Shortly afterwards, Gazprom notified Ukraine that it owed US$7 billion for failing to take up agreed volumes of gas. Like so many Ukrainian issues, this situation remains unresolved. Despite all the above, UKRO's Net Asset Value ("NAV") was almost unchanged in 2012 because the bulk of the portfolio is represented by private equity in four operating companies. Details of these are included in the Investment Manager's report below. Three corporate investments are re-valued twice a year using rigorous, consistent methods (cash flow multiples or book values if appropriate) and a leading international property consultant calculates the fourth company, the property company's value bi-annually.
The listing of the Company’s warrants was
v. can·celed also can·celled, can·cel·ing also can·cel·ling, can·cels also can·cels
1. To cross out with lines or other markings. See Synonyms at erase.
last year after they reached maturity and none were exercised on expiry.
No shares were bought back during 2012, although the Board
1. Recurring regularly or frequently:
reviews this and will be seeking to renew the authority at the
annual general meeting
n abbr (= annual general meeting) →
n abbr (= annual general meeting) →
I would like to thank my fellow Directors, the Investment Manager
and our advisers for all their efforts throughout the year.
Gordon Lawson Chairman 27 March 2013 Investment Manager's Report The Company's NAV was broadly unchanged in 2012, a result that should be viewed in the context of Ukraine's continuing wearisome struggle to overcome its political and economic difficulties. In an economy which fell back into recession at year-end and which saw the incumbent party grudgingly confirmed in power by parliamentary elections, it has been difficult to generate momentum and returns. The UX Ukrainian Equities Index reflected this lingering malaise, falling another 35 per cent in 2012 after 2011's 40 per cent retreat. In this context of quasi-existential crisis, the tiny gain in NAV should be seen as a decent result, albeit that it lagged the performance of the Global Listed Private Equity Index which recovered nicely from 2011's 18.5 per cent fall with a 29.7 per cent rally over the year. Many countries have had a better 2012 than Ukraine. The Company's outperformance of the broader Ukrainian economy and stock market can be put down at least in part to a focus on the consumer. More specifically on the Company's private equity exposure to consumer retailing and financial services - now well over half the Company's full exposure and more than two-thirds of its private equity allocation. It is the companies in these sectors that have performed best, benefiting from the dramatic fall in inflation and the fact that consumers' real incomes have therefore grown despite the challenges faced in the country's export sector in particular. Inflation actually fell below zero in the last few months of 2012 having been nearer 5 per cent at the beginning of the year - with wage settlements still reflecting that higher inflation expectation - consumers ended up with more money to spend in their purses and wallets. This positive effect was clearly seen at both our restaurant business and in the consumer finance business which posted good growth despite the economic headwinds. A longer period of deflation would be a concern, but seems unlikely. It is probably worth reiterating the challenges which Ukraine faces in 2013. A double-dip recession and fiscal deterioration make it very difficult for Authorities to grapple with servicing external debt and managing an increasing current account deficit which is now approaching some 8 per cent of GDP - equalled in Europe only by booming Turkey. Ukraine's GDP growth expectations are pretty subdued (in the 1-2 per cent range for 2013), but without some major shift in the external trade picture such as spot prices in the important steel, coal or chemicals sectors, it will be almost impossible for Ukraine to meet the repayment demands of creditors such as the IMF (US$6 billion in 2013) whilst controlling the current account and fiscal position. Expensive imports of energy also remain a key concern both for the trade account and relations with Russia. At present Ukraine is set to pay over US$400 per 1,000 m3 for its natural gas in 2013 - above the rate for most of the EU despite Ukraine's important transit role. Ultimately a swift agreement with the IMF in terms of renewed lending and the much vaunted increase in domestic energy tariffs which this would entail seems the only obvious solution to the squeeze. The currency may also be allowed to weaken somewhat although overall cost of living comparisons do not show it to be expensive. Moreover with the corporate sector the main user of external debt, the Authorities may be reluctant to risk the fiscal fallout from a large devaluation. Broadly speaking Ukraine has to keep the external financing window open in order to fund its current account without entirely depleting foreign exchange reserves which are currently approaching the lows of 2009/10 at US$24.7 billion, down from US$31.8 billion at the beginning of 2012. Overall for the hard-pressed Ukrainian consumer the picture will be one of caution in the face of currency uncertainty, political in-fighting and potential price increases for household bills. Together with subdued overall GDP growth, we must expect another tough year. The only real positive is that this difficult outlook is fully reflected in the equity markets, in interest-rates, and in the discount to NAV of the Company. For 2013 we have to hope that any surprises will for once be positive rather than negative. The largest positive change to NAV (+US$1,890k) came from Food Master, the Company's restaurant business which saw positive trading into Q4. One surprise was the relatively small impact the Euro 2012 football tournament had over the summer. Nevertheless 12-month USD sales growth remains very impressive at 38 per cent year-on-year and still on track for the full-year target, as is EBITDA with margins remaining stable above 22 per cent. The chain now has 52 restaurants, up from 49 at the beginning of the year, making it we believe Ukraine's second largest offering after McDonalds. Food Master remains pleased with the new 'Bistro Olivier' format of mid-market open-kitchen restaurants which are performing well and has expanded Murakami sushi to 14 sites. The trial of 'Tarantino' - an upmarket Italian restaurant on a Moscow site has also started well. We have applied a valuation multiple of 5.6x EV/EBITDA, a 30 per cent discount to international peers, to value the company, reflecting the market's cautious view of Ukraine's prospects despite the profitability and growth of Food Master's restaurants. Chalsen posted its first quarters results with both positive operating income and EBITDA. Management has remained focussed on increasing gross margins towards 25 per cent and reducing operating costs in what is a fiercely competitive pharmacy sector. This progress is to be welcomed, but the year saw a small markdown (-US$250k) as in line with Food Master we moved to a 30 per cent discount to international peers (from 20 per cent) and hence apply a 0.35x sales multiple instead of 0.4x sales. Those sales are currently only growing at 1-2 per cent in line with GDP, so the focus on profitability remains vital. The company also has a reasonable net cash position which might raise acquisition opportunities in the event of currency devaluation. No change in the valuation at Korsando. Korsando has reduced its quarterly administrative expenses to the region of US$300,000 in line with the revised budget. This budget reflects the continued moribund state of the real estate market and our desire to limit the need for any further financing of Korsando's land bank and office block. Asset disposals remain our preferred option here, subject to market conditions. The company has also successfully recovered some cash from another investment made with a supermarket chain, which allowed Korsando to report a small net profit in Q3 2012. The real estate market remains subdued, with little transaction activity reported for larger blocks. Platinum Bank continues to raise its profile as a credit bank with an increased branch operation and over 1,500 points of sale nationwide. The economic environment, in particular the high local interest rates - at times over 20 per cent -associated with the National Bank of Ukraine's defensive stance on the exchange rate have made it a difficult environment to expand credit operations. The Bank will not hit the 60 per cent plus growth target for the credit book in the full-year management budgets, we still expect above 30 per cent growth. Nevertheless in a difficult environment Platinum remains one of the few profitable operators and at around a 20 per cent Return on Equity the Bank should comfortably exceed US$110 million in shareholder equity at year-end. The Company carries this investment at 0.6x book value. Platinum Bank is a significant player in the non-mortgage credit market and its business should attract considerable interest when the overall macro-economic picture improves as it eventually must. The listed holdings were basically responsible for reducing the gains from the private equity book to a minimum. This reflects the illiquid and occasionally downright marginal nature of the local market. We saw gains in Polish-listed Industrial Milk, but these were the only significant gains and they were wiped out by the forced take-out in Ukrros Sugar, where Kernel, a larger agricultural producer, took out minorities in the sugar producer at less than 25 per cent of what was paid for control. On the same theme of corporate governance we also had to write off the investment in Land West which has been absorbed into an unlisted entity called Ukrlandfarming since January 2011 following a previous takeover by a firm called Dakor. No terms of acquisition have been published and only vague assurances given of some form of share swap following a Warsaw listing of Ukrlandfarming at a future unspecified date. After the experience with Ukrros it is difficult to be optimistic we can recover much value. Creativ remains very illiquid and volatile with price movements determined by single trades. We believe that the soy and sunseed crushing business remains sound with a natural hedge against currency depreciation and so retain the position. Dragon Ukrainian Properties continues its efforts to put its house in order following a botched buyback process in the Isle of Man but this London-listed Ukraine play remains as highly discounted to its real estate NAV as the Company itself having fallen 31 per cent in Dollar terms in 2012 versus the Company's 8 per cent fall. FPP Asset Management LLP Investment Manager 27 March 2013 Portfolio Valuation as at 31 December 2012 Fair value Country of Cost valuation % of business Currency US$'000 US$'000 portfolio operations Private fixed income securities Bank Nadra 2.5% USD 3,044 148 0.7 Ukraine Loan 10 April 2018 Total fixed income 3,044 148 0.7 securities Equity Listed equity Azovstal Iron & UAH 427 127 0.6 Ukraine Steelworks Bank Forum UAH 192 13 0.1 Ukraine Centrenergo UAH 325 166 0.8 Ukraine Creativ Industrial UAH 1,255 870 4.3 Ukraine Group Dragon Ukrainian GBP 1,371 408 2.0 Ukraine Properties ISFP Money Mkt UAH 152 - - Ukraine Mutual Fund*** JKX Oil & Gas GBP 197 101 0.5 Ukraine Land West**** USD 1,978 - - Ukraine Milkiland PLN 198 178 0.9 Ukraine Motor Sich UAH 179 165 0.8 Ukraine Rodovid Bank* UAH 4,633 - - Ukraine Ukrproduct Group GBP 144 58 0.3 Ukraine Ukrsotsbank UAH 249 64 0.3 Ukraine Zakhidenergo UAH 166 36 0.2 Ukraine 11,466 2,186 10.8 Private equity Food Master USD 3,664 7,928 39.3 Ukraine (Anthoreal Estates) Bank Nadra ** USD 5,469 - - Ukraine Vitalux (Chalsen USD 2,118 1,537 7.6 Ukraine Trade) Korsando USD 6,596 5,111 25.3 Ukraine PT Platinum Bank USD 1,593 3,288 16.3 Ukraine Public Shares Star Galaxy* USD 2,885 - - Russia SV Company* USD 7,554 - - Ukraine 29,879 17,864 88.5 Total equity 41,345 20,050 99.3 Total portfolio 44,389 20,198 100.0 valuation
* Investments written down to zero during the 2009 financial year **
Investments written down to zero during the 2010 financial year ***
Investments written down to zero during the 2011 financial year ****
Investments written down to zero during the 2012 financial year
As at 31 December 2012, the portfolio was held in the following
denominations: 89.2% in
(Sterling) and 0.9% in
Portfolio Composition by Industry
General Retailers 47% Real Estate 27% Banks 17% Food Producers 5% Electricity 1% Industrial Engineering 1% Industrial Metals & 1% Mining Oil & Gas 1%
Extracts from the Report of the Directors
The Directors present their report and Financial Statements for the year ended 31 December 2012. The Company was incorporated under the name of The Ukraine Opportunity Trust PLC on 16 August 2005 (Company number: 5537892) and commenced trading on 4 November 2005. The Company's Articles of Association contain provisions designed to ensure that, unless the Company is wound up earlier, it will be wound up on 30 September 2020. The Directors may, at their discretion, convene a General Meeting of the Company in 2015 for the purpose of winding-up the Company and the Articles contain provisions designed to ensure that a Special Resolution to wind up the Company proposed at that meeting will be passed.
The Business Review has been prepared in accordance with the requirements of Section 417 of the Companies Act 2006 and best practice. The purpose of the Business Review is to inform members of the Company and help them to assess how the Directors have performed their duty under Section 172 of the Companies Act 2006 to promote the success of the Company for the benefit of Shareholders.
The operating and financial review of the performance during the
year is included in the Chairman’s Statement and the Investment
Manager’s Report above.
Principal Activity and Status The principal activity of the Company is to carry on business as an investment company. The Company applied for, and been granted approval from HM Revenue & Customs ("HMRC") as an authorised investment trust under Sections 1158/1159 of the new Investment Trust (Approved Company)(Tax) Regulations 2011 ("ITR") for the year ended 31 December 2012.
The Company’s performance is detailed in the Chairman’s
Statement and the Investment Manager’s Report above.
(“KPIs”) used to measure
the progress of the Company during the period under review are stated
below, details of which are
tr.v. dis·closed, dis·clos·ing, dis·clos·es
1. To expose to view, as by removing a cover; uncover.
2. To make known (something heretofore kept secret).
in the Summary of Results and the
Investment Manager’s Report above.
-- Net Asset Value ("NAV"). -- The movement in the Company's Share price. -- Premium/discount of the Share price in relation to the NAV.
Investment Policy The Company seeks to achieve long-term capital
growth through investment in selected listed equities (including pre-IPO
and IPO transactions), private equity, money market investments and
fixed income securities. Fixed income securities are held principally
for liquidity purposes.
The Company may invest in companies incorporated, resident or domiciled outside Ukraine that directly or indirectly invest in, or that have a substantial link with Ukraine, and may invest up to 15 per cent of the portfolio in companies incorporated, headquartered or domiciled in, or whose businesses are primarily carried on in other eastern European countries. It is expected that the Company's portfolio will comprise at least ten investments and that investment will be diversified across industries and sectors exposed to the Ukraine marketplace. In addition the Company will seek diversification in terms of the capitalisation size of the investments in which it participates. The Company does not currently hedge its exposure to changes in the US Dollar/ Hryvnia exchange rate but has the power to do so. However hedging will only take place if the Directors, on the recommendation of the Investment Manager, consider this to be in the Company's interests. The Company has the ability under its Articles of Association to borrow up to 30 per cent of its net assets. Examples of when the Directors may exercise the power to borrow include where necessary to make an investment where disposable proceeds from a realisation have not been received or where the Company wishes to purchase its own Shares. The Company has been investing predominantly in unquoted securities but, is also investing in selected listed equities (mostly pre-IPO and IPO transactions) in accordance with the published investment policy. Currently, approximately 88 per cent of the net assets are in private equity, 11 per cent in listed equity and the balance in fixed income securities and cash.
Details of all investments are shown above.
Principal Risks The Board considers the following as the principal risks facing the Company. Mitigation of these risks is sought and achieved in a number of ways. Information regarding the risk assessment and control procedures is given in the Corporate Governance Statement in the full Annual Report and also in the notes to the Financial Statements.
Risks Specific to Investing in Ukraine and
The Company's investments involve certain additional risks not typically associated with investments in developed and other developing market economies. The Investment Manager manages the Company's assets in a manner that will limit the exposure to such risks insofar as is practicable, and formally reports to the Board on a quarterly basis. The Board as a whole undertakes the role of the Investment Committee which reviews and comments on the research into potential private equity investments for the Company. More details regarding this function of the Board can be found in the Corporate Governance Statement in the full Annual Report. The quality of financial reporting of Ukrainian companies is not at the same level as that of Western European companies. Most Ukrainian companies do not use internationally accepted accounting standards, which may create a lack of transparency. There are differences between Western European and Ukrainian securities markets, including the relative underdevelopment and illiquidity of the Ukrainian securities market, together with less government supervision and regulation. The Ukrainian legal framework governing securities transactions is underdeveloped, incomplete and provides guidance only with respect to the most basic and unsophisticated transactions. The value of the Company's investments is affected by fluctuations in the value of the Hryvnia against the US Dollar and by changes in local exchange control regulations, tax laws and economic or monetary policies. The Company is also subject to the risks in Ukraine of continued inflation and currency devaluation. Due to the limited number of investment opportunities available to the Company, the portfolio is concentrated and therefore the insolvency or other business failure of any one or more of the Company's investment enterprises could have a material effect on the Company, its operations and ability to achieve its objectives. Laws on the insolvency of enterprises have been enacted in Ukraine but as yet there has been little practical experience in the manner of implementation of these laws. In order to mitigate this risk the Company has sought to invest in a diversified portfolio of assets however, changing asset values and commercial investment decisions have impacted this policy. Risks Relating to the Company The Company by its nature is exposed to market risk due to fluctuations in the market prices of its investments, interest rates, exchange rates and currency markets, credit risk, liquidity risk, cash flow risk and political risk as detailed in note 19. The Investment Manager actively monitors the Company's performance and the performance of the market in which it invests and formally reports to the Board on a quarterly basis. The Company, as part of its investment strategy, invests in certain securities that are not listed or admitted to trading on any recognised stock exchange and as a consequence such securities are not readily tradeable. The Company seeks to provide attractive long-term absolute returns, rather than returns relative to a particular index or benchmark. Its portfolio is managed without reference to the composition of any stock market index. Therefore, it is quite likely that there will be periods when the Company's performance will be quite unlike that of any index, which may or may not be to the advantage of Shareholders. The Company has qualified as an Investment Trust Company in accordance with Sections 1158/1159 of the ITR for the period under review. The Company will be treated as an Investment Trust Company for each subsequent accounting period, subject to there being no serious breaches of the regulations. Failure by the Company to satisfy the new requirements of Sections 1158/1159 status, could result in the Company being subject to Capital Gains Tax. In order to minimise the impact of taxation costs the Directors, Investment Manager and Company Secretary monitor the Company's position on a monthly basis. On a quarterly basis, a more detailed assessment is made between the Board and the Investment Manager. Operational Risk and Third Party Advisers Like most Investment Trust Companies, the Company has no employees. All of the Directors are non-executive. The Company relies on services provided by third parties, including, in particular, the Investment Manager, FPP Asset Management Limited LLP ("FPP"), and Capita Sinclair Henderson Limited, who provide company secretarial and administrative services. The Company reviews the internal control procedures of its service providers on an annual basis.
Full details of the internal control assessment process are shown in
Social, Environmental and Employee Issues The Company does not have any employees and the Board consists entirely of non-executive Directors. As the Company is an investment company, it has no direct impact on the community or the environment and as such has no policies in these areas. In carrying out its activities and in relationships with suppliers the Company aims to conduct itself responsibly, ethically and fairly. Current and Future Developments Please refer to the Chairman's Statement and the Investment Manager's Report above. Management of Capital
As part of capital, the Company manages assets
Shareholders, which includes the following components:
Share Capital The Company's share capital consists of Ordinary Shares of US$0.01 each. The number of Shares in issue as at 31 December 2012 and at the date of this report was 4,554,381 (2011: 4,554,381) of which 900,000 Shares were held in Treasury (2011: 900,000) and 3,654,381 were in circulation. Ordinary Shares in issue carry one vote each on a poll, there are no restrictions on their transfer.
On 30 April 2012 holders of Warrants had their final opportunity to
convert their Warrants into shares. The exercise price of each Warrant
was US$10.00. No Warrants were converted. The outstanding Warrants in
issue were delisted in June 2012.
Issues of New Ordinary Shares By a resolution passed at the Annual General Meeting of the Company held on 16 May 2012 the Directors were authorised, in accordance with Section 551 of the Companies Act 2006, to allot relevant securities up to a maximum nominal amount of US$12,181. This authority has not been utilised and will expire on the date of the next Annual General Meeting. A resolution to renew this authority will be put to Shareholders at the forthcoming Annual General Meeting.
Ordinary Shares will only be issued on the basis that their issue
To reduce a solution or mixture in concentration, quality, strength, or purity, as by adding water.
Thinned or weakened by diluting.
per existing Ordinary Share.
Treasury Shares The Company indicated in its prospectus, published on 27 September 2005, that it intended to make market purchases of its own Shares for Treasury where it was cost effective and positive for the management of the Company's capital base to do so under the authority granted by Shareholders. The Company is permitted to hold issued share capital in Treasury and to subsequently cancel or sell such Shares for cash. At the year-end and as at the date of this report the Company held 900,000 Shares in Treasury, equating to 19.76 per cent of the issued share capital. Purchase of Own Shares At the Company's Annual General Meeting held on 16 May 2012, Shareholders gave authority for the Company to buy back a total of 547,791 Ordinary Shares representing 12.03 per cent of the then shares in circulation, for cancellation or for placing into Treasury in accordance with the Company's published discount management and share buy-back policy. This authority remained unused during the period.
The Directors are seeking to renew this authority at the forthcoming
Annual General Meeting.
Please refer to the
notes to the Financial Statements
The Company has no borrowings.
Continuing Appointment of the Investment Manager
The Board, acting as the Management Engagement Committee, keeps the performance of the Investment Manager under review. It is the opinion of the Directors that the continuing appointment of FPP Asset Management LLP is in the interests of Shareholders as a whole. The reasons for this view are that the investment performance of the Company is satisfactory relative to that of the markets in which the Company invests and because the remuneration of the Investment Manager is reasonable both in absolute terms and compared to that of the managers of comparable investment companies.
The Directors in office during the year and up to the date of this Report are: Gordon Lawson Bertrand Lipworth Dmitry Chernobay Robin Monro-Davies Nigel Pilkington Going concern The Company's business activities, together with the factors likely to affect its future development, performance and position are described in the Chairman's Statement and in the Investment Manager's Report above. The financial position of the Company, its cash flows and liquidity position can be found in the Financial Statements. In addition, note 19 to the Financial Statements includes the Company's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposure to credit risk, liquidity risk and other risks. The Company has adequate financial resources and no significant investment commitments and as a consequence, the Directors believe that the Company is well placed to manage its business risks successfully. After making appropriate enquiries, the Directors have a reasonable expectation that the Company has adequate available financial resources to meet its obligations for at least a further 12 months and therefore to continue in operational existence for the foreseeable future and accordingly have concluded that it is appropriate to continue to adopt the going concern basis in preparing the Financial Statements.
The full Annual Report contains the following statements regarding
responsibility for the Annual Report and Financial Statements
(references in the following statements are to pages in the Annual
Statement of Directors’ Responsibilities in respect of the
Annual Report and the Financial Statements
The Directors are responsible for preparing the Annual Report and
the Financial Statements in
with applicable law and
Company law requires the Directors to prepare Financial Statements
for each financial year. Under that law they have
v. e·lect·ed, e·lect·ing, e·lects
1. To select by vote for an office or for membership.
2. To pick out; select:
to prepare the
Financial Statements in accordance with
as adopted by the EU and applicable law.
Under company law the Directors must not approve the Financial
Statements unless they are satisfied that they give a true and fair view
of the state of affairs of the Company and of the profit or loss of the
Company for that period. In preparing these Financial Statements, the
Directors are required to:
— select suitable accounting policies and then apply them
consistently; — make judgements and estimates that are reasonable and
prudent; — state whether they have been prepared in accordance with
International Financial Reporting Standards as adopted by EU law; and —
prepare the Financial Statements on the going concern basis unless it is
Medtalk adjective A diagnostic or therapeutic procedure proven to be unnecessary for the efficient management of a particular Pt. See Appropriateness, Canadian plan, Practice guidelines Neurology adjective Referring to a response or behavior
v. pre·sumed, pre·sum·ing, pre·sumes
1. To take for granted as being true in the absence of proof to the contrary:
that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the Financial Statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities. Under applicable law and regulations, the Directors are also responsible for preparing a Report of the Directors,Directors' Remuneration Report and Corporate Governance Statement that comply with that law and those regulations.
The Directors are responsible for the maintenance and integrity of
the corporate and financial information included on the Company’s
website. Legislation in the UK
v. gov·erned, gov·ern·ing, gov·erns
1. To make and administer the public policy and affairs of; exercise sovereign authority in.
the preparation and
Medtalk The spread of a pernicious process–eg, CA, acute infection Oncology Metastasis, see there
of Financial Statements may differ from legislation in
The Directors confirm to the best of their knowledge:
-- the Financial Statements, prepared in accordance with International Financial Reporting Standards as adopted by the EU and applicable law, give a true and fair view of the assets, liabilities, financial position and return of the Company; and -- the Chairman's Statement, Investment Manager's Report and the Report of the Directors includes 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 that it faces. On behalf of the Board Gordon Lawson Chairman 27 March 2013 Non-Statutory Accounts The financial information set out below does not constitute the Company's statutory accounts for the years ended 31 December 2012 and 2011 but is derived from those accounts. Statutory accounts for 2011 have been delivered to the Registrar of Companies, and those for 2012 will be delivered in due course. The Auditors have reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the Auditors drew attention by way of emphasis without qualifying their report and (iii) 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 Financial Statements at www.ukrotrust.co.uk Statement of Comprehensive Income for the year ended 31 December 2012 Year ended Year ended 31 December 2012 31 December 2011 Revenue Capital Total Revenue Capital Total Note US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Income 2 69 - 69 267 - 267 Gains/(losses)on investments Gains/(losses) on fair 9 - 908 908 - (2,376) (2,376) value through profit or loss Exchange losses - (14) (14) - (19) (19) - 894 894 - (2,395) (2,395) Expenses Investment management 3 (400) - (400) (501) - (501) fee Other expenses 4 (521) - (521) (485) - (485) (921) - (921) (986) - (986) Net return before (852) 894 42 (719) (2,395) (3,114) finance income and tax Finance income Gains in fair value of 13 - 241 241 - 2,167 2,167 Warrants Net return before tax (852) 1,135 283 (719) (228) (947) Tax 6 - - - (2) - (2) Net return for the (852) 1,135 283 (721) (228) (949) year US$ US$ US$ US$ US$ US$ Return per Ordinary Share - Basic and diluted 7 (0.2332) 0.3107 0.0775 (0.1604) (0.0507) (0.2111) The total column of this statement is the Statement of Comprehensive Income of the Company prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the EU. The supplementary revenue return and capital return columns have been prepared under guidance published by the Association of Investment Companies. See note 1 for further information on the presentation of the Statement of Comprehensive Income.
All revenue and capital items in the above statement are
v. de·rived, de·riv·ing, de·rives
1. To obtain or receive from a source.
Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the
The Company does not have any income or expense that is not included in the net return for the year, and therefore the "Net return for the year" is also the "Total comprehensive income for the year", as defined in International Accounting Standard 1 (revised). All of the return and total comprehensive income for the year is attributable to the owners of the Company.
The notes form an integral part of these Financial Statements.
Statement of Changes in Equity for the year ended 31 December 2012 Share Capital Share premium Special redemption Capital Revenue capital account reserve reserve reserve reserve Total US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 As at 1 January 46 5,349 48,278 16 (30,652) (3,087) 19,950 2012 Revenue return for - - - - - (852) (852) the year Losses on - - - - (2,261) - (2,261) realisation of investments Movement in fair - - - - 3,169 - 3,169 value of investments Exchange losses - - - - (14) - (14) Movement in fair - - - - 241 - 241 value of Warrants Total recognised - - - - 1,135 (852) 283 income and expenses Refund of buyback - - 5 - - - 5 commission costs Reserve transfer - 1,145 (904) - (241) - - Balance at 31 46 6,494 47,379 16 (29,758) (3,939) 20,238 December 2012 Share Capital Share premium Special redemption Capital Revenue capital account reserve reserve reserve reserve Total US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 As at 1 January 59 5,349 49,175 3 (28,257) (2,366) 23,963 2011 Revenue return for - - - - - (721) (721) the year Gains on - - - - 350 - 350 realisation of investments Movement in fair - - - - (2,726) - (2,726) value of investments Exchange losses - - - - (19) - (19) Movement in fair - - - - 2,167 - 2,167 value of Warrants Total recognised - - - - (228) (721) (949) income and expenses Cancellation of (2) - - 2 - - - Shares from Treasury Cost of Share (11) - (3,064) 11 - - (3,064) buybacks for cancellation Reserve transfer - - 2,167 - (2,167) - - Balance at 31 46 5,349 48,278 16 (30,652) (3,087) 19,950 December 2011
The notes form an integral part of these Financial Statements.
Statement of Financial Position as at 31 December 2012 Note 31 December 31 December 2012 2011 US$'000 US$'000 Non-current assets Investments at fair value 9 20,198 20,056 through profit or loss Current assets Other receivables 11 31 88 Cash and cash equivalents 189 196 220 284 Total assets 20,418 20,340 Current liabilities Other payables 12 180 149 Warrants at fair value 13 - 241 180 390 Total assets less current 20,238 19,950 liabilities Net assets 20,238 19,950 Represented by: Capital and reserves Share capital 14 46 46 Special reserve 47,379 48,278 Capital redemption reserve 16 16 Capital reserve (29,758) (30,652) Share premium 6,494 5,349 Revenue reserve (3,939) (3,087) Total Shareholders' funds 16 20,238 19,950 US$ US$ Net Asset Value per Ordinary 16 5.54 5.46 Share
The above financial information has been prepared in accordance with
IFRS Inter Frame Relay Service
IFRS Indiana Facilities Registry System
(as adopted by the EU) and the accounting policies detailed
These Financial Statements were approved by the Board of Directors
on 27 March 2013, and signed on its behalf by:
Gordon Lawson Chairman Company Registered Number 5537892
The notes below form an integral part of these Financial
Statement of Cash Flows for the year ended 31 December 2012 Year Year ended ended 31 December 31 December 2012 2011 Note US$'000 US$'000 Cash flows from operating activities Net return before tax 283 (947) Adjustments to reconcile net return before tax to net cash flows from operating activities: Add back: (gains)/losses on (908) 2,376 investments Add back: exchange losses 14 19 Movement in fair value of (241) (2,167) Warrants Decrease in other 57 8 receivables Increase in other payables 31 25 Income tax paid - (2) Net cash outflow from (764) (688) operating activities Cash flows from investing activities Purchases of investments (574) (6,368) Sales of investments 1,337 9,336 Net cash flows generated 763 2,968 from investing activities Cash flows from financing activities Cost of Share buybacks for - (3,064) cancellation Refund of buyback 5 - commission costs Net cash flows generated 5 (3,064) from/(used in) financing activities Increase/(decrease) in cash 4 (784) and cash equivalents Cash and cash equivalents 196 983 at the start of the year Effects of exchange (11) (3) movements Cash and cash equivalents 17 189 196 at 31 December
The notes form an integral part of these Financial Statements.
Notes to the Financial Statements for the year ended 31 December 2012
1.1 Corporate information
The Ukraine Opportunity Trust PLC (“the Company”) is an
investment trust company domiciled in the United Kingdom and listed on
London Stock Exchange
The address of the Company’s registered office is
House, 51 New North Road,
, city (1991 pop. 88,235) and district, Devon, SW England, on the Exe River. It is the market, transportation, administrative, and distribution center for SW England.
, EX4 4EP.
The Company’s objective is to achieve long-term capital growth
from a diversified portfolio of companies incorporated, headquartered or
domiciled in, or whose businesses are primarily carried on in
1.2 Basis of preparation
The Financial Statements have been prepared in accordance with IFRS as adopted by the EU. These comprise standards and interpretations approved by the International Accounting Standards Board ("IASB"), together with interpretations of the International Accounting Standards and Standing Interpretations Committee approved by the International Accounting Standards Committee that remain in effect, to the extent that IFRS have been adopted by the EU. Where presentation guidance set out in the Statement of Recommended Practice ("SORP") for Investment Trust Companies and Venture Capital Trusts issued by the Association of Investment Companies in January 2009 is consistent with the requirements of IFRS, the Directors have sought to prepare the Financial Statements on a basis compliant with the recommendations of the SORP. Fair value measurement of financial assets Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction on the measurement date. When available, the Company measures the fair value of an instrument using quoted prices in an active market for that instrument. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency and represent actual and regularly occurring market transactions on an arm's length basis. If a market for a financial instrument is not active, the Company establishes fair value using a valuation technique. The chosen valuation technique makes maximum use of market inputs, relies as little as possible on estimates specific to the company, incorporates all factors that market participants would consider in setting a price, and is consistent with accepted economic methodologies for pricing financial instruments. Inputs to valuation techniques reasonably represent market expectations and measures of the risk-return factors inherent in the financial instrument. The Company calibrates valuation techniques and tests them for validity using prices from observable current market transactions in the same instrument or based on other available observable market data. Assets are measured at bid price; liabilities are measured at ask price. Fair values reflect the credit risk of the instrument and include adjustments to take account of the credit risk of the Company entity or counterparty where appropriate. Fair value estimates obtained from models are adjusted for any other factors, such as liquidity risk or model uncertainties, to the extent that the Company believes a third-party market participant would take them into account in pricing a transaction. Investments in equity securities The fair value of quoted equity securities and interests in pooled investment funds is determined by reference to their closing prices at the reporting date. Fair values for private equity investments are determined in accordance with International Private Equity and Venture Capital ("IPEVC") Valuation Guidelines. Investments in debt securities The fair value of fixed income securities is based on quoted market prices at the reporting date, where the quotes are binding and reflect the price of recent transactions in an active market. For those securities not actively traded, fair value is determined by management based on an analysis of available market inputs, which may include values obtained from one or more independent pricing services or by discounting expected future cash flows using a current market rate applicable to the yield, credit quality, liquidity and maturity of the investment. Cash flows are estimated using issuer-specific default statistics and prepayment assumptions. Independent pricing services will normally derive the security prices through recently reported trades for identical or similar securities, making adjustments through to the reporting date based upon available market observable information. Some debt securities are valued by assessing the credit quality of the underlying borrowers and the credit spreads on comparable quoted debt securities to derive a suitable discount rate relative to government securities.
1.3 Accounting policies
The accounting policies which follow set out those policies which
apply in preparing the Financial Statements for the year ended 31
Functional and presentational currency The Financial Statements are presented in US Dollars. All values are rounded to the nearest thousand dollars (US$'000) except where otherwise indicated.
Use of estimates and judgements The preparation of Financial
Statements in conformity with IFRS requires management to make
judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets, liabilities,
income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing
to accounting estimates are recognised in the period in
which the estimates are revised and in any future periods affected.
In particular, information about significant areas of
uncertainty in applying accounting policies that have the most
significant effect on the amounts recognised in the Financial Statements
is included in note 9 – Investments at fair value through profit or
In order to value the private equity investments, there are a number
of valuation techniques that can be used. Judgement is used to determine
the best methodology to obtain the most accurate valuation. The types of
valuation techniques used are disclosed in note 19.
Going concern The Financial Statements have been prepared on a going concern basis. The Directors are confident that, given the nature of the current investment holdings and based on advice from the Investment Manager, the net realisable value for the portfolio as at the year end date and as at the date of this report would not differ significantly from the bid value in current market conditions. However if the Company was to be wound up there is a risk that liquidation of the portfolio might take place at a time when liquidity is poor and prices achievable would be lower in some cases than prevailing market prices.
1.4 Significant accounting policies
The accounting policies set out below have been applied consistently
to all periods presented in these Financial Statements.
Income recognition Dividends receivable on quoted equity and non-equity shares are included in the Financial Statements when the investments concerned are quoted ex-dividend or where no ex-dividend date is quoted, when the Company'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. All other income is included on an accruals basis.
Expenses and finance costs All expenses are accounted for on an
basis and charged through the revenue account in the Statement
of Comprehensive Income except as follows:
uA transaction costs incurred on the purchase and sale of
investments are expensed through the capital account of the Statement of
Comprehensive Income; and
uA the investment management performance fee (if due), is charged in total to the capital account of the Statement of Comprehensive Income, on the basis that the underlying growth in net assets over the course of the life of the Company will be predominantly of a capital nature. Foreign currency transactions The currency of the Primary Economic Environment in which the Company operates (the functional currency) is US Dollars which is also the presentational currency. This was adopted as this is the major currency in which the majority of transactions are enacted. Transactions denominated in foreign currencies are translated into US Dollars at the rates of exchange ruling at the date of the transaction.
are converted to US Dollars at the
rates of exchange ruling at the year end date. Exchange gains and losses
relate prep →
relate prep → ,
capital items are treated as components of capital elements
of Other Comprehensive Income. Realised and unrealised exchange gains
and losses on non-capital items are taken to the Statement of
Comprehensive Income in the period in which they arise.
Financial instruments - Group of financial assets or financial liabilities managed on a fair value basis Designation of financial instruments as at FVTPL (fair value through profit or loss) under this criterion is based on the manner in which the Company manages and evaluates the performance of a group of financial assets or financial liabilities rather than the nature of those financial instruments.
Designations as at FVTPL made on this basis shall be made at initial
recognition and shall be in accordance with the risk management policies
and investment objective.
Items that are not deemed
or financial liabilities
) are shown at their face value.
Investments at fair value through profit or loss All investments are initially recognised at fair value which is equal to the cost of the consideration given.
Investments are designated as being at FVTPL in accordance with
39. For investments actively traded in organised financial markets, fair
value is generally determined by reference to quoted market bid
Investments where there is no active market and unquoted investments are valued at fair value determined in accordance with IPEVC Valuation Guidelines. This valuation incorporates all factors that market participants would consider in setting a price. Net movement arising from changes in fair value are included in the capital account in the Statement of Comprehensive Income. The net movement arising from changes in fair value of investments that can be readily converted to cash are treated as realised gains/losses and of those that cannot be readily converted to cash are treated as unrealised gains/losses. Trade date accounting All regular way purchases and sales of financial assets are recognised on the 'trade date' i.e. the date the Company commits to purchase or sell the asset. Regular way purchases or sales of financial assets are those that require delivery of the asset within a timeframe generally established by regulation or convention in the market place.
Other purchases and sales of financial assets are recognised at the
date of commitment.
Other receivables Fixed returns on debt securities are recognised on a time apportionment basis so as to reflect the effective yield on the debt security. Other receivables are non-interest bearing and are short term in nature and are accordingly stated at fair value, with the exception of payments and accrued income. Cash and cash equivalents Cash and cash equivalents are defined as cash in hand, demand deposits and short-term highly liquid investments readily convertible to known amounts of cash and subject to insignificant risk of changes in value. Other payables Other payables are non-interest bearing and are stated at fair value, with the exception of accruals.
Derivative financial instruments are recognised in the Statement of Financial Position when the Company becomes a party to the contractual provisions of the instrument. The Warrant holders were entitled to subscribe on the basis of one Ordinary Share for one Warrant on 30 April in any of the years 2007 to 2012 inclusive. The warrants expired on 30 April 2012, see above for further details. Movements in the fair value of the Warrants were taken to the capital account of the Statement of Comprehensive Income.
The charge for taxation is based on the net revenue for the period. Tax deferred or accelerated is accounted for in respect of all material temporary differences to the extent that it is probable that a liability or asset will crystallise. Temporary differences arise from the inclusion of items of income and expenditure in tax computations in periods different from those in which they are included in the Financial Statements. Provision is made at the rate which is expected to be applied when the liability or asset is expected to crystallise. Deferred tax arising from unrelieved foreign tax is recognised only if it is considered more likely than not that there will be suitable profits from which the future reversal of the underlying temporary differences can be deducted.
The tax effect of different items of income/gain and
expenditure/loss is allocated between capital and revenue on the same
basis as the particular item to which it relates, using the
Company’s effective rate of tax for the accounting period.
The following are non-statutory reserves, with the exception of the
share premium and capital
reserve which are statutory
The following are accounted for in this reserve:
uA gains and losses on the realisation of investments;
uA net movement arising from changes in fair value of investments
that can be readily converted to cash;
uA realised exchange differences of a capital nature;
uA expenses, together with related taxation effect, charged to this
account in accordance with the above policies;
uA movement on fair value of Warrants. Such movements are then
transferred to the special reserve; and
uA net movement arising from changes in fair value of investments
(excluding those that can be readily converted to cash) held at the year
Share premium The share premium account may be applied by the Company in paying up unissued Shares to be allotted to Shareholders as fully paid bonus Shares or in writing off the expenses of, or commission paid on any issue of Shares. Special reserve The special reserve was created by a reduction in the share premium reserve by order of the High Court on 7 December 2005. It can be used for the repurchase of the Company's Ordinary Shares.
Capital redemption reserve The capital redemption reserve was
created with the amount that the share capital had been reduced,
equivalent to the
of the Shares repurchased for
CANCELLATION. Its general acceptation, is the act of crossing a writing; it is used sometimes to signify the manual operation of tearing or destroying the instrument itself. Hyde v. Hyde, 1 Eq. Cas. Abr. 409; Rob.
Revenue reserve The revenue reserve represents the excess or deficit of revenue income less expenses. The reserve can be utilised in the distribution of dividends and the purchase of the Company's own Shares. New standards and interpretations not applied IASB and IFRIC have issued and endorsed the following standards and interpretations, applicable to the Company, which are not yet effective for the year ended 31 December 2012 and have therefore not been applied in preparing these Financial Statements. New/Revised International Financial Issued Effective Reporting Standards date for annual periods beginning on or after IFRS 7 Financial Instruments: December 2011 1 January Disclosures 2013 (and interim - Amendments enhancing periods disclosures about offsetting within those of financial assets and periods) financial liabilities IFRS 7 Financial Instruments: December 2011 1 January Disclosures 2015 (or otherwise - Amendments requiring when IFRS 9 disclosures about the initial is first application of IFRS 9 applied) IFRS 9 Financial Instruments - Original Issue 1 January Classification and November 2009 2015 measurement of financial (mandatory assets application date amended December 2011) IFRS 9 Financial Instruments Original issue 1 January - Accounting for financial October 2010 2015 liabilities and derecognition (mandatory application date amended December 2011) IFRS 12 Disclosure of Interests in Original issue 1 January Other Entities May 2011 2013 - Disclosure of information to evaluate the nature of, and risks associated with, interests in other entities and the effects of those interests on its financial position, financial performance and cash flows IFRS 13 Fair Value Measurement Original issue 1 January - Replaces the guidance on May 2011 2013 fair value measurement in existing IFRS accounting literature with a single standard Revised International Accounting Standards Revised Effective date IAS 1 Presentation of Financial June 2011 1 July 2012 Statements - Amendments to revise the way other comprehensive income is presented IAS 32 Financial Instruments: December 2011 1 January Presentation 2014 - Amendments to application guidance on the offsetting of financial assets and financial liabilities
The Directors do not anticipate that the initial adoption of the
above standards, amendments and interpretations will have a material
impact in future periods.
The Company will only adopt standards at the beginning of its
financial year, therefore any standards or interpretations with an
effective date after 1
2012 will not have been adopted.
1. pertaining to or forming a segment or a product of division, especially into serially arranged or nearly equal parts.
2. undergoing segmentation.
A segment is a distinguishable component of the Company that is
engaged in business activities from which it may earn revenues and
expenses for which
financial information is available and whose
operating results are regularly
v. re·newed, re·new·ing, re·news
1. To make new or as if new again; restore:
and reviewed by the
Company’s decision makers.
The Company operates in a single geographical segment (being an investment business mainly operating in Ukraine based entities) but identifies two key areas based on the decision making process by the Board and Investment Manager and has therefore prepared an analysis of results by segment based on these key decision making processes. These two identifiable segments are:
1) the listed investment portfolio (both equity and fixed income
securities) 2) the private investment portfolio (both equity and fixed
Information regarding the Company's reportable operating segments is presented below. 31 December 2012 Listed Private equity/ equity/ fixed fixed income income Total securities securities Unallocated US$'000 US$'000 US$'000 US$'000 Segment income and expenses Investment income 69 10 59 - Total gains/ 908 (790) 1,698 - (losses) on investments taken to profit or loss Other losses (14) - - (14) Finance income 241 - - 241 Expenses (921) - - (921) Total net return 283 (780) 1,757 (694) before tax as per Statement of Comprehensive Income 31 December 2011 Listed Private equity/ equity/ fixed fixed income income Total securities securities Unallocated US$'000 US$'000 US$'000 US$'000 Segment income and expenses Investment income 267 143 122 2 Total (losses)/ (2,376) (2,519) 143 - gains on investments taken to profit or loss Other losses (19) - - (19) Finance income 2,167 - - 2,167 Expenses (986) - - (986) Total net return (947) (2,376) 265 1,164 before tax as per Statement of Comprehensive Income 31 December 2012 Listed Private equity/ equity/ fixed fixed income income Total securities securities Unallocated US$'000 US$'000 US$'000 US$'000 Segment assets Investments at 20,198 2,186 18,012 - fair value through profit or loss Receivables 31 - 13 18 Cash and cash 189 - - 189 equivalents Total assets as 20,418 2,186 18,025 207 per Statement of Financial Position Segment liabilities Payables (180) - - (180) Total liabilities (180) - - (180) as per Statement of Financial Position Net assets 20,238 2,186 18,025 27 31 December 2011 Listed Private equity/ equity/ fixed fixed income income Total securities securities Unallocated US$'000 US$'000 US$'000 US$'000 Segment assets Investments at 20,056 3,742 16,314 - fair value through profit or loss Receivables 88 9 13 66 Cash and cash 196 - - 196 equivalents Total assets as 20,340 3,751 16,327 262 per Statement of Financial Position Segment liabilities Payables (149) - - (149) Warrants at fair (241) - - (241) value Total liabilities (390) - - (390) as per Statement of Financial Position Net assets 19,950 3,751 16,327 (128) All assets are allocated to reportable segments other than cash and prepayments as these are not directly attributable to either segment. All liabilities are unallocated to reportable segments as these are not directly attributable to either segment. The accounting policies of each reported segment are the same as those for the Company as described in note 1. Segmental net return represents the net return earned by each segment without allocation of expenses as they are deemed to be expensed regardless of decisions made in accordance with each investment segment and are incurred during the normal course of the day to day running of the Company. 2. Income Year Year ended ended 31 December 31 December 2012 2011 US$'000 US$'000 Investment income Income from fixed income 67 257 securities Overseas dividends 2 8 Other interest - 2 69 267 Total income comprises: Dividends 2 8 Interest 67 259 69 267 3. Investment management fee Year ended Year ended 31 December 2012 31 December 2011 Revenue Capital Total Revenue Capital Total US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Basic fee 400 - 400 501 - 501 400 - 400 501 - 501 The basic investment management fee is calculated at the annual rate of 2 per cent of the Net Asset Value attributable to Shareholders of the Company on the last business day of each calendar month. The basic management fee accrues daily and is payable in arrears in respect of each calendar month. The Investment Manager is also entitled to a performance fee of 20 per cent of the increase in the Net Asset Value of the Company (before deduction of accruals in respect of performance fees, in respect of such performance period) net of any issues and repurchases of Shares made by the Company and after adding back any dividends paid by the Company over the course of a performance period. The first performance period began on the admission to listing and ended on 31 December 2005 (there was no fee earned for this period). Each subsequent performance period is a period of one year ending on 31 December in each year. The performance fee is 20 per cent of the increase in the Net Asset Value of the Company (adjusted as above) since the performance period in respect of which a performance fee was last earned. No performance fee was payable for either the year ended 31 December 2012 or 31 December 2011. 4. Other expenses Year Year ended ended 31 December 31 December 2012 2011 US$'000 US$'000 Secretarial services 103 99 Auditor's remuneration: - audit 61 48 - taxation services 11 10 - other non-audit services 4 - Directors' remuneration (see 151 151 note 5) Legal and professional fees 23 22 Other expenses 168 155 521 485
comprises audit fees of US$57,000
(2011: US$46,000), expenses of US$4,000 (2011: US$2,000) and fees for
taxation services of US$11,000 (2011: US$10,000.)
5. Directors’ remuneration
An analysis of Directors’ remuneration is shown in the
Directors’ Remuneration Report contained in the full Annual Report
and Financial Statements.
6. Tax Year ended Year ended 31 December 2012 31 December 2011 Revenue Capital Total Revenue Capital Total US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 UK corporation - - - - - - tax at an average rate of 24.5 per cent (2011: 26.5 per cent) Overseas tax not - - - 2 - 2 recoverable - - - 2 - 2 The current taxation charge for the year is lower than the standard rate of corporation tax in the UK of 26 per cent to 31 March 2012 and 24 per cent from 1 April 2012 (2011: 28 per cent to 31 March 2011 and 26 per cent from 1 April 2011). The differences are explained below. Year ended Year ended 31 December 2012 31 December 2011 Revenue Capital Total Revenue Capital Total US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Net return before (852) 894 42 (719) (2,395) (3,114) finance income and tax Theoretical tax (209) 219 10 (191) (635) (826) at an average rate of UK corporation tax of 24.5 per cent (2011: 26.5 per cent) Effects of: - Overseas tax - - - 2 - 2 not recoverable - (Gains)/losses - (219) (219) - 728 728 on investments and exchange losses on capital items - Unrelieved/ 209 - 209 193 (93) 100 (relieved) expenses - Overseas - - - (2) - (2) dividends not taxable Actual current - - - 2 - 2 tax charge
Factors that may affect future tax charges
The Company intends to meet the conditions for approval as an Investment Trust Company for the year ended 31 December 2012 and therefore no deferred tax has been provided on capital gains and losses arising on the revaluation or disposal of investments. After claiming relief against accrued income taxable on receipt, the Company has unrelieved losses of US$6,474,000 (2011: US$5,951,000). It is unlikely that the Company will generate sufficient taxable profits in the future to utilise these losses and therefore no deferred tax asset has been recognised. 7. Return per Ordinary Share Year ended Year ended 31 December 2012 31 December 2011 Weighted Weighted average average number number of of Net Ordinary Ordinary Net ordinary Ordinary return Shares Share return Shares Share US$'000 '000 US$ US$'000 '000 US$ Basicand diluted Total return per 283 3,654 0.0775 (949) 4,496 (0.2111) Ordinary Share Revenue return (852) 3,654 (0.2332) (721) 4,496 (0.1604) per Ordinary Share Capital return 1,135 3,654 0.3107 (228) 4,496 (0.0507) per Ordinary Share
The return per Ordinary Share is calculated based on the return for
the period of US$283,000 (2011: (US$949,000)) and 3,654,000 (2011:
4,496,000) Ordinary Shares, being the weighted average number of Shares
in issue for the year.
The Company does not propose the payment of a dividend in respect of
the year ended 31 December 2012 (2011: nil).
9. Investments at fair value through profit or loss
Year Year ended ended 31 December 31 December 2012 2011 US$'000 US$'000 Investment portfolio summary
Listed equity investments at fair value 2,186 2,854
Private equity investments at fair value 17,864 16,166
Fixed income securities 148 1,036 20,198 20,056 2012 2011 2012 2012 Total Total Listed Private portfolio portfolio US$'000 US$'000 US$'000 US$'000 Analysis of investment portfolio movements Opening book cost 14,493 32,923 47,416 50,040 Opening investment (10,751) (16,609) (27,360) (24,634) holding losses Opening valuation 3,742 16,314 20,056 25,406 Movements in the period: Purchases at cost 574 - 574 6,367 Sales - proceeds (1,340) - (1,340) (9,341) Sales - realised (2,261) - (2,261) 350 (losses)/gains on sales Movement in fair 1,471 1,698 3,169 (2,726) value Closing valuation 2,186 18,012 20,198 20,056 Closing book cost 11,466 32,923 44,389 47,416 Closing investment (9,280) (14,911) (24,191) (27,360) holding losses Closing valuation 2,186 18,012 20,198 20,056 Year Year ended ended 31 December 31 December 2012 2011 US$'000 US$'000 Analysis of capital gains/(losses) Realised (losses)/gains on sales (2,261) 350
Movement in fair value of fixed income (392) (156) securities
Movement in fair value of other 3,561 (2,570) investments Gains/(losses) on investments 908 (2,376)
A list of the portfolio holdings by their aggregate market value is
given in the portfolio valuation above.
to the acquisition of investments
totalled US$1,646 and to the disposal of investments totalled US$463 for
There were no material disposals of unlisted investments in the
Material changes in the value of unlisted investments in the
uA Food Master, ordinary shares value increased during the year to
at 31 December 2011 was
The table below shows the detail of the private equity investments
with a value of greater than 3 per cent of the portfolio.
As at 31 December 2012 Net assets/ equity due to Proportion Turnover at Net profit shareholders Fair of capital Date of date of at
date of at date of Net income
value at owned at last audited last audited last
audited last audited recognised
31 December 31 December financial financial financial financial by the 2012 2012 statements statements statements statements Company US$'000 per cent US$'000 US$'000 US$'000 US$'000 Food Master 7,928 17.1 2011 30,872 4,685 21,844 - (Anthoreal Estates) Vitalux (Chalsen 1,537 19.3 2011 21,616 (198) 2,853 - Trade) Korsando 5,111 19.2 2011 1,135 (526) 35,810 - PT Platinum Bank 3,288 4.8 2011 88,045 30,558 94,875 - Public shares As at 31 December 2011 Proportion Turnover at Net profit shareholders Fair of capital Date of date of at
date of at date of Net income
value at owned at last audited last audited last
audited last audited recognised
31 December 31 December financial financial financial financial by the 2012 2012 statements statements statements statements Company US$'000 per cent US$'000 US$'000 US$'000 US$'000 Food Master 6,040 17.1 2010 21,311 3,157 17,593 - (Anthoreal Estates) Vitalux (Chalsen 1,786 19.3 2010 19,425 (558) 3,168 - Trade) Korsando 5,111 19.2 2010 3,262 (703) 35,050 - PT Platinum Bank 3,229 4.8 2010 34,080 11,730 82,984 - Public shares 10. Significant interests
The Company had equity holdings of 3 per cent or more that are
material in the context of the Financial Statements in the following
Name of Equity 31 December 2012 investment holding Percentage held Food Master (Anthoreal Estates) 5,370 shares 17.1 Vitalux (Chalsen Trade) 5,563 shares 19.3 Korsando 17,980 shares 19.2 PT Platinum Bank Public shares 115,478 shares 4.8 11. Other receivables 31 December 31 December 2012 2011 US$'000 US$'000 Accrued income 13 22 Prepayments 17 42 Taxation recoverable 1 24 31 88 12. Other payables 31 December 31 December 2012 2011 US$'000 US$'000 Audit fee 58 49 Investment management fee 34 34 Accruals 88 66 Other payables due within one year 180 149 13. Warrants Statement of Comprehensive Income Year ended Year ended 31 December 2012 31 December 2011 Revenue Capital Total Revenue Capital Total US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Movement in fair value of - (241) (241) - (2,167) (2,167) Warrants 31 December 31 December 2012 2011 US$'000 US'000 Statement of Financial Position - current liabilities Warrants at fair value at 31 December 2011 241
Movement in fair value of Warrants (241)
Warrants at fair value at 31 December 2012 -
Fair value equates to the ask (cash) price of the Warrants. The
Company’s Warrants expired on 30 April 2012. As at 31 December 2011
the fair value was US$0.20 per Warrant.
14. Called up share capital 31 December 31 December 2012 2011 US$'000 US$'000 Allotted, called up and fully paid: 4,554,381 (2011: 4,554,381) Ordinary Shares of 46
The Company’s Warrants expired on 30 April 2012. As at 31
December 2011 the Company had 1,204,000 Warrants in issue.
The number of Ordinary Shares in issue at 31 December 2012 is
4,554,381 of which 900,000 are currently held in Treasury and 3,654,381
are in circulation.
Ordinary Shares in circulation carry one vote each on a poll.
15 Own Shares held in Treasury
During the year, the Company cancelled no Ordinary Shares from
The Board had originally agreed the purchase of the Shares for capital management reasons with a view to reducing the discount of the Company's Net Asset Value. Year ended Year ended 31 December 31 December 2012 2011 Number Number of Shares of Shares Opening balance 900,000 1,109,291 Additions during the year - - Cancelled during the year - (209,291) Closing balance at 31 December 900,000 900,000 Nominal value of own Shares held in Treasury US$9,000 US$9,000 Per cent of issued share capital held 19.76% 19.76%
There were no purchases into Treasury during the year.
16. Issued capital and reserves attributable to Ordinary Shares
The issued capital and reserves attributable to Shareholders are
calculated in accordance with IAS 32 as follows:
31 December 31 December 2012 2011 US$'000 US$'000 Issued capital and reserves attributable to Ordinary 20,238 20,191 Shareholders prior to Warrant dilution Warrants at fair value (note 13) -
Issued capital and reserves attributable to Ordinary 20,238 19,950 Shareholders 31 December 31 December 2012 2011 US$'000 US$'000 They are represented by: Share capital 46 46 Special reserve* 47,379 48,278 Capital redemption reserve 16 16 Capital reserve* (29,758) (30,652) Share premium 6,494 5,349 Revenue reserve* (3,939) (3,087)
Issued capital and reserves attributable to Ordinary 20,238 19,950
* Distributable reserves (by way of dividend).
The basic Net Asset Value per Ordinary Share as calculated including
the Warrants at fair value is:
31 December 31 December 2012 2011 US$ US$ Basic Net Asset Value 5.54 5.46 As at 31 December 2011, the above method of calculation of the Net Asset Value differed from the Net Asset Values per Ordinary Share which were announced to the London Stock Exchange, as the latter did not take into account the outstanding Warrants as at 31 December 2011 as a preferential liability, before the remaining net assets were attributed to Ordinary Shares, to reflect the fact that the Warrants would either lapse or be converted to Ordinary Shares. On this basis and for information only the Net Asset Value per Ordinary share was as follows: 31 December 31 December 2012 2011 US$ US$ Basic and diluted Net Asset Value 5.54
The Net Asset Value per Ordinary Share is calculated on the net assets attributable to Ordinary Shareholders of US$20,238,000 (2011: US$20,191,000) and 3,654,681 (2011: 3,654,381) Ordinary Shares, being the number of Shares in issue at 31 December 2012 excluding 900,000 Shares held in Treasury.
There is no
17. Reconciliation of net cash flow to net funds
Year Year ended ended 31 December 31 December 2012 2011 US$'000 US$'000 Opening net funds 196 983 Increase/(decrease) in cash and cash equivalents in 4 (784) year 200 199 Effects of exchange movements (11) (3) Closing net funds 189 196
18. Capital commitments and
As at 31 December 2012, there were no contingent liabilities or
19. Analysis of financial assets and liabilities
The Company's financial instruments comprise its investment portfolio, cash balances, Warrants and debtors and creditors that arise from its operations, for example, in respect of sales and purchases awaiting settlement and debtors for accrued income.
The Company finances its operations through its issued capital and
The principal risks the Company faces in its investment portfolio
management activities are:
- Credit risk; - Market price risk, i.e. the movements in value of investment holdings caused by factors other than interest rate movement; - Interest rate risk; - Liquidity risk; - Political risk; and - Foreign currency risk.
The policies for managing these risks are summarised below and have
been applied throughout the year:
Policy (i) Credit risk
Credit risk is the risk of financial loss to the Company if the
contractual party to a financial instrument fails to meet its
contractual obligations, and arises principally from the Company’s
fixed income securities.
Where the Company makes an investment in a loan or other security with credit risk, that risk is assessed and considered as part of the investment decision making process by the Investment Manager.
The Company seeks to manage credit risk by undertaking transactions
Having a good reputation; honorable.
and also ensuring that transactions are
settled upon delivery. The receipt of fixed income interest is also
The Board reviews the values of the fixed income securities on a regular basis using reports provided by the Investment Manager. In addition, short-term flexibility can be achieved via the option to borrow up to 30 per cent of the Company's net assets. The carrying amount of fixed income securities, cash and other debtors (not prepayments) represents the maximum credit exposure. Therefore, the maximum exposure to credit risk at the year end date was US$350,000 which comprises US$148,000 (2011: US$1,036,000) being the total of the carrying amount of fixed income securities, plus US$189,000 (2011: US$196,000) being the carrying amount of cash. There were trade debtors amounting to US$13,000 (2011: US$22,000).
None of the debtors due to the Company are considered to be past due
(ii) Market price risk
In line with the investment policy, plus in order to limit exposure,
the Company would not normally invest more than 15 per cent in any one
company at the time of purchase.
Details of the Company’s investment portfolio as at 31 December
2012 are disclosed above.
The Company’s investment portfolio is exposed to market price
fluctuations which are monitored by the Investment Manager. Detailed
valuation reports from the Investment Manager are regularly sent to the
Private equity investments are not immediately sensitive to market
moves. However, over the medium/long term, the valuation techniques
applied to certain private equity investments will be affected by
significant changes in the listed equity markets.
Fixed income securities are mostly exposed to general changes in
interest rates: when interest rates go up, bond prices go down and
Listed equity positions in Ukraine may be exposed to general market
moves (refer to liquidity risk).
A significant proportion of the Company’s portfolio is invested
in overseas securities and movements in foreign currencies can affect
their value (refer to foreign currency risk).
The Directors are conscious of the fact that the nature of
investments are such that prices can be
. Investors should be
aware that the Company is exposed to a higher rate of risk than exists
within a fund which holds traditional blue-chip securities.
Private equity investments in the portfolio have been valued following the IPEVC Valuation Guidelines applied include cost of additional investments, net assets, market value of underlying assets, sales multiples, and earnings multiples. The Manager pays due consideration to the liquidity of the holding when assessing the fair value of the security. An indication of how each investment may be affected by a 10 per cent movement in valuation is illustrated in the table below. In the case of quoted investments, the price is sourced from the stock exchange in which it is traded. Private equity investment Sensitivity analysis Resultant Resultant valuation valuation after 10% after 10% increase in decrease in 2012 fair 2012 2012 2011 fair value valuation valuation value US$'000 US$'000 US$'000 US$'000 Food Master (Anthoreal 7,928 8,721 7,135 6,040 Estates) Vitalux (Chalsen Trade) 1,537 1,691 1,383 1,786 Korsando 5,111 5,622 4,600 5,111 PT Platinum Bank Public 3,288 3,617 2,959 3,229 shares Private equity valuation 17,864 19,651 16,077 16,166
The valuation techniques applied are based on the following
For Vitalux (Chalsen Trade) and Food Master (Anthoreal Estates), the valuations are based on comparable multiples (deemed an appropriate assumption in relation to the economic environment that the companies operate in) plus the application of a 30 per cent marketability discount to reflect minority position. For Korsando, the valuation is based on the valuation of their land at US$3.7/mU plus a 5 per cent residential markup provided by an independent valuation carried out by CB Richard Ellis in December 2011.
, metallic chemical element; symbol Pt; at. no. 78; at. wt. 195.08; m.p. 1,772°C;; b.p. 3,827±100°C;; sp. gr. 21.45 at 20°C;; valence +2 or +4.
Bank Public shares, the valuation is based on 0.6x
2012 net asset book value.
Adherence to the investment objectives and the limits on investment set by the Company mitigates the risk of excessive exposure to any one particular type of security or issuer. If the investment portfolio valuation fell by 10 per cent from the 31 December 2012 valuation with all other variables held constant there would have been a reduction of US$2,020,000 (2011: US$2,006,000 ) in the return before taxation. An increase of 10 per cent in the investment portfolio valuation would have had an equal and opposite effect in the return before taxation.
(iii) Interest rate risk
The Company holds fixed income securities (intended to provide
liquidity) and is therefore subject to interest rate risk.
The Board sets an overall investment strategy and also has limits
within the investment portfolio which aim to spread the portfolio
investments and to reduce the impact of interest rate risk on the
The Company’s fixed income securities are held over a medium to
long term period and pay a fixed rate of interest which does not
fluctuate with the market.
The Company has the option to
funds and hedge currency, but
currently chooses not to, therefore limiting exposure to interest rate
Details of the Company’s interest rate exposure as at 31
December 2012 is disclosed below.
If the average coupon from fixed income securities and the bank interest rates held as at 31 December 2012 had been 1 per cent lower throughout the year, with all other variables held constant, income before taxation would have been lower by US$23,000 (2011: US$28,000). If coupon and interest rates had been higher throughout the year by 1 per cent income before taxation would have been higher by US$25,000 (2011: US$30,000). The calculations are based on funds invested in fixed income securities and cash deposits as at 31 December 2012 and are not representative of the year as a whole.
(iv) Liquidity risk
The Company invests in securities that are not listed or admitted to trading upon any recognised stock exchange and as a consequence such securities may not be readily tradable. Private equity investments are expected to have an average holding period of approximately five to seven years. Listed equities in Ukraine are often not liquid and the free float may be placed in the hands of very few investors.
At 31 December 2012, the Company held
1. Almost exact or correct:
1 per cent
(2011: 5 per cent) of its investments in fixed income securities and
convertible loans, intended to provide liquidity on short notice for
purchasing equities or to be converted into Shares.
The Company’s policy is to continue to hold fixed income
securities to maintain this flexibility.
The Company also assesses the
regularly to ensure they are neither past due or impaired.
The Company maintains appropriate levels of cash in order to finance
Liquidity risk is
v. mit·i·gat·ed, mit·i·gat·ing, mit·i·gates
To moderate (a quality or condition) in force or intensity; alleviate. See Synonyms at relieve.
To become milder.
by the fact that as a closed end fund,
assets will not need to be liquidated to meet redemptions.
(v) Political risk
The Ukrainian political situation is under constant observation by
both the Investment Manager and the Board. It is commented upon in the
Chairman’s Statement and in the Investment Manager’s Report
above. There are political risks in respect of the Company’s
investments which are greater than those which exist in countries which
have a longer established political system.
(vi) Foreign currency risk
The Company invests primarily in USD, UAH,
, GBP and PLN equities
and fixed income securities and is therefore subject to foreign currency
The functional and presentational currency of the Company is US dollars (USD) and, therefore, the principal exposure to foreign currency risk comprises investments priced in other currencies, principally the Euro (EUR), Sterling (GBP), the Ukrainian Hryvnia (UAH) and the Polish Zloty (PLN). The Investment Manager monitors the exposure to foreign currencies on a daily basis and reports to the Board on a regular basis. The Investment Manager measures the risk of the foreign currency exposure by considering the effect on the Net Asset Value and income of a movement in the rates of exchange to which the Company's assets, liabilities, income and expenses are exposed.
The Company does not use financial instruments to
To moderate in force or intensity.
currency exposure in the period between the time that income is included
in the Financial Statements and is converted into USD. The Company may
hold cash balances in USD, UAH and GBP. Shareholders investing in the
Company’s Shares are exposed to currency fluctuations between these
The interest rate and currency cash flow profile of the
Company’s financial assets and liabilities at 31 December 2012
Financial assets No Floating Fixed interest interest interest rate risk rate risk rate risk Maturity Maturity Maturity Maturity financial financial financial within 2-3 3-5 5+ Total assets assets assets one year years years years US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 USD Equities 17,864 17,864 - - Fixed income 148 - - 148 - - - 148 securities and convertible loans* Cash 155 - 155 - 18,167 17,864 155 148 UAH Equities 1,441 1,441 - - GBP Equities 567 567 - - Cash 34 - 34 - 601 567 34 - PLN Equities 178 178 - - 20,387 20,050 189 148 Financial liabilities USD Warrants* - - - - - - - - - - - - Interest rate sensitivity 20,387 20,050 189 148 gap
* The contractual maturity dates of the fixed income securities are
shown in the portfolio valuation above.
Of all the financial assets, only fixed income securities and
convertible loans have a contracted maturity date.
The interest rate and currency cash flow profile of the
Company’s financial assets and liabilities at 31 December 2011
Financial assets No Floating Fixed interest interest interest rate risk rate risk rate risk Maturity Maturity Maturity Maturity financial financial financial within 2-3 3-5 5+ Total assets assets assets one year years years years US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 USD Equities 16,268 16,268 - - Fixed income 1,036 - - 1,036 888 - - 148 securities and convertible loans** Cash 163 - 163 - 17,467 16,268 163 1,036 UAH Equities 993 993 - - Cash 9 - 9 - 1,002 993 9 - GBP Equities 742 742 - - Cash 24 - 24 - 766 742 24 - EUR Equities 863 863 - - PLN Equities 154 154 - - 20,252 19,020 196 1,036 Financial liabilities USD Warrants* (241) (241) - - (241) - - - (241) (241) - - Interest rate sensitivity 20,011 18,779 196 1,036 gap
* Warrant holders had the option to convert in April of each year,
** The contractual maturity dates of the fixed income securities are
shown in the portfolio valuation above.
Of all the financial assets, only fixed income securities and
convertible loans have a contracted maturity date.
Fair values of financial assets and financial liabilities
All of the financial assets and liabilities of the Company are held
at fair value. For investments actively traded in organised financial
markets, fair value is generally determined by reference to quoted
market bid prices.
see ministry and orders, holy.
A structure that has a predetermined ordering from high to low. For example, all files and folders on the hard disk are organized in a hierarchy (see Win Folder organization).
The Company has adopted the amendment to IFRS 7, effective 1 January
2009. This requires the Company to
tr.v. clas·si·fied, clas·si·fy·ing, clas·si·fies
1. To arrange or organize according to class or category.
2. To designate (a document, for example) as confidential, secret, or top secret.
fair value measurements
using a fair value hierarchy that reflects the significance of the
inputs used in making the measurements. The fair value hierarchy
consists of the following three levels:
uA Level 1 – Quoted prices (unadjusted) in active markets for
identical assets or liabilities.
An active market is a market in which transactions for the asset or liability occur with sufficient frequency and volume on an ongoing basis such that quoted prices reflect prices at which an orderly transaction would take place between market participants at the measurement date. Quoted prices provided by external pricing services, brokers and vendors are included in level 1 if they reflect actual and regularly occurring market transactions on an arm's length basis. uA Level 2 - 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 include the following:
* Quoted prices for similar (i.e. not identical) assets in active
* Quoted prices for identical or similar assets or liabilities in markets that are not active. Characteristics of an inactive market include a significant decline in the volume and level of trading activity, the available prices vary significantly over time or among market participants or the prices are not current.
* Inputs other than quoted prices that are observable for the asset
(for example, interest rates and yield curves observable at commonly
* Inputs that are derived principally from, or
tr.v. cor·rob·o·rat·ed, cor·rob·o·rat·ing, cor·rob·o·rates
To strengthen or support with other evidence; make more certain. See Synonyms at confirm.
observable market data by
or other means
uA Level 3 – Inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability. The determination of what constitutes 'observable' requires significant judgement by the Company. The Company considers observable data to 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 at the year end date, without adjustment for transaction costs necessary to realise the asset.
The table below sets out fair value measurements of financial assets
and liabilities in accordance with the IFRS fair value hierarchy
Financial assets at fair value through profit or loss at Total Level 1 Level 2 Level 3 31 December 2012 US$'000 US$'000 US$'000 US$'000 Equity investments 20,050 1,316 870 17,864 Fixed income securities 148 - - 148 Total 20,198 1,316 870 18,012 Financial assets at fair value through profit or loss at Total Level 1 level 2 Level 3 31 December 2011 US$'000 US$'000 US$'000 US$'000 Equity investments 19,020 1,605 1,249 16,166 Fixed income securities 1,036 - 888 148 Total 20,056 1,605 2,137 16,314 Financial liabilitiesat fair value through profit or loss at Total Level 1 Level 2 Level 3 31 December 2011 US$'000 US$'000 US$'000 US$'000 Warrants 241 - 241 - Total 241 - 241 - There are no other financial assets or liabilities other than those disclosed above. Receivables consist purely of accrued income and prepayments and payables consist purely of accruals and are not restated at fair value. Cash is also not restated at fair value. Investments whose values are based on quoted market prices in active markets, and therefore classified within level 1, include active listed equities. The Company does not adjust the quoted price for these instruments. Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within level 2. As level 2 investments include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information. Investments classified within level 3 have significant unobservable inputs. 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, fair value is established by using recognised valuation methodologies, in accordance with IPEVC Valuation Guidelines. New investments are initially carried at cost, for a limited period, being the price of the most recent investment in the investee. This is in accordance with IPEVC Valuation Guidelines as the cost of recent investments will generally provide a good indication of fair value. Fair value is the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm's length transaction.
There were no transfers between levels for the year ended 31
December 2012 for the financial assets.
The following table presents the movement in level 3 instruments for the year ended 31 December 2012: Fair value Equity Fixed income Total investments investments US$'000 US$'000 US$'000 Opening fair value 16,314 16,166 148 Purchases - - - Sales - proceeds - - - Total gains for the year included in the 1,698 1,698 - Statement of Comprehensive Income Closing fair value 18,012 17,864 148 The following table presents the movement in level 3 instruments for the year ended 31 December 2011: Fair Fixed value Equity income Total investments investments US$'000 US$'000 US$'000 Opening fair value 16,668 15,789 879 Purchases 3,970 926 3,044 Sales - proceeds (4,348) (590) (3,758) Total gains/(losses) for the year included 24 41 (17) in the Statement of Comprehensive Income Closing fair value 16,314 16,166 148
Although the Company believes that its estimates of fair values are
appropriate, the use of different methodologies or assumptions could
lead to different measurements of fair values. The table below shows how
certain different assumptions would have affected the valuation of the
level 3 investments as at 31 December 2012.
2012 Using Forecast Alternate Varying Resulting Fair value Cost multiples EBITDA yield multiples variance US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Vitalux (Chalsen 1,537 - 1,756** - - - 219 Trade) Food Master 7,928 - - 8,785**** - - 857 (Anthoreal Estates) PT Platinum Bank 3,288 - - - - 3,410****** 122 Public shares Korsando 5,111 6,596*** - - - - 1,485 Bank Nadra 2.5 per 148 - - - 210* - 62 cent 10 April 2018 18,012 6,596 1,756 8,785 210 3,410 2,745 ** using forecast sales including 20 per cent marketability discount. **** using forecast sales for 2012 and EBITDA margin. ****** 0.60x November 2012 book value. *** land valued at cost. * using Bank Nadra EuroBond yield with a non-tradeability discount.
Capital management policies
The Company's capital management objectives are to ensure that it will be able to continue as a going concern and to maximise the income and capital return to its equity Shareholders through an appropriate balance of equity capital and "debt". The Board with the assistance of the Investment Manager monitors and reviews the broad structure of the Company's capital on an ongoing basis. This review includes:
uA The Investment Manager’s view of the market;
uA A review of the Shareholders' funds, which takes account of the difference between the Net Asset Value per share and the share price (i.e. the level of share price discount or premium);
uA The need for any potential new issues of equity shares; and
uA The extent to which revenue in excess of that which is required
to be distributed should be retained.
The Company’s objectives, policies and processes for managing
capital are detailed within the introduction of this report, and are
unchanged from the prior period.
20. Related party transactions
, the Investment Manager, is a related
The total investment management charge payable to FPP Asset Management LLP in the Statement of Comprehensive Income for the year was US$400,000 (2011: US$501,000) of which US$34,000 (2011: US$34,000) was outstanding at 31 December 2012. No investment management performance fee was due to FPP Asset Management LLP for the year ended 31 December 2012 (2011: nil) (see notes 3 and 12).
There are no transactions or payments to the Directors other than
the remuneration of US$151,000 as detailed in the Directors’
Remuneration Report on page 22 of the full Annual Report.
ANNUAL GENERAL MEETING
The Company's Annual General Meeting will be held at the offices of FPP Asset Management LLP, 34 Brook Street, London W1K 5DN on Wednesday, 15 May 2013 at 2:00 pm.
The Notice of this Meeting can be found via the Company’s
website at www.ukrotrust.co.uk or by contacting the Company Secretary on
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 Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.