TIDMUKRO
The Ukraine Opportunity Trust PLC
Half-Yearly Report for the Period Ended 30 June 2015
Introduction
The Ukraine Opportunity Trust PLC ("the Company" or "UKRO") was incorporated on
16 August 2005 and commenced operations 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.
Capital Structure
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 30 June 2015 was 4,404,381, of
which 800,000 were held in Treasury and 3,604,381 were in circulation.
Investment Objective
The Company's investment objective is to achieve long-term capital growth
primarily from a diversified portfolio of companies incorporated, headquartered
or domiciled 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.
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 may be 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.
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 investment, 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.
Company Summary
Management Company FPP Asset Management LLP.
Assets attributable to Shareholders US$11,928,000 as at 30 June 2015.
Market capitalisation US$7,930,000 as at 30 June 2015.
Management fee US$140,000 (2 per cent of Net Asset Value
("NAV") of the Company) for the six
months to 30 June 2015.
Performance fee US$nil (20 per cent of increase in the
NAV of the Company since the performance
period when such fee was last earned).
Ongoing charges* 6.71 per cent.
ISA status The Company is fully eligible for
inclusion in ISAs.
AIC The Company is a member of the
Association of Investment Companies.
* Ongoing charges incurred in the six months to 30 June 2015 (excluding
interest costs and certain non-recurring items) as a percentage of average Net
Assets.
Summary of Results
30 June 2015 30 June 2014 31 December 2014
Assets attributable to US$11.93m US$21.68m US$12.88m
Shareholders
NAV per Ordinary Share US$3.31 US$6.01 US$3.57
Mid market Ordinary Share price US$2.20 US$3.925 US$3.10
Discount to NAV 33.53% 34.69% 13.17%
Dividend declared Nil Nil Nil
Six months to Six months Year to
to
30 June 2015 30 June 2014 31 December 2014
Total earnings per Ordinary (US$0.2650) (US$0.4472) (US$2.8868)
Share
Proposed Delisting
Having consulted with its major shareholders, and taking into consideration the
ongoing conflict in Ukraine, the Board believes the cost of maintaining a
public listing outweighs the benefits. As such, the Board will be writing to
shareholders via a shareholder circular to seek approval to delist the
Company's shares from trading. A draft circular is currently with the UK
Listing Authority for approval, and once approved will be sent to shareholders.
Board Changes
Further to the statement made in the Company's Annual Report for the year ended
31 December 2014, Robin Monro-Davies, a Non-Executive Director and Chairman of
the Company retired from the Board at the Company's Annual General Meeting held
on 18 June 2015. Following his resignation, Nigel Pilkington, was appointed
Chairman.
Following the result of the Annual General Meeting, when shareholders chose not
to elect Beatrice Hollond or re-elect Dmitry Chernobay, Bertrand Lipworth
remained on the Board contrary to his initial intention.
Subsequently, Gordon Lawson and Nicholas Cournoyer were appointed as
Non-Executive Directors of the Company on 26 June 2015.
On 29 July 2015, the Company announced with great regret that Bertrand Lipworth
had passed away. Bertrand had been a Director of the Company since 2007. The
Board issued a statement saying "This is a great shock to us all and we will
miss Bertrand's wise council and his excellent company."
Risks
The Board considers the following as the principal risks and uncertainties
facing the Company for the remaining six months of the financial year.
Risks Specific to Investing in Ukraine and Ukrainian Companies
The Company's investments involve certain additional risks not typically
associated with investments in developed and other developing market economies.
This is increased with the unresolved conflict with Russia and the uncertainty
this causes. 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. Independent members of the
Board undertake 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 Company's Annual Report and Financial Statements
for the year ended 31 December 2014.
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, or have their accounts
subject to external audit, 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. There is an inherent lack of minority
investor protection in Ukrainian law, however a change in political will would
hopefully see this improve in the future.
The value of the Company's investments is affected by fluctuations in the value
of the Hryvnia against the US Dollar and by tightening in local exchange
control regulations, tax laws and economic or monetary policies. The Company is
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also subject to the risks in Ukraine of continued inflation and significant
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
objective. 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. 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.
Failure by the Company to satisfy the requirements of Sections 1158/1159 of the
CTA 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. The Board had, in late 2013, engaged lawyers to carry out a
review of the share register to ensure the Company is not a close company (as
defined in the CTA). The review concluded that the Company was not, and had not
been, a close company; the Board regularly monitors this. The Board
acknowledges that it has no control over shareholders purchasing shares, nor
their concentration on the share register.
A further prerequisite to qualify as an Investment Trust Company is the
requirement to diversify risk in the portfolio; this is also a requirement of
the Listing Rules. As the Company increases its focus on the successful private
equity investments, the portfolio will become increasingly concentrated. The
Board monitors the risk diversification and the Company's compliance with the
Listing Rules and the CTA.
Related Party Transactions
FPP Asset Management LLP, as Investment Manager of the Company, is a related
party by virtue of its management contract with the Company (novated to it on 7
December 2008). During the six months to 30 June 2015, services with a total
value of US$140,000 (six months to 30 June 2014: US$225,000; year ended 31
December 2014: US$414,000) were purchased under the contract. No investment
management performance fee was payable for the six months to 30 June 2015 (six
months to 30 June 2014: US$nil; year ended 31 December 2014: US$nil). At 30
June 2015, the amount due to the Investment Manager, included within creditors,
was US$20,000 (30 June 2014: US$36,000; 31 December 2014: US$22,000).
There were no changes in the transactions or arrangements with related parties
as described in the Company's Annual Report and Financial Statements for the
year ended 31 December 2014 that would have a material effect on the financial
position or performance of the Company in the first six months of the current
financial year.
Interim Management Report and Responsibility Statement of the Directors in
respect of the Half-Yearly Financial Report
Interim Management Report
Under the Disclosure and Transparency Rules the Company is required to make a
number of disclosures, including the following:
Important events that have occurred during the period under review; key factors
influencing the financial statements; and principal risks and uncertainties for
the remaining six months of the financial year. These are set out in this
Half-Yearly Report.
Responsibility Statement
The Directors confirm that to the best of their knowledge:
(a) the condensed set of financial statements has been prepared in accordance
with International Accounting Standard ("IAS") 34, Interim Financial Reporting,
as adopted by the European Union, and gives a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company;
(b) the Half-Yearly Report includes a fair review of the information required
to be disclosed under the Disclosure and Transparency Rule 4.2.7R. This
includes (i) an indication of important events that have occurred during the
first six months of the financial year and their impact on the condensed
interim financial information presented in the Half-Yearly Report and (ii) a
description of the principal risks and uncertainties for the remaining six
months of the financial year; and
(c) the Half-Yearly Report includes a fair review of the information required
to be disclosed under Disclosure and Transparency Rule 4.2.8R, being any
changes in related party transactions described in the last annual report.
On behalf of the Board
Nigel Pilkington
Chairman
26 August 2015
Investment Management Report for The Ukraine Opportunity Trust PLC for the six
months to 30 June 2015
Ukraine has seen immense changes over the last year and a half. Politically we
have seen the overthrow of the previous government in February 2014, closely
followed by the Russian annexation of Crimea in March of that year. Mr
Poroshenko then won the May 2014 Presidential election with 54.7 per cent
support. The October parliamentary election returned a large pro-reform
majority, led by the People's Front of the Prime Minister, Mr Yatsenyuk, and
the Petro Poroshenko Bloc. Hostilities in the East of Ukraine, which peaked in
early 2015, were finally brought to some sort of conclusion by the second
ceasefire agreement signed in Minsk in February 2015. In March, the IMF board
then approved a new programme loan, the first US$5 billion tranche of which was
disbursed. This process, combined with an increase in interest rates and some
exchange controls brought an end to repeated phases of Hryvnia weakness,
allowing it to settle at around UAH22 per Dollar, compared to a low of UAH30
per Dollar in February.
In 2014, Ukraine's GDP fell by 6.8 per cent and a similar economic contraction
is expected this year. 2014 average inflation rose to 12.1 per cent, driven by
currency weakness and IMF-led increases in utility tariffs. Inflation has
continued to accelerate in 2015 as the currency has weakened further in Q1,
this despite a higher base, low global energy prices and recession. Inflation
accelerated rapidly to April 2015 when it peaked at 60 per cent. As of July, it
has fallen back marginally to 55.3 per cent year-on-year, although
month-on-month inflation has fallen to near zero from 14 per cent in April.
This situation obviously still represents a major challenge for Ukrainian
companies and consumers as incomes have singularly failed to keep pace with
inflation, leading to a fall in real purchasing power.
The external position of Ukraine has improved with both the current account
deficit and the trade deficit contracting in 2015. The major positive effect of
lower energy prices was in part cancelled out by lower demand in ex-Soviet CIS
markets, but the Economist Intelligence Unit expects a 'marked narrowing' of
the current account deficit from last year's 4 per cent of GDP to around 1.7
per cent of GDP in 2015. Taken together with the renewal of the IMF programme,
this improvement will reduce the pressure on Ukraine's foreign reserves which
had been sharply reduced by debt repayments and a fall in FDI. It remains to be
seen whether Ukraine can deliver a significant debt restructuring along the
lines outlined by the IMF, as talks with creditors are currently entering their
fifth month. Currency depreciation and a deep recession have increased
Ukraine's sovereign debt burden from around 40 per cent of GDP pre-crisis to
nearer 70 per cent of GDP and this could hit 80 per cent this year without any
restructuring agreement. Ukraine and the IMF have asked for a 40 per cent cut
in debt principal, but creditors are reluctant to concede this degree of
haircut. Ultimately some compromise will likely be reached which allows Ukraine
to re-build its reserves.
In an environment of accelerating inflation and economic contraction it was a
difficult first half for our portfolio of companies. Managements must focus on
trying to maintain sales volumes whilst passing through Hryvnia price increases
where they can; at the same time a focus on cost containment and minimising
financial debt remain paramount. It is too much to expect Dollar sales growth
for 2015 in these circumstances, but our consumer-facing companies have
delivered good local currency growth and maintained some measure of
profitability in what have been challenging circumstances. The Company's
insistence on minimal debt exposures for all our companies has also been
important in an environment of rising local rates. Suppliers are quick to deny
their services to companies they deem too risky in terms of working capital or
debt exposure, and we have had no such problems at our pharmacy chain or the
restaurants, in this situation, a conservative balance sheet becomes a
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competitive advantage.
The Company has continued the process of regularly reviewing asset valuations
in this difficult environment. Property holdings are marked in line with third
party estimates of their value as produced by a leading international property
consultant. In the half year we also decreased the valuation of Food Master in
line with the slight fall in rolling 12- month US Dollar cash flow as per the
Q1 numbers. The listed holding in Creative, a sunflower and soy oil processor,
was also marked down to account for the limited liquidity of the locally-listed
shares. The Company continues to retain a considerable cash position,
reflecting the uncertain environment.
The ongoing conflict in Ukraine has prompted the Board and ourselves to review
the Company's public market listing and whether the costs of maintaining this
outweigh the benefits. Our goal is to continue to do everything to maximise
the net asset value of the Company's investments and to protect long-term value
for shareholders. Our collective judgement is that the current listed
investment trust structure and the recurring expenses that it entails are not
justifiable at current asset values. As such, the Board will be writing to
shareholders via a shareholder circular to seek approval to delist the
Company's shares from trading.
FPP would also like to take this opportunity to extend our condolences to the
family and friends of Mr Bertrand Lipworth, a Director of the Company, who died
in July. Bertrand's contribution to the management of the business, most
particularly his expertise in Private Equity transactions, was a great asset to
us and he will be much missed by all who knew and worked with him.
FPP Asset Management LLP
Investment Manager
26 August 2015
ukro@fpictet.com
Forward-looking statements
This Half-Yearly Report may contain certain "forward-looking statements" which
reflect the Company's and/or the Directors' current views with respect to
financial performance, business strategy and future plans, both with respect to
the group and the sectors and industries in which the Company invests.
Statements which include the words "expects", "intends", "plans", "believes",
"projects", "anticipates", "will", "targets", "aims", "may", "would", "could",
"continue" and similar statements are of a future or forward-looking nature.
All forward-looking statements address matters that involve risks and
uncertainties. Accordingly, there are or will be important factors that could
cause the Company's actual results to differ materially from those indicated in
these statements. Any forward-looking statements in this Half-Yearly Report
reflect the Company's current views with respect to future events and are
subject to risks, uncertainties and assumptions relating to the Company's
investments, results and growth strategy. These forward-looking statements
speak only as of the date of this Half-Yearly Report. Subject to any legal or
regulatory obligations, the Company undertakes no obligation publicly to update
or review any forward-looking statement, whether as a result of new
information, future developments or otherwise. All subsequent written and oral
forward-looking statements attributable to the Company or individuals acting on
behalf of the Company are expressly qualified in their entirety by this
paragraph. Nothing in this publication should be considered as a profit
forecast.
Portfolio Valuation as at 30 June 2015
Fair value % of net assets
Security Name Currency Cost valuation as at as at 30 June
30 June 2015 2015
US$'000 US$'000
Private fixed income securities
Bank Nadra 2.5% Loan 10 April UAH 3,044 218 1.8
2018
Total fixed income securities 3,044 218 1.8
Equities
Listed equity
Azovstal Iron & Steelworks UAH 427 52 0.4
Black Iron CAD 18 15 0.1
Centrenergo UAH 248 59 0.5
Creative Industrial Group UAH 1,255 403 3.4
Ferrexpo GBP 452 314 2.6
Kernel PLN 227 201 1.7
MHP USD 186 201 1.7
Ukrproduct Group GBP 144 25 0.2
Ukrsotsbank UAH 249 13 0.1
Zakhidenergo UAH 167 19 0.2
3,373 1,302 10.9
Private equity
Food Master (Anthoreal Estates) UAH 5,663 5,389 45.2
Vitalux (Chalsen Trade) UAH 2,118 545 4.6
Ekipazh UAH 541 456 3.8
Elcinory UAH 1,131 668 5.6
UKRO Land Invest UAH 2,513 1,000 8.4
11,966 8,058 67.6
Total equity 15,339 9,360 78.5
Total portfolio valuation 18,383 9,578 80.3
Cash and cash equivalents 2,566 21.5
Other net liabilities (216) (1.8)
Net assets 11,928 100.0
As at 30 June 2015, the portfolio was held in the following denominations: 2.1%
in USD (US Dollar); 92.1% in UAH (Ukranian Hryvnia); 3.5% in GBP (Sterling);
2.1% in PLN (Polish Zloty); and 0.2% in CAD (Canadian Dollar).
Statement of Comprehensive Income (unaudited)
for the six months to 30 June 2015
Six months to 30 June 2015 Six months to 30 June 2014 Year ended 31 December 2014
(audited)
Revenue Capital Revenue Capital Revenue Capital
return return Total return return Total return return Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Income 44 - 44 44 - 44 35 80 115
Losses on investments
Losses on fair value through
profit or loss investments
- (372) (372) - (1,064) (1,064) - (9,338) (9,338)
Exchange gains/(losses) (3) (3) - (15) (15)
- 14 14 -
- (358) (358) - (1,067) (1,067) - (9,353) (9,353)
Expenses
Investment management fee
(140) - (140) (225) - (225) (414) - (414)
Other expenses
(488) - (488) (360) - (360) (747) - (747)
(628) - (628) (585) - (585) (1,161) - (1,161)
Net return before tax
(584) (358) (942) (541) (1,067) (1,608) (1,126) (9,273) (10,399)
Tax (Note 3) (13) - (13) (4) - (4) (5) - (5)
Net return for the period
(597) (358) (955) (545) (1,067) (1,612) (1,131) (9,273) (10,404)
US$ US$ US$ US$ US$ US$ US$ US$ US$
Return per Ordinary Share
Basic and Diluted (Note 4)
(0.1657) (0.0993) (0.2650) (0.1512) (0.2960) (0.4472) (0.3138) (2.5730) (2.8868)
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.
All revenue and capital items in the above statement are derived from
continuing operations.
The Company does not have any income or expense that is not included in net
return for the period, and therefore the "Net return for the period" is also
the "Total comprehensive income for the period", as defined in IAS 1 (revised).
All of the net return and total comprehensive income for the period is
attributable to the owners of the Company.
Statement of Changes in Equity (unaudited)
for the six months to 30 June 2015
Share Capital
Share premium Special redemption Capital Revenue
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capital account reserve reserve reserve reserve Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
As at 1 January 2015 44 6,494 47,227 18 (34,968) (5,932) 12,883
Revenue return for the (597)
period - - - - - (597)
Losses on realisation of
investments - - - - (84) - (84)
Movement in fair value
of investments - - - - (288) - (288)
Exchange gains - - - - 14 - 14
Total recognised income
and expenses - - - - (358) (597) (955)
Balance at 30 June 2015 44 6,494 47,227 18 (35,326) (6,529) 11,928
Statement of Changes in Equity (unaudited)
for the six months to 30 June 2014
Share Capital
Share premium Special redemption Capital Revenue
capital account reserve reserve reserve reserve Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
As at 1 January 2014 44 6,494 47,227 18 (25,695) (4,801) 23,287
Revenue return for the
period - - - - - (545) (545)
Movement in fair value
of investments - - - - (1,064) - (1,064)
Exchange losses - - - - (3) - (3)
Total recognised income
and expenses - - - - (1,067) (545) (1,612)
Balance at 30 June 2014 44 6,494 47,227 18 (26,762) (5,346) 21,675
Statement of Changes in Equity (audited)
for the year ended 31 December 2014
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$'000
As at 1 January 2014 44 6,494 47,227 18 (25,695) (4,801) 23,287
Revenue return for the
year - - - - - (1,131) (1,131)
Losses on realisation
of investments - - - - (2,997) - (2,997)
Capital dividend
received - - - - 80 - 80
Movement in fair value
of investments - - - - (6,341) - (6,341)
Exchange losses - - - - (15) - (15)
Total recognised income
and expenses - - - - (9,273) (1,131) (10,404)
Balance at 31 December
2014 44 6,494 47,227 18 (34,968) (5,932) 12,883
Statement of Financial Position (unaudited)
as at 30 June 2015
As at 30 June As at 30 June As at 31 December 2014
2015 2014 (audited)
US$'000 US$'000 US$'000
Non-current assets
Investments at fair
value through profit or 9,578 17,875 9,806
loss
Current assets
Other receivables 28 33 81
Cash and cash 2,566 3,963 3,245
equivalents
2,594 3,996 3,326
Total assets 12,172 21,871 13,132
Current liabilities
Other payables (244) (196) (249)
(244) (196) (249)
Total assets less
current liabilities/net 11,928 21,675 12,883
assets
Represented by:
Capital and reserves
Share capital 44 44 44
Special reserve* 47,227 47,227 47,227
Capital redemption 18 18 18
reserve
Capital reserve* (35,326) (26,762) (34,968)
Share premium account 6,494 6,494 6,494
Revenue reserve* (6,529) (5,346) (5,932)
Total Shareholders' 11,928 21,675 12,883
funds
US$ US$ US$
NAV per
Ordinary Share (Note 6) 3.31 6.01 3.57
The above financial information has been prepared in accordance with IFRS (as
adopted by the EU).
* These reserves are distributable (by way of dividend).
Statement of Cash Flows (unaudited)
for the six months to 30 June 2015
Six months to Six months to Year ended 31 December 2014
30 June 2015 30 June 2014 (audited)
US$'000 US$'000 US$'000
Cash flows from operating
activities
Net return before tax (942) (1,612) (10,399)
Adjustments to reconcile net
return before tax to net cash
flows from operating activities:
Add back: losses on investments 372 1,064 9,338
Add back: exchange (gains)/ (14) 3 15
losses
Decrease/(increase) in other 53 22 (25)
receivables
(Decrease)/increase in other (5) 7 60
payables
Net cash outflow from operating
activities (536) (516) (1,011)
Taxation
Irrecoverable overseas tax paid (13) - (5)
(13) - (5)
Cash flows from investing
activities
Purchases of investments (309) (2,136) (2,430)
Sales of investments 164 - 87
Net cash flows used in investing
activities (145) (2,136) (2,343)
Decrease in cash and cash
equivalents (Note 8) (694) (2,652) (3,359)
Cash and cash equivalents at
start of period/year 3,245 6,618 6,618
Effect of exchange movements 15 (3) (14)
Cash and cash equivalents at end
of period/year (Note 8) 2,566 3,963 3,245
Notes
1. Accounting policies
The interim financial information has been prepared in accordance with IAS34,
'Interim Financial Reporting' and also in accordance with the accounting
policies set out in the statutory accounts for the year ended 31 December 2014.
The interim financial information should be read in conjunction with the
statutory accounts for the year ended 31 December 2014, which have been
prepared in accordance with IFRS.
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 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
Half-Yearly Report.
2. Financial information
The financial information contained in this Half-Yearly Report does not
constitute full statutory accounts as defined in sections 434-436 of the
Companies Act 2006. The financial information for the six months to 30 June
2015 and 30 June 2014 has not been audited or reviewed.
The information for the year ended 31 December 2014 has been extracted from the
latest published audited accounts. Those statutory accounts have been filed
with the Registrar of Companies and included a report of the auditors which was
unqualified and did not contain a statement under sections 498(2) or (3) of the
Companies Act 2006.
3. Tax credit/charge on ordinary activities
The tax charge for the six months to 30 June 2015 is US$13,000 (six months to
30 June 2014: US$4,000 year ended 31 December 2014: US$5,000). The tax charge
for the six months to 30 June 2015 relates entirely to irrecoverable overseas
withholding tax. The estimated effective tax rate is zero per cent for the year
ending 31 December 2015. This is because investment gains are exempt from
Capital Gains Tax owing to the Company's current status as an Investment Trust
Company and there is expected to be an excess of management expenses over
taxable income in the year ending
31 December 2015. Therefore there is no liability to Corporation Tax during the
six months to 30 June 2015 (six months to 30 June 2014: US$nil; year ended 31
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December 2014: US$nil).
However, as a result of the Company's intention to delist before the year
ending 31 December 2015, the Company will become an unapproved Investment Trust
Company for the full year and therefore will be subject to Corporation Tax on
all profits and required to recognise deferred tax on gains and losses arising
on the revaluation or disposal of investments. The Directors' current
expectation is that unless there is a very significant change to the current
political and military impasse in Ukraine before the end of 2015, asset values
will be at best around current levels, meaning little or no tax is likely to
become payable.
4. Return per Ordinary Share
Six months to
30 June 2015
Weighted
average
number of
Net Ordinary Ordinary
return Shares Share
US$'000 '000 US$
Total return per ordinary (955) 3,604 (0.2650)
share
Revenue return per ordinary (597) 3,604 (0.1657)
share
Capital return per ordinary (358) 3,604 (0.0993)
share
Six months to
30 June 2014
Weighted
Average
number of
Net Ordinary Ordinary
return Shares Share
US$'000 '000 US$
Total return per ordinary (1,612) 3,604 (0.4472)
share
Revenue return per ordinary (545) 3,604 (0.1512)
share
Capital return per ordinary (1,067) 3,604 (0.2960)
share
Year to
31 December
2014
Weighted
Average
Net number of Ordinary
return Ordinary Share
US$'000 Shares US$
'000
Total return per ordinary (10,404) 3,604 (2.8868)
share
Revenue return per ordinary (1,131) 3,604 (0.3138)
share
Capital return per ordinary (9,273) 3,604 (2.5730)
share
5. Segment reporting
As detailed in the Company's Report and Financial Statements for the year ended
31 December 2014, 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);
and
2) the private investment portfolio (both equity and fixed income securities).
The listed investment portfolio and the private investment portfolio are shown
above. Information regarding the Company's reportable operating segments is
presented below.
30 June 2015 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 44 44 - -
Total losses on investments taken to
profit or loss (372) (107) (265) -
Other gains 14 - - 14
Expenses (628) - - (628)
Total net return after tax as per
Statement of Comprehensive Income (942) (63) (265) (614)
30 June 2014 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 44 15 29 -
Total losses on investments taken to
profit or loss (1,064) (76) (988) -
Other losses (3) - - (3)
Expenses (585) - - (585)
Total net return after tax as per
Statement of Comprehensive Income (1,608) (61) (959) (588)
31 December 2014 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 115 19 96 -
Total losses on investments taken to
profit or loss (9,338) (754) (8,584) -
Other losses (15) - - (15)
Expenses (1,161) - - (1,161)
Total net return after tax as per
Statement of Comprehensive Income (10,399) (735) (8,488) (1,176)
6. Net assets attributable to Ordinary Shares
The total net assets attributable to Shareholders are calculated as follows:
30 June 2015 30 June 2014 31 December
2014
US$'000 US$'000 US$'000
Shareholders' funds 11,928 21,675 12,883
The basic NAV per Ordinary Share is as follows:
NAV US$3.31 US$6.01 US$3.57
Number of Ordinary Shares 3,604,381 3,604,381 3,604,381
7. Fair value hierarchy
Financial assets and financial liabilities of the Company are carried in the
Statement of Financial Position at their fair value. The fair value is the
amount at which the asset could be sold or the liability transferred in a
current transaction between market participants, other than a forced or
liquidation sale. For investments actively traded in organised financial
markets, fair value is generally determined by reference to quoted market bid
prices.
The Company measures fair values using the following hierarchy that reflects
the significance of the inputs used in making the measurements.
Categorisation within the hierarchy has been determined on the basis of the
lowest level input that is significant to the fair value measurement of the
relevant assets as follows:
* Level 1 - valued using quoted prices, unadjusted in active markets for
identical assets or liabilities.
* Level 2 - valued by reference to valuation techniques using observable inputs
for the asset or liability other than quoted prices included in level 1.
* Level 3 - valued by reference to valuation techniques using inputs that are
not based on observable market data for the asset or liability.
The tables below set out fair value measurements of financial instruments as at
the respective period ends, by the level in the fair value hierarchy into which
the fair value measurement is categorised.
Financial assets at fair value though
profit or loss at 30 June 2015 Total Level 1 Level 2 Level 3
US$'000 US$'000 US$'000 US$'000
Equity investments 9,360 899 403 8,058
Fixed income securities 218 - - 218
Total 9,578 899 403 8,276
Financial assets at fair value though
profit or loss at 30 June 2014 Total Level 1 Level 2 Level 3
US$'000 US$'000 US$'000 US$'000
Equity investments 17,504 1,029 851 15,624
Fixed income securities 371 - - 371
Total 17,875 1,029 851 15,995
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