Last checked at 29 Jun 2010 07:00
For immediate release: 29 June 2010
Kingswalk Investments Limited Audited results for the year ended 31 December 2009
Kingswalk Investments Limited (AIM: KWI), the strategic investment company, today announces its audited results for the year ended 31 December 2009.
DIRECTORS' REPORT
Introduction
We are pleased to present this annual report of Kingswalk Investments Limited("Kingswalk" or the "Company") to shareholders for the year ended 31 December2009.BackgroundThe Company was set up in 2004 as a Guernsey based pre-IPO strategic investmentcompany and was admitted to AIM in 2005. During the course of the next fewyears, the Company made a number of successful investments in businessespreparing for flotations in a wide range of sectors, including financialservices, property, retail and support services. During the onset of the creditcrisis in 2007, the lack of available funding for these businesses at the time,both in terms of equity and debt finance, ultimately resulted in a largeproportion of the Company's investments becoming worthless as the companieseither entered administration or were sold at low valuations at the bottom ofthe cycle. This resulted in significant write downs of the value of investmentsduring 2007 (approximately £3.3 million) and 2008 (approximately £3.6 million).During 2009, the Company underwent some material changes such as a newmanagement team being appointed, new shareholders being brought in, theCompany's name being changed from Equity Pre-IPO Investments Limited and theCompany's investment strategy being broadened to include the ability to investin both public and private companies and also to permit Kingswalk to acquirecompanies in their entirety as well as being able to continue to make minorityinvestments. The Company's management is now actively reviewing potentialinvestment opportunities and hopes to be able to make a significant investmentduring the second half of 2010. Any investment will require the Company toraise new equity funds.
Financial Review
During the year under review, the Company did not make any new investments andrealised one investment entirely for £100,000, the proceeds of which were usedto partly repay Kingswalk's outstanding borrowings at the time of £115,000. TheCompany ended the year with one quoted investment valued at approximately £90,000, part of which has been sold post the year end to meet ongoing runningcosts. Investments made in previous years by previous management were writtendown to zero during 2008 and therefore were carried forward at zero valueduring 2009.The loss for the year was £259,916 (2008: £3,737,827), made up of net losses onthe carrying value of the one remaining investment of £64,277 (2008: £3,598,699) and administration costs for the year of £195,639 (2008: £581,949,including £210,000 loan write off).The value of net assets improved marginally at the year end to £76,118 (2008: £43,356). The Company's balance sheet was further simplified during 2009 withoutstanding loans and trade creditors either being repaid or converted into newordinary shares of 1 pence in the Company ("Ordinary Shares"). At the year end,the Company had cash balances of £26,816 (2008: £880) and zero debt (2008: £115,000). The Company today announces that it has entered into a new securedtwo year convertible loan facility ("June Facility") with a lender for up to £150,000, £25,000 of which has been drawn down to meet the Company's ongoingrunning costs. The June Facility is to be used by the Company to pay itsongoing running costs until suitable investments have been made and furtherequity funds raised. Amounts drawn down under the facility can, at the optionof the lender, be converted into new Ordinary Shares at a price of 1p perOrdinary Share. The Directors estimate that the normal annual running costs ofthe Company total approximately £130,000, and therefore the June Facilityprovides the Directors with sufficient comfort as to the Company's ability tomeet its obligations as they fall due for at least the next 12 months.During the year, the Company issued an aggregate 29,267,772 new Ordinary Sharesto end the year with 42,505,007 Ordinary Shares in issue. In June 2009, theCompany issued and allotted 19,018,392 new Ordinary Shares, 15,018,392 of whichwere issued in settlement of £150,184 of outstanding debts owed by the Companyto its suppliers and advisers and 4,000,000 of the new Ordinary Shares wereissued to raise new funds for the Company totalling £40,000. In December 2009,the Company issued and allotted a further 10,249,380 new Ordinary Shares inorder to settle a loan facility of £100,000, plus interest of £2,494. At thesame time as entering into the June Facility, the Company has issued a newwarrant instrument to the lender agreeing to issue up to 15,000,000 newOrdinary Shares at an exercise price of 1p per Ordinary Share ("Warrant"). TheWarrant has a 2 year exercise period and could raise up to a further £150,000in cash for the Company.Investment PolicyThe Company's investment policy is the policy that was approved by itsshareholders at the 2009 annual general meeting ("2009 AGM"). This policyallows the Company to invest in a broad range of listed and unlistedbusinesses. The Company's investment policy allows the Board to continue toevaluate potential investments from a wide variety of industry sectors and theCompany will seek investments in sectors where there is potential for growth.This is likely to include sectors such as financial services, support servicesand property, where values remain soft. The Company will primarily focus onEuropean and US-based businesses but will also consider investments in othergeographical areas if appropriate. Over the last 6 months, the Company'smanagement and advisers have appraised a number of companies in detail with aview to making an investment and have undertaken extensive due diligenceexercises in respect of two of these. One of these companies operates in thesecurity sector (a security installation and maintenance service contractbusiness) with potentially attractive opportunities for consolidation and theother in the financial services sector (a business owning equity stakes in awide range of collateralised loan obligation vehicles ("CLOs") which provideattractive returns) with a view to taking advantage of the current lowvaluations of CLOs by raising further investment monies to acquire more equitystakes. Either or both investments may still be made but, at this time, themanagement and its advisers are making further enquiries in respect of bothbusinesses.Before the Company's 2009 AGM, the Company could only invest in privately heldcompanies, however, the Company has now broadened its investment criteria toinclude publicly quoted companies and partnerships. The Company does not seekto limit the size of the investment or the size of the entities in which itinvests and does not limit the percentage ownership that it may hold in any onecompany at any time. Accordingly, the Company's investment policy permits theCompany to make investments of up to, and including, 100% of businesses.The Company will not seek to have a fixed number of investments or seek todiversify the investments over particular sectors or particular indexes,however it is envisaged that the total number of investments at any given timewill not exceed 30 investments. The Company will instead generally focus ondiversifying the relative risks of investments. The Company does not intend atthis stage to gear its investments but may consider doing so in the future ifsuitable funding arises.
Subject to seeking further finance for further investment purposes, the Directors continue to review investment opportunities.
The Company will generally be a passive investor in the entities in which itinvests but if the Board or the Company's consultants are able to add value tothe investee entity then the Company may take a more active stance. TheCompany's investment decisions will be based upon research prepared andpresented to the Board by its panel of research consultants and advisers.
Director Changes
As previously announced, on 30 July 2009, the Company's board of directorschanged with the appointments of Paul Everitt and Roger Parry replacing MartinShires and Paul Schreibke. In addition, two further non-executive directorswere appointed to the board, Guus Berting in June 2009 and Daan van den Noortin January 2010, who replaced Jonathan Freeman who stepped down at the sametime to focus on his other business interests.
Annual General Meeting
The Company's Annual General Meeting ("AGM") is be held at its registered office, being Roseneath, The Grange, St Peter Port, Guernsey, GY1 3SJ on 30 July 2010 at 12:00 noon. The notice of AGM, together with a form of proxy for use at the AGM has today been sent to shareholders.
Outlook
Overall trading conditions remain challenging across the wider economy, notjust the financial sector, with evidence of a slowing down in the recent paceof recovery and continued low levels of lending to businesses by the banks.Notwithstanding this, the Directors believe that there are good qualitybusinesses currently seeking investment capital and opportunities to partner upwith businesses that can provide significant returns to the investors. With thecontinued support of the Company's shareholders, the Directors hope to makefurther investments during the course of 2010 to take advantage of the currentstage of the economic cycle.INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2009
For the year ended 31 December 2009 For
the year ended 31 December 2008
Note Revenue Capital Total Revenue Capital Total £ £ £ £ £ £ LOSSES ON INVESTMENTSNet losses on investments at fair value through profit or loss 3 - (64,277) (64,277) - (3,598,699) (3,598,699) ___________ ___________ ___________
__________ ___________ ____________
- (64,277) (64,277) - (3,598,699) (3,598,699) ___________ ___________ ___________ ___________ ___________ __________ INCOME 1(b)Interest income - - - 13,770 - 13,770Loan waiver 8 - - - - 429,051 429,051 ___________ ___________ ___________ ___________ ___________ ___________ - - - 13,770 429,051 442,821 ___________ ___________ ___________ ___________ ___________ ___________ EXPENDITURE 1(e) Loan write off - - - - 210,306 210,306Directors' fees 4,226 - 4,226 15,000 - 15,000Administration fees 75,089 - 75,089 50,939 - 50,939Professional fees 48,774 - 48,774 26,890 - 26,890Consultancy fees - 44,998 44,998 - 154,220 154,220Audit fee 13,370 - 13,370 11,500 - 11,500Interest expense 4 3,333 - 3,333 77,362 - 77,362Regulatory and registration fees 5,849 - 5,849 12,588 - 12.588Loss on foreign exchange - - - 23,144 - 23,144 ___________ ___________ ___________ ___________ ___________ _________ 150,641 44,998 195,639 217,423 364,526 581,949 ___________ ___________ ___________ ___________ ___________ _________ LOSS ON ORDINARY ACTIVITIES FOR THE FINANCIAL YEAR (150,641) (109,275) (259,916) (203,653) (3,534,174) (3,737,827) Loss per share:- basic (pence per share) 6 (0.64) (0.46) (1.10) (1.54) (26.70) (28.24)
All revenue and capital items in the above statement derive from continuing operations.
No operations were acquired or discontinued during the year.
The Company has no recognised gains or losses other than those shown in theIncome Statement.BALANCE SHEET31 DECEMBER 2009 Note 31 December 2009 31 December 2008 £ £ £ £ FIXED ASSETS
Investments at fair value through profit or loss 3 86,962
251,239 CURRENT ASSETS Other debtors and prepayments 1,725 - Cash and cash equivalents 26,816 880 _____ ______ 28,541 880 CREDITORS - AMOUNTS FALLING DUE WITHIN ONE YEAR Loans payable 8 - (115,000) Other creditors and accruals 9 (39,385) (93,763) (39,385) (208,763) NET CURRENT LIABILITIES (10,844) (207,883)
TOTAL ASSETS LESS CURRENT LIABILITIES 76,118
43,356 CAPITAL AND RESERVES CALLED UP SHARE CAPITAL 11 425,050 132,372 SHARE PREMIUM ACCOUNT 12 4,254,872 4,254,872 RESERVES (4,603,804) (4,343,888) EQUITY SHAREHOLDERS' FUNDS 76,118 43,356 Net asset value per share 7 (pence per share) 0.18 0.33 CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2009
For the year ended For the year ended Notes 31 December 2009 31 December 2008 £ £
Net cash outflow from operating activities 10(a) (251,742) (317,270) Return on investments and servicing of finance 10(b) - (32,343) Capital expenditure and financial investment 10(c) 100,000
243,484 _________ _________
Cash outflow before financing (151,742)
(106,129) Financing 10(d) 177,678 100,358
Increase / (decrease) in cash for the year 10(e) 25,936 (5,771)
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Called up Share Share Premium Reserves Capital Account Revenue Capital Total £ £ £ £ £ Balance at 1 January 2008 132,372 4,254,872 (530,409) (75,652) (606,061) Net return for the year - - (203,653) (3,534,174) (3,737,827) ________ _________ ______ ________ ________ Balance at 1 January 2009 132,372 4,254,872 (734,062) (3,609,826) (4,343,888) Net return for the year - - (150,641) (109,275) (259,916)
Issue of shares in the year 292,678 - - -
- _______ _________ ______ ________ _________
Balance at 31 December 2009 425,050 4,254,872 (884,703) (3,719,101) (4,603,804)
Included in the revenue reserve carried forward is £33,680 in relation to share options.
Notes to the Financial Statements
31 December 20091 ACCOUNTING POLICIES(a) CONVENTIONThe financial statements have been prepared under the historical costconvention, modified to include the revaluation of investments and inaccordance with applicable United Kingdom accounting standards and with theStatement of Recommended Practice "Financial Statements of Investment TrustCompanies and Venture Capital Trusts" issued by The Association of InvestmentTrust Companies in January 2009. The principal accounting policies which theDirectors have adopted within that convention are set out below.
(b) INCOME
Dividends receivable from equity investments are recognised on the ex-dividenddate. Dividends receivable from equity investments where no ex-dividend date isquoted are recognised when the Company's right to receive payment isestablished. Interest receivable on cash deposits is accounted for using theeffective interest rate method.
(c) FOREIGN CURRENCY
The Directors have considered and will continue to consider the primaryeconomic environment of the Company and have considered and will continue toconsider the currency in which the original finance was raised and ultimatelywhat currency would be returned to investors on a break up basis. Thedirectors have also considered the currency to which the underlying investmentsare exposed. On balance, the directors believe sterling best represents thefunctional currency of the Company. Sterling is also the presentationalcurrency.Assets and liabilities denominated in currencies other than sterling (whererelevant) have been translated into sterling at the rates of exchange ruling atthe balance sheet date. No transactions were made during the period underreview in currencies other than Sterling and when, in the past, transactionshave been made in currencies other than Sterling, those transactions have beentranslated at the rates of exchange ruling at the date of that transaction.
(d) FINANCIAL INSTRUMENTS
The Company's financial instruments fall into the categories discussed belowwith the allocation depending to an extent on the purpose for which the assetwas acquired. Unless otherwise indicated, the carrying amounts of the Company'sfinancial instruments are a reasonable approximation of their fair values.
(i) Investments held at fair value through profit or loss
Classification
All investments are classified as "fair value through profit or loss". These financial assets are designated by the Board of Directors at fair value through profit or loss at inception.
Financial assets designated at fair value through profit or loss at inceptionare those that are managed and their performance evaluated on a fair valuebasis in accordance with the Company's documented investment strategy. TheCompany's policy is for the Board of Directors to evaluate the information about these financial assets on a fair value basis together with other relatedfinancial information.Recognition
Purchases and sales of investments are recognised on the trade date or the dateon which the Company commits to purchase or sell the investment. Investmentsare derecognised when the rights to receive cash flows from the investmentshave expired or the Company has transferred substantially all risks and rewardsof ownership.Measurement
Financial assets at fair value through profit or loss are initially recognised at fair value. Transaction costs are expensed in the income statement. Subsequent to initial recognition, all financial assets at fair value through
profit or loss are measured at fair value. Gains and losses arising from changes in the fair value of the 'financial assets at fair value through profitor loss' category are presented in the Income Statement in the period in whichthey arise.Fair value estimation
Quoted investments are valued at bid price.
Unquoted investments are valued by the Board according to the valuationprinciples of the European Private Equity and Venture Capital Association asset out in the International Private Equity and Venture Capital ValuationGuidelines (Published June 2005, amended October 2006). Currently and as at 31December 2009, the Company's unquoted investments are valued at nil (2008: £100,000) due to the companies being in administration.
Because of the inherent uncertainty associated with the valuation of such investments and the absence of a liquid market, these fair values may differ from the realisable values, and differences could be material.
Realised gains or losses on the disposal of investments are taken to the capital reserve - realised. Unrealised gains or losses on revaluation of investments are taken to the capital reserve - unrealised.
(ii) Receivables
These assets are non-derivative financial assets with fixed or determinablepayments that are not quoted in an active market. They consist of loansreceivable, other debtors and cash and cash equivalents, but also incorporateother types of contractual monetary assets. They are initially recognised atfair value plus transaction costs that are directly attributable to theacquisition or issue and subsequently carried at amortised cost using theeffective interest rate method, less provision for impairment. The effect ofdiscounting on these financial instruments is not considered to be material.Impairment provisions are recognised when there is objective evidence (such assignificant financial difficulties on the part of the counterparty or defaultor significant delay in payment) that the Company will be unable to collect allof the amounts due under the terms receivable, the amount of such a provisionbeing the difference between the net carrying amount and the present value ofthe future expected cash flows associated with the impaired receivable.
(iii) Financial liabilities measured at amortised cost
These include;
other creditors and accruals which are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method; and
loans payable which are initially recognised at fair value net of attributabletransaction costs incurred. Such interest bearing liabilities are subsequentlymeasured at amortised cost using the effective interest rate method.
Other creditors and accruals primarily comprise of amounts outstanding for ongoing costs. The Company has a financial risk management procedure in place to ensure all payables are paid within the credit timeframe.
(iv) Share capital
Financial instruments issued by the Company are treated as equity only to the extent that they do not meet the definition of a financial liability.
(v) Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.
(vi) Effective interest rate method
The effective interest method is a method of calculating the amortised cost ofa financial asset or financial liability and of allocating the interest incomeor interest expense over the relevant period. The effective interest rate isthe rate that exactly discounts estimated future cash payments or receiptsthroughout the expected life of the financial instrument, or, whenappropriate, a shorter period, to the net carrying amount of the financialasset or financial liability. When calculating the effective interest rate,the Company estimates cash flows considering all contractual terms of thefinancial instruments but does not consider future credit losses. The calculation includes all fees and points paid or received between parties tothe contract that are an integral part of the effective interest rate,including transaction costs and all other premiums or discounts.
(e) EXPENDITURE
All expenses are accounted for on an accruals basis. Expenses that are directlyattributable to the management of investments are allocated directly to capitalin the Income Statement. With the Directors' long term target for returns oninvestments being entirely capital gain there is no requirement to apportionthese expenses between revenue and capital.
(f) SHARE BASED PAYMENTS
The Company has applied the requirements of FRS 20: Share-based Payments.
The Company makes equity-settled share-based payments to certain consultants.Equity-settled share based payments are measured at fair value as at the dateof grant. The fair value determined at grant date is expensed on a straightline basis over the period the service was received. Further details of how thefair value of share based payments is determined are shown in note 14.
(g) GOING CONCERN
The directors have reviewed the current budgets and cash flow projections for aperiod of more than 12 months from the date of this report. The forecasts takeinto account the loan facility of £150,000, of which £25,000 has been drawndown, post year end and the potential sale proceeds from a disposal of theCompany's existing quoted investment of not less than £50,000.Various additional sources of additional financing have been considered by thedirectors including raising of fresh equity. A final decision regarding thesource of further financing has not yet been made, however, the directors areconfident that sufficient cash will be raised by the company to pay its futureliabilities.
Accordingly the directors have prepared the financial statements on the going concern basis.
2 TAXATIONThe company has been granted exempt status under the Income Tax (Exempt Bodies)(Guernsey) Ordinance 1989, and is therefore subject to the payment of an annualfee which is currently £600.
3 INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
31 December 2009 31 December 2008
Designated at fair value through profit or loss
£ £ - Listed equity securities 86,962 151,239 - Unlisted investments - 100,000 _____ ______
Total investments at fair value through profit or loss 86,962 251,239
The net disposal proceeds realised from the sale of the Company's unlisted investment during 2009 was £100,000. This investment had been acquired in 2004 at a cost of approximately £650,000.
Changes in fair value of financial assets 31 December 2009 31 December 2008
at fair value through profit or loss. £ £ - Realised - disposed of during the year -
(1,055,234)
- Unrealised - held at the year end (64,277) (2,543,465) ______ _________ (64,277) (3,598,699) 4 INTEREST EXPENSE 31 December 2009 31 December 2008 £ £ Bank interest and charges (note 5) - 685 Loan interest (note 5) 3,333 76,677 _____ ______ Total 3,333 77,362
The above loan interest charges in 2009 were satisfied through the issue of new Ordinary Shares in the Company on 8 December 2009 (see note 11). The above interest expense arise on financial liabilities measured at amortised cost using the effective interest rate method (see note 8 for further details).
5 NET GAINS OR LOSSES ON FINANCIAL LIABILITIES CARRIED AT AMORTISED COST
31 December 2009 31 December 2008 £ £ Bank interest and charges (note 4) - 685 Loans interest (note 4) 3,333 76,677 Loans waived (note 8) - (429,051) _____ _______ Net (gain) / loss 3,333 (351,689) 6 LOSS PER SHARE
The calculation of basic earnings per share is based on the net return on ordinary activities after tax for the year and on 23,730,924 shares ( 2008: 13,237,235) being the weighted average number of shares in issue during the year.
FRS 22: "Earnings Per Share" defines dilution as a reduction in earnings pershare or as an increase in loss per share. When calculating the diluted lossper share for the year the loss decreased. Accordingly the diluted loss pershare is not disclosed as per FRS 22. The Company has 800,000 share options inissue which could potentially dilute basic earnings per share in the future -see note 14.
7 NET ASSET VALUE PER SHARE
The calculation of net asset value per share is based on the net assets of £76,118 (2008: £43,356) and on the ordinary shares in issue of 42,505,007 (2008:13,237,235) at the balance sheet date.8 LOANS PAYABLE 31 December 2009 31 December 2008 £ £ Loan - 115,000 ____ ______ Total Loans - 115,000 ____ ______
The loan outstanding at 31 December 2008 was secured and repayable on demand and bore interest at 3% above GBP base rate per annum.
During 2008, the Company reached an agreement with the lender, whereby the loanand accrued interest of £741,908 was reduced to £312,857 by the waiver of £429,051 of the outstanding balance. Prior to the year ended 31 December 2008, £197,857 was repaid with the balance of £115,000 being paid during 2009. InFebruary 2009, the Company took on new borrowings to pay the Company's ongoingrunning costs. In December 2009, the aggregate value of loans and interestoutstanding of £102,494 were converted into new ordinary shares of 1 pence eachin the company. There were no borrowings outstanding at 31 December 2009.
9 OTHER CREDITORS AND ACCRUALS
31 December 2009 31 December 2008 £ £ Audit fees 12,000 10,000 Consultancy fees 6,604 72,570 Professional fees - 5,000 Nomad fees 8,250 - Registrar fees 4,984 2,193 Administration fees 7,522 4,000 Sundry creditors 25 - ______ ______ 39,385 93,763
10 NOTES ON THE CASH FLOW STATEMENT
(a) Reconciliation of revenue loss to net cash outflow from operating ativities 31 December 2009 31 December 2008 £ £
Net revenue loss on ordinary activities for the year
(150,641) (203,653)
Expenses charged to capital
(44,998) (154,220)
(Increase) / decrease in debtors (1,725) 1,875 Increase / (decrease) in creditors
(54,378) 38,728 _______ _______
Net cash outflow from operating activities
(251,742) (317,270)
(b) Returns on investments and servicing of finance
31 December 2009 31 December 2008 £ £ Loan interest paid - (18,788) Loan interest received
- (13,555) _ _______
Net cash outflow from returns on investments and servicing of finance - (32,343)(c) Capital expenditure and financial investment
31 December 2009 31 December 2008 £ £
Receipts from sale of unquoted investments
100,000 243,484 _______ _______
Net cash inflow for capital expenditure and financial investment 100,000 243,484(d) Financing 31 December 2009 31 December 2008 £ £ Loans payable repaid (115,000) - Loans receivable repaid - 100,358
Issue of equity share capital 292,678 - _______ _______ Net cash inflow from financing 177,678 100,358 (e) Reconciliation of net cash flow to movement in net funds
31 December 2009 31 December 2008 £ £
Increase / (decrease) in cash for the year 25,936
(5,771)
Cash inflow from (increase)/decrease in debt finance 115,000
(47,782) _______ _______
Change in net debt resulting from cash flows 140,936
(53,553) Loans waived - 429,051
net (debt) / funds at 1 January 2009 (114,120)
489,618 _______ _______
Net funds / (debt) at 31 December 2009 26,816
(114,120) (f) Analysis of net debt At 1 January 2009 Cashflow Other At 31 December 2009 £ £ £ £
Cash and cash equivalents 880 25,936 -
26,816 Loan payable (115,000) - 115,000 - ________ ________ _____ _______ (114,120) 25,936 115,000 26,816
11 CALLED UP SHARE CAPITAL
31 December 2009 31 December 2008 £ £ Authorised 200,000,000 ordinary shares of £0.01 each 2,000,000 500,000 Allotted and fully paid
42,505,007 ordinary shares of £0.01 each (2008: 13,237,235) 425,050 132,372 On 25 June 2009, the Company issued and allotted 19,018,392 new ordinary Sharesof 1 pence each ("Ordinary Shares"). 15,018,392 of the new Ordinary Shares wereissued in settlement of £150,183 of outstanding debts owed by the Company and4,000,000 of the new Ordinary Shares were issued to raise new funds for theCompany totalling £40,000. On 8 December 2009, the Company issued and allotted10,249,380 new Ordinary Shares in settlement of £102,493.80 of outstanding loanand interest owed by the Company.
12 SHARE PREMIUM ACCOUNT
As at 1 January 2009 and at 31 December 2009 £ 4,254,872
13 RELATED PARTY TRANSACTIONS
On 9 February 2005 and as disclosed in the AIM Admission Document dated 18February 2005, Combined Management Services Limited ("CMS") entered into aservices agreement with the Company under the terms of which CMS agreed toprovide research, consultancy, office management and administration services tothe Investment Advisory Panel. CMS charged the Company a total of £54,435 forthe year to 31 December 2009 (£111,270 for the year to 31 December 2008), ofwhich £3,272 (2008: £41,769) remained unpaid at the year end. Jonathan Freeman,who served as a director of the Company during 2009, resigning on 27 January2010, owns 50% of CMS.Up until 30 July 2009, the Company had entered into an Administration Agreementwith Intertrust Fund Services (Guernsey) Limited which included the provisionof the services of two Directors up until that date. From 30 July 2009, theCompany entered into a new Adminstration Agreement with Fund Corporation of theChannel Islands Limited ("Fund Corp") and the provision of two directors to theCompany is not part of that Administration Agreement. The fees paid to theAdministrator are shown on the face of the income statement and the amountunpaid at the year end is shown in note 9. Paul Everitt and Roger Parry, whoserved as directors of the Company during 2009, are directors of Fund Corp andown 28% and 12% of Fund Corp, respectively. There were no Directors' feesunpaid at 31 December 2009 and 2008.
14 SHARE OPTIONS
At 31 December 2009 the number of ordinary shares of 1 pence each subject to options granted under the Company's Share Option Plan were:
Exercise Exercise 01-Jan Grants Options 31-Dec 31-Dec Period Price per 2009 during year exercised 2009 2008 Share No. No. No. No. No. Exercisable 30 November 2007 - 26.0 pence 50,000 - - 50,000 50,000 30 May 2017 1 December 2007 - 26.0 pence 750,000 - - 750,000 750,000 1 June 2017 _______ ______ ______ 800,000 - - 800,000 800,000
Share options were granted for services provided in previous periods and are exercisable at the holders' discretion. There were no share-based payment charges during the years ending 2008 and 2009.
15 FINANCIAL INSTRUMENTS
In common with other businesses, the Company is exposed to risks that arise from its use of financial instruments. This note describes the Company's objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements.
There have been no substantive changes in the Company's exposure to financialinstrument risks, its objectives, policies and processes for managing thoserisks or the methods used to measure them from previous periods unlessotherwise stated in this note.
(a) Strategy in using financial instruments
The Company's activities expose it to a variety of financial risks: market risk(including currency risk, fair value interest rate risk, cash flow interestrate risk and price risk), credit risk and liquidity risk. The Company'soverall risk management programme focuses on the unpredictability of financialmarkets and seeks to minimise potential adverse effects on the Company'sfinancial performance.The Company has, and may continue to, invest in companies which are unquoted ortrading on AIM at the time of the investment and where the Directors believethat a flotation is likely to be achieved by the company within eighteen monthsof an investment by the Company. Investee companies will be principally locatedin Europe and the US.InvestmentsAll of the Company's intended investments present the risk of a loss ofcapital. Such investments are subject to investment-specific pricefluctuations as well as to macro-economic, market and industry-specificconditions including, but not limited to, international economic conditions,international financial policies and performance, governmental events andchanges in laws. Moreover, the Company may only have a limited ability to varyits investments in response to changing economic, financial and investmentconditions.The success of the Company will be dependent upon, inter alia, theidentification, making, management and realisation of suitable investments.There can be no guarantee that such investments can or will be made or thatsuch investments will be successful. Poor performance by an investment couldseverely affect the Net Asset Value per share. In particular, investors shouldnote that:-
* Shareholders will not have an opportunity to evaluate for themselves the
relevant economic, financial and other
information regarding the investments to be made by the Directors and,
accordingly, will be dependent on the
judgement and ability of the Directors in investing and managing the assets
of the Company. No assurance can be given that the Directors will be
successful in making suitable investments or that, if such investments are
made, the investment objectives will be achieved;
* the Company may have minority interests in the companies, partnerships and
ventures in which it invests ("Investments") and may be unable to exercise
control over the operations of such Investments or control over any exit,
or timing of any exit, by other investors in such Investments;
* the management of the investee companies targeted by the Directors may not
always welcome proactive
shareholder involvement and may be resistant to change;
* the Company may be unable to effect an investment in an identified
opportunity and, in particular, resources of the Company may be expended
investigating potential projects which are subsequently rejected as being
unsuitable;
* the Company may dispose of investments in certain circumstances and may be
required to give representations
and warranties about those investments and to pay damages to the extent
that such representations and
warranties turn out to be inaccurate or other terms of sale are breached;
* an investee company's competitors may develop or market technologies that
are more effective or less expensive than those developed or marketed by
the investee company, or that would render the invests company's technology
or business model obsolete or uncompetitive;
* the Company cannot guarantee that the value of investments as reported from
time to time will in fact be realised; and
* although the Directors will use all due care and diligence when
implementing the investment strategy, the situation may arise whereby an
unquoted investee company does not proceed with a successful IPO or trade
sale. In such instance, the Company may find it difficult to achieve an
exit, or may do so at a loss to the initial investment, or may lose the
entirety of its investment.
Investments in small unquoted and quoted companies
It is intended that the Company's investment portfolio will comprise interestspredominantly in growth companies and companies with an AIM listing which maybe difficult to value and/or realise. Investment in the securities of smallercompanies may involve greater risks than is customarily associated withinvestments in larger, more established companies. In particular, suchcompanies may have limited product offerings, markets or resources and may bedependent on a small number of key individuals. As at 31 December 2009, theCompany's holding of unquoted investments was valued at £nil (2008: £100,000).
Concentration risk
It is possible that certain investments will represent a significant proportionof the Company's total assets. As a result, the impact on the Company'sperformance and the potential returns to investors will be adversely affectedto a greaterdegree if anyone of those investments were to perform badly than would be thecase if the Company's portfolio ofinvestments was more diversified.At 31 December 2009 the overall investment allocation was one investment in aquoted company and three investments in unquoted investments. All three of theunquoted companies in which the Company has an investment were inadministration at the year end and remain so at the date of this document,leaving only one quoted investment in the portfolio with a year end valuationof approximately £0.09 million (2008: £0.15 million) .
(b) Market risk
The Company operates in a competitive market for investment opportunities.While the Directors consider the smaller companies' market to be an attractivearea for investment, it is nonetheless likely that the Directors will encountercompetition for target investments from investors many of which will havesignificantly greater resources than the Company. There can be no assurancethat these competitive pressures will not have a material adverse effect on theCompany's business, financial condition and results of operations. As a resultof this competition, the Directors may not be able to take advantage ofattractive investment opportunities from time to time. Furthermore theDirectors can offer no assurance that they will be able to identify and makeinvestments that are consistent with the Company's investment strategy.
bi) Interest rate risk
The majority of the Company's financial assets and liabilities are non-interestbearing. As result, the Company is not subject to significant amounts of riskdue to fluctuations in the prevailing levels of market interest rates. Any cashand cash equivalents are invested at short-term market interest rates.The Company's interest-bearing financial assets and liabilities expose it torisks associated with the effects of fluctuations in the prevailing levels ofmarket interest rates on its financial position and cash flows.
The table below summarises the Company's exposure to interest rate risks.
Non-Interest Variable Fixed Bearing Interest Interest Total As at 31 December 2009 £ £ £ £ Assets
Investments at fair value through profit or loss 86,962 -
- 86,962 Cash and cash equivalents - 26,816 - 26,816 ______ ______ _ _______ Total financial assets 86,962 26,816 - 113,778 Liabilities Sundry creditors and accruals 39,385 - - 39,385 ______ _ _ ______ Total financial liabilities 39,385 - - 39,385 The terms, including the interest rate, of the loan payable are disclosed innote 8. Non-Interest Variable Fixed Bearing Interest Interest Total As at 31 December 2008 £ £ £ £ Assets
Investments at fair value through profit or loss 251,239 -
- 251,637 Cash and cash equivalents - 880 - 880 ________ _____ ______ ________ Total financial assets 251,239 880 - 252,517 Liabilities Loan payable 115,000 - - 115,000
Sundry creditors and accruals 93,763 -
- 93,763 ______ _ _ _______ Total financial liabilities 208,763 - - 208,763
The Company is not exposed to any significant interest rate risk.
bii) Hedging and currency risk
The majority of the Company's investments are expected to be denominated inpounds sterling. The Directors may invest in opportunities other than sterlingand may, through forward foreign exchange contracts, hedge its exposure back tosterling. While hedging may attempt to reduce currency risk, it is not possibleto hedge fully or perfectly against currency fluctuations. Accordinglyinvestors may, at certain times, be exposed to exchange rate risks betweensterling and other currencies, such that if the value of other currencies fallsrelative to sterling, the Company's assets will, in sterling terms be worthless.
biii) Other price risk
Other price risk is the risk that value of an instrument will fluctuate as aresult of changes in market prices (other than those arising from currency riskor interest rate risk), whether caused by factors specific to an individualinvestment, its issuer or all factors affecting all instruments traded in themarket.
As the majority of the Company's financial instruments are carried at fair value with changes in value recognised in the Income Statement, all changes in market conditions will directly affect net investment income.
The table below details the breakdown of the investment assets held by theCompany 31 December 2009 31 December 2008 Value % of Net Value % of Net £ Assets £ Assets Investment assets Equity investments: º Listed equities 86,962 118.19% 151,239 348.83% º Unlisted equities - 100,000 230.65% ______ ______ 86,962 251,239 Investment liabilities
At the year end the equity investment held by the Company was listed. A 5%increase in the fair value of all investments at 31 December 2009 would haveincreased the net assets attributable to shareholders by £4,348 (2008: £12,562): an equal change in the opposite direction would have decreased the netassets attributable to shareholders by an equal but opposite amount.
(c) Liquidity risk
The Company's financial instruments include unlisted equity instruments, someof which are not traded in an organised public market and which generally maybe illiquid. As a result, the Company may not be able to liquidate quickly someof its investments in these instruments at an amount close to their fair valuein order to meet its liquidity requirements.The Company has a procedure to manage liquidity risk whereby the board meetregularly to review investment holdings and current and anticipated levels offinancial liabilities. Where liquidity of the investments within the portfoliois believed to be at a level which may adversely affect the Company's abilityto service its financial obligations, the board will consider taking action toimprove cash flow, which may include utilising bank overdrafts or other creditarrangements.
The table below details the contractual, undiscounted cash flows of the Company's financial liabilities
Less than 1-3 3 months No stated 1 month months to 1 year maturity 31 December 2009 £ £ £ £ Financial liabilities Sundry creditors and accruals 39,385 - - - ______ ______ ______ ______ Total 38,385 - - - ______ ______ ______ ______ 31 December 2008 Financial liabilities Loans payable 115,000 - - - Sundry creditors and accruals 93,763 - - - _______ ______ ______ ______ Total 208,763 - - - _______ ______ ______ ______
The gross nominal outflow disclosed above is the contractual, undiscounted cash flow on the financial liability or commitment.
Amounts in the above table are based on the carrying value of all accounts.
The Company has a procedure to manage liquidity risk whereby the board meets regularly to review credit positions.
d) Credit risk
Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company.
The carrying amounts of financial assets best represent the maximum credit risk exposure at the balance sheet date.
At the reporting date, the Company's financial assets exposed to credit riskamounted to the following: 31 December 31 December 2009 2008 £ £ Other debtors 1,725 - Cash and cash equivalents 26,816 880 Total 28,541 880 16 POST BALANCE SHEET EVENTS
The Directors consider that there are no events not disclosed elsewhere in this report that require disclosure as post balance sheet events.
The Company's Report and Accounts for the year ended 31 December 2009 will be posted to shareholders today and the full report is available to view and download from the Company's website at www.kingswalkinvestments.com.
For further information please contact:
Kingswalk Investments Limited Paul Everitt +44 (0)14 8173 2888Daniel Stewart & Company Plc Oliver Rigby +44 (0)20 7776 6550GTH Communications Toby Hall +44 (0)20 3103 3903Christian Pickel +44 (0)20 3103 3902
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