Kingswood H. Regulatory News (KWG)

26 Sep 2007 07:01

Equity Pre-IPO Investments Ltd26 September 2007 26 September 2007 EQUITY PRE-IPO INVESTMENTS LIMITED ("Pre IPO" or "the Company") UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2007 Equity Pre-IPO Investments Limited, (AIM :EIL), the pre-IPO investment company,is pleased to announce its unaudited results for the six months ended 30 June2007. Some additional information is also provided for the period up to 14September 2007. Period end highlights: • NAV of 54.32 pence at 30 June 2007 • Flotations of two investee companies in second half of year progressed: financial advisors appointed and timetables set Post period highlights: • Successful exit from one unquoted investment since 30 June 2007 for a profit of 34% on the amount invested • Five investments held as at 14 September 2007, all of which are unquoted • Net asset value per share of 55.27 pence as at 14 September 2007 Martin Shires, Director of Pre IPO, commented: "As a result of the progress that has been made with our investment portfoliosince the beginning of the year we are very excited about the next twelvemonths, in particular the prospect of further material uplifts in investeecompany valuations and the flotation and realisation of a number of existinginvestments. We believe that Pre IPO's business model is now a proven one and welook forward to the next phase in the Company's growth with confidence." For a complete set of Interim Statements, or for further information on theCompany please go to www.equitypreipo.com For further information: Martin Shires, +44 (0)1481 751 000Director, Equity Pre-IPO Investments Limited Paul Schreibke +44 (0)1481 751 000Director, Equity Pre-IPO Investments Limited John Riddell +44 (0)20 7763 2200Noble & Company Limited GTH Communications +44 (0)20 7153 8035Toby Hall/Jade Mamabachi UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2007 Directors Review We are delighted to present our interim results to shareholders, showing thefinancial performance of the Company from 1 January 2007 to 30 June 2007. Inaddition we have included some further information for the period up to 14September 2007. Net Asset Value The Company's Net Asset Value ("NAV") per share as at 14 September 2007 stood at55.27 pence. This compares with an NAV as at 31 December 2006 of 55.37 penceper share. Whilst there has been little change in the NAV so far this year weare working with our portfolio of investee companies very closely in order toensure that there is either an exit from our investment in the near term or elsea strategic plan that will ultimately generate an exit for us. The investmentstrategy of Pre IPO is such that the NAV will often experience periods ofminimal movement followed by one off events that trigger material changes. Investments We stated in our annual report for the year to 31 December 2006 that our focusfor 2007 is the partial or complete exit from companies within our portfolio.We set ourselves a target of the flotation of at least two companies from theportfolio during 2007 and to increase the portfolio of investee companies toten. We are delighted to be able to report that since the period end we havecompleted the trade sale of Combimeer NV for a profit which equates to a returnof 34% on the amount invested. We are also working closely with two otherinvestee companies regarding their flotation - one on to AIM and one on to thePlus Market. Both these companies have appointed their financial advisors andhave a timetable for completion of their respective flotations before the end of2007. These flotations are, of course, subject to a number of matters and theirsuccess may be impacted by the uncertainties being experienced in the markets atthe moment. We continue to work closely with our three other existinginvestments with a view to securing a planned exit route for our investments. In addition, since the period end, we participated in a fund raising for one newinvestment. We have invested a total of €600,000 into Fashion BrandsCollections B.V. Fashion Brands is a Dutch based private company which holdsthe exclusive rights to operate ELLE branded stores throughout Europe and theMiddle East selling ELLE's day wear collection, "pret-a-porter". Fashion Brandswas granted the rights from Hachette Filipacchi Presse SA ("HFP"), the Parisbased ultimate owner of ELLE magazine worldwide. ELLE is amongst the world'slargest fashion magazines, with 39 editions printed globally of which 24 areprinted in Europe and the Middle East. HFP has been extremely successful inleveraging the strength of the ELLE brand in related markets having grantedapproximately 150 licences and generating some $1.0 billion consumer annualturnover. Fashion Brands began operations last year and is forecast to have more than 15stores open and operational across Europe before the end of 2007 Fashion Brandsdesigns the bi-annual collections in-house with its team of talented and up andcoming designers and outsources its manufacturing to high quality third parties.ELLE branded stores are operated by sub-licencees of Fashion Brands and areobliged to only sell clothing designed by Fashion Brands. We have been workingwith the management of Fashion since March 2007 and are delighted to have madethis investment. Therefore as of 14 September 2007 we held investments in a total of 6 unquotedcompanies. Funding We are increasingly concerned that our inability to raise additional funds forthe Company will have a detrimental effect on the continued progress anddevelopment of the Company. We have discussed and explored a number of ways toincrease the amount of capital available but to date have not succeeded in thisregard. We are continuing to explore a number of avenues which include raisingfurther equity capital and combining with other complementary organisations. Webelieve that we will need to reach a resolution on this issue during 2007 andwill keep shareholders informed of any progress. Outlook As a result of the progress that has been made with our investment portfoliosince the beginning of the year we are very excited about the next twelvemonths, in particular the prospect of further material uplifts in investeecompany valuations and the flotation and realisation of a number of existinginvestments. We believe that Pre IPO's business model is now a proven one and welook forward to the next phase in the Company's growth with confidence. Martin ShiresPaul Schreibke EQUITY PRE-IPO INVESTMENTS LIMITED STATEMENT OF TOTAL RETURNFOR THE SIX MONTHS ENDED 30 JUNE 2007 For the six month For the six month For the year ended period period ended 30 June 2007 ended 30 June 2006 31 December 2006 (unaudited) (unaudited) (audited) Note Revenue Capital Total Revenue Capital Total Revenue Capital Total £ £ £ £ £ £ £ £ £GAINS ON INVESTMENTSNet realised gains - 11,254 11,254 - 535,241 535,241 - 115,845 115,845Net (decrease)/increase inreserve for - 2,766 2,766 - (524,863) (524,863) - 1,759,775 1,759,775unrealised gains - 14,020 14,020 - 10,378 10,378 - 1,875,620 1,875,620INCOME 2Investment income - - - - - - - - -commission received 1,200 - 1,200 - - - - - -Loan interest received - - - - - - 432 - 432Bank interest 1,724 - 1,724 781 - 781 1,477 - 1,477 2,924 - 2,924 781 - 781 1,909 - 1,909 EXPENDITURE 2Directors' fees 10,000 - 10,000 10,000 - 10,000 20,000 - 20,000Administration fees 28,016 - 28,016 30,707 - 30,707 49,498 - 49,498Professional fees - 65,848 65,848 - 37,645 37,645 42,862 14,609 57,471AIM admission expenses - - - - - - - - -Consultancy fees - 34,532 34,532 - 94,672 94,672 - 171,961 171,961Share based payments - 4,811 4,811 - - - - - -Audit fee 6,555 - 6,555 5,650 - 5,650 9,300 - 9,300Bank charges and interest 800 - 800 3,273 - 3,273 2,074 - 2,074Interest - other - - - - - - 2,124 - 2,124Commission paid - - - 3,288 - 3,288 3,288 - 3,288Sundry expenses - - - 3,100 - 3,100 - - -Regulatory andregistration fees 3,110 - 3,110 12,705 - 12,705 18,046 - 18,046Unrealised loss on foreignexchange 7,594 - 7,594 - - - - - - 56,075 105,191 161,266 68,723 132,317 201,040 147,192 186,570 333,762 NET RETURN ON ORDINARYACTIVITIES FOR THE FINANCIALPERIOD/YEAR (53,151) (91,171) (144,322) (67,942) (121,939) (189,881) (145,253) 1,689,050 1,543,797 Return per share - basic and diluted(pence per share) (0.40) (0.69) (1.09) (0.51) (0.92) (1.43) (1.10) 12.76 11.66 All revenue and capital items in the above statement derive from continuingoperations. No operations were acquired or discontinued during the period. A reconciliation of movements in shareholders' funds is set out in note 13 to the financial statements. EQUITY PRE-IPO INVESTMENTS LIMITED BALANCE SHEET30 JUNE 2007 Note 30 June 2007 30 June 2006 31 December 2006 (unaudited) (unaudited) (audited)FIXED ASSETSQuoted investments 4 - 1,102,261 918,000Unquoted investments 5 7,077,739 4,559,876 6,352,739 7,077,739 5,662,137 7,270,739CURRENT ASSETSLoans receivable 80,000 - -Cash at bank and broker 85,130 2,319 77,504 165,130 2,319 77,504 CREDITORS - AMOUNTS FALLINGDUE WITHIN ONE YEARSundry creditors 8 (52,794) (68,548) (18,657) NET CURRENT ASSETS 112,336 (66,229) 58,847 TOTAL ASSETS LESS CURRENT LIABILITES £ 7,190,075 £ 5,595,908 £ 7,329,586 CAPITAL AND RESERVES CALLED UP SHARE CAPITAL 10 132,372 132,372 132,372SHARE PREMIUM ACCOUNT 4,254,872 4,254,872 4,254,872CAPITAL RESERVE REALISED 11 452,906 533,637 546,843 UNREALISED 11 2,853,967 1,053,418 2,851,201SHARE OPTION RESERVE 4,811 - -REVENUE RESERVE 11 (508,853) (378,391) (455,702) SHAREHOLDERS' FUNDS 12 £ 7,190,075 £ 5,595,908 £ 7,329,586 Net asset value per share (pence per share) 7 & 15 54.32 42.27 55.37 APPROVED BY THE BOARD OF DIRECTORS P Schreibke M ShiresDirector Director 25 September 2007 EQUITY PRE-IPO INVESTMENTS LIMITED CASH FLOW STATEMENTFOR THE SIX MONTHS ENDED 30JUNE 2007 Six month Six month Year ended period ended period ended 31 December 30 June 2007 30 June 2006 2006 (unaudited) (unaudited) (audited) Notes Net cash outflow from operating activities 9 (199,394) (159,889) (341,344) Investing activities: Purchase of quoted investments - - -Purchase of unquoted investments (731,910) (837,825) (1,833,741)Proceeds from disposals of quoted investments 938,930 898,365 2,150,921 Net cash inflow/(outflow) from financial investment 207,020 60,540 317,180 (Decrease)/increase in cash resources for the period/year £ 7,626 £ (99,349) £ (24,164) RECONCILIATION OF NET CASHFLOW TO MOVEMENT IN NET FUNDS (Decrease)/increase in cash resources for the period/year 7,626 (99,349) (24,164) Opening net funds 77,504 101,668 101,668 Closing net funds £ 85,130 £ 2,319 £ 77,504 NOTES TO THE FINANCIAL STATEMENTS30 JUNE 2007 1. ACCOUNTING POLICIES (a) CONVENTION The financial statements have been prepared under the historical costconvention, modified to include the revaluation of investments and in accordancewith applicable accounting standards and with the Statement of RecommendedPractice "Financial Statements of Investment Trust Companies" issued by TheAssociation of Investment Trust Companies in December 2005. The principalaccounting policies which the directors have adopted within that convention areset out below. (b) INCOME Dividends receivable from quoted equity investments are recognised on theex-dividend date. Dividends receivable from equity investments where noex-dividend date is quoted are recognised when the Company's right to receivepayment is established. Interest receivable on cash deposits is accounted foron an accruals basis. (c) FOREIGN CURRENCY TRANSLATION Assets and liabilities denominated in foreign currencies other than sterlinghave been translated into sterling at the rates of exchange ruling at thebalance sheet date. Transactions during the period have been translated at therates of exchange ruling at the date of the transaction. (d) VALUATION OF INVESTMENTS 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) and accordingly arestated at the value of their latest third party funding. Where no third partyfunding has taken place, they are valued at cost, less a provision forimpairment when necessary. Realised gains or losses on the disposal of investments are taken to the capitalreserve - realised. Unrealised gains or losses on revaluation of investmentsare taken to the capital reserve - unrealised. (e) EXPENDITURE All expenses are accounted for on an accruals basis. Expenses are chargedthrough the Statement of Total Return except where the expense is incidental tothe acquisition or disposal of an investment in which case the expense is addedto the cost of the investment or deducted from the sale proceeds. Expenses that are directly attributable to the management of investments areallocated directly to capital in the Statement of Total Return. With theDirectors' long term target for returns on investments being entirely capitalgain there is no requirement to apportion these expenses between revenue andcapital. 2. TAXATION The 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. QUOTED INVESTMENTS 30 June 2007 30 June 2006 31 December 2006 (unaudited) (unaudited) (audited) At cost £ - £ 1,140,270 £ 920,246 At market value £ - £ 1,102,261 £ 918,800 4. UNQUOTED INVESTMENTS At cost £ 4,223,773 £ 3,648,449 £ 3,499,293 At Directors' valuation £ 7,077,739 £ 4,559,876 £ 6,352,739 5. EARNINGS PER SHARE The calculation of basic earnings per share is based on the net return onordinary activities after tax for the year and on 13,237,235 (six month periodended 30 June 2006: 13,237,265, year ended 31 December 2006: 13,237,235) sharesbeing the weighted average number of shares in issue during the year. The calculation of diluted earnings per share is based on the net return onordinary activities after tax for the year and on 13,237,235 (six month periodended 30 June 2006: 13,237,235, year ended 31 December 2006: 13,237,235) sharesbeing the weighted average number of shares in issue during the year adjustedfor any dilutive effect of the share options. 6. NET ASSET VALUE The calculation of net asset value is based on the net assets of £7,190,075 (30June 2006: £5,596,908, 31 December 2006: £7,329,586) and on the ordinary sharesin issue of 13,237,235 (30 June 2006:13,237,235, 31 December 2006: 13,237,235)at the balance sheet date. 7. SUNDRY CREDITORS 30 June 2007 30 June 2006 31 December 2006 (unaudited) (unaudited) (audited) Audit fees 3,625 1,000 4,650 Consultancy / directors 11,524 45,546 - fees Professional fees 3,122 12,945 7,500 Administration fees 34,523 9,057 6,507 £ 52,794 £ 68,548 £ 18,657 8. RECONCILIATION OF REVENUE RETURN TO OPERATING CASH FLOW 30 June 2007 30 June 2006 31 December 2006 (unaudited) (unaudited) (audited) Net return on ordinary activities for the financial period before (53,151) (67,942) (145,253) taxation Expenses charged to capital (105,191) (132,317) (186,570) (Increase) in debtors (80,000) - - Increase in creditors 34,137 40,370 (9,521) Share based payments 4,811 - - Net cash outflow from operating £ (199,394) £ (159,889) £ (341,344) activities 9. CALLED UP SHARE CAPITAL 30 June 2007 30 June 2006 31 December 2006 (unaudited) (unaudited) (audited) Authorised 50,000,000 ordinary shares of £0.01 each £ 500,000 £ 500,000 £ 500,000 Allotted and fully paid 13,237,235 ordinary shares of £0.01 each £ 132,372 £ 97,833 £ 132,372 10. SHARE PREMIUM ACCOUNT As at 1 January 2007 and at 30 June 2007 £ 4,254,872 11. RESERVES Capital Capital Share Revenue Reserve Reserve Option Reserve Total - Realised - Reserve Unrealised Balance at 1 January 2007 546,843 2,851,201 - (455,702) 2,942,342 Net Return for the financial period (105,191) - - (53,151) (158,342) Net realised gains/ 11,254 - - - 11,254 (losses) Net unrealised gains/ - 2,766 - - 2,766 (losses) Share based payments - - 4,811 - 4,811 Balance at 30 June 2007 452,906 2,853,967 4,811 (508,853) 2,802,831 12. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS 30 June 2007 30 June 2006 31 December 2006 (unaudited) (unaudited) (audited) Net return for the financial period/year (144,322) (253,750) 1,479,928 Dividends paid (net) - - - (144,322) (253,750) 1,479,928 Net proceeds of new share capital subscriptions - - - - Net (reduction in)/addition to shareholders' funds - - - Opening shareholders' funds 7,329,586 5,849,658 5,849,658 Closing shareholders' funds £ 7,185,264 £ 5,595,908 £ 7,329,586 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. A total of £22,502 has been paid to CMS for the period to 30 June 2007 (£101,601for the year to 31 December 2006). Jonathan Freeman owns 50% of CMS. 14. SHARE OPTIONS At 30 June 2007 the number of ordinary shares of 1 pence each subject to optionsgranted under the Company's Share Option Plan were: Exercise Exercise At January 2006 Grants Options At 30Period Price per during exercised June Share No. year No. No. 2007 No.30 November 2007 - 26.0 pence Nil 50,000 Nil 50,00030 May 20171 December 2007 - 26.0 pence Nil 750,000 Nil 750,0001 June 2017 The Binomial formula is the option pricing model applied to the grant of alloptions in respect of calculating the fair value of the options. There were no market conditions within the terms of the grant of the options.The main vesting condition for all the options awarded was that the consultantremained employed within the Company at the date of exercise. For the granting of options during the six month period ended 30 June 2007, thefollowing inputs have been used: Six month period ended 30 June 2007 Number of shares under options 800,000 Share price at grant 22.1 penceOption exercise price 26.0 penceExpected life of options 3.5 yearsExpected volatility 23.70%Risk free rate 5.66% p.a.Grant date 50,000 on 30 May 2007 750,000 on 1 June 2007Fair value per share under option 4.21 penceTotal expected charge over the vesting period 33,680.00 The share-based remuneration charge comprises: Period ended Year ended 30 June 2007 31 December 2007 Share-based payments £4,811 £Nil 15. FINANCIAL INSTRUMENTS (i) Management of risk The Company's financial instruments comprise: - Equity shares that are held in accordance with the Company's investment objective as set out in the Director's Statement - Cash and short term debtors and creditors that arise directly from the Company's operations. The main risks arising from the Company's financial instruments are due tofluctuations in market prices, foreign exchange rates and interest rates. The Board regularly reviews and agrees policies for managingeach of these risks and they are summarised below. These policies have remainedconstant throughout the period under review. Market price risk Market price risk arises mainly from uncertainty about the future prices offinancial instruments used in the Company's operations. It represents thepotential loss the Company might suffer through holding market positions in theface of price movements and movements in exchange rates. The Company's assetscomprise mainly investments in smaller, unquoted businesses which, by theirnature, tend to bemore fragile than larger, longer established businesses. In addition theseinvestments may include fast-growing companies undergoing significant changewhich are, therefore, usually exposed to greater risks than lower growthbusinesses. The Company's unquoted investments may therefore change in naturequickly with such changes not being reflected in the Company's valuation ofinvestment. It is the Board's policy to hold an appropriate spread of investments in theportfolio in order to reduce risk arising from factors specific to a particularcountry or sector. The allocation of assets to international markets and stockselection are other factors which act to reduce market price risk. TheInvestment Advisory Panel monitor market prices throughout the year and reportto the Board, which meets regularly to consider investment strategy. Foreign currency risk The Company's total return and net assets can be significantly affected byfluctuations in foreign currency exchange rates because a portion of theCompany's assets and revenue are denominated in currencies other than sterling.The Board carefully monitors the Company's exposure to exchange risk and if itfeels it necessary will utilise appropriate hedging strategies. Liquidity risk Liquidity risk is the risk that the Company will encounter in realising assetsor otherwise raising funds to meet its financial commitments. The Company'sassets comprise mainly investments in smaller, unquoted businesses which, bytheir nature are difficult to realise. There is therefore a risk that theCompany may not be able to exit from an investment to meet a financial liabilityor to fund further investment, when such an opportunity arises. Accordingly theCompany is generally able to use its non-cash assets to fund the Company'son-going activities until an exit can be achieved. The Diretors carefullymonitor the ongoing working capital requirements of the Company and seek toensure that there is sufficient cash resources to meet the liabilities of theCompany as they arise. The Company places funds with authorised deposit takers from time to time and istherefore potentially at risk from the failure of any such institution of whichit is a creditor. The company expects to place any deposits on a short termbasis and where possible with more than one institution to reduce its creditrisk. (ii) Interest rate risk of financial assets The majority of the Company's financial assets are equity shares and otherinvestments which neither pay interest nor have a stated maturity date. (iii) Currency exposure A portion of the financial assets of the of the company are denominated incurrencies other than sterling with the effect that the net assets and totalreturn can be significantly affected by currency movements. 30 June 2007 Currency Investments Cash at bank Total Euro £ 269,040 £ - £ 269,040 US Dollar £ - £ 212 £ 212 31 December 2006 Currency Investments Cash at bank Total Euro £ 276,470 £ - £ 276,470 US Dollar £ - £ 371 £ 371 (iv) Fair values of financial assets All of the financial assets of the Company are held at fair value, as shown innotes 3 and 4. 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