RC2.L Regulatory News (RC2)

31 Aug 2006 07:01

Reconstruction Capital II Ltd31 August 2006 31 August 2006 RECONSTRUCTION CAPITAL II LIMITED INTERIM UNAUDITED FINANCIAL STATEMENTS For the period 19 December 2005 to 30 June 2006 Investment Manager and Adviser Report Reconstruction Capital II Limited ("RC2" or the "Fund") was incorporated on 17thOctober 2005 and started operations on 19th December 2005 when a total of EUR23.4 million was raised from investors. On 23rd December 2005, RC2's shares wereadmitted to trading on the London Stock Exchange's AIM market (AIM) and on 15thMay 2006 a further net amount of EUR 40.2 million was raised from investors. Theperiod under review was the first for which interim accounts are being prepared.The Fund's NAV was relatively stable during the period. The Fund operates two investment programmes, a Private Equity Programme and aTrading Programme. It is intended that the volume of investments be balancedequally between the two programmes during the Fund's first year of operations. Under the Trading Programme, the Investment Manager has invested approximatelyEUR 12.2m, representing over half the funds raised in December 2005 and justunder 20% of all funds raised to date. The majority of investments under theTrading Programme were made in the second half of June 2006, when the InvestmentManager took advantage of price falls on the local markets, having taken a verycautious approach earlier on. In retrospect, this has proved a wise approach. Under the Private Equity Programme, the Investment Adviser has analysed a largenumber of investment opportunities, and made several indicative offers toprospective vendors during the period. Of these, one has been accepted, subjectto contract, two are still being discussed with the prospective vendors, and theothers have lapsed. The Investment Adviser is currently analysing a number ofother potential investments. Although in its early stages, the most encouraging aspect of the Private EquityProgramme is the number of companies the Investment Adviser has identified withcapital requirements of under EUR 15m which are not actively searching forfinancing. This has given the Investment Adviser the opportunity to focus onthese deals, and to assign a lower level of priority to more competitiveauction-type situations. The Investment Adviser is targeting to close at leastthree private equity deals before the end of the year. The Romanian and Bulgarian economies have continued to grow healthily over theperiod under review, with strong improvements in overall GDP, industrial outputand inflation. In Romania, inflation was 2.7% over the first six-months of 2006,compared to 4.1% during the same period last year. In June 2006 the countryexperienced year-on-year GDP growth of 7% and year-on-year growth in industrialoutput of 6.7%. In Bulgaria, at the end of the first quarter, GDP was 5.6%higher than a year before, while industrial output had undergone 6.7%year-on-year growth by May 2006. Inflation was 2.9% over the first semester of2006 compared to 1.2% during the same period in 2005. The Investment Manager and Investment Adviser are confident that with the twomain economies in which the Fund invests continuing to show such strong growthrates and proving to be relatively immune to the shocks affecting other emergingmarkets, and with the date for EU accession rapidly approaching, the investmentclimate remains very favourable for both RC2's Trading and its Private EquityProgrammes. New Europe Capital Ltd New Europe Capital SRL Independent review report to Reconstruction Capital II Limited Introduction We have been instructed by the company to review the financial information forthe period ended 30 June 2006 on pages 5 to 12. We have read the otherinformation contained in the interim report and considered whether it containsany apparent misstatements or material inconsistencies with the financialinformation. Our report has been prepared in accordance with the terms of our engagement toassist the company in meeting the requirements of the rules of the London StockExchange for companies trading securities on the Alternative Investment Marketand for no other purpose. No person is entitled to rely on this report unlesssuch a person is a person entitled to rely upon this report by virtue of and forthe purpose of our terms of engagement or has been expressly authorised to do soby our prior written consent. Save as above, we do not accept responsibility forthis report to any other person or for any other purpose and we hereby expresslydisclaim any and all such liability. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by the directors. The directors areresponsible for preparing the interim report in accordance with the rules of theLondon Stock Exchange for companies trading securities on the AlternativeInvestment Market which require that the half-yearly report be presented andprepared in a form consistent with that which will be adopted in the company'sannual accounts having regard to the accounting standards applicable to suchannual accounts. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the United Kingdom by auditorsof fully listed companies. A review consists principally of making enquiries ofmanagement and applying analytical procedures to the financial information andunderlying financial data and based thereon, assessing whether the accountingpolicies and presentation have been consistently applied unless otherwisedisclosed. A review excludes audit procedures such as tests of controls andverification of assets, liabilities and transactions. It is substantially lessin scope than an audit performed in accordance with International Standards onAuditing (UK and Ireland) and therefore provides a lower level of assurance thanan audit. Accordingly we do not express an audit opinion on the financialinformation. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2006. BDO STOY HAYWARD LLPChartered AccountantsLondonAugust 2006 INCOME STATEMENTFor the period to 30 June 2006 2006 Notes EUR Investment loss 4 (296,017) Operating expenses 5 (713,925) ---------Loss for the period before and after taxation (1,009,942) Attributable to equity shareholdersof the company (1,009,942) Loss per share (cents) - basic and diluted 6 (0.0321) ========= As this is the first period of accounts for the company there are no comparativefigures. BALANCE SHEET30 June 2006 2006 Notes EURCurrent assets - Trade and other receivables 7 113,802 - Investments in transferable securities 8 11,472,545 - Cash and cash equivalents 52,425,848 ---------Total assets 64,012,195 Liabilities Current liabilities - Trade and other payables 9 (1,411,783) --------- 10 62,600,412 =========Capital & reserves attributable to equity holders of thecompany - Share capital 650,393 - Share premium reserve 62,959,961 - Retained deficit (1,009,942) ---------Total equity 62,600,412 ========= As this is the first period of accounts for the company there are no comparativefigures. CASHFLOW STATEMENTFor the period to 30 June 2006 2006 EUR Operating activities Net loss from ordinary activities (1,009,942) Adjustments for: Net unrealised loss on investments 643,519 Operating loss before changes in --------- working capital (366,423) --------- Increase in trade and other receivables (113,802) Increase in trade and other payables 1,411,783 --------- Cash generated from operations 931,558 Investing activities Purchase of securities (12,323,712) Proceeds from sales of securities 207,648 --------- (12,116,064) Financing activities Net proceeds from issue of ordinary shares 63,610,354 --------- --------- Increase in cash and cash equivalents 52,425,848 --------- STATEMENT OF CHANGES IN EQUITYFor the period to 30 June 2006 Share Share Retained Total Capital Premium Earnings EUR EUR EUR EURBalance at start of period - - - - Transferred to loss forthe period - - (1,009,942) (1,009,942)Issue of share capital 650,393 62,959,961 - 63,610,354 ------- ------- ------- -------Balance at 30 June 2006 650,393 62,959,961 (1,009,942) 62,600,412 ======= ======= ======= ======= The share premium is stated net of share issue costs of EUR 1,119,605. Notes to the Interim Unaudited Financial Statements 1.Establishment Reconstruction Capital II Limited was incorporated on 17 October 2005 as aclosed ended Cayman Islands company created to invest in private and listedequity and fixed income securities, including convertible and other mezzanineinstruments, primarily in Romania and Bulgaria. The Company intends to generate returns for its Shareholders through two primaryroutes: to achieve medium and long term capital appreciation through theinvestment in and subsequent disposal of significant or controlling stakes incompanies, both listed and private, established and/or operating primarily inRomania and Bulgaria (the Private Equity Programme), and to make portfolioinvestments in listed equities and fixed income securities, includingconvertible and other mezzanine instruments, issued primarily by Romanian andBulgarian entities (the Trading Programme). The main focus of the Company will be investments in Romania and Bulgaria.However, the Company reserves the right to make investments into neighbouringcountries, notably Ukraine, Serbia-Montenegro, Moldova, Croatia, Albania and theFormer Yugoslav Republic of Macedonia. It is currently anticipated that in themedium term the Company will invest approximately 70 per cent of its assets inRomania and approximately 30 per cent of its assets in Bulgaria and neighbouringcountries. 2. Basis of preparation The interim results were approved by the directors on 31 August 2006. Theinterim results have been prepared in accordance with International FinancialReporting standards (IFRS) and are not audited but have been subjected to alimited review, in accordance with guidance contained in Bulletin 1999/4 issuedby the Auditing Practices Board, by the auditors of Reconstruction Capital IILimited 3. Significant accounting policies The significant accounting policies adopted by the Company are as follows; (a) Revenue recognition Unrealised gains and losses arising from changes in the fair value of securitiesand realised gains and losses arising on the sale of securities are recognisedin the income statement as they arise. Realised gains and losses are recognised in the income statement using averageweighted cost. Interest receivable is recognized in the income statement on an accruals basis (b) Investments in transferable securities Investments in transferable securities are initially recognised at cost andsubsequently re-measured at fair value. Securities listed on a stock exchange ortraded on any other regulated market will be valued at the last available priceon such exchange or market or, if no such price is available, at the mean of thebid and asked price on such day. If there is no such price or such market priceis not representative of the fair market value of any such security, then thesecurity will be valued in a manner determined by the Directors to reflect itsfair value in accordance with the guidelines of the European Venture CapitalAssociation from time to time in force. If a security is listed on several stock exchanges or markets, the lastavailable price on the stock exchange or market which constitutes the mainmarket for such security will be used. Where the securities are not listed on any stock exchange they shall be valuedin such manner as the Directors in good faith deem appropriate to reflect theirfair market value, in accordance with the guidelines of the European VentureCapital Association from time to time in force. (c) Foreign currency Assets and liabilities arising in foreign currencies have been translated intoEuro at rates of exchange prevailing at the balance sheet date. Transactions inforeign currencies are translated into Euro at the exchange rates prevailing atthe dates of the transactions. Exchange differences arising on transactionsduring the year have been recognised in the income statement. 4. Investment loss 2006 EURNet realised gain on investments 14,719Net realised loss on foreign exchange (2,410)Net unrealised loss on investments (643,519)Net unrealised loss on foreign exchange (11,363)Interest receivable 346,556 ---------Investment loss (296,017) --------- 5. Operating expenses 2006 EURAdministrative expenses - Investment Management fees (424,811) - Administration fees (32,922) - Custody fees (41,537) - Directors' fees (51,781) --------- (551,051) --------- Other expenses - Audit fees (20,712) - Legal fees (44,696) - Listing fees (6,798) - Other fees (90,668) --------- (162,874) ---------Total operating expenses (713,925) --------- 6. Loss per share The loss per share is calculated on the loss for the period of EUR 1,009,942 andusing the weighted average number of ordinary shares in issue during the periodof 31,455,354. There are no potentially dilutive shares in issue. 7. Trade and other receivables 2006 EUR --------Interest Income Receivable 113,802 ======== 8. Investments in transferable securities 2006 EURCost 12,116,064Unrealised loss on Investments (643,519) ------------Market Value of Investments 11,472,545 ============ 9. Trade and other payables 2006 EUR - Investment Management Fees (157,515) - Administration Fees (19,614) - Custody Fees (41,537) - Directors' Fees (51,781) - Audit Fees (20,712) - Other Fees (8,158) - Payable on trades (1,112,466) -------- (1,411,783) ======== 10. Net asset value 2006 EURNET ASSET VALUEAs at 30 June 2006 62,600,412 NUMBER OF ORDINARY SHARES IN ISSUEAs at 30 June 2006 65,039,425 NET ASSET VALUE PER SHAREAs at 30 June 2006 0.9625 11. Dividends There were no dividends declared or paid during the period. This information is provided by RNS The company news service from the London Stock Exchange