TCA.L Regulatory News (TCA)

Terra Capital plc/ Market: AIM/ Epic: TCA/ Sector: Equity Investment Instruments

27 September 2018

Terra Capital Plc ('Terra' or 'the Fund')

Interim Results for the Year Ended 30 June 2018

Terra Capital Plc, the AIM quoted investment company announces interim results for the six month period ended 30 June 2018.

On 10 July 2018 at an Extraordinary General Meeting, Shareholders approved a change in the Company's investing policy.

The new investing policy states that "the Company shall cease to make any new investments and shall realise its portfolio of investments in an orderly manner and return the net proceeds to Shareholders as soon as practicable".

As a result the Fund is now operating as a realisation company.

For more information, please visit www.terracapitalplc.com or contact:

Galileo Fund Services Limited (Administrator)

Frazer Pickering

+44 1624 692600

Panmure Gordon (UK) Limited (Nominated adviser and corporate broker)

Jonathan Becher

+44 20 7886 2500

Terra Capital plc.

Ian Dungate, Director

+44 1624 692600

Chairman's Statement

On behalf of the Board of Directors (the "Board") I am pleased to present the interim results for Terra Capital plc (Terra or the "Company") for the six months ended 30 June 2018.

The first half of 2018 has been an active one for the Company culminating in our shareholders resolving to adopt of a new investment policy whereby "the Company shall cease to make any new investments and shall realise its portfolio of investments in an orderly manner and return the net proceeds to Shareholders as soon as practicable". This new investment policy was approved by Shareholders shortly after the period end.

A tender for the re-purchase of up to ten percent. of the shares in issue (excluding shares held in treasury) was carried out in March in accordance with the discount control policy implemented in January 2016 as a result of the discount to Net Asset Value per Ordinary Share at which the shares traded during the last nine months of 2017. This tender retuned a total of $6.8 million to shareholders.

In January 2015, as part of the recommended restructuring proposals, Shareholders approved proposals whereby the Board was released from the obligation to propose a continuation vote in 2017. Instead the Board agreed to offer Shareholders, in June 2018, an opportunity to realise all or part of their investment in the Company at a price equal to the then prevailing net asset value (less costs associated with the opportunity) (the "Realisation Opportunity"). Additionally, it was envisaged that if the number of Shareholders who availed themselves of the Realisation Opportunity was such that the Company was no longer a viable proposition the Realisation Opportunity would be abandoned and the Company would be placed into voluntary liquidation.

As announced on 19 April 2018, the Board consulted with Shareholders who between them hold in excess of 60 per cent. of the issued share capital of the Company, from which it became clear that such Shareholders would accept the Realisation Opportunity and as such the Company would no longer be a viable proposition.

In the light of the above consultation the Board determined to dispense with the Realisation Opportunity, and instead, subject to approval by Shareholders, adopt the New Investment Policy which involves the Company ceasing all new investments and seeking to realise, in an orderly fashion, the Company's portfolio of investments and return the net proceeds generated to Shareholders as soon as is practicable. The Board, having consulted with its advisers, believed an orderly realisation of the portfolio of investments was preferable to an immediate liquidation as it was likely to achieve greater returns to Shareholders.

In order to give the Board maximum flexibility in terms of the manner in which the net proceeds of the realisation of the Company's portfolio of investments is returned to Shareholders, it was also proposed to Re-register the Company under the 2006 Act. As part of this process the Company would adopt the New Articles which, in addition to reflecting the fact that the Company would be re-registered under the 2006 Act, would include a mechanism to allow the Company to redeem compulsorily Ordinary Shares as a means of returning the proceeds of realisations to Shareholders.

These proposals were approved by shareholders after the period end on 10 July 2018 along with the New Investment Policy noted above.

Following the shareholder approval, received on 10 July 2018, your Board implemented the first of these compulsory redemptions returning a further $36.8 million to shareholders representing 60% of the Net Asset Value at that time.

Our Investment Manager continues to realise the portfolio in an orderly manner and a second compulsory partial redemption of 50% of the remaining shares in issue was announced on 26 September 2018, which will return a further $11.8 million to Shareholders in October 2018.

Sincerely yours, 

Dirk Van den Broeck

Chairman

27 September 2018

Report of the Investment Manager

Given the Company's obligation to provide a realisation opportunity in June 2018 or, failing this, in preparation for the adoption of the New Investing Policy, the Company's investment level has been reduced during the first six months of 2018 as an excess of cash was established.

The Company's investment level has been reduced from 81.7% at 31 December 2017 to 43.3% at 30 June 2018.

The Investment Manager continues to realise the Company's investments in an orderly manner in furtherance of the New Investing Policy adopted subsequent to the year end.

Respectfully Submitted by:

Terra Partners Asset Management Limited

Suite 8/5A, Portomaso Tower, Portomaso Avenue,

St. Julian's STJ 4011 Malta

Regulated by the Malta Financial Services Authority, Reg. No. C 56353

Unaudited consolidated income statement

Unaudited consolidated statement of comprehensive income

Unaudited consolidated balance sheet

Approved by the Board of Directors on 27 September 2018

Ian Dungate Dirk van den Broeck

Director Director

Unaudited consolidated statement of changes in equity

For the six months ended 30 June 2018

For the six months ended 30 June 2017

Unaudited consolidated statement of cash flows

Notes to the consolidated financial statements

1. The Company

Terra Capital plc (formerly named Speymill Macau Property Company plc) was incorporated and registered in the Isle of Man under the Isle of Man Companies Acts 1931 to 2004 on 31 October 2006 as a public company with registered number 118202C.

The interim consolidated financial statements of Terra Capital plc as at, and for, the six months ended 30 June 2018 comprise the Company and its subsidiaries (together referred to as the "Group").

The consolidated financial statements of the Group as at, and for, the year ended 31 December 2017 are available upon request from the Company's registered office at Millennium House, 46 Athol Street, Douglas, Isle of Man, IM1 1JB or at www.terracapitalplc.com.

The Company's investment objective to achieve capital appreciation while attempting to reduce risk primarily by applying a disciplined and diversified value investing philosophy in purchasing securities in Frontier markets for its portfolio was amended by Shareholder resolution subsequent to the period end on 10 July 2018 whereby, the Company shall cease to make any new investments and shall realise its portfolio of investments in an orderly manner and return the net proceeds to Shareholders as soon as practicable".

2 Statement of compliance and significant accounting policies

These condensed consolidated interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting. They do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group as at, and for, the year ended 31 December 2017.

These condensed consolidated interim financial statements were approved by the Board of Directors on 25 September 2018.

The Group has one segment focusing on achieving capital appreciation while attempting to reduce risk primarily by applying a disciplined and diversified value investing philosophy. No additional disclosure is included in relation to segment reporting as the Group's activities are limited to one business segment.

The Group's financial risk management objectives and policies are consistent with those disclosed in the consolidated financial statements as at, and for, the year ended 31 December 2017.

The accounting policies applied by the Group in these condensed consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 December 2017.

3 Use of estimates and judgements

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

Certain investments are in illiquid/inactive markets and classified as Level 2 in the IFRS 7 fair value Hierarchy (see note 7).

4 Finance income and costs

5 Net asset value per share

The net asset value per share as at 30 June 2018 is US$ 1.11 based on 55,322,381 ordinary shares in issue as at that date (excluding 6,146,931 shares held in treasury) (31 December 2017: US$1.09 based on 61,469,312 ordinary shares (excluding 6,829,924 shares held in treasury)).

6 Related party transactions

Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below.

Parties are considered to be related if one party has the ability to control the other party or to exercise significant influence over the party making financial or operational decisions.

Directors of the Company

Howard Golden and Filip Montfort are directors of the Manager. The Manager was appointed at the EGM held on 24 May 2012. Following the EGM, Mr Golden and Mr Yarden Mariuma resigned as directors of the Company and Mr Dirk van den Broeck was elected Chairman of the Board of Directors as an independent non-executive director and Mr Ian Dungate was elected as an independent non-executive director.

Filip Montfort is a director of the Investment Manager and remained as a Director of the Company following the above noted EGM until his resignation on 16 December 2015.

Mr Dungate is a director of the administrator.

Directors remuneration is disclosed in note 13.

The Investment Manager

Following the EGM held on 24 May 2012, the Company appointed the immediate predecessor to the current investment manager until the current investment manager, Terra Partners Asset Management, Limited ("TPAM") received its license in Malta and then the Investment Management Contract was assigned to TPAM to be the Group's investment manager (the "Manager").

Term and termination

The Investment Management Agreement may be terminated by either party giving to the other not less than 12 months' notice expiring on, or at any time after, the third anniversary of the commencement date of the agreement or otherwise, in circumstances, inter alia, where one of the parties has a receiver appointed over its assets or if an order is made or an effective resolution passed for the winding-up of one of the parties.

Management fee

The Manager shall be entitled to receive a management fee equal to 1.25 per cent. per annum of the aggregate Net Asset Value of the Company during the relevant fee payment period, calculated on the first day of each month, accrued on a daily basis and payable monthly in arrears (or pro rata for lesser periods).

Performance fee

The Manager is also entitled to receive a performance fee equal to 12 per cent. of the increase (if any) in the Net Asset Value per Share (with dividends and other distributions added back and ignoring any accrued performance fee) as at each semi-annual performance fee calculation period above the Net Asset Value as at the commencement of each such semi-annual performance fee calculation period, provided that any performance fee shall be payable only to the extent that the Net Asset Value of the Share exceeds the Net Asset Value immediately following the settlement of the Tender Offer or, if a performance fee has been paid, the Net Asset Value per Share when a performance fee was last paid. The performance fee shall be calculated on 30 June and 31 December in each year and paid following such calculation. The performance fee for the period ending 30 June 2018 was US$ Nil (30 June 2017: US$ 544,375).

Expenses

In addition, the Company shall be responsible for the payment of certain out-of-pocket expenses reasonably incurred by the Manager in the proper performance of the Investment Management Agreement up to a maximum of US$75,000 per annum and any other out-of-pocket expenses in excess of this maximum shall be borne by the Investment Manager.

The Administrator

The Administrator shall be paid by the Company a fixed fee of US$100,000 per annum, payable quarterly in arrears.

For the preparation of the financial statements the Administrator shall be paid by the Company US$3,000 per set.

In the event that the Administrator provides secretarial services to the Company, the Administrator shall be paid an annual fee of US$8,000. The Administrator shall be entitled to additional fees for such general secretarial services based on time and charges where the number of board meetings or general meetings exceeds four per annum. The Administrator shall be entitled to an attendance fee of US$750 per day or part thereof where the Administrator attends a board meeting or general meeting which is not held in the Isle of Man.

7 Fair value hierarchy

IFRS 7 requires the Company to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:

• Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).

• Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2).

• Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).

US$25,172,000 (31 December 2017: US$55,309,000) of the Company's investments are classed as level 1 investments and

US$2,107,000 (31 December 2017: US$2,240,000) of the Company's investments are classed as level 2 investments.

8 Financial assets at fair value through profit or loss

Group

30 June 2018: Financial assets at fair value through profit or loss (all quoted equity securities):

9 Trade and other receivables

10 Provisions

The Company is now operating as a realisation company. The calculation of the net asset value includes an estimate of liquidation costs and a provision for fees and expenses expected to be incurred in realising the assets. As at 30 June 2018 these provisions amounted to £1,163,605 (30 June 2017: £Nil).

11 (Loss)/earnings per share

Basic (loss)/earnings per share is calculated by dividing the profit for the period attributable to equity holders of the Company by the weighted-average number of ordinary shares in issue during the period.

12 Share capital

As at 15 March 2018 6,146,931 shares were repurchased and placed in treasury and 6,829,924 shares previously held in treasury were cancelled. The Ordinary shares held in treasury have no voting rights and are not entitled to dividends

13 Taxation

Isle of Man taxation

The Company is resident in the Isle of Man which means that it pays income tax at 0%. The Company pays a corporate charge of £390 to the Isle of Man Government for each tax year.

14 Directors' remuneration

Mr Van den Broeck, as Chairman, is entitled to remuneration of US$45,000 per annum from the date of his appointment and Mr Dungate and Mr Bartlett are each entitled to remuneration of US$30,000 per annum from the respective dates of their appointments.

15 Trade and other payables

16 Contingent liabilities and capital commitments

The Company has no outstanding capital commitments as at 30 June 2018.

17 Post balance sheet events

On 10 July 2018 at an Extraordinary General Meeting, Shareholders approved a change in the Company's investing policy. The new investing policy states that "the Company shall cease to make any new investments and shall realise its portfolio of investments in an orderly manner and return the net proceeds to Shareholders as soon as practicable".

In order to give the Board maximum flexibility in terms of the manner in which the net proceeds of the realisation of the Company's portfolio of investments is returned to Shareholders, it was also proposed to re-register the Company under the 2006 Act. As part of this process the Company adopted the New Articles which, in addition to reflecting the fact that the Company would be re-registered under the 2006 Act, would include a mechanism to allow the Company to redeem compulsorily Ordinary Shares as a means of returning the proceeds of realisations to Shareholders.

This mechanism was used to carry out a compulsory partial redemption of 60% of the shares in issue on 26 July 2018, returning $36.8 million to Shareholders as a result.

A second compulsory partial redemption of 50% of the remaining shares in issue was announced on 26 September 2018, which will return a further $11.8 million to Shareholders in October 2018t.

The Board, having consulted with Shareholders, believed that it was appropriate and in the best interests of Shareholders to incentivise the Investment Manager to realise, in accordance with the New Investment Policy, the Company's portfolio of investments in a timely fashion. The arrangements with the Investment Manager were varied with effect from 1 July 2018 whereby the then current fee structure, 1.25 per cent. per annum of NAV and a performance fee linked to NAV increases, have been replaced with an arrangement whereby the Investment Manager will be entitled to receive a fee equal to 1 per cent. of any Distributions made to Shareholders, which would include cash that is returned by way of a Compulsory Redemption of Ordinary Shares.