Westmount Engy. Regulatory News (WTE)

30 June 2010

30 June 2009

Notes

£

£

Realised gain on disposal of investments

1,612,003

3,874,768

Unrealised gain/(loss) on financial assets at fair value though profit or loss

3,046,569

(5,270,739)

Administrative expenses

(333,784)

(374,827)

Operating profit/(loss)

4,324,788

(1,770,798)

Interest receivable

3,703

49,035

Profit/(loss) before tax

4,328,491

(1,721,763)

Taxation

3

-

-

Comprehensive income/(loss)for the year

4,328,491

(1,721,763)

Basic gain/(loss) per share (pence)

4

62.01

(24.66)

Diluted gain/(loss) per share (pence)

4

58.76

(23.62)

The Company has no items of other comprehensive income.

As at

As at

As at

30 June 2010

30 June 2009

30 June 2008

Notes

£

£

£

ASSETS

Non Current Assets

Financial assets at fair value through profit or

loss

5

5,485,350

2,724,300

8,768,500

Current Assets

Trade and other receivables

6

7,015

10,540

7,689

Cash and cash equivalents

7

2,515,599

873,656

1,118,597

2,522,614

884,196

1,126,286

Total assets

8,007,964

3,608,496

9,894,786

LIABILITIES AND EQUITY

Current Liabilities

Trade and other payables

8

210,507

172,377

131,730

EQUITY

Share capital

9

1,396,060

1,396,060

1,403,060

Share premium account

10

261,682

261,682

416,317

Share option account

10

277,210

244,363

269,416

Profit and loss account

5,862,505

1,534,014

7,674,263

Total equity

7,797,457

3,436,119

9,763,056

Total liabilities and equity

8,007,964

3,608,496

9,894,786

These financial statements were approved and authorised for issue by the board of directors on 4 October 2010 and were signed on its behalf by:

P J RICHARDSON

Director

Share capital

Share Premium

Share Option

Retained

Total

Account

Account

Account

Earnings

Equity

£

£

£

£

£

As at 1 July 2008 (restated)

1,403,060

416,317

269,416

7,674,263

9,763,056

Comprehensive Income

(Loss) for the year ended 30 June 2009

-

-

-

(1,721,763)

(1,721,763)

Transaction with owners

Issue of B shares

-

(69,803)

-

-

(69,803)

Purchase of own shares

(7,000)

(24,668)

(31,668)

Redemption of B shares

-

-

-

(4,467,391)

(4,467,391)

Redemption costs

-

(60,164)

-

-

(60,164)

Cost of share options

-

-

23,852

-

23,852

Lapse of share options

-

-

(48,905)

48,905

-

(7,000)

(154,635)

(25,053)

(4,418,486)

(4,605,174)

At 30 June 2009 (restated)

1,396,060

261,682

244,363

1,534,014

3,436,119

Comprehensive Income

Profit for the year ended 30 June 2010

-

-

-

4,328,491

4,328,491

Transaction with owners

Cost of share options

-

-

32,847

-

32,847

-

-

32,847

-

32,847

At 30 June 2010

1,396,060

261,682

277,210

5,862,505

7,797,457

30 June 2010

30 June 2009

Note

£

£

Cash Flows from operating activities

Total comprehensive income/(loss) for the year

4,328,491

(1,721,763)

Adjustment for interest income

(3,703)

(49,035)

Adjustment for net (gain)/loss on investments at fair value through profit or loss

(3,046,569)

5,270,739

Adjustment for costs attributable to share options

32,846

23,852

Adjustment for realised gains on investments at fair value through profit or loss

(1,612,003)

(3,874,768)

Decrease/(increase) in prepayments and accrued income

3,525

(2,851)

Increase in creditors and accrued expenses

38,130

40,647

Net cash outflows from operating activities

(259,283)

(313,179)

Cash Flows from investment activities

Purchase of investments

(1,874,656)

(50,250)

Sale of investments

3,772,179

4,698,479

Interest received

3,703

49,035

Net cash generated from investing activities

1,901,226

4,697,264

Cash flows from financing activities

Purchase of ordinary shares

-

(31,668)

Redemption of B shares

-

(4,597,358)

Net cash used in financing activities

-

(4,629,026)

Net increase/(decrease) in cash and cash equivalents

1,641,943

(244,941)

Cash and cash equivalents at beginning of year

873,656

1,118,597

Cash and cash equivalents at end of year

7

2,515,599

873,656 

1. GENERAL INFORMATION AND STATEMENTS OF COMPLIANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS AS ADOPTED BY THE EUROPEAN UNION

Westmount Energy Limited (the "Company") operates solely as an energy investment company. The investment strategy of the Company is to provide seed capital to small companies that are identified as having significant growth possibilities. These investments are usually sold subsequent to flotation or when a significant third party offer is available, which values such a stake as attractive both for price and market reasons.

The Company was incorporated in Jersey on 1 October 1992 under the Companies (Jersey) Law 1991, as amended, and is a public Company with registered number 53623.

The Company was incorporated and is domiciled in Jersey, Channel Islands. The Company is listed on the London Stock Exchange Alternative Investment Market (AIM).

The financial statements have been prepared under the historical cost convention with the exception of investments measured at fair value and are in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union, including standards and interpretations issued by the International Accounting Standards Board (IASB). These are the Company's first financial statements prepared in accordance with IFRS (see note 14 for explanation of the transition to IFRS).

The financial statements for the year ended 30 June 2010 (including comparatives) were approved by the board of directors on 4 October 2010.

2. ACCOUNTING POLICIES

The significant accounting policies that have been applied in the preparation of these financial statements are summarised below. These accounting policies have been used throughout all periods presented in the financial statements, except where the Company has applied certain accounting policies and exemptions upon transition to IFRS. The exemptions applied by the Company and the effects of transition to IFRS are presented in note 14.

Basis of Preparation

First time Adoptions of IFRS

The Company has elected to adopt IFRS 1 'First-time adoption of International Financial Reporting Standards' (Revised 2008) and has restated retrospectively the opening Statement of Financial Position at 1 July 2008 and 30 June 2009 by applying the IFRS's in force at 30 June 2010. Full details of the restatement are detailed in note 14.

IFRS 1 (Revised 2008) changes only the structure of the standard and its paragraph references. The revised version does not change any of the technical requirements of the standard, and therefore has no effect on first-time application of IFRS.

IFRS 1 was amended in July 2009 to introduce additional optional exemptions for first-time adopters, none of which are applicable to the Company.

The impact of the adoption of the amended IFRS 7 has been to expand the disclosures provided in the financial statements with regards to classification of financial instruments using the fair value hierarchy.

The impact of the adoption of IAS 1 has been presentational changes in respect of the primary statements which include the statement of comprehensive, statement of financial position, statement of changes in equity and statement of cash flows of the current year and prior period.

The preparation of financial statements in conformity with IFRS requires the use of accounting estimates and exercise of judgement by the management while applying the Company's accounting policies in relation to the value of options issued, as set out in note 10. These estimates are based on the management's best knowledge of the events which existed at the date of issue and the balance sheet date however, the actual results may differ from these estimates.

Presentation of Financial Statements in accordance with IAS 1 (Revised 2007)

The financial statements are presented in accordance with IAS 1 'Presentation of Financial Statements' (Revised 2007). The Company has elected to present the 'Statement of comprehensive income' in a single statement.

In accordance with IFRS 1, the Company presents three statements of financial position in its first IFRS financial statements. In future periods, the Company presents two comparative periods for the statement of financial position only when it: (i) applies an accounting policy retrospectively, (ii) makes a retrospective restatement of items in its financial statements, or (iii) reclassifies items in the financial statements.

In the current year Improving Disclosures about Financial Instruments (Amendments to IFRS 7 'Financial Instruments: Disclosures'), IAS 1 (revised) 'Presentation of Financial Statements' and IAS 32 (revised) 'Financial Instruments: Presentation' were issued. They are effective for annual reporting periods beginning on or after 1 January 2009.

Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Company

At the date of the authorisation of these financial statements, the following new standards, amendments and interpretations to existing standards have been published but are not yet effective and have not been adopted early by the Company. The standards below are not expected to affect the financial position of the Company, however they will require additional disclosure in the future financial statements.

·; IAS 1 (improvements to IFRSs 2010) Presentation of Financial Instruments, effective for annual periods beginning on or after 1 January 2011

·; IFRS 9 (revised April 2009) Financial Instruments - Classification and Measurement, effective for annual periods beginning on or after 1 January 2013

Foreign currency

a) Functional and presentational currency

The functional currency of the Company is United Kingdom Sterling, the currency of the primary economic environment in which the Company operates. The reporting currency of the Company for accounting purposes is also United Kingdom Sterling ("Sterling").

b) Transactions and balances

Foreign currency monetary assets and liabilities balances are translated into United Kingdom Sterling at the rate of exchange ruling on the last day of the Company's financial year. Foreign currency transactions are translated at the exchange rate ruling on the date of the transaction. Gains and losses arising on the currency translation are included in administrative expenses in the statement of comprehensive income in the year in which they arise.

Financial assets

The Company classifies its financial assets in the following categories:

·; at fair value through profit or loss; and

·; loans and receivables

The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

a) Financial assets at fair value through profit or loss

The Company designates its financial assets as at fair value through profit or loss (FVTPL) as the financial assets are managed on and their performance is evaluated on a fair value basis. Financial assets carried at fair value through profit or loss are initially recognised at fair value and any transactions costs are recognised in the statement of comprehensive income. Regular purchases and sales of financial assets are recognised on the trade date, the date on which the Company commits to purchase or sell the investment.

Financial assets are derecognised when the rights to receive cash flows from the investments have expired or the Company has transferred substantially all the risks and rewards of ownership. Financial assets at fair value through profit or loss are subsequently carried at fair value. Any gains or losses on derecognition of investments is calculated after setting the proceeds against the fair value and, in respect of a part disposal, against the fair value at the date of sale. The surplus or deficit on realisation is transferred to the statement of comprehensive income.

Gains or losses arising from changes in the fair value of the 'financial assets at fair value through profit or loss' are presented in the statement of comprehensive income in the period in which they arise.

b) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets and are stated at cost, which is equivalent to their fair value. The Company's loans and receivables comprise 'trade and other receivables' and 'cash and cash equivalents'.

Financial liabilities

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities.

Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held at call with banks. For the purpose of the Statement of Cash Flow, cash and cash equivalents are considered to be all highly liquid investments with maturity of three months or less.

Trade and other payables

Trade and other payables are not interest bearing and are stated at their cost, which is equivalent to fair value.

Equity, reserves and dividend payments

Ordinary shares are classified as equity. Share premium includes any premiums received on issue of share capital. Transaction costs associated with the issuing of shares are deducted from share premium. Retained earnings include all current and prior period retained profits. It also includes charges related to share-based employee remuneration.

Revenue Recognition

Revenue comprises interest income from short term deposits and is recognised on an accruals basis.

Expenditure

The expenses of the Company are recognised on an accruals basis in the statement of comprehensive income.

Share options

Awards of share options are recorded under IFRS 2: 'Share-based Payment'. The cost of the share options are ascribed a fair value at grant date and accounted for as an administration expense of the Company with an equal Share Option Reserve being created in the statement of changes in equity. The cost is recognised in the statement of comprehensive income over the vesting period of the award.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand together with cash deposits with a maturity of less than three months and which are subject to an insignificant risk of changes in value.

3. TAXATION

Effective 1 January 2009, Jersey's tax regime changed. The new regime imposed a general corporate income tax rate of 0%, a 10% rate applies to certain regulated financial companies and a 20% rate applies to utilities and income from Jersey land (i.e. rents and development profits). Jersey registered companies are treated as resident for tax purposes and are subject to zero or ten percent standard income tax. The effect of the new tax regime is that the Company is subject to income tax at 0%.

The Company is registered as an International Services Entity under the Goods and Services Tax (Jersey) Law 2007 and a fee of £100 has been paid, which has been included in administrative expenses.

4. EARNINGS PER SHARE

The calculation of basic earnings per ordinary share is based on the comprehensive income for the year of £4,328,491 (2009: loss £1,721,763). The weighted average number of shares in issue during the year was 6,980,300 (2009: 6,983,273). As explained in note 10 there are share options in issue over the Company's ordinary shares. As the exercise price of all these options at 30 June 2010 was below the average market price of the ordinary shares during the year, they are deemed to have a dilution effect on earnings per share (EPS) and diluted earnings per share are consequently disclosed separately. The weighted average number of shares for diluted EPS were 7,366,474 (2009: 7,287,933).

5. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

2010

2009

2008

£

£

£

Desire Petroleum plc ("Desire")

3,306,600

2,025,000

4,771,000

Sterling Energy plc ("Sterling")

2,178,750

699,300

3,262,500

Eclipse Energy plc

-

-

735,000

Total investments

5,485,350

2,724,300

8,768,500

Investments at fair value through profit or loss at 30 June 2010

Cost

Unrealised gain/(loss)

Fair value

£

£

£

Desire Petroleum plc

1,080,826

2,225,774

3,306,600

Sterling Energy plc

2,589,191

(410,441)

2,178,750

3,670,017

1,815,333

5,485,350

Investments at fair value through profit or loss at 30 June 2009

Cost

Unrealised gain/(loss)

Fair value

£

£

£

Desire Petroleum plc

570,287

1,454,713

2,025,000

Sterling Energy plc

3,385,250

(2,685,950)

699,300

3,955,537

(1,231,237)

2,724,300

Investments at fair value through profit or loss at 30 June 2008

Cost

Unrealised gain/(loss)

Fair value

£

£

£

Desire Petroleum plc

658,998

4,112,002

4,771,000

Sterling Energy plc

3,335,000

(72,500)

3,262,500

Eclipse Energy plc

735,000

-

735,000

4,728,998

4,039,502

8,768,500

5. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (Continued)

On 30 June 2010 the market value of the company's holding of 3,674,000 (2009: 4,500,000) ordinary fully paid shares in Desire, representing 1.13% (2009: 1.96%) of the issued share capital of the company, was £3,306,600 (2009: £2,025,000) (90.00p per share, (2009: 45.00p per share)). During the year, the Company disposed of 2,456,610 (2009: 700,000) ordinary shares in Desire, realising a profit of £1,869,406 (2009: £215,328) (after expenses) which is included in the statement of comprehensive income.

On 30 June 2010 the market value of the company's holding of 1,500,000 (2009: 31,500,000) ordinary fully paid shares representing 0.68% (2009: 1.35%) of the issued share capital of Sterling was £2,178,750 (2009: £699,300) (145.25p per share, (2009 2.22p per share)). On 23 December 2009, Sterling consolidated its issued shares replacing every 40 shares held in the company with one share.

During the year, the Company disposed of 25,082,601 ordinary shares in Sterling prior to the consolidation and 135,815 after (2009: nil), realising a loss of £257,403 (2009: £nil) (after expenses) which is included in the statement of comprehensive income.

6. TRADE AND OTHER RECEIVABLES

2010

2009

2008

£

£

£

Prepayments

7,015

10,224

7,689

Accrued income

-

316

-

7,015

10,540

7,689

The carrying value of trade and other receivables is considered to be a reasonable approximation of its fair value.

7. CASH AND CASH EQUIVALENTS

2010

2009

2008

£

£

£

Cash at bank

2,515,599

138,656

94,597

Short term bank deposit

-

735,000

1,024,000

2,515,599

873,656

1,118,597

Cash and cash equivalents are considered to be highly liquid, so that book cost is considered equivalent to fair value.

8. TRADE AND OTHER PAYABLES

2010

2009

2008

£

£

£

Amounts due to shareholders

124,437

127,292

93,892

Accrued expenses

86,070

45,085

37,838

210,507

172,377

131,730

The carrying value of trade and other payables is considered to be a reasonable approximation of its fair value.

9. SHARE CAPITAL

2010

2009

2008

£

£

£

Authorised:

10,000,000 ordinary shares of 20p each

2,000,000

2,000,000

2,000,000

15,100,000 redeemable "B" shares of 1p each

151,000

151,000

151,000

Allotted, called up, fully-paid:

2010 No.

2009 No.

2008

No.

2010 £

2009 £

2008 £

'000'

'000'

'000'

In issue:

Ordinary shares

6,980.3

6,980.3

7,015.3

1,396,060

1,396,060

1,403,060

"B" Class shares

-

-

-

-

-

-

Ordinary shares

Ordinary shares

Movement

No.

£

Balance at 1 July 2008

7,015,300

1,403,060

Purchase of own shares

(35,000)

(7,000)

Balance at 1 July 2009

6,980,300

1,396,060 

Balance at 30 June 2010

6,980,300

1,396,060 

During the year the Company did not issue any further shares. On 30 January 2009, following the sale of the Company's shares in Eclipse Energy plc, the company issued 6,980,300 fully paid redeemable "B" shares of 1p each ranking parri passu with existing shareholdings to enable the return of capital to shareholders of the company equivalent to 65p per ordinary share (£4,597,358 in aggregate). These "B" shares were redeemed on 6 February 2009.

10. SHARE PREMIUM AND SHARE OPTIONS

Share Premium Account

Share option Account

£

£

At 1 July 2008

416,317

269,416

Issue of B shares

(69,803)

-

Purchase of own shares

(24,668)

-

Redemption costs

(60,164)

-

Cost of share options

-

23,852

Lapse of share options

-

(48,905)

At 30 June 2009

261,682

244,363

Cost of share options

-

32,847

Lapse of share options

-

-

At 30 June 2010

261,682

277,210

As at 30 June 2010, options were outstanding over 800,000 (2009: 640,000) ordinary 20p shares, with a weighted average exercise price of 44.28p (2009: 32.87p). The options are exercisable at the election of the option holder, over various periods expiring 31 December 2016. Of the 150,000 options held by former nominated advisor Ruegg & Co Limited, 60,000 options were deemed to have lapsed as at 30 June 2009 for accounting and valuation purposes as these could only be exercised upon a change of control of the Company prior to 20 September 2009. The remaining 90,000 options were not exercised and therefore lapsed on 20 September 2009.

As at 30 June 2010 450,000 (2009: 480,000) of the options were exercisable at a price of 38.5p (2009: 38.5p), 100,000 (2008: 100,000) of the options were exercisable at a price (adjusted) of 26p (2009: adjusted 26p) and 250,000 (2009: nil) of the options were exercisable at a weighted average exercise price of 62p. The share options are ascribed a total expense for the year ended 30 June 2010 of £32,847 (2009: £23,852).

The options granted up to June 2009, were re-priced by a deduction of 65 pence from the original grant price to take into account the return of capital made to shareholders by the issue and redemption of B shares made during the financial year. The deduction of 65 pence accorded with the advice received by the Board from Ruegg & Co Limited.

Share options were granted during the year over 250,000 shares at a weighted average price of 62p (2009: nil). The fair value of options granted was £128,111 and was calculated using the Black Scholes valuation model. At the date of grant the volatility of the Company was estimated as 40.2651% and was calculated as the standard deviations of daily historical continuously compounded returns over a period commensurate with the expected life of the options, back from the date of grant, and annualised by the factor of square root 252, assuming 252 trading days per year. The risk-free rate was 2.81815% and is the yield to maturity on the date of grant of a UK Gilt Strip, with term to maturity equal to the life of the option. The expected life of the options is 5.14 years and is estimated as the mid-point between the date of grant and the date of expiry of the option.

11. FINANCIAL RISK

The Company's investment activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The Company's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Company's financial performance.

a) Market Risk

i) Foreign exchange risk

The Company is not exposed directly to foreign exchange risk as it invests in companies listed on the London Stock Exchange, denominated in Sterling and has cash balances denominated in Sterling.

ii) Price Risk

Price risk is the risk that the fair value of the future cash flows of a financial instrument will fluctuate due to changes in market prices. The Company is exposed to price risk on the investments held by the Company and classified by the Company on the balance sheet as fair value through profit or loss. To manage its price risk Management closely monitor the activities of the underlying investments.

The Company's exposure to price risk is as follows:

Cost

Fair Value

Fair Value Through Profit or Loss, as at 30 June 2010

3,670,017

5,485,350

Fair Value Through Profit or Loss, as at 30 June 2009

3,955,537

2,724,300

The Company's investments are all publicly traded and listed on the Alternative Investment Market ("AIM").

The Company's sensitivity to a 15% increase/(decrease) in market price would be £822,803 /(£822,803) (2009: £408,645/(£408,645)). A positive number indicates an increase in the net assets attributable to ordinary share holders and a negative number indicated a decrease. The 15% increase/(decrease) on the net assets attributable to ordinary share holders would have the same impact on the post tax profit for the year. 15% represents management's assessment of a reasonably possible change in the market prices.

iii) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is not significantly exposed to interest rate risk as it does not have any borrowings, however, the Company does have short term (

An increase in the interest rates of 1% would cause the Company's net financial assets to increase by £23,912 (2009: £7,467). An equal change in the opposite direction would have decreased the net assets attributable to shareholders by an equal but opposite amount. 1% represents the Management's assessment of a reasonably possible change in interest rates.

The following table summarises the Company's exposure to interest rate risks.

Interest rate risk profile

As at 30 June 2010

Up to

1 year

Over 1

 year

Non-interest

bearing

Total

£

Assets

Trade and other receivables

-

-

7,015

7,015

Cash and cash equivalents

2,515,599

-

-

2,515,599

2,515,599

-

7,015

2,522,614

Liabilities

Trade and other payables

124,436

-

86,071

210,507

As at 30 June 2009

Up to

1 year

Over 1

 year

Non-interest

bearing

Total

£

Assets

Trade and other receivables

316

-

10,224

10,540

Cash and cash equivalents

873,656

-

-

873,656

873,972

-

10,224

884,196

Liabilities

Trade and other payables

127,292

45,085

172,377

b) Credit Risk

Credit risk is the risk that an issuer or counterparty will be unable or unwilling to meet commitments it has entered into with the Company. The carrying amounts of the financial assets best represent the maximum credit exposure at the end of the reporting period. This also relates to the financial assets carried at cost, as they have a short term to maturity.

The Directors do not believe the Company is subject to any significant credit risk exposure regarding investments and trade receivables. The credit risk for cash and cash equivalents is considered negligible, since the counterparty is a reputable bank with high quality external credit ratings.

At the end of the reporting period, the Company's financial assets exposed to credit risk amounted to the following:

2010 

£

2009 

£

Investments at Fair Value Through Profit or Loss

5,485,350

2,724,300

Trade receivables

7,015

10,540

Cash and cash equivalents

2,515,599

873,656

8,007,964

3,608,496

The Company considers that all the above financial assets are not impaired or past due for each of the reporting dates under review and are of good credit quality.

c) Liquidity Risk

Liquidity risk is the risk that the Company cannot meet its liabilities as they fall due. The Company's primary source of liquidity consists of cash and cash equivalents and investments held at fair value through profit or loss. The Company's investments at fair value through profit or loss are publicly traded and are deemed highly liquid. The Company also has the ability to issue additional share capital to facilitate the capital management of the Company.

The following table details the contractual, undiscounted cash flows of the Company's financial liabilities.

As at 30 June 2010

Up to 3 months

Up to

1 year

Over 1

 year

Total

£

Financial liabilities

Accrued expenses

6,386

79,684

-

86,070

Payable to shareholders

-

124,437

-

124,437

6,386

204,121

-

210,507