In the market approach, recent sales, listings of comparable
assets and such other factors as the Board deems relevant are
gathered and analysed. After identifying and selecting the
comparable publicly traded companies, their business and financial
profiles are analysed for relative similarity. Price or EV
multiples of the publicly traded companies are calculated and then
adjusted for factors such as relative size, growth, profitability,
risk, and return on investment. The adjusted multiples are then
applied to the relevant element of the subject company's
business.
All valuations of unquoted investments and investments in
subsidiaries (collectively referred to as the "portfolio") were
performed using weighted combination of revenue and/or EBITDA
multiples (except for KFL where an agreed sales price was used).
17% (2013: 32%), by value at year-end, of the portfolio was valued
using an agreed sales price with the remaining 83% (2013: 68%) of
the portfolio being valued using an enterprise value/EBITDA
multiple approach and/or enterprise value/revenue multiple.
The key assumptions in the valuations were as follows:
- Liquidity adjustment: 25% to 30% (31 March 2013: 20% to
30%)
2) Income Approach:
The income approach methodology is used as a cross-check for the
Market Approach and indicates the market value of a business
enterprise based on the present value of the cash flows that the
business can be expected to generate in the future. Such cash flows
are discounted at a discount rate that reflects the time value of
money and the risks associated with the cash flows.
The reconciliation between beginning and ending balances of
Level 3 investments is disclosed in Note 21.6. There was a transfer
to level 2 from level 3 during the year. The investment was moved
from level 3 to level 2 as the sales price could be used to value
the investment. The investment was sold after year end, refer to
note 25.
22. Segmental information
The Board of Directors of the Company decides on the strategic
resource allocations of the Company. The operating segments of the
Company are the business activities that earn revenue or incur
expenses, whose operating results are regularly reviewed by the
Board of Directors of the Company, and for which discrete financial
information is available. The Board of Directors considers the
Company to be made up of one segment, which is reflective of the
business activities of the Company and the information used for
internal decision-making which includes the monthly reporting to
management of investment holdings on a fair value basis:
- Aurora Russia
The Investment Manager's Report provides more information on the
Company's business and the operations of each investment.
The Company derives its revenues from its investments primarily
through fair value gains or losses.
The Company regards the holders of its ordinary shares as its
customers, as it relies on their funding for continuing operations
and meeting its objectives. The Company's shareholding structure is
not exposed to a significant shareholder concentration.
The Company is engaged in investment in small and mid-sized
companies in Russia and in one principal geographical area, being
Russia..
23. Related party transactions
The Company had three direct subsidiaries, KFL, Flexinvest and
Flex Bank during the year and one subsidiary at the year end (see
note 7 and 8). Details of the investments in Unistream Bank and
Grindelia Holdings are presented in note 8.
Michael Hough, who is a director of AIAL, holds 100,000 (2013:
100,000) of the shares in Aurora Russia as at 31 March 2014.
AIAL holds 1,224,072 (2013: 2,576,534) of the shares in Aurora
Russia as at 31 March 2014.
The management fees paid to AIAL were GBP744,743 (2013:
GBP1,103,705); at year end there was no prepayment of management
fees. There were no amounts payable at year end (2013: GBPNil).
Per the Amended and Restated Management Agreement, the
management fee and performance fee payable to AIAL were as
follows:
(a) Management fee of an amount equal to i) for all Valuation
Dates up to and including 31 March 2011, 1% of the net asset value
of the Company; and ii) for all Valuation Dates after 31 March
2011, 0.75% of net asset value of the Company;
(b) Performance fee is calculated as follows:
- 2.5% of the value of any disposals realised by the Company
would be payable to the Manager, calculated on the value of assets
of the Company realised up to GBP45 million, i.e. GBP0.40 per share
(the "2.5% Tranche");
- 7.5% of the value of any disposals realised by the Company
would be payable to the Manager, calculated on the value of assets
of the Company realised between GBP45 million and GBP99 million,
i.e. GBP0.40 per share to GBP0.88 per share (NAV) (the "7.5%
Tranche"); and
- 20% of the value of any disposals realised by the Company
would be payable to the Manager, calculated on the value of assets
of the Company realised over GBP99 million, i.e. over GBP0.88 per
share (the "20% Tranche").
Performance fees to decline by 20% per annum from 1 January 2012
in respect of the 2.5% Tranche, and by 20% per annum from 1 January
2013 in respect of each of the 7.5% Tranche and the 20%
Tranche.
The performance fees paid by the Company to AIAL during the year
was GBP27,735 (2013: GBP470,758); at year end GBP40,960 (2013:
GBP107,520) was outstanding. The performance fees became payable on
the sale of Flexinvest, calculated at 1.28% on the cash
consideration of GBP3.2 million. At year end GBP40,960 was still
payable.
If the remaining investments were sold at their fair values as
at 31 March 2014, GBP150,630 (GBP11,767,500 at 1.28%) would be
payable to AIAL by way of performance fees.
24. Contingencies and capital commitments
The Company had no contingencies and capital commitments
outstanding at the reporting date other than disclosed in note
23.
25. Events after the reporting date
Sale of KFL
On 28 April 2014 the Company announced that it has agreed to
sell KFL for a total consideration of RUR100 million (approximately
GBP1.7 million) plus US$450,000 (approximately GBP267,500). The
Board have agreed to the sale at a discount in the light of the
current Russian market for banking assets and the difficult nature
of the portfolio, which is the rump of the Flexinvest mortgage book
and which could only otherwise be disposed of on a protracted
piecemeal basis, which would be lengthy and uncertain.
Tender offer
On 1 May 2014 the Company announced a tender offer to
Shareholders for up to 29,651,549 Shares, being approximately 39.9
per cent. of the current issued share capital of the Company, at a
price of 27.5454p per Share (the "Repurchase Price"). The
Repurchase Price has been calculated by reference to the Unaudited
Net Asset Value of 27.8464p per Share as at 31 March 2014 and after
deducting 0.3010p per Share of costs of the Tender Offer (such
costs representing approximately 1.1 per cent. of the Unaudited Net
Asset Value per Share). The full amount of shares under the tender
offer was repurchased at 27.5454 pence per Share by the Company and
subsequently cancelled.
Following the implementation of the Tender Offer and the
cancellation, the Company has 44,611,131 shares in issue (being
74,262,617 shares in issue less 29,651,486 shares being repurchased
under the Tender Offer and subsequently cancelled).
Termination of Investment Advisor
On 30 April 2014 the Management agreement between the Manager,
Aurora Russia Investment Advisors Limited, and the Company was
terminated by mutual agreement. Under the termination agreement
GBP40,960 is payable to the Manager in respect of the sale of
Flexinvest as a performance fee as well as GBP15,000 per calender
month for the service to be provided for the two months to 30 June
2014. Mr Nicholas Henderson-Stewart was appointed as advisor to the
Company on 19 June 2014 to assist in managing, monitoring and
realising the Company's residual investments. This will include
representing the Company on Investee company boards if so requested
by Aurora Russia Board, assistance with certain administrative
functions and the provision of financial information, including
management accounts, and other relevant information on the Investee
companies.
Fees payable to the Advisor comprise a modest annual fee. In
addition the Advisor will obtain a commission of 2 per cent of any
payment made by the Company to its shareholders (whether by way of
dividends, capital return, share buy backs or otherwise) during the
term of the agreement.
Change in directors interests
The Company announced that as a result of the tender offer for
Shares on 30 May 2014, the Company's directors' beneficial
shareholdings in the Company have changed as follows:-
Gilbert Chalk: from 33,005 ordinary shares to 19,827 ordinary
shares.
Tim Slesinger: from 9,446,850 ordinary shares to 5,674,913
ordinary shares.
Peregrine Moncreiffe: from 635,209 ordinary shares to 381,583
ordinary shares.
There are no further events after reporting date that require
disclosure.
Directors and Advisors
Directors Independent Auditor
Gilbert Chalk - Chairman - appointed 25 February KPMG Channel Islands Limited
2013 20 New street
Geoffrey Miller - resigned 12 April 2013 St Peter Port
Tim Slesinger - appointed 22 August 2011 Guernsey GY1 4AN
Grant Cameron - resigned 1 May 2013
John Whittle - resigned 12 April 2013
Jonathan Bridel - appointed 12 April 2013
Peregrine Moncreiffe - appointed 12 April 2013 CREST Service Provider and UK Transfer Agent
Lyndon Trott - appointed 1 May 2013 Capita Registrars
The Registry
Manager 34 Beckenham Road
Aurora Investment Advisors Limited Beckenham
(terminated 30 June 2014) Kent BR3 4TU
Sarnia House
Le Truchot
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