TIDMMTH
RNS Number : 7274X
Mithras Investment Trust PLC
23 February 2017
MITHRAS INVESTMENT TRUST PLC (the "Company")
Annual Financial Report Announcement of Audited Results for the
year ended 31 December 2016.
This announcement contains regulated information.
Financial Summary
Group Financial Highlights
% change
Year ended Year ended compared
31 December 31 December to previous
2016 2015 year
--------------------- --------------------- ---------------------
Net assets attributable
to owners of GBP31.5 GBP33.7
the Company million million (6.5)
Number of Ordinary
shares in issue
at end of year 14,228,143 19,490,606 (27.0)
Net Asset Value
("NAV") per Ordinary
share 221.2 pence 173.0 pence 27.9
Mid market share
price
31 December 181.3 pence 146.5 pence 23.8
22 February(1) 186.0 pence
Discount 18.0% 15.3% 2.7
Cash distributions to shareholders during
the year (dividends paid plus tender offers)
- Dividends
paid GBP0.2 million GBP0.2 million
- Tender offer GBP9.0 million GBP6.1 million
proceeds ---------- ----------
GBP9.2 million GBP6.3 million
---------- ----------
- Tender offer
proceeds per
Ordinary share 45.9 pence 25.8 pence
- Proposed dividends
per Ordinary
share(2) 1.0 pence 1.0 pence
Total return
before tax GBP7.0 million GBP2.3 million
Ongoing charges
(annualised)(3) 1.6% 1.4%
Total expense
ratio (annualised)(4) 2.4% 2.1%
(1) Being the last practical date prior to approval of the
Annual Financial Report.
(2) Proposed dividends, if approved by shareholders at the
Annual General Meeting ("AGM"), is paid in the calendar year
following proposal. Further information can be found in note 6 of
this announcement and note 9 to the Financial Statements on page 54
and in the Financial Calendar on page 71 of the Annual Financial
Report.
(3) The ongoing charges figures have been calculated using the
Association of Investment Companies' ("AIC") recommended
methodology and relate to the ongoing costs of running the Company.
Subsidiary expenses, such as those incurred by Mithras Capital
Partners LLP ("MCP") and non-recurring fees are therefore excluded
from the calculation.
(4) The ratio reflects the ongoing expenses for the Group. This
follows the AIC guidance in calculating ongoing charges, but
includes ongoing expenses of all subsidiaries.
Performance (Total Return) at 31 December 2016
Since
1 Year 3 Year 5 Year Flotation
% % % %
---------------- ---------------- ---------------- ----------------
Share price 24.4 34.0 88.2 396.0
NAV* 28.4 39.8 56.6 365.5
FTSE All-Share
Index 16.8 19.3 61.8 397.8
* Returns based on NAV per share adjusted for dividends paid.
The return since flotation is based on Group total return after tax
before dividends, attributable to owners on opening owners'
equity.
Chairman's Statement
Highlights for the Year
2016 was an excellent year for the Company both in terms of cash
generation and NAV growth despite the background of considerable
political and market volatility. The Company's NAV increased from
173.0 pence per share to 221.2 pence per share, an increase of
27.9%. The Company's NAV benefited significantly from the weakness
of Sterling against the Euro and the Dollar especially after the
Brexit vote.
Although there was a noticeable slowdown, in private equity deal
activity immediately pre and post the EU Referendum, the exit
environment throughout the year remained largely positive. Cash
distributions received by the Company for the year amounted to
GBP8.6 million, a small increase over the GBP8.4 million of
distributions received during 2015. The number of underlying
portfolio companies held through MCF decreased significantly from
53 to 38 during the year, which compares to the original total of
88. Encouragingly, significant progress was made in realising a
number of the larger and older underlying portfolio companies.
The fifth and largest tender offer was completed in April 2016,
returning GBP9.0 million to shareholders. The Company has now
returned a gross total of GBP34.9 million to shareholders by way of
tender offers. This equates to a capital return of 94.6 pence per
share or the cancellation of approximately 61% of the original
shares in issue.
During the year, the Company's share price increased from 146.5
pence per share to 181.3 pence per share, an increase of 23.8%. The
Company's discount increased slightly from 15.3% to 18.0% although
we hope that this discount will narrow as the Company moves closer
towards its next tender offer.
Update on the Realisation Strategy
The Board continues to believe that the current strategy of
returning cash to shareholders by way of tender offers at close to
NAV is the best way to maximise value in the near term. The Company
had a net surplus cash position, (after allowing for estimated
outstanding commitments) of GBP4.8 million as at 31 December 2016.
A number of realisations of underlying portfolio companies have
been announced which we anticipate will complete in the next few
months. As a consequence, the Board expects to be in a position to
announce its next tender offer during the first half of 2017.
In line with the realisation strategy, the Board monitors the
balance between the prospects of NAV growth and cash generation and
the ongoing costs of running the Company relative to NAV. The
Company's costs for 2016 decreased slightly although the ongoing
cost ratio was 1.6% (1.4% in 2015). This increase was largely a
result of the reduction in net assets following the tender offer in
the first half of the year. Whilst our current cost ratio remains
comparable with our listed private equity peer group, completion of
further tender offers will cause the ratio to rise.
As a consequence of the growth in NAV, MCF's net IRR as at 31
December 2016 was above the 8% hurdle rate and therefore a
provision for carried interest of GBP1.4 million is included within
the Company's MCF valuation. In previous years, MCF's carried
interest scheme has been noted in the accounts as a potential
liability.
If market conditions for private equity exits remain favourable,
it is likely that within the next 12-18 months the costs of running
the Company relative to NAV will rise to a level where continuing
to run the Company as an investment trust ceases to be economic. At
that point, the Board will commence the final stage of the
realisation strategy. This is likely to involve either the Company
being put in to liquidation or the Company's stake in MCF being
sold.
At present the Board envisages that the Company will make at
least two further tender offers prior to the final stage of the
realisation strategy, with the next tender during the first half of
2017.
As always the Board remains open to value-enhancing offers from
third parties. Any offers will be evaluated against the core
strategy of further tender offers followed by a liquidation of the
Company.
Outlook
The last 12 months have seen a remarkable change in the
political landscape, most notably in the UK and US. It seems likely
that political volatility will continue, particularly as a
consequence of key elections in Continental Europe. Despite the
uncertain political and economic backdrop, markets and valuations
have proved resilient and the environment for private equity
realisations remains positive.
The managers of our underlying funds are reporting that the
trading performance of their portfolio companies is generally
strong. As a result, the Board believes that the current portfolio
still has good prospects for further NAV growth and cash
generation.
At the AGM or around the time of the next tender offer, the
Board intends to provide shareholders with a timeline for the final
stages of the realisation strategy.
William Maltby
Chairman
23 February 2017
Investment Manager's Review
Results and Performance for the Year
The Company enjoyed a strong 2016 despite a continuation of
volatility and uncertainty impacting financial markets. Strong
underlying portfolio company performance and a fall in the value of
Sterling have ensured that the Company's results for this year have
been positive. The Company's share price increased from 146.5 pence
per share to 181.3 pence per share. The Group's NAV increased from
173.0 pence per share to 221.2 pence per share during the year and
the Group's total return for the year was 28.4% (2015: 7.3%) which
compares to the Group's benchmark, the FTSE All-Share Index's
return of 16.8% (2015: 1.0%). The Company's performance was helped
by Sterling falling by 13.7% against the Euro and by 16.1% against
the US Dollar during the year.
Consistent with the Company's realisation strategy, we will
continue to pay a level of dividend required to maintain investment
trust status. Shareholders should continue to expect the majority
of future returns to be capital in nature. Accordingly, the Board
has recommended a final dividend totalling 1.0 pence per Ordinary
share (2015: 1.0 pence). If approved by shareholders, the proposed
final dividend will be paid on 5 May 2017 to shareholders on the
register on 3 March 2017.
Investment Activity
Given MCF's fully invested status, the Company was only required
to provide GBP0.2 million of capital during the year to meet its
ongoing obligations to MCF and this was funded by retained
distribution proceeds. A number of value accretive add-on
investments were made by underlying portfolio companies which did
not require any new capital from MCF. PAI Europe V completed the
add-on of Safegate to existing portfolio company ADB Airfield
Solutions creating ADB Safegate and R&R Ice Cream completed a
transaction with Nestlé which created Froneri, a new 50:50 joint
venture in ice cream and frozen food operating across 22 countries.
CVC Europe V completed an add-on acquisition to Ista and Doughty
Hanson V completed several add-on acquisitions for TMF Group which
were all funded directly by TMF Group.
Realisations and Repayments
The exit environment remained positive for the Company's mature
portfolio despite the ongoing uncertainty surrounding the European
Union ("EU") and Brexit with MCF making gross distributions to the
Company totalling GBP8.6 million (2015: GBP8.4 million). These
distribution proceeds comprised a number of full or partial exits,
as well as some refinancing and dividend recapitalisation proceeds.
A number of pending exits have been announced but are yet to
complete, notably CVC Europe V's proposed sales of Quironsalud and
Alix Partners, PAI Europe V's proposed sale of Xella and Cerba
HealthCare and Doughty Hanson V's proposed sale of LM Wind Power.
This should ensure that the Company's realisation strategy
continues into 2017 on a positive note.
CVC Europe V was again the most active underlying fund in terms
of the number of exits, realising six portfolio companies and
distributing a total of GBP1.6 million to the Company. This
included the sales of Avolon and Raet for multiples in excess of
2.0x cost and the exit of Sunrise Communications for a multiple in
excess of 3.0x cost. OCM Principal Opportunities Fund IV provided
the largest distribution proceeds returning GBP2.8 million, having
made good progress during the year monetising the remaining mature
portfolio. OCM Principal Opportunities Fund IV exited Fu Sheng,
Alliance Healthcare Services, Alstria Office and successfully
floated AdvancePierre Foods during the latter part of 2016 with MCF
also receiving partial distribution proceeds from the flotation.
PAI Europe V distributed GBP2.1 million following the sales of
Swissport at a gross multiple of 3.1x cost and Hunkemoeller at a
gross multiple of 2.2x cost. Riverside Europe III exited Diatron
for a gross multiple of 2.6x cost.
As at 31 December 2016, the MCF portfolio comprised 38
underlying investments with the largest investment, AdvancePierre
Foods equating to 20% of the MCF portfolio (although the Company
received a further distribution of GBP1.6 million from MCF in
February 2017, following a further sell down of shares post IPO).
The Company has made good progress with its realisation strategy
with seven of the top ten largest underlying portfolio companies as
at 31 December 2015 having been sold, listed or are in the process
of being exited. The average hold period for the remaining
portfolio has increased from 5.6 to 6.1 years.
Liquidity and Outstanding Commitments
The Group's liquidity position remains strong and the Group's
cash balance as at 31 December 2016 was GBP5.7 million (2015:
GBP6.8 million).
Excluding subsidiary company cash balances, the Company's cash
balance was GBP5.2 million. This compares to maximum outstanding
commitments of GBP3.5 million, of which only GBP0.4 million is
expected to be drawn. This gives the Company a net surplus cash
position of GBP4.8 million as at 31 December 2016.
Outlook
The Company enjoyed a strong 2016 both in terms of NAV and share
price growth helped by good underlying portfolio company
performance and a fall in the value of Sterling. The Company has
made significant further progress with its realisation strategy and
the pipeline of potential exits remains strong for 2017.
Whilst the Company's future performance remains sensitive to the
value of both the Euro and the US Dollar and the exit environment
generally, we believe the Company is well placed to deliver further
growth in shareholder value as it moves towards the final stages of
the realisation strategy.
Mithras Capital Partners LLP
Investment Manager
23 February 2017
Principal Risks and Uncertainties
The Board, in conjunction with MCP, has established a risk
management framework within the context of the Company's overall
objective. The Board and the Audit Committee are responsible for
the risk management framework, which enables the Company to assess
the overall risk and exposure of the Company and to review and
monitor such risk. The Board confirms that it has carried out a
robust assessment of the principal risks facing the Company as
noted below together with how they are being managed or
mitigated.
General Risks Associated with Investment in Private Equity:
The Group invests in private equity through its exposure to MCF
which mitigates some of these general risks through
diversification. MCF investments are illiquid and might be
difficult to realise, particularly within a short timeframe.
Financial Risks:
By its nature as an investment trust, the Company's business
activities are exposed to market risk (which includes price risk
and currency risk), credit risk, liquidity risk and interest rate
risk. These are monitored by the Board. Details of these risks and
how they are managed are set out in note 20 to the Financial
Statements on pages 61 to 64 of the Annual Financial Report.
Operational Risks:
As the Company's main functions are delegated to MCP and third
party service providers, operational risk would arise from failures
of internal control of those service providers. This would include,
for example, non-compliance with statutes and regulations governing
the functions of the Company. Operational risks are regularly
assessed by the Board, which receives timely reports from MCP and
its main service providers as to the internal control processes in
place within those organisations. These serve to minimise the risk
exposure to the Company. Further details regarding the Group's
internal controls and management of risks are set out within the
Corporate Governance Statement on page 25 of the Annual Financial
Report.
Investment and Strategy Risks:
The Board considers at each meeting the performance of the
investment portfolio and has established investment restrictions
and guidelines within which MCP operates.
Valuation Risks:
The Group's exposure to valuation risk mainly comprises
movements in the value of its underlying investments. The Company's
investment in MCF is valued at fair value by the Directors in
accordance with the current International Private Equity and
Venture Capital ("IPEV") Guidelines. Valuation risks are mitigated
by a comprehensive review of underlying investments carried out by
MCP bi-annually. These valuations are then considered and approved
by the Audit Committee and the Board.
Regulatory Risks:
A breach of the Corporation Tax Act 2010 ("CTA") could result in
the Company losing its status as an investment trust and becoming
subject to Corporation Tax on capital gains. MCP monitors the CTA
qualification criteria and provides a report to the Board at each
meeting. As an entity listed on the London Stock Exchange, the
Company must also comply with the Listing, Prospectus and
Disclosure Guidance and Transparency Rules (the "Rules") of the
Financial Conduct Authority ("FCA") as well as the Companies Act
2006 (the "Act"). MCP and the Company Secretary provide regular
reports to the Board on compliance with relevant provisions and
report breaches without delay. The Board relies on MCP, the Company
Secretary and professional third party advisers to ensure
compliance with laws and regulations. In particular, under the
Rules, the Company is required to maintain at least 25% of its
shares in "public hands". The definition of "public hands" excludes
any holdings by shareholders owning more than 5% of the issued
share capital as well as the Directors own shareholdings. Details
of the Company's substantial shareholders are disclosed on page 18
of the Annual Financial Report. Any inadvertent breach of this test
could result in the Company's share listing being suspended and the
loss of investment trust status.
Corporate Governance and Shareholder Relations Risks:
Details of the Company's compliance with corporate governance
best practice guidelines, including compliance with the AIC Code of
Corporate Governance (the "AIC Code") and the maintenance of good
communication with shareholders, are set out in the Corporate
Governance Statement on pages 21 to 25 of the Annual Financial
Report.
Related Party Transactions and Disclosures
The following note provides details of the Group and Company's
related party disclosures and related party transactions during the
year:
(a) Under the Investment Management Agreement, dated 27 March
2009, the Company paid fees of GBP64,000 (2015: GBP64,000) to MCP,
of which GBP16,000 was outstanding at 31 December 2016 (2015:
GBP16,000).
(b) Legal and General Assurance Society Limited ("LGAS") held
32.92% of the Ordinary share capital of the Company as at 31
December 2016 (2015: 33.50%). The Company announced on 23 July 2015
that LGAS had sold its 49.99% stake in MCF to Pomona Capital, VIII
LP.
(c) Mr Boylan, the Managing Partner and Designated Member of
MCP, in his personal capacity held 0.39% (2015: 0.36%) of the
Ordinary share capital of the Company as at 31 December 2016. Mr
Boylan is a member of MCP and has a profit entitlement of 15% of
the profits in MCP (2015: 15%).
(d) Under a Retention Arrangement dated 5 November 2014 Mr
Boylan would become entitled, on completion of the realisation
strategy, to a sum of GBP200,000 in consideration for acquiring his
15% minority interest in MCP (referred to as the Non-controlling
Interest within the Consolidated Financial Statements). The
circumstances that will give rise to the completion of the
realisation strategy could vary depending upon the choice of exit
route taken by the Company and the arrangement is subject to good
leaver provisions.
(e) The compensation payable to key management personnel (which
includes members of MCP but excludes Directors of the Company)
amounted to GBP149,000 (2015: GBP149,000) paid as guaranteed
drawings. Profit share distributed to the Non-controlling Interests
(members of MCP) amounted to GBP34,000 (2015: GBP32,000). The
compensation payable to the Directors can be found in note 7 on
page 52 of the Annual Financial Report.
(f) The Company invests in MCF, which is managed by MCP. A
carried interest scheme operates for the benefit of the founder
partners in the scheme. The founder partners are Ms Gillian Brown,
Mr Adrian Johnson and Mr Boylan. Carried interest of 10% of
investment profits could become payable once MCF has returned all
capital contributed by investors as well as exceeding a net IRR of
8% per annum. As at 31 December 2016, MCF's net fund IRR was 8.3%
and a provision of GBP1.4 million was made against the valuation of
MCF. No carried interest payments were made during the period or
have been since the inception of MCF.
Extract from Statement of Directors' Responsibilities
Pursuant to Rule 4 of the Disclosure Guidance and Transparency
Rules, each of the Directors, whose names and functions are listed
on page 16 of the Annual Financial Report confirm that, to the best
of their knowledge:
-- The Group Financial Statements have been prepared in
accordance with IFRSs as adopted by the EU and Article 4 of the IAS
Regulation and give a true and fair view of the assets,
liabilities, financial position and profit and loss of the
Group.
-- The Annual Financial Report includes a fair review of the
development and performance of the business and the financial
position of the Group and the Company, together with a description
of the principal risks and uncertainties that they face.
On behalf of the Board
William Maltby
Chairman
23 February 2017
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2016
2016 2015
Revenue Capital Total Revenue Capital Total
return return return return return return
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------- ---------- ---------- ---------- ---------- ----------
Income
Net gains on investments 4 - 6,992 6,992 - 1,920 1,920
Investment income 5 300 - 300 602 - 602
459 - 459 461 - 461
Other income ---------- --------- ---------- ---------- --------- ----------
759 6,992 7,751 1,063 1,920 2,983
---------- --------- --------- ---------- --------- ---------
Expenses
(728) - (728) (729) - (729)
Operating expenses ---------- --------- --------- ---------- --------- ---------
Profit before 31 6,992 7,023 334 1,920 2,254
taxation ---------- --------- --------- ---------- --------- ---------
12 - 12 (20) - (20)
Taxation ---------- --------- --------- ---------- --------- ---------
Profit and total
comprehensive
income for the 43 6,992 7,035 314 1,920 2,234
year ====== ===== ====== ====== ===== ======
Attributable to:
Owners of the
Company 7 9 6,992 7,001 282 1,920 2,202
Non-controlling
Interests 34 - 34 32 - 32
Basic and diluted
earnings
per Ordinary share 0.1 43.9 44.0 1.3 9.1 10.4
(pence) 7 ====== ===== ====== ====== ===== ======
The total return column of this statement represents the
Consolidated Statement of Comprehensive Income, prepared in
accordance with IFRS. The supplementary revenue return and capital
return columns are both prepared under the guidance published by
the AIC.
The accompanying notes form an integral part of these Financial
Statements.
Consolidated Statement of Changes in Equity
For the year ended 31 December 2016
Total
equity
attributable
Capital to holders Non-
Share redemption Capital Revenue of the controlling Total
Notes capital reserve reserve reserve Company interest equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------- ----------- ----------- ----------- ----------- ----------- -----------
31 December
2014 467 368 32,415 4,595 37,845 21 37,866
Profit and
total
comprehensive
income for
the year - - 1,920 282 2,202 32 2,234
Contributions
by and
distributions
to owners
Dividends 6 - - - (233) (233) - (233)
Profit share
paid to
members
in a
subsidiary - - - - - (32) (32)
Cost of
shares
purchased
for
cancellation
under tender (77) 77 (6,096) - (6,096) - (6,096)
offer -------- ------------ ----------- ---------- ---------- --------- --------
Total
contribution
by and
distributions (77) 77 (6,096) (233) (6,392) (32) (6,361)
to owners -------- -------- -------- -------- -------- -------- --------
31 December
2015 390 445 28,239 4,644 33,718 21 33,739
Profit and
total
comprehensive
income for - - 6,992 9 7,001 34 7,035
the year ----------- ------------ ----------- ------------ ------------ ------------ -----------
Contributions
by and
distributions
to owners
Dividends 6 - - - (195) (195) - (195)
Profit share
paid to
members
in a
subsidiary - - - - - (34) (34)
Cost of
shares
purchased
for
cancellation
under tender (105) 105 (9,046) - (9,046) - (9,046)
offer -------- ------------ ----------- --------- ---------- --------- --------
Total
contributions
by and
distributions (105) 105 (9,046) (195) (9,241) (34) (9,275)
to owners -------- -------- -------- -------- -------- -------- --------
31 December 285 550 26,185 4,458 31,478 21 31,499
2016 ==== ======= ====== ===== ====== ===== =====
The accompanying notes form an integral part of these Financial
Statements.
Consolidated Balance Sheet
As at 31 December 2016
2016 2015
Notes GBP'000 GBP'000
----------- -----------
Non-current assets
Investments at fair value
through profit or loss 26,113 27,218
----------- -----------
Current assets
Receivables 20 21
Current tax receivable 42 58
5,691 6,824
Cash and cash equivalents ----------- -----------
5,753 6,903
----------- -----------
31,866 34,121
Total assets ----------- -----------
Current liabilities
Payables (154) (140)
(13) (42)
Current tax liability ----------- -----------
(167) (182)
----------- -----------
Total assets less current 31,699 33,939
liabilities ----------- -----------
Non-current liabilities
Retention arrangement (200) (200)
for key management personnel ----------- -----------
Net assets 31,499 33,739
======= =======
Equity attributable to
owners of the Company
Share capital 285 390
Capital redemption reserve 550 445
Capital reserve 26,185 28,239
4,458 4,644
Revenue reserve ------------ ------------
Equity attributable to
owners of the Company 31,478 33,718
21 21
Non-controlling Interest ------------ ------------
31,499 33,739
Total equity ======= =======
Net assets per Ordinary
share (pence)
221.2 173.0
- basic and diluted 8 ======= =======
The Financial Statements were approved by the Board of Directors
and authorised for issue on 23 February 2017.
The accompanying notes form an integral part of these Financial
Statements.
They were signed on the Board's behalf by William Maltby,
Chairman and David Shearer, Chairman of the Audit Committee.
Consolidated Cash Flow Statement
For the year ended 31 December 2016
2016 2015
Notes GBP'000 GBP'000
----------- -----------
Cash flows from operating
activities
Investment income received 300 602
Interest income received 20 21
Investment management
fees received 440 440
Cash paid to service
providers (565) (613)
Compensation to key
management personnel (149) (149)
Taxation paid (1) (13)
Call on commitment (209) (1,112)
Proceeds on partial 8,306 7,793
disposal of investment ------------ ------------
Net cash flow from 8,142 6,969
operating activities ------------ ------------
Cash flows from financing
activities
Equity dividends paid 6 (195) (233)
Profit share distributed
to Non-controlling
Interest (34) (32)
(9,046) (6,131)
Tender offer proceeds ------------ ------------
Net cash flow from (9,275) (6,396)
financing activities ------------ ------------
Net (decrease)/increase
in cash and cash equivalents (1,133) 573
Cash and cash equivalents 6,824 6,251
at beginning of year ------------ ------------
Cash and cash equivalents 5,691 6,824
at end of year ======= =======
The accompanying notes form an integral part of these Financial
Statements.
Annual Financial Report
This Annual Financial Report announcement does not constitute
statutory accounts for the year ended 31 December 2016 as defined
in Section 434 of the Act.
Statutory accounts for the year ended 31 December 2015 have been
delivered to the Registrar of Companies. The statutory accounts for
the year ended 31 December 2015 and the year ended 31 December 2016
both received an audit report which was unqualified and did not
include reference to any matters to which the Auditors drew
attention by way of emphasis without qualifying the report and did
not include statements under Section 498 of the Act. The statutory
accounts for the year ended 31 December 2016 have not yet been
delivered to the Registrar of Companies and will be delivered
following the AGM.
The Company's Annual Financial Report for the year ended 31
December 2016 will be posted to shareholders in March 2017. Copies
of the Annual Financial Report will be available from the
Registered Office of the Company at 10 Harewood Avenue, London, NW1
6AA and on the website, www.mithrasinvestmenttrust.com, which is a
website maintained by the Company's Investment Manager. The
Company's AGM will be held at 12 noon on Wednesday, 26 April 2017
at the offices of BNP Paribas Fortis, 5 Aldermanbury Square,
London, EC2V 7BP. A copy of the Annual Financial Report for the
year ended 31 December 2016 will be submitted to the National
Storage Mechanism of the UK Listing Authority and will shortly be
available for inspection at: www.Hemscott.com/nsm.do.
Key Notes extracted from the Financial Statements
1. General Information
The Company is a company incorporated and domiciled in the
United Kingdom. The Consolidated Financial Statements of the Group
for the year ended 31 December 2016 comprise the Company and its
subsidiaries, Mithras Investments Limited ("MIL"), Mithras Capital
Holdings Limited ("MCH"), Mithras Capital Partners LLP ("MCP"),
Mithras Capital Partners GP Limited ("MCGP") and Mithras Capital
Scottish GP LLP ("MCSGP"), together referred to as the "Group". The
nature of the Group's operations and its principal activities are
set out in note 3 Segment Reporting on page 50 and in the Strategic
Report on pages 12 to 15 in the Annual Financial Report. The
Group's organisational structure is disclosed in note 17 on pages
59 and 60 in the Annual Financial Report.
2. Summary of Significant Accounting Policies
A summary of the principal accounting policies, all of which
have been applied consistently throughout the year, is set out
below.
a) Basis of Preparation
The Consolidated Financial Statements of the Group have been
prepared in accordance with IFRS, as adopted by the EU.
The preparation of Financial Statements requires management to
make estimates and assumptions that affect the amounts reported for
assets and liabilities as at the Balance Sheet date and the amounts
reported for revenue and expenses during the year. The valuation of
unquoted investments requires estimates and assumptions. The nature
of the estimations means that actual outcomes could differ from
those estimates. Estimates and underlying assumptions are reviewed
on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimates are revised and in
any future periods affected.
The Consolidated Financial Statements have been prepared on the
historic cost basis, except for the revaluation of financial assets
at fair value through profit or loss. Investments are held at fair
value with unrealised gains and losses on investments and
impairment of investments recognised in the Consolidated Statement
of Comprehensive Income and allocated to capital. Gains and losses
on investments sold are calculated as the difference between sale
proceeds and cost and allocated to capital. All other assets and
liabilities are held at carrying amounts, which approximate to
their fair values unless otherwise stated.
In determining the analysis of total income and expenses as
between capital return and revenue return, the Directors have
followed the guidance contained in the Statement of Recommended
Practice (the "SORP") for investment trusts issued by the AIC as
revised in 2014, to the extent that this is not inconsistent with
the requirements of IFRS.
To reflect the activities of an investment trust company,
supplementary information which analyses the Consolidated Statement
of Comprehensive Income between items of a revenue and capital
nature has been presented alongside the Consolidated Statement of
Comprehensive Income. In accordance with the Company's status as a
UK investment company under Section 833 of the Act, net capital
returns may not be distributed by way of dividend.
b) New IFRSs, Interpretations and Amendments Not Yet Effective
None of the new standards, interpretations or amendments which
are effective for the first time in the Financial Statements has
had a material impact on the Financial Statements.
The following relevant standards and interpretations were issued
by the International Accounting Standards Board or the
International Financial Reporting Interpretations Committee before
the period end but are as yet not effective for the 2016 year
end:
IFRS 9 Financial Instruments (effective for annual periods
beginning on or after 1 January 2018)
IFRS 15 Revenue from Contract with Customers (effective for
annual reporting period beginning on or after 1 January 2018)
The Group is currently assessing the impact, if any, that these
standards will have on the presentation of, and recognition in, its
consolidated results in future periods.
c) Basis of Consolidation
The Consolidated Financial Statements incorporate the results of
the Company and its subsidiaries. Inter-company transactions,
balances and unrealised gains and losses on transactions between
Group companies are eliminated. Where necessary, the accounting
policies of subsidiaries have been aligned to ensure consistency
with the policies adopted by the Group.
The Company controls an investee if all three of the following
elements are present: power over the investee, exposure to variable
returns from the investee, and the ability of the investor to use
its power to affect those variable returns. Control is reassessed
whenever facts and circumstances indicate that there may be a
change in any of these elements of control.
MIT has a 49.9875% interest in MCF. MIT does not control MCF
because there are certain removal clauses in the MCF limited
partnership agreement which allow for the removal of its general
partners without cause by the other significant independent
investor (Pomona Capital VIII, LP). Therefore MCF does not form
part of the Group Structure and is instead included in the
Company's Consolidated Balance Sheet as the Company's sole
investment.
d) Presentation of Consolidated Statement of Comprehensive Income
In order to reflect better the activities of an investment trust
company and in accordance with the SORP, supplementary information
which analyses the income statement and statement of comprehensive
income between items of a revenue and capital nature has been
presented. Additionally, the net revenue is the measure the
Directors believe appropriate in assessing the Group's compliance
with certain requirements set out in Section 1158 of the CTA.
e) Financial Instruments
Investments
Additions in the form of calls on commitments and disposals of
investments are accounted for at the settlement date for unquoted
investments. On initial recognition, being the date that the Group
is committed to the call on investment, the Group and the Company
have designated all investments, including investments in the
subsidiaries, as held at fair value through profit or loss, with
all gains and losses reflected in the Consolidated Statement of
Comprehensive Income, including foreign currency gains and losses
on translation of investments at the Balance Sheet date. The Group
manages and evaluates the performance of these investments on a
fair value basis in accordance with its investment strategy and
information about the Group is provided internally on this basis to
the entity's key management personnel.
The Group invests in unquoted limited partnerships through its
commitment to MCF. The Company's valuation process is set out in
note 11 on page 56 and 57 of the Annual Financial Report.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held
with banks or "AAA" rated money market liquidity fund
investments.
f) Receivables
Other receivables are short-term in nature and are initially
recognised at fair value and subsequently measured at amortised
cost using the effective interest method, less provision for
estimated irrecoverable amounts.
g) Payables
Accrued expenses are recognised initially at fair value and
subsequently stated at amortised cost using the effective interest
method.
h) Revenue Recognition
Investment income includes dividends and interest on
investments, while interest income on cash and cash equivalents is
shown as a component of other income in the revenue return column
of the Consolidated Statement of Comprehensive Income.
Income from limited partnership funds is recognised when the
income is distributed and received. The limited partnership funds
allocate income once a year, after the general partners' priority
profit share has been allocated in the partnerships' annual tax
returns.
Investment management fee income is accrued over the period for
which the service is provided. Interest income is recognised on a
time proportion basis using the effective interest method.
i) Expenses
All expenses are accounted for on an accruals basis. In respect
of the analysis between revenue and capital items presented within
the Consolidated Statement of Comprehensive Income, all expenses
have been presented as revenue items except as follows:
(i) Expenses which are incidental to the disposal of an
investment are deducted from the disposal proceeds of the
investment.
(ii) Expenses are presented as capital items where a connection
with the maintenance or enhancement of the value of the investments
can be demonstrated. The investment management fee has been
allocated 50% to revenue and 50% to capital. Tax relief
attributable to the investment management fees charged to capital
is credited to the capital return. The Directors consider this
apportionment to be appropriate, having regard to the quantum of
investment management fee which is also an intercompany transaction
eliminated on consolidation.
The Directors consider the retention arrangement to be capital
in nature and this amount has been charged in full to the Capital
Reserve.
(iii) Transaction costs are disclosed within the net gains and losses on investment.
j) Foreign Currency Transactions and Translation
The Company's functional and presentation currency is Sterling.
Transactions in currencies other than Sterling are translated at
the rates of exchange prevailing on the dates of the transactions.
At each Balance Sheet date, financial assets and liabilities
denominated in foreign currencies are translated at the rates
prevailing. Gains and losses arising on translation are included in
the Consolidated Statement of Comprehensive Income and presented as
revenue or capital as appropriate.
k) Non-controlling Interest
The interest of the non-controlling member is stated as the
non-controlling member's proportion of the fair values of the
assets and liabilities recognised. Subsequently, the
Non-controlling Interest represents the proportion of profit or
loss for the year and net assets not held by the Group and are
presented separately in the Consolidated Statement of Comprehensive
Income and within Total Equity in the Consolidated Balance Sheet,
separately from shareholders' equity.
l) Taxation
Tax recognised in the Consolidated Statement of Comprehensive
Income represents the sum of current tax and deferred tax charged
or credited in the year. In line with the recommendations of the
SORP, the tax effect of different items of expense is allocated
between revenue and capital on the same basis as the particular
item to which it relates, using the marginal method.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the Financial Statements and the corresponding tax bases used in
the computation of taxable profit. Deferred tax liabilities are
recognised for all taxable temporary differences and deferred tax
assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible
temporary differences can be utilised.
Investment trusts which have approval under Section 1158 of the
CTA are not liable for taxation on capital gains.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the asset is realised or the liability
settled based on tax rates that have been enacted or substantively
enacted by the Balance Sheet date.
m) Dividends
Dividends paid to the Company's shareholders are recognised as a
liability in the period in which the dividends are approved by the
Company's shareholders.
n) Reserves
(i) Capital Redemption Reserve - the nominal value of shares
bought back for cancellation is added to this reserve. This reserve
is non-distributable.
(ii) Capital Reserve - an accumulation of holding gains and
losses, gains and losses on the disposal of investments and
exchange adjustments to overseas currencies are taken to the
Capital Reserve together with the proportion of management fees and
taxation allocated to capital.
(iii) Revenue Reserve - the net profit arising in the revenue
column of the Statement of Comprehensive Income is added to this
reserve. Dividends paid during the year may be deducted from this
reserve.
3. Segment Reporting
Year ended 31 December Year ended 31 December
2016 2015
Private Private
equity equity
Investing fund-of-funds Investing fund-of-funds
Activities management Consolidated Activities management Consolidated
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------- ---------- ---------- ---------- ---------- ----------
Net gains
on investments 6,992 - 6,992 1,920 - 1,920
Investment
income 300 - 300 602 - 602
Interest
income 19 - 19 21 - 21
Other income - 440 440 - 440 440
Operating (468) (260) (728) (452) (277) (729)
expenses ---------- ----------- ------------ ---------- ----------- ------------
Profit
before
taxation 6,843 180 7,023 2,091 163 2,254
12 - 12 (20) - (20)
Taxation ---------- ----------- ------------ ---------- ----------- ------------
Profit
for the 6,855 180 7,035 2,071 163 2,234
year ====== ====== ======= ====== ====== =======
Segment
assets 31,707 159 31,866 33,967 154 34,121
Segment (349) (18) (367) (364) (18) (382)
liabilities ---------- ----------- ----------- ---------- ----------- -----------
Net segment 31,358 141 31,499 33,603 136 33,739
assets ====== ====== ======= ====== ====== =======
The Group makes investments into various geographical areas and
the information about the total gains and losses and income on
investments and their fair value, analysed by geographical
location, is presented in notes 4 and 5 on page 51 and note 11 on
pages 55 to 57 to the Financial Statements in the Annual Financial
Report.
The chief operating decision-maker has been identified as the
Board of Directors. The Board reviews the Group's internal
reporting in order to assess performance and allocate resources.
The Board has determined the operating segments based on these
reports.
The Board considers the operating segments to be investment
holdings and private equity fund-of funds management. The Board
assesses the performance of the Group based upon the KPI's as
stated in the Strategic Report on pages 12 to 15 in the Annual
Financial Report.
Investing holdings represent the Group and Company's operations
and commitment to MCF. Comprehensive income for this segment is
derived from gains and losses on investments, income from
investments, interest income and other income. The private equity
fund-of-funds management business is undertaken by MCP. Revenue for
this segment is primarily derived from management services provided
to MCF.
4. Net Gains on Investment
Group Group
Year ended Year ended
31 December 31 December
2016 2015
Total Total
GBP'000 GBP'000
---------- ----------
Realised gain on disposal
based on carrying values
at previous Balance
Sheet date 2,760 4,189
Unrealised gain/(loss)
on investment held at
fair value through profit 4,232 (2,269)
and loss ----------- -----------
6,992 1,920
====== ======
Segmental Analysis of
Underlying Funds
Continental Europe 5,804 1,080
North America 2,709 1,127
Asia 202 (40)
(297) (247)
United Kingdom ----------- -----------
8,418 1,920
MCF carried interest (1,426) -
provision ----------- -----------
6,992 1,920
====== ======
The total fair value movement estimated using a valuation
methodology detailed in note 2 on page 47 of the Annual Financial
Report was an increase of GBP4,232,000 (2015: GBP2,269,000
decrease).
5. Investment Income
Group Group
Year ended Year ended
31 December 31 December
2016 2015
Total Total
GBP'000 GBP'000
---------- ----------
Interest income
on unquoted investment 251 386
Dividend income 49 216
on unquoted investment ----------- -----------
300 602
======== ========
Segmental Analysis
Continental Europe 179 602
North America 121 -
======= =======
6. Dividends
The final dividend of 1.0 pence per Ordinary share, for the year
ended 31 December 2015, was paid on 6 May 2016 on 19,490,606
shares.
Year ended Year ended
31 December 31 December
2016 2015
GBP'000 GBP'000
---------- ----------
Final dividend: 1.0 pence
(2015: 1.0 pence) per 195 233
Ordinary 2 pence share ======= =======
The Company proposes the following dividend for the year ended
31 December 2016 which is subject to approval by shareholders at
the forthcoming AGM. This proposed dividend, which is required to
comply with Section 1158 of the CTA, has not been included as a
liability in these Financial Statements.
Year ended Year ended
31 December 31 December
2016 2015
GBP'000 GBP'000
---------- ----------
Proposed final dividend:
1.0 pence (2015: 1.0 pence) 142 195
per Ordinary 2 pence share ======= ========
7. Earnings per Ordinary Share
The calculation of the basic and diluted earnings per Ordinary
share is based on the following data:
Year ended Year ended
31 December 31 December
2016 2015
Revenue Capital Revenue Capital
return return Total return return Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------- ---------- ---------- ---------- ---------- ----------
Earnings for the
purposes of basic
and diluted earnings
per share being
net profit attributable 9 6,992 7,001 282 1,920 2,202
to owners ====== ====== ====== ====== ====== ======
Basic and diluted
earnings per Ordinary 0.1 43.9 44.0 1.3 9.1 10.4
share (pence) ====== ====== ====== ====== ====== ======
The weighted average number of Ordinary shares for the purpose
of calculating the basic and diluted earnings per share was
15,924,784 (2015: 21,200,011).
8. Net Assets per Ordinary Share
The basic total net assets per Ordinary share is based on the
net assets attributable to owners shown in the Consolidated Balance
Sheet at 31 December 2016 and on 14,228,143 (2015: 19,490,606)
Ordinary shares, being the number of Ordinary shares in issue at 31
December 2016.
There is no dilution effect and therefore no difference between
the diluted total net assets per Ordinary share and the basic total
net assets per Ordinary share stated on page 42 of the Annual
Financial Report.
For further information, please contact:
Susan Gledhill
For and on behalf of
BNP Paribas Secretarial Services Limited
Tel: 020 7410 5971
23 February 2017
This information is provided by RNS
The company news service from the London Stock Exchange
END
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