FF&P VENTURE FUNDS PCC LIMITED Annual Report And
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FF&P VENTURE FUNDS PCC LIMITED Annual Report and Audited Consolidated Financial Statements for the year ended 31 March 2017 FF&P VENTURE FUNDS PCC LIMITED Contents Page Directors and Administration 2 Directors' Report 3 - 4 Investment Adviser's Report 5 - 9 Independent Auditor's Report 10 - 14 Investment Portfolio Statement - (Cell I) (unaudited) 15 Investment Portfolio Statement - (Cell II) (unaudited) 16 Investment Portfolio Statement - (Cell III) (unaudited) 17 Investment Portfolio Statement - (Cell IV) (unaudited) 18 Investment Portfolio Statement - (Cell V) (unaudited) 19 Investment Portfolio Statement - (Cell VI) (unaudited) 20 Investment Portfolio Statement - (Cell VII) (unaudited) 21 Investment Portfolio Statement - (Cell VIII) (unaudited) 22 Investment Portfolio Statement - FF&P Venture Funds Subsidiary Limited (unaudited) 23 Consolidated Statement of Comprehensive Income 24 - 25 Consolidated Statement of Changes in Equity 26 - 27 Consolidated Statement of Financial Position 28 - 29 Consolidated Cash Flow Statement 30 Notes to the Consolidated Financial Statements 31 - 53 FF&P VENTURE FUNDS PCC LIMITED Page 2 Directors and Administration Directors: Richard Crowder (Chairman)* Rupert Evans Niall McCallum * Independent director Registered Office: 11 New Street St Peter Port Guernsey, GY1 2PF Manager: Stonehage Fleming Investment Management (Guernsey) Limited 11 New Street St Peter Port Guernsey, GY1 2PF Investment Adviser: Stonehage Fleming Investment Management Limited 15 Suffolk Street London SW1Y 4HG Custodian and Banker: Butterfield Bank (Guernsey) Limited Regency Court Glategny Esplanade St Peter Port Guernsey, GY1 3AP Administrator, Secretary and Vistra Fund Services (Guernsey) Limited Registrar of the Company: 11 New Street St Peter Port Guernsey, GY1 2PF Independent Auditor: PricewaterhouseCoopers CI LLP Royal Bank Place 1 Glategny Esplanade St Peter Port Guernsey, GY1 4ND Legal Advisers: As to Guernsey Law: As to English Law: Mourant Ozannes Slaughter & May 1 Le Marchant Street 1 Bunhill Row St Peter Port London Guernsey, GY1 4HP United Kingdom, EC1Y 8YY FF&P VENTURE FUNDS PCC LIMITED Page 3 Directors' Report for the year ended 31 March 2017 The Directors present their annual report and the audited consolidated financial statements for FF&P Venture Funds PCC Limited (the "Company") and FF&P Venture Funds Subsidiary Limited (the "Subsidiary”) (together the "Group") for the year ended 31 March 2017. Company background FF&P Venture Funds I Limited was incorporated with limited liability in Guernsey on 17 May 2002 in accordance with The Companies (Guernsey) Law, 1994 as amended (superseded by The Companies (Guernsey) Law, 2008). On 26 January 2004 an Extraordinary General Meeting was convened and it was approved that the name of the Company be changed to FF&P Venture Funds PCC Limited and that a reconstruction takes place with the Company converting to a protected cell company under The Protected Cell Companies Ordinance, 1997 as amended (the "Ordinance"). The principal activity of the Group is that of investment holding. The Company currently has eight cells, Cell I, Cell II, Cell III, Cell IV, Venture Funds Direct II "Cell V", "Special Situations II" Cell VI, "Special Situations III" Cell VII and Cell VIII. During the year the Board of Directors, in conjunction with the Investment Adviser, have assessed the portfolio’s within each cell and considered how best to maintain, or return, value to shareholders. As a result of these considerations the Board of Directors have concluded that Cell II, Cell VI, Cell VII and Cell VIII should close and all available monies returned to shareholders. These cells have either disposed of all investments, or are in the process of doing so. The fixed costs which would be incurred in the continuation of these cells are not felt to contribute any further benefit to the shareholders. During the year the shares of Cell VI, Cell VII and Cell VIII were delisted from The International Stock Exchange (“TISE”), formerly Channel Islands Securities Exchange (“CISE”). As such only the shares in Cell I, Cell III, Cell IV and Cell V remain listed on the TISE. Cell Objectives The objective of Cell I and Cell IV is to achieve long-term capital appreciation by investing in a diversified portfolio of Venture Capital, Leveraged Buyout (LBO) and Opportunistic unquoted funds. Cell II also had this objective prior to the sale of its investment portfolio in order to facilitate the return of capital back to shareholders. The objective of Cell III and Cell V is to achieve long-term capital appreciation by investing primarily in unquoted investments. The objective of Cell VI and VII was to achieve long-term capital appreciation by providing development capital to private, unquoted companies and the objective of Cell VIII was to achieve a mixture of long-term capital appreciation and income by investing in infrastructure investments. The assets of the different Cells are held in segregated portfolios. Persons investing and dealing with a Cell of the Company shall only have recourse to the assets attributable to that particular Cell. They shall have no recourse to the assets of any other Cell, except as provided under the Ordinance, against any non-cellular assets of the Company. Company's principal activity and objective The principal activity of the Group is that of investment holding. The objective of the Company is to deliver increases in capital value to investors, principally via investment in pooled investment vehicles such as limited partnerships as well as direct investments. The Company aims to offer investors a diversified exposure to a broad spectrum of early and later stage opportunities, including technology, venture buy-out, growth capital and mezzanine investments. A number of cells within the Company have now closed or are at a stage of realisation of their investments. In these cases the aim is now to maximise the value that can be realised and returned to shareholders. Results and dividends In the period under review, the Group recorded a net operating loss after taxation of US$2,663,000 (2016: loss of US$4,911,000) and a net gain on investments of US$8,073,000 (2016: loss of US$1,408,000). As at 31 March 2017, the Group had net assets of US$127,296,000 (2016: US$246,213,000) and a net asset valuation per share of: 31 March 2017 31 March 2016 Cell I $8.16 $7.63 Cell I: New Series $6.47 $6.29 Cell II $3.12 $2.56 Cell III $0.55 $0.50 Cell IV $5.92 $5.48 Cell V £0.70 £0.88 Cell VI £0.30 £0.38 Cell VII £0.55 £0.56 Cell VIII £0.00 £0.77 Cell VIII: PFI I series £0.20 £0.31 No dividend has been declared in the year (2016: nil). FF&P VENTURE FUNDS PCC LIMITED Page 4 Directors' Report for the year ended 31 March 2017 (Continued) Significant events during the year As disclosed in the prior year financial statements, on 11 April 2016 the Company formally closed on a contract to sell the holding of investment in FF&P Special Situations III LP, held by Cell VII, for approximately £10m. All proceeds from this sale were received prior to 31 March 2017. In April 2016 the last remaining investment within FF&P PFI LLP, the investment held by Cell VIII, was fully redeemed with proceeds of approximately £27.8m received by Cell VIII in June 2016. Post year end Cell VI, Cell VII and Cell VIII have all been formally wound up. Further details are disclosed within the notes to the financial statements, at note 25. Directors The Directors of the Company are set out on page 2. Audit Committee On 31 October 2016 the Chairman of the Audit Committee, Mr Stewart Merry, resigned from his position at Stonehage Fleming and with this, from his position as Chairman of the Audit Committee of the Company. On 7 December 2016 the Board elected to appoint Mr Andy Gray as the new Chairman of the Audit Committee. The board have delegated the responsibility for this role to Mr Gray as a non-board member. The fee for this role continues to be £7,000 per annum. Mr Gray is a Director in the Corporate Services Division and Head of Accounting Services at Stonehage Fleming in Jersey. He manages the team responsible for fund valuations, accounting and financial reporting. He is a fellow member of the Association of Chartered Certified Accountants. Directors' interests As at 31 March 2017 Rupert Evans held a beneficial interest of 16,204.26 (2016: 46,430.08) Redeemable Shares in Cell III (Class B). Going Concern The Directors believe it is appropriate to continue to adopt the going concern basis in preparing the Consolidated Financial Statements as the assets of the Group include sufficient cash and securities which are readily realisable, there are minimal creditors and shares are only redeemable at the discretion of the Directors. Accordingly, the Group has adequate financial resources to continue in operational existence for the foreseeable future. Statements of Directors' responsibilities The Companies (Guernsey) Law, 2008 (the "Law") requires the Directors to prepare financial statements for each financial year. As disclosed in Note 2, the financial statements of the Company are prepared in accordance with United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 "The Financial Reporting Standard Applicable in the United Kingdom and Republic of Ireland", ("FRS 102") and applicable law. The Directors are responsible for preparing the financial statements for each financial period which give a true and fair view of the state of affairs of the Company and of the profit or loss for that period in accordance with applicable Guernsey Law and United Kingdom Accounting Standards. In preparing these financial statements, the Directors are required to: * select suitable accounting policies and apply them consistently; * make judgements and estimates that are reasonable and prudent; * state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and * prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.