TIDMPEBI
RNS Number : 7495L
Port Erin Biopharma Investments Ltd
28 December 2018
Port Erin Biopharma Investments Limited
("Port Erin" or "the Company")
Annual audited results for the year ending 30 June 2018
Notice of AGM
The Board of Port Erin, the AIM quoted company focused on
investing in the biotechnology and biopharmaceutical sectors, is
pleased to announce its annual results for the year ending 30 June
2018.
Copies of the 2018 Audited Report and Financial Statements are
being posted to shareholders and will shortly be available from the
Company's website www.porterinbiopharma.com.
The Company will post its Notice of Annual General Meeting
("AGM") to Shareholders at the same time. The AGM will be held at
the Sanderson Suite, Claremont Hotel, Loch Promenade, Douglas, Isle
of Man IM1 2LX at 10:00 a.m. on Wednesday, 6 February 2019.
For further information, please contact:
Port Erin Biopharma Beaumont Cornish Limited Optiva Securities
Investments Limited Limited
The Company Nomad Broker
Denham Eke Roland Cornish/James Jeremy King/Ed McDermott
+44 (0) 1624 639396 Biddle +44 (0) 203 137 1904
+44 (0) 207 628 3396
Corporate information
Company's website www.porterinbiopharma.com
Registered Agent & Office Greystone Trust Company Limited
18 Athol Street
Douglas
Isle of Man, IM1 1JA
Nominated Adviser From 8 February 2018:
Beaumont Cornish Limited
10(th) Floor, 30 Crown Place,
London, EC2A 4EB
Prior to 8 February 2018:
Northland Capital Partners Limited,
60 Gresham Street
London, EC2V 7BB
Broker From 8 February 2018:
Optiva Securities Limited
New Liverpool House, 49 Berkeley
Square, Mayfair,
London, W1J 5AZ
Prior to 8 February 2018:
Peterhouse Corporate Finance
Limited
New Liverpool House, 15 Eldon
Street
London, EC2M 7LD
Prior to 8 February 2018:
Northland Capital Partners Limited
60 Gresham Street
London, EC2V 7BB
Registrar Link Asset Services (Isle of
Man) Limited
Clinch's House
Lord Street
Douglas,
Isle of Man, IM1 1JD
Auditors KPMG Audit LLC
Heritage Court
41 Athol Street
Douglas
Isle of Man, IM99 1HN
Legal Advisers As to Isle of Man Law
Long & Humphrey
The Old Courthouse
Athol Street
Douglas
Isle of Man, IM1 1LD
Legal Advisers As to English Law
Hill Dickinson LLP
The Broadgate Tower
20 Primrose Street
London, EC2A 2EW
Depositary Link Asset Services (Isle of
Man) Limited
Clinch's House
Lord Street
Douglas
Isle of Man, IM1 1JD
Administrator Burnbrae Limited
4(th) Floor, Viking House
Nelson Street
Douglas
Isle of Man, IM1 2AH
Chairman's statement
Introduction
I am pleased to present the audited financial statements for
Port Erin Biopharma Investments Limited (the "Company") for the
year ending 30 June 2018.
Financial Review
The Company recorded a net loss of GBP211,406 for the period
(2017: loss of GBP37,030). Our investment income, including
dividends, net realised gain on sales, and net unrealised losses,
reflected a loss of GBP26,603 (2017: gain of GBP181,329). Operating
expenses remained at a similar level at GBP201,411 (2017:
GBP228,464), principally representing the costs of maintaining our
listing. The period included no performance fee and no performance
fee has been accrued during the period under review. There were no
exceptional costs during the period. The basic and diluted loss per
share was 0.91 pence (2017: loss of 0.16 pence).
Our invested assets at fair value increased to GBP1,131,164
(2017: GBP1,052,236), and cash and equivalents were GBP555,293
(2017: GBP875,885). Thus, our total assets, including receivables
of GBP14,480 (2017: GBP17,090) and a loan note, plus accrued
interest, of GBP226,584 (2017: GBP200,000), stood at GBP1,927,521
(2017: GBP2,145,211). Payables stood at GBP23,759 (2017:
GBP30,043). As a result, the net asset value per share at 30 June
2018 was 8.21 pence (2017: 9.12 pence).
Approach to Risk and Corporate Governance
As part of the adoption of the Quoted Companies Alliance
Corporate Governance code subsequent to 30 June 2018, the Board has
completed an assessment of the risks inherent in the business and
has defined and adopted a statement of risk appetite, being the
amount and type of risk, it is prepared to seek, accept or tolerate
in pursuit of value. This being: -
"The Company's general risk appetite is a moderate, balanced one
that allows it to maintain appropriate growth, profitability and
scalability, whilst ensuring full corporate compliance."
The Group's primary risk drivers include: -
Strategic, Reputational, Credit, Operational, Market, Liquidity,
Foreign Exchange, Capital and Funding, Compliance and Conduct.
Our risk appetite has been classified under an "impact" matrix
defined as Zero, Low, Medium and High. Appropriate steps are
underway to ensure the prudential control monitoring of risks to
the Company and a suitable committee and reporting structure, under
the Chairmanship of the Chairman, will be formed to undertake this
essential requirement. Further details of the Corporate Governance
Statement, including the role and responsibilities of the Chairman
and an explanation as to how the QCA Code has been applied, will be
found on pages 7 to 9 of this report.
The Board is currently refining the Company's business plan
which will incorporate the risk and compliance framework.
Investment Review
Of our quoted investments, Regent Pacific Group Limited ("RPG")
continues to be our most significant holding. RPG's principal
investment is in Plethora Solutions Holdings plc ("Plethora"), a
wholly-owned subsidiary. Plethora is focussed on the
commercialisation of its product Fortacin(TM) - the first
EU-approved topical prescription treatment for premature
ejaculation. Fortacin(TM) was commercially launched in the United
Kingdom in November 2016 and can now be prescribed in the UK from a
physician either in person or online via an online consultation,
with prescriptions to be fulfilled by Chemist 4 U. The European
roll-out commenced in Europe in early 2018 by way of first sales
from Recordati Group ("Recordati"), RPG's commercial partner, to
wholesalers in Italy on 9 February 2018. First Fortacin(TM) sales
in France and Spain followed on 16 and 19 February 2018
respectively, and thereafter in Germany and Portugal on 1 March
2018. Following the first commercial sale of Fortacin(TM) in each
of France, Germany, Italy, Portugal and Spain, a total of EUR4
million (or approximately GBP3.5 million) will be due from
Recordati to RPG. In addition, discussions are ongoing with new
potential commercial partners with regards to "outlicensing"
Fortacin(TM) in other key markets including Asia Pacific, Middle
East, Latin America, North America and sub-Sahara Africa. In
December 2018, RPG announced a licence agreement with Wanbang
Pharmaceutical Marketing and Distribution Co., Ltd to launch
Fortacin(TM) in China which will result in up to US$13 million in
upfront licence payments, up to US$25 million in sales milestones
together with royalties ranging from low to high-teens, potential
to help an initial target market of approximately 9 million
patients in China in its first year of launch, rising to over 170
million patients by its tenth year; and RPG retains full commercial
rights to Fortacin(TM) in all unlicensed countries, including the
USA.
Of our other quoted holdings, Summit Therapeutics plc ("Summit")
is an international biopharmaceutical operation focussed on the
discovery and development of novel medicines to treat the fatal
muscle wasting disease Duchenne muscular dystrophy ("DMD") and
infections caused by the bacteria Clostridium difficile ("CDI"). In
February 2018, Summit announced further positive findings from
PhaseOut DMD, a Phase 2 open-label, multi-centre clinical trial of
the utrophin modulator ezutromid DMD. In August 2018, Summit
announced that it had been awarded US$12 million under its contract
with the Biomedical Advance Research and Development Authority
("BARDA"), a division of the US Department of Health and Human
Services - Office of the Assistant Secretary for Preparedness and
Response. The Funds will support the Phase 3 development programme
for ridinilazole, Summit's precision new mechanism antibiotic for
the treatment of CDI infection. The total commitment from BARDA is
$44 million, which includes the base package of $32 million
announced in September 2017.
SalvaRx Group plc ("SalvaRX") is a drug discovery and
development operation concentrating on immune-oncology. SalvaRx
invests in novel cancer immuno-therapies and provides its portfolio
companies with operational support ranging from direct operation of
subsidiaries to advisory or part-time involvement in more
established companies. SalvaRx has a mandate to assemble and
develop a portfolio of differentiated immune-oncology therapies for
the treatment of late-stage cancers. SalvaRx provides its portfolio
companies with operational support in addition to capital,
sometimes operating its portfolio companies directly and sometimes
augmenting the current team. Investee companies include iOx
Therapeutics Limited, Intensity Therapeutics Limited, Nekonal
Oncology Limited and RIFT Biotherapeutics Inc. On 27 November 2018,
SalvaRX announced the disposal of its interest in SalvaRx Limited,
its 94.2 per cent. owned subsidiary, to Portage Biotech Inc
("Portage") for a consideration of US$67.5 million, satis ed by the
issue of 757,943,784 new shares in Portage by transferring not less
than 660,593,556 of the new shares on a pro-rata basis to SalvaRX's
shareholders on record as of 8 January 2019. In December 2018,
SalvaRx announced that iOx, its 56.95% subsidiary undertaking, has
issued US$1 million of unsecured convertible loan notes to further
the development of its leading immunology drug, IMM60.
In March 2018, Luminor Medical Technologies Inc. changed its
name to RISE Life Science Corp ("RISE"). RISE is a medical
diagnostic operation which acquires, develops and commercialises
medical technologies for unmet clinical needs. Following its recent
acquisition of Cultivate Kind and Life Bloom Organics, RISE has
leveraged its in-house capacity for sales and distribution,
packaging and fulfilment, production, and retail marketing. Over
the next 12 months, both Karezza and Life Bloom Organics products
will be distributed to a target network of 200+ premium retail
locations across California.
The Diabetic Boot Company ("DBC") is working hard to
commercialise its ground breaking PulseFlowDF(TM) device for the
treatment of diabetic foot ulcers. Negotiations are in hand with
distribution partners in the US, UK, Germany, Turkey, Serbia and
Malta - where over 50% of the latter's adult population suffer from
diabetes. PulseFlowDF(TM) is being repositioned as a front-line
device which is generating considerable interest from podiatrists
and clinicians. We retain a small shareholding in DBC and also have
a loan note for GBP200,000 with a 7% coupon. DBC repaid this loan
note on 21 December 2018, generating GBP238,606 cash, including
accrued interest, for the Company.
Agex Therapeutics Inc ("Agex") is a biotechnology operation
which develops and commercialises therapeutics targeting human
aging. Their holdings include the PureStem(R) and iTR(TM)
platforms, which reflect over 25 years of research and development
in cellular therapies, cell immortality and regenerative biology.
These platforms are designed to address many of the largest unmet
needs of an aging population, by translating state-of-the-art
biomedical science relating to aging into potential first-in-class
therapeutic cell therapies, small-molecule drugs and medical
devices. On 29 November 2018, it announced that its shares
commenced trading on the New York Stock Exchange.
Insilico Medicine, Inc ("Insilico"), a start-up headquartered at
the John Hopkins University, Maryland, USA, is developing new tools
for drug discovery and repurposing, biomarker development and
pursuing novel strategies for rapid validation. Projects combine
advances in genomics, big-data analysis, deep learning and
reinforcement learning. As an example, Insilico, together with
Juvenescence Ltd and the Buck Institute for Research on Aging,
recently partnered to form Napa Therapeutics Ltd ("Napa"). Napa
will use Insilico's deep learning platform to discover small
molecules against an undisclosed aging-related target. Although
established to focus on that single target, Napa would consider
other programs on a case-by-case basis based on complementary
biology. Napa will have a license to compounds generated under the
deal from Insilico, which will be eligible for over $100 million in
milestone payments related to Napa's program.
Post period, in August 2018 the Company completed a subscription
of US$ 250,000 for 43,357 issued shares in Blue Nalu, Inc
("BlueNalu"), based in San Diego, California, USA, providing an
interest of approximately 2.0% (on a diluted basis), paid by cash.
The level of investment allows PEBI to qualify as a "Major
Investor", providing additional information rights unavailable to
smaller investors. BlueNalu's mission is to be the global leader in
cellular aquaculture(TM), manufacturing 'clean' seafood by growing
cells of certain species of seafood in bioreactors which will
ultimately be for human consumption, providing consumers with great
tasting, healthy, safe, and trusted products that support the
sustainability and diversity of the world's oceans.
Strategy and Outlook
The Board is in the process of finalising a strategic review and
the optimum way to develop the opportunities that are available to
the Company. I anticipate that we will be in a position to announce
our future direction during the course of Quarter 1, 2019.
Meanwhile, I believe that our current investment portfolio,
albeit reduced in scale following the cash distribution from the
disposal of our Magna Biopharma holding, shows considerable promise
for future growth.
Jim Mellon
Chairman
Directors' report
The Directors of Port Erin Biopharma Investments Limited (the
"Company") take pleasure in presenting the Directors' report and
financial statements for the year ended 30 June 2018.
Principal activity
The Company was formed for the purpose of investing in the
biotechnology and biopharmaceutical sector. The Company was
incorporated on 3 May 2011 under the Isle of Man Companies Act 2006
and has no employees other than Directors. On 15 September 2011,
the Company's shares were admitted to AIM.
Results and transfer to reserves
The results and transfers to reserves for the year are set out
on pages 17 and 19.
The Company made a loss for the year after taxation of
GBP211,406 (2017: loss of GBP37,030).
Dividend
The Directors do not propose the payment of a dividend (2017:
GBPnil).
Policy and practice on payment of creditors
It is the policy of the Company to agree appropriate terms and
conditions for its transactions with suppliers by means of standard
written terms to individually negotiated contracts. The Company
seeks to ensure that payments are always made in accordance with
these terms and conditions.
Financial risks
Details relating to the financial risk management are set out in
note 9 to the financial statements.
Directors' interests
As at 30 June 2018, the interests of the Directors and their
families (as such term is defined in the AIM Rules for Companies)
in the share capital of the Company are as follows:
Ordinary shares
Interest Interest at
at end of start of
year year
2018 2017
----------------- ----------- ------------
Jim Mellon(1) 6,729,273 6,729,273
Denham Eke(2) - -
Anderson Whamond - -
(1) Galloway Limited, a company where Jim Mellon is considered
to be the ultimate beneficial owner, holds 5,455,313 Ordinary
shares.
(2) Denham Eke is Managing Director of Galloway Limited.
Significant shareholdings
Except for the interests disclosed in this note, the Directors
are not aware of any holding of ordinary shares as at 30 June 2018
representing 3% or more of the issued share capital of the
Company:
Number of Percentage
ordinary shares of total
issued capital
Jim Mellon(1) 6,729,273 29.01%
Hargreaves Lansdown (Nominees)
Limited HLNOM 1,579,485 6.81%
The Bank of New York (Nominees)
Limited 1,250,000 5.39%
Share Nominees Ltd 1,152,701 4.97%
Vidacos Nominees Limited 1,050,000 4.53%
Lawshare Nominees Limited 875,478 3.77%
Barclays Direct Investing Nominees
Limited 754,918 3.25%
Interactive Investor Services
Nominees Limited 714,593 3.08%
Note:
(1) Jim Mellon's shareholding consists of 5,455,313 shares held
by Galloway Limited. Galloway Limited is a company where Jim Mellon
is considered to be the ultimate beneficial owner. The balance of
Jim Mellon's shareholding is held in his own name.
Directors
The Directors who served during the year and to date were:
Jim Mellon
Denham Eke
Anderson Whamond
Auditors
KPMG Audit LLC, being eligible, have expressed their willingness
to continue in office.
On behalf of the Board
Denham Eke
Director 18 Athol Street
Douglas
28 December 2018
Isle of Man
IM1 1JA
British Isles
Corporate Governance Statement
Corporate Governance Report
The Board (the "Board") is committed to best practice in
corporate governance for Port Erin Biopharma Investments Limited
(the "Company"). Subsequent to 30 June 2018, the Directors have
agreed to comply with the provisions of the Quoted Companies
Alliance ("QCA") Corporate Governance Code for Small and Mid-Size
Quoted Companies (2018) to the extent which is appropriate to its
nature and scale of operations. This report illustrates how the
Company will comply with those principles.
Remuneration Committee
The Remuneration Committee will meet at least twice a year and
comprises of the whole Board. It will be chaired by Anderson
Whamond and is responsible for determining the remuneration of the
Directors and other members of the management. Committee members do
not take part in discussions concerning their own remuneration.
Nomination Committee
The Nomination Committee is comprised of the whole Board. It
will be chaired Anderson Whamond and is responsible for making
recommendations to the Board on matters relating to the composition
of the Board, including Executive and Non-executive Director
succession planning, the appointment of new Directors and the
election and re-election of Directors. The Nomination Committee
only meets as matters arise.
Audit, Risk and Compliance Committee
The Audit, Risk and Compliance Committee (the "ARCC") will meet
at least two times each year and comprises one Non-executive
Director, currently Anderson Whamond (Chairman) and the Finance
Director Denham Eke. The external auditors will attend by
invitation. Its role is to be responsible for reviewing the
integrity of the financial statements and the balance of
information disclosed in the accompanying Directors' Report, to
review the effectiveness of internal controls and risk management
systems and recommend to the Board (for approval by the members)
the appointment or re-appointment of the external auditor. The ARCC
reviews and monitors the external auditor's objectivity,
competence, effectiveness and independence, ensuring that if it or
its associates are invited to undertake non-audit work it will not
compromise auditor objectivity and independence.
Further information can be found within the Audit, Risk and
Compliance Report contained within this Annual Report.
The Role of the Board
The Board is collectively responsible for the long-term success
of the organisation. Its principal function is to determine the
strategy and policies of the Company within an effective control
framework which enables risk to be assessed and managed.
The Board ensures that the necessary financial and human
resources are in place for the Company to meet its objectives and
that business and management performances are reviewed.
Furthermore, the Board ensures that the Company operates within its
constitution, relevant legislation and regulation and that proper
accounting records and effective systems of business control are
established, maintained, documented and audited.
There are at least four formal Board meetings each year. All
Board members have the benefit, at the Company's expense, of
liability insurance in respect of their responsibilities as
Directors and have access to independent legal or other
professional advice if required. The Board has a formal schedule of
matters which are reserved for its consideration and it has
established three committees to consider specific issues in greater
detail, being the Audit, Risk and Compliance, Remuneration and
Nomination Committees. The Terms of Reference for each of these
Committees are published on the Company's website.
Division of Responsibilities
The offices of Chairman and Finance Director are distinct and
held by different people. The role of each is set out in their
respective job descriptions.
The Chairman
The Chairman is responsible for leading the Board, ensuring its
effectiveness in all aspects of its role, promoting a culture of
openness of debate and communicating with the Company's members on
behalf of the Board. The Chairman sets the direction of the Board
and promotes a culture of openness and debate by facilitating the
effective contribution of Non-executive Directors and ensuring
constructive relations between Executive and Non-executive
Directors. The Chairman also ensures that Directors receive
accurate, timely and clear information. In doing so, this fosters a
positive corporate governance culture throughout the Company.
The Chief Executive Officer
At present, the Company does not have a Chief Executive Officer.
Instead, the responsibility for managing the Company's business and
operations within the parameters set by the Board is held by the
Finance Director.
Non-executive Directors
The Non-executive Directors are responsible for bringing
independent judgement to the discussions held by the Board, using
their breadth of experience and understanding of the business.
Their key responsibilities are to constructively challenge and
contribute to strategic proposals, and to monitor performance,
resources, and standards of conduct, compliance and control, whilst
providing support to executive management in developing the
Company.
The Composition of the Board
At the year end, the Board is made up of three directors,
comprising two Non-executive Directors and one Executive Director.
At least one Non-executive Director is considered by the Board to
be independent in character and judgement and to have an
appropriate balance of skills and experience. They are also
considered to be free of any relationship or circumstances which
could materially interfere with the exercise of their judgement,
impede the provision of constructive challenge to management and
provide assistance with the development of strategy.
Appointments to the Board
The principal purpose of the Nomination Committee is to
undertake the assessment of the balance of skills, experience,
independence and knowledge on the Board against the requirements of
the business, with a view to determining whether any shortages
exist. Having completed the assessment, the Committee makes
recommendations to the Board accordingly. Appointments to the Board
are made on merit, with due regard to the benefits of diversity.
Within this context, the paramount objective is the selection of
the best candidate, irrespective of background, and it is the view
of the Board that establishing quotas or targets for the diversity
of the Board is not appropriate.
All Director appointments must be approved by the Company's
Nominated Adviser, as required under the AIM Rules, before they are
appointed to the Board.
Prior to appointment, Non-executive Directors are required to
demonstrate that they are able to allocate sufficient time to
undertake their duties.
Information and Support
The Chairman ensures that the Board receives accurate, timely
and clear information in a form and of sufficient quality to enable
it to fulfil its responsibilities.
All Directors have access to the advice and services of the
Finance Director who is responsible for ensuring compliance with
all Board procedures and advising the Board on governance
matters.
Evaluation
An internal process exists to evaluate, on an annual basis, the
performance and effectiveness of individual Directors and of the
Board and its Committees.
Re-election
The Rules require that all Directors are submitted for election
at the AGM following their first appointment to the Board.
Thereafter all directors will submit themselves for re-election at
least once every three years, irrespective of performance.
Financial and Business Reporting
The Board confirms that the Annual Report and Accounts, taken as
a whole, is fair, balanced and understandable and provides the
information necessary for members to assess the Company's
performance, business model and strategy. The responsibilities of
the Directors in relation to the preparation of the Company's
accounts are set out on page 11. The Chairman's Statement on pages
2 to 4 provides a detailed review of the Company's business
activities and future prospects.
Risk Management and Internal Control
The Board is responsible for determining a framework for risk
management and control, including the Company's risk appetite and
tolerance. Senior management are responsible for designing,
operating and monitoring risk management and internal control
processes in line with the risk appetite and tolerance while the
ARCC, on behalf of the Board, is responsible for reviewing the
adequacy and effective operation of these processes. The role of
the ARCC is described previously and provides the Board with
independent assurance that the Company is operating specifically in
accordance with the risk appetite parameters determined and
approved by the Board. It also ensures that the outcomes for the
Company's various activities are in line with those parameters.
The system of internal control overall is designed to enable the
Company to achieve its corporate objectives within the Board's
predetermined risk appetite, not to eliminate risk.
The directors have reviewed the need for an internal audit
function and believe that the Company is not of sufficient size and
complexity to require such a function.
Remuneration
The Report on Directors' Remuneration, prepared by the Chairman
of the Remuneration Committee, is to be found on pages 12 and 13
and explains how the Company complies with the Code Principles
relating to remuneration. Details of Directors' Emoluments during
2017-18 can be found on page 13.
Dialogue with Shareholders
The Company is owned by both individual and institutional
shareholders. All shareholders are kept informed of developments
and feedback is encouraged both at the AGM and through
communication via the Company's website.
Constructive use of the AGM
Each year the Company sends details of the AGM, including
appointment of proxy and voting forms, to members who are eligible
to vote.
Approval
This report was approved by the Board of Directors on 28
December 2018 and signed on its behalf by:
Denham Eke
Finance Director
Audit, Risk and Compliance Committee Report
Subsequent to 30 June 2018, the Directors have agreed to comply
with the provisions of the Quoted Companies Alliance ("QCA")
Corporate Governance Code for Small and Mid-Size Quoted Companies
(2018) to the extent which is appropriate to its nature and scale
of operations.
This report illustrates how the Company complies with those
principles in relation to its Audit, Risk and Compliance Committee
(the "ARCC").
Membership
The Committee comprises of two Non-executive Directors and the
members are Anderson Whamond (Chairman) and Jim Mellon. The
composition of the Committee has been reviewed during the year and
the Board is satisfied that the Committee members have recent
relevant financial experience and the expertise to resource and
fulfil its responsibilities effectively, including those relating
to risk and controls.
Meetings
The Committee meets two times a year, including the review of
the interim and full year results. Other Directors and
representatives from the external auditors attend by
invitation.
Duties
The Committee carries out the duties below for the Company, as
appropriate:
-- Monitors the integrity of the financial statements of the
Company, including annual and half-yearly reports, interim
management statements, and any other formal announcement relating
to financial performance, reviewing significant financial reporting
issues and judgements which they contain.
-- Reviews and challenges the consistency of the information
presented within the financial statements, compliance with stock
exchange or other legal requirements, accounting policies and the
methods used to account for significant or unusual
transactions.
-- Keeps under review the effectiveness of the Company's
internal controls and risk management systems.
-- KPMG Audit LLC was appointed as auditor in 2011 and ARCC
oversees the relationship with them including regular meetings to
discuss their remit and review the findings and any issues with the
annual audit. It also reviews their terms of appointment, meets
them once a year independent of management and considers and makes
recommendations to the Board, to be put to the Company for approval
at the Annual General Meeting, in relation to the appointment,
re-appointment and removal of the Company's external auditor. There
are no contractual restrictions in place in respect of the auditor
choice.
-- The Committee is governed by a Terms of Reference and a copy
of this is available on the Company's website.
2018 Annual Report
During the year, ARCC held two meetings and can confirm that it
has received sufficient, reliable and timely information from
management and the external auditors to enable it to fulfil its
responsibilities.
The Committee has satisfied itself that there are no
relationships between the auditor and the Company which could
adversely affect the auditor's independence and objectivity.
All internal control and risk issues that have been brought to
the attention of ARCC by the external auditors have been considered
and the committee confirms that it is satisfied that management has
addressed the issues or has plans to do so.
The Company has a number of policies and procedures in place as
part of its internal controls and these are subject to continuous
review and as a minimum are reviewed by ARCC on an annual
basis.
-- ARCC has reviewed and discussed together with management and
the external auditor the Company's financial statements for the
year ended 30 June 2018 and reports from the external auditor on
the planning for and outcome of their reviews and audit. The key
accounting issues and judgements considered relating to the
Company's financial statements and disclosures were as follows:
-- Valuation of unquoted investments GBP554,318;
-- Carrying amount of quoted investments GBP576,846
-- Going concern - ARCC reviewed the going concern position of
the Company, taking into account the 12-month cash flow forecasts
and the continued support of the ultimate parent. ARCC is satisfied
that preparing the financial statements on a going concern basis is
appropriate. Disclosures are included in note 1;
-- Cash balances - ARCC reviewed the cash position to ensure
that it is able to meet its ongoing requirements and also has
sufficient cash reserves to cover the relevant player liabilities.
ARCC is satisfied that there are sufficient cash balances to meet
its ongoing expenses and cover the player balances in full if
required. Disclosures are included in note 9.
Anderson Whamond
Chairman ARCC
28 December 2018
Statement of Directors' Responsibilities in Respect of the
Directors' Report and the Financial Statements
The Directors are responsible for preparing the Directors'
Report and the financial statements in accordance with applicable
law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law they have
elected to prepare the financial statements in accordance with
International Financial Reporting Standards as adopted by the
European Union (IFRSs as adopted by the EU), as applicable to an
Isle of Man company and applicable law.
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Company and of its profit or
loss for that period. In preparing the financial statements, the
Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and estimates that are reasonable, relevant and reliable;
-- state whether they have been prepared in accordance with IFRSs as adopted by the EU;
-- assess the Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern;
and
-- use the going concern basis of accounting unless they either
intend to liquidate the Company or to cease operations, or have no
realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
its financial statements comply with the Isle of Man Companies Act
2006. They are responsible for such internal control as they
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error, and have general responsibility for taking such
steps as are reasonably open to them to safeguard the assets of the
Company and to prevent and detect fraud and other
irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in the Isle of Man governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
Report of the Remuneration Committee
As an Isle of Man registered company there is no requirement to
produce a Directors' Remuneration Report. However, the Board
follows best practice and therefore has prepared such a report.
The Directors have agreed to comply with the provisions of the
Quoted Companies Alliance ("QCA") Corporate Governance Code for
Small and Mid-Size Quoted Companies (2018) to the extent which is
appropriate to its nature and scale of operations.
This report illustrates how the Company complies with those
principles in relation to directors' remuneration.
The Level and Components of Non-Executive Directors
Remuneration
The Remuneration Policy reflects the Company's business strategy
and objectives as well as sustained and long-term value creation
for shareholders. In addition, the policy aims to be fair and
provide equality of opportunity, ensuring that:
-- the Company is able to attract, develop and retain
high-performing and motivated employees in the competitive local
and wider markets;
-- employees are offered a competitive remuneration package to
encourage enhanced performance and are, in a fair and responsible
manner, rewarded for their individual contribution to the success
of the Company;
-- it reflects the Company's culture and values; and
-- there is full transparency of the Remuneration Policy.
In line with the Board's approach, which reflects that adopted
within other comparable organisations, the Remuneration Policy
provides for the reward of the Non-Executive Directors through
salary and other benefits.
Non-Executive Directors Emoluments
The remuneration for the Non-Executive Director reflects their
responsibilities. It comprises basic salary, eligibility to
participate in an annual bonus scheme when this is considered
appropriate, private healthcare and share option incentives.
Annual bonus scheme payments are not pensionable and are not
contracted.
The basic salary payable to the Executive Director is reviewed
each year with reference to jobs carrying similar responsibilities
in comparable organisations, market conditions generally and local
employment competition in view of the Company's geographical
position.
It is anticipated that an annual bonus scheme will operate when
profitability and cash flow allow. Bonuses for the executive
director will be calculated with reference to the profit before tax
as disclosed in the audited accounts of the Company, together with
an assessment by the Committee of the director's performance
against agreed personal targets. Bonus payments are not
pensionable.
The Committee believes that share ownership by executives
strengthens the link between their personal interests and those of
shareholders. Options will be granted to executives periodically at
the discretion of the Remuneration Committee. The grant of share
options is not subject to fixed performance criteria. This is
deemed to be appropriate as it allows the Committee to consider the
performance of the executives and the contribution of the
individual executives and, as with annual bonus payments,
illustrates the relative importance placed on performance-related
remuneration.
Except when required by statute, the Company does not intend to
contribute to the personal pension plans of directors in the
forthcoming year.
Executive Directors' Contractual Terms
The service contract of the Executive Director provides for a
notice period of six months.
Non-executive Directors' Remuneration
Non-executive Directors do not receive any benefits other than
their fees and travelling expenses for which they are reimbursed.
The level of fees payable to Non-executive Directors is assessed
using benchmarks from a group of comparable biopharma
organisations.
The Procedure for Determining Remuneration
The Remuneration Committee, comprising two Non-executive
Directors, is responsible for setting the remuneration of the
Executive Director and is chaired by Jim Mellon. Committee members
do not take part in discussions concerning their own remuneration.
The basic Non-executive Director fee is set by the Chairman. The
Chairman of the Committee reports at the Board meeting following a
Committee meeting.
It is the view of the Committee that Directors' remuneration
awarded across the Company for the year has been in accordance with
the Company's stated Remuneration Policy and, on behalf of the
Committee I recommend that you endorse this report. An analysis of
Directors' emoluments is as follows:
2018 2017
GBP000 GBP000
----------- ----------------------------------------- ------- -------
Emoluments - salaries, bonuses and taxable benefits - -
- fees 10 10
----------------------------------------------------- ------- -------
10 10
----------------------------------------------------- ------- -------
Directors' Emoluments
Basic Termination 2018 2017
salary Fees Bonus payments Benefits Total Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------------- -------- --------- -------- ------------ ----------- -------- --------
Executive
Denham Eke - - - - - - -
Non-executive
Jim Mellon* - - - - - - -
Anderson Whamond - 10 - - - 10 10
Aggregate emoluments - 10 - - - 10 10
--------------------- -------- --------- -------- ------------ ----------- -------- --------
* Any emoluments are subject to an agreement with Shellbay
Limited whereby Shellbay Limited receives a profit share equating
to 15% of any increase in the Net Asset Value of the Company's
investments, subject to the previous Net Asset Value high watermark
being exceeded (please see Note 2 to the Accounts).
Approval
The report was approved by the Board of directors and signed on
behalf of the Board.
Anderson Whamond
Chairman of Remuneration Committee
28 December 2018
Report of the Independent Auditors, KPMG Audit LLC, to the
members of Port Erin Biopharma Investments Limited
1 Our opinion is unmodified
We have audited the financial statements of Port Erin Biopharma
Investments Limited ("the Company") for the year ended 30 June 2018
which comprise the statement of comprehensive income, the statement
of financial position, the statement of changes in equity, the
statement of cash flows and the related notes, including the
accounting policies in note 1.
In our opinion the financial statements:
-- give a true and fair view of the state of Company's affairs
as at 30 June 2018 and of its loss for the year then ended;
-- have been properly prepared in accordance with International
Financial Reporting Standards as adopted by the European Union;
and
-- have been prepared in accordance with the requirements of the
Isle of Man Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our
responsibilities are described below. We have fulfilled our ethical
responsibilities under, and are independent of the Company in
accordance with, UK ethical requirements including the FRC Ethical
Standard. We believe that the audit evidence we have obtained is a
sufficient and appropriate basis for our opinion.
2 Key audit matters: our assessment of risks of material
misstatement
Key audit matters are those matters that, in our professional
judgment, were of most significance in the audit of the financial
statements and include the most significant assessed risks of
material misstatement (whether or not due to fraud) identified by
us, including those which had the greatest effect on: the overall
audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. We have identified
one key audit matter. This matter was addressed in the context of
our audit of the financial statements as a whole, and in forming
our opinion thereon we do not provide a separate opinion on this
matter. In arriving at our audit opinion above, the key audit
matter identified was as follows:
The risk Our response
Valuation of Subjective valuation
unquoted 28.8% of the Our procedures included:
investments Company's * Control design: Documenting and assessing the design
(2018: GBP554,318; total assets (by and implementation of the investment valuation
2017: GBP368,660) value) are held processes and controls;
in investments
Refer to note where no quoted
1(b) (use of market price is * Methodology choice: In the context of observed
estimates available. Unquoted industry best practice and the provisions of the
and judgement), investments are International Private Equity and Venture Capital
1(d) (accounting measured at fair Valuation Guidelines, we challenged the
policy for financial value, which is appropriateness of the valuation basis selected;
instruments) and established in
note 9 (Fair value accordance with
of financial IAS 39 and based * Comparing valuations: Where a recent transaction has
instruments). on the International been used as a basis to value a holding we obtained
Private Equity an understanding of the circumstances surrounding the
and Venture Capital transaction such as whether it was considered to be
Valuation Guidelines on an arms-length basis and suitable as an input into
by using a valuation
measurements
of value such
as comparison * Assessing transparency: Consideration of the
with prices of appropriateness, in accordance with relevant
recent orderly accounting standards, of the disclosures in respect
transactions, of unquoted investments and the significant inherent
where available. uncertainty associated with valuing such investments.
The effect of
these matters
is that, as part
of our risk
assessment,
we determined
that the valuation
of unquoted
investments
has a high degree
of estimation
uncertainty, with
a potential range
of reasonable
outcomes greater
than our materiality
for the financial
statements as
a whole, and
possibly
many times that
amount.
--------------------- ------------------------------------------------------------------------
Report of the Independent Auditors, KPMG Audit LLC, to the
members of Port Erin Biopharma Investments Limited (continued)
There has been one change in key audit matters since the prior
year, as follows:
The carrying amount of quoted investments is no longer included
as a key audit matter. Whilst we continue to perform procedures
over quoted investments, following a re-assessment of the risk
associated with this account caption we have not assessed this as
one of the most significant risks in our current year audit.
Accordingly, the carrying amount of quoted investments is not
separately identified in our report this year
3 Our application of materiality and an overview of the scope of
our audit
Materiality for the financial statements as a whole was set at
GBP58,400 (2017: GBP63,455), determined with reference to a
benchmark of net assets, of which it represents 3% (2017: 3%).
We consider net assets to be the most appropriate benchmark as
it is consistent with reporting provided to shareholders.
We agreed to report to the Board of Directors any corrected or
uncorrected identified misstatements exceeding GBP2,900 (2017:
GBP3,170), in addition to other identified misstatements that
warranted reporting on qualitative grounds.
4 We have nothing to report on going concern
We are required to report to you if we have concluded that the
use of the going concern basis of accounting is inappropriate or
there is an undisclosed material uncertainty that may cast
significant doubt over the use of that basis for a period of at
least twelve months from the date of approval of the financial
statements. We have nothing to report in these respects.
5 We have nothing to report on the other information in the
Annual Report
The Directors are responsible for the other information
presented in the Annual Report together with the financial
statements. Our opinion on the financial statements does not cover
the other information and, accordingly, we do not express an audit
opinion or any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in
doing so, consider whether, based on our financial statements audit
work, the information therein is materially misstated or
inconsistent with the financial statements or our audit knowledge.
Based solely on that work we have not identified material
misstatements in the other information.
6 Respective responsibilities
Directors' responsibilities
As explained more fully in their statement set out on page 11,
the Directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and fair
view; such internal control as they determine is necessary to
enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error; assessing the
Company's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern; and using the going
concern basis of accounting unless they either intend to liquidate
the Company or to cease operations, or have no realistic
alternative but to do so.
Auditor's responsibilities
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue our
opinion in an auditor's report. Reasonable assurance is a high
level of assurance, but does not guarantee that an audit conducted
in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in aggregate,
they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial
statements.
A fuller description of our responsibilities is provided on the
FRC's website at: -
www.frc.org.uk/auditorsresponsibilities.
7 The purpose of our audit work and to whom we owe our
responsibilities
This report is made solely to the Company's members, as a body,
in accordance with Section 80(c) of the Isle of Man Companies Act
2006. Our audit work has been undertaken so that we might state to
the Company's members those matters we are required to state to
them in an auditor's report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company's
members, as a body, for our audit work, for this report, or for the
opinions we have formed.
KPMG Audit LLC
Chartered Accountants
Heritage Court
41 Athol Street
Douglas
Isle of Man IM99 1HN
28 December 2018
Statement of comprehensive income
for the year ended 30 June 2018
2018 2017
Notes GBP GBP
Income
Investment (loss)/gain 3 (35,228) 180,329
Other income 8,625 1,000
---------------- ----------------
(26,603) 181,329
Operating expenses
Directors' fees 2 (10,000) (10,000)
Other costs 4 (191,411) (218,464)
Foreign exchange (loss)/gains (66) 132
---------------- ----------------
Loss from operating activities 5 (228,080) (47,003)
Interest received 16,674 9,973
---------------- ----------------
Loss before taxation (211,406) (37,030)
Taxation 1(i) - -
---------------- ----------------
Loss for the year (211,406) (37,030)
Other comprehensive income - -
---------------- ----------------
Total comprehensive loss
for the year (211,406) (37,030)
Basic and diluted earnings
loss per share (pence) 12 (0.91) (0.16)
The Directors consider that the Company's activities are
continuing.
Statement of financial position
as at 30 June 2018
2018 2017
Notes GBP GBP
Current assets
Financial assets at
fair value through profit
or loss 7 1,131,164 1,052,236
Loan receivable 8 226,584 200,000
Trade and other receivables 14,480 17,090
Cash and cash equivalents 555,293 875,885
---------------- ----------------
Total assets 1,927,521 2,145,211
Equity and liabilities
Capital and reserves
Share capital 6 23 23
Share premium 6 1,890,142 1,890,142
Retained earnings 13,597 225,003
---------------- ----------------
1,903,762 2,115,168
Current liabilities
Trade and other payables 10 23,759 30,043
---------------- ----------------
Total equity and liabilities 1,927,521 2,145,211
These financial statements were approved by the Board of
Directors on 28 December 2018 and were signed on their behalf
by:
Denham Eke
Director
Statement of changes in equity
for the year ended 30 June 2018
Notes Share Share Retained
Capital Premium Profit Total
GBP GBP GBP GBP
Balance at 30 June 2017 6 23 1,890,142 225,003 2,115,168
Total comprehensive loss
for the year - - (211,406) (211,406)
---------------- ---------------- ---------------- ----------------
Balance at 30 June 2018 6 23 1,890,142 13,597 1,903,762
Share Share Retained
Capital Premium Profit Total
GBP GBP GBP GBP
Balance at 30 June 2016 6 23 1,890,142 262,033 2,152,198
Total comprehensive loss
for the year - - (37,030) (37,030)
---------------- ---------------- ---------------- ----------------
Balance at 30 June 2017 6 23 1,890,142 225,003 2,115,168
Statement of cash flows
for the year ended 30 June 2018
2018 2017
Notes GBP GBP
Cash flows from operating activities
Loss for the year (211,406) (37,030)
Adjusted for:
Foreign exchange loss/(gain) 66 (132)
Interest received (16,674) (9,973)
Realised and unrealised loss/(gain)
on investments 3 35,228 (180,329)
-------------- --------------
Operating loss before changes
in working capital (192,786) (227,464)
Change in receivables 2,610 (9,756)
Change in payables 10 (6,284) (24,154)
-------------- --------------
Net cash outflow from operating
activities (196,460) (261,374)
-------------- --------------
Cash flows from investing activities
Purchase of investments 7 (233,042) (79,837)
Proceeds from sale of investments 7 118,886 1,395,006
Loan advanced 8 (26,584) (200,000)
Interest received 16,674 9,973
-------------- --------------
Net cash (outflow)/ inflow from
investing activities (124,066) 1,125,142
-------------- --------------
(Decrease)/Increase in cash
and cash equivalents (320,526) 863,768
Cash and cash equivalents at
beginning of year 875,885 11,985
Effect of exchange rate differences (66) 132
-------------- --------------
Cash and cash equivalents at
the end of year 555,293 875,885
Notes
(forming an integral part of the financial statements for the
year ended 30 June 2018)
1 Accounting policies
Port Erin Biopharma Investments Limited is a Company domiciled
in the Isle of Man. The Company's strategy is to create value for
Shareholders through investing in companies that have the potential
to generate substantial revenues through the development of
biopharmaceutical drugs.
The principal accounting policies are set out below.
a) Statement of compliance
The financial statements are prepared on the historical cost
basis except for the valuation of financial assets and liabilities
which are held at fair value through profit or loss and in
accordance with International Financial Reporting Standards (IFRS)
and interpretations as adopted by the European Union.
The financial statements were approved by the Board of Directors
on 28 December 2018.
b) Basis of preparation
Use of estimates and judgment
The preparation of financial statements in conformity with IFRS
requires management to make judgements, estimates and assumptions
that affect the application of policies and reported amounts of
assets and liabilities, income and expenses. The estimates and
associated assumptions are based on historical experience and
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making the
judgements about carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ
from these estimates.
The estimates and underlying assumptions are reviewed on an
on-going basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision only
affects that period or in the period of the revision and future
periods if the revision affects both current and future
periods.
Judgements made by the Directors in the application of IFRS, as
adopted by the EU, that have a significant impact on the financial
statements and estimates with a significant risk of material
adjustment in the next financial year relate to valuation of
financial assets at fair value through profit or loss. The
determination of fair values for financial assets for which there
is no observable market price requires judgment as to the selection
of valuation techniques as described in accounting policy 1(d). For
financial instruments that trade infrequently and have little price
transparency, fair value is less objective, and requires varying
degrees of judgement and estimation depending on liquidity,
concentration, uncertainty of market factors, pricing assumptions
and other risks affecting the specific instrument. The portfolio
companies are all in the start-up/development stage and in the
biotechnology and biopharmaceutical sector. By their nature, such
companies are difficult to value, as they have little or no track
record regarding sales and margins and may be subject to continued
funding being available in order to continue in operation. The
eventual outcome may differ from the value estimate. See also note
9 in respect of the valuation of financial instruments.
Going concern
The financial statements have been prepared on a going concern
basis, taking into consideration the level of cash and liquid
investments held by the Company. The Directors have a reasonable
expectation that the Company will have adequate resources for its
continuing existence and projected activities for the foreseeable
future, and for these reasons, continue to adopt the going concern
basis in preparing the financial statements for the year ended 30
June 2018.
Functional and presentation currency
These financial statements are presented in Pound Sterling (GBP)
which is the Company's functional currency and rounded to the
nearest pound.
c) Investment income
Any realised and unrealised gains and losses on investments are
presented within 'Investment (loss)/gain'.
Interest income earned during the period, is accrued on a time
apportionment basis, by reference to the principal outstanding and
the effective rate applicable.
Dividend income is recognised when a security held goes
ex-dividend. Dividends are shown as net cash received, after the
deduction of withholding taxes.
d) Financial instruments
Classification
The Company classifies its investments in equity securities as
financial assets at fair value through profit or loss. These
financial assets are classified as held for trading or designated
at fair value through profit or loss at inception.
Financial assets held for trading are acquired or incurred
principally for the purpose of selling in the short term.
Financial assets designated at fair value through profit or loss
are those that are managed and their performance evaluated on a
fair value basis in accordance with the Company's documented
investment strategy.
Financial assets that are classified as loans and receivables
include amounts due from brokers, other receivables.
Recognition/de-recognition
Purchases and sales of investments are recognised on their trade
date, which is the date on which the Company commits to purchase or
sell the asset. Investments are initially measured at fair value.
Investments are derecognised when the rights to receive cash flows
from the investments have expired or the Company has transferred
substantially all risks and rewards of ownership.
Measurement
Subsequent to initial recognition, all financial assets and
financial liabilities at fair value through profit or loss are
measured at fair value. Any gains and losses arising from changes
in 'financial assets at fair value through profit or loss' are
included in profit or loss in the period in which they arise.
Interest from financial assets at fair value through profit or loss
is recognised in the Statement of Comprehensive Income using the
effective interest rate method. Dividend income from financial
assets at fair value through profit or loss is recognised in the
Statement of Comprehensive Income when the Company's right to
receive payment is established.
Fair value measurement principles
The fair value of investment holdings of listed investments is
based on their quoted market prices at the reporting date on a
recognised exchange or in the case of non-exchange traded
instruments, sourced from a reputable counterparty, without any
deduction for estimated future selling costs. Financial assets are
priced at their closing bid prices, while financial liabilities are
priced at their closing offer prices.
Company assets may, at any time include securities and other
financial instruments or obligations that are thinly traded or for
which no market exists and/or which are restricted as to their
transferability under securities laws.
If a quoted market price is not available on a recognised stock
exchange, or a market is not sufficiently active for the market
price to be considered reliable, or if a price is not available
from a reputable counterparty, fair value of the financial
instruments may be estimated by the Directors using valuation
techniques, including use of recent arm's length market
transactions, reference to the current fair value of another
instrument that is substantially the same, discounted cash flow
techniques, option pricing models or any other valuation technique
that provides a reliable estimate of prices obtained in actual
market transactions.
The Company recognizes transfers between levels of the fair
value hierarchy as at the end of the reporting period during which
the change occurred.
Impairment of financial assets
The Company assesses at each reporting date whether a financial
asset is impaired. A financial asset is deemed to be impaired if,
and only if, there is objective evidence of impairment as a result
of one or more events that have occurred after the initial
recognition of the asset and that loss event has an impact on the
estimated future cash flows of the financial asset that can be
reliably estimated.
If there is objective evidence that an impairment loss has been
incurred, the amount of the loss is measured as the difference
between the assets' carrying amount and the present value of
estimated future cash flows discounted using the asset's original
effective interest rate.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call
deposits with maturities of three months or less from the
acquisition date that are subject to an insignificant risk of
changes in fair value.
Trade and other receivables
Trade and other receivables originated by the Company are
initially recognised at fair value and subsequently stated at
amortised cost less impairment losses.
Trade and other payables
Trade and other payables are initially recognised at fair value
less directly attributable transaction costs. Subsequently they are
measured at amortised cost using the effective interest method.
e) Share capital and share premium
Ordinary shares are classified as equity. The ordinary shares of
the Company have a par value of GBP0.000001 each. Excess proceeds
received for the issue of shares has been credited to share
premium. Incremental costs directly attributable to the issue of
ordinary shares are recognised as a deduction from equity, net of
any tax effects.
f) Warrants
The fair value of warrants is calculated using the Black-Scholes
option pricing model (where no fair value of the service or assets
provided is evident) and is recognised as expense over the vesting
period where applicable with a corresponding increase in equity. On
determining fair values, terms and conditions attaching to the
warrants are taken into account. Management is also required to
make certain assumptions and estimates regarding such items as the
life of warrants, volatility and forfeiture rates. Changes in the
assumptions used to estimate fair value could result in materially
different results.
g) Foreign currencies
Transactions in foreign currencies are translated into the
functional currency at the rate ruling at the date of the
transaction. Monetary assets and liabilities denominated in foreign
currencies are retranslated into functional currency at the rate of
exchange ruling at the reporting date. All differences are taken to
the income statement.
Non-monetary assets and liabilities that are measured in terms
of historical cost in a foreign currency are translated using the
exchange rate at the date of the transaction.
h) New standards and interpretations not yet adopted
A number of new standards, amendments to standards and
interpretations are not yet effective for the year, and have not
been applied in preparing these consolidated historical financial
statements:
New/revised International Accounting Effective date
Standards / International Financial (accounting periods
Reporting Standards ("IAS/IFRS") commencing on
or after)
--------------------------------------------- ---------------------
IFRS 15 Revenue from Contracts with 1 January 2018
Customers
IFRS 9 Financial Instruments 1 January 2018
Classification and Measurement of 1 January 2018
Share-based Payment Transactions
(Amendments to IFRS 2)
Applying IFRS 9 Financial Instruments 1 January 2018
with IFRS 4 Insurance Contracts (Amendments
to IFRS 4)
Transfers of Investment Property 1 January 2018
(Amendments to IAS 40)
Annual Improvements to IFRSs 2014-2016 1 January 2018
Cycle (Amendments to IFRS 1 First-time
Adoption of IFRSs and IAS 28 Investments
in Associates and Joint Ventures)
IFRIC 22 Foreign Currency Transactions 1 January 2018
and Advance Consideration
IFRS 16 Leases 1 January 2019
IFRS 17 Insurance Contracts 1 January 2021
--------------------------------------------- ---------------------
The Directors do not expect the adoption of the standards and
interpretations to have a material impact on the financial
statements in the period of initial application.
There has been no material impact on the Company's financial
statements of new standards or interpretations that have come into
effect during the current reporting period.
i) Taxation
The Company is subject to income tax at a rate of 0% in the Isle
of Man, and accordingly, no tax has been provided for in these
financial statements.
The Company may be subject to withholding taxes in relation to
income from investments, or investment realisation proceeds or
gains, and such amounts will be accounted for as incurred.
2 Directors' and performance fees
The fees of Directors who served during the year ended 30 June
2018 were as follows:
2018 2017
GBP GBP
Alexander Whamond 10,000 10,000
On 6 May 2011, Shellbay Investments Limited entered into a
Letter of Appointment with the Company to provide the services of
Jim Mellon as Non-Executive Chairman of the Company. The Letter of
Appointment was for an initial period of twelve months, from 16 May
2011 and was renewed on 1 June 2012, and may be terminated on not
less than one month's notice given by either party at any time. The
Letter of Appointment contains provisions for early termination,
inter alia, in the event of a breach by Jim Mellon. Remuneration
under the Letter of Appointment shall be payable to Shellbay
Investments Limited and shall be satisfied by the issue of such
number of Ordinary Shares equivalent to 15.0 per cent. of any
increase in the Net Asset Value of the Company over each quarterly
period, subject to an initial high watermark of 10 pence per share.
This fee is recorded as a performance fee since it is based on the
performance of the Company. There are no provisions providing for
any benefit to Shellbay Investments Limited or Jim Mellon on the
termination of the engagement. Total fees payable to Shellbay
Investments Limited for the year under this arrangement were GBPNil
(2016: GBPNil) with no balance remaining outstanding at the
year-end (2016: GBPNil).
Denham Eke was appointed as a Director on 30 May 2012 and
currently receives no remuneration for providing his services.
Alexander Anderson Stuart Whamond was appointed as a
Non-Executive Director of the Company on 12 April 2013 and is
entitled to receive a fee of GBP10,000 per annum.
3 Investment income
Derived from financial assets held at fair value through profit
or loss at initial recognition:
2018 2017
GBP GBP
Net realised gains on sale
of investments 12,193 61,178
Net unrealised (losses)/gains
on investments (47,421) 119,151
-------------- --------------
(35,228) 180,329
4 Other costs
2018 2017
GBP GBP
Auditors' fees 18,630 18,030
Bank charges 23 114
Insurance 6,600 6,556
Professional fees 166,001 193,540
Sundry expenses 157 224
-------------- --------------
191,411 218,464
The Company has no employees other than the Directors.
5 Loss from operating activities
Loss from operating activities is stated after charging:
2018 2017
GBP GBP
Auditors' fees 18,630 18,030
Directors' fees 10,000 10,000
6 Share capital and share premium
Each share in the Company confers upon the shareholder:
-- the right to one vote at a meeting of the shareholders or on any resolution of shareholders;
-- the right to an equal share in any dividend paid by the Company, and
-- the right to an equal share in the distribution of the
surplus assets of the Company on its liquidation.
The Company may by resolution of Directors redeem, purchase or
otherwise acquire all or any of the shares in the Company subject
to regulations set out in the Company's Articles of
Association.
2018 2017
GBP GBP
Authorised
2,000,000,000 Ordinary shares
of GBP0.000001 2,000 2,000
No. of Share Share
Shares Capital Premium
Issued
Balance at 01 July 2017 23,195,558 23 1,890,142
---------------- ---------------- ----------------
Balance at 30 June 2018 23,195,558 23 1,890,142
---------------- ---------------- ----------------
Balance at 30 June 2017 23,195,558 23 1,890,142
Capital management
The Company manages its capital to maximise the return to
shareholders through the optimisation of equity. The capital
structure of the Company as at 30 June 2018 consists of equity
attributable to equity holders of the Company, comprising issued
capital, reserves and retained earnings as disclosed.
The Company manages its capital structure and makes adjustments
to it in light of economic conditions and the strategy approved by
shareholders. To maintain or adjust the capital structure, the
Company may make dividend payments to shareholders, return capital
to shareholders or issue new shares and release the share premium
account. No changes were made in the objectives, policies or
processes during the year under review.
7 Financial assets at fair value through profit or loss
2018 2017
GBP GBP
Quoted 576,846 683,576
Unquoted 554,318 368,660
-------------- --------------
1,131,164 1,052,236
2018 2017
GBP GBP
Equities 1,131,164 1,052,236
Warrants - -
-------------- --------------
1,131,164 1,052,236
These financial instruments were designated as at fair value
through profit or loss on initial recognition. See note 9 regarding
the valuation of investments.
8 Loan receivable
On 13 October 2016, the Company entered into a loan agreement
with the Diabetic Boot Company Limited to provide it with a
short-term loan of GBP200,000 less expenses, for working capital
purposes. This loan pays a coupon of 7 per cent, is unsecured and
was fully repayable on the earlier of 31 March 2017 or the date on
which DBC secures additional equity funding of GBP1,000,000. In
December 2017 the loan repayment date was extended to 31 March
2018. See note 13. As at 31 December 2017, the Diabetic Boot
Company Limited had net liabilities. However, the Directors have
assessed the loan receivable for impairment and have concluded that
it is fully recoverable with the knowledge that the loan plus
accrued interest was repaid in full on 21 December 2018.
9 Financial instruments
Financial Risk Management
The Company has risk management policies that systematically
view the risks that could prevent it from achieving its objectives.
These policies are intended to manage risks identified in such a
way that opportunities to deliver the Company's objectives are
achieved. The Company's risk management takes place in the context
of day-to-day operations and normal business processes such as
strategic and business planning. The Directors have identified each
risk and are responsible for coordinating and continuously
improving risk strategies, processes and measures in accordance
with the Company's established business objectives.
The Company's principal financial instruments consist of
investments, cash, receivables and payables arising from its
operations and activities. The main risks arising from the
Company's financial instruments and the policies for managing each
of these risks are summarised below.
Credit Risk
Credit risk is the risk of loss associated with the
counterparty's inability to fulfil its obligations. The Company's
credit risk is primarily attributable to investments, receivables
and cash balances with the maximum exposure being the reported
balance in the statement of financial position. The Company has a
nominal level of debtors and as such the Company believes that the
credit risk to these is minimal. The Company holds available cash
and securities with licensed banks and financial institutions. The
Company considers the credit ratings of banks in which it holds
funds in order to reduce exposure to credit risk. The funds are
available on demand.
The carrying amount of financial assets represents the maximum
credit exposure. The maximum exposure to credit risk at the
reporting date was:
Carrying amount Carrying amount
2018 2017
GBP GBP
Cash and cash equivalents 555,293 875,885
Loan receivable 226,584 200,000
Trade and other receivables 14,480 17,090
-------------- --------------
796,357 1,092,975
Market price risk
Market price risk is the risk that the market price will
fluctuate due to macro-economic issues such as changes in market
factors specific to that security, market interest rates and
foreign exchange rates.
The Company is exposed to significant market price risks as
financial instruments recognised are linked to market price
volatility.
A 1% increase/decrease in market value of investments would
increase/decrease equity and profit by GBP11,312 (2017:
GBP10,522).
Liquidity risk
The Company is exposed to liquidity risk to the extent that it
holds investments that it may not be able to sell quickly at close
to fair value.
The risk is managed by the Company by means of cash flow
planning to ensure that future cash requirements are anticipated
and, where financial instruments have to be sold to meet these
requirements, the process is carried out in a controlled manner
intended to minimise the liquidity risk involved.
The residual undiscounted contractual maturities of financial
liabilities are as follows:
30 June 2018
Less than 1-3 3 months 1-5 Over No stated
1 month months to 1 year years 5 years maturity
GBP GBP GBP GBP GBP GBP
Financial liabilities
Trade and other 23,759 - - - - -
payables
---------------------- ---------- -------- ----------- ------- --------- ----------
23,759 - - - - -
---------------------- ---------- -------- ----------- ------- --------- ----------
30 June 2017
Less than 1-3 3 months 1-5 Over No stated
1 month months to 1 year years 5 years maturity
GBP GBP GBP GBP GBP GBP
Financial liabilities
Trade and other 30,043 - - - - -
payables
---------------------- ---------- -------- ----------- ------- --------- ----------
30,043 - - - - -
---------------------- ---------- -------- ----------- ------- --------- ----------
Interest rate risk
A significant share of the Company's assets can be comprised of
cash held at banks. As a result, the Company is subject to risk due
to fluctuations in the prevailing level of market interest rates.
However, income earned from bank interest is not considered
material to the Company's performance or financial position.
Fair values of financial assets and liabilities
At 30 June 2018, the carrying amounts of cash resources, trade
and other receivables, and trade and other payables approximate
fair value due to their short-term maturities.
Foreign currency risk
The Company is exposed to foreign currency risk on fluctuations
related to financial assets and liabilities that are denominated in
a number of currencies.
GBP equivalents as at 30 June 2018
Total by
Investments Cash at currency
bank
GBP GBP GBP
HKD 465,973 - 465,973
USD 369,794 1,460 371,254
CAD 19,614 - 19,614
-------------- -------------- --------------
855,381 1,460 856,841
GBP equivalents as at 30 June 2017
Total by
Investments Cash at currency
bank
GBP GBP GBP
HKD 341,859 - 341,859
USD 155,549 879 156,428
CAD 11,306 - 11,306
-------------- -------------- --------------
508,714 879 509,593
The following significant exchange rates applied during the
year:
Average Average
rate for rate for
active year active year
2018 2017
HKD 10.539 9.851
USD 1.347 1.269
CAD 1.711 1.683
Year-end Year-end
rate rate
2018 2017
HKD 10.306 10.149
USD 1.313 1.300
CAD 1.711 1.688
Sensitivity analysis
A 5% percent strengthening of Sterling against the Hong Kong
Dollar, US Dollar and Canadian Dollar at 30 June 2018 would have
decreased equity and profit for the year by the amounts shown
below. The analysis assumes that all other variables, in particular
interest rates, remain constant.
2018 Equity Profit or loss
HKD (GBP22,188) (GBP22,188)
USD (GBP17,669) (GBP17,669)
CAD (GBP934) (GBP934)
A 5% percent weakening of Sterling against the Hong Kong Dollar,
US Dollar and Canadian Dollar at 30 June 2018 would have the equal
but opposite effect on the basis that all other variables, in
particular interest rates, remain constant.
2017 Equity Profit or loss
HKD (GBP16,279) (GBP16,279)
USD (GBP7,451) (GBP7,451)
CAD (GBP538) (GBP538)
Fair value of financial instruments
The fair values of financial assets and financial liabilities
that are traded in an active market are based on quoted market
prices. For all other financial instruments, the Company determines
fair values using other valuation techniques in compliance with
IAS39 and based on the British Private Equity & Venture Capital
Association ("BVCA") and International Private Equity and Venture
Capital Valuation Guidelines ("IPEV").
For financial instruments that trade infrequently and have
little price transparency, fair value is less objective, and
requires varying degrees of judgement depending on liquidity,
uncertainty of market factors, pricing assumptions and other risks
affecting the specific instrument.
The Company measures fair values using the following fair value
hierarchy that reflects the significance of the inputs used in
making the measurements:
-- Level 1: Inputs that are quoted market prices (unadjusted) in
active markets for identical instruments;
-- Level 2: Inputs other than quoted prices included within
Level 1 that are observable either directly (i.e. as prices) or
indirectly (i.e. derived from prices).This category includes
instruments valued using; quoted market prices in active markets
for similar instruments; quoted prices for identical or similar
instruments in markets that are considered less than active; or
other valuation techniques in which all significant inputs are
directly or indirectly observable from market data;
-- Level 3: Inputs that are unobservable. This category includes
all instruments for which the valuation technique includes inputs
not based on observable data and the unobservable inputs have a
significant effect on the instrument's valuation. This category
includes instruments that are valued based on quoted prices for
similar instruments but for which significant unobservable
adjustments or assumptions are required to reflect differences
between the instruments.
Various valuation techniques may be applied in determining the
fair value of investments held as Level 3 in the fair value
hierarchy. The objective of valuation techniques is to arrive at a
fair value measurement that reflects the price that would be
received to sell the asset or paid to transfer the liability in an
orderly transaction between market participants at the measurement
date.
Fair value hierarchy measurement at 30 June 2018
Investments in securities at fair value:
Quoted prices Significant Significant
In active other unobservable
markets observable Inputs
for identical inputs
Total assets
(Level 1) (Level 2) (Level 3)
Investments
Quoted 576,846 576,846 - -
Unquoted 554,318 - - 554,318
-------------- -------------- -------------- --------------
1,131,164 576,846 - 554,318
Reconciliation of Level 3 investments:
Opening balance 368,660
Changes due to fluctuations
in foreign currency (950)
Purchases 233,042
(46,434)
Unrealised loss --------------
Closing balance 554,318
Fair value hierarchy measurement at 30 June 2017
Investments in securities at fair value:
Quoted prices Significant Significant
In active other unobservable
markets observable Inputs
for identical inputs
Total assets
(Level 1) (Level 2) (Level 3)
Investments
Quoted 683,576 683,576 - -
Unquoted 368,660 - - 368,660
-------------- -------------- -------------- --------------
1,052,236 683,576 - 368,660
Reconciliation of Level 3 investments:
Opening balance 400,756
Changes due to fluctuations
in foreign currency 1,116
Purchases 76,915
(110,127)
Unrealised loss --------------
Closing balance 368,660
There have been no disposals or reclassifications of investments
classified as Level 3 during the financial year ending 30 June
2018.
In the absence of observable prices or suitable unobservable
model inputs being available and, given level 3 portfolio companies
are in the start-up/development stage and in the biotechnology/
biopharmaceutical sector, the Board believes that a recent share
transaction cost represents the best available estimate of fair
value, where available. The price of a recent investment valuation
technique is commonly used in a seed, start-up or early-stage
situation. Where applicable, the Company's Level 3 investments are
valued at the price of each funding round of the respective
companies entered into with their shareholders, adjusted where
necessary should the Directors deem any adjustment is needed in
order to determine the fair value. The only change in the value of
these occur if the investments are not denominated in Sterling, and
will thus be subject to foreign exchange rate fluctuations. The
Directors deem all investments to be held fair value. Whilst the
price of a recent transaction is deemed most appropriate for the
Company's unquoted investments, three unquoted investments held
have been written down to nil value, reflecting the uncertain
financial position or limited information available in respect of
these investee entities. Although the Board believes that its
estimates of fair value are appropriate, the use of different
methodologies or assumptions could lead to different measurements
of fair
value. The Board continues to monitor the performance of the
investee entities and the underlying information available in order
to assess whether the valuation technique adopted and the fair
value hierarchy remain appropriate.
IFRS 13 requires disclosure, by class of financial instrument,
if the effect of changing one or more inputs to reasonably possible
alternative assumptions would result in a significant change to the
fair value measurement. However, where fair value is determined
with reference to the price of a recent investment, such a
sensitivity analysis is not relevant. The valuation basis used in
determination of the fair value of Level 3 investments is chosen
with reference to the specific underlying circumstances and
position of the investee company. Given the valuation basis used,
the Directors believe that the impact of changing one or more of
the inputs to reasonably possible alternative assumptions would not
change the fair value significantly.
10 Trade and other payables
2018 2017
GBP GBP
Provision for audit fee 18,009 17,388
Other provisions 5,750 9,157
Trade creditors - 3,498
------------ --------------
23,759 30,043
11 Related party transactions
Under an agreement dated 1 December 2011, Burnbrae Limited, a
Company for which Jim Mellon is the ultimate beneficial owner and
Denham Eke is a Director, provide certain services, principally
accounting and administration, to the Company. This agreement may
be terminated by either party on three months' notice. The charge
for services provided in the year in accordance with the contract
was GBP36,048 (2017: GBP36,000) of which GBPnil was outstanding as
at the year-end (2017: GBPnil).
Under an agreement dated 6 May 2011, Shellbay Investments
Limited, a Company related to both Jim Mellon and Denham Eke,
provide the services of Jim Mellon as Non-Executive Chairman of the
Company (see note 2). The charge for services provided in the year
was GBPNil (2017: GBPNil) of which GBPNil was outstanding at the
year-end (2017: GBPNil).
Jim Mellon holds personal interests both directly and indirectly
in the Diabetic Boot Company Limited. In accordance with the
published investing policy, Jim Mellon holds personal interests
both directly and indirectly in some of the investments held by the
Company.
12 Basic and diluted earnings per share
The calculation of basic earnings per share of the Company is
based on the loss for the year of GBP211,406 (2017: GBP37,030) and
the weighted average number of shares of 23,195,558 (2017:
23,195,558) in issue during the year.
Diluted earnings per share are calculated by adjusting the
weighted average number of ordinary shares outstanding to assume
conversion of all dilutive potential ordinary shares such as
warrants and options. There is no dilutive effect as at 30 June
2018.
13 Subsequent events
During August 2018, PEBI invested US$250,000 into Blue Nalu
Inc.
In December 2017, the Directors agreed to extend the repayment
date of the loan receivable from the Diabetic Boot Company Limited
("DBC"). The loan was fully repayable on the earlier of 31 March
2018 or the date on which DBC secured additional equity funding of
GBP1,000,000. As the loan was not repaid on the repayment date, the
loan was incurring a default interest rate of 11% from the date of
repayment. On 21 December 2018, the loan and outstanding interest
was repaid in full.
14 Commitments and contingent liabilities
There are no known commitments or contingent liabilities as at
the year-end.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR FKFDDQBDDNBB
(END) Dow Jones Newswires
December 28, 2018 09:21 ET (14:21 GMT)
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