LOW CARBON ACCELERATOR LIMITED 
By 1. GENERAL INFORMATION
Low Carbon Accelerator Limited ("LCA" or "the Company") is a company incorporated and registered in Guernsey on 26 September 2006. LCA is a closed-end investment company with limited liability under the Companies (Guernsey) Law, 2008, and its shares are admitted to trading on the AIM market of the London Stock Exchange. The directors will recommend at the next proposed Extraordinary General Meeting of the Company that the Company delists from the London Stock Exchange.
The nature of LCA's operations and its principal activities are set out in the Directors' report. The address of the LCA's Registered Office is set out on page 1.
These financial statements are presented in Pounds Sterling because that is the currency of the primary economic environment in which the Company and its subsidiaries operate.
2. BASIS OF PREPARATION
The consolidated financial statements incorporate the financial statements LCA and entities (including special purpose entities) controlled by LCA (its subsidiaries) (together known as "the Group"). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group.
All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.
The Company holds two investments via a wholly owned intermediate holding group structure. The acquisition of equity in the underlying investments was funded by a long term loan account through the intermediate holding companies.
3. GOING CONCERN
The directors have proposed to convene an Extraordinary General Meeting at which it will be proposed to shareholders that the Company is placed in to voluntary liquidation. Accordingly these financial statements are not prepared on the going concern basis and non-current assets have been reclassified as current assets available for sale.
4. SIGNIFICANT ACCOUNTING POLICIES
The financial statements are made up for the year ended 30 November 2012, and have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union.
The following is a description of the significant accounting policies of the Group. The accounting policies are consistent with those applied in the year ended 30 November 2011 and amended to reflect the adoption of the new standards, amendments to standards or interpretations which are mandatory for the first time for the financial year ended 30 November 2012.
Standards, amendments and interpretations to published standards not yet effective, not early adopted
· IAS 19 (amended), "Employee Benefits" (effective for periods commencing on or after 1 January 2013)
· IAS 28 (amended), "Investments in Associates" (effective for periods commencing on or after 1 January 2013)
· IAS 27 (amended), "Consolidated and Separate Financial Statements" (effective for periods commencing on or after 1 January 2013)
· IFRS 11, "Joint arrangements" (effective for periods commencing on or after 1 January 2013)
· IFRS 9, "Financial Instruments - Classification and Measurement" (effective for periods commencing on or after 1 January 2013)
· IFRS 12, "Disclosures of interests in other entities" - (effective for periods commencing on or after 1 January 2013)
· IFRS 13, "Fair Value Measurement" (effective for periods commencing on or after 1 January 2013)
· IFRS 10, "Consolidated Financial Statements" (effective for periods commencing on or after 1 January 2013)
The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Group.
The financial statements have been prepared under the historical cost convention as modified by the revaluation of financial assets and financial liabilities at fair value through profit or loss and foreign currency derivatives.
The preparation of the financial statements requires the Directors to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the date of the financial statements. If in the future such estimates and assumptions, which are based on the Directors' best judgement at the date of the financial statements, deviate from actual circumstances, the original estimates and assumptions will be modified as appropriate in the period in the which the circumstances change.
The principal accounting policies adopted are set out below.
(a) Financial assets at fair value through profit or loss
Classification
In prior years, the Group classified its equity investments as financial assets at fair value through profit and loss and all such investments were designated as such on acquisition. This included investments in associated undertakings that were held by the Group with a view to the ultimate realisation of capital gains.
Financial assets and financial liabilities designated at fair value through profit or loss at inception were those that are managed and their performance evaluated on a fair value basis in accordance with the Group's documented investment strategy. The Group's policy was for the Investment Manager and the Board of Directors to evaluate the information about these financial assets on a fair value basis together with other related financial information. As explained in policy (b), all financial assets are classified as financial assets held for sale in the current year.
Recognition / De-recognition
Purchases and sales of investments are recognised on the date on which the Group commits to purchase or sell the investment. Investments are derecognised when the rights to receive cash flows from the investments have expired or the Group has transferred substantially all risks and rewards of ownership.
Measurement
Financial assets at fair value through profit or loss are initially recognised at fair value. Transaction costs are expensed as incurred in the income statement. Subsequent to initial recognition, all financial assets at fair value through profit or loss are measured at fair value.
Gains and losses arising from changes in the fair value of the financial assets at fair value through profit or loss are presented in the income statement in the period in which they arise. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset.
Fair value estimation
The fair values of unlisted securities are established using International Private Equity and Venture Capital ("IPEV") valuation guidelines. The valuation methodology used most commonly by the Group is the 'price of recent investment' contained in the IPEV valuation guidelines. Where the investment being valued was itself made recently, its cost will generally provide a good indication of fair value. Where there has been any recent investment by third parties, the price of that investment will provide a basis of the valuation.
Where there has been a reasonable period of time since the time of the most recent investment, and it is the Group's view that the 'price of the recent investment' no longer represents the true fair value of the investment, the Group considers alternative methodologies in the IPEV guidelines, being principally discounted cash flows and price-earnings multiples. These methodologies require management to make assumptions over the timing and nature of future earnings and cash flows when calculating fair value.
Where the Directors do not believe there has been a material change (positive or negative) in the fair value of an investment, the investment is reported at the carrying value at the previous reporting date.
All recorded values of investments are reviewed quarterly for any indication of impairment and adjusted accordingly.
Classification of fair value measurements
The Company classifies fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:
· Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
· Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2); and
· Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).
The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, the measurement is a level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement considering factors specific to the asset or liability. The determination of what constitutes "observable" requires significant judgement by the Company. The Company considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.
(b) Current financial assets classified as held for sale
Recognition / De-recognition
Investments held as "financial assets at fair value through profit or loss" are reclassified as "current financial assets classified as held for sale" on the date when the Group decides to dispose of the shareholding in full within the next 12 months, or where there is a pre-agreed sale programme which has been actively marketed and can be measured at a reasonable price.
Investments held as "financial assets classified as held for sale" are derecognised when the rights to receive cash flows from the investments have expired or the Group has transferred substantially all risks and rewards of ownership.
Measurement
Financial assets classified as held for sale are valued at fair value in accordance with the measurement provisions of IAS 39: "Financial Instruments: Recognition and Measurement'.
(c) Revenue recognition
Interest income is accrued on a time basis, by reference to the principal outstanding and the effective interest rates applicable.
Dividend income is recognised in the income statement when the Group's right to receive payment is established.
(d) Expenses
Expenses are accounted for on an accruals basis. Expenses are charged through the income statement except where they relate to the raising of capital.
(e) Foreign currency translation
Functional and presentation currency
The performance of the Group is measured in Pounds Sterling (GBP). The Board of Directors considers GBP as the currency that most faithfully represents the economic effects of the underlying transactions, events and conditions, and thus is the functional currency.
The financial statements are presented in GBP.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. Translation differences on non-monetary financial assets and liabilities such as equities at fair value through profit or loss are recognised in the income statement within the fair value net gain or loss.
(f) Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangement entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.
(g) Loans receivable
Loans receivable that have fixed or determinable payments that are not quoted in an
active market are classified as 'loans and receivables'. Loans and receivables are measured at amortised cost using the effective interest method less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables where the recognition of interest would be immaterial.
(h) Financial instruments
Financial assets and financial liabilities are recognised on the Group's balance sheet when the Group becomes party to the contractual provisions of the instrument.
The Group shall offset financial assets and financial liabilities if the Group has a legally enforceable right to set off the recognised amounts and interests and intends to settle on a net basis.
(i) Cash and cash equivalents
Cash at bank and short term deposits are carried at cost. Cash and cash equivalents consist of cash in hand, short term deposits in banks and money market instruments with an original maturity of three months or less.
(j) Trade and other receivables.
Other receivables do not carry any interest and are short-term in nature and are accordingly stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts.
(k) Trade and other payables
Trade and other payables are not interest-bearing and are stated at their nominal value.
(l) Investments in associates
An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.
Investments which fall within the definition of an associate under IAS 28 (Investments in Associates) are accounted for as investments held at fair value through profit and loss, as permitted by that standard. IAS 28 requires certain disclosures to be made about associates, including summary historical financial information, even where these associates have been accounted for in accordance with IAS 39 and held at fair value. The Group has a number of investments which fall within the definition of an associate, all of which are held at fair value.
The disclosures required by IAS 28 have not been made. It is considered that, in the context of the current investment portfolio, such information would not be useful to users of the accounts. Information is considered useful if it helps users assess the net asset value of the Group or the future growth therein. Many factors are taken into account in determining the fair value of individual investments, of which historical financial information is only one. Taken alone, this information would not be useful in making such an assessment and may even be misleading in some instances.
5. MATERIAL AGREEMENTS
(a) Under the terms of the Investment Management Agreement dated 6 October 2006, a management fee is payable to Low Carbon Investors Limited ("LCI") for investment management services. These are paid quarterly in advance and are equal to 0.625% per quarter of the net asset value ("NAV") of the Group, as at the last day of the preceding quarter. On 13 April 2012, but with effect from 1 June 2012, this fee was reduced to 0.5% per quarter of the NAV of the Group.
In addition, LCI will be paid an annual performance fee equal to 20% of any amount by which the Adjusted NAV of the Group at the relevant year end exceeds the previous high watermark subject to performance exceeding the previous high watermark plus a hurdle rate of 7.5%.
On 30 June 2009 the Investment Management Agreement was amended to reset the Hurdle Base, on a weighted average basis, following the issue by the Group of any new Ordinary Shares pursuant to a placing for cash.
The Company served notice on the Investment Manager on 13 April 2012 terminating the Investment Management Agreement. The Agreement is therefore due to terminate on 12 April 2013.
(b) Under the terms of the Broker Agreement dated 1 March 2012, between Jefferies International Limited ("Jefferies") and the Company, Jefferies is entitled to a retainer fee as appointed broker of the Company. The retainer fee is at a rate of not less than £25,000 per annum and increasing at a rate of £1,000 per annum for each £1 million by which the net assets of the Group exceeds £50 million subject to a maximum fee of £75,000 per annum where the net assets of the Group are equal to, or exceed, £100 million.
(c) Under the Terms of Engagement dated 18 December 2006, the Company is liable to pay a retainer's fee to Grant Thornton for its services as nominated adviser. The retainer fee is at a rate of £25,000 per annum payable quarterly in advance.
(d) On 12 April 2012 the Company announced the appointment of Cogent Partners to assist in the marketing and sale of the LCA portfolio. Cogent Partners are a leading secondary sell-side advisor with strong trans-Atlantic presence. Under the terms of engagement Cogent are due a retainer fee and a success fee. The success fee of $100,000 has been agreed with Cogent Partners from the sale of assets to Sterling Planet Holdings, Inc. and is payable according to the receipt of proceeds under the Sale and Purchase Agreement with Sterling Planet (note 13).
(e) On 21 January 2013 the Company appointed Grant Thornton to act in relation to advising the Company on the proposed members' voluntary liquidation, dividend distribution and delisting of the Company. Grant Thornton will coordinate the production of a circular to be sent to Company's shareholders. The Company has agreed a fee of £20,000 for these services.
6. SEGMENT INFORMATION
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors of the Group.
For management purposes, the Group is organised into one business segment which focuses on achieving medium term capital growth by investing in early stage low carbon companies.
The Group operates in two main geographical areas. The geographic split of financial assets as at 30 November 2012 was:
2012 |
2011 | |||
UK | 1,645 | 5,111 | ||
USA | 1,096 | 16,389 | ||
2,741 | 21,500 | |||
7. PROVISIONS MADE AGAINST LOAN RECEIVABLES
2012 £'000 | 2011 £'000 | |
Provision against other receivable from Low Carbon Accelerator Luxembourg Limited s.a.r.l. | - | 20 |
Provision against other receivable from Low Carbon Accelerator (Barbados) ISRL | - | 49 |
Provision against short-term loan to QuantaSol Limited | - | 500 |
Provision against interest receivable on short-term loan to Proven Energy Limited | - | 76 |
Provision against short-term loan to Proven Energy Limited | 1,750 | |
Provision against Vigor loan notes | 400 | - |
Recovery of provision against Vaperma | (330) | - |
Recovery of provision against QuantaSol | (30) | - |
40 | 2,395 | |
8. TAXATION
The Company has been granted exemption from income tax in Guernsey under the Income Tax (Exempt Bodies) (Bailiwick of Guernsey) Ordinance, 1989. As such it will not be liable to income tax in Guernsey other than on Guernsey source income (excluding deposit interest on funds deposited with a Guernsey bank). No withholding tax is applicable to distributions to shareholders by the Company.
The companies in which the Group has made an investment are subject to taxation in their relevant jurisdiction.
9. DIVIDENDS
In accordance with the strategy set out in the Company's AIM Admission Document, no dividend has been declared for the year to 30 November 2012 (2011 - £nil).
10. BASIC AND DILUTED EARNINGS PER SHARE
The calculation of basic and diluted return per share is based on the return on ordinary activities for the year ending 30 November 2012 and on 86,100,000 (2011 - 86,100,000) Ordinary Shares, being the weighted average number of shares in issue during the period.
11. INVESTMENTS - DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS
2012 £'000 | 2011 £'000 | |||
Total financial assets at fair value through profit or loss at beginning of year | 21,500 | 26,386 | ||
Additions during the year | ||||
- acquired for cash | 773 | 350 | ||
- disposed for cash | - | (1,230) | ||
- gain on sale of investment | - | 230 | ||
Net changes in fair value through profit or loss | (19,532) | (4,236) | ||
Reclassified as current financial assets classified as held for sale | (2,741) | - | ||
Total financial assets at fair value through profit or loss at end of year | - | 21,500 | ||
The net changes in fair value through profit or loss represents amounts relating to the revaluation of investments. During the year the Group made the following provisions and write-downs against investments:
· ResponsiveLoad Limited ("RLtec")
On 6 June 2011, LCA announced that it had sold 175,747 Preference B shares in RLtec to Ombu Limited ("Ombu") for a cash consideration of £1.23 million. The previous carrying value of this stake, £4,461,000 was based on the valuation set at the June 2011 investment by Ombu. Subsequent to that investment round, RLtec failed to make the progress expected and required further funding. This funding round saw the Company's shareholding in RLtec significantly diluted, to the extent that it is considered that these shares no longer have any value. Subsequent to the year end the Company sold its remaining shares in RLtec to Ombu for £5,000.
· Sterling Planet Holdings Inc. ("Sterling Planet")
On 9 January 2013 the Company concluded an agreement with Sterling Planet to sell its entire shareholding in Sterling Planet back to Sterling Planet for a total consideration of USD 1.76 million, payable in four tranches between January and June 2013 (see note 13). As a consequence, the Company reclassified its investment in Sterling Planet as 'Current financial assets held for sale', and an impairment of £11,670,560 has been recognised against the carrying value.
· Lumenergi Inc. ("Lumenergi")
On 30 January 2012 the Company announced that it had invested a further USD 200,000 (£129,247) into Lumenergi Inc in the form of a convertible loan. This was followed on
13 March 2012 by an investment of a further USD 1 million (£642,833) into Lumenergi Inc, at which point the convertible loan note of 30 January 2012 was converted into equity.
On 9 January 2013 the Company concluded an agreement with Sterling Planet to sell its entire shareholding in Lumenergi to Sterling Planet for a total consideration of USD 1.76 million, payable in four tranches between January and June 2013 (see note 13). As a consequence, the Company reclassified its investment in Lumenergi as 'Current financial assets held for sale', and an impairment of £2,130,102 has been recognised against the carrying value.
On 8 March 2013 the directors of Lumenergi determined that it can no longer continue operations and approved an assignment of all of the Company's assets for the benefit of its creditors and the subsequent winding up and dissolution of the Company. The directors and shareholders in Lumenergi approved the assignment of all of the Company's assets to Development Specialists, Inc. (the "Assignee"), who will proceed to sell such assets for the benefits of Lumenergi's creditors. If the Assignee is able to sell Lumenergi's assets for an amount that exceeds the amount owed by Lumenergi to its creditors, any excess funds will be distributed to shareholders in Lumenergi.
The Company's shareholding in Lumenergi is one of the assets being sold by the Company to Sterling Planet. This assignment of Lumenergi's assets does not impact the consideration payable by Sterling Planet to the Company.
· Vigor Renewables Limited ("Vigor")
On 9 January 2013 the Company concluded an agreement with Sterling Planet to sell its entire shareholding in Vigor to Sterling Planet for a total consideration of USD 880,000, payable in four tranches between January and June 2013 (See note 13). As a consequence, the Company reclassified its investment in Vigor as 'Current financial assets held for sale', and an impairment of £101,833 has been recognised against the carrying value.
The table below summarises the underlying investments of the Group. All of the investments are in unquoted companies.
2012 | 2011 | ||||
Currency of investment |
Cost of investment in original currency |
Value of investment |
Cost of investment in original currency |
Value of investment | |
Sterling Planet, Inc. | USD | * | - | 7,000 | 13,541 |
ResponsiveLoad Limited | GBP | 2,354 | - | 2,354 | 4,461 |
Lumenergi Inc | USD | * | - | 5,973 | 2,848 |
Vigor Renewables Limited | GBP | * | - | 650 | 650 |
Group total | - | 21,500 | |||
* As explained in note 13, all of the investments of the Group have been reclassified as 'Current financial assets held for sale' in the current year.
12. LONG-TERM LOANS
2012 £'000 | 2011 £'000 | ||
Vigor Renewables Limited ("Vigor") | - | 200 | |
13. CURRENT FINANCIAL ASSETS CLASSIFIED AS HELD FOR SALE
On 25 April 2012 it was resolved to appoint Cogent Partners to market the Group's portfolio of investments for sale. After significant marketing, the best offer received for the portfolio was from Sterling Planet Holdings Inc. On 9 January 2013 the Company concluded an agreement with Sterling Planet Holdings Inc ("Sterling Planet") to sell its entire share capital in Sterling Planet, Lumenergi Inc and Vigor Renewables Limited to Sterling Planet for total consideration of USD 4.4 million payable in four tranches between January and June 2013. As a consequence, the Company has reclassified these investments as 'Current financial assets classified as held for sale'.
Two tranches of USD 1 million were received on 7 March 2013 and 7 May 2013 with a further USD 1.2 million received on 17 May 2013. A final payment of USD 1.2 million is due to be received on 17 July 2013. This remaining payment is dependent on Sterling Planet receiving proceeds from the sale of core assets, the timing of which is uncertain.
The table below summarises the breakdown of the total consideration of USD 4.4 million between the relevant underlying assets. All of the investments are in unquoted companies.
2012 | 2011 | ||||
Currency of investment |
Cost of investment in original currency |
Price being paid by Sterling Planet |
Value of investment |
Value of investment | |
Sterling Planet, Inc. | USD | 7,000 | 1,760 | 1,096 | - |
Lumenergi Inc | USD | 7,173 | 1,760 | 1,096 | - |
Vigor Renewables Limited | GBP | 650 | 880 | 549 | - |
Group total | 2,741 | - | |||
In the prior year Proven Energy was classified as 'Non-current financial assets held for resale' on the basis that it was the Board's intention to seek to reduce the Company's interest to a minority shareholding. On this basis, and in accordance with FRS5, the Group did not consolidate the results of Proven Energy and this investment was treated as held for resale. Proven Energy was subsequently placed into receivership on 16 September 2011. During the year ended 30 November 2011 a full provision was made of £9.25 million was made against the carrying value of the Company's investment in Proven Energy. The investment was subsequently sold for a nominal consideration by the receiver, and as such realised no shareholder value.
14. OTHER RECEIVABLES
|
| |
QuantaSol Limited | 150 | 350 |
Vaperma | 70 | - |
Vigor | - | 200 |
Prepayments | 10 | 15 |
Other receivables | - | 28 |
230 | 593 | |
On 7 July 2011, the Company announced that Quantasol Limited ("Quantasol") had completed an agreement to sell its core assets, including intellectual property rights, to JDS Uniphase in a cash transaction. The final tranche of deferred consideration on this transaction was received by the Company in January 2013.
The amount due from Vaperma is a final amount receivable from the liquidator of Vaperma. This amount was received in January 2013.
The loan to Vigor is secured and accrues interest at a rate of 8% per annum and were repayable in two tranches of £200,000 on 31 March 2012 and 26 April 2013. Vigor was unable to repay the tranche due on its due date, and this balance remains outstanding. The Company has therefore made a full provision against all amounts due from Vigor.
15. OTHER PAYABLES
|
| |
Trade creditors | - | 54 |
Accruals | 166 | 10 |
166 | 64 | |
16. SHARE CAPITAL
Authorised | No. | £'000 | ||
Ordinary shares of no par value | Unlimited | - | ||
Issued and fully paid | ||||
Ordinary shares of no par value | 86,100,000 | - | ||
No. | ||||
Balance as at 30 November 2011 | 86,100,000 | |||
Issued (ordinary shares of no par value) | - | |||
Balance as at 30 November 2012 | 86,100,000 | |||
The Company has one class of ordinary shares which carry no right to fixed income.
17. SHARE PREMIUM
£'000 | ||||
Balance as at 30 November 2011 and 2012 | 52,720 | |||
18. RECONCILIATION OF MOVEMENT IN RESERVES
| |||
Balance as at 30 November 2011 | (28,451) | ||
Total comprehensive loss | (20,562) | ||
Balance as at 30 November 2012 | (49,013) | ||
19. FINANCIAL RISK MANAGEMENT
The Group's activities expose it to a variety of financial risks: market price risk, credit risk, interest rate risk, currency risk and liquidity risk. The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance. The risk management policies employed by the Group to manage these risks are discussed below:
Market price risk
All of the Group's "Financial assets at fair value through profit or loss" and "Current financial assets classified as held for sale" on the balance sheet are classified as Level 2 in the fair value hierarchy.
Credit risk
Subsequent to the year end, the Group became exposed to credit risk in respect of its cash and cash equivalents, arising from possible default of the relevant counterparty, with a maximum exposure equal to the carrying value of those assets. The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies. The Group monitors the placement of cash balances on an ongoing basis.
The Group is exposed to the credit risk of Sterling Planet as prospective purchaser of the portfolio. The maximum exposure to this risk is equal to the carrying value of the Group's 'Current financial assets held for sale'.
The Group is also exposed to credit risk in respect of the loans granted to its investments and subsidiaries, with a maximum exposure equal to the value of the loans advanced. The Group manages the credit risk of third party borrowers by regularly reviewing their underlying financial performance.
Interest rate risk
A significant proportion of the Group's financial assets and liabilities are non-interest bearing. As such, the Group is not subject to significant amounts of risk due to fluctuations in the prevailing levels of market interest rates.
The following table summarises the Group's exposure to interest rate risks.
As at 30 November 2012 |
Interest bearing |
Non-interest bearing |
Total |
Assets | |||
Cash and cash equivalents | 902 | - | 902 |
Financial assets classified as held for sale | - | 2,741 | 2,741 |
Trade and other receivables | - | 230 | 230 |
902 | 2,971 | 3,873 | |
Liabilities | |||
Trade and other payables | - | (166) | (166) |
Total interest gap | 902 | 2,805 | 3,707 |
As at 30 November 2012, if interest rates had been 200 basis points higher with all other variables held constant, profit after tax for the year and net assets would have been £18,000 higher, mainly as a result of higher interest income on floating rate deposits.
As at 30 November 2011 |
Interest bearing |
Non-interest bearing |
Total |
Assets | |||
Financial assets at fair value through profit or loss | - | 21,500 | 21,500 |
Long-term loans | 200 | - | 200 |
Cash and cash equivalents | 2,040 | - | 2,040 |
Trade and other receivables | 550 | 43 | 593 |
2,790 | 21,543 | 24,333 | |
Liabilities | |||
Trade and other payables | - | (64) | (64) |
Total interest gap | 2,790 | 21,479 | 24,269 |
Currency risk
The Group has assets denominated in currencies other than GBP, the functional currency. The Group is therefore exposed to currency risk, as the value of the assets and liabilities denominated in other currencies will fluctuate due to changes in exchange rates. The Group does not enter into hedging contracts in relation to such investments.
The table below summarises the Group's exposure to currency risks at the period end.
2012 | 2011 | ||||||
Currency |
Amount in currency | £'000 |
Amount in currency | £'000 | |||
Assets | |||||||
Financial assets at fair value through profit or loss | |||||||
USD | - | - | 25,780 | 16,389 | |||
Financial assets classified as held for sale | USD | 4,400 | 2,741 | - | - | ||
As at 30 November 2012, if foreign currency rates against the value of GBP had been 30% higher or 30% lower with all other variables held constant, profit after tax for the year and net assets would have been £822,000 lower or £822,000 higher respectively, as a result of higher/lower exchange rates on assets denominated in currencies other than GBP.
Liquidity risk
The Group's financial instruments include investments in unlisted securities, which are not traded in an organised public market and may generally be illiquid. As a result, the Group may not be able to liquidate quickly its investments in these instruments at an amount close to fair value in order to respond to its liquidity requirements or to specific events.
As at 30 November 2012 the Group had a cash balance of £902,000, and total liabilities of £166,000. The Group has no gearing.
Capital Management
The Group monitors capital which comprises all components of equity (i.e. share premium and revenue reserves). The Group's objective when maintaining capital is to safeguard the Group's ability to continue as a going concern, so that it can continue to provide returns for shareholders
The Group is not subject to any external capital requirements. As at 30 November 2012 the Group had no borrowings.
20. POST BALANCE SHEET EVENTS
a. On 9 January 2013 the Company entered into a stock purchase agreement with Sterling Planet Holdings Inc. to sell its entire shareholding in Sterling Planet, Lumenergi and Vigor to Sterling Planet for a total consideration of USD 4.4 million, payable in four tranches between January and July 2013. These amounts have been reflected in the carrying valuation of the respective investments. The first three tranches of this payment have been received by the date of these financial statements (see note 13).
b. On 15 January 2013 the Company announced that it had received £150,000 as a deferred receipt from its sale of QuantaSol Limited to JDS Uniphase in July 2011.
21. FINANCIAL COMMITMENTS
As at 24 May 2013, the Group has no commitments to companies in its portfolio.
22. RELATED PARTY TRANSACTIONS
a. The Company has appointed Low Carbon Investors Limited, a company in which David Nussbaum has a minority shareholding and provides advisory services, to provide investment management services. During the year the Group paid a management fee to Low Carbon Investors Limited of £420,000 (2011 - £1,099,000).
b. Andrew Neil Munro, a director of the Company, is an employee and director of Ogier Fiduciary Services (Guernsey) Limited. Ogier Fund Administration (Guernsey) Limited provides administration services to LCA. During the period the LCA paid fees of £80,000 (2011 - £134,000) to Ogier Fund Administration (Guernsey) Limited.
The financial information set out in this announcement does not constitute the LCA's statutory accounts for the year ended 30 November 2012 but is derived from those accounts.www.lowcarbonaccelerator.com.
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