Half Yearly Report

RNS Number : 8790I

Aurora Russia Limited

11 December 2015

 



11 December 2015

Aurora Russia Limited ("Aurora Russia" or the "Company")

Results for the six months ended 30 September 2015

The financial information set out in this announcement is the full unedited unaudited interim report and unaudited condensed half year financial statements (the "Interim Report") of the Company for the period ended 30 September 2015, as approved by the Board of Directors today. The Interim Report will be uploaded onto the Company's website at www.aurorarussia.com and sent to shareholders shortly.  Its publication on the website will announced separately.

Enquiries:
Aurora Russia Limited
Gilbert Chalk	[phone]
JTC Fund Solutions (Guernsey) Limited	[phone]
Secretary

Chairman's Statement

Introduction

The results of Aurora Russia Limited (the "Company" or "Aurora Russia") for the 6 months ended 30 September 2015 are presented below.

The last 6 months in Russia have seen a further contraction in the Russian economy. The key drivers of the valuation of Russian assets being the Ukraine crisis, sanctions, and the oil price continue to play a pivotal role. These three variables have stabilised in the third quarter with oil hovering at the $45 range at that time, the Ukraine crisis an unresolved stalemate and sanctions making doing business in Russia more difficult. The future in Russia is as ever unpredictable, but it would seem the beginning of the end of the crisis is in sight, with the IMF forecasting economic growth of 0.2% in 2016. This should serve to further ease pressure on the economy.

The Annual General Meeting ('AGM')

The AGM will be held on 23 December 2015. Notice of the AGM has been sent to all shareholders by post and, as announced on 24 November 2015, the AGM notice can also be downloaded from the Company's website. As required by the Company's articles of incorporation, a continuation vote is to be proposed at the AGM, which the Board has recommended be approved, and all shareholders should read the covering circular explaining the rationale for this recommendation prior to making their decision as to how they wish to cast their votes.

Review

A share buy back was undertaken in April 2015 following the earlier successful sale in February of the Company's investment in Superstroy. The buy back resulted in a net amount of £668,720 being returned to shareholders.

The Company's sole remaining asset now is its 26% shareholding in OJSC Unistream Bank ("Unistream"), a Russian bank and money transfer company, that has performed well in the nine months ended 30 September 2015. As further set out in the Investment Advisor's report, Unistream's trade volumes, revenue, and EBITDA continue to grow year on year in Rouble terms. Unistream's share of the money remittance market also grew strongly to 17.2% in June 2015 from 13.4% in December 2014, according to Central Bank of Russia figures. The Board remains confident in Unistream's future and is determined to achieve a sale for a price that reflects its fair value in current market conditions. Aurora Russia is currently in discussions with various strategic investors to  sell its  26% stake in Unistream. The Board and the Investment Advisor have continued their extensive negotiations over the last six months with prospective acquirers of the Company's investment in Unistream. These negotiations have not been made easier by the Company's position as a minority holder in Unistream and the limited appetite for Russian assets during the period. Notwithstanding these obstacles, the Board believe that  the  prospect of a sale is realistic given Unistream remains an attractive company due to its consistent growth, strong market positioning and cash generation.

Results

For the 6 months to 30 September 2015, Aurora Russia recorded a loss of £2.35 million or 6.11 pence per share, calculated based on the unaudited condensed half year's statement of comprehensive income. The net asset value ('NAV') of the Company as at 30 September 2015 was £4.79 million or 12.6 pence per share. This decline in value is derived from the reasons set out above and in the Investment Advisor's report.

Direct administration and operating expenses of the Company for the 6 months amounted to £430,000 which includes one off payments of £11,438 to JTC Fund Solutions (Guernsey) Limited, £18,000 to Numis Securities Limited for additional work undertaken, incentive fees of £75,000 to the Directors and £6,000 to Mr Nicholas Henderson-Stewart and performance fees of £34,816 to AIAL and £68,000 to Mr Nicholas Henderson-Stewart. This overall cost compares to £371,000 in the same period last year. Cash balances as at 30 September 2015 stood at £1.67 million.

Investments

The Company has one remaining investment, 26.0% of Unistream, a Russian bank including a leading money transfer business.

Portfolio Valuation

A re-valuation of the investment portfolio was performed as at 30 September 2015, resulting in a decrease in the value of Unistream from £5.3 million to £3.4 million (36% since 31 March, 2015). This value is based largely on an indicative offer from a third party, supported by a market approach. This valuation was prepared for accounting purposes only and is in accordance with the International Private Equity and Venture Capital Board's ('IPEV') valuation guidelines.

Outlook

The Board with the assistance of the Investment Advisor is seeking to achieve a sale of the Company's holding in Unistream in the near term at a price which reflects Unistream's market position, trading results and balance sheet. Based on recent discussions, the Board believes that a sale at the valuation included in this interim report should be feasible.

Gilbert Chalk

Chairman of the Board

Aurora Russia Limited

11 December 2015

Investment Advisor's Report

Overview

The Russian economy has continued to decline since the March 2015 annual report and audited financial statements. Although experiencing some relief between April-June when the oil price rallied strongly, the economy has since again been under strain as the oil price fell once more to under $50 per barrel. The Ukraine crisis has been out of the headlines for some time, as a fragile ceasefire appears to be holding. However, the fundamental differences in views between Russia and the US/EU countries remain and neither side shows much willingness to compromise. So it seems the sanctions imposed on Russia will not be lifted any time soon and the market will continue to heavily discount Russian assets until the situation in Ukraine resolves itself.

Russia's sizeable foreign currency reserves have remained stable over the last six months at $360 billion. The reserves coupled with low debt to GDP levels and a positive trade balance will continue to limit the blow caused to the Russian economy by low commodity prices and Western sanctions.

Trading Updates

Unistream

Unistream has performed relatively well in the first nine months of 2015. Results were buoyed by a strong first half period, when currency turmoil in Russia led Unistream's clients to actively trade currency and send money to Russia to take some advantage of a cheap Rouble environment. There was a marked slowdown in the third quarter as customers' falling disposable income reduced their cash transfer activities. Unistream's management accounts show that volume transfers in the first nine months of 2015 were RUR159.8 billion (£1.71 billion using average exchange rate for the year), up 12.4% year on year. Net revenues grew 11.1% to RUR2.3 billion (£25 million) for the same period.

The Central Bank of Russia's statistics indicate Unistream's share of the Russian money remittance market grew from 13.4% in December 2014 to 17.2% in June 2015. The growth in transfer volumes and market share growth were driven by an increase in partner networks, such as with Tinkoff Bank and Megafon. This drove revenue growth, but slightly reduced the share of profit attributed to Unistream (the remainder being the partner's commission).

The valuation of Aurora's stake in Unistream as at 30 September 2015 was marked down  to  £3.4  million, based largely on an indicative third party offer. The valuation was supported by  a market-based approach using a weighted combination of revenue and EBITDA multiples as detailed in notes 4 and 7 of the financial statements. The main factors in the decrease in the valuation were adverse currency movements and an increase in the liquidity discount from 40% to  45%,  reflecting more stringent working capital requirements, which is expected to reduce significantly the cash available for distribution to Unistream's shareholders.

Conclusion

I will continue to work closely with Aurora Russia's Board of Directors to achieve its stated objective of realising Unistream at a price that properly reflects its value. As the Chairman states in his report, we believe that such a sale is feasible.

Nicholas Henderson-Stewart

11 December 2015

Independent Review Report to Aurora Russia Limited

We have been engaged by the Company to review the unaudited condensed half year financial statements for the six months ended 30 September 2015 which comprise the unaudited condensed half year statement of comprehensive income, the unaudited condensed half year statement of financial position, the unaudited condensed half year statement of changes in equity, the unaudited condensed half year statement of cash flows and related explanatory notes. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the unaudited condensed half year financial statements. As described in note 2.1, the half year financial statements have been prepared on a non-going concern basis.

This report is made solely to the Company, in accordance with the terms of our engagement letter dated 22 October 2015. Our work has been undertaken so that we might state to the Company those matters we are required to state to them in an independent review 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, for our review work, for this report, or for the conclusions we have reached.

Directors' responsibilities

The interim report and unaudited condensed half year financial statements is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half year financial report in accordance with the AIM Rules of the London Stock Exchange.

As disclosed in note 2, the annual financial statements of the Company are prepared in accordance with International Financial Reporting Standards ('IFRS') as issued by  the International Accounting Standards Board ('IASB'). The unaudited condensed half year financial statements included in this half year financial report have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting'.

Our responsibility

Our responsibility is to express to the Company a conclusion on the unaudited condensed half year financial statements in the interim report based on our review.

Scope of review

We conducted our review in accordance with International Standards on Review Engagements (UK and Ireland) ISRE 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to  believe that the unaudited condensed half year financial statements for the six months ended 30 September 2015 are not prepared, in all material respects, in accordance with International Accounting Standard 34 and the AIM rules of the London Stock Exchange.

KPMG Channel Islands Limited

Glategny Court

Glategny Esplanade

St Peter Port

Guernsey

GY1 1WR

Date: 11 December 2015

Unaudited Condensed Half Year Company Statement of Comprehensive Income

For the 6 month period 1 April 2015 to 30 September 2015

			1 April 2015		1 April 2014
			to 30 September 2015		to 30 September 2014
	Notes		£'000		£'000
Loss on sale of investments			-		(20,675)
Revenue			-		6
-  Interest			-		6
Administration and operating expenses	3		(430)		(371)
Fair value movements on revaluation of investments	4		(1,900)		(1,506)
Exchange losses			(15)		(1)
Operating loss before tax			(2,345)		(1,535)
Income tax expense			-		-
Total comprehensive loss for the period			(2,345)		(1,535)
Basic and diluted loss per share			(6.11p)		(2.82p)

All items in the above statement derive from continuing operations.

The accompanying notes on pages 9 to 19 form an integral part of these financial statements.

Unaudited Condensed Half Year Company Statement of Financial Position

As at 30 September 2015

			30 September 2015		31 March 2015
	Notes		£'000		£'000
Non-current assets
Investments at fair value through profit and loss	4		-		5,300
			-		5,300
Current assets
Investments	4		3,400		-
Other receivables			8		13
Cash and cash equivalents			1,672		2,638
			5,080		2,651
Total assets			5,080		7,951
Current liabilities
Other payables			293		150
Total liabilities			293		150
Total net assets			4,787		7,801
Equity
Share capital	6		379		446
Special reserve	6		55,7474		56,349
Accumulated loss			(51,339)		(48,994
Total equity			4,787		7,801
Total equity and liabilities			4,787		7,801
Net asset value per share - basic and diluted			12.6p		17.5p

The accounts on pages 5 to 19 were approved by the Board of Directors on 11 December 2015 and signed on its behalf by:

Gilbert Chalk	Jonathan Bridel
Director:	Director:

Date: 11 December 2015

The accompanying notes on pages 9 to 19 form an integral part of these financial statements.

Unaudited Condensed Half Year Statement of Changes in Equity

For the 6 month period 1 April 2015 to 30 September 2015

		Share Capital	Special Reserve	Accumulated loss	Total
		£'000	£'000	£'000	£'000
Balance as at 1 April 2014		743	64,331	(44,386)	20,688
Total comprehensive loss for the period
Loss for the period		-	-	(1,535)	(1,535)
Share buy back		(44)	(8,235)	-	(8,279)
At 30 September 2014		699	56,096	(45,921)	10,874
Balance as at 1 April 2015		446	56,349	(48,994)	7,801
Total comprehensive loss for the period
Loss for the period		-	-	(2,345)	(2,345)
Share buy back		(67)	(602)	-	(669)
At 30 September 2015		379	55,747	(51,339)	4,787

The accompanying notes on pages 9 to 19 form an integral part of these financial statements.

Unaudited Condensed Half Year Statement of Cash Flows

For the 6 month period 1 April 2015 to 30 September 2015

			1 April 2015		1 April 2014
	Notes		to 30 September 2015		to 30 September 2014
Cash flows from operating activities			£'000		£'000
Total comprehensive loss			(2,345)		(1,535)
Adjustments for movements in working capital:
Decrease/(increase) in operating trade and other                     Receivables			5		(5)
Increase / (decrease) in operating trade and other   payables			143		(117)
Adjust for:
Revaluation of investments	4		1,900		(19,506)
Exchange losses			15		1
Loss on disposal of Kreditmart Finance Limited			-		20,675
Interest received			-		(6)
Net cash outflow from operating activities			(282)		(493)
Cash flows from investing activities
Proceeds on disposal of Kreditmart Finance Limited			-		1,919
Bank interest received			-		6
Net cash inflow from investing activities			-		1,925
Cash flows from financing activities
Share buy back			(669)		(8,279)
Net cash outflow from financing activities			(669)		(8,279)
Net decrease in cash and cash equivalents			(951)		(6,847)
Opening cash and cash equivalents			2,638		9,136
Effect of exchange rate changes			(15)		(1)
Closing cash and cash equivalents			1,672		2,288

The accompanying notes on pages 9 to 19 form an integral part of these financial statements.

Notes to the Unaudited Condensed Half Year Financial Statements

For the 6 month period 1 April 2015 to 30 September 2015

1.         Reporting entity

Aurora Russia Limited (the 'Company') is a closed-ended investment fund that was incorporated in Guernsey on 22 February 2006, and was admitted to the Alternative Investment Market of the London Stock Exchange ('AIM') on 20 March 2006. The Company was established to acquire interests in small and mid-sized private companies in Russia, focusing on the financial, business and consumer services sectors.

2.         Accounting Policies

2.1        Basis of preparation

These unaudited condensed half year financial statements have been prepared in accordance with International Accounting Standard (IAS) 34 'Interim Financial Reporting' ('IAS 34') and the AIM Rules for Companies.

The unaudited condensed half year financial statements do not include all the information and disclosures required for a complete set of International Financial Reporting Standards ('IFRS') financial statements, and should be read in conjunction with the Company's audited annual report and financial statements for the year ended 31 March 2015. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance since the last audited annual report and financial statements as at and for the year ended 31 March 2015.

The Directors resolved to begin the gradual winding up of the Company over the following 12 months. As such the Directors believe it is appropriate to adopt a non-going concern basis in preparing the financial statements. The Directors believe that the Company will be able to realise its investment in an orderly manner and therefore do not consider there to be a material difference in the value of the Company's assets, and liabilities, compared to if the financial statements had been prepared on a going concern basis. Accruals of £15,000 for circular and de-listing, £20,000 for liquidation and £15,000 for retention have been accrued in the financial statements for the year ended 31 March 2015 and carried forward to the current period.

2.2        Accounting period

The comparative numbers used for the unaudited condensed half year statement of comprehensive income, unaudited condensed half year statement of changes in equity and unaudited condensed half year statement of cash flows are that of the half year period ended 30 September 2014, which is considered a comparable period as defined per IAS 34. The comparatives used in the unaudited condensed half year statement of financial position are that of the previous financial year ended 31 March 2015.

2.3        Significant accounting policies

There were no new standards adopted in the current period and the accounting policies applied are consistent with that of 31 March 2015 year end.

New standards and interpretations not yet adopted:

There are a number of new standards, amendments to standards and interpretations that are not yet effective for the year ended 31 March 2015, and have not been applied in preparing these financial statements.

• IFRS 9 Financial Instruments (effective on or after 1 January 2018)

IFRS 9 deals with classification and measurement of financial assets and its requirements represent a significant change from the existing requirements in IAS 39 in respect of financial assets: amortised cost and fair value. Financial assets are measured at amortised cost when the business model is to hold assets in order to collect contractual cash flows. All other financial assets are measured at fair value with changes recognised in profit or loss. For an investment in an equity instrument that is not held for trading, an entity may on initial recognition elect to present all fair value changes from the investment in other comprehensive income. The company is currently in the process of evaluating the potential effect of this standard. The standard is not expected to have a significant impact on the financial statements since all of the Company's financial assets are designated at fair value through profit and loss and the Company is in the process of winding up and realising its remaining investment.

2.4        Revenue                                                                                                          

            Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount.

Dividend income from investments is recognised when the Company's right to receive payment has been established, which is the last date of registration of shareholders.

2.5        Segmental reporting

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, assessing performance of the operating segments and making strategic decisions, has been identified as the Board of Directors of the Company. There have been no changes to operating segments since year end.

2.6        Investments

Recognition and Measurement

Unquoted investments are designated as fair value through profit or loss. Investments are initially recognised at cost on a trade date basis. The investments are subsequently re-measured at fair value, which is determined by the Directors on the recommendation of the Valuation Committee; all the Directors are currently on the Valuation Comittee. Unrealised gains and losses arising from the revaluation of investments are taken directly to profit or loss. Investments deemed to be denominated in a foreign currency are revalued in Sterling even if there is no revaluation of the investment in its currency of denomination. Acquisition of investments is recorded on the trade date or when substantially all the risks and rewards of ownership transfer to the Company.

Investments are denominated in Russian Roubles, which the Directors believe best reflect the underlying nature of the currency exposure of the investee companies. The investments are translated into Sterling at period end, which is the functional and presentational currency of the Company. Unrealised gains and losses arising from the revaluation of investments are taken directly to the statement of comprehensive income.

The fair value of the investments is arrived at on the basis of the recommendation of the Company's Valuation Committee, based on valuations that were performed by Mr Nicholas Henderson-Stewart  ("NHS"). Fair value is determined as follows:

Unquoted securities are valued based on the fair value which is estimated by the Valuation Committee. The Valuation Committee will take into account the guidelines and principles for valuation of Portfolio Companies set out by the International Private Equity and Venture Capital Board (IPEV), with particular consideration of the following factors:

• Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

• The valuation methodology applied uses reasonable assumptions and estimations and takes account of the nature, facts and circumstances of the investment and its materiality in the context of the total portfolio.

• An appropriate methodology incorporates available information about all factors that are likely material to affect the fair value of the investment. The valuation methodologies are applied consistently from period to period, except where a change would result in a better estimate of fair value. Any changes in valuation methodologies will be clearly disclosed in the financial statements.

The most widely used methodologies are listed below (discussed further in note 7). In assessing which methodology is appropriate, the Valuation Committee is predisposed towards those methodologies that draw upon market-based measures of risk and return.

• Market Approach

• Income Approach

• Net Assets Approach

Investments made by the Company are generally considered to be long term investments and are not intended to be disposed of on a short term basis. Accordingly valuations do not necessarily represent the amounts which may eventually be realised from sales or other disposals of investments. Values of unlisted investments may differ significantly from the values that would have been used had a ready market for these assets existed.

                Derecognition

The Company derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred or in which the Company neither transfers nor retains substantially all the risks and rewards of ownership and does not retain control of the financial asset. Any interest in such transferred financial assets that is created or retained by the Company is recognised as a separate asset or liability.

On de-recognition of a financial asset, the difference between the carrying amount of the asset (or the carrying amount allocated to the portion of the asset de-recognised), and consideration received (including any new asset obtained less any new liability assumed) is recognised in profit or loss. In determining the consideration received the proceeds received are decreased by any payables that are directly linked to the sale.

The Company enters into transactions whereby it transfers assets recognised on its statement of financial position, but retains either all or substantially all the risks and rewards of the transferred asset or a portion of them. If all or substantially all risk and rewards are retained, then the transferred assets are not derecognised. Transfers of assets with retention of substantially all risks and rewards include securities lending and repurchase transactions.

The Company derecognises a financial liability when its contractual obligations are discharged, cancelled or expire.

2.7        Critical accounting judgements and key sources of estimation uncertainty

In preparing these unaudited condensed half year financial statements management has made judgements, estimates and assumptions that affect the application of policies and the 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 judgements about the 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 ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the periods of the revision and future periods if the revision affects both current and future periods.

The following areas are a key source of estimation uncertainty for the Company and are included within the relevant accounting policy note:

• Valuation of Investments

Significant estimates in the Company's unaudited condensed half year financial statements include the amounts recorded for the fair value of the investments. By their nature, these estimates and assumptions are subject to measurement uncertainty and the effect on the Company's unaudited condensed half year financial statements of changes in estimates in future periods could be significant (note 7).

		1 April 2015 to 30 September 2015	1 April 2014 to 30 September 2014
		£'000	£'000
3.	Administration and operating expenses
	Investment management fee	35	49
	Auditors' remuneration	38	61
	Directors' remuneration	53	110
	Other operating and administrative expenses
	- Administration fees	25	71
	- Performance fee	103	25
	- Marketing costs	4	19
	- Incentive fee	81	-
	- Other	91	36
		430	371

4.         Investments

             Investments in Subsidiaries

	30 September 2015	31 March 2015
	£'000	£'000
Kreditmart
At beginning of period	-	1,968
Proceeds on sale	-	(1,919)
Loss on sale	-	(20,675)
Reversal of unrealised losses	-	20,626
At end of period	-	-

Other Investments

			30 September 2015	31 March 2015
			£'000	£'000
Unistream Bank ('Unistream')			3,400	5,300
Total investments at fair value through profit and loss			3,400	5,300

The investment in Unistream is classified as a current asset as at 30 September 2015 as the Company expects to realise its remaining investment in the following 12 months.

Change in fair value of investments at fair value through profit and loss

			1 April 2015 to 30 September 2015	1 April 2014 to 30 September 2014
			£'000	£'000
Unistream Bank			(1,900)	400
Grindelia Holdings*			-	(1,520)
Reversal of Kreditmart unrealised losses			-	20,626
Total unrealised losses			(1,900)	19,506

*Holding company for Superstroy, sold on 28 January 2015.

The valuation of the Company's investment at 30 September 2015 and 31 March 2015 were performed by the Investment Advisor, who is considered by the Board of Directors to have the necessary experience in valuing investments of this nature, and were approved by the Board on the recommendation of the Valuation Committee.

In the view of the Board, the fair value of the investment in Unistream Bank as at 30 September 2015 was £3.4 million (31 March 2015: £5.3 million) representing a decrease in the total value of the Company's investment from the prior year end.

Methodologies and assumptions used in valuing the Company's investment:

The Company based the value of its investment in Unistream largely on an indicative third party offer, supported by a market-based approach using a combination of revenue and EBITDA multiples.

The market approach uses industry specific benchmarks as its basis and indicates the market value of the shares of the investment based on a comparison of the subject company to other comparable companies in similar lines of business that are publicly traded or which have been part of a recent public or private transaction.

The market comparable method indicates the market value of the shares of a business by comparing it to publicly traded companies in similar lines of business. The conditions and prospects of companies in similar lines of business depend on common factors, such as overall demand for their products and services. An analysis of the market multiples of companies engaged in similar businesses yields insight into investors' perceptions and, therefore, the value of the subject company.

In the market approach, recent sales, listings of comparable assets and such other factors as the Board deems relevant are gathered and analysed. After identifying and selecting the comparable publicly traded companies, their business and financial profiles are analysed for relative similarity. Price or EV multiples of the publicly traded companies are calculated and then adjusted for factors such as relative size, growth, profitability, risk, and return on investment. The adjusted multiples are then applied to the relevant element of the subject company's business.

The Company's investment in Unistream was valued using a weighted combination of revenue and/or EBITDA multiples with a discount applied for liquidity (see note 7 for details). This valuation was supported by an independent valuation performed by a third party expert in September 2015.

5.         Sale of Kreditmart Finance Limited

		30 September 2015	31 March 2015
		£'000	£'000
Proceeds on sale		-	1,919
Less: Cost of Investment		-	(20,594)
Loss of sale		-	(20,675)

The Company sold 100% of its shares in Kreditmart Finance Limited to Amikson Business Limited on 24 April 2014. The proceeds of the sale was RUB 100,000,000 and USD 450,000, the total amount of which was paid in USD.

6.         Share buyback

Number of shares		30 September 2015		31 March 2015
Authorised share capital:
Ordinary Shares of 1p each		200,000,000		200,000,000
Issued share capital:
Opening balance as at 1 April		44,611,131		74,262,617
Shares redeemed in share buy back - 4 June 2014		-		(29,651,486)
Shares redeemed in share buy back - 14 April 2015		(6,687,203)		-
		37,923,928		44,611,131

	30 September 2015		31 March 2015
	£'000		£'000
Share Capital
Opening balance as at 1 April	446		743
29,651,486 Ordinary Shares of 0.01p bought back	-		(297)
6,687,203 Ordinary Shares of 0.01p bought back	(67)		-
	379		446
Number of shares
Treasury Shares
Opening balance as at 1 April	-		-
29,651,486 Ordinary Shares bought	-		29,651,486
4,343,081 Shares cancelled	-		(4,343,081)
25,308,405 Share cancelled	-		(25,308,405)
6,687,203 Ordinary Shares bought	6,687,203		-
6,687,203 Shares cancelled	(6,687,203)		-
	-		-

Special Reserve
Opening balance as at 1 April	56,349		64,331
29,651,486 Ordinary Shares bought back by NUMIS	-		(7,871)
Professional and legal fees incremental to Share buyback	-		(111)
6,687,203 Ordinary Shares bought back by NUMIS	(602)		-
	55,747		56,349

On 1 May 2014 the Company entered into a repurchase agreement to purchase ordinary shares of the Company from Numis Securities Limited ("Numis"). On 4 June 2014, the Company purchased 29,651,486 ordinary shares at 27.5454 p per share for an aggregate gross consideration of £8,167,620.

On 7 April 2015, the Company entered into a professional client agreement and side letter to the Nominated Adviser and Broker Agreement with Numis, in order to purchase pursuant to a tender offer and via Numis ordinary shares in the Company from its shareholders. On 10 April 2015, the Company purchased 6,687,203 ordinary shares at 10p per share for an aggregate gross consideration of £668,720.

7.         Financial risk factors

Other than as set out below, the risks faced by the Company and its management of those risks are consistent with the prior year end.

Market price risk

Market price risk arises principally from uncertainty concerning future values of financial instruments used in the Company's operations.

It represents the potential loss the Company might suffer through holding interests in unquoted private companies whose value may fluctuate and which may be difficult to value and/or to realise. The Company seeks to mitigate such risk by assessing such risks as part of the due diligence process related to all potential investments, and by establishing a clear exit strategy for all potential investments. There is a rigorous due diligence process before an investment can be approved which will cover financial, legal and market risks. Following investment the Company/Manager will always have Board representation, the investee company is required to submit regular management information to an agreed standard and timeliness and the Manager undertakes regular monitoring. The Board receives and considers the most recent monitoring report prepared by the Manager at every Board meeting.

Pricing Risk Table

All security investments present a risk of loss of capital, the maximum risk resulting from instruments is determined by the fair value of the financial instrument. The following represents the Company's market pricing exposure at period end:

At 30 September 2015:

				Fair value	% of Net
			Notes	£'000	Assets
Investments
- Unlisted Equities			4	3,400	71.03
At 31 March 2015: Investments			Notes
- Unlisted Equities			4	5,300	67.94

Valuation of financial instruments

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: Quoted market price (unadjusted) in an active market for an identical instrument.

> Level 2: Valuation techniques based on observable inputs, 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 where all significant inputs are directly or indirectly observable from market data.

> Level 3: Valuation techniques using significant unobservable inputs. This category includes all instruments where 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 where significant unobservable adjustments or assumptions are required to reflect differences between the instruments.

The table below analyses financial instruments, measured at fair value at the end of the reporting period, by the level in the fair value hierarchy into which the fair value measurement is categorised:

 At 30 September 2015:

	Level 1	Level 2	Level 3	Total
	£'000	£'000	£'000	£'000
Investments
- Unlisted Equities	-	-	3,400	3,400
	-	-	3,400	3,400
At 31 March 2015: Investments
- Unlisted Equities	-	-	5,300	5,300
	-	-	5,300	5,300

The following table shows a reconciliation from the beginning balances to the ending balances for fair value measurements in Level 3 of the fair value hierarchy of the Company:

			Level 3	Level 3
			£'000	£'000
			2015	2014
Opening balance			5,300	9,800
Disposal of investments			-	(1,000)
Total fair value gains or losses in profit or loss			(1,900)	(3,500)
			3,400	5,300

Although the Company believes that its estimates of fair values are appropriate, the use of different methodologies or assumptions could lead to different measurements of fair value. Investments classified within level 3 have significant unobservable inputs, as they are not traded. As observable prices are not available for these securities, the Company has used valuation techniques to derive the fair value. Transfers between levels are deemed to take place at the end of the period.

Level 3 investments have been valued in accordance with the methodologies in Note 4. The value of the investment and the fair value movement is disclosed in note 4.

Unrealised loss on fair value movements from revaluation of level 3 investments still held at period end and recognised in the Unaudited Condensed Half Year Statement of Comprehensive Income amounted to £1.90 million (31 March 2015: unrealised loss of £3.5 million).

Unistream was valued using 75% EBITDA multiple and 25% Revenue multiple and 45% liquidity discount (March 2015: 40% liquidity). For Unistream the Revenue multiple observed was 1.6x (31 March 2015: 1.6x) and for EBITDA was 6.1x (31 March 2015: 6.2x).

Price Sensitivity

The sensitivity analysis below has been determined based on the exposure to equity price risks as at the reporting date.

At the reporting date, if the valuations had been 20% higher while all other variables were held constant net loss would decrease by £680,000 (31 March 2015: £1,060,000) for the Company. This sensitivity rate was determined by the Directors as reasonable taking market conditions into account.

If the Revenue multiple increases from 25% to 35% the value of Unistream would become £4 million.

8.         Segmental information

The Board of Directors of the Company decides on the strategic resource allocations of the Company. The operating segments of the Company are the business activities that earn revenue or incur expenses, whose operating results are regularly reviewed by the Board of Directors of the Company, and for which discrete financial information is available. The Board of Directors considers the Company to be made up of one segment, which is reflective of the business activities of the Company and the information used for internal decision-making which includes the monthly reporting to management of investment holdings on a fair value basis:

- Aurora Russia Limited.

The Investment Manager's Report provides more information on the Company's business and the operations of its investment. The Company derives its revenues from its investment primarily through fair value gains or losses.

The Company regards the holders of its ordinary shares as its customers, as it relies on their funding for continuing operations and meeting its objectives. The Company's shareholding structure is not exposed to a significant shareholder concentration.

The Company is engaged in an investment in a small and mid-sized company in Russia and in one principal geographical area, being Russia.

9.         Related party transactions

Directors' and other interests

Directors of the Company or its Manager who held office during the period had the following interests in the shares of the Company:

	Number of ordinary shares at 30 September 2015	Number of ordinary shares at 31 March 2015
Gilbert Chalk	16,855	19,827
Timothy Slesinger	4,824,244	5,674,913
Peregrine Moncreiffe	381,583	381,583

Directors' remuneration

The Directors received the following emoluments during the period:

	30 September 2015	31March 2015
Gilbert Chalk	15,000	81,250
Timothy Slesinger	8,750	28,500
Lyndon Trott	8,750	28,500
Jonathan Bridel	11,250	48,750
Peregrine Moncreiffe	8,750	28,500

Details of the investment in Unistream Bank is presented in note 4.

The management fees paid to Aurora Investment Advisors Limited for the half year ended 30 September 2015 were Nil (March 2015: £30,000); at the period end there was no management fees owing (March 2015: £Nil). Aurora Investment Advisors Limited was terminated as manager on 30 April 2014 and thus received no management fee during the period ended 30 September 2015.        

Per the Amended and Restated Management Agreement, the management fee and performance fee payable to Aurora Investment Advisors Limited ('AIAL') were as follows:

(a)   Management fee of an amount equal to I) for all Valuation Dates up to and including 31 March 2011, 1% of the net asset value of the Company; and ii) for all Valuation Dates after 31 March 2011, 0.75% of net asset value of the Company;

(b)  Performance fee is calculated as follows:

-  2.5% of the value of any disposals realised by the Company would be payable to the Manager, calculated on the value of assets of the Company realised up to £45 million, i.e. £0.40 per share (the "2.5% Tranche");

-  7.5% of the value of any disposals realised by the Company would be payable to the Manager, calculated   on the value of assets of the Company realised between £45 million and £99 million, i.e. £0.40 per share to £0.88 per share (NAV) (the "7.5% Tranche"); and

-  20% of the value of any disposals realised by the Company would be payable to the Manager, calculated on the value of assets of the Company realised over £99 million, i.e. over £0.88 per share (the "20% Tranche").

The performance fees reduced by 20% per annum from 1 January 2012 in respect of the 2.5% Tranche, and by 20% per annum from 1 January 2013 in respect of each of the 7.5% Tranche and the 20% Tranche.

The performance fees paid by the Company to AIAL during the period were Nil (March 2015: £34,799); at the period end £34,816 (March 2015: Nil) was outstanding. The performance fees became payable on the sale of Flexinvest, calculated at 1.28% on the cash consideration of £1.9 million. Performance fees also became payable on the sale of Grindelia, calculated at 1.024% on the cash consideration of £1 million.

Performance fees of £34,816 (£3,400,000 at 1.024%) to AIAL and £68,000 (£3,400,000 at 2%) Mr Nicholas Henderson-Stewart were accrued during the period.

Investment advisory fees of £35,040 (March 2015: £46,227) were paid during the period to Mr Nicholas Henderson-Stewart. At the period end no investment advisory fees were outstanding (31 March 2015: £Nil). Performance fees of Nil (March 2015: £14,128) were paid during the period to Mr Nicholas Henderson-Stewart. At the period end no performance fees were outstanding.

The Company's management contract with AIAL was terminated effective 30 April 2014. The Manager's services were extended to 30 June 2014. Mr Nicholas Henderson-Stewart was appointed Advisor effective 19 June 2014.

As announced by the Company on 31 March, 2015, following completion of a review of the cost base of the Company, the total annual running costs of the Company for the year commencing 1 April 2015, excluding one off payments and accruals relating to a potential sale, were budgeted at £380,000, a decrease of 42% on a like-for like basis on the costs expected to have been incurred in the year ending 31 March 2015. Included in these savings was a 43% reduction in the fees payable to the Company's directors to £105,000 in aggregate. The directors recognised that this fee reduction was necessary, given the fact that the Company held only one residual investment, but believed that the self-managed nature of the Company meant that it was also appropriate, in consideration for the reduction in their fees, to establish an incentive arrangement for the directors.

Following a consultation with certain major shareholders, arrangements were therefore entered into between the Company and the directors, whereby the directors were incentivised to maximise distributions to the Company's shareholders over a period of twelve months commencing on 1 April 2015. The incentive fee payable to the directors would increase relative to the value of any such distributions made subsequent to that date, subject to reductions to the extent that the realisation period extended beyond six months, and the directors would receive a net reduction  in fees until distributions  to the Company's shareholders exceeded approximately £5.3 million. Under the Company's articles, the aggregate directors' remuneration is limited to £300,000 in any financial year. The aggregate directors' remuneration will exceed this threshold if distributions to shareholders exceed approximately £7.6 million, in which event the payment of such excess will be subject to shareholders' approval in general meeting.

The Company has also entered into a new incentive arrangement with the Investment Advisor, under which the Investment Advisor will also receive an additional incentive fee based on distributions to shareholders made subsequent to 1 April 2015. The percentage of the distributions to shareholders payable to the Investment Advisor will vary according to the value and timing of such distributions, with no payment being due until distributions exceed approximately £5.3 million and the payment being capped at 4% of such distributions.

As explained elsewhere in this interim report, the Board with the assistance of the Investment Advisor is seeking to achieve a sale of the Company's holding in Unistream in the near term at a price which reflects Unistream's market position, trading results and balance sheet. Based on recent discussions, the Board believes that a sale is feasible.

As required by International Financial Reporting Standards, the Board has therefore accrued for incentive fees and performance fees to be paid to the directors, the Investment Advisor and AIAL based on a disposal of Unistream at or around the valuation ascribed to that final remaining investment in this interim report and a subsequent return to shareholders of substantially  all of their remaining invested capital prior to the voluntary liquidation of the Company following a members' vote in favour of the same in general meeting.

Although the Board currently intends to effect the distribution of cash by placing the Company into a members' voluntary liquidation (the "Liquidation"), the Board reserves the right to put forward a proposal other than the Liquidation in order to secure an enhanced return for the Company's shareholders.

Based on current best estimates incentive fees of £75,000 to the Directors and £6,000 to Mr Nicholas Henderson-Stewart were accrued for during the period.

10.        Contingencies

The Company had no contingencies outstanding at the reporting date other than those disclosed in note 9.

11.        Events after the reporting date

No further material post balance sheet events were noted.

 

END

 

 

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