PORTON CAPITAL TECHNOLOGY FUNDS ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

Transcription

1 PORTON CAPITAL TECHNOLOGY FUNDS ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

2 PORTON CAPITAL TECHNOLOGY FUNDS Contents Page Management and Administration 1 Directors' Statement 2 Directors' Report 3 Independent Auditors' Report to the Shareholders and Board of Directors of Porton Capital Technology Funds 4 Statement of Total Return 5-6 Statement of Changes in Net Assets Attributable to Holders of Participating Shares 5-6 Balance Sheet 7-8 Cash Flow Statement 9 Notes to the Financial Statements Portfolio Statements Summary of Significant Portfolio Changes 26

3 PORTON CAPITAL TECHNOLOGY FUNDS Page 1 Management and Administration Directors of the Company Harvey Boulter Andrew Collins David Copperwaite Gavin Hayman Patrick Firth Registered Office P.O. Box 309 Ugland House George Town Grand Cayman, KY Cayman Islands Administrator & Registrar Sub-administrator and Secretary Investment Manager Custodian Butterfield Fulcrum Group (Cayman) Limited PO Box 705 Butterfield House 68 Fort Street Grand Cayman, KY Cayman Islands Butterfield Fulcrum Group (Guernsey) Limited 2nd Floor Regency Court Glategny Esplanade St Peter Port Guernsey, GY1 3NQ Channel Islands Porton Capital Limited P.O. Box 309 Ugland House Grand Cayman, KY Cayman Islands Butterfield Trust (Bermuda) Limited 65 Front Street Hamilton Bermuda Auditors Grant Thornton Limited Grant Thornton Limited (Cayman Islands office) (Guernsey office) 5th Floor, Bermuda House PO Box 313 Dr. Roys Drive Lefebvre House PO Box 1044 Lefebvre Street Grand Cayman St Peter Port Cayman Islands KY Guernsey, GY1 3TF Legal Advisers On Cayman Islands Law: Maples and Calder Asia 53rd Floor The Center 99 Queen's Road Central Hong Kong On English Law: DLA Piper UK LLP Victoria Square House Victoria Square Birmingham B2 4DL, United Kingdom

4 PORTON CAPITAL TECHNOLOGY FUNDS Page 2 Directors' Statement As at 30 June 2010 Porton Capital Technology Funds ( PCTF ) had five sub-funds: the Science & Innovation fund ( SIF ), that is openended; MVC (Pre-IPO) Fund, MVC3, Synergis Seed Fund ( SSF ) and Porton Series A ( PSA ), all of which are closed-ended privateequity sub-funds. Psynova Sale In September 2009, the Porton Group sold Psynova Ltd to Rules Based Medicine Inc (RBM) at a multiple of 2.5 times its investment cost. RBM, which is based in Austin, Texas, provides multiple assay services to drug companies to help them assess drug programmes, and has a joint development agreement with Psynova to launch a schizophrenia diagnostic. The exit benefited the MVC range of funds by generating a return of capital of 26.2% and 31.3% for the SSF USD and GBP classes, and 5.6% and 7.0% for the PSA USD and GBP classes. Alaska Restructure and Sale In October 2009, the manager announced the re-structuring and re-birth of its strategic interest in the Adenylate Kinase Phage (AK) technology and Alaska Food Diagnostics Limited. To this end, a new vehicle called AK Applied Limited was formed which was granted the exclusive primary licence to the AK technology in the key fields of food, beverage, water and wastewater. Due to significant benefits for both companies, AK Applied Ltd was subsequently sold in June 2010 to Enigma Diagnostics Ltd, another company in the funds portfolio. AK Applied will add extensive sample preparation capabilities to the Enigma platform, as well as a portfolio comprising over 100 patents; and Enigma Diagnostics will provide the technical and commercial capability to accelerate the commercialisation trajectory of the AK technology. The sale was an all-share deal, with consideration being two Enigma shares for every one AK Applied share held. Adjustments to Investment Values In July 2009, the Directors announced positive developments in Enigma Diagnostics Ltd and Cellcrypt Ltd which resulted in upward adjustments in the values of the two companies. Enigma Diagnostics Ltd concluded a global partnership and investment with GSK, for the point-of-care detection of pandemic influenza. Cellcrypt Ltd launched their mobile encrypted software on Blackberry, and were in the final stages of closing the first tranche of their fundraising. Throughout the remainder of the year, further positive developments in Enigma Diagnostics Ltd were announced. As a reflection of these developments, a further upward adjustment to the value of Enigma occurred in June Science & Innovation Fund ( SIF ) The Directors have been satisfied with the progress of SIF with the fund having delivered a good performance since its launch in June 2000 against a backdrop of varying market conditions over this period. During the year SIF has made further investments in existing private equity investments, Warwick Warp Limited and HydroVenturi Limited. In July 2009 the manager made the decision to suspend subscriptions and redemptions in all share classes of SIF. On the back of the positive developments in the portfolio mentioned above, SIF has been in the process of realising part of the private equity component to rebalance the liquid assets, and as at 30 June 2010 the suspension period was still in place to allow this process to occur while maintaining acceptable levels of liquidity. MVC (Pre-IPO), MVC3, SSF and PSA The Directors have been satisfied with the progress of the private equity investments held in SSF, PSA and the MVC series of funds. During the year SSF made further investments in existing private equity investments Warwick Warp Limited and HydroVenturi Limited. MVC 3 made a further investment in Hydroventuri Limited. Please refer to the Porton Capital website for updated information relating to specific investments. In March 2010 the Directors announced that the duration of MVC (Pre-IPO) would be extended to the closing date of 5th June This decision was made based on the fact that investments within the fund s portfolio were entering into positive stages of development and a later closing date would allow the manager to maximize returns for investors. Summary Overall, the Board remains confident of delivering strong relative returns for Porton Capital Technology Funds investors over the medium term. October 2010

5 PORTON CAPITAL TECHNOLOGY FUNDS Page 3 Directors' Report The Directors present their report and the audited financial statements for the year ended 30 June Statement of Directors' Responsibilities The Directors are responsible for preparing financial statements for each financial year which give a true and fair view of the state of affairs of the Porton Capital Technology Funds ("'PCTF" or the "Company") as at the end of the financial year and of the profit and loss of the Company for that year, and which are in accordance with the Mutual Funds Law (Revision) In preparing those financial statements the directors are required to: Activities - select suitable accounting policies and apply them consistently; - make judgements and estimates that are reasonable and prudent; - state whether applicable accounting standards have been followed subject to any material departures disclosed and explained in the financial statements; and - prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. The Directors confirm that they have complied with the above requirements in preparing the financial statements and that the going concern basis for the preparation of the financial statements is appropriate. The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements have been properly prepared in accordance with the Mutual Funds Law of the Cayman Islands. They are also responsible for the system of internal control, for safeguarding the assets of the Company and for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Company was incorporated in the Cayman Islands on 29 February 2000 and exists under the Companies Law of the Cayman Islands as an exempted company with limited liability and is registered under the Mutual Funds law (Revision) As at 30 June 2010, it had five sub-funds, Science & Innovation Fund which is an open-ended investment fund (established on 7 June 2000) and four closedended funds, MVC (Pre-IPO) (established on 28 February 2003), MVC 3 (established on 20 March 2004), Synergis Seed Fund (established on 1 September 2005) and Porton Series A (established 2 July 2007). The sub-fund MVC terminated on 30 April 2009 and the redemption of the sub-fund was settled by an in specie transfer of MVC's investments at 30 April The investment objective of the Science & Innovation Fund is to invest in private equity or development capital funding of research and development (R&D) opportunities for commercialisation through a number of Public Sector Research Establishments (PSRE's) and Universities. Additionally, the sub-fund intends to have investment exposure directly or indirectly in quoted technology funds. The investment objective of MVC (Pre-IPO) and MVC 3 is long term capital appreciation by investing in UK Government research and development for commercialisation. The aim of Synergis Seed Fund is to invest into technology spin-outs at an earlier stage as compared with the existing funds within the PCTF range. The investment objective of Porton Series A ("PSA") is long-term capital appreciation. The sub-fund intends to invest in companies in which the Company, through its other sub-funds, particulary the Synergis Seed Fund, has made investments. Results and dividends The results for the year are set out in the attached financial statements. The Directors approved a dividend of 831,601 from the Synergis Seed Fund during the year (2009: nil) and 125,740 from Porton Series A during the year (2009: nil). Directors The current directors of the Company are set out on page 1. All directors served throughout the year. Harvey Boulter - Director David Copperwaite - Director 29 October 2010

6 PORTON CAPITAL TECHNOLOGY FUNDS Page 4 Independent Auditors' Report to the Shareholders and Board of Directors of Porton Capital Technology Funds We have audited the financial statements of Porton Capital Technology Funds for the year ended 30 June 2010 which comprise of Statement of Total Return, Statement of Changes in Net Assets Attributable to Holders of Participating Shares, Balance Sheet, the related notes, Portfolio Statements and the Summary of Significant Portfolio Changes (all expressed in United States Dollars or Sterling). The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). This report is made solely to the Company s shareholders, as a body, in accordance with our terms of engagement and the Mutual Funds Law (Revision) Our audit work has been undertaken so that we might state to the Company s shareholders those matters we are required to state to them in an auditors 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 shareholders as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors As described in the Statement of Directors Responsibilities in the Directors report, the company s directors are responsible for the preparation of the financial statements in accordance with applicable Cayman Islands law, Mutual Funds Law (Revision) 2009 and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice) and for being satisfied that they give a true and fair view. Our responsibility is to audit the financial statements in accordance with applicable Cayman Islands legal and regulatory requirements and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board s Ethical Standards for Auditors. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the company s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. Qualified opinion arising from non-consolidation of subsidiaries As explained in note 1 the Company has not prepared consolidated financial statements as required by Financial Reporting Standard 2 Accounting for Subsidiary Undertakings but has instead treated such holdings as unconsolidated investments. As a consequence the financial statements do not give the information required by standard accounting practice about the economic activities of the Company. It is not practicable to quantify the effects of the departure. Except for the absence of consolidated information, as described above, in our opinion the financial statements: give a true and fair view of the state of the Company s affairs as at 30 June 2010 and its total return for the year then ended; have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice. Fundamental uncertainty relating to the valuation of intangibles and unquoted investments In forming our opinion we have considered the adequacy of disclosures made in the notes which explain the basis of the value ascribed to the Company s interest in unquoted investments. The attributed value cannot be accurately determined either due to the inherent uncertainty within the unquoted investments or the lack of substantial trading of the company shares. Our opinion is not qualified in this respect. Grant Thornton Limited Chartered Accountants 5th Floor, Bermuda House Dr. Roys Drive P.O. Box 1044 Grand Cayman Cayman Islands KY October 2010

7 PORTON CAPITAL TECHNOLOGY FUNDS Page 5 Statement of Total Return For the year ended 30 June 2010 Science & Innovation MVC Synergis Porton Company Fund (PRE-IPO) MVC 3 Seed Fund Series A Total Notes USD GBP GBP GBP GBP USD Net gains on investments during the year 7 16,205,202 6,918,405 17,017,249 4,623,151 5,331,094 69,829,528 Losses on foreign exchange (133,183) - (3,187) - (317) (138,727) Gross income 8 91, ,224 19, ,042 Expenses 9 (4,475,187) (1,713,313) (5,045,844) (1,249,431) (1,365,555) (19,246,730) Net operating expense (4,383,862) (1,713,304) (5,020,620) (1,229,856) (1,365,508) (19,145,688) Finance Costs: Distributions to holders of participating shares (831,601) (125,740) (1,514,810) #REF! Total finance costs (831,601) (125,740) (1,514,810) Total return for the year 11,688,157 5,205,101 11,993,442 2,561,694 3,839,529 49,030,303 Net increase in net assets from operations attributable to holders of participating shares 11,688,157 5,205,101 11,993,442 2,561,694 3,839,529 49,030,303 Total return per share 22 Total return per USD denominated ordinary share USD 7.66 * Total return per USD denominated Class B share USD 7.17 * USD 0.04 ** USD 0.84 USD 4.45 Total return per USD denominated Class I share USD 6.54 * USD 0.04 ** Total return per USD denominated Class A share USD 0.04 ** Total return per GBP denominated Class B share GBP 0.07 GBP 0.09 ** GBP 0.96 GBP 0.79 Statement of changes in net assets attributable to holders of participating shares For the year ended 30 June 2010 Science & Innovation MVC Synergis Porton Company Fund (PRE-IPO) MVC 3 Seed Fund Series A Total Notes USD GBP GBP GBP GBP USD Net assets attributable to holders of participating shares at 1 July ,636,377 8,375,617 16,819,813 3,061,988 2,327,278 73,989,491 Movement due to sales and repurchases of shares Subscriptions Redemptions Net increase in net assets from operations attributable to holders of participating shares (see above) , , (200,573) (200,573) 785, ,874 11,688,157 5,205,101 11,993,442 2,561,694 3,839,529 49,030,303 Foreign exchange loss on translation Net assets attributable to holders of participating shares at 30 June (6,619,050) 16 36,110,408 13,580,718 28,813,255 5,623,682 6,166, ,186,618 The above results for all sub funds are derived from continuing operations. There were no recognised gains and losses for the current or previous financial year other than as stated in the Statement of Total Return. * Total return based on average shares in issue calculated on a quarterly basis for the year then ended ** Total return based on participating shares subscription value for the year then ended The accompanying notes form part of these financial statements.

8 PORTON CAPITAL TECHNOLOGY FUNDS Page 6 Statement of Total Return For the year ended 30 June 2009 Science & Innovation MVC Synergis Porton Company Fund MVC (PRE-IPO) MVC 3 Seed Fund Series A Total Notes USD GBP GBP GBP GBP GBP USD Net (losses)/gains on investments during the year 7 (15,718,414) (3,289,880) (9,281,853) (7,165,667) 3, ,689 (46,950,674) (Losses)/gains on foreign exchange (196,394) ,886 17,875 (8,681) (162,327) Gross income 8 23, ,753 25, ,281 Expenses 9 (1,732,970) 394,134 1,701,929 2,502,669 (93,240) (132,514) 5,338,679 Net operating (expense)/income (1,709,489) 394,135 1,702,360 2,556,422 (67,340) (132,494) 5,486,960 Total return/(deficit) for the year (17,624,297) (2,895,745) (7,579,493) (4,597,359) (45,930) 266,514 (41,626,041) Net increase/(decrease) in net assets from operations attributable to holders of participating shares (17,624,297) (2,895,745) (7,579,493) (4,597,359) (45,930) 266,514 (41,626,041) Total return per share 22 Total return per USD denominated ordinary share -USD 9.99 * Total return per USD denominated Class B share -USD * -USD 0.02 ** USD 0.01 USD 0.31 Total return per USD denominated Class I share -USD * -USD 0.01 ** Total return per USD denominated Class A share -USD 0.01 ** Total return per GBP denominated Class B share -GBP GBP GBP 0.04 ** -GBP 0.02 GBP 0.06 Statement of changes in net assets attributable to holders of participating shares For the year ended 30 June 2009 Science & Innovation MVC Synergis Porton Company Fund MVC (PRE-IPO) MVC 3 Seed Fund Series A Total Notes USD GBP GBP GBP GBP GBP USD Net assets attributable to holders of participating shares at 1 July 2008 Movement due to sales and repurchases of shares Subscriptions Redemptions Net increase/(decrease) in net assets from operations attributable to holders of participating shares (see above) 44,042,290 3,412,578 15,955,110 21,417,172 3,107,918 2,060, ,526,602 2,913, ,913,392 (5,695,008) (5,695,008) (2,781,616) (2,781,616) (17,624,297) (2,895,745) (7,579,493) (4,597,359) (45,930) 266,514 (41,626,041) In specie transfer to Porton Capital Inc - (516,833) (835,233) Foreign exchange loss on translation Net assets attributable to holders of participating shares at 30 June (16,294,221) 16 23,636,377-8,375,617 16,819,813 3,061,988 2,327,278 73,989,491 * Total return based on average shares in issue calculated on a quarterly basis for the year then ended ** Total return based on participating shares subscription value for the year then ended The accompanying notes form part of these financial statements.

9 PORTON CAPITAL TECHNOLOGY FUNDS Page 7 Balance Sheet as at 30 June 2010 Science & Innovation MVC Synergis Porton Company Fund (PRE-IPO) MVC 3 Seed Fund Series A Total Notes USD GBP GBP GBP GBP USD Fixed Assets Investments at valuation 1,12 30,605,274-35,507,674 6,762,277 7,402, ,929,446 30,605,274-35,507,674 6,762,277 7,402, ,929,446 Current Assets Investments at valuation 1,12 4,710,786 16,085, ,779,910 Debtors 13 2,727,383 12,799 26, , , ,985 Cash at bank 97, ,127 45, ,179 7,535,629 16,098,588 26, , ,333 29,995,074 Total assets 38,140,903 16,098,588 35,533,723 6,921,524 7,581, ,924,520 Equity Equity share capital Current Liabilities Creditors payable within one year 14 2,030, ,853 1,085,465 59,316 21,294 2,293,294 Non Current Liabilities Creditors payable after one year 14-2,055,017 5,635,003 1,238,526 1,393,253 15,444,508 Liabilities (excluding net assets attributable to holders of participating shares) Net assets attributable to holders of participating shares Total Equity and liabilities 2,030,495 2,517,870 6,720,468 1,297,842 1,414,547 17,737, ,110,408 13,580,718 28,813,255 5,623,682 6,166, ,186,618 38,140,903 16,098,588 35,533,723 6,921,524 7,581, ,924,520 Net asset value per share 23 Net asset value per USD denominated participating share Net asset value per USD denominated Class B participating share Net asset value per USD denominated Class I participating share Net asset value per USD denominated Class A participating share Net asset value per GBP denominated Class B participating share USD USD USD 0.09 USD 1.72 USD 2.63 USD USD 0.08 USD 0.08 GBP 0.17 GBP 0.22 GBP 2.12 GBP 3.39 Approved by the board on 29 October 2010 Harvey Boulter - Director David Copperwaite - Director The accompanying notes form part of these financial statements.

10 PORTON CAPITAL TECHNOLOGY FUNDS Page 8 Balance Sheet as at 30 June 2009 Science & Innovation MVC Synergis Porton Company Fund MVC (PRE-IPO) MVC 3 Seed Fund Series A Total Notes USD GBP GBP GBP GBP GBP USD Fixed Assets Investments at valuation 1,12 16,738,218-9,167,355 18,163,508 2,779,631 2,266,667 70,042,357 Current Assets Investments at valuation 1,12 5,317, ,317,380 Debtors 13 1,939,960-57, , , ,742 3,178,644 Cash at bank 337, ,701 28, ,367 7,595, , , , ,139 8,949,391 Total assets 24,333, ,224,782 18,713,170 3,191,574 2,459,806 78,991,748 Equity Equity share capital Current Liabilities Creditors payable within one year , , ,341 24,294 15, ,249 Non Current Liabilities Creditors payable after one year ,881 1,510, , ,949 4,023,908 Liabilities (excluding net assets attributable to holders of participating shares) Net assets attributable to holders of participating shares Total equity and liabilities 696, ,165 1,893, , ,528 5,002, ,636,377-8,375,617 16,819,813 3,061,988 2,327,278 73,989,491 24,333, ,224,782 18,713,170 3,191,574 2,459,806 78,991,748 Net asset value per share 23 Net asset value per USD denominated participating share Net asset value per USD denominated Class B participating share Net asset value per USD denominated Class I participating share Net asset value per USD denominated Class A participating share Net asset value per GBP denominated Class B participating share USD USD USD 0.05 USD 1.03 USD 1.10 USD USD 0.05 USD 0.05 GBP 0.00 GBP 0.11 GBP 0.13 GBP 1.15 GBP 1.27 The accompanying notes form part of these financial statements.

11 PORTON CAPITAL TECHNOLOGY FUNDS Page 9 Cash Flow Statement For the year ended 30 June 2010 Notes Company Company year ended year ended 30 June June 2009 US$ US$ OPERATING ACTIVITIES Net cash outflow from operating activities 24 (4,492,734) (3,815,324) FINANCIAL INVESTMENT Purchases of investments (14,006,839) (47,478,857) Cash realised from sales of investments 18,879,307 53,007,691 Net cash inflow from financial investment 4,872,468 5,528,834 Net cash inflow before financing 379,734 1,713,510 FINANCING Issue of shares 16 1,066,447 3,053,224 Redemption of shares 16 (200,573) (5,695,008) Distributions paid (1,449,796) - Net cash outflow from financing (583,922) (2,641,784) Decrease in cash (204,188) (928,274) Cash balances as at start of year 453,367 1,381,641 Cash balances as at end of year 249, ,367 As at As at Reconciliation of Movement in Cash at Bank: 1 July 2009 Cash Flow 30 June 2010 US$ US$ US$ Cash at bank 453,367 (204,188) 249, ,367 (204,188) 249,179 On 25 May 1999 the reporting currency of the Fund changed from US Dollars into Euros. The comparative figures were converted at a rate of 1

12 PORTON CAPITAL TECHNOLOGY FUNDS Page 10 Notes to the financial statements for the year ended 30 June Establishment and Accounting policies Establishment The Company was incorporated in the Cayman Islands on 29 February 2000 and exists under the Companies Law of the Cayman Islands as an exempted company with limited liability. As at 30 June 2010, it had five sub-funds, Science & Innovation Fund which is an openended investment fund (established on 7 June 2000) and four closed-ended funds, MVC (Pre-IPO) (established on 28 February 2003), MVC 3 (established on 20 March 2004), Synergis Seed Fund (established on 1 September 2005) and Porton Series A (established 2 July 2007). The sub-fund Military Venture Capital ( MVC ) terminated on 30 April 2009 the redemption of the sub-fund was settled by an in specie transfer of MVC's investments at 30 April In March 2010 the Directors announced that the duration of MVC (Pre-IPO) would be extended to 5 June The Science & Innovation Fund's Class B participating redeemable preference USD0.001 shares were listed on the Channel Islands Stock Exchange on 31 March The investment objective of the Science & Innovation Fund is to invest in private equity or development capital funding of research and development (R&D) opportunities for commercialisation through a number of Public Sector Research Establishments (PSRE's) and Universities. Additionally, the sub-fund intends to have investment exposure directly or indirectly in quoted technology funds. The investment objective of MVC (Pre-IPO) and MVC 3 is long term capital appreciation by investing in UK Government research and development for commercialisation. The investment objective of Synergis Seed Fund is to invest into technology spin-outs at an earlier stage as compared with the existing funds within the PCTF range. The investment objective of Porton Series A is long-term capital appreciation. The Fund intends to invest in companies in which the Company, through its other sub-funds, particularly the Synergis Seed Fund, has made investments. Basis of accounting Except as noted below, the financial statements have been prepared in accordance with applicable accounting standards in the United Kingdom, the Statement of Recommended Practice for the Financial Statements of Authorised Funds issued in December 2005 by the Investment Management Association and the historical cost convention as modified by the revaluation of investments to the extent that it is applicable. The company has decided not to opt for adoption of Financial Reporting Standard ("FRS") 23 "The effects of Changes in Foreign Exchange Rate, FRS 25 "Financial Instruments: Disclosure and Presentation", FRS 26 "Financial Instrument : Measurement and Recognition and FRS 29 "Financial Instruments: Disclosures" other than the mandatory presentation requirements of FRS 25. A summary of the important accounting policies is set out below: Consolidation The Company has not prepared consolidated financial statements as required under Financial Reporting Standard 2 ( FRS 2 ) Accounting for Subsidiary Undertakings. The Company has investments in HydroVenturi Limited and Synergis Technologies Limited which would be regarded as subsidiary undertakings under FRS 2 in the current or preceeding financial years. FRS 2 requires the Company to consolidate the results and position of these subsidiaries in these financial statements, however, as the nature of the Company s business is to achieve long term capital growth by the provision of risk capital, the Company considers it more appropriate not to reflect the Company s share of the results of these entities in the financial statements but to show them as investments. This treatment represents a departure from the requirements of FRS 2 and the Auditor's report is qualified in this respect, see page 4. Foreign exchange For individual sub-funds: Foreign currency monetary assets and liabilities, including investments, are translated into the reporting currency (US dollar "US$") at the rate of exchange ruling at the balance sheet date. Investment transactions and income and expenditure items are translated at the rate of exchange ruling at the date of the transaction. Differences on foreign exchange are included in reserves. For Company total: Assets and liabilities of the sub-funds have been translated at the rate ruling at the balance sheet date. The revenue account and reserve movements of the sub-funds are translated at the average exchange rate for the year. The exchange difference on translation is included in reserves. Balance sheet date exchange rate: GBP:USD (2009: ). Average exchange rate: GBP:USD (2009: ). Income Income is accounted for on an accruals basis. Investments at Valuation Quoted investments in technology funds are valued at the mid market price at close of business on the balance sheet date or, where no mid market price is available, a closing price as provided by the portfolio manager. Unquoted investments are initially valued at cost and then may be revalued from time to time as the directors shall determine on the basis outlined in note 12. Unrealised gains and losses arising on revaluation are included in the Statements of Total Return. 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. Investments are classified as Current Investments when have a maturity date of less than one year. Introductory fees and commissions A commission is paid from the proceeds received on share issues to various introducers for introducing investors to the Company. The fees paid are treated as prepayments (note 13) and amortised over 5 years from the subscription date, as there are redemption penalties to recoup any introductory fees within 5 years of the initial investment. Fees are amortised in full on shareholder redemption, any redemption penalties are netted off against this amortisation charge.

13 PORTON CAPITAL TECHNOLOGY FUNDS Page 11 Notes to the financial statements for the year ended 30 June Establishment and Accounting policies (continued) Expense allocation Expenses are allocated to the individual sub-funds on a pro rata basis on net asset value unless directly attributable. Critical Accounting Estimates and Judgments Estimates and judgments are continually evaluated and are based on historical experience as adjusted for current market conditions and other factors. The resulting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined as follows. Fair Values of Investments at Valuation The fair value of investments not traded in active markets is determined using the basis outlined in note 12. Where the investment being valued was made recently, its cost will generally provide a good indication of fair value. The variety of valuation bases adopted and quality of management information provided by the underlying investee companies means there are inherent difficulties in determining the value of the investments. Amounts realised on the sale of those investments will inevitably differ from the values reflected in these financial statements and the difference may be significant. Fair value and impairment estimates are made at a specific point in time based on market conditions and information about the investments. These estimates are subjective in nature and involve uncertainties and matters of significant judgment. 2 Investment management and performance fees Porton Capital Limited (the "Investment Manager") is entitled to an investment management fee at the annual rate of 1.5% of the net assets of Science & Innovation Fund ("SIF") paid monthly in arrears for the ordinary shares and 2.0% for the Class B and Class I shares. The Investment Manager was entitled to an investment management fee at the annual rate of 1% of the amounts subscribed for participating shares of MVC paid quarterly in arrears. The Investment Manager is entitled to an investment management fee at the annual rate of 1% of the amounts subscribed for participating shares of MVC (Pre-IPO) paid quarterly in arrears. The Investment Manager is entitled to an investment management fee at the annual rate of 1.5% of the amounts subscribed for participating shares of MVC 3 paid quarterly in arrears. The Investment Manager is entitled to an investment management fee at the annual rate of 2% of the amounts subscribed for participating shares of Synergis Seed Fund ("SSF") paid quarterly in arrears. The Investment Manager is entitled to an investment management fee at the annual rate of 2% of the amounts subscribed for participating shares of Porton Series A ("PSA") paid quarterly in arrears. In addition, for each sub-fund a performance fee calculated in accordance with the Offering Memorandum will be deducted from any gains achieved. The fee for the MVC series, SSF and PSA will become payable upon realisation of investment gains after the repayment of the subscription price for each participating share. 3 Administration fee The Administrator of SIF is entitled to fees calculated based on 0.25% of the net asset value of SIF subject to a minimum of US$4,167 per month payable monthly in arrears. Pursuant to an admendment to the administrators agreement dated 31 August 2005, fees post 1 November 2009 are payable to Butterfield Fulcrum Group (Cayman) Limited (the "Administrator") as follows: The Administrator of MVC (PRE-IPO), MVC 3, SSF and PSA is entitled to fees paid quarterly in arrears for the sub-funds as follows. - 8 basis points on first US$50 million of the NAV of the sub funds, in total; - 7 basis points on US$ million of the NAV of the sub funds, in total; - 6 basis points on US$ million of the NAV of the sub funds, in total; - 5 basis points on the aggregate NAV of the sub funds greater than US$200 million. The fees are subject to a minimum fee of GBP4,000 per sub fund, split across the sub funds on a net asset value weighted basis. Prior to the new Administration agreement, fees were paid to the Administrator as follows: The Administrator of MVC (PRE-IPO), MVC 3, SSF and PSA was entitled to fees on a time spent basis at the Administrator's standard hourly rates. The Administrator was entitled to a fee on a time spent basis at their standard hourly rates for the preparation of the annual financial statements. 4 Custodian fee Butterfield Trust (Bermuda) Limited is the Custodian for SIF, and is entitled to fees based on a percentage of net asset value, subject to a minimum fee of USD 7,500 per annum. 5 Directors' fees Harvey Boulter, Andrew Collins, David Copperwaite, Patrick Firth and Gavin Hayman were entitled to 15,000 per annum. From 1 July 2010 they are entitled to 18,000 per annum. 6 Authorisation Porton Capital Technology Funds is registered as an exempted company with limited liability under the Mutual Funds Law of the Cayman Islands.

14 PORTON CAPITAL TECHNOLOGY FUNDS Page 12 Notes to the financial statements for the year ended 30 June Net gains/(losses) on investments The net gains/(losses) on investments during the year ended 30 June 2010 comprise: Investments in unquoted investments Proceeds from sales of investments during the year Original cost of investments sold/transferred during the year Gains/(losses) realised on investments sold during the year Net change in unrealised appreciation for the year Science & Innovation MVC Synergis Porton Company Fund (PRE-IPO) MVC 3 Seed Fund Series A Total USD GBP GBP GBP GBP USD 1,120,700 1,913, , ,740 5,916, ,446 2,012, , ,000 4,526, ,254 (98,959) - 621,601 95,740 1,389,726 16,160,211 7,017,364 17,017,249 4,001,550 5,235,354 68,806,065 Net gains on investments 16,571,465 6,918,405 17,017,249 4,623,151 5,331,094 70,195,791 Investments in money market funds and treasury bills Proceeds from sales of investments during the year Original cost of investments sold during the year Losses realised on investments sold during the year Net change in unrealised depreciation for the year Science & MVC Synergis Porton Company Innovation Fund (PRE-IPO) MVC 3 Seed Fund Series A Total USD GBP GBP GBP GBP USD 16,000, ,000,627 16,012, ,012,236 (11,609) (11,609) (354,654) (354,654) Net losses on investments (366,263) (366,263) Total net gains on investments 16,205,202 6,918,405 17,017,249 4,623,151 5,331,094 69,829,528 The net gains on investments during the year ended 30 June 2009 comprise: Investments in unquoted investments Proceeds from sales of investments In specie transfer of investments on termination of sub fund Original cost of investments sold during the year Losses realised on investments sold during the year Net change in unrealised appreciation/ (depreciation) for the year Science & MVC Synergis Porton Company Innovation Fund MVC (PRE-IPO) MVC 3 Seed Fund Series A Total USD GBP GBP GBP GBP GBP USD , ,043,041 2,572,381 1,395, ,828,343 (2,572,379) (750,542) (3,785,300) (13,697,619) (2,539,338) (9,284,255) (7,168,420) - 350,827 (43,822,894) Net (losses)/gains on investments (16,269,998) (3,289,880) (9,284,255) (7,168,420) - 350,827 (47,608,194) Investments in money market funds Proceeds from sales of investments during Original the cost year of investments sold during the year Gains realised on investments sold during the year Net change in unrealised appreciation/ (depreciation) for the year Science & MVC Synergis Porton Company Innovation Fund MVC (PRE-IPO) MVC 3 Seed Fund Series A Total USD GBP GBP GBP GBP GBP USD 50,618, , , , ,986 53,007,690 50,215, , , , ,124 52,357, ,696-24,291 46,143 25,677 56, , ,888 - (21,889) (43,390) (22,142) - 7,610 Net gains on investments 551,584-2,402 2,753 3,535 56, ,520 Total net losses/(gains) on investments (15,718,414) (3,289,880) (9,281,853) (7,165,667) 3, ,689 (46,950,674)

15 PORTON CAPITAL TECHNOLOGY FUNDS Page 13 Notes to the financial statements for the year ended 30 June Gross Income for the year ended 30 June 2010 Science & Synergis Innovation MVC Seed Porton Company Fund (PRE-IPO) MVC 3 Fund Series A Total USD GBP GBP GBP GBP USD Deposit interest 7, ,177 Loan interest 22,069-25,206 18,904-91,865 Loan interest (inter fund) 61, , ,224 19, ,042 Gross Income for the year ended 30 June 2009 Science & Synergis Innovation MVC Seed Porton Company Fund MVC (PRE-IPO) MVC 3 Fund Series A Total USD GBP GBP GBP GBP GBP USD Deposit interest 9, ,023 1, ,987 Other income 14, ,730 24, ,294 23, ,753 25, ,281 9 Expenses for the year ended 30 June 2010 Science & Synergis Innovation MVC Seed Porton Company Fund (PRE-IPO) MVC 3 Fund Series A Total USD GBP GBP GBP GBP USD Payable to the designated manager and its associates Investment management fee (note 2) 552,649 79, ,281 52,180 35,991 1,121,477 Performance fee (note 2) 3,112,842 1,343,136 4,124,987 1,133,234 1,276,304 15,577,744 3,665,491 1,422,176 4,317,268 1,185,414 1,312,295 16,699,221 Payable to the custodian and its associates Custodian fee (note 4) 14, ,934 A Management fee at the annual rate of 1.75% of the net assets of the Fund is paid 14, ,934 Other expenses Administration fee (note 3) 71,845 15,413 34,994 9,901 8, ,354 Introductory fees (note 1) 289, ,056 37,079 28, ,250 Directors fees (note 5) 36,259 13,255 28,197 5,457 4, ,132 Audit fee 5,771 2,521 7,832 1,741 1,594 27,430 Preliminary expenses , ,099 Legal and professional fees 357, , ,345 2,756 1,325 1,492,197 Other expenses 32,840 20,531 54,152 4,306 7, , , , ,576 64,017 53,260 2,532,575 Total expenses 4,475,187 1,713,313 5,045,844 1,249,431 1,365,555 19,246,730

16 PORTON CAPITAL TECHNOLOGY FUNDS Page 14 Notes to the financial statements for the year ended 30 June Expenses A Management (continued) fee at the annual rate of 1.75% of the net assets of the Fund is paid for the year ended 30 June 2009 Science & Synergis Innovation MVC Seed Porton Company Fund MVC (PRE-IPO) MVC 3 Fund Series A Total USD GBP GBP GBP GBP GBP USD Payable to the designated manager and its associates Investment management fee (note 2) 544,723 13,039 79, ,085 56,167 35,916 1,168,921 Performance fee (note 2) 457,174 (437,895) (1,935,140) (3,084,629) (24,627) 45,181 (8,329,522) 1,001,897 (424,856) (1,856,100) (2,882,544) 31,540 81,097 (7,160,601) Payable to the custodian and its associates Custodian fee (note 4) 14, ,853 14, ,853 Other expenses Administration fee (note 3) 104,870 18,575 15,198 24,181 10,663 15, ,071 Introductory fees (note 1) 421,091-34, ,250 37,079 28, ,225 Directors fees (note 5) 37,694 3,031 18,552 27,654 1,854 1, ,975 Audit fee 9, , ,667 Preliminary expenses ,127 2, ,640 Legal and professional fees 96,306 4,870 67, ,540 5,278 4, ,692 Other expenses 45,978 3,514 13,150 20,199 3,141 1, , ,220 30, , ,875 61,700 51,417 1,807,069 Total expenses 1,732,970 (394,134) (1,701,929) (2,502,669) 93, ,514 (5,338,679) 10 Distributions During the year ended 30 June 2010, the directors approved and paid the following distributions: Science & Synergis Innovation MVC Seed Porton Company Fund (PRE-IPO) MVC 3 Fund Series A Total USD GBP GBP GBP GBP USD Distributions , ,740 1,514,810 No distributions were made during the year ended 30 June Taxation At present, no income, profit or capital gains taxes are levied in the Cayman Islands and, accordingly, no provision for such taxes has been recorded in the accompanying financial statements. In the event that such taxes are levied, the Company has received an undertaking from the Cayman Islands Government exempting it from all such taxes until 9 January Investments Unquoted investments are investments in venture capital projects as noted in the Directors' statement and the portfolio statements. The investments made to date are as follows: Valued at cost:. a 2.8% stake in ACAL Energy Limited (2009: 3.5%) a 80.3% stake in HydroVenturi Limited (2009: 53.8%) a 5.4% stake in Microvisk Limited (2009: 12.3%). a 21.3% stake in Petrra Limited (2009: 21.3%) a 51.1% stake in Synergis Technologies Limited (2009: 51.1%) a 13.1% stake in Warwick Audio Limited (2009: 28.6%) a 15.3% stake in Warwick Warp Limited (2009: 15.3%) Valued at the secondary market sale price less an appropriate discount:. a 12.2% stake in CellCrypt Limited (2009: 16.6%) a 28.5% stake in Enigma Diagnostics Limited (2009: 34.2%) a 15.6% stake in P2i Limited (2009: 27.3%) a 32.4% stake in Smart Holograms Limited (2009: 32.3%)

17 PORTON CAPITAL TECHNOLOGY FUNDS Page 15 Notes to the financial statements for the year ended 30 June Debtors as at 30 June 2010 Synergis Science & MVC Seed Porton Company Innovation Fund (PRE-IPO) MVC 3 Fund Series A Total USD GBP GBP GBP GBP USD Cash on deposit at McDermott Will & Emerett 18,986 12,750 25, ,219 Convertible loan to Synergis Technology Limited 74, , ,630 Inter-fund loans and other balances 2,160, , Prepaid introductory fees 442, ,930 82, ,765 Preliminary expenses ,072-5,613 Fees to be reimbursed from Investment Manager 13, ,726-61,232 Other debtors 16, ,036 1,937 57,526 Debtors as at 30 June ,727,383 12,799 26, , , ,985 Synergis Science & MVC Seed Porton Company Innovation Fund MVC (PRE-IPO) MVC 3 Fund Series A Total USD GBP GBP GBP GBP GBP USD Subscriptions receivable 80, ,000 Convertible loan to HydroVenturi Limited 211, , ,192-1,057,243 Convertible loan to Synergis Technology Limited 82, , ,635 Cash on deposit at DLA 164, , ,953 Cash on deposit at McDermott Will & Emerett 74,472-57, , ,850 Inter-fund Loan 641, Prepaid introductory fees 655, ,056 71, ,553 1,168,065 Preliminary expenses ,316-9,782 Fees to be reimbursed from Investment Manager 13, ,726-65,992 Other debtors 16, ,940-4,189 28,124 1,939,960-57, , , ,742 3,178, Creditors as at 30 June 2010 Synergis Science & MVC Seed Porton Company Innovation Fund (PRE-IPO) MVC 3 Fund Series A Total USD GBP GBP GBP GBP USD Creditors payable within 1 year Inter-fund loan and other balances - 428,043 1,015,896-9,356 - Dividend payable 43,450 65,014 Amounts due to Investment Manager 54,190 19,715 50,380 12,618 8, ,351 Amounts due to Administrator 6,953 4,036 8,718 1,657 1,588 30,892 Amounts due to Custodian 29, ,787 Other creditors and accruals 144,870 11,059 10,471 1,591 1, ,555 Performance fee accrual 1,794, ,794,695 2,030, ,853 1,085,465 59,316 21,294 2,293,294 Creditors payable after 1 year Performance fee accrual - 2,055,017 5,635,003 1,238,526 1,393,253 15,444,508-2,055,017 5,635,003 1,238,526 1,393,253 15,444,508 Creditors as at 30 June 2009 Synergis Science & MVC Seed Porton Company Innovation Fund MVC (PRE-IPO) MVC 3 Fund Series A Total USD GBP GBP GBP GBP GBP USD Creditors payable within 1 year Inter-fund Loan , , Amounts due to Investment Manager 35,162-19,706 50,381 13,236 8, ,082 Amounts due to Administrator 15,444-6,857 8,037 6,246 5,124 58,684 Amounts due to Custodian 14, ,853 Other creditors and accruals 174, ,897 30,136 4,812 1, ,456 Performance fee accrual 457, , , , ,341 24,294 15, ,249 Creditors payable after 1 year Performance fee accrual ,881 1,510, , ,949 4,023, ,881 1,510, , ,949 4,023,908

18 PORTON CAPITAL TECHNOLOGY FUNDS Page 16 Notes to the financial statements for the year ended 30 June Share Capital and Share Premium USD USD Authorised share capital of the Company: 100 management shares of USD 1.00 each ,900,000 participating shares of USD each 999, , ,000,000 participating shares of GBP each 495, ,840 1,495,840 1,495,840 The management shares are held by the Investment Manager and carry the entire voting power of the Company but do not participate in the Company's profits and losses and are not redeemable. In a winding-up, the management shares rank only for a return of the nominal capital paid up on the participating shares. They have no right to participate in any surplus assets of the Company. As at 30 June 2010, the Company had established five sub-funds of participating redeemable shares and reserves the right to establish further sub-funds in the future. The sub-funds established as at 30 June 2010 are Science and Innovation Fund, MVC (Pre-IPO), MVC 3, Synergis Seed Fund and Porton Series A. The sub-fund MVC terminated on 30 April Each sub-fund has a specific portfolio of securities to which that sub-funds assets and liabilities are attributable and shareholders are treated separately. In the case of insolvency, the holder of each participating redeemable share will participate in the net assets in proportion to the share s redemption value, however, creditors may nevertheless look to all assets of the Company including those of one or more other sub-funds for satisfaction of the claims against that sub-fund. This may result in assets being reallocated to and from sub-funds permanently or temporarily to satisfy such creditors. Under Financial Reporting Standard 25 ("FRS 25") Financial Instruments: disclosure and presentation, participating share capital is classified as debt as the facility exists for the redemption of the shares at the direction of the participating shareholders. These shares are treated as debt of the Company and are reflected as a liability on the Balance Sheet. The management shares are treated as equity. Science & Innovation Fund The participating shares are redeemable but have no voting power except to the extent that any variation of their class rights requires class approval or to approve a resolution to terminate a sub-fund or to approve a resolution to reorganise a sub-fund or to approve any proposal upon which the holders of the management shares are precluded from voting by reason of their having a material interest in the subject matter of the proposal. The participating shares are entitled to receive, to the exclusion of the management shares, any dividends which may be declared by the Board of Directors (although none is expected) and, upon the winding up of the Company, to share in the surplus of the Company to the exclusion of the management shares (other than the par value thereof). Holders of participating shares will be subject to redemption penalties where shares are redeemed within 5 years of initial subscription. In addition, for participating shares issued after 1 June 2001, the directors have resolved that they will not be capable of being redeemed for a period of 12 months following the subscription date, although this may be waived in certain circumstances at the absolute discretion of the directors. In October 2004, a new class of share was issued - Class B participating shares. These shares have the same rights as the ordinary participating shares other than being subject to a management fee of 2% of NAV and performance fees of 20%. In October 2005, a new class of share was issued - Class I participating shares. These shares have the same rights as the ordinary participating shares other than being subject to a management fee of 2% of NAV and performance fees of 25%. MVC The sub-fund had a fixed term which was extended to 8 years from the Initial Closing Date. Upon the expiry of this term, the sub-fund was wound up and the remaining assets were distributed in accordance with the priorities set out in the Offering Memorandum. MVC (Pre-IPO) The participating GBP Class B shares are generally not redeemable and have no voting powers except to the extent that any variation of their class rights requires class approval or to approve a resolution to terminate a sub-fund or to approve a resolution to reorganise a subfund or to approve any proposal upon which the holders of the management shares are precluded from voting by reason of their having a material interest in the subject matter of the proposal. The sub-fund had a fixed term of 7 years from the Initial Closing Date (28 February 2003) this was subsequently extended to 5 June Upon the expiry of this term, the sub-fund will be wound up and any remaining assets will be distributed in accordance with the priorities set out in the Offering Memorandum. MVC 3 As at 1 July 2004, MVC 3 had both GBP Class B and USD Class I Participating Shares. During the year ended 30 June 2005 two new classes were launched, being USD Class B and USD Class A shares. The classes of shares differ in the performance fees that they are charged. The participating shares are generally not redeemable and have no voting powers except to the extent that any variation of their class rights requires class approval or to approve a resolution to terminate a sub-fund or to approve a resolution to reorganise a sub-fund or to approve any proposal upon which the holders of the management shares are precluded from voting by reason of their having a material interest in the subject matter of the proposal. The sub-fund has a fixed term of 7 years (but is extendable to 8 years) from the Initial Closing Date (29 March 2004). Upon the expiry of this term, the sub-fund will be wound up and any remaining assets will be distributed in accordance with the priorities set out in the Offering Memorandum.