Interim / Quarterly Report • Aug 29, 2016
Interim / Quarterly Report
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Prepared in accordance with the Rules for the Preparation and the Submission of the Periodic and Additional Information (approved by the decision of the Board of the Bank of Lithuania passed on 28 February 2013 No. 03-48)
After the end of the reporting period the Bank of Lithuania issued INVL Technology a closed-ended type investment company licence. Therefore, the next periodic report of the company will be prepared in accordance with the Rules for the Preparation and Submission of Information by Management Companies, Collective Investment Undertakings and Pension Funds (approved by the decision of the Board of the Bank of Lithuania passed on 12 July 2012, No. 03-154).
REPORTING PERIOD FOR WHICH THE REPORT IS PREPARED 3 GENERAL INFORMATION ABOUT THE ISSUER AND ITS' MANAGED COMPANIES 3 AGREEMENTS WITH INTERMEDIARIES ON PUBLIC TRADING IN SECURITIES 8 INFORMATION ON ISSUER'S BRANCHES AND REPRESENTATIVE OFFICES 8
THE ORDER OF AMENDMENT OF ISSUER'S ARTICLES OF ASSOCIATION 9 STRUCTURE OF THE AUTHORISED CAPITAL 9 TRADING IN ISSUER'S SECURITIES AS WELL AS SECURITIES, WHICH ARE DEEMED TO BE A SIGNIFICANT FINANCIAL INVESTMENT TO THE ISSUER ON A REGULATED MARKET 9
THE MANAGING BODIES OF THE ISSUER TILL 17 MAY 2016 12
INFORMATION ABOUT THE AUDIT COMMITTEE OF THE COMPANY 16
INFORMATION ON THE AMOUNTS CALCULATED BY THE ISSUER, OTHER ASSETS TRANSFERRED AND GUARANTEES GRANTED TO THE MEMBERS OF THE BOARD AND ADMINISTRATION 17
INFORMATION ABOUT AGREEMENTS OF THE COMPANY AND THE MEMBERS OF THE BOARD, OR THE EMPLOYEES' AGREEMENTS PROVIDING FOR COMPENSATION IN CASE OF THE RESIGNATION OR IN CASE THEY ARE DISMISSED WITHOUT A DUE REASON OR THEIR EMPLOYMENT IS TERMINATED DUE TO THE CHANGE OF THE CONTROL OF THE COMPANY 17
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OVERVIEW OF THE ISSUER'S AND ITS GROUP'S ACTIVITIES, THEIR PERFORMANCE AND BUSINESS DEVELOPMENT 17
DESCRIPTION OF THE KEY RISKS AND UNCERTAINTIES 26
SIGNIFICANT INVESTMENTS MADE DURING THE REPORTING PERIOD 31
INFORMATION ON THE RELATED PARTIES' TRANSACTIONS 31
SIGNIFICANT EVENTS OF THE ISSUER AND ITS PORTFOLIO COMPANIES SINCE 30 JUNE 2016 32
The report covers six months financial period of INVL Technology starting 1 January 2016 and ending on 30 June 2016. The material events of the Issuer and its group that took place after the reporting period are disclosed as well. The report is unaudited.
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|---|---|
| DURING THE REPORTING PERIOD | |
|---|---|
| Name of the Issuer | The public joint-stock company INVL Technology |
| Code | 300893533 |
| Address | Gyneju str. 16, LT-01109, Vilnius, Lithuania |
| Telephone | +370 5 219 1919 |
| Fax | +370 5 219 6533 |
| [email protected] | |
| Website | www.invltechnology.lt |
| Legal form | Public joint-stock company |
| Date and place of registration | 27 June 2007 (version 42, 9th February 2015). Register of Legal Entities |
| Register in which data about the Company are accumulated and stored |
Register of Legal Entities |
17 May 2016 the Register of Legal Entities has registered Articles of Association of a special closed-end type private capital investment company INVL Technology. On 14 July 2016 the Bank of Lithuania issued INVL Technology a closed-ended type investment company licence.
| FROM 14 JULY 2016 | |
|---|---|
| Name of the Issuer | Special closed-ended type private capital investment company INVL Technology |
| Code | 300893533 |
| Address | Gyneju str. 14, LT-01109, Vilnius, Lithuania |
| Telephone | +370 5 279 0601 |
| Fax | +370 5 279 0530 |
| [email protected] | |
| Website | www.invltechnology.lt |
| Legal form | Public joint-stock company |
| Type of the company | Closed-ended type investment company |
| Date and place of registration | 27 June 2007 (version 42, 9th February 2015). Register of Legal Entities |
| Date on which the supervisory authority approved the documents on the formation of the collective investment undertaking |
14 July 2016 |
| Register in which data about the Company are accumulated and stored |
Register of Legal Entities |
| Management company | INVL Asset Management UAB, code 126263073, licence No. VĮK-005 |
| The depository | SEB bank AB, code 112021238, bank licence |
INVL Technology – company, investing in IT businesses, listed on NASDAQ Baltic stock exchange (Nasdaq Vilnius: INC1L) from June 2014.
On 14 July 2016 INVL Technology received a closed-ended type investment company licence, issued by the Bank of Lithuania. Under the company's Articles of Association, a closed-ended type investment company (UTIB) INVL Technology will operate until 14 July 2026, with a possible extension for two more years. The management of the closed-end investment company has been assumed by INVL Asset Management, a part of asset management group Invalda INVL.
INVL Technology operates as a cluster of B2B- and B2G-oriented IT businesses with a focus in four key areas: business climate improvement and e-governance, IT infrastructure, cyber security and IT intensive industries' solutions.
Currently, INVL Technology has investments in the Norwegian company Norway Registers Development AS with subsidiaries NRD UAB and Etronika UAB in Lithuania, Norway Registers Development East Africa Ltd. in Tanzania, Norway Registers Development Rwanda Ltd. in Rwanda and Infobank Uganda Ltd. in Uganda. It has also invested in BAIP UAB with its subsidiary Acena UAB, NRD CS UAB and Algoritmu Sistemos UAB, all in Lithuania, and Estonia's Andmevara AS with its subsidiary Andmevara SRL in Moldavia.
INVL Technology acts as a financial-strategic investor, seeks to increase the value of the companies in its portfolio by bringing financial and intellectual capital for growth and add-on acquisitions, management support, and globalization via sales channels in East Africa and Southeast Asia.
INVL Technology operates as a cluster of IT businesses working with large corporate and government entities with a focus in four key areas: business climate improvement and e-governance, IT infrastructure, cyber security and IT intensive industries' solutions.
Companies working in the area of Business climate improvement and e-governance combine legal, consultancy and information technology skills to address governance and economic digital infrastructure development challenges effectively. They develop national state-of-art registries and provide digital and mobile signature, digital platforms for finance and retail sectors, state taxes, information distribution, digital licences, digital documents and other economic digital infrastructure solutions.
Companies working in the area of IT infrastructure provide information systems' resilience and mobility services for the largest corporate IT users, central banks and public sector organisations with high data availability requirements. Companies are acknowledged as strategic IT infrastructure architects and assist organisations to ensure their business continuity processes.
Cybersecurity companies provide technology consulting, incident response and National Computer Incident Response Teams (CIRTs/SOCs) establishment services. They are focused on the services to law enforcement, national communication regulators, CERTs, and corporate information security departments.
Companies working in the area of IT intensive industries' solutions develop high quality, effective and reliable information systems and business process facilitating programs for large and medium-sized public organizations and enterprises. Main fields of activities include e-governance, e-health, finance, social security, environmental protection and education.
Norway Registers Development AS (NRD AS) is management consulting and IT services' company, specializing in the development of national registers, e-governance solutions and public sector reforms backed by ICT solutions. NRD was established in Norway in 1995.
More information – www.nrd.no.
NRD UAB was incorporated in October 1998. NRD, UAB is a subsidiary company and information system design and development excellence center of Norway Registers Development AS. NRD, UAB specializes in business, property, mortgage, licences, citizen's registry and tax information systems creation and development.
More information – www.nrd.lt.
Norway Registers Development East Africa Limited – NRD AS subsidiary in East Africa, established in April 2013. Provides on-site delivery of NRD group services, supports the companies in East Africa in the delivery of information security technologies as a value added distributor and assists other organizations investing in East Africa in the creation, development, maintenance and security of their information technology infrastructure. Performs audit of information systems, provides IT management consulting and trainings.
More information – www.nrd.co.tz.
ETRONIKA UAB is NRD group's company, specialised in e-banking and m-signature solutions. ETRONIKA develops complex and innovative solutions for finance and online business, integrating advanced and secure technologies across various electronic channels.
More information – www.etronika.com.
Infobank Uganda Limited – company in Uganda, established in December 2014. Norway Registers Development AS holds 30 percent of the shares. Currently does not perform any activities but intends to to work with different registries which are currently largely paper based, and provide registries information to financial sector clients via electronic system.
More information – www.infobank-uganda.com.
Norway Registers Development Rwanda Ltd. (NRD Rwanda) was registered in Kigali on 22 February 2016. NRD Rwanda will offer full portfolio of NRD group and other INVL Technology businesses' services. In addition, backing the regional export strategy of Rwanda, it might also participate in projects in Burundi and Democratic Republic of the Congo.
More information – www.nrd.no
Andmevara AS (Estonia) is a complex IT solutions and services provider to public sector organisations with expertise in e-Government solutions that include development of registries, important national information systems and software, digitisation, database development and hosting services. Andmevara actively contributes to implementation of Estonian E-Government project, offers several ready-made software products to municipal and governmental institutions, and mostly serves Estonian public sector organisations.
More information – www.andmevara.ee
BUSINESS PROCESS OUTSOURCING:
FINtime UAB established on 29 February 2016 will provide business process outsourcing services.
INVL Technology has the agreements with Siauliu bankas AB (Seimyniskiu str. 1, Vilnius, Lithuania, tel. +370 5 203 2233) – the agreement on management of securities accounting and the agreement on dividends payment.
During the accounting period the company has signed the agreement with SEB Bank (Gedimino av. 12, Vilnius, Lithuania, tel. +370 5 268 2800) regarding depository services. This agreement came into force 14 July 2016.
INVL Technology has no branches or representative offices.
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The Articles of Association of INVL Technology may be amended by resolution of the General Shareholders' Meeting, passed by more than 2/3 of votes (except in cases provided for by the Law on Companies of the Republic of Lithuania).
During the reporting period the Articles of Association were amended 2 times:
The Actual wording of the Articles of Association are dated as of 27 June 2016. The Articles of Association are available on the company's website.
| Ordinary registered shares |
12,175,321 | units 12,175,321 |
0.29 | 3,530,843.09 | 100 |
|---|---|---|---|---|---|
| Type of shares | Number of shares, units |
Total voting rights granted by the issued shares, |
Nominal value, EUR |
Total nominal value, EUR |
Portion of the authorised capital, % |
All shares are fully paid-up and no restrictions apply on their transfer.
INVL Technology or its subsidiary has not acquired shares in INVL Technology directly or indirectly under the order of subsidiary by persons acting by their name.
Company used no services of liquidity providers during the reporting period. Starting 8 August 2016 Siauliu bankas acts as market maker for INVL Technology shares. Under the agreement, Siauliu bankas will provide liquidity on both bid and ask sides around the INVL Technology spread at least 85 percent of the trading time on the stock exchange, increasing market depth in this way.
| Share price, EUR: | 2016 1H | 2015 1H* | 2014 1H* |
|---|---|---|---|
| - Opening |
2.01 | 1.47 | 1.47 |
| - Highest |
2.07 | 2.00 | 1.47 |
| - Lowest |
1.79 | 1.33 | 1.23 |
| - Average |
1.90 | 1.78 | 1.35 |
| - Last |
1.80 | 1.85 | 1.34 |
| Turnover, units | 38,175 | 9,660 | 252 |
| Turnover, EUR | 71,327.53 | 17,225.06 | 2,316.22 |
| Traded volume, units | 196 | 122 | 34 |
| Capitalisation, mEUR | 21.92 | 11.31 | 5.39 |
*From 4 June 2014 (the beginning of the listing of the company in the Stock Exchange) until 12 February 2015 share price is corrected by the reorganisation impact coefficient 0.147370903.
| Index/Shares | 30.06.2014 | 30.06.2016 | +/-% |
|---|---|---|---|
| OMX Baltic Benchmark GI | 605.06 | 711.29 | 17.56 |
| OMX Vilnius | 470.30 | 510.69 | 8.59 |
| B8700GI Financial Services | 1,241.71 | 1,550.92 | 24.90 |
| INC1L | 1.474 EUR | 1.800 EUR | 22.12 |
Total number of shareholders exceeds 3,500.
| Name of the shareholder or company |
Number of shares held by the right of ownership, units |
Share of the authorised capital held, % |
votes given by the shares held by the right of ownership, % |
Indirectly held votes, % |
Total, % |
|---|---|---|---|---|---|
| LJB investments, UAB, code 300822575, A. Juozapaviciaus str. 9A, Vilnius |
2,424,152 | 19.91 | 19.91 | 0 | 19.91 |
| Invalda INVL, AB code 121304349, Gyneju str. 14, Vilnius |
1,910,812 | 15.69 | 15.69 | 0 | 15.69 |
| Irena Ona Miseikiene | 1,466,421 | 12.04 | 12.04 | 0 | 12.04 |
| Lietuvos draudimas, AB code 110051834, J. Basanaviciaus g. 12, Vilnius |
909,090 | 7.47 | 7.47 | 0 | 7.47 |
| Kazimieras Tonkunas | 675,452 | 5.55 | 5.55 | 1.531 | 7.08 |
| Alvydas Banys | 618,745 | 5.08 | 5.08 | 19.912 | 24.99 |
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During the reporting period the governing bodies of INVL Technology were the General Shareholders' Meeting, sole governing body – the director and a collegial governing body – the Board. The Supervisory Board was not formed.
The powers of CEO and the Board of INVL Technology have terminated on 17 May 2016 due to the registration of the Articles of Association of a special closed-ended type private capital investment company INVL Technology.
The management of INVL Technology was assumed by the management company INVL Asset Management on 14 July 2016, when the Bank of Lithuania issued the closed-ended type investment company licence.
As from 10 February 2015 Mr. Kazimieras Tonkunas was elected as the Chairman of the Board. Mr. Nerijus Drobavicius, Mr. Gytis Umantas, Mr. Vytautas Plunksnis and Mr. Alvydas Banys were elected as the Members of the Board (the Board of INVL Technology was elected during the General Shareholders' Meeting of BAIP Grupe, AB on 5 December 2014). Mr. Tonkunas was appointed as the director of the company on 9 December 2014.
1According to Part 10 of Paragraph 1 of Article 24 of the Law on Securities of the Republic of Lithuania, it is considered that Kazimieras Tonkunas has votes of his spouse. 2According to Part 6 of Paragraph 1 of Article 24 of the Law on Securities of the Republic of Lithuania, it is considered that Alvydas Banys has votes LJB Investments, UAB a company controlled by him.
| The term of office | 2014 – 17 May 2016 | ||||
|---|---|---|---|---|---|
| Educational background and qualifications |
Vilnius University, Faculty of Economics, Master in economics– mathematics (systematic analysis of the economic) |
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| Work experience | Since 22 July 2016 Managing Partner of INVL Technology at INVL Asset Management. |
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| 2015 – 2016 Director and Chairman of the Board of INVL Technology, AB. |
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| 2007 – 2015 Director and Chairman of the Board of BAIP group, AB. |
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| KAZIMIERAS | Since 2013 – Director of Vitma, UAB. | ||||
| TONKUNAS | 2007 – 2013 General Director of BAIP, UAB. | ||||
| CHAIRMAN OF THE BOARD |
Owned amount of shares in INVL Technology |
Personally: 675,452 units of shares, 5.55 % of authorised capital and votes. Together with the spouse: 861,722 units, 7.08 % of authorised capital and votes. |
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| DIRECTOR | Till 17 May 2016 votes together with other Board members of INVL Technology – 33.39 %. |
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| Participation in other | Acena, UAB – Board member. | ||||
| companies | Andmevara, AS – Supervisory Board member. | ||||
| BAIP, UAB - The Chairman of the Board. | |||||
| Norway Registers Development, AS – The Chairman of the Board. |
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| NRD, CS – The Chairman of the Board. | |||||
| The term of office | 2014 – 17 May 2016 | ||||
| Educational background and qualifications |
In 1998 graduated Vytautas Magnus University and gained his Bachelor's degree in Business management. Graduated Vytautas Magnus University in 2000 and gained his Master's degree in banking and finance. |
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| Work experience | Since 2015 - INVL Asset Management, UAB, Head of Finance and IT department. |
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| Since 2014 works at Invalda INVL, AB group. | |||||
| 2014 – 2012 Independent financial expert. | |||||
| 2011 – 2007 CFO in Sanitas Group. | |||||
| NERIJUS DROBAVICIUS |
2007 – 2001 Sampo Bank. Head of Accounting and Reporting department, later – CFO of the bank. |
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| MEMBER OF | Owned amount of shares in INVL |
Personally: 4,472 units of shares; 0.04 % of authorised capital and votes. |
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| THE BOARD | Technology | Till 17 May 2016 votes together with other Board members of INVL Technology – 33.39 %. |
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| Participation in other | INVL Asset Management,UAB – Member of the Board | ||||
| companies | INVL Asset Management, UAB (Latvia) – Member of the Supervisory Board. |
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| INVL atklātais pensiju fonds, AB (Latvija) – Member of the Supervisory Board. |
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| Andmevara AS - The Chairman of the Supervisory Board. | |||||
| Inservis, UAB – The Chairman of the Board. | |||||
| Imoniu grupe Inservis, UAB – The Chairman of the Board. | |||||
| Jurita, UAB - The Chairman of the Board. |
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VYTAUTAS PLUNKSNIS
MEMBER OF THE BOARD
The term of office 2014 – 17 May 2016
| Educational background and |
Graduated the studies in economics at Kaunas University of Technology in 2001, gained Bachelor's degree in Management. |
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|---|---|---|---|---|---|
| qualifications | Financial broker's licence (General) No. G091. | ||||
| Work experience | Since 2016 - INVL Asset Management, UAB, Head of Private Equity Funds. |
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| Since 2015 – Inventio, UAB, Director. | |||||
| Since 2014 – Consult Invalda, UAB, Director. | |||||
| 2009-2015 Fund Manager at Invalda INVL, AB. | |||||
| 2006 – 2009 Finasta Asset Management, UAB – analyst, fund manager, strategic analyst. |
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| 2004 ELTA redactor (business news). | |||||
| 2002 – 2004 Baltic News Service business journalist. | |||||
| Owned amount of shares in INVL |
Personally: 5,259 units of shares; 0.04 % of authorised capital and votes. |
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| Technology | Till 17 May 2016 votes together with other Board members of INVL Technology – 33.39 %. |
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| Participation in other | INVL Asset Management, UAB – Member of the Board. | ||||
| companies | INVL Asset Management, IPAS (Latvia) – Deputy Chairman of the Supervisory Board. |
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| INVL atklātais pensiju fonds, AB (Latvia) – Deputy Chairman of the Supervisory Board. |
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| Norway Registers Development, AS – Member of the Board. | |||||
| NRD, UAB – Member of the Board. | |||||
| NRD CS, UAB - Member of the Board. | |||||
| Algoritmu sistemos, UAB - Chairman of the Board. | |||||
| Vernitas, AB – Member of the Supervisory Board. | |||||
| Investuotoju Asociacija – Chairman of the Board. | |||||
| INVL Farmland Management, UAB – Chairman of the Board. | |||||
| INVL Finasta, UAB FMI - Member of the Board. |
Educational background and qualifications
Owned amount of shares in INVL Technology
Participation in other
Vilnius University, International Business School, Bachelor in International business management in 2001
Work experience Since 2013 General Director of BAIP, UAB.
2008 – 2015 Member of the Board BAIP group, AB.
2008 – 2013 Director of Vitma, UAB.
Personally: 151,270 units of shares, 1.24 % of authorised capital and votes.
Till 17 May 2016 votes together with other Board members of INVL Technology – 33.39 %.
companies
GYTIS UMANTAS
MEMBER OF THE BOARD
| The term of office | 2014 – 17 May 2016 | |
|---|---|---|
| Educational background and qualifications |
Vilnius Gediminas Technical University. Faculty of Civil Engineering. Master in Engineering and Economics. Junior Scientific co-worker. Economics' Institute of Lithuania's Science Academy. |
|
| Work experience | Since 1 July 2013 Invalda INVL, AB, Advisor. Since 2007 LJB Investments, UAB, Director. Since 2007 LJB Property, UAB, Director. |
|
| ALVYDAS BANYS |
1996 – 2006 Invalda, AB, Vice President. 1996 – 2007 Nenuorama, UAB, President. |
|
| MEMBER OF THE BOARD |
Owned amount of shares in INVL Technology |
Personally: 618,745 units of shares, 5.08 % of authorised capital and votes. Together with controlled company LJB Investments, UAB: 3,042,897 units of shares, 24.99 % of authorized capital and votes. Till 17 May 2016 votes together with other Board members of INVL Technology – 33.39 %. |
| Participation in other companies |
Invalda INVL, AB – Chairman of the Board, adviser. INVL Baltic Farmland, AB – Chairman of the Board. INVL Baltic Real Estate, AB – Chairman of the Board. Litagra, UAB – Member of the Board. |
|
| The term of office | May 2015 – April 2016 | |
| Educational background and qualifications |
In 2010 graduated from Vilnius university Economics faculty with MA in accounting and auditing. |
|
| Work experience | Since March 2016 – FINtime, UAB, Director May 2015 – December 2015 bank Finasta, AB – Member of the Board. February 2015 - September 2015 – CFO of bank Finasta, AB. 2013 – 2015 The director of accounting and reporting |
|
| KRISTUPAS BARANAUSKAS |
department at bank Finasta, AB. 2009 – 2013 DNB bank, AB - IFRS project manager. 2008 – 2009 Coface Lietuva - director of finance management |
|
| CFO | department. 2003 – 2008 Ernst & Young Lietuva, UAB - audit consultant. |
|
| Owned amount of shares in INVL Technology |
- |
Participation in other companies
Acena, UAB – Board member.
BAIP, UAB - Board member.
During the reporting period accounting services and preparation of the documents related with bookkeeping for INVL Technology were provided by the personnel of INVL Technology. 14 July 2016 the Bank of Lithuania issued the closed-ended type investment company licence. Accounting services from this date are provided by the management company INVL Asset management (code 126263073, address Gyneju str. 14, Vilnius) and FINtime, UAB (code 304192355, address A.Juozapaviciaus st. 6, Vilnius).
The Audit Committee consists of two members, one of whom is independent. The members of the Audit Committee are elected by the General Shareholders' Meeting. The main functions of the Committee are the following:
The Member of the Audit Committee of INVL Technology, AB may resign from his post before the expiry of term of office, notifying the Management company in writing at least 14 calendar days in advance. When the Management company receives the notice of resignation and estimates all circumstances related to it, the Board may pass the decision either to convene the Extraordinary General Shareholders Meeting to elect the new member of the Audit Committee or to postpone the question upon the election of the new member of the Audit Committee until the nearest General Shareholders Meeting. In any case the new member is elected till the end of term of office of the operating Audit Committee.
| The term of office | 2016 – 2020 | |
|---|---|---|
| Educational background and qualifications |
2004 – 2006 Mykolas Romeris University. Faculty of Law. Master in Financial Law. 2000 – 2004 Faculty of Law, BA in Law. 1997 International School of Management. |
|
| Work experience | Since 2009 Lawyer of Legisperitus, UAB. 2008 – 2009 Lawyer of Finasta FBC. 2008 – Lawyer of Invalda, AB. 1999 – 2002 Administrator, Office of Attorney of Law Arturas |
|
| DANUTE KADANAITE |
Sukevicius. 1994 – 1999 Legal Consultant, Financial brokerage company Apyvarta, UAB. |
|
| MEMBER OF THE AUDIT COMMITTEE |
Owned amount of shares in INVL Technology |
- |
| The term of office | 2016 – 2020 | |
| Educational background and qualifications |
2004 – 2005 Baltic Management Institute (BMI), Executive MBA. 1997 – 2000 Association of Chartered Certified Accountants. |
|
| ACCA. Fellow Member. 1997 Lithuanian Sworn Registered Auditor. |
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| Work experience | 1988 – 1993 Vilnius University, Msc. in Economics. Since 2013 Chief Operating Officer of Biotechpharma, UAB. 2010 – 2012 Senior Director of TEVA Biopharmaceuticals |
|
| TOMAS | (USA). 2004-2010 – TEVA Pharmaceuticals, Chief Financial Officer for the Baltic States. |
|
| BUBINAS | 2001-2004 – Sicor Biotech, Chief Financial Officer | |
| INDEPENDENT MEMBER OF |
1999 – 2001 Senior Manager of PricewaterhouseCoopers. 1994 – 1999 Senior Auditor, Manager of Coopers & Lybrand. |
Technology
CEO and CFO of the company are entitled only to a fixed salary. The company does not have a policy concerning payment of a variable part of remuneration to the management. During the first half of 2016, the average expenses related to administration remuneration per month amounted to 11.83 thousand EUR. The Members of the Board are not remunerated.
Since 14 July 2016 the management of INVL Technology was assumed by INVL Asset Management. The management fee will be payable to the management company. The management fee during investment period for a full quarter shall be 0.625 percent while after its end it shall be 0.5 percent of the weighted average capitalisation of the company.
| Salary | 108 |
|---|---|
| Social Insurance Taxes | 34 |
| Total | 142 |
During the first half of 2016, the Company did not transfer any assets or provided guarantees, and no special payouts have been made by the company to its Director or the CFO.
12 INFORMATION ABOUT AGREEMENTS OF THE COMPANY AND THE MEMBERS OF THE BOARD, OR THE EMPLOYEES' AGREEMENTS PROVIDING FOR COMPENSATION IN CASE OF THE RESIGNATION OR IN CASE THEY ARE DISMISSED WITHOUT A DUE REASON OR THEIR EMPLOYMENT IS TERMINATED DUE TO THE CHANGE OF THE CONTROL OF THE COMPANY
There are no agreements of the company and the Members of the Board, or the employees' agreements providing for compensation in case of the resignation or in case they are dismissed without a due reason or their employment is terminated due to the change of the control of the company.
13 OVERVIEW OF THE ISSUER'S AND ITS GROUP'S ACTIVITIES, THEIR PERFORMANCE AND BUSINESS DEVELOPMENT
INFORMATION ABOUT THE ISSUER'S AND ITS PORTFOLIO COMPANIES' ACTIVITY
| Index/Shares | 2016.01.01 | 2016.06.30 | +/-% |
|---|---|---|---|
| OMX Tallinn | 898.99 | 980.37 | 9.05 |
| OMX Riga | 594.35 | 620.68 | 4.43 |
| OMX Vilnius | 485.99 | 510.69 | 5.08 |
Source: Nasdaq Baltic
| Rate | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 1H |
|---|---|---|---|---|---|---|---|---|
| Real GDP annual change (excluding seasonal and labour days, percent) |
-14.9 | 1.6 | 6.1 | 3.7 | 3.7 | 3.0 | 1.6 | 2.0 |
| Nominal GDP (EUR billion) | 26,935 | 28,028 | 31,263 | 33,335 | 34,962 | 36,444 | 37,190 | 37,602 |
| Retail trade turnover (at constant prices, excluding vehicle trade) annual change (percent) |
-21.3 | -6.7 | 6.1 | 3.9 | 4.5 | 5.6 | 5.3 | 7 |
| CPI, annual change* (%) | 1.3 | 3.8 | 3.4 | 2.8 | 0.4 | -0.3 | -0.1 | 0.7 |
| HICP, annual average change (%) |
4.2 | 1.2 | 4.1 | 3.2 | 1.2 | 0.2 | -0.7 | 0 |
| Average monthly wage | 613.5 | 614.4 | 629.9 | 646.4 | 677.8 | 714.5 | 756.9 | 748** |
| Annual change of average monthly wage |
-8.7 | 0.2 | 2.5 | 2.6 | 4.8 | 5.4 | 5.9 | 6.9** |
*As of the last month of the year. **Data for the first quarter
Source: SEB Bank
| 2013 | 2014 | 2015 | 2016 | 2017 | |
|---|---|---|---|---|---|
| USA | 2.2 | 2.4 | 2.4 | 1.9 | 2.5 |
| Japan | 1.6 | -0.1 | 0.6 | 0.5 | 0.5 |
| Germany | 0.1 | 1.6 | 1.7 | 1.7 | 1.8 |
| China | 7.7 | 7.3 | 6.9 | 6.5 | 6.3 |
| GB | 1.7 | 2.9 | 2.3 | 1.9 | 2.3 |
| Euro zone | -0.5 | 0.9 | 1.6 | 1.7 | 1.8 |
| Nordic countries | 0.4 | 1.6 | 2.2 | 2.2 | 2 |
| Baltic countries | 3.2 | 2.8 | 1.8 | 2.6 | 3.1 |
| Lithuania | 3.3 | 3.0 | 1.6 | 2.8 | 3.2 |
| Latvia | 4.2 | 2.4 | 2.7 | 2.7 | 3.5 |
| Estonia | 1.6 | 2.9 | 1.1 | 2 | 2.4 |
| OECD | 1.4 | 1.9 | 2.1 | 1.9 | 2.3 |
| Emerging markets | 4.7 | 4.7 | 3.9 | 4.1 | 4.7 |
| The world, PPP* | 3.1 | 3.5 | 3.1 | 3.1 | 3.7 |
* Purchasing Power Parities
Source: SEB Nordic Outlook, February 2016, OECD
On 7 March 2016 the resolutions of the extraordinary General Shareholders Meeting of INVL Technology, AB were announced. A new wording of the Articles of Association of special closed-ended type private capital investment company INVL Technology, the Management Agreement of special closed-ended type private capital investment company INVL Technology with the management company UAB INVL Asset Management and the Depository Services Agreement of special closed-ended type private capital investment company INVL Technology with AB SEB Bankas were approved.
On 21 March 2016 Inventio, a subsidiary of INVL Technology, acquired 100 per cent shares of information system development company Algoritmu sistemos for EUR 2.385 million.
NRD group - Norway Registers Development AS with subsidiaries NRD UAB, ETRONIKA UAB, Norway Registers Development East Africa Ltd, Norway Registers Development Rwanda Ltd. and associated company Infobank Uganda Ltd
In 2016, NRD group continued to implement projects in Sub-Saharan Africa: Tanzania, Zanzibar, Uganda, Burundi, Mauritius, and the Kingdom of Lesotho as well as in South Asia: Bangladesh and the Kingdom of Bhutan.
In Tanzania, NRD group implemented Unified Registry of Beneficiaries System for Tanzania Social Action Fund. In Zanzibar companies successfully finished the adjustment project of the Civil Registration Vital Statistics (CRVS) system. BAIP in joint venture with NRD East Africa completed 2 large scale modernisation projects in the National Bank of Rwanda and signed an additional agreement this year.
Together with NRD CS consultants, NRD group implemented COBIT 5 framework for the governance and management of enterprise IT at the Bank of the Republic of Burundi (BRB) as well as Pre-Investment Study for the Lesotho E-Government Infrastructure Project at the Kingdom of Lesotho. In Bangladesh, the companies continued developing Bangladesh National Computer Incident Response Team (BGD e-GOV CIRT).
In the 6 months of 2016, NRD group also won new international tenders. The companies signed a contract with the Ministry of Finance and Development Planning of Liberia for consultancy services to upgrade Liberia Business Registry System to integrate with Standard Integrated Government Tax Administration System. In Uganda, an agreement was signed with National Information Technology Authority-Uganda (NITA-U) for the extension of the integrated One-Stop-Centre solution.
In August 2016, an agreement was signed with Tanzanian Business Registration and Licensing Agency (BRELA) for the development of an online registration system.
Revenue of NRD group (including ETRONIKA) increased by 100% - from EUR 1.416 million during 6 months of 2015 till EUR 2.834 million during the same period this year.Revenue of NRD group after eliminating ETRONIKA increased by 46 percent (till EUR 2.061 million). EBITDA of NRD group in the first half of 2016 was negative – 107 thousand. In first half of 2015, EBITDA was EUR 147 thousand.
Profit of NRD group was mainly affected by ETRONIKA UAB results and increased expenses of business development in Rwanda and Tanzania. ETRONIKA is included starting from 1 July 2015 when the control was acquired
| Net Profit (Loss)** |
|
|---|---|
| EUR Thousand | 30.06.2016 | 30.05.2015 | EUR Thousand | 30.06.2016 | 31.12.2015 |
|---|---|---|---|---|---|
| Revenue | 2,834 | 1,416 | Tangible assets | 321 | 346 |
| Gross profit | 2,223 | 1,108 | Intangible assets | 761 | 772 |
| EBITDA | (107) | 147 | Other non-current assets | 83 | 74 |
| EBIT | (168) | 126 | Current assets | 2,293 | 3,479 |
| Net Profit (Loss)** |
(163) | 97 | of which cash | 578 | 868 |
| * ETRONIKA, UAB is included from 1 July 2015 when the control was acquired. **After minority share In 2015 revenue of ETRONIKA amounted to EUR 1.835 million, EBITDA – EUR 112 thousand; |
TOTAL ASSETS | 3,458 | 4,671 | ||
| Equity | 1,444 | 1,309 | |||
| Non-current liabilities | 146 | 191 | |||
| During 6 months of 2015 revenue of ETRONIKA amounted to EUR 514 thousand, EBITDA was negative EUR -295 thousand; |
of which financial debt | 26 | 26 | ||
| During 6 months of 2016 revenue of ETRONIKA amounted to EUR 773 thousand, EBITDA was negative EUR -119 thousand; |
Current liabilities | 1,868 | 3,171 | ||
| of which financial debt | 76 | 131 | |||
| TOTAL LIABILITIES AND EQUITY |
3,458 | 4,671 |
BUSINESS CLIMATE IMPROVEMENT AND E-GOVERNANCE. ANDMEVARA
On 20 April INVL Technology acquired 100 per cent of shares in Estonian IT company Andmevara from Estonian Ministry of the Interior for EUR 664.6 thousand. Andmevara has a subsidiary company in Moldova.
Before the transaction, Estonian state paid out EUR 1.25 million in dividends and related taxes. A significant part of Andmevara business (processing of Estonian Population Registry) was spun-off from the Company in the beginning of 2016 and is not a part of the acquisition.
After privatization, Andmevara seeks to update and renew agreements with its long-term clients, acquire new clients and provide services in Estonia and Moldova together with other INVL Technology portfolio companies.
Currently, Andmevara provides services to around 250 clients. The biggest clients include IT and Development Center of the Ministry of the Interior, the Ministry of Internal Affairs, the Ministry of Finance and most of Estonian cities and regions municipalities.
The company is also active in Moldova where it is currently implementing three projects: digitization of 4.8 million archive documents and development of an information system for data preserving at the egovernment of Moldova, digitisation of 650 thousand Moldovan court documents and a contract with the Ministry of Foreign Affairs and European Integration of the Republic of Moldova for the partial digitisation of Moldova State Archive paper archive (250 thousand documents) and implementation of search system for digital documents, signed in June 2016.
In Moldova, Andmevara provides the whole portfolio of its services but most of the projects are in the fields of digitisation and information system development. Adnemvara clients in Moldova also include the Parliament of the Republic of Moldova;, General Prosecutor Office, Bureau for Migration and Asylum and Environmental Pollution Prevention Office.
| EUR Thousand | 01.05.2016 - 30.06.2016 | EUR Thousand | 30.06.2016 |
|---|---|---|---|
| Revenue | 191 | Tangible assets | 42 |
| Gross profit | 154 | Intangible assets | 14 |
| EBITDA | (50) | Other non-current assets |
0 |
| EBIT | (58) | Current assets | 492 |
| Net Profit (Loss)* | (58) | of which cash | 206 |
| assets | 0 | |
|---|---|---|
| Equity | 212 | |
| Non-current liabilities | 31 | |
| of which financial debt | 0 | |
| Current liabilities |
Current liabilities | 305 |
| of which financial debt |
of which financial debt | 0 |
| TOTAL LIABILITIES AND EQUITY |
548 |
In 6 months of 2016, IT infrastructure company BAIP implemented projects and signed new agreements in Lithuania, Latvia, Estonia, Denmark, Norway, Rwanda and Burundi.
In Lithuania, BAIP implemented projects in the National courts administration, State Enterprise "Infostruktūra", and Vilnius University Hospital Santariskiu Klinikos. The company also provided maintenance services to Lithuanian Geological Survey and State Consumer Rights Protection Authority.
In Latvia and Estonia, BAIP continued servicing the largest retail chains and Scandinavian banks, while in Norway it signed new critical IT infrastructure maintenance agreements.
In the National Bank of Rwanda, BAIP together with NRD East Africa completed three large scale modernisation projects with a total value of EUR 2.193 million. Two of the projects have begun last year, and in 2016 a new agreement was signed. In the first half of 2016, new service agreement was also signed in the Bank of the Republic of Burundi.
Furthermore, IT operations department was optimised due to application of LEAN methodology and new management methods.
On 7 March 2016 in Vilnius BAIP held its annual conference "Resilience and technologies 2016", attended by the management and heads of IT departments of the biggest Lithuanian corporate and government organisations.
Acena has concentrated on providing services. The company develops Office 365, Project and BI solutions as well as related services with a focus on corporate sector as well as development of own services and unique solutions.
Revenue of the companies operating in the area of IT infrastructure increased from EUR 4.985 million in the 6 months of 2015 to EUR 5.044 million in the same period of 2016.
The revenue loss which occurred due to decrease in demand from the public sector customers in the Baltics in 2016 was compensated by international activities as well as long-term service agreements with large private sector organisations – banks and retail chains.
Due to the new EU funding program currently being prepared, in 2016 IT demand from the public sector customers has decreased. It is expected that new tenders under the new program will begin towards the end of 2016.
BAIP EBITDA and net profit decreased in the 6 months of 2016 due to increased expenses from international development.
According to the management of BAIP, due to third-party activities, BAIP also experienced one-off expenses. However, BAIP management expects that the actions that are being taken will allow to compensate these expenses at least partially.
| EBITDA | 245 | 413 | Other non-current |
|---|---|---|---|
| EUR Thousand | 30.06.2016 | 30.05.2015 | EUR Thousand | 30.06.2016 | 31.12.2015 | |
|---|---|---|---|---|---|---|
| Revenue | 5,044 | 4,985 | Tangible assets | 1,303 | 1,023 | |
| Gross profit | 1,626 | 1,596 | Intangible assets | 356 | 334 | |
| EBITDA | 245 | 413 | Other non-current assets |
68 | 145 | |
| EBIT | 36 | 312 | Current assets | 3,971 | 5,253 | |
| Net Profit (Loss) | 19 | 406 | of which cash | 71 | 746 | |
| *BAIP UAB acquired Acena UAB in October 2015 but, in order to present the results of IT infrastructure business |
TOTAL ASSETS | 5,698 | 6,755 | |||
| Equity | 1,948 | 2,782 | ||||
| area, consolidated data is provided for the whole period. | Non-current liabilities | 373 | 115 | |||
| of which financial debt | 373 | 115 | ||||
| Current liabilities | 3,377 | 3,858 | ||||
| of which financial debt | 745 | 246 | ||||
| TOTAL LIABILITIES AND EQUITY |
5,698 | 6,755 |
In the 6 months of 2016, specialised cyber defence company NRD CS signed new international agreements and implemented projects in Lithuania, Burundi, Lesotho , Bhutan and Bangladesh.
In Lithuania, NRD CS completed IT forensics modernisation project at the Police Department under the Ministry of Interior as well as other cyber security testing, auditing, consulting and training projects.
In addition, NRD CS signed an agreement with Kaunas University of Technology to cooperate in cybersecurity research. KTU and NRD CS will conduct research in the University's academic computer network and laboratories, improve the network security and develop new cybersecurity methods, applicable both in Lithuania and abroad.
In Burundi, NRD CS consultants participated in NRD group project and implemented COBIT 5 framework for the governance and management of enterprise IT at the Bank of the Republic of Burundi (BRB). In the Kingdom of Lesotho, NRD CS consultants participated in the Pre-Investment Study for the Lesotho E-Government Infrastructure Project.
In the Kingdom of Bhutan, together with NRD AS and BAIP, the company completed a national cybersecurity incident response team (BtCIRT) establishment project.
In Bangladesh, NRD CS and NRD AS continue developing Bangladesh National Computer Incident Response Team (BGD e-GOV CIRT).
NRD CS results in the first half of 2016 were positively affected by international development as well as preventative cyber security capabilities development services.
In the 6 months of 2016, the company earned 4 times more revenue than in the same period last year – revenue increased from EUR 150 thousand to EUR 672 thousand.
EBITDA of the company from negative EUR 147 thousand in the 6 months of 2015 increased to EUR 94 thousand in the first half of 2016.
| EUR Thousand | 30.06.2016 | 30.05.2015 | EUR Thousand | 30.06.2016 | 31.12.2015 |
|---|---|---|---|---|---|
| Revenue | 672 | 150 | Tangible assets | 36 | 40 |
| Gross profit | 421 | 48 | Intangible assets | 1 | 2 |
| EBITDA | 94 | (147) | Other non-current assets |
1 | 1 |
| EBIT | 85 | (156) | Current assets | 458 | 782 |
| Net Profit (Loss) | 80 | (156) | of which cash | 49 | 76 |
| EUR Thousand | 30.06.2016 | 30.05.2015 | EUR Thousand | 30.06.2016 | 31.12.2015 |
|---|---|---|---|---|---|
| Revenue | 672 | 150 | Tangible assets | 36 | 40 |
| Gross profit | 421 | 48 | Intangible assets | 1 | 2 |
| EBITDA | 94 | (147) | Other non-current assets |
1 | 1 |
| EBIT | 85 | (156) | Current assets | 458 | 782 |
| Net Profit (Loss) | 80 | (156) | of which cash | 49 | 76 |
| TOTAL ASSETS | 496 | 825 | |||
| Equity | 330 | 250 | |||
| Non-current liabilities | 0 | 0 | |||
| of which financial debt | 0 | 0 | |||
| Current liabilities | 166 | 575 | |||
| of which financial debt | 0 | 27 | |||
| TOTAL LIABILITIES AND EQUITY |
496 | 825 |
Algoritmu sistemos UAB – developer of high quality, effective and reliable information systems and business process facilitating programs for large and medium-sized public organizations and enterprises – is a part of INVL Technology portfolio since 21 March 2016.
Main fields of company activity include: e-governance, ehealth, finance, social security, environmental protection and education.
The largest clients of Algoritmu sistemos in the first half of 2016 include Klaipeda city municipality, National Health Insurance Fund under the Ministry of Health, State Enterprise Lithuanian Airports and State Tax Inspectorate under the Ministry of Finance.
In 2016, Algoritmų sistemos signed new agreements with the Environmental Protection Agency, State Studies Foundation and Vilnius city municipality.
In addition, the company signed an agreement with the Ministry of Environment of the Republic of Lithuania for the development of the Unified product, packaging and waste accounting information system for EUR 1.7 million.
Together with other INVL Technology portfolio companies, Algoritmu sistemos started participating in international tenders.
Algoritmu sistemos was profitable during the second quarter of 2016. Revenue of the company reached EUR 624 thousand while EBITDA amounted to EUR 138 thousand.
| EUR Thousand | 01.04.2016 – 30.06.2016 | EUR Thousand | 30.06.2016 |
|---|---|---|---|
| Revenue | 624 | Tangible assets | 59 |
| Gross profit | 517 | Intangible assets | 0 |
| EBITDA | 138 | Other non-current assets |
0 |
| EBIT | 132 | Current assets | 726 |
| Net Profit (Loss) | 132 | of which cash | 38 |
In 2015 revenue of Algoritmu sistemos amounted to EUR 2.768 million, EBITDA – EUR 463 thousand;
| assets | 0 | ||
|---|---|---|---|
| TOTAL ASSETS | 785 | ||
| Equity | 443 | ||
| Non-current liabilities | 0 | ||
| of which financial debt | 0 | ||
| Current liabilities |
Current liabilities | 342 | |
| of which financial debt |
of which financial debt | 0 | |
| TOTAL LIABILITIES AND EQUITY |
786 |
| Thousand EUR | 2016 1H | 2015 1H |
|---|---|---|
| Change in the fair value of financial assets |
(61) | (60) |
| Profit (loss) before taxes | (317) | (282) |
| Net profit (loss) | (318) | (257) |
| 30.06.2016 | 31.12.2015 | |
| Value of financial assets | 20,582 | 16,955 |
| Other assets | 3,369 | 7,393 |
| TOTAL ASSETS | 23,951 | 24,348 |
| Equity | 23,925 | 24,243 |
| Liabilities | 26 | 105 |
| TOTAL EQUITY AND LIABILITIES | 23,951 | 24,348 |
The document provides information on risk factors related to INVL Technology
Information provided in this document shall not be considered complete and covering all the aspects of the risk factors associated with the activity and securities of INVL Technology.
After the issuance of the Licence by the Bank of Lithuania on 14 July 2016, the Company started to operate not only according to the Law on Companies and Law on Securities and other related legal acts, as it was until obtaining a Licence, but also under the Law on Collective Investment Undertakings and other related legal acts, which establish certain specific obligations in respect of the protection of Company's shareholders and certain operating restrictions, e.g. the Company is entitled to invest the managed funds following the requirements of the investment strategy of the Company, certain limitations of the applicable laws are applied to the Company with regards its investments, their diversification, management thereof, etc. Furthermore, the Company's operating expenses might be increased because of the requirements to conduct periodic property's assessment, protect the Company's property in the Depository and other.
It should also be noted that investments into Shares of the Company (holding a Licence) are related to higher than average, longterm risk. The Company cannot guarantee that the shareholders will get invested funds back.
The business of information technologies and the market related to information technologies change particularly quickly. Therefore, there is a risk that due to unforeseen changes in the market the value of investments of the Company or the investment return from investment objects of the Company can decrease, the development of companies acquired by the Company will take longer and/or will cost more than planned, therefore, the Company's investments will not be profitable and/or their value will decrease.
Due to on-going recession and financial disturbance in Europe the availability of capital can be limited and therefore the cost of borrowing can increase. Poor economic situation in Greece, Spain, Cyprus and some other EU member states might further negatively affect the commercial situation of many banks operating in Europe. In addition, the risk of lower consumer confidence can have an adverse impact on financial markets and economic conditions in the EU and throughout the world and, in turn, the market's anticipation or reflection of these impacts could have a material adverse effect on the business of the Company and/or its Portfolio Companies in a variety of ways:
– difficulty or inability to acquire capital for further acquisitions by the Company and/or its Portfolio Companies and to cover financial obligations of current debt;
– increased risk of weak financial condition of the debtors of the Company and/or its Portfolio Companies resulting from current economic situation, etc.
There is a risk that in case of inflation the value of a Share will grow slower than the inflation, which would result in the return lower than inflation. In such a case, the real return earned by persons who sold the Shares of the Company in the market from increase in the value of the Shares can be smaller than expected. In case of deflation, there would be a risk that the value of the Company's investments will decrease by reason of the drop of the general price level.
There is a risk that geopolitical changes can have an effect on activities of the Company and for this reason the investment value of the Company can decrease or it may be impossible to sell the Company's investments at the desired time for the desired price.
The value of investments into the Company can fluctuate significantly in the short term, depending on the situation in the market. Investments into the Company should be made for a long term in order that the shareholder could avoid the risk of short-term price fluctuations.
Redemption of the Shares of the Company is limited, i.e. a shareholder cannot demand that the Company or the Management Company, which took over its management, would redeem the Shares. But a shareholder of the Company has a possibility to sell Shares of the Company in the secondary market as it is indicated in Articles 82 – 84 of the Articles of Association, incorporated by reference to this Prospectus.
The success of the Company's investments will largely depend on heads of companies managed by the Company (directly or indirectly), also on decisions taken by persons in the Management Company who are responsible for management of the Company and on experience and capabilities of the said persons. There is no guarantee that the same employees will continue managing companies managed by the Company (directly or indirectly), as well as the Management Company throughout the whole Term of Activities of the Company.
There are quite a few transactions with related parties among the Company and its Portfolio Companies. Detailed information about such transactions is presented in Section 4.13 of the Prospectus. Following applicable taxation legislation, transactions with related parties must be conducted at arm's length (i.e. independent and on an equal footing). In spite of the fact that the Management uses all efforts in order to ensure the conformity with the above-mentioned standard, a theoretical taxation risk remains here, i.e. the risk that applicable taxes will be calculated according to prices applicable at arm's length in case it was determined that certain transactions were conducted disregarding this principle, also the risk that relevant fines and default interest will be imposed. Besides, neither the Company nor its Portfolio Companies have approved their pricing policy.
The Company carried out investment projects of large scope in the past and can carry them out in the future. Though the Management Company and its employees, as well as the employees of companies managed by the Company (directly or indirectly), when forecasting investments, rely on all the information and analytical resources they have, there is no guarantee that all the information, which was relied on when planning investments, was full and correct. Besides, there is no guarantee that investment plans and investments will earn the expected or planned return or that the investment will not cost more than planned. If the investment projects which are being carried out or planned investment projects turn out to be worse than expected, if the return on these projects is less than planned or if their price turns out to be more than planned, this can have a significant adverse effect on the Issuer's activities, its financial situation and performance.
Also, there is no guarantee that the current investment projects related to increase of the Portfolio companies' capacities, introduction of new products and/or technologies will meet the needs of the Portfolio companies' customers.
Though the Company is not dependent on any one major customer or their group, still loss of one or several of them and inability to substitute other similar customers for the lost ones can have an adverse effect on the Issuer's controlled Portfolio Companies' business, financial situation or performance.
There is a risk that in case of fast recovery of the global economy or increase in inflation, central banks will increase interest rates and it will be more expensive to service loans in connection with the Company's investments, therefore, the value of the Company's investments can decrease.
The Operational Companies enter into a large portion of non-EUR denominated agreements in foreign markets, whereas some of their performance costs are incurred in EUR, therefore a drop in the rate of respective currencies can have a negative effect on profitability of the managed companies. A large part of computers and other equipment is purchased from foreign manufactures where payments are also made in non-EUR currencies. Besides, having in mind that the Operational Companies operates in many states, there is a risk that the attractiveness or profitability of the Company's investments will decrease also due to fluctuations in rates of other currencies.
There is a risk that buyers of products and services of companies (directly or indirectly) owned by the Company will fail to fulfil their obligations in time – this would have a negative effect on the profit of the Company and/or companies (directly or indirectly) managed by it. In case of late performance of a large part of obligations, the ordinary business of the Company and/or companies (directly or indirectly) owned by it may be disrupted, it may be necessary to search for additional sources of financing, which may be not always available. The Company also incurs the risk of keeping funds in bank accounts or investing into short-term financial instruments.
INVL Technology AB (former parent company) took over 2.6 percent of the assets, equity and liabilities of Invalda LT AB (currently, Invalda INVL AB). If certain obligations of Invalda INVL AB were not known at the time of the spin-off and for this reason were not distributed to all companies operating after the spin-off, all the companies operating after the spin-off will be liable for them jointly and severally. The liability of each of those companies for these obligations will be limited by the amount of the equity, assigned to each of them according to the terms of spin-off. Thus, there is a risk that if the obligations of Invalda INVL AB are not distributed, the Company will be liable for obligations of Invalda INVL AB, which according to the terms of spin-off are assigned to the Company.
The Company does not have any information that the reorganisation of Invalda INVL AB was performed improperly and/or that some of the obligations of Invalda INVL AB are not distributed.
There is a risk that investments into Operational Companies will be relatively illiquid and finding buyers for such companies can take some time. Furthermore, financing conditions can become worse due to deteriorating economic condition of the world, a region or a country, where the Operational Company is acting. Therefore, sale of the Company's investments can take longer than planned or their return may be less than planned. When investing into Operational Companies, securities issued by which (shares, bonds and other financial instruments) are not admitted to trading on regulated markets, there is a probability of facing a situation when sale of securities, due to absence of demand or other conditions in the market, can take longer than planned or not be as profitable as planned or may even cause losses.
There is a risk that due to deteriorating economic condition of the world, a region or a country it will become difficult/expensive for the Company (managed by the Management Company) to obtain new loans for acquisition of investment objects or to refinance old loans, therefore the value of the Company's investments can decrease. In order to reduce this risk, the Management Company will seek to maintain a sufficient level of liquidity in the Company or will seek to organise timely financing from financial institutions or other parties.
Acquiring Shares of the Company, the shareholders assume the risk of securities liquidity – in case of a drop in demand for Shares or delisting them from the stock exchange, investors would find it difficult to sell them. In case of deterioration of the Company's financial situation, the demand for Shares of the Company, as well as their price may decrease.
Operational Companies can control/acquire companies in countries other than those indicated in Article 18 of the Articles of Association and that shall not be considered as performance of the Company's activities beyond the limits of the countries indicated in Article 18 of the Articles of Association. However, there is a risk that companies acquired/controlled by Operational Companies will be relatively illiquid and finding buyers for such companies can take some time.
Furthermore, financing conditions can become worse due to deteriorating economic condition of the world, a region or a country. Therefore, there is a probability of facing a situation when, due to activities of companies managed by an Operational Company or sale of companies managed by an Operational Company, the Operational Company will suffer losses, which will be reflected in the Net Asset Value of the Company.
The Portfolio Companies are party to public sector contracts, which may be affected by political and administrative decisions, and the success and profitability of such contracts may be influenced by political considerations
Public sector customers account for a significant portion of revenues of the Portfolio Companies. The extent and profitability of public sector business of the Portfolio Companies may be influenced by political considerations. It may also be affected by political and administrative decisions concerning levels of public spending. In certain cases, due to applicable regulations, such as European Union tender rules, certain terms of public sector contracts, such as pricing terms, contract period, use of business partners and ability to transfer receivables under contract, provide the Portfolio Companies with less flexibility than comparable private sector contracts do. Moreover, decisions to decrease public spending may result in the termination or downscaling of public sector contracts, which could have a material adverse effect on business, results of operations, financial condition and prospects of the Portfolio Companies.
Contracts in the public sector are also subject to review and monitoring by authorities to ensure compliance with applicable laws and regulations, including those prohibiting anti-competitive practices. The Management believes that it complies with these laws and regulations. However, regulatory authorities may nevertheless deem a Portfolio Company to be in violation of such laws or regulations, and the relevant Portfolio Company could be subject to fines, penalties and other sanctions, including exclusion from participation in tenders for public contracts. Any such event would have a material adverse impact on the business, results of operations, financial condition, prospects and reputation of the Portfolio Company or some of them.
The Company could face attempts by other persons to gain unauthorised access to the Company's information technology systems, which could threaten the security of the Company's information and stability of its systems. These attempts could arise from industrial or other espionage or actions by hackers that may harm the Company or its customers. The Company may be not successful in detecting and preventing such theft and attacks. Theft, unauthorised access and use of trade secrets or other confidential business information as a result of such an incident could disrupt the Company's business and adversely affect its reputation and competitive position, which could materially adversely affect the Company's business, results of operation or financial condition.
Operational Companies, in performance of their activities, can face insolvency problems (go bankrupt, undergo restructuring, etc.). Accordingly, such situations can have a negative effect on the price of the Shares or result in insolvency of the Company itself.
In case of realisation of one or several of the risks, which would have a negative effect on the value and/or liquidity of Operational Companies, this can result in the Company's solvency problems, when the Company will be incapable of fulfilling its obligations. In such a case, shareholders of the Company can lose all their funds invested into the Company.
The past performance of the Company and its investments is not a reliable indication of the future performance of the investments held by the Company.
The shareholders and investors of the Company should be aware that the value of an investment in the Company is subject to normal market fluctuations and other risks inherent in investing in securities. There is no assurance that any appreciation in the value of the Shares will occur or that the investment objectives of the Company will be achieved. The value of investments and the income derived therefrom may fall as well as rise and investors may not recoup the original amount invested in the Company.
Acquisition of Shares of the Company entails the risk to incur losses due to unfavourable changes in the Share price in the market. A drop in the price of the Shares can be caused by negative changes in the value of assets and profitability of the Company, general share market trends in the region and in the world. Trade in Shares of the Company can depend on comments of financial brokers and analysts and announced independent analyses about the Company and its activities. If the analysts give an adverse opinion about prospects of the Shares of the Company, this can also have a negative effect on the price of Shares in the market. In assessing shares, non-professional investors are advised to address intermediaries of public trading or other specialists in this field for help.
Financial or other turmoil in emerging markets has in the recent past adversely affected market prices in the world's securities markets for companies operating in the affected developing economies. There can be no assurance that renewed volatility stemming from future financial turmoil, or other factors, such as political unrests that may arise in other emerging markets or otherwise, will not adversely affect the value of the Shares even if the Lithuanian economy remains relatively stable.
All the Shares of the Company may be provided for sale without any restrictions (except for certain limited restrictions, described in Section 5.9 of the Prospectus) and there can be no assurance as to whether or not they will be sold on the market.
The Company cannot predict what affect such future sales or offerings of Shares, if any, may have on the market price of the Shares. However, such transactions may have a material adverse effect, even if temporary, on the market price of the Shares. Therefore, there can be no assurance that the market price of the Shares will not decrease due to subsequent sales of the Shares held by the existing shareholders of the Company or a new Share issue by the Company.
The Company cannot assure that the marketability of the Shares will improve or remain consistent. Shares listed on regulated markets, such as Nasdaq, have from time to time experienced, and may experience in the future, significant price fluctuations in response to developments that are unrelated to the operating performance of particular companies. The market price of the Shares may fluctuate widely, depending on many factors beyond the Company's control. These factors include, amongst other things, actual or anticipated variations in operating results and earnings by the Company and the Portfolio Companies and/or their competitors, changes in financial estimates by securities analysts, market conditions in the industry and in general the status of the securities market, governmental legislation and regulations, as well as general economic and general market conditions, such as recession. These and other factors may cause the market price and demand for the Shares to fluctuate substantially and any such development, if adverse, may have an adverse effect on the market price of the Shares which may decline disproportionately to the operating performance of the Company and/or the Portfolio Companies. The market price of the Shares is also subject to fluctuations in response to further issuance of Shares by the Company, sales of Shares by the Company's existing shareholders, the liquidity of trading in the Shares and capital reduction or purchases of Shares by the Company as well as investor perception.
There is a risk that the Company will not pay dividend. A decision on payment of dividend will depend on profitability of activities, cash flows, investments plans and the general financial situation and other circumstances.
It may be possible that in case an investor wants to urgently sell the Issuer's securities (especially a large number of them), demand for them on the exchange will not be sufficient. Therefore, sale of shares can take some more time or the investor may be forced to sell shares at a lower price. Analogous consequences could appear after the exclusion of the Company's Shares from the Secondary List of Nasdaq. Besides, in case of deterioration of the Company's financial situation, demand for the Shares of the Company and, at the same time, their price may decrease.
There is a risk that there will be situations when interests of the Management Company (or persons related to it) and the Company or shareholders will differ or interests of individual shareholders will differ, i.e. there will be a conflict of interest. When it is impossible to avoid a conflict of interest, the Management Company must ensure that shareholders are treated fairly. Employees of the Management Company and other persons related to the Management Company and persons, directly or indirectly related to the Management Company by relationship of control, must immediately, as soon as they become aware of such information, notify the Investment Committee about a potential or existing conflict of interest. The Investment Committee, approving of investment decisions, shall take into account the information presented to it about potential or existing conflicts of interest. The Investment Committee shall immediately inform the head and the Board of the Management Company about conflicts of interest it is aware of. Following legal acts regulating organisation of activities of collective investment undertakings, the Management Company has implemented appropriate measures for avoiding conflicts of interest, which enable to perform the activities of managing the risk of conflicts of interest and managing conflicts of interest independently, in order to avoid/reduce the risk of conflicts of interest or properly manage a conflict of interest when it occurs.
The Prospectus includes some forward looking statements, are based on estimate, opinion, expectations and forecasts regarding future events and financial trends that will possibly have an effect on the activities of the Company. Forward looking statements include information about possible or presumable results of the Company's activities, investment strategy, contractual relationships, borrowing plans, investment conditions, effect of future regulation and other information. The Company cannot assure that the forward looking statements will reflect future events and circumstances fully and correctly. The Company, the Management Company and their employees do not undertake to adjust or modify the forward looking statements, except to the extent required by laws and the Articles of Association.
The assets of the Company will be evaluated according to the main rules set in the Articles of Association, incorporated by reference to this Prospectus and the accounting policy of the Management Company. Valuation of individual assets held by the Company shall be performed by a property appraiser, however, such valuation of assets shall be only determining the value of the assets, which does not automatically mean the exact sale price of an investment held by the Company, which depends on many circumstances, for example, economic and other conditions, which cannot be controlled. Thus, the sale price of investments held by the Company can be higher or lower than the value of assets determined by a property appraiser.
The Company, investing into Operational Companies, competes with other investors, including, without limitation, with other investment companies or private capital investment funds. Thus, there is a risk that competition with other investors will demand that the Company would conduct transactions at less favourable conditions than it would be possible in other cases.
Legal acts provide for a duty of the Company in certain circumstances to redeem its Shares from the shareholders that requested such redemption (for more information please see Article 90 of the Articles of Association). Accordingly, if the Company becomes subject to the duty to offer to the shareholders redemption of its own Shares and if such a redemption is requested by the shareholders holding a significant number of Shares, the Company can be forced to sell its investments urgently, which can significantly reduce the return earned by the Company from sale of its investments. This risk is planned to be managed by means stipulated in Article 97 of the Articles of Association.
There is a risk that upon changes in legal acts of the Republic of Lithuania or the states where assets of the Company are invested or where Operational Companies, into which the Company invests, operate, such changes in legal acts can have a negative effect on the protection of the Company's investments, the activities, profitability and value of the Operational Companies or such changes in legal acts can have a negative effect on rights and interests of the Company otherwise.
There is a risk that the activities of the Company and the general performance results of the Company can be negatively affected by demands and claims regarding non-disclosed or non-identified obligations and/or violations in connection with investments acquired by the Company, which may result in the Company's liability for such obligations and/or violations and for this reason the value of the Company's investments and, at the same time, the price of the Shares can significantly decrease.
It should be also noted that, the Company after the reorganisation – the merger of Former parent company with the Company (previous name – BAIP grupe AB), which continues its activities after the reorganisation, took over all the assets, equity and liabilities of the Former parent company. For any and all the obligations of the Former parent company after the reorganisation, the Company took responsibility.
Lithuanian tax legislation which was enacted or substantively enacted at the end of the reporting period may be subject to varying interpretations. Consequently, tax positions taken by management and the formal documentation supporting the tax positions may be successfully challenged by relevant authorities. Fiscal periods remain open to review by the authorities in respect of taxes for five calendar years preceding the year of review. Management is not aware of any circumstances that could lead to significant tax charges and penalties in the future that have not been provided for or disclosed in these financial statements. Uncertain tax positions of the Company and of the Portfolio Companies are reassessed by management at the end of each reporting period. Liabilities are recorded for income tax positions that are determined by management as more likely than not to result in additional taxes being levied if the positions were to be challenged by the tax authorities. The assessment is based on the interpretation of tax laws that have been enacted or substantively enacted by the end of the reporting period, and any known court or other rulings on such issues. Liabilities for penalties, interest and taxes other than on income are recognized based on management's best estimate of the expenditure required to settle the obligations at the end of the reporting period.
There is also a risk that upon changes in economic conditions, political situation in the country or due to any other reasons, new taxes on shareholders of the Company, the Company or the Operational Companies will appear or the rates of current taxes will increase, therefore the price, liquidity and/or attractiveness of the Shares or the value of investments of the Company may decrease.
On February 29 in Lithuania INVL Technology registered a company FINtime that will provide business processes outsourcing services.
Norway Registers Development Rwanda Ltd. was established in Kigali, Rwanda on the 22 February 2016. NRD Rwanda will offer full portfolio of NRD group and other INVL Technology businesses' services. In addition, backing the regional export strategy of Rwanda, it might also participate in projects in Burundi and Democratic Republic of the Congo. According to him, NRD Rwanda will attract and combine the know-how of NRD group in the fields of business climate improvement and e-governance, smart IT infrastructure, cybersecurity and digital platforms for finance sector, and advance these competences in the country.
On 18 March 2016 Inventio, a subsidiary of INVL Technology, acquired 100 per cent shares of information system development company Algoritmu sistemos for EUR 2.385 million. The acquisition was completed after the permits had been issued by the Competition Council and the Commission for the evaluation of compliance of potential buyers to the national security interests. In 2015, revenue of Algortmu sistemos increased by 22 per cent and reached EUR 2.768 million, while net profit increased by 18 per cent and reached EUR 386 thousand. The results of Algoritmu sistemos will be included in the financial reports from the day the control of the companies was transferred – 1 April 2016, and will be reflected in the interim financial report for 6 months of 2016.
On 20 April INVL Technology acquired 100 per cent of shares in Estonian IT company Andmevara from Estonian Ministry of the Interior for EUR 664.6 thousand. Andmevara also has a subsidiary company in Moldova.
Before the transaction, Estonian state paid out EUR 1.25 million in dividends and related taxes. A significant part of Andmevara business (processing of Estonian Population Registry) was spun-off from the Company in the beginning of 2016 and is not a part of the acquisition. Company's revenue in 2015 (before the spin-off) was EUR 3.46 million and net profit amounted to EUR 348 thousand. The results of Andmevara will be included in the financial reports from the day the control of the companies was transferred – 1 April 2016, and will be reflected in the interim financial report for 6 months of 2016.
Detailed information on the related parties' transactions has been disclosed in the explanatory notes of the financial statements for six months of 2016 (9 note).
Upon receiving the new status in July 2016, the Company will seek to invest the attracted capital and grow the value of the companies in its portfolio by bringing financial and intellectual capital for growth, management support, and globalization via sales channels in East Africa and Southeast Asia. The goal is to grow the value of the managed companies, structure their exit and generate significant return for the shareholders.
Darius Šulnis Kazimieras Tonkūnas Director General Management company INVL Asset Management
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Chairman of the Investment Committee INVL Technology
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