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Shentracon Chemicals Ltd.

BSE: 530757 Sector: Industrials
NSE: N.A. ISIN Code: N.A.
BSE 05:30 | 01 Jan Shentracon Chemicals Ltd
NSE 05:30 | 01 Jan Shentracon Chemicals Ltd

Shentracon Chemicals Ltd. (SHENTRACONCHEM) - Auditors Report

Company auditors report

to the Members of

The Income & Growth VCT plc

Our opinion on the Financial Statements

In our opinion The Income & Growth VCT plc Financial Statements for the year ended30 September 2015 which have been prepared by the Directors in accordance with applicablelaw and United Kingdom Accounting Standards:

• give a true and fair view of the state of the Company's affiairs as at 30September 2015 and of it's profit for the year then ended;

• have been properly prepared in accordance with United Kingdom AccountingStandards; and

• have been prepared in accordance with the requirements of the Companies Act2006.

This report is made solely to the Company's members as a body in accordance withChapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so thatwe might state to the Company's members those matters we are required to state to them inan auditor's report and for no other purpose. To the fullest extent permitted by law wedo not accept or assume responsibility to anyone other than the Company and the Company'smembers as a body for our audit work for this report or for the opinions we haveformed.

What our opinion covers

Our audit opinion on the Financial Statements covers the:

• Income Statement;

• Balance Sheet;

• Reconciliation of Movements in Shareholders' Funds;

• Cash Flow Statement; and

• related notes

Respective responsibilities of Directors and Auditor

As explained more fully in the Statement of Directors' Responsibilities the Directorsare responsible for the preparation of the Financial Statements and for being satisfiedthat they give a true and fair view. Our responsibility is to audit and express an opinionon the Financial Statements in accordance with applicable law and International Standardson Auditing (UK and Ireland). Those standards require us to comply with the FRC's EthicalStandards for Auditors.

A description of the scope of an audit of financial statements is provided on the

Financial Reporting Council's (FRC) website at

An overview of the scope of the audit including our assessment of the risk of materialmisstatement

Our audit approach was developed by obtaining an understanding of the Company'sactivities the key functions undertaken on behalf of the Board by the Investment Adviserand Administrator and the overall control environment. Based on this understanding weassessed those aspects of the Ccompany's transactions and balances which were most likelyto give rise to a material misstatement. The outcome of our risk assessment was that thevaluation of investments was considered to be the area that had the greatest effect the onoverall audit strategy including the allocation of resources in the audit.

The valuation of investments is a key accounting estimate where there is an inherentrisk of management override arising from the investment valuations being prepared by theInvestment Adviser who is remunerated based on the net asset value of the Company.

We performed initial analytical procedures to determine the extent of our workconsidering inter alia the value of individual investments the nature of the investmentand the extent of the fair value movement. A breakdown of the investment portfolio bynature of instrument is shown below.

In respect of equity investments quoted on AIM we confirmed that bid price has beenused as the basis for valuation and that there were no contra indicators such asliquidity considerations to suggest bid price was not the most appropriate indication offair value.

Our sample for testing was stratified according to risk having regard to thesubjectivity of the inputs to the valuations. 43% of the portfolio is based on price ofrecent investment or cost (where the investment was recently acquired) quoted priceoffer price or net asset value supported by a third party valuation. 57% of the unquotedinvestment portfolio is valued in accordance with more subjective techniques. The majorityof such investments are valued on an earnings multiple basis. In respect of the sampleselected for detailed testing (representing 91% by value of the investments valued usingmore subjective techniques) we:

• Reviewed and challenged the assumptions inherent in the valuation of unquotedinvestments and assessed the impact of the estimation uncertainty concerning theseassumptions and the disclosure of these uncertainties in the Financial Statements;

• Reviewed the historical financial statements and recent management informationavailable for unquoted investments used to support assumptions about maintainable earningsused in the valuations;

• Considered the earnings multiples applied by reference to observable listedcompany market data; and

• Challenged adjustments made to such market data in establishing the earningsmultiple applied in arriving at the valuations adopted.

For the remaining investments cost reviewed for impairment is used as anapproximation of fair value. For a sample of these investments we considered theappropriateness of this methodology by considering the proximity of the acquisition to theyear-end if appropriate or the operational performance of the investee company. Wheresuch investments were loans we also considered wider economic and commercial factorsthat in our judgement could impact on the recoverability and valuation of those loans.

For all investments tested we developed our own point estimate where alternativeassumptions could reasonably be applied and considered the overall impact of suchsensitisations on the portfolio of investments in determining whether the valuations as awhole are reasonable and unbiased.

The remainder of the portfolio was subject to analytical procedures.

We also consider revenue recognition to be a significant risk. Revenue consists ofdividends receivable from the investee companies and interest earned on loans to investeecompanies and cash balances. Revenue recognition is considered to be a significant auditrisk as it is a key driver of dividend returns to investors. In particular as the companyinvests primariy in unquoted companies dividends receivable can be difficut to predict.

We assessed the design and the implementation of the controls relating to revenuerecognition and we developed expectations for interest income receivable based on loaninstruments and investigated any variations in amounts recognised to ensure they werevalid.

We considered whether the accounting policy had been applied correctly by management indetermining provisions against income where recovery is considered doubtful consideringmanagement information relevant to the ability of the investee company to service the loanand the reasons for any arrears of loan interest.

In respect of dividends receivable we compared actual income to expectations set basedon independent published data on dividends declared by the investee companies held. Wetested the categorisation of dividends received from the investee companies between therevenue and capital.

The Audit Committee's consideration of its key issues is set out on pages 42 - 43.

Materiality in context

We apply the concept of materiality both in planning and performing our audit and inevaluating the effect of misstatements. For planning we consider materiality to be themagnitude by which misstatements including omissions could influence the economicdecisions of reasonable users that are taken on the basis of the Financial Statements.

Importantly misstatements below this level will not necessarily be evaluated asimmaterial as we also take account of the nature of identified misstatements and theparticular circumstances of their occurrence when evaluating their effect on theFinancial Statements. The application of these key considerations gives rise to two levelsof materiality the quantum and purpose of which are tabulated below.

Materiality measure Purpose Key considerations and benchmarks Quantum ()
Financial statement materiality Assessing whether the Financial Statements as a whole present a true and fair view • The value of net assets 1200000
• The level of judgement inherent in the valuation
• The range of reasonable alternative valuations
Specific materiality – classes of transactions and balances which impact on revenue profits Assessing those classes of transactions balances or disclosures for which misstatements of lesser amounts than materiality for the Financial Statements as a whole could reasonably be expected to influence the economic decisions of users taken on the basis of the Financial Statements. • The level of net income return 250000

We agreed with the Audit Committee that we would report to the Committee all auditdifferences in excess of 24000 as well as differences below that threshold that inour view warranted reporting on qualitative grounds.

Opinion on other matters prescribed by the Companies Act 2006

In our opinion:

• the part of the Directors' Remuneration Report to be audited has been properlyprepared in accordance with the Companies Act 2006;

• the information given in the Strategic Report and the Directors' Report for thefinancial year for which the Financial Statements are prepared is consistent with theFinancial Statements; and

• the information given in the Corporate Governance Statement set out on pages 38- 44 of the Annual Report with respect to internal control and risk management systems inrelation to financial reporting processes and about share capital structures is consistentwith the Financial Statements.

Matters on which we are required to report by exception

Under the ISAs (UK and Ireland) we are required to report to you if in our opinioninformation in the Annual Report is:

• materially inconsistent with the information in the audited FinancialStatements; or

• apparently materially incorrect based on or materially inconsistent with ourknowledge of the Company acquired in the course of performing our audit; or

• is otherwise misleading.

In particular we are required to consider whether we have identified anyinconsistencies between our knowledge acquired during the audit and the Directors'statement that they consider the Annual Report is fair balanced and understandable andwhether the Annual Report appropriately discloses those matters that we communicated tothe Audit Committee which we consider should have been disclosed.

Under the Companies Act 2006 we are required to report to you if in our opinion:

• adequate accounting records have not been kept or returns adequate for ouraudit have not been received from branches not visited by us; or

• the Financial Statements and the part of the Directors' Remuneration Report tobe audited are not in agreement with the accounting records and returns; or

• certain disclosures of Directors' remuneration specified by law are not made; or

• we have not received all the information and explanations we require for ouraudit; or

• a Corporate Governance Statement has not been prepared by the Company. Under theListing Rules we are required to review:

• the Directors' statement set out on page 29 in relation to going concern andlonger-term viability; and

• the part of the Corporate Governance Statement relating to the Company'scompliance with the provisions of the UK Corporate Governance Code specified for ourreview.

We have nothing to report in respect of these matters.

Jason Homewood

(senior statutory auditor)

For and on behalf of BDO LLP

statutory auditor


United Kingdom

17 December 2015

BDO LLP is a limited liability partnership registered in England and Wales (withregistered number OC305127).