RNS Number:5470C
Equity Special Situations Limited
05 May 2006
Equity Special Situations Limited
Annual Report
Equity Special Situations Limited ("the Company" or "Equity Special Situations")
is pleased to announce its results for the year ended 31 December 2005.
Directors' Report
We are delighted to present this annual report to shareholders. The following
pages show the financial performance of Equity Special Situations for the
financial year to 31 December 2005. We have also included unaudited summary
information for the period from 31 December 2005 to 2 May 2006 in order to
ensure that shareholders are provided with as up to date information as is
practical.
Net Asset Value
We have set out in the table below the progression of our Net Asset Value ("NAV
") per share since launch. The NAV on 31 December 2004 was 17.49 pence per
share and by 30 June 2005, the date of our interim results, the NAV had risen to
22.26 pence per share. The NAV had risen to 166.38 pence per share by 30
September 2005 and on 31 December 2005 the NAV stood at 149.59 pence per share.
This growth in the NAV represents an increase of approximately 755.29% for the
period from 1 January 2005 to 31 December 2005. The unaudited NAV was 137.45
pence per share as of 2 May 2006.
Date 27 October 31 December 31 March 30 June 30 September 31 December 2 May
2004 2004 2005 2005 2005 2005 2006
(unaudited) (audited) (unaudited) (unaudited) (unaudited) (audited) (unaudited)
NAV 14.88p 17.49 p 20.96 p 22.26 p 166.38 p 149.59 p 137.45 p
Fund raising
The total funds net of commissions that have been raised by ESS during the year
to 31st December 2005 are #1,337,140. This fund raising is in addition to the
#1,950,000 which we raised between incorporation on 16 July 2004 to 31 December
2004. In addition, since the end of the financial year to 31 December 2005, a
further sum of #5,000,000 was raised by placing 3,739,716 Ordinary Shares at
133.7 pence per share. This placing was announced on 15 March 2006. We have,
therefore, raised a total of #8,287,140 in equity finance during the life time
of this company.
The Directors believe that, from an operational point of view, it would be in
the Company's interests to have access to additional funds in order to increase
the number and size of investments made by the Company. This would spread the
operational costs of the Company over a larger portfolio of assets and also
provide a more diversified portfolio of assets which should reduce the reliance
on a very small number of investments for further material increases in the
Company's net asset value. We have discussed this issue over many months with a
variety of advisors and have previously used relatively small amounts of debt
finance. We are currently reviewing the amounts of debt that we believe that it
would be appropriate for ESS to take on and expect that during the course of
2006 the levels of debt will be increased. We are very aware of the leverage
effect that the use of debt creates and of the need therefore to strictly
control the amounts raised through debt. We do not intend to jeopardise the
success of this Company through the unwise use of leveraged finance and the
Directors will strictly manage and monitor this debt facility. The total debt
outstanding as of 31 December 2005 was #70,000.
Investment strategy
There are a number of general investment criteria that the Company looks for
when researching possible investee companies. These are as follows:
* the size of the investment in relation to the Company's assets;
* whether or not the investment price appears to be at a discount to the
actual or potential valuation of the investee company;
* whether or not there is a proven management team in place or available
for the investee company;
* the Company's opinion of the investee company's financial and other
resources, future trading prospects, visibility of earnings, cash flow forecasts
and ongoing working capital requirements; and
* whether or not the Company considers that there are satisfactory
prospects to exit the investment within a reasonable time period.
We have researched a wide variety of potential investment opportunities which
have mainly come from the UK and the Netherlands, but have also included other
countries. The potential investments have been made available to the Company
through the network of contacts that the Directors and consultants of the
Company have, and through original research by consultants employed by the
Company. These potential investments have been intentionally diverse in terms
of industry sector and stage of company development. Most have been rejected as
investments as they have not satisfied the Company's criteria.
We have found during 2005 that a majority of the most interesting investments we
have reviewed, and a majority of the investments made, have been in the
financial services sector within the European Union. The most significant
investment in terms of unrealised returns for ESS is Syndicate Asset Management
plc ("SAM") which we have previously provided information about during the
course of 2005. SAM continues to progress well having announced a total of 5
acquisitions since its flotation on to AIM in September 2005. ESS does not have
an operational role in SAM and now regards SAM as an entirely independent
company. We will of course continue to support the company and its development,
as a shareholder.
By 31 December 2005 we held investments in 8 companies, of which 6 are quoted on
AIM and 2 are unquoted. In terms of industry sector, 6 are in financial
services, 1 is involved in the healthcare sector and 1 is involved in the media
sector.
Share price
The share price on 4 January 2005 was 56.99 pence per share. This has
progressed well during the year, reaching 94.17 pence by 30 June 2005 and 152.5
pence by 31 December 2005. This represents an increase of 167.6% in the share
price over the year, compared with an increase of the AIM All Share index of
4.03%. The share price on 2 May 2006 was 167.5 pence per share.
We are, however, under no illusions that the share price increase during 2005
and the current share price is due in a large part to the success of our
investment in to SAM. We intend to increase our investments into other
companies in order to ensure that we become more diversified. Hopefully this
will provide shareholders with a more stable share price that is not overly
reliant on any single investment.
Outlook
We believe that shareholders will be pleased with the increase in both the NAV
and the share price that we have achieved during 2005. We believe that the
market in general is well positioned to enjoy relatively stable growth in the
months ahead and we continue to see a healthy pipeline of potential
opportunities from which to choose further investments over the forthcoming
months. We therefore remain optimistic about the future.
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
Company and of the profit or loss of the Company for that period and are in
accordance with applicable laws. In preparing those financial statements the
Directors are required to:
(i) select suitable accounting policies and then apply them
consistently;
(ii) make judgements and estimates that are reasonable and
prudent;
(iii) state whether applicable accounting standards have been
followed subject to any material departures disclosed and explained in the
financial statements;
(iv) prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will continue in
business.
The Directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
Company and to enable them to ensure that the financial statements have been
properly prepared in accordance with the Companies (Guernsey) Law, 1994. They
are also responsible for safeguarding the assets of the Company and hence for
taking reasonable steps for the prevention and detection of fraud and other
irregularities.
Principal activity
The principal activity of the Company is that of achieving capital growth for
its shareholders through the purchase, holding and sale of minority stakes in
companies and investment funds, which are or which are expected shortly to be,
quoted on recognised investment exchanges in Europe, the US and Canada.
Results and dividends
The results of the Company for the year are set out in detail on page 10.
The Directors do not recommend a dividend for the year.
Directors and their interests
The Directors of the Company who served during the year were:-
P F Griffin (C R Sharman as alternate)
M T Cahill (R K Hollingsworth as alternate)
J D Freeman - Non-executive director (resigned 19 July 2005)
No Director, who held office at the end of the financial year, had an interest
in the shares or in options over shares of the Company.
Directors' remuneration
The emoluments of the individual Directors for the year were as follows:
Director Salary or Fees
P F Griffin Nil
M T Cahill Nil
J D Freeman #2,000
The Company entered into a services agreement with BGL Reads Fund Management
Limited, now called MPR Fund Management Limited, which included the provision of
the services of Michael Cahill and Peter Griffin as executive directors on a
time-cost basis.
The above fees do not include reimbursed expenditure.
Substantial shareholdings
At 2 May 2006, the issued share capital of the company was 14,167,604 ordinary
shares of 1 pence each and the following shareholders were listed in the
shareholder register as holding 3% or more of the Company's share capital:
Number of Percentage of
ordinary shares issued ordinary
share capital
E*Trade Securities Limited 4,038,766 28.51%
Undesignated account
HSBC Global Custody Nominee (UK) Limited 3,703,500 26.14%
Account 741812
Pershing Keen Nominees Limited 1,739,716 12.28%
Account TYCLT
Euroclear Nominees Limited 1,645,453 11.61%
Account EOC01
Vidacos Nominees Limited 1,302,115 9.19%
Account 4607
HSBC Global Custody Nominee (UK) Limited 700,000 4.94%
Account 741820
HSBC Global Custody Nominee (UK) Limited 560,000 3.95%
Account 813259
Corporate governance
The Company continues to give careful consideration to the principles of
corporate governance to ensure that it complies with current UK corporate
governance requirements to the extent to which the Directors consider these to
be appropriate for a company of its size and taking into account its wish to
conserve cash for investments.
The Board meets regularly and has ultimate responsibility for the management of
the Company. It also meets to review the remuneration of directors, the
Investment Advisory Panel and consultants.
Relationship with shareholders
The Directors seek to build a mutual understanding of objectives between the
Company and its shareholders. The Company reports formally to shareholders in
its interim and annual reports setting out details of its activities. In
addition, the Company keeps shareholders informed of events and progress during
the year through the issue of press releases.
Where possible the Annual Report is sent to shareholders at least 20 working
days before the Annual General Meeting. Directors are required to attend Annual
General Meetings of the Company unless unable to do so for personal reasons or
due to pressing commercial commitments. Shareholders are given the opportunity
to vote on each separate issue, each of which shall be decided on a poll of
every shareholder present in person or by proxy.
Auditors
A resolution to re-appoint BDO Novus Limited as auditors will be proposed at the
Annual General Meeting.
APPROVED BY THE BOARD OF DIRECTORS
Peter Griffin
Michael Cahill
5th May 2006
INDEPENDENT AUDITORS' REPORT TO THE
MEMBERS OF EQUITY SPECIAL SITUTATIONS LIMITED
We have audited the financial statements of Equity Special Situations Limited
for the year ended 31 December 2005 which are set out on pages 10 to 19. These
financial statements have been prepared under the historical cost convention as
modified by the revaluation of investments and in accordance with the accounting
policies as set out on pages 13 and 14.
This report is made solely to the company's members, as a body, in accordance
with Section 64 of the Companies (Guernsey) Law, 1994. Our audit work is
undertaken so that we might state to the company's members 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 members as a body, for our
audit work, for this report, or for the opinions we have formed.
Respective responsibilities of the directors and auditors
As described in the Statement of Directors' Responsibilities within the
Directors' Report the company's directors are responsible for the preparation of
the financial statements in accordance with applicable law and United Kingdom
Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
Our responsibility is to audit the financial statements in accordance with
relevant legal and regulatory requirements and International Standards on
Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements give a true
and fair view and are properly prepared in accordance with the Companies
(Guernsey) Law, 1994. We also report to you if, in our opinion, the Directors'
Report is not consistent with the financial statements, if the company has not
kept proper accounting records, if we have not received all the information and
explanations we require for our audit, or if information specified by law is not
disclosed.
We read the Directors' Report and consider the implications for our report if we
become aware of any apparent misstatements or material inconsistencies within
it. Our responsibilities do not extend to any other information.
Basis of opinion
We conducted our audit in accordance with International Standards on Auditing
(UK and Ireland) issued by the Auditing Practices Board. An audit includes
examination, on a test basis, of evidence relevant to the amounts and
disclosures in the financial statements. It also includes an assessment of the
significant estimates and judgements made by the directors in the preparation of
the financial statements, and of whether the accounting policies are appropriate
to the company's circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
Opinion
In our opinion the financial statements:
* give a true and fair view, in accordance with United Kingdom Generally
Accepted Accounting Practice, of the state of the company's affairs as at 31
December 2005 and of its net return for the year then ended; and
* have been properly prepared in accordance with the Companies (Guernsey)
Law, 1994.
BDO Novus Limited
CHARTERED ACCOUNTANTS
Elizabeth House
St Peter Port
Guernsey.
5th May 2006
STATEMENT OF TOTAL RETURN
FOR THE YEAR ENDED 31 DECEMBER 2005
For the period 16 July 2004
to 31 December 2004
Note Revenue Capital Total Revenue Capital Total
# # # # # #
GAINS ON INVESTMENTS
Net realised gains/(losses) - 4,372 4,372 - (68,624) (68,624)
Net unrealised gains - 13,029,490 13,029,490 - 43,567 43,567
- 13,033,862 13,033,862 - (25,057) (25,057)
INCOME 1
Investment income - - - - - -
Bank interest 1,899 - 1,899 841 - 841
1,899 - 1,899 841 - 841
EXPENDITURE 1
Directors' fees 2,000 - 2,000 1,667 - 1,667
Administration fees 47,944 - 47,944 - 28,398 28,398
Professional fees 58,031 30,862 88,893 29,033 114,437 143,470
AIM admission expenses - - - 213,857 - 213,857
Consultancy fees - 125,692 125,692 - 8,500 8,500
Audit fee 3,000 - 3,000 5,000 - 5,000
Bank charges and interest 1,202 - 1,202 15,361 - 15,361
Loan interest payable 4,525 - 4,525 5,973 - 5,973
Loss/(profit) on exchange 535 - 535 (712) - (712)
Safe custody charges 770 - 770 - - -
Sundry expenses 3,510 - 3,510 - - -
121,517 156,554 278,071 270,179 151,335 421,514
NET RETURN ON ORDINARY ACTIVITIES FOR (119,618) 12,877,308 12,757,690 (269,338) (176,392) (445,730)
THE FINANCIAL YEAR/PERIOD
Return per share - basic and 5 (1.25p) 134.88p 133.63p (3.6p) (2.3p) (5.9p)
diluted
All revenue and capital items in the above statement derive from continuing
operations.
No operations were acquired or discontinued during the year.
A reconciliation of movements in shareholders' funds is set out in note 13 to the financial
statements.
The notes on pages 13 to 19 form an integral part of these financial statements.
BALANCE SHEET
31 DECEMBER 2005
Note 2005 2004
FIXED ASSETS
Quoted investments 3 15,369,796 1,217,862
Unquoted investments 4 287,703 -
15,657,499 1,217,862
CURRENT ASSETS
Cash at bank and broker 44,231 49,465
Sundry debtors 7 - 426,358
44,231 475,823
CREDITORS - AMOUNTS FALLING
DUE WITHIN ONE YEAR
Bank overdraft 44 -
Sundry creditors 32,586 14,747
Loan payable 8 70,000 174,668
102,630 189,415
NET CURRENT (LIABILITIES)/ASSETS (58,399) 286,408
TOTAL ASSETS LESS CURRENT LIABILITES # 15,599,100 # 1,504,270
CAPITAL AND RESERVES
CALLED UP SHARE CAPITAL 10 104,279 86,000
SHARE PREMIUM ACCOUNT 11 3,182,861 1,864,000
CAPITAL RESERVE
REALISED 12 (366,446) (219,959)
UNREALISED 12 13,067,362 43,567
REVENUE RESERVE 12 (388,956) (269,338)
SHAREHOLDERS' FUNDS 13 # 15,599,100 # 1,504,270
Net asset value per share 6 149.59p 17.49p
APPROVED BY THE BOARD OF DIRECTORS
P F Griffin M T Cahill
..........................................Director ..........................................Director
P F Griffin M T Cahill
Date 5th May 2006
The notes on pages 13 to 19 form an integral part of these financial statements.
CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2005
16 July 2004 to
Note 2005 31 December 2004
Net cash outflow from operating activities 9 (258,333) (405,926)
Investing activities:
Purchase of listed investments (1,112,205) (1,280,060)
Purchase of unlisted investments (442,777) -
Proceeds from disposals of listed investments 168,097 1,242,421
Proceeds from disposals of unlisted investments 62,000 -
Net cash outflow from financial investment (1,324,885) (37,639)
Financing:
Loans received 70,000 174,668
Loan repaid (174,668) -
Forestdale commission (18,667) -
Issue of own shares 1,701,275 318,362
Net cash inflow from financing 1,577,940 # 493,030
(Decrease)/increase in cash resources # (5,278) # 49,465
RECONCILIATION OF NET CASH FLOW TO MOVEMENT
IN NET DEBT
(Decrease)/increase in cash resources for the year/ (5,278) 49,465
period
Cash outflow/(inflow) from change in debt financing 104,668 (174,668)
Change in net debt resulting from cashflows 99,390 (125,203)
Net debt at 1 January 2005 (125,203) -
Net debt at 31 December 2005 9 # (25,813) # (125,203)
The notes on pages 13 to 19 form an integral part of these financial
statements.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2005
1. ACCOUNTING POLICIES
(a) CONVENTION
The financial statements have been prepared under the historical cost convention, modified to
include the revaluation of investments and in accordance with applicable accounting standards and
with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies"
issued by The Association of Investment Trust Companies in January 2003. The principal
accounting policies which the directors have adopted within that convention are set out below.
(b) INCOME
Dividends receivable from quoted equity investments are recognised on the ex-dividend date.
Dividends receivable from equity investments where no ex-dividend date is quoted are recognised
when the company's right to receive payment is established. Interest receivable on cash deposits
is accounted for on an accruals basis.
(c) FOREIGN CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies other than sterling have been translated
into sterling at the rates of exchange ruling at the balance sheet date. Transactions during the
year have been translated at the rates of exchange ruling at the date of the transaction.
(d) INVESTMENTS
Quoted investments are valued at middle market prices. Unquoted investments are valued by the
Board according to the valuation principles of the British Venture Capital Association. Realised
gains or losses on the disposal of investments are taken to the capital reserve - realised.
Unrealised gains or losses on revaluation of investments are taken to the capital reserve -
unrealised.
Investments, which may be classified as associate undertakings, are carried at fair value as
determined by the Directors, in accordance with the Company's normal policy.
The Directors consider that, as these investments are held as part of the Company's investment
portfolio with a view to the realisation of capital gains, carrying them at fair value gives a
true and fair view of the Company's interest in these investments.
Carrying investments at fair value is permitted under Financial Reporting Standard No 9 "
Associates and Joint Ventures", where a venture capital or similar entity holds investments as
part of a portfolio.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2005
(e) EXPENDITURE
All expenses are accounted for on an accruals basis. Expenses are charged through the Statement
of Total Return except where the expense is incidental to the acquisition or disposal of an
investment in which case the expense is added to the cost of the investment or deducted from the
sale proceeds.
Expenses that are directly attributable to the management of investments are allocated to capital
in the Statement of Total Return. With the Directors' long term target for returns on investments
being entirely capital gain there is no requirement to apportion these expenses between revenue
and capital.
2. TAXATION
The company has been granted exempt status under the Income Tax (Exempt Bodies) (Guernsey) Ordinance
1989, and is therefore subject to the payment of an annual fee which is currently #600.
3. QUOTED INVESTMENTS 2005 2004
At cost # 2,302,434 # 1,174,295
At market value # 15,369,796 # 1,217,862
4. UNQUOTED INVESTMENTS 2005 2004
At cost # 287,703 # -
At valuation # 287,703 # -
5. EARNINGS PER SHARE
The calculation of basic earnings per share is based on the net return on ordinary activities after tax
for the year and on 9,547,131 shares (2004: 7,525,146 shares) being the weighted average number of
shares in issue during the year.
6. NET ASSET VALUE
The calculation of net asset value is based on the net assets of #15,599,100 (2004: #1,504,270) and on
the ordinary shares in issue of 10,427,888 (2004: 8,600,000) at the balance sheet date.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2005
7. SUNDRY DEBTORS 2005 2004
Unpaid share subscriptions (690,936 shares at 50 - 345,468
pence)
Amount due from broker - 80,890
# - # 426,358
8. LOAN PAYABLE 31 December 2004
Loan # 70,000 # 174,668
The loan payable is unsecured, repayable on demand, and bears interest at 3% above the base rate of Barclays
Bank plc.
9. CASHFLOW NOTES
(a) RECONCILIATION OF REVENUE RETURN ON ORDINARY ACTIVITIES BEFORE TAXATION TO
NET CASH FLOW FROM OPERATING ACTIVITIES
2005 16 July 2004 to 31
December 2004
Net return on ordinary activities for (119,618) (269,338)
the financial year/period before
taxation
Expenses charged to capital (156,554) (151,335)
Increase in creditors 17,839 14,747
Net cash outflow from operating # (258,333) # (405,926)
activities
(b) ANALYSIS OF NET DEBT At At
1 January Cashflow 31 December
2005 2005
Cash at bank and broker 49,465 (5,234) 44,231
Bank overdraft (44) (44)
-
49,465 (5,278) 44,187
Loans payable (174,668) 104,668 (70,000)
# (125,203) # 99,390 # (25,813)
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2005
10. CALLED UP SHARE CAPITAL 2005 2004
Authorised
50,000,000 ordinary shares of #0.01 each # 500,000 # 500,000
Allotted and fully paid
10,427,888 (2004: 7,909,064) ordinary # 104,279 # 79,091
shares of #0.01 each
Allotted and unpaid
Nil (2004: 690,936) ordinary shares of # # 6,909
#0.01 each -
On 12 April 2005 46,921 ordinary shares of #0.01 each were issued at a premium of #0.54 each ranking pari
passu with the existing shares in issue.
On 6 May 2005 777,831 ordinary shares of #0.01 each were issued at a premium of #0.50 each ranking pari
passu with the existing shares in issue.
On 7 June 2005 459,136 ordinary shares of #0.01 each were issued at a premium of #0.53 each ranking pari
passu with the existing shares in issue.
On 29 September 2005 544,000 ordinary shares of #0.01 each were issued at a premium of #1.24 each ranking
pari passu with the existing shares in issue.
11. SHARE PREMIUM ACCOUNT
Balance at 1 January 2005 1,864,000
Premium on new share issues 1,337,528
Commission on new issues (18,667)
Balance at 31 December 2005 # 3,182,861
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2005
12. RESERVES Capital Capital Revenue
Reserve Reserve Reserve Total
- Realised - Unrealised
Balance at 1 January 2005 (219,959) 43,567 (269,338) (445,730)
Net revenue return for the financial year - - (119,618) (119,618)
Net realised losses (152,182) - - (152,182)
Net unrealised gains - 13,029,490 - 13,029,490
Transfer on sale of investments 5,695 (5,695) - -
Balance at 31 December 2005 # (366,446) 13,067,362 (388,956) 12,311,960
13. RECONCILIATION OF MOVEMENTS IN 2005 16 July 2004 to
SHAREHOLDERS' FUNDS 31 December 2004
Net return for the financial year/period 12,757,690 (445,730)
New share capital subscribed (net of commissions) 1,337,140 1,950,000
Net addition to shareholders' funds 14,094,830 1,504,270
Opening shareholders' funds 1,504,270 -
Closing shareholders' funds # 15,599,100 # 1,504,270
14. OPTION AGREEMENT
Under an option agreement dated 29 July 2004 between the Company and Forestdale Trading Limited
("Forestdale"), the Company was entitled to exercise an option which required Forestdale to procure the
subscription by institutional and other third party investors of #1.5 million for new Ordinary Shares
during the one month period following eight months after Admission, failing which itself to subscribe
for such shares. The exercise price of the Option, irrespective of whether it was exercised by the
Company or Forestdale, to be equal to 85% of the average middle market quotations of the Ordinary
Shares for the five dealing days prior to the relevant exercise date as shown by the Stock Exchange
Alternative Trading Service of the London Stock Exchange, subject to a minimum of the nominal value of
such Option Share. Upon exercise of the Option, the Company agreed to pay Forestdale a cash commission
of #70,000.
The Company decided to exercise a part of the option with Forestdale and, on the 6 May 2005 raised
#400,000 by placing 777,831 Ordinary Shares at 51.425 pence per share. The exercise of the Forestdale
Option was announced on 16 May 2005. A pro rata commission of #18,667 was paid to Forestdale.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2005
15. FINANCIAL INSTRUMENTS
(i) Management of risk
The Company's financial instruments comprise:
- Equity shares that are held in accordance with the Company's investment objective as
set out in the Directors' Report
- Cash and short term debtors and creditors that arise directly from the Company's
operations.
The main risks arising from the Company's financial instruments are due to fluctuations in market
prices, foreign exchange rates and interest rates. The Board regularly reviews and agrees policies for
managing each of these risks and they are summarised below. These policies have remained constant
throughout the period under review.
Market price risk
Market price risk arises mainly from uncertainty about the future prices of financial instruments used
in the Company's operations. It represents the potential loss the Company might suffer through holding
market positions in the face of price movements and movements in exchange rates. It is the Board's
policy to hold an appropriate spread of investments in the portfolio in order to reduce risk arising
from factors specific to a particular country or sector. The allocation of assets to international
markets and stock selection are other factors which act to reduce market price risk. The Investment
Advisory Panel monitor market prices throughout the year and report to the Board, which meets regularly
to consider investment strategy.
Foreign currency risk
The Company's total return and net assets can be significantly affected by fluctuations in foreign
currency exchange rates because a portion of the Company's assets and revenue are denominated in
currencies other than sterling.
Liquidity risk
The Company's assets comprise mainly readily realisable securities which can be sold to meet funding
commitments as necessary.
Credit risk
The Company places funds with authorised deposit takers from time to time and is therefore potentially
at risk from the failure of any such institution of which it is a creditor. The company expects to
place any deposits on a short term basis and where possible with more than one institution to reduce
its credit risk.
(ii) Interest rate risk of financial assets and
liabilities
The majority of the Company's financial assets are equity shares and other investments which neither
pay interest nor have a stated maturity date. The Company's interest bearing financial liabilities are
disclosed in note 8.
(iii) Currency exposure
A portion of the financial assets of the company are denominated in currencies other than sterling with
the effect that the net assets and total return can be significantly affected by currency movements.
NOTES TO THE FINANCIAL STATEMENTS
31 DECEMBER 2005
Currency Overseas Cash at Total
investments bank
Euro # - (44) # (44)
Icelandic Kroner # 240,203 - # 240,203
(iv) Fair values of financial assets
All of the financial assets of the Company are held at fair value, as shown
in note 3.
16. RELATED PARTY TRANSACTIONS
The Company has an agreement with Combined Management Services Limited ("CMS") under the terms of which CMS
agreed to provide research, consultancy, office management and administration services to the Investment Advisory
Panel. Jonathan Freeman owns 50% of CMS.
The Company acquired a 47.5% interest in Hillberry Trust Company Limited on 24 May 2005. At the time of the
purchase of this investment Jonathan Freeman had an interest in this company.
17. POST BALANCE SHEET EVENT
Since the end of the financial year to 31 December 2005 the Company received a further #5,000,000 by
placing 3,739,716 Ordinary Shares at 133.7 pence per share. This placing was announced on 15 March
2006.
Copies of the Annual Report for the year ended 31 December 2005 are being sent
to shareholders. Further copies will be available from the Company's registered
office: Martello Court, Admiral Park, St Peter Port, Guernsey, GY1 3HB.
For further information, please contact:
Peter Griffin, Director Tel: +44 (0) 1481 751 000
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR AAMATMMAMBAF
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