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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Acp Capital | LSE:APL | London | Ordinary Share | GB00B0T9K295 | ORD 0.1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.375 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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RNS Number : 5812P
ACP Capital Limited
27 March 2009
ACP Capital Limited
Results for the year ended
31 December 2008
The Board of ACP Capital Limited ("the "Company"; AIM: APL) today announce the
results of the Company and its subsidiaries (together, the "Group") for the 12
months ended 31 December 2008.
Key points:
* EGM held on 17 July 2008 at which Mr. John Chapman, Mr. James Lowenstein and Mr.
Patrick McCann were elected directors to replace the former directors. Mr
Stephen Coe and Mr Antony Gardner-Hillman subsequently appointed to the
Company's Board in September 2008.
* New strategy confirmed to focus on monetising the Company's assets and returning
cash to investors. No new investments since new Board elected.
* Reduced total annual overheads and replaced all major service providers,
strengthened internal controls and appointed BDO Stoy Hayward LLP as auditors.
* Repayment and termination of banking facilities leaving the Company debt free.
* The return of GBP0.04 per share (GBP8.3 million in total) to shareholders in
December 2008.
* The Company continues to seek buyers for its various remaining investments.
* Revaluation of investment and loan portfolio resulting in a consolidated
unrealised loss for year of GBP93.7 million (2007: profit of GBP1.5 million)
attributable to shareholders' equity of the Company.
* Net asset value per share at 31 December 2008: GBP0.628 (31 December 2007:
GBP1.168).
* Loss per share for year ended 31 December 2008: 46.18 pence (31 December 2007:
diluted earnings per share 0.85 pence).
* Consolidated cash and cash equivalents at the balance sheet date of GBP20.6
million (31 December 2007: GBP59.8 million).
Commenting, John Chapman, Chairman said:
"The past year has been a difficult one for the Group and its shareholders,
with the combination of a risky portfolio, a difficult market and internal
turmoil leading to a substantial diminution in the Company's value. I believe
that we have taken the necessary steps to provide a firm foundation to return
capital to shareholders. We are now a far less risky company than we were at the
mid-year when I joined. We have no leverage, our expenses have been cut
significantly and we now have in place internal controls we believe are
appropriate. We are hopeful that we will complete further asset sales as the
year progresses and thus be able to return additional capital to shareholders."
Contacts
* Hugh Field, Collins Stewart Europe, +44 (0) 207 523 8350 (Nominated Adviser)
* Tim McCall/James Longfield, Hogarth Partnership, +44 (0) 207 357 9477
The financial information set out in the announcement does not constitute the
company's statutory accounts for the years ended 31 December 2008 or 2007. The
financial information for the year ended 31 December 2007 is derived from the
statutory accounts for that year.
The audit of the statutory accounts for the year ended 31 December 2008 is
complete. The auditors reported on those accounts; their report was unqualified
and did not include references to any matters to which the auditors drew
attention to by way of emphasis without qualifying their report.
The Company expects the full annual report and financial statements to be posted
to shareholders and published on its web site (www.acpcapital.com) on 30 March
2009.
CHAIRMAN'S STATEMENT
The net asset value ("NAV") per share of ACP Capital Limited ("ACP") and its
subsidiaries (together, the "Group") declined by 46 percent in 2008 to 63 pence
per share (2007: 117 pence per share). The reduction in the value of our
portfolio and cash led to a loss of GBP113.7 million. This is not surprising
given that the crisis in the global financial markets magnified the risky nature
of the Group's portfolio. The following table shows our portfolio as at the
year-end:
+--------------------------+---------------+--------+---------------+--------+
| Asset | Value as at | % of | Value as at | % of |
| |31.12.08 (GBP | Total |31.12.07 (GBP | Total |
| | m) | | m)1 | |
+--------------------------+---------------+--------+---------------+--------+
| | | | | |
+--------------------------+---------------+--------+---------------+--------+
| IFR Senior Facilities | 56.9 | 35.3% | 63.0 | 20.2% |
+--------------------------+---------------+--------+---------------+--------+
| IFR Preferred Equity | 28.2 | 17.5% | 35.6 | 11.4% |
+--------------------------+---------------+--------+---------------+--------+
| Leasecom Equity | 19.1 | 11.9% | 24.3 | 7.8% |
+--------------------------+---------------+--------+---------------+--------+
| CLOs | 9.6 | 5.9% | 29.4 | 9.4% |
+--------------------------+---------------+--------+---------------+--------+
| Other Corporate Loans | 7.7 | 4.8% | 7.3 | 2.3% |
+--------------------------+---------------+--------+---------------+--------+
| Leasecom ABS Loan | 5.6 | 3.5% | N/a | N/a |
+--------------------------+---------------+--------+---------------+--------+
| IFR Equity | 4.6 | 2.9% | 30.2 | 9.7% |
+--------------------------+---------------+--------+---------------+--------+
| GCI Management AG Equity | 3.6 | 2.2% | 12.0 | 3.8% |
| | | | | |
+--------------------------+---------------+--------+---------------+--------+
| GCI Automotive Equity | 2.8 | 1.7% | N/a | N/a |
+--------------------------+---------------+--------+---------------+--------+
| CDOs | 1.4 | 0.9% | 17.4 | 5.6% |
+--------------------------+---------------+--------+---------------+--------+
| Davenham Equity | 0.8 | 0.5% | 16.1 | 5.2% |
+--------------------------+---------------+--------+---------------+--------+
| RMBS | 0.3 | 0.2% | 5.0 | 1.6% |
+--------------------------+---------------+--------+---------------+--------+
| Total Investments | 140.6 | 87.2% | 240.3 | 77.2% |
+--------------------------+---------------+--------+---------------+--------+
| | | | | |
+--------------------------+---------------+--------+---------------+--------+
| Cash | 20.6 | 12.8% | 71.0 | 22.8% |
+--------------------------+---------------+--------+---------------+--------+
| | | | | |
+--------------------------+---------------+--------+---------------+--------+
| Total | 161.2 |100.0% | 311.3 |100.0% |
+--------------------------+---------------+--------+---------------+--------+
(1) 2007 figures are unconsolidated
Structured products are carried at the average of indicative bids. Non-traded
assets (the IFR preferred equity and the investments in Leasecom) have been
valued using methodologies discussed below. Please bear in mind that these
carrying values are not necessarily what we would or could sell these assets at.
As most of our assets are denominated in Euros and our functional currency is
Sterling, the reduction in value of our portfolio was partially offset by
favorable movements in the Euro: Sterling exchange rate. We estimate that this
movement added about 32 pence per share to our NAV per share as at 31 December
2008, or, phrased another way, if the exchange rate had remained constant, NAV
per share would have declined by an additional 28.90 percent.
Although this kind of decline is nothing to be proud of, we have accomplished a
number of things that have strengthened the Group and should positively affect
the amount of cash we can ultimately return to shareholders. We have sold two
assets and returned 4.0 pence per share to shareholders in December 2008 and
another 4.5 pence per share to shareholders in early March 2009. These
distributions are especially satisfying since our shares traded at a low of 8.0
pence in December 2008. As we are now a realisation vehicle with the sole
objective being to return the maximum amount of cash to our shareholders, we
have taken a very hard look at our expenses. We have reduced staff by more than
half and have reduced total annual overheads by about 36 percent by moving into
modest office space. We will continue to focus on expenses and eliminate what is
unnecessary, though not at the expense of effective internal controls and
accurate reporting. In the face of an external investigation related to the
activities of the former management, we have replaced all of our main service
providers, including our administrator and legal counsel. We have beefed up our
internal controls and replaced our auditor with BDO Stoy Hayward LLP. We have
eliminated our internal accounting department and outsourced all of our
accounting to a third party provider. We have eliminated debt and are now debt
free. We have brought our wholly owned subsidiary, ACP Investment Management
Limited ("ACPIM"), into compliance with Jersey regulatory requirements.
Our 2009 operating expenses are budgeted at GBP2.2 million. This comprises all
advisors, including lawyers and accountants, office expenses, rent, and
salaries. Our strategy is simple and straightforward: by remaining cash flow
positive, having no debt, cutting operating expenses to a minimum, eliminating
leverage and improving our internal controls we are now in a strong position to
wait for as long as required to obtain the appropriate prices for our assets.
The Year in Review
The past year has been an especially tumultuous one with two EGMs, a plethora of
litigation and threats of litigation, a new Board of Directors, a new management
team, new auditors, a new administrator, and the elimination of leverage in our
capital structure. In language that now seems faintly anachronistic, ACP at the
beginning of 2008 styled itself as a provider of "equity, mezzanine and senior
debt to companies targeting an integrated finance solution across their capital
structure." The concept seems to have been to export capital from the UK in
favour of investment opportunities on the Continent. The Group's largest
investment by far was (and continues to be) in IFR, Capital plc ("IFR"), a
Cyprus domiciled acquisition platform targeting small and medium-sized food
companies in continental Europe. The Group had invested about EUR186 million in
IFR by investing in four classes of debt, a class of preferred equity and common
shares. By February, it appears to us that the relationship had broken down in
acrimony. In April 2008, the Group commenced litigation against IFR and ING
Bank, as lender in connection with technical provisions relating to one class of
IFR debt. Prior to the Group's entering into a temporary stay of proceedings
with IFR and ING in July, that litigation managed to consume close to GBP1.0
million in legal and professional fees, and ACP's previous management had left
ACP unrepresented at the IFR board level by resigning ACP's two IFR board seats.
In May 2008, our largest shareholder, owning close to 30 percent of ACP's
shares, served a written demand on ACP that ACP cease making new investments and
forthwith return capital to shareholders. ACP rejected the shareholder's
demands, stated that it would continue to make new investments and offered to
assist the shareholder in disposing of its investment in the ACP through a
"block trade."
On 9 June 2008, ACP Mezzanine Limited ("ACPM") held a secondary offering. The
objective was to raise EUR150 million to fund a EUR350 million "pipeline" of
mezzanine debt. The "pipeline's" largest component was a deal called "ConPair"
or "Helios", a large structured transaction comprising 61 small loans to
continental European SME borrowers. The plan was that ACP would invest EUR15.0
million and ACPM EUR57.0 million in several classes of notes issued through a
Lehman Brothers CDO with an eight year maturity. ACP further intended to lever
this transaction through the Deutsche Bank credit facility and thereby increase
returns (and risk).
By June, the market's appetite for risk had begun to turn, and further
investments in opaque, structured products no longer seemed so appealing. The
ACPM secondary offering was heavily undersubscribed. Rather than raising EUR150
million, the offering raised only EUR80 million. Of that EUR80.0 million, almost 60
percent or EUR47.5 million was a subscription from ACP. So following the ACPM
secondary offering, ACP had increased its investment in ACPM from about 47 to
about 54 percent and ACPM became a subsidiary of ACP.
The EGMs
On 17 June, our largest shareholder requisitioned an EGM of shareholders to
replace the Board. The objective was to force ACP to cease investing and return
capital. Nonetheless, the Group accelerated their investment activity. On 16
June, ACPM invested EUR9 million in the debt of Pfaff Industrie Maschinen AG
("PFAFF"), a German sewing machine manufacturer. By September, PFAFF had
voluntarily filed for insolvency. On 12 June, ACPM committed to advance EUR15
million to a wholly-owned subsidiary of Leasecom Group SAS ("Leasecom") for a
period of seven years.
At an EGM on 17 July, the shareholders voted to remove the sitting directors.
The day before, on 16 July, the Board, prior to being removed, took steps to
ensure that an additional 15,318,823 Ordinary Shares were vested predominantly
in the hands of three former directors. So as of 17 July, three former directors
owned 27,421,118 shares or 14.77 percent of ACP. Of these shares, 12.5 million
were purchased for cash (primarily at approximately a 50 percent discount to
ACP's original offering price) while the remainder were acquired through share
and option awards.
Less than two months following their removal, on 3 September, the former
directors ousted at the 17 July EGM requisitioned an EGM to replace the new
Board. On 29 October, our shareholders overwhelmingly defeated the EGM
resolutions put forward by these three former directors. With over 93 percent of
ACP shares represented at the EGM in person or by proxy, over 84 percent of
those shares voted in support of the new Board and opposed returning the former
directors to office. Of the 16 percent of ACP's shares voting in favour of the
resolutions, over 88 percent were shares controlled by the former directors.
Management and Restructuring Issues
Following the EGM, the new Directors undertook a comprehensive review of the
Group's management, expenses, internal controls, and external service providers.
We promoted two managers, both existing Group employees with experience in debt
and equity and an appropriate knowledge of the Group's portfolio. We compensate
them in large part based on cash returned to shareholders. We reduced the
Group's staff by 50 percent and retained a core group of five employees. We
moved into modest office space. Our staff now works out of a single room and
shares common facilities with other companies in the building. We hired BDO Stoy
Hayward LLP as our auditors. We replaced our accounting staff with an outsourced
accounting service provider. We also changed administrators.
One of our major accomplishments has been the elimination of leverage. When we
took over in July, the Group had debt of approximately GBP60 million through a
leverage facility with Deutsche Bank. The terms of the facility included
asset-backed recourse financing, with a guaranteed minimum return to the
financing institution regardless of whether the Group continued to require the
facility, and a "key-man" provision that was triggered if several of the former
managers left ACP. The Group commenced negotiations with Deutsche Bank in August
and reached an agreement with them in September to pay them approximately GBP5.4
million to cancel the facility. This represented a discount of 15 percent from
our contractual obligation. By the time the facility was terminated, it
supported less than GBP4.7 million of leverage because of repeated margin calls
arising from the diminution in value of the Group's assets supporting the
facility. By our calculations, the elimination of the Deutsche Bank leverage
facility (given the collapse in pricing for the structured products which would
have required significant additional margin collateral) along with halting the
ConPair transaction, preserved the Group's financial and cash position.
One of the major issues we have had to deal with was a legacy of unpaid
liabilities, primarily legal bills and claims by disgruntled former employees
who felt that they had been treated unfairly. Starting in July, when the new
Board took over, we were confronted with numerous demands for the payment of
unpaid legal bills incurred by previous management. Some of these were for legal
bills dating back to 2006 and the total of these legal bills amounted to well in
excess of GBP2 million. They were from law firms in the UK, the US, Germany,
France and Cyprus. In September, one of the UK law firms commenced a lawsuit
against us alleging unpaid obligations in excess of GBP1.9 million. That firm
attempted to commence a winding up proceeding against one of the Group's UK
entities. A key piece of evidence supporting this claim was a signed letter from
ACP's former CEO who had been removed in the July EGM. This letter had been
provided to the law firm after the CEO left ACP. Without getting into a lot of
detail, the material claims have now all been settled and adjustments have been
reflected in the balance sheet post year-end.
Our Portfolio
Our portfolio at the year end was as follows:
IFR Capital plc
IFR is a Cyprus domiciled company, traded on the AIM market and whose operations
are headquartered in Dusseldorf. At year end 2008, its shares traded at EUR0.10
per share, down 90 percent from flotation little more than two years earlier,
and had a market capitalisation of around EUR23 million. IFR is very thinly traded
- three shareholders, including ACP, control close to 75 percent of the
outstanding shares - so it is questionable how much information the market price
conveys. ACP is an investor in three classes of IFR debt, a class of preferred
equity shares, and the ordinary equity. Although the equity does on occasion
trade and is therefore carried at its bid price, the debt does not and is
carried at an indicative price. The preferred equity is carried at 55.5 percent
of par, which represents a reduction in value of 44.5 percent since our
semi-annual report. The reasoning behind this write down has nothing to do with
what we expect to ultimately realise, but rather that IFR's preferred equity
cannot in our view be marked above IFR's most junior debt, which was
indicatively priced at 55.5 percent of par at year end.
IFR comprises three major operating subsidiaries: Nordsee GmbH, Europe's largest
fish restaurant chain and number one non-burger fast food chain in Germany and
Austria; Homann Chilled Food GmbH, a manufacturer of chilled food and
convenience products; and Hamker Lebensmittel Beteiligungs GmbH and Co. KG, a
manufacturer of sauces and dressings. The concept behind IFR was to "roll up"
the German food industry and generate profits by creating synergies and
eliminating inefficiencies. IFR went public in November 2006 with an offering
that raised EUR135 million before costs. ACP was one of the two sponsors in the
offering and invested EUR17.34 million. ACP received a further 20.8 million shares
from assets contributed in kind to IFR. According to the IFR offering document
and the advisory services agreement, ACP was to have assisted IFR in its
"acquisition strategy" and contracted with IFR to provide "advisory services,"
which included two IFR board seats. By the end of 2007, the Group had a total
investment in aggregate in IFR of about EUR186 million. This comprised four
classes of debt, a class of preferred equity shares and the ordinary equity.
By February 2008, the relationship between the Group and IFR has disintegrated
amidst accusations and litigation. ACP management resigned from its two IFR
board seats and commenced a lawsuit against both IFR and ING Bank alleging the
breach of a technical aspect of one tranche of the IFR debt. In response, IFR
disavowed the advisory services agreement and counterclaimed against ACP for
breach of fiduciary duty. By the time that the new board took over in July, a UK
court had denied ACP summary judgment, the IFR claim had been dismissed on forum
non conveniens grounds, the ING claim had been stayed, and about GBP1 million in
legal fees had been incurred by ACP alone.
IFR is a public company and shareholders can access its website at
www.ifrcapital.eu. IFR's primary challenge is cleaning up its capital structure.
At year end IFR had EUR164 million of debt and about EUR117 million of preferred
equity, including accrued coupons. The debt comprises three classes of senior
secured debt, a class of subordinated, second lien debt and two classes of
preference shares. The Group is an investor in all four classes of the debt as
well as one class of the preference shares. One class of the debt is amortizing
while the other three are interest only with bullet payments of principle
between 2015 and 2017. To date there have been no interest or repayment
defaults.
ACP and ACPM each own EUR24.1 million of IFR's Class A preference shares. For
2008, they accrued a coupon of 20 percent per annum with consequent accrued
coupons at ACP and ACPM of EUR4.8 million each. For 2009, the coupon steps up to
27.5 percent per annum and for 2010 it steps up further to 37.5 percent per
annum. The preference shares are redeemable at the option of IFR at par plus
accrued interest.
IFR announced on 18 March 2009 that the holder of the Class B preference shares
had exchanged about 25 percent of its Class B Preference Shares for ordinary
shares effectively valued at EUR0.08 each and then had sold a portion of those
ordinary shares to IFR's CEO. The upshot of these transactions is that these two
shareholders now control about 72 percent of IFR's ordinary shares. As IFR is a
Cypriot company, these persons have been able to amass a controlling stake
without making a general bid to all shareholders. The remaining shareholders
have been diluted. ACP's equity interest in IFR has been reduced from 26.99
percent to 14.22 percent -though the legal and economic effect of this dilution
is likely immaterial.
CLO and CDO Structured Products
The Group holds ten CLO, four CDO, and two RMBS investments. All investments
were made during 2006 and 2007.
Each CLO is essentially a form of securitisation where payments from multiple
middle-sized and large business loans are pooled together and investors acquire
different tranches. CDOs have a similar structure and comprise, typically, real
estate asset-backed loan portfolios, including other CDOs. The problem with
these instruments is that they are typically difficult to analyse in detail
because they comprise a large and varied collection of assets. A second layer of
complexity has to do with the structure of the investments and how ratings
downgrades and defaults affect the entitlement of different tranches to payment.
The Group holds the lower-ranked tranches with only the equity tranche as a
default cushion. Most CLOs limit the amount of lower-rated debt that can be held
in the portfolio - so-called ratings concentration tests - which means that as
credits are downgraded the portfolio becomes over concentrated in lower-rated
debt. This may cause the suspension or termination of interest payments to the
lower-rated tranches, such as those we hold.
Investment theory supporting these investments was relatively simple. The rating
agencies rated the CDO, RMBS and CLO tranches. Historical default rates for the
different ratings were known. Pricing was somewhat better than historical
default rates would have implied. The instruments carried internal leverage and
could be levered again with a facility like the Group had with Deutsche Bank.
Markets now view such instruments with suspicion, which is reflected in the
pricing at year end and further falls since 31 December 2008.
There is almost no trading market for these products. We obtain indicative
pricing from five different bank sources. The Group's original nominal value in
CDO, RMBS and CLO investments was GBP51.8 million and at year-end the indicative
value was GBP11.3 million. Indicative pricing for CDOs is typically much worse
than for CLOs, partly because they are much harder to analyse and often contain
riskier assets. Many CDOs are now being liquidated, often with losses for
investors, particularly lower-ranked investors such as ACPM.
Given this pricing, it does not seem appropriate to be selling these assets now
since the payment of one or two more coupons would often exceed the bids that we
see. A recent example involves one of our CLOs with a bi-annual coupon. The
market maker bid 4 percent of par. ACPM holds a EUR7 million face value investment
in this instrument. So the market maker was effectively bidding ACPM EUR280,000
for this investment. This bid was 73 percent of a single coupon or about 4.4
months' worth of coupon. Looked at another way, if ACPM receives one more coupon
that coupon will be 1.4x the indicative bid. With these sorts of conditions, we
believe it is better to continue to hold.
Leasecom Group SAS
Leasecom is a private French leasing company headquartered in Paris with the
website www.leasecom.fr. Leasecom's business model is primarily originating
computer equipment leasing contracts with SME companies brokering these
contracts to refinancing banks. Leasecom, as a broker, does not bear credit
risk, but is itself dependent on bank financing.
In July 2007, ACP invested EUR33.1 million to acquire 45 percent of the share
capital of Leasecom and in June 2008, ACPM entered into a commitment to lend a
subsidiary of Leasecom up to EUR15 million over a period of seven years. ACP
carries its investment in Leasecom at GBP19.12 million, which represents a write
down of 39.6 percent. The basis of this write down is our internal valuation
coupled with a third party valuation of Leasecom.
GCI Management AG ("GCI")
GCI is listed on the Frankfurt Stock Exchange with its headquarters in Munich.
It has a website at www.gci-management.com. GCI is primarily a holding company
for small private equity and turnaround investments in Germany. ACP's total
investment of about EUR27 million in GCI was valued at about GBP3.6 million at
year end. Trading in the shares is limited and the underlying investments lack
visibility. One of the company's major assets, PFAFF, filed for insolvency in
mid-2008. Prior to bankruptcy, PFAFF represented 21 percent of GCI's book value.
This had a double effect on ACP both through its direct investment in GCI and
its investment in ACPM - which in turn had lent EUR9 million to PFAFF less than
three months prior to the bankruptcy. ACPM does not expect any recovery in the
insolvency proceedings.
Following year end, ACP disposed of its 40 percent shareholding in GCI
Automotive Holding GmbH, another co-investment with GCI, for a total
consideration of EUR3.75 million, resulting in a profit on disposal of EUR0.86
million. In addition, ACPM sold its mezzanine loan in GCI Automotive GmbH for EUR3
million with a successful 17.5 percent IRR on gained interests. In connection
with this exit, GCI attempted to access the capital markets with very limited
success.
Davenham Group plc ("Davenham")
Davenham is an independent, specialist commercial finance lender to the United
Kingdom SME sector with an outstanding loan portfolio of GBP221 million as at 24
March 2009. The company was founded in 1991 and provides loans of between
GBP10,000 and GBP4 million. Over 50 percent of Davenham's business has typically
comprised of real estate lending while the remainder was trade and asset
finance. New business in the property finance division ceased in December 2008.
Commencing in 2007, ACP acquired shares in Davenham for a total consideration of
GBP26 million and now owns about 29 percent of the company with an average price
of GBP3.30 per share. The share price at our year end was GBP0.10 - a discount
of around 97 percent to ACP's average entry price. Trading in Davenham's shares
is currently thin.
As a lender to a perceived risky sector of the market, Davenham was adversely
affected by the financial crisis during 2008. Davenham announced in October 2008
that it was withdrawing its dividend recommendation, reducing its headcount by
20 percent and ceasing to provide any new property finance. On 24 March 2009,
Davenham announced the result of its strategic review and the successful GBP215
million refinancing of its banking facilities to support its new strategy of
focusing on its asset and trade finance divisions, whilst optimising recoveries
from its property division. On 26 March 2009, Davenham announced its interim
results for the six months to 31 December 2008, in which a pre-tax loss of
GBP30.4 million, an NAV of GBP26.3 million, and a diluted loss per share of 88
pence were disclosed. Davenham is a public company and shareholders can access
its website at www.davenham.co.uk for information about the company.
* * * *
The past year has been a difficult one for the Group and its shareholders. The
Group has suffered from internal turmoil and very difficult market conditions.
Most of our shareholders have seen a substantial diminution in the value of
their investment. That said, I believe that we have taken the necessary steps to
provide a firm foundation for future returns of capital. We are a far less risky
company than we were at mid-year; we have no leverage; our expenses are rock
bottom; we now have in place internal controls we believe are appropriate; and,
following year end, we have sold one asset and returned a further 4.5 pence per
share to shareholders. We are hopeful that we will complete further asset sales
as the year progresses and thus be able to return additional capital to
shareholders.
I look forward to reporting to you again following our half-year results.
Respectfully yours,
John D. Chapman
Chairman
ACP Capital Limited
26 March 2009
FINANCIAL STATEMENTS
Income Statement
For the year ended 31 December 2008
+--------------------------------+-------+--+---------------+--+--------------+--+---------------+--+--------------+
| | | | Group | | Group | | Company | | Company |
| | | | 2008 | | 2007 | | 2008 | | 2007 |
+--------------------------------+-------+--+---------------+--+--------------+--+---------------+--+--------------+
| |Notes | | GBP | | GBP | | GBP | | GBP |
+--------------------------------+-------+--+---------------+--+--------------+--+---------------+--+--------------+
| | | | | | | | | | |
+--------------------------------+-------+--+---------------+--+--------------+--+---------------+--+--------------+
| Investment income | | | | | | | | | |
+--------------------------------+-------+--+---------------+--+--------------+--+---------------+--+--------------+
| Losses on investments at fair | | | (79,907,473) | | (12,678,348) | | (102,901,782) | | (12,678,348) |
| value through profit or loss | | | | | | | | | |
+--------------------------------+-------+--+---------------+--+--------------+--+---------------+--+--------------+
| Dividend and interest income | | | 19,444,903 | | 9,466,693 | | 26,909,818 | | 9,204,293 |
+--------------------------------+-------+--+---------------+--+--------------+--+---------------+--+--------------+
| Fees and other income | | | 3,773,163 | | 5,734,489 | | 2,540,020 | | 5,734,489 |
+--------------------------------+-------+--+---------------+--+--------------+--+---------------+--+--------------+
| Total investment income | | | (56,689,407) | | 2,522,834 | | (73,451,944) | | 2,260,434 |
+--------------------------------+-------+--+---------------+--+--------------+--+---------------+--+--------------+
| | | | | | | | | | |
+--------------------------------+-------+--+---------------+--+--------------+--+---------------+--+--------------+
| Exchange movements | | | 6,215,010 | | 987,825 | | 3,763,756 | | 987,825 |
+--------------------------------+-------+--+---------------+--+--------------+--+---------------+--+--------------+
| Impairment of loans and | | | (9,412,455) | | - | | (9,412,455) | | - |
| receivables | | | | | | | | | |
+--------------------------------+-------+--+---------------+--+--------------+--+---------------+--+--------------+
| Impairment of available for | | | (32,567,588) | | - | | (3,334,131) | | - |
| sale investments | | | | | | | | | |
+--------------------------------+-------+--+---------------+--+--------------+--+---------------+--+--------------+
| Negative goodwill | 24 | | 1,127,177 | | - | | - | | - |
+--------------------------------+-------+--+---------------+--+--------------+--+---------------+--+--------------+
| Equity-settled share-based | 21 | | (6,043,952) | | (1,207,248) | | (6,043,952) | | (1,207,248) |
| payments | | | | | | | | | |
+--------------------------------+-------+--+---------------+--+--------------+--+---------------+--+--------------+
| Other operating expenses | 7 | | (11,544,344) | | (2,661,698) | | (10,622,968) | | (2,960,125) |
+--------------------------------+-------+--+---------------+--+--------------+--+---------------+--+--------------+
| Operating loss | | | (108,915,559) | | (358,287) | | (99,101,694) | | (919,114) |
+--------------------------------+-------+--+---------------+--+--------------+--+---------------+--+--------------+
| Finance income | 8 | | 2,247,272 | | 2,243,316 | | 968,896 | | 2,243,316 |
+--------------------------------+-------+--+---------------+--+--------------+--+---------------+--+--------------+
| Finance expense | 8 | | (6,903,054) | | (322,064) | | (3,482,297) | | (322,064) |
+--------------------------------+-------+--+---------------+--+--------------+--+---------------+--+--------------+
| (Loss) profit before tax | | | (113,571,341) | | 1,562,965 | | (101,615,095) | | 1,002,138 |
+--------------------------------+-------+--+---------------+--+--------------+--+---------------+--+--------------+
| Income taxes | 9 | | (109,659) | | (83,055) | | - | | - |
+--------------------------------+-------+--+---------------+--+--------------+--+---------------+--+--------------+
| (Loss) profit for the period | | | (113,681,000) | | 1,479,910 | | (101,615,095) | | 1,002,138 |
+--------------------------------+-------+--+---------------+--+--------------+--+---------------+--+--------------+
| | | | | | | | | | |
+--------------------------------+-------+--+---------------+--+--------------+--+---------------+--+--------------+
| | | | | | | | | | |
+--------------------------------+-------+--+---------------+--+--------------+--+---------------+--+--------------+
| Attributable to: | | | | | | | | | |
+--------------------------------+-------+--+---------------+--+--------------+--+---------------+--+--------------+
| Equity Shareholders | | | (93,692,121) | | 1,479,910 | | | | |
+--------------------------------+-------+--+---------------+--+--------------+--+---------------+--+--------------+
| Minority Interests | | | (19,988,879) | | - | | | | |
+--------------------------------+-------+--+---------------+--+--------------+--+---------------+--+--------------+
| | | | (113,681,000) | | 1,479,910 | | | | |
+--------------------------------+-------+--+---------------+--+--------------+--+---------------+--+--------------+
| | | | | | | | | | |
+--------------------------------+-------+--+---------------+--+--------------+--+---------------+--+--------------+
| (Loss) / earnings per share | | | | | | | | | |
| attributable to the equity | | | | | | | | | |
| holders of the parent during | | | | | | | | | |
| the year | | | | | | | | | |
+--------------------------------+-------+--+---------------+--+--------------+--+---------------+--+--------------+
| Basic | 20 | | (46.18) | | 0.85 p | | (50.08) | | 0.58 p |
| | | | p | | | | p | | |
+--------------------------------+-------+--+---------------+--+--------------+--+---------------+--+--------------+
| Diluted | 20 | | (46.18) | | 0.83 p | | (50.08) | | 0.56 p |
| | | | p | | | | p | | |
+--------------------------------+-------+--+---------------+--+--------------+--+---------------+--+--------------+
Balance Sheet
As at 31 December 2008
+----------------------------------+-------+--+--------------+--+--------------+--+--------------+--+--------------+
| | | | Group | | Group | | Company | | Company |
| | | | 2008 | | 2007 | | 2008 | | 2007 |
+----------------------------------+-------+--+--------------+--+--------------+--+--------------+--+--------------+
| Assets |Notes | | GBP | | GBP | | GBP | | GBP |
+----------------------------------+-------+--+--------------+--+--------------+--+--------------+--+--------------+
| Non-current assets | | | | | | | | | |
+----------------------------------+-------+--+--------------+--+--------------+--+--------------+--+--------------+
| Investments measured at fair | 10 | | 113,743,509 | | 164,676,271 | | 105,187,286 | | 164,676,271 |
| value through profit or loss | | | | | | | | | |
+----------------------------------+-------+--+--------------+--+--------------+--+--------------+--+--------------+
| Investments classified as loans | 11 | | - | | 15,912,561 | | - | | 15,912,561 |
| and receivables | | | | | | | | | |
+----------------------------------+-------+--+--------------+--+--------------+--+--------------+--+--------------+
| Available-for-sale investments | 12 | | 24,585,894 | | - | | 3,165,974 | | - |
+----------------------------------+-------+--+--------------+--+--------------+--+--------------+--+--------------+
| Property, plant and equipment | 13 | | - | | 27,233 | | - | | 9,448 |
+----------------------------------+-------+--+--------------+--+--------------+--+--------------+--+--------------+
| | | | 138,329,403 | | 180,616,065 | | 108,353,260 | | 180,598,280 |
+----------------------------------+-------+--+--------------+--+--------------+--+--------------+--+--------------+
| Current assets | | | | | | | | | |
+----------------------------------+-------+--+--------------+--+--------------+--+--------------+--+--------------+
| Investments measured at fair | 10 | | 2,228,496 | | 845,927 | | 1,507,955 | | 845,927 |
| value through profit or loss | | | | | | | | | |
+----------------------------------+-------+--+--------------+--+--------------+--+--------------+--+--------------+
| Trade and other receivables | 15 | | 5,105,434 | | 1,864,640 | | 4,480,098 | | 1,858,699 |
+----------------------------------+-------+--+--------------+--+--------------+--+--------------+--+--------------+
| Cash and cash equivalents | | | 20,621,092 | | 59,855,959 | | 9,262,635 | | 59,141,431 |
+----------------------------------+-------+--+--------------+--+--------------+--+--------------+--+--------------+
| Total current assets | | | 27,955,022 | | 62,566,526 | | 15,250,688 | | 61,846,057 |
+----------------------------------+-------+--+--------------+--+--------------+--+--------------+--+--------------+
| | | | | | | | | | |
+----------------------------------+-------+--+--------------+--+--------------+--+--------------+--+--------------+
| Total assets | | | 166,284,425 | | 243,182,591 | | 123,603,948 | | 242,444,337 |
+----------------------------------+-------+--+--------------+--+--------------+--+--------------+--+--------------+
| | | | | | | | | | |
+----------------------------------+-------+--+--------------+--+--------------+--+--------------+--+--------------+
| Liabilities | | | | | | | | | |
+----------------------------------+-------+--+--------------+--+--------------+--+--------------+--+--------------+
| Non-current liabilities | | | | | | | | | |
+----------------------------------+-------+--+--------------+--+--------------+--+--------------+--+--------------+
| Loans and borrowings | 16 | | - | | 9,188,157 | | - | | 9,188,157 |
+----------------------------------+-------+--+--------------+--+--------------+--+--------------+--+--------------+
| Total non-current liabilities | | | - | | 9,188,157 | | - | | 9,188,157 |
+----------------------------------+-------+--+--------------+--+--------------+--+--------------+--+--------------+
| | | | | | | | | | |
+----------------------------------+-------+--+--------------+--+--------------+--+--------------+--+--------------+
| Current liabilities | | | | | | | | | |
+----------------------------------+-------+--+--------------+--+--------------+--+--------------+--+--------------+
| Trade and other payables | 17 | | 2,519,643 | | 761,016 | | 6,569,537 | | 715,941 |
+----------------------------------+-------+--+--------------+--+--------------+--+--------------+--+--------------+
| Current income tax payable | 9 | | 185,345 | | 83,055 | | - | | - |
+----------------------------------+-------+--+--------------+--+--------------+--+--------------+--+--------------+
| Total current liabilities | | | 2,704,988 | | 844,071 | | 6,569,537 | | 715,941 |
+----------------------------------+-------+--+--------------+--+--------------+--+--------------+--+--------------+
| | | | | | | | | | |
+----------------------------------+-------+--+--------------+--+--------------+--+--------------+--+--------------+
| Total liabilities | | | 2,704,988 | | 10,032,228 | | 6,569,537 | | 9,904,098 |
+----------------------------------+-------+--+--------------+--+--------------+--+--------------+--+--------------+
| | | | | | | | | | |
+----------------------------------+-------+--+--------------+--+--------------+--+--------------+--+--------------+
| Net assets | | | 163,579,437 | | 233,150,363 | | 117,034,411 | | 232,540,239 |
+----------------------------------+-------+--+--------------+--+--------------+--+--------------+--+--------------+
| | | | | | | | | | |
+----------------------------------+-------+--+--------------+--+--------------+--+--------------+--+--------------+
| Equity attributable to owners of | | | | | | | | | |
| the Company | | | | | | | | | |
+----------------------------------+-------+--+--------------+--+--------------+--+--------------+--+--------------+
| Issued capital | 18 | | 208,341 | | 199,531 | | 208,341 | | 199,531 |
+----------------------------------+-------+--+--------------+--+--------------+--+--------------+--+--------------+
| Share premium | 19 | | 208,400,632 | | 216,734,311 | | 208,400,632 | | 216,734,311 |
+----------------------------------+-------+--+--------------+--+--------------+--+--------------+--+--------------+
| Capital Redemption Reserve | | | 3,435 | | - | | 3,435 | | - |
+----------------------------------+-------+--+--------------+--+--------------+--+--------------+--+--------------+
| Translation reserve | | | 12,956,160 | | - | | - | | - |
+----------------------------------+-------+--+--------------+--+--------------+--+--------------+--+--------------+
| Retained earnings | | | (90,773,910) | | 16,216,521 | | (91,577,997) | | 15,606,397 |
+----------------------------------+-------+--+--------------+--+--------------+--+--------------+--+--------------+
| Total equity attributable to owners of | | 130,794,658 | | 233,150,363 | | 117,034,411 | | 232,540,239 |
| the Company | | | | | | | | |
+------------------------------------------+--+--------------+--+--------------+--+--------------+--+--------------+
| Minority interest | | | 32,784,779 | | - | | - | | - |
+----------------------------------+-------+--+--------------+--+--------------+--+--------------+--+--------------+
| Total equity | | | 163,579,437 | | 233,150,363 | | 117,034,411 | | 232,540,239 |
+----------------------------------+-------+--+--------------+--+--------------+--+--------------+--+--------------+
| | | | | | | | | | |
+----------------------------------+-------+--+--------------+--+--------------+--+--------------+--+--------------+
| Net asset value per share | | | 62.8 | | 116.8 | | 56.2 | | 116.5 |
| (pence) | | | | | | | | | |
+----------------------------------+-------+--+--------------+--+--------------+--+--------------+--+--------------+
| | | | | | | | | | |
+----------------------------------+-------+--+--------------+--+--------------+--+--------------+--+--------------+
| | | | | |
+------------------------------------------------------------------------------+--+--------------+--+--------------+
| | | | | | | | | | |
+----------------------------------+-------+--+--------------+--+--------------+--+--------------+--+--------------+
| | | | | | | | | | |
+----------------------------------+-------+--+--------------+--+--------------+--+--------------+--+--------------+
| | | | | | | | | | |
+----------------------------------+-------+--+--------------+--+--------------+--+--------------+--+--------------+
Cash Flow Statement
For the year ended 31 December 2008
+--------------------------------------+------+---------------+--+---------------+--+---------------+--+---------------+
| | | Group | | Group | | Company | | Company |
+--------------------------------------+------+---------------+--+---------------+--+---------------+--+---------------+
| |Note | 2008 | | 2007 | | 2008 | | 2007 |
+--------------------------------------+------+---------------+--+---------------+--+---------------+--+---------------+
| | | GBP | | GBP | | GBP | | GBP |
+--------------------------------------+------+---------------+--+---------------+--+---------------+--+---------------+
| Cash flow from operating activities: | | | | | | | | |
+--------------------------------------+------+---------------+--+---------------+--+---------------+--+---------------+
| Profit/(loss) for the financial | | (113,681,000) | | 1,479,910 | | (101,615,095) | | 1,002,138 |
| period | | | | | | | | |
+--------------------------------------+------+---------------+--+---------------+--+---------------+--+---------------+
| Income tax expense | | 109,659 | | 83,055 | | - | | - |
+--------------------------------------+------+---------------+--+---------------+--+---------------+--+---------------+
| Profit/(loss) before tax | | (113,571,341) | | 1,562,965 | | (101,615,095) | | 1,002,138 |
+--------------------------------------+------+---------------+--+---------------+--+---------------+--+---------------+
| Movement in fair value of | | 79,907,473 | | 12,678,348 | | 102,901,782 | | 12,678,348 |
| investments and loans | | | | | | | | |
+--------------------------------------+------+---------------+--+---------------+--+---------------+--+---------------+
| Negative goodwill | | (1,127,177) | | - | | - | | - |
+--------------------------------------+------+---------------+--+---------------+--+---------------+--+---------------+
| Finance expense | | 6,903,054 | | 322,064 | | 3,482,297 | | 322,064 |
+--------------------------------------+------+---------------+--+---------------+--+---------------+--+---------------+
| Finance income | | (2,247,272) | | (2,243,316) | | (968,896) | | (2,243,316) |
+--------------------------------------+------+---------------+--+---------------+--+---------------+--+---------------+
| | | | | | | | | |
+--------------------------------------+------+---------------+--+---------------+--+---------------+--+---------------+
| Impairment of loans and receivables | | 9,412,455 | | - | | 9,412,455 | | - |
+--------------------------------------+------+---------------+--+---------------+--+---------------+--+---------------+
| Impairment of available-for-sale | | 32,567,588 | | - | | 3,334,131 | | - |
| investments | | | | | | | | |
+--------------------------------------+------+---------------+--+---------------+--+---------------+--+---------------+
| Loss on disposal of property, plant | | 17,785 | | - | | - | | - |
| and equipment | | | | | | | | |
+--------------------------------------+------+---------------+--+---------------+--+---------------+--+---------------+
| Exchange rate differences | | (6,215,011) | | (987,825) | | (3,763,756) | | (987,825) |
+--------------------------------------+------+---------------+--+---------------+--+---------------+--+---------------+
| Equity-Settled Share-Based Payments | | 6,043,952 | | 1,207,248 | | 6,043,952 | | 1,207,248 |
+--------------------------------------+------+---------------+--+---------------+--+---------------+--+---------------+
| Changes in working capital: | | | | | | | | |
+--------------------------------------+------+---------------+--+---------------+--+---------------+--+---------------+
| Decrease / (increase) in trade and | | (1,455,018) | | (323,055) | | 2,725,470 | | (448,707) |
| other receivables | | | | | | | | |
+--------------------------------------+------+---------------+--+---------------+--+---------------+--+---------------+
| (Decrease) / increase in trade and | | (1,108,880) | | 220,521 | | 1,215,645 | | 175,446 |
| other payables | | | | | | | | |
+--------------------------------------+------+---------------+--+---------------+--+---------------+--+---------------+
| | | | | | | | | |
+--------------------------------------+------+---------------+--+---------------+--+---------------+--+---------------+
| New lending / investments | | (10,257,026) | | (233,309,998) | | (46,946,525) | | (233,309,998) |
+--------------------------------------+------+---------------+--+---------------+--+---------------+--+---------------+
| Sale / repayment of investments | | 3,306,860 | | 113,881,100 | | 2,871,702 | | 113,881,100 |
+--------------------------------------+------+---------------+--+---------------+--+---------------+--+---------------+
| Net cash flow from operations | | 2,177,442 | | (106,991,948) | | (21,306,838) | | (107,723,502) |
+--------------------------------------+------+---------------+--+---------------+--+---------------+--+---------------+
| | | | | | | | | |
+--------------------------------------+------+---------------+--+---------------+--+---------------+--+---------------+
| Cash flow from investing activities | | | | | | | | |
+--------------------------------------+------+---------------+--+---------------+--+---------------+--+---------------+
| Purchase of property, plant and | | - | | (17,026) | | - | | - |
| equipment | | | | | | | | |
+--------------------------------------+------+---------------+--+---------------+--+---------------+--+---------------+
| Acquisition of subsidiary net of | 24 | 32,938,915 | | - | | - | | - |
| cash acquired | | | | | | | | |
+--------------------------------------+------+---------------+--+---------------+--+---------------+--+---------------+
| Net cash flow from investing | | 32,938,915 | | (17,026) | | - | | - |
| activities | | | | | | | | |
+--------------------------------------+------+---------------+--+---------------+--+---------------+--+---------------+
| | | | | | | | | |
+--------------------------------------+------+---------------+--+---------------+--+---------------+--+---------------+
| Cash flow from financing activities | | | | | | | | |
+--------------------------------------+------+---------------+--+---------------+--+---------------+--+---------------+
| Proceeds from issues of share | | - | | 145,290,833 | | - | | 145,290,833 |
| capital | | | | | | | | |
+--------------------------------------+------+---------------+--+---------------+--+---------------+--+---------------+
| Options exercised | | 12,245 | | - | | 12,245 | | - |
+--------------------------------------+------+---------------+--+---------------+--+---------------+--+---------------+
| Buy back of own shares | | (4,635,581) | | - | | (4,635,581) | | - |
+--------------------------------------+------+---------------+--+---------------+--+---------------+--+---------------+
| Repayment of financing | | (56,092,802) | | - | | (10,835,153) | | - |
+--------------------------------------+------+---------------+--+---------------+--+---------------+--+---------------+
| Interest paid and other related | | (7,904,639) | | (281,021) | | (4,201,137) | | (281,021) |
| financing costs | | | | | | | | |
+--------------------------------------+------+---------------+--+---------------+--+---------------+--+---------------+
| New bank loans raised | | 5,036,081 | | 9,947,352 | | 5,036,081 | | 9,947,352 |
+--------------------------------------+------+---------------+--+---------------+--+---------------+--+---------------+
| Bank interest received | | 2,268,559 | | 2,243,316 | | 968,896 | | 2,243,316 |
+--------------------------------------+------+---------------+--+---------------+--+---------------+--+---------------+
| Dividends & capital distributions | | (12,344,382) | | - | | - | | - |
| paid to minority interests | | | | | | | | |
+--------------------------------------+------+---------------+--+---------------+--+---------------+--+---------------+
| Dividends & capital distributions | | (15,317,296) | | (1,988,377) | | (15,317,297) | | (1,988,377) |
| paid to holders of the Company | | | | | | | | |
+--------------------------------------+------+---------------+--+---------------+--+---------------+--+---------------+
| Net cash flow from financing | | (88,977,815) | | 155,212,103 | | (28,971,946) | | 155,212,103 |
| activities | | | | | | | | |
+--------------------------------------+------+---------------+--+---------------+--+---------------+--+---------------+
| | | | | | | | | |
+--------------------------------------+------+---------------+--+---------------+--+---------------+--+---------------+
| Effects of exchange rate changes on | | 14,626,591 | | 883,362 | | 399,988 | | 883,362 |
| cash and cash equivalents | | | | | | | | |
+--------------------------------------+------+---------------+--+---------------+--+---------------+--+---------------+
| | | | | | | | | |
+--------------------------------------+------+---------------+--+---------------+--+---------------+--+---------------+
| Net (decrease) increase in cash and | | (39,234,867) | | 49,086,491 | | (49,878,796) | | 48,371,963 |
| cash equivalents | | | | | | | | |
+--------------------------------------+------+---------------+--+---------------+--+---------------+--+---------------+
| Opening cash and cash equivalents | | 59,855,959 | | 10,769,468 | | 59,141,431 | | 10,769,468 |
+--------------------------------------+------+---------------+--+---------------+--+---------------+--+---------------+
| Closing cash and cash equivalents | 27 | 20,621,092 | | 59,855,959 | | 9,262,635 | | 59,141,431 |
+--------------------------------------+------+---------------+--+---------------+--+---------------+--+---------------+
Statement of Changes in Equity - Group
For the year ended 31 December 2008
+---------------------------+----------+--+--------------+--+------------+--+--+-------------+--+--------------+--+--------------+--+--------------+--+---------------+
| | Issued | | Share | | Capital | | | Translation | | Retained | | Shareholders | | Minority | | Total |
| | capital | | premium | | redemption | | | reserve | | earnings | | equity | | interest | | |
| | | | | | reserve | | | | | | | | | | | |
+---------------------------+----------+--+--------------+--+------------+--+--+-------------+--+--------------+--+--------------+--+--------------+--+---------------+
| | GBP | | GBP | | GBP | | | GBP | | GBP | | GBP | | GBP | | GBP |
+---------------------------+----------+--+--------------+--+------------+--+--+-------------+--+--------------+--+--------------+--+--------------+--+---------------+
| At 31 December 2006 | 77,237 | | 69,231,328 | | - | | | - | | 17,423,478 | | 86,732,043 | | - | | 86,732,043 |
+---------------------------+----------+--+--------------+--+------------+--+--+-------------+--+--------------+--+--------------+--+--------------+--+---------------+
| Profit for the period | - | | - | | - | | | - | | 1,479,910 | | 1,479,910 | | - | | 1,479,910 |
+---------------------------+----------+--+--------------+--+------------+--+--+-------------+--+--------------+--+--------------+--+--------------+--+---------------+
| Share options and awards | 2,094 | | 2,092,350 | | - | | | - | | (1,759,461) | | 334,983 | | - | | 334,983 |
| granted | | | | | | | | | | | | | | | | |
+---------------------------+----------+--+--------------+--+------------+--+--+-------------+--+--------------+--+--------------+--+--------------+--+---------------+
| Issue of shares | 120,200 | | 150,119,800 | | - | | | - | | (140,000) | | 150,100,000 | | - | | 150,100,000 |
+---------------------------+----------+--+--------------+--+------------+--+--+-------------+--+--------------+--+--------------+--+--------------+--+---------------+
| Costs of share issue | - | | (4,709,167) | | - | | | - | | - | | (4,709,167) | | - | | (4,709,167) |
+---------------------------+----------+--+--------------+--+------------+--+--+-------------+--+--------------+--+--------------+--+--------------+--+---------------+
| Dividends paid | - | | - | | - | | | - | | (1,994,654) | | (1,994,654) | | - | | (1,994,654) |
+---------------------------+----------+--+--------------+--+------------+--+--+-------------+--+--------------+--+--------------+--+--------------+--+---------------+
| Equity settled share | - | | - | | - | | | - | | 1,207,248 | | 1,207,248 | | - | | 1,207,248 |
| based payments | | | | | | | | | | | | | | | | |
+---------------------------+----------+--+--------------+--+------------+--+--+-------------+--+--------------+--+--------------+--+--------------+--+---------------+
| At 31 December 2007 | 199,531 | | 216,734,311 | | - | | | - | | 16,216,521 | | 233,150,363 | | - | | 233,150,363 |
+---------------------------+----------+--+--------------+--+------------+--+--+-------------+--+--------------+--+--------------+--+--------------+--+---------------+
| Loss for the period | - | | - | | - | | | - | | (93,692,121) | | (93,692,121) | | (19,988,879) | | (113,681,000) |
+---------------------------+----------+--+--------------+--+------------+--+--+-------------+--+--------------+--+--------------+--+--------------+--+---------------+
| Effect of exchange rate | - | | - | | - | | | 12,956,160 | | - | | 12,956,160 | | 10,912,519 | | 23,868,679 |
| fluctuations | | | | | | | | | | | | | | | | |
+---------------------------+----------+--+--------------+--+------------+--+--+-------------+--+--------------+--+--------------+--+--------------+--+---------------+
| Total recognised income | - | | - | | - | | | 12,956,160 | | (93,692,121) | | (80,735,961) | | (9,076,360) | | (89,812,321) |
| and expenses for the year | | | | | | | | | | | | | | | | |
+---------------------------+----------+--+--------------+--+------------+--+--+-------------+--+--------------+--+--------------+--+--------------+--+---------------+
| Equity share options | 12,245 | | - | | - | | | - | | | | 12,245 | | - | | 12,245 |
| exercised | | | | | | | | | | | | | | | | |
+---------------------------+----------+--+--------------+--+------------+--+--+-------------+--+--------------+--+--------------+--+--------------+--+---------------+
| Equity settled share based | | | | | | | | | 6,043,952 | | 6,043,952 | | | | 6,043,952 |
| payments | | | | | | | | | | | | | | | |
+--------------------------------------+--+--------------+--+------------+--+--+-------------+--+--------------+--+--------------+--+--------------+--+---------------+
| Shares acquired for | - | | - | | - | | | - | | (1,748,303) | | (1,748,303) | | - | | (1,748,303) |
| Employee Share Awards | | | | | | | | | | | | | | | | |
+---------------------------+----------+--+--------------+--+------------+--+--+-------------+--+--------------+--+--------------+--+--------------+--+---------------+
| Buy back and cancellation | (3,435) | | - | | 3,435 | | | - | | (2,881,330) | | (2,881,330) | | - | | (2,881,330) |
| of shares | | | | | | | | | | | | | | | | |
+---------------------------+----------+--+--------------+--+------------+--+--+-------------+--+--------------+--+--------------+--+--------------+--+---------------+
| Dividends paid | - | | - | | - | | | - | | (6,983,617) | | (6,983,617) | | - | | (6,983,617) |
+---------------------------+----------+--+--------------+--+------------+--+--+-------------+--+--------------+--+--------------+--+--------------+--+---------------+
| Revaluation adjustment on | - | | - | | - | | | - | | (7,729,012) | | (7,729,012) | | - | | (7,729,012) |
| gaining control of | | | | | | | | | | | | | | | | |
| subsidiary | | | | | | | | | | | | | | | | |
+---------------------------+----------+--+--------------+--+------------+--+--+-------------+--+--------------+--+--------------+--+--------------+--+---------------+
| Minority interest on | - | | - | | - | | | - | | - | | - | | 54,205,520 | | 54,205,520 |
| acquisition of subsidiary | | | | | | | | | | | | | | | | |
+---------------------------+----------+--+--------------+--+------------+--+--+-------------+--+--------------+--+--------------+--+--------------+--+---------------+
| Capital distribution | - | | (8,333,679) | | - | | | - | | - | | (8,333,679) | | - | | (8,333,679) |
+---------------------------+----------+--+--------------+--+------------+--+--+-------------+--+--------------+--+--------------+--+--------------+--+---------------+
| Distributions to minority | - | | - | | - | | | - | | - | | - | | (12,344,381) | | (12,344,381) |
| interests | | | | | | | | | | | | | | | | |
+---------------------------+----------+--+--------------+--+------------+--+--+-------------+--+--------------+--+--------------+--+--------------+--+---------------+
| | | | | | | | | | | | | | | | | |
+---------------------------+----------+--+--------------+--+------------+--+--+-------------+--+--------------+--+--------------+--+--------------+--+---------------+
| At 31 December 2008 | 208,341 | | 208,400,632 | | 3,435 | | | 12,956,160 | | (90,773,910) | | 130,794,658 | | 32,784,779 | | 163,579,437 |
+---------------------------+----------+--+--------------+--+------------+--+--+-------------+--+--------------+--+--------------+--+--------------+--+---------------+
Statement of Changes in Equity - Company
For the year ended 31 December 2008
+----------------------+----------+--+--------------+--+------------+--+--+---------------+--+---------------+
| | Issued | | Share | | Capital | | | Retained | | Shareholders |
| | capital | | premium | | redemption | | | earnings | | equity |
| | | | | | reserve | | | | | |
+----------------------+----------+--+--------------+--+------------+--+--+---------------+--+---------------+
| | GBP | | GBP | | GBP | | | GBP | | GBP |
+----------------------+----------+--+--------------+--+------------+--+--+---------------+--+---------------+
| At 31 December 2006 | 77,237 | | 69,231,328 | | - | | | 17,291,126 | | 86,599,691 |
+----------------------+----------+--+--------------+--+------------+--+--+---------------+--+---------------+
| Profit for the | - | | - | | - | | | 1,002,138 | | 1,002,138 |
| period | | | | | | | | | | |
+----------------------+----------+--+--------------+--+------------+--+--+---------------+--+---------------+
| Share options and | 2,094 | | 2,092,350 | | - | | | (1,759,461) | | 334,983 |
| awards granted | | | | | | | | | | |
+----------------------+----------+--+--------------+--+------------+--+--+---------------+--+---------------+
| Issue of shares | 120,200 | | 150,119,800 | | - | | | (140,000) | | 150,100,000 |
+----------------------+----------+--+--------------+--+------------+--+--+---------------+--+---------------+
| Costs of share issue | - | | (4,709,167) | | - | | | - | | (4,709,167) |
+----------------------+----------+--+--------------+--+------------+--+--+---------------+--+---------------+
| Dividends paid | - | | - | | - | | | (1,994,654) | | (1,994,654) |
+----------------------+----------+--+--------------+--+------------+--+--+---------------+--+---------------+
| Equity settled share | - | | - | | - | | | 1,207,248 | | 1,207,248 |
| based payments | | | | | | | | | | |
+----------------------+----------+--+--------------+--+------------+--+--+---------------+--+---------------+
| At 31 December 2007 | 199,531 | | 216,734,311 | | - | | | 15,606,397 | | 232,540,239 |
+----------------------+----------+--+--------------+--+------------+--+--+---------------+--+---------------+
| Loss for the period | - | | - | | - | | | (101,615,095) | | (101,615,095) |
+----------------------+----------+--+--------------+--+------------+--+--+---------------+--+---------------+
| Equity share options | 12,245 | | - | | - | | | 6,043,952 | | 6,056,197 |
| exercised | | | | | | | | | | |
+----------------------+----------+--+--------------+--+------------+--+--+---------------+--+---------------+
| Shares acquired for | - | | - | | - | | | (1,748,303) | | (1,748,303) |
| Employee Share | | | | | | | | | | |
| Awards | | | | | | | | | | |
+----------------------+----------+--+--------------+--+------------+--+--+---------------+--+---------------+
| Buy back and | (3,435) | | - | | 3,435 | | | (2,881,330) | | (2,881,330) |
| cancellation of | | | | | | | | | | |
| shares | | | | | | | | | | |
+----------------------+----------+--+--------------+--+------------+--+--+---------------+--+---------------+
| Capital distribution | - | | (8,333,679) | | - | | | - | | (8,333,679) |
+----------------------+----------+--+--------------+--+------------+--+--+---------------+--+---------------+
| Dividends paid | - | | - | | - | | | (6,983,618) | | (6,983,618) |
+----------------------+----------+--+--------------+--+------------+--+--+---------------+--+---------------+
| At 31 December 2008 | 208,341 | | 208,400,632 | | 3,435 | | | (91,577,997) | | 117,034,411 |
+----------------------+----------+--+--------------+--+------------+--+--+---------------+--+---------------+
NOTES TO THE FINANCIAL STATEMENTS
1 General information
ACP Capital Limited ("ACP" or the "Company") and its subsidiaries (together the
"Group"), while they were in investment mode, provided specialist integrated
finance and asset management solutions focused on European small and
medium-sized enterprises ("SMEs"). The Company was incorporated on 30 August
2005 and registered in Jersey under registration number 91066. The Company's
shares were admitted to trading on AIM on 6 January 2006. The consolidated
financial statements for the year ended 31 December 2008 were authorised for
issue by the Board of Directors on 26 March 2009.
At an EGM held on 17 July 2008, the Company announced that it would seek to
dispose of assets on an orderly basis and return the proceeds to shareholders by
way of distributions.
2 Basis of preparation
These financial statements have been prepared in accordance with International
Financial Reporting Standards, International Accounting Standards and
Interpretations (collectively "IFRSs") issued by the International Accounting
Standards Board ("IASB") as adopted by the European Union and with those parts
of Companies (Jersey) Law 1991 applicable to companies preparing their financial
statements under IFRSs.
The Group and Company financial statements have been presented in Sterling, the
functional currency of the Company. Some of the subsidiary entities of the Group
use a different functional currency, being the currency in the primary economic
environment in which the entity operates.
They are prepared under the historical cost convention modified to include
investments measured at fair value through profit or loss. The preparation of
financial statements in conformity with IFRS requires management to make
judgments, estimates and assumptions that affect the application of policies and
reported amounts of assets and liabilities, income and expenses. The estimates
and associated assumptions are based on the experience of the Directors and
other factors that are believed to be reasonable under the circumstances, the
results of which form the basis of making the judgments about carrying values of
assets and liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period, or in the period
of the revision and future periods if the revision affects both current and
future periods.
The most significant techniques for estimation are described in the accounting
policies or notes to the financial statements.
Note 3 sets out a description of the significant accounting policies of the
Group. The accounting policies are consistent with those applied in the year
ended 31 December 2008, and amended to reflect the adoption of the new
standards, amendments to standards or interpretations which are mandatory for
the first time for the financial year ended 31 December 2008.
Standards, amendments and interpretations to published standards not yet
effective
Certain new standards, amendments and interpretations to existing standards have
been published that are mandatory for the Group's accounting periods beginning
after 1 January 2009 or later periods and which the Group has decided not to
adopt early.
These are listed below and not expected to have a significant impact on the
Group's financial statements.
Amendments to IFRIC 9 and IAS 39 - Embedded Derivatives (effective for
accounting period beginning on after 30 June 2009 - still to be endorsed)
Amendments to IFRS 7 - Improving disclosures about Financial Instruments
(effective for accounting period beginning on after 1 January 2009 - still to be
endorsed)
Amendments to IAS 1 - Presentation of Financial Statements: A Revised
Presentation (effective for accounting period beginning on after 1 January 2009)
IAS 27 - Consolidated and Separate Financial Statements (effective for
accounting periods beginning on or after 1 July 2009)
IAS 32 & IAS1 - Puttable Financial Instruments and Obligations Arising on
Acquisition (effective for accounting periods beginning on or after 1 January
2009)
IFRS1 & IAS 27 - Cost of an Investment in a Subsidiary, Jointly-Controlled
Entity or Associate (effective for accounting periods beginning on or after 1
January 2009)
IAS 39 - Financial Instruments: recognition and Measurement: Eligible Hedged
Items (effective for accounting periods beginning on or after 1 July 2009)
IFRIC 13 - Customer Loyalty Programmes (effective for accounting periods
beginning on or after 1 July 2008)
IFRIC 15 - Agreements for the Construction of Real Estate (effective for
accounting periods beginning on or after 1 January 2009)
IFRIC 16 - Hedges of a Net Investment in a Foreign Operation (effective for
accounting periods beginning on or after 1 October 2008)
IFRIC 17 - Distributions of Non-Cash Assets to Owners (effective for accounting
periods beginning on or after 1 July 2009)
IFRIC 18 - Transfer of Assets from Customers (effective for accounting periods
beginning on or after 1 July 2009)
Amendment to IFRS2 - Share Based payments: Vesting Conditions and Cancellations
(effective for accounting periods beginning on or after 1 January 2009)
IFRS 3 - Business Combinations and Complementary Amendments to IAS 27
Consolidated and Separate Financial Statements (both effective for accounting
periods beginning on or after 1 July 2009)
IFRS 8 - Operating Segments (effective for accounting periods beginning on or
after 1 January 2009)
3 Significant accounting policies
The accounting policies have been consistently applied across the Group entities
for the purpose of producing these consolidated financial statements. The
significant accounting policies applied are as follows:
a) Basis of consolidation
The financial information in the Group's Financial Statements for the year ended
31 December 2008 incorporates the Financial Statements of the Company and its
subsidiaries. Subsidiaries are entities controlled by the Group. Control exists
when the company has the power, directly or indirectly, to govern the financial
and operating policies of an entity so as to obtain benefits from its
activities. In assessing control, potential voting rights that are currently
exercisable or convertible are taken into account. The financial statements of
the subsidiaries are included in the consolidated financial statements from the
date that the control commences until the date control ceases.
Intra-group balances and any unrealised gains and losses arising from
intra-group transactions are eliminated in preparing the Financial Statements of
the Group.
b) Acquisitions
Acquisitions are accounted for as a business combination, in which case, the
identifiable assets, liabilities and contingent liabilities of a subsidiary or
joint venture are measured at their estimated fair value at the date of
acquisition. The cost of acquisition is measured as the fair value of the
consideration given together with any liabilities incurred or assumed at the
date of acquisition, plus costs directly attributable to the acquisition.
The excess of the cost of acquisition over the fair value of the Group's share
of the identifiable net assets acquired is recorded as goodwill. Where the fair
value of identifiable assets, liabilities and contingent liabilities exceed the
fair value of consideration paid, the excess is credited in full to the
consolidated income statement on the acquisition date.
Where a subsidiary is acquired in stages, the identifiable assets, liabilities
and contingent liabilities are measured at their estimated fair value and
compared to the cost of acquisition at each date investment in the subsidiary
took place. If the investment has previously been carried at fair value through
profit or loss, fair value movements recognised in prior periods are reversed
through equity.
c) Investments measured at fair value through profit or loss
Investments are recognised and derecognised at trade date. All listed and
unlisted equity investments are designated as at fair value through profit or
loss and subsequently carried in the balance sheet at fair value.
The valuation technique used for each class of investment is as follows:
Equity - publicly traded equity is valued at bid price at the balance sheet
date. Non traded equity is stated at Directors' valuation having regard to
venture capital guidelines and third party reports.
Preference equity- valued as a percentage to par using the same percentage to
par of indicative bids of junior debt in the company in which the preference
equity is held.
Syndicated loans - valued based on indicative bids from market makers.
d) Loans and receivables
These assets are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market. They are initially recognised
at fair value plus transaction costs that are directly attributable to their
acquisition or issue, and are subsequently carried at amortised cost using the
effective interest rate method, less provision for impairment.
Impairment provisions are recognised when there is objective evidence (such as
significant financial difficulties on the part of the counterparty or default or
significant delay in payment) that the Group will be unable to collect all of
the amounts due under the terms receivable, the amount of such provision being
the difference between the net carrying amount and the present value of the
future expected cash flows associated with the impaired receivable.
e) Available-for-sale
Non-derivative financial assets not included in the above categories are
classified as available-for-sale and comprise principally the Group's CDOs, CLOs
and SME loans. They are carried at fair value and valued based on an average of
indicative bids from market makers. Where there is a significant or prolonged
decline in fair value of an available for sale financial asset (which
constitutes objective evidence of impairment), the full amount of the
impairment, including any amount previously charged to equity is recognised in
the income statement. Purchases and sales of available-for-sale financial assets
are recognised on trade date with any change in fair value between trade date
and settlement date being recognised in retained earnings.
f) Property, Plant and Equipment
Office equipment is stated at historical cost less depreciation. Depreciation is
calculated on a straight line method to allocate the cost over the estimated
useful life. The estimated life of office equipment is 3 years. Assets costing
less than GBP25,000 are written off on the year of acquisition.
g) Trade and other receivables
Trade and other receivables are recognised initially at fair value. A provision
for impairment is established where there is objective evidence that the Group
will not be able to collect all amounts due according to the original terms of
the receivables concerned.
h) Cash & cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and short-term
deposits with an original maturity of three months or less.
i) Loans
All loans and borrowings are initially recognised at the fair value of the
consideration received net of issue costs associated with the borrowings. After
initial recognition, these are subsequently measured at amortised cost using the
effective interest method, which is the rate that exactly discounts the
estimated future cash flows through the expected life of the liabilities.
Amortised cost is calculated by taking into account any issue costs and any
discount or premium on settlement.
j) Trade and other payables
Trade and other payables are stated at amortised cost.
k) Equity instruments
Equity instruments issued by the Group are recognised at the proceeds or fair
value received with the excess of the amount received over 0.1p par value being
credited to the share premium account. Direct issue costs are deducted from
equity.
l) Revenue
Income from loans and receivables is recognised as it accrues by reference to
the principal outstanding and the effective interest rate applicable, which is
the rate that exactly discounts the estimated future cash flows through the
expected life of the financial asset to that asset's carrying value.
Fee income earned on financing arrangements that relate to investments measured
at fair value through profit or loss are recognised when that investment is
made. Fees earned from financing arrangements that relate to investments
classified as loans and receivables are recognised over the life of the assets.
Fees in respect of any ongoing services are recognised as that service is
provided.
Dividends from equity investments are recognised in the income statement when
the shareholders rights to receive payment have been established.
m) Dividends
Dividends are recognised when they become legally payable. In the case of
interim dividends to equity shareholders, this is when declared by the
Directors. In the case of final dividends, this is when approved by the
shareholders at the AGM.
n) Share-based payments
Where equity settled share options are awarded to employees, the fair value of
the options at the date of grant is charged to the consolidated income statement
over the vesting period. Non-market vesting conditions are taken into account by
adjusting the number of equity instruments expected to vest at each balance
sheet date so that, ultimately, the cumulative amount recognised over the
vesting period is based on the number of options that eventually vest. Market
vesting conditions are factored into the fair value of the options granted. As
long as all other vesting conditions are satisfied a charge is made irrespective
of whether the market vesting conditions are satisfied. The cumulative expense
is not adjusted for failure to achieve a market vesting condition.
When the terms and conditions of options are modified before they vest, the
increase in the fair value of the options, measured immediately before and after
the modification, is also charged to the consolidated income statement over the
remaining vesting period.
o) Finance expense
Interest expense is calculated using the effective interest rate method. Finance
costs are recognised in the income statement over the period of the loans and
borrowings related to those costs.
p) Foreign currency translation
Transactions entered into by group entities in a currency other the currency of
the primary economic environment in which they operate (their "functional
currency") are recorded at the rates ruling when the transactions occur. Foreign
currency monetary assets and liabilities are translated at the rates ruling at
the balance sheet date. Exchange differences arising on the retranslation of
unsettled monetary assets and liabilities are translated at the rates ruling at
the balance sheet date. Exchange differences arising on the retranslation of
unsettled monetary assets and liabilities are recognised immediately in the
consolidated income statement.
On consolidation, the results of overseas operations are translated into
sterling at rates approximating to those ruling when the transactions took
place. All assets and liabilities of overseas operations are translated at the
rate ruling at the balance sheet date. Exchange differences arising on
translation the opening assets at opening rate and the results of overseas
operations at actual rate are recognised directly in equity (the "translation
reserve").
4 Significant judgments, key assumptions and estimates
The Group's significant accounting policies are stated in note 3 above. Not all
of these significant accounting policies required management to make difficult,
subjective or complex judgements or estimates. The following is intended to
provide an understanding of the policies that management consider critical
because of the level of complexity, judgment or estimation involved in their
application and their impact on the consolidated financial statements. These
judgments involve assumptions or estimates in respect of future events. Actual
results may differ from these estimates.
a) Fair value of financial instruments
The Group determines the fair value of financial instruments that are not quoted
by using either indicative prices or valuation techniques. These indicative
prices and valuation techniques are significantly affected by the assumptions
used, including discount rates and estimates of future cash flows. In that
regard, the derived fair value estimation cannot always be substantiated by
comparison with independent markets and in many cases may not be capable of
being realised immediately.
b) Trade receivables and interest receivables on investments
The Group is required to judge when there is sufficient objective evidence to
require the impairment of individual trade receivables or interest receivables
on its investments. It does this on the basis of the age of the relevant
receivables, external evidence of the credit status of the debtor entity and the
status of any disputed amounts.
c) Legal proceedings
The Group reviews outstanding legal cases at each balance sheet date in order to
assess the need for provisions and disclosures in the financial statements. This
requires the Group's management to make determinations about various factual and
legal matters beyond its control. Among the factors considered in making
decisions on provisions are the nature of litigation, claim or assessment, the
legal process and potential level of damages in the jurisdiction in which the
litigation, claim or assessment has been brought, the progress of the case the
opinions or views of legal advisers, experience on similar cases and any
decision of the Group's management as to how it will respond to the litigation,
claim or assessment.
5 Segment reporting
The Directors consider that there is only one business segment being specialist
integrated finance and asset management and only one geographic area being
Europe.
6 Financial risk management
The Group's activities expose it to a variety of financial risks: concentration
risk, market price risk, interest rate risk, currency risk, credit risk,
liquidity risk and capital risk. The Group's overall risk management programme
focuses on the unpredictability of financial markets and seeks to minimise
potential adverse effects on the Group's financial performance.
a) Concentration risk
Concentration risk arises from individual investments to which the Group has
significant exposure. The Group defines significant exposure as 20 percent of
gross portfolio value. Concentration risk is managed through regular review of
public information and from review of reports from debt agents and similar,
where appropriate. The Group seeks to have board representation on such
investments and to communicate regularly with managers of these investments. ACP
management reports quarterly to the Board on the relevant investments.
The concentration risks at year end were:
-IFR Capital plc - the Group's exposure totaled GBP89.7 million of the net asset
value total of GBP163.6 million (2007: GBP128.8 million of GBP233.2 million)
-Leasecom Group SAS - the Group's exposure totaled GBP24.7 million of the net
asset value total of GBP163.6 million (2007: GBP24.3 million of GBP233.2
million)
b) Market price risk
Market price risk arises from uncertainty in the future value of financial
instruments. No new investments are being made. Existing investments are managed
by the investment advisor who reports regularly to the Board to review past and
expected future performance. The nature of investments is diverse. Monitoring
includes reviewing monthly and quarterly financial management reports and
monthly portfolio managers' reports. Regular contact is maintained with
borrowers, agent banks and portfolio managers. Board meetings are also attended.
Where available, prices are monitored daily as are companies on watch lists.
Investments are not actively traded but opportunistic sales of investments have
occurred. Other than listed equity investments all pricing is indicative only as
there is little, if any, actual trading in other instruments.
The Group's investments are exposed to market price fluctuation. If the
valuation of the Group's investment had been 20 percent lower at 31 December
2008 the Group's loss would have been higher and the Group's net assets lower by
GBP28.1million (2007: GBP36.3 million). A 20 percent increase in value would, on
the same basis, have decreased the loss and increased net assets by the same
amount.
If the valuation of the Company's investment had been 20 percent lower at 31
December 2008 the Company's loss would have been higher and the Group's net
assets lower by GBP22.0 million (2007: GBP36.3 million). A 20 percent increase
in value would, on the same basis, have decreased the loss and increased net
assets by the same amount.
c) Interest rate risk
As the Group has no borrowings, interest rate risk arises solely from interest
received in respect of the Group's investments and loans and cash balances.
Investments and loans issued at floating interest rates expose the Group to cash
flow interest rate risk. The Group is also exposed to fair value risk interest
rate risk on the debt instruments held at fair value through profit or loss.
The table below details the Group's exposure to interest rates at 31 December
2008 by reference to the earlier of the contractual repricing or maturity date:
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| Group | | | | | | | | |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| 2008 | | Within | | | | More than | | |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| | | 1 year | | 2-5 years | | 5 years | | Total |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| | | GBP | | GBP | | GBP | | GBP |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| Fixed rate: | | | | | | | | |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| Investments measured at fair value | | - | | - | | 12,740,161 | | 12,740,161 |
| through profit or loss | | | | | | | | |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| Floating rate: | | | | | | | | |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| Investments measured at fair value | | 2,228,496 | | 20,284,573 | | 49,871,827 | | 72,384,896 |
| through profit or loss | | | | | | | | |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| Available-for-sale investments | | - | | 205,283 | | 24,380,612 | | 24,585,895 |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| Cash and cash equivalents | | 20,621,092 | | - | | - | | 20,621,092 |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| | | 22,849,588 | | 20,489,856 | | 86,992,600 | | 130,332,044 |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| | | | | | | | | |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| | | | | | | | | |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| | | | | | | | | |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| | | | | | | | | |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| 2007 | | Within | | | | More than | | |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| | | 1 year | | 2-5 years | | 5 years | | Total |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| | | GBP | | GBP | | GBP | | GBP |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| Fixed rate: | | | | | | | | |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| Investments measured at fair value | | - | | - | | - | | - |
| through profit or loss | | | | | | | | |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| Floating rate: | | | | | | | | |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| Investments measured at fair value | | 845,927 | | 12,443,408 | | 38,400,604 | | 51,689,939 |
| through profit or loss | | | | | | | | |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| Loans and receivables | | - | | - | | 15,912,561 | | 15,912,561 |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| Cash and cash equivalents | | 59,855,959 | | - | | - | | 59,855,959 |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| Loans and borrowings | | (9,188,157) | | - | | - | | (9,188,157) |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| | | 51,513,729 | | 12,443,408 | | 54,313,165 | | 118,270,302 |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| | | | | | | | | |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| Company | | | | | | | | |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| 2008 | | Within | | | | More than | | |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| | | 1 year | | 2-5 years | | 5 years | | Total |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| | | GBP | | GBP | | GBP | | GBP |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| Fixed rate: | | | | | | | | |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| Investments measured at fair value | | - | | - | | - | | - |
| through profit or loss | | | | | | | | |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| Floating rate: | | | | | | | | |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| Investments measured at fair value | | 1,507,955 | | 13,849,028 | | 29,973,244 | | 45,330,226 |
| through profit or loss | | | | | | | | |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| Available-for-sale investments | | - | | - | | 3,165,974 | | 3,165,974 |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| Cash and cash equivalents | | 9,262,635 | | - | | - | | 9,262,635 |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| | | 10,770,590 | | 13,849,028 | | 33,139,218 | | 57,758,835 |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| | | | | | | | | |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| 2007 | | Within | | | | More than | | |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| | | 1 year | | 2-5 years | | 5 years | | Total |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| | | GBP | | GBP | | GBP | | GBP |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| Fixed rate: | | | | | | | | |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| Investments measured at fair value | | - | | - | | - | | - |
| through profit or loss | | | | | | | | |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| Floating rate: | | | | | | | | |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| Investments measured at fair value | | 845,927 | | 12,443,408 | | 38,400,604 | | 51,689,939 |
| through profit or loss | | | | | | | | |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| Loans and receivables | | - | | - | | 15,912,561 | | 15,912,561 |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| Cash and cash equivalents | | 59,141,431 | | - | | - | | 59,141,431 |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| Loans and borrowings | | (9,188,157) | | - | | - | | (9,188,157) |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
| | | 50,799,201 | | 12,443,408 | | 54,313,165 | | 117,555,774 |
+--------------------------------------+---+-------------+--+-------------+--+-------------+--+--------------+
Floating rate interest is based on Libor and Euribor and a fixed margin.
The Group monitors movements in interest rates on an ongoing basis and has
factored in the current low rates of Libor and Euribor in its projections.
At 31 December 2008, if interest rates on Euro floating rate investments had
been 150 basis points lower with all other variables held constant, the Group
loss after tax for the year would have GBP1.5 million higher (2007: profit
GBP0.95 million lower).
At 31 December 2008, if interest rates on Euro floating rate investments had
been 150 basis points lower with all other variables held constant, the Company
loss after tax for the year would have GBP0.9 million higher (2007: profit
GBP0.95 million lower).
The Directors consider that 150 basis points is the maximum likely change in
Euro interest rates over the next year. The Directors consider that UK and US
interest rates are unlikely to fall significantly further than their current
rates.
d) Foreign exchange risk
The Group invests in assets denominated in currencies other than Sterling. The
Group has no foreign exchange hedging in place as the Directors do not consider
that the reduction in foreign currency exposure warrants the cash flow risk
created from such hedging techniques. Therefore the movements in the exchange
rate between Sterling and any currencies in which the Group transact exposes the
Group to currency risk resulting in gains or losses on retranslation into
Sterling. These movements in the exchange rate may be influenced by factors such
as trade imbalances, levels of short term interest rates, differences in
relative values of similar assets in different currencies, long term
opportunities for investment and capital appreciation and political
developments.
The Group's policy is for Group entities to settle liabilities denominated in
their own currency with cash generated from operation in that same currency. If
Group entities have liabilities denominated in a currency other than their
functional currency (and have insufficient reserves of that currency to settle
them) cash already in that currency will, where possible, be transferred from
elsewhere in the Group.
The table below details the Group and Company's exposure to foreign currencies
at the balance sheet date:
+-----------------------------+-------------+--+--------------+--+----------+--+----------+--+--------------+
| Group | | | | | | | | | |
+-----------------------------+-------------+--+--------------+--+----------+--+----------+--+--------------+
| 2008 | Sterling | | Euro | | US | | Swiss | | Total |
| | | | | | Dollar | | Franc | | |
+-----------------------------+-------------+--+--------------+--+----------+--+----------+--+--------------+
| | GBP | | GBP | | GBP | | GBP | | GBP |
+-----------------------------+-------------+--+--------------+--+----------+--+----------+--+--------------+
| Total Assets | 7,280,417 | | 158,061,010 | | 937,272 | | 5,726 | | 166,284,425 |
+-----------------------------+-------------+--+--------------+--+----------+--+----------+--+--------------+
| Total Liabilities | (2,461,985) | | (243,003) | | - | | - | | (2,704,988) |
+-----------------------------+-------------+--+--------------+--+----------+--+----------+--+--------------+
| | | | | | | | | | |
+-----------------------------+-------------+--+--------------+--+----------+--+----------+--+--------------+
| Net assets | 4,818,432 | | 157,818,007 | | 937,272 | | 5,726 | | 163,579,437 |
+-----------------------------+-------------+--+--------------+--+----------+--+----------+--+--------------+
| | | | | | | | | | |
+-----------------------------+-------------+--+--------------+--+----------+--+----------+--+--------------+
| Group | | | | | | | | | |
+-----------------------------+-------------+--+--------------+--+----------+--+----------+--+--------------+
| 2007 | Sterling | | Euro | | US | | Swiss | | Total |
| | | | | | Dollar | | Franc | | |
+-----------------------------+-------------+--+--------------+--+----------+--+----------+--+--------------+
| | GBP | | GBP | | GBP | | GBP | | GBP |
+-----------------------------+-------------+--+--------------+--+----------+--+----------+--+--------------+
| Total Assets | 35,794,320 | | 207,388,271 | | - | | - | | 243,182,591 |
+-----------------------------+-------------+--+--------------+--+----------+--+----------+--+--------------+
| Total Liabilities | (4,922,696) | | (5,109,532) | | - | | - | | (10,032,228) |
+-----------------------------+-------------+--+--------------+--+----------+--+----------+--+--------------+
| | | | | | | | | | |
+-----------------------------+-------------+--+--------------+--+----------+--+----------+--+--------------+
| Net assets | 30,871,624 | | 202,278,739 | | - | | - | | 233,150,363 |
+-----------------------------+-------------+--+--------------+--+----------+--+----------+--+--------------+
| | | | | | | | | | |
+-----------------------------+-------------+--+--------------+--+----------+--+----------+--+--------------+
| | | | | | | | | | |
+-----------------------------+-------------+--+--------------+--+----------+--+----------+--+--------------+
+-----------------------------+-------------+--+--------------+--+----------+--+----------+--+--------------+
| Company | | | | | | | | | |
+-----------------------------+-------------+--+--------------+--+----------+--+----------+--+--------------+
| 2008 | Sterling | | Euro | | US | | Swiss | | Total |
| | | | | | Dollar | | Franc | | |
+-----------------------------+-------------+--+--------------+--+----------+--+----------+--+--------------+
| | GBP | | GBP | | GBP | | GBP | | GBP |
+-----------------------------+-------------+--+--------------+--+----------+--+----------+--+--------------+
| Total Assets | 3,707,103 | | 119,896,845 | | - | | - | | 123,603,948 |
+-----------------------------+-------------+--+--------------+--+----------+--+----------+--+--------------+
| Total Liabilities | (6,569,537) | | - | | - | | - | | (6,569,537) |
+-----------------------------+-------------+--+--------------+--+----------+--+----------+--+--------------+
| | | | | | | | | | |
+-----------------------------+-------------+--+--------------+--+----------+--+----------+--+--------------+
| Net assets | (2,862,434) | | 119,896,845 | | - | | - | | 117,034,411 |
+-----------------------------+-------------+--+--------------+--+----------+--+----------+--+--------------+
| | | | | | | | | | |
+-----------------------------+-------------+--+--------------+--+----------+--+----------+--+--------------+
| Company | | | | | | | | | |
+-----------------------------+-------------+--+--------------+--+----------+--+----------+--+--------------+
| 2007 | Sterling | | Euro | | US | | Swiss | | Total |
| | | | | | Dollar | | Franc | | |
+-----------------------------+-------------+--+--------------+--+----------+--+----------+--+--------------+
| | GBP | | GBP | | GBP | | GBP | | GBP |
+-----------------------------+-------------+--+--------------+--+----------+--+----------+--+--------------+
| Total Assets | 35,169,902 | | 207,274,435 | | - | | - | | 242,444,337 |
+-----------------------------+-------------+--+--------------+--+----------+--+----------+--+--------------+
| Total Liabilities | (4,877,621) | | (5,026,477) | | - | | - | | (9,904,098) |
+-----------------------------+-------------+--+--------------+--+----------+--+----------+--+--------------+
| | | | | | | | | | |
+-----------------------------+-------------+--+--------------+--+----------+--+----------+--+--------------+
| Net assets | 30,292,281 | | 202,247,958 | | - | | - | | 232,540,239 |
+-----------------------------+-------------+--+--------------+--+----------+--+----------+--+--------------+
The table below shows the effect on the net assets of the Group and Company at
the balance sheet date if the Euro had strengthened or weakened by various
percentages against sterling with all other variables held constant.
+--------------------------------------+---+--------------+--+--------------+
| Group | | 2008 | | 2007 |
+--------------------------------------+---+--------------+--+--------------+
| | | Net | | Net |
| | | Assets | | Assets |
+--------------------------------------+---+--------------+--+--------------+
| % change in Euro against Sterling | | GBP | | GBP |
+--------------------------------------+---+--------------+--+--------------+
| 20% weakened | | 137,276,437 | | 199,437,240 |
+--------------------------------------+---+--------------+--+--------------+
| 10% weakened | | 149,232,347 | | 214,761,387 |
+--------------------------------------+---+--------------+--+--------------+
| 5% weakened | | 156,064,295 | | 223,518,042 |
+--------------------------------------+---+--------------+--+--------------+
| Year end closing rate | | 163,579,438 | | 233,150,363 |
+--------------------------------------+---+--------------+--+--------------+
| 5% strengthened | | 171,885,649 | | 243,796,612 |
+--------------------------------------+---+--------------+--+--------------+
| 10% strengthened | | 181,114,772 | | 255,625,778 |
+--------------------------------------+---+--------------+--+--------------+
| 20% strengthened | | 203,033,940 | | 283,720,048 |
+--------------------------------------+---+--------------+--+--------------+
| | | | | |
+--------------------------------------+---+--------------+--+--------------+
| Company | | 2008 | | 2007 |
+--------------------------------------+---+--------------+--+--------------+
| | | Net | | Net |
| | | Assets | | Assets |
+--------------------------------------+---+--------------+--+--------------+
| % change in Euro against Sterling | | GBP | | GBP |
+--------------------------------------+---+--------------+--+--------------+
| 20% weakened | | 97,051,604 | | 198,832,246 |
+--------------------------------------+---+--------------+--+--------------+
| 10% weakened | | 106,134,698 | | 214,154,061 |
+--------------------------------------+---+--------------+--+--------------+
| 5% weakened | | 111,325,037 | | 222,909,384 |
+--------------------------------------+---+--------------+--+--------------+
| Year end closing rate | | 117,034,411 | | 232,540,239 |
+--------------------------------------+---+--------------+--+--------------+
| 5% strengthened | | 123,344,771 | | 243,184,869 |
+--------------------------------------+---+--------------+--+--------------+
| 10% strengthened | | 130,356,283 | | 255,012,235 |
+--------------------------------------+---+--------------+--+--------------+
| 20% strengthened | | 147,008,622 | | 283,102,229 |
+--------------------------------------+---+--------------+--+--------------+
e) Credit risk
Credit risk is the risk of financial loss to the Group if a counterparty to a
financial instrument fails to meet its contractual obligations.
The Group is exposed to credit risk from deposits with banks and financial
institutions. The credit risk on cash and cash equivalents is limited due to the
high proportion of funds being held with high rated banking institutions. The
table below shows the balance of cash and cash equivalents held with various
financial institutions at the end of each reporting period.
+--------------------------------------+---+-------------+--+-------------+--+------------+--+-------------+
| | | Group | | Group | | Company | | Company |
+--------------------------------------+---+-------------+--+-------------+--+------------+--+-------------+
| Bank & rating at 31 December 2008 | | Balance | | Balance | | Balance | | Balance |
| | | at 31 | | at 31 Dec | | at 31 Dec | | at 31 |
| | | Dec 08 | | 07 | | 08 | | Dec 07 |
+--------------------------------------+---+-------------+--+-------------+--+------------+--+-------------+
| | | GBP | | | | | | |
+--------------------------------------+---+-------------+--+-------------+--+------------+--+-------------+
| Deutsche Bank AG - rated AA- | | 19,854,295 | | 59,141,431 | | 9,052,028 | | 59,141,431 |
+--------------------------------------+---+-------------+--+-------------+--+------------+--+-------------+
| The Bank of New York Mellon Corp. - | | 630,253 | | - | | 210,607 | | - |
| rated AA- | | | | | | | | |
+--------------------------------------+---+-------------+--+-------------+--+------------+--+-------------+
| Bank of Cyprus Public Co. Ltd - | | 74,944 | | 93,216 | | - | | - |
| rated BB+ | | | | | | | | |
+--------------------------------------+---+-------------+--+-------------+--+------------+--+-------------+
| HSBC Holdings Plc - rated AA | | 55,465 | | 600,692 | | - | | - |
+--------------------------------------+---+-------------+--+-------------+--+------------+--+-------------+
| Bayerische Hypo-und Vereinsbank AG - | | 6,135 | | 20,620 | | - | | - |
| rated A | | | | | | | | |
+--------------------------------------+---+-------------+--+-------------+--+------------+--+-------------+
| | | 20,621,092 | | 59,855,959 | | 9,262,635 | | 59,141,431 |
+--------------------------------------+---+-------------+--+-------------+--+------------+--+-------------+
The Group is exposed to a loss in investment value, loss in income and increase
in costs, such as legal fees, if counterparties of their investments fail to
meet their interest payment obligations.
The table below shows the fair value of the Group's investments at the end of
each of reporting period and the rating of those investments (where applicable).
The fair value approximates to the Group's maximum credit exposure to these debt
instruments.
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| Group | | 2008 | | | | 2007 | | |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| | | GBP | | % | | GBP | | % |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| Syndicated Loans: | | | | | | | | |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| Rating - B | | 9,228,649 | | 6.6% | | - | | 0.0% |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| Rating - BB | | 47,708,907 | | 33.9% | | 33,978,849 | | 18.7% |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| | | 56,937,556 | | 40.5% | | 33,978,849 | | 18.7% |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| | | | | | | | | |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| | | | | | | | | |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| Equity (not rated) | | 30,846,948 | | 21.9% | | 113,724,024 | | 62.7% |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| Preference Shares | | 28,187,503 | | 20.1% | | 17,819,325 | | 9.8% |
| (not rated) | | | | | | | | |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| SME Loans (not rated) | | 13,307,620 | | 9.5% | | 3,692,578 | | 2.0% |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| CLO1: | | | | | | | | |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| Rating - B | | 1,556,528 | | 1.1% | | - | | 0.0% |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| Rating - BB | | 7,415,333 | | 5.3% | | - | | 0.0% |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| Rating - BBB | | 609,765 | | 0.4% | | 1,837,250 | | 1.0% |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| | | 9,581,626 | | 6.8% | | 1,837,250 | | 1.0% |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| CDO2: | | | | | | | | |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| Rating - BB | | 1,333,447 | | 0.9% | | 5,973,333 | | 3.3% |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| Rating - BBB | | 100,373 | | 0.1% | | - | | 0.0% |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| Rating - BB- | | - | | 0.0% | | 3,674,500 | | 2.0% |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| Rating - BBB- | | - | | 0.0% | | 734,900 | | 0.4% |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| | | 1,433,820 | | 1.0% | | 10,382,733 | | 5.7% |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| RMBS3: | | | | | | | | |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| Rating - B | | 251,168 | | 0.2% | | - | | 0.0% |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| Rating - CCC | | 11,658 | | 0.0% | | - | | 0.0% |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| | | 262,826 | | 0.2% | | - | | 0.0% |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| | | | | | | | | |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| | | 140,557,899 | |100.0% | | 181,434,759 | |100.0% |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| | | | | | | | | |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| | | | | | | | | |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| | | | | | | | | |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| Company | | 2008 | | | | 2007 | | |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| | | GBP | | % | | GBP | | % |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| Syndicated Loans: | | | | | | | | |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| Rating - BB | | 32,544,163 | | 29.6% | | 33,978,849 | | 18.8% |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| | | | | | | | | |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| Equity (rating n/a) | | 61,365,015 | | 55.9% | | 113,724,024 | | 62.7% |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| Preference Shares | | 12,786,063 | | 11.6% | | 17,819,325 | | 9.8% |
| (not rated) | | | | | | | | |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| SME Loans (not rated) | | 1,846,289 | | 1.7% | | 3,692,578 | | 2.0% |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| CLO1: | | | | | | | | |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| Rating - BBB | | 609,765 | | 0.6% | | 1,837,250 | | 1.0% |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| | | | | | | | | |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| CDO2: | | | | | | | | |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| Rating - BB | | 609,547 | | 0.6% | | 5,973,333 | | 3.3% |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| Rating - BBB | | 100,373 | | 0.1% | | - | | 0.0% |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| Rating - BB- | | - | | 0.0% | | 3,674,500 | | 2.0% |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| Rating - BBB- | | - | | 0.0% | | 734,900 | | 0.4% |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| | | 709,920 | | 0.6% | | 10,382,733 | | 5.7% |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| | | | | | | | | |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
| | | 109,861,215 | |100.0% | | 181,434,759 | |100.0% |
+-----------------------+---+-------------+--+--------+--+-------------+--+--------+
1Structured portfolio of leveraged loan assets ("CLO")
2Structured portfolio of debt assets ("CDO")
3Structured portfolio of residential mortgage assets ("RMBS")
In all cases the lowest ranking debt tranches are held for CLO and CDO
investments. As such, the Directors consider these investments pose a credit
risk, particularly as there is no active market for these assets and underlying
portfolio asset defaults are increasing and expected to continue. However as
these investments accounted for only 14 percent of the Group's revenue, the
Directors believe that the Group's cash flows would not be severely affected if
some of the counterparties defaulted on interest payments.
To mitigate against potential interest default and loss in value, investments
are managed on an ongoing basis as follows:
* Review of monthly reports.
* Daily monitoring of watch- listed companies in CLO portfolios.
* Monthly contact with CLO and CDO managers in particular to determine steps to
remedy defaults on covenants and performance of portfolio assets.
* Review of quarterly financial covenant compliance certificates.
* Regular contact with agent banks or in some instances the borrower directly, to
determine covenant compliance, trading status and performance.
* Regular contact with CEOs where equity is held.
* Attendance at board meetings where equity is held and we have a board seat.
However, there is no guarantee that these credit risk management procedures will
be able to limit potential loss in investment value or loss of income from
counterparties who default on their obligations. If any or the Group's
counterparties default on interest payments, the Group's revenues and
profitability will be adversely affected.
f) Liquidity risk
Liquidity risk is the risk that the Group will be unable to meet its financial
commitments.
During the year the Group repaid its borrowings and at 31 December 2008 the
Group had working capital of GBP23.0 million represented by GBP20.6 million of
cash, GBP5.1 million of short-term receivables and GBP2.7 million of short-term
liabilities.
The Group's policy is to ensure that it will always have sufficient cash to
allow it to meet its liabilities when they become due and to budget for a high
multiple of operating costs to revenue such that ongoing operating costs are
fully covered by the income currently generated by the Group's assets.
To monitor liquidity risk, the Board receives rolling 12 month cash flow
projections on a quarterly basis as well as information regarding cash balances
and indications of any potential defaults on income from its investments.
g) Capital risk management policies and objectives
Following the EGM on 17 July 2008, the Group's capital management policy and
objective is to return capital to shareholders by way of distributions.
7 Other operating expenses
Other operating expenses include the following amounts:
Services provided by the Group's auditor
During the year the Group obtained the following services from the Group's
auditors, Kingston Smith LLP and BDO Stoy Hayward LLP:
+--------------------------------------+---+----------+--+-----------+--+-----------+--+----------+
| | | | | | | | | |
+--------------------------------------+---+----------+--+-----------+--+-----------+--+----------+
| | | Group | | Group | | Company | | Company |
+--------------------------------------+---+----------+--+-----------+--+-----------+--+----------+
| | | 2008 | | 2007 | | 2008 | | 2007 |
+--------------------------------------+---+----------+--+-----------+--+-----------+--+----------+
| | | GBP | | GBP | | GBP | | GBP |
+--------------------------------------+---+----------+--+-----------+--+-----------+--+----------+
| Audit services | | | | | | | | |
+--------------------------------------+---+----------+--+-----------+--+-----------+--+----------+
| Statutory audit | | 161,203 | | 37,500 | | 125,745 | | 37,500 |
+--------------------------------------+---+----------+--+-----------+--+-----------+--+----------+
| | | | | | | | | |
+--------------------------------------+---+----------+--+-----------+--+-----------+--+----------+
| Non audit services | | | | | | | | |
+--------------------------------------+---+----------+--+-----------+--+-----------+--+----------+
| Taxation services | | 46,046 | | 13,081 | | 46,046 | | 13,081 |
+--------------------------------------+---+----------+--+-----------+--+-----------+--+----------+
| Other services | | 48,922 | | 15,550 | | 34,426 | | 15,550 |
+--------------------------------------+---+----------+--+-----------+--+-----------+--+----------+
| | | 256,170 | | 66,131 | | 206,217 | | 66,131 |
+--------------------------------------+---+----------+--+-----------+--+-----------+--+----------+
Staff costs
Staff costs (including Directors) comprise:
+--------------------------------------+---+------------+--+------------+
| | | Group | | Group |
+--------------------------------------+---+------------+--+------------+
| | | 2008 | | 2007 |
+--------------------------------------+---+------------+--+------------+
| | | GBP | | GBP |
+--------------------------------------+---+------------+--+------------+
| | | | | |
+--------------------------------------+---+------------+--+------------+
| Wages and salaries | | 1,482,045 | | 1,224,323 |
+--------------------------------------+---+------------+--+------------+
| Social security costs | | 381,553 | | 150,487 |
+--------------------------------------+---+------------+--+------------+
| | | 1,863,598 | | 1,374,810 |
+--------------------------------------+---+------------+--+------------+
| | | | | |
+--------------------------------------+---+------------+--+------------+
| Number of employees | | 13 | | 12 |
+--------------------------------------+---+------------+--+------------+
See note 21 for details of share based payments.
Director emoluments
+--------------------------------------+---+----------+--+-----------+
| | | Group | | Group |
+--------------------------------------+---+----------+--+-----------+
| | | 2008 | | 2007 |
+--------------------------------------+---+----------+--+-----------+
| | | GBP | | GBP |
+--------------------------------------+---+----------+--+-----------+
| Aggregate emoluments (Directors' | | 462,641 | | 572,000 |
| fees) | | | | |
+--------------------------------------+---+----------+--+-----------+
The Company had five Directors at 31 December 2008 (2007: nine Directors)
Bad debts
+--------------------------------------+---+------------+--+-----------+--+------------+--+----------+
| | | Group | | Group | | Company | | Company |
+--------------------------------------+---+------------+--+-----------+--+------------+--+----------+
| | | 2008 | | 2007 | | 2008 | | 2007 |
+--------------------------------------+---+------------+--+-----------+--+------------+--+----------+
| | | GBP | | GBP | | GBP | | GBP |
+--------------------------------------+---+------------+--+-----------+--+------------+--+----------+
| Bad debt expense | | 4,229,019 | | - | | 2,252,080 | | - |
+--------------------------------------+---+------------+--+-----------+--+------------+--+----------+
8 Net finance costs
+--------------------------------------+---+-------------+--+-------------+--+-----------+--+-------------+
| | | Group | | Group | | Company | | Company |
+--------------------------------------+---+-------------+--+-------------+--+-----------+--+-------------+
| | | 2008 | | 2007 | | 2008 | | 2007 |
+--------------------------------------+---+-------------+--+-------------+--+-----------+--+-------------+
| | | GBP | | GBP | | GBP | | GBP |
+--------------------------------------+---+-------------+--+-------------+--+-----------+--+-------------+
| Finance income | | | | | | | | |
+--------------------------------------+---+-------------+--+-------------+--+-----------+--+-------------+
| Interest received on bank deposits | | (2,247,272) | | (2,243,316) | | (968,896) | | (2,243,316) |
+--------------------------------------+---+-------------+--+-------------+--+-----------+--+-------------+
| | | | | | | | | |
+--------------------------------------+---+-------------+--+-------------+--+-----------+--+-------------+
| Finance expense | | | | | | | | |
+--------------------------------------+---+-------------+--+-------------+--+-----------+--+-------------+
| Interest payable on bank borrowings | | 1,276,537 | | 322,064 | | 690,543 | | 322,064 |
+--------------------------------------+---+-------------+--+-------------+--+-----------+--+-------------+
| Break costs | | 5,626,517 | | - | | 2,791,754 | | - |
+--------------------------------------+---+-------------+--+-------------+--+-----------+--+-------------+
| | | 6,903,054 | | 322,064 | | 3,482,297 | | 322,064 |
+--------------------------------------+---+-------------+--+-------------+--+-----------+--+-------------+
| | | | | | | | | |
+--------------------------------------+---+-------------+--+-------------+--+-----------+--+-------------+
| Net finance cost (income) | | 4,655,782 | | (1,921,252) | | 2,513,401 | | (1,921,252) |
+--------------------------------------+---+-------------+--+-------------+--+-----------+--+-------------+
9 Income taxes
The income tax charge represents UK corporation tax at a standard rate of 30
percent chargeable on the profits arising in ACP Capital (UK) Limited, the
controlling partner of the Group's adviser, ACP Capital UK LLP.
The Company and a number of the subsidiaries are registered in Jersey as exempt
companies and are, therefore, not liable to Jersey income tax on profits derived
outside Jersey. Confirmation has been obtained from the Comptroller of Income
Tax in Jersey that, by concession, the companies will be liable to tax in Jersey
only in respect of income, other than bank interest income, arising in Jersey.
During the year no income, other than bank interest income, arose in Jersey.
With effect from the 2009 year of assessment Jersey abolished the exempt company
regime for existing companies. Profits arising in the Group for the 2009 year of
assessment and future periods will be subject to tax at the rate of 0%. In the
prior year the Group was exempt from taxation under the provisions of Article
123A of the Income Tax (Jersey) Law 1961 as amended.
10 Investments measured at fair value through profit or loss
+--------------------------------------+---+--------------+--+---------------+--+---------------+--+---------------+
| | | Group | | Group | | Company | | Company |
+--------------------------------------+---+--------------+--+---------------+--+---------------+--+---------------+
| | | 2008 | | 2007 | | 2008 | | 2007 |
+--------------------------------------+---+--------------+--+---------------+--+---------------+--+---------------+
| | | GBP | | GBP | | GBP | | GBP |
+--------------------------------------+---+--------------+--+---------------+--+---------------+--+---------------+
| Opening balance | | 165,522,198 | | 62,281,436 | | 165,522,198 | | 62,281,436 |
+--------------------------------------+---+--------------+--+---------------+--+---------------+--+---------------+
| Additions | | 8,498,225 | | 218,497,716 | | 46,946,526 | | 218,497,716 |
+--------------------------------------+---+--------------+--+---------------+--+---------------+--+---------------+
| Interest income accrued | | 199,966 | | - | | - | | - |
+--------------------------------------+---+--------------+--+---------------+--+---------------+--+---------------+
| Fair value of investments of | | 46,600,479 | | - | | - | | - |
| subsidiary on acquisition | | | | | | | | |
+--------------------------------------+---+--------------+--+---------------+--+---------------+--+---------------+
| Write back of brought forward parent | | (31,054,816) | | - | | - | | - |
| company investment in subsidiary on | | | | | | | | |
| acquisition | | | | | | | | |
+--------------------------------------+---+--------------+--+---------------+--+---------------+--+---------------+
| Disposals | | (3,306,858) | | (102,578,606) | | (2,871,701) | | (102,578,606) |
+--------------------------------------+---+--------------+--+---------------+--+---------------+--+---------------+
| Movement in fair value of | | (70,487,188) | | (12,678,348) | | (102,901,782) | | (12,678,348) |
| investments | | | | | | | | |
+--------------------------------------+---+--------------+--+---------------+--+---------------+--+---------------+
| Closing balance | | 115,972,005 | | 165,522,198 | | 106,695,241 | | 165,522,198 |
+--------------------------------------+---+--------------+--+---------------+--+---------------+--+---------------+
| | | | | | | | | |
+--------------------------------------+---+--------------+--+---------------+--+---------------+--+---------------+
| Disclosed in current assets | | 2,228,496 | | 845,927 | | 1,507,955 | | 845,927 |
+--------------------------------------+---+--------------+--+---------------+--+---------------+--+---------------+
| Disclosed in non-current assets | | 113,743,509 | | 164,676,271 | | 105,187,286 | | 164,676,271 |
+--------------------------------------+---+--------------+--+---------------+--+---------------+--+---------------+
| | | 115,972,005 | | 165,522,198 | | 106,695,241 | | 165,522,198 |
+--------------------------------------+---+--------------+--+---------------+--+---------------+--+---------------+
The fair value of listed investments is based on quoted market price at the
balance sheet date. The fair value of unlisted investments is determined by
using indicative prices or valuation techniques.
11 Loans and receivables
+------------------------------------+---+--------------+--+--------------+--+--------------+--+--------------+
| | | Group | | Group | | Company | | Company |
+------------------------------------+---+--------------+--+--------------+--+--------------+--+--------------+
| | | 2008 | | 2007 | | 2008 | | 2007 |
+------------------------------------+---+--------------+--+--------------+--+--------------+--+--------------+
| | | GBP | | GBP | | GBP | | GBP |
+------------------------------------+---+--------------+--+--------------+--+--------------+--+--------------+
| Opening balance | | 15,912,561 | | 13,588,149 | | 15,912,561 | | 13,588,149 |
+------------------------------------+---+--------------+--+--------------+--+--------------+--+--------------+
| Additions | | - | | 15,436,209 | | - | | 15,436,209 |
+------------------------------------+---+--------------+--+--------------+--+--------------+--+--------------+
| Fair value of loans and | | 40,916,553 | | - | | - | | - |
| receivables of subsidiary on | | | | | | | | |
| acquisition | | | | | | | | |
+------------------------------------+---+--------------+--+--------------+--+--------------+--+--------------+
| Repayments | | - | | (13,465,066) | | - | | (13,465,066) |
+------------------------------------+---+--------------+--+--------------+--+--------------+--+--------------+
| Interest income accrued | | - | | 24,261 | | - | | 24,261 |
+------------------------------------+---+--------------+--+--------------+--+--------------+--+--------------+
| Impairment of loans and | | (9, 412,454) | | 329,008 | | (9, 412,454) | | 329,008 |
| receivables | | | | | | | | |
+------------------------------------+---+--------------+--+--------------+--+--------------+--+--------------+
| Transfer to Available-for-sale | | (47,416,660) | | - | | (6,500,107) | | - |
| investments | | | | | | | | |
+------------------------------------+---+--------------+--+--------------+--+--------------+--+--------------+
| Closing balance | | - | | 15,912,561 | | - | | 15,912,561 |
+------------------------------------+---+--------------+--+--------------+--+--------------+--+--------------+
Loans and receivables are carried at amortised cost using the effective interest
rate method, less provision for impairment. Impairment provisions are recognised
when there is objective evidence (such as significant financial difficulties on
the part of the counterparty or default or significant delay in payment) that
the Group will be unable to collect all of the amounts due under the terms
receivable, the amount of such provision being the difference between the net
carrying amount and the present value of the future expected cash flows
associated with the impaired receivable.
12 Available-for-sale investments
+---------------------------------+--+----------------+--+----------+--+---------------+--+---------+
| | | Group | | Group | | Company | | Company |
+---------------------------------+--+----------------+--+----------+--+---------------+--+---------+
| | | 2008 | | 2007 | | 2008 | | 2007 |
+---------------------------------+--+----------------+--+----------+--+---------------+--+---------+
| | | GBP | | GBP | | GBP | | GBP |
+---------------------------------+--+----------------+--+----------+--+---------------+--+---------+
| | | | | | | | | |
+---------------------------------+--+----------------+--+----------+--+---------------+--+---------+
| Transfer from loans and | | 47,416,660 | | - | | 6,500,107 | | - |
| receivables | | | | | | | | |
+---------------------------------+--+----------------+--+----------+--+---------------+--+---------+
| Additions | | 1,520,190 | | - | | - | | - |
+---------------------------------+--+----------------+--+----------+--+---------------+--+---------+
| Interest income accrued | | 38,644 | | - | | - | | - |
+---------------------------------+--+----------------+--+----------+--+---------------+--+---------+
| Impairment of | | (24,389,600) | | - | | (3,334,133) | | - |
| Available-for-sale investments | | | | | | | | |
+---------------------------------+--+----------------+--+----------+--+---------------+--+---------+
| Closing balance | | 24,585,894 | | - | | 3,165,974 | | - |
+---------------------------------+--+----------------+--+----------+--+---------------+--+---------+
Following the EGM on 17 July 2008, the Company announced that it would seek to
dispose of its assets and distribute proceeds to its shareholders by way of
distributions. Accordingly assets previously disclosed as Loans and receivables
have been reclassified to Available-for-sale investments.
Available-for-sale investments are carried at fair value which is determined by
using indicative prices.
Where the valuation of an asset was based on an average of indicative prices, if
the lowest price had been used then the value of the Group's Available-for-sale
investments at 31 December 2008 would have been GBP2.17million lower (GBP2.17
million greater if highest price used).
Where the valuation of an asset was based on an average of indicative prices, if
the lowest price had been used then the value of the Company's
Available-for-sale investments at 31 December 2008 would have been GBP0.54
million lower (GBP0.54 million greater if highest price used).
13 Property, plant and equipment
+--------------------------------------+----------+----------+----------+-----------+
| | | Group | | Company |
+--------------------------------------+----------+----------+----------+-----------+
| | | GBP | | GBP |
+--------------------------------------+----------+----------+----------+-----------+
| Cost | | | | |
+--------------------------------------+----------+----------+----------+-----------+
| Brought forward at 1January 2008 | | 50,335 | | 26,790 |
+--------------------------------------+----------+----------+----------+-----------+
| Disposals | | (50,335) | | (26,790) |
+--------------------------------------+----------+----------+----------+-----------+
| Carried forward as at 31 December | | - | | - |
| 2008 | | | | |
+--------------------------------------+----------+----------+----------+-----------+
| | | | | |
+--------------------------------------+----------+----------+----------+-----------+
| Depreciation | | | | |
+--------------------------------------+----------+----------+----------+-----------+
| Brought forward at 1January 2008 | | 23,102 | | 17,342 |
+--------------------------------------+----------+----------+----------+-----------+
| Disposals | | (23,102) | | (17,342) |
+--------------------------------------+----------+----------+----------+-----------+
| Carried forward as at 31 December | | - | | - |
| 2008 | | | | |
+--------------------------------------+----------+----------+----------+-----------+
| | | | | |
+--------------------------------------+----------+----------+----------+-----------+
| Net book value as at 31 December | | - | | - |
| 2008 | | | | |
+--------------------------------------+----------+----------+----------+-----------+
+--------------------------------------+---+----------+--+-----------+
| Cost | | | | |
+--------------------------------------+---+----------+--+-----------+
| Brought forward at 1January 2007 | | 33,309 | | 17,728 |
+--------------------------------------+---+----------+--+-----------+
| Additions | | 17,026 | | 9,062 |
+--------------------------------------+---+----------+--+-----------+
| Carried forward as at 31 December | | 50,335 | | 26,790 |
| 2007 | | | | |
+--------------------------------------+---+----------+--+-----------+
| | | | | |
+--------------------------------------+---+----------+--+-----------+
| Depreciation | | | | |
+--------------------------------------+---+----------+--+-----------+
| Brought forward at 1January 2007 | | 8,522 | | 6,397 |
+--------------------------------------+---+----------+--+-----------+
| Charge for period | | 14,580 | | 10,945 |
+--------------------------------------+---+----------+--+-----------+
| Carried forward as at 31 December | | 23,102 | | 17,342 |
| 2007 | | | | |
+--------------------------------------+---+----------+--+-----------+
| | | | | |
+--------------------------------------+---+----------+--+-----------+
| Net book value as at 31 December | | 27,233 | | 9,448 |
| 2007 | | | | |
+--------------------------------------+---+----------+--+-----------+
The Group's property, plant and equipment was written down to GBPnil during the
year ended 31 December 2008.
14 Financial instruments by category
The accounting policies for financial instruments have been applied to line
items as follows:
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| Group | | | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| 2008 | | Assets | | Available | | Loans and | | Total |
| | | at fair | | for sale | |receivables | | |
| | | value | | assets | | | | |
| | | through | | | | | | |
| | | profit | | | | | | |
| | | or loss | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| | | GBP | | GBP | | GBP | | GBP |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| Assets as per balance sheet | | | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| Equity share investments | | 30,846,948 | | - | | - | | 30,846,948 |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| Preference share investments | | 28,187,503 | | - | | - | | 28,187,503 |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| Syndicated loans | | 56,937,555 | | - | | - | | 56,937,555 |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| Collateralised debt obligations | | - | | 1,433,820 | | - | | 1,433,820 |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| Collateralised loan obligations | | - | | 9,581,626 | | - | | 9,581,626 |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| SME loans | | - | | 13,307,622 | | - | | 13,307,622 |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| Residential Mortgage Backed | | - | | 262,826 | | - | | 262,826 |
| Securitisation | | | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| Trade and other receivables | | - | | - | | 5,105,434 | | 5,105,434 |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| Cash and cash equivalents | | - | | - | | 20,621,092 | | 20,621,092 |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| | | 115,972,005 | | 24,585,894 | | 25,726,526 | | 166,284,425 |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| | | | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| | | | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| | | Liabilities | | | | | | |
| | | held at | | | | | | |
| | | amortised | | | | | | |
| | | cost | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| | | GBP | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| | | | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| Liabilities as per balance sheet | | | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| Trade and other payables | | 2,519,643 | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| | | 2,519,643 | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| | | | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| 2007 | | Assets | | Available | | Loans and | | Total |
| | | at fair | | for sale | |receivables | | |
| | | value | | assets | | | | |
| | | through | | | | | | |
| | | profit | | | | | | |
| | | or loss | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| | | GBP | | GBP | | GBP | | GBP |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| Assets as per balance sheet | | | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| Equity share investments | | 113,724,024 | | - | | - | | 113,724,024 |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| Preference share investments | | 17,819,325 | | - | | - | | 17,819,325 |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| Syndicated loans | | 33,978,849 | | - | | - | | 33,978,849 |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| Collateralised debt obligations | | - | | - | | 10,382,733 | | 10,382,733 |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| Collateralised loan obligations | | - | | - | | 1,837,250 | | 1,837,250 |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| SME loans | | - | | - | | 3,692,578 | | 3,692,578 |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| Property, plant and equipment | | 27,233 | | - | | - | | 27,233 |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| Trade and other receivables | | - | | - | | 1,864,640 | | 1,864,640 |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| Cash and cash equivalents | | - | | - | | 59,855,959 | | 59,855,959 |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| | | 165,549,431 | | - | | 77,633,160 | | 243,182,591 |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| | | | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| | | | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| | | Liabilities | | | | | | |
| | | held at | | | | | | |
| | | amortised | | | | | | |
| | | cost | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| | | GBP | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| | | | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| Liabilities as per balance sheet | | | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| Trade and other payables | | 761,016 | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| Borrowings | | 9,188,157 | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| | | 9,949,173 | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| | | | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| | | | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| | | | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| | | | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| | | | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| | | | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| | | | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| | | | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| | | | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| | | | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| | | | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| | | | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| | | | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| Company | | | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| 2008 | | Assets | | Available | | Loans and | | Total |
| | | at fair | | for sale | |receivables | | |
| | | value | | assets | | | | |
| | | through | | | | | | |
| | | profit | | | | | | |
| | | or loss | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| | | GBP | | GBP | | GBP | | GBP |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| Assets as per balance sheet | | | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| Equity share investments | | 61,365,015 | | - | | - | | 61,365,015 |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| Preference share investments | | 12,786,063 | | - | | - | | 12,786,063 |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| Syndicated loans | | 32,544,163 | | - | | - | | 32,544,163 |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| Collateralised debt obligations | | - | | 709,920 | | - | | 709,920 |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| Collateralised loan obligations | | - | | 609,765 | | - | | 609,765 |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| SME loans | | - | | 1,846,289 | | - | | 1,846,289 |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| Trade and other receivables | | - | | - | | 3,874,645 | | 3,874,645 |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| Amounts owed from subsidiary | | - | | - | | 605,454 | | 605,454 |
| undertakings | | | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| Cash and cash equivalents | | - | | - | | 9,262,635 | | 9,262,635 |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| | | 106,695,241 | | 3,165,974 | | 3,874,645 | | 123,603,949 |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| | | | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| | | | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| | | Liabilities | | | | | | |
| | | held at | | | | | | |
| | | amortised | | | | | | |
| | | cost | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| | | GBP | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| | | | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| Liabilities as per balance sheet | | | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| Trade and other payables | | 2,002,477 | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| Amounts owed to subsidiary | | 4,567,060 | | | | | | |
| undertakings | | | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| Borrowings | | - | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| | | 6,569,537 | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| | | | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| 2007 | | Assets | | Available | | Loans and | | Total |
| | | at fair | | for sale | |receivables | | |
| | | value | | assets | | | | |
| | | through | | | | | | |
| | | profit | | | | | | |
| | | or loss | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| | | GBP | | GBP | | GBP | | GBP |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| Assets as per balance sheet | | | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| Equity share investments | | 113,724,024 | | - | | - | | 113,724,024 |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| Preference share investments | | 17,819,325 | | - | | - | | 17,819,325 |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| Syndicated loans | | 33,978,849 | | - | | - | | 33,978,849 |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| Collateralised debt obligations | | - | | - | | 10,382,733 | | 10,382,733 |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| Collateralised loan obligations | | - | | - | | 1,837,250 | | 1,837,250 |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| SME loans | | - | | - | | 3,692,578 | | 3,692,578 |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| Property, plant and equipment | | 9,448 | | - | | - | | 9,448 |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| Trade and other receivables | | - | | - | | 1,858,699 | | 1,858,699 |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| Cash and cash equivalents | | - | | - | | 59,141,431 | | 59,141,431 |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| | | 165,531,646 | | - | | 76,912,691 | | 242,444,337 |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| | | | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
| | | | | | | | | |
+--------------------------------------+---+--------------+--+-------------+--+-------------+--+--------------+
+--------------------------------------+---+-------------+--+-----------+--+-----------+--+----------+
| | |Liabilities | | | | | | |
| | | held at | | | | | | |
| | | amortised | | | | | | |
| | | cost | | | | | | |
+--------------------------------------+---+-------------+--+-----------+--+-----------+--+----------+
| | | GBP | | | | | | |
+--------------------------------------+---+-------------+--+-----------+--+-----------+--+----------+
| Liabilities as per balance sheet | | | | | | | | |
+--------------------------------------+---+-------------+--+-----------+--+-----------+--+----------+
| Trade and other payables | | 715,941 | | | | | | |
+--------------------------------------+---+-------------+--+-----------+--+-----------+--+----------+
| Borrowings | | 9,188,157 | | | | | | |
+--------------------------------------+---+-------------+--+-----------+--+-----------+--+----------+
| | | 9,904,098 | | | | | | |
+--------------------------------------+---+-------------+--+-----------+--+-----------+--+----------+
15 Trade and other receivables
+--------------------------------------+---+------------+--+------------+--+------------+--+------------+
| | | Group | | Group | | Company | | Company |
+--------------------------------------+---+------------+--+------------+--+------------+--+------------+
| | | 2008 | | 2007 | | 2008 | | 2007 |
+--------------------------------------+---+------------+--+------------+--+------------+--+------------+
| | | GBP | | GBP | | GBP | | GBP |
+--------------------------------------+---+------------+--+------------+--+------------+--+------------+
| Trade receivables | | 4,076,139 | | 1,645,603 | | 3,068,101 | | 1,639,662 |
+--------------------------------------+---+------------+--+------------+--+------------+--+------------+
| Amounts owed from subsidiary | | - | | - | | 605,454 | | - |
| undertakings (note 22) | | | | | | | | |
+--------------------------------------+---+------------+--+------------+--+------------+--+------------+
| Other receivables | | 955,276 | | 100,000 | | 790,042 | | 100,000 |
+--------------------------------------+---+------------+--+------------+--+------------+--+------------+
| Prepayments | | 74,019 | | 119,037 | | 16,501 | | 119,037 |
+--------------------------------------+---+------------+--+------------+--+------------+--+------------+
| | | 5,105,434 | | 1,864,640 | | 4,480,098 | | 1,858,699 |
+--------------------------------------+---+------------+--+------------+--+------------+--+------------+
Trade receivables include interest receivable on interest bearing assets. The
maximum exposure to credit risk at the reporting date is the fair value of each
class of receivable mentioned above. The Group does not hold any collateral as
security.
At 31 December 2008 trade and other receivables that were past due but not
impaired are detailed below, including ageing analysis. These relate to
customers with no default history.
+--------------------------------------+----------+----------+----------+-----------+----------+-----------+----------+----------+
| | | Group | | Group | | Company | | Company |
+--------------------------------------+----------+----------+----------+-----------+----------+-----------+----------+----------+
| | | 2008 | | 2007 | | 2008 | | 2007 |
+--------------------------------------+----------+----------+----------+-----------+----------+-----------+----------+----------+
| | | GBP | | GBP | | GBP | | GBP |
+--------------------------------------+----------+----------+----------+-----------+----------+-----------+----------+----------+
| 3-6 months | | 886,905 | | 100,000 | | 886,905 | | 100,000 |
+--------------------------------------+----------+----------+----------+-----------+----------+-----------+----------+----------+
At 31 December 2008 trade receivables of GBP537,119 (2007: GBPnil) were past due
and impaired. The amount of the provision as at 31 December was GBP134,000
(2007: GBPnil). The ageing of these receivables is as follows:
+--------------------------------------+----------+----------+----------+-----------+----------+-----------+----------+----------+
| | | Group | | Group | | Company | | Company |
+--------------------------------------+----------+----------+----------+-----------+----------+-----------+----------+----------+
| | | 2008 | | 2007 | | 2008 | | 2007 |
+--------------------------------------+----------+----------+----------+-----------+----------+-----------+----------+----------+
| | | GBP | | GBP | | GBP | | GBP |
+--------------------------------------+----------+----------+----------+-----------+----------+-----------+----------+----------+
| 6-12 months | | 537,119 | | - | | 537,119 | | - |
+--------------------------------------+----------+----------+----------+-----------+----------+-----------+----------+----------+
16 Loans and borrowings
+------------------------------------------+----------+--+------------+--+----------+--+------------+
| | Group | | Group | | Company | | Company |
+------------------------------------------+----------+--+------------+--+----------+--+------------+
| | 2008 | | 2007 | | 2008 | | 2007 |
+------------------------------------------+----------+--+------------+--+----------+--+------------+
| | GBP | | GBP | | GBP | | GBP |
+------------------------------------------+----------+--+------------+--+----------+--+------------+
| Loans and borrowings | - | | 9,188,157 | | - | | 9,188,157 |
+------------------------------------------+----------+--+------------+--+----------+--+------------+
The maturity profile of borrowings is as follows:
+--------------------------------------+---+----------+--+------------+--+-----------+--+------------+
| In the fifth year | | - | | 9,188,157 | | - | | 9,188,157 |
+--------------------------------------+---+----------+--+------------+--+-----------+--+------------+
The currency profile of borrowings is as follows:
+--------------------------------------+---+----------+--+------------+--+-----------+--+------------+
| Sterling | | - | | 4,500,000 | | - | | 4,500,000 |
+--------------------------------------+---+----------+--+------------+--+-----------+--+------------+
| Euro | | - | | 4,688,157 | | - | | 4,688,157 |
+--------------------------------------+---+----------+--+------------+--+-----------+--+------------+
| | | - | | 9,188,157 | | - | | 9,188,157 |
+--------------------------------------+---+----------+--+------------+--+-----------+--+------------+
17 Trade and other payables
+--------------------------------------+---+------------+--+-----------+--+------------+--+----------+
| | | Group | | Group | | Company | | Company |
+--------------------------------------+---+------------+--+-----------+--+------------+--+----------+
| | | 2008 | | 2007 | | 2008 | | 2007 |
+--------------------------------------+---+------------+--+-----------+--+------------+--+----------+
| | | GBP | | GBP | | GBP | | GBP |
+--------------------------------------+---+------------+--+-----------+--+------------+--+----------+
| Trade payables | | 450,909 | | 348,514 | | 327,120 | | 335,869 |
+--------------------------------------+---+------------+--+-----------+--+------------+--+----------+
| Amounts owed to subsidiary | | - | | - | | 4,567,060 | | - |
| undertakings (note 22) | | | | | | | | |
+--------------------------------------+---+------------+--+-----------+--+------------+--+----------+
| Accruals | | 2,068,735 | | 412,502 | | 1,675,357 | | 380,072 |
+--------------------------------------+---+------------+--+-----------+--+------------+--+----------+
| | | 2,519,643 | | 761,016 | | 6,569,537 | | 715,941 |
+--------------------------------------+---+------------+--+-----------+--+------------+--+----------+
18 Share capital
+--------------------------------------+---+--------------+--+-----------+--+--------------+--+----------+
| | | 2008 | | 2008 | | 2007 | | 2007 |
+--------------------------------------+---+--------------+--+-----------+--+--------------+--+----------+
| | | No. | | GBP | | No. | | GBP |
| | | (000s) | | | | (000s) | | |
+--------------------------------------+---+--------------+--+-----------+--+--------------+--+----------+
| Authorised share capital of 350 | | | | 350,000 | | | | 350,000 |
| million 0.1pence ordinary shares | | | | | | | | |
+--------------------------------------+---+--------------+--+-----------+--+--------------+--+----------+
| | | | | | | | | |
+--------------------------------------+---+--------------+--+-----------+--+--------------+--+----------+
| Issued and fully paid 0.1 pence | | | | | | | | |
| ordinary shares | | | | | | | | |
+--------------------------------------+---+--------------+--+-----------+--+--------------+--+----------+
| Brought forward | | 199,531,941 | | 199,531 | | 77,237,497 | | 77,237 |
+--------------------------------------+---+--------------+--+-----------+--+--------------+--+----------+
| Issued on placing | | - | | - | | 120,000,000 | | 120,000 |
+--------------------------------------+---+--------------+--+-----------+--+--------------+--+----------+
| Employee share awards | | - | | - | | 2,094,444 | | 2,094 |
+--------------------------------------+---+--------------+--+-----------+--+--------------+--+----------+
| Share options exercised | | 12,245,000 | | 12,245 | | 200,000 | | 200 |
+--------------------------------------+---+--------------+--+-----------+--+--------------+--+----------+
| Buy back of shares | | (3,435,000) | | (3,435) | | - | | - |
+--------------------------------------+---+--------------+--+-----------+--+--------------+--+----------+
| Carried forward | | 208,341,941 | | 208,341 | | 199,531,941 | | 199,531 |
+--------------------------------------+---+--------------+--+-----------+--+--------------+--+----------+
In the period the Group acquired 3,435,000 of the Company's own shares. The
share buy back was made at the prevailing market rates at the date of
transaction with the total cost being GBP2,881,330. 12,245,000 of shares were
issued at par when all outstanding share options vested in July 2008.
At 31 December 2008, 2,073,823 shares (2007: nil) at a total value of
GBP1,748,303 (2007: nil) were held for employee share awards.
19 Share premium
+--------------------------------------+---+----------+--+-----------+--+--------------+--+--------------+
| | | | | | | 2008 | | 2007 |
+--------------------------------------+---+----------+--+-----------+--+--------------+--+--------------+
| | | | | | | GBP | | GBP |
+--------------------------------------+---+----------+--+-----------+--+--------------+--+--------------+
| Brought forward | | | | | | 216,734,311 | | 69,231,328 |
+--------------------------------------+---+----------+--+-----------+--+--------------+--+--------------+
| Issued on placing | | | | | | - | | 150,119,800 |
+--------------------------------------+---+----------+--+-----------+--+--------------+--+--------------+
| Cost of share issue | | | | | | - | | (4,709,167) |
+--------------------------------------+---+----------+--+-----------+--+--------------+--+--------------+
| Share options and awards granted | | | | | | - | | 2,092,350 |
+--------------------------------------+---+----------+--+-----------+--+--------------+--+--------------+
| Capital distribution | | | | | | (8,333,679) | | - |
+--------------------------------------+---+----------+--+-----------+--+--------------+--+--------------+
| Carried forward | | | | | | 208,400,632 | | 216,734,311 |
+--------------------------------------+---+----------+--+-----------+--+--------------+--+--------------+
20 Earnings per share
The calculation of the basic earnings and diluted earnings per share
attributable to the equity shareholders of the Company is based on the following
data:
+--------------------------------------+---+--------------+--+--------------+--+---------------+--+--------------+
| | | | | | | | | |
+--------------------------------------+---+--------------+--+--------------+--+---------------+--+--------------+
| | | Group | | Group | | Company | | Company |
+--------------------------------------+---+--------------+--+--------------+--+---------------+--+--------------+
| | | 2008 | | 2007 | | 2008 | | 2007 |
+--------------------------------------+---+--------------+--+--------------+--+---------------+--+--------------+
| | | GBP | | GBP | | GBP | | GBP |
+--------------------------------------+---+--------------+--+--------------+--+---------------+--+--------------+
| | | | | | | | | |
+--------------------------------------+---+--------------+--+--------------+--+---------------+--+--------------+
| (Loss) / earnings per share | | (93,692,121) | | 1,479,910 | | (101,615,095) | | 1,002,138 |
| attributable to the equity holders | | | | | | | | |
| of the Company during the year | | | | | | | | |
+--------------------------------------+---+--------------+--+--------------+--+---------------+--+--------------+
| | | | | | | | | |
+--------------------------------------+---+--------------+--+--------------+--+---------------+--+--------------+
| Weighted average number of ordinary | | 202,905,796 | | 173,535,776 | | 202,905,796 | | 173,535,776 |
| shares for the purposes of basic | | | | | | | | |
| earnings per share | | | | | | | | |
+--------------------------------------+---+--------------+--+--------------+--+---------------+--+--------------+
| | | | | | | | | |
+--------------------------------------+---+--------------+--+--------------+--+---------------+--+--------------+
| Effect of dilutive potential | | | | | | | | |
| ordinary shares: | | | | | | | | |
+--------------------------------------+---+--------------+--+--------------+--+---------------+--+--------------+
| Share options | | - | | 4,949,411 | | - | | 4,949,411 |
+--------------------------------------+---+--------------+--+--------------+--+---------------+--+--------------+
| | | | | | | | | |
+--------------------------------------+---+--------------+--+--------------+--+---------------+--+--------------+
| Weighted average number of ordinary | | 202,905,796 | | 178,485,187 | | 202,905,796 | | 178,485,187 |
| shares for the purposes of diluted | | | | | | | | |
| earnings per share | | | | | | | | |
+--------------------------------------+---+--------------+--+--------------+--+---------------+--+--------------+
21 Share based payments
The Company operates an executive share option scheme for Directors and certain
senior management.
+--------------------------------------+---+----------+--+----------------+--+-----------+--+--------------+
| | | 2008 | | 2008 | | 2007 | | 2007 |
+--------------------------------------+---+----------+--+----------------+--+-----------+--+--------------+
| | | GBP | | No. | | GBP | | No. |
+--------------------------------------+---+----------+--+----------------+--+-----------+--+--------------+
| | | Weighted | | | | Weighted | | |
| | | average | | | | average | | |
| | | exercise | | | | exercise | | |
| | | price | | | | price | | |
+--------------------------------------+---+----------+--+----------------+--+-----------+--+--------------+
| | | | | | | | | |
+--------------------------------------+---+----------+--+----------------+--+-----------+--+--------------+
| Outstanding at beginning of year | | | | 4,430,000 | | | | 4,430,000 |
+--------------------------------------+---+----------+--+----------------+--+-----------+--+--------------+
| Granted during the year | | | | 8,065,000 | | | | - |
+--------------------------------------+---+----------+--+----------------+--+-----------+--+--------------+
| Exercised during the year | | | | (12,245,000) | | | | - |
+--------------------------------------+---+----------+--+----------------+--+-----------+--+--------------+
| Lapsed during the year | | | | (250,000) | | | | - |
+--------------------------------------+---+----------+--+----------------+--+-----------+--+--------------+
| Outstanding at end of year | | 0.001 | | - | | 0.001 | | 4,430,000 |
+--------------------------------------+---+----------+--+----------------+--+-----------+--+--------------+
All options vested during the year. The exercise price of all options
outstanding as at 31 December 2007 was GBP0.001 per share.
All shares were exercised on 17 July 2008. The share price at that date was 63
pence.
The weighted average fair value of options granted during the year was 47 pence
(2007: no options granted).
The following information is relevant in the determination of the fair value of
options granted during the year (2007: no options granted) under the equity
share option scheme operated by the Group.
+--------------------------------------+---+----------+--+-----------+--+-----------+
| | | | | | | 2008 |
+--------------------------------------+---+----------+--+-----------+--+-----------+
| | | | | | | GBP |
+--------------------------------------+---+----------+--+-----------+--+-----------+
| Option pricing model used | | | | | | QCA - IRS |
| | | | | | | Option |
| | | | | | | value |
+--------------------------------------+---+----------+--+-----------+--+-----------+
| Weighted average share price at | | | | | | 0.855 |
| grant date | | | | | | |
+--------------------------------------+---+----------+--+-----------+--+-----------+
| Exercise price | | | | | | 0.001 |
+--------------------------------------+---+----------+--+-----------+--+-----------+
| Expected Life of Option (years) | | | | | | 3 |
+--------------------------------------+---+----------+--+-----------+--+-----------+
| | | | | | | |
+--------------------------------------+---+----------+--+-----------+--+-----------+
| Expected dividend yield | | | | | | 2% |
+--------------------------------------+---+----------+--+-----------+--+-----------+
| Expected volatility | | | | | | 5% |
+--------------------------------------+---+----------+--+-----------+--+-----------+
| Illiquid market discount | | | | | | 20% |
+--------------------------------------+---+----------+--+-----------+--+-----------+
| Discount due to market performance | | | | | | 20% |
| targets | | | | | | |
+--------------------------------------+---+----------+--+-----------+--+-----------+
The Company recognised the following total expenses and costs in respect of
equity settled share payments in the period.
+--------------------------------------+---+----------+--+-----------+--+------------+--+------------+
| | | | | | | 2008 | | 2007 |
+--------------------------------------+---+----------+--+-----------+--+------------+--+------------+
| | | | | | | GBP | | GBP |
+--------------------------------------+---+----------+--+-----------+--+------------+--+------------+
| Recognised immediately as an expense and charged to | | | | 6,043,952 | | 1,207,248 |
| Income statement | | | | | | |
+--------------------------------------+---+----------+--+-----------+--+------------+--+------------+
22 Related parties
In 2006, the Company entered into an Advisory Services agreement with the LLP.
Under the agreement, the LLP was appointed Advisor for an initial period of 5
years to provide investment advice to the Company. The annual management fee
chargeable by the Advisor is currently based on a fee of 120 percent of the
Advisor's budgeted costs for the year.
In 2006, ACPIM, a wholly owned subsidiary of ACP, entered into an Investment
Management Agreement with ACPM. Under the agreement, ACPIM was appointed
Investment Manager for an initial period of 3 years and given discretion to
manage the investment portfolio of ACPM subject to certain guidelines. The
period of appointment was extended to 7 years starting in December 2007. The
annual management fee chargeable by the Investment Manager is currently based on
1.75 percent of gross shareholders' equity, as reduced by returns of capital to
shareholders. Additionally, the Investment Manager is entitled to a performance
fee equivalent to 25 percent above the benchmark return (minimum 2 percent per
quarter).
Related party transactions between the Company and its subsidiaries are detailed
below:
+-----------------------------------------+--+-------------+--+------------+
| Balance due from/owed to subsidiaries at | | | |
| the balance sheet date: | | | |
+--------------------------------------------+-------------+--+------------+
| | | 2008 | | 2007 |
+-----------------------------------------+--+-------------+--+------------+
| | | GBP | | GBP |
+-----------------------------------------+--+-------------+--+------------+
| Due from: | | | | |
+-----------------------------------------+--+-------------+--+------------+
| ACP Mezzanine Limited | | 242,163 | | - |
+-----------------------------------------+--+-------------+--+------------+
| Mittelstand Kapital Solutions GmbH | | 5,552 | | - |
+-----------------------------------------+--+-------------+--+------------+
| ACP Capital (Cyprus) Limited | | 357,739 | | - |
+-----------------------------------------+--+-------------+--+------------+
| | | 605,454 | | - |
+-----------------------------------------+--+-------------+--+------------+
| Owed to: | | | | |
+-----------------------------------------+--+-------------+--+------------+
| ACP Capital UK LLP | | 822,743 | | - |
+-----------------------------------------+--+-------------+--+------------+
| ACP Investment Management Limited | | 3,744,317 | | - |
+-----------------------------------------+--+-------------+--+------------+
| | | 4,567,060 | | - |
+-----------------------------------------+--+-------------+--+------------+
| | | | | |
+-----------------------------------------+--+-------------+--+------------+
| Income and expense transactions with subsidiaries during the year |
| were as follows: |
+--------------------------------------------------------------------------+
| | | 2008 | | 2007 |
+-----------------------------------------+--+-------------+--+------------+
| | | GBP | | GBP |
+-----------------------------------------+--+-------------+--+------------+
| Income | | | | |
+-----------------------------------------+--+-------------+--+------------+
| Dividend received from ACP Mezzanine | | 3,238,860 | | 2,149,072 |
| Limited | | | | |
+-----------------------------------------+--+-------------+--+------------+
| Distribution received from ACP | | 13,089,746 | | - |
| Mezzanine Limited | | | | |
+-----------------------------------------+--+-------------+--+------------+
| Dividend received from ACP Capital | | 1,092,518 | | - |
| (Cyprus) Limited | | | | |
+-----------------------------------------+--+-------------+--+------------+
| | | | | |
+-----------------------------------------+--+-------------+--+------------+
| Expenses | | | | |
+-----------------------------------------+--+-------------+--+------------+
| Advisory fee from ACP Capital UK LLP | | 2,095,340 | | 1,457,610 |
+-----------------------------------------+--+-------------+--+------------+
| Recharged expenses from Mittelstand | | 18,698 | | - |
| Kapital Solutions GmbH | | | | |
+-----------------------------------------+--+-------------+--+------------+
The Company has 9,141,200 (2007: 10,141,200) options to purchase ordinary shares
in ACPM at an exercise price of EUR1.00 per share. The options are fully vested
and exercisable between January 2008 and July 2011.
In the prior year, loans and receivables with an amortised cost of EUR7,978,284
were transferred from ACPM to the Company.
In the prior year, the Company loaned Eric Youngblood, a former director of the
Company, GBP100,000. This loan remains unpaid at the year end.
23 Subsidiaries
The Group has the following subsidiaries:
+------------------------------------+--+----------+--+--+--+------------+--+-------------------------+
| Name | | Country of | |Percentage | | Principal activity |
| | | incorporation | | owned | | |
| | | and | | | | |
| | | registration | | | | |
+------------------------------------+--+----------------+--+------------+--+-------------------------+
| ACP Mezzanine Limited | | Jersey | | | | 54.17% | | Mezzanine assets and |
| | | | | | | | | other investments |
+------------------------------------+--+----------+--+--+--+------------+--+-------------------------+
| | | | | | | | | |
+------------------------------------+--+----------+--+--+--+------------+--+-------------------------+
| ACP Mezzanine (UK) Limited | | England | | | | 54.17% | | Investment holdings |
| | | & Wales | | | | | | |
+------------------------------------+--+----------+--+--+--+------------+--+-------------------------+
| | | | | | | | | |
+------------------------------------+--+----------+--+--+--+------------+--+-------------------------+
| ACP Mezzanine Asset Holdings 1 | | Jersey | | | | 54.17% | | Dormant |
| Limited | | | | | | | | |
+------------------------------------+--+----------+--+--+--+------------+--+-------------------------+
| | | | | | | | | |
+------------------------------------+--+----------+--+--+--+------------+--+-------------------------+
| ACP Mezzanine Asset Holdings 2 | | Jersey | | | | 54.17% | | Dormant |
| Limited | | | | | | | | |
+------------------------------------+--+----------+--+--+--+------------+--+-------------------------+
| | | | | | | | | |
+------------------------------------+--+----------+--+--+--+------------+--+-------------------------+
| ACP Investment Management Limited | | Jersey | | | | 100% | | Investment manager |
+------------------------------------+--+----------+--+--+--+------------+--+-------------------------+
| | | | | | | | | |
+------------------------------------+--+----------+--+--+--+------------+--+-------------------------+
| ACP Capital Nominee Limited | | Jersey | | | | 100% | | Trustee for employee |
| | | | | | | | | awards |
+------------------------------------+--+----------+--+--+--+------------+--+-------------------------+
| | | | | | | | |
+------------------------------------+--+-------------+--+--+------------+--+-------------------------+
| ACP Capital UK LLP | | England & | | | 100% | | Advisory services |
| | | Wales | | | | | |
+------------------------------------+--+-------------+--+--+------------+--+-------------------------+
| | | | | | | | |
+------------------------------------+--+-------------+--+--+------------+--+-------------------------+
| ACP Capital (UK) Limited | | England & | | | 100% | | Controlling member of |
| | | Wales | | | | | the LLP |
+------------------------------------+--+-------------+--+--+------------+--+-------------------------+
| | | | | | | | | |
+------------------------------------+--+----------+--+--+--+------------+--+-------------------------+
| ACP Capital Cyprus (HR) limited | | Cyprus | | | | 100% | | Ceased trading in 2008. |
| [insolvency proceedings] | | | | | | | | Used to be employment |
+------------------------------------+--+----------+--+--+--+------------+--+-------------------------+
| | | | | | | | | |
+------------------------------------+--+----------+--+--+--+------------+--+-------------------------+
| ACP Capital (Cyprus) Limited | | Cyprus | | | | 100% | | Investment holdings |
+------------------------------------+--+----------+--+--+--+------------+--+-------------------------+
| | | | | | | | | |
+------------------------------------+--+----------+--+--+--+------------+--+-------------------------+
| Perseus Holdings Limited | | Jersey | | | | 100% | | Investment holdings |
+------------------------------------+--+----------+--+--+--+------------+--+-------------------------+
| | | | | | | | | |
+------------------------------------+--+----------+--+--+--+------------+--+-------------------------+
| Mittelstand Kapital Solutions GmbH | | Germany | | | | 100% | | Ceased trading in 2008. |
| [insolvency proceedings] | | | | | | | | Used to be advisory |
| | | | | | | | | services |
+------------------------------------+--+----------+--+--+--+------------+--+-------------------------+
24 Acquisitions during the year
In June 2008, ACP exercised options as part of an Option Deed to acquire
1,000,000 shares in ACPM at EUR1.00 per share. The Company also subscribed for
79,219,798 shares as part of ACPM's secondary placing of 133,333,333 shares for
a consideration of GBP38,453,274. The Company had previously acquired 46.35
percent of ACPM in July 2006 for GBP32,106,018 and acquired a further 0.47
percent in June 2007 for GBP162,591.
The initial investment was included in the accounts at market value. The
transactions in June 2008 resulted in ACP holding a controlling interest of
54.17 percent. As the holding is now in excess of 50 percent, ACPM is accounted
for as a subsidiary of the Company.
The net assets acquired in these transactions, and the goodwill arising, are as
follows:
+------------------------------------------+-------------+--+-------------+--+--------------+
| | July | | June | | June |
| | 2006 | | 2007 | | 2008 |
+------------------------------------------+-------------+--+-------------+--+--------------+
| | GBP | | GBP | | GBP |
+------------------------------------------+-------------+--+-------------+--+--------------+
| | | | | | |
+------------------------------------------+-------------+--+-------------+--+--------------+
| Investments measured at fair value | - | | | | 44,553,053 |
| through profit or loss | | | | | |
+------------------------------------------+-------------+--+-------------+--+--------------+
| Loans and receivables | - | | | | 42,963,979 |
+------------------------------------------+-------------+--+-------------+--+--------------+
| Trade and other receivables | - | | | | 1,487,969 |
+------------------------------------------+-------------+--+-------------+--+--------------+
| Cash and cash equivalents | 68,310,677 | | 67,746,089 | | 71,392,189 |
+------------------------------------------+-------------+--+-------------+--+--------------+
| Loans and borrowings | - | | | | (37,647,258) |
+------------------------------------------+-------------+--+-------------+--+--------------+
| Trade and other payables | (1,691,658) | | (1,677,676) | | (3,256,653) |
+------------------------------------------+-------------+--+-------------+--+--------------+
| | | | | | |
+------------------------------------------+-------------+--+-------------+--+--------------+
| Acquiree's fair value of net assets | 66,619,019 | | 66,068,413 | | 119,493,279 |
| before combination | | | | | |
+------------------------------------------+-------------+--+-------------+--+--------------+
| | | | | | |
+------------------------------------------+-------------+--+-------------+--+--------------+
| Fair value of share of net assets | 30,874,984 | | 312,713 | | 40,661,363 |
| acquired | | | | | |
+------------------------------------------+-------------+--+-------------+--+--------------+
| | | | | | |
+------------------------------------------+-------------+--+-------------+--+--------------+
| Goodwill | 1,231,034 | | (150,122) | | (2,208,089) |
+------------------------------------------+-------------+--+-------------+--+--------------+
| | | | | | |
+------------------------------------------+-------------+--+-------------+--+--------------+
| Consideration | 32,106,018 | | 162,591 | | 38,453,274 |
+------------------------------------------+-------------+--+-------------+--+--------------+
| | | | | | |
+------------------------------------------+-------------+--+-------------+--+--------------+
| Net cash inflow arising on acquisition: | | | | | |
+------------------------------------------+-------------+--+-------------+--+--------------+
| Cash consideration paid | | | | | (38,453,274) |
+------------------------------------------+-------------+--+-------------+--+--------------+
| Cash and cash equivalents acquired | | | | | 71,392,189 |
+------------------------------------------+-------------+--+-------------+--+--------------+
| | | | | | 32,938,915 |
+------------------------------------------+-------------+--+-------------+--+--------------+
ACP's investment in ACPM had previously been carried in the balance sheet at
fair value. In acquiring a controlling stake, GBP3,175,420 of fair value losses
and GBP822,796 of foreign exchange gains that were recognised in prior periods,
have been written back to the Income Statement in the current period.
In accordance with the requirements of IFRS 3 in accounting for piecemeal
acquisitions, a total of GBP1,127,177 of negative goodwill arose on the
acquisition of ACPM. The negative goodwill arising is attributable to the
acquisition of the shares at a discount to ACPM's net asset value.
The loss incurred by ACPM in the period between the date of acquisition and the
balance sheet date was GBP43.7million.
If the acquisition had been completed on 1 January 2008, total Group revenue for
the period would have been negative GBP52.6 million and losses for the period
would have been GBP123.8 million.
25 Dividends
+------------------------------------------+----+--+--+----------+--+------------+--+------------+
| | | | | | 2008 | | 2007 |
+------------------------------------------+-------+--+----------+--+------------+--+------------+
| Interim dividends paid in the period | | | | | GBP | | GBP |
+------------------------------------------+-------+--+----------+--+------------+--+------------+
| Year ended 31 December 2007 - paid | | | | | - | | 1,994,654 |
| February 2007 | | | | | | | |
+------------------------------------------+-------+--+----------+--+------------+--+------------+
| Year ended 31 December 2008 - paid April | | | | | 6,983,618 | | - |
| 2008 | | | | | | | |
+------------------------------------------+-------+--+----------+--+------------+--+------------+
| | | | | | 6,983,618 | | 1,994,654 |
+------------------------------------------+-------+--+----------+--+------------+--+------------+
| The Company additionally made a capital | | | | | | | |
| distribution of 8,333,679 (2007: GBPnil). | | | | | | | |
+-----------------------------------------------+--+--+----------+--+------------+--+------------+
| | | | | | | | |
+------------------------------------------+-------+--+----------+--+------------+--+------------+
| | | | | | | | |
+------------------------------------------+----+--+--+----------+--+------------+--+------------+
26 Post balance sheet events
On 15 January 2009, the Company sold its 40 percent shareholding in GCI
Automotive Holding GmbH for GBP3.40 million (EUR3.75 million) resulting in a
profit on disposal of GBP0.78 million (EUR0.86 million.) As part of this same
transaction, ACPM sold its subordinated debt investment in GCI Automotive
Holding GmbH for GBP2.72 million (EUR3 million) plus accrued interest, with
successful 17.5 IRR on gained interest.
On 4 February 2009, ACPM sold its participation in the Iceland Foods Group
Limited mezzanine loan for GBP3.8 million with accrued interest.
On 3 March 2009, ACP received its share of a distribution made by ACPM in the
amount of EUR1.9 million.
On 6 March 2009, ACP made a distribution to shareholders of 4.5 pence per share
(GBP9.4 million in total).
27 Cash and cash equivalents
Cash and cash equivalents comprise:
+--------------------------------------+---+-------------+--+-------------+--+------------+--+-------------+
| | | Group | | Group | | Company | | Company |
+--------------------------------------+---+-------------+--+-------------+--+------------+--+-------------+
| | | 2008 | | 2007 | | 2008 | | 2007 |
+--------------------------------------+---+-------------+--+-------------+--+------------+--+-------------+
| | | GBP | | GBP | | GBP | | GBP |
+--------------------------------------+---+-------------+--+-------------+--+------------+--+-------------+
| Cash available on demand | | 20,621,300 | | 59,855,959 | | 9,262,635 | | 59,141,431 |
+--------------------------------------+---+-------------+--+-------------+--+------------+--+-------------+
| Overdrafts | | (208) | | - | | - | | - |
+--------------------------------------+---+-------------+--+-------------+--+------------+--+-------------+
| | | 20,621,092 | | 59,855,959 | | 9,262,635 | | 59,141,431 |
+--------------------------------------+---+-------------+--+-------------+--+------------+--+-------------+
28 Commitments
On 11 June 2008, ACPM made a commitment to a subsidiary of Leasecom Group SAS to
provide financing of up to EUR15 million. As at 31 December 2008, ACPM had
acquired notes totalling EUR5.85 million under this commitment.
The loans notes are issued at market rate and the maximum exposure to credit
risk on commitments at the reporting date is EUR9.15 million.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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