Half Yearly Report

 

TIDMEQPI TIDMEQPC 
 
RNS Number : 6392P 
Equity Partnership Inv Co PLC 
27 March 2009 
 
 
 
THE EQUITY PARTNERSHIP INVESTMENT COMPANY PLC 
(EPIC PLC"the Company") 
 
 
PRELIMINARY RESULTS ANNOUNCEMENT 
 
 
This is not the Company's Statutory Financial Statements. All figures are 
based on the unaudited financial statements for the period from 1 August 2008 to 
31 January 2009 
 
 
The preliminary announcement is prepared on the same basis as set out in 
the previous year's annual accounts. 
Chairman's Statement 
 
 
The first six months to 31 January 2009 has been another difficult period for 
the portfolio, resulting in a 39.97% decline in the Net Asset Value attributable 
to the Capital Shares. Again, the Small Cap Indices fell in excess of 30% over 
the period compared with the decline in the All Share Index of a little over 
24%.  Because of the capital structure and the inherent gearing behind the 
Capital Shares NAV has fallen by significantly more than these indices. 
 
 
Income Shareholders have received their full entitlement 6p over the half year. 
The portfolio continues to generate yields in excess of the Company's current 
dividend requirement and this, added to the significant income reserves, 
provides Income Shareholders with a high level of comfort that their dividends 
will be well covered until their redemption in July 2011. 
 
 
Because of the sharp deterioration in the outlook for the UK Economy the Board 
and its advisers have been particularly sensitive to the need to review the 
valuations of the unlisted equities and specialist funds. I am happy to report 
that the Private Equity portfolio appears to be progressing satisfactorily, as 
described in the Manager's Report. As a result there has been no necessity for 
any significant change in the valuation of holdings in this portfolio. However, 
elsewhere within the portfolio the Manager recommended significant write-downs 
on certain unlisted strategic investments and specialist funds. These have been 
reflected in the Capital Shares' NAV performance over the past six months. 
 
 
As the Company moves towards the final years of its initial life and following 
the recent dramatic falls in the markets, the Board are keen to ensure that the 
portfolio's investments are accurately valued. Where we believe there has 
been impairment, this has been reflected in the carrying values of the 
underlying investments and, as many of our long-term investors will be aware, 
the Company has in the past not hesitated to write down valuations when 
circumstances dictate. However, given the current environment we do not believe 
it right to impose forced sale valuations in realisations of less illiquid 
investments given that the Fund is not in a position where it must raise short 
term liquidity from these segments of the portfolio. 
 
 
Asset Allocation Review 
 
 
Our regular quarterly updates provide Shareholders with detailed descriptions of 
individual holdings within our investment portfolio. From this and previous 
communications, Shareholders will understand that following the sharp fall in 
the value of our quoted investments the Fund is very much more heavily weighted 
towards unlisted investments than at any time in the Company's existence. Within 
this category I would also include those specialist funds and strategic 
investments that have private equity characteristics either in terms of risk or 
liquidity. 
 
 
Following the Continuation Vote and in the absence of alternative proposals we 
have a little over 30 months before we are required to repay approximately GBP47 
million to Zero and Income Shareholders, and the Board's focus will therefore 
increasingly be on the Fund's asset allocation and its access to liquidity. 
Moreover, there will be an increasing focus on the valuations of, and prospects 
for the Company's unquoted investments. 
EPIC's structure was designed specifically to address the conflicts that had 
previously been typical of closed-end investment funds with split capital 
structures. In particular, the relatively low yield requirement to service 
Income Shares avoided the need for the fund manager to allocate assets in a 
manner designed exclusively to generate income and they could therefore allocate 
assets with a greater degree of freedom to seek total return. 
 
 
Previous experience has shown how difficult it can be for Boards to arbitrate 
between the shareholders whose main interest is in generating the maximum amount 
of income and those who benefit from capital growth in the underlying assets. 
While there are periods when both objectives can be pursued in parallel, more 
often than not there will be a conflict between the two objectives. If one had 
to point to EPIC's greatest success over the past seven years it has been that 
the Board has seldom, if ever, been exercised by this issue and we now enjoy a 
situation where we have sufficient distributable reserves to cater for the 
Income Shares' likely dividend entitlements until their redemption in July 2011. 
 
 
We now have to address a potential conflict which was not contemplated at the 
time of launch. Eighteen months ago the Capital Shares enjoyed an NAV in excess 
of GBP1.30. As a result the GBP27 million final entitlement for the Zeros was 
more than 3x cover and the Income Share repayment of GBP20 million was covered 
2.5x. The volatility and liquidity of the underlying portfolio was therefore not 
of particular concern to Zero and Income Shareholders who had justifiable 
confidence in the Company's ability to repay them at the end of July 2011 
without the requirement to raise cash from the less liquid segments of the 
portfolio. 
 
 
Following the fall in the Company's NAV (resulting mostly from the collapse in 
the valuations of small and mid cap companies, and specifically those with an 
exposure to cyclical industries both in the UK and overseas), the prices of 
Income Shares and, to a lesser extent Zeros, are reflecting Shareholders' 
concerns that a liquidation of the less liquid assets will be required to effect 
full repayment in 2011 unless there is a meaningful recovery in the listed 
investments in the meantime. Following discussions between the Board, our 
Managers and advisers, we have concluded that while the Company should continue 
to be managed with a view to generating the growth required to generate an 
improvement of the Capital Shareholders' NAV, the portfolio should be gradually 
de-risked to ensure that in the absence of alternative proposals, the Zero and 
Income Shareholders can be repaid in full at the end of July 2011 and that 
Capital Shareholders' investments can be realised in an orderly manner. 
 
 
Future Asset Allocation Policy 
 
 
The Board and Managers are tasked with running the Company for the benefit of 
all underlying shareholders and so our job is to ensure that the interests of 
all three share classes are fairly represented in formulating future strategy 
and, as importantly, clearly communicated to shareholders to help the market to 
value the three constituent parts correctly. 
 
 
As I mentioned in my previous Statement, there may be a requirement to manage a 
rump of investments beyond 2011. We are unlikely to maximise value if we find 
ourselves in the position of forced sellers of illiquid assets into an 
unreceptive market. The position will be regularly reviewed and communicated to 
Shareholders so that they can see clearly both where their class of share ranks 
within the pecking order and the nature of the assets that they are relying upon 
to provide their return and eventual repayment. 
 
 
Given the historically low interest rates and government bond yields, the Board 
does not consider it appropriate to limit asset allocation of monies raised to 
minimum risk investments. The Fund's performance hurdle rate dictates that the 
Fund's assets should be exposed to investments that are likely to at least keep 
pace with the hurdle rate returns in order not to erode the value for 
Shareholders over the next 30 months. 
 
 
Despite continuing uncertainty concerning the length and depth of the current 
downturn, any recovery in the stock markets over the next two years is likely to 
precede any upturn in underlying economic conditions. There are listed companies 
with sound underlying balance sheets and the ability to service and even 
increase dividends which, against a background of almost a zero return from the 
minimum risk asset classes, are at some stage likely to enjoy a significant 
recovery. Moreover, the quoted equity portfolio retains exposures to small 
companies whose share prices, if they survive, are likely to also recover 
strongly in advance of any perceived economic upturn. 
 
 
However, it will be the success of our Manager in realising value from the 
private equity portfolio over the next 30 months that is likely to have the 
greatest influence on the Capital Shares' NAV and provide an increase in cover 
for the final entitlements due to Zero and Income Shareholders. 
 
 
In summary, the Board's recommended asset allocation parameters are as follows: 
 
· No new investments will be introduced to the unquoted portfolio. 
· Any further bolt-on investments to the current portfolio must be bought with a 
view to providing a demonstrable exit opportunity before the end of 2011. 
· No illiquid funds will be purchased without prior reference to the Board. 
· Money raised through sales of unquoted investments will be recommitted to 
liquid funds, equities, cash or bonds with a view to matching or exceeding the 
Company's hurdle rate. 
· If further money is committed to equities, the profile of the UK equity 
portfolio will move away from current small cap focus towards liquid medium and 
larger capitalised equities over the next two years. 
 
Although neither option is under active consideration at the time of writing, 
the Board's focus on an appropriate asset allocation strategy will not be to the 
exclusion of alternative measures which we will be considering with a view to 
improving the liquidity of the three Share Classes, including possible capital 
restructuring or merger with another company if we believe this is in the best 
interests of all Shareholders. 
 
 
Finally, I would again stress the Company's conservative valuation strategy 
which in the current economic circumstances seems particularly appropriate and 
offers the potential for some significant upside as unquoted investments are 
realised over the next three years. 
 
 
After what has been a particularly testing time for the Company we would welcome 
a period of decreased market uncertainty and volatility and, most importantly, a 
period when markets provide a positive use for the Company's structural 
leverage. 
 
 
 
 
Investment Manager's Report 
 
 
Market Commentary 
 
 
The beginning of the period saw one of the most volatile and event filled 
quarters in financial market history, with a multitude of news releases 
regarding troubled financial institutions, authorities' actions to help repair 
the dislocations in the money markets, and the attention of market participants 
shifting from inflation to concerns regarding the health of the financial 
sector. The real global economy continued to show signs of contraction with 
unemployment rates beginning to creep upwards, while inflation pressures started 
to abate due to the retreat of energy and other commodity prices from their 
highs of recent months. As a result of the uncertainty over both sides of banks' 
balance sheets, inter-bank lending rates soared in the major markets. 
 
 
In a manner unseen since the Great Depression, fear, uncertainty and risk 
aversion destroyed asset values in every category other than Government bonds, 
which benefited from the resultant 'flight to quality'. The collapsing oil price 
from mid-year onwards together with the mistaken decision to permit Lehman 
Brothers to collapse forced central banks in Q4 to focus upon the real economic 
problems as opposed to inflation. Q4 witnessed an unprecedented co-ordinated 
easing of monetary and fiscal policy as policy makers world wide belatedly 
fought to prevent the financial crisis from spreading into the wider economy. 
The result, in addition to historically low interest rates and massive projected 
fiscal deficits, was previously an unimaginable level of intervention by 
governments in all sectors of the private economy. In a desperate effort to save 
the capitalist system, particularly in America, authorities re-invented it in an 
ad hoc way and with little philosophical debate. 
 
 
Quoted Equity 
 
 
UK Equity markets suffered another difficult six months with the FTSE all Share 
Index losing 24.3%. The severity of the fall was the result of an unprecedented 
banking crisis. Across the world governments were forced to support the 
financial systems as all but the strongest institutions were threatened with 
failure by bad loans and toxic assets. In the UK competition rules were relaxed 
to allow Lloyds to rescue HBOS. Later in the period substantial cash injections 
resulted in the UK government acquiring two thirds of Royal Bank of Scotland and 
just under half of the newly formed Lloyds/HBOS group. 
 
 
EPIC began the period with holdings in Barclays and Lloyds. Lloyds' medium term 
potential of having a dominant position in the UK mortgage market was eclipsed 
by the somewhat awkward position of the UK government as a major shareholder and 
the entire holding was sold. Barclays' determination to avoid government funding 
initially won praise but some management credibility was lost when substantial 
sums were raised on highly dilutive terms from Middle Eastern investors without 
giving existing shareholders their normal pre-emption rights. Despite this 
disappointment the Barclays holding was retained for its ability to reward 
shareholders when the markets recover. 
 
 
Two portfolio companies failed during the period. Automotive body parts 
manufacturer Wagon and retailer Woolworths were both highly geared and operating 
in difficult markets when their bankers lost patience with them. 
 
 
Conditions in the building supplies markets continued to deteriorate on both 
sides of the Atlantic to the detriment of trading performance at Heywood 
Williams and Lupus Capital. Heywood Williams' bankers continue to be supportive 
and for that reason EPIC increased its holding to 16.6% of the company. If the 
company survives 2009 there is considerable gearing to even a modest upturn in 
UK and US housing markets. Lupus is less exposed directly to housing markets and 
derives around a quarter of its profits from offshore oil services supplier Gall 
Thomson. Like other portfolio holdings Diploma and Electrocomponents its 
earnings benefit on translation from the weakness of Sterling. 
 
 
On the other hand Lupus does have a large exposure to US Dollar debt which will 
impact unfavourably on its year end balance sheet. 
 
 
Aurum Mining should have been producing gold and copper from its low cost Andash 
mine in Kyrgyzstan by the end of 2008. However, an impossible business climate 
in this FSU republic prevented this. The company is seeking court permission to 
return the bulk of its substantial cash assets of up to GBP19.5 million (40 
pence per share) to shareholders. This should occur in spring 2009. 
 
 
The Specialist Funds portfolio represents 30.3% of the total Fund. Percentages 
appear to be higher than normal because of the general decline in the equity 
market. This decline is also reflected in the decline in the sterling assets in 
this portfolio. Within this portfolio Sterling assets represent 5.3% of the 
total Fund; EUR investments total 4.3% of the Fund; and, USD investments represent 
16.8% of the Fund. This portfolio is targeted at achieving non-correlated 
returns - diverse from the main body of the Fund - in excess of the Company's 
Libor + 3% per annum performance benchmark. We were caught by the record fall in 
the value of GBP against the $ and to a lesser extent the EUR as we were hedged in 
both currencies. 
 
The largest holdings are: 
 
 
Jupiter Hyde Park Hedge Fund Limited ($6.7 million), an open-ended limited 
liability company incorporated in Bermuda. The fund is run by Philip Gibbs and 
is mandated to invest in a wide range of international investments. 
 
 
EEA Life Settlement Fund ($3.8 million), a Guernsey domiciled fund listed on the 
Channel Island Stock Exchange. Its objectives are to purchase, hold and manage a 
portfolio of US life settlements, provide a minimum benchmark return of 8% per 
annum and generate a consistent total net return of between 8% and 10% per 
annum. 
 
 
CCD Leisure Investments ($3.2 million), which was set up to invest in prestige 
holiday developments in emerging destinations such as Granada. 
 
 
CCFM Bristol & Stone Baltic Property Limited (EUR2.8 million), an Isle of Man Fund 
which invests in real estate in the Baltic States of Estonia, Latvia and 
Lithuania. Whilst the portfolio was secured at attractive levels through the 
availability of "off-market" opportunities at prices that offered some 
insulation against the inevitable slowing of economic growth in the region, 
following the financial crisis affecting the region's neighbours and trading 
partners we have marked down the value of our investment by ca.25%. 
 
 
King & Shaxson (GBP1.2 million), a hedge fund which invests in ordinary shares 
in the King & Shaxson Master Fund. The current stance is a weighting towards 
large international companies rather than UK domestics. 
 
 
EPE Special Opportunities plc (GBP0.8 million) is a closed-end Fund listed on 
AIM, focused on the control and ownership of distressed assets. The Fund's 
largest investment is in Past Times, a niche retailer of historically inspired 
jewellery, gifts, books and house-wares which was acquired at the end of 
December 2005, which is growing strongly following the initial restructuring 
period. The most recent investment by the Fund was the acquisition of Whittard 
of Chelsea, the tea and coffee specialist which was previously owned by Baugur. 
 
 
Avarae Global Coins plc (GBP0.7 million) is an AIM listed specialist investment 
company which is in the process of purchasing an impressive portfolio of high 
quality rare coins which will be held for the long term. Delivery of the shares 
has been delayed as they were caught in the freeze on the assets of Landsbanki 
in the UK we are presently seeking to resolve this issue but it appears likely 
to be prolonged. 
 
 
Strategic Investments 
 
 
The share price of Syndicate Asset Management PLC continues to trade at low 
levels. However, as mentioned in previous newsletters, the majority of the 
Funds' consideration from the sale of EPIC Investments Partners at the end of 
2006 is retained in Loan Notes which paid a 6% coupon during the period under 
review. 
 
 
Over the last quarter, Strand Partners, while continuing to see high levels of 
general client enquiries, suffered from the uncertainty that such deals can be 
completed in the current market conditions. As a result of this and a general 
de-rating of financial investments in the quoted sector, the Managers have 
written down the valuation of this shareholding. 
 
The Private Equity portfolio held by EPIC Investments LLP and EPIC Investments 2 
LLP has performed robustly over the last six months, managing well through the 
downturn. 
 
 
The portfolio has performed such that no write-downs have had to be made at the 
interim stage. The investments continue to be valued upon a consistent basis, 
with no write-ups having been made in the last two years. Given the current 
market uncertainty, it is unlikely that any holding values will be increased 
until such market uncertainty has passed however at present there are no 
expectations that any write-downs will be necessary. 
 
 
One investment was made in the last six months, with the acquisition in October 
2008 of an additional 13.8% equity in Pinnacle for GBP2.85m. The Manager is 
starting to see very good opportunities due to the current lack of liquidity, 
although it is currently very difficult to leverage such investments. The focus 
over the next 6-12 months will be on bolt-on acquisitions to the existing 
portfolio. 
 
 
Current Portfolio (held by EPIC Investments LLP and EPIC Investments 2 LLP) 
 
 
Pharmacy2U, the online pharmacy, is trading profitably and growing in line with 
expectations. Sales have grown at 30% pa for the last six years at Pharmacy2U, 
and continue to grow at a similar rate. Recent profitability has been ahead of 
expectations. 
 
 
Ryness, the electrical retailer and wholesaler, is performing relatively well 
given the downturn, with the online division in particular growing very 
strongly. Sales are generally slightly down on budget, particularly in the 
wholesale channel, but profits have been on budget. 
 
 
Nexus, the electrical distributor, is performing ahead of expectations, with 
profitability 7% above budget for 2008. Such profitability has continued into 
2009, and the business is seeing a number of new sales opportunities in order to 
grow in the coming year. 
 
 
Palatinate Schools, the London-based schools group, reports solid pupil numbers 
and strong profitability. Recent sales have been ahead of budget, driven by 
better than expected nurseries performance, although profit has been slightly 
behind budget. 
 
 
Pinnacle-psg, the social housing management company, has a promising pipeline of 
new business, although profitability in recent months has been behind 
expectations. Profit performance is expected to improve in the next 12 months 
 
 
Indicia, the marketing services group, are performing to expectations and 
continue to grow despite the downturn. Entire, the most recent acquisition, is 
performing well, and recently renewed its key contract, providing a platform for 
further growth in the coming year. 
 
 
Bighead, the specialist engineering company, is performing strongly, with good 
profit growth in the last few months. Some customer weakness is expected going 
forward, but the sign up of new distributors is expected to compensate for this 
slowness in demand. 
Driver Require, the driver recruitment business, has seen a downturn in trading 
due to the difficult market conditions, but remains profitable. 
 
 
Evolving Media, the digital marketing agency, is performing well with rapid 
growth continuing with new client wins. It recently beat some of the top UK 
digital agencies in order to win a couple of large accounts, with increasing 
credibility driving sales growth. 
 
 
 
 
+--------------------------+----------+---+-----------------------------+--------+ 
|   Asset Allocation as at 31 January |   | Asset Allocation as at 31 July 2008  | 
|                                2009 |   |                                      | 
+-------------------------------------+---+--------------------------------------+ 
|                          |        % |   |                             |      % | 
+--------------------------+----------+---+-----------------------------+--------+ 
| Unquoted                 |  38.38   |   | Unquoted                    |  22.55 | 
| Investments/Private      |          |   | Investments/Private         |        | 
| Equities                 |          |   | Equities                    |        | 
+--------------------------+----------+---+-----------------------------+--------+ 
| Specialist Funds         |  26.00   |   | Specialist Funds            |  21.08 | 
+--------------------------+----------+---+-----------------------------+--------+ 
| Quoted UK Equities       |  17.68   |   | Quoted UK Equities          |  28.80 | 
+--------------------------+----------+---+-----------------------------+--------+ 
| Bonds & Structured       |  8.12    |   | Bonds & Structured Income   |   6.90 | 
| Income Products          |          |   | Products                    |        | 
+--------------------------+----------+---+-----------------------------+--------+ 
| Strategic Investments*   |  5.06    |   | Strategic Investments*      |   6.26 | 
+--------------------------+----------+---+-----------------------------+--------+ 
| Cash & Sterling CD's     |  4.76    |   | Cash & Sterling CD's        |  14.41 | 
+--------------------------+----------+---+-----------------------------+--------+ 
| *Syndicate Asset Management PLC,    |   | *Syndicate Asset Management PLC,     | 
| Strand Partners Limited,            |   | Strand Partners Limited,             | 
| Note: figures do not include the    |   | Note: figures do not include the     | 
| exposure to EPIC Securities PLC     |   | exposure to EPIC Securities PLC      | 
+--------------------------+----------+---+-----------------------------+--------+ 
 
 
Cameron McPhail 
27 March 2009 
 
 
 
 
Consolidated Income Statement 
For the period from1 August 2008 to 31 January 2009 
 
 
 
 
+-------+-------------------------------------+--------------+--------------+--------------+ 
|Notes  |                                     |  1 August 08 |     1 August |     1 August | 
|       |                                     |        to 31 |   2007 to 31 |   2007 to 31 | 
|       |                                     | January 2009 | January 2008 |    July 2008 | 
|       |                                     |  (Unaudited) |  (Unaudited) |    (Audited) | 
+-------+-------------------------------------+--------------+--------------+--------------+ 
|       |                                     |     GBP000's |     GBP000's |    GBP000's  | 
+-------+-------------------------------------+--------------+--------------+--------------+ 
|       | Income                              |              |              |              | 
+-------+-------------------------------------+--------------+--------------+--------------+ 
|       | Bond interest                       |        1,317 |          383 |        2,229 | 
+-------+-------------------------------------+--------------+--------------+--------------+ 
|       | Dividends on financial assets at    |          708 |          416 |        1,107 | 
|       | fair value through profit or loss   |              |              |              | 
+-------+-------------------------------------+--------------+--------------+--------------+ 
|       | Bank interest                       |          120 |          737 |          614 | 
+-------+-------------------------------------+--------------+--------------+--------------+ 
|       | Other income                        |           40 |           29 |           16 | 
+-------+-------------------------------------+--------------+--------------+--------------+ 
|       | Total income                        |        2,185 |        1,565 |        3,966 | 
+-------+-------------------------------------+--------------+--------------+--------------+ 
|       | Expenses                            |              |              |              | 
+-------+-------------------------------------+--------------+--------------+--------------+ 
|       | Management and investment advisory  |          530 |          511 |          976 | 
|       | fees                                |              |              |              | 
+-------+-------------------------------------+--------------+--------------+--------------+ 
|       | Professional fees                   |          159 |          115 |          378 | 
+-------+-------------------------------------+--------------+--------------+--------------+ 
|       | Other expenses                      |          266 |          275 |          515 | 
+-------+-------------------------------------+--------------+--------------+--------------+ 
|       | Performance fees                    |            - |          293 |          273 | 
+-------+-------------------------------------+--------------+--------------+--------------+ 
|       | Abort fees                          |            6 |            7 |           18 | 
+-------+-------------------------------------+--------------+--------------+--------------+ 
|       | Administration fees                 |           65 |           82 |          145 | 
+-------+-------------------------------------+--------------+--------------+--------------+ 
|       | Directors' fees                     |           38 |           30 |           67 | 
+-------+-------------------------------------+--------------+--------------+--------------+ 
|       | Custodian fees                      |            - |            4 |          (6) | 
+-------+-------------------------------------+--------------+--------------+--------------+ 
|       | Audit fees                          |           22 |           44 |           67 | 
+-------+-------------------------------------+--------------+--------------+--------------+ 
|       | Total expenses                      |        1,086 |        1,361 |        2,433 | 
+-------+-------------------------------------+--------------+--------------+--------------+ 
|       | Net investment income               |        1,099 |          204 |        1,533 | 
+-------+-------------------------------------+--------------+--------------+--------------+ 
|       | (Losses)/gains on investments       |              |              |              | 
+-------+-------------------------------------+--------------+--------------+--------------+ 
|       | Realised losses on sale of          |        (334) |      (5,988) |      (8,261) | 
|       | investments                         |              |              |              | 
+-------+-------------------------------------+--------------+--------------+--------------+ 
|       | Net unrealised loss on forward      |        (559) |        (633) |        (617) | 
|       | foreign currency contracts          |              |              |              | 
+-------+-------------------------------------+--------------+--------------+--------------+ 
|       | Realised losses on forward foreign  |      (2,723) |            - |        (509) | 
|       | exchange contracts                  |              |              |              | 
+-------+-------------------------------------+--------------+--------------+--------------+ 
|       | Foreign exchange differences        |          246 |           54 |          700 | 
+-------+-------------------------------------+--------------+--------------+--------------+ 
|  6    | Movement in unrealised losses on    |      (9,733) |      (3,455) |      (9,212) | 
|       | revaluation of investments at fair  |              |              |              | 
|       | value through profit or loss        |              |              |              | 
+-------+-------------------------------------+--------------+--------------+--------------+ 
|       | Loss for the period/year on         |              |              |              | 
|       | investments at                      |              |              |              | 
+-------+-------------------------------------+--------------+--------------+--------------+ 
|       | fair value through profit or loss   |     (13,103) |     (10,022) |     (17,899) | 
+-------+-------------------------------------+--------------+--------------+--------------+ 
|  4    | Dividends on Income Shares          |      (1,295) |      (1,233) |      (2,466) | 
+-------+-------------------------------------+--------------+--------------+--------------+ 
|       | Debt finance costs                  |        (752) |        (705) |      (1,410) | 
+-------+-------------------------------------+--------------+--------------+--------------+ 
|       | Loss for the period/year            |    (14,051)  |     (11,756) |     (20,242) | 
+-------+-------------------------------------+--------------+--------------+--------------+ 
|  5    | Basic and diluted loss  per Capital |     (34.86p) |     (29.17p) |     (50.22p) | 
|       | Share (pence)                       |              |              |              | 
+-------+-------------------------------------+--------------+--------------+--------------+ 
|       |                                     |              |              |              | 
+-------+-------------------------------------+--------------+--------------+--------------+ 
 
 
All items in the above statement are derived from continuing operations. 
 
 
 
 
 
 
Consolidated Balance Sheet 
As at 31 January 2009 
 
 
+-------+------------------------------------------+-------------+-------------+------------+ 
|       |                                          |  31/01/2009 |  31/01/2008 | 31/07/2008 | 
|       |                                          | (Unaudited) | (Unaudited) |  (Audited) | 
+-------+------------------------------------------+-------------+-------------+------------+ 
|Notes  |                                          |    GBP000's |    GBP000's |   GBP000's | 
+-------+------------------------------------------+-------------+-------------+------------+ 
|  6    | Financial assets measured at fair value  |      59,901 |      81,729 |     71,848 | 
|       | through profit or loss                   |             |             |            | 
+-------+------------------------------------------+-------------+-------------+------------+ 
|       | Current assets                           |             |             |            | 
+-------+------------------------------------------+-------------+-------------+------------+ 
|       | Cash and cash equivalents                |       3,030 |       3,295 |      5,109 | 
+-------+------------------------------------------+-------------+-------------+------------+ 
|       | Trade debtors & other receivables        |       4,287 |       2,798 |      3,113 | 
+-------+------------------------------------------+-------------+-------------+------------+ 
|       | Total assets                             |      67,218 |      87,822 |     80,070 | 
+-------+------------------------------------------+-------------+-------------+------------+ 
|       | Current liabilities                      |             |             |            | 
+-------+------------------------------------------+-------------+-------------+------------+ 
|       | Trade creditors & other payables         |       2,030 |       1,702 |      1,686 | 
+-------+------------------------------------------+-------------+-------------+------------+ 
|       | Non-current liabilities                  |             |             |            | 
+-------+------------------------------------------+-------------+-------------+------------+ 
|       | Zero Dividend Preference Shares          |      23,385 |      21,843 |     22,562 | 
+-------+------------------------------------------+-------------+-------------+------------+ 
|       | Income Shares                            |      20,703 |      20,640 |     20,671 | 
+-------+------------------------------------------+-------------+-------------+------------+ 
|       | Total liabilities                        |      46,118 |      44,185 |     44,919 | 
+-------+------------------------------------------+-------------+-------------+------------+ 
|       | Net assets                               |      21,100 |      43,637 |     35,151 | 
+-------+------------------------------------------+-------------+-------------+------------+ 
|       | Shareholders' Equity                     |             |             |            | 
+-------+------------------------------------------+-------------+-------------+------------+ 
|  7    | Share capital                            |       4,030 |       4,030 |      4,030 | 
+-------+------------------------------------------+-------------+-------------+------------+ 
|       | Share premium                            |      35,410 |      35,410 |     35,410 | 
+-------+------------------------------------------+-------------+-------------+------------+ 
|       | Reserves                                 |    (18,340) |       4,197 |    (4,289) | 
+-------+------------------------------------------+-------------+-------------+------------+ 
|       | Shareholders' Equity                     |      21,100 |      43,637 |     35,151 | 
+-------+------------------------------------------+-------------+-------------+------------+ 
|       |                                          |       Pence |       Pence |      Pence | 
+-------+------------------------------------------+-------------+-------------+------------+ 
|  8    | Net asset value per Capital Share        |       52.35 |      108.27 |      87.21 | 
|       | (pence) - (basic and diluted)            |             |             |            | 
+-------+------------------------------------------+-------------+-------------+------------+ 
|       |                                          |             |             |            | 
+-------+------------------------------------------+-------------+-------------+------------+ 
 
 
 
 
The financial statements were approved by the Board of Directors on 27 March 
2009. 
 
 
 
 
 
 
Philip Scales    Martin Richardson 
Director     Director 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated Statement of Changes in Shareholders' Equity 
For the period from 1 August 2008 to 31 January 2009 
 
 
 
 
+----------------------------------------+-------------+-------------+------------+ 
|                                        |  31/01/2009 |  31/01/2008 | 31/07/2008 | 
|                                        | (Unaudited) | (Unaudited) |  (Audited) | 
|                                        |    GBP000's |    GBP000's |   GBP000's | 
+----------------------------------------+-------------+-------------+------------+ 
|                                        |             |             |            | 
+----------------------------------------+-------------+-------------+------------+ 
| Shareholder's Equity at the beginning  |      35,151 |      55,393 |     55,393 | 
| of period/year                         |             |             |            | 
+----------------------------------------+-------------+-------------+------------+ 
| Loss for the period/year               |    (14,051) |    (11,756) |   (20,242) | 
+----------------------------------------+-------------+-------------+------------+ 
| Shareholders' Equity at the end of the |      21,100 |      43,637 |     35,151 | 
| period/year                            |             |             |            | 
+----------------------------------------+-------------+-------------+------------+ 
 
 
 
 
 
 
 
 
 
 
Consolidated Statement of Cash Flows 
For the period 1 August 2008 to 31 January 2009 
 
 
+---------------------------------------+--------------+--------------+--------------+ 
|                                       |     1 August |     1 August |     1 August | 
|                                       |   2008 to 31 |   2007 to 31 |   2007 to 31 | 
|                                       | January 2009 | January 2008 |    July 2008 | 
|                                       |  (Unaudited) |  (Unaudited) |    (Audited) | 
|                                       |    GBP000's  |     GBP000's |    GBP000's  | 
+---------------------------------------+--------------+--------------+--------------+ 
| Operating activities                  |              |              |              | 
+---------------------------------------+--------------+--------------+--------------+ 
| Dividends received                    |          749 |          703 |        1,079 | 
+---------------------------------------+--------------+--------------+--------------+ 
| Bond interest received                |        1,355 |          230 |        2,066 | 
+---------------------------------------+--------------+--------------+--------------+ 
| Bank interest received                |          120 |          456 |          621 | 
+---------------------------------------+--------------+--------------+--------------+ 
| Other income received                 |           40 |            - |           16 | 
+---------------------------------------+--------------+--------------+--------------+ 
| Expenses paid                         |        (980) |      (1,289) |     (2,805)  | 
+---------------------------------------+--------------+--------------+--------------+ 
| Net cash inflow from operating        |        1,284 |          100 |         977  | 
| activities                            |              |              |              | 
+---------------------------------------+--------------+--------------+--------------+ 
| Investing activities                  |              |              |              | 
+---------------------------------------+--------------+--------------+--------------+ 
| Purchase of investments               |     (19,581) |     (39,184) |     (75,378) | 
+---------------------------------------+--------------+--------------+--------------+ 
| Proceeds on sale of investments       |       20,596 |       37,828 |       76,422 | 
+---------------------------------------+--------------+--------------+--------------+ 
| Project costs paid                    |            - |            - |         (39) | 
+---------------------------------------+--------------+--------------+--------------+ 
| Settlement of forward foreign         |      (2,723) |            - |        (509) | 
| exchange contracts                    |              |              |              | 
+---------------------------------------+--------------+--------------+--------------+ 
| Deferred consideration                |           89 |            - |            - | 
+---------------------------------------+--------------+--------------+--------------+ 
| Security deposit                      |        (590) |            - |            - | 
+---------------------------------------+--------------+--------------+--------------+ 
| Net cash (outflow)/inflow from        |      (2,209) |      (1,356) |         496  | 
| investing activities                  |              |              |              | 
+---------------------------------------+--------------+--------------+--------------+ 
| Financing activities                  |              |              |              | 
+---------------------------------------+--------------+--------------+--------------+ 
| Dividends paid on Income Shares       |      (1,264) |      (1,210) |     (2,444)  | 
+---------------------------------------+--------------+--------------+--------------+ 
| Issue cost of ZDP Shares              |            - |           -  |        (214) | 
+---------------------------------------+--------------+--------------+--------------+ 
| Net cash outflow from financing       |      (1,264) |      (1,210) |      (2,658) | 
| activities                            |              |              |              | 
+---------------------------------------+--------------+--------------+--------------+ 
|                                       |              |              |              | 
+---------------------------------------+--------------+--------------+--------------+ 
| Decrease in cash and cash equivalents |      (2,189) |      (2,466) |     (1,185)  | 
+---------------------------------------+--------------+--------------+--------------+ 
| Effects of foreign exchange           |          110 |           54 |          587 | 
| fluctuations on cash and cash         |              |              |              | 
| equivalents                           |              |              |              | 
+---------------------------------------+--------------+--------------+--------------+ 
| Cash and cash equivalents at start of |        5,109 |        5,707 |        5,707 | 
| the period/year                       |              |              |              | 
+---------------------------------------+--------------+--------------+--------------+ 
| Cash and cash equivalents at end of   |        3,030 |        3,295 |        5,109 | 
| the period/year                       |              |              |              | 
+---------------------------------------+--------------+--------------+--------------+ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
 IR PUUUPWUPBGAM