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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
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Equity Special | LSE:EQS | London | Ordinary Share | GB00B02GPB12 | ORD 1P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 237.50 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
RNS Number:5470C Equity Special Situations Limited 05 May 2006 Equity Special Situations Limited Annual Report Equity Special Situations Limited ("the Company" or "Equity Special Situations") is pleased to announce its results for the year ended 31 December 2005. Directors' Report We are delighted to present this annual report to shareholders. The following pages show the financial performance of Equity Special Situations for the financial year to 31 December 2005. We have also included unaudited summary information for the period from 31 December 2005 to 2 May 2006 in order to ensure that shareholders are provided with as up to date information as is practical. Net Asset Value We have set out in the table below the progression of our Net Asset Value ("NAV ") per share since launch. The NAV on 31 December 2004 was 17.49 pence per share and by 30 June 2005, the date of our interim results, the NAV had risen to 22.26 pence per share. The NAV had risen to 166.38 pence per share by 30 September 2005 and on 31 December 2005 the NAV stood at 149.59 pence per share. This growth in the NAV represents an increase of approximately 755.29% for the period from 1 January 2005 to 31 December 2005. The unaudited NAV was 137.45 pence per share as of 2 May 2006. Date 27 October 31 December 31 March 30 June 30 September 31 December 2 May 2004 2004 2005 2005 2005 2005 2006 (unaudited) (audited) (unaudited) (unaudited) (unaudited) (audited) (unaudited) NAV 14.88p 17.49 p 20.96 p 22.26 p 166.38 p 149.59 p 137.45 p Fund raising The total funds net of commissions that have been raised by ESS during the year to 31st December 2005 are #1,337,140. This fund raising is in addition to the #1,950,000 which we raised between incorporation on 16 July 2004 to 31 December 2004. In addition, since the end of the financial year to 31 December 2005, a further sum of #5,000,000 was raised by placing 3,739,716 Ordinary Shares at 133.7 pence per share. This placing was announced on 15 March 2006. We have, therefore, raised a total of #8,287,140 in equity finance during the life time of this company. The Directors believe that, from an operational point of view, it would be in the Company's interests to have access to additional funds in order to increase the number and size of investments made by the Company. This would spread the operational costs of the Company over a larger portfolio of assets and also provide a more diversified portfolio of assets which should reduce the reliance on a very small number of investments for further material increases in the Company's net asset value. We have discussed this issue over many months with a variety of advisors and have previously used relatively small amounts of debt finance. We are currently reviewing the amounts of debt that we believe that it would be appropriate for ESS to take on and expect that during the course of 2006 the levels of debt will be increased. We are very aware of the leverage effect that the use of debt creates and of the need therefore to strictly control the amounts raised through debt. We do not intend to jeopardise the success of this Company through the unwise use of leveraged finance and the Directors will strictly manage and monitor this debt facility. The total debt outstanding as of 31 December 2005 was #70,000. Investment strategy There are a number of general investment criteria that the Company looks for when researching possible investee companies. These are as follows: * the size of the investment in relation to the Company's assets; * whether or not the investment price appears to be at a discount to the actual or potential valuation of the investee company; * whether or not there is a proven management team in place or available for the investee company; * the Company's opinion of the investee company's financial and other resources, future trading prospects, visibility of earnings, cash flow forecasts and ongoing working capital requirements; and * whether or not the Company considers that there are satisfactory prospects to exit the investment within a reasonable time period. We have researched a wide variety of potential investment opportunities which have mainly come from the UK and the Netherlands, but have also included other countries. The potential investments have been made available to the Company through the network of contacts that the Directors and consultants of the Company have, and through original research by consultants employed by the Company. These potential investments have been intentionally diverse in terms of industry sector and stage of company development. Most have been rejected as investments as they have not satisfied the Company's criteria. We have found during 2005 that a majority of the most interesting investments we have reviewed, and a majority of the investments made, have been in the financial services sector within the European Union. The most significant investment in terms of unrealised returns for ESS is Syndicate Asset Management plc ("SAM") which we have previously provided information about during the course of 2005. SAM continues to progress well having announced a total of 5 acquisitions since its flotation on to AIM in September 2005. ESS does not have an operational role in SAM and now regards SAM as an entirely independent company. We will of course continue to support the company and its development, as a shareholder. By 31 December 2005 we held investments in 8 companies, of which 6 are quoted on AIM and 2 are unquoted. In terms of industry sector, 6 are in financial services, 1 is involved in the healthcare sector and 1 is involved in the media sector. Share price The share price on 4 January 2005 was 56.99 pence per share. This has progressed well during the year, reaching 94.17 pence by 30 June 2005 and 152.5 pence by 31 December 2005. This represents an increase of 167.6% in the share price over the year, compared with an increase of the AIM All Share index of 4.03%. The share price on 2 May 2006 was 167.5 pence per share. We are, however, under no illusions that the share price increase during 2005 and the current share price is due in a large part to the success of our investment in to SAM. We intend to increase our investments into other companies in order to ensure that we become more diversified. Hopefully this will provide shareholders with a more stable share price that is not overly reliant on any single investment. Outlook We believe that shareholders will be pleased with the increase in both the NAV and the share price that we have achieved during 2005. We believe that the market in general is well positioned to enjoy relatively stable growth in the months ahead and we continue to see a healthy pipeline of potential opportunities from which to choose further investments over the forthcoming months. We therefore remain optimistic about the future. Directors' responsibilities The Directors are responsible for preparing financial statements for each financial year which give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period and are in accordance with applicable laws. In preparing those financial statements the Directors are required to: (i) select suitable accounting policies and then apply them consistently; (ii) make judgements and estimates that are reasonable and prudent; (iii) state whether applicable accounting standards have been followed subject to any material departures disclosed and explained in the financial statements; (iv) prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements have been properly prepared in accordance with the Companies (Guernsey) Law, 1994. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Principal activity The principal activity of the Company is that of achieving capital growth for its shareholders through the purchase, holding and sale of minority stakes in companies and investment funds, which are or which are expected shortly to be, quoted on recognised investment exchanges in Europe, the US and Canada. Results and dividends The results of the Company for the year are set out in detail on page 10. The Directors do not recommend a dividend for the year. Directors and their interests The Directors of the Company who served during the year were:- P F Griffin (C R Sharman as alternate) M T Cahill (R K Hollingsworth as alternate) J D Freeman - Non-executive director (resigned 19 July 2005) No Director, who held office at the end of the financial year, had an interest in the shares or in options over shares of the Company. Directors' remuneration The emoluments of the individual Directors for the year were as follows: Director Salary or Fees P F Griffin Nil M T Cahill Nil J D Freeman #2,000 The Company entered into a services agreement with BGL Reads Fund Management Limited, now called MPR Fund Management Limited, which included the provision of the services of Michael Cahill and Peter Griffin as executive directors on a time-cost basis. The above fees do not include reimbursed expenditure. Substantial shareholdings At 2 May 2006, the issued share capital of the company was 14,167,604 ordinary shares of 1 pence each and the following shareholders were listed in the shareholder register as holding 3% or more of the Company's share capital: Number of Percentage of ordinary shares issued ordinary share capital E*Trade Securities Limited 4,038,766 28.51% Undesignated account HSBC Global Custody Nominee (UK) Limited 3,703,500 26.14% Account 741812 Pershing Keen Nominees Limited 1,739,716 12.28% Account TYCLT Euroclear Nominees Limited 1,645,453 11.61% Account EOC01 Vidacos Nominees Limited 1,302,115 9.19% Account 4607 HSBC Global Custody Nominee (UK) Limited 700,000 4.94% Account 741820 HSBC Global Custody Nominee (UK) Limited 560,000 3.95% Account 813259 Corporate governance The Company continues to give careful consideration to the principles of corporate governance to ensure that it complies with current UK corporate governance requirements to the extent to which the Directors consider these to be appropriate for a company of its size and taking into account its wish to conserve cash for investments. The Board meets regularly and has ultimate responsibility for the management of the Company. It also meets to review the remuneration of directors, the Investment Advisory Panel and consultants. Relationship with shareholders The Directors seek to build a mutual understanding of objectives between the Company and its shareholders. The Company reports formally to shareholders in its interim and annual reports setting out details of its activities. In addition, the Company keeps shareholders informed of events and progress during the year through the issue of press releases. Where possible the Annual Report is sent to shareholders at least 20 working days before the Annual General Meeting. Directors are required to attend Annual General Meetings of the Company unless unable to do so for personal reasons or due to pressing commercial commitments. Shareholders are given the opportunity to vote on each separate issue, each of which shall be decided on a poll of every shareholder present in person or by proxy. Auditors A resolution to re-appoint BDO Novus Limited as auditors will be proposed at the Annual General Meeting. APPROVED BY THE BOARD OF DIRECTORS Peter Griffin Michael Cahill 5th May 2006 INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF EQUITY SPECIAL SITUTATIONS LIMITED We have audited the financial statements of Equity Special Situations Limited for the year ended 31 December 2005 which are set out on pages 10 to 19. These financial statements have been prepared under the historical cost convention as modified by the revaluation of investments and in accordance with the accounting policies as set out on pages 13 and 14. This report is made solely to the company's members, as a body, in accordance with Section 64 of the Companies (Guernsey) Law, 1994. Our audit work is undertaken so that we might state to the company's members those matters we are required to state to them in an auditors' report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of the directors and auditors As described in the Statement of Directors' Responsibilities within the Directors' Report the company's directors are responsible for the preparation of the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Companies (Guernsey) Law, 1994. We also report to you if, in our opinion, the Directors' Report is not consistent with the financial statements, if the company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law is not disclosed. We read the Directors' Report and consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies within it. Our responsibilities do not extend to any other information. Basis of opinion We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the company's circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. Opinion In our opinion the financial statements: * give a true and fair view, in accordance with United Kingdom Generally Accepted Accounting Practice, of the state of the company's affairs as at 31 December 2005 and of its net return for the year then ended; and * have been properly prepared in accordance with the Companies (Guernsey) Law, 1994. BDO Novus Limited CHARTERED ACCOUNTANTS Elizabeth House St Peter Port Guernsey. 5th May 2006 STATEMENT OF TOTAL RETURN FOR THE YEAR ENDED 31 DECEMBER 2005 For the period 16 July 2004 to 31 December 2004 Note Revenue Capital Total Revenue Capital Total # # # # # # GAINS ON INVESTMENTS Net realised gains/(losses) - 4,372 4,372 - (68,624) (68,624) Net unrealised gains - 13,029,490 13,029,490 - 43,567 43,567 - 13,033,862 13,033,862 - (25,057) (25,057) INCOME 1 Investment income - - - - - - Bank interest 1,899 - 1,899 841 - 841 1,899 - 1,899 841 - 841 EXPENDITURE 1 Directors' fees 2,000 - 2,000 1,667 - 1,667 Administration fees 47,944 - 47,944 - 28,398 28,398 Professional fees 58,031 30,862 88,893 29,033 114,437 143,470 AIM admission expenses - - - 213,857 - 213,857 Consultancy fees - 125,692 125,692 - 8,500 8,500 Audit fee 3,000 - 3,000 5,000 - 5,000 Bank charges and interest 1,202 - 1,202 15,361 - 15,361 Loan interest payable 4,525 - 4,525 5,973 - 5,973 Loss/(profit) on exchange 535 - 535 (712) - (712) Safe custody charges 770 - 770 - - - Sundry expenses 3,510 - 3,510 - - - 121,517 156,554 278,071 270,179 151,335 421,514 NET RETURN ON ORDINARY ACTIVITIES FOR (119,618) 12,877,308 12,757,690 (269,338) (176,392) (445,730) THE FINANCIAL YEAR/PERIOD Return per share - basic and 5 (1.25p) 134.88p 133.63p (3.6p) (2.3p) (5.9p) diluted All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued during the year. A reconciliation of movements in shareholders' funds is set out in note 13 to the financial statements. The notes on pages 13 to 19 form an integral part of these financial statements. BALANCE SHEET 31 DECEMBER 2005 Note 2005 2004 FIXED ASSETS Quoted investments 3 15,369,796 1,217,862 Unquoted investments 4 287,703 - 15,657,499 1,217,862 CURRENT ASSETS Cash at bank and broker 44,231 49,465 Sundry debtors 7 - 426,358 44,231 475,823 CREDITORS - AMOUNTS FALLING DUE WITHIN ONE YEAR Bank overdraft 44 - Sundry creditors 32,586 14,747 Loan payable 8 70,000 174,668 102,630 189,415 NET CURRENT (LIABILITIES)/ASSETS (58,399) 286,408 TOTAL ASSETS LESS CURRENT LIABILITES # 15,599,100 # 1,504,270 CAPITAL AND RESERVES CALLED UP SHARE CAPITAL 10 104,279 86,000 SHARE PREMIUM ACCOUNT 11 3,182,861 1,864,000 CAPITAL RESERVE REALISED 12 (366,446) (219,959) UNREALISED 12 13,067,362 43,567 REVENUE RESERVE 12 (388,956) (269,338) SHAREHOLDERS' FUNDS 13 # 15,599,100 # 1,504,270 Net asset value per share 6 149.59p 17.49p APPROVED BY THE BOARD OF DIRECTORS P F Griffin M T Cahill ..........................................Director ..........................................Director P F Griffin M T Cahill Date 5th May 2006 The notes on pages 13 to 19 form an integral part of these financial statements. CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2005 16 July 2004 to Note 2005 31 December 2004 Net cash outflow from operating activities 9 (258,333) (405,926) Investing activities: Purchase of listed investments (1,112,205) (1,280,060) Purchase of unlisted investments (442,777) - Proceeds from disposals of listed investments 168,097 1,242,421 Proceeds from disposals of unlisted investments 62,000 - Net cash outflow from financial investment (1,324,885) (37,639) Financing: Loans received 70,000 174,668 Loan repaid (174,668) - Forestdale commission (18,667) - Issue of own shares 1,701,275 318,362 Net cash inflow from financing 1,577,940 # 493,030 (Decrease)/increase in cash resources # (5,278) # 49,465 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT (Decrease)/increase in cash resources for the year/ (5,278) 49,465 period Cash outflow/(inflow) from change in debt financing 104,668 (174,668) Change in net debt resulting from cashflows 99,390 (125,203) Net debt at 1 January 2005 (125,203) - Net debt at 31 December 2005 9 # (25,813) # (125,203) The notes on pages 13 to 19 form an integral part of these financial statements. NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2005 1. ACCOUNTING POLICIES (a) CONVENTION The financial statements have been prepared under the historical cost convention, modified to include the revaluation of investments and in accordance with applicable accounting standards and with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies" issued by The Association of Investment Trust Companies in January 2003. The principal accounting policies which the directors have adopted within that convention are set out below. (b) INCOME Dividends receivable from quoted equity investments are recognised on the ex-dividend date. Dividends receivable from equity investments where no ex-dividend date is quoted are recognised when the company's right to receive payment is established. Interest receivable on cash deposits is accounted for on an accruals basis. (c) FOREIGN CURRENCY TRANSLATION Assets and liabilities denominated in foreign currencies other than sterling have been translated into sterling at the rates of exchange ruling at the balance sheet date. Transactions during the year have been translated at the rates of exchange ruling at the date of the transaction. (d) INVESTMENTS Quoted investments are valued at middle market prices. Unquoted investments are valued by the Board according to the valuation principles of the British Venture Capital Association. Realised gains or losses on the disposal of investments are taken to the capital reserve - realised. Unrealised gains or losses on revaluation of investments are taken to the capital reserve - unrealised. Investments, which may be classified as associate undertakings, are carried at fair value as determined by the Directors, in accordance with the Company's normal policy. The Directors consider that, as these investments are held as part of the Company's investment portfolio with a view to the realisation of capital gains, carrying them at fair value gives a true and fair view of the Company's interest in these investments. Carrying investments at fair value is permitted under Financial Reporting Standard No 9 " Associates and Joint Ventures", where a venture capital or similar entity holds investments as part of a portfolio. NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2005 (e) EXPENDITURE All expenses are accounted for on an accruals basis. Expenses are charged through the Statement of Total Return except where the expense is incidental to the acquisition or disposal of an investment in which case the expense is added to the cost of the investment or deducted from the sale proceeds. Expenses that are directly attributable to the management of investments are allocated to capital in the Statement of Total Return. With the Directors' long term target for returns on investments being entirely capital gain there is no requirement to apportion these expenses between revenue and capital. 2. TAXATION The company has been granted exempt status under the Income Tax (Exempt Bodies) (Guernsey) Ordinance 1989, and is therefore subject to the payment of an annual fee which is currently #600. 3. QUOTED INVESTMENTS 2005 2004 At cost # 2,302,434 # 1,174,295 At market value # 15,369,796 # 1,217,862 4. UNQUOTED INVESTMENTS 2005 2004 At cost # 287,703 # - At valuation # 287,703 # - 5. EARNINGS PER SHARE The calculation of basic earnings per share is based on the net return on ordinary activities after tax for the year and on 9,547,131 shares (2004: 7,525,146 shares) being the weighted average number of shares in issue during the year. 6. NET ASSET VALUE The calculation of net asset value is based on the net assets of #15,599,100 (2004: #1,504,270) and on the ordinary shares in issue of 10,427,888 (2004: 8,600,000) at the balance sheet date. NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2005 7. SUNDRY DEBTORS 2005 2004 Unpaid share subscriptions (690,936 shares at 50 - 345,468 pence) Amount due from broker - 80,890 # - # 426,358 8. LOAN PAYABLE 31 December 2004 Loan # 70,000 # 174,668 The loan payable is unsecured, repayable on demand, and bears interest at 3% above the base rate of Barclays Bank plc. 9. CASHFLOW NOTES (a) RECONCILIATION OF REVENUE RETURN ON ORDINARY ACTIVITIES BEFORE TAXATION TO NET CASH FLOW FROM OPERATING ACTIVITIES 2005 16 July 2004 to 31 December 2004 Net return on ordinary activities for (119,618) (269,338) the financial year/period before taxation Expenses charged to capital (156,554) (151,335) Increase in creditors 17,839 14,747 Net cash outflow from operating # (258,333) # (405,926) activities (b) ANALYSIS OF NET DEBT At At 1 January Cashflow 31 December 2005 2005 Cash at bank and broker 49,465 (5,234) 44,231 Bank overdraft (44) (44) - 49,465 (5,278) 44,187 Loans payable (174,668) 104,668 (70,000) # (125,203) # 99,390 # (25,813) NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2005 10. CALLED UP SHARE CAPITAL 2005 2004 Authorised 50,000,000 ordinary shares of #0.01 each # 500,000 # 500,000 Allotted and fully paid 10,427,888 (2004: 7,909,064) ordinary # 104,279 # 79,091 shares of #0.01 each Allotted and unpaid Nil (2004: 690,936) ordinary shares of # # 6,909 #0.01 each - On 12 April 2005 46,921 ordinary shares of #0.01 each were issued at a premium of #0.54 each ranking pari passu with the existing shares in issue. On 6 May 2005 777,831 ordinary shares of #0.01 each were issued at a premium of #0.50 each ranking pari passu with the existing shares in issue. On 7 June 2005 459,136 ordinary shares of #0.01 each were issued at a premium of #0.53 each ranking pari passu with the existing shares in issue. On 29 September 2005 544,000 ordinary shares of #0.01 each were issued at a premium of #1.24 each ranking pari passu with the existing shares in issue. 11. SHARE PREMIUM ACCOUNT Balance at 1 January 2005 1,864,000 Premium on new share issues 1,337,528 Commission on new issues (18,667) Balance at 31 December 2005 # 3,182,861 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2005 12. RESERVES Capital Capital Revenue Reserve Reserve Reserve Total - Realised - Unrealised Balance at 1 January 2005 (219,959) 43,567 (269,338) (445,730) Net revenue return for the financial year - - (119,618) (119,618) Net realised losses (152,182) - - (152,182) Net unrealised gains - 13,029,490 - 13,029,490 Transfer on sale of investments 5,695 (5,695) - - Balance at 31 December 2005 # (366,446) 13,067,362 (388,956) 12,311,960 13. RECONCILIATION OF MOVEMENTS IN 2005 16 July 2004 to SHAREHOLDERS' FUNDS 31 December 2004 Net return for the financial year/period 12,757,690 (445,730) New share capital subscribed (net of commissions) 1,337,140 1,950,000 Net addition to shareholders' funds 14,094,830 1,504,270 Opening shareholders' funds 1,504,270 - Closing shareholders' funds # 15,599,100 # 1,504,270 14. OPTION AGREEMENT Under an option agreement dated 29 July 2004 between the Company and Forestdale Trading Limited ("Forestdale"), the Company was entitled to exercise an option which required Forestdale to procure the subscription by institutional and other third party investors of #1.5 million for new Ordinary Shares during the one month period following eight months after Admission, failing which itself to subscribe for such shares. The exercise price of the Option, irrespective of whether it was exercised by the Company or Forestdale, to be equal to 85% of the average middle market quotations of the Ordinary Shares for the five dealing days prior to the relevant exercise date as shown by the Stock Exchange Alternative Trading Service of the London Stock Exchange, subject to a minimum of the nominal value of such Option Share. Upon exercise of the Option, the Company agreed to pay Forestdale a cash commission of #70,000. The Company decided to exercise a part of the option with Forestdale and, on the 6 May 2005 raised #400,000 by placing 777,831 Ordinary Shares at 51.425 pence per share. The exercise of the Forestdale Option was announced on 16 May 2005. A pro rata commission of #18,667 was paid to Forestdale. NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2005 15. FINANCIAL INSTRUMENTS (i) Management of risk The Company's financial instruments comprise: - Equity shares that are held in accordance with the Company's investment objective as set out in the Directors' Report - Cash and short term debtors and creditors that arise directly from the Company's operations. The main risks arising from the Company's financial instruments are due to fluctuations in market prices, foreign exchange rates and interest rates. The Board regularly reviews and agrees policies for managing each of these risks and they are summarised below. These policies have remained constant throughout the period under review. Market price risk Market price risk arises mainly from uncertainty about the future prices of financial instruments used in the Company's operations. It represents the potential loss the Company might suffer through holding market positions in the face of price movements and movements in exchange rates. It is the Board's policy to hold an appropriate spread of investments in the portfolio in order to reduce risk arising from factors specific to a particular country or sector. The allocation of assets to international markets and stock selection are other factors which act to reduce market price risk. The Investment Advisory Panel monitor market prices throughout the year and report to the Board, which meets regularly to consider investment strategy. Foreign currency risk The Company's total return and net assets can be significantly affected by fluctuations in foreign currency exchange rates because a portion of the Company's assets and revenue are denominated in currencies other than sterling. Liquidity risk The Company's assets comprise mainly readily realisable securities which can be sold to meet funding commitments as necessary. Credit risk The Company places funds with authorised deposit takers from time to time and is therefore potentially at risk from the failure of any such institution of which it is a creditor. The company expects to place any deposits on a short term basis and where possible with more than one institution to reduce its credit risk. (ii) Interest rate risk of financial assets and liabilities The majority of the Company's financial assets are equity shares and other investments which neither pay interest nor have a stated maturity date. The Company's interest bearing financial liabilities are disclosed in note 8. (iii) Currency exposure A portion of the financial assets of the company are denominated in currencies other than sterling with the effect that the net assets and total return can be significantly affected by currency movements. NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2005 Currency Overseas Cash at Total investments bank Euro # - (44) # (44) Icelandic Kroner # 240,203 - # 240,203 (iv) Fair values of financial assets All of the financial assets of the Company are held at fair value, as shown in note 3. 16. RELATED PARTY TRANSACTIONS The Company has an agreement with Combined Management Services Limited ("CMS") under the terms of which CMS agreed to provide research, consultancy, office management and administration services to the Investment Advisory Panel. Jonathan Freeman owns 50% of CMS. The Company acquired a 47.5% interest in Hillberry Trust Company Limited on 24 May 2005. At the time of the purchase of this investment Jonathan Freeman had an interest in this company. 17. POST BALANCE SHEET EVENT Since the end of the financial year to 31 December 2005 the Company received a further #5,000,000 by placing 3,739,716 Ordinary Shares at 133.7 pence per share. This placing was announced on 15 March 2006. Copies of the Annual Report for the year ended 31 December 2005 are being sent to shareholders. Further copies will be available from the Company's registered office: Martello Court, Admiral Park, St Peter Port, Guernsey, GY1 3HB. For further information, please contact: Peter Griffin, Director Tel: +44 (0) 1481 751 000 This information is provided by RNS The company news service from the London Stock Exchange END FR AAMATMMAMBAF
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