TIDMPCX
RNS Number : 5668T
Principle Capital Holdings S.A.
09 June 2009
PRINCIPLE CAPITAL HOLDINGS S.A.
("Principle Capital", the "Company" or the "Group")
Consolidated Final Results for the Year Ended 31 December 2008
Highlights:
Financial:
* Management/advisory and administration fees, excluding performance fees, of
GBP6.10 million, up 79% on 2007 (GBP3.41 million)
* Performance fees received of GBP1.68 million (2007: GBPNil)
* GBP2.46 million accrued in potential performance fees from South African
Property Opportunities plc
* Administrative/operating expenses of GBP7.79 million, up 10% on 2007 (GBP7.11
million)
* Profit in the financial period of GBP1.77 million (2007: loss of GBP5.05
million)
* Net assets of GBP35.1 million (equivalent to 189p per share) (2007: GBP33.6
million, (or 206p per share)) § cash and listed investments at 31 December 2008 of GBP2.87 million and
unlisted investments of GBP3.25 million
* Annualised management/advisory and administration fees as at 31 May 2009
of approximately GBP8.3 million1, up 41% compared to 31 May 2008 (GBP5.9
million), excluding performance fees
Operational:
* Fee earning assets under management at 31 December 2008 up 164% to GBP776
million ($1.12 billion), allowing for cross holdings between the funds (31
December 2007: GBP294 million)
* Fee earning assets under management as at 31 May 2009 up 166% to GBP716 million
($1.16 billion) since 31 May 2008 (GBP269 million), allowing for cross holdings
between the funds. Fall in Sterling terms since 31 December 2008 due to currency
movements
* Investment advisory contract with Principle Capital Investment Trust plc will
end in February 2010, following decision to return capital to shareholders. At
31 May 2009, PCIT represented 7% of funds under management. Group has reduced
expenses to compensate accordingly
* Bulldog Financial Limited generated payment of a performance fee of GBP1.68
million. The underlying investment in Nord Anglia Education plc generated annual
IRRs in excess of 50% to our funds over the three year investment period
* Principle Energy's sugarcane to ethanol project in Mozambique making progress on
the ground and also with its final round of funding. Discussions with a major
global energy company about an ethanol "offtake" contract are at an advanced
stage
* South African Property Opportunities plc ("SAPRO") adjusted net asset values up
16% since 30 June 2008, with minimal gearing. Strategic review announced with a
view to resolving share price discount
* PME African Infrastructure Opportunities ("PME") recent trading statement (30
April 2009) confirmed that each of PME's investments had been independently
valued at 31 December 2008 at or above cost
* Fund and trust administration business, Silex, acquired in October 2007,
contributes profits of GBP0.8 million in 2008
* PCSREAM, asset manager of Sirius Real Estate Limited, acquired in August 2008.
Integration effectively complete and expected to make good contribution in 2009
* Continue to develop existing and new investment products and developing internal
marketing function
* Jonathan Sieff, formerly Chief Executive of Close Brothers Asset Management
Holdings plc, joined the Board of the Company as Chief Executive Officer in
October 2008. Brian Myerson becomes Executive Chairman1 After allowing for our
joint venture partners' share
Commenting on the results, Brian Myerson, Executive Chairman of Principle
Capital, said:
"Notwithstanding the distraction of the recent upheavals at our eponymous
investment trust, which have now been satisfactorily resolved, this has been a
strong period of development for Principle Capital, in which it achieved its
milestone target of $1 billion of funds under management during 2008. We have
five distinct fund operations and a growing fund and trust administration
business. Principle Capital has developed into a substantial business, with
generally good underlying performance in our fund operations and many
opportunities for growth once markets stabilise. During the year we recruited a
new Chief Executive, Jonathan Sieff, and he and the Principle Capital team
continue to focus on developing our distribution platform and investment product
range."
For more information, please contact:
+--------------------------------+------------------------------------+-----------------------------+
| Principle Capital | Jonathan Sieff | +44 20 7240 3222 |
| | Mark Whitfeld | +44 20 7240 3222 |
+--------------------------------+------------------------------------+-----------------------------+
| | | |
+--------------------------------+------------------------------------+-----------------------------+
| Bell Pottinger | Dan de Belder/Victoria Geoghegan | +44 20 7861 3232 |
+--------------------------------+------------------------------------+-----------------------------+
| | | |
+--------------------------------+------------------------------------+-----------------------------+
| Singer Capital Markets | Jeff Keating | +44 20 3205 7500 |
+--------------------------------+------------------------------------+-----------------------------+
www.principlecapital.com
Chief Executive's Statement
For the year ended 31 December 2008
1. Introduction
Despite the turmoil in global financial markets during the first half of the
year, which then turned into a full scale collapse in the second half, our
operational businesses have continued to expand funds under management. I am
pleased to report that following the acquisition of our joint venture interest
in the Sirius Real Estate Asset Management business, the Group has now achieved
assets under management beyond the $1 billion target that the Group set itself
on launch in November 2004.
Strategically, we continue our development as a premier alternative asset
management franchise with strong emerging market expertise. We have reorganised
the business into two divisions: Investment Management and Fund and Trust
Administration. The Investment Management division covers four asset classes:
equities, real estate, infrastructure and commodities (with a focus on renewable
energy). We currently manage five distinct fund strategies (two of these in real
estate, one in each of the other asset classes) and each product remains highly
scaleable. As investor sentiment improves, we plan to grow these products
further. We have been actively developing our distribution platform and have
made three senior hires, Mark Whitfeld (Head of Business Development), Tom
Norton (Head of Asia Pacific) and Raymond Greaves (Managing Director of
Principle Energy). Their primary goal is to increase our funds under management
and to broaden our product range. In addition, our Fund and Trust Administration
division has continued to be a stable and reliable fee generator.
In total, as at 31 December 2008, Principle Capital had fee earning assets under
management, allowing for cross holdings between the funds, of GBP776 million
($1.12 billion). This represented an increase in funds under management of 164%
since 31 December 2007 (GBP294 million), which was primarily achieved by the
acquisition in August 2008 of our joint venture interest in the Sirius Real
Estate Management business. These levels have been maintained through the first
five months of this year, with assets under management at 31 May 2009 down in
Sterling terms at GBP716 million (due to currency movements), although up in US
Dollar terms ($1.16 billion). The well publicised shareholder battle over our
eponymous investment trust, Principle Capital Investment Trust plc ("PCIT") will
result in that fund being wound down over a period of time and our advisory
contract will come to an end in February 2010. PCIT accounted for GBP48 million
or 7% of our funds under management as at 31 May 2009. Given the circumstances
and difficult market backdrop, I believe we have had an outstanding year.
The Group produced a profit of GBP1.77 million in the year, of which GBP1.72
million is attributable to minority interest and GBP0.05 million to equity
holders of the Group (2007: loss of GBP5.05 million). However, of this profit,
GBP4.1 million has been accrued by Proteus Property Partners Limited, our then
59.8% owned subsidiary (now 52%), for a potential performance fee (of which
GBP2.46 million is attributable to the equity holders of the Group) due from
South African Property Opportunities plc ("SAPRO"). Such performance fee will
only crystallise if certain hurdles are met as at 30 June 2009 and these hurdles
are highly sensitive to movements in the South African Rand. On the credit side,
we suffered from falls in the share prices in both PCIT and SAPRO, which reduced
profit by GBP2.71 million. However, we have retained these holdings and their
values have recovered substantially since the year end.
We continued to invest in developing the business during the period and the
results of these efforts are highlighted by the continued growth in
management/advisory and administration fees, the generation of which is the
Group's core focus. Management/advisory and administration fees, excluding
non-recurring performance fees, for the year were GBP6.10 million, up 79% on
2007 (GBP3.41 million), while administrative and operating expenses were up only
10% at GBP7.79 million (2007: GBP7.11 million). We recorded an increase of
GBP0.72 million over the performance fees previously accrued at the end of 2007,
following the realisation of our investment in Nord Anglia Education plc. The
whole of this performance fee was paid out in 2008 in Nord Anglia shares
(equivalent to GBP1.68 million). These shares were subsequently sold for GBP2.52
million.
As at 31 December 2008, the Group had net assets of GBP35.1 million (equivalent
to 189p per share), compared to GBP33.6 million at 31 December 2007 (206p per
share). Of that, GBP2.87 million was represented by cash and listed investments
and GBP3.25 million in unlisted investments. A significant part of the balance
sheet is made up of goodwill, which was created following the acquisition of
Silex and the minorities buy-out of our fund operations business Principle
Capital Partners in October 2007. This has been independently tested for
impairment and remains stable at GBP25.0 million (31 December 2007: GBP25.0
million).
At present we have six fee generating operations, producing annualised recurring
management/advisory fees as at 31 May 2009 of approximately GBP8.3 million, up
41% compared to 31 May 2008 (GBP5.9 million). This amount is calculated after
allowing for our joint venture partners' share in these operations and excludes
any non-recurring performance related revenues.
2. Investment Management
Principle Capital Investment Trust plc ("PCIT"), Principle Capital, L.P.
("PCLP") and Bulldog Financial Limited ("Bulldog")
PCIT and PCLP had a poor year, with their long only UK small and mid cap focus.
The collapse in markets and flight to larger caps saw our funds in this
strategy's composite performance fall 44%, albeit outperforming the FTSE Small
Companies ex Investment Trusts Index which fell 50% over the period.
At 31 December 2008, the net asset value of PCIT was GBP44.9 million (31
December 2007: GBP89 million) and our open-ended fund, Principle Capital, LP
("PCLP"), stood at GBP8 million (31 December 2007: GBP16 million).
The life of Bulldog, our GBP15 million special purpose vehicle investing in Nord
Anglia Education plc, came to an end during the period, generating a significant
carried interest for the Group, which was paid in shares of Nord Anglia.
Subsequently we played a significant role in securing an offer for Nord Anglia
from The Baring Private Equity Asia Fund IV at a 70% premium to the average
market price over the six months prior to the approach being made public. The
Nord Anglia investment generated IRRs in excess of 50% to our funds over a three
year period.
The Nord Anglia position helped bolster performance but also generated
significant cash for PCIT and PCLP, which held positions alongside Bulldog
Financial. Both funds have been able to acquire positions in the remainder of
their portfolios at attractive prices during the downturn and since the year end
performance has benefited from this approach, with the net asset value of PCIT
increasing by 19% in the first four months of the year.
Shareholders will have noticed the much publicised battle over PCIT launched by
QVT, one of its major investors and also an investor in our Company. QVT has
been attempting to exit a number of similar closed-end funds that it invested in
over the last few years. QVT temporarily brought about a wholesale change to the
board of PCIT with a view to winding up the portfolio. The original Board has
since been restored, but has agreed to realise the portfolio in an orderly
fashion and thus our investment advisory contract will end in February 2010.
We intend to continue with the strategy through PCLP and whilst developments at
PCIT have been disappointing, we believe that we can prove that the strategy is
effective, through a fund structure that is not faced with the discount problems
that listed funds suffer from in difficult market conditions and with investors
that have longer term investment horizons.
South African Real Estate
South African Property Opportunities plc ("SAPRO") has made excellent progress.
SAPRO, whose investment manager is Proteus Property Partners Limited
("Proteus"), is listed on AIM and the Channel Islands Stock Exchange. It is
focused on funding and managing real estate developments in southern Africa. It
has made investments in 15 development projects to date across a wide range of
sectors, including industrial, mixed use and residential. In its interim results
for the six months to 31 December 2008, it reported an adjusted net asset value
of GBP79 million (127 pence per share) up 16% since 30 June 2008, despite the
global real estate downturn during that period. It has minimal gearing and a
valuation of its portfolio of developments showed a 38% uplift over base cost
(including post acquisition capex), with the average development being only 13.5
months old.
As with many listed funds the share price has disconnected from the underlying
portfolio value and the fund announced a strategic review in March 2009 and
subsequently certain board changes have occurred. The outcome of the strategic
review is yet to be announced. Proteus makes a reasonable contribution to the
Group on a recurring revenue basis, but potentially more significantly Proteus
could be entitled to performance fees from the period ended 30 June 2009.
However, any payment is subject to achieving its performance criteria as at 30
June 2009, and such criteria are sensitive to movements in the South African
Rand.
Proteus will be working hard to generate strong returns to investors, which we
also hope will result in the payment of further performance fees for the Group.
In order to incentivise further and reward the local management team for their
excellent performance, Principle Capital reduced its interest in Proteus to 52%
(from 59.8%) with effect from 1 January 2009.
PME African Infrastructure
PME African Infrastructure Opportunities plc ("PMEAIO") has made steady progress
in making investments and in developing the existing portfolio. PMEAIO is listed
on AIM and its investment manager is PME Infrastructure Managers Limited
("PMEIM"), in which the Group has a 31.67% interest. As of the most recent
announcement, PMEAIO's five investments covering telecommunications, transport
leasing and logistics, have an equity requirement of $89.5 million. It is also
in advanced negotiations on further projects. The fund has generated some very
interesting opportunities and has given Principle Capital a significant foothold
in the African investment market, which is now one of the few regions globally
to be experiencing growth.
Whilst PMEIM is broadly break even at present on a management fee basis, PMEIM
receives management fees based on the gross asset value of PMEAIO, as a result
of which, as gearing is taken into the portfolio, PMEIM should begin to
contribute on the basis of recurring revenues. In addition, PMEIM receives
performance fees on a project by project basis and, accordingly, has a high
chance of generating strong levels of performance fees from its exposure to
early stage opportunities in the fast growing continent of Africa, once
realisations are made.
Principle Energy Limited
In December 2007, the Company announced it had secured funding for the first
phase of a project to be undertaken by Principle Energy Limited, whose mission
is to become a leading producer of low-cost ethanol. Principle Energy has
secured Mozambican government approval for this project, covering 20,000
hectares of land.
Principle Energy comprises a greenfield project in the central region of
Mozambique near Dombe, based on the building of a single large scale integrated
ethanol from sugarcane production facility. Principle Energy raised
approximately $50 million of equity funding for the project in 2007. Subject to
certain hurdles and parameters, Principle Capital is now entitled to receive
management service and performance fees from Principle Energy as well as an
entitlement to warrants in Principle Energy.
As the plant ordering and land clearing steps up, Principle Energy will need to
raise further equity and debt funds. This process is well under way and there
has been encouraging levels of interest from equity investors and finance
houses. In addition Principle Energy is in advanced discussions with a major
global energy company about an ethanol "offtake" contract.
Sirius Real Estate Limited
In August 2008, the Company announced that its wholly owned subsidiary,
Principle Capital Partners Limited had agreed to acquire a 48% interest in the
asset manager of Dawnay Day Sirius Limited, an AIM listed fund, as well as
certain associated real estate interests. Dawnay Day Sirius has been renamed
Sirius Real Estate Limited and invests primarily in large mixed-use commercial
real estate assets in Germany which can be (or have already been) sub-divided
into flexible workspaces, offering high quality managed business accommodation
to local businesses, predominantly SMEs. Sirius raised EUR328 million in July 2007
and in its last financial statements for the year ended 31 March 2009, had gross
assets of EUR519 million. Our partners in the asset manager are Kevin and Frank
Oppenheim, who own 24% each and senior management who own the remaining 4%.
The business model aims to drive significant increases in rental values through
relatively low capex, by taking typically old inefficient warehouse space and
converting it into space more appropriate for modern business as well as
creating a better quality business environment for its clients. Undoubtedly the
economic situation in Germany will affect the smaller businesses, but equally
some of the offering is defensively priced and also offers flexibility in its
lease terms which appeals to businesses in uncertain times.
We believe the business model is sound and scaleable and we plan to expand it
significantly over time.
New opportunities
We are engaged with a highly regarded European fund manager about promoting an
ethical/environmental fund opportunity. Whilst our target audience, the European
pension funds, have embraced the fund concept, the recent turmoil has slowed
down the process of obtaining commitments. However, we continue to make progress
now that some stability has returned to financial markets.
In recognition of the growth in our alternative funds platform, we are regularly
in discussion with a number of investment professionals and teams about the
creation of alternative fund strategies that resonate with our own strategy.
Recent market dislocations have thrown up a number of opportunities with highly
experienced managers looking to build funds that may not have existed
beforehand. For that reason, we continue to assess the best managers who are
focused on our preferred asset classes primarily in emerging markets.
Performance Fees
Bulldog represented the first fund we established and had a limited life (to 31
March 2008). At 31 December 2007, the notional performance fee payable to
Principle Capital was GBP0.96 million and was accrued in the 2007 accounts.
However, given the strong performance of Nord Anglia in the first quarter of
2008 to the date of its break-up, this realised a fee of GBP1.68 million to
Principle Capital and GBP0.72 million was recorded as a further profit this
year. The fee was paid in Nord Anglia shares, which were subsequently sold for a
total of GBP2.52 million, some prior to but mostly following the Baring Private
Equity Asia offer. This generated good cashflow for the Group. As set out above
there may also be a performance fee payable by SAPRO, subject to certain
performance criteria being achieved at 30 June 2009.
3. Fund and Trust Administration
Silex, our Fund and Trust Administration business which we acquired in October
2007, made an excellent contribution in 2008. Silex generated profits of just
over GBP0.8 million on turnover of GBP2.18 million. Silex provides fund and
trust administration services to over $1.5 billion of client assets, including
five listed funds and several unlisted funds. We are looking at ways in which we
can grow this division's increasingly strong market position.
4. Company Investments
It is the Company's policy to seed and make investments primarily in its own
fund products. At 31 December 2008, the Company held investments of GBP4.1
million, covering PCIT, Principle Energy, SAPRO and certain minority interests
in the Sirius Real Estate portfolio, which it acquired alongside the asset
manager.
5. Strategy
It is our medium term aim to broaden our alternative fund strategies to
approximately ten themes and across a broader geographic range, with a bias
towards emerging markets. Whilst fund raising opportunities have been limited
since the collapse in markets in the second half of 2008, we believe this is a
good time to build operationally. For this reason, we have made the three senior
hires mentioned earlier, focused on business development and distribution. This
will help our existing products to grow but also gives us the ability to attract
new joint venture partners for new product offerings.
We have over 150 staff within the wider Group, including all our joint venture
fund management operations, with offices in Geneva, London, Berlin, Cape Town,
Johannesburg, Durban and Beira (Mozambique) and, most recently, in Singapore. We
continually look at ways in which synergies can be extracted from our various
activities.
6. Outlook
I am pleased to have joined the Group at such a crucial time in its development
and to have achieved the $1 billion milestone in funds under management last
year against a bleak market backdrop. Our share price has suffered along with
the rest of the market, but our business is stable and we are confident that
recent events in financial markets have strengthened demand for alternative
investment products, as well for exposure to emerging markets. As markets
recover, we are well placed to grow our alternative fund strategies and that
growth will benefit our shareholders.
Jonathan Sieff
Chief Executive Officer
DIRECTORS' REPORT FOR THE YEAR ENDED 31 DECEMBER 2008
General
Principle Capital Holdings S.A. (the "Company" or "PCH") is a Luxembourg company
incorporated on 29 December 2003.
Together with its subsidiaries it represents the "Group".
The registered office of the Company is at 58, rue Charles Martel, L- 2134
Luxembourg and the Company is registered with the "Registre de commerce et de
société au Grand-Duché de Luxembourg" under section B, number 98.144. The
Company is established for an unlimited period.
The Company shall have as its business purpose the holding of participations, in
any form whatsoever, in Luxembourg and foreign companies, the acquisition by
purchase, subscription, or in any other manner as well as the transfer by sale,
exchange or otherwise of stock, bonds, debentures, notes and other securities of
any kind.
The Company's year commences on the first of January and terminates on the last
day of December.
The authorised share capital of the Company is 24,500,000 shares with a par
value of GBP1 each, of which 18,644,806 are issued and fully paid.
The Company's shares are admitted to trading on the Alternative Investment
Market of the London Stock Exchange (AIM). All companies admitted to trading on
AIM are required to adopt IFRS for the year ending 31 December
2007. Accordingly, the financial statements for 2008 have been prepared under
IFRS.
Principal Activities
Principle Capital Holdings S.A. is the holding company of a Group established to
raise and manage investment funds. The Company may also invest its own money in
or alongside these funds.
Business Review and Dividend
The Directors draw shareholders attention to the Chief Executive's Statement on
pages 1 to 6 of the annual report, which, in the opinion of the Directors,
contain a balanced and comprehensive review of the Group's performance and
development during the year, and the position at the end of the year.
The results for the year are set out in the Consolidated Income Statement on
page 14 of the financial statements. At 31 December 2008 the Group had a
retained profit on ordinary activities after taxation and before minority
interests of GBP 1.769 million. The retained profit attributable to the Group
for the year is GBP 46,979. Earnings per share were 0.28 pence (stated after
minority interest). The Directors are not recommending payment of a dividend.
In the opinion of the Directors the risks and uncertainties facing the Group
which the Directors consider to be material are shown below.
1. Limited trading history
The Group began trading in late 2004 and therefore has a limited operating
history and trading record. The Company's prospects should be considered in
light of the risks associated with companies in their early stages of
development.
2. Investments and Investment Funds
The value of an investment in the Group is partly dependent upon the performance
of the Group's investments, the performance of the investments and investment
funds managed/advised by companies within the Group (the "Funds") as well as the
Group's ability to raise more capital for the Funds and to raise new
Funds. There can be no guarantee that the Group's investments or the Funds will
perform well, nor that the Group will be successful in raising more capital for
the Funds or new Funds.
3. Silex
The value of an investment in the Group is also partly dependent upon the
performance of Silex, the Group's fund and trust administration business.
Silex's revenues are generated from contracts with various funds and private
clients and typically have notice periods of less than one year. Revenues may
therefore be impacted by loss of client mandates at relatively short notice.
4. Foreign exchange risk
An investment made by the Group may be made in countries other than the United
Kingdom or other currencies whose currency is not pounds sterling, the reporting
currency of the Group. The value of any such investment would, therefore, be
affected by any fluctuations in foreign exchange rates.
5. Dependence on key staff
The Group's performance is dependent on the ability of the executive directors
and key individuals (the "Management Team") retained or employed within the
Group. If one or more of them ceases to work for or provide services to the
Group, the Group's businesses may be adversely affected.
6. Past Performance
The past performance and investment track record of the Management Team is not a
guarantee of future performance of the Group.
7. Further equity issues
The Group may in the future seek to raise further equity funds through the issue
of additional Shares. Any equity funds raised would have a dilutive effect on
existing shareholdings.
8. Trading on AIM and Liquidity
The share prices of publicly quoted companies can be volatile. The price of
shares is dependent upon a number of factors, some of which are general or
market specific, others which are sector specific and others which are specific
to the Group. It may be the case that the market price of the Company's shares
does not fully reflect the underlying net asset value of the Group.
Although the Shares will be traded on AIM, this should not be taken as implying
that there will always be a liquid market in the Shares. In addition, the market
for shares in smaller public companies is less liquid than for larger public
companies. Therefore an investment in Shares may be difficult to realise and the
share price may be subject to greater fluctuations than might otherwise be the
case.
The Shares are quoted on AIM rather than on the Official List of the UK Listing
Authority. An investment in shares quoted on AIM may carry a higher risk than an
investment in shares quoted on the Official List as the AIM Rules are less
demanding than the rules of the Official List. Investors should be aware that
the value of the Shares may be volatile and may go down as well as up and
investors may not recover their original investment.
9. General Market Risk
The performance of the investments held by the Group and/or the Funds may be
adversely affected by general market sentiment or economic trends which bear
little or no relationship to the underlying fundamentals of the companies
concerned.
10. Risk of Illiquidity of Investments
The ability to sell investments held by the Group and/or the Funds may be
adversely affected due to insufficient trading activity or, indeed, actual
trading halts in the markets in which the securities concerned are traded. In
such circumstances it may take time to liquidate the positions of the
Group and/or the Funds and the market prices obtained may be substantially
different from those indicated at the time when the decisions to liquidate were
taken. The Group and/or the Funds may from time to time invest their money in
private entities where there is no market.
11. Institutional Risk
The institutions, including brokerage firms and banks, custodians and
administrative and executive service providers, with which the Group (directly
or indirectly) does business, or to which securities have been entrusted for
custodial purposes may encounter financial difficulties which impair the
operational capabilities or the capital position of the Company and/or the
Funds.
12. Counterparty and Settlement Risk
Transactions effected by Group members on behalf of the Group and/or the Funds
will not always be limited to transactions on, or effected under the rules of
major securities exchanges and it is possible that some trades may be effected
off-exchange, directly with counterparties. The Group and/or the Funds will take
a credit risk on the parties with which it trades and therefore the Group and/or
the Funds acting through Group members will seek to transact only with major
established counterparties. The Group and/or the Funds will also bear the risk
of settlement default by clearing houses and exchanges. Any default by a
counterparty or on settlement could have a material adverse effect on the Group
and/or the Funds.
13. Investment Strategies
The Group may employ certain strategies which depend upon the reliability and
accuracy of the analytical models performed by, amongst others, members of the
Group. To the extent such models (or the assumptions underlying them) and/or
strategies do not prove to be correct, the Group and/or the Funds may not
perform as anticipated, which could result in substantial losses, which will
affect the Company's revenues and in turn might affect the value of the Company.
14. Incentive Fees
Performance-based fees may create an incentive for Group members to make
investments which are riskier and more speculative than would be the case in the
absence of such performance-based fees.
15. Changes in Applicable Law
The Group must comply with various legal requirements, including those imposed
by the securities laws, tax laws and pension laws in various jurisdictions. If
any of those laws change, the legal, regulatory and taxation requirements and
treatments to which the Group and its shareholders may be subject could differ
materially from the current requirements.
16. Stock Options
As at 31 December 2008, the following Directors of the Company have a right to
subscribe for shares in the Company:
David John Cooley, 89,998 shares at 200 pence each, granted 3 November 2004;
Brian Sean Padgett, 44,999 shares at 200 pence each, granted 3 November 2004;
and
Leonard Joseph O'Brien 44,999 shares at 200 pence each, granted 3 November 2004.
17. Disclosure of Information to Auditors
The directors who held office at the date of approval of this Directors' report
confirm that, so far as they are each aware, there is no relevant audit
information of which the Group's auditors are unaware; and each Director of the
Group has taken all the steps that he ought to have taken as a Director to make
himself aware of any relevant audit information and to establish that the
Group's auditors are aware of that information.
18. Auditors
KPMG Audit S.à r.l. were appointed during the period and
have expressed their willingness to be reappointed.
Approved by Board of Directors on 5 June 2009
CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2008
+--------------------------------------------+-------+-------------+--+---------------+
| | | | | |
+--------------------------------------------+-------+-------------+--+---------------+
| | Notes | 2008 | | 2007 |
+--------------------------------------------+-------+-------------+--+---------------+
| | | GBP | | GBP |
+--------------------------------------------+-------+-------------+--+---------------+
| | | | | |
+--------------------------------------------+-------+-------------+--+---------------+
| TURNOVER | 4 | 11,196,860 | | 2,751,878 |
+--------------------------------------------+-------+-------------+--+---------------+
| | | | | |
+--------------------------------------------+-------+-------------+--+---------------+
| OTHER INCOME | | | | |
+--------------------------------------------+-------+-------------+--+---------------+
| Unrealised losses on investments | 10.7 | (2,749,013) | | (1,147,378) |
+--------------------------------------------+-------+-------------+--+---------------+
| Realised gains on sale of investments | 10.7 | 792,839 | | 39,412 |
+--------------------------------------------+-------+-------------+--+---------------+
| Other operating income | | 119 | | 13,200 |
+--------------------------------------------+-------+-------------+--+---------------+
| | | | | |
+--------------------------------------------+-------+-------------+--+---------------+
| | | 9,240,805 | | 1,657,112 |
+--------------------------------------------+-------+-------------+--+---------------+
| | | | | |
+--------------------------------------------+-------+-------------+--+---------------+
| Administrative expenses | 5.1 | (5,112,334) | | (4,810,223) |
+--------------------------------------------+-------+-------------+--+---------------+
| External charges | 5.2 | (2,681,930) | | (2,299,319) |
+--------------------------------------------+-------+-------------+--+---------------+
| | | | | |
+--------------------------------------------+-------+-------------+--+---------------+
| | | | | |
+--------------------------------------------+-------+-------------+--+---------------+
| OPERATING PROFIT/(LOSS) | | 1,446,541 | | (5,452,430) |
+--------------------------------------------+-------+-------------+--+---------------+
| | | | | |
+--------------------------------------------+-------+-------------+--+---------------+
| Interest income | | 335,852 | | 205,409 |
+--------------------------------------------+-------+-------------+--+---------------+
| Interest expense | | (3,365) | | (94,229) |
+--------------------------------------------+-------+-------------+--+---------------+
| Share of gains/(losses) of associate | 10.4 | 108,169 | | (317) |
| companies | | | | |
+--------------------------------------------+-------+-------------+--+---------------+
| | | | | |
+--------------------------------------------+-------+-------------+--+---------------+
| PROFIT/(LOSS) BEFORE INCOME TAX | | 1,887,197 | | (5,341,567) |
+--------------------------------------------+-------+-------------+--+---------------+
| | | | | |
+--------------------------------------------+-------+-------------+--+---------------+
| Income tax expense | 8 | (118,628) | | (93,163) |
+--------------------------------------------+-------+-------------+--+---------------+
| | | | | |
+--------------------------------------------+-------+-------------+--+---------------+
| PROFIT/(LOSS) FOR THE YEAR | | 1,768,569 | | (5,434,730) |
+--------------------------------------------+-------+-------------+--+---------------+
| | | | | |
+--------------------------------------------+-------+-------------+--+---------------+
| Attributable to: | | | | |
+--------------------------------------------+-------+-------------+--+---------------+
| Equity holders of the Company | | 46,979 | | (5,049,730) |
+--------------------------------------------+-------+-------------+--+---------------+
| Minority interests | | 1,721,590 | | (385,000) |
+--------------------------------------------+-------+-------------+--+---------------+
| | | | | |
+--------------------------------------------+-------+-------------+--+---------------+
| PROFIT/(LOSS) FOR THE YEAR | | 1,768,569 | | (5,434,730) |
+--------------------------------------------+-------+-------------+--+---------------+
| | | | | |
+--------------------------------------------+-------+-------------+--+---------------+
| Earnings/(loss) per share | 19 | 0.28p | | (48.23p) |
+--------------------------------------------+-------+-------------+--+---------------+
| | | | | |
+--------------------------------------------+-------+-------------+--+---------------+
| Diluted earnings/(loss) per share | 19 | 0.28p | | (48.23p) |
+--------------------------------------------+-------+-------------+--+---------------+
| | | | | |
+--------------------------------------------+-------+-------------+--+---------------+
CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2008
+----------------------------------+--+------+-----+--+------------+---+----------+-------------+
| | | | | | | |
+----------------------------------+---------+-----+---------------+---+----------+-------------+
| | Notes | | 2008 | | | 2007 |
+----------------------------------+---------+-----+---------------+---+----------+-------------+
| | | | GBP | | | GBP |
+----------------------------------+---------+-----+---------------+---+----------+-------------+
| ASSETS | | | | | | |
+----------------------------------+---------+-----+---------------+---+----------+-------------+
| Tangible assets | 9 | | 513,415 | | | 275,713 |
+----------------------------------+---------+-----+---------------+---+----------+-------------+
| Goodwill | 10.3 | | 25,041,465 | | | 25,041,465 |
+----------------------------------+---------+-----+---------------+---+----------+-------------+
| Investment in associates | 10.4 | | 799,453 | | | - |
+----------------------------------+---------+-----+---------------+---+----------+-------------+
| Other investments | 10.1 | | 3,479,520 | | | 3,909,197 |
+----------------------------------+---------+-----+---------------+---+----------+-------------+
| TOTAL NON-CURRENT ASSETS | | | 29,833,853 | | | 29,226,375 |
+----------------------------------+---------+-----+---------------+---+----------+-------------+
| | | | | | | |
+----------------------------------+---------+-----+---------------+---+----------+-------------+
| Debtors | 11 | | 2,419,803 | | | 2,553,697 |
+----------------------------------+---------+-----+---------------+---+----------+-------------+
| Other assets | 12 | | 4,611,487 | | | 566,864 |
+----------------------------------+---------+-----+---------------+---+----------+-------------+
| Cash at bank and in hand | | | 2,067,794 | | | 3,221,974 |
+----------------------------------+---------+-----+---------------+---+----------+-------------+
| Assets held for sale | 10.5 | | 523,787 | | | - |
+----------------------------------+---------+-----+---------------+---+----------+-------------+
| Available-for-sale financial | 10.6 | | 49,328 | | | 2,711 |
| assets | | | | | | |
+----------------------------------+---------+-----+---------------+---+----------+-------------+
| TOTAL CURRENT ASSETS | | | 9,672,199 | | | 6,345,246 |
+----------------------------------+---------+-----+---------------+---+----------+-------------+
| | | | | | | |
+----------------------------------+---------+-----+---------------+---+----------+-------------+
| TOTAL ASSETS | | | 39,506,052 | | | 35,571,621 |
+----------------------------------+---------+-----+---------------+---+----------+-------------+
| | | | | | | |
+----------------------------------+---------+-----+---------------+---+----------+-------------+
| EQUITY | | | | | | |
+----------------------------------+---------+-----+---------------+---+----------+-------------+
| Called up share capital | 15 | | 18,644,806 | | | 16,249,806 |
+----------------------------------+---------+-----+---------------+---+----------+-------------+
| Share premium | 15 | | 22,392,125 | | | 23,287,500 |
+----------------------------------+---------+-----+---------------+---+----------+-------------+
| Foreign exchange differences | | | (65,662) | | | 21,415 |
+----------------------------------+---------+-----+---------------+---+----------+-------------+
| Non-distributable reserve | | | 25,176 | | | 3,546 |
+----------------------------------+---------+-----+---------------+---+----------+-------------+
| Accumulated losses | | | (5,810,973) | | | (5,949,532) |
+----------------------------------+---------+-----+---------------+---+----------+-------------+
| | | | | | | |
+----------------------------------+---------+-----+---------------+---+----------+-------------+
| Equity attributable to | | | 35,185,472 | | | 33,612,735 |
| shareholders | | | | | | |
+----------------------------------+---------+-----+---------------+---+----------+-------------+
| | | | | | | |
+----------------------------------+---------+-----+---------------+---+----------+-------------+
| Minority interest | | | 1,893,887 | | | 172,297 |
+----------------------------------+---------+-----+---------------+---+----------+-------------+
| | | | | | | |
+----------------------------------+---------+-----+---------------+---+----------+-------------+
| TOTAL EQUITY | | | 37,079,359 | | | 33,785,032 |
+----------------------------------+---------+-----+---------------+---+----------+-------------+
| | | | | | | |
+----------------------------------+---------+-----+---------------+---+----------+-------------+
| Deferred tax liabilities | 8 | | 6,261 | | | 4,375 |
+----------------------------------+---------+-----+---------------+---+----------+-------------+
| Creditors | 13 | | 1,730,588 | | | 1,782,214 |
+----------------------------------+---------+--------+------------+---+----------+-------------+
| Deferred income | 14 | | 689,844 | | | - |
+----------------------------------+---------+--------+------------+---+----------+-------------+
| | | | | | | |
+-------------------------------------+------+--------+------------+---+----------+-------------+
| TOTAL EQUITY AND LIABILITIES | | | 39,506,052 | | | 35,571,621 |
+----------------------------------+--+------+-----+--+------------+---+----------+-------------+
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2008
+---------------------------------------------+----------------+-------------+--+--------------+
| | Notes | 2008 | | 2007 |
+---------------------------------------------+----------------+-------------+--+--------------+
| Cash flows from operating activities | | GBP | | GBP |
+---------------------------------------------+----------------+-------------+--+--------------+
| Profit/(loss) for the year | | 1,768,569 | | (5,434,730) |
+---------------------------------------------+----------------+-------------+--+--------------+
| Adjustments for: | | | | |
+---------------------------------------------+----------------+-------------+--+--------------+
| Depreciation | 9 | 125,994 | | 48,802 |
+---------------------------------------------+----------------+-------------+--+--------------+
| Unrealised losses on investments | 10.7 | 2,749,013 | | 1,147,378 |
+---------------------------------------------+----------------+-------------+--+--------------+
| Realised gains on investments | 10.7 | (792,839) | | (39,412) |
+---------------------------------------------+----------------+-------------+--+--------------+
| Share options | 16 | 113,210 | | 839 |
+---------------------------------------------+----------------+-------------+--+--------------+
| Share of (gains)/losses of associate | 10.4 | (108,169) | | 317 |
| companies | | | | |
+---------------------------------------------+----------------+-------------+--+--------------+
| Interest expense | | 3,364 | | 94,229 |
+---------------------------------------------+----------------+-------------+--+--------------+
| Income taxes | 8 | 118,628 | | 93,163 |
+---------------------------------------------+----------------+-------------+--+--------------+
| (Increase)/decrease in debtors, prepayments | | (5,548,961) | | 3,569,443 |
| and accruals | | | | |
+---------------------------------------------+----------------+-------------+--+--------------+
| Increase/(decrease) in creditors and | | 1,189,086 | | (1,251,007) |
| deferred income | | | | |
+---------------------------------------------+----------------+-------------+--+--------------+
| | | (382,105) | | (1,770,978) |
+---------------------------------------------+----------------+-------------+--+--------------+
| Interest paid | | (3,365) | | (94,229) |
+---------------------------------------------+----------------+-------------+--+--------------+
| Tax paid | | (110,985) | | (28,760) |
+---------------------------------------------+----------------+-------------+--+--------------+
| Net cash outflows from operating activities | | (496,455) | | (1,893,967) |
+---------------------------------------------+----------------+-------------+--+--------------+
| | | | | |
+---------------------------------------------+----------------+-------------+--+--------------+
| Cash flows from investing activities | | | | |
+---------------------------------------------+----------------+-------------+--+--------------+
| Payments to acquire 30% Principle Capital | | - | | (20,632,817) |
| Partners Ltd. | | | | |
+---------------------------------------------+----------------+-------------+--+--------------+
| Payments to acquire tangible fixed assets | 9 | (363,696) | | (265,151) |
+---------------------------------------------+----------------+-------------+--+--------------+
| Cash acquired upon purchase of Silex | | - | | 633,459 |
| Holdings Ltd. | | | | |
+---------------------------------------------+----------------+-------------+--+--------------+
| Loan granted to third parties | | 82,681 | | (72,099) |
+---------------------------------------------+----------------+-------------+--+--------------+
| Loan to associate companies | | (5,805) | | (532,133) |
+---------------------------------------------+----------------+-------------+--+--------------+
| Acquisition costs related to Silex Holdings | | - | | (124,737) |
| Ltd. | | | | |
+---------------------------------------------+----------------+-------------+--+--------------+
| Payments to acquire associates | 10.4 | (931,284) | | (317) |
+---------------------------------------------+----------------+-------------+--+--------------+
| Payments to acquire investments | 10.1,10.5,10.6 | (2,937,183) | | (3,113,887) |
+---------------------------------------------+----------------+-------------+--+--------------+
| Proceeds from sale of investments | | 2,522,180 | | 7,119,075 |
+---------------------------------------------+----------------+-------------+--+--------------+
| Net cash used in investing activities | | (1,633,107) | | (16,988,607) |
+---------------------------------------------+----------------+-------------+--+--------------+
| | | | | |
+---------------------------------------------+----------------+-------------+--+--------------+
| Cash flows from financing activities | | | | |
+---------------------------------------------+----------------+-------------+--+--------------+
| Proceeds from newly subscribed capital | | 1,499,625 | | 20,100,136 |
+---------------------------------------------+----------------+-------------+--+--------------+
| Dividends paid to former shareholders of | 13 | (556,626) | | (145,000) |
| Silex Management Ltd. | | | | |
+---------------------------------------------+----------------+-------------+--+--------------+
| Net cash flows from financing activities | | 942,999 | | 19,955,136 |
+---------------------------------------------+----------------+-------------+--+--------------+
| | | | | |
+---------------------------------------------+----------------+-------------+--+--------------+
| Net (decrease)/increase in cash | | (1,186,563) | | 1,072,562 |
+---------------------------------------------+----------------+-------------+--+--------------+
| Cash at the beginning of the year | | 3,221,974 | | 2,148,710 |
+---------------------------------------------+----------------+-------------+--+--------------+
| Effect of exchange rate fluctuations on | | 32,383 | | 702 |
| cash held | | | | |
+---------------------------------------------+----------------+-------------+--+--------------+
| Cash at the end of the year | | 2,067,794 | | 3,221,974 |
+---------------------------------------------+----------------+-------------+--+--------------+
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY AS AT 31 DECEMBER 2008
+--------------------------------+------------+------------+-------------+-------------------+-------------+---------------+-----------+---------------+
| | Called up | Share | Foreign |Non-distributable |Accumulated | Year end | Minority | Year end |
| | share | premium | exchange | reserve | losses |shareholder's |interests |shareholder's |
| | capital | |differences | | |equity (Group | | equity |
| | | | | | | share) | | (Total) |
+--------------------------------+------------+------------+-------------+-------------------+-------------+---------------+-----------+---------------+
| | | | | | | | | |
+--------------------------------+------------+------------+-------------+-------------------+-------------+---------------+-----------+---------------+
| As at 1 January 2007 | 8,999,806 | 6,250,000 | (242) | - | (851,152) | 14,398,412 | 411,342 | 14,809,754 |
+--------------------------------+------------+------------+-------------+-------------------+-------------+---------------+-----------+---------------+
| Foreign exchange | - | - | 21,657 | - | - | 21,657 | (2) | 21,655 |
+--------------------------------+------------+------------+-------------+-------------------+-------------+---------------+-----------+---------------+
| Total income and expense | - | - | 21,657 | - | - | 21,657 | (2) | 21,655 |
| recognised in equity | | | | | | | | |
+--------------------------------+------------+------------+-------------+-------------------+-------------+---------------+-----------+---------------+
| Result 2007 | - | - | - | - | (5,049,730) | (5,049,730) | (385,000) | (5,434,730) |
+--------------------------------+------------+------------+-------------+-------------------+-------------+---------------+-----------+---------------+
| Total recognised income and | - | - | 21,657 | - | (5,049,730) | (5,028,073) | (385,002) | (5,413,075) |
| expense | | | | | | | | |
+--------------------------------+------------+------------+-------------+-------------------+-------------+---------------+-----------+---------------+
| Shares issued | 7,250,000 | 17,037,500 | - | - | - | 24,287,500 | - | 24,287,500 |
+--------------------------------+------------+------------+-------------+-------------------+-------------+---------------+-----------+---------------+
| Share based payments | - | - | - | - | 839 | 839 | - | 839 |
+--------------------------------+------------+------------+-------------+-------------------+-------------+---------------+-----------+---------------+
| Non-distributable reserve | - | - | - | 3,546 | - | 3,546 | - | 3,546 |
+--------------------------------+------------+------------+-------------+-------------------+-------------+---------------+-----------+---------------+
| PCP minority interest acquired | - | - | - | - | (49,489) | (49,489) | 145,957 | 96,468 |
+--------------------------------+------------+------------+-------------+-------------------+-------------+---------------+-----------+---------------+
| As at 31 December 2007 | 16,249,806 | 23,287,500 | 21,415 | 3,546 | (5,949,532) | 33,612,735 | 172,297 | 33,785,032 |
+--------------------------------+------------+------------+-------------+-------------------+-------------+---------------+-----------+---------------+
| | | | | | | | | |
+--------------------------------+------------+------------+-------------+-------------------+-------------+---------------+-----------+---------------+
| | | | | | | | | |
+--------------------------------+------------+------------+-------------+-------------------+-------------+---------------+-----------+---------------+
| As at 1 January 2008 | 16,249,806 | 23,287,500 | 21,415 | 3,546 | (5,949,532) | 33,612,735 | 172,297 | 33,785,032 |
+--------------------------------+------------+------------+-------------+-------------------+-------------+---------------+-----------+---------------+
| Foreign exchange | - | - | (87,077) | - | - | (87,077) | - | (87,077) |
+--------------------------------+------------+------------+-------------+-------------------+-------------+---------------+-----------+---------------+
| Total income and expense | - | - | (87,077) | - | - | (87,077) | - | (87,077) |
| recognised in equity | | | | | | | | |
+--------------------------------+------------+------------+-------------+-------------------+-------------+---------------+-----------+---------------+
| Result 2008 | - | - | - | - | 46,979 | 46,979 | 1,721,590 | 1,768,569 |
+--------------------------------+------------+------------+-------------+-------------------+-------------+---------------+-----------+---------------+
| Total recognised income and | - | - | - | - | 46,979 | (40,098) | 1,721,590 | 1,681,492 |
| expense | | | | | | | | |
+--------------------------------+------------+------------+-------------+-------------------+-------------+---------------+-----------+---------------+
| Shares issued | 2,395,000 | (895,375) | - | - | - | 1,499,625 | - | 1,499,625 |
+--------------------------------+------------+------------+-------------+-------------------+-------------+---------------+-----------+---------------+
| Share based payments | - | - | - | - | 113,210 | 113,210 | - | 113,210 |
+--------------------------------+------------+------------+-------------+-------------------+-------------+---------------+-----------+---------------+
| Non-distributable reserve | - | - | - | 21,630 | (21,630) | - | - | - |
+--------------------------------+------------+------------+-------------+-------------------+-------------+---------------+-----------+---------------+
| As at 31 December 2008 | 18,644,806 | 22,392,125 | (65,662) | 25,176 | (5,810,973) | 35,185,472 | 1,893,887 | 37,079,359 |
+--------------------------------+------------+------------+-------------+-------------------+-------------+---------------+-----------+---------------+
NOTES TO THE FINANCIAL STATEMENTS AS AT 31 DECEMBER 2008
1. GENERAL INFORMATION
Principle Capital Holdings S.A is a holding company of a Group ("the Group")
established to raise and manage investment funds. The Company has two divisions:
Investment Management, and Fund and Trust Administration.
The Investment Management business includes Principle Capital Investment Trust
Plc (PCIT), the Company's open-ended fund, Principle Capital, LP (PCLP) and
South African Property Opportunities Plc (SAPRO).
The registered office of the Company is at 58, rue Charles Martel, L-2134
Luxembourg and the Company is registered with the "Registre de commerce et de
société au Grand-Duché de Luxembourg" under section B, number 98.144. The
Company is established for an unlimited period. The Company is listed in London
on the AIM stock exchange.
These Group consolidated financial statements were authorised for issue by the
Board of Directors on 8 June 2009.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.1 Basis of preparation
The consolidated financial statements of Principle Capital Holdings S.A. ("the
Company") have been prepared in accordance with International Financial
Reporting Standards. The consolidated financial statements have been prepared
under the historical cost convention, as modified by the revaluation of
available-for-sale financial assets, and financial assets and financial
liabilities (including derivative instruments) at fair value through profit or
loss.
(a) Standards, amendments and interpretations to existing standards that are not
yet effective and have not been early adopted by the Group
The following standards, amendments and interpretations to existing standards
have been published and are mandatory for the Group's accounting periods
beginning on or after 1 January 2009 or later periods, but the Group has not
early adopted them or they are not relevant to the Group:
*
* IFRS 3, "Business Combinations" - Comprehensive revision on applying the
acquisition method". Revised IFRS 3 incorporates the changes in relation to the
definition of a business, the accounting treatment for contingent consideration,
transaction costs, pre-existing interest and non-controlling interest (effective
for annual periods beginning on or after 1 July 2009). The Group does not expect
any significant impact from application of this amendment.
* IFRS 7, "Financial Instruments: Disclosures - Amendments enhancing disclosures
about fair value and liquidity risk" and IAS 39, "Financial Instruments:
Recognitions and Measurements", (effective for annual periods beginning on or
after 1 January 2009). Management is currently assessing the impact on the
Group's consolidated financial statements.
* IFRS 8, "Operating segments" (effective from 1 January 2009). IFRS 8 replaces
IAS 14 and aligns segment reporting with the requirements of the US standard
SFAS 131, 'Disclosures about segments of an enterprise and related information'.
The new standard requires a 'management approach', under which segment
information is presented on the same basis as that used for internal reporting
purposes. The Group does not expect any significant impact from application of
IFRS 8.
* IAS 1, "Presentation of Financial Statements" - Comprehensive revision
including requiring a statement of comprehensive income, which represents
changes in equity during the period other than those changes resulting from
transactions with owners in their capacity as owners. Total comprehensive income
may be presented in either a single statement of comprehensive income
(effectively combining both the income statement and a all non-owner changes in
equity in a single statement), or in an income statement and a separate
statement of comprehensive income. Revised IAS 1, which becomes mandatory for
the Group's 2009 consolidated financial statements, is expected to have impact
on the presentation of changes in owners' equity and of comprehensive income.
* IAS 23 (Amended), "Borrowing costs" (effective from 1 January 2009) requires an
entity to capitalise borrowing costs directly attributable to the acquisition,
construction or production of a qualifying asset (one that takes a substantial
period of time to get ready for use or sale) as part of the cost of that asset.
The option of immediately expensing those borrowing costs will be removed. The
Group will apply IAS 23 (Amended) from 1 January 2009 but has currently no
impact for the Group as there are no qualifying assets.
* IAS 27 - "Consolidated and Separate Financial Statements", requires accounting
for changes in ownership interests by the Group in a subsidiary, while
maintaining control, to be recognized as an equity transaction. When the Group
loses control of a subsidiary, any interest retained in the former subsidiary
will be measured at fair value with the gain or loss recognized in profit and
loss (effective for annual periods beginning on or after 1 January 2009).
Management is currently assessing the impact on the Group's consolidated
financial statements.
* IAS 28, "Investments in Associates - Consequential amendments arising from
amendments to IFRS 3" (effective for annual periods beginning on or after 1
January 2009).
* IAS 32, "Financial Instruments: Disclosure and Presentation" - Amendments
relating to puttable instruments and obligations arising on liquidation. The
amendments require puttable instruments that impose on the entity an obligation
to deliver to another party a pro rata share of the net assets of the entity
only on liquidation, to be classified as equity if certain conditions are met.
The amendments, which become mandatory for the Group's 2009 consolidated
financial statements, with retrospective application required, are not expected
to have any impact on the consolidated financial statements.
* IAS 36 (Amended), "Impairment of Assets" requires disclosure of estimates used
to determine recoverable amount (effective for annual periods beginning on or
after 1 January 2009). The Group does not expect any significant impact from
application of this amendment.
(b) Interpretations to existing standards that are not yet effective
The following interpretations to existing standards have been published and are
mandatory for the Group's accounting periods beginning on or after 1 January
2009 or later periods but are not relevant for the Group:
* IFRIC 16, "Hedges of a Net Investment in a Foreign Operation" (effective for
annual periods beginning on or after 1 October 2008).
* IFRIC 17, "Distributions of Non-cash Assets to Owners" (effective for annual
periods beginning on or after 1 July 2009). IFRIC 17 applies to the entity
making the distribution, not to the recipient.
* IFRIC 18, "Transfers of Assets from Customers" (effective for annual periods
beginning on or after 1 July 2009).
2.2 Basis of consolidation
(a) Subsidiaries
Subsidiaries are entities controlled by the Company. 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 presently are exercisable or
convertible are taken into account. The financial statements of subsidiaries are
included in the consolidated financial statements from the date that control
commences until the date that control ceases.
The purchase method of accounting is used to account for the acquisition of
subsidiaries by the Group. The cost of an acquisition is measured as the fair
value of the assets given, equity instruments issued and liabilities incurred or
assumed at the date of exchange, plus costs directly attributable to the
acquisition. Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured initially at their
fair values at the acquisition date, irrespective of the extent of any minority
interest. 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.
If the cost of acquisition is less than the fair value of the net assets of the
subsidiary acquired, the difference is recognised directly in the income
statement.
IntraGroup balances, and any unrealised gains and losses or income and expenses
arising from intraGroup transactions, are eliminated in preparing the
consolidated financial statements. Unrealised gains arising from transactions
with associates and jointly controlled entities are eliminated to the extent of
the Group's interest in the entity. Unrealised losses are eliminated in the same
way as unrealised gains, but only to the extent that there is no evidence of
impairment.
(b) Associates
Associates are all entities over which the Group has significant influence but
not control, generally accompanying a shareholding of between 20% and 50% of the
voting rights. Investments in associates are accounted for using the equity
method of accounting and are initially recognised at cost.
The Group's share of its associates' post-acquisition profits or losses is
recognised in the income statement, and its share of post-acquisition movements
in reserves is recognised in reserves. The cumulative post-acquisition movements
are adjusted against the carrying amount of the investment. When the Group's
share of losses in an associate equals or exceeds its interest in the associate,
including any other unsecured receivables, the Group does not recognise further
losses, unless it has incurred obligations or made payments on behalf of the
associate.
Unrealised gains on transactions between the Group and its associates are
eliminated to the extent of the Group's interest in the associates. Unrealised
losses are also eliminated unless the transaction provides evidence of an
impairment of the asset transferred. Accounting policies of associates have been
changed where necessary to ensure consistency with the policies adopted by the
Group.
2.3 Foreign currency
(a) Functional and presentation currency
Items included in the financial statements of each of the Group's entities are
measured using the currency of the primary economic environment in which the
entity operates ("the functional currency"). The consolidated financial
statements are presented in Great British Pounds ("GBP"), which is the company's
functional and presentation currency.
(b) Transactions and balances
Transactions in foreign currencies are translated at the foreign exchange rate
ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies at the balance sheet date are translated to
GBP at the foreign exchange rate ruling at that date. Foreign exchange
differences arising on translation are recognised in profit or loss.
Non-monetary assets and liabilities that are measured in terms of historical
cost in a foreign currency are translated using the exchange rate at the date of
the transaction. Non-monetary assets and liabilities denominated in foreign
currencies that are stated at fair value are translated to GBP at foreign
exchange rates ruling at the dates the fair value was determined.
Changes in the fair value of monetary securities denominated in foreign currency
classified as available for sale are analysed between translation differences
resulting from changes in the amortised cost of the security, and other changes
in the carrying amount of the security. Translation differences related to
changes in amortised cost are recognised in profit or loss, and other changes in
carrying amount are recognised in equity.
Translation differences on non-monetary financial assets and liabilities are
reported as part of the fair value gain or loss. Translation differences on
non-monetary financial assets and liabilities such as equities held at fair
value through profit or loss are recognised in profit or loss as part of the
fair value gain or loss. Translation differences on non-monetary financial
assets such as equities classified as available for sale are included in the
available-for-sale reserve in equity.
(c) Financial statements of foreign operations
The assets and liabilities for foreign operations, including goodwill and fair
value adjustments arising on consolidation, are translated to GBP at foreign
exchange rates ruling at the balance sheet date. The revenues and expenses of
foreign operations are translated to GBP at rates approximating the foreign
exchange rate ruling at the dates of the transactions.
2.4 Property, plant and equipment
(a) Owned assets
Items of property, plant and equipment are stated at cost or deemed cost less
accumulated depreciation (see below) and impairment.
(b) Depreciation
Depreciation is charged to profit and loss on a straight-line basis over the
estimated useful lives of each part of an item of property, plant and equipment.
Land is not depreciated. The estimated useful lives are as follows:
+--------------------+------------+----+-----------------------------------+
| Fixture and | 6-7 years | | 15% average depreciation rate |
| fittings | | | |
+--------------------+------------+----+-----------------------------------+
| Computer | 3 years | | 33% average depreciation rate |
| equipments | | | |
+--------------------+------------+----+-----------------------------------+
The residual value is reassessed annually.
2.5 Intangible assets
(a) Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value
of the Group's share of the net identifiable assets of the acquired
subsidiary/associate at the date of acquisition. Goodwill on acquisitions of
associates is included in "investments in associates" and is tested for
impairment as part of the overall balance. Separately recognised goodwill is
tested annually for impairment and carried at cost less accumulated impairment
losses. Impairment losses on goodwill are not reversed. Gains and losses on the
disposal of an entity include the carrying amount of goodwill relating to the
entity sold.
(b) Acquisitions of minority interests
Goodwill arising on the acquisition of a minority interest in a subsidiary
represents the excess of the cost of the additional investment over the carrying
amount of the net assets acquired at the date of exchange.
2.6 Assets held for sale
Assets that are expected to be recovered primarily through sale rather than
through continuing use are classified as held for sale. The assets are measured
at the lower of their carrying amount and fair value less cost to sell.
Impairment losses on initial classification as held for sale and subsequent
gains or losses on remeasurement are recognized in profit and loss. Gains are
not recognized in excess of any cumulative impairment loss.
2.7 Financial assets
The Group classifies its financial assets at fair value through profit or loss,
loans and receivables, and available for sale. The classification depends on the
purpose for which the financial assets were acquired. Management determines the
classification of its financial assets at initial recognition.
(a) Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are classified as non
current as the Company intends to hold them for the purpose of long term capital
growth.
Derivatives are also categorised as held for trading unless they are designated
as hedges. Derivatives are classified as short term.
(b) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. They are included
in current assets, except for maturities greater than 12 months after the
balance sheet date. These are classified as non-current assets. The Group's
loans and receivables comprise 'debtors' and 'prepayments and accruals' in the
balance sheet.
(c) Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are either
designated in this category or not classified in any of the other categories.
They are included in current assets if management intends to dispose of the
investment within 12 months of the balance sheet date.
Regular purchases and sales of financial assets are recognised on the trade-date
- the date on which the Group commits to purchase or sell the asset. Unless fair
values are unavailable, Investments are initially recognised at fair value plus
transaction costs for all financial assets not carried at fair value through
profit or loss. Financial assets carried at fair value through profit or loss
are initially recognised at fair value and transaction costs are expensed in the
income statement.
2.8 Trade and other receivables
Trade and other receivables are stated at their cost less impairment losses.
2.9 Cash and cash equivalents
Cash and cash equivalents comprises cash balances and call deposits with an
original maturity of three months or less. Bank overdrafts that are repayable on
demand and form an integral part of the Group's cash management are included as
a component of cash and cash equivalents for the purpose of the statements of
cash flows.
2.10 Impairment
Except for the Group's investments designated at fair value through profit and
loss, the carrying amount of the Group's assets are reviewed at each balance
sheet date to determine whether there is any indication of impairment. If any
such indication exists, the asset's recoverable amount is estimated.
For goodwill, intangible assets that have an indefinite useful life and
intangible assets that are not yet available for use, the recoverable amount is
estimated at each annual balance sheet date.
An impairment loss is recognised whenever the carrying amount of an asset
exceeds its recoverable amount. Impairment losses are recognised in profit or
loss unless the asset is recorded at a revalued amount in which case it is
treated as a revaluation decrease.
2.11 Share based payment transactions
The share option programme allows Group employees, Senior Managers and
Directors, to acquire shares of the Company. The fair value of options granted
is recognised as an employee expense with a corresponding increase in equity.
The fair value is measured at grant date and spread over the period during which
the employees become unconditionally entitled to the options. The fair value of
the options granted is measured using the Black-Scholes' model, taking into
account the terms and conditions upon which the options were granted. The amount
recognised as an expense is adjusted to reflect the actual number of share
options that vest except where forfeiture is only due to share prices not
achieving the threshold for vesting.
2.12 Trade and other payables
Trade and other payables are stated cost.
2.13 Revenue
Revenue relates to the investment management and fund and trust administration
services provided by the Group and is recognised in the income statement on an
accrual basis.
Performance fees are also recognised in the income statement on an accrual
basis. They are based on the evolution of the net asset value of the funds under
management.
Certain performance fees which are recorded on an accrual basis only are
recovered upon the partial or full liquidation of the underlying investment. In
the event of a decrease in the net asset value of the fund before the
liquidation, performance fees could be significantly reduced or eliminated.
2.14 Income tax
Deferred tax is provided using the balance sheet liability method, providing for
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes. The
following temporary differences are not provided for:
* goodwill not deductible for tax purposes;
* the initial recognition of assets or liabilities that affect neither accounting
nor taxable profit; and,
* differences relating to investments in subsidiaries to the extent that they will
probably not reverse in the foreseeable future.
The amount of deferred tax provided is based on the expected manner of
realisation or settlement of the carrying amount of assets and liabilities,
using tax rates enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that
future taxable profits will be available against which the asset can be
utilised. Deferred tax assets are reduced to the extent that it is no longer
probable that the related tax benefit will be realised.
2.15 Segment reporting
A segment is a distinguishable component of the Group that is engaged either in
providing products or services (business segment), or in providing products or
services within a particular economic environment (geographical segment), which
is subject to risks and rewards that are different from those of other segments.
3 FINANCIAL RISK MANAGEMENT
3.1 Financial risk factors
The Group's activities expose it to a variety of potential financial risks:
market risk (including currency risk, fair value interest rate risk, cash flow
interest rate risk and price risk), credit risk and liquidity 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.
Risk management is carried out by the accounting and finance department under
policies approved by the Board of Directors. The Board provides written
principles for overall risk management, as well as written policies covering
specific areas, such as foreign exchange risk, interest rate risk, credit risk,
use of derivative financial instruments and nonderivative financial instruments,
and investment of excess liquidity.
(a) Market risk
(i) Foreign exchange risk
The Group operates internationally but is exposed to limited foreign exchange
risks. The Group's investment management fees are received in GBP and business
expenses are predominantly GBP. Some expenses are incurred in Swiss francs but
an equal amount of fees are charged in Swiss francs to negate any currency
risk. Investments are, in the main, denominated in GBP.
(ii) Price risk
The Group is exposed to price risk because of listed equity and listed fund
investments held by the Group and classified on the consolidated balance sheet
at fair value through profit or loss. Publicly quoted companies can be subject
to volatile share prices, depending on a number of factors, some of which are
general or market specific, others which are sector specific and others which
are specific to the Company.
The Group is not exposed to commodity price risk at year end. The Group
generally invests in listed equities of Funds managed by the Group. The
investments are held for the long term and price risk is managed through the
Group's investment procedures and policies.
(iii) Cash flow and fair value interest rate risk
The Group has no significant interest-bearing assets nor liabilities. The
Group's income, expenses, and operating cash flows are substantially independent
of changes in market interest rates.
(b) Credit risk
Transactions effected by Group members on behalf of the Group and/or the Funds
will not always be limited to transactions on, or effected under the rules of
major securities exchanges and it is possible that some trades may be effected
off-exchange, directly with counterparties. The Group and/or the Funds will take
a credit risk on the parties with which it trades and therefore the Group and/or
the Funds acting through Group members will seek to transact only with major
established counterparties. The Group and/or the Funds will also bear the risk
of settlement default by clearing houses and exchanges. Any default by a
counterparty or on settlement could have a material adverse effect on the Group
and/or the Funds. Management mitigates this risk through Know-Your-Client and
other investigative procedures performed on counterparties prior to the
commencement of business relationships.
(c) Liquidity risk
The Group's working capital requirements reflect day-to-day administrative and
other operating expenses of an investment management and fund/trust
administration concern. Cash requirements are met by fee income and if
necessary, equity during a Group entity's start up phase. The Group has no
significant borrowings in 2008. Cash deposits are held for working capital
purposes and are deposited within secure financial institutions.
The ability to sell investments held by the Group may be adversely affected due
to insufficient trading activity or actual trading halts in the markets in which
the securities concerned are traded. In such circumstances it may take time to
liquidate the positions of the Group and the market prices obtained may be
substantially different from those indicated at the time when the decisions to
liquidate were taken. The Group and/or the Funds may from time to time invest
their money in private entities where there is no market. For the year ended 31
December 2008, the Group holds some investments in illiquid and unquoted
positions which are not significant in value. They are generally held for the
long term and are managed by the Group.
3.2 Capital risk management
The Group's objectives when managing capital are to safeguard the Group's
ability to continue as a going concern in order to provide returns for
shareholders and benefits for other stakeholders and to maintain an optimal
capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the
amount of dividends paid to shareholders, return capital to shareholders, issue
new shares or sell assets to reduce debt.
3.3 Fair value estimation
The fair value of financial instruments traded in active markets (such as listed
equities, listed funds and derivatives at fair value through profit and loss) is
based on quoted market prices at the balance sheet date. The quoted market price
used for financial assets held by the Group is the current bid price.
The fair value of financial instruments that are not traded in an active market
is determined by using valuation techniques using estimated discounted
cashflows.
The carrying value less impairment provision of trade receivables and payables
are assumed to approximate their fair values. The fair value of financial
liabilities for disclosure purposes is estimated by discounting the future
contractual cash flows at the current market interest rate that is available to
the Group for similar financial instruments.
4 TURNOVER
Turnover relates to the investment management and fund and trust administration
services provided by the Group, is stated net of VAT and is accounted for when
it becomes due. It comprises management, administration and advisory fees for
GBP6,359,426 (2007: GBP3,413,677) and performance fees for GBP4,837,434 (2007:
(GBP661,799)). The performance fees include GBP721,051 received during the year
from Bulldog Financial Limited and GBP 4,116,383 of accrued performance fees
from South African Property Opportunities plc ("SAPRO"). This potential
performance fee (of which GBP2.46 million is attributable to the equity holders
of the Group) due from SAPRO will only crystallise if certain hurdles are met as
at 30 June 2009 and these hurdles are highly sensitive to movements in the South
African Rand.
5 ADMINISTRATIVE EXPENSES AND EXTERNAL CHARGES
5.1 Administrative expenses
+--------------------------------+--+--+-----------+-------------+--+-------------+
| | | | | 2008 | | 2007 |
+--------------------------------+--+--+-----------+-------------+--+-------------+
| | | | | GBP | | GBP |
+--------------------------------+--+--+-----------+-------------+--+-------------+
| Directors' remuneration (Note 7) | | 978,827 | | 2,796,014 |
+--------------------------------------+-----------+-------------+--+-------------+
| Staff costs (Note 6) | | | 3,807,971 | | 1,597,185 |
+-----------------------------------+--+-----------+-------------+--+-------------+
| Depreciation and amortisation | | 125,994 | | 48,802 |
+--------------------------------------+-----------+-------------+--+-------------+
| South African offices | 102,748 | | 48,619 |
+--------------------------------------------------+-------------+--+-------------+
| Administration fees | | | 13,358 | | 236,719 |
+-----------------------------------+--+-----------+-------------+--+-------------+
| Office expenses | | 83,436 | | 82,884 |
+--------------------------------------+-----------+-------------+--+-------------+
| | | | 5,112,334 | | 4,810,223 |
+--------------------------------+--+--+-----------+-------------+--+-------------+
5.2 External charges
+--------------------------------+--+--+-----------+-------------+--+-------------+
| | | | | 2008 | | 2007 |
+--------------------------------+--+--+-----------+-------------+--+-------------+
| | | | | GBP | | GBP |
+--------------------------------+--+--+-----------+-------------+--+-------------+
| Legal and professional fees | | | 913,502 | | 343,978 |
+-----------------------------------+--+-----------+-------------+--+-------------+
| Rent rates and service charges | | 632,422 | | 414,089 |
+--------------------------------------+-----------+-------------+--+-------------+
| Selling and marketing costs | | | 460,755 | | 485,853 |
+-----------------------------------+--+-----------+-------------+--+-------------+
| Auditors' remuneration | | 264,339 | | 216,556 |
+--------------------------------------+-----------+-------------+--+-------------+
| Electronic information | | 144,281 | | 54,766 |
+--------------------------------------+-----------+-------------+--+-------------+
| Insurance | | 143,003 | | 153,653 |
+--------------------------------------+-----------+-------------+--+-------------+
| Subscriptions | | 75,645 | | 103,492 |
+--------------------------------------+-----------+-------------+--+-------------+
| Recruitment and training | | 27,166 | | 70,248 |
+--------------------------------------+-----------+-------------+--+-------------+
| Introduction fees | | - | | 184,632 |
+--------------------------------------+-----------+-------------+--+-------------+
| Bank loan arrangement fee | | - | | 50,000 |
+--------------------------------------+-----------+-------------+--+-------------+
| Other expenses | | | 20,817 | | 222,052 |
+-----------------------------------+--+-----------+-------------+--+-------------+
| | | | | 2,681,930 | | 2,299,319 |
+--------------------------------+--+--+-----------+-------------+--+-------------+
6 STAFF COSTS
Particulars of employees (including Directors) are shown below:
+-------------------+--------------------+--+------+-------------+--+-------------+
| | | | | 2008 | | 2007 |
+-------------------+--------------------+--+------+-------------+--+-------------+
| | | | | GBP | | GBP |
+-------------------+--------------------+--+------+-------------+--+-------------+
| | | | | | | |
+-------------------+--------------------+--+------+-------------+--+-------------+
| Wages and salaries | | | 3,149,811 | | 1,256,310 |
+----------------------------------------+--+------+-------------+--+-------------+
| Social security costs | | | 479,943 | | 298,026 |
+----------------------------------------+--+------+-------------+--+-------------+
| Health and life insurance | | | 65,007 | | 42,010 |
+----------------------------------------+--+------+-------------+--+-------------+
| Share based payments (Note 16) | | | 113,210 | | 839 |
+----------------------------------------+--+------+-------------+--+-------------+
| | | | | 3,807,971 | | 1,597,185 |
+-------------------+--------------------+--+------+-------------+--+-------------+
| | | | | | | |
+-------------------+--------------------+--+------+-------------+--+-------------+
There were no pension contributions paid during the year.
7 REMUNERATION OF DIRECTORS
+----------------+-----------------------------+-------------+--+--------------+
| | | 2008 | | 2007 |
+----------------+-----------------------------+-------------+--+--------------+
| | | GBP | | GBP |
+----------------+-----------------------------+-------------+--+--------------+
| | | | | |
+----------------+-----------------------------+-------------+--+--------------+
| Directors' remuneration | 978,827 | | 2,796,014 |
+----------------+-----------------------------+-------------+--+--------------+
The aggregate emoluments of the highest paid Director were GBP 470,000.
There were no pension contributions paid to Directors during the year.
8 TAX ON PROFIT ON ORDINARY ACTIVITIES
+----------------------------------------------------+--------+-------------+--+-------------+
| Analysis | | | | |
| of | | | | |
| charge | | | | |
| in year | | | | |
+----------------------------------------------------+--------+-------------+--+-------------+
| | | 2008 | | 2007 |
+----------------------------------------------------+--------+-------------+--+-------------+
| | | GBP | | GBP |
+----------------------------------------------------+--------+-------------+--+-------------+
| Foreign | | | | |
| tax | | | | |
+----------------------------------------------------+--------+-------------+--+-------------+
| Current | | 116,742 | | 89,808 |
| tax on | | | | |
| income | | | | |
| for the | | | | |
| year | | | | |
+----------------------------------------------------+--------+-------------+--+-------------+
| Adjustments | | - | | - |
| in respect | | | | |
| of prior | | | | |
| years | | | | |
+----------------------------------------------------+--------+-------------+--+-------------+
| Total | | 116,742 | | 89,808 |
| current | | | | |
| tax | | | | |
+----------------------------------------------------+--------+-------------+--+-------------+
| | | | | |
+----------------------------------------------------+--------+-------------+--+-------------+
| Deferred | | | | |
| tax | | | | |
+----------------------------------------------------+--------+-------------+--+-------------+
| Originating/reversal | | 1,886 | | 3,355 |
| of timing | | | | |
| differences | | | | |
+----------------------------------------------------+--------+-------------+--+-------------+
| | | | | |
+----------------------------------------------------+--------+-------------+--+-------------+
| Tax | | 118,628 | | 93,163 |
| on | | | | |
| profit | | | | |
| on | | | | |
| ordinary | | | | |
| activities | | | | |
+----------------------------------------------------+--------+-------------+--+-------------+
+----------------------------------------------+---------+-------------+--+---------------+
| Reconciliation | | | | |
| of effective | | | | |
| tax rate | | | | |
+----------------------------------------------+---------+-------------+--+---------------+
| | | 2008 | | 2007 |
+----------------------------------------------+---------+-------------+--+---------------+
| | | GBP | | GBP |
+----------------------------------------------+---------+-------------+--+---------------+
| Profit | | 1,768,569 | | (5,434,730) |
| (loss) | | | | |
| for | | | | |
| the | | | | |
| year | | | | |
+----------------------------------------------+---------+-------------+--+---------------+
| Total | | 118,628 | | 93,163 |
| income | | | | |
| tax | | | | |
| expenses | | | | |
+----------------------------------------------+---------+-------------+--+---------------+
| Profit | | 1,887,197 | | (5,341,567) |
| (loss) | | | | |
| excluding | | | | |
| income | | | | |
| tax | | | | |
+----------------------------------------------+---------+-------------+--+---------------+
| | | | | |
+----------------------------------------------+---------+-------------+--+---------------+
| Income tax | N/A | - | | - |
| (expense)/gain using | | | | |
| the Company's domestic | | | | |
| tax rate | | | | |
+----------------------------------------------+---------+-------------+--+---------------+
| Differences | 6.19% | 116,742 | | 89,808 |
| in tax | | | | |
| rates | | | | |
+----------------------------------------------+---------+-------------+--+---------------+
| Temporary | 0.1% | 1,886 | | 3,355 |
| differences | | | | |
+----------------------------------------------+---------+-------------+--+---------------+
| Tax | 6.29% | 118,628 | | 93,163 |
| expenses | | | | |
+----------------------------------------------+---------+-------------+--+---------------+
As a 1929 holding company, the Company is not subject to any form of taxation
in Luxembourg other than the "taxe d'abonnement" ("subscription tax") and the
"droit d'apport" ("capital duty").
On 13 December 2006, Luxembourg abolished by law the tax exemption of the
holding 1929 companies. According to this law, Principle Capital Holdings S.A.,
was established in Luxembourg since 2003 and traded on the London AIM Stock
Exchange before 20 July 2006, may continue to benefit from this regime during a
transitional period from 1 January 2007 till 31 December 2010.
Alternative tax regimes, including potential conversion of the Company into a
normally taxable company that may benefit from particular exemption rules, are
currently being reviewed by the Company, so as maintain an efficient tax regime
in the future.
The corporation tax charge relates to tax on the profit of Principle Capital
Advisors Limited, Principle Capital Administration S.A., Silex Administartion
S.A. and Proteus Property Partners Limited during the year.
Deferred taxation arises from timing difference on depreciation of assets
qualifying for capital allowances held by Principle Capital Advisors Limited.
+--------------------------------------------+------------+--+-------------+
| | 2008 | | 2007 |
| | GBP | | GBP |
+--------------------------------------------+------------+--+-------------+
| Deferred tax liability | | | |
+--------------------------------------------+------------+--+-------------+
| - Property, plant and equipment | 6,261 | | 4,375 |
+--------------------------------------------+------------+--+-------------+
| | | | |
+--------------------------------------------+------------+--+-------------+
| Charge for the year | | | |
+--------------------------------------------+------------+--+-------------+
| - Origination and reversal of temporary | 1,886 | | 3,355 |
| differences | | | |
+--------------------------------------------+------------+--+-------------+
| | | | |
+--------------------------------------------+------------+--+-------------+
| Reconciliation of deferred tax liability | | | |
+--------------------------------------------+------------+--+-------------+
| - Opening balance | 4,375 | | 1,020 |
+--------------------------------------------+------------+--+-------------+
| - Deferred tax expense | 1,886 | | 3,355 |
+--------------------------------------------+------------+--+-------------+
| - Closing balance | 6,261 | | 4,375 |
+--------------------------------------------+------------+--+-------------+
9 TANGIBLE FIXED ASSETS
+------------------------------------------+-----------------+---------------+
| | | Fixtures & |
+------------------------------------------+-----------------+---------------+
| For the Group | | Equipment |
| | | |
+------------------------------------------+-----------------+---------------+
| | | |
| | | GBP |
+------------------------------------------+-----------------+---------------+
| Cost | | |
+------------------------------------------+-----------------+---------------+
| At 1 January 2008 | | 347,862 |
+------------------------------------------+-----------------+---------------+
| Additions | | 363,696 |
+------------------------------------------+-----------------+---------------+
| At 31 December 2008 | | 711,558 |
+------------------------------------------+-----------------+---------------+
| | | |
+------------------------------------------+-----------------+---------------+
| Depreciation | | |
+------------------------------------------+-----------------+---------------+
| At 1 January 2008 | | 72,149 |
+------------------------------------------+-----------------+---------------+
| Depreciation for the year | | 125,994 |
+------------------------------------------+-----------------+---------------+
| At 31 December 2008 | | 198,143 |
+------------------------------------------+-----------------+---------------+
| | | |
+------------------------------------------+-----------------+---------------+
| Net Book Value | | |
+------------------------------------------+-----------------+---------------+
| At 1 January 2008 | | 275,713 |
+------------------------------------------+-----------------+---------------+
| At 31 December 2008 | | 513,415 |
+------------------------------------------+-----------------+---------------+
10 INVESTMENTS
10.1 Other investments
+--------------------------------------------+--------------+--------------+----------------+---+------------------------------+
| | | | | | 2007 |
| | | | 2008 | | GBP |
| | | | GBP | | |
+--------------------------------------------+--------------+--------------+----------------+---+------------------------------+
| Financial assets designated at fair value through profit or loss | | | |
+--------------------------------------------------------------------------+----------------+---+------------------------------+
| | | | | | |
+--------------------------------------------+--------------+--------------+----------------+---+------------------------------+
| | Proportion | Proportion | | | |
| | of | of | | | |
+--------------------------------------------+--------------+--------------+----------------+---+------------------------------+
| | capital | capital | Fair Value | | Fair Value |
| | held | held | | | |
+--------------------------------------------+--------------+--------------+----------------+---+------------------------------+
| | 2008 | 2007 | 2008 | | 2007 |
+--------------------------------------------+--------------+--------------+----------------+---+------------------------------+
| | % | % | GBP | | GBP |
+--------------------------------------------+--------------+--------------+----------------+---+------------------------------+
| Un-listed equity | | | | | |
+--------------------------------------------+--------------+--------------+----------------+---+------------------------------+
| Principle Energy Limited | 8.50 | 18.41 | 2,673,082 | | 422,330 |
+--------------------------------------------+--------------+--------------+----------------+---+------------------------------+
| Listed funds | | | | | |
+--------------------------------------------+--------------+--------------+----------------+---+------------------------------+
| Principle Capital Investments Trust Plc | 3.45 | 3.45 | 596,438 | | 2,929,367 |
+--------------------------------------------+--------------+--------------+----------------+---+------------------------------+
| South African Property Opportunities Plc | 0.34 | 0.80 | 210,000 | | 557,500 |
+--------------------------------------------+--------------+--------------+----------------+---+------------------------------+
| | | | 3,479,520 | | 3,909,197 |
+--------------------------------------------+--------------+--------------+----------------+---+------------------------------+
In August and October 2008, the Group made further investments in Principle
Energy Ltd, a renewable energy company which invests in the production of
ethanol in Africa, incorporated in the Isle Man on 24 November 2006, registered
number 118329C. An additional 2,079,668 shares were purchased for a total cost
of GBP 2,250,752. Nonetheless, the issued share capital of Principle Energy Ltd.
increased during the year. Therefore, the percentage holding of the Group
decreased to 8.5%.
There was no change in the number of shares held by the Group in South African
Property Opportunities Plc ("SAPRO") during the year; however the Group's
percentage holding in SAPRO has declined to 0.34% due to an increase in issued
share capital within SAPRO.
10.2 Shares in group undertakings
+-----------------------------------------------+--------------+--------------+
| | Proportion | Proportion |
| | of the | of the |
| | capital held | capital held |
+-----------------------------------------------+--------------+--------------+
| | 2008 | 2007 |
+-----------------------------------------------+--------------+--------------+
| | % | % |
+-----------------------------------------------+--------------+--------------+
| Principle Capital Advisors Ltd. | 100 | 100 |
+-----------------------------------------------+--------------+--------------+
| Principle Capital Partners Ltd. | 100 | 100 |
+-----------------------------------------------+--------------+--------------+
| Principle Capital Administration S.A. | 100 | 100 |
+-----------------------------------------------+--------------+--------------+
| Principle Capital Advisors (South Africa) | 100 | 100 |
| (Proprietary) Ltd. | | |
+-----------------------------------------------+--------------+--------------+
| Proteus Property Advisors Ltd. | 59.8 | 59.8 |
+-----------------------------------------------+--------------+--------------+
| Silex Holdings Ltd. | 100 | 100 |
+-----------------------------------------------+--------------+--------------+
| Proteus Property Partners Ltd. | 59.8 | 59.8 |
+-----------------------------------------------+--------------+--------------+
| Principle Energy Management Services Ltd. | 100 | - |
+-----------------------------------------------+--------------+--------------+
| Principle Capital Fund Managers Ltd. | 100 | 100 |
+-----------------------------------------------+--------------+--------------+
| Principle Capital GP Ltd. | 100 | 100 |
+-----------------------------------------------+--------------+--------------+
| Principle Energy Management Ltd. | 100 | 100 |
+-----------------------------------------------+--------------+--------------+
As at balance sheet date, Proteus Property Partners Ltd., Principle Energy
Management Services Ltd., Principle Capital Fund Managers Ltd., and Principle
Energy Management Ltd. are subsidiaries of Principle Capital Partners Ltd..
Principle Capital GP Ltd. is a subsidiary of Principle Capital Fund Managers
Ltd..
Principle Capital Advisors (South Africa) (Proprietary) Ltd. is a subsidiary of
Principle Capital Administration S.A..
10.3 Goodwill on acquisition
For the purpose of impairment testing, goodwill is allocated to the Group's
operating segments which represent the lowest level within the Group at which
the goodwill is monitored for internal management purpose. The aggregate
carrying amounts of goodwill allocated to each unit are as follows:
+------------------------------+-------------------+----+------------------+
| | 2008 | | 2007 |
+------------------------------+-------------------+----+------------------+
| | GBP | | GBP |
+------------------------------+-------------------+----+------------------+
| Investment Management | 20,699,315 | | 20,699,315 |
+------------------------------+-------------------+----+------------------+
| Trust and Fund | 4,342,150 | | 4,342,150 |
| Administration | | | |
+------------------------------+-------------------+----+------------------+
| | 25,041,465 | | 25,041,465 |
+------------------------------+-------------------+----+------------------+
The Group tests annually whether goodwill has suffered any impairment, in
accordance with the accounting policy stated in Note 2.5. The above goodwill
arose from the acquisition of the following during the year 2007.
Acquisition of Silex Holdings Ltd
Silex Holdings Ltd. was acquired on 19 October 2007 through a non-cash
contribution consisting of 100 shares (representing 100% of share capital) in
Silex Holdings Limited ("Silex"), valued at GBP 4,187,500 in exchange for the
issuance of 1,250,000 new shares of the Company. The goodwill of GBP 4,342,150
includes transaction costs.
An impairment test as at 31 December 2008 was conducted using a similar
valuation methodology adopted in 2007. The methodology is a combination of long
term trends, in-house knowledge as well as comparable market information. The
valuation multiples (ranging from 1.2 to 14.7) at the time of the acquisition
have been discounted by 20% for current market conditions. These multiples have
then been applied to Silex Holdings Ltd's revenue and profit precedents for
2008.
The impairment test result indicated no potential impairment in goodwill as at
31 December 2008. A sensitivity analysis was also performed and indicated that a
discount rate of up to 40% could be tolerated before impairment is required.
Acquisition of minority shareholding in Principle Capital Partners Ltd.
On 19 October 2007, the Group acquired the minority shares of Principle Capital
Partners Ltd. (representing 30% of issued capital of the company) for GBP
20,100,000 financed through an issue of shares in Principle Capital holdings
S.A. The goodwill of GBP 20,699,315 includes transaction costs.
An impairment test was based on the discounted cash flows generated by the
related segments, with the assistance of independent valuers. The impairment
testing as at 31 December 2008 indicated no potential impairment in goodwill. A
variety of scenarios were reviewed and the discounted future cash flows were
estimated based on the following key assumptions:
* cost of equity, estimated to be 18%;
* net asset value growth projections (different rates for different funds), and
* terminal value growth range.
A sensitivity analysis was applied to the various scenarios as follows:
* high - all new funds are raised;
* medium - new funds are raised in proportion to PCP's track record, and
* low - no new funds are raised.
The impairment test result indicated no potential impairment in goodwill as at
31 December 2008.
10.4 Shares in associates
a) Summary financial information for equity accounted associates:
+-------------------------+-----------+-----------+-------------+-----------+-------------+-------------+-------------+------------+--------------+---------------+
| | Ownership | Current | Non-current | Total | Current | Non-current | Total | Revenues | Expenses | Profit/(loss) |
| | | assets | assets | assets | liabilities | liabilities | liabilities | GBP | GBP | GBP |
| | | GBP | GBP | GBP | GBP | GBP | GBP | | | |
+-------------------------+-----------+-----------+-------------+-----------+-------------+-------------+-------------+------------+--------------+---------------+
| 2007 | | | | | | | | | | |
+-------------------------+-----------+-----------+-------------+-----------+-------------+-------------+-------------+------------+--------------+---------------+
| PME Infrastructure | 31.67% | 117,083 | 18,578 | 135,661 | (147,709) | (664) | (148,373) | 508,390 | (522,103) | (13,713) |
| Managers Limited | | | | | | | | | | |
+-------------------------+-----------+-----------+-------------+-----------+-------------+-------------+-------------+------------+--------------+---------------+
| | | | | | | | | | | |
+-------------------------+-----------+-----------+-------------+-----------+-------------+-------------+-------------+------------+--------------+---------------+
| 2008 | | | | | | | | | | |
+-------------------------+-----------+-----------+-------------+-----------+-------------+-------------+-------------+------------+--------------+---------------+
| PME Infrastructure | 31.67% | 125,900 | 15,009 | 140,909 | (198,789) | (664) | (199,453) | 1,112,679 | (1,158,511) | (45,832) |
| Managers Limited | | | | | | | | | | |
+-------------------------+-----------+-----------+-------------+-----------+-------------+-------------+-------------+------------+--------------+---------------+
| Principle Oil | 49% | 13,136 | 3,407 | 16,543 | (14,146) | - | (14,146) | - | (31,595) | (31,595) |
| (Proprietary) Limited | | | | | | | | | | |
+-------------------------+-----------+-----------+-------------+-----------+-------------+-------------+-------------+------------+--------------+---------------+
| Principle Capital | 48% | 1,860,175 | 617,390 | 2,477,565 | (655,151) | (1,800,000) | (2,455,151) | 1,336,077* | (1,078,471)* | 257,606* |
| Sirius Real Estate | | | | | | | | | | |
| Asset Management | | | | | | | | | | |
| Limited | | | | | | | | | | |
+-------------------------+-----------+-----------+-------------+-----------+-------------+-------------+-------------+------------+--------------+---------------+
| * denotes financial results since date of | | | | | | | | |
| acquisition | | | | | | | | |
+-------------------------+-----------+-----------+-------------+-----------+-------------+-------------+-------------+------------+--------------+---------------+
b) Share of profits (losses) in the associates and the carrying value:
+-------------------------+-----------+----------+----------+--------------+--------------+
| | Ownership | Carrying | Share | Unrecognized | Accumulated |
| | | value | of | share of | unrecognized |
| | | | profit | loss | share of |
| | | | (loss) | | loss |
+-------------------------+-----------+----------+----------+--------------+--------------+
| 2007 | | | | | |
+-------------------------+-----------+----------+----------+--------------+--------------+
| PME Infrastructure | 31.67% | - | (317) | (3,074) | (3,074) |
| Managers Limited | | | | | |
+-------------------------+-----------+----------+----------+--------------+--------------+
| | | - | (317) | (3,074) | (3,074) |
+-------------------------+-----------+----------+----------+--------------+--------------+
| 2008 | | | | | |
+-------------------------+-----------+----------+----------+--------------+--------------+
| PME Infrastructure | 31.67% | - | - | (14,515) | (17,589) |
| Managers Limited | | | | | |
+-------------------------+-----------+----------+----------+--------------+--------------+
| Principle Oil | 49% | 15,706 | (15,482) | - | - |
| (Proprietary) Limited | | | | | |
+-------------------------+-----------+----------+----------+--------------+--------------+
| Principle Capital | 48% | 783,747 | 123,651 | - | - |
| Sirius Real Estate | | | | | |
| Asset Management | | | | | |
| Limited | | | | | |
+-------------------------+-----------+----------+----------+--------------+--------------+
| | | 799,453 | 108,169 | (14,515) | (17,589) |
+-------------------------+-----------+----------+----------+--------------+--------------+
The Group owns 31.67% of PME Infrastructure Managers Limited, a company
incorporated on 4 April 2007. PME Infrastructure Managers Limited is a
investment management company incorporated to manage a UK listed investment fund
PME African Opportunities Plc.
The Group purchased 49% of Principle Oil (Proprietary) Limited on 15 August 2008
for GBP 31,188. Principle Oil (Proprietary) Limited was incorporated on 16
October 2006 (formerly Blue Haze Investments). Principle Oil (Proprietary)
Limited is an independent trading entity incorporated in South Africa
(Registration Number 2006/032022/07) involved in facilitating the sourcing of
oil, gas and chemical resources from local and international suppliers for sale
to local and international producers of oil, gas and chemical
end-products. During the initial period since 15 August 2008 Principle Oil
(Proprietary) Limited has incurred a net loss of GBP 31,595, resulting in the
Group's share of loss in associate of GBP 15,482.
The Group purchased 48% of Principle Capital Sirius Real Estate Asset Management
Limited (formerly Dawnay Day Sirius Real Estate Asset Management Limited) on 19
September 2008 for GBP 900,096. The principal activity of the company is the
provision of asset management services to Sirius Real Estate Limited (SRE)
(formerly known as Dawnay, Day Sirius Limited). SRE is listed on AIM since May
2007 with the objective of investing in German commercial real estate. Since 19
September 2008 Principle Capital Sirius Real Estate Asset Management Limited has
recorded a net profit for the period of GBP 257,606, and paid dividends of
GBP500,000 to its shareholders. The Group's share of net profit and dividend
amount to GBP 123,651 and GBP 240,000, respectively.
10.5 Assets held for sale
+---------------------------------------+--------------+--------------+----------------+---+---------------+
| | Proportion | Proportion | | | |
| | of | of | | | |
+---------------------------------------+--------------+--------------+----------------+---+---------------+
| | capital | capital | Fair Value | | Fair Value |
| | held | held | | | |
+---------------------------------------+--------------+--------------+----------------+---+---------------+
| | 2008 | 2007 | 2008 | | 2007 |
+---------------------------------------+--------------+--------------+----------------+---+---------------+
| | % | % | GBP | | GBP |
+---------------------------------------+--------------+--------------+----------------+---+---------------+
| Falsa Investments SA | 50.0 | - | 365,810 | | - |
+---------------------------------------+--------------+--------------+----------------+---+---------------+
| Marba Holland BV | 48.0 | - | 157,977 | | - |
+---------------------------------------+--------------+--------------+----------------+---+---------------+
| | | | 523,787 | | - |
+---------------------------------------+--------------+--------------+----------------+---+---------------+
The above investments were acquired during 2008 as part of Principle Capital
Sirius Real Estate Asset Management acquisition as follows:
* A 50% interest in Falsa Investments BV, a vehicle which holds a 5.1 per cent
interest in certain properties that were acquired by DDS at the time of its
initial public offering, purchased for GBP365,810;
* A 48% interest in Marba Holland BV, a vehicle established to receive performance
fees that may become payable to it in respect of DDS's property portfolio,
purchased for GBP157,978 ; and
The investments as above have not been consolidated as the Group does not
exercise control.
10.6 Available-for-sale financial assets
+---------------------------------------+--------------+--------------+----------------+---+---------------+
| | Proportion | Proportion | | | |
| | of | of | | | |
+---------------------------------------+--------------+--------------+----------------+---+---------------+
| | capital | capital | Fair Value | | Fair Value |
| | held | held | | | |
+---------------------------------------+--------------+--------------+----------------+---+---------------+
| | 2008 | 2007 | 2008 | | 2007 |
+---------------------------------------+--------------+--------------+----------------+---+---------------+
| | % | % | GBP | | GBP |
+---------------------------------------+--------------+--------------+----------------+---+---------------+
| Marba Dutch Holdings BV | 2.55 | - | 12,332 | | - |
+---------------------------------------+--------------+--------------+----------------+---+---------------+
| Marba Cedarwood BV | 2.55 | - | 12,332 | | - |
+---------------------------------------+--------------+--------------+----------------+---+---------------+
| Marba Hornbeam BV | 2.55 | - | 12,332 | | - |
+---------------------------------------+--------------+--------------+----------------+---+---------------+
| Marba Mimosa BV | 2.55 | - | 12,332 | | - |
+---------------------------------------+--------------+--------------+----------------+---+---------------+
| Photo-Me | - | 0.00 | - | | 2,711 |
+---------------------------------------+--------------+--------------+----------------+---+---------------+
| | | | 49,328 | | 2,711 |
+---------------------------------------+--------------+--------------+----------------+---+---------------+
The above investments were acquired during 2008 as part of Principle
Capital Sirius Real Estate Asset Management acquisition as follows:
* Principle Capital Partners Limited acquired 48% of Dawnay Day Sirius Real Estate
Asset Management Limited (to be renamed Principle Capital Sirius Real Estate
Asset Management) (PCSREAM). PCSREAM is the asset manager of Dawnay Day Sirius
Limited ("DDS") a property investment company (see Note 10.4);
* A 2.55% interest in each of Marba Dutch Holdings BV, Marba Cedarwood BV, Marba
Hornbeam BV and Marba Mimosa BV, vehicles which hold certain properties that
were rolled into DDS at launch, purchased for a total of GBP49,328.
The investments as above have not been consolidated as the Group does not
exercise control.
In March 2008, Principle Capital Partners Ltd acquired 12,629 shares in Nord
Anglia Education Plc for GBP44,733. The holding in Nord Anglia Education Plc was
increased by additional 613,831 shares which were received in May 2008 in lieu
of the GBP1,681,899 Bulldog performance fee receivable. The whole of the Nord
Anglia Education Plc shareholdings were sold during the year realising a total
gain of GBP792,839 (note 10.7).
10.7 Net gain on investments
The following table details the gains and losses for financial assets at fair
value through the profit and loss for the year ended on 31 December:
+----------------------------------------------+-------------+--+-------------+
| | 2008 | | 2007 |
| | GBP | | GBP |
+----------------------------------------------+-------------+--+-------------+
| Net realised gain/(loss) on financial | | | |
| assets | | | |
+----------------------------------------------+-------------+--+-------------+
| - Nord Anglia Education Plc | 792,839 | | - |
+----------------------------------------------+-------------+--+-------------+
| - Liberty Plc | - | | 285,857 |
+----------------------------------------------+-------------+--+-------------+
| - Principle Capital Investments Trust Plc - | - | | 13,555 |
| CFD | | | |
+----------------------------------------------+-------------+--+-------------+
| - Principle Capital Investments Trust Plc - | - | | (260,000) |
| Ordinary shares | | | |
+----------------------------------------------+-------------+--+-------------+
| | 792,839 | | 39,412 |
+----------------------------------------------+-------------+--+-------------+
| Net unrealised gain/(loss) on financial assets | | |
+------------------------------------------------------------+--+-------------+
| - Principle Capital Investments Trust Plc - | (2,401,513) | | (1,171,063) |
| Ordinary shares | | | |
+----------------------------------------------+-------------+--+-------------+
| - South African Properties Ltd | (347,500) | | 27,500 |
+----------------------------------------------+-------------+--+-------------+
| - Photo Me | - | | (3,815) |
+----------------------------------------------+-------------+--+-------------+
| | (2,749,013) | | (1,147,378) |
+----------------------------------------------+-------------+--+-------------+
11 DEBTORS BECOMING DUE WITHIN ONE YEAR
+------------------------------------------------+--+-----------+--+------------+
| | | 2008 | | 2007 |
+------------------------------------------------+--+-----------+--+------------+
| | | GBP | | GBP |
+------------------------------------------------+--+-----------+--+------------+
| | | | | |
+------------------------------------------------+--+-----------+--+------------+
| Social security and other taxes | | 128,247 | | 30,773 |
+------------------------------------------------+--+-----------+--+------------+
| Trade debtors | | 1,022,797 | | 727,276 |
+------------------------------------------------+--+-----------+--+------------+
| Non trade receivable from associate | | - | | 60,296 |
+------------------------------------------------+--+-----------+--+------------+
| Loan to Principle Energy Ltd. | | 558,623 | | 552,820 |
+------------------------------------------------+--+-----------+--+------------+
| Management fees re PCSREAM | | 250,000 | | - |
+------------------------------------------------+--+-----------+--+------------+
| Dividend receivable | | 240,000 | | - |
+------------------------------------------------+--+-----------+--+------------+
| Bulldog carried interest | | - | | 960,847 |
+------------------------------------------------+--+-----------+--+------------+
| Other debtors | | 220,136 | | 221,685 |
+------------------------------------------------+--+-----------+--+------------+
| | | 2,419,803 | | 2,553,697 |
+------------------------------------------------+--+-----------+--+------------+
12 OTHER ASSETS BECOMING DUE WITHIN ONE YEAR
+------------------------------------------------+--+-----------+--+------------+
| | | 2008 | | 2007 |
+------------------------------------------------+--+-----------+--+------------+
| | | GBP | | GBP |
+------------------------------------------------+--+-----------+--+------------+
| | | | | |
+------------------------------------------------+--+-----------+--+------------+
| Performance fee from SAPRO | | 4,116,383 | | - |
+------------------------------------------------+--+-----------+--+------------+
| Prepayments and accruals | | 495,104 | | 566,864 |
+------------------------------------------------+--+-----------+--+------------+
| | | 4,611,487 | | 566,864 |
+------------------------------------------------+--+-----------+--+------------+
13 CREDITORS FALLING DUE WITHIN ONE YEAR
+------------------------------------------------+--+-----------+--+------------+
| | | 2008 | | 2007 |
+------------------------------------------------+--+-----------+--+------------+
| | | GBP | | GBP |
+------------------------------------------------+--+-----------+--+------------+
| | | | | |
+------------------------------------------------+--+-----------+--+------------+
| Bank loans and overdrafts (*) | | - | | 100,000 |
+------------------------------------------------+--+-----------+--+------------+
| Corporation tax | | 138,852 | | 114,119 |
+------------------------------------------------+--+-----------+--+------------+
| Other taxes and social security | | 117,254 | | 161,387 |
+------------------------------------------------+--+-----------+--+------------+
| Trade creditors | | 70,002 | | 5,803 |
+------------------------------------------------+--+-----------+--+------------+
| Other creditors | | - | | 47,440 |
+------------------------------------------------+--+-----------+--+------------+
| Dividends payable (**) | | - | | 556,626 |
+------------------------------------------------+--+-----------+--+------------+
| Performance management fees - payable to PCIT | | 657,189 | | 366,990 |
| and PCLP | | | | |
+------------------------------------------------+--+-----------+--+------------+
| Other accruals | | 747,291 | | 429,849 |
+------------------------------------------------+--+-----------+--+------------+
| | | 1,730,588 | | 1,782,214 |
+------------------------------------------------+--+-----------+--+------------+
(*) Bank loan represents a Barclays Bank Plc loan to Silex Management Company
Ltd. This was granted under a twelve month repayment term with interest charged
at 2% over the Barclays Bank Plc base rate. This loan was repaid in January
2008.
(**) Dividend payable represents dividend declared by the Directors of Silex
Holdings Limited to its shareholders before the acquisition by Principle Capital
Holdings S.A. in 2007. The amount was paid to Gristel Holdings Ltd and Valira
International Limited, the former shareholders of Silex Holdings Limited during
the year.
14 DEFERRED INCOME
Deferred income, which is classified as current-liabilities, relates to the
management fee received in advance and amounts to GBP 689,844 as at 31 December
2008 (31 December 2007: Nil). Deferred income is amortized over the period for
which the investment management services are paid.
15 SHARE CAPITAL AND SHARE PREMIUM
+-----------------------------------------------+--+---------------+--+------------+
| | | 2008 | | 2007 |
| | | GBP | | GBP |
+-----------------------------------------------+--+---------------+--+------------+
| Authorised: | | | | |
+-----------------------------------------------+--+---------------+--+------------+
| 24,500,000 Ordinary shares of GBP1 each | | 24,500,000 | | 18,500,000 |
+-----------------------------------------------+--+---------------+--+------------+
| | | | | |
+-----------------------------------------------+--+---------------+--+------------+
| Issued: | | | | |
+-----------------------------------------------+--+---------------+--+------------+
| 17,394,806 Ordinary shares of GBP1 each - | | 17,394,806 | | 14,999,806 |
| fully paid | | | | |
+-----------------------------------------------+--+---------------+--+------------+
| 1,250,000 Ordinary shares of GBP1 each - re | 1,250,000 | | 1,250,000 |
| contribution of 100 Silex shares | | | |
+--------------------------------------------------+---------------+--+------------+
| | | 18,644,806 | | 16,249,806 |
+-----------------------------------------------+--+---------------+--+------------+
Further to the EGM of 3 December 2008, the authorised share capital of the
Company was increased from GBP 18,500,000 to GBP 24,500,000.
775,000 ordinary shares of GBP1 nominal value were issued on 14 August 2008 at a
total subscription price of GBP 1,499,625 bringing the issued capital of the
Company to GBP 17,024,806. A further 1,620,000 ordinary shares were issued on 9
December 2008. These shares were issued against an allocation of GBP 1,620,000
from the Company's share premium account bringing the issued capital of the
Company to GBP 18,644,806.
The subscribed and fully paid capital of GBP 18,644,806 comprises 18,644,806
fully paid shares with a nominal value of GBP 1 each.
Group companies registered in Switzerland have provided for Swiss statutory
reserves which are not distributable. By Swiss law, an amount equal to five per
cent (5%) of the net profits of the company is set aside for the establishment
of a statutory reserve, until this reserve amounts to ten per cent (10%) of the
company's nominal share capital. As at 31 December 2008, this amounts to
GBP 25,176 (2007: GBP 3,546).
Share premium was reduced by GBP 895,375 during the year as a net result of the
allocation of GBP 1,620,000 to the share capital account relating to the payment
of an Incentive Plan less GBP 724,625 increase in share premium as a result of
the issuance of 775,000 ordinary shares to Principle Capital Investment Trust
Plc.
16 Share incentiveS and bonus plan
The Group has established the Principle Capital Holdings S.A. Discretionary
Share Option Plan ("DSOP") and the Principle Capital Holdings S.A. Discretionary
Bonus Plan.
Under the DSOP, the Company may grant options to eligible employees, Directors
and Senior Management of the Group to acquire Principle Capital Holdings S.A.
shares. The maximum number of the Company shares which may be put under option
under the DSOP is 3 per cent of the issued share capital of the Company from
time to time. The exercise price of the Company share under each option granted
after admission will be the market value of the Company share determined by the
Board of Directors.
On 22 December 2008, the Board of Directors proposed to make various amendments
to the DSOP to increase the limit of the number of new shares over which options
may be granted from 3% of the issued share capital of the Company to 5%.
Under separate agreement, the Company may grant options to non-employee
Directors up to 5 per cent of the issued share capital. The exercise price for
each Company share under these options will be the placing price and the other
terms of these options will be as similar as practicable to the terms of the
options granted under the DSOP.
+----------------------------------------------------------------------------+
| As at 31 December 2008, stock options outstanding amounted to 802,488 |
| (2007: 678,930), with the following maturity dates : |
+----------------------------------------------------------------------------+
| * 449,990 became exercisable on 3 November 2006 at GBP2 and will lapse to |
| the extent not exercised on 2 November 2014 |
+----------------------------------------------------------------------------+
| * 36,000 became exercisable on 8 April 2007 at GBP2.225 and will lapse to |
| the extent not exercised on 7 April 2015. |
+----------------------------------------------------------------------------+
| * 53,998 become exercisable on 18 June 2009 at GBP3.25 and will lapse to |
| the extent not exercised on 17 June 2017. |
+----------------------------------------------------------------------------+
| * 138,942 become exercisable on 22 October 2009 at GBP3.3833 and will |
| lapse to the extent not exercised on 22 October 2017. |
+----------------------------------------------------------------------------+
| * 73,558 become exercisable on 15 January 2010 at GBP3.25 and will lapse |
| to the extent not exercised on 15 January 2018. |
+----------------------------------------------------------------------------+
| * 28,250 become exercisable on 15 August 2010 at GBP1.65 and will lapse to |
| the extent not exercised on 15 August 2018. |
+----------------------------------------------------------------------------+
| * 21,750 become exercisable on 9 December 2010 at GBP1.20 and will lapse |
| to the extent not exercised on 9 December 2018. |
+----------------------------------------------------------------------------+
Under the Bonus Plan and under separate arrangements in the case of Directors
and Senior Management who are not employees of the Group, 5 per cent of the
profit (if any) of the Company before tax, depreciation, amortisation,
exceptional items and bonuses will be allocated at the end of each financial
year to a bonus pool.
The following assumptions were used by the Company in calculating the fair value
of share options:
+--------------------+--+--------+--------+--------+--------+--------+--------+--------+
| Date | | 3 Nov | 8 | 18 |22 Oct |15 Jan |15 Aug | 9 Dec |
| | | 2004 | April | June | 2007 | 2008 | 2008 | 2008 |
| | | | 2005 | 2007 | | | | |
+--------------------+--+--------+--------+--------+--------+--------+--------+--------+
| | | | | | | | | |
+--------------------+--+--------+--------+--------+--------+--------+--------+--------+
| Stock Price | | 200.0 | 222.5 | 325.0 | 340.0 | 325.0 | 166.0 | 120.0 |
+--------------------+--+--------+--------+--------+--------+--------+--------+--------+
| Exercise Price | | 200.0 | 222.5 | 325.0 | 338.3 | 325.0 | 165.0 | 120.0 |
+--------------------+--+--------+--------+--------+--------+--------+--------+--------+
| Maturity in years | | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 |
+--------------------+--+--------+--------+--------+--------+--------+--------+--------+
| Interest Rate | | 4.59% | 4.60% | 5.64% | 4.94% | 4.20% | 4.48% | 3.11% |
+--------------------+--+--------+--------+--------+--------+--------+--------+--------+
| Annualised | | 29.3% | 25.0% | 23.8% | 11.4% | 11.3% | 15.0% | 15.4% |
| Volatility | | | | | | | | |
+--------------------+--+--------+--------+--------+--------+--------+--------+--------+
| | | | | | | | | |
+--------------------+--+--------+--------+--------+--------+--------+--------+--------+
The fair value of the liability is remeasured at each reporting date and at
settlement date. Expected volatility is estimated by considering the volatility
of two similar listed companies comparable to the Company.
Total charge to the profit and loss for the year was GBP 113,210 (2007: GBP
839).
17 BUSINESS SEGMENTS
Segment information is presented in respect of the Group's business segments.
Inter-segment pricing is determined on an arm's length basis. Segment results,
assets and liabilities include items directly attributable to a segment. Segment
earnings are presented after elimination of inter-segment profit. The Group
comprises the following main business segments:
* Investment Management
The investment management of a number of listed and private investment vehicles.
* Trust and Fund Administration
The administration of a number of listed and private funds and Trusts.
Geographical segments
Operations are centered in Europe for both businesses.
+---------------+-------------+-------------+-----------+-----------+-------------+-------------+
| | Investment Management | Trust and Fund | Consolidated |
| | | Administration | |
+---------------+---------------------------+-----------------------+---------------------------+
| | 2008 | 2007 | 2008 | 2007 | 2008 | 2007 |
+---------------+-------------+-------------+-----------+-----------+-------------+-------------+
| | GBP | GBP | GBP | GBP | GBP | GBP |
+---------------+-------------+-------------+-----------+-----------+-------------+-------------+
| Revenue | 7,426,501 | 1,440,429 | 2,150,156 | 422,092 | 9,576,657 | 1,862,521 |
+---------------+-------------+-------------+-----------+-----------+-------------+-------------+
| Profit/(loss) | 1,133,319 | (5,512,023) | 635,250 | 77,293 | 1,768,569 | (5,434,730) |
| | | | | | | |
+---------------+-------------+-------------+-----------+-----------+-------------+-------------+
| | | | | | | |
+---------------+-------------+-------------+-----------+-----------+-------------+-------------+
| Assets | 38,525,916 | 34,383,527 | 980,136 | 1,188,094 | 39,506,052 | 35,571,621 |
+---------------+-------------+-------------+-----------+-----------+-------------+-------------+
| Liabilities | (2,293,639) | (960,725) | (133,054) | (825,864) | (2,426,693) | (1,786,589) |
+---------------+-------------+-------------+-----------+-----------+-------------+-------------+
| Net assets | 36,232,277 | 33,422,802 | 847,082 | 362,230 | 37,079,359 | 33,785,032 |
+---------------+-------------+-------------+-----------+-----------+-------------+-------------+
| | | | | | | |
+---------------+-------------+-------------+-----------+-----------+-------------+-------------+
Revenue comprises turnover, interest income, other income plus unrealized and
realized gains and losses for the year.
18 RELATED PARTIES
As at the year end the Group had an outstanding balance receivable on a
non-interest bearing loan to Principle Energy Ltd. of GBP 558,623 (2007: GBP
552,820).
During the period the Group received service charges of GBP 111,995 under a
service agreement with PME Infrastructure Advisors Ltd. and administration fees
of GBP 118,727 from PME Infrastructure Managers Ltd.
There are no material related party transactions other than those disclosed in
these financial statements.
19 EARNINGS PER SHARE
(a) Basic
Basic earnings per share is calculated by dividing the profit attributable to
equity holders of the company by the weighted average number of ordinary shares
in issue during the year.
+----------------------------------------------------+------------+--+--------------+
| | 2008 | | 2007 |
| | GBP | | GBP |
+----------------------------------------------------+------------+--+--------------+
| | | | |
+----------------------------------------------------+------------+--+--------------+
| - Profit (loss) attributable to equity holders of | 46,979 | | (5,049,730) |
| the Company | | | |
+----------------------------------------------------+------------+--+--------------+
| - Weighted average number of ordinary shares in | 16,642,587 | | 10,469,669 |
| issue | | | |
+----------------------------------------------------+------------+--+--------------+
| Basic earnings (loss) per share (pence) | 0.28p | | (48.23p) |
+----------------------------------------------------+------------+--+--------------+
(b) Diluted
Diluted earnings per share is calculated by adjusting the weighted average
number of ordinary shares outstanding to assume conversion of all dilutive
potential ordinary shares. The company has one category of dilutive potential
ordinary shares: share options. A calculation is done to determine the number of
shares that could have been acquired at fair value (determined as the average
annual market share price of the company's shares) based on the monetary value
of the subscription rights attached to outstanding share options. The number of
shares calculated as above is compared with the number of shares that would have
been issued assuming the exercise of the share options.
+----------------------------------------------------+------------+--+-------------+
| | 2008 | | 2007 |
| | GBP | | GBP |
+----------------------------------------------------+------------+--+-------------+
| | | | |
+----------------------------------------------------+------------+--+-------------+
| - Profit (loss) attributable to equity holders of | 46,979 | | (5,049,730) |
| the Company | | | |
+----------------------------------------------------+------------+--+-------------+
| - Profit (loss) used to determine diluted earnings | 46,979 | | (5,049,730) |
| per share | | | |
+----------------------------------------------------+------------+--+-------------+
| - Weighted average number of ordinary shares in | 16,642,587 | | 10,469,669 |
| issue | | | |
+----------------------------------------------------+------------+--+-------------+
| - Adjustments for: | | | |
+----------------------------------------------------+------------+--+-------------+
| - Share options | 15,390 | | - |
+----------------------------------------------------+------------+--+-------------+
| - Weighted average number of ordinary shares for | 16,657,977 | | 10,469,669 |
| diluted | | | |
| earnings per share | | | |
+----------------------------------------------------+------------+--+-------------+
| | | | |
+----------------------------------------------------+------------+--+-------------+
| Diluted earnings (loss) per share | 0.28p | | (48.23p) |
+----------------------------------------------------+------------+--+-------------+
Potential ordinary shares are considered as anti-dilutive as their conversion to
ordinary shares would decrease loss per share or increase earning per share from
operating activities. Therefore, diluted loss per share for the year ended 31
December 2008 is equal to basic loss per share.
20 ULTIMATE PARENT COMPANY
Principle Capital Holdings S.A. is the ultimate parent Company of the Group.
These financial statements do not represent the statutory accounts of the
Company.
The statutory annual accounts of the Company are prepared in accordance with
legal and regulatory requirements and generally accepted accounting principles
in the Grand Duchy of Luxembourg. The last audited version of these annual
accounts is available at the registered office of the Company.
21 EVENTS AFTER THE BALANCE SHEET DATE
There were no significant events after the balance sheet at the Group level.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SSLFWASUSESM
Principle Cap. (LSE:PCX)
Historical Stock Chart
From Jun 2024 to Jul 2024
Principle Cap. (LSE:PCX)
Historical Stock Chart
From Jul 2023 to Jul 2024
