ARL.L Regulatory News (ARL)

9 Apr 2008 14:06

Arlington Group Ltd09 April 2008 Arlington Group Limited Audited consolidated financial results of the Group for the period ended 31 December 2007 Chairman's Statement I am pleased to report upon the audited consolidated financial results of theGroup for the period ended 31 December 2007 which, having been prepared on abreak-up basis, show a loss after taxation of £645,000 (31/3/07: profit of£265,000). Basic earnings per share (EPS) were a loss of 1.04 pence (31 March 2007: profitof 0.41 pence), with fully diluted EPS at a loss of 1.04 pence (31 March 2007:profit of 0.41 pence). The net cash position at the Balance Sheet date was £1.97 million (31 March2007: £13.55 million) Net Asset Values (NAV) per share were: 31 December 2007 31 March 2007 (pence/share) (pence/share) - undiluted: 59.43 57.21 - fully diluted 57.63 55.85 RESULTS AND DIVIDENDS The accounting reference date has been changed from 31 March to 31 December tobetter align the Group's reporting with its investments' reporting periods.Accordingly, the period under review is one of only 9 months compared to 12months for the previous reporting period. The operating loss for the period was £883,000 (31 March 2007: £90,000) and lossafter tax was £645,000 (31 March 2007: profit of £265,000). CURRENT PERIOD'S TRADING AND PROSPECTS The first quarter of 2008 has been extremely challenging in the face of theturmoil of the current global banking and financial liquidity crisis leading tosubstantial asset and equity value erosion in stock markets worldwide. While this has been thoroughly covered by the media, I am able to report that,with a defensively positioned portfolio and a lack of gearing, the impact ofsuch trading conditions has been much less adverse on the Group compared to manyorganisations in the hedge fund sector. However, for reasons more fully described below, the Board believes that theorderly liquidation of the Company is in the best interests of all of theshareholders and, in further consideration of proposals being put toshareholders in a Circular to be issued at the same time as these FinancialStatements, trading activity in the last 3 months has been conducted on a veryconservative basis. RETURN OF CAPITAL TO SHAREHOLDERS For a number of years the share price of the Company's Ordinary Shares hastraded at a discount to the reported Net Asset Value, as per the Company'spublished Financial Statements. This discount has historically been in the rangeof approximately 25 to 45 per cent to the underlying NAV per share. The Board recognises that the structure of the share register has, in some partat least, contributed to both the level of discount and to the accompanyingilliquidity in the Company's shares. The Company has also made extensive effortsto narrow the discount while also delivering profitable trading results in mostreporting periods. Furthermore, during the last 24 months, a number ofsignificant transactions with strategic merger targets have been activelypursued but, for various reasons, no deal has been concluded on terms which theBoard could justify as being in the best interests of all of the shareholders. Therefore, after careful consideration of the above-referenced aspects, and inclose consultation with its professional advisers, the Board has concluded thatit is in the best interests of shareholders as a whole for the Company to returnvalue to them by way of a return of capital via a liquidation of the Company.The Board is therefore proposing to cancel the admission to trading on AIM ofthe Ordinary Shares and then to liquidate the Company by way of a Members'Voluntary Liquidation (MVL). Further details of, and the steps involved in, theMVL are set out in the Circular. As the Board recognises that some shareholders may not wish to wait until thecompletion of the liquidation process to receive value in respect of theirOrdinary Shares, it also considers that a Tender Offer would be an appropriatemeans of achieving an accelerated return of value to shareholders. Accordingly, the Board commissioned an independent firm of Chartered Accountants(FW Smith Riches & Co) to carry out an independent valuation of the company'sinvestment portfolio for the purpose of calculating the NAV per ordinary sharein advance of the liquidation of the Company and to establish the Tender OfferPrice. The valuation criteria are described in Note 2 of the Notes to theFinancial Statements and also in the Circular. Shareholders therefore have the option of either selling their Ordinary Sharesunder the Tender Offer or receiving a cash distribution in respect of suchOrdinary Shares on the Company's liquidation. TENDER OFFER PRICE DETERMINATION Since the Balance Sheet date, a current valuation has been carried out by theIndependent Valuer. This has been done using the latest available valuationdata for 31 March 2008, being the nearest reasonable date to the publication ofthese financial statements. The conclusion reached, and being that upon which the Tender Offer Price hasbeen determined, is that at 31 March 2008 the fully diluted NAV per ordinaryshare is 55 pence. As the basis of the valuation at the two dates is identical, the core reason forthis downward movement in value is the effect on the underlying value of theexisting investments and assets in the portfolio by virtue of the ongoingbanking crisis and stock market volatility. While such NAV is an unaudited figure, the basis of computing the amount isconsistent with the basis of computation used to calculate recoverable amountsin these financial statements. SPECIAL GENERAL MEETINGS (SGMs) The Company is convening two SGMs in connection with the proposed Tender Offerand Member's Voluntary Liquidation. These will both be held in Monaco at 11:30am hours (local time) on each of 7th May 2008 and 15th May 2008. Notice of thesemeetings is being despatched together with the Financial Statements and theabove-referenced Circular to shareholders. Shareholders should note that, as the Company has a Bermudian registration, incommon with other overseas enterprises whose shares are listed in London, it hasbeen advised that any such meetings should be held outside of the UnitedKingdom. Once again my fellow Directors and I would like to thank everyone who has workedso hard in supporting the Group over the last 11 years NICHOLAS BARHAM 9 April 2008 ENQUIRIES: Evolution Securities Bobbie Hilliam Tel +44 (0) 20 7071 4300 Arlington Group Colin Hill Tel: +44 (0) 20 7389 5010 CONSOLIDATED INCOME STATEMENT FOR THE PERIOD ENDED 31 DECEMBER 2007 9 months ended 12 months ended 31 December 2007 31 March 2007 £'000 £'000 £'000 £'000 TRADING INCOME 2,321 2,704 Adjustment in respect of break-up valuationbasis (1,227) - NET TRADING INCOME 1,094 2,704Operating expenses (1,176) (2,794)Provision for liquidation costs (801) - (1,977) (2,794)OPERATING LOSS (883) (90) Finance income 225 400 (LOSS)/PROFIT ON ORDINARY ACTIVITIESBEFORE TAXATION (658) 310 Taxation 13 (45) RETAINED (LOSS) / PROFIT FOR THEFINANCIAL PERIOD (645) 265 Earnings per share - basic (pence) (1.04) 0.41 - fully diluted (pence) (1.04) 0.41 STATEMENTS OF CHANGES IN EQUITY FOR THE PERIOD ENDED 31 DECEMBER 2007 GROUP Share capital Capital Shares to Retained redemption be issued earnings reserve Total £000 £000 £000 £000 £000 As at 31 323 3 39 37,623 37,988 March 2006 Profit for - - - 265 265the year Distributionat 1September - - - (1,292) (1,292)2006 (2p pershare) Share based - - 5 - 5payments As at 31 323 3 44 36,596 36,966March 2007 As at 31 323 3 44 36,596 36,966March 2007 Loss for the - - - (645) (645)period Purchase of (53) 53 - (4,255) (4,255)Shares As at 31 270 56 44 31,696 32,066December2007 COMPANY Share capital Capital Shares to Retained redemption be issued earnings reserve Total £000 £000 £000 £000 £000 As at 31 323 3 39 37,013 37,378March 2006 Profit for - - - 282 282the year Distributionon 1September - - - (1,292) (1,292)2006 (2p pershare) Share based - - 5 - 5payments As at 31 323 3 44 36,003 36,373March 2007 As at 31 323 3 44 36,003 36,373March 2007 Loss for the - - - (92) (92)period Purchase of (53) 53 - (4,255) (4,255)Shares As at 31 270 56 44 31,656 32,026December2007 CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2007 31 December 2007 31 March 2007 £000 £000 £000 ASSETS NON-CURRENT ASSETS Property, plant and equipment - 21 CURRENT ASSETS Property, plant and equipment 66 -Trade and other receivables 410 348Held for trading investments 30,749 23,566Cash and cash equivalents 1,971 13,546 Total current assets 33,196 37,460 TOTAL ASSETS 33,196 37,481 EQUITY AND LIABILITIES EQUITY Share capital 270 323Capital redemption reserve 56 3Shares to be issued 44 44Retained earnings 31,696 36,596 Total equity 32,066 36,966 CURRENT LIABILITIES Trade and other payables 329 477Current tax liabilities - 38Provisions 801 - Total current liabilities 1,130 515 TOTAL EQUITY AND LIABILITIES 33,196 37,481 COMPANY BALANCE SHEET AT 31 DECEMBER 2007 31 December 2007 31 March 2007 £000 £000 £000 ASSETS NON-CURRENT ASSETS Property, plant and equipment - 21Investments - 293 - 314 Investments 293 -Property, plant and equipment 66 -Trade and other receivables 410 336Held for trading investments 30,749 23,566Cash and cash equivalents 1,719 13,250 Total current assets 33,237 37,152 TOTAL ASSETS 33,237 37,466 EQUITY AND LIABILITIES EQUITY Share capital 270 323Capital redemption reserve 56 3Shares to be issued 44 44Retained earnings 31,656 36,003 Total equity 32,026 36,373 CURRENT LIABILITIESTrade and other payables 410 1,093Provisions 801 - Total current liabilities 1,211 1,093 TOTAL EQUITY AND LIABILITIES 33,237 37,466 The financial statements were approved by the Directors on 8 April 2008. CONSOLIDATED CASH FLOW STATEMENT FOR THE PERIOD ENDED 31 DECEMBER 2007 9 months ended 12 months ended 31 December 31 March 2007 2007 £000 £000CASHFLOWS FROM OPERATING ACTIVITIESGroup operating loss (883) (90)Adjustments to reconcile group operating loss to netcash (outflows)/inflows from operating activitiesDepreciation of property plant and equipment 16 8Share based payments - 5(Increase) /Decrease in trade and other receivables (62) 749Decrease in trade and other payables (148) (453)Increase in provisions 801 -(Increase) /Decrease in held for trading assets (7,183) 8,522 Net cash (outflow)/inflow from operating activities (7,459) 8,741Taxation paid (25) (389)Net cash (outflow)/inflow from operating activities (7,484) 8,352 CASHFLOWS FROM INVESTING ACTIVITIESInterest received 225 400Purchase of property plant and equipment (61) - Net cash inflow from investing activities 164 400 CASHFLOWS FROM FINANCING ACTIVITIESDividends paid to equity shareholders of the parent - (1,292)Purchase of own shares (4,255) - Net cash used in financing activities (4,255) (1,292) Net (decrease)/increase in cash and cash equivalents (11,575) 7,460Cash and cash equivalents at the start of the period 13,546 6,086 Cash and cash equivalents at the end of the period 1,971 13,546 COMPANY CASH FLOW STATEMENT FOR THE PERIOD ENDED 31 DECEMBER 2007 9 months ended 12 months ended 31 December 2007 31 March 2007 £000 £000CASHFLOWS FROM OPERATING ACTIVITIESCompany operating loss (308) (95)Adjustments to reconcile company operating loss to netcash (outflows)/inflows from operating activitiesDepreciation of property plant and equipment 16 8Share based payments - 5(Increase)/decrease in trade and other receivables (74) 745(Decrease)/increase in trade and other payables (683) 416Increase in provisions 801 -(Increase)/decrease in held for trading assets (7,183) 7,923 Net cash (outflow)/inflow from operating activities (7,431) 9,002Taxation paid - - Net cash (outflow)/inflow from operating activities (7,431) 9,002 CASHFLOWS FROM INVESTING ACTIVITIESInterest received 216 377Purchase of property plant and equipment (61) - Net cash inflow from investing activities 155 377 CASHFLOWS FROM FINANCING ACTIVITIESDividends paid to equity shareholders - (1,292)Purchase of own shares (4,255) - Net cash used in financing activities (4,255) (1,292) Net (decrease)/increase in cash and cash equivalents (11,531) 8,087Cash and cash equivalents at the start of the period 13,250 5,163 Cash and cash equivalents at the end of the period 1,719 13,250 NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 DECEMBER 2007 1. ACCOUNTING POLICIES Accounting convention The principal accounting policies are summarised below. They have allbeen applied consistently throughout the period save as otherwise noted inconsideration of the application of a break-up basis of asset valuation beingused in the preparation of these financial statements. Basis of preparation The finance information has been prepared in accordance withInternational Financial Reporting Standards ("IFRS"). The financial statementshave been prepared in accordance with IFRS as adopted by the European Union. The accounting reference date has been changed from 31 March to 31December to better align the Group's reporting with its investments' reportingperiods. Accordingly, the period under review is one of only 9 months comparedto 12 months for the previous reporting period These Financial Statements have been prepared on a break-up basis andall assets and liabilities have been stated at their recoverable values. The Group's and Company's financial statements therefore reflect thatall assets and liabilities are stated at their recoverable value with theexpectation that, subject to gaining the necessary shareholder approvals inSpecial General Meetings, the Company will be placed into a Member's VoluntaryLiquidation in May 2008. Consequently, all assets and liabilities have beenre-classified as current. In addition, a provision of £801,000 for liquidationexpenses and the costs of buying out directors' contracts have been made whichis more fully disclosed in Note 19. Basis of consolidation The consolidated financial statements incorporate the financialstatements of the company and entities controlled by the company (itssubsidiaries) and are prepared to 31 December 2007. Subsidiaries areconsolidated from the date control is transferred to the group and cease to beconsolidated from the date control is transferred from the group. The previous acquisition of Arlington Group plc occurred prior to thedate of transition to IFRS and therefore the Company has taken advantage of theexemption provided in IFRS 1 not to revisit the transaction. No goodwill wascreated on the transaction and the carrying values of the assets and liabilitieswere not adjusted by virtue of this transaction. When the Company owns greater than 20% of the equity share capital of aninvestee company, it considers whether this gives it significant influence overthe affairs of that company. Currently, in all cases the Directors believe thatdue to independent management and shareholders it does not have significantinfluence of such companies and accordingly does not account for them asassociates but as held for trading investments. Foreign currency translation The financial statements are presented in UK Pounds Sterling.Transactions denominated in currencies other than UK Pounds Sterling have beentranslated at the rate of exchange prevailing at the date of the transaction.Monetary assets and liabilities in other currencies are translated to PoundsSterling at the rates of exchange prevailing at the balance sheet date. Theresulting profits or losses are reflected in the consolidated income statement. Foreign exchange contracts are used as currency hedges againstinvestments made in foreign currencies. Movements on foreign exchange contracts that have not been realised atthe period end are taken to the income statement and reflected within held fortrade investments. Trading income Trading income is recognised to the extent that it is probable that economicbenefit will flow to the group and the trading income can be reliably measured. Income arising from financial assets (investments at fair value through profitand loss) and changes in market value of open ended hedge funds are recognisedin profit or loss on the basis of movements in the fair value of assets,together with dividends and interest receivable and payable. Investment management fees are recognised as revenue as the services areprovided. Other fees are recognised as earned. Depreciation The cost of property, plant and equipment is depreciated on a straight-linebasis over the expected useful lives of the assets as follows:- Motor vehicles - 20%-25% straight line and reducing balance Computer equipment and software - 20%-33% straight line and reducing balance Held for trading investments The policies applied consistently throughout the current and previous periodsare as set out below: - All investments are classified as held for trading. - Investments are initially recognised at fair value. - Transaction costs are expensed as incurred. - After initial recognition, investments are measured at fair value, withunrealised gains and losses on investments and impairment of investmentsrecognised in the Consolidated Income State-ment. - Investments held at fair value in managed hedge funds are valued at thefair value of the net assets as provided by the administrators of those funds. Adiscount may be applied where, in the opinion of the Directors, this betterreflects the value of the holding. - Investments in listed investments are valued at bid price. This may beadjusted where, in the opinion of the Directors, the price may be unreliable dueto illiquidity. - Unlisted investments are valued by the Directors at fair value whichtakes into account subsequent financing and other circumstances. - When a valuation is undertaken, consideration is given to the mostrecent information available, including the latest trading figures, performanceagainst forecast, management view of prospects and the price of any transactionsin the security. In view of the forthcoming liquidation the Directors have engaged the servicesof an independent third party expert in order to calculate the recoverablevalues of held for trading investments. Trade date accounting All purchases and sales of financial assets are recognised on the "trade date",i.e., the day that the entity commits to purchase or sell the asset. Cash and cash equivalents Cash and cash equivalents are defined as cash in hand and demand deposits. Forthe purposes of the cash flow statement, cash and cash equivalents consist ofcash in hand and bank deposits. Taxation The tax currently payable is based on the taxable profit for the period.Taxable profit differs from net profit as reported in the income statementbecause it excludes items of income or expense that are taxable or deductible inother periods and it further excludes items that are never taxable ordeductible. The Group's liability for current tax is calculated using tax ratesthat have been enacted or substantially enacted by the balance sheet date. Deferred taxation Deferred income tax is provided for using the liability method on temporarytiming differ-ences at the balance sheet date between tax basis of assets andliabilities and their carrying amounts for financial reporting purposes.Deferred tax liabilities are recognised in full for all temporary differences.Deferred tax assets are recognised for all deductible temporary differ-encescarried forward of unused tax credits and unused tax loss to the extent that itis prob-able that taxable profit will be available against which the deductibletemporary differences, and carry-forward of unused tax credits and unused lossescan be utilised. The carrying amount of deferred income tax assets is assessed at each balancesheet date and reduced to the extent that it is no longer probable thatsufficient taxable profit will be available to allow all or part of the deferredincome tax asset to be utilised. Unrecognised deferred income tax assets arereassessed at each balance sheet date and are recognised to the extent that isprobable that future taxable profits will allow the deferred tax asset to berecovered. Deferred income tax assets and liabilities are measured at the tax rates thatare expected to apply to the period when the asset is realised or the liabilitysettled, based on tax rates that have been enacted or substantively enacted atthe balance sheet date. Share-based payments Certain employees of the group and others providing similar services receiveremuneration in the form of share-based payment transactions, whereby employeesand others providing similar services render services as consideration forequity instruments (equity-settled transactions). The cost of equity-settledtransactions is determined with reference to the fair value at the date on whichthey were granted. The fair value is determined by using the Black-Scholesoption pricing model. The cost of equity-settled transactions is recognised, together with acorresponding increase in equity, over the period in which the serviceconditions are fulfilled, ending on the date on which the relevant employeesbecome fully entitled to the award ("the vesting date"). The cumulative expenserecognised for equity-settled transactions at each re-porting date until thevesting date reflects the extent to which the vesting period has expired and thegroup's best estimate of the number of equity instruments that will ultimatelyvest. The income statement charge or credit for a period represents the movementin cumulative expense recognised as at the beginning and end of that period.The dilutive effect of the outstanding options is reflected as additionaldilution in the compu-tation of earnings per share. Operating leases Rentals applicable to operating leases where substantially all of thebenefits and risks of ownership remain with the lessor are charged againstprofits on a straight-line basis over the period of the lease. Financial instruments Financial assets and financial liabilities are recognised on the group'sbalance sheet when the group becomes a contractual party to the instrument. Trade receivables Trade receivables are recognised initially at their fair value whichequates to their nominal value as reduced by appropriate amounts for recoverableamounts and subsequently at amortised cost. Trade payables Trade payables are recognised initially at their fair value andsubsequently at amortised cost. New standards The following new amendments and interpretations became effective in thesefinancial statements: IFRS 7, Financial instruments disclosure; This standard introduces new disclosures of qualitative and quantitativeinformation about exposure to risk. This had no impact on the classification orvaluation of the Group's financial instruments. The relevant disclosures havebeen made in the financial statements. The following new standard, amendments and interpretations became effective butwere not relevant to the Group's operations: - IFRIC 7, Applying the restatement approach under IAS 29, Financial reporting in hyperinflationary economies; - IFRIC 8, Scope of IFRS 2; - IFRIC 9, Re-assessment of embedded derivatives; and, - IFRIC 10, Interim Financial Reporting and Impairment. The following new standards, amendments, and interpretations have been issuedbut are not yet effective and have not been adopted early by the Group: IFRS 8, Operating segments This is mandatory for accounts periods beginning on or after 1 January 2009 buthas not yet been endorsed by the European Union. This standard will replace IAS14 and is essentially identical to US Standard SFAS 132. IFRS 8 will require anentity to adopt a "management approach" to report on the financial performanceof its operating segments. The information to be reported would be whatmanagement uses internally for allocating resources to operating segments. Thisis not expected to affect reported net assets or profits. The following new standards, amendments, and interpretations have been issuedbut are not yet effective and are not expected to be relevant to the Group'sOperations: - IFRIC 11, Group and treasury share transactions; - IFRIC 12, Service concession arrangements; - IFRIC 13, Customer Loyalty Programmes; and, - IFRIC 14, The Limit on a Defined Benefit Asset Minimum Funding Requirements and their Interaction. The Directors do not anticipate that the adoption of these statements andinterpretations will have a material impact on the Group's financial statementsin the period of initial application. 2. Accounting judgements and key sources of estimation uncertainty The preparation of financial statements in accordance with IFRS requiresmanagement to make estimates and assumptions in certain circumstances thataffect reported amounts. The most sensitive estimates affecting the financialstatements are in the area of valuation of investments. Actual outcomes maytherefore differ from these estimates and assumptions. The estimates andassumptions that have the most significant impact on the carrying value ofassets and liabilities of the Group within the next financial period arediscussed below. Valuation of investments The valuation of investments at 31 December 2007 is £30,749,000 (31March 2007: £23,566,000). The Group has used the same basis of asset valuation as that which hasbeen adopted by the independent valuers contracted by the Directors to carry outall necessary work required to establish a net asset value per ordinary sharefor the purpose of the forthcoming Tender Offer as mentioned in the Chairman'sStatement. The Group's and Company's financial statements therefore reflect thatall assets and liabilities are stated at their recoverable value with theexpectation that, subject to gaining the necessary shareholder approvals inGeneral Meeting, the Company will be placed into a Member's VoluntaryLiquidation in May 2008. Consequently, all assets and liabilities have beenre-classified as current. The valuation principles applied can be summarised thus: (a) That the Company had been placed into a voluntary liquidation processas of 31 December 2007. (b) That all of the Company's assets were to be realised in cash at theearliest possible date, consistent with an orderly realisation rather than on aforced sale basis. (c) The net present value of future cash receipt should be determinedusing discount rates that reflect the inherent risk profile of each asset class. (d) No adjustment would be made to reflect any future market volatility A summary of the principal asset classes is as follows: (i) Investments held in managed hedge funds with, broadly, these characteristics - Mutual fund type where the unit/shares can only effectively bepurchased or realised by dealing directly with the fund manager. - Fund valuations are provided usually by an administrator on behalf ofthe fund manager. - That a reliable period end valuation is available. - That the Company's holding is not a significant proportion of thefund's total assets under management so that it is unlikely that a delay inpayment of the realisation. proceeds will be imposed as a result of lack ofliquidity in the fund itself. These holdings will be redeemed at the earliest possible date subject to dueapplication of process, being the notification of such redemption beingdelivered to the fund in accordance with the constitution thereof and thatredemption is effected in a timely manner thereafter. The NPV of the expectedproceeds will be calculated using a rate of discount appropriate to the natureof the underlying investment. (ii) Investment assets other than managed hedge funds. - Investments with a defined time frame for realisation, where therealisation proceeds have been presumed to be the value as shown in theCompany's books of account. The proceeds have been discounted back to theBalance Sheet date from the presumed date of realisation at a rate assessed asbeing most appropriate to the risks inherent in the underlying assets. - Investments with no defined time frame for realisation whererealisation is assessed to be achievable only if a willing third-party buyer canbe found and where, since the date of the original investment there has been nosignificant change in the circumstances or outlook for the investment; finally,that the notional willing third-party buyer will be found within one year whowill pay the same for the positions as did the Company and that the NPV of theexpected proceeds will be calculated using a rate of discount appropriate to thenature of the underlying investment. . (iii) Hedge funds in which the Company holds a significantshare of the units/shares. The underlying assets of such investments have beenanalysed to assess their nature, specifically as to liquidity and time lines totheir orderly realisation. In these cases a short-term realisation of theCompany's entire holding would not be possible, primarily due to the inherentilliquidity within the hedge fund itself. The underlying assets classes havebeen assessed on the characteristics thus determined in order to estimate thetime scales likely to be involved in achieving the liquidity necessary in thefund in order to effect the full realisation of the Company's investment. Thesefuture cash flows have been made subject to rates of discount appropriate toeach underlying asset class. Provision for liquidation costs A provision of £801,000 for liquidation expenses and the costs of buying outdirectors' contracts has been made which is more fully disclosed in Note 19. Itis appropriate to provide for liquidation costs resulting from the probableMember's Voluntary Liquidation because, due to the significance of theseestimated costs, to provide for these is consistent with the basis ofpreparation that the company will be broken up. 3. SEGMENTAL ANALYSIS The trading income and profit before taxation of the Group are whollyattributable to the principal activities. Trading income is analysed in note 4.Net assets are wholly attributable at 31 December 2007 and 31 March 2007 to theprincipal activities. The nature of the investment strategy of the group isprimarily to invest in third party managed hedge funds with an overall globalexposure and the related costs are incurred on a global basis. 4. NET TRADING INCOME An analysis of trading income by origin is given below: 9 months ended 12 months ended 31 December 2007 31 March 2007 £000 £000United Kingdom 290 419Rest of the World 804 2,285 1,094 2,704 An analysis of trading income by type is given below: 9 months ended 12 months ended 31 December 2007 31 March 2007 £000 £000 Income arising from financial assets (at fair value through 1,848 2,083income statement )Fees and commission income 473 350Investment management fees - 271 2,321 2,704LESS: Value adjustment re break-up basis of valuation (1,227) - 1,094 2,704 The company sold certain rights in respect of an investment in a hedge fundduring the period to a third party for US$2 million, such sum comprising part ofthe "Income arising from financial assets" as noted above. 5. OPERATING LOSS Operating loss is stated after charging: 9 months 12 months ended ended 31 December 2007 31 March 2007 £000 £000 Share based payment charge - 5Depreciation of owned fixed assets 16 8Break value adjustment (see Note 4) 1,227 -Liquidation costs (see Note 19) 801 - Auditors' remuneration - as auditors for parent company 16 18 - as auditors of subsidiary 4 7 - as reporting accountant - 75 - for other services 11 26 The fees for non-audit work for the period ended 31 March 2007 and the periodended 31 December 2007 include the preparation of tax returns and tax complianceadvice. These services are reviewed by the Board of Directors to ensure thatthe independence of the auditors is not compromised. 6. EARNINGS PER SHARE Basic earnings per share amounts are calculated by dividing the net profit forthe period attributable to ordinary equity holders of the parent by the weightedaverage number of ordinary shares outstanding during the period. Diluted earnings per share amounts are calculated by dividing the net profitattributable to ordinary equity holders of the parent by the weighted averagenumber of ordinary shares outstanding during the period plus the weightedaverage number of ordinary shares that would be issued on the conversion of allthe dilutive potential ordinary shares into ordinary shares. Due to the level ofearnings in the prior period there is no material difference between basic anddiluted earnings per shares. In the current period the options areanti-dilutive as there was a loss for the period. The anti-dilutive options aredescribed in note 23. Reconciliations of the earnings and weighted average number of shares used inthe calculation are set out below: 9 months ended 12 months ended 31 December 2007 31 March 2007 Weighted Weighted average number Per-share average number Per-share Earnings of shares amount Earnings of shares amount (£'000) ('000) (pence) (£'000) ('000) (pence) Basic EPS Earnings attributable to (645) 61,777 (1.04) 265 64,611 0.41ordinary shareholders Adjusted EPS Earnings attributable to 1,383 61,777 2.24 n/a n/a n/aordinary shareholders The adjusted EPS figures are included for information only to facilitatecomparison with the previous year. The adjusted "Earnings attributable toordinary shareholders" are those per these financial statements adjusted by anadd-back of £1,227,000 in respect of the downward valuation of investmentsrequired as a result of adopting a break-up basis and a further add-back of£801,000 being the provision required in respect of the costs of the proposedliquidation. (See also Note 19) 7. SHARE CAPITAL Authorised share capital: 31 December 2007 31 March 2007 £000 £000 500,000,000 Ordinary shares of £0.005 each 2,500 2,500 Allotted, called up and fully paid: 31 December 2007 31 March 2007 £000 £000 53,955,639 Ordinary shares of £0.005 each (31 March 2007: 64,611,139) 270 323 During the period the Company purchased 10,655,500 (2007: nil) of its ownordinary shares of 0.5 pence each for a total consideration of £4,255,343 (2007:nil). As permissible under Bermudian company law these shares have beencancelled. Share options The Company granted and issued share options over ordinary shares in the Company as follows: Date granted Parties Exercise price Number of shares Final Exercisable date 26/06/03 C W Hill 30p 197,758 24/09/0926/06/03 NEC Barham 30p 791,031 24/09/0926/06/03 C W Hill 40p 791,031 24/09/0926/06/03 NEC Barham 40p 3,164,126 24/09/0912/09/06 Others 60p 500,000 24/09/09 _____________Options outstanding at 1 April 2007 5,443,946 ============Options outstanding at 31 December 2007 5,443,946 ============ While there were no options granted, exercised, forfeited or lapsed during theperiod, NEC Barham acquired full rights under the options noted above pursuantto a private transaction with the original grantees of such options, all as dulyannounced by RNS on 26 July 2007. The fair value of equity-settled share options granted was estimated as at thedate of grant using a Black-Scholes option pricing model, taking into accountthe terms and conditions upon which the options were granted. The followingtable lists the inputs into the model used for the period ended 31 March 2007. 31 March 2007 £000Dividend yield on underlying shares 5%Risk free rate 5%Expected volatility 25%Average time to expiry 1 1/2 yearsWeighted average share price of options 40 pence =============== =============== The full £44,000 charge arising from the issuance of all options is shown as "Shares to be issued" on the Consolidated Balance Sheet, such sums having beenduly accounted for as to £39,000 prior to 31 March 2005 and £5,000 in theFinancial Statements for the year ended 31 March 2007. This information is provided by RNS The company news service from the London Stock Exchange