<pre> Part 2 : For preceding part double-click [nRn1R6294X] PROPERTY, PLANT AND EQUIPMENT Motor vehicles & office equipment Group £'000 Cost At 1 January 2007 79 Additions 88 Disposals (24) At 31 December 2007 143 Additions - Disposals - At 31 December 2008 143 Accumulated depreciation At 1 January 2007 48 Charge for the period 36 Disposals (11) At 31 December 2007 73 Charge for the period 36 Disposals - At 31 December 2008 109 Net book value At 31 December 2008 34 At 31 December 2007 70 7. OTHER FINANCIAL ASSETS Group 2008 2007 £'000 £'000 NON CURRENT Investments held at fair value through profit and loss 16,626 21,138 Investment in group entities (Note 10) - - 16,626 21,138 Financial assets held at fair value through profit and loss represent the investment into the Stonehage Westcity Property Fund. The movement in the Fund during the period can be summarised as follows: Group £'000 At 1 January 2007 19,568 Profit on fund investment (note 2) 1,570 At 31 December 2007 21,138 Loss on fund investment (note 2) (4,512) At 31 December 2008 16,626 The company has secured a two year loan facility from Chapman International LTD and has granted a charge over 5 million units in the Fund as security for the loan. 8. INVESTMENT IN GROUP ENTITIES Total Investments in subsidiaries £000 Cost At 1 January 2007 140,900 Disposals - At 31 December 2007 / 1 January 2008 140,900 Additions - At 31 December 2008 140,900 Provisions At 1 January 2007 117,345 Movement - At 31 December 2007 / 1 January 2008 117,345 At 31 December 2008 117,345 Cost less provisions for impairment in value At 31 December 2008 23,555 At 31 December 2007 23,555 Details of the principal subsidiary undertakings are as follows: Country of incorporation and residence % owned at year end Activity Westcity Developers Limited United Kingdom 100 Development Management (from 1 January 2007) Weasel Investments Limited United Kingdom 100 Non-Trading Westcity Development Investments Limited United Kingdom 100 Dormant Westcity Property Developers Limited United Kingdom 100 Dormant Westcity Property Investments Limited United Kingdom 100 Dormant Westcity Property Development Limited United Kingdom 100 Dormant There are an additional 9 subsidiary undertakings, all of which were and continue to be dormant. 9. TRADE AND OTHER RECEIVABLES 2008 2007 Group Group £'000 £'000 Amounts receivable in less than one year: Other receivables 342 413 342 413 Amounts receivable in more than one year: Amounts due from Group Companies - - - - 342 413 10. TRADE AND OTHER PAYABLES 2008 2007 Group Group £'000 £'000 Amounts due in less than one year: Other taxes and social security costs 42 164 Trade payables 33 63 Other payables 105 93 Accruals and deferred income 75 83 255 403 Amounts due in more than one year: Amounts due to Group Companies - - - - 255 403 11. PROVISIONS Group Group pension scheme deficit onerous property leases Group Total £'000 £'000 £'000 Provision at 1 January 2008 250 210 460 Provision utilised - (68) (68) Provision Increased 18 80 98 Provision at 31 December 2008 268 222 490 Current 268 55 323 Non-current - 167 167 268 222 490 Provision is made in these financial statements for all material liabilities including any legal claims which are expected to materialise and lease liabilities which had materialised on premises formerly occupied by a Group company. The Directors have considered the adequacy of provisions for product liability, property lease liabilities which have materialised, trade disputes and environmental issues relating to disposed businesses and consider that adequate provision has been made, or sufficient funds held in escrow, to meet any contingent costs. The Group pension scheme deficit will be repaid by November 2009 at which time the scheme will effectively cease. The provision for the Group onerous property leases is still a current obligation and will be valid until the lease is re-assigned. 12. FINANCIAL RISK MANAGEMENT The group's operations expose it to a number of financial risks. The Group has exposure to the following risks from its use of financial instruments: * Interest rate risk * Credit risk * Foreign currency risk * Market risk * Liquidity risk This note presents information about the Group's exposure to each of the above risks, the Group's objectives, policies and processes for measuring and managing risk, and the Group's management of capital. Further quantitative disclosures are included throughout these financial statements. The Board of Directors have overall responsibility for the establishment and supervision of the Group's risk management framework. The Board is responsible for developing and monitoring the Group's risk management policies. A risk management programme has been established to protect the group against the potential adverse effects of these financial risks, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group's activities. To assist the companies cash outflow, the Company has secured a two-year loan facility from Chapman International Investment LTD, the company's largest shareholder. The Company has granted Chapman a charge over five million units in the Fund as security for the loan (carrying amount 2008: E2,950,000). The loan is for a two year period from June 2008. No repayments are required until the end of the loan. This facility will only be drawn down to the extent that the Directors consider that the Company's remaining cash resources for working capital are insufficient. In the eventuality that the loan is not repaid the security will be exercised. The loan bears interest at Libor 3 month sterling deposit rate + 2.5% which is payable monthly in arrears. Fair value of financial instruments: 2008 2007 Financial assets Carrying value Fair Carrying value Fair Value Value £'000 £'000 £'000 £'000 Cash and cash equivalents 42 42 4,787 4,787 Financial Liabilities Forward exchange contract - - 1,550 1,550 It is the directors' opinion that the carrying value of the Financial Assets and Financial Liabilities approximates their fair value. Interest Rate Risk Interest rate risk is the risk that the value of a financial instrument or cash flows associated with the instrument will fluctuate due to changes in market interest rates. Interest rate risk arises from the interest bearing liability that we use. Our interest rate risk primarily arises from borrowings issued at floating interest rates which exposes the group to cashflow interest rate risk. The group is exposed to interest rate risk as a result of its loan from Chapman International Investment LTD. At 31 December 2008 the group had debt of £400,000. Based on the year end debt levels, a 1% change in interest rates would decrease or increase the group's annual loss before tax by £893. 2008 2007 Financial liability Carrying value Average Interest Rate Carrying value Average Interest Rate £'000 % £'000 % Other loans 400 7.6% - - Credit Risk The group's principal financial assets are cash balances and deposits. To reduce the risk of counterparty default the group deposits its surplus funds in approved high quality banks. Credit risk is limited due to the group's close working relationship with the Fund. The trade and other receivables age analysis is evaluated on a regular basis for potential doubtful debts. It is management's opinion that no further provision for doubtful debts is required. An analysis of trade and other receivables: 2008 Neither impaired nor past due Carrying amount Past due but not impaired 61-90 days 91-120 days More than 121 days Trade and other receivables 174 174 - - - 2007 Neither impaired nor past due Carrying amount Past due but not impaired 61-90 days 91-120 days More than 121 days Trade and other receivables 287 287 - - - The group allows an average receivables payment period of 60 days after invoice date. It is the group's policy to assess receivables for recoverability on an individual basis and to make provision where it is considered necessary. Trade receivables that are neither impaired nor past due are made up of 1 debtors' balances (2007: 7). The largest individual debtor corresponds to 100% of the total balance (2007: 80%). Historically these debtors have always paid balances when due, unless this is disputed. No debtors' balances have been renegotiated during the year or in the prior year. Foreign Currency Risk Foreign currency risk refers to the risk that the value of a financial commitment or recognised asset or liability will fluctuate due to changes in foreign currency rates. The group is exposed to foreign currency risk as a result of its investment into the Stonehage Westcity Property Fund. The group made use of forward exchange contracts to manage the risk relating to future transactions, in accordance with its risk management policy. As at 9th June 2008 the forward exchange contract was settled at a loss of £2,991,000, the balance of which, £1,441,000 (2007: £1,550,000) was paid in the current year. No amounts were recognised directly in equity during the period or the prior period as the relationship between the forward exchange contracts and the item being hedged does not meet certain conditions in order to qualify as a hedging relationship. Fluctuations in the fair values of forward exchange contracts are recognised directly in profit or loss. Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk. The year under review has been one of unparalleled turbulence with severe volatilities within the real estate and financial markets which has led to a re-evaluation of property as an asset class. The past twelve months have proved to be a particularly testing time with most property companies and funds experiencing a sharp fall in capital values. Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group's reputation. The financial obligation in the Group is principally restricted to trade and other payables and the loan from Chapman International Investment LTD. Contractual maturity analysis for financial liabilities: Financial liabilities 2008 Due or due in less than 1 month Due between 1 to 3 months Due between 3 months to 1 year Due between 1 to 5 years Due after 5 years Total Trade and other payables 180 -- 5 70 - 255 Non-current borrowings - -- - 400 - 400 180 - 5 470 - 655 Financial liabilities 2007 Trade and other payables 228 - 89 86 - 403 Non-current borrowings - - - - - - Financial liability on forward exchange contract - - 1,550 - - 1,550 228 - 1,639 86 - 1,953 Capital risk management The group defines its equity as share capital, special reserves and retained earnings. The group's objectives when maintaining capital are to safeguard the entities ability to continue as a going concern. The definition of the components of equity is given in Note 1. 13. SHARE CAPITAL 2008 2007 2008 2007 No. No. £'000 £'000 Authorised Ordinary shares of 1p each 141,793,724 141,793,724 1,418 1,418 Issued and fully paid Ordinary shares of 1p each 74,299,301 74,299,301 743 743 14. STATEMENT OF RECOGNISED INCOME AND EXPENSE 2008 2007 Group Group £'000 £'000 Loss for the year (8,170) (1,604) Total recognised loss for the year attributable to equity (8,170) (1,604) holders 15. NET CASH OUTFLOW FROM OPERATING Group Group ACTIVITIES 2008 2007 £'000 £'000 Operating Profit/(Loss) (8,170) (1,604) Loss on sale of property, plant and equipment - 13 Depreciation 36 37 Share based payments expense 130 190 Share of profits of equity accounted investment (68) (34) (Increase)/decrease in the fair value of investments 4,512 (1,570) Finance income (91) (335) Finance expense 27 - (Increase)/decrease in receivables 71 (296) (Increase)/decrease in prepayments 12 22 (Decrease)/increase in payables (1,297) 1,440 (Decrease)/increase in provisions 29 (53) Management Charge - - Employee Benefits Expense - - (4,809) (2,190) 16. GROUP FINANCIAL COMMITMENTS The group had contracted capital commitments of £nil at the end of the current year (2007: £nil). The future minimum lease payments under non-cancellable operating leases are as follows: 2008 2008 2007 2007 £'000 £'000 £'000 £'000 Group Land & Buildings Other Land & Buildings Other Operating leases which expire: Not later than one year 75 - 151 - Between two & five years inclusive - - 75 - Later than five years - - - - 75 - 226 - 17. CONTINGENT LIABILITIES Indemnities and warranties The Group continues to have contingent liabilities in connection with indemnities and warranties given to the purchasers of its former businesses. As no claims have been made under these indemnities and warranties, the Directors are unable to quantify these potential liabilities. Property lease liabilities The Group continues to have contingent liabilities in connection with the property leases of its former businesses, for which it is exposed to lease obligations in the event of an assignee's default. The remaining lengths of these leases range from 3 to 5 years. Whilst all assignees continue to meet their obligations under these leases, the current total rent obligations (which may be subject to periodic reviews), before allowing for any mitigating activities, for all such leases are approximately £1,504,000. £325,000 of this is due within one year. No provision has been made in respect of these contingent matters. 18. RELATED PARTY TRANSACTIONS Trading transactions During the year group companies entered into the following transactions with related parties who are not members of the Group. 2008 2007 £'000 £'000 Key management personnel: Rent paid to Floral Holdings Limited, a company in which 147 137 Michael Rapp is a Director Advisory & Consulting Fee paid by Capital & Counties Ltd, 480 160 whose holding company is Liberty International a company in which Michael Rapp is a Non-executive Director Relocation costs paid on behalf of Mr Rex Wood-Ward following 7 - his resignation as Chairman as per his employment contract. Subsidiaries: Annual directors, agents & compliance fees paid on behalf of 9 - Weasel Investments Ltd for 2007 & 2008 Other related parties: Loan balance of a two year facility of £2 million has been 400 - taken out with Chapman International LTD, the company's largest shareholder. Trailer Fee due from the Stonehage Westcity Property Fund in 35 16 which the company has an investment. Admin Fee due from Stonehage Westcity Property Fund in which 17 10 the company has an investment. Acquisition Fees due from the Stonehage Westcity Property - 286 Fund in which the company has an investment. Key Management comprise of senior employees, details of which are included in Note 3 19. SHARE BASED PAYMENT PLANS The expense recognised for employee services received during the year is shown in the following table : Year ended 31/12/08 Year ended 31/12/07 £000 £000 Expense arising from equity settled share-based payment 130 190 transactions Total expense arising from share-based payment transactions 130 190 The share-based payment plans are described below The 1995 Scheme Under the 1995 Approved Scheme, options are subject to performance conditions linked to the growth in earnings per share over a total period of three consecutive financial years being such to place the company within the comparable top quartile of FTSE 100 companies ranked by reference to growth in earnings per share over the same period. Options under this scheme were issued to one director and one employee. The Equity Partnership Plan Options issued under the Westcity Equity Partnership Plan are subject to performance conditions linked to average total shareholder return exceeding a specified market index of average shareholder return over a specified period. Options under this scheme have only been issued to one director, Mr Wood-Ward. These shares were issued in April 2009. The 2006 Scheme All other options issued under the 2006 Approved Scheme are subject to performance conditions linked to the "Base EPS" (EPS for the financial year ending 31 December 2006). The condition is that the EPS for the Assessment Period must not be less than the amount found by compounding the Base EPS annually at the rate of 12.5%. If the Base EPS are less than 1.0 pence, the condition is that the EPS for the Assessment Period must not be less than 1.265 pence (for options exercisable no earlier than two years from the Date of Grant) or 1.425 pence (if the Option is exercisable no earlier than three years from the Date of Grant). This scheme covers directors and employees of Westcity plc. Movements in the year The following table illustrates the number and weighted average exercise prices of, and movements in, share options during the year 2008 2008 2007 2007 No Price No Price Outstanding at 1 January 4,656,190 44.29p 4,266,190 44.32p Granted during the year 2,628,987 22.00p 390,000 43.93p Forfeited during the year - - - - Exercised during the year - - - - Expired during the year (1,239,896) 26.55p - - Outstanding at 31 December 6,045,281 36.36p 4,656,190 44.29p Exercisable at 31 December 2,146,190 41.35p - - The weighted average remaining contractual life for the share options outstanding as at 31 December 2008 is 6.97 years (2007 9.316) The weighted average fair value of options granted during the year was £0.1750 (2007: £0.2061 - No shares granted). The range of exercise prices for options outstanding at the year end was £0.2200 - £0.4625 (2007 £0.3275 - £0.4625) The following table lists the inputs to the models used for the share based payment plans 1995 Scheme Equity Partnership Plan 2006 Scheme Expected volatility (%) 50% 20% 20% Risk-free interest rate (%) 10% 5% 5% Expected life of option (years) 4 4 5 Weighted average exercise price (£) 0.425 0.425 0.4625 Valuation model used Black Scholes Black Scholes Black Scholes The fair value of the options have been calculated using Black-Scholes option pricing model. The Company's calculations are based on a single option valuation approach. The expected volatility is based on historical volatility of the share price during the period after eliminating any abnormal price fluctuations. This information is provided by RNS The company news service from the London Stock Exchange END FR EAFPPFLNNEFE </pre>