CVC LIMITED — Annual Report 2008

Aug 28, 2008

THIS IS THE AMENDED VERSION OF THE LODGED APPENDIX 4E.

$\mathcal{O}(n^{\alpha})$

$\sim 10^{11}$ m $^{-1}$

Commentary on Results, Dividends, Developments and Future Expectations

Commentary on Results:

As foreshadowed in releases made to the ASX during the course of the last 6 months, the results of CVC for the year ended June 30, 2008 have been adversely affected by the downturn in Australian equity markets and the liquidity crisis generally.

The Directors of CVC announce a net profit after tax of \$1.1 million for the year ended June 30, 2008, after recognising an impairment expense of \$13.6 million on existing loans and investments. This represents a loss on shareholders funds of 13.5% which includes a \$55.0 million after tax reduction in the value of listed investments

On June 26 2008 the Directors announced that the forecast full year after tax result was expected to be approximately \$7 million subject to the formal audit review. The difference between the original forecast and the final audited net profit represents additional impairment provisions totalling \$6 million following the further review of investment and loan carrying values during the course of the year end audit.

Whilst the profit performance of CVC is clearly disappointing, there have been a number of subsequent positive initiatives which the Company has undertaken both in response to, and in foreshadowing the market turbulence, these include;

• $\triangleright$ Acquisition and sale of stake in Blue Energy at significant profit
• $\triangleright$ Realisation of a number of investments resulting in accumulation of cash assets in excess of \$80 million and a balance sheet free of borrowings
• $\triangleright$ Continued development of core investment holdings, including continued strategic acquisitions, balance sheet rationalisation and corporate activity which the Company believes will optimally position these investments for an improved stock market and economic climate
• $\triangleright$ Provision of structured mezzanine finance facilities to a number of both public and private companies, enhancing returns on cash assets and positioning the company for potential meaningful equity stakes

Summary of operating results include:

Financial Highlights:

• Profit before taxation of \$1.1 million (2007: \$35.8 million);
• Net profit after tax of \$1.1 million (2007: \$30.8 million); L.
• Earnings per share of 0.7 cents (2007: 23.9 cents);
• Fully franked final dividend of 9 cents per share, full year dividend of 3 cents per share declared on 17 July 2008 and payable on 26 September 2008;
• Dividends paid to shareholders of \$14.5 million (2007: \$14.6 million); and
• 9,778,617 shares bought back at a cost of \$12.7 million (\$1.29 per share).

The profit for the year is directly attributed to the following:

Listed Investments:

During the year CVC sold a number of its listed investments resulting in a total contribution to operating profit of \$9.8 million which included the timely sale of its investment in Trinity Group generating a profit of \$5.9 million on the original investment.

During the year CVC continued to increase its core investment portfolio by acquiring shareholdings in Cellnet Group Limited, Mercury Mobility Limited and Pro-Pac Packaging Limited.

The major impact on the value of the listed portfolio is the fall in value of Sunland from \$139.9m (30 June 2007) to \$70.8m (30 June 2008). The Directors feel the drop in price of Sunland is not warranted, as the company is in a sound position with strong sales, a strong pipeline of construction from the Dubai operations and a low gearing level. Sunland continues to generate over \$4.5m per annum in fully franked dividends to CVC Limited.

Private Equity:

Whilst a number of investments have been made generating significant returns during the year these positives have been overshadowed by impairment losses attributable to investments and equity accounted operating losses amounting in total to \$6.7 million.

Property:

CVC has continued to focus on providing mezzanine finance (principally as first or second mortgage security) to a number of property projects during the year totalling \$15.7 million at above average interest rates. These positive returns have been overshadowed by the impairment losses attributable to the revaluation of the Company's holding in the associated entities and impairment on finance provided to other entities totalling \$6.0 million.

Funds Management:

CVC continues to focus on the development and profitability of the funds management segment which includes the investment in Concise Asset Management, a new fund manager focused on mid-cap Australian listed companies and CVC Sustainable Investments, which continues to invest and raise capital in a sector that a gained a great deal more focus following the change in Federal Government and the subsequent signing of the Kyoto Protocol and the announcement of the carbon emissions trading scheme.

CVC also continues to develop strategies to grow both CVC Trinity Property Fund and CVC Private Equity Limited.

Corporate Finance

The newly created corporate finance segment contributed to profits during the year by arranging and participating in numerous capital raising and corporate finance initiatives of CVC investees.

Dividends:

On July 17, 2008 the Directors announced a fully franked final dividend for the year of 3 cents per share. The company paid a fully franked interim dividend of 3 cents per share bringing the total for the year to 6 cents, fully franked.

Developments and Future Expectations:

The volatility in capital markets has presented CVC with a significantly improved flow of investment opportunities, and with cash holdings in excess of \$80 million is well placed to capitalise on these opportunities.

In the coming year CVC expects to continue to realise non-core holdings, increasing its cash reserves and continue to develop its core investees both financially and by the provision of management expertise.

CVC's objective remains to deliver a return on shareholders funds in excess of 15% per annum, and whilst the current year has been disappointing CVC believes that ultimately the havoc wreaked by the market downturn will lead to financial discipline that will substantially strengthen and enhance those investments that survive.

Growth in funds under management will continue to be a major strategy of CVC over the long term. However, as announced on June 27, 2008 the volatility experienced in global capital markets has, and will impact on the current and future generation of profits from this initiative.

Accordingly, level of profits declared by CVC in the short to medium term will continue to largely be determined by the timing of the realisation of capital profits.

Alexander Beard Chief Executive Officer 29 August 2008

Appendix 4E

Preliminary Final Report Results for announcement to the market

	CVC Limited
ABN 34 002 700 361	Financial Year ended ('Reporting Period') 30 June 2008			30 June 2007	Previous Financial Year ended ('Corresponding period')
Results
Income		up/down	48%	to	\$21,830,698
Net profit after tax		$\mu$ down	96%	to	\$1,122,803
Profit after tax attributable to members		$\frac{\text{up}}{\text{up}}$ down	96%	to	\$1,152,985
Net profit for the period attributable to members		$up$ /down	96%	to	\$1,152,985

Dividends (distributions)

	Amount per security	Franked amount per security
Final Dividend - 2007	оc	оc
Interim Dividend - 2008		ነ ሮ

Information on Dividends:

A fully franked interim dividend in respect of the current financial year totalling 3 cents per share was paid on 29 February 2008. A fully franked final dividend in respect of the year ended 30 June 2007 of 6 cents per share was paid on 9 November 2007.

On 17 July 2008 the Directors announced a final fully franked dividend in respect of the year ended 30 June 2008 of 3 cents per share payable on 26 September 2008.

As previously advised the Dividend Reinvestment Plan has been suspended until such time as there is a better correlation between the share price and the underlying net asset value of CVC Limited.

Ex-Dividend date for the purposes of receiving the dividend Record date for determining entitlements to the final dividend Last date for elections to participate in the Dividend Reinvestment Plan Payment Date

22 July 2008
28 July 2008
28 July 2008
26 September 2008

Net tangible asset per security

	Year ended 30 June 2008	Year ended 30 June 2007
Net assets per share	\$1.69	\$2.01
Net tangible assets ("NTA") per share	\$1.64	\$1.96

The preliminary final report is based on accounts that are in the process of being audited.

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i.

CONDENSED INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2008

	Consolidated
	2008	2007
	\$	\$
INCOME
Revenue from services	3,035,737	1,880,163
Net gain on sale of equity investments	9,881,817	14,733,314
Interest revenue	11,727,899	7,126,143
Dividend revenue	5,407,785	5,646,136
Recoveries of loans	134,987	1,224,701
Other income	861,932	680,733
Total income	31,050,157	31,291,190
Share of net (losses)/profits of associates accounted for using the equity method Share of net (loss)/profits of joint ventures accounted for using the equity	(9,235,161)	10,982,860
method	15,702	(17,080)
EXPENSES
Amortisation of intangibles	117,000	117,000
Assets expensed as non-recoverable	1,112,746	432,706
Depreciation expense	36,996	37,366
Employee expenses	2,054,796	2,002,070
Finance costs	523,084	743,926
Impairment expense on assets	13,644,339
Management and consultancy fees	1,213,058	1,619,776
Net realised foreign exchange loss	230,854
Operating lease rental	361,242	377,604
Other expenses	1,474,011	1,115,682
Profit before related income tax expense	1,062,572	35,810,840
Income tax (benefit)/expense	(60, 231)	4,999,242
Net profit	1,122,803	30,811,598
Net (loss)/profit attributable to minority interest	(30, 182)	53,653
Net profit attributable to members of the parent entity	1,152,985	30,757,945
Basic earnings per share	0.0067	0.2387
Diluted earnings per share
	0.0067	0.2369

CONDENSED BALANCE SHEET AS AT 30 JUNE 2008

		Consolidated
	2008	2007
	\$	\$
CURRENT ASSETS
Cash and cash equivalents	51,936,285	115,008,945
Loans and other receivables	42,340,390	24,794,211
Other assets	87,502	69,421
Total current assets	94,364,177	139,872,577
NON-CURRENT ASSETS
Loans and other receivables	1,170,374	4,069,502
Financial assets - available-for-sale	145,129,775	204,265,739
Investments accounted for using the equity method	55,966,019	41,512,461
Property, plant and equipment	34,484	45,621
Investment properties	2,783,873	2,799,197
Intangible assets	8,356,634	8,473,634
Deferred tax assets	8,301,965	3,218,075
Total non-current assets	221,743,124	264,384,229
TOTAL ASSETS	316,107,301	404,256,806
CURRENT LIABILITIES
Trade and other payables	2,280,120	1,209,233
Interest bearing loans and borrowings	2,693,695
Provisions	199,199	187,623
Current tax liabilities	4,261,699	4,429,030
Total current liabilities	9,434,713	5,825,886
NON-CURRENT LIABILITIES
Trade and other payables
Provisions	23,948
Interest bearing loans and borrowings	8,431,997	8,325,924
Deferred tax liabilities	23,773,546	44,940,051
Total non-current liabilities	32,229,491	53,265,975
TOTAL LIABILITIES	41,664,204	59,091,861
NET ASSETS	274,443,097	345,164,945
EQUITY
Contributed equity	136,823,139	145,370,769
Retained profits	99,069,611	113,202,090
Other reserves	38,484,350	86,494,859
Total parent entity interest	274,377,100	345,067,718
Minority interest	65,997	97,227
TOTAL EQUITY	274,443,097	345,164,945

CONDENSED CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2008

	Consolidated
	2008	2007
	\$	\$
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts in the course of operations	2,668,747	2,098,763
Cash payments in the course of operations	(3,875,817)	(6,007,522)
Interest received	8,531,943	3,385,478
Dividends received	5,714,692	5,646,136
Interest paid	(163, 131)	(158, 848)
Income taxes paid	(4,581,990)	(4,314,405)
Net cash provided by/(used in) operating activities	8,294,444	649,602
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for property, plant and equipment	(10, 535)	(44, 123)
Payments for equity investments	(76,992,364)	(48,348,727)
Proceeds on disposal of equity investments	42,814,062	34,915,293
Proceeds for sale of controlled entities		200,000
Loans provided	(30,851,394)	(28, 348, 254)
Loans repaid	17,918,534	41,528,101
Net cash (used in)/provided by investing activities	(47, 121, 697)	(97, 710)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid to members of parent entity	(14, 535, 418)	(14,581,818)
Shares bought-back on market	(12,655,998)	(1,395,712)
Issue of shares	3,105,000	110,195,000
Cost of share issue	(3, 481)	(3,955,214)
Net cash (used in)/provided by financing activities	(24,089,897)	90,262,256
Net increase in cash held	(62, 917, 150)	90.814,148
Foreign exchange loss on cash	(155, 510)
Cash at the beginning of the financial year	115,008,945	24,194,797
CASH AT THE END OF THE FINANCIAL YEAR	51,936,285	115,008,945

CONTROLLED ENTITIES

The consolidated financial statements include the following controlled entities. The financial years of all controlled entities are the same as that of the parent entity. All companies are incorporated in Australia.

	Interest Held by Consolidated Entity
	2008	2007
	$\frac{0}{2}$	$\frac{0}{0}$
CVC Limited
Direct Controlled Entities:
Biomedical Systems Pty Limited	100	100
CVC Climate Innovations Pty Limited	100
CVC Fairfield Pty Limited	100	100
CVC Finance Company Pty Limited	100	100
CVC Investment Managers Pty Limited	100	100
CVC Funds Management Pty Limited (formerly CVC Leasing Pty Limited)	100	100
CVC Managers Pty Limited	100	100
CVC Mezzanine Finance Pty Limited	100	100
CVC Narabang Pty Limited	95	95
CVC (Newcastle) Pty Limited	100	100
CVC Trinity Property Managers Limited *	50	50
CVC Technologies Pty Limited	100	100
Energy Technology Holding Pty Limited	100	100
Laserex Pty Limited	100	100
Renewable Energy Managers Pty Limited	100	100
Stinoc Pty Limited	99	99
Skyline Investments Australia Pty Limited	100	100
The Eco Fund Managers Pty Limited	100	100
The Eco Fund Pty Limited	100	100
Controlled Entities owned 100% by Laserex Pty Limited
CVC Communication and Technology Pty Limited	100	100
Controlled Entities owned 100% by CVC Managers Pty Limited
CVC Capital Markets Pty Limited	100	100

* CVC Trinity Property Managers Limited is considered to be controlled by CVC Limited as 50% of the ordinary shares and the appointment of the Chairman of the company is controlled by CVC Limited.

	Consolidated
	2008	2007
	\$	£
RETAINED PROFITS
Retained profits at the beginning of the year	113,202,090	98,077,668
Net profit attributable to members of the parent company	1,152,985	30,757,945
Dividends	(15, 285, 464)	(15,633,523)
Retained profits at the end of the year	99,069,611	113,202,090

	Consolidated
	2008	2007
	\$	S
INCOME
Revenue from services	3,035,737	1,880,163
Net gain on sales of equity investments	9,881,817	14,733,314
Interest:
Controlled entities
Related parties	3,163,659	1,171,168
Other parties	8,564,240	5,954,975
Dividends
Related parties	88,925	14,550
Other parties	5,318,860	5,631,586
Impairment recoveries	134,987	1,224,701
Other revenue	861,932	680,733
Total income	31,050,157	31,291,190

PROFIT BEFORE INCOME TAX EXPENSE

Profit before income tax expense has been arrived at after charging the following items:

Related parties	359,953 585,078
Other parties	163,131 158,848
Total borrowing costs	523,084 743,926
Other expenses:
Audit fees	109,348 90,000
Directors fees	74,000 74,000
Insurance	142,954 115,638
Legal costs	404,629 69,339
Travel and accommodation	102,191 144,516
All other expenses	640,840 622,189
Total other expenses	1,473,962 1,115,682
Impairment expense on assets:
Loans to other corporations	2,261,136
Loans to director related entities	1,276,465
"Available-for-sale" investments	5,627,594
Associated entities	4,479,144
Total impairment expense on assets 13,644,339

DIVIDENDS

Dividends proposed or paid and not provided for in previous years by the Company are: Declared during the financial period and included within the balance sheet:

	Cents Per Share	Total	Date of Payment	Tax rate for Franking Credit	Percentage Franked
2007 Final on ordinary shares	6.00	10,302,823	9 November 2007	30%	100%
2008 Interim on ordinary shares	3.00	4,982.641	29 February 2008	30%	100%

Declared after the end of the financial period and not included in the balance sheet:

A final dividend in respect of the year ended 30 June 2008 of 3 cents per share was declared on 17 July 2008 payable on 26 September 2008 to those shareholders registered on 28 July 2008.

	The Company
	2008	2007
Dividend franking account
Franking credits available to shareholders for subsequent financial years	7,585,962	7,337,419

The franking account is stated on a tax paid basis. The balance comprises the franking account at year-end adjusted for:

$(a)$ franking credits that will arise from the payment of the amount of the provision for income tax

$(b)$ franking debits that will arise from the payment of dividends recognised as a liability at year-end

$(c)$ franking credits that the entity may be prevented from distributing in subsequent years.

The ability to utilise the franking credits is dependent upon there being sufficient available profits to declare dividends.

INVESTMENTS IN ASSOCIATED ENTITIES

Details of material interests in associated entities are as follows:

	Ownership Interest			Investment Carrying Amount
	Type	Consolidated			Consolidated
		2008	2007	2008	2007
		$\frac{0}{0}$	$\frac{0}{2}$	S	\$
Cellnet Group Limited	Ords	33.6	22.9	14,193,694	9,866,114
Concise Asset Management Pty Limited	Ords	50.0		577,552
CVC Geelong Unit Trust	Ord Units	50.0
CVC Private Equity Limited	Ords	36.6	33.7	3,101,929	7,026,592
CVC Reef Investment Managers	Ords	50.0	50.0	67,627
Limited
CVC Shepparton Pty Limited	Ords	50.0
CVC Sustainable Investments	Ords	19.5		2,772,563
CVC Trinity Property Fund	Ord Units	37.8	37.4	3,015,497	5,744,191
CVC Wagga Wagga Unit Trust	Ord Units	50.0
GPG (No.7) Pty Limited	Ords	27.5	27.5	13,670,281	14,637,531
Mercury Mobility Limited	Ords	29.6	22.9	4,059,106	3,345,152
Pro-Pac Packaging Limited	Ords	22.3		12,491,977
Ron Finemore Transport Pty Limited	Ords	25.0	25.0	2,013,742	794,401
Winten (No.20) Pty Limited	Ords	50.0	50.0
				55,963,968	41,413,981

(AND ITS CONTROLLED ENTITIES) CVC LIMITED

$\frac{1}{2}$

INVESTMENTS IN ASSOCIATED ENTITIES (CONTINUED)

Reconciliations:
Movements in the carrying amount of the investments in associated entities under the equity accounting method are as follows:

	CVC	CVC	Lauden	Pro-Pac	CVC	GPG	Cellnet	Mercury	Winten	Other	Total
	Private	Sustainable	CVC	Packaging	Trinity	(No. 7) Pty	Group	Mobility	(No. 20) Pty	Entities(a)
	Equity	Investments	Property I rust	Limited	Fund Property	Limited	Limited	Limited	Limited
	œ	s	tĄ.	s	Ð	Đ.	ዏ	œ	မာ		U)
Year ended 30 June 2008
Balance at the start of year	7,026,592				5,744,191	14,637,531	9,927,512	3,283,754		794,401	41,413,981
New interests acquired	306,613	118,013		1,607,617	32,548	1,430,000	8,459,450	2,905,180		851,665	15,711,086
Share of associates profits/(losses) before tax	(2,872,868)	(639,099)		(44,552)	(2,761,242)	(1,733,910)	(193,356)	(558,509)	(122, 700)	270,419	(8,655,817)
Share of associates tax (expenses)/benefit	(207, 661)	100,672		(314)		(663,340)	551,137)			742,436	(579,344)
Share of associates reserves	(992, 483)	562,688		(202)			559,397)	18,447			(970,947)
Dividends received during the year	(158, 264)	(66,288)		(230, 616)							(455, 168)
Reclassification of investments		2,696,577		11,160,044					122,700		13,979,321
Impairment							(2,889,378)	1,589,766)			(4.479, 144)
Balance at the end of the year	3,101,929	2,772.563		12,491,977	3,015,497	13,670,281	14,193,694	4,059,106		2,658,921	55,963,968
Year ended 30 June 2007
Balance at the start of year	4,729,024		3,604,087		516,386				1,652,798	540,109	11,042,404
New interests acquired	1,144,414				5,805,431	12,455,055	1,961,495	3,595,581		300,000	25,261,976
Elimination of disposal profit from associated
company					(587,325)						(587,325)
Share of associates profits/(losses) before tax	155,074		22,636		9,699	2,051,260	(267, 719)	(311, 827)	9,047,571	(45,708)	10,660,986
Share of associates tax (expenses)/benefit	173,273					131,216	17,385				321,874
Share of associates reserves	995,951										995,951
Dividends received during the year	(171, 144)										(171,144)
Interests disposed during the year			(3,626,723)				(3,595,581)				(7,222,304)
Reclassification of investments							11,811,932		(10,700,369)		1,111,563
Balance at the end of the year	7,026,592		I		5,744,191	14,637,531	9,927,512	3,283,754		794,401	41,413,981
(a) Other entities include Ron Finamore Truncat Pt: I imited $C_{\alpha}$ and $\alpha$

include Ron Finemore Transport Pty Limited, Concise Asset Management Pty Limited and CVC Reef Investment Managers Limited. 5 u) Dutel

$\overline{r}$