Annual Report • Dec 31, 2010
Annual Report
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Annual Report and Accounts from incorporation on 9 October 2009 to 31 December 2010
| Corporate Summary | 2 |
|---|---|
| Chairman's Statement | 3 |
| Board of Directors | 4 |
| Report of the Directors | 5 |
| Directors' Remuneration Report | 10 |
| Statement of Directors' Responsibilities | 11 |
| Independent Auditor's Report | 12 |
| Statement of Comprehensive Income | 14 |
| Balance Sheet | 15 |
| Statement of Changes in Equity | 16 |
| Cash Flow Statement | 17 |
| Notes to the Accounts | 18 |
| Corporate Information | 24 |
F&C Private Equity Zeros plc (the 'Company') was incorporated in Scotland on 9 October 2009 and has a capital structure comprising unlisted Ordinary Shares and Zero Dividend Preference Shares ('ZDP Shares') listed on the Official List and The London Stock Exchange. The Company is a wholly owned subsidiary of F&C Private Equity Trust plc ('F&C PET') which is a closed-ended investment company incorporated in Scotland. On 14 December 2009, the Company placed 30,000,000 ZDP Shares at 100p per share and this placing raised a total of £29.9 million of net proceeds. Pursuant to a loan agreement between the Company and F&C PET, the Company has lent F&C PET the net proceeds of its placing. These funds are to be managed in accordance with the investment policy of F&C PET. This loan is on terms requiring its repayment by F&C PET to the Company at any time up to or immediately prior to the ZDP Shares repayment date of 15 December 2014. The principal terms of the ZDP Shares are given in note 9 to the accounts.
The objective of the Company is to provide the final capital entitlement of the Company's ZDP Shares to the holders of the ZDP Shares at the repayment date of 15 December 2014.
The Board has appointed F&C Investment Business Limited ('the Manager') as investment manager of the Company under a contract terminable by either party giving the other not less than six months' notice.
F&C Asset Management plc.
Net Assets at 31 December 2010 £53,000
Market Capitalisation at 31 December 2010 £36.5 million
I am pleased to present the Company's first Annual Report for the period from incorporation on 9 October 2009 to 31 December 2010.
The Company is a wholly owned subsidiary of F&C Private Equity Trust plc ('F&C PET') and was established solely for the purpose of issuing and redeeming Zero Dividend Preference Shares ('ZDP Shares'). 30,000,000 ZDP Shares were issued on 14 December 2009 at 100 pence per share and will redeem on 15 December 2014 at a price of 152.14 pence per ZDP Share, giving a redemption yield of 8.75 per cent per annum. The proceeds of the ZDP Shares issue were lent to F&C PET for use in future investment opportunities.
The revenue available for dividends for the period was £2,920. As at 31 December 2010 the net asset value per Ordinary Share was 105.84 pence and the net asset value per ZDP Share was 105.91 pence.
As at 31 December 2010 the ZDP Share price was 121.50 pence, representing a premium of 14.7 per cent over the net asset value per share.
Mr David Simpson, who was the Company's Chairman from the date of incorporation, retired from the Board on 24 May 2010 and I was elected Chairman of the Company on the same date. All the Directors of the Company are also directors of F&C PET.
Mark Tennant Chairman 8 April 2011
Age 63, is a senior adviser to JP Morgan and a member of the Advisory Board of T Rowe Price Global Investor Services. He is Chairman of the Scottish Financial Enterprise, the management consultancy firm Bluerock and of Honister Capital, the UK's second largest IFA. He joined the Board on 12 November 2009 and was appointed as Chairman on 24 May 2010. He is standing for election at this year's Annual General Meeting.
Age 55, is a senior Consultant Director of Brewin Dolphin with 30 years' experience in corporate finance, principally in IPOs, secondary issues and takeovers. She is also Chairman of Octopus Second AIM VCT plc. She joined the Board on 12 November 2009 and is standing for election at this year's Annual General Meeting.
Age 71, is Executive Chairman of Kinloch Anderson Limited. He was National President of the Royal Warrant Holders Association, President of The Edinburgh Chamber of Commerce and Master of the Edinburgh Merchant Company. He is also a director of Fidelity Special Values plc. He joined the Board on 12 November 2009 and is standing for election at this year's Annual General Meeting.
Age 59, was a senior partner of Burness, the Scottish Law firm, until his retiral in July 2009. He is a fellow of the Securities and Investment Institute, and Honorary Consul for Canada in Scotland. He has a wide experience of private equity investments and of investment realisations and is director of a number of private companies. He joined the Board on 12 November 2009 and is standing for election at this year's Annual General Meeting.
Age 62, sits on the boards of a number of private companies including acting as Chairman of the charity Dyslexia Scotland. He was previously Chief Executive, then Chairman, of Bridgepoint Capital, a leading European mid corporate private equity firm until his retiral in December 2009, and Chairman of Aberforth Smaller Companies Trust plc until his retiral in March 2010. He joined the Board on 12 November 2009 and is standing for election at this year's Annual General Meeting.
All the Directors are also directors of the Company's parent company, F&C PET.
The Directors submit the first Annual Report and Accounts of the Company for the period from incorporation on 9 October 2009 to 31 December 2010.
The accounts have been prepared in accordance with International Financial Reporting Standards ('IFRS').
The revenue available for dividends for the period was £2,920.
The Company was incorporated in Scotland as a public limited company on 9 October 2009 with the name Dunwilco (1634) plc. Pursuant to a special resolution passed at a general meeting on 11 November 2009, the Company's name was changed from Dunwilco (1634) plc to F&C Private Equity Zeros plc on that date. It is a wholly owned subsidiary of F&C Private Equity Trust plc ('F&C PET') which is a closed-ended investment company incorporated in Scotland. F&C PET owns the entire issued ordinary share capital of the Company.
The Company is an investment company as defined by section 833 of the Companies Act 2006.
The Company's registration number is SC 366628.
Upon incorporation, the Company's issued share capital was one Ordinary Share of £1 which share was taken by the Subscriber to the Company. This share was subsequently transferred to F&C PET. Pursuant to an ordinary resolution passed at a general meeting on 11 November 2009, 49,999 Ordinary Shares of £1 each were created. On 12 November 2009, 49,999 Ordinary Shares of £1 each were allotted to F&C PET at a price of £1 per share for a total consideration of £49,999.
The issued ordinary share capital of the Company at 31 December 2010 amounted to 50,000 Ordinary Shares of £1.00 each.
Pursuant to an ordinary resolution passed at a general meeting on 11 November 2009, 30,000,000 Zero Dividend Preference Shares of 0.01 pence each were created. On 14 December 2009 the Company issued 30,000,000 ZDP Shares at a price of 100 pence per share for a total consideration of £30 million. This issue raised a total of £29.9 million of net proceeds. Each ZDP Share has a par value of 0.01 pence and is redeemable on 15 December 2014 for 152.14 pence per share. The ZDP Shares were first admitted to the London Stock Exchange's Main Market on 14 December 2009.
At 31 December 2010 there were a total of 30,000,000 ZDP Shares of 0.01 pence each in issue.
In accordance with the Company's Articles of Association, the ZDP Shares carry no entitlement to any dividends or other distributions or to participate in the revenue or any other profits of the Company. The ZDP shareholders have no right to receive notice of, or to attend or vote at, any general meeting of the Company except in those circumstances set out in the Company's Articles of Association, which would be likely to affect their rights or general interests. The final capital entitlement for the ZDP Shares is not guaranteed should F&C PET's net assets be insufficient on the repayment date.
The Board of Directors is responsible for the overall stewardship of the Company including investment and dividend policies, corporate strategy, corporate governance and risk management. Biographical details of the Directors, all of whom are non-executive, can be found on page 4. All Directors are also directors of the Company's parent company, F&C PET.
The objective of the Company is to provide the final capital entitlement of the Company's ZDP Shares to the holders of the ZDP Shares at the repayment date of 15 December 2014.
A review of the Company's results for the period is included within the Chairman's Statement on page 3.
The Board believes that the principal risks faced by the Company are:
• Final capital entitlement - the ZDP Shares offer a pre-determined rate of growth in capital entitlement up to the repayment date of 15 December 2014 but no right of income.
F&C PET's debt to the Company is pursuant to the loan agreement which ranks behind any secured creditors of F&C PET. Therefore it is not guaranteed that the final capital entitlement will be paid. On a return of assets, including a winding up of F&C PET, the Company will only receive payment if there are sufficient assets of F&C PET, having first taken account of prior ranked liabilities and having regard to all other unsecured liabilities of F&C PET. ZDP shares are not a secured, protected or guaranteed investment. The final capital entitlement of the ZDP Shares is 152.14 pence per share.
The performance of F&C PET's underlying investment portfolio is principally influenced by a combination of economic growth, the availability of appropriately priced debt finance, interest rates and the number of active trade and financial buyers. All of these factors have an impact on F&C PET's ability to invest, its ability to exit from its underlying portfolio and on the levels of profitability achieved on exit. Financial results may be adversely affected by movements in foreign exchange rates.
F&C PET operates in a very competitive market. Changes in the number of market participants, the availability of funds within the market, the pricing of assets, or in the ability of its investment manager, F&C Investment Business Limited, to access deals could have a significant effect on F&C PET's competitive position and on sustainability of returns.
In order to source and execute good quality investments, F&C PET is primarily dependent upon F&C Investment Business Limited having the ability to attract and retain executives with the requisite investment experience.
Once invested, the performance of F&C PET's portfolio is dependent on a range of factors. These include, but are not limited to: (i) the quality of the initial investment decision; (ii) the ability of the portfolio company to execute successfully its business strategy; and (iii) actual outcomes against key assumptions underlying the portfolio company's financial projections. Any one of these factors could have an impact on the valuation of a portfolio company and upon F&C PET's ability to make a profitable exit from the investment within the desired timeframe. Future F&C PET share issues, share buy backs or raising new debt facilities in the longer term could dilute the interests of the holders of ZDP Shares and lower the price of the ZDP Shares.
• Government Policy and Regulation Risk - F&C PET carries on business as an investment trust under section 1158 of the Corporation Tax Act 2010. Continued status as an investment trust is subject to F&C PET conducting its affairs in a manner which will satisfy HM Revenue and Customs' conditions for continued approval as an investment trust. Any change in F&C PET's tax status, or in taxation legislation of practice in the UK or elsewhere, could affect the value of investments in F&C PET's investment portfolio and F&C PET's ability to achieve its investment objective and could also affect the tax treatment of the ZDP Shares and the tax treatment of the final capital entitlement.
The Company is also exposed to risks in relation to its financial instruments. Further details of these risks and the way in which they are managed are contained in note 12 to the financial statements.
The key performance indicators used by the Board to measure the Company's success are the asset cover and movement in price of the ZDP Shares.
The asset cover was 1.0 times repayment value as at 31 December 2010 and the price of a ZDP Share was 121.5p as at 31 December 2010 compared to the issue price of 100p on 14 December 2009.
Mr David Simpson, Mr Mark Tennant, Ms Elizabeth Kennedy, Mr Douglas Kinloch Anderson, Mr John Rafferty and Mr David Shaw were appointed as Directors on 12 November 2009. Mr David Simpson retired as a Director and Chairman on 24 May 2010 and was succeeded by Mr Mark Tennant. The Directors' biographical details are shown on page 4. All the Directors are also directors of the Company's parent company, F&C PET.
D.W. Director 1 Limited and Michael Polson were Directors of the Company from incorporation until 12 November 2009.
None of the Directors have had any interest in either the Ordinary Shares or the ZDP Shares of the Company at any time during the period. The Directors' interests in the shares of F&C PET, the Company's parent company, are shown in F&C PET's Annual Report and Accounts for the year ended 31 December 2010.
In accordance with the Articles of Association, all the Directors retire at the forthcoming Annual General Meeting, being the first such meeting since the Company's incorporation. Being eligible, all of the Directors offer themselves for election.
The Board confirms that, following formal performance evaluations, the performance of each of the Directors seeking election continues to be effective and demonstrates commitment to the role. The Board therefore believes that it is in the interests of shareholders that these Directors are elected.
As at the date of this report, indemnities are in force between F&C PET and each of its Directors under which the Company has agreed to indemnify each Director, to the extent permitted by law, in respect of certain liabilities incurred as a result of carrying out his or her role as a Director of F&C PET and the Company. The Directors are also indemnified against the costs of defending any criminal or civil proceedings or any claim by the F&C PET or the Company or a regulator as they are incurred provided that where the defence is unsuccessful, the Director must repay those defence costs to the Company. The indemnities are qualifying third party indemnity provisions for the purposes of the Companies Act 2006.
A copy of each deed of indemnity is available for inspection at the Company's registered office during normal business hours.
Under the Companies Act 2006 a Director must avoid a situation where he or she has, or can have, a direct or indirect interest that conflicts, or possibly may conflict with the Company's interests. The requirement is very broad and could apply, for example, if a Director becomes a director of another company or a trustee of another organisation. The Companies Act 2006 allows directors of public companies to authorise conflicts and potential conflicts, where appropriate, where the Articles of Association contain a provision to this effect. The Company's Articles of Association give the Directors authority to approve such situations.
The Company maintains a register of Directors' conflicts of interest which have been disclosed and approved by the other Directors. This register is kept up-to-date and the Directors are required to disclose to the Company Secretary any changes to conflicts or any potential new conflicts.
The Company is committed to high standards of corporate governance and the Board is accordingly accountable to the Company's shareholders for good governance. However, as the Company has only ZDP Shares listed, it has availed itself of an exemption from the Financial Services Authority's requirement to make corporate governance disclosures and from auditor review thereof.
Further detailed disclosures relating to the corporate governance procedures of the Group can be found in the Annual Report of the Parent Company, F&C Private Equity Trust plc, which is available on the Company's website (www.fcpet.co.uk).
In carrying out its activities and in its relationships with the community, the Company aims to conduct itself responsibly, ethically and fairly. The Company has no employees and the Board is comprised entirely of non-executive Directors. As a wholly owned subsidiary of F&C PET, the Company has no direct impact on the environment.
The Directors believe that the Company has the ability to meet its financial obligations as they fall due for a period of at least twelve months from the date of approval of the financial statements. Accordingly the financial statements have been prepared on a going concern basis.
Pursuant to a special resolution passed at a general meeting on 19 November 2009, the Company was authorised to make market purchase of ZDP Shares for cancellation in certain circumstances in accordance with section 701 of the Companies Act 2006. This authority expired on 19 February 2011. The Directors wish the Company to continue to have this authority and a resolution authorising the Company to make on market purchases of ZDP Shares will be proposed at the Annual General Meeting of the Company's ordinary shareholders in 2011.
The Company's financial instruments comprise its investments, cash balances and debtors and creditors that arise directly from its operations. The financial risk management objectives and policies arising from its financial instruments and the exposure of the Company to risk are disclosed in note 12 to the financial statements.
The Company's payment policy is to settle investment transactions in accordance with market practice and to ensure settlement of supplier invoices in accordance with stated terms. The Company did not have any trade creditors at the year end.
Pursuant to the intra-group loan agreement between the Company and F&C PET documenting the loan from the Company to F&C PET of the net proceeds of the ZDP Share placing, the loan will be on terms requiring its repayment by F&C PET to the Company immediately prior to the ZDP repayment date, being 15 December 2014.
These funds are to be managed in accordance with the investment policy of F&C PET.
The Directors confirm that, so far as each of them are aware, there is no relevant audit information of which the Company's auditors are unaware and the Directors have taken all the steps that they ought to have taken as Directors in order to make themselves aware of any relevant audit information and to establish that the Company's auditors are aware of that information.
The Directors have appointed Ernst & Young LLP as auditors of the Company. Ernst & Young LLP have expressed their willingness to continue in office as auditors and a resolution proposing their appointment will be submitted at the Annual General Meeting of the Company's ordinary shareholders in 2011. A separate resolution will be proposed at the Annual General Meeting authorising the Directors to determine the remuneration of the auditors.
By order of the Board F&C Asset Management plc Company Secretary 80 George Street Edinburgh EH2 3BU 8 April 2011
None of the Directors received any remuneration for his or her services during the period. No Director has a service contract with the Company and no Director is eligible for bonuses, pension benefits, share options, long-term incentive schemes or other benefits.
On behalf of the Board Mark Tennant Director 8 April 2011
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable United Kingdom law and those International Financial Reporting Standards ('IFRS') as adopted by the European Union.
Under company law the Directors must not approve the financial statements unless they are satisfied that they present fairly the financial position, financial performance and cash flows of the Company for that period. In preparing the financial statements the Directors are required to:
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006 and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Each of the Directors confirms that to the best of his or her knowledge:
On behalf of the Board Mark Tennant Director 8 April 2011
We have audited the financial statements of F&C Private Equity Zeros plc for the period from 9 October 2009 to 31 December 2010 which comprise the Statement of Comprehensive Income, Balance Sheet, the Statement of Cash Flows, the Statement of Changes in Equity and the related notes 1 to 13. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards ('IFRSs') as adopted by the European Union.
This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.
As explained more fully in the Statement of Directors' Responsibilities, set out on page 11, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Report and Accounts to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.
In our opinion the financial statements:
In our opinion:
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you if, in our opinion:
Under the Listing Rules we are required to review:
Susan Dawe (Senior statutory auditor) for and on behalf of Ernst & Young LLP, Statutory Auditor Edinburgh 8 April 2011
| Period ended 31 December 2010 |
||
|---|---|---|
| Note | £'000 | |
| Revenue | ||
| Income | 2 | 2,909 |
| Total income | 2,909 | |
| Expenditure | ||
| Expenses | 3 | - |
| Total expenditure | - | |
| Profit before finance costs and taxation | 2,909 | |
| Finance costs | 4 | (2,906) |
| Profit before taxation | 3 | |
| Taxation | 5 | - |
| Total comprehensive income | 3 | |
| Earnings per Ordinary Share | 6 | 5.84p |
All items in the above statement are derived from continuing operations.
| £'000 £'000 Note Non current assets Investments 50 7 50 Current assets 31,775 Loans and other receivables 8 2 Cash at bank Net current assets 31,777 Total assets less current liabilities 31,827 Creditors: amounts falling due after one year Zero dividend preference shares (31,774) 9 53 |
|
|---|---|
| Net assets | |
| Equity | |
| Ordinary share capital 50 10 |
|
| Revenue reserve | |
| Shareholders' funds 53 |
|
| Net asset value per Ordinary Share 105.84p 11 |
|
| Net asset value per ZDP Share 105.91p 11 |
The financial statements were approved and authorised for issue by the Board of Directors on 8 April 2011 and signed on their behalf by:
Mark Tennant, Chairman
| Share Capital |
Revenue Reserve |
Total | |
|---|---|---|---|
| £'000 | £'000 | £'000 | |
| Net assets at start of period | - | - | - |
| Share Capital proceeds | 50 | - | 50 |
| Profit for the period | - | 3 | 3 |
| Net assets at 31 December 2010 | 50 | 3 | 53 |
| 2010 | |
|---|---|
| £'000 | |
| Cash flows from operating activities | |
| Profit before finance costs and taxation | 3 |
| Increase in other receivables | (1) |
| Net cash inflow from operating activities | 2 |
| Cash flows from investing activities | |
| Purchase of investments | (50) |
| Net cash outflow from investing activities | (50) |
| Cash flows from financing activities | |
| Proceeds from issue of share capital | 50 |
| Proceeds from issue of ZDPs | 30,000 |
| Loan to parent company | (30,000) |
| Net cash inflow from financing activities | 50 |
| Increase in cash and cash equivalents | 2 |
| Cash and cash equivalents at beginning of period | - |
| Cash and cash equivalents at end of period | 2 |
The financial information has been prepared under the historical cost convention and in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority and International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union. The financial information comprises the Balance Sheet as at 31 December 2010 and for the period ended 31 December 2010 the related Statement of Comprehensive Income, Statement of Changes in Equity, Cashflow Statement and related notes hereinafter referred to as 'financial information'. The principal accounting policies adopted by the Company are set out below.
The period of the accounts is from incorporation, on 9 October 2009, to 31 December 2010.
The financial information is prepared under the historical cost convention.
The Company's financial information is presented in sterling, which is the currency of the primary environment in which the Company operates. All values are rounded to the nearest thousand pounds (£'000) except where otherwise indicated.
These accounting policies are expected to be consistent with those that will be applied in the annual financial statements of the Company for the period ended 31 December 2010.
Cash comprises cash at bank.
Gilt and loan interest income is recognised on an accruals basis.
All expenses are accounted for on an accruals basis.
Investments are classified as fair value through profit or loss and are recognised on trade date. These are measured initially and at subsequent reporting dates at fair value, which for listed investments is bid price.
Zero Dividend Preference Shares are recognised as liabilities in the Balance Sheet in accordance with IAS 32. After initial recognition, these liabilities are measured at amortised cost, which represents the initial net proceeds of the issuance after issue costs plus the accrued entitlement to the date of these financial statements.
The accrued entitlement (see above) is calculated as the difference between the proceeds on the issue of these shares and the final liability and is charged as finance costs over the term of the life of these shares using the effective interest method.
The charge for taxation is based on the taxable profits for the period. Taxable profit differs from profit before tax as reported in the Statement of Comprehensive Income because it excludes items of income or expense that are never taxable or deductible. The Company's liability for tax is calculated using rates that have been enacted or substantively enacted by the balance sheet date.
Estimates and judgements used in preparing the financial statements are continually evaluated and are based on historical experience and other factors, including expectations
of future events that are believed reasonable. The resulting estimates will, by definition, seldom equal the related actual results.
The accounts have been prepared on a going concern basis as the Directors believe the Company has sufficient resources to continue for the foreseeable future.
| Period from 9 October 2009 | |
|---|---|
| to 31 December 2010 | |
| £'000 | |
| Gilt interest | 3 |
| Loan interest | 2,906 |
| 2,909 |
Administration expenses of £nil were suffered during the period from 9 October 2009 to 31 December 2010. All administration expenses during the period were borne by the parent company, F&C Private Equity Trust plc.
| Period from 9 October 2009 to | |
|---|---|
| 31 December 2010 | |
| £'000 | |
| ZDP interest costs | 2,754 |
| Amortisation of issue expenses | 152 |
| 2,906 |
| Period from 9 October 2009 to | |
|---|---|
| 31 December 2010 | |
| £'000 | |
| Profit before tax | 3 |
| Corporation tax at 21 per cent | - |
The calculation of earnings per share is based on a profit after tax for the year of £2,920 and a weighted average number of 50,000 Ordinary Shares in issue during the year. The basic and diluted earnings per share are the same.
| 2010 | |
|---|---|
| £'000 | |
| Cost at beginning of period | - |
| Purchase of UK Gilt | 49 |
| Cost at end of period | 49 |
| Holding gain | 1 |
| Valuation at end of period | 50 |
| 2010 | |
|---|---|
| £'000 | |
| Amounts due from parent company | 31,774 |
| Accrued interest on gilts | 1 |
| 31,775 |
| 2010 Number |
2010 £'000 |
|
|---|---|---|
| ZDP Shares of 0.01pence each: | ||
| Issued on 14 December 2009 | 30,000,000 | 30,000 |
| Issue costs | - | (1,132) |
| Finance charges | - | 2,906 |
| Balance at 31 December 2010 | 30,000,000 | 31,774 |
On 14 December 2009 the Company issued 30,000,000 ZDP Shares at £1 each. These shares redeem on 15 December 2014 at a price of 152.14 pence per share giving a redemption yield of 8.75 per cent per annum. The ZDP Shares do not carry any voting rights.
| 2010 | 2010 | |
|---|---|---|
| Number | £ | |
| Ordinary Shares of £1each: | ||
| Issued during period | 50,000 | 50,000 |
| Balance at 31 December 2010 | 50,000 | 50,000 |
On incorporation, the Company's issued share capital was one Ordinary Share of £1 which share was taken by the Subscriber to the Company. This share was subsequently transferred to F&C PET. Pursuant to an ordinary resolution passed at a general meeting on 11 November 2009, 49,999 Ordinary Shares of £1 each were created. On 12 November 2009, 49,999 Ordinary Shares of £1 each were allotted to F&C PET at a price of £1 per share for a total consideration of £49,999.
At 31 December 2010 there were 50,000 Ordinary Shares of £1 each in issue.
Each Ordinary Share is entitled to one vote at a general meeting.
In addition to receiving any income distributed by way of dividend, the ordinary shareholders will be entitled to all surplus assets after payment of all debts, including the ZDP Shares.
The net asset value per Ordinary Share is based on net assets of £52,375 and on 50,000 Ordinary Shares, being the number of Ordinary Shares in issue at year end.
The net asset value per ZDP Share is based on the entitlement due of £31,774,000 at the year end and on 30,000,000 ZDP Shares, being the number of ZDP Shares in issue at the year end.
The Company's financial instruments comprise fixed interest investments, cash balances and liquid resources including debtors and creditors.
Quoted fixed assets investments held (see note 7) are valued at bid prices which equate to their fair values.
The main risks arising from the Company's financial instruments are market risk, interest rate risk, liquidity risk and credit risk.
The Company held the following categories of financial instrument at 31 December 2010:
| Level 1 | Level 2 | Level 3 | 2010 | |
|---|---|---|---|---|
| £'000 | £'000 | £'000 | £'000 | |
| Investments | 50 | - | - | 50 |
The above table provides an analysis of investments based on the fair value hierarchy described below and which reflects the reliability and significance of the information used to measure their fair value. The levels are determined by the lowest (that is the least reliable or least independently observable) level of impact that is significant to the fair value measurement for the individual investment in its entirety as follows:
Level 1 reflects financial instruments quoted in an active market.
Level 2 reflects financial instruments whose fair value is evidenced by comparison with other observable current market transactions in the same instrument or based on a valuation technique whose variables includes only data from observable markets.
Level 3 reflects financial instruments whose fair value is determined in whole or in part using a valuation technique based on assumptions that are not supported by prices from observable market transactions in the same instrument and not based on available observable market data.
Market risk embodies the potential for both losses and gains and includes interest rate risk and price risk.
The Company's investment is listed on a recognised stock exchange. A 10 per cent increase in stock prices at 31 December 2010 would have increased the net assets attributable to the Company's shareholders and the total profit for the year by £5,000; an equal change in the opposite direction would have decreased the net assets attributable to the Group's shareholders and the total profit for the year by an equal amount.
The Company's financial assets are interest bearing, some of which are at fixed rates and some at variable. As a result the Company is subject to exposure to fair value interest rate risk due to fluctuations in the prevailing levels of market interest rates.
The Company holds a fixed interest investment.
| 2010 £'000 |
2010 Average interest rate |
2010 Average period until maturity |
|
|---|---|---|---|
| UK gilt | 50 | 5% | 3.7 years |
When the Company retains cash balances the majority of the cash is held in deposit accounts. The benchmark rate which determines the interest payments received on cash balances is the bank base rate for the relevant currency.
The Company had the following floating rate instruments at 31 December 2010.
| 2010 £'000 |
2010 Average interest rate |
2010 Average period until maturity |
|
|---|---|---|---|
| Cash and cash equivalents | 2 | 0.5% | n/a |
An increase of 25 basis points in interest rates as at 31 December 2010 would have increased the cash balances by £5. A decrease of 25 basis points would have had an equal but opposite effect.
This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities.
Liquidity risk is considered to be significant as the Company is reliant upon the sale of assets within its parent undertaking, which mainly comprises unlisted investments. Details of how this risk is managed are contained within the financial statements of the parent company.
| Between one and five years | Total | |
|---|---|---|
| £'000 | £'000 | |
| Cash and cash equivalents | 45,642 | 45,642 |
This is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered with the Company.
At the reporting date, the Company's financial assets exposed to credit risk amounted to the following:
| 2010 | |
|---|---|
| £'000 | |
| Investments in fixed interest instruments | 50 |
| Cash and cash equivalents | 2 |
| 52 |
Details of how this risk is managed are contained within the financial statements of the parent company.
Transactions for the period from incorporation to 31 December 2010 between the Company and its parent, F&C Private Equity Trust plc, are disclosed below.
| Period from 9 October 2009 to 30 June 2010 £'000 |
|
|---|---|
| Loan to parent company balance brought forward | - |
| Loan payment to parent company | 30,000 |
| ZDP issue expenses paid by parent on behalf of Company | (1,132) |
| Interest accrued | 2,906 |
| Loan to parent company balance carried forward | 31,774 |
The loan to F&C Private Equity Trust plc commenced on 21 December 2009. The loan accrues interest at a rate of 8.75 per cent per annum and is repayable on demand.
| Directors | Mark Tennant (Chairman) Elizabeth Kennedy Douglas Kinloch Anderson John Rafferty David Shaw |
|---|---|
| Investment Manager | F&C Investment Business Limited 80 George Street Edinburgh EH2 3BU Telephone: 0207 628 8000 |
| Company Secretary | F&C Asset Management plc 80 George Street Edinburgh EH2 3BU Telephone: 0207 628 8000 |
| Registrars | Capita Registrars The Registry 34 Beckenham Road Beckenham Kent BR3 4TU Telephone: 0871 664 0300 |
| Auditors | Ernst & Young LLP Ten George Street Edinburgh EH2 2DZ |
| Solicitors | Dundas & Wilson CS LLP Saltire Court 20 Castle Terrace Edinburgh EH1 2EN |
| Bankers | The Royal Bank of Scotland plc 24-25 St Andrew Square Edinburgh EH2 5NT |
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