Fletcher King Plc AAnnnnuuaall RReeppoorrtt aanndd AAccccoouunnttss 22001166 D I R E C T O R S A N D A D V I S E R S C O N T E N T S Directors DJR Fletcher FRICS Chairman REG Goode FRICS Managing Director RA Dickman FRICS Executive Director PJ Andrews MRICS Executive Director DH Stewart Non Executive Secretary and Registered Office PE Bailey ACA 61 Conduit Street, London W1S 2GB Financial Advisers and Stockbrokers Cairn Financial Advisers LLP 61 Cheapside, London EC2V 6AX Solicitors Boodle Hatfield 240 Blackfriars Road, London SE1 8NW Auditors Nexia Smith & Williamson 25 Moorgate, London EC2R 6AY Tax Advisers Smith & Williamson LLP 25 Moorgate, London EC2R 6AY Principal Bankers NatWest Bank Plc 63 Piccadilly, London W1A 2AG Registrars and Transfer Office Computershare Investor Services Plc Registrar’s Department, PO Box No 82 The Pavilions, Bridgwater Road, Bristol BS99 7NH Dedicated shareholder telephone number: 0870 889 4095 Audit Committee DH Stewart Chairman DJR Fletcher Remuneration Committee DH Stewart, Chairman DJR Fletcher AIM Committee DH Stewart, Chairman DJR Fletcher Company Number 02014432 Financial Highlights two Chairman’s Statement three – four Strategic Report five – six Directors’ Report seven – ten Auditors’ Report eleven – twelve Accounts thirteen – thirty five Notice of Meeting thirty six – thirty eight Form of Proxy tthirty nine Certificate No. FS27825 O N E H I G H L I G H T S • • • • • Revenue for the year of £4,633,000 (2015: £3,380,000) Profit before tax of £1,355,000 (2015: £461,000) Profit after tax for the year of £1,060,000 (2015: £359,000) Basic and diluted earnings per share of 11.51p (2015: 3.90p) Final dividend of 1.00p per share. An interim dividend of 1.00p per share was paid together with a special dividend of 8.00p per share and therefore the total ordinary dividend for the year will be 10.00p per share (2015: 2.25p) F I N A N C I A L C A L E N D A R Half Year Results Announced 16 December 2015 Full Year Results Preliminary announcement 12 July 2016 Annual General Meeting 28 September 2016 Final Dividend Payable 7 October 2016 Interim Dividend To be announced in December 2016 Payable in January 2017 T W O C H A I R M A N ’ S S TAT E M E N T Results Revenue for the year was £4,633,000 (2015: £3,380,000). In addition, profit on disposal of property investments amounted to £593,000 (2015: £nil). Profit before tax was £1,355,000 (2015: £461,000). The Board is proposing a final dividend of 1.00p per share. The final dividend is subject to shareholder approval at the AGM and will be paid on the 7 October 2016 to those shareholders on the register at close of business on 9 September 2016. With the interim dividend of 1.00p per share (2015: 1.50p per share) plus the special dividend of 8.00p per share already paid, the dividend for the year will amount to 10.00p per share (2015: 2.25p per share). The Commercial Property Market The market generally has seen reasonably strong demand from both tenants and investors. However this demand diminished somewhat in the lead up to the EU referendum. This was particularly noticeable in the investment market. The stamp duty increase of 1% didn’t help and data from IPD showed capital values in Q1 2016 falling for the first time for some years albeit by only 0.2%. UK investors have been net sellers in Q4 2015 and Q1 2016 and the outlook post Brexit is currently uncertain. Business Overview As reported in the Interim Results, our excellent performance this year was significantly influenced by the fees and profits earned on the sale of 145 Leadenhall Street, a property owned by the SHIPS 14 Syndicate in which the Group co-invested and acted as adviser. The sale of the property and the payment of a special dividend of 8p per share was announced on 1 September 2015. During the year, we established two new SHIPS funds to acquire freehold office buildings in Botolph Lane adjacent to Monument Tube Station in the City and a building in Sekforde Street, Clerkenwell. They will become vacant by the end of 2016 when refurbishment works will commence. We anticipate having them available to let in 2017. The underlying business continued to perform well with all departments performing much in line with last year. Valuation instructions increased significantly, reflecting increased bank lending to the commercial property sector. The Valuation Office has again slowed down settlement of Rating Appeals which affected turnover, but we still settled some significant assessments. T H R E E C H A I R M A N ’ S S TAT E M E N T Outlook We have started the year well and have completed the sale of over £50m of office and industrial investments. The unexpected vote to leave the EU has had a destabilising effect on the market and the uncertainties are likely to influence it for some time to come. Clients are delaying decisions to sell and purchase investment property and this is not helpful for our transaction business. The effect of this is impossible to predict but we are debt free and have cash reserves. We are well placed to weather challenging times as we have done on numerous times in the past. I hope that later in the year the market will establish a pattern and give confidence to our clients to move forward. DAVID FLETCHER CHAIRMAN 24 August 2016 F O U R S T R AT E G I C R E P O R T The Directors present the group strategic report for Fletcher King Plc (“the Company”) and its subsidiary companies for the year end 30 April 2016 (together “the Group”). Principal Activities The Group provides a comprehensive range of property services and expert advice throughout the United Kingdom, including property fund management, property asset management, rating, valuations and investment broking. Business Review The Group continued its strategy of providing a range of property services to existing and new clients and key performance indicators for the Group for the year to 30 April were as follows: Revenue Profit before taxation Profit for the year Earnings per share 2016 £4,633,000 £1,355,000 £1,060,000 11.51p 2015 £3,380,000 £461,000 £359,000 3.90p The excellent performance this year was significantly influenced by the fees and profits earned on the sale of 145 Leadenhall Street, a property owned by the SHIPS 14 Syndicate in which the Group co-invested and acted as adviser. The underlying business continued to perform well with all departments performing much in line with last year. Cash generated by operations in the year amounted to £665,000 (2015: cash absorbed amounted to £1,000) and after investing activities and dividend payments the cash balance decreased by £6,000 to £2,846,000. The Group continued to look for opportunities to participate in the Syndicated Property Investments (‘SHIPS’) and co-invested in new SHIPS 15 and SHIPS 16 funds during the year. The Chairman’s Statement contains a review of the Group’s performance, financial results, future development and prospects and is incorporated into this Strategic Report by reference. Principal Risks and Uncertainties The Directors have identified below a number of risks which they believe may affect the Group’s ability to deliver its strategic goals. This list does not purport to be an exhaustive summary of the risks affecting the Group, is given in no particular order of priority and contains risks considered to be outside the control of the Directors. (i) Economic Risk The main economic risks that would affect the Group’s performance are a major slowdown in the UK economy and a slump in UK commercial property values. The referendum result on 23 June 2016 to leave the EU has had a destabilising effect on the market and increased economic risk for the Group. The Group has, where possible, implemented actions to mitigate some of the effects of these risks. This includes providing a comprehensive range of services, some being less influenced by economic factors than others. F I V E S T R AT E G I C R E P O R T (ii) Management of Growth The ability of the Group to implement its strategy requires effective planning and management control systems. The speed at which the business develops may place significant strain on the Group’s management, operational, financial and personnel resources. Failure to expand and improve operational, financial and management information and quality control systems in line with the Group’s own growth could have detrimental impact on the trading performance of the Group. In mitigation the Group has an experienced management team and a clear strategy for the integration and management of the expected business growth. (iii) Attraction and Retention of Key Employees The Group will depend on the continued service and performance of the Executive Directors and key employees and whilst it has entered into contractual arrangements with these individuals with the aim of securing the services of each of them, retention of these services cannot be guaranteed. The loss of the services of Executive Directors or other key employees could damage the Group’s business. Equally the ability to attract new employees and senior executives with the appropriate expertise and skills cannot be guaranteed. The Group may experience difficulties in hiring appropriate employees and failure to do so may have a detrimental effect upon the trading performance of the Group. (iv) Financial Risk Management Details of the Group’s approach to financial risk management are disclosed in detail in note 23 to the financial statements. (v) Forward-Looking Statements This annual report contains forward-looking statements on Fletcher King Plc’s future financial performance, results from operations, and goals and strategy. By definition, forward-looking statements carry risk and uncertainty because they refer to events in the future and depend on circumstances that cannot be foreseen in advance. Numerous factors can contribute to material deviation from results and developments indicated in forward-looking statements. Such factors can include general economic circumstances, scarcity on the labour market and the ensuing demand for personnel, changes in labour legislation, personnel costs, future interest rates, changes in tax rates, and future corporate mergers, acquisitions and divestments. Undue reliance should not be placed on these forward-looking statements. They are made at the time of publication of the annual financial statements of the Group and in no way provide guarantees for future performance. All operating and business environments are subject to risk and uncertainty. For this reason, no assurances can be offered that the forward-looking statements published here will prove correct at a future date, and the company assumes no duty to update any such forward-looking statements. Approved by the board of Directors and signed on behalf of the board DAVID FLETCHER 24 August 2016 S I X D I R E C T O R S ’ R E P O R T The Directors present their report and accounts for the year ended 30 April 2016. General Information Fletcher King Plc is a public limited company which is listed on the AIM market of the London Stock Exchange and is incorporated and domiciled in the UK. The Company’s registration number is 02014432. Results and Dividend The consolidated statement of comprehensive income is set out on page 13. The profit for the year after taxation is £1,060,000 (2015: £359,000). The Directors recommend the payment of an ordinary final dividend of 1.00p per share (2015: 0.75p). An interim dividend of 1.00p per share (2015: 1.50p per share) has already been paid to shareholders together with a special dividend of 8.00p per share. Income from the Group’s available-for-sale investments and net bank interest amounted to £626,000 (2015: £17,000). The effective taxation charge was 21.8% (2015: 22.1%). Future Developments The new financial year has started well with the completion of the sale of £50m of office and industrial investments. However the unexpected vote on 23 June 2016 to leave the EU has had a destabilising effect on the market and the uncertainties are likely to influence it for some time to come. Capital and equity interests Basic and diluted earnings per share from continuing operations amounted to 11.51p (2015: 3.90p). During the year no shares were issued to Directors or employees pursuant to the exercise of share options. The total number of ordinary shares in issue at 30 April 2016 was 9.2 million (2015: 9.2 million). Cash flow and liquidity Net cash inflow from operating activities amounted to £665,000 (2015: outflow of £1,000) which, after allowing for cash flows including dividends and capital expenditure, resulted in a net decrease in cash balances of £6,000 (2015: decrease of £462,000). At 30 April 2016, the Group’s cash at bank and on short term deposit amounted to £2.85 million (2015: £2.85 million). This was deposited with leading banks. Risk identification and Management The identification, control and monitoring of risks facing the business remain a management priority. S E V E N D I R E C T O R S ’ R E P O R T Financial risk management The Group manages its treasury operations in accordance with policies and procedures approved by the Board. Information about the Group’s policies on financial instruments is set out in note 3 of the accounts. The Group has no borrowings. As the Group operates almost exclusively in the United Kingdom, there are no significant direct foreign exchange risks. The Group has in place a risk management programme that seeks to limit the adverse effects on the financial performance of the Group and these are outlined in note 23 to the accounts. Directors The current Directors of the Company are set out below. D J R Fletcher R E G Goode R A Dickman D H Stewart P J Andrews Chairman Managing Director Executive Director Non Executive Director Executive Director (appointed 10 May 2016) R E G Goode and D H Stewart retire by rotation in accordance with the Company’s Articles of Association, and being eligible offer themselves for re-election at the forthcoming Annual General Meeting. R E G Goode FRICS, is a Managing Director and has been jointly responsible for running the Company since 2000. Previously he worked in the property investment departments of DTZ and Hillier Parker. He is involved in the fund and asset management for a number of major institutional and in-house clients. D H Stewart, had a long career in banking. At Abbey National Group, he led business banking and the asset finance activities of First National Bank. Prior to that he held senior appointments with TSB Group, Hill Samuel Bank, Creditanstalt and Country NatWest Limited. Directors Remuneration DJR Fletcher REG Goode DH Stewart R A Dickman Salary Benefits Bonus £000 £000 £000 Fees £000 100 100 - 100 300 25 22 - 15 62 455 455 - 49 959 - - 20 - 20 2016 £000 580 577 20 164 1,341 2015 £000 281 269 20 219 789 No Executive Directors at 30 April 2016 received any pension entitlements. E I G H T D I R E C T O R S ’ R E P O R T Directors’ Indemnity Insurance As permitted by Section 233 of the Companies Act 2006, the Company has purchased insurance cover on behalf of the Directors indemnifying them against certain liabilities which may be incurred by them in relation to the Company. Corporate social responsibility The Board recognises the importance of social and environmental matters in the conduct of the Group’s business and remains committed to social and environmental awareness throughout its operations, notwithstanding the relatively low environmental impact of the Group’s activities. Energy efficiency, recycling and the use of “fair trade” products are encouraged. The Board recognises that enthusiastic, well-trained and high-quality staff are essential to the achievement of the Group’s commercial objectives. Participation in the success of the Group is encouraged via comprehensive incentive schemes. The Group provides employment on an equal basis irrespective of race, sex, disability, sexual orientation and religious beliefs. Employee communication and feedback is encouraged across the Group. Authority to Allot Unissued Shares In accordance with normal practice the Directors propose to take the usual authorities under Sections 551 and 570 of the Companies Act 2006. Therefore it is proposed to extend the Section 551 authority given at the last Annual General Meeting on 16 September 2015 for a further year in respect of ordinary 10p shares up to a maximum of 2,762,934 shares (£276,293.40). Apart from possible issues under Employee Share Option Schemes there is at present no intention of issuing any further ordinary shares. In any event, no issue will be made which would effectively alter the control of the Company without the prior approval of the Company in general meeting. Purchase of Shares The Directors, in line with boards of directors of other listed companies, consider that it would be appropriate for the Company to have the authority to purchase its own shares as one of a range of investment options available to them, more especially if the purchase of its own shares produced an improvement in earnings per share. Shareholders should be assured that the Board will commence share purchases only after careful consideration and after taking account of the overall financial position of the Group. An ordinary resolution will be proposed to authorise the Company to make market purchases of up to a maximum of 460,000 of its own shares, representing less than 5% of the existing issued ordinary shares. The maximum price to be paid on any exercise of the authority will be restricted to 5% above the average of the middle market quotation as derived from The London Stock Exchange Daily Official List for the ordinary shares for the ten dealing days immediately prior to purchase. The minimum price that may be paid for the ordinary shares is the nominal value of 10p per share. The authority for the purchase sought at the Annual General Meeting will expire at the conclusion of the following Annual General Meeting which is expected to take place in September 2017. The intention of the Board is to seek to renew the authority at future Annual General Meetings. N I N E D I R E C T O R S ’ R E P O R T Statement of Directors’ Responsibilities The Directors are responsible for preparing the Strategic Report, the Directors' Report and the financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the Group and of the profit or loss of the Group for that period. In preparing these financial statements, the directors are required to: • select suitable accounting policies and then apply them consistently; • make judgments and accounting estimates that are reasonable and prudent; • state that the financial statements comply with IFRSs as adopted by the European Union; and • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business. 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. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are also responsible for ensuring that they meet their responsibilities under the AIM rules. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Disclosure of information to the auditors In the case of each person who was a Director at the time this report was approved, so far as that Director was aware there was no relevant available information of which the Group and Company’s auditors were unaware; and that Director had taken all steps that the Director ought to have taken as a Director to make himself aware of any relevant audit information and to establish that the Group and Company’s auditors were aware of that information. Auditors A resolution to reappoint the auditors, Nexia Smith & Williamson, will be proposed at the forthcoming Annual General Meeting. This report was approved by the Board on 24 August 2016. P E Bailey Company Secretary Registered Number: 02014432 T E N A U D I T O R S ’ R E P O R T Independent auditors’ report to the members of Fletcher King plc We have audited the financial statements of Fletcher King Plc for the year ended 30 April 2016 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated and Parent Company Statements of Financial Position, the Consolidated and Parent Company Statements of Cash Flows, the Consolidated and Parent Company Statements of Changes in Equity and the related notes 1 to 24. 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 and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006. 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. Respective responsibilities of directors and auditors As explained more fully in the Directors’ Responsibilities Statement set out on page 10, 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 Financial Reporting Council’s (FRC’s) Ethical Standards for Auditors. Scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the FRC’s website at www.frc.org.uk/auditscopeukprivate. Opinion on financial statements In our opinion: (cid:3) the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 30 April 2016 and of the Group’s profit for the year then ended; (cid:3) the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; (cid:3) the Parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and (cid:3) the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. E L E V E N A U D I T O R S ’ R E P O R T Opinion on other matter prescribed by the Companies Act 2006 In our opinion the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: (cid:3) adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or (cid:3) the Parent Company financial statements are not in agreement with the accounting records and returns; or (cid:3) certain disclosures of directors’ remuneration specified by law are not made; or (cid:3) we have not received all the information and explanations we require for our audit. Stephen Drew Senior Statutory Auditor, for and on behalf of Nexia Smith & Williamson Statutory Auditor Chartered Accountants 25 Moorgate London EC2R 6AY 30 August 2016 T W E LV E C O N S O L I D AT E D S TAT E M E N T O F C O M P R E H E N S I V E I N C O M E for the year ended 30 April 2016 Notes 6 11 Revenue Employee benefits expense Depreciation expense Other operating expenses Operating profit Profit on disposal of available for sale investments Income from investments Finance income )) 13 7 Profit before taxation 8 Taxation Profit and total comprehensive income for the year attributable to equity shareholders 10 Basic and diluted earnings per share 2016)) £000)) 4,633)) (2,640)) (34)) (1,230)) 729)) 593)) 22)) 11)) 1,355)) (295)) 1,060)) 11.51p 2015))) £000))) 3,380))) (1,843))) (36))) (1,057))) 444))) –))) 4))) 13))) 461))) (102))) 359))) 3.90p) T H I R T E E N 2016) £000) 50) 1,274) 18) 1,342) 871) 2,846) 3,717) 5,059) 346) 282) 526) 1,154) 1,154) 921) 140) 2,844) 3,905) 5,059) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) 2015 £000 84 875 18 977 1,149 2,852 4,001 4,978 516 78 641 1,235 1,235 921 140 2,682 3,743 4,978 C O N S O L I D AT E D S TAT E M E N T O F F I N A N C I A L P O S I T I O N as at 30 April 2016 Notes Assets Non-current assets Property, plant and equipment Available-for-sale investments Deferred tax assets 11 13 18 Current assets Trade and other receivables Cash and cash equivalents 14 15 Total assets Liabilities Current liabilities Trade and other payables Current taxation liabilities Other payables 16 17 Total liabilities 19 Shareholders’ equity Share capital Share premium Retained earnings Total shareholders’ equity Total equity and liabilities Approved by the Board on 24 August 2016 and signed on its behalf by David Fletcher Chairman Registered Number: 02014432 England and Wales F O U R T E E N C O M PA N Y S TAT E M E N T O F F I N A N C I A L P O S I T I O N as at 30 April 2016 Notes 12 14 15 16 17 19 Assets Non-current assets Investments in group undertakings Current assets Trade and other receivables Cash and cash equivalents Total assets Liabilities Current liabilities Trade and other payables Other payables Total liabilities Shareholders’ equity Share capital Share premium Retained earnings Total shareholders’ equity Total equity and liabilities Approved by the Board on 24 August 2016 and signed on its behalf by David Fletcher Chairman Registered Number: 02014432 England and Wales 2016) £000) 105) 450) 942) 1,392) 1,497) –) 14) 14) 14) 921) 140) 422) 1,483) 1,497) 2015 £000 ) ) ) ) ) ) 105 508 1,011 1,519 1,624 8 14 22 22 921 140 541 1,602 1,624 ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) The notes on pages 19 to 35 form part of the financial statements. F I F T E E N C O N S O L I D AT E D S TAT E M E N T O F C A S H F L O W S for the year ended 30 April 2016 Cash flows from operating activities Profit before taxation from continuing operations Adjustments for: Depreciation expense Profit on disposal of available for sale investments Income from investments Finance income Cash flows from operating activities before movement in working capital Decrease in trade and other receivables Decrease in trade and other payables Cash generated from operations Taxation paid Net cash flows from operating activities Cash flows from investing activities Purchase of fixed assets Purchase of investments Sale of investments Finance income Income from investments Net cash flows from investing activities Cash flows from financing activities Dividends paid to shareholders Net cash flows from financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at start of year Cash and cash equivalents at end of year (note 15) The notes on pages 19 to 35 form part of the financial statements. S I X T E E N 2016) £000) 1,355 34) (593) (22) (11) 763) 284) (291) 756) (91) 665) –) (1,274) 1,468) 11) 22) 227) (898) (898) (6) 2,852) 2,846) 2015) £000) 461) 36) –) (4) (13) 480) 98) (432) 146) (147) (1) (8) (125) –) 13) 4) (116) (345) (345) (462) 3,314 2,852 C O M PA N Y S TAT E M E N T O F C A S H F L O W S for the year ended 30 April 2016 Cash flows from operating activities Profit before taxation Adjustments for: Finance income Dividends received from subsidiary undertakings Cash flows from operating activities before movement in working capital Dncrease/(increase) in trade and other receivables Decrease in trade and other payables Cash absorbed by operations Cash flows from investing activities Dividends received from subsidiary undertakings Finance income Net cash flows from investing activities Cash flows from financing activities Dividends paid to shareholders Net cash flows from financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at start of year 2016)) £000)) 779)) (4)) (898)) (123)) 58)) (8))) (73)) 898)) 4)) 902)) (898)) (898)) (69)) 1,011)) Cash and cash equivalents at end of year (note 15) 942)) ) ) 2015) £000) ) ) ) ) ) ) ) 738) (6) (845) (113) (445) (7) (565) ) ) 845 ) 6) ) ) ) 851) (345) (345) ) (59) ) ) 1,070 ) 1,011) The notes on pages 19 to 35 form part of the financial statements. S E V E N T E E N S TAT E M E N T O F C H A N G E S I N E Q U I T Y for the year ended 30 April 2016 CONSOLIDATED Balance at 1 May 2014 Total comprehensive income for the year Equity dividends paid Share) capital) £000) Share) premium) £000) ) ) ) 921 — — ) ) ) 140 — — )) ) Retained) earnings) £000)) 2,668 ) ) 359)) ) (345) TOTAL)) EQUITY)) £000)) )) 3,729 359)) ) (345) Balance at 30 April 2015 921) 140) 2,682)) 3,743)) Total comprehensive income for the year Equity dividends paid —) —) —) —) 1,060)) (898)) 1,060)) (898)) Balance at 30 April 2016 921) 140) 2,844)) 3,905)) COMPANY Balance at 1 May 2014 Total comprehensive income for the year Equity dividends paid Share Share) capital) £000) Share Share) premium) £000) ) 921 ) ) — — ) 140 ) ) — — )) ) Retained)) earnings)) £000)) 148)) 738)) ) (345) TOTAL) TOTAL)) EQUITY)) £000)) 1,209 ) ) 738)) ) (345) Balance at 30 April 2015 921) 140) 541)) 1,602)) Total comprehensive income for the year Equity dividends paid —) —) —) —) 779)) (898)) 779) (898)) Balance at 30 April 2016 921) 140) 422)) 1,483) E I G H T E E N N O T E S T O T H E F I N A N C I A L S TAT E M E N T S 1. General information Fletcher King Plc (‘the Company’) and its subsidiaries (together ‘the Group’) carry on the business of property fund management, property asset management, rating, valuations and investment broking throughout the United Kingdom. The Company is a public limited company incorporated and domiciled in England and Wales and listed on the AIM Market of The London Stock Exchange. The registered office address is 61 Conduit Street, London W1S 2GB. These consolidated financial statements were approved for issue by the Board of Directors on 24 August 2016. They are presented in Sterling which is the Group’s functional currency. The Group has no overseas operations. 2. Basis of preparation and presentation of financial statements These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and under the historical cost convention. New standards and interpretations Standards and interpretations effective for the year ended 30 April 2016 include the following. None of the pronouncements has had a material impact on the consolidated results or assets and liabilities for the year ended 30 April 2016. (cid:3) Annual improvements to IFRSs 2011 - 2013. At the date of authorisation of these financial statements, the following new standards and interpretations are relevant to the Group and have been issued but have not been applied in these financial statements because they are not yet effective:- (cid:3) IFRS 9 “Financial Instruments”* (cid:3) IFRS 15 “Revenue from contracts with customers”* (cid:3) IAS 16 “Leases”* (cid:3) Amendments to IAS 12 “Recognition of deferred tax assets for unrealised losses”* (cid:3) Amendments to IAS 16 “Propert, plant and equipment” * Not yet endorsed by the European Union The Directors do not anticipate that the adoption of these standards and interpretations will have a material impact on the Group’s financial statements, however the extent of this has not yet been assessed. Certain of these standards and interpretations will require additional disclosures over and above those currently included in these financial statements in the period of application. The preparation of financial statements in accordance with IFRS requires the use of certain critical accounting estimates and also requires management to exercise judgement in applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are highly significant to the financial statements, are set out in note 3 below. N I N E T E E N N O T E S T O T H E F I N A N C I A L S TAT E M E N T S 3. Principal accounting policies The principal accounting policies applied in the preparation of these financial statements are set out below. These policies, which are also applicable to the financial statements of the Company, have been consistently applied to all the years presented. Basis of consolidation The financial statements consolidate the accounts of the Company and all subsidiary undertakings drawn up to the same year end. Subsidiaries Subsidiaries are entities over which the Company has the power to govern the financial and operating policies generally accompanying a shareholding of more than 50% of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Company controls another entity. Subsidiary entities are consolidated from the date on which control is transferred to the Company and are deconsolidated from the date on which control ceases. In respect of subsidiaries, inter-company transactions, balances and unrealised gains on intra-group transactions are eliminated on consolidation. The accounting policies of subsidiaries are changed where necessary to ensure consistency with the policies adopted by the Group. T W E N T Y N O T E S T O T H E F I N A N C I A L S TAT E M E N T S Property, plant and equipment and depreciation Property, plant and equipment are stated at historical cost, net of depreciation, at rates calculated to write off the cost, less residual value, of each asset over its expected useful life. Depreciation rates on a straight line basis are as follows:- Motor vehicles Office furniture and fittings Computer equipment Short leasehold premium and improvements 25% 25% 33% 10% Cost includes expenditure that is directly attributable to the acquisition of the asset. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the statement of comprehensive income during the financial period in which they are incurred. Residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposal are determined by comparing proceeds with carrying amount. These are included in the Statement of Comprehensive Income. Segmental reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker as required by IFRS 8 “Operating Segments”. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Executive Committee. Financial instruments Financial assets and liabilities are recognised on the Group’s statement of financial position when the Group becomes a party to the contractual provisions of the instrument. Measurement depends on their classification and is discussed below: T W E N T Y- O N E N O T E S T O T H E F I N A N C I A L S TAT E M E N T S (i) Investments Investments held by the Company in subsidiary entities, not held for sale, are shown at cost less any provision for impairment. The Directors determine the classification of investments held by the Group at initial recognition and re-evaluate this designation at each reporting date. At the reporting date all these investments were classified as available-for-sale. Available-for-sale investments are initially recognised at the fair value of the consideration given, including associated acquisition costs, which may equate to cost. On subsequent measurement, available-for-sale investments are measured at either fair value or at cost where fair value is not reliably measurable. Changes in fair value are recognised in Other Comprehensive Income, together with the related deferred tax asset or liability. When such investments are disposed of, the accumulated gains or losses, previously recognised in equity, are reclassified to Profit or Loss. Available-for-sale financial assets are included in non-current assets unless management intends to dispose of the investment within twelve months of the reporting date. (ii) Trade and other receivables Trade and other receivables are initially measured at fair value, and are subsequently measured at amortised cost using the effective interest method. A provision is established when there is objective evidence that the Group will not be able to collect all amounts due. The amount of any provision is recognised in the Statement of Comprehensive Income. All financial assets are reviewed annually for impairment, with any losses reflected in the statement of comprehensive income. Investment income is recognised in the Statement of Comprehensive Income. (iii) Cash and cash equivalents Cash and cash equivalents include cash in hand, call deposits held with banks, and other short-term highly liquid investments with original maturities of three months or less. (iv) Financial liabilities and equity Financial liabilities and equity instruments issued by the Group are classified in accordance with the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. The accounting policies adopted for specific financial liabilities and equity instruments are set out below. T W E N T Y- T W O N O T E S T O T H E F I N A N C I A L S TAT E M E N T S (a) Trade and other payables Trade and other payables are initially measured at fair value, and are subsequently measured at amortised cost using the effective interest rate method. (b) Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction from the proceeds, net of tax. Taxation Current income tax is provided on taxable profits at the current rate. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred income tax is determined using rates enacted at the reporting date which are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets are only recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Income tax and deferred tax are reflected in the Statement of Comprehensive Income, unless they relate to items recognised in equity, in which case they are recognised in equity. Provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that the Group will be required to settle the obligation, and the amount can be reliably estimated. Provisions are measured at the Directors’ best estimate of the expenditure required to settle the obligation at the reporting date. Revenue recognition Revenue comprises commissions and fees receivable excluding value added tax and is measured at fair value. Fees on property transactions and other contingent fee arrangements are recognised as earned on the unconditional completion of a contract or when a fee is contractually due. Fees for other professional services are recognised on completion of the assignment. Interest and investment income is recognised on a time-proportion basis using the effective interest method. T W E N T Y- T H R E E N O T E S T O T H E F I N A N C I A L S TAT E M E N T S Operating profit Operating profit is stated before income from investments, finance income, costs and losses on impairment of available-for-sale investments and taxation. Employee benefits No pension schemes are operated by the Group. Contributions to employees’ money-purchase pension schemes are made on an arising basis where these form part of contractual remuneration obligations. The Group recognises a liability and an expense for cash-settled bonuses when contractually obliged or when there is a past practice creating a constructive obligation. Operating Leases Leases where the lessor retains substantially all the risks and rewards of ownership are classified as operating leases. Payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease. Dividend Distributions Dividends to the Company’s shareholders are recognised as a liability when paid (if interim dividends) or approved by shareholders (if final dividends). Critical accounting estimates and assumptions The preparation of the consolidated financial statements in conformity with International Financial Reporting Standards requires management to make estimates and assumptions concerning the future. While the resulting accounting estimates will, by definition, seldom equal the related actual results, in the opinion of the Directors the estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are detailed below. (i) Impairment of available-for-sale investments The fair value of available-for-sale investments is determined by reference to the underlying value of the assets of those investments at each balance sheet date. The Directors have made provisions for impairment where there is objective evidence that fair value is less than cost. (ii) Provisions for impairment of trade receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost less provision for impairment. The Directors have made provisions for impairment where there is objective evidence that the Group will not be able to collect all amounts due. There have not been any provisions for impairment of available-for-sale investments or trade receivables in the year. T W E N T Y- F O U R N O T E S T O T H E F I N A N C I A L S TAT E M E N T S 4. Segment Information – Group IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker to allocate resources to the segments and to assess their performance. In accordance with IFRS 8 the chief operating decision maker has been identified as the Executive Committee. They review the Group’s internal reporting in order to assess performance and allocate resources. The Executive Committee considers that the business comprises a single activity being General Services. Therefore, the Group is organised into one operating segment and there is one reporting segment. The segment information is the same as that set out in the Consolidated Statement of Comprehensive Income, Consolidated Statement of Financial Position, Consolidated Statement of Changes in Equity and Consolidated Statement of Cash Flows. 5. Operating profit Operating profit is stated after charging/(crediting): Year ended 30 April Operating lease rentals relating to property Depreciation Rental income Fees payable to the Company’s auditor for the audit of the Company’s consolidated annual financial statements Fees payable to the Company’s auditor and its associates for other services: - the audit of the Company’s subsidiaries - other assurance services - tax compliance services 2016) £000) 287) 34) (28) ) 6) 19) 4) 9) 2015 £000 ) ) ) ) ) ) ) 287 ) 36 ) (33) ) ) 6 ) ) ) ) ) ) 19 4 9 As permitted by section 408(3) of the Companies Act 2006, the Company has taken advantage of the legal dispensation not to present its own Statement of Comprehensive Income. The profit after taxation of the Company for the year was £779,000 (2015: £737,000). 6. Employee benefits expense YYear ended 30 April Basic wages and salaries Performance-based payments Social security costs Other costs 2016 ) ) £000)) 1,275)) 1,015)) 2,290)) 299)) 51)) 2,640)) The average number of persons (including directors) employed by the Group was as follows: Year ended 30 April Management Professional Administration 2016)) No.)) 4)) 7)) 7)) 18)) ) ) 2015) £000) ) ) 1,120) 470) 1,590 ) ) ) 203) ) ) 50 ) 1,843) ) ) 2015) No.) 4)) 7)) 7)) 18)) T W E N T Y- F I V E N O T E S T O T H E F I N A N C I A L S TAT E M E N T S Key management are those persons having authority and responsibility for planning, directing and controlling the activities of the entity. In the opinion of the Board, the Group’s key management comprises the executive and non-executive Directors of Fletcher King Plc. Information regarding their compensation, all of which are short-term benefits, is set out below: The Group does not operate any pension schemes. Directors’ Emoluments Fees Salaries and benefits Performance-related bonuses 2016) £000) 20) 362) 959) 1,341) No executive Directors at 30 April 2016 received any pension entitlements (2015: nil). Highest Paid Director Basic Pay Benefits Performance Related Bonus 2016) £000) 100) 25) 455) 580) Key Management Compensation Aggregate compensation for key management, being the Directors of the Company, was as follows: Short term employee benefits 2016) £000) 1,526) 2015) £000) 20) 371) 398) 789) 2015) £000) 100) 34) 147) 281) 2015) £000) 898) In accordance with AIM Rule 19, information of individual director’s remuneration has been disclosed in the Directors’ Report. 7. Finance income Year ended 30 April Finance income Bank interest receivable 2016) £000) 11) 2015) £000) 13) T W E N T Y- S I X 8. Taxation Year ended 30 April Current tax UK corporaton tax – current year UK corporation tax – prior years Deferred tax UK deferred tax – current year Total tax charged for the year N O T E S T O T H E F I N A N C I A L S TAT E M E N T S 2016)) £000)) 284)) 11)) 295)) –)) –)) 295)) )) 2015 £000)) 107)) (5)) 102)) –)) –)) 102)) The effective rate of UK corporation tax is calculated as the standard rate of UK corporation tax of 20%. The difference between the total current tax shown above and the amount calculated applying the effective rate of UK corporation tax, to the profit before taxation is as follows: Year ended 30 April Profit before taxation Tax on Group profit at UK corporation tax rate of 20.0% (2015: 20.9%) Deferred tax assets not recognised Expenses not deductible for tax purposes Prior year adjustment Other adjustments Group total tax charge for the year )) )) )) )) 2016 £000 1,355 271 –)) )) 8 )) 11 )) 5 295)) ) ) 2015) £000) )) )) 461 96 )) 2 )) 8 ) (5) )) 1 )) 102 The main rate of corporate tax changed from 21% to 20% on 1 April 2015 to be aligned with the small companies rate of 20%. T W E N T Y- S E V E N N O T E S T O T H E F I N A N C I A L S TAT E M E N T S 9. Dividends Year ended 30 April Equity dividends on ordinary shares: Declared and paid during year Ordinary final dividend for the year ended 30 April 2015: 0.75p per share (2014: 2.25p) Special dividend for the year ended 30 April 2016: 8.00p per share Interim dividend for the year ended 30 April 2016: 1.00p per share (2015: 1.50p) \ Proposed ordinary final dividend for the year ended 30 April 2016: 1.00p per share 2016) £000) 69) 737) 92) 898) 92) 2015) £000) 207) –)) 138) 345) 10. Earnings per share Weighted average number of shares for basic and diluted earnings per share Earnings for basic and diluted earnings per share Basic and diluted earnings per share 2016)) No)) 2015)) No)) 9,209,779)) 9,209,779)) £000)) 1,060)) 11.51p) £000)) 359)) 3.90p) T W E N T Y- E I G H T N O T E S T O T H E F I N A N C I A L S TAT E M E N T S Furniture,))) fittings and))) computers))) £000))) Short))) leasehold))) Motor))) premium and))) vehicles))) improvements))) £000))) £000))) 181))) –))) – ))) 181))) 161))) 7))) – ))) 168))) 13 ) )) 173))) 8))) – ))) 181))) 153))) 8))) –))) 161))) 20 ) )) ) ) ) – )) – )) – )) – ) )) ) – )) –) )) ) – )) – ))) – ) )) 53))) ) – )) (53) )) –) )) 53))) – ) )) (53) )) –))) –) )) 276))) ) – )) ) – )) 276))) 212))) 27))) – ))) 239))) 37 ) )) 276))) ) – )) ) – )) 276))) 184))) 28))) ) – )) 212))) 64 ))) Total))) £000))) 457))) ) – )) ) – )) 457))) 373))) 34))) ) – )) 407))) 50 ))) 502))) 8))) )) (53) 457))) 390))) 36))) (53) )) 373))) 84 ))) 11. Property, plant and equipment - Group Cost At 1 May 2015 Additions Disposals As at 30 April 2016 Depreciation At 1 May 2015 Charge for the year Disposals At 30 April 2016 Net book value at 30 April 2016 Cost At 1 May 2014 Additions Disposals As at 30 April 2015 Depreciation At 1 May 2014 Charge for the year Disposals At 30 April 2015 Net book value at 30 April 2015 12. Investments in Group undertakings – Company Year ended 30 April Shares in Group undertakings at cost: At 1 May and 30 April 2016) £000) 105) 2015) £000) 105) As at 30 April 2016, the Company owns 100% of the ordinary share capital of the following companies registered in England and Wales, the accounts of which are consolidated into the Group accounts: Fletcher King Services Limited, which is the trading subsidiary through which the Fletcher King business is carried out and Fletcher King Investment Management Plc, the Group’s FCA-regulated investment services company. T W E N T Y- N I N E N O T E S T O T H E F I N A N C I A L S TAT E M E N T S 13. Available-for-sale investments – Group Year ended 30 April At 1 May Additions Disposals At 30 April Classified as: Available-for-sale investments UK unlisted investments classified as available-for-sale 2016)) £000)) 875)) 1,274)) (875)) 1,274)) 1,274)) 1,274)) 2015)) £000)) 750)) 125)) —)) 875)) 875)) 875)) An amount of £752,000 (2015: £nil) represents a syndicate interest in the Stratton House Investment Property Syndicate (SHIPS 15). This investment is stated at cost, which is equal to the fair value of the investment based on the underlying value of the Syndicate’s assets. An amount of £522,000 (2015: £nil) represents a syndicate interest in the Stratton House Investment Property Syndicate (SHIPS 16). This investment is stated at cost, which is equal to the fair value of the investment based on the underlying value of the Syndicate’s assets. During the year ended 30 April 2016, interests held in the Stratton House Investment Property Syndicate (SHIPS 14) were sold, realising a capital profit of £593,000 on an initial investment of £875,000. Under IFRS7 Financial instruments: Disclosures and IFRS13 Fair value measurements, UK unlisted equity investments are classified under the fair value hierarchy as Level 2. 14. Trade and other receivables Trade receivables Amount owed by group undertakings Other receivables Prepayments and accrued income Group)) 2016))) £000))) 746))) —))) 15))) 110))) 871))) Group))) 2015))) £000))) 1,026))) —))) 15))) 108))) 1,149))) Company)) 2016)) £000)) Company))) 2015))) £000))) —)) 444)) –)) 6)) 450)) —))) 500))) 2))) 6))) 508))) Trade receivables are non-interest bearing and generally have a 30-90 day term. Due to their short maturities, the fair value of trade receivables approximates their book value. The fair value of amounts owed by group undertakings approximate their book value. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms. The Group considers factors such as default or delinquency in payment, significant financial difficulties of the debtor and the probability that the debtor will enter bankruptcy in deciding whether the trade receivable is impaired. As at 30 April 2016, trade receivables of £nil were impaired (2015: £nil). As at 30 April 2016, trade receivables of £470,000 (2015: £646,000) were past due, but not impaired. The ageing analysis of these trade receivables is as follows: Group))) 2016)) £000))) Group)))) 2015)))) £000)))) Company))) 2016))) £000))) Company))) 2015))) £000))) 437))) 33))) —))) 470))) 644))) 2))) —))) 646))) —))) —))) —))) —))) —))) —))) —))) —))) Up to 3 months past due 3 to 6 months past due Over 6 months past due T H I R T Y N O T E S T O T H E F I N A N C I A L S TAT E M E N T S 15. Cash and cash equivalents Cash at bank and in hand Group))) 2016))) £000))) 2,846))) 2,846))) Group)))) 2015)))) £000)))) Company))) 2016))) £000))) Company))) 2015))) £000))) 2,852))) 2,852))) 942))) 942))) 1,011))) 1,011))) Cash and cash equivalents are all denominated in Sterling. The effective interest rate on Group cash balances for the year ended 30 April 2016 was 0.4% (2015: 0.5%). There is no material difference between the fair value and book value of cash and cash equivalents. 16. Trade and other payables Trade payables Other taxation and social security Other payables Group))) 2016))) £000))) Group)))) 2015)))) £000)))) Company))) 2016))) £000))) Company))) 2015))) £000))) 114))) 215))) 17))) 346))) 202))) 250))) 64))) 516))) —))) —))) —))) —))) 8))) —))) —))) 8))) The carrying amounts of trade and other payables approximate their fair value. 17. Other creditors )Bonus accruals Other accruals and deferred income Group))) 2016))) £000))) Group)) 2015)) £000)) Company)) 2016)) £000)) Company)) 2015)) £000)) 334))) 192))) 526))) 437)) 204)) 641)) —)) 14)) 14)) —)0 14)) 14)) T H I R T Y- O N E N O T E S T O T H E F I N A N C I A L S TAT E M E N T S 18. Deferred taxation (non-current) – Group Year ended 30 April Deferred taxation asset: Timing differences on provisions At 1 May Movement during year At 30 April 2016)) £000)) 18)) —)) 18)) 2015)) £000)) 18)) —)) 18)) 19. Share capital and other reserves 30 April)) 2016)) Number)) 30 April))) 2015))) Number))) 30 April)) 2016)) £000)) 30 April)) 2015)) £000)) Ordinary shares of 10p each: ) Issued and fully paid 9,209,779)) 9,209,779))) 921)) 921)) The Company has one class of ordinary shares which carry no rights to fixed income. No shares were issued during the year. Details of movements in other reserves are set out in the Statement of Changes in Equity. A description of each reserve is set out below. The Share Premium reserve records the amount above the nominal value received for shares sold, less transaction costs. Retained earnings are the accumulated, undistributed profits of the Group or Company that have been recognised through the Statement of Comprehensive Income. 20. Capital Commitments As at 30 April 2016 the Group has capital commitments to further invest up to £122,500 in the SHIPS 15 fund and up to £144,000 in the SHIPS 16 fund. These amounts are expected to be invested during the year to 30 April 2017. T H I R T Y- T W O N O T E S T O T H E F I N A N C I A L S TAT E M E N T S 21. Operating lease commitments and contingent liabilities As at 30 April 2016 and 30 April 2015, neither the Group nor the Company had any contingent liabilities. As at 30 April 2016 and at 30 April 2015, the Group had outstanding commitments under non-cancellable leases which fall due as follows: Within one year In two to five years Property leases Other leases 2016) £000) 302) 3) 305) 2015) £000) 302) 305) 607) 2013) £000) 2012) £000) –– ) –– ) –– ) 22) 8) 30) Total) 2013) £000) 287) 571) Total) 2012) £000) 309) 866) 858) 1175) Property leases relate to office premises occupied by the Group. 22. Related party transactions Transactions between the Company and its subsidiaries are in the normal course of business. Such transactions are eliminated on consolidation. Total inter-company balances between the Company and its subsidiaries, which are unsecured and which relate to the provision of working capital, are disclosed in the accounts. During the year, the Company had funding transactions with subsidiaries amounting to £56,000 (2015: £57,000) Group companies hold investments in a number of property funds (see note 13) in which Group companies also act as fund manager. During the year, Group companies received fees and were owed amounts as follows:- SHIPS 04 Fund SHIPS 14 Fund SHIPS 15 Fund SHIPS 16 Fund Fees 2016)) £000)) 2015)) £000)) 67)) 1,580)) 96)) 101)) 117)) 78)) –)) –)) Amount Due 2016) £000) 2015)) £000)) 5) – ) 2) 2) 13)) 13)) –)) –)) All transactions were made in the ordinary course of business. Compensation paid to the Company’s Board of directors and key management is disclosed in note 6 and in the Directors Report. 23. Financial instruments The Group’s and the Company’s financial instruments comprise UK unlisted investments, cash and cash equivalents, and items such as trade payables and trade receivables which arise directly from its operations. The main purpose of these financial instruments is to provide capital gains and finance for the Group’s and the Company’s operations. The Group’s and the Company’s operations expose them to a variety of financial risks including credit risk, interest rate risk, and liquidity risk. Commensurate with the size of the Group, the Directors set the policies regarding financial risk management, and these are implemented accordingly by Group companies. Loans and receivables Trade receivables Amount owed by group undertakings Other receivables Cash and cash equivalents Group)) 2016)) £000)) 746)) –– )) 15)) 2,846)) 3,607)) Group))) 2015))) £000)v) Company)) 2016)) £000)) Company)) 2015)) £000)) 1,026)) –)) 15)) 2,852)) 3,893)) –– )) 444)) –– )) 942)) 1,386)) –))) 500)) 2)) 1,011)) 1,513)) T H I R T Y- T H R E E N O T E S T O T H E F I N A N C I A L S TAT E M E N T S Financial liabilities at amortised costs Trade payables Tax and social security Other payables Amounts owed to group undertakings Bonus accruals Other accruals and deferred income Group)) 2016) £000)) Group)) 2015)) £000)) Company)) 2016)) £000)) Company)) 2015)) £000)) 114)) 215)) 17)) –– )) 334)) 192)) 872)) 202)) 250)) 64)) –)) 437)) 204)) 1,157)) –– )) –– )) –– )) –– )) –– )) 14)) 14)) 8)) –)) –)) –)) –)) 14)) 22)) Credit risk ) The Group’s credit risk is attributable both to trade receivables and to cash balances held. The Company’s credit risk is attributable primarily to cash balances held. The Group has implemented policies to ensure that credit checks are made on potential clients before work is carried out on their behalf. The amount of exposure to any individual counterparty is subject to limits set by the directors. Cash balances held are deposited with leading banks. The carrying amount of financial assets represents the maximum credit exposure. The maximum credit exposure to credit risk at the reporting date was: Group)) 2016)) £000)) 746)) 2,846)) 15)) 3,607)) Group)) 2015)) £000)) 1,026)) 2,852)) 15)) 3,893)) Company)) 2016)) £000)) Company)) 2015)) £000)) –– )) 942)) –– )) 942)) –)) 1,011)) 2)) 1,013) Trade receivables Cash and other equivalents Other receivables Interest rate risk ) The Group and the Company have interest bearing assets, but no interest bearing liabilities. Interest bearing assets comprise only cash and cash equivalents which earn interest at a variable rate. The interest earned on the Group’s and the Company’s cash and cash equivalents, denominated in sterling, derived principally from Money Market deposits of differing fixed time periods, and from call deposits held with banks which provide short-term liquidity to meet liabilities when they fall due. The Group and the Company are exposed to interest rate risk as a result of these positive cash balances. For the year ended 30 April 2016, if LIBOR had increased by 0.5% with all other variables held constant, post tax profit and equity for the Group would have been £14,000 (2015: £13,000) higher, and for the Company £5,000 (2015: £6,000) higher. Conversely, if LIBOR had decreased by 0.5% with all other variables held constant, post tax profit and equity for the Group would have been £14,000 (2015: £13,000) lower, and for the Company £5,000 (2015: £6,000) lower. The Group’s cash and cash equivalents earned interest during the year at an average of 0.4% (2015: 0.5%), and the Company’s cash and cash equivalents earned interest during the year at an average of 0.4% (2015: 0.5%). T H I R T Y- F O U R N O T E S T O T H E F I N A N C I A L S TAT E M E N T S Liquidity risk ) The Group and the Company actively maintain cash and cash equivalents to ensure that there are sufficient funds available for a period of at least six months to meet liabilities when they fall due. The following table shows the contractual maturities of the Group’s and the Company’s financial liabilities, all of which are measured at amortised cost: Financial liabilities falling due: Within 1 month From 2 to 3 months Group)) 2016)) £000)) 174)) 483)) 657)) Group)) 2015)) £000)) Company)) 2016)) £000)) Company)) 2015)) £000)) 385)) 522)) 907)) 15)) –– )) 15)) 22)) –)) 22)) 24. Capital risk management The Group and the Company seek, when managing capital, to safeguard the Group’s and the Company’s ability to continue as going concerns, in order to provide returns for shareholders and to maintain an optimal capital structure to reduce the cost of capital. The Group and the Company define capital as being share capital plus reserves. The Board of Directors monitors the level of capital employed in order to achieve these objectives. T H I R T Y- F I V E N O T I C E O F A N N U A L G E N E R A L M E E T I N G Notice is hereby given that the Annual General Meeting of Fletcher King Plc will be held at 61 Conduit Street, London W1S 2GB on 28 September 2016 at 9.00am for the following purposes: 1 To receive and adopt the Directors’ Reports and Accounts for the financial year ended 30 April 2016. 2.To declare a final dividend for the financial year ended 30 April 2016. 3 To re-elect R E G Goode as a Director, who retires by rotation in accordance with the Company’s Articles of Association and who offers himself for re-election. 4 To re-elect D H Stewart as a Director who retires by rotation in accordance with the Company’s Articles of Association and who offers himself for re-election. Biographical details regarding these Directors are included in the accompanying Report and Accounts. 5 To re-appoint Nexia Smith & Williamson as auditors to hold office from the completion of the meeting to the conclusion of the next meeting at which the accounts are laid before the Company, at a remuneration to be determined by the Directors. To consider and, if thought fit, to pass the following resolutions of which resolution number 6 will be proposed as an ordinary resolution and resolutions number 7 and number 8 will be proposed as special resolutions. 6 ORDINARY RESOLUTION That the Directors of the Company be and are hereby authorised generally and unconditionally for the purpose of Section 551 of the Companies Act 2006 (such authority to be in substitution for all previous authorities granted to the Directors for the purpose of the said Section 551 or Section 80 of the Companies Act 1985) to allot shares in the Company up to a maximum number of 2,762,934 of the unissued ordinary shares of 10p each of the Company with a nominal value of £276,293.40, such authority to expire at the conclusion of the next Annual General Meeting of the Company and at any time thereafter pursuant to any offer or agreement made by the Company before the expiry of this authority. 7 SPECIAL RESOLUTION That, subject to the passing of resolution 6, the Directors of the Company be and are hereby empowered pursuant to Section 570 of the Companies Act 2006 to allot equity securities (as defined in Section 560 of that Act) pursuant to the authority conferred by the immediately preceding resolution as if subsection (1) of Section 561 of the said Act did not apply to any such allotment, provided that this power shall be limited: (a) To the allotment of equity securities in connection with a rights issue in favour of ordinary shareholders where the equity securities respectively attributable to the interests of all ordinary shareholders are proportionate (as nearly as may be) to the respective numbers of ordinary shares held by them but subject to such other exclusions or arrangements as the Directors may deem necessary or expedient in relation to fractional entitlements for legal or practical problems under the laws of any territory or the requirements of any recognised regulatory body or any stock exchange in any country; and (b) to the allotment (otherwise than pursuant to sub-paragraph (a) above) of equity securities up to an aggregate nominal value of £138,146.69 (being 15% of the said issued capital of the Company), and shall expire at the conclusion of the next Annual General Meeting of the Company unless it is renewed by special resolution of the Company in general meeting, provided that if the Company before such expiry shall make an offer or agreement which would or might require securities to be allotted after such expiry, the Directors of the Company may allot equity securities in pursuance of such offer or agreements as if the power conferred hereby had not expired. T H I R T Y- S I X N O T I C E O F A N N U A L G E N E R A L M E E T I N G 8 SPECIAL RESOLUTION That the Company is hereby generally and unconditionally authorised to make one or more market purchases (within the meaning of Section 693(4) of the Companies Act 2006) of ordinary shares of 10p each in the capital of the Company (‘ordinary shares’) provided that: (a) The maximum number of ordinary shares hereby authorised to be purchased is 460,000; (b) the maximum price which may be paid for an ordinary share is 5% above the average of the middle market quotations for shares of the same class as derived from The London Stock Exchange Daily Official List for the ten dealing days immediately prior to the date of the purchase of such shares and the minimum price that may be paid for an ordinary share is the nominal value of 10p per share; (c) the authority hereby conferred shall expire at the conclusion of the Annual General Meeting of the Company to be held in 2017 or eighteen months from the passing of this resolution, if earlier, unless such authority is renewed prior to such time; and (d) the Company may enter into a contract to purchase ordinary shares under the authority hereby conferred prior to the expiry of such authority which will or may be executed wholly or partly after the expiry of such authority and may make such purchases of ordinary shares in pursuance of any such contract or contracts. By order of the Board P E Bailey Secretary Fletcher King Plc 24 August 2016 Registered Office: 61 Conduit Street London W1S 2GB Notes (a) A member of the Company entitled to attend and vote at the meeting covered by this notice is entitled to appoint a proxy or proxies to exercise all or any of his or her rights to attend, speak and to vote at the meeting instead of him or her. A member of the Company can only appoint a proxy using the procedures set out in these notes and the notes to the proxy form. A proxy need not be a member of the Company. To be valid the form of proxy must be completed, signed and deposited at the office of the Company’s registrars not less than 48 hours before the time appointed for the meeting. Completion of the proxy does not preclude a member from subsequently attending and voting at the meeting in person if he or she so wishes. If a proxy has been appointed and the member subsequently attends the meeting in person, the proxy appointment will automatically be terminated. (b) To change your proxy instructions simply submit a new proxy appointment using the method set out above. Note that the cut-off time for receipt of proxy appointments (as above) also applies in relation to amended instructions; any amended proxy appointment received after the relevant cut-off time will be disregarded. Where you require another hard-copy proxy form in order to change the instructions, please contact the Company Secretary at 61 Conduit Street, London, W1S 2GB. If you submit more than one valid proxy appointment, the appointment received last before the latest time for the receipt of proxies will take precedence. (c) In order to revoke a proxy instruction, you will need to inform the Company by sending a hard copy notice clearly stating your intention to revoke your proxy appointment to the office of the Company’s registrars, Computershare Investor Services Plc, at PO Box No 1075, The Pavilions, Bridgwater Road, Bristol BS99 6ZY. The revocation notice must be received by the Company no less than 48 hours before the time appointed for the meeting. In the case of a member which is a company, the revocation notice must be executed under its common seal or signed on its behalf by an officer of the company or an attorney for the company. Any power of attorney or any other authority under which the revocation notice is signed (or a duly certified copy of such power or authority) must be included with the revocation notice. (d) In accordance with Regulation 41 of the Uncertificated Securities Reg 2001, only those members entered on the Company’s register of members at 6.00pm on 26 September 2016 or, if the meeting is adjourned, shareholders entered on the Company’s register of members at 6.00pm on the day which is two days before the day of the adjourned meeting, shall be entitled to attend and vote at the meeting. T H I R T Y- S E V E N N O T I C E O F A N N U A L G E N E R A L M E E T I N G (e) As at 30 April 2016, the Company’s issued share capital comprised 9,209,779 ordinary shares of 10p each. Each ordinary share carries the right to one vote at a general meeting of the Company and, therefore, the total number of voting rights in the Company as at 30 April 2016 is 9,209,779. (f) In order to facilitate voting by corporate representatives at the Meeting, arrangements will be put in place at the Meeting so that: (i) (ii) if (i) a corporate member has appointed the Chairman of the Meeting as its corporate representative with instructions to vote on a poll in accordance with the directions of all the other corporate representatives for that member at the Meeting, then, on a poll, those corporate representatives will give voting directions to the Chairman and the Chairman will vote (or withhold a vote) as corporate representative in accordance with those directions; and if (ii) more than one corporate representative for the same corporate member attends the Meeting but the corporate member has not appointed the Chairman of the Meeting as its corporate representative, a designated corporate representative will be nominated, from those corporate representatives who attend, who will vote on a poll and the other corporate representatives will give voting directions to that designated corporate representative. Corporate members are referred to the guidance issued by the Institute of Chartered Secretaries and Administrators on proxies and corporate representatives – www.icas.org – for further details of this procedure. The guidance includes a sample form of representation letter to appoint the Chairman as a corporate representative as described in (i) above. (g) Except as provided above, members who have general queries about the meeting should contact the Company Secretary A member may not use any electronic address provided in this notice or in any related documents (including the proxy form) to communicate with the Company for any purposes other than those expressly stated. T H I R T Y- E I G H T F O R M O F P R O X Y For use at the Annual General Meeting of the Fletcher King Plc to be held at 9.00 am on 28 September 2016. I/We (Block capitals please) of being (a) member(s) of the Company, hereby appoint the Chairman of the Meeting or (see Note 5) as my/our proxy to attend and vote for me/us and on my/our behalf at the Annual General Meeting of the Company to be held on 28 September 2016 at 9.00 am and at any adjournment of the meeting. I/We direct my/our proxy to vote on the Resolutions set out in the notice convening the Annual General Meeting as follows: For Against Vote Withheld To Adopt Ordinary Resolution 1 To Adopt Ordinary Resolution 2 To Adopt Ordinary Resolution 3 To Adopt Ordinary Resolution 4 To Adopt Ordinary Resolution 5 To Adopt Ordinary Resolution 6 To Adopt Special Resolution 7 To Adopt Special Resolution 8 If no indication is given, my/our proxy will vote or abstain from voting at his or her discretion and I/we authorise my/our proxy to vote (or abstain from voting) as he or she thinks fit in relation to any other matter which is put before the meeting. Signature Date Notes 1 Please indicate with an ‘X” in the spaces provided how you wish your votes to be cast. If you do not indicate how your votes are to be cast the proxy will vote as he thinks fit or abstain. The ‘‘Vote Withheld’’ option is provided to enable you to instruct your proxy not to vote on any particular resolution. Please note that a ‘‘Vote Withheld’’ has no legal effect and will not be counted in the calculation of the votes ‘‘For’’ or ‘‘Against’’ a resolution. Your proxy will vote (or abstain from voting) as he or she thinks fit in relation to any other matter which is put before the Meeting. 2 3 4 5 6 In the case of a corporation, this form of proxy must be executed under the common seal or under the hand of an officer or duly authorised attorney. In the case of joint holders, the vote of the senior who tenders a vote whether in person or by proxy shall be accepted to the exclusion of the votes of the other registered holders and for this purpose seniority shall be determined by the order in which the names stand in the register of members. To be effective this form of proxy, and the power of attorney or other authority (if any) under which it is signed or a notarially certified or office copy of such power or authority, must be deposited at the office of the Company’s registrars at Computershare Investor Services Plc, at PO Box No 1075, The Pavilions, Bridgwater Road, Bristol BS99 6ZY, not less than 48 hours before the time of the meeting. Any alterations made to this form of proxy should be initialled. If you wish to appoint a proxy other than as above please delete the reference to the Chairman and insert the name of your proxy or proxies, who need not be members of the Company, in the space provided. A proxy must attend the meeting in person to represent you. Your appointment of a proxy will not preclude you from attending and voting at the meeting. If you wish your proxy to make any comments on your behalf, you will need to appoint someone other than the chairman and give them the relevant instructions directly. Where you appoint as your proxy someone other than the Chairman, you are responsible for ensuring that they attend the meeting and are aware of your voting intentions. You may appoint more than one proxy provided each proxy is appointed to exercise rights attached to different shares. You may not appoint more than one proxy to exercise rights attached to any one share. To appoint more than one proxy, please contact the Company registrars for more information at the address provided in note 3 sufficiently in advance of the meeting so that the requirements of note 3 may be complied with. T H I R T Y- N I N E Third fold and tuck in BUSINESS REPLY SERVICE License No. SWB 1002 d l o f t s r i F Computershare Investor Services Plc PO Box 1075 The Pavilions Bridgwater Road Bristol BS99 6ZY 11 Second fold