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Deneway House 88-94 Darkes Lane Potters Bar Hertfordshire EN6 1AQ Annual Report & Financial Statements 2012 The Year in Brief Revenue Loss before tax Total comprehensive loss for the year Net assets of the Group 2012 £’000 12,673 (4,633) (2,989) 62,053 2011 £’000 11,940 (2,312) (2,902) 67,066 Loss per 25p ordinary share (17.2)p (5.1)p Dividend per ordinary share (based on those proposed in relation to the financial year) Net assets attributable to ordinary shareholders per 25p ordinary share **12p – 3p is paid and 9p proposed 12p** 367p 12p 397p Contents The Year in Brief Directors, Secretary and Advisors Chairman’s Statement Chairman’s Ramblings Operating and Financial Review Report of the Directors Corporate Governance Directors’ Remuneration Report Independent Auditors’ Report Consolidated Income Statement 1 2 3 10 15 17 21 25 27 29 1 Consolidated Statement of Comprehensive Income 30 Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Consolidated Accounts Parent Company Balance Sheet Parent Company Cash Flow Statement Notes to the Parent Company Accounts Notice of Annual General Meeting Ten Year Review 31 32 33 34 58 59 60 66 68 Panther Securities P.L.C. Directors, Secretary and Advisers Directors * Andrew Stewart Perloff (Chairman and Chief Executive) ** Bryan Richard Galan (Non – executive) ** Peter Michael Kellner (Non – executive) John Terence Doyle (Executive) John Henry Perloff (Executive) Simon Jeffrey Peters (Finance) Company Secretary Simon Jeffrey Peters Registered Office Deneway House, 88-94 Darkes Lane, Potters Bar, Herts. EN6 1AQ Company number 293147 Website Auditors Bankers www.panthersecurities.co.uk Nexia Smith & Williamson 25 Moorgate, London EC2R 6AY HSBC Bank PLC 31 Holborn, London EC1N 4HR Brokers Financial Advisors Registrars Solicitors Santander Corporate Banking 2 Triton Square, Regents Place, London NW1 3AN Natwest Bank PLC Unit 40, 56 Churchill Square, Brighton, East Sussex BN1 2ES Arbuthnot and Latham Private Bankers Arbuthnot House, 20 Ropemaker Street, London EC2Y 9AR Raymond James Investment Services 77 Cornhill, London EC3V 3QQ Sanlam Securities UK 10 King William Street, London EC4N 7TW Capita Registrars The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU Oberman Law 15 Southampton Place, London WC1A 2AJ Howard Kennedy 19 Cavendish Square, London W1A 2AW Biggart Baillie Dalmore House, 310 St Vincent Street, Glasgow G2 5QR MacRoberts LLP 152 Bath Street, Glasgow G2 4TB Fox Williams LLP Ten Dominion Street, London EC2M 2EE Blake Lapthorn New Kings Court, Tollgate, Chandler’s Ford, Eastleigh, Hampshire SO53 3LG * Member of the Nomination Committee and Audit Committee ** Member of the Nomination Committee, Audit Committee and Remuneration Committee Panther Securities P.L.C. 2 Chairman’s Statement As always, I am pleased to present our figures for the Our finance costs are up considerably this year rising year ended 31st December 2012, this being my 39th from £2,954,000 to £4,466,000, due to our increased annual Chairman’s statement. Every year we are banking borrowings with higher margins, as well as obliged to provide shareholders with more information increased interest rate fixing costs due to a swap that and each year it becomes less understandable to you crystallised in 2011, which was payable for only part of and slightly harder for me to explain what is happening the previous year. It is worthy of note that our remaining in our accounts. finance costs are relatively cheap as they are not fixed with historic fixing instruments and if we continue to buy Our loss for the current year which is shown as high yielding property investments it will contribute to a £2,948,000 compared to £850,000 the previous year, strong increase in our profits. When we are fully invested was heavily influenced by an almost £5,000,000 our gross rents should be approaching three times the reduction in value of our investment portfolio and cost of finance. £777,000 deterioration in our swaps liability. The reduction in the value of our entire portfolio following the Once again this has been a very active year for our directors’ revaluation was mainly a result of a slowdown Group. We disposed of two separate freeholds in in property values. After two years of increases totalling Eastleigh and Southampton for a total of £595,000 and £9,700,000 a deteriorating market sentiment warrants giving us a profit of approximately 50% of book value. an appropriate reduction in values. I have reiterated ad infinitum my views regarding the Our purchases are far more extensive and brief details foolishness of including property revaluation and are as follows with all prices stated to include stamp Acquisitions during this accounting year derivative revaluations in the Income Statement. For duty:- instance, if our accounts had been produced for the period that ended just four days later, our swaps liability Lowestoft, Suffolk would have been approximately £2,000,000 less. This Beale PLC department store is in London Road Unfortunately, they are now approximately back again North, Lowestoft. It is a modern store with 21,000 to about the Balance Sheet valuation, this probably square feet of selling space spread over two floors, caused by the American Christmas budget failure and situated on the town’s main pedestrianised shopping then by the financial crisis in Cyprus, both factors way street close to Tesco Metro Supermarket, Sports Direct, out of our control. BHS department store and Peacocks. Reporting on the more relevant parts of the business, Wisbech, Cambs our rental income receivable for this period increased to This Beale PLC department store in Little Church Street, £10,781,000 compared to £8,961,000 the previous just off The Market Place, is a modern, two storey store year which is mainly due to additional property containing 26,000 square feet of selling space and sited investment. Worth noting is the fact that investment in the centre of town. purchases of approximately £7,300,000 completed towards the end of the year will subsequently contribute Beccles, Suffolk a full gross rental income of over £1,600,000 p.a. and This is another Beale PLC department store which is an net income after ground rent of about £1,100,000 p.a. older building consisting of two separate sections as opposed to only one month in the period under adjoining but separated by a small vehicular service review. road. It comprises approximately 17,000 square feet 3 Panther Securities P.L.C. Chairman’s Statement continued over the ground floor with some footage on the first Direct Limited at a rent of £35,000 per annum and floor. The property fronts through from Smallgate to The comprises 1,900 sq ft ground floor sales and a total of Walk and is close to the centre of this market town and 7,700 sq ft. It is located in a prime location in Bradford also to the Tesco superstore. adjoining M&S and gives us enhanced synergies on The above three freehold properties are let on similar block. Textiles Direct have since vacated and we hope management being next to an existing large investment leases to Beale PLC, whereby the rent is a share of to re-let on better terms. department store profits until May 2014, when there is a mutual break which we are likely to utilise to negotiate Liverpool a market rent which would produce an acceptable In November we acquired 14-26 Williamson Street for return on our investment. £1,007,000. This is a modern 30,000 sq ft long leasehold investment held at a fixed nominal ground The price paid for these three properties was rent and is located in a prime, central pedestrianised £2,347,000 of which £300,000 was deferred, payable retail district of Liverpool. The current rental income is in February 2015. £214,000 from the two retail tenants. Huntingdon, Cambs Glasgow In February 2012 we acquired a modern factory Also in November we acquired a feuhold (Scottish premises on 5.5 acre site on the Stukeley Meadows equivalent of freehold) office and industrial site totalling Industrial Estate, one mile north of Huntingdon town 2.26 acres in Ruchill Street, Glasgow. It has 8 tenancies, centre. It comprises 96,000 square feet of which a number of buildings and 88 parking spaces. It cost 90,000 feet is on the ground floor. £504,000 and produces an income of £271,000 per annum. This high return was possible due to the fact The property is currently let VIP Polymers Ltd on an FR&I that there were six leases due to expire in March 2013. lease for 15 years from February 2005 at £190,000 p.a. The Group took the view that it could negotiate lease exclusive with rent reviews in 2015 to 65% of open extensions with enough of these tenants to provide a market rental value. The property cost £1,278,000 and is decent return and re-let some of the vacant space. held on a long lease for a term of 999 years from Most of the tenants are still there but it is likely the rent February 2005 at a fixed rent of one peppercorn. will fall from the initially exceptionally high level. Scunthorpe Coatbridge In August we acquired a vacant, double-fronted Also in the same month, the long leasehold interest of freehold shop unit in Scunthorpe for £250,000. This 18-80 & 84-106 Main Street, Coatbridge was acquired property is situated in a prime corner position in the for £5,760,000. The two neighbouring, well located and High Street. Half the unit is now let to William Hill PLC prominent parades are key retail hubs within Coatbridge, and when fully let we anticipate a high return and an near Glasgow. Together, the parades provide 88,000 increased capital value. Bradford sq ft across 42 retail units. Current tenants include Specsavers, Boots, Co-op Travel, Superdrug, Phones 4 U and the Royal Bank of Scotland. The parade currently In September the freehold of 26 Darley Street, Bradford produces a gross income of approximately £1,230,000 was acquired for £494,000. This unit was let to Textiles per annum with ground rent payable as a proportion of Panther Securities P.L.C. 4 rents collected. Our initial net income after all costs will be due course the CPO was lifted but not before the local approximately £730,000. This investment offers strong vandals and petty thieves of building materials such as returns as well as opportunities for asset management lead, tiles etc., had done their worst. We are now through the letting of vacant units and further discussing with the Council the partial or total demolition development. Progress on Developments Holloway Head, Birmingham Approximately half of this site has recently received permission for demolition and temporary use as a car park. This will at least allow for a financial return pending of the buildings in the parade and some new uses which will bring the property back into use to the benefit of us, the Council and an important part of Wolverhampton town centre. Our current ideas are along the lines of suggestions submitted in the Mary Portas High Street Regeneration Report. the eventual comprehensive development of this huge This brings us to High Street, Margate which, scheme which may proceed when the Birmingham because it was one of the most depressed High Streets residential market picks up. High Street, Croydon This property has partially completed its transformation with over half the ground floor successfully now trading as a Sainsbury’s Local mini market with an adjoining in the country, was chosen by Mary Portas as her first pilot scheme to rejuvenate tired, dying high streets. We were asked to lend a triple fronted vacant unit for fifteen months, rent free, which we willingly did under licence, after spending approximately £15,000 on minor repairs. shop unit available for letting. The upper part has The Margate town centre rejuvenation team created received planning permission for six large flats. We about 20 individual stall units, out of a possible 30, originally wanted to create twelve small flats as there is which were quickly occupied by small, local start up little demand for large family units without parking or businesses to showcase their wares. gardens in the town centre. However, there is excellent demand for smaller units. Of course, to build large units There was a grand opening ceremony attended by costs more proportionally making the scheme less Mary Portas, The Margate Council leader, various local viable. We will therefore try to obtain an amended dignitaries, a local college choir, a few minor celebrities planning permission. and, of course, television cameras. Margate High Street had probably not seen such a huge crowd for over Wolverhampton 40 years! I have previously mentioned our properties in Victoria Street which are located in the very heart of About half of the initial pop-up stores are still there but Wolverhampton. These properties, purchased some there has been disquiet in the Town Centre Team when years ago for improvement and letting, unfortunately did they discovered that the project does not qualify as a not live up to expectations. This was due to the failure of charity and may have to pay full rates. The rates are a proposed grandiose comprehensive town centre enormous for the unit and the project may struggle. The scheme that was caused by the financial meltdown, and previous tenant was in administration and did not have unfortunately not before a Compulsory Purchase Order to pay them but once the Town Team took over, rates (“CPO”) was placed on the entire block. This meant any became payable. These rates may be three times the money invested in the property would not be reimbursed correct level, which will obviously hinder their efforts but under the terms of the eventual compensation paid. In may be corrected on appeal. 5 Panther Securities P.L.C. Chairman’s Statement continued I actually read the whole Portas report and found for the Ramsgate High Street – Thirty flat units; Broadstairs most part it was excellent although lacking in High Street – Two large shops plus eleven flats; understanding from a landlords’ perspective and the Wickford, together with adjoining owners, a possible problems and constraints faced by them. Her particular 60 houses on redundant factories adjoining a residential genius is in the retailing, merchandising and publicity area; Heybridge, Maldon – Two acres of surplus generation that is essential with any new ideas and also industrial land adjoining a residential area suitable for in galvanising the locals in trying to help themselves. housing. She was there to help in all this, whilst the cameras were still rolling. St Aldate Street, Gloucester Above this block of 17 shops, which are mostly let, this property contains 21 flat units that have been vacant for some time. Our refurbishment of them is now complete and we have provisionally agreed to let them in their entirety to a Housing Association at £72,500 per annum. This will mean a great improvement to the profitability and capital value of this property. High Street, Perth After tenant requirement works had been carried out at this shop, it was let to Sainsbury’s Plc at £45,000 per Under the new attitude and desire to promote residential development, there are also one or two other larger sites suitable for development. Tenant Activity During the accounting year we lost a total of 29 tenants who produced approximately £470,000 per annum net. During the same period we let to 48 tenants at rents totalling £742,000 per annum yielding a net gain of approximately £272,000, before allowing for tenant incentives etc. We also concluded 16 lease renewals or extensions. These figures do not include income from new acquisitions or disposals. annum as a convenience store. We have a similar sized unit next door whose desirability will now have Tax improved. Wimbledon Studios This year our Corporation Tax payable is £372,000. We also paid around £450,000 in stamp duty tax, approximately £450,000 in vacant rates, £172,000 Our associated company’s first year turnover was £1 National Insurance tax and also £85,000 in non- million. In its second year it reached £2 million and is recoverable VAT thus contributing approximately £1.5 still increasing. Whilst it has not yet reached the million to government coffers. As I said last year, a 1% profitability breakthrough point, the facilities it offers and cut in Corporation Tax on profits is of minor significance the huge publicity it generates are bringing more and but welcome. more business its way. I am hopeful that in due course this may prove to be one of our more successful High stamp duty inhibits investment, and so in this most investments. recent Budget, mindful of this, the Chancellor reduced stamp duty on investing in equities on the AIM market Residential Development Opportunities from ½% to nil with a view to assisting growing The Budget proposals to encourage new residential companies raise finance. Where is the logic then in development may help some of the schemes which we charging 4% stamp duty on commercial property already have under consideration on existing investment over £500,000, when a company raises properties/sites. money by selling and leasing back the property it Panther Securities P.L.C. 6 occupies, either for expansion or repaying finance rating revaluation that is due because practically all costs? properties outside of the M25 would have a big reduction in their rateable value due to falling values. A Budget that helps people buy their own homes is always welcome and if it encourages new house Hundreds of companies go bankrupt because they are building our economy will also benefit. Charging stamp unable to close non-profit making shops which would duty of 7% on high value and 5% on slightly less still bear full rates, often more than the rent paid to a valuable residential properties considerably reduces the Landlord who will have invested hard earned tax paid amount of high value sales. Virtually all people selling money to purchase the property and is often willing to high value properties either move up or down the make temporary concessions. Cautious people who property ladder, freeing up another purchaser to do the have wisely invested in property for their retirement who same causing activity in the market and so on and so then have the misfortune to lose a tenant are then on whereas a first time buyer creates a single unit perniciously and doubly punished by being forced to purchase of economic activity. pay vacant rates. This is iniquitous. I could go on for much longer on this subject showing how dreadfully A wealthy new purchaser is more likely to spend money foolish it is for the well-being not just of the British on redecoration and refurbishment including the economy, but also social cohesion, but instead I will purchase of new furniture, beds and appliances. move onto the next subject! Unfortunately, rapacious, greedy and daft high taxation policies that affect the upper level housing market Political Donations or “Funds For Fighting Fiscally means less house sales, less retail sales, less Foolish Fiddling Fibbers” manufacturing, less employment and thus less taxes Most of you will know I have been a supporter of the are collected overall. Conservative Party since Winston Churchill led the party which was obviously well before I could vote! For many Any sensible business makes profitable use of its years I have asked shareholders to support them assets, and governments should try to do the same for financially. Last year the resolution to pay £25,000 to the country it claims to govern. Throughout the UK, their funds was supported by approximately 4 out of 5 12.5% of this country’s shops are vacant, depressing shareholders who voted (I never vote my family’s our High Streets. We all know the changing sales holdings on these resolutions). I was already having my pattern of the modern era, due to the non shop-rent doubts and feeling unhappy about all the anti-property paying internet websites and super-duper large, out of and anti-enterprise measures formulated by the town stores with free parking, and also all not subjected previous government and sadly increased by this new to vengeful personnel in uniforms persecuting drivers one (too boring to list). I therefore decided not to give who want to shop – all play a large part in this change! the approved donation. But what does our listening government do? It puts the To say I am disappointed with progress since the retail property industry into its “care pathway” charging Conservatives and their civil partners have been in ever rising uncommercial rates which increase annually control of the commanding heights of our economy is due to inflation which is caused by government an understatement. Whilst I still have Conservative mismanagement. THESE CHARGES ARE PAYABLE sympathies, this coalition or marriage between the WHETHER A PROFIT IS MADE OR NOT. It delays a Conservatives and Liberal Democratic parties appears 7 Panther Securities P.L.C. Chairman’s Statement continued to have the European Union as a third party to the Shareholders with approximately 10,000,000 shares marriage which is an even worse basket case than our combined have already indicated that they will take up own government. I believe the majority of this country’s the share allocation. Personally, I will take up problems stem from our membership of the European approximately one quarter of my maximum allocation Union. Although we have been promised a referendum as my dividend is my major source of income (I take no on the subject, it has so many caveats that it is unlikely salary, or drawdown on my pension fund). I believe in to ever happen. Any shareholder with over 5% equity in a public company can requisition the company to include a resolution for consideration at an AGM. My personal holding is well in excess of this level. Therefore, this year I have put forward a resolution to donate £25,000 to the UK Independence Party in the hope they can generate some new blood and guts into our government. As with all other votes on political donations, I will not vote the shares I control. Dividends On 30th November 2012 we paid an interim dividend of 3p per share. This year we are proposing a final dividend of 9p per share. I have often been asked by shareholders if we could give a share alternative to the cash dividend because many found it difficult or disproportionately costly to purchase a few hundred extra shares. In the last three accounting years we have invested £40,000,000 in what we believe are good long term property investments. Therefore, we have decided to henceforth offer a scrip dividend. A scrip dividend will assist the company by keeping funds within the business to invest in other opportunities. The scrip dividend also has the being in the same boat as my shareholders. I just have a much larger paddle! The appropriate forms will be included with the accounts when posted to shareholders. Prospects Those of you who read my ramblings may recall my “chopped liver syndrome” story that I recounted in our accounts for the year ended 31st December 2008. Briefly put, it was that after a severe case of chopped liver poisoning, it took me at least three years before I could face eating it again. I likened this to the investment market suggesting that those who had suffered severe financial shocks and indigestion would take at least three or more years before they recovered their appetite to invest. This is now happening. With the stock market rising with renewed confidence, the normal course of events would be for property investment to follow. One of our independent valuers once suggested to me that much of our portfolio comprised opportunity property, meaning that if certain action is taken successfully the values rise disproportionately upward to normal inflation adjustments. These changes could be re-letting a vacant property, obtaining planning advantage for shareholders by providing them with the permission for a different use, acquiring an adjoining flexibility of choosing between their usual cash dividend property (back land), utilising the space better (vacant or to take the share alternative without the cost of upper parts), changing the lease terms or tenant brokers fees or stamp duty. The value of the shares that covenant and many other possibilities, all of which our would be received would have the equivalent value of Group understand well. Current times are more difficult the dividend due, based on an average share price over than in the past because not only are we facing a feeble 5 working days from the ex-dividend date. financial recovery, but also battling against Panther Securities P.L.C. 8 uncomprehending government incompetence, both centrally and locally. However, I still believe we can face the future with confidence because of our basic corporate mantra which is to have a large spread of different types of property i.e., department stores, shops, factories, offices and residential investments, spread over more than 100 different locations from Perth to Plymouth with a huge variety of tenants ranging from household names down to one-man band operations. From Sainsbury’s, Poundland and William Hill covenants to tattoo artists and nail bars or garage repair workshops, all of which provide desirable services to the community and most of whom are capable of paying their rent which produces a substantial rental income, for us, with prospects of growth. Finally, I wish to thank our small but dedicated teams of staff, financial advisers, legal advisers, agents and accountants for all their hard work during the past year which has been even busier and more intensive than usual and, of course, our tenants, most of whom pay their rents despite a difficult trading environment. Andrew S Perloff Chairman 24th April 2013 9 Panther Securities P.L.C. Chairman’s Ramblings There was much excitement in the archaeological world I believe he had been waiting for many, many months last September. Researchers believed that beneath a for permission to be granted and that whilst engaged in council car park in Leicester they had unearthed the the Battle at Bosworth Field he received a message that bones of one of England’s most famous kings, Richard III. the permission certificate was almost ready. So excited Richard III supposedly died in 1485 at the Battle of Bosworth Field bringing an end to his two year reign. It is widely believed that he was the last English King to die in battle. Nowadays, most perceptions about Richard III are based on Shakespeare’s version of events or upon Laurence Olivier’s portrayal of the king as a limping, hunchbacked, cunning killer, responsible for the death of his two young nephews in the Tower of London, along with many others who may have been an was he that he rushed off on his trusty steed, leaving a King’s double at the battle in his place. His haste was to be in vain as when he reached the council’s parking field he had to wait, and wait and wait……. He was a king – certainly not accustomed to being kept waiting. After a week his patience finally ran out and in a burst of frustrated anger he bellowed loudly “A HOUSE, A HOUSE, MY KINGDOM FOR A HOUSE”. The strain unfortunately proved too much, for he then fell down dead with a heart attack. impediment to his ascent to the Throne. What happens next is easy to imagine. He lay there for I have however long felt that history had misjudged Richard III and finding his bones in a council car park was the final clue to what I believe happened. Shakespeare wrote his play based on verbal stories that had been passed down from generation to generation as there was little written unbiased, factual reporting at that time – no Daily Mail or Telegraph. English as we weeks because the gravediggers were on strike wanting a reduction in their 120 hour working week for in those days there were plagues galore, wars, much killing and death came often and early. Almost certainly the rubbish gatherers were also on strike because the councillors wanted a share of the profits from the rubbish collectors’ scavenging rights. know it would be barely comprehensible to today’s ears Thus the body of Richard III was gradually swallowed and regional accents were particularly hard to up beneath piles of rubbish and forgotten about. No understand. It makes sense therefore that when doubt in due course the council built over the site with Shakespeare was told that Richard III’s dying words a prestigious tavern and luxurious wenching hall for were “A HORSE, A HORSE, MY KINGDOM FOR A visiting councillors, or dignitaries from towns with which HORSE” he actually misheard and mistakenly assumed they were twinned and entwined. that Richard fell from his horse and was killed in battle and so Shakespeare’s play ended Richard III’s reign in that way. Over 500 years later not much has changed. Pickles, son of Yorkshire, a modern day lord, bestrides the country like a mighty colossus loudly berating all We know Richard III liked to build castles. I believe it councillors “100,000 houses, 100,000 houses, our was much more likely he had applied for permission to kingdom needs 100,000 more houses” and of course, build a very large turreted, fortified house for himself and with little effect. his huge retinue somewhere in Leicestershire to defend his northern estates. Many thousands of people wait and wait and wait for planning permissions in months and years of agonising frustration whilst the councillors and bureaucrats live the Panther Securities P.L.C. 10 high life, in easy jobs with generous pensions, partly Hitler walked up to him, pinned an iron cross to his paid for when they collect their share of the scavenging chest and announced “You single-handedly wiped out rights now called parking revenues (charges and fines). a gypsy camp whose wedding party kept me awake for Was it Shakespeare who said “A plague on both your two nights running. A great General cannot plan battles without his sleep! Name your greatest wish and it shall houses”? He obviously meant the Lords and the be yours.” Commons not the Montagues and Capulets as widely believed. My ramblings can leap through time and so we now arrive in April 1942 and war-torn France is occupied by Germany’s front line Panzer Divisions. Hitler was visiting his troops in preparation for a special awards ceremony in celebration of his birthday the following day. He decided to take an early evening stroll along the banks of the River Seine with his faithful Labrador, Heinz. Although Heinz was generally a well-behaved dog, he had been trained by Hitler. So when a black swan swam past them, the dog instantly jumped into the river to attack it, pulling Hitler in behind him. Hitler could not swim and began thrashing around in the water, sinking and resurfacing time after time. The only person to witness his distress was Hymie Le Cohen who immediately threw off his coat and jacket, jumped in and saved both Hitler and his dog. Hitler’s aides came running to help their spluttering and soaking Fuhrer. They were instructed to take Hymie to the camp, let him have a bath, dry and iron his clothes and the following morning a special birthday award would be bestowed upon him. At nine a.m., the Panzer’s 1st, 2nd & 3rd Division were all lined up for inspection and additionally the four people who were to receive Hitler’s special award were in the front line ready to receive the extra special personal service award of the Fuhrer. “My Fuhrer, after the war I would like a magnificent schloss in Bavaria with a 1,000 hectare forest surrounding it where I can hunt and shoot every day at my leisure”. Hitler replied “Your wish is noted and will be granted”. Hitler moved to the next person, a rotund man with rosy cheeks wearing a clean butcher’s apron, this being his profession as well as being Hitler’s personal chef. Hitler approached him, pinned an iron cross on his chest and said “Fleishman, you have been an exceptional chef providing wonderful meals and always tasting my food before me. What is your greatest wish?” Fleishman replied “After our great victory I want to retire to a farm with 1,000 hectares and a herd of fine Friesian cattle in Austria”. Hitler replied “Your wish is noted and will be granted”. The next man, slender but smart, was Hitler’s tailor. He wanted and was promised the largest department store situated on the main shopping street in Dresden. Finally, Hitler came to the last and smallest man in the line, Hymie Le Cohen. Hitler looked at Hymie and instantly realised he was a Jew, his powers of observation helped by the fact Hymie had a large yellow Star of David sewn onto his coat lapel. Hitler looked at Hymie and announced “A Jew could not possibly be so brave as to jump into the fast flowing river and save the Fuhrer, there must be a mistake on your papers”. Hitler then strode up to Hymie, tore off the yellow Star of David, threw it to the ground and loudly announced The first was Heinrich, a 6’6”, big muscle-bound soldier “You are now an Honorary Aryan. What is your greatest with blue eyes, blonde hair and a look of utter devotion. wish?” “Please Herr Fuhrer, I would love to have a plate 11 Panther Securities P.L.C. Chairman’s Ramblings continued of pickled herrings and gefilte fish”. “Is that all?” Hitler To paraphrase Lady Bracknell: “For a government to replied. “It is my greatest wish”, Hymie answered. Hitler lose just one tax payer earning over £1,000,000 per ordered his aide to deal with this wish immediately. year is unfortunate. To lose ten such high tax payers Hitler turned round and to the sound of trumpets blowing and three stupendously loud sieg heil salutes from his troops, Hitler left the parade ground. The three other award winners crowded round Hymie Le Cohen. smacks of carelessness but to lose 10,000 of these enormously high earning tax payers shows colossal incompetence, passing through insanity and reaching on financial suicide.” They mocked him and laughed at him saying how The disclosure of this golden nugget of information is of stupid he was to ask for so little from the most powerful course only the tip of the iceberg of the stupidity of our man in the world. Hymie replied “Mark my words, taxation system. Heinrich, you won’t get your schloss and 1,000 hectare forest, Fleishman, you won’t get your big farm and cattle. Mr Tailor, you won’t get your Dresden department store but I might, just might, get my plate of pickled herring and gefilte fish!” Much of the legislation regarding taxation, employment rights, health & safety, environmental concerns etc., are equally dysfunctional and would appear to have been created by a team of vindictive idiots who have been locked up in an asylum for the insane with the brief of Across our country those who have survived the long creating laws and regulations for the whole country wait for planning permission find that in return for the which very, very few people can understand. right to develop – the local petty Hitlers are demanding the use of either half the block of flats or houses to be built for community use (i.e., at a loss), a new library, road, public hall, meeting room, money for parking places (never built), new parks, statues, grants, even mini tunnels for newts! However, over the years I have encountered many of our MPs, former MPs and legislators, not just Conservatives but also those from other parties. You may be surprised to learn that I have found most of them pleasant and intelligent people, often with a keen sense of humour, earnestly dedicated to their beliefs These are called Section 106 payments. The correct after consideration of their own personal interests. term is blackmail – and like the soldier, the butcher and the tailor, they rarely get them. So how come they make such a ‘balls-up’ of our laws and regulation systems? As always, I look way back Unfortunately, as always, the real loser is the community into my past experiences to see if I can find a reason for who do not obtain the extra homes needed to house this dichotomy between the pleasant and reasonable future generations or the better shops, offices and legislator and the ridiculous outcomes of the laws they factories to work in and the boost to the economy that implement. extra jobs from development and building creates. So councils’ please note. LESS MIGHT MEAN MORE!! manufacturing optical company, which was gradually Many years ago, when our Group was originally a In his penultimate Budget, our Chancellor announced that the year after tax rates for high earners were increased to 50% from 40%, the number of people declaring an income in excess of £1,000,000 per annum fell from 16,000 people to 6,000 people. making a change to be a property company, our then Board decided, in view of the constant and increasing losses from the optical manufacturing operations, that this part of the business should go. It was sold in a complicated transaction (brief details of which I Panther Securities P.L.C. 12 mentioned in my ramblings in the Interim Report of boxes with the appropriate order for the frame and the 30 June 2009). The Contract for Sale contained an agreement that on the completion date, all our stocks of lenses and frames prescription of the lenses required. The Stock Manager would allocate the lenses and frame and then distribute the boxes to the various finishing departments to be worked on and assembled prior to dispatch to the would be valued at current value and paid over to the opticians. optical subsidiary companies that were selling all of their assets, the Group retaining the quoted holding I am sure most of you know that depending how short company and property owning subsidiaries. or long sighted you are, the glass lenses become Most of the stock value was in glass and plastic lenses, which don’t go out of fashion and are probably much progressively thicker. The lenses for short-sightedness range from -1 up to -20 diopters in ¼ diopter stages. the same as today. We were comfortable with this The vast majority of people need between -1 to -6 and methodology of dealing with the stock payment as our the higher the number the thicker the lens (at -20 nearly stock was valued regularly. We had estimated we would 1 inch thick). The higher the number the more receive over £200,000 for this stock. expensive and less commonly used the lens. However, when all the other initial payments had been The lenses were delivered in cardboard boxes of 20. paid and the stock figure came in, calculated by When a box of stock was down to only two or three independent optical stock assessors, we were units the Stock Manager would order another box from surprised to learn that it was over £50,000 less than the lens manufacturer. It transpired that when the Stock anticipated. Manager was on his twice a year holidays, the former Chairman’s teenage son would deputise and take his I was, of course, furious. My initial reaction was that a place. mistake had been made. I wondered whether stock had been stolen or was a stock fraud possible? It transpired He was, I am reliably informed, honest and quite bright. that none of these things had happened. Whenever a box of lenses neared the end he We examined the contract more closely and realised that the clause for assessing stock value – which was perfectly normal – stated that stock was priced at current wholesale prices but only one year’s normal usage would be included as current stocks and paid for. A large part of our stock was more than a year’s usage. We had always been short of cash so how could this have happened? I made enquiries about stock security and ordering systems which appeared very simple and secure. The stock was kept in a large locked room, all daily optical orders were delivered to the stockroom in small shallow industriously did what he had been instructed to do and would promptly order another box of lenses. No-one had told him not to order the very thick lenses in whole box loads but only to order one or two pairs of these lenses at a time. Therefore, over the course of about four school holidays we had over £50,000 of slow moving stock that may have taken more than five years to use up. With this unexpected and substantial loss, we were unable to pay all of the manufacturing subsidiary companies creditors and the parent company had no spare money to chip in, hence the optical companies were put into receivership and many long term optical business suppliers and service providers went unpaid. 13 Panther Securities P.L.C. Chairman’s Ramblings continued The Chairman’s son was honest and trustworthy, with You can therefore see what a ‘balls-up’ you can make nothing but the best intentions but he had absolutely if you have NO EXPERIENCE of the matter in hand. NO EXPERIENCE of optical stocktaking. The lawyer who dealt with the sale on our behalf also had LITTLE EXPERIENCE of the optical business and was not therefore able to advise on the particular stock valuation clause. To the best of my knowledge none of our legislators or their advisers despite their expensive educations and degrees have the slightest experience of running a business or indeed any experience of the matters they legislate upon and that’s why we’re in the mess they And one more lazy sod took for granted that the stock have created. valuation clause would correctly provide the appropriate value, i.e., ME – I WAS THAT LAZY SOD HAVING INSUFFICIENT EXPERIENCE of our stock systems and I assumed previous valuations were correct! Andrew S Perloff Chairman 24th April 2013 Panther Securities P.L.C. 14 Operating and Financial Review Key features of the year The year ended 31 December 2012 was another year in which we continued to invest strongly with a further £11.4 million of property acquisitions (£21.0 million in 2011), utilising £8.5 million of our loan facility. Many of these acquisitions were high yielding, bought from keen sellers, and were purchased using our floating facility (not fixed like the bulk of our loan facility) which has a relatively lower interest rate. Three of these high yielding properties were purchased in November 2012, with a combined purchase price of £7.3 million, producing approximately £1.1 million of annual net rental income. We were previously paying a non-utilisation fee, for non- draw down of our loan facility and as such our marginal increase in financing costs on these properties is only approximately £150,000. This year we only received a month of benefit, due to the completion in late November. We look forward to enjoying a full years benefit of the income over our financing costs, (after taking account of any additional costs involved of management) which should improve overall profits. After two years of small growth in valuation of our portfolio, unfortunately we have seen a reversal of some of that value due to a weakening property investment market. Our rental income was £10.8 million in 2012 compared to £9.0 million prior year. As mentioned above we expect our rental income to continue to increase following acquisitions. Financing The Group entered into facilities in July 2011 of £75.0 million with HSBC and Santander under a club loan facility. We drew down a further £8.5 million in the year. The Group still has £6.5 million of this facility available and at the year end had £2.8 million cash for future investment and trading activities. We are also looking to dispose of non-core properties where we can get a good price, to provide us with more funds to seek higher yielding assets. Once we have utilised our remaining loan facilities we may consider other alternative finance, including raising new bank loans or bond issues. Financial derivative Unfortunately we have seen a further increase in our instruments of long term liability on these financial £777,000 (£10.6 million in 2011) with the total long term liability on our balance sheet being £20.7 million. We are hoping that this has now plateaued and post year end we have seen some reversal of this liability. These financial instruments (shown at note 30) are our interest rate swaps that were entered into to remove the risk of interest rates increasing, by fixing our interest costs. However, in economic uncertain times, as we have seen over the last few years, there can be large swings in the accounting valuations, as small movements in the expectation of future interest rates can have a significant impact on their market value; this is partly due to their long dated nature. These contracts were entered into in 2008 when long term interest rates were significantly higher than at the balance sheet date. In a hypothetical world if we could fix our interest at current rates and term we would overall have much lower interest rate costs. Of course we cannot undo these contracts that were entered into historically but for accounting purposes these financial instruments are compared to current market rates, with the additional liability compared to the market shown on our balance sheet. Key Ratios Gross Profit Margin (Gross profit/turnover) Gearing (debt*/(debt* + equity)) 2012 2011 69% 53% 65% 47% Interest Cover** 1.25 times 1.97 times Finance cost rate (finance costs/average borrowings for the year) Yield (rents investment properties/average market value investment properties) 6.9% 5.7% 7.4% 6.7% * Debt in short and long term loans, excluding any liability on financial derivatives ** Profit before taxation excluding interest, less movement on investment properties and on financial instruments, divided by interest 15 Panther Securities P.L.C. Operating and Financial Review continued Financial risk management The review of financial risk management is contained within the Corporate Governance statement. Other non financial risks The Directors consider that the following are potentially material non financial risks. Risk Reputation Impact Action taken to mitigate Raise capital/deal flow reduced Act honourably, invest well Regulatory changes Transactional and holding costs Seek high returns to cover additional costs. increase Lobby Government. People related issues Loss of key employees/low morale/inadequate skills Maintain market level remuneration packages, flexible working, training. Strong succession planning and recruitment. Computer failure Loss of data, debtor history External IT consultants, backups, offsite copies Asset management Wrong asset mix, asset illiquidity Draw on wealth of experience to ensure balance between income producing and development opportunities. Continue spread of tenancies and geographical location. Panther Securities P.L.C. 16 Report of the Directors Company number 293147 The Directors submit their report together with the audited financial statements of the Company and of the Group for the year ended 31 December 2012. Directors’ Responsibilities Statement The Directors are responsible for preparing the annual report, the Directors’ remuneration 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 prepared the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and the Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). The financial statements are required by law to give a true and fair view of the state of affairs of the Company and the Group and of the profit or loss of the Group for that period. In preparing those financial statements the Directors are required to: l Select suitable accounting policies and then apply them consistently. l Make judgements and estimates that are reasonable and prudent. l State that the Group financial statements comply with IFRSs as adopted by the European Union. l State that the Company financial statements comply with United Kingdom Generally Accepted Accounting Practice. l Prepare the financial statements on the going concern basis, unless it is inappropriate to presume that the Group will continue in business, in which case there should be supporting assumptions or qualifications as necessary. This statement should cover both the parent company and the Group as a whole. The Directors are also required by the Disclosure and Transparency Rules of the Financial Services Authority (as of 1 April 2013 the Financial Conduct Authority) to include a management report containing a fair review of the business and a description of the principal risks and uncertainties facing the Group and Company. The Directors are responsible for keeping adequate accounting records that disclose with reasonable accuracy at any time the financial position of the Company and the Group and to enable them to ensure that the financial statements and the Directors’ Remuneration Report comply with the Companies Act 2006 and, as regards the Group financial statements, the IAS Regulation. They are also Article 4 of 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. Each of the Directors, (refer to section of annual report containing details of Directors) confirm that, to the best of each person’s knowledge and belief: l The financial statements, prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of liabilities and financial position and profit or loss of the Group; and the assets, l The financial statements, prepared in accordance with United Kingdom Generally Accepted Accounting Practice, give a true and fair view of the assets, the Company; and liabilities and financial position of l The Report of the Directors contained in the Annual Report includes a fair review of the development and performance of the business and the position of the Company and Group, together with a description of the principal risks and uncertainties that they face. the included corporate The Directors are responsible for the maintenance and financial and integrity of information the Group website, on www.panthersecurities.co.uk. Legislation in the UK governing the preparation and dissemination of financial from legislation in other statements may differ jurisdictions. Going concern The Group’s business activities, together with the its future development, factors likely to affect performance and position are set out in the Chairman’s Statement and Operating and Financial Review. The 17 Panther Securities P.L.C. Report of the Directors continued financial position of the Group, including key financial ratios is set out in the Operating and Financial Review. In addition, the Report of the Directors includes the Group’s objectives, policies and processes for managing its capital; the corporate governance section includes details of risk management its financial objectives; and the notes to the accounts provide details of its financial instruments and hedging activities, and its exposures to credit risk and liquidity risk. The Group is strongly capitalised, has reasonable liquidity together with a number of long term contracts with its customers many of which are household names. The Group also has strong diversity in terms of customer spread, investment location and property sector. The Group has recently refinanced and has a long term loan in place and excellent relations with its lenders. The Directors believe the Group is very well placed to manage its business risks successfully and have a good expectation that both the Company and the Group have adequate resources to continue their operations. For these reasons they continue to adopt the going concern basis in preparing the financial statements. Principal activities, review of business and future developments The principal activity of investment and dealing in property and securities. the Group consists of The review of activities during the year and future developments is contained in the Chairman’s Statement and Operating and Financial Review. Company’s objectives and management of capital Our primary objective is to maximise long-term return for our shareholders by stable growth in net asset value from a consistent and and dividend per share, sustainable rental income stream. The Company’s principal capital base includes share capital and retained reserves, which is prudently invested to achieve the above objective and is supplemented with medium to long-term bank finance. Results and dividends The loss for the year after taxation, amounted to £2,948,000 (2011 – loss of £850,000). Panther Securities P.L.C. 18 The interim dividend of £506,000 (3.0p per share) on ordinary shares was paid on 30 November 2012. The Directors recommend a final dividend of £1,518,000 (9.0p per share) payable on 31 July 2013 to shareholders on the register at the close of business on 21 June 2013 (Ex dividend on 19 June 2013). The total dividend for the year ended 31 December 2012 being anticipated at 12p. We are proposing to give shareholders the option of a scrip dividend for the 2012 final dividend of 9p per share, with the default option being cash. Financial risk management The review of financial risk management is contained within the Corporate Governance statement. Donations During the year the Group made £nil political donations (2011 – £24,000) to the Conservative Party. The Group makes donations to charities through advertisements at charity events and in the diaries of charities, the total of which in 2012 was £4,000 (2011 – £4,000) and also we became a Foundation Partner of the preferred charity of the property industry, Land Aid, donating £10,000. Directors and their beneficial interests in shares of the Company The Directors who served during the year and their beneficial interests in the Company’s issued share capital were: Ordinary shares of £0.25 each 2011 2012 A. S. Perloff (Chairman) B. R. Galan (Non – executive) P. M. Kellner (Non – executive) J. T. Doyle J. H. Perloff S. J. Peters 4,179,713 4,176,213 306,239 17,000 60,000 105,000 170,000 306,239 17,000 60,000 107,500 173,500 A. S. Perloff and his family trusts have beneficial interests in shares owned by Portnard Limited, a Company under their control, amounting to 7,737,336 (2011 – 7,737,336). have been There shareholdings since 31 December 2012. changes no in Directors’ interest No beneficial is attached to any shares registered in the names of Directors in the Company’s subsidiaries. No right has been granted by the Company to subscribe for shares in or debentures of the Company. Investment Properties The Directors have revalued the property investment portfolio to market value as at 31 December 2011 and 2012. An independent valuation was previously undertaken as at 31 December 2010 by GL Hearn. Third party indemnity provision for Directors Qualifying third party indemnity provision for the benefit of 6 directors was in force during the financial year and as at the date this report was approved. Health and safety The Group’s policy is to provide and maintain safe and healthy working conditions, equipment and systems of its employees and to provide such work for all information, training and supervision as they need for this purpose. Employment The Group recognises the contribution its employees make to its continued success and acknowledges the need to attract and retain employees of high calibre through the operation of an equal opportunity policy. It believes in continuous development and the support of employees to benefit both the Group and the individual. Environment and community issues A small part of the Group’s business involves the development of brown field sites and finding uses for redundant buildings which overall contributes to environmental improvement. The Group also invests in neighbourhood shopping parades which provide important local amenities to communities. The Group also participates in a recycling programme for some of the office waste it generates. Capital structure Details of the issued share capital of the Company are shown in note 25. The Company has one class of ordinary shares which carries no right to fixed income. Each share carries the right to one vote at general meetings of the Company. There are no specific restrictions on the size of a holding nor on the transfer of shares, which are both governed by the general provisions of the Articles of Association and prevailing legislation. The Directors are not aware of any agreements between holders of the Company’s shares that may result in restrictions on the transfer of securities or on voting rights. No person has any special rights of control over the Company’s share capital and all issued shares are fully paid. With regard to the appointment and replacement of Directors, the Company is governed by its Articles of Association, the UK Corporate Governance Code, the Companies Act and related legislation. The Articles themselves may be amended by special resolution of the shareholders. Under its Articles of Association, and subject to prior approval of shareholders, the Company has authority to issue a further 13,131,000 ordinary shares. Contracts of significance There are no contracts with controlling shareholders or key contractual arrangements. There were no changes to the Company’s share capital during the year. At the year end there were 16,869,000 ordinary shares in circulation. Payment policy and practice The Group agrees payment terms with each of its major suppliers and abides by these terms, subject to satisfactory performance by the supplier. Trade creditors of the Group at 31 December 2012 were equivalent to 74 days purchases (2011 – 56), based on the average daily amount invoiced by suppliers during the year. Status Panther Securities P.L.C. is a Company listed on the UK Stock Exchange and is incorporated in Great Britain. 19 Panther Securities P.L.C. Report of the Directors continued Auditors In the case of each person who was a Director at the time this report was approved: l so far as that Director was aware there was no relevant available information of which the Company’s auditors were unaware; and l 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 Company’s auditors were aware of that information. This information is given and should be interpreted in accordance with the provisions of s418 of the Companies Act 2006. A resolution to re-appoint the auditors, Nexia Smith & Williamson, will be proposed at the next Annual General Meeting. This report was approved and authorised for issue by the Board and signed on its behalf by: S. J. Peters Company Secretary Dated: 24th April 2013 Deneway House 88-94 Darkes Lane Potters Bar Hertfordshire EN6 1AQ Panther Securities P.L.C. 20 Corporate Governance Panther Securities P.L.C. supports a high standard of Corporate Governance and has, during 2012, complied with the UK Corporate Governance Code issued by the Financial Services Authority (as of 1 April 2013 the Financial Conduct Authority), subject to the points detailed below. UK Corporate Governance Code The Company has applied the principles and provisions set out in section 1 of the UK Corporate Governance including both the main principles and the Code, supporting principles throughout the accounting period except as detailed below. Further explanation of how the principles and supporting principles have been in the Directors’ Remuneration applied is set out Report. The Board The Board currently consists of six Directors, of whom two are non-executives. It meets regularly during each year to review appropriate strategic, operational and financial matters and otherwise as required. In the year the Board met three times with all members present. It supervises the executive management and a schedule of items reserved for the full Board’s approval is in place. Panther Securities P.L.C. has an Executive Chairman who is also the Chief Executive. The UK Corporate Governance Code requires that there should be sufficient division of duties between Board members and that the Company should have at least 3 non-executive Directors, however the Board has carefully considered the division of the duties of the Chairman and Chief Executive (this dual role is not compliant with the UK Corporate Governance Code), together with the number of non-executive Directors and has concluded, given the size of the Company and Group, that the present arrangements are appropriate. Each Board member has responsibility to ensure that the Group’s strategies lead to increased shareholder value. The performance of the Board, its Committees and individual Directors are not subject to specific evaluation. The Directors consider that the small size of the Group and Board does not warrant a formal evaluation process. Based on the close working relationships of the Board and the Committees, the Directors are satisfied with both the performance of the In making decisions Board and its Committees. throughout the year, the Board is strongly aware of its responsibilities to the Company’s Shareholders. Biographical details of Executive Directors:- Andrew Perloff (Chairman) He has 50 years’ experience in the property sector, including almost 40 years’ experience of being a Director of a Public Listed Company mainly as Panther’s Chairman. He has significant experience of corporate activity including several contested take-over bids and has also served on the Board of Directors of 6 other public listed companies. Simon Peters (Finance Director) He is a full member of the Chartered Institute of Taxation and a Fellow of the Chartered Certified Accountants and was formerly with the KPMG Corporate Tax Department and Lombard Bank Finance Department and was previously also a Non-executive director of Beale PLC. He joined Panther in 2004 and was appointed Finance Director in 2005. John Doyle (Executive) He is a member of the Royal Institution of Chartered Surveyors and was previously with London Electricity plc and Chesterton International plc, having worked in the property sector since 1989, he joined Panther in January 2001. His areas of responsibility include property acquisition and disposal, asset management and development. He was appointed Executive Director in 2005. John Perloff (Executive) Previously with a commercial West End agent specialising in retail acquisitions and disposals, he joined Panther in 1994. His areas of responsibility include property lettings and acquisitions. He was appointed Executive Director in 2005. Biographical details of Non-executive Directors:- Bryan Richard Galan (Non-executive) Chairman of the Remuneration Committee. He is a Fellow of the Royal Institution of Chartered Surveyors. joint Managing Director of He was Amalgamated Investment and Property Co. Limited and was previously a Non-executive Director of Rugby Estates Investment Trust Plc. formerly 21 Panther Securities P.L.C. Corporate Governance continued Peter Michael Kellner (Non-executive) Chairman of Audit and Nomination Committees. He is an Associate of the Chartered Institute of Bankers and of the Institute of Taxation. He was formerly joint General Manager of the U.K. banking operations of Credit Lyonnais Bank Nederland NV. The non-executive Directors were appointed and reappointed on their experience in the property and related industries and their continuing advice and independence. Peter Kellner and Bryan Galan do not act as non-executive for any other company. Neither is considered to be the senior independent Director. Both non-executive Directors are of the highest calibre. Each is independently minded with a breadth of successful business and relevant experience. They are entitled to the same information as the Executive Directors and are an integral part of the team, making a most valuable contribution. The board consider both non-executive Directors to be independent, and to have sufficient expertise in accountancy and audit. The UK Corporate Governance Code states that it is advisable that non-executive Directors should serve no more than nine years on the Board from the date of their first election. However the Group’s Board believes that both non-executive Directors, who have served on the Board for longer than the recommended period, are independent in character and judgement and are not affected by any matters that would impact on these qualities. Auditor Independence and Objectivity Nexia Smith & Williamson conducts the annual statutory audit. In forming their opinion of the independence and objectivity of the external auditors, the Audit Committee takes into account the safeguards operating within Nexia Smith & Williamson and their Associates. Regard is given to the nature of remuneration received for other services provided by Nexia Smith & Williamson and their Associates and confirmation is sought from them that the fee payable for is adequate to enable them to fulfil their obligation in accordance with the scope of the audit. The Directors are satisfied that the external auditors are independent. the annual statutory audit Internal Controls and Audit Committee The Directors are responsible for the system of internal control which is designed to meet the needs and risks of the Group. The internal control system provides reasonable but not absolute assurance against material loss. The key procedures cover misstatement or maximising long term revenue and cash flow, organisational responsibilities and authority limits and regular executive monitoring and review. This process was in place for the year under review and up to the date of approval of the report. It is regularly reviewed by the Board and accords with Turnbull guidance, excluding associates. The Audit Committee has three members and includes both non-executive Directors and is chaired by P. M. Kellner, and also includes an executive Director, being the Chief Executive (this does not comply with the requirement that all members of the audit committee are non-executive Directors). However having three members prevents stalemate on decisions and adds more experience in audit and accounting to the committee. Its terms of reference, which are available from the Company’s registered office, are that it meets at least twice a year to review the Group’s accounting policies, financial and other reporting procedures, with the external auditors in attendance when appropriate. In 2012 the committee met three times with all members present. The internal controls are reviewed annually ensuring their effectiveness and any specific issues are dealt with if and when they arise. When the Board reviews internal controls they consider the effectiveness of controls, including concentrating on all material controls, operational and compliance controls, and risk management systems. Details of the Remuneration Committee can be found in the Directors’ Remuneration Report and the terms of reference are available from the Company’s registered office. The UK Corporate Governance Code requires that there should be an internal audit function in place, however the Company does not have one as the Directors do not believe there is the need for one due to the small size of the Group. Communication with shareholders The Company provides extensive information about the Group’s activities in the Annual Report and Financial Statements and the Interim Report, copies of which are Panther Securities P.L.C. 22 sent to shareholders. Additional copies are available by application. The Group is active in communicating with both its institutional and private shareholders and welcomes queries on matters relating to shareholdings and the business of the Group. All shareholders are encouraged to attend the Annual General Meeting, at which Directors and senior management are introduced and are available for questions. The Company provides a website with up to date information, including announcements and company accounts. Substantial Interests At the date of this report the Company has been notified of the following interests of 3 percent or more in the shares of the Company. Ordinary Shares H M Perloff Holding 895,000 % 5.3 For details of A S Perloff (Chairman) interest in shares of the Company, please see the ‘Directors and their beneficial interests in the shares of the Company’ section within the Report of the Directors. Nomination Committee The Nomination Committee consists of Andrew Perloff, Peter Kellner and Bryan Galan and met three times in 2012 with all members present. Any changes that are required to be made are made in the best interests of the Group. In 2012 there were no changes in Directorships. The terms of reference of the Committee are available from the Company’s registered office and detail that it will consist of three members, the majority of whom should be independent non-executive Directors. They shall meet at least twice a year to review the structure, size and composition of the Board and make recommendations with regard to any changes. Internal controls and risk management systems in relation to the financial reporting process The main features of the company’s internal control and risk management systems in relation to the financial the Financial Controller reporting process include, preparing a trial balance supported by invoices, reconciling all cash movements to the bank statements. The Finance Director reviews the trial balance prepared before adjusting for all accruals and prepayments and other timing differences, then consolidates the results and produces the financial statements. These are later reviewed by the Board before being audited by an independent external auditor. Financial Risk Management The Company and Group operations expose it to a variety of financial risks, the main two being the effects of changes in credit risk of tenants and interest rate movement exposure on borrowings. The Company and Group have in place a risk management programme that seeks to limit the adverse effects on the financial performance of the Company and Group by monitoring levels of debt finance and the related finance costs. The Company and Group also use interest rate swaps to protect against adverse interest rate movements and no hedge accounting is applied. In the current and prior years, mark to market valuations on our financial instruments have been erratic, and these large swings are shown within the income statement adding to the year’s financial accounting loss. However, the actual cash outlay effect is nil when considered with the loan as the instruments are used to protect increases in cash outlays. Given the size of the Company and Group, the Directors have not delegated the responsibility of monitoring financial risk management to a sub-committee of the Board. The policies set by the Board of Directors are implemented by the Company and Group’s finance department. Price risk The Company and Group are exposed to price risk due to normal inflationary increases in the purchase price of the goods and services it purchases in the UK. The Company and Group also have price exposure on listed equities that are held as investments. The Group has a policy of holding only a small proportion of its assets as listed investments. Credit risk The Company and Group have implemented policies that require appropriate credit checks on potential tenants before lettings are agreed. In most cases a deposit is requested unless the tenant can provide a strong personal or other guarantee. The amount of exposure to any individual counterparty is subject to a limit, which is reassessed annually by the Board. Exposure is also reduced significantly as the Group has a large spread of tenants who operate in different industries. 23 Panther Securities P.L.C. Corporate Governance continued Liquidity risk The Company and Group actively ensure liquidity by maintaining a long-term finance facility and also hold significant cash deposits, which are both to ensure that the Company and Group have sufficient available funds for operations and planned expansions. Interest rate risk The Company and Group have both interest bearing assets and interest bearing liabilities. Interest bearing assets include only cash balances which earn interest at fixed rate. The Company and Group have a policy of only borrowing debt to finance the purchase of cash generating assets (or assets with the potential to the generate cash). The Directors will appropriateness of this policy should the Company and Group operations change in size or nature. revisit This report was approved and authorised for issue by the Board and signed on its behalf by: S. J. Peters Company Secretary Dated: 24th April 2013 Deneway House 88-94 Darkes Lane Potters Bar Hertfordshire EN6 1AQ Panther Securities P.L.C. 24 Directors’ Remuneration Report Remuneration Committee The Remuneration Committee consists solely of the two non-executive Directors, B. R. Galan (Chairman) and P. M. Kellner. It reviews the terms and conditions of service of the Chairman and Executive Directors, ensuring that salaries and benefits satisfy performance and other criteria. When setting remuneration the Committee consults with the Chairman of the Board no external In 2012 the Committee met three times with all members present. third parties are consulted. The Company has given full consideration to the best practice provisions relating to remuneration committees as set out in the UK Corporate Governance Code. The Directors do not have a Share Option Scheme. Remuneration policy Company policy is to reward fairly the Executive Directors sufficiently to retain and motivate these key individuals. In determining remuneration, consideration will be given to reward levels throughout the organisation as well as the external employment market. The Remuneration Committee aim to reward all Directors fairly based on their role, their performance, and salary levels in the wider market. The Remuneration Committee considers that currently the Executive Directors’ remuneration is below market comparables. The only element of remuneration that reflects specific performance are the bonuses, however this element has historically been considerably adjusted to reflect market conditions and also to take into account company results. The proportion of the Group’s basic salary bill attributable to the Executive Directors was 14% (2011: 15%). Service contracts No Director has a service contract or any other written agreement between the Company and the Director. Non-executive Directors The remuneration of non-executive Directors is determined by the Board and based upon fees paid to non-executive Directors of companies both similar in sector and size. Subject to Board approval, non- executive Directors may be paid other fees for professional services provided to the Group. Pension and other benefits A. S. Perloff is the sole member and beneficiary of a non-contributory Director’s pension scheme. The Group ceased contributions in 1997 and accordingly made no contributions to the pension fund in 2012 and does not anticipate making further contributions. S. J. Peters had pension contributions paid in the year by the Company of £33,000 (2011 – £24,000) into his personal stake holders’ contribution pension scheme. No other payments were paid in respect of any other Director during the year (2011 – £nil). Directors’ emoluments Directors’ emoluments of £240,000, (2011 – £254,000) are made up as follows: Director Executive A. S. Perloff J. T. Doyle J. H. Perloff S. J. Peters Non-executive B. R. Galan P. M. Kellner Salary/Fees £’000 Bonus £’000 Pension Taxable Benefit Contribution £’000 £’000 Total 2012 £’000 Total 2011 £’000 — 73 46 48 10 10 187 — 3 2 3 — — 8 6 5 1 — — — 12 — — — 33 — — 33 6 81 49 84 10 10 240 6 86 53 89 10 10 254 The Directors’ emoluments note as listed above is audited information. All other information in the Directors’ Remuneration Report is unaudited. 25 Panther Securities P.L.C. Directors’ Remuneration Report continued Total shareholder return The following graphs show: (1) The value by the end of 2012 of £100 invested in Panther Securities P.L.C. on 31 December 2006 compared with the value of £100 invested in the FTSE all share index. (2) The dividend yield compared with the FTSE all share index for the same period as in (1) above. Panther Securities P.L.C. has been a constituent of this index for the whole period and this index is deemed to be the most appropriate for comparison. Dividend yield ) % ( l d e Y i Panther Securities PLC FTSE all share dividend yield 5.00 4.75 4.50 4.25 4.00 3.75 3.50 3.25 3.00 2.75 2.50 2.25 2.00 1.75 1.50 2006 2007 2008 2009 2010 2011 2012 Year ended 31 December Total shareholder return Panther Securities PLC FTSE all share index ) £ ( e u a V l 110.00 105.00 100.00 95.00 90.00 85.00 80.00 75.00 70.00 65.00 60.00 2006 2007 2008 2009 2010 2011 2012 Year The Directors Remuneration report was approved and authorised for issue by the board and signed on its behalf by: B. R. Galan Chairman of Remuneration Committee Dated: 24th April 2013 Panther Securities P.L.C. 26 Independent Auditors’ Report Independent Auditor’s Report to the Members of Panther Securities Plc We have audited the Consolidated and Parent Company accounts (“the accounts”) of Panther Securities P.L.C. for the year ended 31 December 2012 which comprise the Consolidated Income Statement, Consolidated Statement of Comprehensive Income, the Consolidated Statement of Financial Position and the Parent Company Balance Sheet, the Consolidated Statement of Cash Flows and the Parent Company Cash Flow Statement, the Consolidated Statement of Changes in Equity and the related notes 1 to 49. The financial reporting framework that has been applied in the preparation of the Consolidated accounts is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial reporting framework that has been applied in the preparation of the Parent Company accounts is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). 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 auditor As explained more fully in the Directors’ Responsibilities Statement, the Directors are responsible for the preparation of the accounts and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the accounts 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. Scope of the audit of the accounts A description of www.frc.org.uk/apb/scope/private.cfm. the scope of an audit of accounts is provided on the FRC’s website at Opinion on accounts In our opinion: (cid:1) (cid:1) (cid:1) (cid:1) the accounts give a true and fair view of the state of the Group’s and Parent Company’s affairs as at 31 December 2012 and of the Group’s loss for the year then ended; the Consolidated accounts have been properly prepared in accordance with IFRSs as adopted by the European Union; the Parent Company accounts have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and the accounts have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Consolidated accounts, Article 4 of the IAS Regulation. Opinion on other matters prescribed by the Companies Act 2006 In our opinion: (cid:1) (cid:1) (cid:1) the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006; the information given in the Directors’ Report for the financial year for which the accounts are prepared is consistent with the accounts; the information given in the Corporate Governance Statement with respect to internal control and risk management systems in relation to financial reporting processes and about share capital structures is consistent with the accounts. 27 Panther Securities P.L.C. Independent Auditors’ Report continued Matters on which we are required to report by exception 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: (cid:1) (cid:1) (cid:1) (cid:1) (cid:1) 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 the Parent Company accounts and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records and returns; or certain disclosures of directors’ remuneration specified by law are not made; or we have not received all the information and explanations we require for our audit; or a Corporate Governance Statement has not been prepared by the Company. Under the Listing Rules we are required to review: (cid:1) (cid:1) (cid:1) the directors’ statement, on pages 17 to 20, in relation to going concern; the part of the Corporate Governance Statement, on pages 21 to 24 relating to the Company’s compliance with the nine provisions of the UK Corporate Governance Code specified for our review; and certain elements of the report to the shareholders by the Board on directors’ remuneration. Stephen Drew Senior Statutory Auditor, for and on behalf of Nexia Smith & Williamson Statutory Auditor Chartered Accountants 25 Moorgate London EC2R 6AY 24th April 2013 The maintenance and integrity of the Panther Securities PLC website is the responsibility of the directors; the work carried out by the auditor does not involve consideration of these matters and, accordingly, the auditor accepts no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the web site. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Panther Securities P.L.C. 28 Consolidated Income Statement For the year ended 31 December 2012 Revenue Cost of sales Gross profit Other income Administrative expenses Profit on disposal of investment properties Movement in fair value of investment properties Share of trading loss from associate undertaking Finance costs Investment income Profit on disposal of available for sale investments (shares) Impairment of available for sale investments (shares) Fair value loss on derivative financial liabilities Loss before income tax Income tax credit Loss for the year Attributable to: Equity holders of the parent Non-controlling interest Loss for the year Loss per share Basic and diluted Notes 5 5 16 19 10 9 30 11 31 December 2012 £’000 31 December 2011 £’000 12,673 (3,906) 8,767 84 (3,303) 5,548 241 (4,967) 822 (152) (4,466) 63 99 (222) (777) (4,633) 1,685 (2,948) (2,898) (50) (2,948) 11,940 (4,148) 7,792 76 (3,230) 4,638 — 5,671 10,309 (171) (2,954) 58 2,007 (926) (10,635) (2,312) 1,462 (850) (865) 15 (850) 14 (17.2)p (5.1)p 29 Panther Securities P.L.C. Consolidated Statement of Comprehensive Income For the year ended 31 December 2012 Loss for the year Other comprehensive income Movement in fair value of available for 31 December 2012 £’000 31 December 2011 £’000 Notes (2,948) (850) sale investments (shares) taken to equity 20 Realised fair value on disposal of available for sale investments (shares) previously taken to equity Realised fair value on impairment of available for sale investments (shares) previously taken to equity Deferred tax relating to movement in fair value of available for sale investments (shares) taken to equity 28 Other comprehensive loss for the year, net of tax Total comprehensive loss for the year Attributable to: Equity holders of the parent Non-controlling interest (83) 68 — (26) (41) (2,989) (2,939) (50) (2,989) (517) (2,366) 476 355 (2,052) (2,902) (2,917) 15 (2,902) Panther Securities P.L.C. 30 Consolidated Statement of Financial Position Company number 293147 As at 31 December 2012 31 December 2012 £’000 31 December 2011 £’000 Notes ASSETS Non-current assets Plant and equipment Investment property Goodwill Deferred tax asset Available for sale investments (shares) Current assets Inventories Stock properties Trade and other receivables Cash and cash equivalents Total assets EQUITY AND LIABILITIES Equity attributable to equity holders of the parent Capital and reserves Share capital Share premium account Capital redemption reserve Retained earnings Non-controlling interest Total equity Non-current liabilities Long-term borrowings Derivative financial liability Deferred tax liabilities Obligations under finance leases Current liabilities Trade and other payables Short-term borrowings Current tax payable Total liabilities Total equity and liabilities 15 16 28 20 21 21 23 25 26 26 27 30 28 33 29 27 401 153,156 8 1,674 1,761 157,000 263 2,714 4,529 2,813 10,319 167,319 4,217 2,886 604 54,285 61,992 61 62,053 68,857 20,705 — 7,278 96,840 8,014 140 272 8,426 105,266 167,319 489 136,491 8 — 2,597 139,585 321 7,015 3,815 5,482 16,633 156,218 4,217 2,886 604 59,248 66,955 111 67,066 60,252 19,928 151 1,205 81,536 7,228 140 248 7,616 89,152 156,218 The accounts were approved by the Board of Directors and authorised for issue on 24th April 2013. They were signed on its behalf by: A. S. Perloff Chairman 31 Panther Securities P.L.C. Consolidated Statement of Changes in Equity For the year ended 31 December 2012 Share Capital premium Redemption £’000 £’000 Balance at 1 January 2011 Loss for the year Other comprehensive income Dividends paid Share capital £’000 4,217 — — 2,886 — — Balance at 1 January 2012 4,217 2,886 Loss for the year Other comprehensive income Dividends paid — — — — Balance at 31 December 2012 4,217 2,886 Retained earnings £’000 Total £’000 63,515 71,222 (865) (2,052) (1,350) (865) (2,052) (1,350) 59,248 66,955 (2,898) (2,898) (41) (41) (2,024) (2,024) 54,285 61,992 604 — — 604 — — 604 Within retained earnings are unrealised gains of £156,000 and deferred tax credit of £448,000 (2011 – unrealised gains of £170,000 and a deferred tax credit of £423,000) relating to fair value of available for sale investments (shares). Panther Securities P.L.C. 32 Consolidated Statement of Cash Flows For the year ended 31 December 2012 Cash flows from operating activities Profit from operating activities Add: Depreciation charges for the year Add: Loss on sale of fixed assets Add: Loss on impairment of stock properties Profit before working capital change Decrease in inventory Increase in stock properties Increase in receivables Increase in payables Cash generated from operations Interest paid Income tax paid Net cash generated from operating activities Cash generated used in investing activities Purchase of plant and equipment Purchase of investment properties Purchase of available for sale investments (shares) Proceeds from sale of investment property Proceeds from the disposal of available for sale investments (shares) Dividend income received Interest income received Net cash used in investing activities Cash generated from financing activities Repayments of loans Payment of loan arrangement fees and associated costs New loans received Dividends paid Net cash generated from financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at the beginning of year Cash and cash equivalents at the end of year 31 December 2012 £’000 31 December 2011 £’000 5,548 134 3 683 6,368 58 (494) (865) 492 5,559 (4,220) (143) 1,196 (49) (11,085) (356) 645 1,055 53 10 4,638 122 — 60 4,820 — — (1,046) 1,304 5,078 (2,545) (511) 2,022 (59) (20,952) (693) — 3,222 39 20 (9,727) (18,423) (145) (469) 8,500 (2,024) 5,862 (2,669) 5,482 2,813 (49,640) (714) 67,000 (1,350) 15,296 (1,105) 6,587 5,482 33 Panther Securities P.L.C. Notes to the Consolidated Accounts For the year ended 31 December 2012 1. 2. General information Panther Securities P.L.C. (the Company) is a Public Limited Company incorporated in Great Britain. The addresses of its Registered Office and principal place of business are disclosed in the introduction to the Annual Report. The principal activities of the Company and its subsidiaries (the Group) are described in the report of the Directors. New and revised International Financial Reporting Standards New and amended standards adopted by the Group None of the new standards, interpretations and amendments, effective for the first time from 1 January 2012, have had a material effect on the financial statements of the Group or the Company. Standards, interpretations and amendments to published standards that are not yet effective Certain new standards, amendments and interpretations to existing standards have been published that are mandatory for the Group or Company’s accounting periods beginning on or after 1 January 2013 or later periods and have not been early adopted. It is anticipated that these new standards, interpretations and amendments currently in issue at the time of preparing the financial statements (April 2013) will have a material effect on the consolidated financial statements of the Group, however the extent of this has not yet been assessed. l l l l l l l l l l IFRS 9 Financial Instruments* Amendments to IFRS 7: Disclosures – Transfers of Financial Assets Amendments to IAS12: Deferred Tax: Recovery of Underlying Assets IFRS 10 Consolidated Financial Statements IFRS 12 Disclosure of Interests in Other Entities IAS 27 Separate Financial Statements IAS 28 Investments in Associates and Joint Ventures IFRS 13 Fair Value Measurement Presentation of items of Other Comprehensive income (Amendments to IAS1) Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance: Amendments to IFRS 10, IFRS 11 and IFRS 12* * Not yet endorsed by the EU The Parent Company and subsidiaries have not adopted IFRS in their individual accounts. 3. Critical accounting judgements and key sources of estimation uncertainty In the process of applying the entity’s accounting policies, which are described below, the critical accounting judgements made by management which have had a material effect on the financial statements are as follows: Impairment of available for sale equity investments The Group follows the guidance of IAS 39 to determine when an available for sale equity investment is impaired. This determination requires significant judgement. In making this judgement, the Group evaluates, among other factors, the duration and extent to which the fair value of an investment is less than its cost, the financial health and short-term business outlook for the investee, including factors such as industry and market sector performance, and operational and financing cash flow. In respect of available for sale equity investments held by the Group as at 31 December 2012, if all of the declines in fair value below cost were considered as prolonged, the Group would suffer an additional loss of £nil (2011 – additional loss of £69,000) through the income statement. Additionally there were sources of estimation and uncertainty as noted under the accounting policy for Investment Properties and fair value of Derivative Assets and Liabilities. Panther Securities P.L.C. 34 4. Significant accounting policies The financial statements have been prepared in accordance with International Financial Reporting Standards adopted for use in the European Union and therefore comply with Article 4 of the EU IAS Regulation. The financial statements have been prepared on the historical cost basis, except for the revaluation of Investment Properties, Derivative Assets and Liabilities and Available for Sale Investments which are carried at fair value. The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the date of the financial statements. If in the future such estimates and assumptions which are based on management’s best judgement at the date of the financial statements, deviate from the actual circumstances, the original estimates and assumptions will be modified as appropriate in the year in which the circumstances change. Where necessary, the comparatives have been reclassified or extended from the previously reported results to take into account presentational changes. The principal accounting policies are set out below. Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The results of subsidiaries disposed of are included in the consolidated income statement to the effective date of disposal, and those acquired from the date on which control is transferred to the Group. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group. All intra-Group transactions, balances, income and expenses are eliminated on consolidation. Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group’s equity therein. Non-controlling interests consist of the amount of those interests at the date of the original business combination and the non-controlling share of changes in equity since the date of the combination. Profits applicable to the non-controlling interest in the subsidiary’s equity are allocated against the interests of the Group. Investment Properties Investment properties, which are properties held to earn rentals and/or capital appreciation, are revalued annually by the Directors and by independent professional valuers at intervals of not more than three years using the fair value model of accounting for Investment Property at the statement of financial position date. When the Directors revalue the properties they make judgements based on the covenant strength of tenants, remainder of lease term of tenancy, location, and other developments which have taken place in the form of open market lettings, rent reviews, lease renewals and planning consents. Gains or losses arising from changes in the fair value of investment property are included in the income statement in the period in which they arise. In the current year, the properties were valued by the Directors. In accordance with IAS 17 (‘Leases’) and IAS 40 (‘Investment Property’), a property interest held under an operating lease, which meets the definition of an investment property, is classified as an investment property. The property interest is initially accounted for as if it were a finance lease, recognising as an asset and a liability the present value of the minimum lease payments due by the group to the freeholder. Subsequently, and as described above, the fair value model of accounting for investment property is applied to these interests. Transfers between investment property and stock properties Transfers from stock properties to investment property are made at fair value; any difference between the fair value of the property at the date of transfer and its carrying amount is recognised in profit or loss. For a transfer from investment property carried at fair value to inventories, the property’s deemed cost for subsequent accounting in accordance with IAS 2 (‘Inventories’) is its fair value at the date of change in use. 35 Panther Securities P.L.C. Notes to the Consolidated Accounts continued For the year ended 31 December 2012 4. Significant accounting policies continued Taxation Income tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit or loss for the period. Taxable profit or loss differs from profit or loss as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the statement of financial position date. Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the statement of financial position liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each statement of financial position date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that have been substantially enacted on or before the balance sheet date. Deferred tax is charged or credited to the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Current tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current assets and liabilities on a net basis. Corporation tax for the period is charged at 24.5% (2011 – 26.5%), representing the best estimate of the weighted average annual corporation tax rate expected for the full financial year. Segment reporting An operating segment is a component of an entity about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. M.R.G. Systems Limited is classified as separate operating segment to the activities of the rest of the Group, where M.R.G Systems Limited’s principal activity is that of electronic designers, engineers and consultants. The impact of its activities on the income statement is shown in note 5. The impact on the statement of financial position and statement of cash flows is not material to the accounts. Retirement benefit costs The Company operates a defined contribution pension scheme and any pension charge represents the amounts payable by the Company to the fund in respect of the year. Revenue recognition Revenue comprises: (1) (2) (3) Rental income from tenancy occupied properties net of Value Added Tax where appropriate: The income is recognised on an accruals basis. Sale of stock properties: This is recognised on the date that exchange of contracts becomes unconditional. Trading income from M.R.G. Systems Limited, is representing amounts receivable for work undertaken and goods sold during the year, exclusive of Value Added Tax. Panther Securities P.L.C. 36 (4) (5) (6) Sale of current asset investments: This is recognised on the sale becoming unconditional. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated cash receipts through the expected life of the financial assets to that asset’s net carrying amount. Dividend income from investments is recognised when the Company’s rights to receive payment have been established. Foreign currency translation Transactions in foreign currency are recorded at the rates of exchange prevailing on the dates of the transactions. At each statement of financial position date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the statement of financial position date. Any gains or losses arising on translation are taken to the income statement. Plant and equipment Fixtures, fittings and motor vehicles are stated at cost less accumulated depreciation and any accumulated impairment losses. Depreciation is provided at rates calculated to write off the cost of plant and equipment less their residual value, over their expected useful lives. The rates used across the Group are as follows; Fixtures and equipment 10% – 33% Straight line. Motor vehicles 20% Straight line The gain or loss arising on the disposal or retirement of an item of plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the income statement. Impairment of property, plant and equipment At each statement of financial position date, the Group reviews the carrying amounts of its property, plant and equipment to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable amount of an asset is estimated to be less than the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised immediately in the income statement, unless the relevant asset is carried at a revalued amount, in which case the impairment loss up to value of previous revaluation is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised immediately in the income statement, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. Leasing All leases are operating leases. The Group as lessor Rental income from operating leases is recognised on a straight line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight line basis over the lease term. 37 Panther Securities P.L.C. Notes to the Consolidated Accounts continued For the year ended 31 December 2012 4. Significant accounting policies continued The Group as lessee Rentals payable under operating leases are charged to profit or loss on a straight line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight line basis over the lease term. The accounting policy for investment properties describes the Group’s statement of financial position for investment properties held under an operating lease. Financial instruments Financial assets and financial liabilities are recognised on the Group’s statement of financial position when the Group becomes a party to the contractual provisions of the instrument. Trade receivables Trade receivables are initially recognised at fair value, and are subsequently measured at amortised cost using the effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in the income statement when there is objective evidence that the asset is impaired. The allowance recognised is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition. Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits. Financial liabilities and equity Financial liabilities and equity instruments issued by the Group are classified according to 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. Trade payables Trade payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method. Bank borrowings Interest bearing bank loans and overdrafts are initially measured at fair value less any transaction fees such as loan arrangement fees, and are subsequently measured at amortised cost, using the effective interest rate method. Any difference between the proceeds and the settlement or redemption of borrowings is recognised over the term of the borrowings. Derivative financial instruments Certain financial instruments are entered into by the Directors on behalf of the Group to hedge against interest rate fluctuations. These include interest rate swaps, options, collar and caps. The Group does not hold or issue derivatives for trading purposes. Such derivatives financial instruments are initially recognised at fair value on the date at which a derivative contract is entered into and are subsequently remeasured at fair value at each reporting date. The Directors estimate the fair value annually for these financial instruments using the year end yield curve to extract the markets estimate of future pricing for interest rates, this valuation is then considered alongside two valuations obtained from banks (one being HSBC bank – the counterparty to these agreements) in deciding the most appropriate value. This is an estimation and as such there is uncertainty to the fair value shown within the accounts. For derivatives that do not qualify for hedge accounting, any gains or losses arising from changes in fair value are taken directly to the income statement for the year. None of the Group’s derivative financial instruments qualify for hedge accounting. Panther Securities P.L.C. 38 Available for sale investments Under IAS 39, these investments are carried at fair value and classified in the statement of financial position as available for sale investments (shares). Fair values of these investments are based on quoted market prices where available. The fair value of the available for sale investments in unquoted equity securities cannot be measured reliably and they have therefore been measured at the lower of cost and net realisable value. Movements in fair value are taken directly to equity. When these investments are considered impaired in accordance with the requirements of IAS 39, the impairment losses are recognised in the income statement. On realisation of the available for sale investments, the cumulative gain or loss previously recognised through equity is reclassified from reserves to the income statement. The Group has not designated any financial assets that are not classified as held for trading as financial assets at fair value through the income statement. The available for sale investments represent investments in listed and unquoted equity securities that offer the Group the opportunity for return through dividend income and fair value gains. They have no fixed maturity or coupon rate. Those shares that are expected to be held for the long term are shown as non-current assets and those that are held for short term are shown as current assets. Impairment of available for sale investments At each Statement of Financial Position date the Group reviews any decline in the fair value of available for sale investments to determine whether there is any objective evidence that those assets are impaired. If the asset is judged to be impaired the cumulative loss that had been recognised in other comprehensive income is reclassified from equity to the Income Statement being the difference between the acquisition cost and the current fair value, less any impairment loss for that financial asset previously recognised in the Income Statement. Provisions Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation. Provisions are measured at the Directors’ best estimate of the expenditure required to settle the obligation at the statement of financial position date, and are discounted to present value where the effect is material. Stock properties Properties that are purchased for future sale are classified as stock properties. Stock properties are valued at the lower of cost and net realisable value. Cost comprises the cost of the property, and those overheads that have been incurred in bringing the stock properties to their present condition. Net realisable value represents the estimated selling price less all estimated costs to be incurred in marketing, selling and distribution. Inventories Stock and work in progress has been valued at the lower of cost and net realisable value, after making due allowance for obsolete and slow moving items. Investments in associates and jointly controlled entities Associates are those entities in which the Group has the ability to exert significant influence, but not control, over the financial and operating policies. Significant influence is presumed to exist when the Group holds between 20 and 50 percent of the voting power, unless it can be shown otherwise, such as other stakeholders having greater influence reducing the Groups influence so that it is not significant. Joint ventures are those entities over whose activities the Group has joint control, established by contractual agreement or voting power. Investments in associates are accounted for using the equity method and are recognised initially at cost. The consolidated financial statements include the Group’s share of the profit or loss and other comprehensive income. When the Group’s share of losses exceeds its interest (being equity interest and long term loans) in an equity-accounted investee, the carrying amount of that interest is reduced to zero and the recognition of further losses is discontinued. Jointly controlled ventures are accounted for through proportional consolidation on a line by line basis. 39 Panther Securities P.L.C. Notes to the Consolidated Accounts continued For the year ended 31 December 2012 5. Revenue and cost of sales The Groups’ main operating segment is investment and dealing in property and securities. The majority of the revenue, cost of sales and profit or loss before taxation being generated in the United Kingdom. The Group is not reliant on any key customers. M.R.G. Systems Limited is an operating business segment whose principal activity is that of electronic designers, engineers and consultants. 70% of its revenues arose in the United Kingdom and 100% of its cost of sales. Tunnel Limited was an operating segment whose principal activity was that of value shoe retailer. Its activities were discontinued in 2011. 100% of its revenues arose in the United Kingdom. 50% of the company was owned by the Group as a joint venture and only the Group’s share was represented in these accounts. The split of assets, tax effect and cash flow of each segment is not shown as these are not material in relation to M.R.G. Systems Limited or Tunnel Limited. Turnover arose as follows: Rental income Income from trading (Tunnel Limited) – 50% share Income from trading (M.R.G. Systems Limited) Cost of sales arose as follows: Cost of sales from rental income Cost of sales from impairment of stock property Cost of sales from trading (Tunnel Limited) – 50% share Cost of sales from trading (M.R.G. Systems Limited) Profit/(loss) before income tax: Loss from investment and dealing in properties Loss from trading (Tunnel Limited) –50% share Profit/(loss) from trading (M.R.G. Systems Limited) 6. Loss for the year The loss for the year is stated after charging: Depreciation of tangible fixed assets – owned by the Group Fees payable to the Group’s auditor for the audit of both the parent company and the Group’s annual report and accounts Fees paid to the Group’s auditor and its associates for other services: The audit of the parent’s subsidiaries, pursuant to legislation Other services provided Panther Securities P.L.C. 40 2012 £’000 10,781 — 1,892 12,673 2012 £’000 2,202 683 — 1,021 3,906 2012 £’000 (4,436) — (197) (4,633) 2012 £’000 134 6 60 2 2011 £’000 8,961 224 2,755 11,940 2011 £’000 2,286 60 131 1,671 4,148 2011 £’000 (2,332) (41) 61 (2,312) 2011 £’000 122 13 56 — 7. Staff costs Staff costs, including Directors’ remuneration, were as follows: Wages and salaries Social security costs Pension contributions The average monthly number of employees, including Directors, during the year was as follows: Directors Other employees 8. Directors remuneration Emoluments for services as Directors 2012 £’000 1,426 172 39 1,637 6 36 42 2012 £’000 240 2011 £’000 1,435 134 35 1,604 6 41 47 2011 £’000 254 There are no Directors with retirement benefits accruing under money purchase pension schemes in respect of qualifying services. Please refer to the Directors’ Remuneration Report for information on the highest paid Director and in respect of individual Directors emoluments. Key management are those persons having authority and responsibility for planning, directing and controlling the activities of the Group. In the opinion of the Board, the Group’s key management comprises the Executive and Non-Executive Directors of Panther Securities PLC. Information regarding their emoluments is set out below. The following disclosures are in respect of employee benefits payable to the Directors of Panther Securities PLC across the Group and are thus stated in accordance with IFRS: Short term employee benefits (salaries and benefits) 9. Investment income Interest on bank deposits Dividends from equity investments 2012 £’000 265 2012 £’000 10 53 63 2011 £’000 285 2011 £’000 19 39 58 41 Panther Securities P.L.C. Notes to the Consolidated Accounts continued For the year ended 31 December 2012 10. Finance costs Interest payable on bank overdrafts and loans Other interest payable 11. Income tax credit The charge for taxation comprises the following: Current year UK corporation tax Prior year UK corporation tax Current year deferred tax credit Income tax credit for the year 2012 £’000 4,466 — 4,466 2012 £’000 372 (206) 166 (1,851) (1,685) 2011 £’000 2,953 1 2,954 2011 £’000 678 2 680 (2,142) (1,462) Domestic income tax is calculated at 24.5% (2011 – 26.5%) of the estimated assessable profit or loss for the year. The future provision for deferred tax has been calculated on the basis of 23.25% (2011 – 25%). The total charge for the year can be reconciled to the accounting profit or loss as follows; Loss before taxation Loss on ordinary activities before tax multiplied by the average of the standard rate of UK corporation tax of 24.5% (2011 – 26.5%) Tax effect of expenses that are not deductible in determining taxable profit/(loss) Dividend income not allowable for tax purposes Capital allowances for the year in excess of depreciation Non taxable movement in fair value of investment properties Non deductible movement in fair value of available for sale investments (shares) Non deductible movement in fair value of financial instruments Tax effect of non deductible loss in associate Tax losses utilised Marginal relief/taxed at small companies rate Disposal of properties or shares Prior year UK corporation tax Tax credit 2012 £’000 (4,633) 2012 % 2011 £’000 (2,312) 2011 % (1,135) (24.5) (613) 26.5 33 (13) (58) (750) 3 358 37 48 — (2) (206) (1,685) 0.5 — (1) (16) — 7.5 0.5 1 — — (4) (36) 21 (10) 22 — — — (847) 36.5 13 252 45 — (4) (343) 2 (1,462) — (10) (2) — — 16 — 67 Panther Securities P.L.C. 42 12. Profit or loss attributable to members of the parent undertaking Dealt with in the accounts of: – the parent undertaking – subsidiary undertakings A reconciliation of parent company profit or loss is provided in note 31. 13. Dividends Amounts recognised as distributions to equity holders in the period: Final dividend for the year ended 31 December 2011 of 9p per share (2010 of 5p per share) Interim dividend for the year ended 31 December 2012 of 3p per share (2011 of 3p per share) 2012 £’000 (6,516) 3,568 (2,948) 2012 £’000 1,518 506 2,024 2011 £’000 (13,863) 13,013 (850) 2011 £’000 844 506 1,350 The Directors recommend a payment of a final dividend of 9p per share (2011 – 9p), following the interim dividends paid on 30 November 2012 of 3p per share. The final dividend of 9p will be payable on 31 July 2013 to shareholders on the register at the close of business on 21 June 2013 (Ex dividend on 19 June 2013). The full dividend for the year ended 31 December 2012 is anticipated to be 12p per share. We are proposing to give shareholders the option of a scrip dividend for the 2012 final dividend of 9p per share, with the default option being cash. 14. Loss per ordinary share (basic and diluted) The calculation of loss per ordinary share is based on loss, after excluding non-controlling interests, being a loss of £2,898,000 (2011 – loss of £865,000) and on 16,869,000 ordinary shares being the weighted average number of ordinary shares in issue during the year (2011 – 16,869,000). There are no potential ordinary shares in existence. 43 Panther Securities P.L.C. Notes to the Consolidated Accounts continued For the year ended 31 December 2012 15. Plant and equipment Fixtures and Equipment £’000 Motor Vehicles £’000 Total £’000 Cost At 1 January 2011 Additions Disposals At 1 January 2012 Additions Disposals At 31 December 2012 Accumulated depreciation At 1 January 2011 Depreciation charge for the year Disposals At 1 January 2012 Depreciation charge for the year Disposals At 31 December 2012 Carrying amount At 31 December 2012 At 31 December 2011 859 59 (62) 856 39 — 895 317 119 (62) 374 130 — 504 391 482 28 — — 28 10 (8) 30 18 3 — 21 4 (5) 20 10 7 887 59 (62) 884 49 (8) 925 335 122 (62) 395 134 (5) 524 401 489 Panther Securities P.L.C. 44 16. Investment property Fair value At 1 January 2011 Additions Transferred from stock Fair value adjustment on property held on operating leases Revaluation increase At 1 January 2012 Additions Disposals Transferred to stock properties Transferred from stock properties Fair value adjustment on property held on operating leases Revaluation decrease At 31 December 2012 Carrying amount At 31 December 2012 At 31 December 2011 Investment Properties £’000 108,960 20,952 910 (2) 5,671 136,491 11,385 (405) (500) 4,612 6,540 (4,967) 153,156 153,156 136,491 At 31 December 2012, £114,616,000 (2011 – £123,791,000) and £38,540,000 (2011 – £21,700,000) included within investment properties relates to freehold and leasehold properties respectively. On the historical cost basis, investment properties would have been included as follows: Cost of investment properties 2012 £’000 111,325 2011 £’000 96,233 The Group has pledged £139,419,000 of investment property (2011 – £122,938,000) as security for the loan facilities granted to the Group. Costs relating to ongoing and potential developments are included in additions to investment properties and in the year ended 31 December 2012 amounted to £13,000 (2011 – £59,000). The Group did not have contractual obligations at the statement of financial position date to purchase investment properties (2011 – £1,257,000 obligation at year end to purchase investment properties) but had a commitment to spend £40,000 (2011- £180,000) on developing investment property. At the year end deferred consideration of £300,000 (2011 – £nil) was payable. The market value shown at 31 December 2012 and 2011 was valued internally by the Directors. As at 31 December 2010, the investment properties were valued independently at their open market value, by GL Hearn, Chartered Surveyors. The property rental income earned by the Group from its investment property, all of which is leased out under operating leases, amounted to £10,139,000 (2011 – £8,253,000). 45 Panther Securities P.L.C. Notes to the Consolidated Accounts continued For the year ended 31 December 2012 17. Subsidiaries Details of the Company’s subsidiaries at 31 December 2012 are as follows; Name of subsidiary Panther Trading Limited Panther (Dover) Limited (*) Panther Developments Limited Panther Shop Investments Limited Country of incorporation and operation Great Britain Great Britain Great Britain Great Britain Panther Shop Investments (Midlands) Limited Great Britain Panther Investment Properties Limited Panther (Bromley) Limited (***) Snowbest Limited Surrey Motors Limited (****) Great Britain Great Britain Great Britain Great Britain Westmead Building Company Limited (*) Great Britain Multitrust Property Investments Limited Great Britain Activity Property Property Property Property Property Property Property Property Property Property Property Etonbrook Properties PLC Great Britain Non-trading Northstar Property Investment Limited Panther (VAT) Properties Limited Northstar Land Limited London Property Company PLC Eurocity Properties PLC Eurocity Properties (Central) Limited (**) CJV Properties Limited (**) M.R.G. Systems Limited Panther AL Limited Panther AL (VAT) Limited Melodybright Limited TRS Developments Limited Abbey Mills Properties Limited Great Britain Great Britain Great Britain Great Britain Great Britain Great Britain Great Britain Great Britain Great Britain Great Britain Great Britain Great Britain Great Britain Property Property Property Dormant Property Property Property Trading Property Property Property Property Property Proportion of Proportion of voting power held % ownership interest % 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 75 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 75 100 100 100 100 100 * – 100% subsidiaries of Panther Shop Investment (Midlands) Limited ** – 100% subsidiaries of Eurocity Properties PLC *** – 100% subsidiary of Surrey Motors Limited **** – 95% owned by Panther Securities PLC/5% owned by Panther (Bromley) Limited All companies have a 31 December year end and have been included in the consolidated financial statements. Panther Securities P.L.C. 46 18. Investment in joint venture Until November 2011, the Group owned 50% of the 2 £1 issued equity shares in Tunnel Limited, a company incorporated in England and Wales, which is a retailer of value shoes. The Group’s share of joint venture revenue, expenses and losses are shown at note 5. The disposal of Tunnel Limited has not been disclosed as a discontinued operation as it is not considered to be material to the Financial Statements. 19. Investment in associate undertaking The Group purchased 25%, being 150,000 ordinary shares of £1 each (newly issued share capital for cash) in Wimbledon Studios Limited for £150,000 in August 2010. The company operates as an independent film studio letting out sets and offices to media and television organisations. The entity operates out of a Group wholly owned property for which a market rental has been agreed (with one year’s rent free). In accordance with IAS 28 (revised 2008) – Investments in Associates, the Group has equity accounted for its share of the profits and losses and assets and liabilities of this entity. The aggregated financial information of Wimbledon Studios Limited for the period ended 31 December 2012 is set out below: Profit and loss account: Revenue Net loss for entity Panther Securities PLC’s share of net loss Balance sheet: Non-current assets Current assets Non-current liabilities Current liabilities Net liabilities Panther Securities PLC’s share of net liabilities 2012 £’000 2,051 (608) (152) 420 365 785 (438) (1,132) (1,570) (785) (196) 2011 £’000 1,093 (685) (171) 1,033 407 1,440 (891) (726) (1,617) (177) (44) In accordance with IAS 28 (revised 2008) Investment in Associates, where the Group’s share of losses in the associate exceeds its equity investment, the carrying value of that equity investment is reduced to £nil and the remaining loss is taken against any further long term interest that in substance forms part of the investors net investment in the associate. 47 Panther Securities P.L.C. Notes to the Consolidated Accounts continued For the year ended 31 December 2012 19. Investment in associate undertaking continued Accordingly, the £196,000 share of net liabilities referred to above has been allocated against the carrying value of the £400,000 overdraft provided by the Group to the associate as noted below. Group transactions with associate: Rent receivable from associate recognised in year Trade receivables and accrued income Trade receivables and accrued income – overdue Provision Other receivables – overdraft facility drawn Provision on overdraft 20. Available for sale investments (shares) Cost or valuation At 1 January 2011 Additions Disposals Impairment on revaluation through income statement Movement in fair value taken to equity Realised fair value on disposal previously taken to equity Realised fair value on impairment previously taken to equity At 1 January 2012 Additions Disposals Impairment on revaluation through income statement Movement in fair value taken to equity Realised fair value on disposal previously taken to equity At 31 December 2012 Comprising at 31 December 2012: At cost At valuation/net realisable value Carrying amount At 31 December 2012 At 31 December 2011 2012 £’000 445 787 532 (632) 400 (196) 2011 £’000 434 506 95 (90) 400 (44) Non-current assets £’000 6,452 693 (1,215) (926) (517) (2,366) 476 2,597 356 (955) (222) (83) 68 1,761 529 1,232 1,761 2,597 Panther Securities P.L.C. 48 The available for sale investments represent investments in listed and unquoted equity securities that offer the Group the opportunity for return through dividend income and fair value gains. They have no fixed maturity or coupon rate. The fair values of the listed securities are based on quoted market prices. The available for sale securities carried at fair value are classified as level 1 in the fair value hierarchy specified in IFRS 7. The fair value of available for sale investments in unquoted equity securities, which are not publically traded, cannot be measured and have therefore been shown at cost. The valuation of the available for sale investments is sensitive to stock exchange conditions. Panther Securities PLC holds 19.9% of the issued share capital of Beale PLC at the year end. This has been treated as an investment rather than as an associate under IAS 28, since, apart from holding less than 20% of the issued share capital, the Group does not have the ability to exercise significant influence. Price risk For the year ended 31 December 2012 if the average share price of the portfolio was 10% lower there would be a further impairment charge in the year of £84,000 to the Income Statement and £40,000 of valuation movements charged to equity. Corresponding gains would be seen for a 10% uplift. 21. Inventories Stock properties 2012 £’000 2,714 2011 £’000 7,015 The cost of stock properties recognised as expense and included in cost of sales amounted to £nil (2011 – £nil). Impairments of £683,000 have been recognised against stock properties (2011 – £60k). The market value of stock properties is £4,310,000 (2011 – £9,455,000). £3,960,000 of stock properties at market value have been provided as security for the bank loan from HSBC and Santander referred to in note 27. The market value shown as at 31 December 2012 and 2011 was valued internally by the Directors. At 31 December 2010, the stock properties were valued independently at their open market value by GL Hearn, Chartered Surveyors. The stock properties are held at the lower of cost and market value and as such any uplift is not recognised in the accounts. Trading stock Inventories 2012 £’000 263 2011 £’000 321 Inventories relates to stock and work in progress for M.R.G Systems Limited’s trade of electronic designers, engineers and consultants. 22. Capital commitments Capital expenditure that has been contracted for but has not been provided for in the accounts The above relates to building works. 2012 £’000 40 2011 £’000 180 49 Panther Securities P.L.C. Notes to the Consolidated Accounts continued For the year ended 31 December 2012 23. Trade and other receivables Trade receivables Bad debt provision Other receivables Prepayments and accrued income 2012 £’000 3,894 (1,370) 336 1,669 4,529 2011 £’000 3,155 (851) 514 997 3,815 The Directors consider that the carrying amount of trade and other receivables approximates their fair value. Net trade receivables are financial assets. The total of financial assets included within the financial statements at amortised cost is £5,673,000 (2011 – £8,300,000) (which relates to £2,860,000 (2011 – £2,818,000) included in the above and the Group’s cash or cash equivalents). Debts are specifically provided once recovery becomes doubtful. The bad debt provision includes all material doubtful debts that the directors are aware of. Movement in allowance for doubtful debts on trade receivables and cash and cash equivalents Balance at 1 January 2011 Amount written off as uncollectable Charge to income statement Balance at 1 January 2012 Amounts written off as uncollectable Charge to income statement Balances at 31 December 2012 Trade receivables £’000 Cash and Cash Equivalents £’000 Total bad debt provisions £’000 914 (487) 424 851 (282) 801 1,370 117 — — 117 (37) 80 1,031 (487) 424 968 (282) 764 1,450 The cash and cash equivalents balances provided against related to balances on account with Kaupthing Singer and Friedlander before they went into administration. The Group at the statement of financial position date had received 76p in the pound from an original balance of £343,000. Amounts past due but not impaired: Current debtors (rental) Overdue (rental)* MRG Systems Limited** * More than one month ** Various terms up to 90 days 2012 £’000 2,297 — 227 2,524 2011 £’000 1,743 147 414 2,304 Panther Securities P.L.C. 50 24. Other financial assets Cash and cash equivalents Cash and cash equivalents comprise of cash held by the Group and short-term bank deposits. The carrying amount of these assets approximates their fair value. Credit risk The Group’s principal financial assets are bank balances/cash and debtors. The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies. Materially all of the credit risk is with three counterparties in the United Kingdom. Kaupthing Singer and Friedlander went into administration and some of its balances are provided against (see note 23). Further information on the general Group’s credit risk is detailed within the corporate governance section. 25. Share capital Allotted, called up and fully paid 16,869,000 ordinary shares of £0.25 each, 2012 £’000 4,217 The Company has one class of ordinary shares which carry no fixed right to income. During 2012 and 2011 no ordinary shares of 25p were purchased by the company. 26. Capital reserves Share premium account At 31 December Capital redemption reserve At 31 December 27. Bank loans Bank loans due within one year (within current liabilities) 2012 £’000 2,886 604 2012 £’000 140 2011 £’000 4,217 2011 £’000 2,886 604 2011 £’000 140 Bank loans due within more than one year 68,857 60,252 (within non-current liabilities) Total bank loans 68,997 60,392 51 Panther Securities P.L.C. Notes to the Consolidated Accounts continued For the year ended 31 December 2012 27. Bank loans continued Analysis of debt maturity Trade and other payables**: Bank loans repayable On demand or within one year In the second year In the third year to the fifth year After five years 2012 £’000 Interest* — 1,769 1,732 2,631 100 6,232 2012 £’000 Capital 4,382 140 3,140 2012 £’000 Total 4,382 1,909 4,872 2011 £’000 Total 4,579 1,996 1,996 65,920 68,551 64,951 480 580 780 74,062 80,294 74,302 * based on current 3 month LIBOR floating rate – 0.52%, and bank rate of 0.50% ** Trade creditors, other creditors and accruals In July 2011 the Group completed and drew down the £60,000,000 fixed term element of its club loan facilities with HSBC and Santander, with the full facility totalling £75,000,000, where the banks are equal lenders. After drawing £8,500,000 in 2012 the Group has undrawn at the year end a further £6,500,000 which is a revolving facility. The loan has repayments of £3,000,000 that are due on the third, and fourth anniversaries of drawdown and is fully repayable in July 2016. The Natwest bank loan was £1,180,000 at the year end and is repayable over its life to September 2022. Bank loans are secured by fixed and floating charges over the assets of the Group. The estimate of interest payable is based on market expectation of future interest rates and as such, are subject to change. The Directors estimate the fair value of the Group’s borrowings, by discounting their future cash flows at the market rate (in relation to the prevailing market rate for a debt instrument with similar terms). The fair value of bank loans is not considered to be materially different to the book value. Bank loans are financial liabilities. 28. Deferred taxation The following are the major deferred tax liabilities and assets recognised by the Group, and the movements thereon, during the current and prior reporting periods. Liability at 1 January 2011 Credit to equity for the year Credit to profit and loss for the year Liability at 1 January 2012 Debit to equity for the year Credit to profit and loss for the year Asset at 31 December 2012 Panther Securities P.L.C. 52 Total £’000 (2,648) 355 2,142 (151) (26) 1,851 1,674 Deferred taxation arises in relation to: Deferred tax Deferred tax liabilities: Investment properties Deferred tax assets: Tax allowances in excess of book value Available for sale investments (shares) Derivative financial liability Net deferred tax asset/(liability) 2012 £’000 2011 £’000 (3,775) (5,687) 187 448 4,814 1,674 131 423 4,982 (151) The aggregate amount of temporary differences associated with investments in subsidiaries, associates, and interests in joint ventures, for which deferred tax liabilities may arise, have not been recognised. The UK government has announced future changes to the Corporation tax rate. These changes will result in a decrease in the standard rate of corporation tax to 23% in April 2013. If enacted, these changes will result in a further 2% reduction in April 2014 and a further 1% to a standard rate of 20% in April 2015. As at 31 December 2012 the substantively enacted rate remains at 23%. Deferred tax has been measured using the effective rate that will apply in the UK for the year ending 31 December 2013 (23.25%) 29. Trade and other payables Trade creditors Social security and other taxes Other creditors Obligations under finance leases (see note 33) Accruals and deferred income 2012 £’000 2,650 687 1,064 562 3,051 8,014 2011 £’000 2,434 518 871 95 3,310 7,228 Trade creditors and accruals comprise amounts outstanding for trade purchases and on-going costs. The Directors consider that the carrying amount of trade payables approximates their fair value. All trade and other payables are due within one year. Trade creditors and accruals are financial liabilities. Liabilities included within the financial statements at amortised cost total £77,011,000 (2011 – £67,620,000) (includes payables above and the long term and short term borrowings). 53 Panther Securities P.L.C. Notes to the Consolidated Accounts continued For the year ended 31 December 2012 30. Derivative financial instruments The main risks arising from the Group’s financial instruments are those related to interest rate movements. Whilst there are no formal procedures for managing exposure to interest rate fluctuations, the Board continually reviews the situation and makes decisions accordingly. Hence, the Company will, as far as possible, enter into fixed interest rate swap arrangements. The purpose of such transactions is to manage the interest rate risks arising from the Group’s operations and its sources of finance. 2012 Rate 7.06% 6.63% Bank loans Interest is charged as to: Fixed/Hedged HSBC Bank plc* HSBC Bank plc** Unamortised loan arrangement fees Floating element HSBC Bank plc Natwest Bank plc 2012 £’000 35,000 25,000 (683) 8,500 1,180 68,997 2011 Rate 7.06% 6.63% — 2011 £’000 35,000 25,000 (932) — 1,324 60,392 Bank loans totalling £60,000,000 (2011 – £60,000,000) are fixed using interest rate swaps removing the Group exposure to fair value interest rate risk. Other borrowings are arranged at floating rates, thus exposing the Group to cash flow interest rate risk. Financial instruments for Group and Company The derivative financial assets and liabilities are designated as held for trading. Derivative Financial Liability Interest rate swap Interest rate swap Net fair value loss on derivative financial assets Hedged amount £’000 35,000 25,000 Duration of contract remaining ‘years’ 25.69 8.92 Average rate 5.06% 4.63% 2012 Fair value £’000 2011 Fair value £’000 (14,504) (14,261) (6,201) (5,667) (20,705) (19,928) (777) (10,635) * Fixed rate came into effect on 1 September 2008. Rate includes 2% margin. The contract includes mutual breaks, the first one being on 23 November 2014 (and every 5 years thereafter). ** This arrangement came into effect on 1 December 2011 when HSBC exercised an option to enter the Group into this interest swap arrangement. The rate shown includes a 2% margin. This contract includes a mutual break on the fifth anniversary and its duration is until 1 December 2021. Interest rate derivatives are shown at fair value in the income statement, and are classified as level 2 in the fair value hierarchy specified in IFRS 7. The vast majority of the derivative financial liabilities are due in over one year and therefore they have been disclosed as all due in over one year. The above fair values are based on quotations from the Group’s banks and Directors’ valuation. Panther Securities P.L.C. 54 Interest rate risk For the year ended 31 December 2012, if on average the 3 month LIBOR over the year had been 100 basis points (1%) higher with all other variables held constant, under the financing structure in place at the year end, loss before tax for the year would have been approximately £97,000 larger (2011- £64,000 larger). This analysis excludes any affect this rate adjustment might have on expectations of future interest rates movements which is likely to affect the estimation of the fair value of the derivative financial assets/liabilities (as this movement would also be shown within the income statement affecting post-tax profit or loss), but indicates the likely cash saving/(cost) a 100 basis points (1%) movement would have had for the Group. Treasury management The long-term funding of the Group is maintained by three main methods, all with their own benefits. The Group has equity finance, has surplus profits and cash flow which can be utilised, and also has loan facilities with financial institutions. The various available sources provide the Group with more flexibility in matching the suitable type of financing to the business activity and ensure long-term capital requirements are satisfied. Please also see the Financial Risk management: Objectives, policies and processes for managing risk, of the Corporate Governance Report. 31. Parent company profit and loss account As permitted under Section 408 of the Companies Act 2006, no income statement is presented for the parent company. Reconciliation of parent company profit and loss Loss of parent company before intercompany adjustments Add: Write off of intercompany debt (removed on consolidation) Less: intercompany dividends (removed on consolidation) Loss attributable to members of the Parent undertaking 2012 £’000 (651) 400 (6,265) 2011 £’000 (9,669) — (4,194) as per note 12 (6,516) (13,863) 32. Contingent liabilities There were no contingent liabilities at the year end. 33. Operating lease arrangements and obligations under finance leases The Group as lessor The Group rents out its investment properties under operating leases. Rental income for the Group is disclosed in note 5. The Group paid rent under non-cancellable operating leases in the year of £313,000 (2011 – £376,000). The majority of these non-cancellable lease obligations are long leasehold investments in which the Group receives a profit rent. These investments often have rents payable, often with a contingent element (for example paying a proportion of collected rents), and a minimum rent obligation that is due to the superior landlord. The average lease length is 73 years. The minimum rental payment obligations due under these operating leases and anticipated rental income derived from these investments are shown below. The difference between the rents payable in the year of £313,000 and the minimum for the year of £154,000 is related to the contingent element only payable out of rents receivable. 55 Panther Securities P.L.C. Notes to the Consolidated Accounts continued For the year ended 31 December 2012 33. Operating lease arrangements and obligations under finance leases continued Minimum future payments under non-cancellable operating leases (Lessee) Payable within one year Payable between one year and five years Payable in more than five years 2012 £’000 562 2,248 45,926 48,736 Anticipated rental income derived under non-cancellable operating leases (Lessor) Payable within one year Payable between one year and five years Payable in more than five years 2012 £’000 3,055 12,220 238,781 254,056 2011 £’000 95 680 5,920 6,695 2011 £’000 1,885 7,540 140,543 149,968 Obligations under finance leases Investment property held under an operating lease is initially accounted for as if it were a finance lease, recognising as an asset and a liability the present value of the minimum lease payments due by the group to the freeholder. Subsequently and as described in accounting policies, the fair value model of accounting for investment property is applied to these interests. Obligations under finance leases due within one year (included within current liabilities) Obligations under finance leases due within one to five years Obligations under finance leases due in more than five years (included within non-current liabilities) Total obligations under finance leases 2012 £’000 562 1,898 5,380 7,278 7,840 2011 £’000 95 321 884 1,205 1,300 34. Events after the statement of financial position date There were no material transactions after the statement of financial position date. Panther Securities P.L.C. 56 35. Related party transactions Transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. The compensation of the Group’s key management personnel Directors’ emoluments are shown in note 8 and the Directors’ Remuneration Report. is shown in note 8 to the accounts and Note 19 details the Group’s transactions with its associate. Included in other receivables Panther Securities PLC has a loan to a director of Wimbledon Studios Limited of £62,500, in order for them to be able to purchase their shareholding in that company. The loan is unsecured for a maximum term of 3 years and attracts interest of 4% per annum. The fair value of this loan is assessed to be the same as its carrying value. 36. Net assets per share Total equity attributable to shareholders per 25p ordinary share 2012 367p 2011 397p The calculation of net asset per ordinary share is based on the equity attributable to shareholders of the equity in the parent company, and on 16,869,000 ordinary shares being number of ordinary shares in issue at 31 December 2012 and 31 December 2011. 37. Approval of financial statements The financial statements were approved by the Board of Directors and authorised for issue on 24th April 2013. 57 Panther Securities P.L.C. Parent Company Balance Sheet Company number 293147 As at 31 December 2012 Fixed assets Investments Current assets Debtors Cash at bank and in hand Notes £’000 39 40 105,278 2,396 107,674 2012 £’000 17,236 17,236 £’000 95,190 4,939 100,129 Creditors: amounts falling due within one year 41 (10,714) (10,841) Net current assets Total assets less current liabilities Creditors: amounts falling due after more than one year Derivative financial liability Net assets Capital and reserves Called up Share Capital Share Premium Account Capital Redemption Reserve Profit and Loss Account Shareholders’ funds 42 30 44 45 45 45 96,960 114,196 (67,817) (20,705) 25,674 4,217 2,886 604 17,967 25,674 2011 £’000 18,072 18,072 89,288 107,360 (59,068) (19,928) 28,364 4,217 2,886 604 20,657 28,364 The accounts were approved by the Board of Directors and authorised for issue on 24th April 2013. They were signed on its behalf by: A.S. Perloff Chairman Panther Securities P.L.C. 58 Parent Company Cash Flow Statement For the year ended 31 December 2012 Net cash outflow from operating activities Returns on investments and servicing of finance Cash inflow from refinancing Capital expenditure and financial investment Equity dividends paid Increase/(decrease) in cash in the year Notes 46 46 46 Reconciliation of operating loss to net cash flow from operating activities Operating loss Depreciation of tangible fixed assets Increase in debtors Increase/(decrease) in creditors Net cash outflow from operating activities 2012 £’000 (11,377) 2,128 8,031 699 (2,024) (2,543) 2012 £’000 (1,631) — (10,088) 342 (11,377) 2011 £’000 (19,081) 1,723 16,786 2,529 (1,350) 607 2011 £’000 (1,428) 1 (17,666) 12 (19,081) 59 Panther Securities P.L.C. Notes to the Parent Company Accounts For the year ended 31 December 2012 38. Accounting policies for the Parent Company The Parent Company financial statements have been prepared in accordance with applicable accounting standards in the United Kingdom. 38.1 Basis of preparation of financial statements The financial statements have been prepared under the historical cost convention as modified by the revaluation of derivatives and equity investments the results of the Company’s operations which are described in the report of the Directors and all of which are continuing. In preparing the Financial Statements of the Parent Company the Directors have taken advantage of the exemption offered under FRS 29 to disclose information in regard to the Company’s financial instruments as they are included in the Consolidated Financial Statements of the Group. 38.2 Revenue recognition Turnover comprises: (1) (2) (3) (4) Rental income from tenancy occupied properties net of Value Added Tax where appropriate: The income is recognised on an arising basis. Sale of stock properties: This is recognised on the date that exchange of contracts becomes unconditional. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated cash receipts through the expected life of the financial assets to that asset’s net carrying amount. Dividend income from investments is recognised when the Company’s rights to receive payment have been established. 38.3 Deferred taxation Deferred tax is provided for on a full provision basis on all timing differences which have arisen but not reversed at the balance sheet date. A deferred tax asset is not recognised to the extent that the transfer of economic benefit in the future is uncertain. Any assets and liabilities recognised have not been discounted. 38.4 Derivative financial instruments The Company uses derivative financial instruments, such as interest rate swaps, to hedge its risks associated with interest rate fluctuations. The Company does not hold or issue derivatives for trading purposes. Such derivative financial instruments are initially recognised at fair value on the date at which a derivative contract is entered into and are subsequently remeasured at fair value at each reporting date. For derivatives that do not qualify for hedge accounting, any gains or losses arising from changes in fair value are taken directly to the profit and loss account for the year. None of the Company’s derivative financial instruments qualify for hedge accounting. 38.5 Investments Investments in subsidiaries undertakings are stated at cost less any provisions for impairment. Under FRS 26, equity investments are carried at fair value and classified in the balance sheet as investments. Fair values of these investments are based on quoted market prices where available. The fair value of the investments in unquoted equity securities cannot be measured reliably and they have therefore been measured at the lower of cost and net realisable value. Movements in fair value are taken directly to equity. When these investments are considered impaired in accordance with the requirements of FRS 26, the impairment losses are recognised in profit and loss. On realisation of the investments, the cumulative gain or loss previously recognised through equity is reclassified from reserves in the profit and loss. The Company has not designated any financial assets that are not classified as held for trading as financial assets at fair value through the profit and loss. The investments represent investments in listed and unquoted equity securities that offer the Company the opportunity for return through dividend income and fair value gains. They have no fixed maturity or coupon rate. Those shares that are expected to be held for the long term are shown as non-current assets and those that are held for short term are shown as current assets. Panther Securities P.L.C. 60 39. Fixed asset investments Shares in Group undertakings £’000 Associate undertaking £’000 Other investments £’000 Cost or valuation At 1 January 2012 15,325 150 Additions Disposals Impairment through income statement Movement in fair value taken to equity Realised fair value on disposal previously taken to equity — — — — — At 31 December 2012 15,325 Investments: Listed Unlisted — 15,325 15,325 — — — — — 150 — 150 150 2,597 356 (955) (222) (83) 68 1,761 1,232 529 1,761 The above investments are shown at market value where there is an active market for these shares. For details of the Company’s subsidiaries at 31 December 2012, see note 17. 40. Debtors Due within one year Trade debtors Amounts owed by Group undertakings Other debtors Prepayments and accrued income 2012 £’000 206 104,579 472 21 Total £’000 18,072 356 (955) (222) (83) 68 17,236 1,232 16,004 17,236 2011 £’000 — 94,670 491 29 For further details on the Company’s policy for debtors see note 23. The total financial assets included within the financial statements of the Company at amortised cost are £107,653,000 (2011 – £100,100,000) (which includes items within debtors above and the Company’s cash). 105,278 95,190 61 Panther Securities P.L.C. Notes to the Parent Company Accounts continued For the year ended 31 December 2012 41. Creditors: Amounts falling due within one year Trade creditors Amounts owed to Group undertakings Social security and other taxes Other creditors Accruals and deferred income 2012 £’000 52 10,151 33 85 393 2011 £’000 105 9,656 47 109 924 10,714 10,841 For further details on the Company’s policy for creditors see note 29. Liabilities included within the financial statements of the Company at amortised cost total £78,531,000 (2011 – £69,909,000) (includes certain items within creditors shown above and the long term borrowings). Further information on the bank loan facility is available in note 27. 42. Creditors: Amounts falling due after more than one year Bank loans 43. Deferred taxation The following potential deferred taxation asset is not recognised: Potential capital losses Fair value of financial instruments 44. Called up share capital Authorised 30,000,000 ordinary shares of £0.25 each Allotted, called up and fully paid 16,869,000 ordinary shares of £0.25 each 2012 £’000 67,817 2011 £’000 59,068 2012 £’000 448 4,814 5,262 2012 £’000 7,500 4,217 2011 £’000 423 4,982 5,405 2011 £’000 7,500 4,217 The Company has one class of ordinary shares which carry no right to fixed income. There were no purchases of ordinary shares for cancelation in the year ending 31 December 2012 or 2011. Panther Securities P.L.C. 62 45. Reserves Balance at 1 January 2011 Loss for the year Movement in fair value of equity investments taken to equity Realised fair value on disposal of equity investments previously taken to equity Realised fair value on impairment of equity investments previously taken to equity Dividends paid Share premium £’000 2,886 — — — — — Balance at 1 January 2012 2,886 Loss for the year Movement in fair value of equity investments taken to equity Realised fair value on disposal of equity investments previously taken to equity Dividend paid — — — — Balance at 31 December 2012 2,886 Capital Redemption £’000 604 — — — — — 604 — — — — 604 Retained earnings £’000 34,083 (9,669) (517) (2,366) 476 (1,350) 20,657 (651) (83) 68 (2,024) 17,967 Within retained earnings are unrealised gains of £156,000 and a deferred tax credit of £448,000 (2011 – unrealised gains of £170,000 and a deferred tax credit of £423,000) reserves relating to fair value of available for sale investments (shares). 63 Panther Securities P.L.C. Notes to the Parent Company Accounts continued For the year ended 31 December 2012 46. Analysis of cash flows for line items in the cash flow statement Returns on investments and servicing of finance Interest received Interest paid Income from investments Net cash inflow for returns on investments and servicing of finance Cash flows from refinancing Repayments of loans Payment of loan arrangement fees and associated costs New loans received Capital expenditure and financial investment Purchase of fixed asset investments Sale of fixed asset investments Net cash inflow for capital expenditure 2012 £’000 6 (4,194) 6,316 2011 £’000 10 (2,519) 4,232 2,128 1,723 — (469) 8,500 8,031 (356) 1,055 699 (49,500) (714) 67,000 16,786 (693) 3,222 2,529 At 1 January 2012 £’000 Cash flow £’000 At Non- cash 31 December 2012 items £’000 £’000 Net cash: Cash at bank and in hand 4,939 (2,543) Debt: Due within one year Due after more than one year — (59,068) (54,129) — (8,500) (11,043) — — (249) (249) 2,396 — (67,817) (65,421) 47. Other commitments At 31 December 2012 the Company had annual commitments under non-cancellable operating leases as follows: Expiry date: Between 1 and 5 years Land and buildings 2012 £’000 22 2011 £’000 22 Panther Securities P.L.C. 64 48. Related party transactions The compensation of the Company’s key management personnel is shown in note 8 to the accounts and Directors’ emoluments are also shown in note 8 and the Directors’ Remuneration Report. In respect of Wimbledon Studios Limited the Company provided a £400,000 (2011 – £400,000) overdraft facility. Included in other debtors Panther Securities PLC has a loan to a director of Wimbledon Studios Limited of £62,500 (2011 – £62,500), in order for them to be able to purchase their shareholding in that company. The loan is unsecured for a maximum term of 3 years and attracts interest of 4% per annum. The fair value of this loan is assessed to be the same as its carrying value. There were no further related party transactions during the period other than dividends paid to directors who hold ordinary shares in the Company. 49. Risk management For information on the Company’s risk management please refer to the Corporate Governance section of the Group accounts. 65 Panther Securities P.L.C. Notice of Annual General Meeting PLEASE NOTE CHANGE OF VENUE Panther Securities P.L.C. and subsidiaries Notice is hereby given that the 79th Annual General Meeting of Panther Securities P.L.C. will be held at Nexia Smith and Williamson, 25 Moorgate, London EC2R 6AY on 14 June 2013 at 11.30 a.m. for the following purposes:– As Ordinary Business 1. To receive and adopt the Directors’ Report, Remuneration Report and Financial Statements for the year ended 31 December 2012. 2. 3. 4. 5. To authorise the payment of a final dividend of 9.0p per ordinary share. To re-elect (biographical details are available in the Corporate Governance report): (i) (ii) B. R. Galan who is retiring by rotation, as a Director. P. M. Kellner who is retiring by rotation, as a Director. To re-appoint the auditors Nexia Smith & Williamson and to authorise the Directors to determine their remuneration. To consider and, if thought fit, pass the following resolution as an Ordinary Resolution of the Company:– That for the purposes of section 551 Companies Act 2006 (and so that expressions used in this resolution shall bear the same meaning as in the said section 551): (i) (ii) (iii) the Directors be and are generally and unconditionally authorised to allot equity securities (as defined in section 560 of the Companies Act 2006) up to a maximum aggregate nominal amount of £2,400,000 to such persons and at such times and on such terms as they think proper during the period expiring at the conclusion of the Annual General Meeting of the Company to be held in 2013 (unless previously revoked or varied by the Company in general meeting); and This authority shall (unless previously revoked or renewed) expire two years after the date of the passing of this resolution. this resolution revokes and replaces all unexercised authorities previously granted to the directors pursuant to section 80 Companies Act 1985 but without prejudice to any allotment of shares or grant of rights already made, offered or agreed to made pursuant to such authorities. As Special Business To consider, and, if thought fit, pass the following resolutions of which will be proposed as special resolutions: 6. That, subject to the passing of resolution 1 set out in the Notice convening this Meeting, the Directors are empowered in accordance with section 571 Companies Act 2006 to allot equity securities (as defined in section 560 Companies Act 2006) for cash, pursuant to the authority conferred on them to allot equity securities (as defined in section 560 of the Act) by that resolution, as if section 561 (1) Companies Act 2006 did not apply to any such allotment, provided that the power conferred by this resolution shall be limited to: (i) the allotment of equity securities in connection with an issue or offering in favour of holders of equity securities and any other persons entitled to participate in such issue or offering where the equity securities respectively attributable to the interests of such holders and persons are proportionate (as nearly as may be) to the respective number of equity securities held by or deemed to be held by them on the record date of such allotment, subject only to such exclusions or other arrangements as the Directors may consider necessary or expedient to deal with fractional entitlements or legal or practical problems under the laws or requirements of any recognised regulatory body or stock exchange in any territory; Panther Securities P.L.C. 66 (ii) (iii) the allotment (otherwise than pursuant to paragraph 2.1 above) of equity securities up to an aggregate nominal value not exceeding £211,838; and the power granted by this resolution, unless renewed, shall expire at the conclusion of the Annual General Meeting of the Company to be held in 2014 but shall extend to the making, before such expiry, of an offer or agreement which would or might require equity securities to be allotted after such expiry and the Directors may allot equity securities in pursuance of such offer or agreement as if the authority conferred hereby had not expired. 7. That the Company is generally and unconditionally authorised for the purpose of section 701 Companies Act 2006 to make market purchases (as defined in section 693 (4) of the said Act) of ordinary shares of 25p each in the capital of the Company (“ordinary shares”) provided that the Company be and is hereby authorised to purchase its own shares by way of market purchase upon and subject to the following conditions:– (i) (ii) (iii) The maximum number of shares which may be purchased is 2,500,000 ordinary shares; The maximum price (exclusive of expense) at which any share may be purchased is the price equal to 5 per cent. above the average of the middle market quotations of an ordinary share as derived from the London Stock Exchange Daily Official List for the five business days preceding the date of such purchase, and the minimum price at which any share may be purchased shall be the par value of such share; and The authority to purchase conferred by this Resolution shall expire at the conclusion of the next Annual General Meeting of the Company provided that any contract for the purchase of any shares as aforesaid which was concluded before the expiry of the said authority may be executed wholly or partly after the said authority expires. 8. That the directors be authorised to make a payment of £25,000 by way of donation to the UK Independence Party. By order of the Board S. J. Peters Company Secretary Deneway House 88-94 Darkes Lane Potters Bar Hertfordshire EN6 1AQ Dated: 24th April 2013 Notes: 1. Any member of the Company entitled to attend and vote at this meeting is also entitled to appoint a proxy to attend and vote in his stead. Such a proxy need not also be a member of the Company. 2. 3. A proxy form is enclosed. Completed forms must be deposited at the address shown on the form not later than 48 hours before the meeting. A statement of all transactions of each Director and his family interests in the share capital of the Company will be available for inspection at the Company’s registered office during normal business hours from the date of this notice up to the close of the Annual General Meeting and will be available for inspection at the place of the Annual General Meeting for at least 15 minutes prior to and during the meeting. 4. No Director is employed under a contract of service. 67 Panther Securities P.L.C. 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Deneway House 88-94 Darkes Lane Potters Bar Hertfordshire EN6 1AQ Annual Report & Financial Statements 2012