Final Results

RNS Number : 3537T
Electra Private Equity PLC
06 December 2011
 



EMBARGOED UNTIL 07:00 AM, TUESDAY 6 DECEMBER 2011

 

ELECTRA PRIVATE EQUITY PLC

Audited Results for Year ended 30 September 2011

 

The information contained in this announcement is restricted and is not for release, publication, or distribution, directly or indirectly, nor does it constitute an offer of securities for sale in the United States, Canada, Japan, Australia or New Zealand.

 

References in this announcement to Electra Private Equity PLC and its subsidiaries have been abbreviated to 'Electra' or the 'Company'. References to Electra Partners LLP and EQM Capital LLP (manager of Electra's money market investments) have been abbreviated to 'Electra Partners' or 'the Manager'.

 

Financial Highlights

 

·      Diluted NAV per share up 8.5% to 2,225p as a result of strong portfolio performance

·      Diluted NAV per share at 30 November 2011 of 2,221p

·      Diluted NAV per share including dividends up 46.7% over five years resulting in a five-year annualised ROE of 8.1%

·      Share price down 0.6% over the year against 7.4% decline for FTSE All-Share

·      Outperformance over 10 years: diluted NAV up 168.2% and share price up 108.9% against 13.4% for FTSE All-Share

·      £100 million Convertible Bond issued December 2010

·      Credit facility refinanced post 30 September 2011- increased to £195 million and loan term extended to June 2016

·      Net liquid resources of £105 million (£39 million cash, £230 million liquidity funds and bank borrowings of £164 million)

·      Outstanding commitments to third party funds of £97 million expected to be substantially funded from existing fund investments

·      Investment capacity of £290 million (£230 million liquidity funds, £21 million undrawn borrowings, £39 million cash)

 

Portfolio

 

·      £136 million invested

·      £137 million realised

·      £118 million of net valuation increases (£50.4 million realised post year end)

·      Largest individual gains: SAV Credit (£28.2 million), Allflex (£27.1 million), BDR Thermea (£22.2 million), esure (£17.8 million) and Capital Safety Group (£11.2 million)

 

Commenting on the results, Colette Bowe, Chairman of Electra Private Equity, said:

 

"The performance of the business in the last financial year has once again demonstrated the Manager's ability to invest and divest successfully during tough times. This expertise together with Electra's financial resources and flexible investment mandate, will, in our view, enable the Company to continue to deliver good returns."

 

Commenting on Electra's position, Hugh Mumford, Managing Partner of Electra Partners, said:

 

"Portfolio performance is encouraging and we have a good pipeline of quality deals. However caution is still required and our focus remains on businesses we consider to have good defensive qualities to meet the potential difficulties ahead.

 

"Against the background of a tightening banking market and shortage of capital, Electra's high level of investment capacity is likely to be extremely advantageous. Electra therefore remains well placed for the challenges ahead."

 

Post Balance Sheet Event - Sale of Capital Safety

On 29 November conditional agreement was reached for the sale of Electra's interest in Capital Safety Group. At 30 September 2011 Electra valued its interest in Capital Safety at £32.3 million. Whilst completion is not expected until January 2012, based on the exchange rate on 29 November, proceeds of £54 million would be received by Electra which would give rise to an uplift of 54p above the 30 September 2011 diluted NAV of 2,225p. The sale of Capital Safety Group is not reflected in the diluted NAV per share calculation at 30 November 2011.

 

 

For further information:

For Colette Bowe & Hugh Mumford:

Nick Miles, M:Communications                                                                                                    020 7920 2321

Monique Dumas, Investor Relations Partner, Electra Partners LLP                                     020 7306 3911

 

Performance Summary

 

At 30 September the diluted NAV per share was 2,225p and 2,325p on a basic NAV per share basis. At 30 November 2011 the diluted NAV per share was 2,221p and 2,320p on a basic NAV per share basis. The sale of Capital Safety Group is not reflected in the diluted NAV per share calculation at 30 November 2011.

 

Performance excluding dividends:

 

Period ended 30 September 2011

6 months

One year

Five years

10 years

NAV per share (diluted)

1.5%

8.5%

44.0%

168.2%

NAV per share (basic)

1.6%

13.4%

50.4%

180.2%

Share price

(18.3)%

(0.6)%

(0.8)%

108.9%

FTSE All-Share

(13.5)%

(7.4)%

(13.0)%

13.4%

 

Diluted and Basic NAV

 

As a result of the issue of £100 million 5% Subordinated Convertible Bonds ('Bonds') in December 2010, Electra is required to report both a basic and diluted NAV per share. During the year to 30 September 2011 a total of 35 Bonds were converted into 1,704 ordinary shares. Accordingly, the diluted NAV per share assumes the issue at 30 September 2011 of a further 4,876,341 ordinary shares on the basis of the conversion terms of the Bonds.

 

Calculation of NAV

 

The calculation of the audited NAV per share at 30 September 2011 has been affected by the issue of the Bonds. Electra is required to prepare accounts and report in accordance with the Companies Act 2006 and International Financial Reporting Standards (IFRS). Under IFRS, the Bonds are a compound financial instrument which contain both a liability and an equity component. Of the £100 million raised, £23 million of the Bonds were accounted for as an equity component with the balance accounted for as debt at 30 September 2011. Further details of the accounting treatment of the Bonds are set out later in the Accounts.

 

The unaudited NAV per share at 30 November 2011 was calculated on the basis of the NAV at 30 September 2011 adjusted to reflect the purchases and sales of investments, currency movements and bid values on that day in respect of listed investments.

 

Return on Equity

 

Return on Equity is the internal rate of return based on the difference between the opening and closing NAV plus any dividend paid in the period. The annualised return on equity for the five years ended 30 September 2011 was 8.1% (diluted) and 9.0% (basic).

 

Percentage Change in Electra's Diluted Net Asset Value per Share Compared to FTSE All-Share Index

 

Electra's Diluted Net Asset Value per Share

FTSE All-Share Index

As at 30 September

%

%

10 year period 2001 - 2011

168

13

9 year period 2002 - 2011

191

47

8 year period 2003 - 2011

193

31

7 year period 2004 - 2011

144

17

6 year period 2005 - 2011

86

(3)

5 year period 2006 - 2011

44

(13)

4 year period 2007 - 2011

11

(20)

3 year period 2008 - 2011

24

7

2 year period 2009 - 2011

30

1

1 year period 2010 - 2011

9

(7)

 

Objective and Investment Policy

 

Electra has been quoted on the London Stock Exchange since 1976. Electra is managed as an HM Revenue and Customs approved investment trust, and invests primarily in the private equity mid-market.

 

The business and affairs of Electra are managed on an exclusive and fully discretionary basis by Electra Partners, an independent private equity fund manager with over 25 years experience in the mid-market.

 

Electra's objective is to achieve a rate of return on equity of between 10-15% per year over the long term by investing in a portfolio of private equity assets.

 

Electra Partners aims to achieve this target rate of return on behalf of Electra by utilising a flexible investment strategy and:

 

·      exploiting a track record of successful private equity investment;

·      utilising the proven skills of its management team with a strong record of deal flow generation and long-term presence in the private equity market;

·      targeting private equity opportunities (including direct investment, fund investments and secondary buyouts of portfolios and funds) so that the perceived risks associated with such investments are justified by expected returns;

·      investing in a number of value creating transactions with a balanced risk profile across a broad range of investment sectors through a variety of financial instruments; and

·      actively managing its capital position and levels of gearing in light of prevailing economic conditions.

 

The investment focus is principally on Western Europe, with the majority of investments made in the United Kingdom where Electra Partners has historically been most active. There is an emphasis on areas where Electra Partners has specific knowledge and expertise. In circumstances where Electra Partners feels that there is merit in gaining exposure to countries and sectors outside its network and expertise, consideration is given to investing in specific funds managed by third parties or co-investing with private equity managers with whom it has developed a relationship.

 

In implementing Electra's flexible investment strategy, Electra Partners typically targets investments at a cost of £40 million to £100 million in companies with an enterprise value of up to £300 million.

 

Electra Partners attempts to mitigate risk through portfolio diversification. Investments will therefore be made across a broad range of sectors and industries and not more than 15% of Electra's net asset value, at the time of investment, will be invested in any single investment. If Electra acquires a portfolio of companies in a single transaction, this limitation shall be applied individually to each of the underlying companies purchased and not to the portfolio as a whole.

 

Electra has a policy to maintain total gearing below 40% of its total assets.

 

Unless required to do so to maintain Electra's investment trust status, it is the policy of the Directors not to pay dividends.

 

 

Chairman's Statement

 

Overview

 

Electra has made solid progress this year despite the continuing financial crisis which has resulted in further market volatility around the world. Trading results of the majority of companies in the unlisted portfolio have been resilient, resulting in another successful year for Electra.

 

During the year, Electra's capital base was expanded through the issue of £100 million of Subordinated Convertible Bonds and, subsequent to the year end, the refinancing of our existing multi-currency revolving credit facility.

 

Results

 

At 30 September 2011 Electra's diluted net asset value per share was 2,225p compared with 2,050p at 30 September 2010, an increase of 8.5% against a FTSE All-Share decrease of 7.4%. Over the five years to 30 September 2011, the diluted net asset value per share, inclusive of Special Dividends, has increased by 46.7% and Electra has achieved an annualised return on equity of 8.1%.

 

Over the year Electra's share price broadly tracked the volatile movement in the FTSE All-Share rising from 1,368p at the beginning of the year to a high of 1,755p in April 2011 before ending the year at 1,360p, a 0.6% decline over the year.

 

The year end share price of 1,360p represents a discount to diluted NAV of 39% which continues to remain in line with the average discount of the Company's peer group.

 

Investment Activity

 

The first part of the year saw a steady increase in the number of investment opportunities offset by a reduction in the availability of quality deals as a result of renewed market volatility at the end of June. The net effect was that Electra Partners considered 148 new investment opportunities in the year and invested a total of £136 million. The largest new investment was £35.8 million in the buyout of Davies Group, a leading provider of claims management services to the insurance industry. Other investments included a £21.7 million secondary investment in Steadfast Capital Fund II, a fund comprising five investments in Germany.

 

As I reported in my Statement to 31 March 2011, the initial investments of £26.2 million in Daler-Rowney and £35.6 million in Sentinel Performance Solutions were reduced to £17.4 million and £15.7 million respectively, following an investment by the Electra Partners Club 2007 LP Fund, and the securing of medium-term banking facilities by Sentinel which resulted in Electra receiving £19.9 million.

 

Total proceeds of £137 million were received in the year from the sale of unlisted investments, of which £54 million related to the disposal of Rio Trens Corporation.

 

Since the year end, Electra has agreed terms for the sale of its stake in heating products manufacturer BDR Thermea ending a very successful long-term investment in Baxi. Proceeds of £39.1 million have already been received with further proceeds in the region of £40 million due to be received over the next two years. Electra also sold its stake in specialist credit card provider SAV Credit with Electra receiving gross proceeds of £40.8 million.

 

Convertible Bond Issue and Banking Facilities

 

In December 2010 Electra issued £100 million of 5% Subordinated Convertible Bonds through a placing and open offer. In October 2011 Electra refinanced its existing multi-currency revolving credit facility, increasing the size to £195 million and extending the loan term to June 2016. This is part of our on-going strategy to diversify the sources and maturity of Electra's capital base, which started in 2009 with the raising of £46 million of ZDPs.

 

Board Changes

 

As reported previously, Kate Barker joined the Board in November 2010 and Geoffrey Cullinan was appointed a Director in January 2011. Ron Armstrong and Peter Williams both retired as Directors at the Annual General Meeting held in February 2011. Lucinda Webber was appointed Senior Independent Director and Chairman of the Remuneration and Nomination Committee in March 2011.

 

Corporate Governance

 

The duty of the Board is to act in our shareholders' interests at all times and, as part of this, we take corporate governance very seriously. We report in detail on corporate governance matters later in the Report and Accounts. During the year, we established a Management Engagement Committee, chaired by Geoffrey Cullinan, to carry out the work previously done by the full Board in reviewing the performance of the Manager and the terms of the management contract. The duties of Electra Partners include investment management, with full discretion on investments and realisations, and all treasury, accounting and administrative responsibilities of the Trust. I am pleased to confirm that the Board believes that the continuing appointment of the Manager is in the best interests of shareholders.

 

Outlook

 

The performance of the business in the last financial year has once again demonstrated the Manager's ability to invest and divest successfully during tough times.

 

Within the private equity market there are currently a number of conflicting messages on availability, pricing and financing of investments. Electra Partners has successfully invested through several economic downturns and this expertise, together with Electra's financial resources and flexible investment mandate, will, in our view, enable Electra to continue to deliver good returns and enhanced value for shareholders.

 

 

 

 

Colette Bowe

Chairman

5 December 2011

 

The Manager

 

Electra Partners is an independent, private equity fund manager with over 25 years experience in the mid-market. During this time the firm has invested in excess of £3 billion, accumulating considerable expertise and building a strong track record. As at 30 September 2011, Electra Partners had funds under management of over £1.3 billion on behalf of Electra and other clients.

 

With one of the most experienced and stable teams in the private equity industry, the majority of the senior management have worked together for over 20 years. The investment professionals have on average over 18 years experience in private equity and are supported by a 24-strong team skilled in finance, compliance, investor relations and marketing.

 

Senior Management Team


Years of private equity experience

Hugh Mumford

Managing Partner

30

Tim Syder

Deputy Managing Partner

26

David Symondson

Deputy Managing Partner

28

Alex Fortescue

Chief Investment Partner

13

Rhian Davies

Partner

18

Philip Dyke

Partner

38

Steve Ozin

Partner

21




Investment Team


Years of private equity experience

Alex Cooper-Evans

Investment Partner

17

Charles Elkington

Investment Partner

17

Nigel Elsley

Investment Partner

23

Chris Hanna

Investment Partner

10

Roger Isaac

Investment Partner

25

John Martin

Investment Manager

9

Sarah Williams

Investment Manager

9

Oliver Huntsman

Portfolio Manager, UK

29




Peter Carnwath

Portfolio Manager, US

29

John Levack

Portfolio Manager, Asia

21




Monique Dumas

Investor Relations Partner

12

 

 

Investment Highlights

 

Market Environment

 

The financial year to 30 September 2011 began with an improvement in market conditions relevant to private equity. However, these conditions deteriorated in the second half of the year as concerns about the eurozone, its financial stability, and global imbalances generally, caused stock markets to fall sharply in many parts of the world. Current market conditions remain difficult in the financial markets.

 

Performance

 

Despite these changes in the market, Electra's net asset value continued to make positive progress. Over the year, Electra's diluted net asset value per share increased to 2,225p at 30 September 2011 compared to 2,050p at the beginning of the year. This 175p per share increase represents a growth in net asset value over the year of 8.5% which compares to a decline of 7.4% in the FTSE All-Share over the same period. The increase in net asset value in the second half of the year amounted to 1.5% which compared to a fall of 13.5% in the FTSE All-Share.

 

The growth in net asset value over the year of £96 million was due to realised and unrealised capital gains in the investment portfolio, net of incentive provisions, of £73 million, together with £23 million which was capitalised in December 2010 on the issue of the £100 million of 5% Subordinated Convertible Bonds.

 

Analysis of Movement in Net Asset Value

 

£m

30 September 2010 Opening NAV

725

Issue of Convertible Bond

23

Income

36

FX on loans/other expenses

(1)

Priority profit share

(17)

Finance costs

(18)

Net capital gain on investments

84

Incentive provisions

(11)

30 September 2011 Closing NAV

821

 

Supporting the growth in net asset value, the underlying investment portfolio has continued to make progress despite the difficult economic conditions. Those portfolio companies, whose value depends predominantly on earnings and which make up the most significant part of the direct unlisted portfolio, delivered an increase in earnings over the year of 6%. This increase in earnings and consequent valuation increases together with interest, dividends and other gains including those resulting from disposals and imminent disposals enabled the portfolio to generate a total return of £118 million, an increase of 15.4%. Excluding the listed portfolio which declined by £22 million in the year, the remaining unlisted portfolio, including funds and secondaries, generated a total return of £140 million, an increase of 21.6%, a highly successful outcome for these segments of the portfolio.

 

During the year the underlying leverage in the portfolio continued to fall and by the end of the year debt levels had fallen to a multiple of 2.5 x EBITDA.

 

Investment Activity

 

Over the year Electra has seen an increase in disposal activity. One major realisation occurred during the year and two further significant realisations occurred shortly after the year end. These were all made at substantial premiums to the carrying value of the relevant investment immediately prior to the announcement of the sale.

 

The environment for new investment continued to be difficult throughout most of the year as prices remained high relative to the uncertain outlook for the growth of operating profits. In view of this we retained a cautious outlook with total investment for the year amounting to £136 million. Within this total however we added four significant new investments to the portfolio. Whilst investment was lower than the previous year, investment activity in terms of deal flow showed a marked increase. At the same time the quality of the deal flow also increased.

 

Outlook

 

Electra has continued to deliver positive results despite the challenging environment. Portfolio performance is encouraging and we have a good pipeline of quality deals. However caution is still required and our focus remains on businesses we consider to have good defensive qualities to meet the potential difficulties ahead.

 

Against the background of a tightening banking market and shortage of capital, having a high level of investment capacity is likely to be highly advantageous. Electra therefore remains well placed for the challenges ahead.

Portfolio Review

 

At 30 September 2011 Electra's investment portfolio was valued at £883 million. The investment portfolio consists of direct unlisted investments, secondaries, funds and listed companies. The top 10 and 20 investments account for 53.3% and 72.5% respectively of the investment portfolio.

 

Portfolio Breakdown

 

Investment Portfolio *
As at 30 September

2011
£m

2010
£m

Direct unlisted

621

501

Secondaries

57

50

Funds

111

96

Listed

94

119

Investment portfolio *

883

766

 

*       Includes accrued income of £52,831,000 (2010: £32,203,000)

 

Direct Unlisted Investments (70% of portfolio)

Direct unlisted investments form the major part of Electra's portfolio and consist of investments in 37 companies with an aggregate value of £621 million. The 18 largest investments (all of which have a book value in excess of £10 million) accounted for 95% of the direct unlisted investments at the year end.

 

Secondary Investments (6% of portfolio)

Secondary investments are predominantly acquisitions of limited partnership interests in third party funds where an existing investor is seeking to sell its position prior to the end of the fund's life. At 30 September 2011 Electra held five secondary positions containing 16 investments with an aggregate value of £57 million. As a result of their relative maturity, secondary investments typically produce faster returns than direct investments.

 

Fund Investments (13% of portfolio)

Investments in funds are made primarily to generate co-investment opportunities for Electra from a limited number of managers of investment partnership funds based in Continental Europe and, in the case of two funds, to gain exposure outside Electra Partners' network. At 30 September 2011, the fund portfolio also contained a number of legacy funds which are in the process of being run off by their managers.

 

Listed Investments (11% of portfolio)

Listed investments consisted of 10 investments with an aggregate value of £94 million at 30 September 2011. For the most part, listed investments are held where they arise from previously unlisted investments which continue to generate the returns required under Electra's investment objectives. However, Electra may also invest in listed companies where the management team, which Electra wishes to support, operates through a listed vehicle.

 

Investment Portfolio - Geographic breakdown

 

30 Sept 2011

30 Sept 2010


%

%

UK

56

48

Continental Europe

35

33

USA

5

5

Asia and elsewhere

4

14

 

Investment Portfolio - Sector Breakdown

 

30 Sept 2011

30 Sept 2010


%

%

Agricultural

13

11

Building and construction

7

7

Healthcare

8

9

Non-cyclical consumer goods

17

13

Other

2

3

Private equity funds

14

16

Property investment

13

14

Speciality engineering

4

5

Financial services

19

11

Software and computing

3

4

Transport

-

7

 

Direct Unlisted - Age Analysis (by last refinancing date)

 

30 Sept 2011

30 Sept 2010


%

%

Less than 1 year old

13

32

1 - 2 years

26

3

2 - 3 years

6

12

Over 3 years

55

53

 

Portfolio Movement

 

Electra's investment portfolio increased from £766 million to £883 million during the year to 30 September 2011 with realisations and new investments at £137 million and £136 million respectively.

 

Year ended 30 September

2011

2010

2009


£m

£m

£m

Opening investment portfolio *

766

576

514

Investments

136

183

88

Realisations

(137)

(149)

(33)

Total return

118

156

7

Closing investment portfolio*

883

766

576

 

*       Includes accrued income of £52,831,000 (2010: £32,203,000; 2009: £29,450,000, 2008: £9,034,000)

 

New Investments

 

New investments during the year of £136 million compared to £183 million in the previous twelve months but, as explained earlier, investing remained difficult in view of the divergence between buyer and seller expectations leading to longer timelines or negotiations being terminated.

 

The most significant individual new investments were in respect of Davies Group, Daler-Rowney and Sentinel Performance Solutions:

 

Davies Group, in which Electra invested £35.8 million, is a leading provider of claims management services to the insurance industry. Recognised as one of the most innovative and well-respected providers of claims solutions in the UK, the Davies Group has a strong market position with a stable client base and good growth prospects from further developing their product range to support existing and new customers.

 

Electra invested £35.6 million in Sentinel which supplies products to increase the performance and efficiency of residential heating and hot water systems. Sentinel also has a strong market position and good opportunities for growth from new product development and the geographic expansion of sales. In April the investment in Sentinel was reduced to £15.7 million following the securing of medium-term bank finance.

 

Daler-Rowney, in which Electra invested £17.4 million, is the world's third largest supplier of fine art materials. Daler-Rowney has a strong management team, good defensive characteristics and significant opportunities to expand through consolidation in its marketplace.

 

In addition to these individual investments Electra acquired a secondary investment in Steadfast Capital GmbH's second fund at a cost of €24 million together with a commitment of €2 million. Our relationship with this German private equity fund manager dates back to 2008 when Electra invested in their first fund. Steadfast's second fund is fully invested and comprises five investments, the largest of which are FEP (automotive connectors); Kautex (specialist manufacturing equipment); and Falk & Ross (promotional clothing distributor).

 

In addition to these investments a further £19.9 million was drawn down by private equity funds in which Electra is a limited partner. At 30 September 2011, Electra had commitments to third party funds of £97 million which are expected to be funded substantially from realisation proceeds received from existing fund investments.

 

New Investments

 

Year to 30 September

£m

2007

322

2008

114

2009

88

2010

183

2011

136

 

Realisations

 

Total realisations for the year ended 30 September 2011 amounted to £137 million. The most significant realisation during the year related to Rio Trens Corporation which generated proceeds of £54 million. As previously reported, this sale marked the successful conclusion of a transaction where the original investment was made in 1998 and a substantial restructuring had taken place over a number of years. The period also saw the return of £20 million following the securing of medium-term banking finance by Sentinel and the redemption of the Baxi mezzanine position with proceeds of £11.4 million being received against a cost two years earlier of £3.5 million. £11.7 million was received from the sale of two companies from Electra's portfolio of secondaries and £13.3 million was received from other private equity funds during the period.

 

Shortly after the year end, Electra made two further substantial realisations involving BDR Thermea and SAV Credit. In October Electra received £39.1 million as the first instalment in respect of proceeds from the sale of the investment in BDR Thermea. Further instalments with a value of approximately £40 million are due over the next two years. In November Electra received £40.8 million from of the sale of the investment in SAV Credit. The sale of SAV Credit, a company involved in the management of credit card portfolios, provided an excellent result for an investment highly dependent on the continuing availability of banking finance. The proceeds of £40.8 million amounted to a 236% increase on the carrying value of the investment at 31 March 2011.

 

The realisation of BDR Thermea and SAV Credit together with the realisations completed during the year gave rise to proceeds and potential proceeds of £257 million, an amount equal to almost 40% of the unlisted portfolio value at the beginning of the financial year.

 

Realisations

 

Year to 30 September

£m

2007

318

2008

201

2009

33

2010

149

2011

137

 

Performance

 

During the year to 30 September 2011, the total return from Electra's investment portfolio amounted to £118 million, a percentage return of 15.4%. The total return was made up of £84 million of capital gains together with £34 million received or receivable in the form of income or dividends.

 

Of the total return of £118 million, £129 million arose in respect of direct unlisted investments and £11 million arose in respect of funds and secondaries. These positive returns were offset by a negative return on the listed portfolio of £22 million.

 

Portfolio Performance

 

Year to 30 September

%

2007

82.4

2008

(5.1)

2009

1.4

2010

27.1

2011

15.4

 

The reason for the increase in Electra's portfolio valuation was principally due to two factors. Firstly the underlying profit performance of the portfolio which resulted in £73 million of valuation increases and secondly from £69 million of gains which were realised during the year or subsequent to the year end. A further £17 million of gains was due to other factors including debt repayment, offset by a £19 million fall in value due to a reduction in multiples used for valuation purposes and a £22 million fall in the value of listed securities.

 

Analysis of Gains

 

£m

Profit increase

73

Multiple changes

(19)

Debt repayment

7

Change in yield

2

Funds

8

Listed price

(22)

Realised profits *

69

Total net gain

118

 

*      £50.4 million realised subsequent to the year end

 

Valuation Changes

 

Of the total return recognised in respect of the direct unlisted investments, funds and secondaries, £69 million represented income received and realised gains. For this purpose, gains included those relating to BDR Thermea and SAV Credit which were sold shortly after the year end. The balance of the total return of £71 million, represented unrealised value increases. In terms of individual investments, the three largest unrealised value increases were recorded in respect of Allflex (£27.1 million), esure (£17.8 million) and Capital Safety (£11.2 million), all made to reflect exceptional profit performance.

 

Of the decline in value of the listed portfolio, £7.9 million was due to Zensar which fell in line with the relevant Indian stock exchange and £6.7 million was due to Moser Baer whose decline in value exceeded the market fall. Both these companies have been exceptional investments for Electra and are expected to continue to perform in the longer term.

 

The performance of Electra's investments in private equity funds was below that of Electra's other unlisted investments. A significant amount of Electra's investment in funds is however now relatively mature and their performance should improve as the realisation process gains momentum.

 

Of the 18 largest investments in the direct unlisted portfolio, 12 increased in value during the year, five were reduced in value and one was retained at the price of the recent transaction having been purchased on 30 September 2011.

 

Direct Unlisted Investments - Valuation Changes

 


Valuation change

Company

£m

%

SAV Credit

28.2

272.7

Allflex Holdings

27.1

37.6

BDR Thermea

22.2

48.7

Esure

17.8

54.3

Capital Safety Group

11.2

52.9

Nuaire

7.4

36.9

CPA Global

5.0

36.3

Lil-lets Group

4.8

13.0

Promontoria

4.7

14.4

Amtico

3.1

17.6

Volution (Vent-Axia)

1.3

8.0

Pine

1.0

6.5

Davies Group

0.0

0.0

Kalle

(0.2)

(1.4)

Daler-Rowney

(2.0)

(11.3)

Labco

(2.4)

(15.3)

Premier Asset Management

(4.3)

(13.4)

Sentinel Performance Solutions

(4.3)

(27.4)

 

Direct Unlisted Investments - Valuation Basis

 

30 Sept 2011

30 Sept 2010


%

%

Earnings basis

59

66

Recent cost / listed price

6

3

Yield basis

9

11

Sale / loan value

25

16

Other basis

1

4

 

 

 

 

Hugh Mumford

Managing Partner

Electra Partners LLP

5 December 2011

Key New Investments and Realisations

 

New Investments

 

Sentinel Performance Solutions

 

Location: UK

Equity Ownership: 50%

Valuation: £11,385,000

Cost: £15,692,000

Type of Deal: MBO

Website: www.sentinel.co.uk

 

Valuation based on a multiple of earnings

 

In February 2011, Electra acquired Sentinel Performance Solutions for £43 million in an all equity financed secondary buyout. In April Electra's investment was reduced to £15.7 million by a subsequent debt and equity refinancing.

 

Based in Runcorn, Sentinel supplies water treatment products to improve the performance and efficiency of residential heating and hot water systems. It has a strong track record in new product development. Sentinel has developed a market-leading position in the UK and is building a market presence in other European countries as well as the USA.

 

Difficult conditions during 2011 in the European boiler markets in which Sentinel operates have led to a decline in profitability in the core business. This has been partially mitigated by the launch of new products and the growth of sales in new geographic markets. However the valuation has been reduced to reflect the overall fall in profitability and the fall in comparable multiples.

 

Daler-Rowney

 

Location: International

Equity Ownership: 41.1%

Valuation: £15,473,000

Cost: £17,435,000

Type of Deal: MBO

Website: www.daler-rowney.co.uk

 

Valuation based on multiple of earnings

 

Electra acquired Daler-Rowney in March 2011 for £17.4 million. Daler-Rowney is one of the largest suppliers of fine art materials in the world with a comprehensive product range including artists' paints, brushes, papers and canvases which meet the needs of beginner, amateur, student and professional artists. The company manufactures its products in the UK and the Dominican Republic and sells in more than 90 countries worldwide.

 

Daler-Rowney is successfully growing by building on its strong heritage brands and customer relationships with turnover ahead of prior year. The business strategy is based on further developing market share in established core markets in the US and Continental Europe and on increasing penetration in other markets; this will be achieved through continued investment in sales infrastructure and product development.

 

Whilst the business has performed strongly since Electra's investment, the valuation of Daler-Rowney has fallen as a result of the decline, in line with the stock market, of comparable company valuation multiples.

 

Steadfast Capital Fund II

 

Location: Germany

Ownership: 16.8%

Valuation: £20,940,000

Cost: £21,749,000

Type of Deal: Secondary

Website: www.steadfast.de

 

Valuation based on price of recent transaction

 

In June 2011, Electra was the largest investor in a secondary acquisition of a significant limited partnership interest in Steadfast Capital Fund II LP ("Fund II").

 

Building on the success of Electra's investment in Steadfast Capital Fund I GmbH ("Fund I"), Electra Partners had been monitoring the performance of Fund II for some time and received extensive access prior to making the investment. Fund II is closed to new investments and comprises five assets: FEP (automotive components), Dahlback (retail bakeries), Falk & Ross (clothing distribution), Kautex (capital goods) and proFagus (barbecue fuel).

 

Davies Group

 

Location: UK

Equity Ownership: 46.2%

Valuation: £35,789,000

Cost: £35,789,000

Type of Deal: MBO

Website: www.davies-group.com

 

Valuation based on price of recent transaction

 

On 30 September 2011 Electra invested £35.8 million in Davies Group Limited ("Davies Group"), a leading provider of claims management solutions to the insurance industry. Davies Group is recognised as one of the most innovative and well respected providers of claims solutions in the UK providing a range of services across all sectors of the insurance market, including claims management, validation and loss adjusting services, and claims fulfilment to some of the best-known and most successful insurance brands in the UK.

 

Operating nationally, Davies acts on behalf of a range of insurance companies, specialist sectors such as Lloyd's of London, as well as service companies, brokers and self-insured entities. With a team of over 600 employees the business processes in excess of 125,000 insurance claims annually, equating to £500 million of insurers indemnity spend. Revenues in year to March 2011 were £37 million, having a compound annual growth rate of 16% per annum since 2009.

 

Realisation

 

Rio Trens Corporation

 

Location: Brazil

Proceeds: £54,137,000

Cost: £34,362,000

 

In 1998 Electra first invested in Rio Trens Corporation ('RTC') which has an investment in a Brazilian transportation company operating 159 trains on a 225km network serving 89 stations. Electra invested US$25 million in the company between 1998 and 2000.

 

Following a series of financial and operational difficulties the investment was written off by Electra in 2000. Subsequently, changes were made to the management and Electra invested a further £17.3 million to aid the company's ongoing investment programme to improve the network and capacity.

 

With the forthcoming World Cup and Olympics in Brazil, the concession attracted interest and Electra accepted an offer for its shareholding in RTC in November 2010, receiving £54 million of proceeds.

Key Investments

 

Direct Unlisted and Secondary Investments

 

Fair Value of holding at
30 Sept 2010

Net
payments/
(receipts)

Performance in period

Fair Value of holding at
30 Sept 2011

Cost of holding at
30 Sept 2011

Company

£'000

£'000

£'000

£'000

£'000

ALLFLEX HOLDINGS

71,924

-

27,076

99,000

40,781

Animal identification tags






BDR THERMEA

63,074

 (12,120)

22,246

73,200

44,347

Heating products






ESURE

35,376

(2,536)

17,829

50,669

29,733

Motor & home insurance






LIL-LETS GROUP

36,346

280

4,779

41,405

21,692

Feminine hygiene products






SAV CREDIT

12,177

 (1,848)

28,171

38,500

22,844

Credit card operator






PROMONTORIA

39,843

 (7,124)

4,707

37,426

14,074

Property holding company






DAVIES GROUP

-

35,789

-

35,789

35,789

Provider of claims solutions






CAPITAL SAFETY GROUP

19,854

1,281

11,188

32,323

19,082

Specialist safety equipment






NUAIRE

20,146

-

7,435

27,581

23,138

Fan manufacturer






PREMIER ASSET MANAGEMENT

31,823

-

 (4,262)

27,561

55,785

Investment management






AMTICO

17,734

51

3,139

20,924

22,326

Luxury flooring manufacturer






CPA GLOBAL

13,901

 (196)

4,974

18,679

13,901

Patent renewals management






VOLUTION (VENT-AXIA)

17,559

(842)

1,342

18,059

15,840

Fan manufacturer






PINE

15,000

282

993

16,275

14,500

Nursery school finance






DALER-ROWNEY

-

17,435

 (1,962)

15,473

17,435

Fine art materials supplier






LABCO

15,444

233

 (2,391)

13,286

24,189

Medical diagnostics






KALLE

11,684

(31)

(166)

11,487

9,001

Food casings






SENTINEL PERFORMANCE SOLUTIONS

-

 15,692

 (4,307)

11,385

15,692

Heating system treatment products






Sub total

421,885

46,346

120,791

589,022

440,149

Other investments

129,107

** (50,762)

10,810

89,155


Total Direct Unlisted and Secondary Investments*

550,992

(4,416)

 131,601

678,177


 

*      Includes accrued income

**     Includes realisation proceeds of £54 million from Rio Trens Corporation

Listed Investments

 

Fair Value of holding at
30 Sept
2010

Net payments/
(receipts)

Performance in period

Fair
Value of holding at 30 Sept 2011

Cost of holding at
30 Sept 2011


£'000

£'000

£'000

£'000

£'000

LONDON & STAMFORD PROPERTY

34,214

(2,525)

3,090

34,779

30,195

Property holding company






ZENSAR TECHNOLOGIES

23,971

-

(7,907)

16,064

4,211

Software






MOSER BAER

11,913

(85)

(6,661)

5,167

1,900

Manufacturer of recordable optical media






Sub total

70,098

(2,610)

(11,478)

56,010

36,306

Other investments

49,025

(433)

(10,269)

38,323


Total Listed Investments*

119,123

(3,043)

(21,747)

94,333


 

*      Includes accrued income

 

 

Fund Investments

 

Fair Value of holding at
30 Sept
2010

Net payments/
(receipts)

Performance in period

Fair
Value of
holding at
30 Sept 2011

Cost of holding at
30 Sept 2011


£'000

£'000

£'000

£'000

£'000

Funds

 95,686

 6,969

 8,010

 110,665

116,155

 

 

The three largest funds were Cognetas Fund II LP, Sinergo Con Imprenditori and Duke Street Capital VI No 1 Limited Partnership, which accounted for 53% of the total value.

Large Private Equity Investments

 

Allflex Holdings

 

Location: International

Equity Ownership: 33.0%

Valuation: £99,000,000

Cost: £40,781,000

Type of Deal: MBO

Website: www.allflex.co.uk

 

Valuation based on multiple of earnings

 

In 1998 Electra invested £23.1 million in the US$160 million buyout of Allflex. Allflex is the world's leading manufacturer and distributor of plastic and electronic animal identification tags ("Rfid") with factories in France, Brazil and China. In 2005 and 2007 the business was refinanced with Electra being repaid £90 million cumulatively, whilst retaining an investment of £40.5 million in the equity of the business.

 

In the year ended 31 December 2010, Allflex generated sales of $222.1 million (2009: $187.4 million). The business is showing strong growth in 2011 as a result of increased sales of electronic tags in Europe, where new sheep identification legislation has been implemented, and the impact of acquisitions completed in 2010.

 

In July 2011, Allflex completed the acquisition of a US based company active in the livestock, pet and fish identification markets.

 

Increased traceability regulation is forecast to continue across all species, products and markets over the forthcoming years.

 

BDR Thermea

 

Location: International

Equity Ownership: 6.0%

Valuation: £73,200,000

Cost: £44,347,000

Type of Deal: MBO

Website: www.bdrthermea.com

 

Valuation based on net present value of expected disposal proceeds

 

Electra has a longstanding relationship with Baxi Group, a leading manufacturer of heating products, and has continued to support the business since its first investment in 1999.

 

In 2004 Electra re-invested £14.9 million in the buyout of Baxi Group allowing Electra to maintain its exposure to a business considered to have good long term growth potential.

 

In October 2009 Baxi combined with De Dietrich Remeha Group to create a leading player in the European heating market. The combined group, now known as BDR Thermea, is active in over 70 countries with over 7,000 employees and has an annual turnover of over €1.8 billion.

 

On 31 October 2011, the interest in BDR Thermea held by the former Baxi shareholders was acquired by the group's parent company, Remeha Group BV. €45 million was received by Electra on that date, with the remainder of the proceeds receivable over the next two years.

 

esure

 

Location: UK

Equity Ownership: 7.0%

Valuation: £50,669,000

Cost: £29,733,000

Type of Deal: MBO

Website: www.esure.co.uk

 

Valuation based on multiple of earnings

 

In February 2010, Electra invested £30 million in the management buyout of esure from Lloyds Banking Group, led by Peter Wood, founder and CEO of esure. The transaction was unleveraged and the total value was in excess of £185 million. esure is now one of the UK's leading motor insurers, offering car, home, pet and travel insurance over the internet and by phone through the esure and Sheilas' Wheels brands. esure also has a 50% interest in Go compare, the internet aggregator.

 

Following a steep rise in motor bodily injury claims since 2009, management's actions to improve profitability and reserving and relatively benign weather have driven a marked improvement in 2011 in underwriting performance and overall profitability, despite low investment returns. Go compare continues to perform well in a very competitive marketplace. Despite a number of challenges in the UK motor insurance industry, including the OFT's Call for Evidence on Motor Insurance and the potential ban on referral fees, management remains confident in the future prospects of the business. 

 

Lil-lets Group

 

Location: UK and South Africa

Equity Ownership: 61.7%

Valuation: £41,405,000

Cost: £21,692,000

Type of Deal: MBO

Website: www.lil-lets.com

 

Valuation based on multiple of earnings

 

In 2006 Electra made an equity investment in the management buyout of Lil-lets. Lil-lets is a leading feminine hygiene brand with operations in the UK and South Africa and sells a range of applicator and non-applicator tampons, sanitary towels and pantliners.

 

The UK market for feminine hygiene products remains competitive with a high level of promotional activity on branded and own label products. Lil-lets has recently completed a significant product launch and rebranding exercise and consumers across the country can now choose from a full range of innovative, high-performance Lil-lets products developed and packaged to meet their requirements. South Africa remains a growth market in which the company has a leading position.

 

Lil-lets is continuing to invest in brand and product development as well as geographic expansion opportunities. Group net sales in the year to 31 December 2010 were £38.6 million (2009: £37.7 million).

 

SAV Credit

 

Location: UK

Equity Ownership: 23.2%

Valuation: £38,500,000

Cost: £22,844,000

Type of Deal: Co-investment / Development Capital

Website: www.savcredit.co.uk

 

Valuation based on sale proceeds

 

In 2006 Electra provided £15 million of senior ranked equity to SAV Credit to support the growth of the business. SAV provides credit cards to non-mainstream profile customers. Electra provided further capital to support SAV's acquisition of the Marbles credit card portfolio in 2007 and again as part of the Opus transaction in 2010. In total, Electra's investment cost in SAV reached £22.9 million in March 2010.

 

Trading performance has remained robust during 2011 with SAV starting to benefit materially from the improvements in trading in the Opus portfolio, whilst still benefiting from the low interest rate environment. As a result, trading profits during 2011 show significant improvement on the prior year results.

 

As a result of the improved trading performance, a sales process was launched during 2011 which was concluded in November 2011. Electra realised £39.0 million for its remaining investment in SAV, after a loan of £1.8 million was repaid during September 2011.

 

Promontoria

 

Location: Germany

Equity Ownership: 10.7%

Valuation: £37,426,000

Cost: £14,074,000

Type of Transaction: Acquisition capital

 

Valuation based on a combination of rental yield and expected disposal value

 

In 2002 Electra provided a first tranche of acquisition funding to Promontoria, an unleveraged investment company which owns 98 retail properties situated throughout the major towns and cities in Germany, of which 84 are leased to the discount chain Woolworth. Electra's investment is in the form of ordinary shares and loan stock.

 

The German retail property market has remained buoyant in the first half of 2011 with investor demand remaining high. The company has continued to progress over the past six months. Its major tenant, Woolworth, has been significantly restructured and as a result demonstrated a healthy level of profits combined with a strong balance sheet. The development of certain vacated properties is progressing well and more than 50,000 m² of retail space has been leased to third parties over the past 12 months. Promontoria has sold 11 properties over the past 18 months for aggregate post tax proceeds of €85 million. Of the remaining 14 vacated stores it is expected that a further seven will be sold during the course of the next 12 months.

 

Capital Safety Group

 

Location: International

Equity Ownership: 10%

Valuation: £32,323,000

Cost: £19,082,000

Type of Deal: MBO

Website: www.capitalsafety.com

 

Valuation based on multiple of earnings

 

Electra originally invested in the buyout of Capital Safety Group ("CSG") in 1998. CSG manufactures harnesses, lifelines and anchors for people working at height in a wide range of end user sectors including manufacturing, construction, oil and gas, and utilities. Following the sale of the investment in 2007, Electra reinvested in the mezzanine, shareholder loan and equity of the business to benefit from the continued growth forecast in the fall protection market and complementary acquisitions.

 

Since investment, CSG has been transformed from having a regional focus into an international brand. A number of acquisitions have been completed in the last year, including the purchase of Arseg, a significant fall protection business in Colombia.

 

The company continues to focus on winning market share and cost control, as well as entering new markets such as wind power.

 

Nuaire

 

Location: UK and France

Equity ownership: 38.8%

Valuation: £27,581,000

Cost: £23,138,000

Type of Transaction: MBO

Website: www.nuaire.co.uk

 

Valuation based on multiple of earnings

 

In 2007, Electra led the £83 million management buyout of Nuaire. Nuaire is a leading UK based manufacturer and distributor of ventilation equipment for commercial and residential applications, with factories in Caerphilly, South Wales and St Brisson-sur-Loire, France.

 

Nuaire had a strong year's trading delivering profits ahead of budget in a challenging environment. In the year to 30 September 2011 Nuaire generated unaudited group sales of circa £60 million (2010: £53.8 million) with a low double digit increase in operating profits on the prior year.

 

Premier Asset Management

 

Location: UK

Equity Ownership: 73.7%

Valuation: £27,561,000

Cost: £55,785,000

Type of Deal: MBO

Website: www.premierassetmanagement.co.uk

 

Valuation based on multiple of earnings

 

Premier is a retail asset manager distributing funds through IFAs as well as other discretionary and advisory channels. Electra initially invested in minority equity and subordinated debt in support of the take-private of Premier in 2007. In December 2009 Electra made a further equity investment in Premier in order to support the acquisition of two OEICs from Aberdeen Asset Management.

 

Despite assets under management at the end of September 2011 falling to £2.1bn from £2.4bn at the end of March 2011 as a result of market corrections, Premier produced a record profit for the year to September 2011. Premier has now captured cost synergies through the integration of fund management and administration onto a single platform following the Aberdeen transaction and has strengthened its operations through further investment in systems.

 

Premier is well positioned for organic growth based on its IFA market positioning and distribution infrastructure, as well as the long-term growth nature of the retail investment market. The company's strategy is to accelerate organic growth by selective recruitment and to make further acquisitions.

 

Amtico

 

Location: UK

Equity Ownership: 18.8%

Valuation: £20,924,000

Cost: £22,326,000

Type of Deal: MBO

Website: www.amtico.com

 

Valuation based on a multiple of earnings

 

Electra originally invested £17.1 million in Amtico in 1995. Amtico designs, manufactures and markets resilient vinyl flooring products for both the residential and commercial sectors.

 

In 2006 Amtico underwent a secondary management buy-out providing a successful exit for Electra. However, with a new management team now established, Electra reinvested £22.3 million.

 

Whilst raw material cost inflation is an issue, the increase in the sales price is partially compensating for any adverse effect. Market conditions remain competitive and difficult, however Amtico continues to grow its sales and profitability with sales at £112 million and EBITDA of £14 million for the year to March 2011.

 

CPA Global

 

Location: Global

Equity Ownership: 3.5%

Valuation: £18,679,000

Cost: £13,901,000

Type of Deal: Co-investment

Website: www.cpaglobal.com

 

Valuation based on multiple of earnings

 

In July 2010, Electra purchased £14 million of mezzanine and equity interests in CPA Global ("CPA"). CPA is a leading provider of legal services outsourcing and the world's top intellectual property management specialist. The company employs more than 1,300 people in 10 countries around the world.

 

CPA traded well throughout the year ended July 2011 with revenue growth of over 10%. CPA is expanding its international operations with further investment in its USA and German operations, the opening of an office in Korea and the acquisition of Ipendo together with a strategic alliance with Zacco Group to strengthen CPA's presence in Scandinavia.

 

Volution (Vent-Axia)

 

Location: UK

Equity Ownership: nil

Valuation: £18,059,000

Cost: £15,840,000

Type of Deal: Mezzanine

Website: www.vent-axia.com

 

Valuation based on multiple of earnings

 

Electra invested £16 million in the mezzanine and debt instruments in Vent-Axia in 2006. Vent-Axia is a market leader in the manufacture of residential and commercial fans for the ventilation of buildings.

 

Vent-Axia had a strong trading performance in the year to July 2011 with sales increased to £95.1 million, up 16% on the prior year. EBITDA was also up on the prior year. The increased cash flow was utilised in reducing the company's bank debt. Current trading in the new financial year is ahead of the prior year, despite continuing difficulties within the construction industry.

 

Pine

 

Location: UK

Equity Ownership: 98.6%

Valuation: £16,275,000

Cost: £14,500,000

Type of Deal: Start up

Website: www.thepinefund.com

 

Valuation comprises a combination of property investment value and a multiple of earnings

 

Electra first invested in PINE as a start up business in 2005. PINE is made up of a nursery school operating business (Treetop Nurseries) and a portfolio of nursery schools let on index-linked leases to nursery school operators who are ranked in the top ten in the UK.

 

Under Electra's ownership, Treetops Nurseries has grown to become one of the UK's top 10 operators and currently operates 31 schools. EBITDA in the year ended September 2011 was up 10% to £2.2 million.

 

The portfolio of properties has maintained its value in a difficult commercial property market through a combination of rental growth and general market appetite for index-linked rental income.

 

Labco

 

Location: Europe

Equity Ownership: 4.6%

Valuation: £13,286,000

Cost: £24,189,000

Type of Deal: Growth capital

Website: www.labco.eu

 

Valuation based on multiple of earnings

 

In 2008, Electra invested €30 million for a minority position in Labco. Labco is Europe's largest private network of clinical laboratories. Over 400 senior chemists or doctors perform 500,000 tests per day for 15,000 referring physicians serving approximately 15 million patients each year.

 

Labco has a leading position in both France and Spain and its strategy is to consolidate the highly fragmented European laboratory sector of which it currently has a 3% market share.


Labco is making steady progress on synergies from its recent acquisitions and continues to consolidate its market driven by changes in European regulation. In the year to December 2010, revenues were over €430 million. In January 2011 the company successfully raised a high yield bond which refinanced a number of bi-lateral arrangements and provided sufficient firepower and flexibility to continue its acquisition plans.

 

Kalle

 

Location: Germany

Equity Ownership: 8.8%

Valuation: £11,487,000

Cost: £9,001,000

Type of Deal: Co-investment

Website: www.kalleuk.co.uk

 

Valuation based on multiple of earnings

 

In February 2010, Electra invested €10.4m in the equity syndication of Kalle. Kalle is a leading global manufacturer and supplier of sausage casings with operations in Europe and the USA. In the year to 31 December 2010, Kalle had a turnover of circa €220 million.

 

Kalle has traded reasonably during 2011 and profits remain in line with prior year, despite significant raw material cost inflation.

 

Consolidated Income Statement

 

For the year ended 30 September



2011



2010

Note


Revenue £'000

Capital £'000

Total £'000

Revenue £'000

Capital £'000

Total £'000


Profit on investments:







2

Investment income/net gain

35,602

83,848

119,450

27,499

127,622

155,121


Profit on revaluation of foreign currencies

- 

388

388

- 

5,728

5,728



35,602

84,236

119,838

27,499

133,350

160,849

3

Other Income

461

-

461

467

-

467

25

Incentive schemes

-

(11,187)

(11,187)

-

(16,360)

(16,360)

4

Priority profit share

(17,048)

-

(17,048)

(14,665)

-

(14,665)


Fair value movement of derivatives

1,191

-

1,191

(1,159)

-

(1,159)

4

Other expenses

(1,889)

-

(1,889)

(1,928)

-

(1,928)


Net Profit before Finance Costs and Taxation

18,317

73,049

91,366

10,214

116,990

127,204

7

Finance Costs

(14,394)

(3,474)

(17,868)

(8,103)

(3,205)

(11,308)


Profit on Ordinary Activities before Taxation

3,923

69,575

73,498

2,111

113,785

115,896

8

Taxation credit/(expenses)

282

245

527

(553)

1,796

1,243


Profit on Ordinary Activities after Taxation attributable to owners of the parent

4,205

69,820

74,025

1,558

115,581

117,139

11

Basic Earnings per Ordinary Share

11.90p

197.57p

209.47p

4.41p

327.07p

331.48p

11

Diluted Earnings per Ordinary Share

23.00p

178.97p

201.97p

4.41p

327.07p

331.48p

 

 

The 'Total' columns of this statement represent the Group's Income Statement prepared in accordance with International Financial Reporting Standards adopted by the EU ("IFRS"). The supplementary Revenue and Capital columns are both prepared under guidance published by the Association of Investment Companies. This is further explained in the Basis of Accounting and Significant Accounting Policies in Note 27.

 

The amounts dealt with in the Consolidated Income Statement are all derived from continuing activities.

 

 

Consolidated Statement of Comprehensive Income

 

For the year ended 30 September

2011

2010


£'000

£'000

Profit for the year

74,025

117,139

Exchange differences arising on consolidation

 (144)

(561)

Total comprehensive Income for the year

 73,881

116,578

Total comprehensive Income attributable to owners of the parent

 73,881

116,578


Consolidated Statement of Changes in Equity

 

For the year ended 30 September 2011

Called-up Share capital

Share premium

Capital redemption reserve

Other reserves

Translation reserve

Realised capital profits/ (losses)

Unrealised capital

profits/
(losses)

Revenue reserves

Total Shareholders' funds

Note


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

20

Total equity at 1 October 2010

8,835

24,147

34,440

-

(3,936)

810,981

(175,434)

25,498

724,531


Profit/ (loss) for the period

-

-

-

-

-

(18,158)

87,978

4,205

74,025

20

Exchange differences arising on consolidation

-

-

-

-

(144)

-

-

-

(144)

17

Convertible bond issue

-

-

-

23,046

-

-

-

-

23,046

17

Conversion of convertible bond

-

34

-

-

-

-

-

-

34


Total Equity attributable to the owners of the parent at           30 September 2011

8,835

24,181

34,440

23,046

(4,080)

792,823

(87,456)

29,703

821,492

 

 

Company Statement of Changes in Equity

 

For the year ended 30 September 2011

Called-up Share capital

Share premium

Capital redemption reserve

Other reserves

Realised capital profits/ (losses)

Unrealised capital profits/
(losses)

Revenue reserves

Total Shareholders' funds

Note


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

20

Total equity at 1 October 2010

8,835

24,147

34,440

-

833,506

(171,809)

(4,588)

724,531


Profit/ (loss) for the period

-

-

-

-

(2,562)

91,703

(15,260)

73,881

17

Convertible bond issue

-

-

-

23,046

-

-

-

23,046

17

Conversion of convertible bond

-

34

-

-

-

-

-

34


Total Equity at           30 September 2011

8,835

24,181

34,440

23,046

830,944

(80,106)

(19,848)

821,492

 

 

No special dividend was paid during the year (2010: nil). There were no share buy-backs or cancellations during the year to 30 September 2011 (2010: nil).

Consolidated Statement of Changes in Equity

 

For the year ended
30 September 2010

Called-up Share capital

Share premium

Capital redemption reserve

Translation reserve

Realised capital profits/ (losses)

Unrealised capital profits/
(losses)

Revenue reserves

Total Shareholders' funds

Note


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

20

Total equity at 1 October 2009

8,835

24,147

34,440

(3,375)

780,882

(260,916)

23,940

607,953


Profit/ (loss) for the period

-

-

-

-

30,099

85,482

1,558

117,139

20

Exchange differences arising on consolidation

-

-

-

(561)

-

-

-

(561)


Total Equity attributable to the owners of the parent at           30 September 2010

8,835

24,147

34,440

(3,936)

810,981

(175,434)

25,498

724,531

 

Company Statement of Changes in Equity

 

For the year ended
30 September 2010

Called-up Share capital

Share premium

Capital redemption reserve

Realised capital profits/ (losses)

Unrealised capital profits/
(losses)

Revenue reserves

Total Shareholders' funds

Note


£'000

£'000

£'000

£'000

£'000

£'000

£'000

20

Total equity at 1 October 2009

8,835

24,147

34,440

779,619

(239,549)

461

607,953


Profit/(loss) for the period

-

-

-

53,887

67,740

(5,049)

116,578


Total Equity at
30 September 2010

8,835

24,147

34,440

833,506

(171,809)

(4,588)

724,531

 

Consolidated Balance Sheet

 

As at 30 September


2011


2010

Note


£'000

£'000

£'000

£'000


Non-Current Assets





12

Investments held at fair value:






Unlisted and listed


883,175


765,801


Other investments


230,136


174,889




1,113,311


940,690








Current Assets





13

Trade and other receivables

2,173


2,576



Current tax asset

831


51



Cash and cash equivalents

39,434


36,947




42,438


39,574









Current Liabilities





14

Current tax liability

-


158


14

Trade and other payables

4,414


4,918



Derivative financial instruments

358


1,549



Net Current Assets


37,666


32,949








Total Assets less Current Liabilities


1,150,977


973,639

15

Bank loans

163,707


163,945


16

Zero Dividend Preference Shares

53,034


49,560


17

Convertible Bond

75,310


-


24

Deferred tax

-


245


25

Provisions for liabilities and charges

37,434


35,358



Non-Current Liabilities


329,485


249,108


Net Assets


821,492


724,531


Capital and Reserves





19

Called up share capital


8,835


8,835

20

Share premium

24,181


24,147


20

Capital redemption reserve

34,440


34,440


20

Other reserves

23,046


-


20

Translation reserve

(4,080)


(3,936)


20

Realised capital profits

792,823


810,981


20

Unrealised capital losses

(87,456)


(175,434)


20

Revenue reserve

29,703


25,498





812,657


715,696


Total Equity Shareholders' Funds


821,492


724,531


Basic Net Asset Value per Ordinary Share


2,324.51p


2,050.25p


Diluted Net Asset Value per Ordinary Share


2,224.78p


2,050.25p


Ordinary Shares in issue at
30 September


35,340,391


35,338,687

 

The notes on pages 31 to 60 are an integral part of the financial statements.

 

The Accounts on pages 24 to 60 were approved by the Directors on 5 December 2011 and were signed on their behalf by:

 

 

 

 

Colette Bowe, Chairman

Electra Private Equity PLC

Company Number: 303062

Company Balance Sheet

 

As at 30 September


2011


2010

Note


£'000

£'000

£'000

£'000


Non-Current Assets





12

Investments held at fair value:






Subsidiary undertakings


610,895


454,008


Unlisted and listed


127,193


135,113


Other investments


230,136


174,889




968,224


764,010








Current Assets





13

Trade and other receivables

7,163


45,532



Current tax asset

600


403



Cash and cash equivalents

37,282


35,669




45,045


81,604









Current Liabilities






Derivative financial instruments

358


1,549


14

Trade and other payables

67,178


53,564



Net Current (Liabilities)/Assets


(22,491)


26,491








Total Assets less Current Liabilities


945,733


790,501

17

Convertible Bond

75,310


-


25

Provisions for liabilities and charges

48,931


65,970



Non-Current Liabilities


124,241


65,970


Net Assets


821,492


724,531








Capital and Reserves





19

Called up share capital


8,835


8,835

20

Share premium

24,181


24,147


20

Capital redemption reserve

34,440


34,440


20

Other reserves

23,046


-


20

Realised capital profits

830,944


833,506


20

Unrealised capital losses

(80,106)


(171,809)


20

Revenue reserve

(19,848)


(4,588)





812,657


715,696


Total Equity Shareholders' Funds


821,492


724,531

 

The notes on pages 31 to 60 are an integral part of the financial statements.

 

The Accounts on pages 24 to 60 were approved by the Directors on 5 December 2011 and were signed on their behalf by:

 

 

 

 

Colette Bowe, Chairman

Electra Private Equity PLC

Company Number: 303062

Consolidated Cash Flow Statement

 

For the year ended 30 September


2011


2010


£'000

£'000

£'000

£'000

Operating activities





Purchase of investments

(136,547)


(128,391)


Purchase of other investments

(321,200)


(132,800)


Amounts paid under incentive schemes

(9,111)


(1,742)


Sales of investments

123,631


86,390


Sales of other investments

266,000


188,000


Dividends and distributions received

4,695


967


Other investment income received

10,499


8,015


Interest income received

162


170


Other income received

298


297


Expenses paid

(21,234)


(20,841)


Taxation (paid)/received

(660)


795


Net Cash (Outflow)/Inflow from Operating Activities


(83,467)


860

Financing Activities





Bank loans drawn

10,144


7,628


Bank loans repaid

(10,203)


(6,899)


Zero Dividend Preference shares

-


4,459


Finance costs

(7,756)


(6,699)


Other finance costs

-


(618)


Convertible Bond received

96,290


-


Convertible Bond interest paid

(2,500)


-


Net Cash Inflow/(Outflow) from Financing Activities


85,975


(2,129)






Changes in cash and cash equivalents


2,508


(1,269)

Cash and cash equivalents at 1 October


36,947


36,500

Translation difference


(21)


1,716

Cash and Cash Equivalents at 30 September


39,434


36,947


Company Cash Flow Statement

 

For the year ended 30 September


2011


2010


£'000

£'000

£'000

£'000

Operating activities





Purchase of investments

(135,114)


(72,651)


Purchase of other investments

(321,200)


(132,800)


Amounts paid under incentive schemes

(9,111)


(1,721)


Sales of investments

120,753


80,167


Sales of other investments

266,000


188,000


Dividends and distributions received

4,695


2,093


Other investment income received

6,263


13,078


Interest income received

157


157


Other income received

297


297


Expenses paid

(18,534)


(15,930)


Taxation (paid)/received

(197)


795


Net Cash (Outflow)/Inflow from Operating Activities


(85,991)


61,485

Financing Activities





Zero Dividend Preference shares

-


-


Purchase of own shares

-


-


Intercompany loans

(5,799)


(58,011)


Other finance costs

(366)


(1,255)


Interest paid

-


(2,272)


Convertible Bond received

96,290


-


Convertible Bond interest paid

(2,500)


-


Net Cash Inflow/(Outflow) from Financing Activities


87,625


(61,538)






Changes in cash and cash equivalents


1,634


(53)

Cash and cash equivalents at 1 October


35,669


34,006

Translation difference


(21)


1,716

Cash and Cash Equivalents at 30 September


37,282


35,669

 

 

Notes to Accounts

 

1 Segmental Analysis

 

The chief operating decision-maker has been identified as Electra Partners. Electra Partners reviews the Group's internal reporting in order to assess performance and allocate resources. Electra Partners has determined the operating segments based on these reports. Electra Partners considers the business as a single operating segment.

 

2 Portfolio Investment Income/Net gains

 

For the year ended 30 September


2011


2010


£'000

£'000

£'000

£'000

Income of the Investment Trust










UK Dividend Income from Non-current Assets





Unlisted - UK

1,752


1,600


Listed - UK

76


27


Partnership interests - UK *

2,170


-




3,998


1,627

 

*      This represents the income that has been appropriated in accordance with the limited partnership agreements by the general partners of the limited partnership funds in which the Group invests.

 

For the year ended 30 September


2011


2010


£'000

£'000

£'000

£'000

Income of the Investment Trust continued










Other Investment Income from Non-current Assets





Unlisted - UK

1,856


9,313


Unlisted - overseas

606


4,319


Partnership interests - UK*

4,807


-




7,269


13,632






Net Income of Subsidiary Undertakings










Other Investment Income from Non-current Assets





Unlisted - UK *

21,249


12,240


Unlisted - Overseas

3,086


-




24,335


12,240



35,602


27,499

 

*      This represents the income that has been appropriated in accordance with the limited partnership agreements by the general partners of the limited partnership funds in which the Group invests.

 

3 Other Income

 

For the year ended 30 September


2011


2010


£'000

£'000

£'000

£'000

Interest and Other Income





Bank interest income

163


170


Other income

298


297




461


467

 

4 Expenses

 

Year to
30 Sept 2011

Year to
30 Sept 2010


£'000

£'000

Priority profit share paid to general partners

17,048

14,665

 

For the year ended
30 September



2011



2010


Revenue

Capital

 Total

Revenue

Capital

 Total


£'000

£'000

£'000

£'000 

£'000

£'000

Other Expenses







Administrative expenses

1,241

-

1,241

1,186

-  

1,186

Directors' remuneration (see Note 5)

373

-

373  

390

-  

390

Auditors' remuneration

275

-

275

352

-  

352


1,889

-  

1,889

1,928

-  

1,928

 

Audit services

 

During the year PricewaterhouseCoopers LLP earned the following fees in relation to audit services:

 

Year to 30 Sept 2011

Year to 30 Sept 2010


£'000

£'000

Audit fees



 Statutory audit of the group and parent company

        130

      188

 Statutory audit of the subsidiary companies

         50

       57

 Interim review of the group and subsidiary companies

         35

       45


        215

      290

Other services *

         60

       62

Auditors Remuneration

        275

      352

 

*      The above amount includes £47,000 (2010: £62,000) in relation to taxation and compliance services and £13,000 (2010: £nil) for professional services in relation to agreed procedures performed in respect of Electra's Internal Controls Monitoring Reports.

 

Non-audit services

 

It is the Group practice to employ PricewaterhouseCoopers LLP on assignments additional to their statutory audit duties where their expertise and experience with the Group are important, principally tax advice and compliance matters, or where they have been awarded assignments on a competitive basis. These services are services that could be provided by a number of firms. Work is allocated to the auditors only if it does not impact upon the independence of the audit team.

 

An amount of £35,000 was earned by PricewaterhouseCoopers LLP for professional advice in relation to the issue of Convertible Bonds during the period. This amount in relation to Convertible Bonds has been capitalised as costs of the issue of the Bond, as described in Note 17.

5 Directors' Remuneration

 

Year to 30 Sept 2011

Year to 30 Sept 2010


£'000

£'000

Chairman's remuneration for year
1 October 2009 to 24 May 2010

-

           120

Chairman's remuneration for full year
(24 May 2010 to 30 September 2010) *

150

52

Directors' fees

223

           218


373

           390

Emoluments



Chairman and highest paid Director *

150 

120

 

* Sir Brian Williamson held the position of Chairman of the Board for the period from 1 October 2009 until his retirement on 24 May 2010 at which date Colette Bowe was appointed Chairman.

 

The Board of Directors are considered to be the Key Management Personnel. For further details see Directors' Remuneration Report on pages 73 and 74.

 

No pension contributions were made in respect of any of the Directors and no Director will receive any pension from any company within the Group.

 

During the year no Director (2010: none) waived remuneration.

 

6 Employees (Excluding Directors)

 

The Company has no employees (2010: none).

 

7 Finance Costs

 

For the year ended 30 September



2011



2010


Revenue

Capital

Total

Revenue

Capital

Total


£'000

£'000

£'000

£'000

£'000

£'000

Loans Repayable After More Than One Year







Bank facility

8,544

     -  

8,544

 8,103

     -  

  8,103

Convertible Bond costs

  5,850

-

5,850

-

-

-

Zero Dividend Preference Share costs

     -  

3,474

3,474

     -  

  3,205

 3,205


14,394

3,474

17,868

 8,103

3,205

11,308

 

The bank loan is a £185,000,000 committed revolving multi-currency facility entered into on 17 July 2009 and is repayable on 17 January 2013. The Facility Agreement states that the Group is liable to pay interest at LIBOR rates plus a margin of 3.0%. On 12 October 2011 the facility was amended and restated as a £195,000,000 committed revolving multi-currency facility, repayable on 30 June 2016. The interest remains payable at LIBOR rates plus a margin of 3.0%.

8 Taxation on Ordinary Activities

 

A tax credit of £527,000 arose in the year to 30 September 2011 (2010: tax credit of £1,243,000). Corporation tax at 27% (2010: 28%).

 

For the year ended 30 September



2011



2010


Revenue

Capital

Total

Revenue

Capital

Total


£'000

£'000

£'000

£'000

£'000

£'000

(a) UK Corporation Tax







Current tax

-

-

-

563

-  

563

Adjustment in respect of prior periods

(282)

-

(282)

(10)

             -  

(10)

Overseas tax adjustments in respect of prior periods

-

-

-

-

(1,891)

(1,891)


(282)

-

(282)

553

(1,891)

(1,338)

Deferred tax overseas

-

(245)

(245)

-

95

95

Tax (Credit)/Charge

(282)

(245)

(527)

553

(1,796)

(1,243)

 

The actual tax charge reconciles to the tax charge on revenue before tax based on the standard rate of corporation tax of 27% (2010: 28%) as follows:

 

For the year ended 30 September



2011



2010


Revenue

Capital

Total

Revenue

Capital

Total


£'000

£'000

£'000

£'000

£'000

£'000

(b) Factors Affecting the Tax Charge for the Year







Profit on ordinary activities before taxation

3,923

69,575

73,498

2,111

113,785

115,896

Profit on ordinary activities multiplied by the standard rate of UK corporation tax of 27% (2010 : 28%)

1,059

18,785

19,844

591

31,860

32,451

Effects of:







Prior year adjustments

(282)


(282)

(10)


(10)

Dividend income

(892)

-  

(892)

(988)

-  

(988)

Disallowed expenses

20

-  

20

366

-  

366

Priority profit share of partnership income appropriated by general partners

2,719

(2,719)

-

4,106

(4,106)

             -  

Brought forward loss utilised in the year

(3,092)

(1,796)

(4,888)




Current losses utilised

-

-  

-

(1,394)

-  

(1,394)

Capital allowances

-

-  

-

(1)

-  

(1)

Unutilised losses arising in the year

508

             -  

508

8

             -  

8

Deferred tax overseas

-  

(245)

(245)

-  

95

95

Capital profits not chargeable due to Investment Trust status

            -  

(14,270)

(14,270)

             -  

(27,754)

(27,754)

Non-taxable income

(322)

-  

(322)

(2,125)

-  

(2,125)

Overseas Tax charge

-  

-

-

-  

(1,891)

(1,891)

Tax (Credit)/Charge

(282)

(245)

(527)

553

(1,796)

(1,243)

 

9 Dividends

 

No dividend was approved/paid during the year ended 30 September 2011 (30 September 2010: approved £nil, paid £nil).

 

10 Total Return Attributable to Equity Shareholders

 

The Total Return dealt with in the Accounts of the Company includes a profit of £73,881,000 (2010: profit of £116,578,000).

 

11 Earnings per Share

 


Basic earnings per share


Diluted earnings per share


2011

2010

2011

2010


p

p

p

p

Revenue return per ordinary share

11.90

4.41

23.00

4.41

Capital return per ordinary share

197.57

327.07

178.97

327.07

Earnings per ordinary share

209.47

331.48

201.97

331.48

 

The calculation of revenue return per share is based on the revenue profits attributable to shareholders of £4,205,000 (basic) and £8,973,000 (diluted), after adding back the finance charge on the Convertible Bond of £5,850,000 less associated tax of £1,082,000 (2010: profit £1,558,000) on a weighted average number of 35,339,597 (basic) and 39,013,929 (diluted) (2010: 35,338,687) ordinary shares of 25p in issue. The calculation of capital return per share is based on the capital profit attributable to ordinary shareholders of £69,820,000 (2010: profit £115,581,000) on a weighted average number of 35,339,597 (basic) and 39,013,929 (diluted) (2010: 35,338,687) ordinary shares of 25p in issue.

 

The basic Net Asset Value ("NAV") per share is calculated by dividing NAV of £821,492,000 by 35,340,391 (basic) ordinary shares. The diluted NAV per share is calculated by adding the liability component of the Convertible Bond as at 30 September 2011 and then dividing the adjusted NAV (diluted) by ordinary shares amounting to 40,216,732.

 

12 Non Current Assets

 

Investments Held at Fair Value

 

As at 30 September for the Group



2011



2010


Value before accrued income

Accrued income

Valuation

Value before accrued income

Accrued income

Valuation


£'000

£'000

£'000

£'000

£'000

£'000

Unlisted at Fair Value







UK and Continental Europe

611,038

50,438

661,476

430,137

29,811

459,948

UK and Continental Europe liquidity funds

      230,000

           136

       230,136

       174,800

            89

       174,889

USA and Other

8,945

-  

8,945

58,829

-  

58,829

Partnership interests - UK and Continental Europe

        90,303

             -  

        90,303

       100,486

             -  

       100,486

Partnership interests - USA and other

        28,118

             -  

        28,118

        28,069

             -  

        28,069


968,404

50,574

1,018,978

792,321

29,900

822,221

Listed at Fair Value







UK, Continental Europe and other

91,940

2,393

94,333

       116,077

         2,392

       118,469


1,060,344

52,967

1,113,311

908,398

32,292

940,690

 

 


Group


Company


30 Sept 2011

30 Sept 2010

30 Sept 2011

30 Sept 2010


£'000

£'000

£'000

£'000

Subsidiary Undertakings at Fair Value





Unlisted - USA and other

 -

-

9,225

47,365

Investment partnerships - UK and Continental Europe

 -

-

557,867

336,337

Investment partnerships - USA and other

 -

-

43,803

70,306


 -

-

610,895

454,008

 

 

As at 30 September for the Company



2011



2010


Value before accrued income

Accrued income

Valuation

Value before accrued income

Accrued income

Valuation


£'000

£'000

£'000

£'000

£'000

£'000

Unlisted at Fair Value






UK and Continental Europe

67,862

52

67,914

35,700

36,274

UK and Continental Europe liquidity funds

      230,000

           136

       230,136

       174,800

       174,889

USA and Other

17,777

-

17,777

-  

-  

Partnership interests - UK and Continental Europe

         5,772

             -  

        5,772

        18,299

        18,299

Partnership interests - USA and other

        11,417

             -  

        11,417

        26,065

             -  

        26,065


      332,828

188

       333,016

       254,864

           663

       255,527

Listed at Fair Value






UK, Continental Europe and other

24,313

-

24,313

        54,472

             3

        54,475


357,141

188

357,329

309,336

666

310,002

 

Investments held at Fair Value

 

As at 30 September 2011



Group



Company


Value before accrued income

Accrued income

Valuation

Value before accrued income

Accrued income

Valuation


£'000

£'000

£'000

£'000

£'000

£'000

Valuation at 1 October 2010







Investments

908,397

-

908,397

763,343

-  

763,343

Accrued income at 1 October 2010

-  

32,293

32,293

-  

667

667


908,397

32,293

940,690

763,343

667

764,010

Purchases

457,747

-  

457,747

 507,314

-  

507,314  


1,366,144

32,293

1,398,437

1,270,657

667

1,271,324

Accrued income realised

-  

15,389

15,389

-  

2,779

2,779  

Disposals

386,562

-  

386,562

 384,149

-  

384,149  


386,562

15,389

401,951

384,149

2,779  

386,928  

Increase in accrued income

-  

36,063

36,063

-  

2,300

2,300  

Increase in valuation

80,762

-  

80,762

81,528

-  

81,528  

Valuation at 30 September 2011

     1,060,344

        52,967

     1,113,311

968,036

           188

       968,224

 

As at 30 September 2010



Group



Company


Valuation

Accrued income

Total

Valuation

Accrued income

Total


£'000

£'000

£'000

£'000

£'000

£'000

Valuation at 1 October 2009







Investments

776,041

-  

776,041

704,260

-  

704,260

Accrued income at 1 October 2009

         -  

29,572

29,572

       -  

579

579


776,041

29,572

805,613

704,260

579

704,839

Purchases

315,822

-  

315,822

206,614

-  

206,614


1,091,863

29,572

1,121,435

910,874

579

911,453

Accrued income realised

-  

17,016

17,016

-  

576

576

Disposals

296,843

-  

296,843

249,604

-  

249,604


296,843

17,016

313,859

249,604

576

250,180

Increase in accrued income provision

         -  

19,737

19,737

       -  

664

664

Increase in valuation

113,377

-

113,377

102,073

-  

102,073

Valuation at 30 September 2010

908,397

32,293

940,690

763,343

667

764,010

 

 

13 Trade and Other Receivables - Current

 


Group


Company


30 Sept 2011

30 Sept 2010

30 Sept 2011

30 Sept 2010


£'000

£'000

£'000

£'000

Sales for future settlement

-

508

-  

-  

Prepayments

1,022

1,809

1,022

1,809

Amounts owed by subsidiary undertakings

-

-  

5,281

43,529

Other receivables

1,151

259

860

194


2,173

2,576

7,163

45,532

 

 

14 Trade and Other Payables - Current

 


Group


Company


30 Sept 2011

30 Sept 2010

30 Sept 2011

30 Sept 2010


£'000

£'000

£'000

£'000











Amounts owed to Subsidiary undertakings

             -

             -  

        64,443

        51,568

Other payables

4,414

4,918

2,735

1,996


4,414

4,918

67,178

53,564

 

15 Bank Loans

 


Group


Company


30 Sept 2011

30 Sept 2010

30 Sept 2011

30 Sept 2010


£'000

£'000

£'000

£'000

Bank Loans are repayable as follows:





   Due between one to two years

163,707

163,945

 −

 −

 

A variable rate of interest is charged on the bank loan. The bank loan relates to a £185,000,000 committed multi-currency revolving credit facility, entered into on 17 July 2009 and repayable on 17 January 2013. Under the Facility Agreement the Group is liable to pay interest at LIBOR rates plus a margin of 3%. The weighted average effective interest rate for the year was 4.7% (2010: 4.7%).

 

16 Zero Dividend Preference Shares

 


Group


Company


30 Sept 2011

30 Sept 2010

30 Sept 2011

30 Sept 2010


£'000

£'000

£'000

£'000

Zero Dividend Preference Shares

53,034

49,560

 −

 −

 

Under the Companies Act 2006, the concept of authorised share capital was abolished with effect from 1 October 2009 for companies incorporated after that date. Accordingly, the figure 60,000,000 ZDP Shares stated in the articles of association of Electra Private Equity Investments PLC is the maximum amount of ZDP Shares that may be allotted by Electra Private Equity Investments PLC authorised by shareholders in general meeting.

 

On 2 December 2009, 4,295,000 Zero Dividend Preference Shares were issued at a price of 104p each. Each share has a par value of 0.01p at maturity price of 155.41p. The fair value of the Zero Dividend Preference shares at 30 September 2011 was £56,281,000 (2010: £54,626,000) based on the quoted offer price of 119.0p (2010: 115.50p) per Zero Dividend Preference Share.

 

17 Convertible Bond

 

At
29 Dec 2010

Costs

Bond net of costs

Finance charge

Finance charge paid

Bond conversion

At
30 Sept 2011


£'000

£'000

£'000

£'000

£'000

£'000

£'000

Fair value of debt (debt cashflows discounted at 9.9%)

76,066

(2,822)

73,244

2,100

-

(34)

75,310

Fair value of equity component

23,934

(888)

23,046

-

-

-

23,046

5% coupon payable *

-

-

-

3,750

(2,500)

-

1,250

Issue of ordinary shares

-

-

-

-

-

34

34

Total Bond issue

100,000

(3,710)

96,290

5,850

(2,500)

-

99,640

 

* Included in trade and other payables

 

On 29 December 2010, Electra issued £100 million 5% Subordinated Convertible Bonds due 29 December 2017 at an issue price of 100 per cent and with an initial conversion price of 2,050p. Bondholders may convert their bonds into ordinary shares of the Company from 7 February 2011 up to and including the date falling seven business days prior to 29 December 2017. The conversion price of 2,050p will be adjusted to deal with certain events which would otherwise dilute the conversion of bondholders. These events include dividends paid to ordinary shareholders, share rights and share related securities issued to shareholders, issue of other securities to shareholders, demergers and other events detailed in the Prospectus for the Bond.

 

The Bond, in accordance with IFRS, has been treated as a compound financial instrument that contains both a liability and an equity component. The economic effect of issuing the instrument is substantially the same as issuing both a debt instrument with an obligation to payment of interest and principal (assuming it is not converted) and an equity instrument (a written call option granting the holder the right for a specified period of time to convert into a fixed number of ordinary shares). The proceeds from issuing Convertible Bonds are split on Electra's balance sheet into its constituent parts of debt and equity in accordance with the requirement of IFRS.

 

The fair value of the debt element of the bond has been calculated by using a market rate of interest for a similar borrowing that does not include an equity component or a conversion option. The rate used for these purposes was 9.9%, which, using discounted cash flow, gives a fair value for the debt component of £73.2 million after deducting the pro rata costs of issue of £2.8 million. The fair value of the equity element is calculated by deducting the fair value of debt from the issue value of the Bond after deducting the pro rata costs of £0.9 million.

 

Finance costs are taken to the Income Statement and are calculated as the yield to maturity of the fair value of the debt component of the Bond. On conversion the value of the Bonds converted will be debited to long term liabilities. The nominal value of the ordinary shares issued on conversion will be credited to share capital and the balance representing the excess of conversion proceeds over nominal value of the shares will be credited to the share premium account.

 

18 Financial Instruments

 

(i) Management of Risk

 

As an investment trust, the Group's investment objective is to seek capital growth from a portfolio of securities drawn from markets both within the UK and worldwide. The holding of these financial instruments to meet this objective results in certain risks.

 

The Group's financial instruments comprise:

 

1. Securities in unquoted and quoted companies, partnership interests and liquidity funds.

 

2. A loan facility, issuance of Zero Dividend Preference shares and Convertible Bonds, the purpose of which is to finance tender offers, other share buy-backs and on-market purchases of shares, the financing of new investment and refinancing existing debt.

 

3. Interest rate Swap and Cap in order to manage the risk of interest rate fluctuation in interest payable on the new multi-currency loan facility.

 

The main risks arising from the Group's and Company's financial instruments are fluctuations in market price, interest rate, credit, liquidity, capital and foreign currency exchange rate risk. The policies for managing each of these risks are summarised below. These policies have remained constant throughout the year under review and the preceding year. The financial risks of the Company are aligned to the Group's financial risks.

 

Market Price Risk

 

Market price risk arises mainly from uncertainty about future prices of financial instruments used in the Group's operations. It represents the potential loss the Group might suffer through holding market positions in the face of price movements, mitigated by stock selection.

 

Electra Partners has responsibility for monitoring the portfolio in accordance with the Group's investment objectives and seeks to ensure that individual stocks meet an acceptable risk reward profile.

 

The Group is exposed to the risk of the change in value of its fund investments, listed and unlisted equity and non-equity shares, fixed income securities and floating rate notes. For funds, listed investments, floating rate notes and liquidity funds the market risk variable is deemed to be the price itself. For unlisted equity and non-equity shares the market risk is deemed to be the price/earnings ratio. The impact on profit or loss after tax and on shareholders' equity, in absolute and percentage terms of those figures, due to movements in these variables, is set out in part (ii) of this Note.

 

Credit Risk

 

The Group's exposure to credit risk principally arises from its investment in liquidity funds and its cash deposits. Only major clearing houses are used when making cash deposits and the level of cash is reviewed on a regular basis.

 

A well diversified portfolio of liquidity funds is maintained with no more than 10% of gross assets held with any one institution. The total invested in liquidity funds was £230,136,000 with associated accrued income of £136,000 (2010: £174,889,000 with associated accrued income of £89,000). The cost of this investment was £230,000,000 (2010: £174,800,000).

 

Cash held on deposit was principally with two UK banks and totalled £39,434,000 (2010: £36,947,000).

 

Interest Rate Risk

 

The Group finances its operations through retained profits including both realised and unrealised capital profits. In addition, financing is obtained through loan facilities. During the year, a long-term multi-currency loan facility was in existence. The loan has a floating rate of interest. Interest rate swap and cap derivatives were entered into during the year to manage the risk of interest rate fluctuation in interest payable on the Multi-currency facility.

 

The cash balances held on deposit mitigate in part the interest rate risk.

 

Interest rate risk profiles for financial assets and liabilities and the impact of the profit or loss after tax and on shareholders' equity of a 1.0% increase or decrease in interest rates, in absolute terms and as a percentage of those figures, are shown in part (iv) of this Note. These profiles exclude short term receivables and payables.

 

Liquidity Risk

 

The Group's assets comprise listed and unlisted equity and non-equity shares, fixed income securities and liquidity funds whilst the unlisted equity is intentionally illiquid. Short-term flexibility is achieved through the revolving loan facility, and liquidity funds which are relatively liquid and cash which is available on demand.

 

The maturity of the Group's existing borrowings are set out in part (v) of this Note.

 

Capital Risk Management

 

The Group's objective in the management of capital risk is to safeguard its ability to continue as a going concern in order to provide returns for shareholders and to maintain an optimal capital structure. In doing so the Group may adjust the amount of dividends paid to shareholders (whilst remaining within the restrictions imposed by its investment trust status), return capital to shareholders, change level of borrowing in the £185,000,000 committed multi-currency revolving credit facility or issue new shares. During the year the Group paid no dividend (2010: £nil). In order to be able to pay a dividend out of profits available for distribution the Company has to be able to meet one of the two capital restriction tests imposed on investment companies by company law.

 

The Group manages the levels of cash deposits held whilst maintaining sufficient liquidity for investments. The Group has an existing authority to implement an on-market share buy-back programme to generate shareholder value. During the year £nil (2010: £nil) was utilised to repurchase shares for cancellation.

 

The £185,000,000 committed multi-currency revolving credit facility was drawn down such that a balance of £163,707,000 was outstanding at the year end (2010: £163,945,000). The loan is repayable on 17 January 2013. On 5 August 2009 the Group issued 43,000,000 Zero Dividend Preference Shares at 100p each and on 2 December 2009 4,295,000 Zero Dividend Preference Shares were issued at 104p each (Note 16). On 29 December 2010, Electra issued £100 million 5% Subordinated Convertible Bonds due on 29 December 2017 (Note 17). The level of outstanding borrowings is reviewed on an ongoing basis taking into account the need to buy back shares, future levels of investment and any foreign currency hedging concerns.

 

The Group's capital comprises:

 

30 Sept 2011

30 Sept 2010


£'000

£'000

Debt



Borrowing under the credit facility

       163,707

         163,945

Zero Dividend Preference shares

        53,034

          49,560

Convertible bond

        75,310

              -  


       292,051

         213,505

Equity



Equity share capital

         8,835

           8,835

Retained earnings and other reserves

       812,657

         715,696


       821,492

         724,531

Total capital

     1,113,543

         938,036

Debt as a percentage of total capital

26.2%

22.8%

 

 

Foreign Currency Risk

 

The Company's total return and net assets are affected by foreign exchange translation movements as a significant proportion of the investments held are denominated in currencies other than sterling.

 

The foreign investments held are principally held in the USA, Continental Europe and the Far East.

 

During the year, the Company held loans denominated in US Dollars and Euros, which partially offset foreign currency risk on foreign currency investments. The ratio of loans held in US Dollar and Euro is under regular review in order to partially hedge as efficiently as possible.

 

Foreign currency exposures and the impact on profit after tax on shareholders' equity of 10% increases and decreases in the value of US Dollar and Euros, in absolute terms and as a percentage of those figures, are analysed in part (iii) of this Note.

 

(ii) Market Price Exposure

 


2011


2010


Increase
in variable

Decrease in variable

Increase in variable

Decrease in variable


£'000

£'000

£'000

£'000

10% movement in price of fund, listed investments, liquidity funds* and price/earnings ratio for unlisted investments





Impact on profit after tax

88,177

(100,255)

83,818

(90,038)

Impact as a percentage of profit after tax

119.1%

(135.4)%

71.6%

(76.9)%

Impact on shareholders' equity

88,177

(100,255)

83,818

(90,038)

Impact as a percentage of shareholders' equity

10.7%

(12.2)%

11.6%

(12.4)%

 

* 1% movement on liquidity funds.

 

(iii) Foreign Currency Exposures

 

A portion of the financial assets and liabilities of the Group are denominated in currencies other than sterling, which has an impact on the net assets and return of the Group as at 30 September 2011.

 

 

Currency


Foreign currency assets


Foreign currency liabilities


Net foreign currency
assets

As at 30 September

2011

2010

2011

2010

2011

2010


£'000

£'000

£'000

£'000

£'000

£'000

US Dollar

199,393

233,462

(33,220)

(27,905)

166,173

205,557

Euro

187,425

175,239

(130,487)

(131,040)

56,938

44,199

Total

386,818

408,701

(163,707)

(158,945)

223,111

249,756

 

Currency

 


2011


2010


 Sterling appreciation

 Sterling depreciation

 Sterling appreciation

 Sterling depreciation


£'000

£'000

£'000

£'000

10% Movement in Euro





Impact on profit after tax

(78)

244

(5,297)

9,621

Impact as a percentage of profit after tax

(0.1)%

0.3%

(4.5)%

8.2%

Impact on shareholders' equity

(78)

244

(5,297)

9,621

Impact as a percentage of shareholders' equity

-

0.1%

(0.7)%

1.3%

10% Movement in US Dollar





Impact on profit after tax

(11,354)

15,355

(13,449)

18,562

Impact as a percentage of profit after tax

(15.2)%

20.7%

(11.5)%

15.8%

Impact on shareholders' equity

(11,354)

15,355

(13,449)

18,562

Impact as a percentage of shareholders' equity

(1.4)%

1.9%

(1.9)%

2.6%

 

(iv) Interest Rate Risk Profile of Financial Assets and Liabilities

 

Financial Assets

 

The financial instruments held by the Group include equity and non-equity shares as well as fixed interest securities. The financial instruments shown below are separated into the type of income they generated as at 30 September 2011.

 

Currency

Total

Floating rate financial assets

Fixed rate financial assets

Financial assets on which no interest is earned

As at 30 September 2011

£'000

£'000

£'000

£'000

Sterling

765,927

264,743

330,340

170,844

US Dollar

199,393

11,892

23,845

163,656

Euro

187,425

-  

11,603

175,822

Total

1,152,745

276,635

365,788

510,322

 

Interest on floating rate financial assets is at prevailing market rates.

 

Currency

Total

Floating rate financial assets

Fixed rate financial assets

Financial assets on which no interest is earned

As at 30 September 2010

£'000

£'000

£'000

£'000

Sterling

568,936

209,854

232,854

126,228

US Dollar

233,462

11,619

20,055

201,788

Euro

175,239

1,066

11,803

162,370

Total

977,637

222,539

264,712

490,386

 

 

Currency


Fixed rate financial assets weighted average interest rate


Fixed rate financial assets on which no interest is paid weighted average period until maturity

As at 30 September

2011

2010

2011

2010


%

%

years

years

Sterling

10.0

           11.5

-  

              -  

US Dollar

12.7

           12.8

-  

              -  

Euro

12.0

           12.0

-  

              -  

 

The equity shares held have no interest payable and do not have a stated maturity date.

 

Financial Liabilities

 

The interest rate profile of the financial liabilities:

 

Currency


Total


Fixed rate financial liabilities


Floating rate financial liabilities

As at 30 September

2011

2010

2011

2010

2011

2010


£'000

£'000

£'000

£'000

£'000

£'000

Sterling

128,344

54,560

128,344

49,560

-  

5,000

US Dollar

33,220

27,905

-  

-  

33,220

27,905

Euro

130,487

131,040

-  

-  

130,487

131,040

Total

292,051

213,505

128,344

49,560

163,707

163,945

 

 

The floating rate financial liabilities comprise a £185,000,000 committed multi-currency revolving credit facility, entered into on 17 July 2009. The margin is 3.0%. The weighted average effective interest rate for the year was 4.7% (2010: 4.7%). Interest rate swap and cap derivatives are used to manage the risk of interest rate fluctuation in the interest payable on the multi-currency facility. The fixed rate financial liabilities comprise 47,295,000 (2010: 47,295,000) Zero Dividend Preference shares and £75,310,000 (2010: £nil) Convertible Bonds issued on 29 December 2010.

 


2011


2010


Increase in variable

Decrease in variable

Increase in variable

Decrease in variable


£'000

£'000

£'000

£'000

1% movement in interest rates





Impact on interest income from cash

301

(149)

232

(152)

Impact on interest income on floating rate notes and liquidity funds

1,098

(1,098)

1,053

(1,053)

Impact on interest payable on credit facility

(1,665)

1,665

 (1,654)

1,654

Total impact on profit/(loss) after tax and shareholders' equity

(266)

418

 (369)

449






Impact as a percentage of profit/(loss) after tax

(0.4)%

0.6%

 (0.3)%

0.4%

Impact as a percentage of shareholders' equity

0.0%

0.1%

 (0.1)%

0.1%

 

 

(v) Maturity of Financial Liabilities

 

The maturity profile of the Group's undiscounted cash flow for financial liabilities as at 30 September was:

 

As at 30 September

2011

2010


£'000

£'000

Between one and two years

       163,707

163,945

Over four years

       173,462

73,496

 

The financial liability between one and two years (2010: one and three years) relates to a £185,000,000 committed multi-currency revolving credit facility. The facility was entered into on 17 July 2009 and is repayable on 17 January 2013 (see Note 26). The financial liability over five years relates to the 47,295,000 Zero Dividend Preference Shares: 43,000,000 issued on 5 August 2009 and 4,295,000 issued on 2 December 2009. These are redeemable on 5 August 2016. On the 29 December 2010 the Company issued £100 million 5% Convertible Bonds, convertible on or before 29 December 2017 (see Note 17).

 

(vi) Fair Values of Financial Assets and Liabilities

 

Carrying value of the financial assets are equal to the fair value.

 

Fair Value

Fair Value

As at 30 September

2011

2010


£'000

£'000

Primary Financial Assets Held



Equity shares

511,995

435,339

Non-equity shares

23,845

18,100

Fixed interest securities

343,859

264,712

Floating rate securities

233,612

222,539

Cash at bank and in hand

39,434

36,947

Fair value of interest rate swaps and caps

358

1,549

Primary Financial Liabilities held to Finance the Group's Operations



Bank loans

163,707

163,945

Zero Dividend Preference shares

53,034

54,626

Convertible bond

75,310

-

 

The unlisted financial assets held at fair value, in accordance with the Principles of Valuation of Unlisted Equity Investments are detailed within the Basis of Accounting.

 

(vii) Fair value hierarchy

 

Fair value is the amount for which an asset could be exchanged or a liability settled between knowledgeable willing parties in an arm's length transaction.

 

Fair value measurements are based on observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Group's view of market assumptions in the absence of observable market information. The Group utilises techniques that maximise the use of observable inputs and minimise the use of unobservable inputs.

 

The levels of fair value measurement bases are defined as follows:

 

Level 1: fair values measured using quoted prices (unadjusted) in active markets for identical assets or liabilities.

 

Level 2: fair values measured using valuation techniques for all inputs significant to the measurement other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

 

Level 3: fair values measured using valuation techniques for any input for the asset or liability significant to the measurement that is not based on observable market data (unobservable inputs).

 

The following table represents the Group's assets by IFRS 7 hierarchy levels:

 

 

As at 30 September 2011

Total

Level 1

Level 2

Level 3


£'000

£'000

£'000

£'000

Unlisted and listed investments

883,175

94,810

-  

788,365

Other investments

230,136

230,136

-  

-  

Interest rate swaps

(358)

-  

-  

(358)


1,112,953

324,946

-  

788,007

 

As at 30 September 2010

Total

Level 1

Level 2

Level 3

£'000

£'000

£'000

£'000

Unlisted and listed investments

765,801

118,469

-  

647,332

Other investments

174,889

174,889

-  

-  

Interest rate swaps

(1,549)

        -

-  

(1,549)  


939,141

293,358

-  

645,783

 

Assets measured at fair value based on Level 3

 

         2011

2010


 £'000

£'000

Opening balance as at 1 October 2010

647,332

459,075

Purchases

136,545

179,250

Disposals

(102,972)

(121,475)

Increase in value

107,460

130,482

Closing balance as at 30 September 2011

788,365

647,332

 

19 Share Capital

 

2011

2010


£'000

£'000

Allotted, called-up and fully paid 35,340,391 (2010:35,338,687) ordinary shares of 25p each

8,835

8,835

 

 

During the year ended 30 September 2011, 35 Subordinated Convertible Bonds were converted into 1,704 ordinary shares.

 

No shares were purchased by the Company from shareholders during the year ended 30 September 2011 (2010: nil).

 

 

20 Capital and Reserves

 

For the year ended 30 September 2011 for the Group

Called-up Share capital

Share premium

Capital redemption reserve

Other reserves

Translation reserve

Realised capital
profits/
(losses)

Unrealised
capital
profits/
(losses)

Revenue reserves

Total Shareholders' Funds


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Opening balance at 1 October 2010

8,835

24,147

34,440

-

(3,936)

810,981

(175,434)

25,498

724,531

Net revenue transferred to reserves

-

-

-

-

-

-

-

4,205

4,205

Net profits on realisation of investments during the year

-

-

-

-

-

4,014

-

-

4,014

Financing costs

-

-

-

-

-

(3,474)

-

-

(3,474)

Increase in value of non-current investments

-

-

-

-

-

-

79,834

-

79,834

Increase in incentive provisions

-

-

-

-

-

-

(11,187)

-

(11,187)

Gains and losses on foreign currencies

-

-

-

-

(144)

217

171

-

244

Investments sold during the year

-

-

-

-

-

(19,160)

19,160

-

-

Convertible bond issue

-

-

-

23,046

-

-

-

-

23,046

Conversion of convertible bond

-

34

-

-

-

-

-

-

34

Tax liabilities on capital

-

-

-

-

-

245

-

-

245

At 30 September 2011

8,835

24,181

34,440

23,046

(4,080)

792,823

(87,456)

29,703

821,492

 

For the year ended 30 September 2010 for the Group

Called-up Share capital

Share premium

Capital redemption reserve

Translation reserve

Realised capital
profits/
(losses)

Unrealised capital
profits/
(losses)

Revenue reserves

Total Shareholders' Funds


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Opening balance at 1 October 2009

8,835

24,147

34,440

(3,375)

780,882

(260,916)

23,940

      607,953

Net revenue transferred to reserves

-

-

-

-

-

-

1,558

1,558

Net losses on realisation of investments during the year

-

-

-

-

15,472

-

-

       15,472

Increase in value of non-current investments

-

-

-

-

-

112,096

-

      112,096

Increase in incentive provisions

-

-

-

-

-

(16,360)

-

(16,360)

Gains and losses on foreign currencies

-

-

-

(561)

(788)

6,517

-

        5,168

Unrealised net appreciation at 1 October 2009 on investments sold during the year

-

-

-

-

13,619

(16,771)

-

(3,152)

Tax liabilities on capital

-

-

-

-

1,796

-

-

        1,796

At 30 September 2010

8,835

24,147

34,440

(3,936)

      810,981

(175,434)

       25,498

      724,531

 

1 The capital redemption reserve is established by the Group on the redemption or repurchase of its own shares.

 

2 The translation reserve consists of foreign exchange differences arising on retranslation of the equity and reserves of subsidiaries with functional currencies other than sterling.

 

3 The realised capital reserve recognises all realised profits that are capital in nature or have been allocated to capital.

 

4 The unrealised capital reserve recognises all unrealised profits that are capital in nature or have been allocated to capital.

 

5 The revenue reserve shows all profits that are revenue in nature or have been allocated to revenue.

 

For the year ended 30 September 2011 for the Company

Called-up Share capital

Share premium

Capital redemption reserve

Other reserves

Realised capital profits/
(losses)

Unrealised capital profits/
(losses)

Revenue reserves

Total Shareholders' Funds


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Opening balance at 1 October 2010

8,835

24,147

34,440

-

833,506

(171,809)

(4,588)

724,531

Net revenue transferred to reserves

-

-

-


-

-

(15,260)

(15,260)

Net profits on realisation of investments during the year

-

-

-


3,549

-

-

3,549

Increase in value of non-current investments

-

-

-

-

-

77,317

-

77,317

Increase in incentive provisions

-

-

-

-

-

(11,187)

-

(11,187)

Gains and losses on foreign currencies

-

-

-

-

67

177

-

244

Unrealised net appreciation at 1 October 2010 on investments sold during the year

-

-

-

-

(25,396)

25,396

-

-

Revaluation of subsidiaries

-

-

-

-

19,218

-

-

19,218

Convertible bond issue

-

-

-

23,046

-

-

-

23,046

Conversion of convertible bond

-

34

-

-

-

-

-

34

At 30 September 2011

8,835

24,181

34,440

23,046

830,944

(80,106)

(19,848)

821,492

 

 

For the year ended 30 September 2010 for the Company

Called-up Share capital

Share premium

Capital redemption reserve

Realised capital
profits/
(losses)

Unrealised capital
profits/
(losses)

Revenue reserves

Total Shareholders' Funds


£'000

£'000

£'000

£'000

£'000

£'000

£'000

Opening balance at 1 October 2009

8,835

24,147

34,440

779,619

(239,549)

461

607,953

Net revenue transferred to reserves

           -  

           -  

-

-

-

(5,049)

(5,049)

Net profits on realisation of investments during the year

           -  

           -  

-

18,180

-

-

18,180

Increase in value of non-current investments

           -  

           -  

-

-

91,578

-

91,578

Increase in incentive provisions

           -  

           -  

-

-

(16,735)

-

(16,735)

Losses on foreign currencies

           -  

           -  

-

(1,129)

6,516

-

5,387

Net fees

-  

-  

-

-

-

-

-

Unrealised net appreciation at 1 October 2009 on investments sold during the year

           -  

           -  

-

13,619

(13,619)

-

-

Revaluation of subsidiaries

           -  

           -  

-

21,327

-

-

21,327

Tax liabilities on capital

           -  

           -  

-

1,890

-

-

1,890

At 30 September 2010

        8,835

       24,147

       34,440

      833,506

(171,809)

         (4,588)

      724,531

 

1 The capital redemption reserve is established by the Group on the redemption or repurchase of its own shares.

 

2 The realised capital reserve recognises all realised profits that are capital in nature or have been allocated to capital.

 

3 The unrealised capital reserve recognises all unrealised profits that are capital in nature or have been allocated to capital.

 

4 The revenue reserve shows all profits that are revenue in nature or have been allocated to revenue.

 

21 Contingent Liabilities and Commitments

 

The Company has undertaken to invest up to a further US$32,019,000 (2010: US$36,488,000) in various syndicates of investors in the USA and elsewhere.

 

The Company has undertaken to make further investments through various limited partnership funds in the UK and Continental Europe amounting to £76,421,000 (2010: £49,148,000).

 

As a limited partner in a number of limited partnership funds, the Company has entered into agreements with Electra Partners for the management of the Company's portfolio of investments. In consideration for this the limited partnership funds pay a priority profit share to the general partners. The management agreements are rolling contracts which now allow for termination by either party as set out in the section entitled 'Management Arrangements' on pages 65 and 66.

 

22 Particulars of Holdings

 

Principal Subsidiary Undertakings

 

All companies are incorporated in Great Britain and registered in England and Wales unless otherwise stated. All companies operate in their country of incorporation.

 

The results and balances of the following significant subsidiaries are included in the consolidated financial statements of the Group.

 

Albion (Electra) Limited (trading partnership member)

4,995 ordinary shares of US$1.00 (par value). Paid-in capital US$11,565,002.

Incorporated in the Commonwealth of the Bahamas.

The subsidiary is wholly owned and held directly by the Company

 

Credit Opportunities LP

Capital contributions of £308. Incorporated in Jersey.

The subsidiary is wholly owned and held through Electra Investments Limited.

 

Electra Investments Limited (Investment Holding Company)

87,000 ordinary shares of £10 (par value). Paid-in capital £1,027,389. Incorporated in England and Wales.

The subsidiary is wholly owned and held directly by the Company.

Capital contributions of £300. Incorporated in England and Wales.

The subsidiary is 100% owned and held directly by the Company.

 

Electra Private Equity Investments PLC (Zero Dividend Preference Share Holding Company)

50,000 ordinary shares of £1.00 (par value). Paid-in capital £50,000.

Incorporated in England and Wales.

The subsidiary is wholly owned and held directly by the Company

 

Kingsway Equity Partners LP

Capital contributions of £10,705,000. Incorporated in Scotland.

The subsidiary is 99% owned and held directly by the Company.

 

Electra Private Equity Partners 1995 LP

Capital contributions of £9,500. Incorporated in England and Wales.

The subsidiary is 99% owned and held through Kingsway Equity Partners LP.

 

Electra Quoted Partners 1995 LP

Capital contributions of £120,277,699. Incorporated in England and Wales.

The subsidiary is 99% owned and held through Kingsway Equity Partners LP.

 

EF Private Equity Partners (Americas) LP

Capital contributions of $2,500. Incorporated in England and Wales.

The subsidiary is 99% owned and held through Kingsway Equity Partners LP.

 

Electra Far East LP

Capital contributions of $5,640. Incorporated in England and Wales.

The subsidiary is 99% owned and held through Kingsway Equity Partners LP.

 

Electra Private Equity Partners (Scotland)

Capital contributions of £17,500,000. Incorporated in Scotland.

The subsidiary is 99% owned and held through Kingsway Equity Partners LP.

 

Electra Private Equity Partners 2001 - 2006 Scottish LP

Capital contributions of £20. Incorporated in Scotland.

The subsidiary is 99% owned and held through Kingsway Equity Partners LP.

 

Electra Private Equity Partners 2006 Scottish LP

Capital contributions of £20. Incorporated in Scotland.

The subsidiary is 99% owned and held through Kingsway Equity Partners LP.

 

Other Companies Held as Investments at Fair Value

All companies are incorporated in Great Britain and registered in England and Wales unless otherwise stated. All companies operate in their country of incorporation.

 

Significant Interests in Investee Undertakings

The fair value of the undertakings shown below each represent by value more than 1% of the non-current asset investments of the Group:

 

Carrying value at 30 Sep 2010

Carrying value at 30 Sep 2011

Cost 30 Sep 2011


£'000

£'000

£'000

ALLFLEX HOLDINGS III

   71,924

   99,000

   40,781

Class 'A' common stock 1.9%




Class 'G' common stock 100.0%




A Warrants 98.8%




Loan notes 100.0%




AMTICO

   17,734

   20,924

   22,326

A Ordinary shares 18.8%




Mezzanine loan 100.0%




Unsecured deep discount bond 23.8%




BARCLAYS GLOBAL INVESTMENTS

   49,325

   25,019

   25,000

Liquidity fund 0.2%




BDR THERMEA

   63,074

   73,200

   44,347

Class A shares 11.0%




Class B shares 22.0%




Class C shares 5.0%




Class A PECs 11.0%




Class B PECs 22.0%




Class C PECs 5.0%




CAPITAL SAFETY GROUP III

   19,854

   32,323

   19,082

A PECs 13.5%




A Ordinary shares 12.1%




E1 Ordinary shares 12.1%




F1 Ordinary shares 12.1%




G1 Ordinary shares 12.1%




H1 Ordinary shares 12.1%




Mezzanine loan 16.7%




CPA GLOBAL

   13,901

   18,679

   13,901

Ordinary shares 3.5%




B Preference shares 6.5%




C Preference shares 3.8%




Mezzanine loan 4.8%




DALER ROWNEY

        -  

   15,473

   17,435

B Ordinary shares 43.9%




G Ordinary shares 100.0%




B Unsecured loan notes 67.0%




DAVIES GROUP

        -  

   35,789

   35,789

G Ordinary shares 100.0%




Warrants 99.9%




Senior unsecured loan notes 70.7%




Unsecured loan notes 58.6%




ESURE

   35,376

   50,669

   29,733

C Ordinary shares 6.8%




Preferred ordinary shares 15.0%




Priority return shares 15.0%




Loan note 15.0%




Perpetual subordinated note 15.0%




GOLDMAN SACHS

   24,010

   25,021

   25,000

Liquidity fund 0.6%




INSIGHT

   28,217

   25,020

   25,000

Liquidity fund 0.3%




JP MORGAN LIQUIDITY FUND

   24,009

   25,021

   25,000

Liquidity fund 0.4%




LABCO

   15,444

   13,286

   24,189

C Ordinary shares 4.6%




LIL-LETS GROUP

   36,346

   41,405

   21,692

Ordinary shares 44.6%




'B' Ordinary shares 100.0%




Warrants 44.7%




Unsecured loan notes 96.3%




LONDON & STAMFORD PROPERTY

   34,214

   34,779

   30,195

B Ordinary shares 7.0%




NUAIRE

   20,146

   27,581

   23,138

A' Ordinary shares 97.1%




B' Ordinary shares 100.0%




Series 'A' loan notes 99.6%




Series 'B' loan notes 31.9%




PINE UNIT TRUST

   15,000

   16,275

   14,500

Income units 98.4%




Capital units 98.4%




PREMIER ASSET MANAGEMENT

   31,823

   27,561

   55,785

B Ordinary shares 67.8%




G Ordinary shares 100.0%




Warrants 100.0 %




B Preference shares 100%




Deferred shares 38.4%




PROMONTORIA

   39,843

   37,426

   14,074

'B' Ordinary shares 10.0%




Loan notes 10.4%




ROYAL BANK OF SCOTLAND

   49,321

   65,024

   65,000

Liquidity fund 0.8%




SAV CREDIT

   12,177

   38,500

   22,844

"A" Preferred shares 100%




Subordinated loan




C Fixed preference shares 26.8%




SCOTTISH WIDOWS

        -  

   65,031

   65,000

Liquidity fund 0.8%




SENTINEL PERFORMANCE SOLUTIONS

        -  

   11,385

   15,692

B Ordinary shares 66.7%




G Ordinary shares 100.0%




Warrants 66.7%




Unsecured loan stock 66.7%




VOLUTION (VENT-AXIA)

   17,559

   18,059

   15,840

Mezzanine loan 45.7%




Senior loan 47.1%




ZENSAR TECHNOLOGIES (INDIA)

   23,971

   16,064

    4,211

Ordinary shares 22.1%




 

23 Related Party Transactions

 

Certain members of Electra Partners (the "participants") are entitled under various limited partnership agreements to benefit from carried interest and co-investment arrangements. Under these schemes the participants invest in every new investment made by the Company up to 31 March 2006. In return, the participants receive a percentage of the total capital and revenue profits made on each investment. The participants do not receive any profits until the Company has received back its initial investment. During the year ended 30 September 2011, the participants received £3,952,000 (2010: £759,000) under these schemes and had provisional allocations of £14,074,000 (2010: £14,830,000) based on current valuations. The participants are entitled to a percentage of the incremental value of unlisted investments held at 31 March 1995, subject to the Company having received in total proceeds equal to the valuation of those investments as at 31 March 1995 and a preferred return. During the year ended 30 September 2011, the participants received £nil (2010: £962,000) and had provisional allocations of £72,000 (2010: £66,000) based on current valuations.

 

Following approval at the Extraordinary General Meeting held on 12 October 2006, two new schemes were created. The participants are entitled to receive a percentage of the incremental value of certain investments held at 31 March 2006 following the Company receiving total proceeds equal to the value at that date and a preferred return, after deduction of related priority profit share. During the year ended 30 September 2011, the participants received £5,159,000 (2010: £nil) and had provisional allocations of £18,860,000 (2010: £16,952,000) under this scheme based on current valuations. The second scheme entered into under the new arrangements requires the participants to invest in every new investment made by the Company since 1 April 2006 until 30 September 2009. On a pooled basis, participants receive a percentage of the total capital and revenue profits once the Company has received back its initial investment, a preferred return and a related priority profit share. During the year ended 30 September 2011, the participants had provisional allocations of £nil (2010: £2,078,000) based on current valuations. Following the same methodology new pools commenced for deals starting since 1 October 2009. During the year ended 30 September 2011, the participants had provisional allocations of £4,428,000 (2010: £1,432,000) based on current valuations.

 

No Directors of Electra participated in the above arrangements. The non-executive Directors' remuneration is set out on page 74 in these accounts.

               

During the year ended 30 September 2007, Electra Partners exercised its option to cancel all priority profit share reductions by paying Electra the equivalent of the net present value of the remaining expected priority profit share reductions. An amount of £1.1 million will be payable over the period to October 2011. The amount was approved by a qualified independent third party.

 

In November 2007, Electra entered into a co-investment agreement with Electra Partners Club 2007 LP ("Club"), a fund managed by Electra Partners LLP. The co-investment agreement requires Electra to co-invest at the ratio of 2:1 in all Electra Partners investments in private equity opportunities in Western Europe where the combined investment of Electra and the Club would represent a controlling stake and where the combined equity investment is between £25 million to £75 million. Both parties will invest on the same terms and conditions. The agreement allows for variations to these arrangements in certain prescribed circumstances. For example, where investment would compromise Electra's ability to qualify as an Investment Trust or where the Club would exceed certain concentration ratios. Investments that arise from interests that Electra already held prior to the establishment of the Club are unaffected by these sharing arrangements. These arrangements will expire in May 2013.

 

Net sales of investments to Electra from Electra Investments Limited amounted to £51,000,000 for the year ended 30 September 2011 (2010: to Electra Investments Limited from Electra of £nil). Net loans advanced by Electra to Electra Investments Limited were £19,620,004 (2010: loans advanced by Electra Investments Limited to Electra of £55,984,000). Interest of £198,000 (2010: £221,000) was paid on these loans.

 

Net loans for working capital and/or to clear intercompany balances were made to Albion (Electra) for £26,000 (2010: £66,000), to Electra Holdings Inc for £52,000 (2010: to Electra Holdings Inc for £56,000), to Electra Property, Inc for £17,000 (2010: to Electra Property, Inc for £45,000), from Electra Private Equity Investments PLC for £1,651,000 (2010: £5,880,000).

 

24 Deferred Tax

 


Group


Company


30 Sept 2011

30 Sept 2010

30 Sept 2011

30 Sept 2010


£'000

£'000

£'000

£'000

Deferred Tax Overseas

-

245

         -  

-  

 

The deferred tax position relates to overseas tax provided on unrealised gains on investment.

 

The analysis of the deferred tax liabilities is as follows:

 


Group


Company


30 Sept 2011

30 Sept 2010

30 Sept 2011

30 Sept 2010


£'000

£'000

£'000

£'000

Deferred Tax liabilities:





   Deferred tax liability to be recovered after more than 12 months

-

245

         -  

         -  

 

The gross movement on the deferred income tax account is as follows:

 


Group


Company


30 Sept 2011

30 Sept 2010

30 Sept 2011

30 Sept 2010


£'000

£'000

£'000

£'000

At 1 October

245

148

-  

-  

Exchange differences

-

2

-  

-  

Charged/(credited) directly to equity

(245)

95

-  

-  

As at 30 September

-

245

-  

-  

 

The movement in deferred income tax liabilities during the year, without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows:

 

Deferred Tax liabilities

Accelerated Tax depreciation

Fair Value Gains

Other

Total

At 1 October 2010

-

245

-

245

Charged/(credited) directly to equity

-

(245)

-

(245)

At 30 September 2011

-  

-  

 -

-  

 

25 Provision for Liabilities and Charges

 


Group


Company



30 Sept 2011


30 Sept 2011


£'000

£'000

£'000

£'000

Incentive scheme provision





At 1 October 2010

35,358


65,970


Amounts paid and payable under incentive schemes

(9,111)


(9,111)




26,247


56,859

Increase in incentive scheme provision


11,187


11,187



37,434


68,046

Liability in subsidiaries


-  


(19,115)

At 30 September 2011


37,434


48,931

 

Current and former executives of Electra Partners are entitled to incentives based on the performance of investments made by Electra. Under the current contractual terms of the Realisation Incentive Schemes, executives receive the value of any amounts that were due at 30 September 2000 and 8% on uplifts in value from that date, on a pooled basis, 10% on uplifts from 31 March 2006 valuations after a 15% preferred return and on deals invested at cost on 31 March 2006, 18% on a 3 year pooled basis on uplifts after an 8% preferred return on deals commencing from 1 April 2006 until 30 September 2009 and 18% on a three year pooled basis on uplifts after an 8% preferred return on deals commencing from 1 October 2009 until 30 September 2012.

 

26 Post Balance Sheet Events

 

On 12 October 2011 the Bank Loan, a £185 million revolving multi-currency credit facility agreement, dated 17 July 2009 was amended and restated on broadly similar terms at a revised total facility amount of £195 million and repayable on 30 June 2016.

 

27 Basis of Accounting and Significant Accounting Policies

 

The Accounts for the year ended 30 September 2011 have been prepared in accordance with the Companies Act 2006 and International Financial Reporting Standards ("IFRS"). IFRS comprises standards and interpretations approved by the International Accounting Standards Board ("IASB") and the International Financial Reporting Interpretations Committee ("IFRIC") as adopted in the European Union as at 30 September 2011.

 

In order to reflect the activities of an investment trust company, supplementary information which analyses the Consolidated Income Statement between items of a revenue and capital nature has been presented alongside the Consolidated Income Statement. In analysing total income between capital and revenue returns, the Directors have followed the guidance contained in the Statement of Recommended Practice for investment companies issued by the Association of Investment Companies in January 2009 (the "SORP").

 

The recommendations of the SORP which have been followed include:

 

·      Realised and unrealised profits or losses arising on the revaluation or disposal of investments classified as held at fair value through profit or loss should be shown in the capital column of the Income Statement. Realised gains are taken to the realised reserves in equity and unrealised gains are transferred to the unrealised reserves in equity.

·      Returns on any share or debt security (whether in respect of dividends, interest or otherwise) should be shown in the revenue column of the income statement. The total of the revenue column of the Income Statement is taken to the revenue reserve in equity.

·      The Board should determine whether the indirect costs of generating capital gains should also be shown in the capital column of the Income Statement.

 

If the Board decides that this should be so, the management fee should be allocated between revenue and capital in accordance with the Board's expected long term split of returns, and other expenses should be charged to capital only to the extent that a clear connection with the maintenance or enhancement of the value of investments can be demonstrated. The Board has decided that the Company should continue to charge priority profit share and finance costs, other than those in relation to the Zero Dividend Preference shares, as revenue items for the year ended 30 September 2011.

 

In accordance with the Company's status as a UK investment company under Section 833 of the Companies Act 2006, capital reserve may not be distributed by way of dividend.

 

The Company has taken advantage of the exemption under section 408 of the Companies Act 2006 and accordingly has not presented a separate parent company income statement.

 

The Accounts have been prepared on a going concern basis and under the historical cost basis of accounting, modified to include the revaluation of certain assets at fair value, as disclosed in the Principles of Valuation of Investments.

 

Application of New Standards

 

At the balance sheet date, the Company has adopted all Standards and IFRIC interpretations that were either issued, or which become effective, during the year. None of the standards applicable during the year were relevant and did not have a significant impact on the financial statements or accounting policies.

 

New Standards to be Applied

 

At the date of authorisation of these financial statements, the IASB and the IFRIC have issued the following standards, amendments and interpretations to be applied to financial statements with periods commencing on or after the following dates:

 

·      IAS 24 (revised) Related Party Disclosures (effective for financial periods beginning on or after 1 January 2011). Revises the definition of related parties.

·      IFRS 9 Financial instruments: Classification (effective for financial periods beginning on or after 1 January 2013). Standard addresses the classification and measurement of financial assets in the form of debt instrument or equity.

·      IFRS 7 (amendments) Financial Instruments: Disclosures (effective for financial periods beginning on or after 1 January 2011). Amendments include multiple clarifications related to the disclosures of financial instruments.

·      IFRS 10 Consolidated financial statements (effective for financial periods beginning on or after 1 January 2013, subject to endorsement by the EU). Standard provides additional guidance to assist in the determination of control where this is difficult to assess.

·      IFRS 13 Fair value measurement (effective for financial periods beginning on or after 1 January 2012, subject to endorsement by the EU). Standard aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs.

·      IAS 27 (revised 2011) Separate Financial Statements (effective for financial periods beginning on or after 1 January 2013, subject to endorsement by the EU). Standard contains accounting and disclosure requirements for investments in subsidiaries, joint ventures and associates, when an entity prepared separate financial statements.

 

Basis of Consolidation

 

The consolidated Accounts include the Company and its subsidiary undertakings. Where subsidiaries are acquired or sold during the year their results are included in the consolidated accounts from the date of acquisition and up to the date of disposal respectively. A subsidiary is an entity where the Company has the power to govern the financial and operating policies so as to obtain benefit from its activities. The principal subsidiaries comprise wholly owned companies and near wholly owned investment holding limited partnerships set up by the Company through which investments are made and through which external borrowings for investment purposes are raised. These are set out in Note 22. The holdings in investment holding limited partnerships and wholly owned investment holding companies are included in the consolidated financial statements, on the basis that they are considered to be special purpose entities of the Company, which have been set up for the specific purpose of holding investments. These investment holding limited partnerships and wholly owned investment holding companies are considered to be controlled by the Company under the interpretation of SIC 12 'Special Purpose Entities' as the Company enjoys predominantly all the risks and rewards from their activities. All intra-group transactions, balances, income and expenses are eliminated on consolidation.

 

Investments

 

The Board have appointed Electra Partners LLP ("Electra Partners"), an independent investment manager, under a contract of full discretionary management to manage the investments of the Company. This is effected through the Management and Investment Guideline Agreement and the relevant limited partnership agreements of the investment holding limited partnerships through which the Company makes its investments. Under these agreements Electra Partners as Manager, has full power to exercise the voting rights attaching to any of the Company's investments without reference to the Board. Consequently, the Company does not have the power to participate in or govern the financial and operating policies of any of its investments and therefore even where the holding is greater than 50% of the equity, or between 20% and 50% of the equity, investments are not consolidated or accounted for using the equity method respectively.

 

Purchases and sales of listed investments and floating rate notes are recognised on the trade date where a contract exists whose terms require delivery within a time frame determined by the relevant market. Purchases and sales of unlisted investments are recognised when the contract for acquisition or sale becomes unconditional. Investments are designated at fair value through profit or loss (described in the Accounts as investments held at fair value) and are subsequently measured at reporting dates at fair value. The fair value of direct unquoted investments is calculated in accordance with the Principles of Valuation of Investments below. Changes in the fair value of investments are recognised in the Income Statement through the capital column.

 

Principles of Valuation of Investments

 

(i) General

 

In valuing investments, Electra Partners (the "Manager") values investments at Fair Value at the reporting date, in accordance with IAS 39.

 

Fair Value represents the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm's length transaction. In estimating Fair Value, the Manager uses a methodology which is appropriate in light of the nature, facts and circumstances of the investment and its materiality in the context of the total investment portfolio. Methodologies are applied consistently from one period to another except where a change results in a more accurate estimate of Fair Value.

 

(ii) Unlisted Investments

 

The principal methodologies applied in valuing unlisted investments include the following:

 

·      Earnings multiple

·      Price of recent investment

·      Net assets

·      Discounted cash flows

·      Industry valuation benchmarks

 

In assessing whether a methodology is appropriate the Manager will be biased towards those methodologies that draw heavily on market based measures of risk and return, favouring those that rely on observable market data rather than assumptions.

 

Typically an earnings multiple basis will be used. In applying the earnings multiple methodology, the Manager applies a market based multiple that is appropriate and reasonable to the maintainable earnings of the portfolio company. In the majority of cases the Enterprise Value of the underlying business is derived by the use of an earnings multiple applied to the current year's earnings where these can be forecast with a reasonable degree of certainty and are deemed to represent the best estimate of maintainable earnings. Where this is not the case, historic earnings will generally be used in their place.

 

·      The Enterprise Value of the underlying business will be calculated using the earnings multiple or other appropriate basis (as above);

·      The Enterprise Value of the underlying business will then be adjusted for surplus assets or excess liabilities to arrive at an Enterprise Value for the portfolio company; and

·      The valuation of Electra's investment will be calculated from the Enterprise Value for the portfolio company after deduction of prior ranking debt and other financial instruments.

 

The Manager will normally derive the earnings multiple by reference to current market based multiples reflected in the valuations of quoted comparable companies or the price at which comparable companies have changed ownership. Differences between the comparator multiple and the unquoted company being valued are reflected by adjusting the multiple for points of difference. The reasons why such adjustments may be necessary include the following:

 

·      Size and diversity of the entities

·      Rate of growth of earnings

·      Reliance on a small number of key employees

·      Diversity of product ranges

·      Diversity and quality of customer base

·      Level of borrowing

·      Any other reason the quality of earnings may differ

·      Risks arising from the lack of marketability of the shares

 

Where a recent investment has been made, either by Electra or by a third party in one of Electra's investments, after considering the background of the underlying investment, this price will generally be used as the estimate of Fair Value, subject to consideration of changes in market conditions and company specific factors. Other methodologies, as detailed above, may be used at any time if this is deemed to provide a more accurate assessment of the Fair Value of the investment. The indicators that the price of recent investment may no longer be appropriate include:

 

·      Significant under / over achievement of budgeted earnings

·      Concerns with respect to debt covenants or refinancing

·      Significant movements in the market sector of the investment

·      Regulatory changes in the industry

 

The Company's valuation model for debt instruments is the net present value of estimated future cash flows based on a discounted cash flow model. The discount rate used by the Company is based on the risk-free rate of the economic environment in which portfolio companies operate and is adjusted in relation to other factors such as liquidity, credit and market risk. Similar to the earnings multiple model the cash flows used in the discounted cash flow model are based on projected cash flow or earnings of the portfolio companies.

 

(iii) Listed Investments

 

Listed investments that are traded on active markets are stated at the market bid price on the balance sheet date without discount. Where the market for the listed investment is not considered to be active, the investment is treated as unlisted for valuation purposes. Markets will be considered active if transactions are occurring regularly enough to provide reliable pricing information. Markets will be considered inactive if the market price is not current, there is little publicly available information or there are few transactions for the investment.

 

(iv) Limited Partnership Funds

 

Limited partnership funds are those set up by a third party where the Company does not hold a majority share and are at fair value, typically using the third party manager's valuation after adjustment for purchase and sales between the date of the valuation and current financial year end.

 

(v) Other Investments

 

Liquidity funds are held at the current fair value of the note.

 

Accrued Income

 

Accrued income is included within investment valuations.

 

Derivative Financial Instruments

 

Derivative financial instruments are used by the Group to manage the risk associated with changes in interest rates on its borrowings. This is achieved by the use of interest rate swaps and interest rate caps. All derivative financial instruments are held at fair value.

 

Derivative financial instruments are recognised initially at fair value on the contract date and subsequently remeasured at fair value at each reporting date. The fair value of currency swaps and interest rate swaps is determined with reference to future cash flows and current interest and exchange rates. All changes in the fair value of financial instruments are accounted for in the Income Statement.

 

Cash and Cash Equivalents

 

Cash comprises cash at bank and short term deposits with an original maturity of less than three months.

 

Dividends

 

Dividend distributions to shareholders are recognised as a liability in the period in which they are approved unconditionally by the shareholders or in the case of interim dividends when paid.

 

Foreign Currencies

 

The Group's presentational currency and the Company's functional and presentational currency is pounds sterling ("sterling"), since that is the currency of the primary economic environment in which the Group operates. Transactions in currencies other than sterling are recorded at the rates of exchange prevailing on the dates of the transactions. Foreign currency assets and liabilities are translated into the functional currencies of the Group's respective entities at rates prevailing at the balance sheet date. Exchange differences arising are recognised through the Income Statement. At each balance sheet date assets and liabilities of foreign operations are translated into sterling at the rates prevailing on the balance sheet date. Foreign exchange differences arising on retranslation of the equity and reserves of subsidiaries with functional currencies other than sterling, are recognised directly in the Translation Reserve in equity. Foreign exchange differences arising on the retranslation of non-monetary items carried at fair value are included in the Income Statement for the period.

 

Investment Income/Net Gains

 

Dividends receivable from equity shares are accounted on the ex-dividend date or, where no ex-dividend date is quoted, are accounted when the Group's right to receive payment is established. Fixed returns on non-equity shares and debt securities are recognised on a time apportionment basis so as to reflect the effective yield when it is probable that economic benefit will flow to the Group. Where income accruals previously recognised, but not received, are no longer considered to be reasonably expected to be received, either through investee company restructuring or doubt over its receipt, then these amounts are reversed through expenses.

 

Income distributions from limited partnership funds are recognised when the right to distribution is established.

 

Expenses

 

All expenses are accounted for on an accruals basis. Expenses are charged through the revenue column of the Income Statement except for expenses in connection with the disposal and acquisition of non-current asset investments, which are deducted from the disposal proceeds and added to acquisition costs of investments.

 

Finance Costs

 

Costs of borrowings are expensed as revenue items through the Income Statement as they accrue on an effective interest rate basis. Any costs incurred which were not directly related to the borrowing facility are expensed in the revenue account.

 

Priority Profit Share

 

The majority of the investments are made by the Company through investment holding limited partnerships managed by Electra Partners. Under the terms of the relevant limited partnership agreements the general partner is entitled to appropriate, as a first charge on the net income or net capital gains of the limited partnerships, an amount equivalent to its priority profit share. In periods in which the investment holding limited partnerships have not yet earned sufficient net income or net capital gain to satisfy this priority profit share the entitlement is carried forward to the following period. In all instances the cash amount paid to the general partner in each period is equivalent to the priority profit share.

 

The priority profit share is charged wholly to the revenue column of the Income Statement.

 

Taxation

 

The tax effect of different items of income/gain and expense/loss is allocated between capital and revenue on the same basis as the particular item to which it relates, using the Company's effective rate of tax for the accounting period. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised for all 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.

 

Zero Dividend Preference Shares

 

Zero Dividend Preference Shares which exhibit the characteristics of debt are recognised as liabilities in the Balance Sheet in accordance with IAS 32. After initial recognition, these liabilities are measured at amortised cost, which represents the initial net proceeds from the issuance after issue costs plus the accrued entitlement to the balance sheet date.

 

The accrued entitlement is calculated as the difference between the proceeds on the issue of these shares and the redemption amount at maturity and is charged as interest expense over the life of these shares using the effective interest method. In accordance with the AIC SORP this interest expense is allocated to the capital column of the Income Statement.

 

Convertible Bonds

 

See Note 17.

 

Provisions

 

Provisions are recognised when the Group has a present obligation of uncertain timing or amount as a result of past events and it is probable that the Group will be required to settle that obligation and a reliable estimate of that obligation can be made. The provisions are measured at the Directors' best estimate of the amount to settle the obligation at the balance sheet date. Changes in provisions are recognised in the Income Statement.

 

The provision for the incentive schemes is based on the valuation of investments as at the balance sheet date. The incentive scheme is charged to the capital column of the Income Statement as a direct cost.

 

Revenue and Capital Reserves

 

Net Capital return is taken to the non-distributable Capital Reserve in the Consolidated Statement of Changes in Equity. The net revenue return is taken to the Revenue Reserve from which dividend distributions are made.

 

Operating segments

 

The chief operating decision-maker has been identified as Electra Partners. Electra Partners review the Group's internal reporting in order to assess performance and allocate resources. Electra Partners has determined the operating segments based on these reports. Electra Partners considers the business as a single operating segment.

 

Bank Loans and receivables

 

Bank loan is initially recognised at the fair value of the consideration received net of issue costs associated with the loan. After initial recognition, these are subsequently measured at amortised cost using the effective interest method, which is the rate that exactly discounts the estimated future cash flows through the expected life of the liabilities. Amortised cost is calculated by taking into account any issue costs and any discount or premium on settlement.

 

Share Capital

 

Ordinary shares issued by the Group are recognised at the proceeds or fair value received with the excess of the amount received over nominal value being credited to the share premium account. Direct issue costs net of tax are deducted from equity.

 

Key Estimates and Assumptions

 

Estimates and judgements used in preparing the financial information are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable. The resulting estimates will, by definition, seldom equal the related actual results.

 

The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities relate to the valuation of unquoted investments. These are valued by Electra Partners in accordance with IAS 39. Judgement is required in order to determine the appropriate valuation methodology under this standard and subsequently in determining the inputs into the valuation model used. These judgements include making assessments of the future earnings potential of portfolio companies, appropriate earnings multiples to apply, and adjustments to comparable multiples.

INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF ELECTRA PRIVATE EQUITY PLC

 

We have audited the financial statements of Electra Private Equity for the year ended 30 September 2011 which comprise the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated and Company Statements of Changes in Equity, the Consolidated and Company Balance Sheets, the Consolidated and Company Cash Flow Statements and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the Company financial statements, as applied in accordance with the provisions of the Companies Act 2006.

 

Respective responsibilities of directors and auditors


As explained more fully in the Statement of Directors' Responsibilities set out on page 81, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.

 

This report, including the opinions, has been prepared for and only for the Company's members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.


Scope of the audit of the financial statements


An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group's and the Company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

 
Opinion on financial statements


In our opinion:

 

·      the financial statements give a true and fair view of the state of the Group's and of the Company's affairs as at 30 September 2011 and of the Group's profit and Group's and Company's cash flows for the year then ended;

 

·      the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;

 

·      the Company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and

 

·      the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the lAS Regulation.

 

Opinion on other matters prescribed by the Companies Act 2006

In our opinion:

 

·      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 Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements; and

 

·      the information given in the Corporate Governance Statement set out on pages 75 to 80 with respect to internal control and risk management systems and about share capital structures is consistent with the financial statements.


Matters on which we are required to report by exception

We have nothing to report in respect of the following:

Under the Companies Act 2006 we are required to report to you if, in our opinion:

 

·      adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from branches not visited by us; or

 

·      the Company financial statements 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:

 

·      the Directors' Statement, set out on page 68, in relation to going concern;

 

·      the parts of the Corporate Governance Statement 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 shareholders by the Board on Directors' remuneration.

 

 

 

 

Mark Pugh (Senior Statutory Auditor)

for and on behalf of PricewaterhouseCoopers LLP

Chartered Accountants and Statutory Auditors

London

5 December 2011

Report of the Directors

 

To the Members of Electra Private Equity PLC

 

The Directors present the audited Accounts of the Group for the year ended 30 September 2011 and their Report on its affairs.

 

Investment Trust Status

 

The Company carries on business as an investment trust. HM Revenue and Customs has approved the Company as an investment trust under Section 1158 of the Corporation Taxes Act 2010 for the accounting period to 30 September 2010. In accordance with the self-assessment of Corporation Tax this approval is based upon the computations submitted by the Company and is subject to the findings of any enquiries that HM Revenue and Customs may make. The Directors are of the opinion that since that date the Company has conducted its affairs in a manner which will satisfy the conditions for continued approval as an investment trust under that section.

 

Business Review

 

This Business Review describes the business of the Company and details the main risks and uncertainties associated with the Company's activities, taking into account performance as measured by the Key Performance Indicators ('KPIs').

 

Objective and Investment Policy

 

The Objective and Investment Policy of the Company are set out on page 3.

 

Current and future development

 

A review of the main features of the year is contained in the Chairman's Statement, the Investment Highlights and Portfolio Review.

 

The Board regularly reviews the development and strategic direction of the Company. The Board believes that the current investment strategy which was approved by shareholders in October 2006 remains effective in the light of existing market conditions. The Board's main focus continues to be on the Company's long-term investment return. The Board, in consultation with the Manager, reviews, sets a strategy for and monitors the Company's total capital position and gearing.

 

Performance

 

A detailed review of performance during the year is contained in the Investment Highlights and Portfolio Review.

 

A number of performance measures are considered by the Board and the Manager in assessing the Company's success in achieving its objectives.

 

The KPIs used to measure the progress and performance of the Company are established industry measures and are as follows:

 

·      Return on equity over the long term

 

·      The movement in net asset value per ordinary share

 

·      The movement in share price

 

Details of the KPIs are shown on page 4.

 

Risk management

 

As the Company is focused on investment in private equity assets, Electra Partners aims to limit the risk attaching to the portfolio as a whole by careful selection of investments and by a spread of holdings in terms of overall portfolio analysis, age and geographic split in accordance with the Company's Objective and Investment Policy.

 

It is the role of the Board to review and manage all risks associated with the Company, either mitigating these directly or through Electra Partners. The principal risks facing the Company include Market Price Risk, Credit Risk, Interest Rate Risk, Liquidity Risk and Capital Risk as further detailed in Note 18 of the Notes to the Accounts.

 

In addition the Company is also focused on the following risks:

 

Macroeconomic risks

 

The performance of the Company's underlying investment portfolio is principally influenced by a combination of economic conditions, the availability of appropriately priced debt finance, interest rates and the number of active trade and financial buyers. All of these factors have an impact on the Company's ability to invest, the Company's ability to exit from its underlying portfolio and the levels of profitability achievable on exit.

 

Gearing risks

 

The Company uses gearing in a number of forms, through its multi-currency revolving credit facility, its Subordinated Convertible Bonds ('Bonds') and Zero Dividend Preference Shares ('ZDP Shares').

 

At 30 September 2011, the Company had a revolving credit facility of £185 million which was due to expire in January 2013. In October 2011, this was refinanced with the facility increasing in size to £195 million and the loan term being extended to June 2016.

 

In December 2010, the Company issued £100 million of 5% Subordinated Convertible Bonds which have their final redemption in 2017 unless they are converted into ordinary shares. In 2009, Electra Private Equity Investments Plc, a wholly owned subsidiary of the Company, issued ZDP Shares, which have their final capital entitlement due in 2016, which represents a form of gearing for the Company.

 

All of these forms of gearing rank prior to the Company's ordinary shares, with the multi-currency revolving credit facility ranking higher than the ZDP Shares which in turn rank higher than the Bonds.

 

The Company may also invest in unquoted companies or private equity funds which are geared by loan facilities that rank ahead of the Company's investment both for payment of interest and capital.

 

One of the principal risks of gearing is that it can cause both gains and losses in the asset value of the Company to be magnified. Another significant risk associated with gearing is the potentially severe operational impact on the Company of a breach of its banking covenants. Secondary risks relate to whether the cost of gearing is too high and whether the length of the gearing is appropriate. The Board regularly monitors the headroom available under banking covenants and reviews the impact of the various forms of gearing and their cost to the Company.

 

Foreign Currency Risk

 

The Company's total return and net assets are affected by foreign exchange translation movements as a significant proportion of the investments held are denominated in currencies other than sterling.

 

The foreign investments held are principally held in the USA, Continental Europe and the Far East.

 

During the year, the Company held loans denominated in US Dollars and Euros, which partially offset foreign currency risk on foreign currency investments. The ratio of loans held in US Dollar and Euro is under regular review in order to partially hedge as efficiently as possible.

 

Long-term strategic risk

 

The Company is subject to the risk that its long-term strategy and its level of performance fail to meet the expectations of its shareholders. The Board monitors the level of discount of share price to net asset value per share and considers the most effective methodologies to keep this at a minimum, including the share buy-back policy. With the need to fund the future redemption of the ZDP shares and anticipating attractive investment opportunities, the Board considers that the purchases of shares for cancellation will be less likely in the medium term. Nevertheless, Directors will continue to seek shareholder authority on an annual basis to enable them to purchase shares for cancellation when they believe it will be in the best interests of shareholders.

 

In addition the Board regularly reviews the Objective and Investment Policy in light of prevailing investor sentiment to ensure the Company remains attractive to its shareholders.

 

Government policy and regulation risk

 

The Company carries on business as an investment trust under section 1158 of the Corporation Taxes Act 2010. Retention of investment trust status is subject to the Company conducting its affairs in a manner which will satisfy annually the HM Revenue and Customs conditions for continuing approval as an investment trust. Expected and actual changes in government policy and treatment of investment trusts are closely monitored, as are other changes which could affect the Company's business or financial position.

 

Electra Partners is an authorised person under the Financial Services and Markets Act 2000 and is regulated by the FSA. Changes to the regulatory framework under which Electra Partners operates are closely monitored by Electra Partners and reported upon as necessary by Electra Partners to the Board.

 

Investment risks

 

The Company operates in a very competitive market. Changes in the number of market participants, the availability of funds within the market, the pricing of assets, or in the ability of Electra Partners to access deals could have a significant effect on the Company's competitive position and on the sustainability of returns.

 

In order to source and execute good quality investments the Company is primarily dependent on Electra Partners having the ability to attract and retain executives with the requisite investment experience and whose compensation is in line with the Company's objectives.

 

Once invested, the performance of the Company's portfolio is dependent upon a range of factors. These include but are not limited to: (i) the quality of the initial investment decision; (ii) the ability of the portfolio company successfully to execute its business strategy; and (iii) actual outcomes against the key assumptions underlying the portfolio company's financial projections. Any one of these factors could have an impact on the valuation of a portfolio company and upon the Company's ability to make a profitable exit from the investment within the desired timeframe. A rigorous process is put in place by Electra Partners for managing the relationship with each investee company. This includes regular asset reviews and in many cases, board representation by one of Electra Partners' executives.

 

The Board reviews both the performance of Electra Partners and its incentive arrangements on a regular basis to ensure that both are appropriate to the objectives of the Company.

 

Valuation risk

 

In order to value investments correctly, the Company is primarily dependent on Electra Partners following Accounting Standards, in this case IAS 39 as further detailed on page 57.

 

Operational risk

 

The Company's investment management, custody of assets and many administrative systems are provided or arranged for the Company by Electra Partners. Therefore the Company is exposed to a range of operational risks at Electra Partners which might arise from inadequate or failed processes, people and systems or from external factors affecting these. These include operational events such as human resources risks, legal and regulatory risks, information technology systems failures, business disruption and shortcomings in internal controls.

 

The Company's system of internal control mainly comprises the monitoring of the services provided by Electra Partners, including the operating controls established by them to ensure they meet the Company's business objectives, as further detailed in the Corporate Governance Statement on pages 75 to 80.

 

Management Arrangements

 

Electra Partners is appointed as the Manager of the Company under a management agreement dated 12 October 2006. The agreement may be terminated by either party giving notice of not less than 12 months. Whatever notice period is worked, Electra Partners will be entitled to receive additional compensation equivalent to 12 months' priority profit share (determined by reference to the previous 12 months' priority profit share).

 

If Electra Partners terminates the management agreement, Electra may pay compensation in lieu of any part of the notice period but Electra Partners is not entitled to any additional compensation.

 

Electra Partners receives a priority profit share of 1.5% on the gross value of the Company's investment portfolio including cash (but excluding any amounts committed to funds established and managed by Electra Partners).

 

During the year the Company continued to operate carried interest and co-investment schemes for executives of Electra Partners and details of these schemes are contained in Notes 23 and 25 of the Notes to the Accounts.

 

As detailed in the Corporate Governance Statement, the Board reviews the activities of Electra Partners on an ongoing basis and believes that the continuing appointment of Electra Partners on the terms agreed is in the interests of shareholders as a whole.

               

Electra Partners is responsible for the investment management of a number of limited partnership funds to which the Company has subscribed. Electra Partners manages the Company's investments in accordance with guidelines determined by the Directors and as specified in limited partnership and in management and investment guideline agreements.

 

Management Engagement Committee

 

A Management Engagement Committee was established in 2011. The Committee is chaired by Mr Cullinan and comprises Ms Barker and Ms Webber. The Committee has written terms of reference which are available on the Company's website. Further details in relation to the committee are provided in the Corporate Governance Statement on pages 75 to 80.

 

Social, community, employee and environmental issues

 

In carrying out its activities and in its relationships with the community, the Company aims to conduct itself responsibly, ethically and fairly. The Company has no employees and the Board is composed entirely of non-executive Directors. As an investment trust, the Company has no direct impact on the environment. However, the Company believes that it is in the shareholders' interests to consider environmental, social and ethical factors when selecting and retaining investments.

 

Electra believes that high standards of corporate social responsibility ('CSR') make good business sense and have the potential to protect and enhance investment returns. Consequently, the investment process takes social, environmental and ethical issues into account when, in Electra Partners' view, these have a material impact on either investment risk or return.

 

Electra recognises and supports the view that social, environmental and ethical best practice should be encouraged. It favours investing in companies committed to high standards of CSR and to the principles of sustainable development.

 

Results

 

A revenue profit attributable to shareholders of £4,205,000 (2010: profit of £1,558,000) was transferred to Revenue Reserves. No dividend is proposed in respect of the year ended 30 September 2011 (2010: nil).

 

Share capital

 

On 29 December 2010 the Company issued £100 million of 5% Subordinated Convertible Bonds due 29 December 2017 at an issue price of 100 per cent and with an initial conversion price of 2,050p. Bondholders may convert their bonds into ordinary shares of the Company from 7 February 2011 up to and including the date falling seven business days prior to 29 December 2017. The conversion price of 2,050p will be adjusted to deal with certain events which would otherwise dilute the conversion of bondholders. These events include dividends paid to ordinary shareholders, share rights and share related securities issued to shareholders, issue of other securities to shareholders, demergers and other events detailed in the Prospectus for the Bond dated 30 November 2010.

 

During the year, 35 Subordinated Convertible Bonds were converted into 1,704 ordinary shares.

 

At 30 September 2011 there were 35,340,391 ordinary shares of 25p each in issue. The Company does not hold any shares in treasury.

 

Authority to Make Market Purchases of Shares

 

As at 30 September 2011, the Company had authority to purchase for cancellation up to 5,297,269 shares. This authority will lapse at the 2012 Annual General Meeting when a Special Resolution will be proposed to renew the Company's authority to make market purchases of its own shares.

 

During the year the Company did not purchase any shares for cancellation.

 

Multi-Currency Loan Facility

 

At 30 September 2011 borrowings under the £185 million (2010: £185 million) multi-currency revolving credit facility amounted to £163,707,000 (2010: £163,945,000).

 

In October 2011, the Company completed a refinancing of the existing facility, increasing the size from £185 million to £195 million and extending the loan term from January 2013 to June 2016.

 

Directors

 

The current Directors of the Company are listed on page 82. Dr C Bowe, Mr RK Perkin, Mr MED'A Walton and Ms L Webber served as Directors throughout the year ended 30 September 2011. Ms K Barker was appointed as a non-executive Director on 1 November 2010 and Mr G Cullinan as a non-executive Director on 1 January 2011. Mr RA Armstrong and Mr JP Williams retired from the Board at the conclusion of the Annual General Meeting on 24 February 2011. No other person was a Director of the Company during any part of the year. Mr Perkin and Mr Walton will retire at the Annual General Meeting in 2012 and, being eligible, offer themselves for re-election.

 

Mr Cullinan offers himself for election at the Annual General Meeting in 2012.

 

Board Diversity

 

The Board of Electra Private Equity PLC supports the recommendations of Lord Davies of Abersoch in his report "Women on Boards".

 

The current balance of the Board is 50:50 women : men, with three female and three male Directors on the Board. There have been two female Directors on the Board since 2007.

 

The Company aims to have a balance of relevant skills, experience and background amongst the Directors on the Board and believes that all Board appointments should be made on merit and with due regard to the benefits of diversity, including gender. The Board's aim is to continue to maintain a diverse Board and, subject to appointing the best candidates available when current Directors retire, to have a proportion of at least one third women on the Board.

 

The Company is an investment trust which has no employees other than the non-executive Directors and therefore has no disclosures to make in this regard.

 

Directors' Conflicts of Interest

 

Directors report on actual or potential conflicts of interest at each Board meeting. The Board has agreed that the Remuneration and Nomination Committee is responsible for considering and reviewing conflicts of interest and that any Director or Directors with a potential conflict would be excluded from such a review. After consideration, if required, the Remuneration and Nomination Committee would subsequently make a recommendation to the Board of Directors. The terms of reference of the Remuneration and Nomination Committee have been amended accordingly.

 

Directors' Indemnity

 

Directors' and Officers' Liability insurance cover has been put in place. In addition, the Company's Articles of Association provide, subject to the provisions of applicable UK legislation, an indemnity for Directors in respect of costs incurred in the defence of any proceedings brought against them by third parties arising out of their positions as Directors, in which they are acquitted or judgement is given in their favour.

 

Directors' Interests

 

The interests of the Directors (including connected persons) in the ordinary shares and 5% Subordinated Convertible Bonds of the Company are shown below. Save as disclosed, no Director had any notifiable interest in the securities of the Company or of any subsidiary of the Company. There have been no changes in the interests of any of the Directors in the ordinary shares and 5% Subordinated Convertible Bonds of the Company between 1 October 2011 and 5 December 2011.

 

30 September 2011
Shares

30 September 2011
Bonds

30 September 2010 Shares

Dr C Bowe

5,000

-

5,000

K Barker*

1,000

-

-

G Cullinan*

1,500

-

-

RK Perkin

-

42

-

MED'A Walton

16,016

44

16,016

L Webber

2,500

4

1,500

 

* Upon appointment neither Ms Barker nor Mr Cullinan had an interest in any ordinary shares of the Company.

 

Substantial Interests

 

The Company has received the following notifications of interests of 3% or more in the voting rights attached to the Company's ordinary shares:

 

Direct No.

Voting Rights Notified Indirect No.

Direct
%

Percentage of Voting Rights * Indirect
%

Prudential PLC group of companies

2,707,768

1,825

7.66

-

The Cooperative Asset Management

2,027,730

-

5.74

-

Investec Wealth & Investment Limited

-

1,850,616

-

5.24

Asset Value Investors Limited as discretionary manager

1,741,132

-

4.93

-

Bear, Stearns International Trading Limited

1,441,394

-

4.08

-

Legal & General Group PLC

1,409,952

-

3.99

-

HSBC Holdings PLC

-

1,767,264

-

5.00

 

*      Percentage shown as a percentage of 35,340,391 ordinary shares, being the number of shares in issue at the latest practicable date before the publication of this Directors' Report.

 

Audit Information

 

Each of the Directors confirms that so far as they are aware, there is no relevant audit information of which the Company's Auditors are unaware and they have taken all steps they ought to have taken to make themselves aware of any relevant audit information and to establish that the Company's Auditors are aware of that information.

 

Auditors

 

A resolution to re-appoint PricewaterhouseCoopers LLP as Auditors to the Company will be proposed at the Annual General Meeting. A separate resolution will be proposed at the Annual General Meeting authorising the Directors to determine the remuneration of the Auditors.

 

The Auditors, PricewaterhouseCoopers LLP, have indicated their willingness to continue in office.

 

Creditor Payment Policy

 

The Company agrees the terms of payment with its suppliers when agreeing the terms of each agreement. Suppliers are aware of the terms of payment and the Company abides by the terms of payment.

 

 

Going Concern

 

The Directors believe that it is appropriate to continue to adopt the going concern basis in preparing the Accounts as the Company has adequate resources to continue in operational existence for the foreseeable future.

 

Annual General Meeting

 

The Annual General Meeting will be held on Thursday 23 February 2012. In addition to the ordinary business the following special business will be considered:

 

Authority to Purchase own Shares (Resolution 8)

 

A special resolution will be proposed to renew the Board's authority to purchase its own shares, so as to permit the purchase of up to 5,297,524 of the Company's ordinary shares (or such number of shares as is equal to 14.99% of the total number of ordinary shares in issue at the date of the passing of the resolution) subject to the constraints set out in the special resolution. The Directors would intend to use this authority to purchase shares only if this would result in an increase in net asset value per share and would be in the best interests of shareholders generally. Should any shares be purchased under this authority, it is the intention of the Board that such shares be cancelled.

 

The Directors believe that the renewal of the Board's authority to purchase shares, as detailed above, is in the best interests of shareholders as a whole and therefore recommend shareholders to vote in favour of Resolution 8.

 

Additional Information for Shareholders

 

Set out below is a summary of certain provisions of the Company's current Articles of Association (the "Articles") and applicable English law concerning companies (the Companies Act 2006 ("Companies Act")). This is a summary only and the relevant provisions of the Articles or the Companies Act should be consulted if further information is required.

 

Alteration of Articles of Association

 

Any change to the Company's articles of association needs to be approved by shareholders by means of a special resolution.

 

Share Capital

 

The Company has a single class of share capital which is divided into ordinary shares of 25 pence each. The shares are in registered form.

 

Dividends and Distributions

 

Subject to the provisions of the Companies Act, the Company may by ordinary resolution from time to time declare dividends not exceeding the amount recommended by the Board. The Board may pay interim dividends whenever the financial position of the Company, in the opinion of the Board, justifies such payment.

 

The Board may withhold payment of all or any part of any dividends payable in respect of the Company's shares from a person with a 0.25% interest of a class of shares if such a person has been served with a notice after failure to provide the Company with information concerning interest in those shares required to be provided under the Companies Act.

 

Voting Rights

 

Subject to any rights or restrictions attached to any shares, on a show of hands, every member who is present in person has one vote and every proxy present who has been duly appointed has one vote for every complete 25p in nominal amount of the shares of which he is the holder. However, if the proxy has been duly appointed by more than one member entitled to vote on the resolution, and is instructed by one or more of those members to vote for the resolution and by one or more others to vote against it, or is instructed by one or more of those members to vote in one way and is given discretion as to how to vote by one or more others (and wishes to use that discretion to vote in the other way) he has one vote for and one vote against the resolution. Every corporate representative present who has been duly authorised by a corporation has the same voting rights as the corporation would be entitled to. On a poll every member present in person or by duly appointed proxy or corporate representative has one vote for every share of which he is the holder or in respect of which his appointment as proxy or corporate representative has been made.

 

A member, proxy or corporate representative entitled to more than one vote need not, if he votes, use all his votes or cast all the votes he uses the same way.

 

In the case of joint holders the vote of the senior who tenders a vote shall be accepted to the exclusion of the votes of the other joint holders, and seniority shall be determined by the order in which the names of the holders stand in the register of members.

 

A member is entitled to appoint another person as his proxy to exercise all or any of his rights to attend and to speak and vote at a meeting of the Company. The appointment of a proxy shall be deemed also to confer authority to demand or join in demanding a poll. Delivery of an appointment of proxy shall not preclude a member from attending and voting at the meeting or at any adjournment of it. A proxy need not be a member. A member may appoint more than one proxy in relation to a meeting, provided that each proxy is appointed to exercise the rights attached to a different share or shares held by him.

 

Restrictions on Voting

 

No member shall have the right to vote at any general meeting or at any separate meeting of the holders of any class of shares, either in person or by proxy, in respect of any share held by him unless all amounts presently payable by him in respect of that share have been paid. In addition, if a person with a 0.25% interest of a class of shares has been served with a notice after failure to provide the Company with information concerning interest in those shares required to be provided under the Companies Act the member shall not be entitled to vote.

 

Deadlines for exercising voting rights

 

Votes are exercisable at a general meeting of the Company in respect of which the business being voted upon is being heard. Votes may be exercised in person, by proxy, or in relation to corporate members, by corporate representative. The Articles provide a deadline for submission of a proxy form in hard copy and electronic form of not less than 48 hours before the time appointed for the holding of the meeting or adjourned meeting. In the case of a poll taken subsequently to the date of the meeting or adjourned meeting, the proxy form must be received not less than 24 hours (or such shorter time as the Directors may determine) before the time appointed for the taking of the poll.

 

Variation of rights

 

The Articles specify that if the capital of the Company is divided into different classes of shares, rights attached to any class may be varied, either in such manner (if any) as may be provided by those rights; or in the absence of any such provision, with the consent in writing of the holders of three-quarters in nominal value of the issued shares of that class (excluding any shares of that class held as treasury shares), or with the sanction of a special resolution passed at a separate meeting of the holders of the shares of that class, but not otherwise. At every such separate meeting other than an adjourned meeting the quorum shall be two persons together holding or representing by proxy at least one-third in nominal value of the issued shares of the class in question (excluding any shares of that class held as treasury shares). At an adjourned meeting, the quorum shall be two persons holding shares of the class in question (other than treasury shares) or his proxy.

 

Transfer of shares

 

The instrument of transfer of a share in certificated form may be in any usual form or in any other form which the Directors approve and shall be executed by or on behalf of the transferor and, where the share is not fully paid, by or on behalf of the transferee. Where any class of shares is, for the time being, a participating security, title to shares of that class which are recorded on an operator register of members as being held in uncertificated form may be transferred by means of the CREST system. The transfer may not be in favour of more than four transferees. Transfers of shares in uncertificated form are effected by means of the CREST system.

 

The Directors may, in their absolute discretion, refuse to register the transfer of a share in certificated form which is not fully paid provided that if the share is listed on the Official List of the UK Listing Authority such refusal does not prevent dealings in the shares from taking place on an open and proper basis.

 

The Directors may also refuse to register a transfer of a share in certificated form (whether fully paid or not) unless the instrument of transfer:

 

(a)   is lodged, duly stamped, at the Office or at such other place as the Directors may appoint and (except in the case of a transfer by a financial institution where a certificate has not been issued in respect of the share) is accompanied by the certificate for the share to which it relates and such other evidence as the Directors may reasonably require to show the right of the transferor to make the transfer;

 

(b)   is in respect of only one class of share; and

 

(c)   is in favour of not more than four transferees.

 

If the Directors refuse to register a transfer of a share, they shall as soon as practicable and in any event within two months after the date on which the transfer was lodged with the Company (in the case of a transfer of a share in certificated form) or the date on which the Operator-instruction was received by the Company (in the case of a transfer of a share in uncertificated form to a person who is to hold it thereafter in certificated form) send to the transferee notice of the refusal together with reasons for the refusal. The Directors shall send such further information about the reasons for the refusal to the transferee as the transferee may reasonably request.

 

Nothing in the Articles shall preclude the Directors from recognising a renunciation of the allotment of any share by the allottee in favour of some other person.

 

Appointment and replacement of Directors

 

Unless otherwise determined by the Company by ordinary resolution the number of Directors (disregarding alternate Directors) shall not be less than three nor more than fifteen.

 

At the annual general meeting in every year all Directors who held office at the time of each of the two preceding annual general meetings and who did not retire at either of them shall retire from office by rotation and such further Directors (if any) shall retire by rotation as would bring the number retiring by rotation up to one-third of the number of Directors in office at the date of the notice of the meeting (or, if their number is not a multiple of three, the number nearest to but not greater than one third). The additional Directors to retire shall be those who have been longest in office since their last appointment or reappointment, but, as between persons who became or were last reappointed Directors on the same day, those to retire shall (unless they otherwise agree among themselves) be determined by lot. Any non-executive Director (other than the chairman) who has held office as a non-executive Director for nine years or more shall retire from office at each annual general meeting and shall be eligible for reappointment. A Director who retires at an annual general meeting may be reappointed. If he is not reappointed or deemed to have been reappointed, he shall retain office until the meeting elects someone in his place or, if it does not do so, until the close of the meeting.

 

If the Company, at the meeting at which a Director retires under any provision of the Articles, does not fill the vacancy the retiring Director shall, if willing to act, be deemed to have been reappointed unless at the meeting it is resolved not to fill the vacancy or a resolution for the reappointment of the Director is put to the meeting and lost.

 

The office of a Director shall be vacated if a Director:

 

(i)    becomes bankrupt or compounds with his creditors generally;

 

(ii)   is prohibited by law from being a Director;

 

(iii)  has a court order made in respect of his mental health which wholly or partly prevents him from exercising powers or rights which he would otherwise have;

 

(iv)   sends a notice to the Company that he is resigning or retiring from his office and such registration or retirement has taken effect;

 

(v)    sees his appointment (at an executive office) terminated or expiring and the Directors resolve that he should cease to be a Director;

 

(vi)   is absent without permission of the Board from meetings of the Board for six consecutive months and the Board resolves that the office is vacated; or

 

(vii)  notice is served upon a Director in writing by all other co-Directors.

 

Powers of the Directors

 

Subject to the Articles, the Companies Act and any directions given by special resolution, the business of the Company will be managed by the Board who may exercise all the powers of the Company.

 

The Directors shall restrict the borrowings of the Company and exercise all powers of control exercisable by the Company in relation to its subsidiary undertakings so as to secure that the aggregate principal amount (including any premium payable on final repayment) outstanding of all money borrowed by the Company and its subsidiaries shall not at any time, save with the previous sanction of an ordinary resolution of the Company, exceed (i) the amount paid up or credited as paid up on the share capital of the Company or (ii) the total of any credit balance on the distributable and undistributable reserves of the Company and its subsidiaries, subject to certain adjustments.

 

The Company may by ordinary resolution declare dividends in accordance with the respective rights of the members, but no dividend shall exceed the amount recommended by the Directors. Subject to the provisions of the Articles and to the rights attaching to any shares, any dividends or other monies payable on or in respect of a share may be paid in such currency as the Directors may determine. The Directors may deduct from any dividend payable to any member all sums of money (if any) presently payable by him to the Company on account of calls or otherwise in relation to shares of the Company. The Directors may retain any dividends payable on shares on which the Company has a lien, and may apply the same in or towards satisfaction of the debts, liabilities or engagements in respect of which the lien exists.

 

Significant agreements: Change of control

 

If there is a no fault termination by the Company of the Management Agreement dated 12 October 2006 (between the Company and Electra Partners) within 24 months of a change of effective control of the Company, 100% of the carried interest which has accrued as at the date of termination will be payable to the members of Electra Partners over three years and any future additional carry on existing investments will vest at 80% and will be paid on the realisation of investments when it becomes due in the ordinary course.

 

 

 

 

By order of the Board of Directors

Frostrow Capital LLP, Company Secretary

25 Southampton Buildings, London WC2A 1AL

5 December 2011

Directors' Remuneration Report

 

The Directors submit this report in accordance with the requirements of Schedule 8 of the Large and Medium sized Companies and Groups (Accounts and Reports) Regulations 2008. An Ordinary Resolution for the approval of this report will be put to members at the forthcoming Annual General Meeting.

 

The law requires the Company's Auditors to audit certain of the disclosures provided. Where disclosures have been audited they are indicated as such.

 

Remuneration and Nomination Committee

 

The Remuneration and Nomination Committee comprises all the non-executive Directors of the Company. The Board considers it appropriate, given the number of non-executive Directors, that all Directors should be members of the Committee.

 

The Committee met three times in the year.

 

On 31 March 2011, Ms L Webber was appointed as Chairman of the Remuneration and Nomination Committee and as Senior Independent Director in place of Mr JP Williams who retired as a Director at the Annual General Meeting in February 2011.

 

The Committee resolved that the role of Senior Independent Director should receive an additional fee of £6,000 per annum, to reflect the increased responsibility and time commitment involved. The Committee resolved at the same time that the additional fee paid to the Chairman of the Remuneration and Nomination Committee should be reduced to £3,000 (previously £6,000). The Committee did not consider it necessary to recommend any other changes to the existing fee arrangements during the year.

 

The basic Director's fee for each Director is £35,000 per annum with an additional fee of £115,000 per annum for the Chairman of the Company. An additional fee of £6,000 per annum is payable to the Chairman of each of the Audit and Valuations Committees and to the Senior Independent Director. Separate additional fees of £3,000 per annum are payable to the Chairman of the Remuneration and Nomination Committee and the non-Chairman members of the Valuations Committee.

 

The Company has no employees.

 

Policy on Directors' Remuneration

 

The Company's policy is that remuneration of non-executive Directors should be fair and sufficient to enable Directors properly to oversee the affairs of the Company and should reflect the specific circumstances of the Company, the duties and responsibilities of the Directors and the value and amount of time committed to the Company's affairs. It is intended that this policy will continue for the year ended 30 September 2012 and subsequent years. Non-executive Directors are not eligible to receive bonuses, pension benefits, share options or other benefits. The Remuneration and Nomination Committee relies mainly on general salary surveys in respect of its consideration of the level of Directors' remuneration. The total remuneration of the Directors is determined by the provisions of the Articles of Association and by shareholders' resolutions.

 

Directors' Service Contracts

 

None of the Directors has a service contract with the Company. No arrangements have been entered into between the Company and the Directors to entitle any of the Directors to compensation for loss of office.

 

Total Shareholder Return

 

The Directors consider that, since the Company invests in a broad range of commercial sectors, the FTSE All-Share Index is the most appropriate index against which to compare the Company's performance.

 

Electra Private Equity Total Shareholder Return versus FTSE All-Share Index

 

Electra's Total Shareholder Return

FTSE All-Share Index

As at 30 September

%

%

2006

100.0

100.0

2007

123.8

110.4

2008

91.0

78.9

2009

90.2

91.5

2010

100.8

105.4

2011

100.3

98.2

 

Directors' Remuneration for the Year (audited)

 

The Directors who served during the year received the following emoluments in the form of salary and fees:

 

30 September
2011
£000

30 September
2010
£000

Dr C Bowe (Highest paid Director)

150

77

RA Armstrong (retired 24 February 2011)

15

38

K Barker (appointed 1 November 2010)

34

-

G Cullinan (appointed 1 January 2011)

29

-

RK Perkin

44

35

MED'A Walton

41

41

L Webber

43

38

JP Williams (retired 24 February 2011)

17

41

Sir Brian Williamson (retired 25 May 2010)

-

120

Total

373

390

 

 

 

 

L Webber, Chairman of the Remuneration and Nomination Committee

Paternoster House

65 St Paul's Churchyard, London EC4M 8AB

5 December 2011

 

Corporate Governance

 

The Board of the Company has considered the principles and recommendations of the AIC Code of Corporate Governance ('AIC Code') by reference to the AIC Corporate Governance Guide for Investment Companies ('AIC Guide') both of which were issued in October 2010. The AIC Code as explained by the AIC Guide, addresses all the principles set out in the UK Corporate Governance Code, which was issued in June 2010, as well as setting out additional principles and recommendations on issues that are of specific relevance to the Company. Copies of the UK Corporate Governance Code can be found on the Financial Reporting Council's website www.frc.org.uk and copies of the AIC Code and the AIC Guide can be found on the website of the Association of Investment Companies www.theaic.co.uk.

 

The Board considers that reporting against the principles and recommendations of the AIC Code and by reference to the AIC Guide (which incorporates the UK Corporate Governance Code), will provide better information to shareholders.

 

The Company has complied with the recommendations of the AIC Code and the relevant provisions of the UK Corporate Governance Code during the year to 30 September 2011 except as set out below.

 

The UK Corporate Governance Code includes provisions relating to the role of the chief executive, executive directors' remuneration and the need for an internal audit function. For the reasons set out in the AIC Guide, and as explained in the UK Corporate Governance Code, the Board considers that these provisions are not relevant to the position of the Company, which is an externally managed investment company. The Company has not, therefore, reported further in respect of these provisions.

 

In addition, the AIC Code includes provisions relating to the annual re-election of Directors of FTSE 350 companies which the Board considers not relevant to the position of the Company as explained further below.

 

The Board of Directors

 

The Board comprised six Directors at 30 September 2011, all of whom were non-executive. The Board appointed Ms K Barker as a non-executive Director on 1 November 2010 and Mr G Cullinan as a non-executive Director on 1 January 2011. The Board nominated Ms L Webber as the Senior Independent Director with effect from 31 March 2011 in place of Mr JP Williams who retired from the Board at the Annual General Meeting in February 2011. The Directors' terms of appointment are available for inspection on request.

 

It is the responsibility of the Board to ensure that there is effective stewardship of the Company's affairs. The Board has agreed a schedule of matters reserved for its specific approval, which includes a regular review of the Company's management arrangements with Electra Partners.

 

Management agreements between the Company and Electra Partners set out the matters for which Electra Partners is responsible and those over which Electra Partners has authority in accordance with the policies and directions of the Board. Regular Board meetings are held to consider, as appropriate, such matters as overall strategy, investment performance, gearing, share price performance, share price discount, the shareholder profile of the Company and communication with shareholders. The Chairman is responsible for setting the Board's agenda and ensuring that adequate time is available for discussion on all agenda items, in particular strategic issues. The Board considers that it meets sufficiently regularly to discharge its duties effectively.

 

The numbers of meetings of the Board and Committees of the Board held during the year and the attendance of the individual Directors at those meetings is shown in the table below. All the Directors attended the 2011 Annual General Meeting.

 

Directors' Attendance at Meetings of the Board and Committees of the Board

 

Board

Audit
Committee

Remuneration and Nomination Committee

Valuations Committee

Number of Meetings

14

4

3

2

Dr C Bowe *

14

-

3

-

RA Armstrong **

5

2

1

-

K Barker ***

11

3

2

1

G Cullinan ***

7

2

1

1

RK Perkin

13

4

3

2

MED'A Walton

14

4

3

2

L Webber

12

4

2

2

JP Williams**

6

2

1

-

 

*          Dr Bowe is not a member of the Audit or Valuation Committees.

**         Mr RA Armstrong and Mr JP Williams were not members of the Valuations Committee. They retired from the Board on 24 February 2011.

***       Ms Barker and Mr Cullinan were appointed to the Board during the year.

 

                                                               

The Board receives information that it considers to be sufficient and appropriate to enable it to discharge its duties. Directors receive board papers several days in advance of Board meetings and are able to consider in detail the Company's performance and any issues to be discussed at the relevant meeting.

 

The Directors believe that the Board has an appropriate balance of skills and experience, independence and knowledge of the Company to enable it to provide effective strategic leadership and proper governance of the Company. Information about the Directors, including their relevant experience can be found on page 82.

 

Independence of the Board

 

Mr Walton has served on the Board for more than nine years. Dr Bowe and Mr Perkin were non-executive Directors of Electra Private Equity Investments PLC throughout the year and Mr Walton was appointed as a non-executive Director of Electra Private Equity Investments PLC on 31 March 2011. Electra Private Equity Investments PLC is a wholly-owned subsidiary of Electra which was established solely for the purpose of issuing and redeeming Zero Dividend Preference shares.

 

The Board has carefully considered the independence of each Director under the provisions of the AIC Code and, notwithstanding Mr Walton's length of service and the cross-directorships detailed above, has concluded that each Director is wholly independent on the basis that the Board firmly believes that independence is a state of mind and the character and judgement which accompany this are distinct from and are not compromised by length of service. Mr Walton is the only Director who has been in office for more than nine years and he submits himself for annual re-election by shareholders.

 

The Board carried out a formal appraisal process of its own operations and performance and those of its Committees during the year. This was implemented by means of questionnaires circulated to the Directors, the results of which were then reviewed by the Board. Issues covered included Board composition, meeting arrangements and communication. The process was considered by the Board to be constructive in identifying areas for improving the functioning and performance of the Board and of its Committees. The Board concluded that its performance and that of its Committees was satisfactory.

 

The Board proposes to commission an externally-facilitated evaluation of its operations and performance and those of its Committees in early 2012.

 

The Chairman carried out a formal appraisal of each of the Directors during the year and the Board, under the leadership of the Senior Independent Director, similarly appraised the Chairman. Relevant matters considered included the attendance and participation at Board and Committee meetings, commitment to Board activities and the effectiveness of the contribution made by the relevant Director. As a result of this process, the Chairman has confirmed that each of the Directors being proposed for re-election continues to be effective and that each of them continues to show commitment to his role. The Senior Independent Director has also confirmed the continuing effectiveness and commitment of the Chairman.

 

Directors' Terms of Appointment

 

It is the Board's policy that Directors shall retire and be subject to appointment by shareholders at the first Annual General Meeting following their appointment by the Board and be subject to re-election at least every third year thereafter. Directors who have served for more than nine years and who wish to continue in office are required to submit themselves for re-election annually. The Board does not believe that length of service disqualifies a Director from seeking re-election.

 

The AIC Code's provisions on re-election of Directors state that all Directors of FTSE 350 companies should be subject to annual re-election by shareholders. Whilst the Company is a constituent of the FTSE 350, the Board does not consider it to be in the interests of shareholders that all Directors should be re-elected annually. A number of shareholders in the Company have supported this view on the basis that annual re-election could engender a short term culture.

 

Therefore the Company did not introduce annual re-election of Directors at the Annual General Meeting held in 2011 and at future Annual General Meetings it will continue to comply with the requirements of the Company's Articles and the Board's policy on Directors' Terms of Appointment in relation to the re-election of Directors.

 

Re-election of Directors

 

In accordance with the Company's Articles and the Board's policy on Directors' Terms of Appointment, Mr Perkin and Mr Walton will retire at the Annual General Meeting to be held in 2012 and each offers himself for re-election. Mr Cullinan will offer himself for election at the Annual General Meeting to be held in 2012. Biographical details of the Directors seeking election or re-election are set out on page 82.

 

Independent Professional Advice

 

Individual Directors may seek independent professional advice in furtherance of their duties at the Company's expense within certain parameters. All Directors have access to the advice and services of the Company Secretary.

 

Company Secretary

 

Frostrow Capital LLP acted as the independent Company Secretary in addition to its role as Board Advisor during the year under review.

 

The Audit Committee

 

The Board is supported by the Audit Committee which comprised all the Directors during the year, other than the Chairman of the Board, Dr Bowe. Mr Perkin is Chairman of the Committee. The Board has taken note of the suggestion that at least one member of the Committee should have recent and relevant financial experience and is satisfied that the Committee is properly constituted in this respect. Its authority and duties are clearly defined in its written terms of reference which are available on the Company's website.

 

The Committee's responsibilities include:

 

·      monitoring and reviewing the integrity of the financial statements, the internal financial controls and the independence, objectivity and effectiveness of the external auditors;

·      making recommendations to the Board in relation to the appointment of the external auditors and approving their remuneration and terms of their engagement;

·      developing and implementing the Company's policy on the provision of non-audit services by the external auditors;

·      reviewing the arrangements in place within Electra Partners whereby their staff may, in confidence, raise concerns about possible improprieties in matters of financial reporting or other matters insofar as they may affect the Company; and

·      considering annually whether there is a need for the Company to have its own internal audit function.

 

The Committee met four times during the year under review. The main matters discussed at those meetings were:

 

·      review and approval of the annual plan of the external auditors;

·      discussion and approval of the fee for the external audit;

·      detailed review of the Annual and Half Year Report and Accounts and recommendation for approval by the Board;

·      discussion of reports from the external auditors following their audit;

·      assessment of the effectiveness of the external audit process as described below;

·      review of the Company's key risks and internal controls;

·      review of Electra Partners' Business Continuity Plan and IT Disaster Recovery Plan.

·      review of the accounting for the 5% Subordinated Convertible Bonds;

·      discussion of the impact on the Company of changes to Auditing Standards;

·      consideration of the new AIC Code of Corporate Governance and the UK Stewardship Code and the impact of these on the Company; and

·      consideration of ways of improving the format of the Report and Accounts.

 

 

The Committee annually reviews the performance of PricewaterhouseCoopers LLP, the Company's external auditors. In doing so the Committee considers a range of factors including the quality of service, the auditors' specialist expertise and the level of audit fee. The Committee remains satisfied with their effectiveness and therefore has not considered it necessary, to date, to require the auditors to tender for the audit work. The auditors are required to rotate the audit partner every five years: the current partner has been in place for five years and a new audit partner will be responsible for the audit with effect from the 2012 Report and Accounts. There are no contractual obligations restricting the choice of external auditor. Under Company Law the reappointment of the external auditor is subject to shareholder approval at the Annual General Meeting.

 

The Committee has reviewed the provision of non-audit services and believes them to be cost-effective and not an impediment to the external auditors' objectivity and independence. The non-audit services include the provision of taxation advice. It has been agreed that all non-audit work to be carried out by the external auditors must be approved by the Committee and that any special projects must be approved in advance.

 

Following the review carried out by the Committee as to whether there is a need for the Company to have its own internal audit function, the Board has considered and continues to believe that the internal control systems in place within Electra Partners and the internal control reports provided by it give sufficient assurance that a sound system of internal control, which safeguards shareholders' investment and the Company's assets, is maintained. In addition, the work of the external auditors is extended to include supplementary testing of certain of Electra Partners' internal controls. An internal audit function, specific to the Company, is therefore considered unnecessary.

 

The Remuneration and Nomination Committee

 

The Remuneration and Nomination Committee comprises all the Directors of the Company, all of whom are considered to be independent. The Board considers it appropriate, given the number of Directors, that all Directors should comprise the Committee. Ms Webber was appointed as Chairman of the Committee in March 2011, in place of Mr Williams who retired at the Annual General Meeting in February 2011.

 

The Committee met three times in the year under review, to consider the appointments of Ms Barker and Mr Cullinan as Directors and the appointment of Ms Webber as Chairman of the Committee and Senior Independent Director. During the year the Committee engaged the services of an external search consultant in relation to the appointment of the additional Directors.

 

The Committee's duties in relation to remuneration, include determining and agreeing with the Board the policy for the remuneration of the Directors. The Committee's duties in relation to nomination include identifying and nominating, for the approval of the Board, candidates to fill Board vacancies on merit and against objective criteria and with due regard for the benefits of diversity on the Board including gender. The Committee has written terms of reference which are available on the Company's website.

 

The Valuations Committee

 

The Valuations Committee adds a further level of oversight to the valuation process carried out by Electra Partners under its contractual arrangements with the Company. The Valuations Committee is chaired by Mr Walton. Ms Webber and Mr Perkin were members of the Committee throughout the year. Ms Barker and Mr Cullinan were appointed as members of the Committee during the year.

 

Management Engagement Committee

 

A Management Engagement Committee was established in 2011. The Committee is chaired by Mr Cullinan and comprises Ms Barker and Ms Webber. The Committee has written terms of reference which are available on the Company's website.

 

The Committee's duties are to review the terms of the management contract to ensure that they are competitive and sensible for shareholders by satisfying itself that the investment management of the Company's portfolio is in accordance with the Investment Policy; satisfying itself that all other duties of the Manager are being performed; reviewing the overall performance of the Manager; and deciding, at the intervals prescribed by the Management Agreement, on the continuation or termination of the agreement and by agreeing the terms and fees of any ongoing agreement.

 

The Committee met in October 2011 to agree its terms of reference and to review the performance of the Manager.

 

Induction and Training

 

New Directors are provided with an induction programme which is tailored to the particular circumstances of the appointee and which includes being briefed fully about the Company by the Chairman, senior executives of Electra Partners and the Company Secretary. Following appointment, the Chairman regularly reviews and agrees with Directors their training and development needs as necessary to enable them to discharge their duties.

 

The Company's Relationship with its Shareholders

 

The Company places great importance on communication with its shareholders. The Company, in conjunction with Electra Partners, endeavours to provide the fullest information on the Company to its shareholders, maintaining a regular dialogue with institutional shareholders and City analysts, as well as making a number of presentations and visits throughout the year. Meetings are held with principal shareholders to discuss relevant issues as they arise.

 

At the Annual General Meeting all shareholders are welcome to attend and have the opportunity to put questions to the Board and hear a presentation from Electra Partners covering the investment performance during the last financial year.

 

The notice of the Annual General Meeting and related papers are sent to shareholders at least 20 working days before the meeting. A separate resolution is proposed on each substantially separate issue including receipt of the annual report and accounts. All proxy votes are counted and, except where a poll is called, the level of proxies lodged for each resolution is announced at the Meeting and is published on the Company's website. The Chairmen of the Audit, Remuneration and Nomination, Valuations and Management Engagement Committees are normally available to answer questions at the Annual General Meeting each year.

 

The Chairman and the Senior Independent Director can be contacted either through the Company Secretary, Frostrow Capital LLP, at 25 Southampton Buildings, London WC2A 1AL or at the Company's registered office at Paternoster House, 65 St Paul's Churchyard, London EC4M 8AB.

 

Internal Control

 

The Board confirms that it has an ongoing process for identifying, evaluating and managing the significant risks faced by the Company. This process has been in place throughout the year and has continued since the year end. It is reviewed at regular intervals by the Board.

 

The Board is responsible for the Company's system of internal control and has reviewed its effectiveness for the year ended 30 September 2011. This review encompasses all controls including financial, operational and compliance controls and risk management. The system of internal control is designed to manage, rather than eliminate, the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss.

 

The Company's consolidated annual financial statements, along with the half-yearly financial statements and interim management statements are prepared in accordance with applicable regulatory requirements.

 

Since investment management, custody of assets and many administrative services are provided or arranged for the Company by Electra Partners, the Company's system of internal control mainly comprises the monitoring of the services provided by Electra Partners, including the operating controls established by them to ensure they meet the Company's business objectives. As part of this process Electra Partners is responsible for submitting performance statistics, investment valuations and management accounts to the Board. The key elements designed to provide effective internal control are as follows:

 

·      Financial Reporting - regular and comprehensive review by the Board of key investment and financial data, including management accounts, revenue projections, analyses of transactions and performance comparisons.

·      Investment Strategy - regular review by the Board of the Company's Objective and Investment Policy, including commitments to new funds.

·      Management Agreements and Investment Performance - the Board regularly monitors the performance of Electra Partners to ensure that the Company's assets and affairs are managed in accordance with the Company's Objective and Investment Policy.

 

The Board keeps under review the effectiveness of the Company's system of internal control by monitoring the operation of the key controls of Electra Partners as follows:

 

·      The Board reviews the terms of the management agreements and receives regular reports from Electra Partners executives.

·      The Board reviews the certificates verifying compliance with documented controls provided by Electra Partners on a six monthly basis.

 

Voting Policy

 

Under the investment management arrangements Electra Partners has complete discretion in relation to all voting issues in respect of the Company's investments.

 

Electra Partners has adopted the UK Stewardship Code and has made disclosures regarding its policies on stewardship on its website www.electrapartners.com. Electra Partners' policies on stewardship have been reviewed and endorsed by the Board.

 

Other Information in the Report of the Directors

 

Other information regarding voting rights of shares, restrictions on voting, deadlines for exercising voting rights, appointment and replacement of Directors, powers of Directors, authority to make market purchases of shares, substantial interests in the Company's shares and details concerning alteration of the Articles of Association of the Company is contained in the Report of the Directors. 

 

 

 

Statement of Directors' Responsibilities

 

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 and Parent Company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for the period. In preparing those financial statements, the Directors are required to:

 

·      select suitable accounting policies and then apply them consistently;

·      make judgements and estimates that are reasonable and prudent;

·      state whether applicable IFRSs as adopted by the European Union have been followed subject to any material departures disclosed and explained in the financial statements;

·      prepare the financial statements on the going concern basis, unless it is inappropriate to presume that the Company will continue in business.

 

The financial statements are published on www.electraequity.com, which is a website maintained by Electra Partners. The maintenance and integrity of the website is, so far as it relates to the Company, the responsibility of Electra Partners. The work carried out by the Auditors does not involve consideration of the maintenance and integrity of this website and, accordingly, the Auditors accept no responsibility for any changes that have occurred to the financial statements since they were initially presented on the website. Visitors to the website need to be aware that legislation in the United Kingdom governing the preparation and dissemination of the financial statements may differ from legislation in other jurisdictions.

 

The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and 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, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

 

Each of the Directors, whose names and functions are listed in the Board of Directors section of the Annual Report confirms that, to the best of their knowledge:

 

·      the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and

·      the Report of the Directors' contained in the Reports section of the Annual Report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces;

·      so far as the Director is aware, there is no relevant audit information of which the Company's auditors are unaware; and

·      they have taken all the steps that they ought to have taken as a Director in order to make themselves aware of any relevant audit information to establish that the Company's Auditors are aware of that information.

 

 

 

 

By order of the Board of Directors

Dr Colette Bowe, Chairman, Paternoster House

65 St Paul's Churchyard, London EC4M 8AB

5 December 2011

Board of Directors

 

Colette Bowe (Chairman)

 

An economist by profession, Dr Bowe has worked in Whitehall, City regulation and the fund management industry. She is currently Chairman of the Ofcom board, a board member of the UK Statistics Authority and a member of the supervisory board of AXA Investment Managers Deutschland GmbH.

 

Dr Bowe was appointed a Director in 2007 and as Chairman in May 2010.

 

Kate Barker

 

Ms Barker is a non executive director of Taylor Wimpey PLC and the Yorkshire Building Society, a non-executive member of the Office for Budget Responsibility and a senior adviser to Credit Suisse. She was, until May 2010, a member of the Monetary Policy Committee of the Bank of England, on which she served for three terms, and has held a range of other senior positions, including chief economic adviser to the Confederation of British Industry from 1994 to 2001.

 

Ms Barker was appointed a Director in November 2010.

 

Geoffrey Cullinan

 

Mr Cullinan was a Director of Bain & Company from 1997 to 2005. He was the founder and leader of their private equity business in Europe and continues to be an Adviser to Bain. He was formerly Chief Executive of Hamleys plc (1996) and senior non executive director of Datamonitor plc (1994 to 2002). Prior to that he was the managing partner of OC&C Strategy Consultants, which he co-founded in 1986.

 

Mr Cullinan was appointed a Director in January 2011. He is Chairman of the Management Engagement Committee.

 

Roger Perkin

 

Mr Perkin is a former senior partner at Ernst & Young with extensive global accounting experience and financial services expertise. He spent 40 years at Ernst & Young and its predecessor firms, including over 30 years as a Partner, working with a wide range of clients before specialising in financial services. He is a director of Nationwide Building Society and The Evolution Group Plc.

 

Mr Perkin was appointed a Director in 2009. Mr Perkin is Chairman of the Audit Committee.

 

Michael Walton

 

Mr Walton has over 35 years of experience in the private equity industry, having joined the Electra House Group in 1972, with responsibility for unlisted investments. He was a Director of the Company from 1981 to 1986. Subsequently, Mr Walton was Managing Director of Gartmore Private Capital and a Director of NatWest Ventures and Bridgepoint Capital. He has served on the Council of the British Venture Capital Association.

 

Mr Walton was most recently appointed as a Director in 2000. He is Chairman of the Valuations Committee.

 

Lucinda Webber

 

Ms Webber has over 25 years of experience in the private equity industry, having joined Barclays Development Capital Limited from Barclays Merchant Bank in 1984. She became a director of Barclays Development Capital Limited (now Barclays Private Equity) and Barclays Capital Dévéloppement in 1990. In 1997 she moved to working part-time as a director for Barclays Private Equity and Barclays

Capital Dévéloppement and from 1999, worked as a consultant in private equity.

 

Ms Webber was appointed a Director in 2007. She was appointed as Chairman of the Remuneration and Nomination Committee and the Senior Independent Director in March 2011.

 

Notes:

 

All Directors are members of the Remuneration and Nomination Committee.

 

All Directors apart from the Chairman are members of the Audit Committee and the Valuations Committee.

 

Mr Cullinan, Ms Barker and Ms Webber are members of the Management Engagement Committee.

 

Dr Bowe, Mr Perkin and Mr Walton are Directors of the Company's wholly owned subsidiary Electra Private Equity Investments PLC.

 

Information for Shareholders

 

Financial Calendar

 

Annual General Meeting

23 February 2012

Interim Management Statement to December 2011

January/February 2012

Half-year Results announced

May 2012

Interim Management Statement to June 2012

July/August 2012

Annual Results announced

November/December 2012

 

Electra News via Email

 

If you would like to receive notice of announcements or shareholder communications, please visit our website at www.electraequity.com and click on the "Register for Email Alerts" logo in the top right hand corner. Registering for email alerts will not stop you receiving annual reports or any other documents you are entitled to through the post.

 

Trading Information - Ordinary shares

 

Listing                                    London Stock Exchange

ISIN                                        GB0003085445

SEDOL                                  0308544

Ticker/EPIC code                 ELTA

Bloomberg                            ELTALN

Reuters                                 ELTAL

 

Trading Information - Convertible Bond

 

Listing                                    London Stock Exchange

ISIN                                        GB00B5B0NW64

SEDOL                                  B5B0NW6

Ticker/EPIC code                 ELTC

Bloomberg                            ELTALN5 12/29/2017 Corp

 

Analysis of Ordinary Shareholders as at 30 September 2011 taken from the Company's Share Register held by Equiniti Limited

 

Party type

No of shareholders

Holders within type
%

No of shares

Issued capital
%

Nominee

725

18.34%

32,477,441

91.90%

Individuals

3,134

79.28%

2,331,586

6.60%

Public Limited Company

1

0.02%

1

0.00%

Limited Company

45

1.14%

308,588

0.87%

Other Organisation

44

1.12%

208,196

0.59%

Bank

2

0.05%

12,753

0.04%

Pension Fund

2

0.05%

1,826

0.00%

Total

3,953

100.00%

35,340,391

100.00%

 

Convertible Bond

 

What is a Convertible Bond?

 

A convertible bond is a tradable debt that can be converted into a predetermined amount of the company's equity during its life.

In the case of Electra, £100 million of Convertible Bonds were raised in December 2010. Each bond was priced at £1,000 per bond and generates 5% interest per annum payable semi-annually in equal instalments in arrears on 29 June and 29 December in accordance with the terms of the Prospectus.

Bondholders can convert their bonds into Electra shares at any time within the life of the bond (expires 2017) in accordance with the terms of the Prospectus. The conversion price in effect immediately upon issue of the bonds is 2,050p. The Convertible Bond is listed on the London Stock Exchange and can be traded like other listed securities.

In the unlikely event of Electra winding up, the Bondholders would rank above the ordinary shareholders in terms of being entitled to the capital of Electra.

 

Why did you raise this money through Convertible Bonds?

 

The Convertible Bond was raised for two reasons. Firstly, to diversify the sources and maturity of our borrowing. Secondly, the Board of Electra believed that there would be a need for flexible capital to help mid-market businesses grow and profit from opportunities in their respective markets. The Bond expanded Electra's capital base and has provided Electra with the necessary firepower to take advantage of these investment opportunities.

 

For further information please visit our website www.electraequity.com/convertible.

 

Registrar

 

The Company's ordinary share register is maintained on behalf of the Company by Equiniti Limited.

 

Ordinary Shareholders who have enquiries concerning their registered holdings, including balance queries, assistance with lost certificates and change of address notifications should contact Equiniti Limited, whose full details are provided on page 91.

 

Warning to Shareholders - 'Boiler Room' Scams

 

Many companies have become aware that their shareholders have received unsolicited phone calls or correspondence concerning investment matters. These are typically from overseas based 'brokers' who target UK shareholders, offering to sell them what often turn out to be worthless or high risk shares in US or UK investments. These operations are commonly known as 'boiler rooms'. These 'brokers' can be very persistent and extremely persuasive, and a 2006 survey by the Financial Services Authority (FSA) reported that the average amount lost by investors is around £20,000.

 

It is not just the novice investor that has been duped in this way. Many of the victims had been successfully investing for several years. Shareholders are advised to be very wary of any unsolicited advice, offers to buy shares at a discount or offers of free company reports. If you receive any unsolicited investment advice:

 

·      Make sure you get the correct name of the person and organisation

·      Check that they are properly authorised by the FSA before getting involved by visiting www.fsa.gov.uk/register

·      Report the matter to the FSA by calling 0845 606 1234

·      If the calls persist, hang up.

 

If you deal with an unauthorised firm, you will not be eligible to receive payment under the Financial Services Compensation Scheme.

 

Other Useful Websites

 

LPEQ

 

Electra is a founder member of LPEQ (formerly iPEIT), a group of private equity investment trusts and similar vehicles listed on the London Stock Exchange and other major European stock markets, formed to raise awareness and increase understanding of listed private equity.

 

LPEQ provides information on private equity in general, and the listed sector in particular, undertaking and publishing research and working to improve levels of knowledge about private equity among investors and their advisers.

 

For further information visit www.lpeq.com.

 

Association of Investment Companies (AIC)

 

Electra is a member of the AIC, the trade organisation for the closed-ended investment companies. The AIC represents a broad range of closed-ended investment companies, including investment trusts, offshore investment companies and venture capital trusts which are traded on the London Stock Exchange, Alternative Investment Market, Special Financials Market, Euronext and the Channel Islands Stock Exchange.

 

For further information visit www.theaic.co.uk.

 

Ten Year Record

 

Ten Year Record of Net Assets, Share Price and Earnings

 

As at 30 Sept

Net Assets

Diluted Net Asset Value per share

Diluted earnings per share

Basic earnings per share

Dividends paid per share

1
Share price as at
5 April per share

1
Share price as at 30 Sept per share


£'000

p

p

p

p

p

p

2002

498,330

763.94

 -

(8.95)

-

637

462.5

2003

495,498

759.6

 -

(2.55)

-

522

633.5

2004

2 426,723

912.86

 -

5.70

-

747.5

793.5

2005

3 520,883

1,197.22

 -

64.09

-

931

1,113.00

2006

4 598,292

1,545.07

 -

20.58

5 20.00

1,326.00

1,371.00

2007

6 745,506

2,001.21

 -

24.60

7 17.00

1,605.00

1,680.00

2008

8 640,949

1,800.64

-

(13.98)

9 25.00

1,570.00

1,235.00

2009

10 607,953

1,720.36

 -

34.05

-

632.5

1,224.00

2010

724,531

2,050.25

 -

4.41

 -

1,361.00

1,368.00

2011

821,492

2,224.78

23.00

11.90

-

1,414.00

1,360.00

 

Notes

The net asset value per share for the years 2002 to 2004 above are as previously reported under UKGAAP. 2005 to 2011 have been prepared on an IFRS basis as explained in the Basis of Accounting.

 

1. Middle market price at close of business on 5 April or 30 September or, if appropriate, previous business day in each case.

2. During the year ended 30 September 2004 £100,000,000 was repaid to shareholders via a tender offer and 6,232,000 shares were repurchased for cancellation (cost: £48,082,000).

3. During the year ended 30 September 2005 3,238,000 shares were repurchased for cancellation (cost:£29,677,000).

4. During the year ended 30 September 2006 4,785,000 shares were repurchased for cancellation (cost: £64,257,000).

5. Includes special dividend of 20.00p per share paid in March 2006.

6. During the year ended 30 September 2007 1,470,000 shares were repurchased for cancellation (cost: £22,304,000).

7. Includes special dividend of 17.00p per share paid in March 2007.

8. During the year ended 30 September 2008 1,657,000 shares were repurchased for cancellation (cost: £26,492,000).

9. Includes special dividend of 25.00p per share paid in March 2008.

10. During the year ended 30 September 2009 257,000 shares were repurchased for cancellation (cost: £2,096,000).

 

Notice of Annual General Meeting

 

Notice is hereby given that the seventy-seventh Annual General Meeting of Electra Private Equity PLC will be held at 12.00 noon on Thursday 23 February 2012 in The Great Hall at The Saddlers' Hall, 40 Gutter Lane, London EC2V 6BR for the following purposes:

 

Ordinary Business

 

1.     To receive the reports of the Directors and Auditors and the Group Accounts for the year ended 30 September 2011.

 

2.     To approve the Directors' Remuneration Report for the year ended 30 September 2011 which is set out in the Annual Report and Accounts of the Company for the year ended 30 September 2011.

 

3.     To elect Mr G Cullinan as a Director of the Company.

 

4.     To re-elect Mr RK Perkin as a Director of the Company.

 

5.     To re-elect Mr MED'A Walton as a Director of the Company.

 

6.     To re-appoint PricewaterhouseCoopers LLP as Auditors of the Company to hold office until the conclusion of the next general meeting at which accounts are laid before the Company.

 

7.     To authorise the Directors to fix the remuneration of the Auditors.

 

Special Business

 

As Special Business, to consider and, if thought fit, to pass the following Resolution as a Special Resolution:

 

8.     Special resolution to renew share buyback authority:

 

That the Company be and is hereby generally and unconditionally authorised in accordance with Section 701 of the Companies Act 2006 to make market purchases (within the meaning of Section 693(4) of the said Act) of ordinary shares of 25 pence each, provided that:

 

(i)    the maximum number of ordinary shares hereby authorised to be purchased is 5,297,524 or such number of shares as is equal to 14.99 per cent of the total number of ordinary shares in issue as at the date of the passing of this resolution;

 

(ii)   the minimum price which may be paid for an ordinary share shall be 25 pence;

 

(iii)  the maximum price, exclusive of any expenses, which may be paid for an ordinary share shall be an amount equal to 105 per cent of the average of the middle market quotations for an ordinary share taken from and calculated by reference to the London Stock Exchange Daily Official List for the five business days immediately preceding the day on which the ordinary share is purchased;

 

(iv)   any purchase of ordinary shares will be made in the market for cash at prices below the prevailing net asset value per ordinary share (as determined by the Directors); and

 

(v)    unless renewed, the authority hereby conferred shall expire on the earlier of 23 May 2013 or the conclusion of the Company's Annual General Meeting in 2013 save that the Company may, prior to such expiry, enter into a contract to purchase ordinary shares which will or may be completed or executed wholly or partly after such expiry.

 

 

 

 

By order of the Board of Directors

Frostrow Capital LLP, Company Secretary, 25 Southampton Buildings, London WC2A 1AL

5 December 2011

 

Notes

 

1

Members of the Company who are entitled to attend and vote at the Meeting are entitled to appoint one or more proxies to exercise all or any of their rights to attend and to speak and vote at the Meeting. A member may appoint more than one proxy in relation to the Meeting provided that each proxy is appointed to exercise the rights attached to a different share or shares held by that member. A proxy need not be a member of the Company.

 

2

A member may vote at the Annual General Meeting subject to being on the Register of Members as at 6pm on 21 February 2012.

 

3

A Form of Proxy is enclosed. To be effective, the Form of Proxy and any power of attorney under which it is executed (or a duly certified copy of any such power) must reach the Company's Registrars, Equiniti Limited, Aspect House, Spencer Road, Lancing, BN99 6GJ, not less than 48 hours before the time of the Meeting or adjourned Meeting or (in the case of a poll taken otherwise than at or on the same day as the Meeting or adjourned Meeting) for the taking of the poll at which it is to be used. Completion and return of the Form of Proxy will not prevent a member from attending and voting at the Meeting. Replacement forms of proxy may be obtained from the Company's Registrar.

 

4

In accordance with Regulation 41 of the Uncertificated Securities Regulations 2001, only those holders of ordinary shares entered on the Register of Members of the Company as at 6.00 pm on 21 February 2012 ("the Specified Time") shall be entitled to attend and vote at the Meeting in respect of the number of ordinary shares registered in their name at that time. Changes to entries on the register of members after the Specified Time shall be disregarded in determining the rights of any person to attend and vote at the Meeting. If the Meeting is adjourned to a time not more than 48 hours after the Specified Time applicable to the original Meeting, that time will also apply for the purposes of determining the entitlement of members to attend and vote (and for the purposes of determining the number of votes they may cast) at the adjourned Meeting. If, however, the Meeting is adjourned for a longer period, then to be so entitled, members must be entered on the Company's register of members at a time which is not more than 48 hours before the time fixed for the adjourned Meeting or, if the Company gives notice of the adjourned Meeting, at the time specified in that notice.

 

5

CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so for the Annual General Meeting to be held on 23 February 2012 and any adjournment(s) thereof by using the procedures described in the CREST Manual. CREST personal members or other CREST sponsored members, and those CREST members who have appointed a voting service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf. For a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a CREST Proxy Instruction) must be properly authenticated in accordance with CREST specifications and must contain the information required for such instructions, as described in the CREST Manual. The message, regardless of whether it constitutes the appointment of a proxy or an amendment to the instruction given to a previously appointed proxy must, in order to be valid, be transmitted so as to be received by the issuer's agent (ID RA19) by the latest time for receipt of proxy appointments specified in the notice of meeting. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST Applications Host) from which the issuer's agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time, any change of instructions to proxies appointed through CREST should be communicated to the appointee through other means. CREST members and, where applicable, their CREST sponsors or voting service providers should note that Euroclear UK & Ireland Limited does not make available special procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member or sponsored member or has appointed a voting service provider(s), to procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting service providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings (www.euroclear.com/CREST). The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001.

 

 

6

The right to appoint a proxy does not apply to persons whose shares are held on their behalf by another person and who have been nominated to receive communications from the Company in accordance with Section 146 of the Companies Act 2006 ("nominated persons"). Nominated persons may have a right under an agreement with the member who holds the shares on their behalf to be appointed (or to have someone else appointed) as a proxy. Alternatively, if nominated persons do not have such a right, or do not wish to exercise it, they may have a right under such an agreement to give instructions to the person holding the shares as to the exercise of voting rights.

 

7

Shareholders are entitled to attend and vote at general meetings of the Company. On a vote by show of hands, every member and every duly appointed proxy who is present in person shall have one vote. On a poll vote, every member who is present in person or by proxy shall have one vote for every share of which he is the holder.

 

8

Any corporation which is a member can appoint one or more corporate representatives who may exercise on its behalf all of its powers as a member provided that they do not do so in relation to the same shares. A member that is a company may appoint either a proxy or a corporate representative. Members wishing to appoint a corporate representative should examine the Company's Articles of Association and the provisions of the Companies Act 2006.

 

9

Under Regulation 12, Section 319A of the Shareholder Rights Directive, the Company must answer any question relating to the business being dealt with at the Meeting put by a member at the Meeting. However, the Company need not answer if a) to do so would interfere unduly with the preparation for the Meeting or b) to answer would involve the disclosure of confidential information or c) the answer has already been given on a website in the form of an answer to a question or d) it is undesirable in the interests of the Company or the good order of the Meeting that the question be answered.

 

10

Information about the Annual General Meeting is published on www.electraequity.com.

 

11

The following documents will be available for inspection at the registered office of the Company during usual business hours on any weekday (Saturdays and public holidays excepted) from the date of this Notice until the close of the Annual General Meeting, and will be available at the place of the Annual General Meeting from 11.45 am until the conclusion of the Meeting:

 

(a) the current Articles of Association of the Company; and

 

(b) the terms and conditions of appointment of all Directors

 

No Director has a service contract with the Company.

 

12

Short biographical details regarding Mr Cullinan, Mr Perkin and Mr Walton are contained on page 82.

 

13

The total number of issued ordinary shares/voting rights in the Company on 30 November 2011, which is the latest practicable date before the publication of this document, is 35,340,391.

 

14

Shareholders may require the Company to place on its website a statement, made available also to the Company's auditors, setting out any matter relating to the audit of the Company's accounts, including the Auditor's Report and the conduct of the audit, which shareholders intend to raise at the Annual General Meeting. The Company becomes required to place such a statement on the website once a) members with at least 5% of the total voting rights of the Company or b) at least 100 members who are entitled to vote and on whose shares an average sum per member of at least £100 has been paid have submitted such a request to the Company. Members seeking to do this should write to the Company providing their full name and address.

 

15

You may not use any electronic address provided either in this Notice of Meeting or any related documents (including the Form of Proxy) to communicate with the Company for any purposes other than those expressly stated.

 

If you have sold or otherwise transferred all your shares in Electra Private Equity PLC, you should pass this document and other relevant accompanying documents (other than any personalised form of proxy) to the purchaser or transferee or to the stockbroker, bank or other agent through whom the sale transfer was made for transmission to the purchaser or transferee.

 

Contact Details

 

Board of Directors

Colette Bowe  Chairman

Kate Barker

Geoffrey Cullinan

Roger Perkin

Michael Walton

Lucinda Webber

Telephone +44 (0)20 7214 4200

www.electraequity.com

 

Secretary

Frostrow Capital LLP

25 Southampton Buildings

London WC2A 1AL

Telephone +44 (0)20 3008 4910

 

Registered Office

Paternoster House

65 St Paul's Churchyard

London EC4M 8AB

 

Company number

303062

 

Manager

Electra Partners LLP

Paternoster House

65 St Paul's Churchyard

London EC4M 8AB

Telephone +44 (0)20 7214 4200

www.electrapartners.com

 

Investor Relations

Monique Dumas

Telephone +44 (0)20 7214 4200

 

Registered Independent Auditors

PricewaterhouseCoopers LLP

Chartered Accountants &

Statutory Auditors

7 More London Riverside

London SE1 2RT

 

Stockbroker

JPMorgan Cazenove

 

Financial Advisor

Evercore Partners

10 Hill Street

London W1J 5NQ

 

Registrar and Transfer Office

Equiniti Limited

Aspect House

Spencer Road

Lancing

West Sussex BN99 6DA

Telephone (UK) 0871 384 2351 *

Textel/Hard of hearing line (UK) 0871 384 2255 *

Telephone (Overseas) +44 121 415 7047

 

* Calls to these numbers are charged at 8p per minute from a BT landline. Other telephony providers' costs may vary.

The Annual Report and Financial Statements will be available on the Company's website www.electraequity.com shortly. Neither the contents of this website nor the contents of any website accessible from hyperlinks on this website (or any other website) is incorporated into, or forms part of this announcement.

 

The financial information set out above does not constitute the Company's statutory financial statements for the year ended 30 September 2011. The financial information for 2010 is derived from the statutory financial statements which have been delivered to the Registrar and included the Auditors' Report which was unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006. The statutory financial statements for 2011 will be finalised on the basis of the financial information presented in this announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

 

 

 


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