PCTZ Picton Zdp

28 June 2016

PICTON ZDP LIMITED

ANNUAL RESULTS

(THE “COMPANY”)

Picton ZDP Limited (LSE: PCTZ) announces its results for the year ended 31 March 2016.

The Company’s principal objective is to provide Zero Dividend Preference Shares with a predetermined final capital entitlement. It is recommended that these accounts are read in conjunction with those of its parent, Picton Property Income Limited, also issued today.

For further information:

Tavistock
Jeremy Carey/James Verstringhe, 020 7920 3150, jverstringhe@tavistock.co.uk

Picton Capital Limited
Michael Morris, 020 7011 9980, michael.morris@picton.co.uk

The Company Secretary
Northern Trust International Fund Administration Services (Guernsey) Limited
Trafalgar Court
Les Banques
St Peter Port
Guernsey
GY1 3QL

Katie Le Page, 01481 745 001, team_picton@ntrs.com

Directors’ report

The Directors present their report and the audited financial statements of Picton ZDP Limited (the “Company”) for the year ended 31 March 2016. Comparatives are provided for the year ended 31 March 2015. It is recommended that these accounts are read in conjunction with the consolidated accounts of Picton Property Income Limited, (the “Parent”) issued as at 28 June 2016.

Company’s business and objective

Picton ZDP Limited is a Guernsey registered company, established to issue zero dividend preference shares which mature in October 2016 (“ZDP shares”). The Company is a wholly owned subsidiary of Picton Property Income Limited, an investment company registered in Guernsey.

The Company’s principal investment objective is to provide the ZDP shares with a predetermined final capital entitlement. On repayment of the ZDP shares the shareholders are entitled to receive an amount equal to 100 pence per share increased daily at an equivalent annual rate of 7.25% per annum.

The repayment date is 15 October 2016 and the final capital entitlement will be 132.2 pence per ZDP share. Once repayment to the ZDP shareholders is made the Directors intend to wind up the affairs of the Company.

The Parent has entered into a Contribution Agreement with the Company to provide an undertaking to pay any costs and expenses incurred by the Company and to enable the Company to meet its payment obligations in respect of the ZDP shares. Although the Parent has entered into an undertaking to meet all liabilities as they fall due, it is important to note that all risks are borne by the ZDP shareholders who are not guaranteed to receive their full capital entitlement.

Share capital

The Company has two ordinary shares in issue as at 31 March 2016.

In total 22,000,000 ZDP shares were admitted to the official list of the London Stock Exchange on 15 October 2012.

Going concern

The financial statements have been prepared on a non-going concern basis as the Directors intend to wind up the affairs of the Company following the repayment of the ZDP shares, which will be funded by the Parent. In presenting the financial statements on a non-going concern basis, with the exception of presenting the zero dividend preference shares as current liabilities and the amounts due from the Parent as current assets, the Directors do not consider there to be a material difference in the values and presentation of the Company’s assets and liabilities compared to if the financial statements had been prepared on a going concern basis. The Directors have not accrued for the additional costs of winding up the Company as these will be covered by the Parent.

Results

The results for the year are set out in the Statement of Comprehensive Income on page 4. 

Taxation

The Company is exempt from Guernsey Income Tax under the Income Tax (Exempt Bodies) (Guernsey) Ordinance 1989 and is charged an annual exemption fee of £1,200 (2015: £600).

Directors and directors’ interests

The Directors of the Company holding office during the year were as follows:

Nicholas Thompson
Robert Sinclair
Trevor Ash (resigned 1 October 2015)
Vic Holmes
Roger Lewis

Michael Morris (appointed 1 October 2015)

All Directors were appointed on incorporation except Vic Holmes, who was appointed on 1 January 2013, and Michael Morris, who was appointed on 1 October 2015. None of the Directors hold a beneficial interest in the Company, however Mrs Elizabeth Thompson holds 45,249 ZDP shares. Any Director’s interest in the shares of the Parent is disclosed in the consolidated accounts of the Parent. 

The Company has prepared these financial statements in compliance with the Companies (Guernsey) Law, 2008.

Statement of directors’ responsibilities

The Directors are responsible for preparing the Directors’ Report and the financial statements in accordance with applicable law and regulations. 

Company law requires the Directors to prepare financial statements for each financial year. Under that law they have elected to prepare the financial statements in accordance with International Financial Reporting Standards as issued by the IASB and applicable law. 

The financial statements are required by law to give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. 

In preparing these 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 accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

•     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 have been prepared on a non-going concern basis as the Directors intend to wind up the affairs of the Company following the repayment of the ZDP shares.

The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies (Guernsey) Law, 2008. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities. 

Disclosure of information to auditor

The Directors who held office at the date of approval of this Directors’ Report confirm that, so far as they are each aware, there is no relevant audit information of which the Company’s auditors are unaware; and each Director has taken all the steps that he ought to have taken as a Director to make himself aware of any relevant audit information and to establish that the Company’s auditor are aware of that information.

Auditor

The Directors re-appointed KPMG Channel Islands Limited (the “Auditor”) as auditor of the Company.

Responsibility statement

We confirm to the best of our knowledge:

•     the financial statements, prepared in accordance with International Financial Reporting Standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company as required by Disclosure and Transparency Rules (‘DTR’) 4.1.12 R; and

•     the Directors’ Report includes a fair review of development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces as required by DTR 4.1.12 R.

By order of the Board

Robert Sinclair 
Director
27 June 2016

Independent auditor’s report to the members of Picton ZDP Limited

We have audited the financial statements (the “financial statements”) of Picton ZDP Limited (the “Company”) for the year ended 31 March 2016 which comprise the statement of comprehensive income, the statement of changes in equity, the balance sheet and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards as issued by the IASB. As described in note 2, the financial statements have been prepared on a non-going concern basis.

This report is made solely to the Company’s members, as a body, in accordance with section 262 of the Companies (Guernsey) Law, 2008. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditor

As explained more fully in the statement of directors' responsibilities set out on pages 1 and 2, 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.

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 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 and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on the financial statements

In our opinion the financial statements:

• give a true and fair view of the state of the Company’s affairs as at 31 March 2016 and of its result for the year then ended;
• are in accordance with International Financial Reporting Standards as issued by the IASB; and
• comply with the Companies (Guernsey) Law, 2008.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies (Guernsey) Law, 2008 requires us to report to you if, in our opinion:

• the Company has not kept proper accounting records; or
• the financial statements are not in agreement with the accounting records; or
• we have not received all the information and explanations, which to the best of our knowledge and belief are necessary for the purpose of our audit.

Neale D Jehan

for and on behalf of KPMG Channel Islands Limited

Chartered Accountants and Recognised Auditors, Guernsey

27 June 2016

Statement of comprehensive income

For the year ended 31 March 2016

Notes 1 to 12 form part of these financial statements.

Statement of changes in equity

For the year ended 31 March 2016

Notes 1 to 12 form part of these financial statements.

Balance sheet

As at 31 March 2016

These financial statements were approved by the Board of Directors on 27 June 2016 and signed on its behalf by:

Robert Sinclair 
Director

Notes 1 to 12 form part of these financial statements.

Notes to the financial statements

For the year ended 31 March 2016

1. General information

Picton ZDP Limited (the “Company”) was incorporated on 2 September 2012 and is registered in Guernsey. The Company is a wholly owned subsidiary of Picton Property Income Limited (the “Parent”), which is an investment company registered in Guernsey.

The financial statements are prepared for the year ended 31 March 2016 with comparatives provided for the year ended 31 March 2015.

2. Significant accounting policies

Basis of accounting

The financial statements have been prepared under the historical cost convention, they give a true and fair view, have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the IASB and are in compliance with the Companies (Guernsey) Law, 2008.

The financial statements are presented in pounds sterling which is the Company’s functional currency. All financial information presented in pounds sterling has been rounded to the nearest thousand, except when otherwise indicated.

The accounting policies applied by the Company are the same as those applied by the Company in its financial statements for the year ended 31 March 2015, with the exception of the following which have had no effect on the financial statements:

•     Annual Improvements to IFRSs (2010-2012 Cycle)

•     Annual Improvements to IFRSs (2011-2013 Cycle)

•     IAS 19 Employee Benefits – Defined Benefit Plans: Employee Contribution

At the date of approval of these financial statements, the Directors do not consider that any standards or interpretations in issue but not yet effective will have a material impact on the financial statements of the Company prior to its winding up.

Going concern

The financial statements have been prepared on a non-going concern basis as the Directors intend to wind up the affairs of the Company following the repayment of the ZDP shares, which will be funded by the Parent. In presenting the financial statements on a non-going concern basis, with the exception of presenting the zero dividend preference shares as current liabilities and the amounts due from the Parent as current assets, the Directors do not consider there to be a material difference in the values and presentation of the Company’s assets and liabilities compared to if the financial statements had been prepared on a going concern basis. The Directors have not accrued for the additional costs of winding up the Company as these will be covered by the Parent.

Statement of cash flows

No Statement of Cash Flows is presented as all funding activities are provided by the Parent. The Company does not operate any bank accounts.

Capital contribution

Capital contributions from the Parent are recognised in the financial statements to meet current and future obligations of the Company in accordance with the Contribution Agreement entered into between the Parent and the Company on 12 September 2012. These contributions are recognised directly in equity.

Loans and borrowings

All loans and borrowings are initially recognised at cost, being the fair value of the consideration received associated with the borrowing. After initial recognition, loans and borrowings are subsequently measured at amortised cost using the effective interest rate method. Amortised cost is calculated by taking into account any issue costs, and any discount or premium on settlement. Gains and losses are recognised in profit or loss of the Statement of Comprehensive Income when the liabilities are derecognised, as well as through the amortisation process.

Significant estimates and judgements

The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and the reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. No critical judgements or estimates have been made by the Directors in the period.

3. Operating segments

The Board sets the Company’s strategy in accordance with the principal objective and therefore retains full responsibility for investment policy and strategy. The Board will always act under the terms of the Prospectus. The Board has considered the requirements of IFRS 8 ‘Operating Segments’. The Board is of the opinion that the Company operates in one reportable industry segment therefore no segmental reporting is required. 

4. Administration expenses

The Company receives administration services from Picton Capital Limited, a fellow subsidiary of Picton Property Income Limited. The fees payable are fixed at £10,000 per annum (2015: £10,000).

5. Tax

The Directors conduct the affairs of the Company such that the management and control of the Company is not exercised in the United Kingdom and that the Company does not carry on a trade in the United Kingdom. 

The Company is exempt from Guernsey income tax under the Income Tax (Exempt Bodies) (Guernsey) Ordinance 1989. A fixed fee of £1,200 is payable per year to the States of Guernsey in respect of this exemption.

6. Other assets

Issue costs totalling £729,000 have been capitalised and are being amortised over the term of the ZDP share issue. For the year ended 31 March 2016, £183,000 of these costs were written off to the Statement of Comprehensive Income (2015: £183,000).

7. Amounts due from parent company

Funds raised through the ZDP share issue, after the deduction of issue costs of £729,000 (see Note 6), totalled £21,271,000. These funds have been transferred to the Parent as a non-interest bearing loan repayable on demand according to the Loan Agreement dated 12 September 2012.

On 12 September 2012 the Company entered into a Contribution Agreement with the Parent. The agreement provides an undertaking by the Parent to pay any costs and expenses incurred by the Company in respect of its operation and the continuation of its business and to enable the Company to meet its payment obligations in respect of the ZDP shares. The Parent has agreed to support the Company’s obligations and has agreed to certain protections to ensure the Parent does not make distributions or returns of capital without retaining sufficient capital to meet its obligations to the Company. The Parent provided an undertaking of costs totalling £2,114,000 (2015: £1,975,000), of which £26,000 (2015: £30,000) was settled by the Parent during the year.

8. Zero dividend preference shares

On 15 October 2012 the Company issued 22,000,000 zero dividend preference shares (‘ZDP shares’) at 100 pence per share. The ZDP shares have an entitlement to receive a fixed cash amount on 15 October 2016, being the maturity date, but do not receive any dividends or income distributions. Additional capital accrues to the ZDP shares on a daily basis at a rate equivalent to 7.25% per annum, resulting in a final capital entitlement of 132.2 pence per share. The ZDP shares are listed on the London Stock Exchange.

At the reporting date the Company has accrued for £6,034,000 (2015: £4,134,000) of additional capital. The total amount repayable at maturity is £29,114,000.

The ZDP shares do not carry the right to vote at general meetings of the Company, although they carry the right to vote as a class on certain proposals which would be likely to materially affect their position. In the event of a winding-up of the Company, the capital entitlement of the ZDP shares (except for any undistributed revenue profits) will rank ahead of ordinary shares but behind other creditors of the Company.

9. Share capital

The Company has one class of share which carries no right to fixed income. The authorised share capital of the Company is two ordinary share issued at £1 each. The Company issued one ordinary share at par value to its Parent on 2 September 2012 and one ordinary share at par value to Picton Finance Limited on 27 February 2014.

10. Risk management

The Company’s principal investment objective is to provide the ZDP shares with a predetermined final capital entitlement. The Directors regularly monitor and review all the risks noted below.

General risk

An investment in ZDP shares is suitable only for investors capable of evaluating the risks and merits of such an investment and who have sufficient resources to bear any loss (including total loss) which may result from the investment. Although the Parent has entered into an undertaking to meet the Company’s liabilities, essentially all risks are borne by the holders of the ZDP shares. The market offer price of the ZDP shares at 31 March 2016 was 128.25 pence per share (2015: 126 pence).

Credit risk

The obligations of the Parent to repay the ZDP shares and discharge its obligations pursuant to the undertakings will be subordinated to the claims of the Parent’s other creditors on a winding up. If, at the repayment date, the Parent has insufficient assets then its obligations to repay the ZDP shares may be satisfied only in part or not at all.

Accordingly the Company may have insufficient assets to satisfy the current or final capital entitlement of the ZDP shares.

Liquidity risk

The Company’s exposure to liquidity risk depends upon the Parent’s ability to promptly meet all current and future obligations of the Company. The Parent’s liquidity risk is the risks that it will encounter in realising assets or otherwise raising funds to meet its financial commitments. The Parent invests in commercial property in which there is a market where investments are not always readily realisable.

Interest rate risk

Returns from ZDP shares are fixed at the time of purchase, as are the final redemption proceeds. Consequently, if a share is held until redemption date, the total return achieved is unaltered from its purchase date.

Capital risk management

The capital structure of the Company consists of zero dividend preference shares, as disclosed in Note 8, and equity attributable to the Parent comprising issued capital and retained earnings. The Company is not subject to any external capital requirements. The Company has entered into a Contribution Agreement with its Parent to meet any liabilities arising from the Company’s operations.

11. Controlling and related parties

The Company is wholly owned by Picton Property Income Limited (the “Parent”), a Guernsey registered company. The Parent is therefore the immediate and ultimate controlling party.

On 12 September 2012 the Parent entered into a Contribution Agreement with the Company to provide an undertaking to pay any costs and expenses incurred in respect of the operation and continuation of the Company’s business. As at 31 March 2016 the Parent owed £6,681,000 to the Company under the Contribution Agreement (2015: £4,598,000).

The Company also entered into a non-interest bearing Loan Agreement with the Parent dated 12 September 2012. As at 31 March 2016 the Parent owed £21.3 million to the Company under the Loan Agreement (2015: £21.3 million).

Picton Capital Limited, a fellow subsidiary of the Parent, was paid administration expenses in the period of £10,000 by the Company (2015: £10,000). As at 31 March 2016 the Company owed £2,500 to Picton Capital Limited (2015: £2,500).

The Directors received no remuneration for their services to the Company during the year.

12. Events after the balance sheet date

There are no subsequent events that require disclosure in these financial statements.

Company information