Panther Securities Regulatory News (PNS)

Panther Securities P.L.C.

("Panther" or "the Company")

Final Results for the

year ended 31 December 2011

For further information please contact:

Chairman's Statement

I am once again pleased to be able to present satisfactory figures for the year ended 31st December 2011. Under the INTERNATIONAL Financial Reporting Standards our consolidated income statement shows a loss of £850,000 compared to a profit of £5,869,000 the previous year.

This apparent trading loss is due to the severe deterioration in the liability of our financial derivatives by an additional £10,635,000 counter-balanced by a valuation increase in our investment properties as at the financial statement date of £5,671,000. I have pointed out on previous occasions that both these items should not be shown in an income statement (they had to change the name as it used to be called profit & loss account) but shown on the balance sheet and the notes to the financial statements.

Leaving aside these non-cash flow items the Company is trading well considering the difficult times we live in and the constant extra burden placed upon us by uncomprehending government.

Our rental income receivable during the year end 31 December 2011 rose to £8,961,000 compared to £7,717,000 in the year ended 31 December 2010 and is still rising due to our purchases mentioned later in my report.

This year the Directors re-valued the entire portfolio which produced a surplus of £5,671,000 compared to the previous year's increase of £4,039,000.

Our costs of running the business increased during the year, part of which was due to extra banking fees of £103,000 but also by £272,000 due to extra vacant rates because of the unfair removal of vacant rate relief for lower value properties.

Sales of more of our Elektron PLC shares and our entire holding in O Twelve Estates produced a £2,007,000 profit and generated free cash proceeds of £3,222,000.

This year has been an extremely busy and acquisitive year for our Group. Property purchases totalling approximately £21,000,000 were successfully completed. Last year approximately £8,000,000 of purchases were completed. We always purchase assets where our group experience leads us to believe there could be added income and value created. Whilst we have been proved successful in this regard for many years, one cannot predict the future but somehow it feels right to be investing in property in these times.

Acquisitions during this accounting year

25/26/27 Victoria Street, Wolverhampton

In February 2011 we re-acquired 25/26/27 Victoria Street, Wolverhampton for £202,000 (including stamp duty) having sold it in June 2006 for £333,000. We own most of this island town centre site, which has considerable re-development potential as the Town Centre scheme and compulsory purchase order has been abandoned.

67 High Street, Ayr

In March 2011 we purchased 67 High Street, a vacant listed freehold shop with upper part in the prime shopping position opposite Marks & Spencer and BHS. Our purchase was from an LPA Receiver at £289,000 (including stamp duty) and we hope that it will have a considerable added value when let. We are in discussion with a number of retailers about this unit.

Northgate Street and St Aldgate Street, Gloucester

In May 2011, we purchased this block of 17 shops and 21 flats in the very centre of Gloucester. The property is situated close to Debenhams and Marks & Spencer, and since our purchase the two vacant shops have been let, increasing the income to £237,000 per annum, from £207,000 per annum. We are seeking a single letting of the 21 vacant flats to a social housing provider but, if unsuccessful in this regard, will let them individually at a higher total rental but involving more management costs and management time. This freehold cost approximately £2,200,000 (including stamp duty).

Five Department Stores

As announced in July 2011, we purchased five freehold department stores which were owned and formerly occupied by the Anglia Regional Co-operative Society Limited ("ARCS") trading as Westgate Stores. The majority of the trade and assets of Westgate Stores in May 2011 were acquired by Beale PLC, a fully listed department store group in which the Company holds just under 20 per cent of the issued share capital. We paid approximately £7,330,000 (including stamp duty) for the following five properties:

80 Newgate Street, Bishop Auckland, County Durham comprising approximately 50,000 sq ft over three floors situated just off the prime shopping position in the town centre.

49 Low Street, Keighley, West Yorkshire comprising approximately 35,000 sq ft on three floors. This property adjoins a Marks & Spencer store and the main shopping centre in the town.

53-57 High Street, St Neots, Cambs comprising approximately 30,000 sq ft on two floors together with an 80 space car park to the rear, adjoining the Marks & Spencer store.

Market Place/ Bridge Street, Spalding, Lincolnshire comprising approximately 23,000 sq ft on two floors in the main trading position of the town.

8 Market Place, Diss, Norfolk comprising approximately 8,000 sq ft in the prime shopping area of the town centre.

80 Newgate Street, Bishop Auckland has a one year rent free period (ending 21 May 2012), the other four stores have a two year rent free period which ends on 21 May 2013. The leases are all on full repairing and insuring terms for 15 years with rent reviews every 5 years.

The rent of £100,000 p.a. on Bishop Auckland starts in May 2012 and in May 2013 a further rent of £575,000 p.a. is payable on the other properties.

Templegate House, 115-123 High Street, Orpington

This property was purchased in July 2011, and is a long leasehold (94 years remaining at a peppercorn rent) modern building which contains five shops and 17,000 sq ft of office space over the three floors above. The property was almost fully let and produced rent of £276,000 per annum. The price we paid of £1,300,000 (including stamp duty) reflected the fact that two of the larger tenants' leases were due to expire towards the end of the year. The property was purchased from a LPA Receiver but only one office tenant failed to renew, thus the property still produces over £200,000 p.a. which should increase when vacant space is let.

79/97 Commercial Street, Batley

This freehold property also purchased in July 2011 is well positioned in the town, and was purchased for £1,404,000 (including stamp duty). The property produced £143,000 per annum, excluding income from two vacant shops. The tenants include Boots, the Card Factory, Coral Estates, TUI UK and Kirkwood Hospice. One further shop is now let.

The Mill and Warehouse, Upper Mills Trading Estate, Bristol Road, Stonehouse

In August 2011, Panther purchased a 13,000 sq ft office with an adjoining 12,000 sq ft warehouse building for £489,000 (including stamp duty). The building was purchased for Panther's 75 per cent owned subsidiary MRG Systems Ltd ("MRG"). The Board expects that this will not only reduce MRG's rental cost of £30,000 a year and provide it with a permanent office but it should also provide additional space for MRG and allow them to sublet and generate additional rental income to benefit the group overall.

Bentalls Complex, Colchester Road, Heybridge, Maldon, Essex

In August 2011, Panther purchased, via a sale and lease back arrangement, a 200,000 sq ft freehold industrial building set in 8.5 acres of grounds for £3,921,000 (including stamp duty). The property has been let for 10 years to Wyndeham Group Ltd for £500,000 per annum, with a one year rent free period which commenced at completion in August 2011. This property offers a high return from a good covenant together with redevelopment prospects on 2.5 acres of rear unused land.

Lyceum Building, Bold Street, Liverpool

In August 2011, Panther completed on this prime, iconic listed building let to the Post Office with 3.5 years remaining on its lease. The rent is £500,000 per annum. The tenant is not in occupation but has sublet part of the building to the Co-operative Building Society. The purchase price was £2,964,000 (including stamp duty).

34 Marine Terrace, Margate, Kent

This freehold property was purchased by the Company in August 2011 for £190,000 (including stamp duty) and is positioned on the seafront. The property has takeaway use and is let at £21,000 a year. This investment is in a location where the Board hopes to see improve in the medium to long-term.

Post Balance Sheet Acquisitions

In February 2012 the Company purchased the freeholds of a further three Beales Department Stores, these being:-

Lowestoft, Suffolk

The freehold property now known as Beales department store, London Road North, Lowestoft, is a modern store with 21,000 square feet of selling space on two floors, situated on the town's main pedestrianized shopping street close to Tesco Metro supermarket, Sports Direct, BHS department store and Peacocks (R.I.P.).

Wisbech, Cambs

This property, now known as Beales department store on Little Church Street, just off The Market Place, is a modern, two storey department store containing 26,000 square feet of selling space, being situated in the centre of town.

Beccles, Suffolk

This department store is an older store in two separate sections adjoining but separated by a small vehicular service road and contains approximately 17,000 square feet on mainly ground but also first floor. The property fronts through from Smallgate to The Walk which is close to the centre of this market town and to a Tesco superstore.

All three properties are let on similar leases to Beale PLC whereby rent is a share of profits until May 2014, thereafter to market rent subject to negotiations.

In its announcement made in April 2011, the estimated turnover for these stores to the Beale Group was approximately £6 million (excluding VAT).

The price paid for the freehold properties was £2,250,000, of which £300,000 is deferred, payable in three years' time.

Huntingdon, Cambs

In February 2012 Panther purchased a factory investment comprising 96,000 square feet (90,000 feet ground floor) of modern factory premises on 5.5 acres on the Stukeley Meadows Industrial Estate, 1 mile north of Huntingdon town centre.

The property is let on an FR&I lease for 15 years from February 2005 at £190,000 per annum exclusive with rent reviews in 2010 (still outstanding) and 2015 to 65% of open market rental value.

The property is held on a long lease for a term of 999 years from February 2005 at a fixed rent of one peppercorn and the price paid was £1,278,000 (including stamp duty).

Progress on Developments

59/61 High Street, Sittingbourne

This large shop unit with extensive upper parts has been refurbished and split into two shop units and separate upper part. The larger shop unit is let to a local, long established furniture shop. When the property is fully let the Directors expect it will show a 20% rental return on cost.

49/61 High Street, Croydon

Panther has agreed to lease 4,000 sq ft to Sainsbury's Supermarkets Limited as a local convenience store at £55,700 per annum exclusive. The remaining ground floor space of 3,000 sq ft should let easily and leave the upper part to be converted (subject to planning permission) as eight or nine flats and eventually produce a valuable surplus on our initial investment of approximately £600,000.

Holloway Head, Birmingham

This 450,000 sq ft development site will only take place when the property market improves and we find a suitable partner to carry out the scheme. The property is carried in our books at a very conservative written down figure.

High Street, Broadstairs

Having received full planning for our 4,000 sq ft shop and 10 flats development situated in Charles Dickens' favourite seaside resort, we will shortly be demolishing the building with a view to carrying out the development as soon as a suitable prelet on the shop is obtained. We currently have some interested parties with one rental offer in hand which is currently under negotiation.

Tunnel Shoes Limited

Towards the end of the year we decided to sell Tunnel shoes (our joint retailing venture) for a nominal sum. This accounts for a loss of £224,000 in our operations. In this difficult retail market this is not a great surprise and it is no great consolation to know that we would have borne over half of this loss in vacant rates and unrecovered insurance had we not tried out that venture.

Wimbledon Studios

Whilst we only own a small proportion of the film studio's operational company, we own the freehold from which they operate and thus their success brings added value to our freehold. To date they are making good progress towards profitability and they are now noticing opportunities to profitably expand but this may need extra capital. They are currently investigating whether they are able to raise money under any of the government's new Enterprise Investment Schemes. With the Twickenham Studios site due to close in the next few years for residential development and the BBC relocating most of its studio facilities to Salford, there is likely to be studio space shortages in London in the next two to three years which should benefit Wimbledon Studios considerably.

This year we are holding our AGM at Wimbledon Studios and our shareholders who are able to attend will be able to inspect one of their prime assets.

Tenant Activity

During the accounting year we lost a total of 42 tenants which produced £495,000 per annum rent. 

During the same period we let to 61 new tenants at rents totalling £720,000 per annum, yielding a net gain of £233,000 per annum after various rent free periods elapse.

Political Donations

Once again I am proposing a resolution to allow the company to donate £25,000 to the Conservative Party who are the only party capable of holding back the country from the abyss of excessive debt caused by their predecessors. Whilst they have not yet been able to produce policies to stimulate the economy I have no doubt the intention is there when circumstances allow them too.

Finance

In July 2011 we completed our refinancing package. This was a new 5 year club loan facility of £75,000,000 provided equally by HSBC and Santander. This replaces our existing facility of £42,500,000 with HSBC with whom we have had an excellent banking relationship for over 30 years. We are, of course, pleased to have this new banking relationship with Santander which we hope will prove as reliable and long standing.

The additional finance has already allowed us to expand and make a number of new purchases and, at the balance sheet date, £60,000,000 of the loan facility had been drawn down and we have yet to utilise the remaining £15,000,000 of the total facility.

The benefit of these borrowings will be reflected in future years' accounts, especially when we can invest the final £15,000,000 which, not being fixed, would be at a much lower "all in" interest cost (at current floating rate).

Tax

This year our tax payable is £678,000 with a large notional reduction of £2,142,000 in our deferred tax. However, we also paid over £800,000 in stamp duty tax and £700,000 in vacant rates, plus approximately £90,000 in non-recoverable VAT. Plus £169,000 National Insurance premiums a minimum total of £2,437,000 towards government coffers and so an additional 1% lowering of corporate profits tax is meaningless to most property companies like ourselves.

A government that has between £100 billion and maybe as much as £200 billion locked in the banking sector whose survival is dependent on a property market that only works with willing buyers, would seem foolish to constantly make property investment or ownership less desirable or less financeable. So charging vacant rates or extra stamp duty or heavier, mostly unnecessary, environmental obligations and placing extra financial and regulatory burdens on the banks which lower their lending ability, only delays the recovery of their government loans still longer or, worse, may cause some, or all, of this huge debt to be written off, of course only done at a time which will be politically expedient.

Dividends

During the year we paid an interim dividend of 3p per share. At the time of the interim announcement in August 2011 we were unable to give a view as to what final, if any, dividend could be paid due to the uncertain times and also the much higher total annual interest charges we would be paying partly due to our derivatives arrangement having now crystalized and interest payment combined with the higher margins now payable on our increased facility.

There is, of course, a hiatus between the cost of borrowing and the receipt of benefits from investing the funds but the sale of our entire holding of O Twelve shares gave us £3,222,000 of extra liquidity. Thus I am pleased to say we have decided to pay a final dividend of 9p per share to bring a yearly total of 12p and thus continue our 30th year of uninterrupted dividends, these having multiplied by a factor of 50 over that period.

Prospects

In the last two years we have invested £30,000,000 in commercial property and anticipate investing at least another £15,000,000 in the forthcoming year. I believe that this is laying the foundation for much improved profitability and increasing asset values for our Group in the years to come. In my fifty years in the property industry I have rarely seen so many good value investment opportunities for those capable of investing for the longer term.

If it is possible to invest in a freehold building with an honest, reliable tenant paying between 8% to 10% return for 10 years and which should provide some protection against inflation or buy a piece of paper with a government promise of 2.5% return for 10/20 years, what should you choose? I suspect history already tells us which is the better and wiser choice.

Finally I wish to thank our small but dedicated teams of staff, financial advisers, legal advisers, agents and accountants for all their hard work during the past year which has been busier and more intensive than usual and, of course, our tenants, most of whom pay their rents despite a difficult trading environment.

Andrew S Perloff

CHAIRMAN

25 April 2012

CHAIRMAN'S RAMBLINGS

This year marks the 200th anniversary of the birth of Charles Dickens and having often used quotes from his novels I wondered if I have any other possible connections.

And of course I have:-

In 1969 we purchased a freehold pub called the "Sir Robert Peel" at 178 Bishopsgate. It was tiny with a frontage of about 14 ft. and three vacant upper floors. We had agreed to purchase at £27,500 and found the raising of finance was slow. The pub owners, one of the big brewers, were desperate to complete quickly and thus agreed to lend us 90% of the purchase price for nine months thus enabling them to transfer the liquor licence to a much bigger unit nearby. This gave us time and we let the entire property to Dombey & Son at £3,500 per annum, this is a very old established multiple firm of men's made to measure suits whose name and city presence was possibly the inspiration for Dickens' story "Dombey & Son" which was about a ship owning brokerage company or vice versa. The connection ends there.

However, as always, my stories don't. Over the next three years property prices boomed and even more so in the city of London. In 1974 we decided to sell this investment at one of Healey and Baker's auctions. We were hoping for £100,000 but it made £126,000, a phenomenal profit. This was owned personally in an investment partnership with my brother, sister and Malcolm Bloch and this would be subject to 30% capital gains tax.

About the same time some listed property company shares I personally owned had risen from £12,500 to over £50,000 in value. A sale would crystallise another big capital gains tax bill.

We had heard about a tax specialist who could legally, for a fee, either substantially reduce or even remove completely the tax liability.

Our accountant thus organised a meeting with the "specialist". We met him at his smart office off Harley Street. He spoke so quietly both Malcolm and I thought we had gone deaf.

His scheme was that various companies were formed A B & C - and A sold part interest in the freehold investment to B which leased part to C who gave a loan to A who then transferred the lot to an outside party for real money and 'dished it out' to the original property and company owners. This description is, of course, complete rubbish but that's what it seemed like to us.

Our accountant had listened carefully and told us he understood it, told us it was near the mark but legal and should work but if it did not would take ten years to unravel before any tax would have to be paid, but also we could have heavy court costs to argue our case.

We thought about it for a month or so, put off by the complexity, by which time my shares had fallen in value by 60% thus I only had a small profit. We thus decided we would not bother but reinvest the money to make more profit before the tax would become due in two years' time.

Of course, you've guessed it, by the time our tax was due and demanded, a severe property recession was in place, our money was tied up in property and no cash was available to pay. The total needed was about £30,000. We paid a little off and tried delaying tactics by promising more but the more embarrassing problem was that my sister's share of the capital gains tax was about £4,500 but the tax demand went directly to my brother-in-law, a pharmacist employed on a good salary but never previously having had a capital gains tax bill. To say he was shocked was an understatement.

Prevarication was no longer possible so we arranged to visit the local tax collectors head office in Aldwych.

We met the local senior inspector in one of the bleakest offices I have ever entered; no decoration, worn linoleum on the floor, an old and cheap wooden desk and four uncomfortable chairs. The inspector was pleasant whilst we explained our plight, in particular that of our brother-in-law who was completely unaware of his wife's investment and capital gains tax and also that she had not received any money.

The inspector then laughed at the situation and explained that a husband is responsible for his wife's debts, in particular her taxes, whether he knew about them or not. Well, in Oliver Twist when the magistrate told Mr Bumble "in the eyes of the law a man is responsible for his wife's actions" he replied "if that is what the law says then the law, Sir, is an ass".

Bumble was, of course, correct and in due course this onerous anomaly of tax law was changed, but too late for us.

However, the tax inspector agreed to give us over six months' (which turned out to be a year) to pay in stages which we eventually did.

Tax is on everyone's mind and most people will know income tax was brought in circa 1800 to finance the then forthcoming war with France under its emperor Napoleon initially at less than 1p in the pound on incomes of £60 per year (the average men's wage) rising to 10% on incomes of £200 per year or more (the income of moderately successful solicitors) and rose and fell during the wars with Napoleon and was abolished in 1816 after his defeat at Waterloo the previous year. However, it was reintroduced in 1842 by the then Prime Minister, SIR ROBERT PEEL and remained and has constantly risen ever since.

There has been much comment lately since the Budget when the top rate of tax was reduced from 50p to 45p in the £1. If they had pitched it at 35% this year going up to 45% next year, the 300,000 tax payers who pay 57% of all income tax would have brought forward their income, dividends and gains early probably giving the Chancellor an extra £10 billion to reduce their deficit when he most needs it

Some of you will have noticed how sometimes over the last 15 years or so the immigration figure changed from "immigration" to "net immigration" i.e., the amount of people who emigrated was deducted from the total obviously to mislead the public but in this ramble I'm more concerned about tax.

In the modern age of computer and monumental government snooping and records, there is a huge amount of facts and figures available to those who know where to look.

Apparently there are about 5,250,000 British ex-pats round the world and it is a fair bet that a larger percentage of them than those remaining in the UK, are those that had substantial wealth or earning capacity and felt that our taxation system was unfair in a more honest meaning of the word. If that amounted to just 3% of the total i.e., 150,000 people, how much better the UK would be if they were lured back by better tax rates. Currently 300,000 top earners pay 57% of the total income tax (let alone all the other taxes) so if they came back and paid the same rates, another 28% would be paid - so top rate taxes could be substantially reduced so that this could happen and those on lower levels of income would not have to pay any income tax.

Now I know the HM Revenue and Customs keep records going back many years. They should be able to say how many top earners, i.e., over £150,000 per annum, have left the UK in the last 10 or 15 years and thus we would know how much these high tax rates have cost the country in lost taxes.

To be continued……..

Andrew S Perloff

CHAIRMAN

25 April 2012

The accounts were approved by the Board of Directors and authorised for issue on 25th April 2012. They were signed on its behalf by:

A.S. Perloff, Chairman

Within retained earnings are unrealised gains of £170,000 and deferred tax credit of £423,000 (2010 - unrealised gains of £2,578,000 and a deferred tax expense of £164,000) relating to fair value of available for sale investments (shares).

1. Revenue and cost of sales

The Groups' main operating segment is investment and dealing in property and securities. The majority of the revenue, cost of sales and profit or loss before taxation being generated in the United Kingdom. The Group is not reliant on any key customers.

M.R.G. Systems Limited is an operating business segment whose principal activity is that of electronic designers, engineers and consultants. 70% of its revenues arose in the United Kingdom and 100% of its cost of sales.

Tunnel Limited was an operating segment whose principal activity was that of value shoe retailer. Its activities were discontinued in the year. 100% of its revenues arose in the United Kingdom. 50% of the company was owned by the Group as a joint venture and only the Group's share was represented in these accounts. 

The split of assets, tax effect and cash flow of each segment is not shown as these are not material in relation to M.R.G. Systems Limited or Tunnel Limited.

2. Income tax expense

The charge for taxation comprises the following:

Domestic income tax is calculated at 26.5% (2010 - 28.0%) of the estimated assessable profit or loss for the year. The future provision for deferred tax has been calculated on the basis of 25% (2010 - 27%).

The total charge for the year can be reconciled to the accounting profit or loss as follows;

3. Dividends

Amounts recognised as distributions to equity holders in the period:

The Directors recommend a payment of a final dividend of 9p per share (2010 - 5p *including a 3p special dividend), following the interim dividends paid on 28 October 2011 of 3p per share. The final dividend of 9p will be payable on 31 July 2012 to shareholders on the register at the close of business on 6 July 2012 (Ex dividend on 4 July 2012). The full dividend for the year ended 31 December 2011 is anticipated to be 12p. 

4. (Loss)/ earnings per ordinary share (basic and diluted)

The calculation of earnings per ordinary share is based on earnings, after excluding non-controlling interests, being a loss of £865,000 (2010 - profit of £5,864,000) and on 16,869,000 ordinary shares being the weighted average number of ordinary shares in issue during the year (2010 - 16,869,000). There are no potential ordinary shares in existence.

5. Net assets per share

The calculation of net asset per ordinary share is based on the equity attributable to shareholders of the equity in the parent company, and on 16,869,000 ordinary shares being number of ordinary shares in issue at 31 December 2011 and 31 December 2010.

6. Investment property

At 31 December 2011, £123,791,000 (2010 - £89,020,000) and £21,700,000 (2010 - £19,940,000) included within investment properties relates to freehold and leasehold properties respectively.

* Investment property held under an operating lease is initially accounted for as if it were a finance lease, recognising as an asset and a liability the present value of the minimum lease payments due by the group to the freeholder. Subsequently and as described in accounting policies, the fair value model of accounting for investment property is applied to these interests.

On the historical cost basis, investment properties would have been included as follows:

Costs relating to ongoing and potential developments are included in additions to investment properties and in the year ended 31 December 2011 amounted to £59,000 (2010 - £49,000).

The Group did have contractual obligations at the statement of financial position date to purchase investment properties, including a balance to pay of £1,257,000 and also a commitment to spend £180,000 on developing investment property. 

The market value shown at 31 December 2011 was valued internally by the Directors. As at 31 December 2010, the investment properties were valued independently at their open market value, by GL Hearn, Chartered Surveyors. 

The property rental income earned by the Group from its investment property, all of which is leased out under operating leases, amounted to £8,253,000 (2010 - £7,051,000).

7. Available for sale investments (shares)

The available for sale investments represent investments in listed and unquoted equity securities that offer the Group the opportunity for return through dividend income and fair value gains. They have no fixed maturity or coupon rate. The fair values of the listed securities are based on quoted market prices. The available for sale securities carried at fair value are classified as level 1 in the fair value hierarchy specified in IFRS 7. The fair value of available for sale investments in unquoted equity securities, which are not publically traded, cannot be measured and have therefore been shown at cost. The valuation of the available for sale investments is sensitive to stock exchange conditions. 

Panther Securities PLC holds 19.9% of the issued share capital of Beale PLC at the year end. This has been treated as an investment rather than as an associate under IAS 28, since, apart from holding less than 20% of the issued share capital, the Group could not exercise significant influence.

Price risk

For the year ended 31 December 2011 if the average share price of the portfolio was 10% lower there would be a further impairment charge in the year of £106,000 to the Income Statement and £101,000 valuation movements charged to equity. Corresponding gains would be seen for a 10% uplift.

8. Derivative financial instruments

The main risks arising from the Group's financial instruments are those related to interest rate movements. Whilst there are no formal procedures for managing exposure to interest rate fluctuations, the Board continually reviews the situation and makes decisions accordingly. Hence, the Company will, as far as possible, enter into fixed interest rate swap arrangements. The purpose of such transactions is to manage the interest rate risks arising from the Group's operations and its sources of finance.

Bank loans totalling £60,000,000 (2010 - £35,000,000) are fixed using interest rate swaps removing the Group exposure to fair value interest rate risk. Other borrowings are arranged at floating rates, thus exposing the Group to cash flow interest rate risk.

Financial instruments

The derivative financial assets and liabilities are designated as held for trading.

* Fixed rate came into effect on 1 September 2008. Rate includes 2% margin (2010 1% margin). The contract includes mutual breaks, the first one being on 23 November 2014 (and every 5 years thereafter).

** This arrangement came into effect on 1 December 2011 when HSBC exercised an option to enter the Group into this interest swap arrangement. The rate shown includes a 2% margin. This contract includes a mutual break on the fifth anniversary and its duration is until 1 December 2021.

Interest rate derivatives are shown at fair value in the income statement, and are classified as level 2 in the fair value hierarchy specified in IFRS 7.

The vast majority of the derivative financial liabilities are due in over one year and therefore they have been disclosed as all due in over one year. 

The above fair values are based on quotations from the Group's banks and Directors' valuation.

Interest rate risk

For the year ended 31 December 2011, if on average the 3 month LIBOR over the year had been 100 basis points (1%) higher with all other variables held constant, under the financing structure in place at the year end, post-tax profit for the year would have been approximately £84,000 higher (2010 - the profit would have been lower by £90,000). This analysis excludes any affect this rate adjustment might have on expectations of future interest rates movements which is likely to affect the estimation of the fair value of the derivative financial assets/ liabilities (as this movement would also be shown within the income statement affecting post-tax profit or loss), but indicates the likely cash saving/ (cost) a 100 basis points (1%) movement would have had for the Group. Going forward this is minimal due to the hedging of the HSBC/ Santander loan. 

Treasury management

The long-term funding of the Group is maintained by three main methods, all with their own benefits. The Group has equity finance, has surplus profits and cash flow which can be utilised, and also has loan facilities with financial institutions. The various available sources provide the Group with more flexibility in matching the suitable type of financing to the business activity and ensure long-term capital requirements are satisfied. Please also see the Financial Risk management: Objectives, policies and processes for managing risk, of the Corporate Governance Report.

9. Events after the balance sheet date

There were no material transactions after the statement of financial position date.

10. Investment in joint venture

Until November 2011, the Group owned 50% of the 2 £1 issued equity shares in Tunnel Limited, a company incorporated in England and Wales, which is a retailer of value shoes. 

As well as the £1 equity investment, the Group originally invested £85,000 by way of an interest free intercompany loan which was mainly used for the purchase of stock. During the year, the Company made a further loan of £100,000 (which was to be repaid in priority to the other joint venture partner loans) and paid for £44,000 salary costs on behalf of the management of Tunnel Limited. 

The joint venture company traded out of some of the Group's premises which were provided on rent free terms with the intention that once the business was established, market rents would be payable.

In November 2011, the Company's equity holding in Tunnel Limited was sold for £1 and the Group granted four month licenses on three of the shops to enable the business to continue trading at no rent for this period. Prior to the disposal of its equity interest, the Group received £40,000 from the cash balances of Tunnel Limited in part payment of its superior loan and all remaining intercompany debt was written off as part of the disposal.

The Group's share of joint venture revenue, expenses and losses excluding the loan write off are shown at note 1.

Whilst the Group's overall loss for the year on the joint venture was £224,000, it estimates that it saved £92,000 in costs of holding vacant properties (mainly in rates and insurance paid). The disposal of Tunnel Limited has not been disclosed as a discontinued operation as it is not considered to be material to the Financial Statements.

11.  Investment in associate undertaking

The Group purchased 25% of this entity being 150,000 ordinary shares of £1 each (newly issued share capital for cash) in Wimbledon Studios Limited for £150,000 in August 2010. The company operates as an independent film studio letting out sets and offices to media and television organisations. The entity operates out of a Group wholly owned property for which a market rental has been agreed (with one year's rent free). 

In accordance with IAS 28 (revised 2008) - Investments in Associates, the Group has equity accounted for its share of the profits and losses and assets and liabilities of this entity.

The aggregated financial information of Wimbledon Studios Limited for the period ended 31 December 2011 is set out below:

In accordance with IAS 28 (revised 2008) Investment in Associates, where the Group's share of losses in the associate exceeds its equity investment, the carrying value of that equity investment is reduced to £nil and the remaining loss is taken against any further long term interest that in substance forms part of the investors net investment in the associate. Accordingly, the £44,000 share of net liabilities referred to above has been allocated against the carrying value of the overdraft provided by the Group to the associate as discussed below.

The Group has also provided a £400,000 overdraft to the associate undertaking. As at the year end, this was fully drawn down but the associate also had £238,000 of cash at bank. This loan is included in other receivables.

During the year £351,000 rent receivable was recognised by the Group in respect of the Associate. At the Statement of Financial Position date, the Group was owed rent and insurance of £142,000. Additionally during the year £111,000 was recognised by the Group as rental receivable in relation to equipment and fixtures. At the Statement of Financial Position date the Group was owed £108,000, which has been provided against in full.

12. Related party transactions

Transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. 

The compensation of the Group's key management personnel is shown in the accounts (see online) as well as the Directors' emoluments in the notes and within the Directors' Remuneration Report. 

Notes 10 and 11 detail the Group's transactions with joint ventures and associated undertakings.

In respect of Wimbledon Studios Limited, during the year the Group provided a £400,000 overdraft facility to the company. As discussed in note 11, the Groups £44,000 share of net liabilities has been allocated against the carrying value of the overdraft therefore showing a receivable of £356,000. At the Statement of Financial Position date, the Group was also owed rent and insurance of £142,000 and was also owed £108,000 in relation to the rental of equipment and fixtures which has been provided against.

Included in other receivables Panther Securities PLC had made advances to the two independent directors of Wimbledon Studios Limited of £62,500 each, in order for them to be able to purchase their shareholdings in that company. Both loans are unsecured for a maximum term of 3 years and attract interest of 4% per annum. One of these was repaid in the year as the director stepped down and the other remains fully outstanding. Fair value of this loan is assessed to be the same as its carrying value.

Portnard Limited provided Panther Securities PLC with a £7,000,000 interest free, unsecured bridging loan in July 2011 for a two week period. The loan assisted the Group in performing a verbal commitment (but not a contractual one) in respect of the acquisition of certain properties and was repaid when the refinancing was completed with HSBC/ Santander. Portnard Limited is the Group's largest shareholder and A S Perloff and his family trusts have a beneficial interest in the company, as detailed in the Directors report.

There were no further transactions with other related parties.

13. Copies of the full set of Report and Accounts will be posted to shareholders shortly, will be available from the Company's registered office at Deneway House, 88-94 Darkes Lane, Potters Bar, Hertfordshire, EN6 1AQ and also will be available for download on the Group's website www.panthersecurities.co.uk in due course.