PGIT SECURITIES 2020 PLC
(formerly PEWT Securities 2020 PLC)
Annual Report and Accounts
for the year ended 31 December 2017
PRINCIPAL OBJECTIVE
To provide Zero Dividend Preference Shares ("ZDP Shares") with a predetermined final capital entitlement.
DIRECTORS
Geoffrey Burns (Chairman)
Ian Graham
Gillian Nott OBE
Kasia Robinski (appointed on 28 February 2017)
Charles Wilkinson (retired on 25 April 2017)
SECRETARY AND REGISTERED OFFICE
Premier Portfolio Managers Limited
Eastgate Court
High Street
Guildford
Surrey GU1 3DE
REGISTERED NUMBER
9863364
Registered in England and Wales
CONTENTS
| Strategic Report | 1-2 |
| Directors' Report | 3-4 |
| Statement of Directors' Responsibilities | 5-6 |
| Independent Auditor's Report | 7-10 |
| Income Statement | 11 |
| Balance Sheet | 12 |
| Statement of Changes in Equity | 13 |
| Cashflow Statement | 14 |
| Notes to the Financial Statements | 15-20 |
Strategic Report for the period to 31 December 2017
The Directors submit to the shareholders their Strategic Report, Director's Report and the Audited Financial Statements of the Company for the year ended 31 December 2017.
Business Model and Strategy
The Directors present their Report and the audited financial statements of PGIT Securities 2020 PLC (formerly PEWT Securities 2020 PLC), domiciled and registered in England and Wales number 9863364 (the "Company") for the year ended 31 December 2017. The Company's registered office is Eastgate Court, High Street, Guildford, Surrey GU1 3DE.
Change of Company name
The Board of PEWT Securities 2020 PLC announced on 1 November 2017 that the name of the Company was changed to PGIT Securities 2020 PLC. The name change was registered at Companies House on the same day and the Registrar of Companies issued the Certificate of Incorporation on change of name.
Parent Company
The Company is a wholly owned subsidiary of Premier Global Infrastructure Trust PLC (formerly Premier Energy and Water Trust PLC) (the "Parent Company"), the name of the Parent Company was changed on 1 November 2017 to reflect a change of emphasis within the Company's portfolio.
Objective and principal activity
The Company's principal objective is to provide Zero Dividend Preference Shares with a predetermined final capital entitlement. The principal activity of the Company is to be the issuer of ZDP Shares.
Key performance indicator
The key performance indicator of the Company is the ZDP Share Cover. This is based on the Parent Company's Gross Assets less Current Liabilities divided by its shareholders' funds at the end of each year (the ZDP Shares will have a final capital entitlement of 125.6519p on 30 November 2020, equivalent to a gross redemption yield of 4.75%, subject to there being sufficient capital in the Parent Company).
At 31 December 2017 the ZDP Share Cover was 1.73 times (2016: 1.74 times).
Principal risks
The principal financial risks the Company faces can be found in note 8 to the Financial Statements. The Board considers that the material non-financial risk which the Company faces is the ability to repay the final capital entitlement of the ZDP Shares.
Final capital entitlement - the ZDP Shares offer a pre-determined rate of growth in capital entitlement to be paid on
30 November 2020.
The Directors' have carried out a robust assessment of the Company's principal risks and its current position. The principal risks relating to the viability of the Company and the procedures in place to monitor and mitigate them are included in the summary of principal risks set out in note 8 on pages 18 and 19.
Based on the above assessment the Directors confirm that they have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities to 30 November 2020 (the due date of the 2020 ZDP Shares final capital entitlement).
Future prospects
The future of the Company is dependent upon the success of the investment strategy of the Parent Company.
For and on behalf of the Board
Kasia Robinski
Director
5 March 2018
Directors' Report
The Directors present their Report and the audited financial statements of PGIT Securities 2020 PLC (formerly PEWT Securities 2020 PLC), domiciled and registered in England and Wales number 9863364 (the "Company") for the year ended 31 December 2017. The Company's registered office is Eastgate Court, High Street, Guildford, Surrey GU1 3DE.
Business Review
This section of the Directors' Report provides a review of the Company's business.
Objective and principal activity
The Company's principal objective is to provide Zero Dividend Preference Shares with a predetermined final capital entitlement. The principal activity of the Company is to be an issuer of ZDP Shares.
Parent Company
The Company is a wholly owned subsidiary of Premier Global Infrastructure Trust PLC (formerly Premier Energy and Water Trust PLC) (the "Parent Company").
Share capital
The Company has one class of share which carries no right to fixed income. The authorised and issued share capital of the Company is 50,000 ordinary shares issued at £1 which have been 25% called.
Assets
The Company's total assets comprise an amount of £26,468,000 (2016: £25,267,000) receivable from the Parent Company.
Retained earnings and dividend
The loss after taxation for the period amounted to £1,201,000 (2016: £1,143,000). The Directors have not declared a dividend in respect of the period.
Directors
The Directors of the Company who were in office during the period and up to the date of signing the financial statements were:
Geoffrey Burns (Chairman)
Ian Graham
Gillian Nott OBE
Kasia Robinski (appointed on 28 February 2017)
Charles Wilkinson (retired on 25 April 2017)
Going concern
The Directors believe that the Company has adequate financial resources to continue in operational existence for the foreseeable future. They therefore believe it is appropriate to adopt a going concern basis in preparing the financial statements.
Auditor's right to information
Each of the Directors confirms that:
•so far as he/she is aware, there is no relevant audit information of which the auditors are unaware; and
•he/she has taken all the steps that he/she ought to have taken as a Director in order to make himself/herself aware of any relevant audit information and to establish that the Company's auditors are aware of that information.
Reappointment of Auditors
The present auditor, KPMG LLP, have expressed their willingness to continue in office and in accordance with Section 487(2) of the Companies Act 2006, will be deemed to be re-appointed. Following a competitive tender process KPMG LLP were appointed as the Company's new external auditor for the year ended 31 December 2017 following the resignation of Ernst & Young LLP as the Company's previous auditor. However, pursuant to Section 488 of the Act, any member(s) representing at least 5% of the Company's total voting rights may prevent the deemed re-appointment by depositing a notice to that effect (either in hard copy or electronic format) not later than 28 days after the dispatch of the Annual Report and financial statements to members.
By order of the Board
Kasia Robinski
Director
5 March 2018
Statement of Directors' Responsibilities in respect of the Annual Report and the Financial Statements
The Directors are responsible for preparing the Annual Report and financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with International Financial Reporting Standards.
Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the 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 International Financial Reporting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
• assess the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and
• use the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and 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.
Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, and Directors' Report that comply with that law and those regulations.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Parent Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Responsibility statement of the Directors in respect of the annual financial report
We confirm that to the best of our knowledge:
• the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fairview of the assets, liabilities, financial position and profit or loss of the Company; and
•the Strategic Report includes a fair review of the development and performance of the business and the position of the issuer, together with a description of the principal risks and uncertainties that they face
We consider the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy.
For and on behalf of the Board
Kasia Robinski
Director
5 March 2018
Independent Auditor's Report
to the members of PGIT Securities 2020 PLC (formerly PEWT Securities 2020 PLC)
1. Our opinion is unmodified
We have audited the financial statements of PGIT Securities 2020 plc ("the Company") for the year ended 31 December 2017 which comprise the Income Statement, Balance Sheet, Statement of Changes in Equity, and Cashflow Statement, and the related notes, including the accounting policies in note 1.
In our opinion:
• the financial statements give a true and fair view of the state of the Company's affairs as at 31 December 2017 and of the Company's loss for the year then ended;
• the financial statements have been properly prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU);
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our responsibilities are described below. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion. Our audit opinion is consistent with our report to the audit committee.
We were appointed as auditor by the members on 13 November 2017. The period of total uninterrupted engagement is for the one financial year ended 31 December 2017. We have fulfilled our ethical responsibilities under, and we remain independent of the Company in accordance with, UK ethical requirements including the FRC Ethical Standard as applied to listed public interest entities. No non-audit services prohibited by that standard were provided.
2. Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. We summarise below the key audit matter, in arriving at our audit opinion above, together with our key audit procedures to address this matter and, as required for public interest entities, our results from those procedures. This matter was addressed, and our results are based on procedures undertaken, in the context of, and solely for the purpose of, our audit of the financial statements as a whole, and in forming our opinion thereon, and consequently are incidental to that opinion, and we do not provide a separate opinion on this matter.
| Key Audit Matter | The risk | Our response |
| Recoverability of debt due from parent Company £26.5 million (2016: £25.3 million) Refer to page 16 (accounting policy) and page 17 (financial disclosures). | Low risk, high value The carrying amount of the intragroup debtor balance represents 100% of the Company's total assets. The recoverability is not at a high risk of significant misstatement or subject to significant judgement. However, due to their materiality in the context of the financial statements, this is considered to be the area that had the greatest effect on our audit. | Our procedures included: Tests of detail: Assessing 100% of debtors to identify, with reference to the Parent Company's draft balance sheet, whether they have a positive net asset value and therefore coverage of the debt owed, as well as assessing whether the Parent Company has historically been profit-making. Assessing the parent company audit: Assessing the work performed by the Parent Company audit team, and considering the results of that work, on those net assets, including assessing the liquidity of the assets and therefore the ability of the Parent Company to fund the repayment of the receivable. Our results: We found the Company's assessment of the recoverability of the Parent Company debtor balance to be acceptable. |
3. Our application of materiality and an overview of the scope of our audit
Materiality for the financial statements as a whole was set at £265,000, determined with reference to a benchmark of total assets for the Company, of which it represents 1%.
We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements exceeding £13,000, in addition to other identified misstatements that warranted reporting on qualitative grounds.
Our audit of the Company was undertaken to the materiality level specified above and was all performed via the administrator's head office in London.
4. We have nothing to report on going concern
We are required to report to you if we have concluded that the use of the going concern basis of accounting is inappropriate or there is an undisclosed material uncertainty that may cast significant doubt over the use of that basis for a period of at least twelve months from the date of approval of the financial statements. We have nothing to report in these respects.
5. We have nothing to report on the other information in the Annual Report
The Directors are responsible for the other information presented in the Annual Report together with the financial statements. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except as explicitly stated below, any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work we have not identified material misstatements in the other information.
6. We have nothing to report on the other matters on which we are required to report by exception
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 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.
We have nothing to report in these respects.
7. Respective responsibilities
Directors' responsibilities
As explained more fully in their statement set out on page 5, the Directors are responsible for: the preparation of the financial statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or other irregularities (see below), or error, and to issue our opinion in an auditor's report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud, other irregularities or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
A fuller description of our responsibilities is provided on the FRC's website at:
www.frc.org.uk/auditorsresponsibilities.
Irregularities - ability to detect
Our audit aimed to detect non-compliance with relevant laws and regulations (irregularities) that could have a material effect on the financial statements. In planning and performing our audit, we considered the effect of laws and regulations in respect of the Company's qualification as an Investment Trust under UK tax legislation, any breach of which could lead to the Company losing various deductions and exemptions from UK corporation tax. We identified these areas through our sector experience and discussion with the Directors, the manager and the administrator (as required by auditing standards). In addition we had regard to laws and regulations in other areas including such as financial reporting and company legislation.
We considered the extent of compliance with those laws and regulations that directly affect the financial statements, being the Company's qualification as an Investment Trust for tax purposes and financial reporting (including related company legislation), as part of our procedures on the related financial statement items. For the remaining laws and regulations, we made enquiries of Directors, the manager and the administrator (as required by auditing standards).
We communicated identified laws and regulations throughout our team and remained alert to any indications of non.compliance throughout the audit.
As with any audit, there remained a higher risk of non-detection of irregularities, as these may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls.
8. The purpose of our audit work and to whom we owe our responsibilities
This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members, as a body, for our audit work, for this report, or for the opinions we have formed.
Philip Merchant (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
319 St Vincent St
Glasgow
G2 5AS
5 March 2018
Income Statement
for the year ended 31 December 2017
| From 9 November 2015 | |||
| Year ended | (the date of incorporation) | ||
| 31 December 2017 | to 31 December 2016 | ||
| Notes | £000 | £000 | |
| Finance costs* | (1,201) | (1,143) | |
| Loss before taxation | (1,201) | (1,143) | |
| Taxation | 4 | - | - |
| Loss for the period | (1,201) | (1,143) |
All items derive from continuing operations; the Company does not have any other recognised gains or losses.
*These costs relate to the provision for compound growth entitlement of the Zero Dividend Preference Shares.
The notes on pages 15 to 20 form part of these financial statements.
Balance Sheet
at 31 December 2017
| 31 December 2017 | 31 December 2017 | ||
| Notes | £000 | £000 | |
| Current assets | |||
| Amount due from Parent Company | 5 | 26,468 | 25,267 |
| Total assets | 26,468 | 25,267 | |
| Creditors: amounts falling due after more than one year | |||
| Other financial liabilities | 6 | (26,418) | (25,217) |
| Net assets | 50 | 50 | |
| Equity attributable to Ordinary Shareholders | |||
| Share capital | 9 | 50 | 50 |
| Capital contribution | 5 | 2,344 | 1,143 |
| Accumulated losses | (2,344) | (1,143) | |
| Total equity attributable to Ordinary Shareholders | 50 | 50 |
The financial statements on pages 11 to 20 of PGIT Securities 2020 PLC (formerly PEWT Securities 2020 PLC), company number 9863364, were approved by the Board on 5 March 2018 and were signed on its behalf by:
Kasia Robinski
Director
The notes on pages 15 to 20 form part of these financial statements.
Statement of Changes in Equity
for the year ended 31 December 2017
| Ordinary | ||||
| Share | Capital | Accumulated | ||
| Capital | Contribution | Losses | Total | |
| 2017 | 2017 | 2017 | 2017 | |
| £000 | £000 | £000 | £000 | |
| Balance at 31 December 2016 | 50 | 1,143 | (1,143) | 50 |
| Loss for the year | - | - | (1,201) | (1,201) |
| Contribution by Parent Company | - | 1,201 | - | 1,201 |
| Balance at 31 December 2017 | 50 | 2,344 | (2,344) | 50 |
| Ordinary | ||||
| Share | Capital | Accumulated | ||
| Capital | Contribution | Losses | Total | |
| 2016 | 2016 | 2016 | 2016 | |
| £000 | £000 | £000 | £000 | |
| Balance at start of period | - | - | - | - |
| Issue of Ordinary Shares | 50 | - | - | 50 |
| Loss for the period | - | - | (1,143) | (1,143) |
| Contribution by Parent Company | - | 1,143 | - | 1,143 |
| Balance at 31 December 2016 | 50 | 1,143 | (1,143) | 50 |
The notes on pages 15 to 20 form part of these financial statements.
Cashflow Statement
for the year ended 31 December 2017
| From 9 November 2015 | ||
| Year ended | (the date of incorporation) | |
| 31 December 2017 | to 31 December 2016 | |
| £000 | £000 | |
| Loss before taxation | (1,201) | (1,143) |
| Adjustments for: | ||
| Increase in trade and other receivables | 1,201 | (24,074) |
| Increase in trade and other payables | - | 25,217 |
| Net cash inflow from operating activities | - | - |
| Increase in cash and cash equivalents | - | - |
| Cash and cash equivalents at the start of the period | - | - |
| Cash and cash equivalents at the end of the period | - | - |
The notes on pages 15 to 20 form part of these financial statements.
Notes to the Financial Statements
for the year ended 31 December 2017
1. GENERAL INFORMATION
PGIT Securities 2020 PLC (formerly PEWT Securities 2020 PLC) (the "Company") was incorporated in England and Wales on 9 November 2015 (company number 9863364) and is a wholly owned subsidiary of Premier Global Infrastructure Trust PLC (formerly Premier Energy and Water Trust PLC) (the "Parent Company") which is an investment trust registered in England and Wales. The Company commenced operation on 31 December 2015 as part of the reconstruction of the Parent Company when it issued 24,073,337 New Zero Dividend Preference Shares. The Board of PEWT Securities 2020 PLC announced on 1 November 2017 that the name of the Company was changed to PGIT Securities 2020 PLC. The name change was registered at Companies House on the same day and the Registrar of Companies issued the Certificate of Incorporation on change of name.
The Company's principal objective is to provide Zero Dividend Preference Shares with a predetermined final capital entitlement.
The financial statements are prepared for the year ended 31 December 2017.
2. ACCOUNTING POLICIES
2.1 Basis of Preparation
The financial information for the year ended 31 December 2017 has been prepared in accordance with International Financial Reporting Standards ("IFRSs") and with those parts of the Companies Act 2006 applicable to companies reporting under IFRSs as adopted by the European Union. These comprise standards and interpretations approved by the International Accounting Standards Board ("IASB"), together with interpretations of the International Accounting Standards and Standing Interpretations Committee approved by the International Accounting Standards Committee ("IASC") that remain in effect, to the extent that IFRSs have been adopted by the European Union.
The financial statements have been prepared on a going concern basis and on the historical cost basis.
The functional currency of the Company is Sterling as this is the currency of the primary economic environment in which the Company operates. Accordingly, the financial statements are presented in Sterling rounded to the nearest thousand pounds.
A number of new standards, amendments to standards and interpretations are effective for annual periods beginning on or after 1 January 2018 and have not been applied in preparing these financial statements (major changes and new standards issued are detailed below). None of these had a significant effect on the measurement of the amounts recognised in the financial statements of the Company.
IFRS 9 - Financial Instruments (2014) replaces IAS 39 and deals with a package of improvements including principally a revised model for classification and measurement of financial instruments, a forward looking expected loss impairment model and a revised framework for hedge accounting. In terms of classification and measurement the revised standard is principles based depending on the business model and nature of cash flows. Under this approach instruments are measured at either amortised cost or fair value. Under IFRS 9 equity and derivative investments will be held at fair value because they fail the 'solely payments of principal and interest' test and debt investments will be held at fair value because the business model is to manage them on a fair value basis. The scope of the fair value option is reduced within IFRS 9. The standard is effective from 1 January 2018 with earlier application permitted. The Company does not plan to early adopt this standard.
IFRS 15 Revenue from Contracts with Customers (effective 1 January 2018) specifies how and when an entity should recognise revenue and enhances the nature of revenue disclosures. Given the nature of the Company's revenue streams from financial instruments the provisions of this standard are not expected to be applicable.
2.2 Use of Estimates
The preparation of financial statements requires the Directors to make estimates and assumptions that affect the items reported in the Balance Sheet and Income Statement and the disclosure of contingent assets and liabilities at the date of the financial statements. Although these estimates are based on management's best knowledge of current facts, circumstances and, to some extent, future events and actions, the Company's actual results may ultimately differ from those estimates, possibly by a significant amount. There have not been any instances requiring any significant estimates or judgements in the year.
2.3 Segmental Reporting
The chief operating decision maker has been identified as the Board of the Company. The Board reviews the Company's internal management accounts in order to analyse performance. The Directors are of the opinion that the Company is engaged in one segment of business, being the issue of Zero Dividend Preference Shares to fund the operation of the Parent Company.
2.4 Capital Contribution
The Parent Company has entered into the Undertaking Agreement whereby the Parent Company will undertake to contribute (by way of gift, capital contribution or otherwise) such amount as will result in PGIT Securities 2020 PLC (formerly PEWT Securities 2020 PLC) having sufficient assets to satisfy the then current or, as the case maybe, Final Capital Entitlement of the ZDP Shares on the repayment date of 30 November 2020 or any earlier winding up of PGIT Securities 2020 PLC (formerly PEWT Securities 2020 PLC) under the Articles. The contributions from the Parent Company equate to the return of the ZDP Shares and are accounted for on an accruals basis and recognised in the Statement of Changes in Equity.
2.5 Zero Dividend Preference Shares
The Zero Dividend Preference Shares are classified as a financial liability and shown as a liability in the balance sheet. The Zero Dividend Preference Shares are initially measured at fair value being the proceeds of issue less transaction costs and are subsequently measured at amortised cost under the effective interest rate method.
The provision for compound growth entitlement of the Zero Dividend Preference Shares is recognised through the Income Statement and analysed as a finance cost.
2.6 Taxation
The tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on the taxable profit for the period. Taxable profit differs from net profit as reported in the Income Statement because it excludes items of income or expenses that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company's liability for current tax is calculated using tax rates that were applicable at the balance sheet date.
Deferred taxation is recognised in respect of all temporary differences that have originated but not reversed at the financial reporting date, where transactions or events that result in an obligation to pay more tax in the future or right to pay less tax in the future have occurred at the financial reporting date. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the temporary differences can be deducted. Deferred tax assets and liabilities are measured at the rates applicable to the legal jurisdictions in which they arise.
3. ADMINISTRATIVE EXPENSES
The Company's administrative expenses are met by its Parent Company. The audit fee of £4,000 payable to KPMG LLP for the period ended 31 December 2017 will be paid by its Parent Company. The Company has no employees.
4. TAXATION ON ORDINARY ACTIVITIES
(a) Taxation charge on ordinary activities
| From 9 November 2015 | ||
| Year ended | (the date of incorporation) | |
| 31 December 2017 | to 31 December 2016 | |
| £000 | £000 | |
| Total tax charge for the year at 19.00% (2016: 20.00%) | - | - |
(b) Factors affecting the tax charge for the year
The tax assessed for the period is lower than the standard rate of corporation tax in the UK of 19.00%. The differences are explained below:
| From 9 November 2015 | ||
| Year ended | (the date of incorporation) | |
| 31 December 2017 | to 31 December 2016 | |
| £000 | £000 | |
| Loss on ordinary activities before taxation | (1,201) | (1,143) |
| Corporation tax credit of 19.25% (2016: 20.00%) | (231) | (229) |
| Effects of: | ||
| Excess expenses | 231 | 229 |
| Total tax charge | - | - |
No provision for deferred taxation has been made in the current period.
The Company has not recognised a deferred tax assets of £398,000 (2016: £194,000) arising as a result of excess expenses.
5. AMOUNTS DUE FROM PARENT COMPANY
| 31 December 2017 | 31 December 2016 | |
| £000 | £000 | |
| Funds raised through ZDP share issue | 24,074 | 24,074 |
| Amount due in respect of issued share capital | 50 | 50 |
| Additions under undertaking agreement | 2,344 | 1,143 |
| Total due | 26,468 | 25,267 |
In 2016, funds raised through the ZDP Share Issue after the deduction of issue costs totalled £23.6 million. These funds have been transferred to the Parent Company under an Undertaking Agreement pursuant to which the Parent Company agrees to contribute to the Company such amount as will result in the Company having sufficient assets to satisfy the then current or, as the case may be, the final capital entitlement of the ZDP Shares (scheduled repayment date of 30 November 2020, however the facility is repayable on demand).
The Directors believe the carrying amount due from the Parent Company approximates its fair value.
6. OTHER FINANCIAL LIABILITIES
| 31 December 2017 | 31 December 2016 | |
| £000 | £000 | |
| 24,073,337 Zero Dividend Preference Shares of £0.01 | 26,418 | 25,217 |
The accrued capital entitlement of each Zero Dividend Preference Share was 109.74p as at 31 December 2017 (2016: 104.75p).
7. ZERO DIVIDEND PREFERENCE SHARES
| 31 December 2017 | 31 December 2017 | |
| Number of Shares | Number of Shares | |
| Balance at start of year | 24,073,337 | - |
| 24,073,337 Shares issued during the year | - | 24,073,337 |
| Balance at end of year | 24,073,337 | 24,073,337 |
In 2016, the Company issued 24,073,337 Zero Dividend Preference Shares ("ZDP Shares") at 100 pence per share on 31 December 2015. The ZDP Shares have an entitlement to receive a fixed cash amount on 30 November 2020, being the maturity date, of 125.6519 pence per share, but do not receive any dividends or income distributions.
The ZDP Shares do not carry the right to vote at general meetings of the Company, although they carry the right to vote on certain proposals which would be likely to materially affect their position. ZDP Shares also carry the right to vote, as a class, on certain matters that relate to the activities of the Group.
The fair value of the ZDP Shares at 31 December 2017, based on the quoted bid price at that date, was £26,842,000 (2016: £26,842,000). The fair value of the ZDP Shares is classified as Level 1 under the hierarchy of fair value measurements.
8. RISK MANAGEMENT
The Company's only financial assets is an amount due from the Parent Company, Premier Global Infrastructure Trust PLC (formerly Premier Energy and Water Trust PLC), repayable on 30 November 2020 (see note 5).
The main risks arising from the Company's financial instruments are market risk, liquidity risk and credit risk.
Market risk
The market risk comprises three elements - price risk, currency risk and interest rate risk.
Market risk is the possibility of financial loss to the Company arising from fluctuations in the value of investments held in its Parent Company, Premier Global Infrastructure Trust PLC (formerly Premier Energy and Water Trust PLC). There is no currency risk as there are no foreign currency transactions or balances, there is no interest rate exposure as interest rates are fixed and assets and liabilities are stated at amortised cost and there is no significant other price risk.
Liquidity risk
The liquidity risk is the possibility of failure of the Company to realise sufficient assets to meet its financial liabilities. The Company is not subject to significant liquidity risk and had no borrowings at any time during the period ended 31 December 2017.
The Company's only class of non-equity share capital in issue: Zero Dividend Preference Shares, which give shareholders the right to a repayment entitlement that accrues to provide a predetermined level of growth equivalent to a gross redemption yield of 4.5%, per annum based on the issue price of 100p on issue on 31 December 2015 up to the repayment date on 30 November 2020. The final capital entitlement payable at this date will be £30,248,605. The Company has an agreement with its Parent Company, Premier Global Infrastructure Trust PLC (formerly Premier Energy and Water Trust PLC), whereby the Parent Company has entered into the Undertaking Agreement pursuant to which the
Parent Company has undertaken to contribute (by way of gift, capital contribution or otherwise) such amount as will result in PGIT Securities 2020 PLC (formerly PEWT Securities 2020 PLC) having sufficient assets to satisfy the then current or, as the case may be, Final Capital Entitlement of the ZDP Shares on the ZDP Repayment Date of 30 November 2020 or any earlier winding up of PGIT Securities 2020 PLC (formerly PEWT Securities 2020 PLC) under the Articles.
The Parent Company has given certain undertakings for the benefit of PGIT Securities 2020 PLC (formerly PEWT Securities 2020 PLC) and the ZDP Shareholders whilst the Parent Company remains liable to make any payment under the Undertaking Agreement.
Full repayment of the ZDP Shares is, however, subject to sufficient growth being generated in the portfolio of the Company's Parent Company by the repayment date.
Credit risk
The total credit exposure of the Company at 31 December 2017 was £26,418,000 (2016: £25,217,000) and consisted of the following:
| 31 December 2017 | 31 December 2016 | |
| £000 | £000 | |
| 24,073,337 Zero Dividend Preference Shares of £0.01 | 26,418 | 25,217 |
The contractual maturities of the Company's financial liabilities at 31 December 2017, based on the earliest date on which payment can be required, were as follows:
| 31 December 2017 | 31 December 2017 | 31 December 2016 | 31 December 2016 | |
| Between | Between | |||
| one and five | one and five | |||
| years | Total | years | Total | |
| £000 | £000 | £000 | £000 | |
| Zero Dividend Preference Shares | (30,249) | (30,249) | (30,249) | (30,249) |
9. SHARE CAPITAL
The Company has one class of share which carries no right to fixed income. The authorised and issued share capital of the Company is 50,000 Ordinary Shares issued at £1 which have been 25% called.
10. RELATED PARTIES
The Directors are all directors of the Parent Company and received no remuneration for their services to the Company during the period. As mentioned in note 4 above the following administrative expenses have been paid during the year by the Parent Company; Registrar's fees paid £5,850, London Stock Exchange fees paid £5,000, and audit fee payable of £4,000. The amount due from the Parent Company was £26,468,000 as at 31 December 2017 (2016: £25,267,000) (note 5).
11. PARENT COMPANY UNDERTAKING
The Company is a wholly owned subsidiary of its ultimate holding company and controlling party, Premier Global Infrastructure Trust PLC (formerly Premier Energy and Water Trust PLC), a company registered in England and Wales. These financial statements therefore provide information about the Company as an individual undertaking. Copies of the Parent Company's Annual Report may be obtained from the Company Secretary, Premier Portfolio Managers Limited, at Eastgate Court, High Street, Guildford, Surrey GU1 3DE or on the website: www.premierfunds.co.uk
PGIT SECURITIES 2020 PLC
(formerly PEWT Securities 2020 PLC)
Eastgate Court
High Street
Guildford
Surrey GU1 3DE
