ANNUAL REPORT AND FINANCIAL STATEMENTS 2011 | 69
14. Financial investments The following assets are designated as available for sale:
Unquoted investments At 1 January
Fair value movement in the year
Fair value gains transferred to the Income Statement At 31 December
2011 £m
3.5 1.5
(3.3) 1.7
Unquoted investments include the Group’s direct investment, co-investments and carried interest entitlement in private equity limited partnerships. The investments have no fixed maturity date or coupon rate.
The fair value of the unquoted investments has been estimated using International Private Equity and Venture Capital Valuation Guidelines.
The Directors believe that the estimated fair values resulting from the valuation technique applied to unquoted shares which are recorded in the Statement of Financial Position, and the related realised fair value gains recorded in the Income Statement, are reasonable and the most appropriate at the reporting date.
Included within the unquoted financial investments at 31 December 2011 are £0.1m (31 December 2010: £0.1m) of equity instruments measured at the price of recent investments. The fair value of these investments cannot be measured reliably as the Group does not have access to the underlying information to produce fair value valuations for these investments. These investments consist of loans and carried interest in private equity limited partnerships. These investments are managed by external fund managers and the Group obtains income when the investments are realised. The Group intends to hold these investments until all the private equity investments are realised. In 2011, the Group received £0.4m (2010: £nil) in respect of the investments held at cost.
15. Acquisition of subsidiaries The acquisition of Thames River Capital Group was made on 1 September 2010. Section (a) discloses the 2010 acquisition note andsection (b) discloses the 2011 updates for changes in consideration.
(a) 2010 – Acquisition of Thames River Capital Group F&C Asset Management plc (FCAM) acquired and gained control of the Thames River Capital Group (TRC or the TRC Group) on 1 September 2010 (‘Completion’ date). TRC is a London-based asset management business that provides specialist products and services to wholesale and wealth management clients. TRC manages a range of specialist high alpha and absolute return products.
The acquisition of TRC represented an attractive opportunity to broaden F&C’s specialist investment management capabilities in multiple product areas, augment its sales and marketing skills and expand its distribution footprint, thereby accelerating the achievement of F&C’s strategic objectives.
The TRC Group operates its business through two limited liability partnerships (LLPs), Thames River Capital LLP and Thames River Multi- Capital LLP. Between them they had seven Investment Teams at 1 September 2010.
FCAM acquired 100% ownership of Thames River Capital Group Limited which, in turn, owned, directly or indirectly, 100% of the following entities at the date of acquisition:
Thames River Capital Holdings Limited Thames River Capital UK Limited (TRC UK) TRC UK’s interest in Thames River Capital LLP TRC UK’s interest in Thames River Multi-Capital LLP Thames River Capital GmbH
As a result of the acquisition, F&C indirectly acquired TRC UK’s economic and membership interests in the LLPs.
The consideration payable by FCAM for the acquisition will be up to £53.6m (excluding the adjustment in respect of the consolidated net assets target) comprised as follows:
(i) The initial consideration: • £33.6m was paid in cash at Completion; and
• The consideration paid at Completion will be subject to an adjustment if the consolidated net asset value of the TRC Group at the Completion date exceeds or falls short of an agreed target amount of £9.0m.
(ii) The conditional consideration payment:
• Up to a further £20.0m of conditional consideration is payable, in two instalments, shortly after 31 December 2011 and 30 June 2012, and is contingent on the TRC Group achieving certain financial targets at each of these dates;
• The first instalment is a variable amount dependent on the Run-rate Earnings Before Interest, Taxation, Depreciation and Amortisation (Run-rate EBITDA) on an annualised basis as at 31 December 2011. This instalment becomes payable if the December 2011 Run-rate EBITDA exceeds £12.5m and the amount payable increases on a straight-line basis from zero to a maximum of £10.0m, which is payable if the December 2011 Run-rate EBITDA equals or exceeds £15.0m;
2010 £m
2.2 1.3 –
3.5
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