Jupiter Annual Report 2010 - Jupiter Asset Management

Financial statements – continuation | Notes to the financial statements
18. Financial instruments continued
31 December 2010
Financial assets at fair
value through profit or loss
2010
£m
Available for
sale investments
2010
£m
Opening balance – 13.2
Arising on acquisition – –
Purchases – –
Sales – (3.3)
Transfer in/(out) of level 3 – –
Revaluation – 10.3
Closing balance – 20.2
■■Investments
Available for sale investments
As at 1 January 2010, the Group owned 12.89 per cent. of the “A” ordinary shares in Cofunds. During the year 13,186,760 “A” ordinary shares
were disposed of leaving a holding of 9.68 per cent. of the “A” ordinary shares as at 31 December 2010. At year end the Group revalued the
9.68 per cent. holding and a £10.3m (2009: £nil) gain was recognised through the available for sale reserve.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include seed capital investments in funds and investments made through a subsidiary
undertaking, Jupiter Investment Management Group Limited.
The fair values of quoted equity shares classified under level 1 are determined by reference to published price quotations in an active market.
Investments classified under level 2 are investments in non-quoted investment funds. The fair value of a fund’s unit is determined to be a
proportion of the net asset value of the fund. If there are significant liquidity discounts applied (e.g. when the funds have redemption gates or
lock-up periods), the effect of the adjustments will be to put the fair value in level 3. There is no such indication in investments classified under
level 2 in 2010 for Group or Company.
The Group does not trade in derivatives. Derivatives are held to hedge specific exposures and have maturities designed to match the exposures
they are hedging. It is the intention to hold both the financial instruments giving rise to the exposure and the derivative hedging them until maturity
and therefore no net gain or loss is expected to be realised. The derivatives are held at fair value which represents the price to exit the
instruments at the balance sheet date. Movements in the fair value are included in the consolidated income statement.
■■Interest rate swaps
The Group uses interest rate swaps to manage its exposure to interest rate movements on its interest bearing loans and borrowings. The fair
value of these contracts is recorded in the balance sheet and is determined by discounting future cash flows at the prevailing market rates at the
balance sheet date. No contracts are designated as hedging instruments, as defined in IAS 39, and consequently all changes in fair value are
taken to the consolidated income statement.
In 2007, the Group entered into a £300m amortising interest rate swap agreement with The Royal Bank of Scotland plc, at an interest rate of
6.2475 per cent. The notional amount of the swap was £275m from 26 November 2008 until 26 February 2009, £225m until 26 May 2009 and
£212.5m until maturity on 26 August 2010.
In November 2010, the Group entered into two swap transaction agreements with Credit Suisse for periods of three and four years. Under the
terms of the agreements, the Group has agreed to pay a fixed interest rate of 1.33 per cent. on a notional amount of £35m and 1.6175 per cent.
on a further notional amount of £35m, settling quarterly.
At 31 December 2010, the notional amount of outstanding interest rate swaps is £70.0m (2009: £212.5m).
■■Total return swap
The Group has entered into a total return swap arrangement with Bank of America Merrill Lynch over certain of its holdings of investments in seed
funds. Gains and losses on the swap contracts are recognised and settled monthly in accordance with the terms of the contract. At 31 December
2010, the notional value of the swap was £38.7m (2009: £40.3m). As the swap is settled and reset monthly, the fair value of the swap at 31
December 2010 was £nil (2009: £nil).
Annual Report & Accounts 2010 83 Jupiter Fund Management plc