TIDMIERE
RNS Number : 2006U
Invista European Real Estate Trust
19 December 2011
19 December 2011
INVISTA EUROPEAN REAL ESTATE TRUST SICAF
FULL YEAR RESULTS FOR 12 MONTHS ENDED 30 SEPTEMBER 2011
The Invista European Real Estate Trust SICAF (the "Company"/
"Group") has today announced its results for the year ended 30
September 2011.
Financial Highlights
-- Property assets of EUR451.1 million (30 September 2010:
EUR515.7 million) following disposals of EUR50.2 million. Portfolio
now comprises 39 properties with over eighty six per cent in the
two main European markets, France and Germany
-- Portfolio valuation decreased by 3.16% on a like for like basis over the year
-- Adjusted NAV of EUR0.52 per share (30 September 2010: EUR0.54
per share), reflecting the weakening of property valuations in the
second half of the year
-- Earnings on an EPRA basis of EUR4.7 million
-- Loss before tax EUR11.5 million (30 September 2010: EUR1.1 million)
-- Loss per share of EUR0.045 (30 September 2010: EUR0.0002)
-- Drawn down debt facilities of EUR298.0 million resulting in a
loan-to-value ratio of 66.1% (30 September 2010: 66.6%). The
Company has repaid over EUR49.7 million of borrowings over the last
year
-- Group cash of EUR36.2 million (excluding tenants' deposits and escrow amounts) at year end.
Operational highlights
-- Five properties sold for EUR50.2 million at prices, on
average, at 1.3% discount to the prevailing valuation
-- Void levels stabilised at circa 10.2% of income at year end
-- Lease lengths stabilised with a weighted average of 6.25
years as at 30 September 2011 (30 September 2010: 6.22 years)
Investment manager and strategy
-- Post year-end, the Company appointed Internos Real Investors
("Internos"), a leading pan-European property fund manager, to take
on the management of the Company's assets, following a rigorous
selection & approval process
-- The Company announced in June that it proposed to change its
investment objective and policy to a structured realisation. This
was approved by Shareholders at a general meeting following the
financial year end and discussions continue with the Commission de
Surveillance du Secteur Financier on this point.
Commenting, Tom Chandos, Chairman of the Invista European Real
Estate Trust, said:
"The appointment of Internos represents a new start for the
Company and its key managers worked assiduously to prepare for the
assumption of the management role. This makes the Company well
placed to face the challenges of the macroeconomic environment in
Europe, with financing for commercial real estate becoming once
more very restricted and tenants increasingly cautious which will
have inevitable impact on both the valuation of the Company's
properties and their liquidity."
For further information:
Ludovic Bernard
Internos Real Investors 020 7355 8800
Michael Sandler
Hudson Sandler 020 7796 4133
Invista European Real Estate Trust Company Summary
As at 30 September 2011, Invista European Real Estate Trust
SICAF (the "Company") and its subsidiaries (together the "Group")
held a diversified real estate portfolio comprising 39 commercial
properties across six Continental European countries. The combined
aggregate value of these properties was EUR451.1 million.
At the time of IPO on 20 December 2006, the stated long term
investment objective of the Company was to provide shareholder
returns through investing in a diversified commercial real estate
portfolio in Continental Europe with the potential for income and
capital growth. The geographical focus of the Group was France and
Germany due to the relative stability, transparency and liquidity
of these markets.
On 14 October 2011 an Extraordinary General Meeting ('EGM') of
the Company's shareholders was held to approve a proposed new
investment objective to realise the existing property portfolio
owned by the Group and return capital to shareholders. This
resolution was approved by shareholders subject to approval by the
Commission de Surveillance du Secteur Financier ('CSSF'). The CSSF
has approved the appointment of Internos Real Limited ("Internos")
as investment manager and promoter and discussions continue with
the CSSF regarding the proposed new investment objective and
policy.
Financial Summary
v Net Asset Value decreased during the year from EUR139.9
million to EUR136.1 million
v Net Asset Value per share decreased by 2.8% to EUR0.52
v Loss per share of EUR0.04503(2)
Year ended Year ended
30 Sep 11 30 Sep 10
----------------------------------- ----------- -----------
Net Asset Value ("NAV")(1,2) EUR136.1m EUR139.9m
----------------------------------- ----------- -----------
NAV per share (1,2) EUR0.52 EUR0.54
----------------------------------- ----------- -----------
NAV per share (1,2,4) GBP0.46 GBP0.46
----------------------------------- ----------- -----------
NAV per preference shares (5) EUR1.18 EUR1.20
----------------------------------- ----------- -----------
NAV per preference shares (4,5) 102.7p 103.2p
----------------------------------- ----------- -----------
Ordinary share price 28.0p 26.5p
----------------------------------- ----------- -----------
Preference share price 103.88p 107.3p
----------------------------------- ----------- -----------
Warrant price 6.75p 7.5p
----------------------------------- ----------- -----------
Share price discount to NAV (1,2) 39.1% 42.4%
----------------------------------- ----------- -----------
NAV total return -2.8% -52.0%
----------------------------------- ----------- -----------
Total Group assets less current
liabilities (6) EUR494.8m EUR553.4m
----------------------------------- ----------- -----------
Sources: Invista Real Estate Investment Management;
Datastream
(1) NAV is calculated using International Financial Reporting
Standards and adjusted to add back the change in fair value of the
warrants and deferred tax.
(2) As at 30 September 2011, deferred tax liabilities of EUR24.9
million, based upon temporary differences at the time of initial
recognition arising from transactions treated as asset acquisitions
have not been recognised in accordance with IAS12. The Group has
deferred tax assets of EUR14.2 million which also have not been
recognised.
(3) Loss for the period divided by the weighted average number
of ordinary shares in the year.
(4) EUR:GBP exchange rate used was EUR1.149 as at 30 September
2011; EUR1.161 as at 30 September 2010.
(5) The NAV for preference share is equal to the nominal value
plus accrued interest divided by the total number of preference
shares.
(6) Current Liabilities exclude banking facilities.
Performance Summary
Property performance
Year ended Year ended
30 Sep 11 30 Sep 10
EURm EURm
------------------------------------ ----------- -----------
Value of property assets* 451.1 515.7
------------------------------------ ----------- -----------
Current annualised rental income 36.8 42.1
------------------------------------ ----------- -----------
Estimated open market rental value
per annum 36.9 42.2
------------------------------------ ----------- -----------
*The company disposed of five properties valued at EUR50.8
million during the year.
Summary consolidated income statement
Year ended Year ended
30 Sep 11 30 Sep 10
EURm EURm
------------------------------------------- ----------- -----------
Net rental and other income 38.5 39.8
------------------------------------------- ----------- -----------
Net gain on disposal of investment
property 0.5 1.1
------------------------------------------- ----------- -----------
Net valuation gain / (loss) on derivative
financial instruments 0.2 7.4
------------------------------------------- ----------- -----------
Net valuation loss on investment property (16.2) (6.1)
------------------------------------------- ----------- -----------
Expenses (8.0) (9.0)
------------------------------------------- ----------- -----------
Net finance costs (26.5) (34.3)
------------------------------------------- ----------- -----------
Loss before tax (11.5) (1.1)
------------------------------------------- ----------- -----------
Taxation (0.2) 1.1
------------------------------------------- ----------- -----------
Loss for the year (11.7) -
------------------------------------------- ----------- -----------
Earnings and dividends
Year ended Year ended
30 Sep 11 30 Sep 10
--------------------------- ----------- -----------
Loss per share (euro) (1) (0.0450) (0.0002)
--------------------------- ----------- -----------
Bank borrowings
Year ended Year ended
30 Sep 11 30 Sep 10
-------------------------------------------- ----------- -----------
Borrowings EURm 298.0 343.7
-------------------------------------------- ----------- -----------
Borrowings as % of total assets less
current liabilities 60.2% 62.1%
-------------------------------------------- ----------- -----------
Borrowing as % of market value of property
assets 66.1% 66.6%
-------------------------------------------- ----------- -----------
BoS loan covenant of borrowings as
% of market value of property assets 82.5% 85.0%
-------------------------------------------- ----------- -----------
Estimated annualised total expense ratio (2)
Year ended Year ended
30 Sep 11 30 Sep 10
----------------------------------------------- ----------- -----------
As % of total assets less current liabilities
(2) 1.56% 1.63%
----------------------------------------------- ----------- -----------
As % of shareholders' funds (2,3) 5.78% 7.13%
----------------------------------------------- ----------- -----------
(1) Share price converted to Euro at exchange rate of EUR:GBP of
1.149 prevailing at 30 September 2011 and 1.161 prevailing at 30
September 2010. During the 2009 and 2010 financial years no
ordinary dividend was paid.
(2) The TER reflects the total of all operating costs associated
with running the Group, including the Investment Manager's annual
management charge, but excluding any costs associated with the day
to day maintenance of the assets.
(3) These calculations are presented as a percentage of average
shareholder's funds over the period.
Chairman's Statement
In a year which has got progressively more difficult, the
Company has made steady progress in strengthening its balance
sheet, with a programme of disposals generating EUR50.2 million of
net proceeds, allowing a reduction in net debt of EUR49.7 million.
At the same time, significant strategic changes have been
initiated, with the appointment of a new investment manager,
Internos Real Limited ("Internos"), having been announced in the
summer and implemented on 15(th) December 2011. A new investment
objective and policy has been proposed, which, having been approved
by shareholders in October 2011, is under discussion with the
Luxembourg financial regulator.
Adjusted net asset value declined modestly in the year from EUR
0.538 (46.4p) to a figure of EUR0.52 (45.5p) per share, reflecting
the weakening of property valuations in the second half of the year
and some further adverse movement in the valuation of interest rate
swaps, offset by retained earnings from operations; net earnings
(on an EPRA basis) were EUR4.7 million. The proceeds of the
property disposals allowed the level of net debt to fall to 60.2%
of total assets, compared to 62.1% in the previous year.
As at year end, the Company's property portfolio was valued at
EUR451.1 million and comprised 39 commercial property investments
across 6 countries (EUR515.7 million, 43 assets and 7 countries as
at 30 September 2010). The implementation of a range of asset
management initiatives made a positive contribution to the net
earnings of the Company with almost a third of portfolio income
re-negotiated during the year. Net property income returns and
lease lengths have remained stable at 7.53% (7.56%; 30 September
2010) and 6.25 years (6.22 years;30 September 2010) respectively.
Internos expects the Company to make further leasing and disposal
announcements in due course.
As has been previously reported, the parent company of Invista
Real Estate Management ("Invista"), the Company's then investment
manager, announced at the beginning of the financial year that it
intended to realise its assets. After initially exploring the
possibility of jointly acquiring the fund management arm, the
Company instead served notice on the manager and began a process of
selecting a new manager. Internos, a leading pan-European property
fund manager, was selected and, after all the necessary approvals
had been obtained, has now, since the financial year end, taken
over the management of the Company.
The Company announced at the same time as the selection of the
new manager that it proposed to change its investment objective and
policy to a structured realisation. This was approved, subject to
regulatory approval, by shareholders at a general meeting following
the financial year end. The Commission de Surveillance du Secteur
Financier ("CSSF"), has approved the appointment of Internos as
investment manager and promoter and discussions continue with the
CSSF regarding the proposed new investment objective and
policy.
In the meantime, the existing investment objective and policy
continue to apply, under which the Company has been pursuing an
accelerated, proactive programme of disposals (with EUR50.2 million
of sales in the past twelve months); Internos will be maintaining
this approach, in order to further reduce the Company's borrowings,
while discussions continue with the CSSF about the longer term
strategy.
The macroeconomic environment in Europe is extremely
challenging, with financing for commercial real estate becoming
once more very restricted and tenants increasingly cautious. This
has an inevitable impact on both the valuation of the Company's
properties and their liquidity. The corporate instability at
Invista has been very unhelpful to the Company, although at the
working level the team that has been responsible for the management
of the Company maintained a strong level of focus and commitment;
we wish them well in the future.
The appointment of Internos represents a new start for the
Company and its key managers worked assiduously to prepare for the
assumption of the management role. A number of former employees of
Invista have now joined Internos, including the entire Paris-based
team, so there should be a useful level of continuity and transfer
of knowledge. I therefore look forward to the challenges of the
coming years fortified both by the quality of the Company's
underlying assets and the commitment and enthusiasm of the new
investment manager.
Tom Chandos
16 December 2011
Investment Manager's Report
Invista Real Estate Investment Management ("IREIM") has been the
Investment Manager throughout the financial year concerned and
until 15(th) December 2011 when management was handed over to
Internos. The Investment Manager's Report was prepared by IREIM and
reviewed by Internos.
Results
The Company's Adjusted NAV as at 30 September 2011 was EUR0.523
(45.5p) per share. This decreased over the financial year by 2.8%
(1.9%) from EUR0.538 (46.4p) due principally to the combined effect
of a fall in property valuations of 3.16% and further reductions in
the mark-to-market valuation of the Company's interest rate
swaps.
Over the 12 months to September 2011, the Company generated net
earnings of EUR4.7 million as calculated on an EPRA basis.
In order to meet strategic objectives, the Company completed
five sales (including one part sale) totalling EUR50.2 million and
reduced borrowings by EUR49.7 million, accessing lower margin
financing at below 65% LTV.
Asset management initiatives completed included new lettings on
19,970 sqm of accommodation, generating net additional earnings of
EUR1.8 million on an annualised basis. On a like-for-like basis
(excluding sales), the weighted average lease length to first break
improved by 9.5% to 4.27 years.
The Market
Signs of economic recovery in the first half of 2011 in the
Eurozone, which had supported the region's property markets over
the past year, began to lose some of their momentum over the summer
and as a result GDP growth forecasts for the region have been
reduced in recent months.
Within the property market, the 'prime' sub-markets have,
according to CB Richard Ellis, experienced rental growth of 2.7% in
the 12 months to Q3 2011 (source: CB Richard Ellis Prime Eurozone
Index). By contrast, rents in secondary and tertiary sub-markets
generally remain weak as a result of high rates of availability in
older stock. Overall, investors and tenants are cautious and this
has constrained the volume of property leasing and investment
activity, particularly in countries on the Eurozone's
Periphery.
Property investment turnover has held up best in Europe's most
liquid markets (Germany and France) and its strongest economies
(Sweden and Central & Eastern Europe), which together accounted
for 73% of investment turnover in the 12 months to Q3 2011,
compared to a long-term average of 64% (source: CB Richard Ellis,
Continental European investment turnover). By contrast, in Benelux,
Italy and Iberia, where economic growth is most at threat from
public and private sector deleveraging, property investment volumes
in the year to Q3 2011 accounted for only 16% of the European total
(compared to a long-term average of 22%).
Events in the European sovereign debt market since the end of Q3
2011 have underlined that a sovereign default within the Eurozone
remains the most significant risk to economic growth and by
extension to future performance in the property market. While the
exact consequences of such an event are difficult to predict, the
immediate damage to economic growth would inevitably lead to
heightened risk aversion among investors, emphasising the need to
protect rental income through tenant retention.
Property Portfolio
As at 30 September 2011, the Company's property portfolio was
valued at EUR451.1 million and comprised 39 commercial property
investments across 6 countries (EUR515.7 million, 43 assets and 7
countries as at 30 September 2010) following disposals of five
properties (includes one part sale) of EUR50.2 million during the
financial year.
On a like for like basis the portfolio value decreased by 3.16%
during the year; 2.03% of this was experienced during the last
quarter of the year due to increased uncertainty associated with
the Eurozone's sovereign debt crisis.
Top 10 properties by value*- Table 1
Address Sector %
--------------------------------- ----------- ------
Heusenstamm, Frankfurt, Germany Office 14.3%
--------------------------------- ----------- ------
Riesa, Germany Retail 10.6%
--------------------------------- ----------- ------
Lutterberg, Germany Logistics 6.1%
--------------------------------- ----------- ------
Cergy, Paris, France Office 5.9%
--------------------------------- ----------- ------
Grenoble, France Office 3.7%
--------------------------------- ----------- ------
Roth, Germany Retail 3.6%
--------------------------------- ----------- ------
Miramas, France Logistics 3.4%
--------------------------------- ----------- ------
Monteux, France Logistics 3.4%
--------------------------------- ----------- ------
Marseille, France Logistics 3.1%
--------------------------------- ----------- ------
Madrid, Spain Logistics 3.1%
--------------------------------- ----------- ------
Total 57.2%
---------------------------------------------- ------
* Percentage of aggregate asset value plus cash as at 30
September 2011.
Table 1 above shows the Company's ten largest properties by
value calculated as a proportion of the open market value of the
portfolio (including cash) as at 30 September 2011.
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France EUR192,130,000 42.60%
---------------- ---------------- -------
Germany EUR197,050,000 43.69%
---------------- ---------------- -------
Spain EUR21,120,000 4.68%
---------------- ---------------- -------
Netherlands EUR16,270,000 3.61%
---------------- ---------------- -------
Belgium EUR14,920,000 3.31%
---------------- ---------------- -------
Czech Republic EUR9,560,000 2.12%
---------------- ---------------- -------
Note: percentages are calculated as a proportion of aggregate
asset value as at 30 September 2011
Over 86% of the portfolio is located in the Company's key
markets, France and Germany. These are the largest property markets
in Continental Europe and account for 55% of the total market
(Source: IPD 2010). In line with the stated objective to reduce
weighting to non-core markets, the Company sold down its only
investment in Poland at a price 2.9% above valuation.
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Logistics EUR226,500,000 50.22%
----------- --------------- -------
Offices EUR140,250,000 31.09%
----------- --------------- -------
Retail EUR 84,300,000 18.69%
----------- --------------- -------
Note: percentages are calculated as a proportion of aggregate
asset value as at 30 September 2011
The portfolio is invested in the three main commercial property
sectors, logistics, offices and retail. Disposals during the year
contributed to the reduction in the logistics weighting from 55.8%
as at 30 September 2010 to 50.2% as at 30 September 2011.
Income/Tenancies
As at 30 September 2011 the Company's portfolio generated a
gross income of EUR36.8 million per annum (net EUR36.0 million) and
a Net Initial Yield at property level ("NIY") of 7.53%. The
portfolio void level increased to 10.2% as at 30 September 2011
from 8.4% as at 30 September 2010. This risk was noted in the
interim results and reflects a combination of completing sales of
fully let properties during the year and continuing weakness in the
occupational markets.
The weighted average lease length to expiry has remained
relatively stable over the year at 6.25 years as at year end. The
weighted average lease length to first break has improved slightly
to 4.27 years from 3.86 years as at 30 September 2010. The
portfolio's credit rating as measured by the Investment Property
Databank's M-IRIS credit analysis system in October 2011 was 73 out
of 100 which is classified as "low to medium risk". Furthermore,
over 61% of the portfolio income is considered to have negligible
or low credit risk. This includes our two largest tenants, Deutsche
Telekom and Norbert Dentressangle.
Top 10 tenants by income**- Table 2
Tenant %
------------------------------- ------
Deutsche Telekom 15.6%
------------------------------- ------
Norbert Dentressangle 12.0%
------------------------------- ------
DHL Exel Supply Chain 10.1%
------------------------------- ------
Valeo 5.8%
------------------------------- ------
Schenker Logistics 4.8%
------------------------------- ------
Carrefour 4.3%
------------------------------- ------
AVA Marktkauf 3.3%
------------------------------- ------
SDV Logistique Internationale 2.8%
------------------------------- ------
Tech Data 2.8%
------------------------------- ------
Real-SB Warenhaus GmbH 2.8%
------------------------------- ------
Total 64.3%
------------------------------- ------
** Percentage of aggregate gross rent as at 30 September
2011
Table 2 above shows the Group's ten largest tenants by income,
calculated as a proportion of the gross annual rental income
receivable by the group as at 30 September 2011.
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2012 8.05%
------- -------
2013 4.43%
------- -------
2014 1.42%
------- -------
2015 13.99%
------- -------
2016 4.05%
------- -------
2017 10.19%
------- -------
2018 7.95%
------- -------
2019 12.01%
------- -------
2020 16.61%
------- -------
2021+ 21.10%
------- -------
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2012 24.03%
------- -------
2013 9.76%
------- -------
2014 10.93%
------- -------
2015 9.91%
------- -------
2016 3.80%
------- -------
2017 18.53%
------- -------
2018 0.09%
------- -------
2019 1.64%
------- -------
2020 0.00%
------- -------
2021+ 21.10%
------- -------
Source: Invista Real Estate Investment Management and DTZ,
Debenham Tie Leung valuation as at 30 September 2011
The charts above show the lease expiry and break profile of the
Company's portfolio. The percentages represent the proportion of
the Group's total annual rental income due to break or expire in
each year, as at 30 September 2011. A total of twelve leases have
been renegotiated during the year representing 26.5% of portfolio
income for a fixed term weighted average 6.3 years. Negotiations
are progressing in respect of those leases with breaks occurring
during 2012.
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1 As at 30 September 2011
2 Source: Invista Real Estate Investment Management Limited
3 Source: DTZ Debenham Tie Leung Valuation as at 30 September
2011
4 Potential Rent is calculated as the sum of Gross Rent and ERV
on vacancy
5 Positive figures represent over-rented, negative figures
represent under-rented. Calculated as the percentage difference
between Potential Rent and ERV
6 Calculated as a percentage of ERV on vacancy on total
Potential Rent
7 Weighted average by property
8 Calculated as a percentage of valuation as at 30 September
2011
Disposals
The key strategic objective of the Company has been to reduce
the level of borrowings. The principal method by which this has
been achieved is through property sales and using cash to access
lower margin financing. In a market characterised by risk averse
investors it has been necessary to prepare assets for sale by
extending leases or completing other asset enhancing initiatives so
as to improve saleability and maximise equity return to the Company
upon realisation.
During the year, the Company completed sales of five logistics
assets (including one part sale) totalling EUR50.2 million and
repaid EUR49.7 million of borrowings, including EUR4.6 million of
cash to achieve lower margin financing. Sale prices were on average
1.3% below valuation.
Using these sale proceeds the Company achieved an LTV ratio with
the Bank of Scotland of below 65%. This triggered a reduction in
the loan margin from 2.50% to 2.25% per annum as at 25 July 2011
which on an annualised basis will result in savings of
approximately EUR1.8 million in interest charges.
Discussions are progressing with prospective purchasers in
respect of further asset sales.
Asset Management Highlights
In addition to preparing assets for potential sale, the key
feature of asset level business plans has been to minimise downside
risk from lease breaks and expiries and, where possible, grow
rental income.
A range of such initiatives have been implemented this year,
including notable lease re-negotiations facilitating the sale of
the EUR20.7 million logistics asset in Trappes, Paris as well as
lease extensions with key occupiers DHL and real SB-Warenhaus GmbH
representing 9.1% of portfolio income.
During the year, leases representing over 28.6% of portfolio
income were negotiated with new or existing tenants. This included
19,970 sqm of vacant office, logistics and retail space let to new
tenants generating additional revenue of EUR1.4 million per annum
and service charge savings of EUR0.4 million per annum.
A further EUR6.1 million of rental income (or 16.5% of portfolio
revenue) is currently under negotiation, largely in respect of
those leases with breaks occurring in 2012. These negotiations have
already resulted in agreeing heads of terms on two properties in
Belgium and France with a combined annual income of EUR1.9 million.
Executing such business plan initiatives to maximise income return
and stabilise or improve capital value is key to preserving Group
earnings as well as positioning assets for disposal.
Offices
Over 35% of office income has been re-negotiated during the
year. The Company's fourth largest tenant Valeo extended their
lease at Cergy, France by four years and leased a further 3,100 sqm
of accommodation. In Grenoble, France two new leases were agreed
with Rolls Royce and Seiitra, representing 2,531 sqm of offices,
while existing tenants Oracle and Euromaster extended their leases
for an additional average fixed term of four years.
Heads of terms have also been agreed on a lease extension on an
office property in central Brussels where the lease has been
extended by nine years at a rent 18.0% above ERV.
New office lettings generated additional income of EUR0.8
million per annum and in addition reduced void costs by EUR0.4
million per annum. As a result of such activity, the office sector
benefits from a high occupancy rate of 95.2% and a weighted average
lease term to break of 6.6 years.
The office portfolio generates an income return (NIY) of
7.74%.
Logistics
Five properties (including one part sale) totalling EUR50.2
million were sold during the year, generating EUR14.8 million of
equity proceeds which were applied to reduce borrowings.
The sale of the prime EUR20.7 million logistics property in
Trappes, southwest Paris was undertaken at a NIY of 7.41% following
the successful completion of a nine year lease extension
immediately prior to disposal. Completing this key asset management
initiative ensured a competitive sales process and maximised value,
realising EUR10.7 million of equity.
In addition to the active sales programme a number of logistics
leases were re-negotiated to improve income security and prepare
properties for sale. This included a lease with Deutsche Post
Immobilien in Lutterberg, Germany which was extended until April
2017 and Norbert Dentressangle in Monteux, France where a three
year extension was achieved. The electronics distributor Nissin
also extended their lease at the property in Nanteuil, France at an
annual rent of EUR0.6 million. Despite challenging occupational
markets in Spain, the Company leased 13,839 sqm of warehousing
space in Madrid resulting in additional revenue of EUR0.5 million
pa.
While the Company has been successful in effecting profitable
sales and securing income, the logistics portfolio has nevertheless
seen occupancy decline over the year to 84.2%. This reflects the
concerns we expressed in the interim results that logistics
occupiers continue to consolidate their space requirements in line
with the wider market, which we believe reflects the challenging
economic environment in which they are operating. It is notable
that tenants have not vacated the Company's properties in favour of
cheaper or better quality accommodation elsewhere; the rising void
level in the logistics portfolio is more of a reflection of
occupiers scaling back their operations.
Active marketing campaigns are in place to lease vacant
accommodation and consideration is being given to short term
letting solutions where this benefits earnings. Continuing to
engage with existing occupiers to track business changes and
negotiate resolutions ahead of lease break or expiry remains a key
initiative to mitigate future risks.
The logistics portfolio generates an income return (NIY) of
7.50%.
Retail
The German retail assets have maintained the highest occupancy
rate of the portfolio at 98.0%. This is in part a reflection of the
longer leases in the German market and also due to the successful
lease re-negotiation with anchor tenant Real-SB Warenhaus GmbH at
the shopping centre in Riesa. This lease was extended by 12 years
to provide a fixed term until 2024 and marked a very significant
step forward in the implementation of the business plan for this
property. Agreeing terms with the anchor tenant has meant that
negotiations with other new occupiers can progress, including for
example, an extension of 250 sqm to be leased to a pharmacy
operator, Apo Concept at a rent of EUR60,000 pa. This new letting
will generate an estimated IRR of 31.5%.
Income security in the retail portfolio has been extended by
2.25 years on a like for like basis during the year.
The retail portfolio generates an income return (NIY) of
7.24%.
Case Studies
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Borrowings
As at 30 September 2011, the Company had drawn down a total of
EUR298.0 million of senior debt in respect of its EUR359.3 million
facility with the Bank of Scotland. In addition, the Company had
cash balances of EUR36.2 million (excluding tenant deposits of
EUR4.2 million and escrow accounts of EUR3.6 million) at that date,
giving a net debt position of EUR261.8 million.
In July 2011, the proceeds from the sale of the logistics assets
in Trappes, Paris and Vitrolles, France plus EUR4.6 million of cash
from the Company's balance sheet were applied to paying down a
total of EUR20.6 million of debt with the Bank of Scotland and all
of the outstanding EUR9.5 million of debt with Credit Foncier. As
at the Interest Payment Date on 25 July 2011 therefore, and based
on valuations of the property portfolio as at 30 June 2011, the
Loan To Value ("LTV") ratio was 64.99% and accordingly the margin
on the debt reduced from 2.50% to 2.25% pa. This reduced margin
will apply at least until the next Interest Payment Date on 25
January 2012 at which point the LTV will be tested using property
valuations as at 31 December 2011.
The Company's gross Loan To Value ("LTV") ratio as at 30
September 2011 was 66.1% and the net debt LTV was 58.0%. As at 30
September 2011, the Company's gross LTV under the Finance Documents
with the Bank of Scotland was 64.7%, against an LTV covenant of
82.5% in 2011.
All debt is fully hedged against changes in European interest
rates until December 2013, giving a total interest cost of 6.29%
per annum at current LTV levels.
Report of the Directors
The Directors of the Company (the 'Directors' or the 'Board')
present their report and the Audited Financial Statements of the
Company and the Group Financial Statements for the year ended 30
September 2011.
Business review
Business of the Company
The Company was incorporated on 6 June 2005 as Insight European
Real Estate Trust S.A. On 17 November 2006 the Company's name was
changed to its present name Invista European Real Estate Trust
SICAF together with conversion of the Company into an investment
company with fixed capital (societe d'investissement a capital
fixe). The Company has been listed on the main market of the London
Stock Exchange since 20 December 2006.
Invista European Real Estate Trust SICAF is a public limited
closed-ended capital company managed by Invista Real Estate
Investment Management Limited ("Invista"). Additional information
regarding the Company and Group's the business during the year is
contained in the Chairman's Statement and the Investment Manager's
Report.
Investments
The independent valuation of the Company's property portfolio as
at 30 September 2011 was EUR451.1 million and consisted of 39
properties located in France, Germany, the Netherlands, Spain,
Belgium, and Poland.
Disposals
The following disposals took place during the year:
Asset Sale date Consideration Market value (quarter
end prior to sale)
--------------------------- ------------------ -------------- ----------------------
Entraigues-sur-la Sorgue,
France 10 November 2010 EUR490,000 EUR420,800
--------------------------- ------------------ -------------- ----------------------
Grodzisk, Poland 22 June 2011 EUR7,000,000 EUR6,800,000
--------------------------- ------------------ -------------- ----------------------
Fos Distriport, France 27 May 2011 EUR15,450,000 EUR16,250,000
--------------------------- ------------------ -------------- ----------------------
Trappes, France 25 July 2011 EUR20,700,000 EUR20,940,000
--------------------------- ------------------ -------------- ----------------------
Anjolyas, France 1 August 2011 EUR6,550,000 EUR6,420,000
--------------------------- ------------------ -------------- ----------------------
TOTALS EUR50,190,000 EUR50,830,800
----------------------------------------------- -------------- ----------------------
Strategic outlook
As referred to in the Company Summary, on 14 October 2011 an EGM
of the Company's shareholders was held to approve a proposed new
investment objective to realise the existing property portfolio
owned by the Group and return capital to shareholders. This
resolution was approved by shareholders and discussions continue
with the Commission de Surveillance du Secteur Financier ('CSSF')
regarding the proposed new investment objective.
Presently, the Company will continue to pursue a strategy where
it actively manages the existing property portfolio to reduce the
level of borrowings through sales where this is beneficial to the
Group, improve the income characteristics of the Group, maximise
capital returns and enhance NAV performance. This will include
regular reviews of the relative performance of the countries,
regions and sectors in which the Company has invested and managing
asset, country and sector allocation.
Key performance indicator
The Board uses the absolute Net Asset Value ('NAV') return of
the Company to monitor and assess the performance of the Company.
As at 30 September 2011, the Company's audited NAV (adjusted to add
back deferred taxation and the change in the fair market value of
warrants) was EUR0.523 per share.
During the year ended 30 September 2011, the Company's audited
adjusted NAV has decreased by EUR0.015 per share or 2.8%. The
decline in NAV was primarily due to the combined effect of a fall
in property valuations and further marked-to-market fall of the
Group's interest rate swaps.
An analysis and review of performance of the property portfolio
is set out in the Property Portfolio section of the Investment
Manager's report.
Important events post year end
The Chairman's Statement and the Investment Manager's Report,
where appropriate, both contain information on the important events
of the Company occurring since the end of the financial year and
the Company's likely future development.
Extraordinary General Meeting
On 14 October 2011, an EGM of the Company's shareholders was
held to approve a proposed new investment objective and policy to
realise its existing portfolio of properties and return capital to
shareholders, subject to the approval of the CSSF.
This resolution was duly passed by shareholders holding Ordinary
Shares, currently the Company is in discussions with the CSSF with
a view to gaining their approval.
Capital Structure
At 30 September 2011 the Company's issued share capital
consisted of 259,980,739 ordinary shares each allotted fully paid,
29,137,134of preference shares and 29,105,344 warrants.
On 29 December 2009 the Company's share capital was reduced from
EUR142,829,093.75 to EUR11,426,327.50 (without the cancellation of
shares and without any reimbursement or repayment to the
shareholders) to accomplish the following:
(i) absorption of the (non consolidated) losses of the Company
as at 30 September 2009 of EUR13,089,270 resulting in the reduction
of share capital of the Company being reduced to EUR129,739,823.75;
and
(ii) creation of a non-distributable reserve of
EUR118,313,496.25 was created which would be used exclusively to
absorb losses incurred or to increase the share capital of the
Company through the capitalisation of the non-distributable
reserve
Subsequent to the share capital reduction each ordinary share
had an accounting par value of 10 eurocents (EUR0.1).
On the 29 December 2009 the Company issued the following
ordinary shares, preference shares and warrants:
-- 145,685,674 Ordinary Shares at GBP0.20 per Ordinary Share,
(representing a discount to the current share price and a discount
to the NAV as at 30 June 2009)
-- 29,137,134 Preference Shares priced at GBP1 per Preference Share, with a seven year term.
-- One Warrant per Preference Share giving the right to
subscribe for an Ordinary Share at GBP0.29 exercisable in May and
November of each year during the four year life of the Warrants as
set out in the Instrument and the Prospectus of the Company dated
16 November 2010.
The ordinary shares and preference shares were issued pursuant
to the terms of the Articles of Incorporation and the terms of
Luxembourg Company law while the Warrant Instrument is governed by
English law.
On 1 December 2010, 2,937 warrants were converted to Ordinary
shares.
On 1 June 2011, 859 warrants were converted to Ordinary
shares.
On 6 December 2011, 170 warrants were converted to Ordinary
shares.
Since the warrants were issued on 16 November 2009, a total of
31,960 warrants have been converted to 31,960 of ordinary
shares.
Voting rights
There are no restrictions on the voting rights attaching to the
ordinary shares. The preference shares do not carry voting rights
except in circumstances (i) set out in articles 44 to 46(1) of the
Company Act, and (ii) where, despite the existence of profits
available for that purpose, the preferential cumulative dividends
to which the Preference Shareholders are entitled are not paid in
their entirety for any reason whatsoever for a period of one
financial year, in which case the holders of Preference Shares will
have the right to vote in the same manner as other shareholders at
all meetings until such time as all such preferential cumulative
dividends have been received in full. The Warrants do not carry any
voting rights. Voting rights to each share and procedures relating
thereto are described in articles 7, 8 and 26 of the Articles of
the Company.
Authority to allot shares
Pursuant to article 8 of the Articles, the Board is authorised
to issue ordinary shares, and, as the case may be, additional
Warrants (if and when required to comply with adjustment mechanisms
provided for in the terms and conditions of the Warrants) within
the limits of the authorised share capital. The ordinary shares
and/or Warrants may be issued in one or several tranches, on such
terms and conditions as the Board may approve, and at such price
including such share premium as the Board may decide. The authority
expires on 29 December 2014.
Pre-emption rights
Pursuant to article 8 of the Articles, pre-emption rights do not
apply to shares that are offered for subscription by way of
contributions in cash at or above the latest published net asset
value, providing such offer is made within the period expiring on
29 December 2014. Where shares are offered for subscription by way
of contributions in cash below the latest published net asset
value, pre-emption rights apply as described in article 8 of the
Articles of the Company.
Repurchase and redemption of own shares
The Company may repurchase its own shares in compliance with the
Company Act, the Listing Rules and its Articles. Shares redeemed by
the Company may remain in existence and be held in treasury by the
Company. Shares which are not cancelled do not have any voting
rights or any right to participate in any dividends declared by the
Company, or in any distribution paid upon the liquidation or
winding-up of the Company. Such shares are also disregarded for
purposes of determining Net Asset Value, in each case, for so long
as such shares are held by the Company. The price of shares
reissued by the Company are determined according to such policy as
the Board may determine from time to time.
Under the Articles of Association, all shares are redeemable
shares within the meaning of article 49-8 of the Company Act. The
Company may redeem its own ordinary shares whenever the Board
considers this to be in the best interest of Company, subject to
the terms and conditions determined by the Board, within the
limitations set forth by the Company Act and by article 9 the
Articles of the Company. Preference shares can only be redeemed in
the specific circumstances described in article 9 of the Articles,
in accordance with the terms of, and subject to the conditions set
in, article 49-8 of the Company Act.
Dividend
As at the date of this report, the Company has neither declared
nor paid dividends to the holders of ordinary shares during the
financial year.
The Payment Dates for the payments of dividends relating to the
Preference Shares changed from 31 May and 30 November to the third
week of June and the third week of December respectively to be
consistent with the ordinary share dividend pay dates previously
set in place.
On 25 May 2011, the Company declared the third semi-annual
preference dividend of GBP0.04488 per Preference Share in respect
of the period from 25 December 2010 to 24 June 2011, which was paid
on 24 June 2011 to Preference Shareholders on the Register on 3
June 2011 and the shares were quoted ex-dividend on1 June 2011.
The fourth semi-annual preference share dividend of GBP0.04488
per Preference Share was declared on 30 November 2011 in respect of
the period from 25 June to 23 December 2011, which will be paid on
23 December 2011 to Preference Shareholders on the Register on 9
December 2011. The shares were quoted ex-dividend on 7 December
2011.
Warrants
The registered holders of Warrants were in a position to
subscribe on 31 May and 30 November for new Ordinary Shares subject
to the terms and conditions attaching to the Warrants as set out in
the Instrument and the Prospectus of the Company dated 16 November
2010.
Shareholders' agreements
The Company is not aware of any shareholders' agreements which
would result in restrictions on the transfer of securities or
voting rights within the meaning of Directive 2004/109/EC on the
harmonisation of transparency requirements in relation to
information about issuers whose securities are admitted to trading
on a regulated market (the "Transparency Directive").
Shares and warrants transferability
Shares of the Company (i.e., Ordinary Shares and Preference
Shares, as such terms are defined in the Articles) are freely
transferable subject to article 10 of the Articles. Warrants issued
by the Company are freely transferable subject to the provisions
laid down in Part IV, Section 5. of the Prospectus.
Special Control rights
No security holder is vested with special control rights with
regard to control of the Company.
Investment objective and policy
Current investment objective and strategy
The Company is currently continuing to implement its long term
investment objective to provide shareholder returns through
investing in a diversified commercial real estate portfolio in
Continental Europe with the potential for income and capital
growth. The geographical focus of the Group is primarily France and
Germany due to the relative stability, transparency and liquidity
of these markets.
The current strategy for the ongoing ownership and management of
the Group's properties is to generate investment performance
through the implementation of initiatives set out in asset level
business plans. These business plans typically require an active
asset management approach to generate performance such as
re-negotiating leases, maximising net rental income receivable from
tenants, extending lease duration to preserve income security,
letting up current vacancy, stabilising rents and, amongst other
initiatives, developing surplus or ancillary land reserves.
The Investment Manager has acquired a portfolio of commercial
property investments which it believes exhibit some or all of the
following characteristics:
> well-located for their purpose;
> modern or recently refurbished;
> let to tenants of good creditworthiness on market standard
leases;
> freehold or long leasehold;
> low vacancy;
> net initial yields higher than those available on prime
properties
> a value in excess of EUR10 million and
> opportunity to enhance value through active asset
management.
The degree to which the Group's current properties exhibit some
or all of these characteristics will depend upon conditions in the
local real estate market and the specific property.
Proposed new investment objective and strategy
At an EGM held on 14 October 2011, shareholders approved a
proposed new investment objective and policy to realise the
existing property portfolio and return capital to shareholders.
Discussions continue with the Commission de Surveillance du Secteur
Financier ('CSSF') regarding the proposed new investment objective.
The Board believes that the proposed new investment objective and
policy is the most appropriate course of action for the Company at
this time, and is expected to have the following benefits:
-- shareholders should be able to obtain net realisable value
(after repayment of borrowings and liabilities) in as short a
timescale as practicable;
-- the approach to realisation should achieve the best balance
between maximising value (compared to an immediate liquidation) and
minimising the time taken to return capital to shareholders;
-- the implementation of the proposed new investment objective
and policy should allow the Company to take advantage of buyers'
immediate appetites for portfolio assets, at the same time as
holding other assets over a longer timescale in order to maximise
realisable value. Portfolio sales and corporate transactions, such
as the merger or sale of the Company, will also be considered as a
means of accelerating the delivery of value to shareholders;
and
-- the Company's listing and capacity to trade in the shares
will be maintained for as long as practicable.
It is proposed that all property assets will be sold as
expeditiously as is consistent with the protection of value, with
an initial focus on those properties already optimised for sale and
those in markets where the Company has relatively few assets, so as
to reduce property management costs.
The sales proceeds would be applied in the first instance to the
repayment of debt and thereafter returned to shareholders of the
Company within a targeted timescale of approximately three years
from 29 September 2011, being the date on which a circular was
issued by the Company to its shareholders seeking approval of the
new investment policy of the Company.
As the property assets of the Company are sold, the Board would
use cash proceeds in excess of the amount that is required to repay
allocated loan amounts and related financing costs either for
further debt repayment or for return of capital to the shareholders
in accordance with its assessment at that time of what will deliver
the best time and risk adjusted returns to shareholders.
New property assets would not be acquired unless such an
acquisition is deemed by the Board, in consultation with the
investment adviser, to be essential to protect or enhance the
realisable value of an existing property asset. Where there is an
opportunity to accelerate the realisation of optimal value for
shareholders of the Company, a corporate transaction, such as the
merger or sale of the Company, will be considered.
Diversification
Under the existing investment objective, the Board continues to
believe that in order to maximise the stability of the Group's
income, the optimal strategy for the Group is to be invested in a
portfolio of assets which (a) is diversified by location, sector,
asset size, lease length and tenant exposure and (b) has low
vacancy rates and (c) creditworthy tenants. While there will be no
predefined limit on exposures to location, sector, asset size,
vacancy rates and tenant types, the Company's portfolio will be
invested and managed, as is currently required by the Listing
Rules, in a way which is consistent with its objective of spreading
investment risk and taking into account the Company's investment
objectives, policies and restrictions.
Asset allocation
The Group currently owns a diversified portfolio of commercial
real estate. Its sector focus is logistics, office, retail and
light industrial. From time to time the Group may have modest
exposure to other types of real estate, for example leisure or
residential. There will be no predetermined limits on investment
per sector and no predetermined geographical limit on investment.
Asset allocation will be determined taking into account current
Listing Rule requirements (see below under 'Investment
Restrictions'), the objective of spreading risk and the Company's
investment objectives, policies and restrictions.
Investment restrictions
As a registered Luxembourg closed ended investment fund company
listed on the London Exchange, the Company and, where relevant, its
subsidiaries are subject to the UK Listing Rules as well as various
rules of the CSSF, the Luxembourg regulator. The Company and where
relevant, its subsidiaries will observe the following restrictions
in compliance with the current Listing Rules:
* Distributable income will be principally derived from
investment. Neither the Company nor any subsidiary
will conduct a trading activity which is significant
in the context of the Group as a whole;
* The Company will invest and manage its assets in a
way which is consistent with its objective of
spreading investment risk; and
* The Company will only use financial derivatives
instruments for hedging purposes.
As the Company is a closed-ended investment fund for the
purposes of the Listing Rules, the Group will also adhere to the
Listing Rules applicable from time to time to closed-ended
investment funds. This includes observing the following
restrictions in compliance with the current Listing Rules for
closed-ended investment funds:
-- The borrowings of the Group (excluding intra group loans) are
limited by the Articles to 65% of the gross assets of the Group.
This limit is tested at the time any borrowing is made. In
addition, the Company is subject to a limit on borrowing of 70% of
gross assets which, in accordance with Luxembourg legal and
regulatory requirements applies at all times; and
-- No one property (including all adjacent or contiguous
properties) shall at the time of Admission or, if later, at the
time of acquisition, represent more than 15% of the gross assets of
the Group
In relation to the investment restriction set out in the second
bullet point above, the Company has previously received a waiver of
this restriction from the UKLA (when this requirement was set out
in the Listing Rules) in respect of the initial assembly of the
Total Property Portfolio. However, in accordance with Luxembourg
regulatory requirements, the Company is now in compliance with
restriction.
No more than 20% of the gross assets of the Company may be
exposed to the creditworthiness or solvency of any one counterparty
(including its subsidiaries or affiliates).
The total amount of loans granted by the Company to entities
which are not part of the Group may not represent more than 20% of
the gross assets of the Company (consolidated where appropriate) at
a time a loan is made.
Ancillary holding of liquid assets by the Group is subject to
the following restrictions:
-- the Company may not invest more than 10% of its net assets in
money market instruments or debt securities of one single
issuer;
-- the Company may not hold more than 10% of any single class of
money market instrument or debt security of a single issuer nor may
it invest more than 10% of its net assets in money market
instruments or debt securities which are neither listed on a stock
exchange nor dealt on a Regulated Market.
The above restrictions are, however, not applicable to
securities issued by companies which are wholly or partly owned and
controlled by the Company.
Where amendments are made to the Listing Rules, the restrictions
applying to the Company will, subject to the prior approval of the
CSSF, be amended so as to reflect the new Listing Rules. In this
instance the Board will consider the revisions applicable to the
Company and, if considered suitable, will, subject to the prior
approval of the CSSF, adopt the new Listing Rules investment
restrictions.
In case of non-compliance with the investment restrictions,
corrective and compensatory actions will be undertaken in
accordance with the CSSF Circular 02/77 and an announcement of such
action shall be made through a regulatory information service.
The proposed new investment objective and strategy of the
Company, if approved by the CSSF, will supersede any previously
published investment policy and/or restrictions.
Material change to investment objective and policy
In accordance with the requirements of the UK Listing Authority
and the CSSF, any material change in the investment objective and
policy of the Company may only be made with the approval of
shareholders. Following regulatory and shareholder approval such a
change will take effect on the quarter end date subsequent to the
quarter during which a notice informing the shareholders of such
material change was sent.
At an EGM held on 14 October 2011, shareholders approved a
proposed new investment objective and policy to realise the
existing property portfolio and return capital to shareholders.
Discussions continue with the Commission de Surveillance du Secteur
Financier ("CSSF") regarding the proposed new investment
objective.
Principal risks and Uncertainties
In addition to the various operating risks presented below, the
Board has set out and presented risks it considers to be critical
to the Company in Note 5 to the Consolidated Financial Statements
as at 30 September 2011.
Investment and strategy
Market circumstances can introduce volatility into investment
returns arising from factors such as market sentiment, an excess
supply of accommodation relative to occupier demand, macro economic
factors impacting on the capability of tenants to pay rents or
fiscal and legislative changes. Under current strategy, the
Investment Manager and the Board seek to mitigate these risks
through a business plan led approach, which incorporates a rigorous
asset management strategy, research-based investment decisions and
regular reviews of portfolio strategy. This approach has led to
owning a well diversified and balanced portfolio with opportunities
for active asset management.
To enable the Board to ensure that the portfolio does not become
overly concentrated or reliant on individual assets, sectors or
tenants, the Investment Manager reports quarterly on asset
concentration, sector and regional diversification.
On a semi-annual basis the Investment Manager provides an
independent analysis of tenant quality to the Board, sourced from
Investment Property Databank's tenant credit rating system.
The primary control is that no single property (including all
adjacent or contiguous properties) shall represent more than 15% of
the gross assets of the Group at the time of purchase.
Borrowings
The Group seeks to enhance NAV total returns through borrowing.
There is risk associated with third party borrowings and to
mitigate this risk, consistent with the Company's Articles of
Incorporation, the Board has adopted an upper borrowing limit of
65% of the Group's gross assets on a fully consolidated basis. This
limit is tested at the time any borrowing is made. In addition, the
Group is subject to a limit on borrowing of
70% of gross assets which that applies at all times in
accordance with Luxembourg legal and regulatory requirement.
At 30 September 2011 the Group had access to a EUR359.3 million
credit facility from Bank of Scotland of which the Group had drawn
down a total of EUR298.0 million. The Company's gross Loan to Value
("LTV") as at that date was 66.1% and the net debt LTV was
58.0%.
The Group seeks to avoid significant exposure to unforeseen
upward interest rate movements, with all third party debt currently
hedged.
Accounting, legal and regulatory
The Group has processes in place to ensure that the
administrators maintain accurate accounting records are maintained
and that sufficient evidence to support the accounts is available
to the auditors upon request. The Administrator also operates
established accounting systems that address issues of control and
completeness. Procedures are in place to ensure that the quarterly
NAV and Gross Asset Value are calculated properly by the
Administrator, and the Group's property assets are valued quarterly
by an independent specialist property valuation firm which is
provided with regular updates on portfolio activity by the
Investment Manager.
The Administrator monitors legal requirements in Luxembourg to
ensure that adequate procedures and reminders are in place to meet
the Group's legal requirements and obligations. The Investment
Manager undertakes appropriate legal, tax and structuring due
diligence with the assistance of external advisers when transacting
and managing the Company's assets. All contracts entered into by
the Group are reviewed by the Company's legal and the Group's other
advisers. Processes are in place to ensure that the Group complies
with the conditions applicable to property investment companies set
out in the Listing Rules and the Circulars issued by the Luxembourg
financial supervisory authority, the CSSF.
The Administrator attends all Board meetings to be aware of all
announcements that need to be made and the Group's advisers are
aware of their obligations to advise the Administrator, and where
relevant the Board, of any events which require notification be
made to the Board.
Finally, the Board is satisfied that the Investment Manager and
Administrator have adequate procedures in place to ensure continued
compliance with regulatory requirements of the UK Financial
Services Authority and the CSSF.
Citco REIF Services (Luxembourg) S.A. has entered into an
Administration Agreement with the Company which may be terminated
by either party giving to the other not less than 120 days notice
in writing. The Administrator is entitled to an annual fee equal to
EUR1.1 million pa.
Management
The investment management arrangements with Invista which
applied during the financial year reported are set out in an
investment management agreement dated 17 November 2006, as
subsequently amended, (the 'Invista IMA'). Invista was responsible
for advising the Group on the overall management of the Group's
investments in accordance with the Group's existing investment
objective and policy and subject to the overall supervision of the
Directors.
The fund manager was Tony Smedley, who also chaired the European
Investment Committee which sat every two weeks or as required. The
other members of that Committee were Tim Francis, Guillaume Masset
and Chris Ludlam.
Under the terms of the Invista IMA, required to the overall
supervision of the Directors, the Investment Manager was subject to
provide the Company with such investment advisory, investment
management services and administrative services as required by them
in relation to the Total Property Portfolio. The Investment Manager
also procured the provision of asset management services to the
Property Subsidiaries.
On 12 October 2010, Invista Real Estate Investment Management
Holdings plc announced that it intended to realise the value of
Invista. The Company subsequently entered into negotiations to
acquire, jointly with Invista Foundation Property Trust Limited and
certain members of Invista's management team, part of the business
of Invista. However, those discussions were ultimately terminated,
and the Company announced on 18 March 2011 that it had given notice
to Invista to terminate the Invista IMA with effect from no later
than 18 September 2012 (the "Notice Period"). The Company announced
on 15 December 2011 that it has entered into a Termination
Agreement with Invista Real Estate Investment Management
Limited.
Following consultation with shareholders and the consideration
of proposals from a wide range of prospective new investment
managers and advisers, the Board concluded that, in light of the
substantial discount to net asset value at which the shares of the
Company were trading, a structured realisation strategy of the
existing assets of the Company would be in the best interests of
shareholders.
The Board has appointed Internos Real Limited ("Internos") to
execute the proposed new investment objective and policy set out
above pursuant to an investment advisory agreement dated 22
September 2011 (the "Internos IAA"). Under the terms of the
Internos IAA, Internos would take over the management of the
Company and its assets with effect from the date on which the
Invista IMA is terminated (which, in any event, will be no later
than the end of the Notice Period).
The appointment of Internos has been approved by (i) the CSSF as
the Company's regulator (in relation to Internos acting as manager
and promoter of the Company); and (iii) Bank of Scotland in its
capacity as facility agent in connection with the credit facility
provided by it to the Company. The Company announced on 15 December
2011 that Internos has taken on the role of investment manager with
effect from 15 December 2011 and that the proposed change of the
Company investment objective and policy to implement a structured
realisation of its portfolio of assets is subject to regulatory
approval. Discussions with the CSSF on this point are still
ongoing.
In the meantime, the existing investment objective and policy
continue to apply. The Company has appointed Internos under the
existing objective and policy, in order to achieve the earliest
possible transition for the management of the Company's assets.
Under the existing investment objective and policy, the Company has
been pursuing an accelerated, proactive programme of disposals
(with EUR50 million of sales in the past twelve months) and
Internos will be maintaining this approach, in order further to
reduce the Company's borrowings.
The Internos IAA (including the transitional arrangements
thereunder), may be terminated by either the Company or Internos on
6 months written notice. The Internos IAA may also be terminated
immediately by the Company in certain circumstances, such as in the
case of the departure of certain key persons of Internos or for
regulatory reasons.
Management fees
Under the Invista IMA that applied during the financial year
reported on, Invista was entitled to a base management fee of 2%
per annum of the aggregate Net Asset Value attributable to the
Ordinary Shares and the Preference Shares subject to a minimum
annual fee of GBP3 million. This fee was subject to a cap of an
amount equal to 0.95% per annum applied to the Adjusted Gross
Assets. The base management fee was payable monthly in arrears
subject to a recalculation provision to capture any change in Net
Assets from quarter to quarter on a straight line basis. The
Investment Management Agreement also provided for the Investment
Manager to be reimbursed by the Company for costs and expenses
incurred by it, including (without limitation) all costs and
expenses relating to accounting, tax, due diligence, legal,
surveyors, building contractors, estate managers and other properly
appointed service providers.
Invista was also entitled to an annual performance fee where the
total return per ordinary share during the relevant financial
period exceeds an annual rate of 10% (the "Performance Hurdle").
Where the Performance Hurdle was met, a performance fee would be
payable in an amount equal to 15% of any aggregate total return
over and above the Performance Hurdle.
The Performance Hurdle was calculated on a three year rolling
basis. This requires that the annualised total return over the
period from Admission to the end of the relevant financial period
in the first three year period, and on a rolling three year basis
thereafter, was equal to or greater than 10% per annum.
Subject to the above conditions, the performance fee was payable
by the Company to Invista within 14 days of receipt by the Company
of such calculation.
From the 15(th) December 2011, when Internos took on the
management of the Company's assets from Invista, the Company agreed
to pay Internos pursuant to the Internos IAA a management fee of
1.25% per annum on the Net Asset Value attributable to the
Company's ordinary shareholders, subject to a minimum of EUR1.0
million per annum. Assuming an unchanged level of NAV, this would
be approximately EUR1.6 million per annum lower than the management
fee payable under the Invista IMA, representing a reduction of
47%.
In addition, the Company will pay Internos a realisation fee
equal to 12.5% of the amount by which cash returned to ordinary
shareholders exceeds EUR82.8 million (being the average market
capitalisation in the 30 days preceding this announcement converted
at the GBP/EUR exchange rate at the close of business on 29 June
2011), compounded thereafter at 10% per annum.
Between 1 August 2011 and the date on which Internos assumes
responsibility for the day-to-day management of the Company from
Invista, the Company will pay Internos a transition fee of
EUR75,000 per month to conduct a full strategic and operational
review of all aspects of the Company's property portfolio, banking
facilities and administrative arrangements with a view to achieving
additional cost reductions for the Company.
On 15 December 2011 the Company announced that it has agreed
under a Termination Agreement to pay to Invista a termination fee
of EUR855,000. This compares with an estimated liability of EUR2.4
million if the management fees for the balance of the notice period
(to 18 September 2012) were to be paid.
In addition the Company will pay Internos a fee of GBP60,000 in
connection with the transition of the entire Invista REIM Paris
team.
Significant contracts
Apart from the Invista IMA, Internos IAA and Administration
Agreements, other significant contracts are with the following
parties:
-- RBC Dexia Investor Services Bank SA as Custodian Bank
-- Maitland Luxembourg SA as Registrars
-- Capita IRG Trustees Limited as Depository
-- Primexis for accounting and tax compliance with regard to
French investment properties/ companies
Other Significant contracts which have been entered into by the
Company are listed in Part XII, Section 8 of the Prospectus.
Creditor payment policy
It is the Group's policy to ensure settlement of supplier
invoices in accordance with stated terms.
Donations
The Company made no political or charitable donations during the
year (2010: nil)
Directors
On 30 September 2011, Duncan Owen resigned as a Director of the
Company. This was resolved and passed at the EGM of the Company on
14 October 2011.
The Directors of the Company (who together with their beneficial
interests in the voting rights of the Company's ordinary share
capital as at 30 September 2011) are listed below:
Director 30 Sep 11 30 Sep 30 Sep 10 30 Sep
11 10
Number of shares % Number of Shares %
Tom Chandos (Chairman) 261,000 ordinary 0.1004 261,000 ordinary 0.1004
shares, and 10,200 shares, and
preference shares, 0.0350 10,200 preference 0.0350
and shares, and
10,200 10,200
warrants warrants
0.0350 0.0350
57,350 ordinary 57,350 ordinary
John Frederiksen shares 0.0221 shares 0.0221
Michael Chidiac - - - -
Robert De Normandie - - - -
Jaap Meijer - - - -
Directors are elected and may be removed with or without cause
or replaced by the shareholders in accordance with the rules set
out in articles 13 and 26 of the Articles.
The appointment dates and gross remuneration of the Directors
during the current and previous financial year was as follows:
Director Date of appointment EUR
Tom Chandos (Chairman) 17 November 2006 52,000
John Frederiksen 17 November 2006 30,000
Michael Chidiac 17 November 2006 35,000
Robert DeNormandie 26 April 2007 40,000
Jaap Meijer 16 November 2007 35,000
The Directors do not have service contracts with the Company.
The terms of appointment provide that a Director shall retire at
every Annual General Meeting.
The Directors receive a base fee of EUR30,000 per annum, and the
Chairman receives EUR52,000 per annum. The Chairman of the Audit
Committee receives an additional fee of EUR5,000 per annum,
reflecting his additional responsibilities and workload. All
Luxembourg based Directors also receive an additional EUR5,000 per
annum in recognition of their additional work.
The Directors are not eligible for bonuses, pension benefits,
share options or other incentives or benefits.
Compensation in case of resignation, redundancy or takeover
bid.
The Company has not entered into any agreements with the
Directors providing for compensation if they resign or are made
redundant without valid reason or if their employment cease because
of a takeover bid.
Disclosure of information to auditors
As far as each of the Directors is aware, there is no relevant
audit information of which has not been disclosed to the Company's
external auditors and each of the Directors has taken all of the
steps that they each ought to have taken to be aware of relevant
audit information and to establish that the Company's Auditors are
aware of that information.
Substantial shareholdings - At 30 November 2011 the Board was
aware that the following shareholders owned 3% or more of the
issued shares of the Company:
Number of
Ordinary Shares %
-------------------------------------- ----------------- ------
Spearpoint Limited 52,836,908 20.32
Ironside Partners LLC 31,564,497 12.14
Investec Wealth & Investment 21,219,924 8.16
Bailie Gifford & Co Ltd 13,096,915 5.04
Ashcourt Rowan Investment Management
Ltd 10,219,047 3.93
Legal & General Investment Mgmt Ltd 9,099,305 3.50
Schroder Investment Mgmt Ltd 8,049,737 3.10
-------------------------------------- ----------------- ------
Number of
Preference Shares %
Forum Partners Investment Mgmt LLC 12,188,633 41.83
Spearpoint Limited 6,287,025 21.58
Henderson Global Investors 1,469,489 5.04
Goodbody Stockbrokers 1,388,962 4.77
------------------------------------ ------------------- ------
Number of
Warrant-holders %
Forum Partners Investment Mgmt LLC 12,088,633 41.53
Barclays Stockbrokers Ltd 5,046,989 17.34
Henderson Global Investors 1,469,489 5.05
Ashcourt Rowan Investment Management
Ltd 1,053,651 3.62
-------------------------------------- ----------------- ------
Independent auditors
KPMG Audit S.a.r.l. has been appointed as independent auditor of
the Company with effect from 17 November 2006 and for a duration of
six years.
Amendment to the Articles
The Articles may be amended in accordance with the rules set out
in article 25 of the Articles.
Status for taxation
The Company is not liable for any Luxembourg tax on profits or
income, nor are distributions paid by the Company subject to any
Luxembourg withholding tax. The Company is, however, liable in
Luxembourg to a subscription tax of 0.05% per annum of its Net
Asset Value, such tax being payable quarterly on the basis of the
value of the aggregate net assets of the Company at the end of the
relevant calendar quarter. No stamp duty or other tax is payable in
Luxembourg on the issue of Shares. No Luxembourg tax is payable on
the realised capital appreciation of the assets of the Company.
Going concern
The Directors have examined significant areas of possible
financial risk and have satisfied themselves that the Group has
adequate resources to continue in operational existence for the
foreseeable future. After due consideration the Board believes it
appropriate to adopt the going concern basis for the preparation of
the financial statements. Please see note 2 to the accounts.
Related Party transactions
This is detailed in Note 28 in the accounts.
Corporate governance
Principles statement
The Directors are committed to high standards of corporate
governance and have made it Company policy to comply with best
practice in this area and insofar as the Directors believe it is
relevant and appropriate to the Company, to comply with the UK
Corporate Governance Code published by the Financial Reporting
Council or to explain areas of non-compliance.
There is no generally applicable Luxembourg corporate governance
code for Luxembourg companies. Whilst the Luxembourg stock exchange
has issued a corporate governance code based on international
precedents, this code is not applicable to the Company.
The relevant corporate governance rules are the statutory rules
of the Luxembourg Companies Act, which are, in essence, reflected
in the constitutional documents of the Company. The Company's
application of the UK Corporate Governance Code (with which the
Company complies, and which is available at
www.frc.org.uk/corporate/combinedcode.cfm) is discussed in the
following paragraphs.
Composition and Balance of the Board
The Board currently consists of five Directors, four of whom are
Non-Executive Directors and one Non-Independent Director.
Tom Chandos is the Chairman of the Board.
John Frederiksen is a Non-Executive Director of Invista
Foundation Property Trust Limited. Invista Foundation Property
Trust Limited is managed by the Investment Manager and Mr.
Frederiksen is therefore considered to be a non-independent
director under Listing Rule 15.2.13A.
The remaining Directors (Tom Chandos, Michael Chidiac, Robert
DeNormandie and Jaap Meijer) are considered independent as they
have no links with the Investment Manager and all have other
professional employment.
The Board believes that the Directors have a breadth of property
investment, business and financial skills and experience relevant
to the Company. Biographical details of all current Board members
are set out at the start of this section.
The Board acknowledges the Financial Reporting Council's
proposed changes to the UK Corporate Governance Code in relation to
the consideration of greater diversity within the boardroom as a
whole, including that of gender. The Board remains committed to
ensuring that the Directors of the Company possess a broad balance
of skills, experience, independence and knowledge and that there is
sufficient diversity within the composition of the Board. The
matter of Board diversity will be considered at regular intervals
and will be an integral part of the annual Board evaluation
process, however all appointments will be made on merit
Senior Independent Director
The Board has considered the need to appoint a Senior
Independent Director, but believes that this is not appropriate due
to the size of the Board. (provision A,4.1)
The Role of the Board
The Board has determined that its role is to consider the
following principal matters which it considers are of strategic
importance to the Company and to take appropriate decisions
thereon:
1. The overall objectives of the Company, as described under
Investment Objective and Policy above, and the strategy for
fulfilling those objectives within an appropriate risk
framework.
2. The strategy followed is appropriate in light of the prevailing market conditions.
3. The capital structure of the company, including consideration
of an appropriate use of borrowings is appropriate both for the
Company and its shareholders.
4. The appointment and monitoring through regular reports and meetings of the Investment Manager, Administrator and other appropriately skilled service providers to ensure their ongoing effectiveness through regular reports and meetings.
5. Review of the key elements of the Company's performance
including NAV growth and the payment of dividends.
Board decisions
At Board meetings, matters listed under the Role of the Board
above are considered and resolved by the Board. Some issues
associated with implementing the Company's strategy may be
delegated by the Board either to the Investment Manager or the
Administrator. However matters of strategic importance to
the Company are usually reserved for the Board. Generally these
are defined as large property decisions affecting either 5% or more
of the Group's assets and decisions affecting the Group's
borrowings.
A formal schedule of matters reserved to the Board has been
adopted which clearly defines the Directors'
Responsibilities and the powers of the Board are further
described in articles 6,9,10 and title III of the Articles. In
particular, the Board may decide to issue shares and to redeem the
Company's own shares subject to the conditions set out in articles
8 and 9 of the Articles of the Company.
Board performance evaluation
The Board undertakes an annual review of its performance and
that of its Committees and individual members during the financial
year. The Board's procedure for evaluating the performance of the
Board, its Committees and the individual Directors in respect of
the year ended 30 September 2011 has occurred through a combination
of questionnaire and discussion. The evaluation process is designed
to show whether individual Directors continue to contribute
effectively to the Board and to clarify the strengths and
weaknesses of the Board's composition and processes. The Chairman
takes the lead in acting upon the results of the evaluation
process. In respect of the Chairman, a meeting of Directors was
held, without the Chairman present, to evaluate his performance.
Following the annual review the Board concluded it was operating
effectively and that the Chairman and the members of the Board had
the breadth of skills required to fulfil their role.
Accordingly, as the individual performance of the respective
Directors continues to be effective and the attendance by all
Directors at meetings of the Board during the last financial year
(see 'Board meetings') demonstrates the continued commitment of all
Directors to their respective roles, the Board therefore considers
all Directors standing for re-election at the Annual General
Meeting on 24 February 2012 should be re-elected for a period of
one year.
Re-appointment of Directors and Directors' tenure
Directors' re-appointment is subject to the Company's Articles
and UK Corporate Governance Code and the Listing rules. The
Company's Articles require that all Directors stand for
re-appointment every year and are appointed for a period of six
years.
Directors Training
Directors are provided on a regular basis with key information
on the Company's activities, including regulatory and statutory
requirements, internal control and operational/portfolio risks.
Conflicts of interest
There are no conflicts of interests between the Directors and
the Company. The Prospectus issued in November 2009 discloses the
Director's interest in Part XI, Section 3.
Insurance
Directors' and Officers' insurance is currently in place.
Board meetings
The Board meets quarterly and as required from time to time to
consider specific issues reserved for the Board.
At the Board's quarterly meetings it considers papers circulated
in advance including reports provided by the Investment Manager and
the Administrator. The Investment Manager's report comments on the
Continental European commercial property market, performance,
strategy, transactional and asset management and the Group's
financial position including relationships with its bankers and
lenders.
These reports enable the Board to assess the success with which
the Group's property strategy and other associated matters are
being implemented and also to consider any relevant risks and how
they can be properly managed. The Board also considers reports
provided from time to time by its various service providers
reviewing their internal controls.
The table below shows the attendance at the Board's quarterly
meetings during the financial year to 30 September 2011:
Director Board Audit Committee
Tom Chandos (Chairman) 4 1
John Frederiksen 4 1
Michael Chidiac 4 4
Robert DeNormandie 4 4
Jaap Meijer 4 4
Number of meetings during the year 4 4
In between its regular quarterly meetings, the Board has also
met on a number of occasions during the year to consider specific
transactions or reach decisions on matters arising. It has not
always been possible for all Directors to attend these meetings.
The Company maintains liability insurance for its Directors and
Officers.
Committees of the Board
The Audit Committee
The Audit Committee is chaired by Robert DeNormandie with
Michael Chidiac and Jaap Meijer as voting members. Non-voting
members are Tom Chandos and John Frederikson. The Company considers
that Robert DeNormandie's experience makes him suitably qualified
to chair the Audit Committee. If required, meetings can also be
attended by the Investment Manager, the Administrator and the
Independent Auditor as well as with the Company's property
appraiser to discuss the scope and conclusions of their work.
The primary tasks of the Company's Audit Committee are to assist
the Board in fulfilling its oversight responsibilities relating to
the integrity of the financial statements of the Company,
including:
-- periodic reporting to the Board on its activities;
-- reviewing the half-year and annual financial statements
before their submission to the Board;
-- advising the Board on the terms and scope of the appointment
of the auditors, their remuneration, the independence and
objectivity as well as reviewing with the auditors the results and
effectiveness of the semiannual review and the annual audit;
-- performing such other duties imposed by applicable laws and
regulations of the markets on which the shares are listed, as well
as any other duties entrusted to the Audit Committee by the Board;
and
-- any material non-audit or tax services must be considered and
approved by the Committee and a recommendation submitted to the
Board for final approval.
During the year the Company's auditors were involved in a
limited review of the interim financial statements. No other work
by the external auditor was performed.
The Audit Committee is satisfied that KPMG s.a.r.l is
independent of the Company.
Terms of Reference
The Committee has written terms of reference, which clearly
define its responsibilities and duties.
Other Committees
The Company does not have a Remuneration Committee [provision
D.2.1] or a Nominations Committee [provision B.2.1], since the
Company does not have any executive Directors. New appointments to
the Board and remuneration issues are considered by the Board as a
whole from time to time.
Review of the Investment Manager's performance and the
contractual arrangement with the Investment Manager are conducted
by the Board as a whole during its regular quarterly meetings.
Shareholder relations
Shareholder communications are a high priority for the Board.
The Investment Manager produces a quarterly fact sheet which is
posted on the Company's website at www.ieret.eu; the latest version
can be
found at http://www.ieret.eu/quarterly-factsheets. The fund
manager and other relevant members of the Investment Manager's
Investment Committee make themselves available at all reasonable
times to meet with brokers, shareholders and sector analysts.
Feedback from these sessions is provided by the Investment Manager
to quarterly Board meetings.
In addition, the Board is also kept fully appraised of all
market commentary on the Company prepared by the Investment Manager
and other professional advisers including the Company's brokers.
Through this process the Board seeks to monitor the views of
shareholders and to ensure an effective communication programme.
The Chairman and Directors also hold meetings with shareholders in
response to invitations to do so or as required.
Details of the resolutions to be proposed at the Annual General
Meeting on 24 February 2012 can be found in the Notice of the
Meeting
Statement of Directors responsibilities
The Directors are responsible for ensuring proper preparation of
the financial statements and Report of Directors for each financial
period:
i) which give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Group as of and at the
end of the financial period in accordance with International
Financial Reporting Standards and the Listing Rules; and
ii) which give a true and fair view of the development and
performance of the business and the position of the Group as well
as a true and fair description of the principal risks and
uncertainties the Group may encounter.
In addition, the Board is responsible to ensure that the Company
is in compliance with applicable company law and other UK or
Luxembourg applicable laws and to provide a description of the
risks and uncertainties the Group may encounter and to put in place
an appropriate control framework designed to meet the Group's
particular needs and the risks to which it is exposed.
In preparing such financial statements the Directors are
responsible for:
-- Selecting suitable accounting policies and applying them consistently.
-- Making judgments and estimates that are reasonable and prudent.
-- Stating whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the Financial Statements.
-- Preparing the Financial Statements on a going concern basis
unless it is inappropriate to presume that the Group will continue
in business.
-- Maintaining proper accounting records which disclose with
reasonable accuracy the financial position of the Group and enable
them to ensure that the Financial Statements comply with all
relevant regulations.
-- Safeguarding the assets of the Group and hence for taking
reasonable steps for the prevention and detection of fraud and
other irregularities.
Internal control
The Directors are responsible for the determination of the
Company's investment objective and related policies and have
overall responsibility for the Group's activities including the
review of investment activity and performance.
The UK Corporate Governance Code requires the Directors to
review the effectiveness of the Group's system of internal controls
on an annual basis and to report to shareholders that they have
done so. Although such a system can only provide reasonable
assurance and not absolute assurance against material misstatement
or loss, as it is designed to manage rather than eliminate the risk
of failure.
The Board considers risk management and internal control on a
regular basis during the year.
The key reviews conducted by the Directors are described as
follows:
1. The Board has reviewed a report prepared by Invista's team on
Invista (Investment Manager), Citco (Administrator), Primexis
(French Accountant), RBC Dexia (Custodian), Capita Registrars (UK
Registrar) and Maitland (Luxembourg Registrar) and has been
satisfied that their approach is appropriate for the Group.
2. The Board meets regularly at the offices of the Administrator
for its formal quarterly Board meetings and for ad-hoc Board
meetings. The Board is therefore familiar with the environment in
which the Administrator is operating and has the opportunity to
meet the staff responsible for providing administrative agency
services to the Company. This enables the Board to view at first
hand the level of resources made available to the Company by the
Administrator.
As the Company has no employees and its operational functions
are undertaken by third parties, the Audit Committee does not
consider it necessary for the Company to establish its own internal
control function. The effectiveness of internal controls is
assessed on a regular basis by the Compliance and Risk departments
of the Investment Manager and Administrator. Therefore the Company
is substantially reliant on the Investment Manager's and
Administrators own internal controls and their internal audit. The
Board considers risk management and internal control on a regular
basis during the year. The processes implemented to identify,
evaluate and manage risk that are described in the following
paragraphs have been in place throughout the financial year to the
date of this document and accord with the Revised Turnbull Guidance
issued by the Financial Reporting Council, a guidance document
relating to the principles under UK Corporate Governance Code .
The key elements designed to provide effective control are as
follows:
1. Regular review of relevant financial data including
management accounts and performance projections.
2. Contractual documentation with appropriately regulated
entities which clearly describes responsibilities for the two
principal service providers concerned.
3. The Investment Manager's system of internal controls is based
on clear written processes, a formal investment committee, clear
lines of responsibility and reporting all of which are monitored by
Invista's internal risk team. Invista is regulated by the Financial
Services Authority in the UK.
4. The Company's strategy is authorised by the Board which also monitors the Investment Manager's effectiveness in implementing the strategy.
Responsibility statement
The undersigned, Mr Tom Chandos, Chairman of the Board, and Mr
Robert DeNormandie, Chairman of the Audit Committee, both Directors
of the Company, state that, to the best of their knowledge:
a) the financial statements which have been prepared in
accordance with the International Financial Reporting Standards and
the Listing Rules give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Group;
and
b) the Annual Report includes a fair review of the development
and performance of the business and the position of the Group for
the financial year ended 30 September 2011, and their impact on the
set of financial statements, together with a description of the
principal risks and uncertainties for the next financial year.
Signed on behalf of the Board of Directors on 16 December
2011
Tom Chandos, Chairman
16 December 2011
Robert DeNormandie, Chairman of the Audit Committee
16 December 2011
CONSOLIDATED INCOME STATEMENT
For the year ended 30 September 2011
30 Sep 11 30 Sep 10
Notes EUR000 EUR000
Rental income 6 40,749 41,865
Other income 8 757 235
------------------------------------ ------- ----------- -----------
Total revenue 41,506 42,100
Property operating expenses 7 (2,960) (2,288)
------------------------------------ ------- ----------- -----------
Net rental and related income 38,546 39,812
------------------------------------ ------- ----------- -----------
Investment management fees 9, 27 (3,797) (3,299)
Administration fees 11 (1,986) (2,336)
Professional fees 10 (1,252) (1,777)
Directors' fees 27 (204) (225)
Other expenses 10 (706) (1,377)
------------------------------------ ------- ----------- -----------
Total expenses (7,945) (9,014)
------------------------------------ ------- ----------- -----------
Net gain on disposal of investment
property 12 494 1,077
Net valuation losses on investment
property 12 (16,237) (6,145)
Profit before net financing
costs and tax 14,858 25,730
------------------------------------ ------- ----------- -----------
Finance income 13 675 401
Finance expense 14 (27,196) (34,651)
Net gain on financial instruments 28.5 152 7,408
Net financing costs (26,369) (26,842)
------------------------------------ ------- ----------- -----------
Loss before tax (11,511) (1,112)
------------------------------------ ------- ----------- -----------
Deferred taxation (167) 5,917
Current taxation (29) (1,367)
Other taxes relating to sale
of property - (3,473)
------------------------------------ ------- ----------- -----------
Total taxation 25 (196) 1,077
------------------------------------ ------- ----------- -----------
Loss for the year attributable
to the equity holders of the
Company (11,707) (35)
------------------------------------ ------- ----------- -----------
Basic loss per share (Euro) 20 (0.04503) (0.00016)
Diluted loss per share (Euro) 20 (0.04503) (0.00016)
------------------------------------ ------- ----------- -----------
The accompanying notes are an integral part of these
consolidated financial statements
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 September 2011
30 Sep 11 30 Sep 10
Notes EUR000 EUR000
--------------------------------------- ------ ---------- ----------
Loss for the year (11,707) (35)
--------------------------------------- ------ ---------- ----------
Other comprehensive income
Reversal of currency translation
reserve - (631)
Fair value of warrants exercised
during the year 23 - 3
Amortisation of hedge reserve
for the period 1 October 2009
to 12 January 2010 18 - (632)
Reversal of hedge reserve balance
as at 12 January 2010 to reflect
hedge effectiveness following
refinancing 18 - (5,054)
Effective portion of changes
in fair value of cash flows hedged
from 12 January 2010 to 30 September
2010 18 - (6,751)
Effective portion of changes
in fair value of cash flows hedged
from 1 October 2010 to 30 September
2011 18 7,933 -
--------------------------------------- ------ ---------- ----------
Other comprehensive loss for
the year, net of tax 7,933 (13,065)
--------------------------------------- ------ ---------- ----------
Total other comprehensive loss
for the year attributable to
owners of the Company (3,774) (13,100)
--------------------------------------- ------ ---------- ----------
All items in the above statement are derived from continuing
operations.
The accompanying notes are an integral part of these
consolidated financial statements
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 September 2011
30 Sep 11 30 Sep 10
Notes EUR000 EUR000
Assets
Investment property 12 451,050 515,690
Deferred tax assets 25 4,108 3,589
--------------------------------------- ------- ---------- ----------
Total non-current assets 455,158 519,279
--------------------------------------- ------- ---------- ----------
Trade receivables 15 10,326 10,383
Other current assets 16 7,632 10,514
Cash and cash equivalents 17 43,892 42,420
--------------------------------------- ------- ---------- ----------
Total current assets 61,850 63,317
Total assets 517,008 582,596
--------------------------------------- ------- ---------- ----------
Equity
Share capital 25,998 25,998
Share premium 164,992 164,991
Restricted reserves 120,484 120,477
Retained earnings (181,413) (169,699)
Hedge reserve 1,182 (6,751)
Total equity attributable to
equity holders of the Company 18 131,243 135,016
Liabilities
Interest bearing loans and borrowings 21 295,868 340,614
Preference shares 22 30,333 30,134
Warrants 23 2,258 2,535
Long term provision 24 6,626 6,723
Derivative financial instruments 28.5 20,133 30,520
Deferred tax liabilities 25 8,386 7,832
--------------------------------------- ------- ---------- ----------
Total non-current liabilities 363,604 418,358
--------------------------------------- ------- ---------- ----------
Trade and other payables 1,008 2,472
Income tax and other taxes payable 25 6,594 7,304
--------------------------------------- ------- ---------- ----------
Accrued expenses and other current
liabilities 26 10,269 14,208
Deferred income 15 4,290 5,238
--------------------------------------- ------- ---------- ----------
Total current liabilities 22,161 29,222
Total liabilities 385,765 447,580
--------------------------------------- ------- ---------- ----------
Total equity and liabilities 517,008 582,596
--------------------------------------- ------- ---------- ----------
Net Asset Value per ordinary
share (Euro) 19 0.505 0.519
--------------------------------------- ------- ---------- ----------
Diluted Net Asset Value per ordinary
share (Euro) 19 0.488 0.501
--------------------------------------- ------- ---------- ----------
The financial statements were approved by the Board of Directors
on 16 December 2011 and signed on its behalf by:
Tom Chandos Robert DeNormandie
Chairman Chairman of Audit Committee
The accompanying notes are an integral part of these
consolidated financial statements
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 September 2011
Share Share Restricted Retained Hedging Currency Total equity
capital premium reserve earnings reserve translation
reserve
Notes EUR000 EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
------------------ ------ ---------- ------------ ----------- ---------- --------- ------------- -------------
Balance as at 30
September
2009 142,829 149,304 (506) (180,086) 5,686 631 117,858
Increase in
capital
contributed 18 14,568 17,977 - - - - 32,545
Decrease in
capital
contributed 18 (131,402) - 118,313 13,089 - - -
Warrants
exercised 23 3 7 - - - - 10
Cost of raising
capital 18 - (2,297) - - - - (2,297)
Recapitalisation
of subsidiaries 18 - - 2,667 (2,667) - - -
Total equity
movement (116,831) 15,687 120,980 10,422 - - 30,258
Total
comprehensive
income/(loss) - - 3 (35) (12,437) (631) (13,100)
------------------ ------ ---------- ------------ ----------- ---------- --------- ------------- -------------
Total
comprehensive
income
for the year (116,831) 15,687 120,983 10,387 (12,437) (631) 17,158
------------------ ------ ---------- ------------ ----------- ---------- --------- ------------- -------------
Balance as at 30
September
2010 25,998 164,991 120,477 (169,699) (6,751) - 135,016
------------------ ------ ---------- ------------ ----------- ---------- --------- ------------- -------------
Warrants
exercised - 1 - - - - 1
Recapitalisation
of subsidiaries - - 7 (7) - - -
------------------ ------ ---------- ------------ ----------- ---------- --------- ------------- -------------
Total equity
movement - 1 7 (7) - - 1
Total
comprehensive
income/(loss) - - - (11,707) 7,933 - (3,774)
------------------ ------ ---------- ------------ ----------- ---------- --------- ------------- -------------
Total
comprehensive
income
for the year - 1 7 (11,714) 7,933 - (3,773)
------------------ ------ ---------- ------------ ----------- ---------- --------- ------------- -------------
Balance as at 30
September
2011 25,998 164,992 120,484 (181,413) 1,182 - 131,243
------------------ ------ ---------- ------------ ----------- ---------- --------- ------------- -------------
The accompanying notes are an integral part of these
consolidated financial statements
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 September 2011
30 Sep 11 30 Sep 10
EUR000 EUR000
------------------------------------------- ----- ------------- -------------
Loss before tax (11,511) (1,112)
Adjustment for:
Net gain on disposal of investment
property 12 (494) (1,077)
Net valuation losses on investment
property 12 16,237 6,145
Net loss/(gain) on financial instruments 28.5 109 (8,058)
Unrealised change in fair value
of warrants 28.5 (261) 650
Interest expense 14 25,136 26,362
Interest received 13 (329) (401)
Amortisation of transaction costs
relating to debt 14 1,672 7,436
Net unrealised foreign currency
losses / gains 14 388 853
Changes in working capital:
Decrease/(increase) in current
assets 2,961 (3,585)
(Decrease)/increase in current
liabilities (5,693) 864
------------------------------------------- ----- ------------- -------------
Cash generated from operations 28,215 28,077
Interest paid 14 (26,032) (26,490)
Interest received 13 173 48
Tax paid 25 (739) (4,887)
------------------------------------------- ----- ------------- -------------
Net Cash flows used in Operating
Activities 1,617 (3,252)
------------------------------------------- ----- ------------- -------------
Investing Activities
Acquisition of property 12 - (11,009)
Capital expenditure 12 (539) (5,483)
Net proceeds from disposal of investment
property 12 49,436 26,962
------------------------------------------- ----- ------------- -------------
Net Cash flows from Investing Activities 48,897 10,470
------------------------------------------- ----- ------------- -------------
Financing Activities
Proceeds from bank loans 21
- Gross proceeds 4,973 5,778
- Gross repayments (50,657) (62,282)
- Transaction costs (228) (1,255)
Swap breakage costs 28.5 (2,563) (2,915)
Gain on forward transaction 13 156 369
Proceeds from exercise of warrants 1 -
Net proceeds from preference shares
issue 22 - 30,250
Net proceeds from capital contributed - 30,258
------------------------------------------- ----- ------------- -------------
Net Cash flows (used in) / from
Financing Activities (48,318) 203
------------------------------------------- ----- ------------- -------------
Effects of changes in exchange
rates (724) 42
------------------------------------------- ----- ------------- -------------
Net increase in cash and cash equivalents
for the year 1,472 7,464
------------------------------------------- ----- ------------- -------------
Opening cash and cash equivalents 42,420 34,956
------------------------------------------- ----- ------------- -------------
Closing cash and cash equivalents 17 43,892 42,420
------------------------------------------- ----- ------------- -------------
The accompanying notes are an integral part of these
consolidated financial statements
COMPANY INCOME STATEMENT
For the year ended 30 September 2011
30 Sep 11 30 Sep 10
Note EUR000 EUR000
------------------------------------ ------ ---------- ----------
Investment management fees (1,405) (1,098)
Professional fees (312) (512)
Administrative fees 11 (746) (861)
Directors' fees (204) (222)
Other expenses (78) (109)
------------------------------------ ------ ---------- ----------
Total expenses (2,745) (2,802)
------------------------------------ ------ ---------- ----------
Losses before net financing cost
and tax (2,745) (2,802)
------------------------------------ ------ ---------- ----------
Finance income 13 16,946 1,489
Finance expenses 14 (6,054) (7,032)
Net gain on derivative instruments 2,714 8,375
------------------------------------ ------ ---------- ----------
Net finance costs 13,606 2,832
Shares and intercompany loans
impairments 33 (22,558) (123,948)
Loss for the year before tax (11,697) (123,918)
------------------------------------ ------ ---------- ----------
Taxation (10) (119)
Loss for the year (11,707) (124,037)
------------------------------------ ------ ---------- ----------
Basic loss per share (Euro) (0.05) (0.55)
Diluted loss per share (Euro) (0.05) (0.55)
------------------------------------ ------ ---------- ----------
The accompanying notes are an integral part of these
consolidated financial statements
COMPANY STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 September 2011
30 Sep 11 30 Sep 10
Notes EUR000 EUR000
------------------------------------- ------ ---------- -----------
Loss for the year (11,707) (124,037)
------------------------------------- ------ ---------- -----------
Other comprehensive income
Fair value of warrants exercised
during the year 23 - 3
Amortisation of hedge reserve
for the period 1 October 2009
to 12 January 2010 18 - (632)
Reversal of hedge reserve balance
as at 12 January 2010 following
refinancing 18 - (5,054)
Effective portion of changes
in fair value of cash flows hedged
of the period/year 18 7,933 (6,751)
------------------------------------- ------ ---------- -----------
Other comprehensive gain/(loss)
for the year 7,933 (12,434)
------------------------------------- ------ ---------- -----------
Total other comprehensive loss
for the year attributable to
owners of the Company (3,774) (136,471)
------------------------------------- ------ ---------- -----------
All items in the above statement are derived from continuing
operations.
The accompanying notes are an integral part of these
consolidated financial statements
COMPANY STATEMENT OF FINANCIAL POSITION
As at 30 September 2011
30 Sep 11 30 Sep 10
Note EUR000 EUR000
Assets
Investment in subsidiaries - -
Loans to subsidiaries 33 172,727 201,587
Deferred expenses 1,313 2,024
---------------------------------- ------ ---------- ----------
Non-current assets 174,040 203,611
---------------------------------- ------ ---------- ----------
Amounts due from subsidiaries 29,390 14,809
Trade and other receivables 141 307
Cash and cash equivalents 17 15,751 19,560
---------------------------------- ------ ---------- ----------
Current assets 45,282 34,676
---------------------------------- ------ ---------- ----------
Total assets 219,322 238,287
---------------------------------- ------ ---------- ----------
Share capital 25,998 25,998
Share premium 164,992 164,991
Restricted reserve 118,316 118,316
Retained earnings (179,245) (167,538)
Hedge reserve 1,182 (6,751)
---------------------------------- ------ ---------- ----------
Total equity attributable to
equity holders of the Company 18 131,243 135,016
---------------------------------- ------ ---------- ----------
Liabilities
Preference shares 22 30,333 30,134
Warrants 23 2,258 2,535
Loans from subsidiaries 17,350 20,950
Long term provision 24 6,626 6,723
Derivative financial instruments 28 20,133 30,519
---------------------------------- ------ ---------- ----------
Non-current liabilities 76,700 90,861
---------------------------------- ------ ---------- ----------
Loans from subsidiaries 9,456 9,390
Trade and other payables 26 1,923 3,020
---------------------------------- ------ ---------- ----------
Current liabilities 11,379 12,410
---------------------------------- ------ ---------- ----------
Total liabilities 88,079 103,271
---------------------------------- ------ ---------- ----------
Total equity and liabilities 219,322 238,287
---------------------------------- ------ ---------- ----------
Net Asset Value per ordinary
share (Euro) 0.505 0.519
The accompanying notes are an integral part of these
consolidated financial statements
COMPANY STATEMENT OF CHANGE IN EQUITY
For the year ended 30 September 2011
Share Share premium Restricted Retained Hedging Total equity
capital reserve earnings reserve
EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
------------------------------------- ---------- -------------- ----------- ----------- ---------- -------------
Balance as at 30 September
2009 142,829 149,304 - (56,590) 5,686 241,229
------------------------------------- ---------- -------------- ----------- ----------- ---------- -------------
Increase in capital contributed 14,568 17,977 - - - 32,545
Decrease in capital contributed (131,402) - 118,313 13,089 - -
Warrants exercised 3 7 - - - 10
Cost of raising capital - (2,297) - - - (2,297)
------------------------------------- ---------- -------------- ----------- ----------- ---------- -------------
Total equity movement (116,831) 15,687 118,313 13,089 - 30,258
------------------------------------- ---------- -------------- ----------- ----------- ---------- -------------
Effective portion of changes
in fair value of cash flow
hedges - - - - (12,437) (12,437)
Warrants exercised - - 3 - - 3
------------------------------------- ---------- -------------- ----------- ----------- ---------- -------------
Total income and expense recognised
directly in equity - - 3 - (12,437) (12,434)
Loss for the year - - - (124,037) - (124,037)
------------------------------------- ---------- -------------- ----------- ----------- ---------- -------------
Total income and expense recognised - - 3 (124,037) (12,437) (136,471)
------------------------------------- ---------- -------------- ----------- ----------- ---------- -------------
Balance as at 30 September
2010 25,998 164,991 118,316 (167,538) (6,751) 135,016
------------------------------------- ---------- -------------- ----------- ----------- ---------- -------------
Warrants exercised - 1 - - - 1
------------------------------------- ---------- -------------- ----------- ----------- ---------- -------------
Total equity movement - 1 - - - 1
------------------------------------- ---------- -------------- ----------- ----------- ---------- -------------
Effective portion of changes
in fair value of cash flow
hedges - - - - 7,933 7,933
------------------------------------- ---------- -------------- ----------- ----------- ---------- -------------
Total income and expense recognised
directly in equity - - - - 7,933 7,933
Loss for the year - - - (11,707) - (11,707)
------------------------------------- ---------- -------------- ----------- ----------- ---------- -------------
Total income and expense recognised - - - (11,707) 7,933 (3,774)
------------------------------------- ---------- -------------- ----------- ----------- ---------- -------------
Balance as at 30 September
2011 25,998 164,992 118,316 (179,245) 1,182 131,243
------------------------------------- ---------- -------------- ----------- ----------- ---------- -------------
The accompanying notes are an integral part of these
consolidated financial statements
COMPANY STATEMENT OF CASH FLOWS
For the year ended 30 September 2011
30 Sep 11 30 Sep 10
Note EUR000 EUR000
----------------------------------- ------- ------------- -----------
Loss before tax (11,697) (123,918)
Adjustment for:
Shares and intercompany loans
impairments 33 22,558 123,948
Net loss/(gain) on financial
instruments 28.5 109 (8,375)
Unrealised change in fair value
of warrants 28.5 (261) -
Net unrealised foreign currency
gain / (loss) 14 381 1,381
Amortisation of transaction costs
relating to debt 14 1,141 1,941
Interest expense 14 4,532 3,710
Interest received 13 (16,946) (1,489)
Changes in working capital:
Decrease/(increase) in current
assets 167 (1,341)
(Decrease)/increase in current
liabilities (370) 2,975
----------------------------------- ------- ------------- -----------
Cash generated from operations (386) (1,168)
Interest paid (4,576) (2,417)
Interest received 2,471 1,164
Tax paid (750) (378)
----------------------------------- ------- ------------- -----------
Net Cash flows from Operating
Activities (3,241) (2,799)
----------------------------------- ------- ------------- -----------
Investing Activities
Investments in subsidiaries - (20,100)
Increase / (decrease) in loans granted
from subsidiaries 2,466 (32,800)
------------------------------------------- ------- ------------ -----------
Net Cash flows (used in) / from Investing
Activities 2,466 (52,900)
------------------------------------------- ------- ------------ -----------
Financing Activities
Increase / (decrease) in loans granted
to subsidiaries - 11,100
Swap breakage 28.5 (2,563) (1,949)
Loan transaction costs 96 -
Gain on forward transaction 13 156 369
Proceeds from exercise of warrants 1 -
Net proceeds from preference share
issue 22 - 30,250
Net proceeds from capital contributed - 30,258
------------------------------------------- ------- ------------ -----------
Net Cash flows (used in) / from Financing
Activities (2,310) 70,028
------------------------------------------- ------- ------------ -----------
Effects of changes in exchange rates (724) 25
Net increase in cash and cash equivalents
for the year (3,809) 14,354
------------------------------------------------ ------------ -----------
Opening cash and cash equivalents 19,560 5,206
Closing cash and cash equivalents 17 15,751 19,560
------------------------------------------- ------- ------------ -----------
The accompanying notes are an integral part of these
consolidated financial statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Reporting entity
Invista European Real Estate Trust SICAF ("the Company") was
incorporated as a "societe anonyme" under the laws of Luxembourg on
6 June 2005. On 17 November 2006 the Company was converted into an
investment company with fixed capital "societe d'investissement a
capital fixe" ("SICAF"). Through its subsidiaries (together "the
Group") its main activity is to evaluate, make and actively manage
direct and indirect investments in real estate in Continental
European countries.
The Company is a public limited liability company incorporated
for an unlimited term. The address of the registered office of the
Company is 25C, Boulevard Royal, L-2449 Luxembourg.
Information pertaining to the Company is included to the extent
required by the London Stock Exchange listing rules. This
information should not be deemed to represent statutory annual
accounts, which are separately prepared in accordance with
International Financial Reporting Standard (IFRS) as adopted by the
European Union (EU).
2. Basis of preparation
2.1 Statement of compliance
These consolidated financial statements have been prepared in
accordance with International Financial Reporting Standard (IFRS)
as issued by the International Accounting Standard Board (IASB),
and adopted by the European Union (EU).
These consolidated financial statements are presented for the
year ended 30 September 2011, with comparative figures for the year
ended 30 September 2010.
The Company's financial statements and the consolidated
financial statements have been approved for issue by the Board of
Directors on 16 December 2011.
2.2 Functional and presentation currency
These consolidated financial statements are presented in Euro,
which is the Company's presentational and functional currency. All
financial information presented in Euro has been rounded to the
nearest thousand.
2.3 Basis of measurement
The consolidated financial statements have been prepared on the
historical cost basis except for the investment properties,
warrants and derivative financial instruments that have been
measured at fair value.
The consolidated financial statements and the Company financial
statements are prepared on a going concern basis.
2.4 Use of estimates and judgements
The preparation of the financial statements in conformity with
IFRSs requires management to make judgments, estimates and
assumptions that affect the application of the accounting policies
and the reported amounts of assets, liabilities, income and
expenses. Actual results may differ from these estimates. Estimates
and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in
which the estimates are revised and in any future periods
affected.
2.4 Use of estimates and judgements (continued)
Information about significant areas of estimation uncertainty
and critical judgements in applying accounting policies that have
the most significant effect on the amounts recognised in the
consolidated financial statements are described in note 4.
2.5 Changes in accounting policy and disclosures
(a) New and amended standards adopted by the Group
The following new standards and amendments to standards are
mandatory for the first time for the financial year beginning 1
January 2010.
IFRS 3 (revised), 'Business combinations', and consequential
amendments to IAS 27, 'Consolidated and separate financial
statements', IAS 28, 'Investments in associates', and IAS 31,
'Interests in joint ventures', are effective prospectively to
business combinations for which the acquisition date is on or after
the beginning of the first annual reporting period beginning on or
after 1 July 2009.
The revised standard continues to apply the acquisition method
to business combinations but with some significant changes compared
with IFRS 3. For example, all payments to purchase a business are
recorded at fair value at the acquisition date, with contingent
payments classified as debt subsequently remeasured through the
statement of comprehensive income. There is a choice on an
acquisition-by-acquisition basis to measure the non-controlling
interest in the acquiree either at fair value or at the
non-controlling interest's proportionate share of the acquiree's
net assets. All acquisition-related costs are expensed.
IAS 27 (revised) requires the effects of all transactions with
non-controlling interests to be recorded in equity if there is no
change in control and these transactions will no longer result in
goodwill or gains and losses. The standard also specifies the
accounting when control is lost. Any remaining interest in the
entity is re-measured to fair value, and a gain or loss is
recognised in profit or loss. IAS 27 (revised) has had no impact on
the current period, as none of the non-controlling interests have a
deficit balance; there have been no transactions whereby an
interest in an entity is retained after the loss of control of that
entity, and there have been no transactions with non-controlling
interests.
(b) New and amended standards, and interpretations mandatory for
the first time for the financial year beginning 1 January 2010 but
not currently relevant to the group (although they may affect the
accounting for future transactions and events)
The following standards and amendments to existing standards
have been published and are mandatory for the Group's accounting
periods beginning on or after 1 January 2010 or later periods, but
the Group has not early adopted them.
IFRIC 17, 'Distribution of non-cash assets to owners' (effective
on or after 1 July 2009): The interpretation was published in
November 2008. This interpretation provides guidance on accounting
for arrangements whereby an entity distributes non-cash assets to
shareholders either as a distribution of reserves or as dividends.
IFRS 5 has also been amended to require that assets are classified
as held for distribution only when they are available for
distribution in their present condition and the distribution is
highly probable.
2.5 Changes in accounting policy and disclosures (continued)
IFRIC 18, 'Transfers of assets from customers', effective for
transfer of assets received on or after 1 July 2009. This
interpretation clarifies the requirements of IFRSs for agreements
in which an entity receives from a customer an item of property,
plant and equipment that the entity must then use either to connect
the customer to a network or to provide the customer with ongoing
access to a supply of goods or services (such as a supply of
electricity, gas or water). In some cases, the entity receives cash
from a customer that must be used only to acquire or construct the
item of property, plant, and equipment in order to connect the
customer to a network or provide the customer with ongoing access
to a supply of goods or services (or to do both).
IFRIC 9, 'Reassessment of embedded derivatives and IAS 39,
Financial instruments: Recognition and measurement', effective 1
July 2009. This amendment to IFRIC 9 requires an entity to assess
whether an embedded derivative should be separated from a host
contract when the entity reclassifies a hybrid financial asset out
of the 'fair value through profit or loss' category. This
assessment is to be made based on circumstances that existed on the
later of the date the entity first became a party to the contract
and the date of any contract amendments that significantly change
the cash flows of the contract. If the entity is unable to make
this assessment, the hybrid instrument must remains classified as
at fair value through profit or loss in its entirety.
IFRIC 16, 'Hedges of a net investment in a foreign operation'
effective 1 July 2009. This amendment states that, in a hedge of a
net investment in a foreign operation, qualifying hedging
instruments may be held by any entity or entities within the Group,
including the foreign operation itself, as long as the designation,
documentation and effectiveness requirements of IAS 39 that relate
to a net investment hedge are satisfied. In particular, the Group
should clearly document its hedging strategy because of the
possibility of different designations at different levels of the
Group. IAS 38 (amendment), 'Intangible assets', effective 1 January
2010. The amendment clarifies guidance in measuring the fair value
of an intangible asset acquired in a business combination and
permits the grouping of intangible assets as a single asset if each
asset has similar useful economic lives.
IAS 1 (amendment), 'Presentation of financial statements': The
amendment clarifies that the potential settlement of a liability by
the issue of equity is not relevant to its classification as
current or non current. By amending the definition of current
liability, the amendment permits a liability to be classified as
non-current (provided that the entity has an unconditional right to
defer settlement by transfer of cash or other assets for at least
12 months after the accounting period) notwithstanding the fact
that the entity could be required by the counterparty to settle in
shares at any time.
IAS 36 (amendment), 'Impairment of assets', effective 1 January
2010: The amendment clarifies that the largest cash-generating unit
(or group of units) to which goodwill should be allocated for the
purposes of impairment testing is an operating segment, as defined
by paragraph 5 of IFRS 8, ' Operating segments' (that is, before
the aggregation of segments with similar economic
characteristics).
IFRS 2 (amendments), 'Group cash-settled share-based payment
transactions': effective form 1 January 2010. In addition to
incorporating IFRIC 8, 'Scope of IFRS 2', and IFRIC 11, 'IFRS 2 -
Group and treasury share transactions', the amendments expand on
the guidance in IFRIC 11 to address the classification of group
arrangements that were not covered by that interpretation.
IFRS 5 (amendment), 'Non-current assets held for sale and
discontinued operations': The amendment clarifies that IFRS 5
specifies the disclosures required in respect of non-current assets
(or disposal groups) classified as held for sale or discontinued
operations. It also clarifies that the general requirement of IAS 1
still apply, in particular paragraph 15 (to achieve a fair
presentation) and paragraph 125 (sources of estimation uncertainty)
of IAS 1.
2.5 Changes in accounting policy and disclosures (continued)
(c) New standards, amendments and interpretations issued but not
effective for the financial year beginning 1 January 2010 and not
early adopted.
The Group's and the Company's assessment of the impact of these
new standards and interpretations is set out below.
IFRS 9, 'Financial instruments', issued in November 2009. This
standard is the first step in the process to replace IAS 39,
"Financial instruments: recognition and measurement". IFRS 9
introduces new requirements for classifying and measuring financial
assets and is likely to affect the Group's accounting for its
financial assets. The standard is not applicable until 1 January
2013 but is available for early adoption. However, the standard has
not yet been endorsed by the EU.
The Group is yet to assess IFRS 9's full impact. However,
initial indications are that it may affect the group's accounting
for its available-for-sale debt financed assets, as IFRS 9 only
permits the recognition of fair value gains and losses in other
comprehensive income if they relate to equity investments that are
not held for trading. Fair value gains and losses on
available-for-sale debt investments, for example, will therefore
have to be recognised directly in profit or loss.
Revised IAS 24 (revised), 'Related party disclosures', issued in
November 2009. It supersedes IAS 24, 'Related party disclosures',
issued in 2003. IAS 24 (revised) is mandatory for periods beginning
on or after 1 January 2011. Earlier application, in whole or in
part, is permitted. However, the standard has not yet been endorsed
by the EU.
The revised standard clarifies and simplifies the definition of
a related party and removes the requirement for government-related
entities to disclose details of all transactions with the
government and other government-related entities. The Group will
apply the revised standard beginning 1 October 2011. When the
revised standard is applied, the group and the Company will need to
disclose any transactions between its subsidiaries and its
associates. The Group is currently putting systems in place to
capture the necessary information. It is, therefore, not possible
at this stage to disclose the impact, if any, of the revised
standard on the related party disclosures.
'Classification of rights issues' (amendment to IAS 32), issued
in October 2009: The amendment applies to annual periods beginning
on or after 1 February 2010. Earlier application is permitted. The
amendment addresses the accounting for rights issues that are
denominated in a currency other than the functional currency of the
issuer. Provided certain conditions are met, such rights issues are
now classified as equity regardless of the currency in which the
exercise price is denominated. Previously, these issues had to be
accounted for as derivative liabilities. The amendment applies
retrospectively in accordance with IAS 8 'Accounting policies,
changes in accounting estimates and errors'. The Group will apply
the amended standard beginning 1 October 2011.
IFRIC 19, 'Extinguishing financial liabilities with equity
instruments', effective 1 July 2010. The interpretation clarifies
the accounting by an entity when the terms of a financial liability
are renegotiated and result in the entity issuing equity
instruments to a creditor of the entity to extinguish all or part
of the financial liability (debt for equity swap). It requires a
gain or loss to be recognised in profit or loss, which is measured
as the difference between the carrying amount of the financial
liability and the fair value of the equity instruments issued. If
the fair value of the equity instruments issued cannot be reliably
measured, the equity instruments should be measured to reflect the
fair value of the financial liability extinguished. The Group will
apply the interpretation beginning 1 October 2011, subject to
endorsement by the EU. It is not expected to have any impact on the
Group or the parent entity's financial statements.
2.5 Changes in accounting policy and disclosures (continued)
'Prepayments of a minimum funding requirement' (amendments to
IFRIC 14): The amendments correct an unintended consequence of
IFRIC 14, 'IAS 19 - The limit on a defined benefit asset, minimum
funding requirements and their interaction'. Without the
amendments, entities are not permitted to recognise as an asset
some voluntary prepayments for minimum funding contributions. This
was not intended when IFRIC 14 was issued, and the amendments
correct this. The amendments are effective for annual periods
beginning 1 January 2011. Earlier application is permitted. The
amendments should be applied retrospectively to the earliest
comparative period presented. The Group will apply these amendments
for the financial reporting period commencing on 1 October
2011.
On 20 December 2010, the IASB issued amendments to IAS 12,
'Income Taxes', effective from 1 January 2012. IAS 12 requires that
deferred tax relating to an asset is measured depending on whether
the entity expects to recover the carrying amount of the asset
through use or sale. The amendment provides guidance by introducing
a presumption that recovery of the carrying amount will, normally,
be through sale. However, the standard has not yet been endorsed by
the EU.
On 12 May 2011, the following standards were published,
applicable to accounting periods beginning on, or after 1 January
2013:
IFRS 10, 'Consolidated financial statements'
IFRS 11, 'Joint arrangements'
IFRS 12, 'Disclosure of interests in other entities'
IFRS 13, 'Fair value measurement'
The Group is currently assessing the impact of the new and
revised IFRS standards as adopted by the EU.
3. Significant accounting policies
The accounting policies set out below have been applied
consistently to all the periods presented in these consolidated
financial statements, and have been applied consistently by Group
entities except as explained in Note 2.5, which addresses changes
in accounting policies.
3.1 Basis of consolidation
The consolidated financial statements comprise the financial
statements of the Company and all of its subsidiaries drawn up to
30 September each year. Subsidiaries are those entities over which
the Company has the power to govern the financial and operating
policies generally accompanying a shareholding of more than one
half of the voting rights. Subsidiaries are fully consolidated from
the date on which control is transferred to the Company. They are
de-consolidated from the date control ceases.
The Group's acquisitions of subsidiaries are primarily accounted
for as acquisitions of assets as the subsidiaries are special
purpose vehicles established for the sole purpose of owning
property. The cost of an acquisition is measured as the fair value
of the assets acquired, equity instruments issued and liabilities
incurred or assumed at the date of exchange, plus costs directly
attributable to the acquisition.
The assets and liabilities of the subsidiaries and their results
are fully reflected in the consolidated financial statements.
Intercompany transactions, balances and unrealised gains on
transactions between group companies are eliminated. Unrealised
losses are also eliminated unless the transaction provides evidence
of an impairment of the asset transferred. Accounting policies of
subsidiaries have also been changed where necessary to ensure
consistency with new or revised accounting policies adopted by the
Group.
3. Significant accounting policies (continued)
3.2 Related parties
Related parties are defined as parties either directly or
indirectly controlled, managed or owned by Invista European Real
Estate Trust SICAF. A list of related party transactions is
disclosed in Note 27.
3.3 Foreign currency translation
The functional currency of a subsidiary is determined as the
principal currency in which the entity's assets, liabilities,
income and expenses are denominated.
Fair value adjustments arising on the acquisition of a foreign
entity are treated as assets and liabilities of the acquired
company and are recorded at the exchange rate at the date of the
transaction.
Transactions in currencies other than the presentational
currency of the group are recorded at the rate in effect at the
date of transaction. Monetary assets and liabilities denominated in
such currencies are translated at the date of exchange ruling at
the balance date sheet date. All differences are recognized in the
Consolidated Income Statement under 'finance income" or "finance
expense" (see Notes 13 and 14). The cumulative effect of exchange
differences on cash transactions are classified as realised gains
and losses in the Consolidated Income Statement in the period in
which they are settled. Exchange differences on transactions not
yet settled in cash are classified as unrealised gains and losses
under "finance expense".
3.4 Investment property
Investment property is property held either to earn rental
income or for capital appreciation or for both, but not for sale in
the ordinary course of business, used in the production or supply
of goods or services or for administrative purposes. Investment
property comprises freehold land, freehold buildings and land held
under operating leases.
Investment property is initially recognised on completion of
contracts at cost, including related transaction and borrowing
costs associated with the investment property. Borrowing costs
incurred for the purpose of acquiring, constructing or producing a
qualifying investment property are capitalised as part of its
costs. Borrowing costs are capitalised while acquisition or
construction is actively underway and cease once the asset is
substantially completed, or suspended if the development of the
asset is suspended.
Where unconditional commitments have been entered into prior to
the Balance Sheet date property acquisitions are recognised at
their contractual value. After initial recognition, investment
properties are measured at fair value as determined by third party
independent appraisers. The gains or losses arising from a change
in the fair value of the investment property are included in the
Consolidated Income Statement under the heading "net valuation
gains / (losses) on investment property" in the period in which
they arise. Depreciation is not provided on investment properties.
Realised gains and losses on the disposal of investment properties
are determined as the difference between the disposal proceeds and
the carrying value and are included in the Consolidated Income
Statement in the period in which they arise.
A property interest under an operating lease is classified and
accounted for as an investment property on a property-by-property
basis when the Group holds it to earn income or for capital
appreciation or both. Any such property interest under an operating
lease classified as an investment property is carried at fair
value. This accounting policy is also applied for assets held for
sale.
3.5 Investment in subsidiaries (Company only)
Investments in subsidiaries are held at cost less any
impairment.
3. Significant accounting policies (continued)
3.6 Loan to subsidiaries (Company only)
Loans and receivables are financial assets with fixed or
determinable payments that are not quoted in an active market. Such
assets are recognised initially at fair value plus any directly
attributable transaction costs. Subsequent to initial recognition
loans and receivables are measured at cost, less any impairment
losses.
3.7 Financial instruments
Financial assets: Initial recognition
The Company determines the classification of its financial
assets at initial recognition. The Company's financial assets
include cash and short term deposits, trade and other receivables
and financial instruments.
Available-for-sale
After initial measurement, available-for-sale financial assets
are measured at fair value with unrealised gains or losses
recognised directly in equity until the investment is (i)
derecognised, at which time the cumulative gain or loss recorded in
equity is recognised in Other Comprehensive Income, or (ii)
determined to be impaired, at which time the cumulative loss is
recognised in Other Comprehensive Income.
Financial liabilities: Initial recognition
Financial liabilities within the scope of IAS 39 are classified
as either financial liability at fair value through profit and
loss, loans and borrowings, or as derivatives designated as hedging
instruments in an effective hedge, as appropriate. The Company
determines the classification of its financial liabilities at
initial recognition.
The Company's financial liabilities include trade and other
payables, loans and borrowings and derivative financial
instruments.
The subsequent measurement of financial liabilities depends on
their classification:
- Financial liability at fair value recognised through profit and loss
Financial liability at fair value recognised through profit and
loss includes financial liabilities held for trading and financial
liabilities designated upon the initial recognition at fair value
through profit and loss. Financial liabilities are classified as
held for trading if they are acquired for the purpose of selling in
the near term. This category includes derivative instruments
entered into by the Company that do not meet hedging accounting
criteria as defined by IAS 39. Gains and losses on liabilities held
for trading are recognised in the Consolidated Income
Statement;
- Fair value of financial instruments
The fair value of financial instruments that are actively traded
in organised financial markets is determined by reference to quoted
market bid prices at the close of business on the balance sheet
date. For financial instruments where there is no active market,
fair value is determined using valuation techniques. Such
techniques may include recent arm's length market transactions;
reference to the current fair value of another instrument that has
substantially the same discounted cash flow analysis or other
valuation methods;
- Amortised cost of financial instruments
Amortised cost is computed using the effective interest rate
method less any allowance for impairment and principal repayment or
reduction. The calculation takes into account any premium or
discount on acquisition and includes transaction costs and fees
that are an integral part of the effective interest rate.
3. Significant accounting policies (continued)
3.8 Derivative financial instruments and hedge accounting
The Group uses derivative financial instruments to hedge its
exposure to interest rate risks arising from operational, financing
and investment activities (refer to Note 28). On initial
designation of the hedge, the Company formally documents the
relationship between the hedging instruments and hedged items,
including the risk management objectives and strategy in
undertaking the hedge transaction, together with the methods that
will be used to assess the effectiveness of the hedge relationship.
The Company makes an assessment, both at the inception of the hedge
relationship as well as on an ongoing basis, whether the hedging
instruments are expected to be "highly effective" in offsetting the
changes in the fair value of cash flows of the respective hedged
items during the period for which the hedge is designated, and
whether the actual results of each hedge are within a range of
80-125 percent.
Derivatives are initially recognised at fair value with related
transaction costs recognised in the Consolidated Income Statement
when incurred. Subsequent to initial recognition, derivative
financial instruments are measured and stated at fair value on the
date on which the derivative contract is entered into and are
subsequently revised to reflect their fair value. Derivatives are
carried as financial assets when the fair value is positive and as
financial liabilities when the fair value is negative. Any gains or
losses arising from changes in fair value on derivatives during the
year that do not qualify for hedge accounting and the ineffective
portion of an effective hedge are taken directly to the
Consolidated Income Statement. The effectiveness of the hedge is
assessed by comparing the value of the hedged item with the
notional value implicit in the contractual terms of the financial
instrument being used in the hedge. The fair value of interest rate
swap contracts is determined by reference to market values for
similar instruments.
For the purpose of hedge accounting, hedges are classified as
either fair value hedges, when they hedge the exposure to changes
in the fair value of a recognised asset and liability, or cash flow
hedges where they hedge exposure to variability in cash flows
attributable to a particular risk associated with a recognised
asset or liability.
Cash flow hedges
Changes in the fair value of the derivative hedging instrument
designated as a cash flow hedge are recognised directly in equity
to the extent that the hedge is effective. To the extent that the
hedge is ineffective, changes in fair value are recognised in the
Consolidated Income Statement. Amounts taken to equity are
transferred to the Consolidated Income Statement when the hedged
transaction affects profit or loss, such as when the hedged
financial income or financial expense is recognized or when the
related sale occurs.
If the hedging instrument no longer meets the criteria for hedge
accounting, expires or is sold, terminated or exercised, then hedge
accounting is discontinued prospectively. The cumulative gain or
loss previously recognised in equity remains there until the
forecast transaction occurs. When the hedged item is a
non-financial asset, the amount recognised in equity is transferred
to the carrying amount of the asset when it is recognised. In other
cases the amount recognised in equity is transferred to the
Consolidated Income Statement in the same period that the hedged
item affects profit or loss.
Prior to the renegotiation of the debt and the interest rate
hedging concluded on 12 January 2010, the interest rate swap
hedging was not fully effective, and the changes of the fair value
were recognised in the Consolidated Income Statement. Subsequent to
the renegotiation of the debt due to the matching duration of hedge
contracts and debt, the hedging contracts are considered to be
effective and the changes of fair value are recognized in the
Consolidated Income Statement and Changes in Equity.
3. Significant accounting policies (continued)
3.9 Impairment
Financial assets (including receivables)
The Company assesses at each balance sheet date whether there is
any objective evidence that a financial asset is impaired. A
financial asset is deemed to be impaired if, and only if, there is
objective evidence of an impairment as a result of one or more
events that has occurred after the initial recognition of the asset
(an incurred "loss event") and that loss event has an impact on the
estimated future cash flows of the financial asset that can be
reliably estimated. Individually significant financial assets are
tested for impairment on an individual basis. The remaining
financial assets are assessed collectively in groups that share
similar credit risk characteristics. All impairment losses are
recognised in the Consolidated Income Statement.
An impairment loss in respect of a financial asset measured at
amortised cost is calculated as the difference between its carrying
amount, and the present value of the estimated future cash flows
discounted at the original effective interest rate.
Non Financial assets
The carrying amounts of the Company's non financial assets are
reviewed at each reporting date to determine whether there is any
indication of impairment. For the purpose of impairment testing,
assets are grouped together into the smallest group of assets that
generates continuing cash flows that are largely independent of the
cash flows of other assets or groups of assets (the
"cash-generating unit").
An impairment loss is recognised if the carrying amount of an
asset or its cash-generating unit exceeds its estimated recoverable
amount. Impairment losses are recognised in the Consolidated Income
Statement.
3.10 Derecognition of financial instrument
Financial assets
A financial asset is derecognised when:
- The rights to receive cash flows from the asset have expired;
- The Company has transferred its rights to receive cash flows
or transferred substantially all the risks and rewards and/or has
neither transferred nor substantially retained all the risks and
rewards of the asset, but has transferred control of the asset;
- If the hedging instrument no longer meets the criteria for
hedge accounting then hedge accounting is discontinued
prospectively. The cumulative gain or loss previously recognised in
equity remains there until the related transaction occurs. When the
hedged item is a non-financial asset, the amount recognised in
equity is transferred to the carrying amount of the asset when it
is recognised. In other cases the amount recognised in equity is
transferred to the Consolidated Income Statement in the same period
as the hedged item affects profit or loss.
Financial liabilities
A financial liability is derecognised when the obligation under
the liability is discharged, cancelled or expires. When an existing
financial liability is replaced by another from the same lender on
substantially different terms, or the terms of an existing
liability are substantially modified, such an exchange or
modification is treated as a reversal of the original liability and
the recognition of a new liability and the difference in the
respective carrying amount is recognised in the Consolidated Income
Statement.
3. Significant accounting policies (continued)
3.11 Trade receivables
Trade receivables are carried at amortised cost less provision
for doubtful debts, if any. The Directors' of the Company assess
specific provisions (refer to Note 28) on a customer by customer
basis throughout the period.
3.12 Current assets and liabilities
Due to the short time frame in which these transactions are
settled, the fair value of other current assets and liabilities due
within one year approximates the carrying value disclosed in the
consolidated financial statements.
3.13 Non current assets held for sale
Investment property is transferred to non-current assets held
for sale when it is expected that the carrying amount will be
recovered principally through sale rather than from continuing use.
For this to be the case, the property must be available for
immediate sale in its present condition subject only to terms that
are usual and customary for sales of such property and its sale
must be highly probable. On reclassification, investment property
that is measured at fair value continues to be so measured.
3.14 Cash and cash equivalents
Cash includes cash on hand and cash with banks. Cash equivalents
are short term, highly liquid investments that are readily
convertible to known amounts of cash with original maturities of
three months or less and are subject to an insignificant risk of
change in value. The use and disbursement of certain cash deposits
are restricted under the terms of various financing agreements.
Bank overdrafts that are repayable on demand and that form an
integral part of the Group's cash management are included as a
component of cash and cash equivalents for the purpose of the
Consolidated Statement of Cash Flows.
3.15 Share capital
Ordinary shares are classified as equity. External costs
directly attributable to the issue of new shares, other than on a
business combination, are shown as a deduction, net of tax, in
equity from the proceeds. Share issue costs incurred directly in
connection with a business combination are included in the cost of
acquisition.
The holders of ordinary shares are entitled to receive dividends
as declared from time to time and are entitled to one vote per
share at meetings of the Company.
3.16 Issue costs
The cost of raising capital represents direct costs incurred in
establishing or increasing the capital of the Company including,
amongst others, legal, accounting, financial advisory and equity
underwriting fees.
3.17 Preference shares
Preference shares are classified as a financial liability due to
the contractual obligation by the issuer to redeem them in cash at
a date in the future.
Where the preference shares are classified as a financial
liability, external costs directly attributable to issuance of the
preference shares are capitalised and amortised over the life of
the preference shares.
3. Significant accounting policies (continued)
3.18 Warrants
Preference shares and their related warrants are considered as
two separate instruments due to the fact they are detachable and
traded separately on the London Stock market. The warrants are
considered as a financial derivative liability at fair value
through profit and loss. Their recognition as a financial liability
is due to the fact the strike price for the warrants is GBP0.29, a
different currency (Sterling) than the functional currency of the
Fund (Euro) as well as the fact the warrants were not issued on a
pro rata basis to the existing shareholders.
3.19 Interest bearing debt
Debt, comprising secured and unsecured bank loans, is reflected
in the Consolidated Statement of Financial Position at the fair
value of the initial proceeds less the unamortised portion of
discounts and transaction costs incurred to acquire the debt.
Discounts and transactions costs are amortised over the life of the
related debt through finance expenses using the effective interest
rate method.
Transaction costs include fees and commission paid to agents,
advisers, brokers and dealers, levies by regulatory agencies and
securities exchanges, and transfer taxes and duties. Transaction
costs do not include internal administrative or holding costs.
3.20 Taxation and deferred taxation
According to the Luxembourg regulations concerning SICAF
companies, the Company is not subject to income taxes in
Luxembourg. It is, however, liable to an annual subscription tax of
0.05% (taxe d'abonnement) of its total net assets, payable
quarterly, and assessed on the last day of each quarter. Real
estate revenues, or capital gains derived thereon, may be subject
to taxes by assessment, withholding or otherwise in the countries
where the real estate is situated.
The subsidiaries of the Group are subject to taxation in the
countries in which they operate. Current taxation is provided for
at the current applicable rates on the respective taxable
profits.
Deferred income tax is provided in full, using the liability
method, on temporary differences arising between the tax base of
assets and liabilities and their carrying amounts in the
consolidated financial statements.
Deferred income tax is not accounted for if it arises from
initial recognition of an asset or liability in a transaction other
than a business combination which at the time of the transaction
affects neither accounting nor taxable profit nor loss. The
aggregate amount of such deferred income tax is disclosed as
unrecognised deferred income tax (note 25). Deferred income tax is
determined with regard to tax laws and rates that have been enacted
or substantially enacted into law by the balance sheet date and are
expected to apply when the related deferred income tax asset is
realised or the deferred income tax liability is settled.
Deferred income tax is provided on temporary differences arising
on investments in subsidiaries, except where the timing of the
reversal of the temporary difference is controlled by the Group and
it is probable that the temporary difference will not reverse in
the foreseeable future.
Deferred income tax assets are recognised to the extent that it
is probable that future taxable profit will be available against
which the temporary differences can be utilised. The carrying
amount of deferred income tax assets are reviewed at each balance
sheet date and reduced to the extent that it is no longer probable
that sufficient taxable profit will be available to allow all or
part of the deferred income tax assets to be utilised. Unrecognised
deferred tax assets are re-assessed at each balance sheet date and
are recognised to the extent that it has become probable that
future taxable profit will allow the deferred tax assets to be
recovered.
3. Significant accounting policies (continued)
Deferred tax assets and deferred tax liabilities are offset, if
(i) a legally enforceable right exists to set off current tax
assets against current tax liabilities, if (ii) the deferred taxes
relate to the same taxable entity and the same taxation authority
and if (iii) different taxable entities which intend either to
settle current tax liabilities and assets on a net basis, or to
realise the assets and settle the liabilities simultaneously, in
each future period in which significant amounts of deferred tax
liabilities or assets are expected to be settled or recovered.
3.21 Provisions
A provision is recognised if, as a result of a past event, the
Group has a present legal or constructive obligation that can be
estimated reliably, and it is probable that an outflow of economic
benefits will be required to settle the obligation. Provisions are
determined by discounting the expected future cash flows at a
pre-tax rate that reflects current market assessments of the time
value of money and the risks specific to the liability.
3.22 Deferred income
Deferred income represents rental income which has been billed
to customers at the balance sheet date, but which relates to future
periods.
3.23 Rental income
Rental income from investment properties is accounted for on a
straight-line basis taking account of any rent free periods and
other lease incentives, net of any sales taxes, over the term of
the ongoing leases.
3.24 Finance income and expenses
Finance income comprises interest income on funds invested and
gains on hedging instruments that are recognised in the
Consolidated Income Statement. Interest income is recognised using
the effective interest rate method.
Finance expenses comprise interest expense on borrowings,
amortisation of debt transaction costs and losses on hedging
instruments that are recognised in the Consolidated Income
Statement.
Attributable transaction costs incurred in establishing the
Group's credit facilities are deducted from the fair value of
borrowings on initial recognition and are amortised over the
lifetime of the facilities through the Consolidated Income
Statement. Borrowing costs that are not directly attributable to
the acquisition, construction or production of a qualifying asset
are recognised in the Consolidated Income Statement using the
effective interest rate.
Finance expenses include the effect of unrealised foreign
currency gains and losses on monetary assets and liabilities
arising in the period plus the effect of the realised foreign
currency gains and losses on cash transactions completed during the
period.
3.25 Operating Expenses
All expenses are accounted for on an accruals basis. The Group's
investment management and administration fees and all other
expenses are charged to the Consolidated Income Statement.
3.26 Earnings per share
The Group presents basic and diluted earnings per share (EPS)
data for its ordinary shares. Basic EPS is calculated by dividing
the profit or loss attributable to ordinary shareholders of the
Company by the weighted average number of ordinary shares
outstanding during the period. Diluted EPS is determined by
adjusting the profit or loss attributable to ordinary shareholders
and the weighted average number of ordinary shares outstanding for
the effects of all dilutive potential ordinary shares, which
comprise warrants.
3. Significant accounting policies (continued)
3.27 Segment reporting
An operating segment is a component of the Group that engages in
business activities from which it may earn revenues and incur
expenses, including revenues and expenses that relate to
transactions with any of the Group's other components. All
operating segments' operating results are reviewed regularly to
make decisions about resources to be allocated to the segment and
to assess their performance (see Note 29).
3.28 Subsequent events
Post balance sheet date adjustments are disclosed in the notes
to the consolidated financial statements when significant.
3.29 Contingencies
Contingent liabilities are not recognised in the consolidated
financial statements, unless there is a probable chance of an
outflow for which a provision is made. They are disclosed unless
the possibility of an outflow of resources embodying economic
benefits is remote.
A contingent asset is not recognised in the consolidated
financial statement but disclosed when an inflow of economic
benefits is probable.
4. Significant accounting estimates and judgements
The preparation of the consolidated financial statements in
conformity with IFRSs requires management to make judgements,
estimates and assumptions that affect the application of accounting
policies and the reported amounts of assets, liabilities, income
and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the
period in which the estimates are revised and in any future periods
affected.
Information about critical judgements in applying accounting
policies that have the most significant effect on the amount
recognised in the consolidated financial statements is included
in:
Investment property
Fair value is based on the open market valuations of the
properties as provided by an independent expert, DTZ Debenham Tie
Leung, in accordance with the guidance issued by the Royal
Institution of Chartered Surveyors (the "RICS"). Market valuations
are carried out on a quarterly basis. The fair values are based on
market values, being the estimated amount for which a property
could be exchanged on the date of the valuation between a willing
buyer and a willing seller in an arm's length transaction after
proper marketing wherein the parties had each acted knowledgeably,
prudently and without compulsion. The determination of the fair
value of investment property requires the use of estimates such as
future cash flows from assets (such as lettings, tenants' profiles,
future revenue streams, capital values of fixtures and fittings,
plant and machinery, any environmental matters and the overall
repair and condition of the property) and discount rates applicable
to those assets. In addition, development risks (such as
construction and letting risks) are also taken into consideration
when determining the fair value of investment properties under
construction. These estimates are based on local market conditions
existing at the reporting date. The experts also used their market
knowledge and professional judgment and did not rely solely on
historical transactional comparables.
4. Significant accounting estimates and judgements (continued)
Valuations typically reflect all the market and operational
risks as described in Note 28.1 It should be noted that the
valuation of property and property related assets is inherently
subjective due to the nature of each property and the
characteristics of local, regional and national real estate markets
which change over time. The current economic climate and volatility
in the global capital markets creates additional uncertainty and
there can therefore be no assurance valuations of the Company's
assets will reflect actual sale prices even where such sales occur
shortly after the valuation date.
Income and deferred taxes
The Company is subject to income and capital gain taxes in
numerous jurisdictions. Significant judgement is required in
determining the total provision for income and deferred taxes. The
Company recognises liabilities for anticipated taxes based on
estimates of whether additional taxes will be due. Where the final
tax outcome of these matters is different from the amounts that
were initially recorded, such differences will impact the income
and deferred tax provision in the period in which the determination
is made.
Derivative financial instruments
An interest rate swap can be viewed as a series of cash flows
occurring at known future dates. The value of the swap is the
present value of these cash flows. To calculate the present value
of each cash flow, both the future cash flows and an appropriate
discount factor for each period on which a cash flow occurs are
estimated. Future cash flows are calculated from a forward interest
rate curve constructed using market prices for similar interest
rate instruments independently sourced from mid-market broker
quotes for the relevant market. The discount factor is the factor
by which the future cash flow must be adjusted to obtain the
present value. Discount factors are derived from an assessment of
interest rates in the future and are calculated using forward rates
such as EURIBOR. Interest rates used for calculating discount
factors are independently sourced from mid-market broker quotes for
the relevant market at the valuation date.
The fair value of the Group's derivatives is the estimated
amount that the Group would receive or pay to terminate the
derivative at the balance sheet date. The Company estimates fair
value of derivatives by reference to current market conditions
compared to the terms of the derivatives agreement using the result
of an external appraiser. Refer to Note 28 for the related
balances.
Classification of preference shares and the warrants
Judgement is required to determine whether preference shares
should be classified as financial liability or equity in accordance
with IAS 32 Financial instruments: Presentation. Based on the terms
and conditions of the preference shares issued in December 2009 the
Company has determined that the preference shares have the
characteristics of a financial liability rather than equity. This
was primarily based on the fact that the preference shares and the
warrants are denominated in sterling whereas the functional
currency used by the Company is the Euro. In addition, the
preference shares have a right to receive a dividend and are
redeemable.
5. Capital Management
The primary objective of the Group's capital management is to
ensure that it remains within its quantitative banking covenants
and maintain a strong credit rating. No changes were made in the
objectives, policies or processes during the years ending 30
September 2011 and 30 September 2010. The Group monitors capital
primarily using a Loan to Value ratio (LTV), which is calculated as
the amount of outstanding debt divided by the valuation of the
investment property portfolio. The Group's policy is to keep the
average LTV ratio of the Group lower than the LTV requirements in
the banking covenants.
The banking covenants require the Group to have a LTV ratio of
85% until 31 December 2010, 82.5% until 31 December 2011, 80% until
30 June 2012, 75% until 31 December 2012, 72.5% until 30 June 2013
and 70% thereafter.
During the period the Group did not breach any of its loan
covenants, nor did it default on any other of its obligations under
its loan agreement.
For the financial year ended 30 September 2011, the LTV ratio
disclosed to the lender was 66.07% (2010: 67.9%)
6. Rental income
The Group leases out its investment properties under operating
leases. The future minimum lease receipts under non-cancellable
leases are as follows:
30 Sep 11 30 Sep 10
EUR000 EUR000
Less than one year 33,355 40,598
Between one and five years 107,091 104,511
More than five years 42,424 40,777
---------------------------- ---------- ----------
Total 182,870 185,886
---------------------------- ---------- ----------
The Investment Manager's Report referred to in this document
provides additional information regarding contingent rent
recognised and leasing arrangements. For the year ended 30
September 2011, EUR40.8 million was recognised as rental income in
the Consolidated Income Statement (2010: EUR41.9 million).
7. Property operating expenses
30 Sep 11 30 Sep 10
EUR000 EUR000
------------------------------ ---------- ----------
Insurance 129 183
Property management fees 497 494
Property service charges 551 736
Property maintenance 520 249
Property tax 671 367
Other miscellaneous expenses 592 259
------------------------------ ---------- ----------
Total 2,960 2,288
------------------------------ ---------- ----------
Property operating expenses incurred during the year were
attributed to:
30 Sep 11 30 Sep 10
EUR000 EUR000
------------------------------- ----------------- -----------------
Income-generating property 2,501 1,469
Vacant property 459 819
------------------------------- ----------------- -----------------
Total 2,960 2,288
------------------------------- ----------------- -----------------
8. Other income
30 Sep 11 30 Sep 10
EUR000 EUR000
----------------------------- ---------- ----------
Other property income 398 -
Proceeds from insurance - 83
Adjustments and reversal of
accruals - 152
Refund of VAT 359 -
Total 757 235
----------------------------- ---------- ----------
9. Investment management and performance fees
Invista Real Estate Investment Management Limited (Invista REIM)
as the investment manager during the financial year reported on was
entitled to a base fee and a performance fee together with
reimbursement of reasonable expenses incurred by it in the
performance of its duties.
The base fee from 17 November 2006 to 26 May 2009 was calculated
at a rate of 0.95% per annum of gross assets prorated from the
acquisition date of the assets. On 27 May 2009 the Company entered
into an agreement with the Investment Manager to effect a change in
the base fee. From this date the base fee was payable monthly in
arrears at an amount equal to the lower of:
-- 2% of the Net Asset Value of the Company per annum (subject
to a minimum threshold of GBP3 million per annum); and
-- A percentage equivalent of the Net Asset Value of the Company
per annum which represents 0.95% of the Adjusted Gross Assets of
the Company per annum.
In addition, and subject to the conditions below, the Investment
Manager was entitled to an annual performance fee where the total
NAV per share during the relevant financial period exceeds an
annual rate of 10.0% (the "performance hurdle"). Where the
performance hurdle was met, a performance fee would be payable in
an amount equal to 15.0% of any aggregate total return over and
above the performance hurdle. The performance hurdle was calculated
on a three year rolling basis.
9. Investment management and performance fees (continued)
This requires that the annualised total return over the period
from listing on 20 December 2006 to the end of the relevant
financial period in the first three year period, and on a rolling
three year basis thereafter, is equal to or greater than 10.0% per
annum.
As the conditions for receipt of a performance fee were not met
during the year, no charge has been recognised in the Consolidated
Income Statement.
On 22 September 2011, the Board of Directors appointed Internos
Real Limited (Internos) as their new investment manager, which took
effect upon the final termination of the existing investment
management agreement with Invista REIM on 14 December 2011. Under
the new management agreement with Internos, the Company will pay a
management fee of 1.25% per annum on the Net Asset Value
attributable to the Company's shareholders, subject to a minimum of
EUR1.0 million per annum. Additionally, the Company will pay
Internos a realisation fee equal to 12.5% of the amount by which
cash returned to ordinary shareholders exceeds EUR82.8 million,
compounded at 10% per annum.
In addition to the above, the Company has also agreed to pay
Internos a retention fee of EUR75,000 per month between 1 August
2011 and the date on which Internos assumes responsibility for the
day to day management of the Company, in consideration for certain
transitional services to be provided by Internos during this
period.
The Company will also pay Internos a fee of GBP60,000 in
connection with the transition of the entire Invista REIM Paris
team.
10. Professional fees and other expenses
The professional fee for audit services for the year ended 30
September 2011 amounted to EUR0.4 million (2010: EUR0.5 million).
In 2011 the non-recurring remuneration to the auditors for services
other than audit was EUR0.2 million (2010: EUR0.2 million).
Other expenses include the write off of non-recoverable VAT of
EUR0.1 million (2010: EUR0.3 million), recoverable service charges
of nil (2010: EUR0.4 million) and abortive transaction costs of
EUR0.4 million (2010: nil).
11. Administration fees
30 Sep 11 30 Sep 10
EUR000 EUR000
-------------------------------- ----------- -----------
Group
Accounting and administrative
fees 1,323 1,364
Investment property valuation
fees 257 293
Custodian, registrar and other
fees 406 679
-------------------------------- ----------- -----------
Total 1,986 2,336
30 Sep 11 30 Sep 10
EUR000 EUR000
------------------------------- ---------- ----------
Company
Accounting and administrative
fees 387 389
Registrar and other fees 253 367
Custodian fees 106 105
------------------------------- ---------- ----------
Total 746 861
12. Investment properties
30 Sep 11 30 Sep 10
EUR000 EUR000
------------------------------------------- ---------- ----------
Historic cost
Cost, beginning of the period 664,586 657,759
Acquisition of properties - 11,009
Capital expenditure 539 3,830
Disposals (44,933) (8,012)
------------------------------------------- ---------- ----------
Cost, end of the period 620,192 664,586
------------------------------------------- ---------- ----------
Net unrealised losses related to property
Net unrealised losses, beginning of
the period (148,896) (140,278)
Valuation gains on investment property
during the period 1,831 13,860
Valuation losses on investment property
during the period (18,068) (20,005)
Reversal of accumulated valuation
of disposal (4,009) (2,473)
------------------------------------------- ---------- ----------
Net unrealised losses, end of the
period (169,142) (148,896)
------------------------------------------- ---------- ----------
Fair value, end of the period 451,050 515,690
------------------------------------------- ---------- ----------
Appraised property value subject to
loan security 297,977 343,661
------------------------------------------- ---------- ----------
The fair value of completed investment property has been
determined on a market value basis in accordance with the
appropriate sections of the current Practice Statements, and United
Kingdom Practice Statements contained within the RICS Valuation
Standards. The valuation is prepared on an aggregated ungeared
basis. As set out in Note 4, in arriving at their estimates of
market values, the experts have used their market knowledge and
professional judgment and not only relied on historical
transactional comparables.
The valuations were performed by DTZ Debenham Tie Leung, an
accredited independent valuer with a recognised and relevant
professional qualification and with recent experience in the
location and category of the investment property being valued.
The net change in the value of the investment property also
includes the valuation of assets sold:
30 Sep 11 30 Sep 10
EUR000 EUR000
---------------------------------------- ---------- ----------
Net proceeds (*) from disposal
of investment property 49,436 26,962
Carrying value of investment disposals (48,942) (25,885)
---------------------------------------- ---------- ----------
Net gain on disposal of investment
property 494 1,077
---------------------------------------- ---------- ----------
(*) Includes sale costs
On 10 November 2010, Fova S.a r.l. sold its warehouse property
located in Entraigues sur la Sorgue, France for a price of
EUR490,000 which enabled the repayment of bank debt of EUR0.3
million.
On 22 June 2011, the Company completed the sale of a warehouse
property in Grodzisk, Poland for a price of EUR7 million, which
enabled the repayment of bank debt of EUR5.5 million.
On 27 May 2011, the Company completed the sale of a warehouse in
Fos Distriport, France for a price of EUR15.5 million, which
enabled the repayment of bank debt of EUR13.8 million.
12. Investment properties (continued)
On 25 July 2011, SAS Trappes sold its warehouse property located
in Trappes, Paris for a price of EUR20.7 million, which enabled the
repayment of EUR9.5 million of bank debt from Credit Foncier de
France and EUR 10.6 million from Bank of Scotland.
On 1 August 2011, Anjolyas S. a r.l. sold its warehouse property
located in Vitrolles, near Marseille, France for a price of EUR6.55
million which enabled the repayment of bank debt of EUR5.4
million.
13. Finance income
30 Sep 11 30 Sep 10
EUR000 EUR000
-------------------------------------- ----------- -----------
Group
Finance income: movements
Interest receivable brought forward - (16)
Interest receivable carried forward - -
Interest received 329 417
-------------------------------------- ----------- -----------
Interest income 329 401
Realised foreign currency gain
on monetary transactions 346 -
-------------------------------------- ----------- -----------
Total finance income 675 401
30 Sep 11 30 Sep 10
EUR000 EUR000
-------------------------------------- ----------- -----------
Group
Interest income: breakdown
Interest income on bank deposits 173 25
Interest income swaps - 7
Realised gain on forward transaction 156 369
-------------------------------------- ----------- -----------
Total finance income 329 401
30 Sep 11 30 Sep 10
EUR000 EUR000
-------------------------------------- ---------- ----------
Company
Interest income on intra-group
loans 16,388 1,110
Interest income on bank deposits 50 10
Realised foreign currency gain
on monetary transactions 352 -
Realised gain on forward transaction 156 369
-------------------------------------- ---------- ----------
Total finance income 16,946 1,489
14. Finance expense
30 Sep 11 30 Sep 10
EUR000 EUR000
-------------------------------------------- ---------- ----------
Group
Finance expense: movements
Interest payable brought forward 5,169 5,297
Interest payable carried forward (4,273) (5,169)
Interest paid (26,032) (26,490)
-------------------------------------------- ---------- ----------
Interest expense (25,136) (26,362)
Amortisation of transaction costs
relating to debt (1,672) (7,436)
Other net unrealised foreign currency
effect on monetary assets and liabilities (731) 553
Unrealised foreign currency loss
on preference shares and warrants 343 (1,406)
-------------------------------------------- ---------- ----------
Total finance expense (27,196) (34,651)
30 Sep 11 30 Sep 10
EUR000 EUR000
-------------------------------- ---------- ----------
Group
Interest expense: breakdown
Interest expense on bank loans (12,585) (12,072)
Interest expense swaps (9,608) (12,059)
Interest on preferred shares (2,943) (2,231)
-------------------------------- ---------- ----------
Total interest expense (25,136) (26,362)
Amortisation of transaction costs incurred in relation to the
refinancing of the bank loans and preference shares are disclosed
respectively in Notes 21 and 22. Such costs are capitalised and
amortised to the maturity date of the bank loans and preference
shares.
30 Sep 11 30 Sep 10
EUR000 EUR000
-------------------------------------------- ---------- ----------
Company
Interest on intra-group loans (1,307) -
Interest expense on bank loans - (814)
Interest expense swaps (282) (665)
Interest on preferred shares (2,943) (2,231)
Amortisation of transaction costs
relating to debt (1,141) (1,941)
Other net unrealised foreign currency
effect on monetary assets and liabilities (724) 25
Unrealised foreign currency loss
on preference shares and warrants 343 (1,406)
-------------------------------------------- ---------- ----------
Total finance expense (6,054) (7,032)
15. Trade receivables
30 Sep 11 30 Sep 10
EUR000 EUR000
-------------------- ---------- ----------
Rent receivable 10,878 10,723
Bad debt provision (552) (340)
-------------------- ---------- ----------
Total 10,326 10,383
The level of accounts receivable from tenants varies due to the
timing of the invoices issued and receipt of cash. Of the EUR10.3
million (2010: EUR10.4 million) rent receivable included in the
table above, EUR4.3 million (2010: EUR5.2 million) relate to the
period after 30 September 2011 (see deferred income in the
Consolidated Statement of Financial Position).
Trade and other receivables are analysed as follows:
30 Sep 11 30 Sep 10
EUR000 EUR000
------------------------------------ ----------- -----------
Not past due 4,846 6,021
Past due from 30 to 120 days 1,097 620
Past due from 120 days to one year 2,501 1,744
More than one year 2,434 2,338
------------------------------------ ----------- -----------
Total 10,878 10,723
As at 30 September 2011, the past due rent receivables includes
EUR6.1 million (2010: EUR4.2 million) in relation to the Montowest
property (refer to Note 31 for further details).
Movements on bad debt provision are set out below:
30 Sep 11 30 Sep 10
EUR000 EUR000
----------------------------------- ---------- ----------
As at 1 October (340) (115)
Bad debt provision for the period (212) (309)
Bad debts written off - 84
----------------------------------- ---------- ----------
As at 30 September (552) (340)
16. Other current assets
30 Sep 11 30 Sep 10
EUR000 EUR000
------------------------- ---------- ----------
Tax receivable 4,926 4,771
Prepayments 851 1,289
Other receivables 757 1,658
Service charge advances 1,098 2,796
------------------------- ---------- ----------
Total 7,632 10,514
17. Cash and cash equivalents
30 Sep 11 30 Sep 10
EUR000 EUR000
-------------------------- ----------- -----------
Group
Bank balances 27,377 32,169
Bank deposits 12,956 6,679
Restricted bank balances 3,559 3,572
-------------------------- ----------- -----------
Total 43,892 42,420
The bank balances mentioned above at the Group level includes a
non restricted amount of tenant deposits, held in a separate
account, of EUR4.2 million (2010: EUR4.5 million). The Group has
EUR3.6 million held in escrow account (2010: EUR3.6 million) which
is not available for current use. As at 30 September 2011, EUR1.3
million (2010: EUR1.3 million) of this escrow amount relates to a
warranty issued in relation to the disposal of the Villeurbanne and
Ecully assets in France which expires on 31 January 2012. The
remaining amount of EUR2.3 million (2010: EUR2.3 million) is a
deposit required by Bank of Scotland with regards to the forward
exchange contract (refer to Note 28.5) to hedge the dividend
payment of preference shares (refer to Note 26) until 24 May
2013.
As at the balance sheet date, an amount of EUR36.0 million
(2010: EUR40.4 million) has been pledged in favour of Bank of
Scotland under the terms of various agreements. These relate to
loan agreements concluded by subsidiaries of the Company and Bank
of Scotland for the purposes of financing acquisitions of
investment property. No restrictions on the utilisation of these
pledged bank accounts have been imposed.
30 Sep 11 30 Sep 10
EUR000 EUR000
-------------------------- ---------- ----------
Company
Bank balances 500 10,559
Bank deposits 12,953 6,679
Restricted bank balances 2,298 2,322
-------------------------- ---------- ----------
Total 15,751 19,560
The Company has EUR2.3 million (2010: EUR2.3 million) held in an
escrow account in respect of a deposit required by Bank of Scotland
which is not available for use until 24 May 2013.
18. Issued capital and reserves
Group & Company Number of ordinary Number of warrants
shares
---------------------------------- ------------------- -------------------
In issue at 1 October 2008 114,263,275 -
In issue at 30 September 2009 114,263,275 -
Issued for cash 145,685,674 -
Issuance of warrants - 29,137,134
Exercise of warrants 27,994 (27,994)
---------------------------------- ------------------- -------------------
In issue as at 30 September 2010 259,976,943 29,109,140
---------------------------------- ------------------- -------------------
Exercise of warrants 3,796 (3,796)
---------------------------------- ------------------- -------------------
In issue as at 30 September 2011 259,980,739 29,105,344
---------------------------------- ------------------- -------------------
18. Issued capital and reserves (continued)
Issuance of ordinary shares
The Company has an issued share capital of EUR25,998,074(1)
(2010: EUR25,997,694) consisting of 259,980,739 shares (2010:
259,976,943 shares) without indication of nominal value all of
which have been fully paid up.
The holders of ordinary shares are entitled to receive dividends
as declared from time to time and are entitled to one vote per
share at meetings of the Company. All ordinary shares rank equally
with regard to the Company's residual assets.
On 29 December 2009 the Company reduced its share capital from
EUR142,829,093 to EUR11,426,327 through the creation of a non
distributable reserve of EUR118,313,496 and by offsetting
cumulative prior year losses of EUR13,089,270.
On 30 December 2009 the Company increased its share capital by
an amount of EUR32,546,179 through issuance of 145,685,674 new
ordinary shares totalling EUR14,568,567 together with share premium
of EUR17,977,612. Issuance costs attributed to the increase in the
capital contribution amounted to EUR2,296,512 which has been
deducted from the capital proceeds.
Restricted reserve
The non-distributable reserve of EUR120,483,765 (2010:
EUR120,476,507) can be used to absorb losses incurred or to
increase Company's share capital. A legal reserve subject to profit
of the Company and its Subsidiaries has been allocated in the
different jurisdictions where applicable. This reserve is not
available for dividend distributions.
The part of the loan conversion to equity (intra-group loan)
used to recapitalise French entities (Invista European RE
Montbonnot Holdco 2 S.ar.l. and Invista European RE Delta Propco 2
S.ar.l.) have, according to the local jurisdiction, to be
recognised as a restricted reserve.
Authorised capital
The Company has an authorised capital of EUR920,980,852
represented by 9,209,808,522 ordinary shares without indication of
nominal value.
Hedge reserve
The hedging reserve relates to the effective portion of the
cumulative net change in the fair value of cash flow hedging
instruments related to hedged transactions that have not yet
transpired. On 28 November 2008, the Company finalised an agreement
with the Bank of Scotland to extend its existing debt facility for
an additional three years to 31 December 2011. Due to the
difference in the maturity of the extended loan facility (2011) and
the related hedging contracts/derivative financial instruments
(2013), the hedge accounting treatment was discontinued, effective
1 October 2008, since the derivative financial instruments no
longer met the IFRS accounting criteria for an effective hedge.
(1) Preference shares for Luxembourg company law purpose are
treated as equity instruments (part of the share capital) whereas
for IFRS purposes they are considered as a financial liability.
18. Issued capital and reserves (continued)
As a result, subsequent movements in the valuation of the
derivative financial instruments were reflected in the income
statement. The related reserve of EUR9.0m which had been reflected
as at 30 September 2008 was to be amortised to the Consolidated
Income Statement over the life of the credit facility through 12
January 2010. On 12 January 2010 the Company extended the loan
facility to 31 December 2013 bringing the maturity date in line
with the swap agreements. Consequently, the swaps once again
qualified as effective cash flow hedges and the remaining
unamortized hedging reserve was fully reversed in the Consolidated
Income Statement. For the year ended 30 September 2011, changes in
the fair value of the swaps deemed to be effective in Other
Comprehensive Income.
Hedge reserve
30 Sep 11 30 Sep 10
EUR000 EUR000
--------------------------------------- ---------- ----------
Group & Company
Balance, beginning of the period (6,751) 5,686
Amortisation of hedge reserve from
the period 1 October 2009 to 12
January 2010 - (632)
Reversal of hedge reserve balance
as at 12 January 2010 following
refinancing - (5,054)
Effective portion of changes in
fair value of cash flows hedged
from 12 January 2010 to 30 September
2010 - (6,751)
Effective portion of changes in
fair value of cash flows hedged
from 1 October 2010 to 30 September 7,933 -
2011
--------------------------------------- ---------- ----------
Balance, end of the period 1,182 (6,751)
Voting rights
There are no restrictions on the voting rights attached to the
ordinary shares. The preference shares will not have the right to
vote except in circumstances set out in the articles 44 to 46 (1)
of the Company Act. In addition, holders of Preference Shares will
have the right to vote in the same manner as other Shareholders at
all meetings, if, despite the existence of profits available for
that purpose, the Preference Dividends at the Preference Dividend
Sterling Equivalent are not paid in their entirely period of one
financial year and until Preference Dividends at the Preference
Dividend Sterling Equivalent have been received in full. Warrants
do not carry any voting rights. Voting rights to each share and
procedures relating thereto are described in articles 7, 8 and 26
of the Articles of the Company.
Shareholder's agreements
The Company is not aware of any shareholder agreement which
could result in restrictions on the transfer of securities or
voting rights within the meaning of Directive 2004/109/EC on the
harmonisation of transparency requirements in relation to
information about issuers whose securities are admitted to trading
on a regulated market (the "Transparency Directive").
Shares and warrant transferability
Shares of the Company (i.e., Ordinary shares and Preference
Shares, as such terms are defined in the Articles) are freely
transferable subject to articles 10 of the Articles. Warrants
issued by the Company are freely transferable subject to provisions
laid down in Part IV, section 5 of the Prospectus.
Special Control rights
No shareholder is vested with special control rights with regard
to control of the Company.
19. Net asset value per ordinary share
The net asset value per ordinary share is based on net assets of
EUR131 million at 30 September 2011 (2010: EUR135 million) and 260
million ordinary shares outstanding at 30 September 2011 (2010: 260
million).
As at 30 Sep 11 As at 30 Sep
EUR000 10
EUR000
----------------------------------- ---- ---------------- ---------------
Net asset value 131,243 135,016
Assuming exercise of all dilutive
potential ordinary shares
Listed warrants(1,2) 9,699 9,801
----------------------------------------- ---------------- ---------------
Fully diluted net asset value 140,942 144,817
----------------------------------------- ---------------- ---------------
Number Number
Number of ordinary shares 259,980,739 259,976,943
Number of warrants 29,105,344 29,109,140
----------------------------------------- ---------------- ---------------
Fully diluted ordinary share
capital 289,086,083 289,086,083
----------------------------------------- ---------------- ---------------
Net asset value per ordinary
share EUR0.505 EUR0.519
Diluted net asset value per
ordinary share EUR0.488 EUR0.501
----------------------------------------- ---------------- ---------------
(1) EUR::GBP exchange rate 1.1492 as at 30 September 2011 (2010:
1.1610)
(2) Exercise price of warrants of GBP0.29
20. Earning per share
The calculation of the basic earnings per share for the
financial year ended 30 September 2011 is based on the loss
attributable to ordinary shareholders of EUR11.707 million (2010:
loss of EUR0.035 million), and the weighted average number of
ordinary shares outstanding during the year ended 30 September
2011.
The calculation of diluted earnings per share at 30 September
2011 is based on a diluted loss attributable to ordinary
shareholders of EUR11.707 million (2010: loss of EUR0.035 million),
and a weighted average number of ordinary shares outstanding during
the year ended 30 September 2011 after the adjustment for the
effect of all dilutive potential ordinary shares.
30 Sep 11 30 Sep 10
EUR000 EUR000
------------------------------------- ------------ ------------
Loss for the period (11,707) (35)
Loss attributable to ordinary
shareholders (11,707) (35)
------------------------------------- ------------ ------------
Number Number
------------------------------------- ------------ ------------
Issued ordinary shares at 1 October 259,976,943 114,263,275
Effect of shares issued in December
2009 - 109,264,256
Effect of warrants exercised 2,734 9,331
------------------------------------- ------------ ------------
Weighted average number of ordinary
shares 259,979,677 223,536,862
Loss per ordinary share (Euro) (0.04503) (0.00016)
Diluted loss per ordinary share
(Euro) (0.04503) (0.00016)
------------------------------------- ------------ ------------
20. Earning per share (continued)
The conversion and assumed exercise of warrants to ordinary
shares are ignored in the calculation of diluted loss per share
since these are anti-dilutive.
Furthermore, the warrant share price has been above the exercise
price throughout the periods in the report, thus the assumption
that warrants are unlikely to be converted to ordinary shares, and
hence does not have a dilutive effect on profit/loss.
21. Interest bearing loans and borrowings
This note provides information about the contractual terms of
the Group's interest bearing loans and borrowings, which are
measured at amortised cost. For more information about the Group's
exposure to interest rate, foreign currency and liquidity risk see
Note 28.
30 Sep 11 30 Sep 10
EUR000 EUR000
------------------------------------ ---------- ----------
Balance at the beginning of the
period 343,661 400,165
Additions during the year 4,973 5,778
Repayment during the year (50,657) (62,282)
------------------------------------ ---------- ----------
Balance at the end of the period 297,977 343,661
------------------------------------ ---------- ----------
Gross book value of bank loans net
of current portion 297,977 343,661
On 12 January 2010, the Group finalised an agreement with the
Bank of Scotland to extend the term of its existing debt facility
from 31 December 2011 to 31 December 2013. The previous facility
related to a EUR416.5 million senior debt facility for which the
annual margin was 2.75% over three month EURIBOR.
On 11 November 2009, the Group entered into revised terms with
the Bank of Scotland which became effective on 12 January 2010
following the pay down of EUR40.0 million of debt by the Group. The
amendment relates to a decreased facility amount of EUR359.3
million and the margin per annum is calculated as follows, 3-month
EURIBOR by reference to the prevailing LTV on the following basis;
225 basis points if the LTV is less than 65%; 250 basis points if
the LTV is more than or equal to 65% but less than 70%; 275 basis
points if the LTV is more than or equal to 70% but less than 75%;
300 basis points if the LTV is more than or equal to 75% but less
than 80% and 400 basis points if the LTV is more than or equal to
80%. The facility has an amendment fee of EUR150,000 and an exit
fee of 2% of the average drawn amount. The maturity date of the
loan was extended until 31 December 2013. The terms provide for an
interest cover covenant of 1.30x and a LTV covenant of 85% until 31
December 2010, 82.5% until 31 December 2011, 80% until 30 June
2012, 75% until 31 December 2012, 72.5% until 30 June 2013 and 70%
thereafter.
On 12 October 2010, the Group drew down EUR5.0 million of
additional debt from Bank of Scotland to replenish Company cash
used to complete the acquisition of the Girona asset in Spain prior
to 30 September 2010.
As at 30 September 2011, the Group had EUR298.0 million of
outstanding indebtedness with Bank of Scotland. The Company's loan
to value ("LTV") (gross debt divided by market value of properties)
under the Bank of Scotland loan documentation at that date was
66.1% (2010: 67.6%), against a covenant of 82.5% (2010: 85.0%). The
LTV is calculated based upon the market value of the properties as
at 30 September 2011.
21. Interest bearing loans and borrowings (continued)
In addition to the above financing, one of the French companies,
SAS Trappes contracted a credit facility with Credit Foncier de
France for EUR12 million in July 2009 which has been fully repaid
following the sale of the asset on 25 July 2011.
Terms and debt repayment schedule
30 Sep 11 30 Sep 10
EUR000 EUR000
--------------------------------------------- ---------- ----------
Proceeds
Bank loans maturing beyond five years - -
Bank loans maturing between two to five
years 297,977 343,661
Bank loans maturing within one year - -
--------------------------------------------- ---------- ----------
Total proceeds from long term bank loans 297,977 343,661
--------------------------------------------- ---------- ----------
Transaction costs
Costs
Balance at the beginning of the period 7,978 19,774
Additions during the year 228 1,255
Retirements and amounts written off (294) (13,051)
--------------------------------------------- ---------- ----------
Gross transaction costs balance at the
end of the period 7,912 7,978
--------------------------------------------- ---------- ----------
Amortisation
Balance at the beginning of the period 4,931 4,881
Additions during the year 947 1,809
Retirements and amounts written off (75) (1,759)
--------------------------------------------- ---------- ----------
Accumulated depreciation balance at the
end of the period 5,803 4,931
--------------------------------------------- ---------- ----------
Net book value of transaction costs 2,109 3,047
Net book value of proceeds from bank loans 295,868 340,614
Less current portion of bank loans - -
--------------------------------------------- ---------- ----------
Net book value of bank loans net of current
portion 295,868 340,614
Transaction costs incurred in refinancing the above loans are
initially deducted from the loan balance and are being amortised
over the extended period of the loan. Amortisation of transaction
costs recognised as finance costs amounted to EUR1.1 million for
the year ended 30 September 2011 (2010: EUR7.4 million). Finance
costs include debt arrangement, structuring, utilisation fees and
exit fees paid in arranging the debt facility and the preference
shares.
All borrowings are denominated in Euro. The weighted average
interest rate at 30 September 2011 on the bank borrowings was
3.656% (2010: 3.296%). The loan is collateralised by all properties
of the portfolio included under "Investment property" account (see
Note 12).
30 Sep 30 Sep
11 10
------------------ ----------- ------------- ----------- --------- ---------- --------- ----------
Currency Nominal Date of Face Carrying Face Carrying
interest maturity Value Amount Value Amount
Rate
EUR000 EUR000 EUR000 EUR000
Bank of Scotland
Secured bank 3M Euribor 31 Dec
loan Euro +2.75% 2013 297,977 295,868 333,241 330,372
Credit Foncier 3M Euribor 31 Dec
Secured loans + 2.75% 2014 - - 10,420 10,242
------------------------------- ------------- ---------- --------- ---------- --------- ----------
22. Preference shares
On 30 December 2009 the Company issued 29,137,134 redeemable
preference shares with one warrant attached per preference share.
The preference shares confer the right to a cumulative preference
share dividend payable semi-annually. As the preference
shareholders have a right to receive a dividend and are redeemable,
they are treated as a financial liability.
In addition, on 30 December 2009, the Company issued 29,137,134
warrants. A reserve was established by allocating a portion of the
proceeds equal to the initial value of the warrants. This reserve
is periodically marked to market and is amortised as the warrants
are exercised.
30 Sep 30 Sep
11 10
EUR000 EUR000
------------------------------------------ -------- --------
Group and Company
Preference shares at the beginning 30,134 -
of the period
Preference share gross proceeds - 32,547
Cost of raising preference shares
(note 18) - (2,297)
Warrant fair value upon initial issuance - (1,712)
Transaction costs amortisation 526 366
Foreign exchange difference (327) 1,230
------------------------------------------ -------- --------
Preference share value at the end
of the period 30,333 30,134
------------------------------------------ -------- --------
Costs
Transaction costs amortisation represents the amortisation of
the cost of raising preference share capital (7 years) and the
amortisation of the warrants fair value upon initial recognition (4
years).
The holders of preference shares are entitled to receive a
preferential cumulative dividend of 9% per annum of the preference
share issue price of GBP1.00. The preference dividend is payable
semi-annually in June and December each year from 2010 to 2016
inclusive.
23. Warrants
On 30 December 2009 the Company issued 29,137,134 warrants. Each
warrant holder is entitled to exercise their subscription right in
cash on any subscription date falling in the years from 2010 to
2013 inclusive. The subscription date in any year is the last
business day in May and the last business day in November. The
subscription price is GBP0.29 per ordinary share. As the exercise
price for the warrants is set in Sterling as opposed to the
functional currency of the Company, which is Euro, the warrants
have been treated as a financial liability.
30 Sep 30 Sep
11 10
EUR000 EUR000
------------------------------------------- -------- --------
Group and Company
Warrant fair value at the beginning 2,535 -
of the period
Warrants fair value upon initial issuance - 1,712
Warrants exercised during the period
(refer to Consolidated Statement of
Change in Equity) - (3)
Fair value movement of the warrants
(note 28.5) (261) 650
Foreign exchange difference (note
14) (16) 176
------------------------------------------- -------- --------
Warrant fair value at the end of the
period 2,258 2,535
------------------------------------------- -------- --------
On 30 November 2010 and 31 May 2011, 2,937 and 859 warrants were
exercised on each respective date.
24. Long term provision
As part of the current facility agreement with Bank of Scotland
there is an exit fee payable. The fee is calculated as 2% of the
weighted average drawn balance during the period commencing on the
issuance date through the final repayment of the facility, 31
December 2013 (or repayment date if earlier). The quantum of the
exit fee has subsequently been reduced according to the revised
terms.
30 Sep 11 30 Sep 10
EUR000 EUR000
Group & Company
Long term provision 6,626 6,723
---------------------- ---------- ----------
25. Taxation
The Company is an incorporated contractual co-ownership scheme
governed by part II of the Luxembourg law on Undertakings for
Collective Investments of 20 December 2002.
According to legislation currently in force, the Company is not
subject to corporate income or capital gains taxes in Luxembourg.
It is however, liable to an annual subscription tax based at 0.05%
of its total net asset value. The tax, payable quarterly, is
assessed on the last day of each quarter.
Within the Group, real estate revenues, or capital gains derived
from real estate, may be subject to taxes by assessment,
withholding or otherwise in the countries where the real estate is
situated. The Group's subsidiaries depreciate their historical
property cost in accordance with applicable tax regulations.
Depreciation is deducted from taxable profits in determining
current taxable income.
Deferred tax liabilities are calculated according to the full
liability method, and mainly arise on timing differences generated
by fair value adjustments occurring post acquisition in the case
where an acquisition does not qualify as a business combination. In
case of acquisitions which are classified as business combinations,
deferred tax is recognised on the timing differences between the
carrying value of real estate investments in these consolidated
financial statements and the respective tax basis at the date of
the acquisition, and is subsequently measured in each period.
A deferred tax liability has not been accrued in respect of
unremitted profits contained in direct and indirect subsidiaries of
the Group as it is unlikely that these profits will be remitted to
the parent in a manner which will attract income tax.
25. Taxation (continued)
30 Sep 11 30 Sep 10
EUR000 EUR000
--------------------------------------- ---------- ----------
Income and other current tax payables
Balance brought forward 7,304 7,351
Tax expense 29 4,840
Tax paid (739) (4,887)
--------------------------------------- ---------- ----------
Income and other current tax payables 6,594 7,304
--------------------------------------- ---------- ----------
Income taxes 254 (933)
Other taxes (195) (368)
Subscription taxes (88) (66)
--------------------------------------- ---------- ----------
Current income tax expense (29) (1,367)
--------------------------------------- ---------- ----------
Arising from liabilities (548) 15
Arising from short term differences (201) (878)
Arising from assets 582 6,780
--------------------------------------- ---------- ----------
Deferred tax benefit (167) 5,917
--------------------------------------- ---------- ----------
Other taxes relating to sale of
property - (3.473)
--------------------------------------- ---------- ----------
Benefit for taxation reported in
the consolidated income statement (196) 1,077
--------------------------------------- ---------- ----------
30 Sep 11 30 Sep 10
EUR000 EUR000
------------------------------------- ---------- ----------
Reconciliation of effective tax
rate
Loss for year (11,707) (35)
Total taxation 196 (1,077)
------------------------------------- ---------- ----------
Loss excluding taxation (11,511) (1,112)
------------------------------------- ---------- ----------
Income tax gain/(expense) using
the Company's domestic tax rate,
which is 29.94% (2010: 27.99%) 3,537 311
Tax adjustments (1,546) (618)
Minimum taxable net margin (21) 14
Differences in tax rates 843 1,103
Tax losses arising/used in the year (1,919) (4,385)
Permanent differences (715) 693
Short term differences (3,866) (1,287)
Differences arising due to fair
value adjustments in investment
property 2,529 5,742
Differences due to consolidation (277) (63)
Other taxes 1,239 (433)
Total (196) 1,077
------------------------------------- ---------- ----------
25. Taxation (continued)
25.1 Deferred tax assets and liabilities recognised
Deferred tax liability 30 Sep 11 30 Sep 10
EUR000 EUR000
-------------------------------------- ---------- ----------
Opening balance
Investment property (7,832) (6,969)
Investment property classified as
non-current asset held for sale - (3,191)
-------------------------------------- ---------- ----------
Effect of revaluations of properties
to fair value post acquisition (465) (869)
-------------------------------------- ---------- ----------
Deferred tax on properties disposed
of 112 4,075
Short timing differences (201) (878)
-------------------------------------- ---------- ----------
Movements on deferred tax liability (554) 2,328
-------------------------------------- ---------- ----------
Closing balance (8,386) (7,832)
Made up of:
Revaluation on investment properties
to fair value (7,240) (6,885)
Short timing differences (1,146) (947)
Total deferred tax liabilities (8,386) (7,832)
-------------------------------------- ---------- ----------
As at 30 September 2011, deferred tax assets of EUR4.1 million
(2010: EUR3.6 million) were recognised. The Company has recognised
deferred tax assets where the tax losses are likely to be offset by
future profits from the sales of the property. In the opinion of
the Directors, this compensation approach is substantiated by the
current economic environment where real estate prices have started
to stabilise.
Long term tax asset mainly related 30 Sep 11 30 Sep 10
to tax losses carried forward EUR000 EUR000
---------------------------------------- ---------- ----------
Opening balance 3,589 -
Relating to tax losses carried forward 519 3,589
---------------------------------------- ---------- ----------
Deferred tax assets 4,108 3,589
---------------------------------------- ---------- ----------
25.2 Deferred tax assets and liabilities unrecognised
As at 30 September 2011 the unrecognised portion of deferred tax
assets related to property fair value movements and excess tax
losses carried forward was EUR14.2 million (2010: EUR14.8
million).
As at 30 September 2011, deferred tax liabilities of EUR24.9
million, based upon temporary differences at the time of initial
recognition arising from transactions treated as asset acquisitions
have not been recognised in accordance with IAS 12.
26. Accrued expenses and other current liabilities
30 Sep 11 30 Sep 10
EUR000 EUR000
-------------------------------- ----------- -----------
Group
Accruals and other creditors 3,324 5,042
Interest payable on bank loans 3,486 4,163
Preference share dividend 787 1,006
Service charges (807) 69
Tenant deposits 3,479 3,928
Total 10,269 14,208
-------------------------------- ----------- -----------
Accruals and other payables indicated above equal their
contractual amounts and are payable in less than six months except
for tenant deposits, which are repayable upon termination of the
related lease contract. The Group has signed forward exchange
contracts with Bank of Scotland Treasury to protect the Euro
payment of the next four sterling dividend payments until May 2013
(the spot rate of between EUR1.00 for GBP0.8437 to EUR1.00 for
GBP0.8945 has been agreed).
30 Sep 11 30 Sep 10
EUR000 EUR000
-------------------------------- ----------- -----------
Company
Accounts payables - 273
Accruals and other creditors 916 788
Interest payable on bank loans 6 -
Preference share dividend 787 1,006
Tax payables 214 953
Total 1,923 3,020
-------------------------------- ----------- -----------
27. Related party transactions
The Company and the Group have related party transactions with
its subsidiaries, shareholders and certain Directors.
Directors' fees
The Directors of the Company and its subsidiaries were paid a
total of EUR204,000 (2010: EUR224,500) in Directors' fees during
the year.
Investment management and performance fees
Invista REIM acted as the Investment Manager of the Group.
Invista REIM received an Investment Management fee of EUR3.6
million (2010: EUR3.3 million). As disclosed in Note 9, the
conditions for payment of a performance fee to the Investment
Manager were not met during the year so no charge for performance
fees was made during the year in the Consolidated Income
Statement.
As disclosed in Note 21, the Group obtained a credit facility
from the Bank of Scotland with related interest rate swap
agreements with Bank of Scotland's Treasury Group. In addition, as
disclosed in Note 26, the Group also entered into a currency rate
swap agreement with Bank of Scotland's Treasury.
The Group also operates an inter-group trading account facility
with its subsidiaries whereby it may receive income on behalf of
its subsidiaries or pay expenses on their behalf. These balances
are non-interest bearing and are settled on demand.
28. Financial risk management objectives and policies
The Group's financial liabilities, other than derivatives, are
loans and borrowings, warrants and preference shares. The main
purpose of the Group's loans and borrowings is to finance the
acquisition and the development of the Group's property portfolio.
The proceeds from the preference shares were used to repay part of
the bank debt the Group contracted with the Bank of Scotland. The
Group has trade and other receivables, trade and other payables and
cash and short term deposits that arise directly from its
operation.
The Group has exposure to the following risks from its use of
financial instruments:
- Market and operational risks,
- Currency risk,
- Credit risk,
- Liquidity risk.
This note presents information about the Group's exposure to
each of the above risks, the Group's objectives, policies and
processes for measuring and managing risk, and the Group's
management of capital. Further quantitative disclosures are
included throughout these Consolidated Financial Statements.
Risk management framework
The Board of Directors has overall responsibility for the
establishment and oversight of the Group's risk management
framework. A description of the internal controls in place is set
out in the Director's report.
28.1 Market and operational risks
Market risk is the risk that changes in market prices, such as
rental income, interest rates and property value will affect the
Group's income. The objective of market risk management is to
manage and control market risk exposures within acceptable
parameters, while optimising the return.
Interest rate risk
The Group uses derivatives, and also incurs financial
liabilities, in order to manage the market risk attributable to the
interest rate risk. Generally, the Group seeks to apply hedge
accounting in order to manage volatility in profit or loss.
The interest rate risk of the Group remained fully hedged
throughout the year ended 30 September 2011, and as such, there
would be no effect on profit before tax due to movements in
interest rates.
Risk of concentration
Please refer to the Investment Manager's Report section page 6,7
and 8.
Market risk
Rental income and the market value for properties are generally
affected by overall conditions in the local economy, such as
changes in gross domestic product, employment trends, inflation and
changes in interest rates. Changes in gross domestic product may
also impact employment levels, which in turn may impact the demand
for premises. Furthermore, movements in interest rates may also
affect the cost of financing for real estate companies.
Both rental income and property values may also be affected by
other factors specific to the real estate market, such as
competition from other property owners, the perceptions of
prospective tenants of the attractiveness, convenience and safety
of properties, the inability to collect rents because of bankruptcy
or the insolvency of tenants or otherwise, the periodic need to
renovate, repair and re-lease space and the costs thereof, the
costs of maintenance and insurance, and increased operating
costs.
28. Financial risk management objectives and policies (continued)
28.1 Market and operational risks (continued)
The Investment Manager also analyses portfolio and investment
risks under the following categories:
Criteria Risk control
Rental income Ongoing review of income receipt of rents and
progress on leasing vacancy - at least on a quarterly basis.
Terms of rental agreements Ongoing review at least on a quarterly basis.
Quality of tenants Informal controls performed on an ongoing
basis. Formal analysis on a semi - annual basis by means of the
credit rating performed by IPD M-RIS. Quarterly reviews with the
Board of Directors.
Sector diversification Quarterly, formal comparison of strategy
and review with the Board of Directors.
Geographic diversification Quarterly, formal comparison of
strategy and review with the Board of Directors.
Sizes of individual properties Quarterly monitoring of the
percentage of specific properties in the portfolio in accordance
with London Stock Exchange regulations.
Payments in arrears Ongoing reviews, supported by quarterly
review of property management reports.
By monitoring assets under these categories using the risk
controls outlined and by diversifying the portfolio in different
property sectors, countries, regions and tenant industries the
Group expects to lower the risk profile of the portfolio.
28.2 Currency risk
The Company obtains financing in currencies other than Euro
(preference shares and warrants issued in Sterling, refer to Note
22 and 23) and is exposed to the fluctuations of the exchange rate
of that currency.
The Company has entered into currency forward contracts to hedge
its exposure to the preference share dividends which are paid in
GBP. The table below details the contracts entered into by the
Company as at 30 September 2011:
Maturity date CCY bought Amount bought CCY sold Amount sold Fair value
(EUR'000)
24 May 2013 GBP 1,311,000 EUR 1,529,019 13
13 December
2012 GBP 1,311,000 EUR 1,553,928 37
17 May 2012 GBP 1,311,200 EUR 1,524,926 5
16 November
2011 GBP 1,309,050 EUR 1,463,518 (56)
--------------- ------------ -------------- --------- ------------ ------------
28. Financial risk management objectives and policies (continued)
28.2 Currency risk (continued)
As at 30 September 2011, the net exposure of the Company to GBP
was as follows:
30 Sep 11 30 Sep 10
EUR000 EUR000
------------------- ---------- ----------
Cash deposits 15,402 17,865
Preference shares (33,483) (33,828)
Warrants (809) (1,043)
------------------- ---------- ----------
Total (18,890) (17,006)
The following table demonstrates the sensitivity to reasonable
changes in the sterling exchange rates, with all others variables
held constant, to the Group's profit before tax:
As at 30 September 2011 Increase/Decrease Effect on profit
or loss before
tax (EUR000)
------------------------- ------------------ -----------------
Sterling +10% 1,889
Sterling -10% (1,889)
------------------------- ------------------ -----------------
As at 30 September 2010 Increase/Decrease Effect on profit
or loss before
tax (EUR000)
------------------------- ------------------ -----------------
Sterling +10% 1,701
Sterling -10% (1,701)
------------------------- ------------------ -----------------
28.3 Credit risk
Credit risk is the risk that an issuer or counterparty will be
unable or unwilling to meet a commitment that it has entered into
with the Group. Credit risk for the Group arises principally from
rental receivables from tenants.
Trade and other receivables
In the event of default by an occupational tenant, the Group
will suffer a rental income shortfall and may incur additional
costs, including legal expenses, in maintaining, insuring and
re-letting the property. The Investment Manager reviews reports
prepared by Experian, or other sources, to assess the credit
quality of the Group's tenants and aims to ensure there is no
excessive concentration of risk and that the impact of any default
by a tenant is minimised:
- Credit risk for tenants
The Group's income would be adversely affected if a significant
number of tenants were unable to pay rent or its properties could
not be rented on favourable terms. Certain significant expenditure
associated with each equity investment in real estate is generally
not reduced when circumstances cause a reduction in income from
properties;
- Credit risk management for tenants and property managers
Receivables from tenants are the main credit risk for the Group.
A credit evaluation is performed on the financial condition of
prospective new tenants and a deposit is taken depending on the
credit worthiness of the tenant.
The Group establishes a provision for doubtful debt that
represents its estimates of potential losses with respect to trade
and other receivables.
28. Financial risk management objectives and policies (continued)
28.3 Credit risk (continued)
Investment securities
Investments, other than those in property, are held only in
liquid securities and only with counterparties that have a credit
rating above or similar to the Group. Transactions involving
derivatives are with the counterparty Bank of Scotland Treasury.
Credit and counterparty risk on liquid funds and on interest rate
hedges is limited because the counterparty is a bank with a high
credit rating assigned by international credit rating agencies.
The carrying amount of the Group's financial assets represents
the maximum credit exposure. The maximum exposure to credit risk at
the reporting date was:
30 Sep 11 30 Sep 10
Note EUR000 EUR000
--------------------------- ------- ---------- ----------
Loans and receivables 15, 16 13,032 16,126
Cash and cash equivalents 17 43,892 42,420
--------------------------- ------- ---------- ----------
Total 56,924 58,546
--------------------------- ------- ---------- ----------
Further quantitative analysis can be found on page 7 of the
Investment Management report.
28.4 Liquidity risk
Liquidity risk is the risk that the Group will encounter in
realising its assets or otherwise raising funds to meet financial
commitments. Investments in property are relatively illiquid. The
Group's approach to managing liquidity exposure is that it will
seek to have sufficient liquidity to meet its liabilities and
obligations when due.
The Group has endeavoured to mitigate liquidity risk by
investing in properties leased to good quality tenants with the
potential for income and capital growth.
28. Financial risk management objectives and policies (continued)
28.4 Liquidity risk (continued)
Carrying 6 months 6 months 1 - 5
amount or less to 1 year years
EUR000 EUR000 EUR000 EUR000
30 September 2011
BoS loans outstanding (297,977) - - (297,977)
Preference shares (33,483) - - (33,483)
BoS Interest payable (3,486) (3,486) - -
Preference share coupons (787) (787) - -
--------------------------------- ---------- --------- ----------- ----------
30 September 2010
BoS loans outstanding (333,241) - - (333,241)
Credit Foncier loan outstanding (10,420) - - (10,420)
Preference shares (32,547) - - (32,547)
BoS Interest payable (4,098) (4,098) - -
Credit Foncier interest payable (65) (65) - -
Preference share coupons (1,006) (1,006) - -
--------------------------------- ---------- --------- ----------- ----------
The maturity date of the interest bearing loans in the table
above is 31 December 2013. The contractual cash flows for loans and
borrowings presented in the above table reflect only the expected
principal cash flows.
The following table indicates the periods in which the cash
flows associated with the interest rate swaps and the currency rate
swaps are expected to occur and how they will impact the future
income statements:
Interest Carrying Expected 6 months 6-12 1 - 2 2 - 5 years More
rate swap amount Cash Flows or less months years than
EUR000 EUR000 5 years
EUR000 EUR000 EUR000 EUR000 EUR000
------------ ---------- ------------ --------- --------- --------- ------------ ---------
As at 30
September
2011 (20,134) (20,134) (3,755) (4,326) (8,580) (3,473) -
As at 30
September
2010 (30,650) (30,650) (5,418) (4,980) (9,123) (11,129) -
------------ ---------- ------------ --------- --------- --------- ------------ ---------
Currency Carrying Expected 6 months 6-12 months 1 - 2 2 - 5 More than
swap amount Cash Flows or less years years 5 years
EUR000 EUR000
EUR000 EUR000 EUR000 EUR000 EUR'000
------------ --------- ------------ --------- ------------ -------- -------- ----------
As at 30
September
2011 1 1 56 (5) (50) - -
As at 30
September
2010 130 130 39 42 49 - -
------------ --------- ------------ --------- ------------ -------- -------- ----------
28. Financial risk management objectives and policies (continued)
28.5 Fair value
Set out below is a comparison by class of the carrying amounts
versus fair value of the Group's financial instruments.
Carrying amount Fair value
30 Sept 2011 30 Sept 2010 30 Sept 2011 30 Sept 2010
EUR000 EUR000 EUR000 EUR000
--------------------------------------- ------------- ------------- ------------- -------------
Financial assets
Trade and other receivables 17,958 20,897 17,958 20,897
Cash and short-term deposits 43,892 42,420 43,892 42,420
--------------------------------------- ------------- ------------- ------------- -------------
Financial liabilities
Interest-bearing loans and borrowings 295,868 340,614 297,977 343,661
Deposits from tenants 3,479 3,928 3,479 3,928
Derivatives 20,133 30,520 20,133 30,520
Trade and other payables 1,008 2,472 1,008 2,472
Preference shares 30,333 30,134 34,790 36,298
Warrants 2,258 2,535 2,258 2,535
--------------------------------------- ------------- ------------- ------------- -------------
Movements in fair value are:
30 Sep 11 30 Sep 10
EUR000 EUR000
------------------------------------------- ---------- ----------
Group & Company
Balance at the beginning of the period 30,520 29,056
Fair value hedges terminated during
the period (2,470) (2,898)
Movement in fair value on forward
transaction 129 (130)
Movement in fair value of effective
hedges (7,933) 6,751
Movement in fair value of ineffective
hedges (113) (2,259)
------------------------------------------- ---------- ----------
Balance at the end of the period 20,133 30,520
30 Sep 11 30 Sep 10
EUR000 EUR000
------------------------------------------- ---------- ----------
Movement in fair value of ineffective
hedges 113 2,259
Movement in fair value on forward
transaction (129) 130
Swap breakage cost (2,563) (2,915)
Fair value hedges terminated during
the period 2,470 2,898
Reversal due to ineffective hedge - 5,054
Amortisation of the hedging reserve - 632
------------------------------------------- ---------- ----------
Net gain/ (loss) on financial instruments (109) 8,058
Movement in warrants fair value (refer
Note 23) 261 (650)
------------------------------------------- ---------- ----------
Net gain/ (loss) on financial instruments 152 7,408
------------------------------------------- ---------- ----------
28. Financial risk management objectives and policies (continued)
28.5 Fair value (continued)
The derivative financial instruments are Euro interest rate
swaps; transacted to hedge the interest rate risks arising from the
floating rate borrowings (see Note 21) and a foreign currency
forward exchange contract to hedge the preference shares dividends
(see Note 26). As at 30 September 2011, the fair value of the
interest rate swaps was a liability of EUR20.1 million (2010:
liability of EUR30.5 million) and the fair value of the foreign
currency contract an asset of EUR0.0 million (2010: asset of EUR0.1
million). The notional amount of the interest rate swaps amounted
to EUR299.4 million (2010: EUR349.1 million). The weighted average
Euro interest swap rate on Group debt was 4.041% per annum (2010:
4.076%).
Fair value hierarchy
The table below analyses financial instruments carried at fair
value, by valuation method. The different levels have been defined
as follows:
i. Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
ii. Level 2: inputs other than quoted prices included within
Level 1 that are observable for the asset or the liability, either
directly (e.g., as prices) or indirectly (i.e., derived from
prices);
iii. Level 3: inputs for the asset or liability that are not based on observable market data.
Level 1 Level 2 Level 3 Total
EUR000 EUR000 EUR000 EUR000
------------------------- -------- --------- -------- ---------
As at 30 September 2011
Warrants (2,258) - - (2,258)
Interest rate swap - (20,133) - (20,133)
As at 30 September 2010
Warrants (2,535) - - (2,535)
Interest rate swap - (30,650) - (30,650)
Currency rate swap - 130 - 130
------------------------- -------- --------- -------- ---------
29. Segment reporting
The Group adopted IFRS 8, 'Operating segments'. This has
resulted in an increase in the number of reportable segments
presented. In addition, the segments are reported in a manner that
is more consistent with the internal reporting provided to the
chief operating decision maker. The chief operation decision maker
is the person or Group that allocates resources to and assesses the
performance of operating segments of an entity. The Group has
determined that its chief operating decision maker is the Board of
Directors of the Company.
An operating segment is a component of the fund that engages in
business activities from which it may earn revenues and incur
expenses, including revenues and expenses that relate to
transactions with any of the Group's other components, whose
operating results are reviewed regularly by the Board of Directors
to make decisions about resources allocated to the segment and
assess its performance, and for which discrete financial
information is available. Segments' results that are reported to
the Board of Directors include items directly attributable to a
segment as well as those that can be allocated on a reasonable
basis.
The Board of Directors is of the opinion that the Group is
engaged in one single segment of business being property
investments and the quarterly reports delivered to the Board are
based into geographical segments. In presenting information on the
basis of geographical segments, segment revenue and segment assets
are based on the domicile country of the properties.
29. Segment reporting (continued)
The operating segments derive their revenue primarily from
rental income from lessees. All of the Group's business activities
and operating segments are reported within the segments below.
The segment information for the year ended 30 September 2011 is
as follows:
Holdings activities
and inter-segmental
France Germany Belgium Others Total
EUR000
EUR000 EUR000 EUR000 EUR000 EUR000
Rental income 18,385 15,822 1,326 5,281 (65) 40,749
Net gain on disposal 605 - - - (111) 494
Earnings before
net financial
cost and tax 10,616 9,924 443 (1,564) (4,561) 14,858
Finance income 645 371 482 28 (920) 606
Finance expense (9,611) (8,977) (1,106) (3,718) (3,715) (27,127)
Net change in
derivatives (173) - (62) (554) 941 152
Taxation (3,232) (473) (41) (78) 3,628 (196)
Gain / (Loss)
for the period (1,755) 845 (284) (5,886) (4,627) (11,707)
Reportable segments'
assets 283,204 236,254 26,429 58,944 (87,823) 517,008
Reportable segments'
liabilities (174,611) (142,164) (21,384) (65,111) 17,505 385,765
The segment information for the year ended 30 September 2010 is
as follows:
Holdings
activities
France Germany Belgium Others and inter-segmental Total
EUR000 EUR000 EUR000 EUR000 EUR000 EUR000
----------------------- ----------- ----------- ---------- ---------- --------------------- ---------
Rental income 19,972 15,588 1,966 4,358 (19) 41,865
Net gain on disposal 816 - 261 - - 1,077
Earnings before
net financial
cost and tax 14,444 18,516 1,516 (2,938) (5,808) 25,730
----------------------- ----------- ----------- ---------- ---------- --------------------- ---------
Finance income 444 177 611 2 (833) 401
Finance expense (10,482) (10,839) (1,915) (3,737) (7,678) (34,651)
Net change in
derivatives (127) - (840) - 8,375 7,408
Taxation (2,239) (424) 1,859 397 1,484 1,077
Gain / (Loss)
for the period 2,040 7,430 1,231 (6,276) (4,460) (35)
----------------------- ----------- ----------- ---------- ---------- --------------------- ---------
Girona acquisition - - - 11,009 - 11,009
---------------------- ------------ ----------- ---------- ---------- --------------------- ---------
Reportable segments'
assets 300,392 237,484 34,419 66,052 (55,751) 582,596
----------------------- ----------- ----------- ---------- ---------- --------------------- ---------
Reportable segments'
liabilities (187,773) (144,240) (22,956) (66,333) (26,278) 447,580
----------------------- ----------- ----------- ---------- ---------- --------------------- ---------
29. Segment reporting (continued)
The Board of Directors assesses the performance of the operating
segments based on a measure of earning before financial cost and
tax. The earning before financial cost and tax and profit or loss
of the Group's reportable segments reported to the Board of
Directors is measured in a manner consistent with that in profit or
loss. A reconciliation of operating profit to profit before tax is
therefore not presented separately.
The amounts provided to the Board of Directors in respect of
total assets and total liabilities are measured in a manner
consistent with that of the consolidated financial statements.
These assets and liabilities are allocated based on the operations
of the segment and the physical location of the asset. As all
assets and liabilities have been allocated to the reportable
segments, reconciliations of reportable segments assets to total
assets, and of reportable segments liabilities to total
liabilities, are not presented.
30 Sep 11 30 Sep 10
EUR000 EUR000
---------------------------------- ---------- ----------
Analysis of revenue per category
Logistics 25,658 26,736
Office 12,903 12,702
Retail 1,077 1,248
Other 1,111 1,179
---------------------------------- ---------- ----------
Rental income 40,749 41,865
Other Income 757 235
Cost of rental activities (2,960) (2,288)
Net revenue 38,546 39,812
---------------------------------- ---------- ----------
The Company is domiciled in Luxembourg but does not generate
revenue and is therefore not an operating segment. The Group's
revenues are primarily generated from property assets which are
held by Group companies domiciled in the same country as the
relevant asset is located. The breakdown of the major components of
revenue from external customers by country is disclosed above.
Rental income is derived from a large number of tenants although
two single tenants contribute more than 10% of the Group's rental
income:
30 Sep 11 30 Sep 10
EUR000 EUR000
----------------------- ---------- ----------
Norbert-Dentressangle 6,041 7,236
Deutsche Telecom 5,720 5,612
Others 28,988 29,017
Rental income 40,749 41,865
----------------------- ---------- ----------
30. Commitments
Foreign exchange hedge/Preference Dividend
The Company has entered into currency forward contracts to hedge
its exposure to the next two years' preference share dividends
which are paid in GBP (note 28.2). Pursuant to the said hedge
agreement, the Company sold on 16 November 2011 GBP1.3 million and
acquired EUR1.5 million at the exchange rate of EUR:GBP 1.118.
The fourth (2010: second) interim dividend of GBP0.04488 (2010:
GBP0.05203) per Preference Share will be paid on 23 December 2011
to Preference Shareholders on the Register on 9 December 2011. The
shares were quoted ex-dividend on 7 December 2011.
31. Contingent assets or liabilities
Certain subsidiaries of the Group are involved in litigation
resulting from operating activities. These legal disputes and
claims for damages are routine resulting from the normal course of
business. Except for the Montowest litigation, none of these legal
disputes and claims is expected to have a material effect on the
balance sheet, the result or liquidity of the Group.
Montowest litigation
Total rental debtor as at 30 September 2011 is EUR7.2 million,
representing an insurance receivable of EUR 2 million and a tenant
debt of EUR5.2 million. A provision of EUR1.1 million has been
recorded against the insurance receivable, leaving a net total
exposure of EUR6.1 million (including VAT and deferred income).
Rents paid by the tenant of EUR4.4 million are currently held in
escrow account, pending the completion of the litigation. In April
2010, the court ruled in favour of Montowest, however, the
defendants appealed the court decision. The next appeal court
hearing is scheduled for September 2012.
32. Subsequent events
Foreign exchange forward contract has been put in place in order
to cover the dividend on preference shares which will be paid in
December 2013 for GBP1.3m at the exchange rate of EUR:GBP
1.1539.
On 6 December 2011, 170 warrants were converted to 170 ordinary
shares.
On 14 October 2011 an Extraordinary General Meeting ("EGM") of
the Company's shareholders was held to approve a proposed new
investment objective to realise the existing property portfolio
owned by the Group and return capital to shareholders. This
resolution was approved by shareholders and the Company is in
discussions with the Commission de Surveillance du Secteur
Financier ('CSSF'), the Company's regulator, to seek approval for
this change.
In connection with the proposed change in investment objective
and policy, on 22 September 2011 the Board of Directors appointed
Internos as their new investment manager and promoter. The
appointment has been approved by the CSSF and Bank of Scotland (in
its capacity as facility agent for the credit facility provided by
it to the Company) and took effect upon the final termination of
the existing investment management agreement with Invista REIM on
15 December 2011. Revised fees will be payable by the Company under
the new management arrangements, as more fully set out in note 9
above. In accordance with the Termination Agreement, the Company
will pay to Invista REIM an early termination fee of EUR855,000.
This compares with an estimated liability of EUR2.4 million if the
management fees for the balance of the notice period (to 18
September 2012) were to be paid.
33. Loans to subsidiaries
30 Sep 11 30 Sep 10
EUR000 EUR000
------------------------------ ---------- ----------
Invista European Real Estate
Holding S.a r.l. 156,469 201,587
Invista European Real Estate 16,258 -
Finance S.a r.l.
------------------------------ ---------- ----------
Loans to subsidiaries 172,727 201,587
Loan to subsidiaries are stated net of an impairment of EUR126.4
million (2010: EUR103.8 million).
34. List of the fully consolidated subsidiaries
Subsidiary Domicile Ownership interest
30 September
2011
Invista European Real Estate Holdings
S.a r.l. Luxembourg 100%
Invista European Real Estate Finance
S.a r.l. Luxembourg 100%
Invista European RE Heusenstamm PropCo
S.a r.l. Luxembourg 100%
Invista European RE Marseille PropCo
S.a r.l. Luxembourg 100%
Invista European RE Solingen PropCo
S.a r.l. Luxembourg 100%
Invista European RE Nanteuil PropCo
S.a r.l. Luxembourg 100%
Invista European RE Monheim PropCo S.a
r.l. Luxembourg 100%
Invista European RE Lutterberg PropCo
S.a r.l. Luxembourg 100%
Lutterberg Logistics GmbH Germany 100%
Invista European RE Villeurbanne Holdco
S.a r.l. Luxembourg 100%
Invista European RE Delta Holdco S.a
r.l. Luxembourg 100%
Invista European RE Delta Propco S.a
r.l. Luxembourg 100%
Invista European RE Delta Propco II
S.a r.l. France 100%
Invista European RE Riesapark PropCo
S.a r.l. Luxembourg 100%
Invista European RE Roth PropCo S.a
r.l. Luxembourg 100%
Invista European RE Monbonnot HoldCo
1 S.a r.l. Luxembourg 100%
Invista European RE Monbonnot HoldCo
2 S.ar.l. France 100%
Invista European RE Germany GmbH Germany 100%
Invista RE Dutch Holdings B.V. The Netherlands 100%
Centaurus Logistics S.A. Luxembourg 100%
Invista European RE Pocking PropCo S.a
r.l. Luxembourg 100%
Invista European RE Sun PropCo S.a r.l. France 100%
Invista European RE Nova PropCo S.a
r.l. France 100%
Invista European RE Spanish PropCo S.L. Spain 100%
Invista European Real Estate Bel-Air
Holdings S.a r.l. Luxembourg 100%
Invista European Bel-Air France S.A.S. France 100%
Compagnie Francesca S.a r.l. France 100%
Fonciere Vauclusienne Fova S.a r.l. France 100%
Anjoly Affretement Stockage (Anjolyas)
S.a r.l. France 100%
Trappes S.A.S. France 100%
Malabar Societe de Manutention Logistique
et d'Affretement Barlantier (Malabar)
S.a r.l. France 100%
Compagnie d'Entrepots et de Magasine
Generaux d'Amiens (Cemga) S.a r.l. France 100%
Les Merisiers S.N.C. France 100%
Mirasud S.a r.l. France 100%
Nelson S.C.I. France 100%
Compagnie frigorifique et immobilere
de Normandie
(Cofrinor) S.a r.l. France 100%
Monto'west S.a r.l. France 100%
Pole Logistique Vauclusien (Poloval)
S.a r.l. France 100%
Societe du Pole Nord S.A.S. France 100%
Compagnie Vauclusienne de Distribution
(Covadis) S.a r.l. France 100%
DBA Czech s.r.o. Czech Republic 100%
Hades Logistics B.V. The Netherlands 100%
Atena Logistics B.V. The Netherlands 100%
Financiere, Immobiliere et Agricole
S.A. Belgium 100%
KP Image House S.A. Belgium 100%
KP Rue Royal S.A. Belgium 100%
KP HH S.A. Belgium 100%
Demeter B.V. The Netherlands 100%
Girona Logistics S.L. Spain 100%
Glossary
Adjusted gross assets is the aggregate value of all of the
assets of the Group, including net distributable but undistributed
income, less current liabilities of the Group (excluding from
current liabilities any proportion of monies borrowed for
investment whether or not treated under accounting rules as current
liabilities), as shown in the consolidated accounts of the
Group.
Articles are the articles of association of the Company as
amended and restated on 29 December 2009.
Earnings per share (EPS) is the profit after taxation divided by
the weighted average number of shares in issue during the
period.
Net equivalent yield is the time weighted average yield between
the Net initial yield and the Reversionary yield.
Estimated rental value (ERV) is the Group's external valuers'
reasonable opinion as to the open market rent which, on the date of
valuation, could reasonably be expected to be obtained on a new
letting or rent review of a property.
Gearing is the Group's net debt as a percentage of adjusted net
assets.
Gross rental income or gross rent is the annualised rental
income receivable in the period, prior to payment of
non-recoverable expenditure such as ground rents and property
outgoings.
Gross initial yield (GIY) is the Gross rent expressed as a
percentage of the net valuation of property portfolio.
Group is Invista European Real Estate Trust SICAF and its
subsidiaries.
Listing rules are rules made by the UK Listing Authority under
section 73A of the UK Financial Services and Markets Act 2000.
Net asset value (NAV) are shareholders' funds, plus the surplus
of the open market value over the book value of both development
and trading properties, adjusted to add back deferred tax.
Net initial yield (NIY) is the Net rental income expressed as a
percentage of the gross valuation of property portfolio.
Net rental income or net rent is the annualised rental income
receivable in the period after payment of non-recoverable
expenditure items such as ground rents and property outgoings.
Potential rent is the rent achievable if all the remaining
vacant space is let at the estimated rental value and added to the
current Gross rental income.
Prospectus is the prospectus of the Company dated 16 November
2009.
Regulated market is a market referred to in article 1, point 13
of the Council Directive 93/22 EEC on investment services in the
securities field, as amended.
Reversionary yield is the anticipated yield, which the Net
initial yield will rise to once the rent reaches the estimated
rental value.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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