Interim Report 30.6.04
Standard Life Invs Property Inc Tst
21 September 2004
Standard Life Investments Property Income Trust Limited
Interim Report
19 December 2003 to 30 June 2004
Objective
To provide shareholders with an attractive level of income and capital growth
from investing in a diversified UK commercial property portfolio.
Financial Summary
Launch Change
since
30 June 31 March (19 December 2003) launch
2004 2004
Price per share 106.75p 107.75p 100.00p +6.8%
Net asset value
per share*** 101.4p 99.5p 97.00p +4.5%
Value of
property £127.5m £107.0m £93.5m N/A
portfolio****
Dividend per
share 1.625p** 1.625p* N/A N/A
* Dividend for the period paid in May 2004
** Dividend for the period paid in August 2004
*** Calculated on a capital basis under UK Generally Accepted Accounting
Principles and practice for investment trust companies
**** Valued on an open market basis in accordance with the RICS Appraisal and
Valuation Standards
Chairman's Statement
I am delighted to report to shareholders that the Company has performed well
since launch at the end of 2003. The Company's Net Asset Value has grown by 4.5%
over the reporting period and the Company's first and second quarterly dividends
of 1.625p per ordinary share were paid to shareholders in May and August.
The increase in the Net Asset Value of the Company over the reporting period was
primarily attributable to increasing capital values across the property
portfolio but the Company also benefited from the effect of financial gearing in
a rising property market.
The Company's ordinary share price per share increased in value by 6.8% over the
reporting period. The FTSE All Share index showed an increase of 2.8% over the
same period.
In a competitive environment for property investments, your Company acquired a
further 5 properties totalling £29.8m. These properties compliment the
attractive income yield, long unexpired lease terms and quality of tenants in
the existing property portfolio.
Conditions in the UK commercial property market strengthened in the first half
of 2004. Investor demand for property remained strong leading to further upward
pressure on capital values. Rental values resumed their upward trend in 2004 as
the office sector showed signs of improvement with corporate occupiers,
particularly in central London, increasing their demand for space.
The outlook for UK commercial property markets remains positive with investor
demand expected to put further upward pressure on capital values and a recovery
underway in a number of office markets. The Company's property portfolio is well
placed to continue to produce attractive investment returns to its shareholders.
David Moore
Chairman of the Board
Investment Manager's Commentary
The first half of 2004 witnessed increased investor appetite for UK commercial
property investments. Returns from the UK commercial property market accelerated
further in the 2nd quarter of 2004. The Investment Property Databank (IPD)
Monthly Index reported a return of 4.9% in the 2nd quarter compared to 3.7% in
the first quarter. With the strongest inward yield shift for more than ten years
recorded by the IPD Monthly Index in June, it is clear that the weight of money
in the market is considerable.
A further five properties were acquired in the first half of 2004 for a total
consideration of £29.8m. With a number of additional properties close to being
acquired our target to be fully invested by the end of the third quarter remains
on track despite the competitive investment environment.
The Company's property portfolio continues to be significantly underweight in
High Street shops despite the acquisition of a High Street retail property in
north London. Whilst investment demand for this type of property remains strong
we believe that this market remains most at risk to a consumer slowdown. The
Company has completed two further acquisitions in the central London office
market in the first half of 2004 in order to further benefit from the renewed
occupier activity being witnessed in this market. We believe the Company's
property portfolio is structured so as to benefit from an upturn in office
markets in general, and central London in particular, but is limited in its
exposure to town centre retail which looks most exposed to a potential slowdown
in consumer spending.
As at 30 June 2004, the value of the property portfolio was £127.5m, with annual
income of £9.1m, representing a running income yield of 7.2%. The void rate on
the portfolio was 1.8% of total income compared to the void rate on the IPD
Monthly Index of 8.3% at 30th June. At the end of June 2004, the Company's
property portfolio contained 18 properties with an average unexpired lease term
of 11.8 years.
In August the Monetary Policy Committee of the Bank of England (MPC) increased
the official interest rate in the UK by a quarter of a percentage point to
4.75%. The MPC have increased base interest rates by 1.25% in less than a year.
The implications for UK commercial property markets are two-fold. Firstly, the
positive margin between commercial property's income yield and the cost of
variable rate debt has reduced. Debt backed investors have therefore reduced
their demand for commercial property investments. Secondly, rising interest
rates have the effect of containing economic activity and ultimately
occupational demand for property. However, as long as rising interest rates are
acting to slow excessive economic activity, and this does not turn into a period
of economic recession, this should not destabilise commercial property markets.
Shareholders should note that the company's exposure to rising interest rates
has been limited with the use of interest rate hedging. From launch until 29
December 2004 a combination of a £5m interest rate swap and a £67m interest rate
cap are in place. On 29 December 2004 these instruments will be converted into a
£72m interest rate swap, and it is our expectation that this will limit interest
rate exposure until 29 December 2013.
UK Property Market Commentary
Retail property continued to experience the strongest returns of the 3 main
property sectors. Although the sector recorded rental growth of 1.5% in the
first half of the year, according to the IPD Monthly Index, the primary driver
of the exceptional growth in capital values has been persistently strong
investor demand and consequent upward pressure on capital values.
The office market has shown substantial improvement so far in 2004. After
falling throughout 2003 office rental values have begun to stabilise. This
improvement is supported by an increasing number of lettings in the Central
London office markets in the first and second quarters of 2004 and a more
notable pick up in occupier requirements for additional office floorspace.
The industrial sector has also seen an increase in returns in the first half of
2004. Although the sector experienced capital growth of 4.5% in the first half
of the year, according to the IPD Monthly Index, rental growth for the same
period was just 0.5%. Nonetheless, there are encouraging signs that UK
industrial production is emerging from recession. This in turn should lead to
improving demand from occupiers and upward pressure on rental values.
Rather than observing slower investor demand for property on the back of higher
borrowing costs, since the start of the year investor demand has strengthened.
The combined effect of increased institutional demand, continued bank lending to
investors and the volume of international funds in the UK market has resulted in
a strong first half to 2004.
Investment Outlook
Weight of money in the UK property market and a recovery in office rental values
will be key to performance over the next year. The continued appetite for
commercial property will benefit most areas of the property market as investors
put upward pressure on capital values.
On the back of slower retail sales and retail rental growth, we anticipate that
investor demand for retail property will ease over the next 12 months. The
prospect of a strengthening occupier base in the office and industrial markets
will, however, support investor demand for these higher yielding sectors of the
market. The combined effect of these influences should result in further
narrowing of the spread of return between the 3 sectors over the next year and
healthy double digit returns from the market as a whole.
Unaudited Consolidated Income Statement
for the period ended 30 June 2004
Note £
Income
Gain arising on adjustment to fair value of investment
properties 8 58,341
Rental income 4,341,440
---------
Total income and capital gains 4,399,781
---------
Expenditure
Set-up costs 3 (432,525)
Investment management fees 3 (496,105)
Other administration expenses 3 (789,895)
---------
(1,718,525)
---------
Operating profit before interest and taxation 2,681,256
---------
Finance costs
Interest payable 6 (506,487)
Interest receivable 231,385
---------
Operating profit before taxation 2,406,154
---------
Taxation 7 (12,372)
---------
Profit for the period 2,393,782
---------
Earnings per share for the period attributable to
the equity holders of the company
Basic and diluted 21 2.39 pence
All items in the above income statement derive from continuing operations.
The notes are an integral part of these unaudited consolidated
financial statements
Unaudited Consolidated Balance Sheet
as at 30 June 2004
Note £
ASSETS
Non-current assets
Freehold investment properties 8 107,320,000
Leasehold investment properties 8 23,850,910
Interest rate swap asset 16 1,675,069
-----------
132,845,979
-----------
Current assets
Trade and other receivables 9 1,185,619
Cash and cash equivalents 11 7,251,567
-----------
8,437,186
-----------
Total assets 141,283,165
-----------
EQUITY
Equity capital and reserves attributable
to Company's equity holders
Share capital 17 1,000,000
Share premium 18 96,692,892
Retained earnings 19 768,782
Other reserves 20 1,675,069
-----------
Total equity 100,136,743
-----------
Liabilities
Non-current liabilities
Bank borrowings 12 28,110,370
Redeemable preference shares 13 6,165,342
Leasehold obligations 14 3,650,910
----------
37,926,622
----------
Current liabilities
Trade and other payables 10 3,207,428
Income tax payable 7 12,372
----------
3,219,800
----------
Total liabilities 41,146,422
----------
Total equity and liabilities 141,283,165
-----------
The notes are an integral part of these unaudited consolidated
financial statements
Unaudited Consolidated Statement of Changes in Equity
for the period ended 30 June 2004
Share Share Retained Other Total
capital premium earnings reserves equity
Notes £ £ £ £ £
Issue of
ordinary
share
capital 17 1,000,000 - - - 1,000,000
Share premium
on issue of
ordinary
share
capital 18 - 99,000,000 - - 99,000,000
Unrealised
profit on
revaluation
of interest
rate swap 20 - - - 1,675,069 1,675,069
Profit for
period - - 2,393,782 - 2,393,782
Dividends - - (1,625,000) - (1,625,000)
paid
Share issue
costs 18 - (2,307,108) - - (2,307,108)
--------- ---------- --------- --------- -----------
Balance at 30
June 2004 1,000,000 96,692,892 768,782 1,675,069 100,136,743
--------- ---------- --------- --------- -----------
Unaudited Consolidated Cash Flow Statement
for the period ended 30 June 2004
Note £
Cash flows from operating activities
Cash generated from operations 24 4,884,723
Interest paid (341,146)
---------
Net cash generated from operating activities 4,543,577
---------
Cash flows from investing activities
Acquisition of shares in subsidiaries 5 (17,366,354)
Purchase of investment properties 8 (29,810,022)
Loan repayments made to related parties 5 (80,285,282)
Interest received 231,386
-----------
Net cash used in investing activities (127,230,272)
-----------
Cash flows from financing activities
Proceeds from issuing of new ordinary shares 100,000,000
Proceeds from issuing of redeemable preference shares 13 6,000,000
Share issue costs (2,307,108)
Dividends paid to shareholders (1,625,000)
Debt issue costs (240,000)
Proceeds from bank borrowings 12 28,110,370
-----------
Net cash generated from financing activities 129,938,262
-----------
Net increase in cash and cash equivalents 7,251,567
Cash and cash equivalents at beginning of period -
---------
Cash and cash equivalents at end of period 7,251,567
---------
The notes are an integral part of these unaudited consolidated
financial statements.
Notes to the Unaudited Consolidated Financial Statements
for the period ended 30 June 2004
1. General information
Standard Life Investments Property Income Trust Limited ('the Company') and its
subsidiaries (together the 'Group') carries on the business of property investment
through a portfolio of freehold and leasehold investment properties located in the United
Kingdom. The Company is a limited liability company incorporated and domiciled
in Guernsey, Channel Islands. The Company has its primary listing on the Channel
Islands Stock Exchange with a secondary listing on the London Stock Exchange.
These unaudited consolidated financial statements have been approved for issue
by the Board of Directors on 20th September 2004. The address of the registered
office is Trafalgar Court, Les Banques, St. Peter Port, Guernsey, GY1 3QL.
2. Accounting policies
Basis of preparation
The unaudited consolidated financial statements of the Group have been prepared
in accordance with International Financial Reporting Standards ('IFRS'), and all
applicable requirements of Guernsey Company Law. The unaudited consolidated
financial statements have been prepared under the historical cost convention as
modified by the measurement of investment property and derivative financial
instruments from cash flow hedges at fair value.
Segmental reporting
The Directors are of the opinion that the Group is engaged in a single segment
of business, being property investment business and in one geographical area,
the United Kingdom.
Basis of consolidation
The unaudited consolidated financial statements comprise the financial
statements of Standard Life Investments Property Income Trust Limited and its
only material wholly owned subsidiary undertaking, Standard Life Investments
Property Holdings Limited, a company with limited liability incorporated and
domiciled in Guernsey, Channel Islands.
Subsidiaries are all entities over which the Group has the power to govern the
financial and operating polices generally accompanying a share holding of more
than one half of the voting rights. The existence and effect of potential voting
rights that are currently exercisable or convertible are considered when
assessing whether the Group controls another entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the Group and they
are deconsolidated from the date that control ceases.
The cost of an acquisition is measured as the fair value of the assets given
plus costs directly attributable to the acquisition including equity instruments
issued and liabilities assumed or incurred at the date of exchange.
Intercompany transactions, balances and unrealised gains on transactions between
group companies are eliminated. Accounting policies of subsidiaries have been
changed where necessary to ensure consistency with the policies adopted by the
Group.
Subsidiaries acquired with the intention of disposal or being liquidated within
12 months of acquisition are not consolidated.
Functional and presentation currency
Items included in the financial statements of each of the Group's entities are
measured using the currency of the primary economic environment in which the
entity operates ('the functional currency'). The consolidated financial
statements are presented in pounds sterling, which is the Company's functional
and presentation currency.
Revenue recognition
Revenue is recognised as follows;
a) Bank Interest
Bank interest income is recognised on an accruals basis.
b) Rental Income
Rental income (net of any rent free and other incentives) is recognised on a
straight line basis over the term of the lease.
Expenditure
All expenses are accounted for on an accruals basis. The investment management
and administration fees, formation and set up costs, finance and set up costs
(including interest on the bank facility and on the redeemable preference
shares) and all other expenses are charged through the income statement.
Share issue costs
Costs directly attributable to the issue of equity that would otherwise have
been avoided are written off against share premium and reflected in the
Statement of Changes in Equity.
Taxation
The Company and its wholly owned Guernsey registered subsidiary, Standard Life
Investments Property Holdings Limited have obtained exempt company status in
Guernsey under the terms of the Income Tax (Exempt Bodies) (Guernsey) Ordinance,
1989 so that they are exempt from Guernsey taxation on income arising outside
Guernsey and bank interest receivable in Guernsey. Each Company is, therefore,
only liable to a fixed fee of £600 per annum. No charge to Guernsey taxation
will arise on capital gains derived from the disposal of the investment
properties.
The Directors intend to conduct the Group's affairs such that the Company and
its Guernsey registered subsidiary continue to remain eligible for exemption.
Standard Life Investments Property Holdings Limited is subject to United Kingdom
income tax on assessable income arising on the United Kingdom investment
properties held.
Deferred income tax
Deferred income tax is provided in full, using the liability method, on
temporary differences arising between the tax bases of assets and liabilities
and their carrying amounts in the financial statements. Deferred income tax is
determined using tax rates (and laws) that have been enacted or substantially
enacted 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.
Freehold investment properties
Freehold investment properties are initially recognised at cost, being the fair
value of consideration given, including transaction costs associated with the
acquisition of the investment property.
After initial recognition, freehold investment properties are measured at fair
value, with movements in the unrealised gains and losses recognised in the
Income Statement. Fair value is based upon the market valuations of the
properties as provided by DTZ Debenham Tie Leung Limited, a firm of independent
chartered surveyors, at the balance sheet date.
Leasehold investment properties
Leasehold investment properties held which meet the criteria of an investment
property as defined by IAS 40 but are held by the Group under a finance lease,
are initially recognised at cost, being the fair value of the consideration
given together with the discounted present value of all minimum lease payments
(i.e. Head lease payments). After initial recognition, leasehold investment
properties are measured at fair value with movements in the unrealised gains and
losses recognised in the Income Statement. Fair value is based on the market
valuations of the properties as provided by DTZ Debenham Tie Leung Limited, a
firm of independent chartered surveyors, as at the balance sheet date.
Cash and cash equivalents
Cash and cash equivalents are defined as cash in hand, demand deposits, and
highly liquid investments readily convertible within three months or less to
known amounts of cash and subject to insignificant risk of changes in value.
Share capital
Ordinary shares are classified as equity. Redeemable preference shares are
classified as liabilities.
Dividends
Dividend distributions to the Group's shareholders are recognised as a liability
in the Group's unaudited consolidated financial statements in the period in
which the dividends are approved by the Board of Directors. The redeemable
preference shareholders are not entitled to payment of any dividends.
Borrowings
All loans and borrowings are initially recognised at cost, being the fair value
of the consideration received, less issue costs where applicable. After initial
recognition, all interest-bearing loans and borrowings are subsequently measured
at amortised cost. Amortised cost is calculated by taking
into account any discount or premium on settlement. Preference shares, which are
mandatorily redeemable on a specific date, are classified as liabilities.
3. Fees
Investment management fees
On 4 December 2003 Standard Life Investments (Corporate Funds) Limited ('the
investment manager') was appointed as investment manager to manage the property
assets of the Group. Under the terms of the Investment Management Agreement the
Investment Manager is entitled to receive a fee at the annual rate of 0.85% of
the total assets (less any amounts drawn down under the facility agreement but
not yet invested in property assets), payable quarterly in arrears. Total fees
charged for the period ended 30 June 2004 amounted to £496,105. The amount due
and payable at period end amounted to £227,418.
Administration, secretarial and registrar fees
On 4 December 2003 Guernsey International Fund Managers Limited (GIFM) were
appointed administrators, secretary and registrar to the Group. GIFM are
entitled to an annual fee from 1 January 2004, payable quarterly in arrears, of
£65,000. GIFM are also entitled to reimbursement of reasonable out of pocket
expenses. Total fees charged for the period ended 30 June 2004 amounted to
£32,500. The amount due and payable at period end amounted to £16,250.
Valuers fees
On 4 December 2003, DTZ Debenham Tie Leung Limited ('The Valuer'), Chartered
Surveyors, were appointed as valuers in respect of the assets comprising the
property portfolio. The valuer is entitled to an annual fee of £2,000 per
property together with all reasonable out of pocket expenses and a start up fee
of 0.0275% of the value of each property added to the portfolio. Total fees
charged for the period ended 30 June 2004 amounted to £59,941. The amount due
and payable at period end amounted to £9,000.
Set-up costs
Set-up costs not directly attributable to the issue of shares amounted to
£432,525. These costs have been written off directly to the income statement.
4. Financial instruments
The Group's activities expose it to various financial risks, the adverse effects
of which the Group seeks to minimise through the use of financial instruments.
The Group has not entered into any derivative transactions during the period
under review other than the cap and interest rate swap contracts as hedges of
interest rate exposure on the bank borrowings. It is the Group's policy that no
trading in financial instruments will be undertaken. The main financial risks
arising from the Group's activities are credit risk, market risk, liquidity risk
and interest rate risk.
Credit risk
Credit risk is the risk that a counter party will be unable to meet a commitment
that it has entered into with the Group. In the event of default by an
occupational tenant, the Group will suffer a rental shortfall and incur
additional related costs. The Board receives regular reports on the
concentration of risk and any tenants in arrears.
Market risk
The Group's exposure to market risk is comprised mainly of movements in the
value of the Group's property investments. The investment property portfolio is
managed within the parameters disclosed in the Group's prospectus.
Liquidity risk
Liquidity risk is the risk that the Group will encounter in realising assets or
otherwise raising funds to meet its financial commitments. Property and related
assets are inherently difficult to value due to the individual nature and as a
result, valuations can be subject to substantial uncertainty. Valuation will not
necessarily reflect the actual sales price, even if a sale were to occur shortly
after the valuation date. In certain circumstances, the terms of the Group's
loan facility entitle the lender to require early value repayment and under such
circumstances the Group's ability to maintain dividend levels and the net asset
value attributable to the ordinary shares, could be adversely affected.
Interest rate risk
Interest rate risk relates primarily to the Group's long term debt obligations.
The Group's policy is to manage its interest cost using a cap and interest rate
swap, in which the Group has agreed to exchange the difference between fixed and
variable interest amounts based on a notional principal amount. The fair value
of the interest rate swap is calculated as the present value of the estimated
future cash flows.
Accounting for derivative financial instruments and hedging activities
Derivatives are initially recognised at cost on the date a derivative contract
is entered into and are subsequently remeasured at their fair value. The method
of recognising the resulting gain or loss depends on whether the derivative is
designated as a hedging instrument, and if so, the nature of the item being
hedged. The group documents at the inception of the transaction the relationship
between hedging instruments and hedged items, as well as its risk management
objective and strategy for undertaking various hedge transactions. The Group
also documents its assessment both at hedge inception and on an ongoing basis of
whether the derivatives that are used in hedging transactions are highly
effective in offsetting changes in fair values or cash flows of hedged items.
The effective portion of changes in the fair value of derivatives that are
designated and qualify as cash flow hedges are recognised as gains or losses in
equity. The gains or losses relating to the ineffective portion are recognised
immediately in the income statement.
Fair value estimation
The fair value of financial instruments not traded in active markets (for
example over-the counter derivatives) is determined by using valuation
techniques. The Group uses a variety of methods and makes assumptions that are
based on market conditions existing at each balance sheet date. Other
techniques, such as estimated discounted cash flows, are used to determine fair
value of the remaining financial instruments.
The fair value of interest rate swaps is calculated as the present value of
estimated cash flows. The nominal value less estimated credit adjustments of
trade receivables and payables are assumed to be their fair values.
5. Related party disclosures
Parties are considered to be related if one party has the ability to control the
other party or exercise significant influence over the other party in making
financial or operational decisions.
Acquisition of initial portfolio
On the 19 December 2003 the Company purchased a wholly owned interest in the
following companies, from Standard Life Assurance Company with the net total
consideration of £17,366,354 being satisfied by a cash payment and the
assumption of various liabilities;
Telelink Swansea Investments Limited,
Drakes Way Investments Limited,
Bathgate Retail Park Investments Limited,
Wellesley House Investments Limited,
Paisley Investments Limited,
Wellington House Investments Limited,
Shire Park Welwyn Investments Limited,
Viscount Way Investments Limited,
Hollywood Green Investments Limited,
Clough Road Hull Investments Limited and
Property Investments Eleven Limited.
These companies were acquired in order to obtain the initial property portfolio
and with the intention that control was intended to be temporary.
The net assets acquired on acquisition of the initial portfolio companies were
as follows;
£
Investment properties at valuation 97,651,636
Loan from Standard Life Assurance Company (80,285,282)
----------
17,366,354
----------
No fair value adjustment to the book value of the net assets was required on
acquisition and no goodwill arose on the acquisition.
The properties were valued independently by DTZ Debenham Tie Leung Limited at
£93,500,000. The difference between the independent valuation and the fair value
amount noted above is £4,151,636. This amount represents an estimate of costs
that would have been incurred had the properties been purchased on the open
market.
On 29 December 2003, the Company transferred all of the investment properties
held within these companies to its wholly owned subsidiary, Standard Life
Investments Property Holdings Limited at the fair value of £97,651,636.
Redeemable preference shares
On 29 December 2003 the Company issued 6,000,000 25p redeemable zero dividend
preference shares for £6,000,000 to Standard Life Assurance Company. These
shares had a nominal value of £1,500,000 and are redeemable by the Company at
£1.7908. See note 13. These shares do not carry any voting rights.
Ordinary share capital
Standard Life unit linked property funds hold 28,700,000 of the issued ordinary
shares. Those parties related to the Investment Manager waived their rights to
commission on the purchase of ordinary shares in order to maintain the fairness
of the transactions to all parties.
Directors
The Directors each hold the following number of ordinary shares in the Company:
David Moore 15,000
Richard Barfield 15,000
John Hallam 15,000
Shelagh Mason 15,000
Paul Orchard-Lisle 25,000
No Director has any interest in any transactions which are or were unusual in
their nature or conditions or significant to the business of the Group and which
were effected by any member of the Group since its date of incorporation. Total
fees relating to the directors in the period under review were £43,877.
Investment Manager
Standard Life Investments (Corporate Funds) Limited is the Investment Manager.
Transactions with the Investment Manager in the period are detailed on note 3.
6. Interest payable
£
Interest payable in relation to redeemable preference shares 165,342
Other interest payable 341,145
-------
506,487
-------
7. Taxation
£
Current tax 12,372
------
The tax on the Group's profit before tax differs from the theoretical amount
that would arise using the weighted average tax rate of the applicable profits
of the consolidated companies as follows:
£
Operating profit before tax 2,406,154
---------
Tax calculated at domestic tax rates applicable to
profits in the respective countries 529,354
Holding company profits not subject to tax (446,230)
Interest income not subject to tax (4,879)
Capital allowances and other amounts (65,873)
--------
Tax charge 12,372
--------
The weighted average applicable tax rate was 22%
8. Freehold and leasehold investment properties
Freehold Leasehold Total
£ £ £
Cost of properties transferred from
subsidiary companies 77,170,947 20,480,690 97,651,637
Cost of properties purchased 29,810,022 - 29,810,022
Gain/(loss) arising on adjustment to
fair value of investment properties 339,031 (280,690) 58,341
----------- ---------- -----------
Market value at period end 107,320,000 20,200,000 127,520,000
----------- ---------- -----------
Discounted present value of minimum
lease payments - 3,650,910 3,650,910
----------- ---------- -----------
Fair value at 30 June 2004 107,320,000 23,850,910 131,170,910
----------- ---------- -----------
Investment properties were revalued at period end by DTZ Debenham Tie Leung
Limited, Chartered Surveyors on the basis of the market value for existing use.
In accordance with the accounting policy in note 2, the market values of
leasehold investment properties have been adjusted to reflect the discounted
present value of minimum lease payments to reflect their fair value in
accordance with IFRS.
9. Trade and other receivables
£
Trade debtors 357,948
VAT receivable 827,671
---------
1,185,619
---------
10. Trade and other payables
£
Trade creditors 30,741
Sundry creditors 709,274
Deferred rental income 2,062,957
Retentions relating to property purchases 404,456
---------
3,207,428
---------
11. Cash and cash equivalents
£
Cash held at bank 7,251,567
----------
12. Bank borrowings
£
Loan facility 80,000,000
----------
Bank borrowing drawn down 28,110,370
----------
On 4 December 2003 the Company entered into a term loan facility with the Royal
Bank of Scotland Plc for an amount not exceeding the lower of £80 million and
76% of the gross proceeds of the ordinary share issue and the issue of the
redeemable preference shares. Interest is payable by the Company at a rate equal
to the aggregate of LIBOR, mandatory costs of the Royal Bank of Scotland Plc and
a margin of 0.675% per annum.
A non-utilisation fee of 0.15% is payable on any undrawn amounts under the loan
facility. The interest rate on the loan drawn down at the balance sheet date of
£28,110,370 was 5.5261%. The loan is due to be repaid on 29 December 2013.
The loan facility is secured by fixed and floating charges over the assets of
the Company and it's wholly owned subsidiary, Standard Life Investments Property
Holdings Limited.
13. Redeemable preference shares
The Company issued 6,000,000 25p redeemable zero dividend preference shares at a
value of £1 on 19 December 2003. The preference shares will be automatically
redeemed by the Company on the tenth anniversary of admission at a redemption
price of £1.7908. The preference shares cannot be redeemed earlier. The
redemption price represents a redemption yield of 6% per annum on the issue
price of £1. On a return of capital the holders of the preference shares are
entitled to the payment of 25p per share increased at the rate of 21.8% per
annum compounded daily from the date of admission up to the tenth anniversary of
admission.
£
The holding at 30 June 2004 comprises:
Proceeds from issue of redeemable preference shares 6,000,000
Accrued finance cost charges to income statement 165,342
---------
6,165,342
---------
14. Leasehold obligations
At 30 June 2004 the Group owned 2 leasehold properties at a market value of
£20,200,000 as valued by the independent valuers DTZ Debenham Tie Leung Limited.
In accordance with the accounting policy for leasehold investment property an
adjustment is required to reflect the discounted present value of minimum lease
payments.
£
Leasehold obligations 3,650,910
---------
15. Lessor analysis
Lessor Length
At the period end the leases in operation based on annual rental is as follows:
£
Less than one year 123,350
Between one and five years 710,566
Over five years 9,256,126
----------
Total 10,090,042
----------
The largest single tenant at the period end accounts for 12.1% of the annual
rent income.
16. Interest rate swap
The Company entered into swap agreements with the Royal Bank of Scotland plc
(RBS) for the initial drawdown of £5,000,000 from 29 December 2003 to 29
December 2004, and for 90% of the total £80,000,000 debt facility (£72,000,000)
from 29 December 2004 to 29 December 2013. The company also entered into a cap
agreement with RBS on £67,000,000 of the loan facility for 29 December 2003 to
29 December 2004.
Fair value of the financial instruments
£
Interest rate swap - £5,000,000 from 29/12/03 to 29/12/04
and £72,000,000 from 29/12/04 to 29/12/13 1,663,370
Interest rate cap - £67,000,000 from 29/12/03 to 29/12/04 11,699
----------
1,675,069
----------
17. Share capital
£
Authorised
130,000,000 ordinary shares of 1p each 1,300,000
----------
Allotted, called up and fully paid:
100,000,000 ordinary shares of 1p each 1,000,000
----------
18. Share premium
100,000,000 ordinary shares carrying a premium of 99p each 99,000,000
Share issue costs (2,307,108)
----------
At 30 June 2004 96,962,892
----------
19. Retained earnings
£
Profit for the period 2,393,782
Dividends paid (1,625,000)
---------
At 30 June 2004 768,782
---------
20. Other reserves
£
Unrealised gain on valuation of interest rate swap 1,675,069
---------
21. Earnings per share
Basic and diluted earnings per share is calculated by dividing the profit
attributable to equity holders of the Company by the weighted average number of
ordinary shares in issue during the period.
£
Profit for the period attributable to equity holders 2,393,782
---------
Weighted average number of ordinary shares in issue 100,000,000
-----------
Basic earnings per ordinary share (pence) 2.39pence
-----------
There is no difference between the basic earning per share and the diluted
earnings per share.
22. Dividends
The interim dividends paid to date in 2004 were £1,625,000 (1.625p per ordinary
share) paid in May 2004 and relating to the quarter ending 30 March 2004. A
further interim dividend of 1.625p per share in respect of the quarter to 30
June 2004 was paid in August 2004. These unaudited consolidated financial
statements do not reflect this latter dividend payable.
23. Reconciliation of unaudited consolidated net asset value to published net
asset value
The net asset value attributable to Ordinary Shares is published quarterly and
is based on the properties' most recent valuations and calculated on an adjusted
capital basis under United Kingdom Generally Accepted Accounting Principles (UK
GAAP) and practice for investment trust companies taking into account the
prevailing capital entitlement from time to time of the Redeemable Preference
Shares under the Articles of the Company.
£
Net asset value per unaudited consolidated financial statements 100,136,743
Adjustments
Re-classification of redeemable preference shares as equity 6,165,342
Unrealised profit on revaluation of interest rate swap (1,675,069)
Preference share adjustment to reflect capital redemption rights (1,665,342)
Proposed dividend for quarter ended 30 June 2004 (1,625,000)
Adjustment for accrued creditors 20,264
-----------
Published net asset value 101,356,938
-----------
24. Cash generated from operations
£
Profit for the period 2,393,782
Movement in debtors (1,185,619)
Movement in creditors 3,207,427
Income tax 12,372
Interest payable 506,487
Interest receivable (231,385)
Gain arising on adjustment to fair value of investment properties (58,341)
Bank loan arrangement fees 240,000
----------
2,490,941
----------
Net cash generated from operating activities 4,884,723
----------
25. Post balance sheet events
On 3 September 2004 the Royal Court of Guernsey granted an application to cancel
the share premium account of the ordinary shares of the Company and re-classify
this premium as a distributable reserve. The share premium as at 30th June 2004
amounted to £96,962,892 as per note 18.
Directors and Company Information
for the period ended 30 June 2004
Directors
David Christopher Moore (Chairman)
Richard Arthur Barfield
John Edward Hallam
Shelagh Yvonne Mason
Paul David Orchard-Lisle CBE
Registered Office
Trafalgar Court
Les Banques
St. Peter Port
Guernsey
GY1 3QL
Administrator, Secretary and Registrar
Guernsey International Fund Managers Limited
Trafalgar Court
Les Banques
St. Peter Port
Guernsey
GY1 3QL
Registered Number
41352
Investment Manager
Standard Life Investments (Corporate Funds) Limited
One George Street
Edinburgh
EH2 2LL
Auditors
PricewaterhouseCoopers CI
National Westminster House
Le Truchot
St. Peter Port
Guernsey
GY1 4ND
Solicitors
Dickson Minto W.S.
16 Charlotte Square
Edinburgh
EH2 4DF
Principal Bankers
The Royal Bank of Scotland plc
135 Bishopsgate
London
EC2M 3UR
Independent Valuers
DTZ Debenham Tie Leung Limited
1 Curzon Street
London
EC2M 3UR
This information is provided by RNS
The company news service from the London Stock Exchange
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