RNS Number:9417V
Westbury Property Fund Limited
01 March 2004
The Westbury Property Fund Limited
Annual Report and Consolidated Financial Statements
For the year from 1 January 2003 to 31 December 2003
I have pleasure in presenting the Annual Report and Financial Statements of your
Company for the twelve months to 31 December 2003.
This has been a successful year for The Westbury Property Fund. Your Company is
close to being fullyinvested on the balanced portfolio and it has made three
significant venture investments during the course of the year.
I am delighted to report the audited net asset value due to Capital Shareholders
has increased by just over 20% to 115.96p during the twelve months to 31
December 2003. This strong performance has been generated across the entire
portfolio and has not been confined to any one single asset or sector.
Dividends
During the year and in accordance with the Prospectus, the Board has declared
and paid four quarterly dividends per Income Share amounting to 9p in total.
This comprised 3p for the three month period to 31 March 2003 and 2p per quarter
for the three quarters to 31 December 2003.
In the absence of any unforeseen circumstances, it is the intention of the Board
to continue to declare and pay quarterly dividends of 2p per Income Share in
line with the Income Shareholders' entitlement to receive a fixed preferential
dividend of 8% per annum over their life.The Income Shares are due to be
redeemed by the Company on 31 March 2010 at their issue price of 100p together
with any arrears of dividend (if any).
In line with the statements made in the Prospectus, no dividends have been
declared in respect of the Capital Shares. The Board will review annually the
dividend policy on the Capital Shares but currently there is no intention to
declare any dividends on the Capital Shares until after the Income Shares have
been redeemed in 2010.
Performance
The IPD Monthly Index for the twelve months to 31 December 2003 has ranked The
Westbury Property Fund's 2003 performance for that period in the top quartile of
the fifty-eight peer group funds analysed.
The Total Annual Return for the Fund for 2003 was 13.5% versus the IPD Monthly
Index of 11.4%.
Net Asset Value
The Capital Shares are entitled to all of the assets of the Company after
satisfaction of all debt and other liabilities of the Company and the
entitlement of Income Shares.
I am pleased to report to you that, over the last twelve months, the audited net
asset value per Capital Share has increased from 96.14p to 115.96p. This is an
increase of some 20% over the audited net asset value per Capital Share as at 31
December 2002.
During the year, your Company has made a net profit of #1,945,648. This has been
retained for the benefit of the Capital Shareholders. It has been achieved after
the payment of all costs relating to the running of the Company, interest paid
on bank debt and all dividends paid to Income Shareholders.
All of the Company's investment properties have been independently valued by
Knight Frank and these valuations are updated on a quarterly basis.
Share Price Performance
The share price performance of the Income Shares has remained stable throughout
the year, trading consistently above par, which reflects the strong asset
backing of the Income Shares and the spread of rental receipts across the entire
portfolio.
The Capital Shares have, on average, traded at a discount of approximately 10%
to the 31 December 2002 net asset value, but with the strong performance shown
by the audited net asset value attributable to Capital Shares this year, I am
hopeful that the share price discount to NAV will start to narrow.
Bank Borrowings
The Company has fixed rate borrowings with Bradford & Bingley amounting to #35m
currently drawn down and fixed at an average all-in-cost of 6.1% per annum until
25 June 2009. The Company has a further #6m drawn down under its revolving
facility which is at a floating rate. Your Board considers this to be a prudent
interest rate policy as it will enable debt breakage costs to be minimised in
the event that any assets are disposed of pending future reinvestment. On a
blended basis the Company's all in cost of debt is just under 6% per annum.
Most commentators believe that interest rates are more likely to rise than fall
over the coming twelve months. It remains your Company's firm policy not to
expose itself to any material interest rate risk.
Property Portfolio
As at 31 December 2003, your Company had a direct property portfolio of fourteen
properties with an aggregate valuation of #64.5m. Your Company now has
thirty-six tenancies in the balanced portfolio, a forecast total annualised rent
roll in 2004 of close to #5m and a weighted average lease length of fourteen
years.
There is a wide and diverse spread by sector, by region and by tenant covenant.
In particular, it should be noted that your Company, at present, has no direct
exposure to any property within the M25. However, your Company aims to start
investing in Central London and the South East as more sensibly priced
opportunities emerge and more capital becomes available.
Venture Property Investments
I am pleased to report that during the year under review your Company has made
three equity investments in joint ventures with other experienced property
investors. Each of these joint ventures is separately capitalised and all debt
in each venture has been structured on a non-recourse basis. Your Company's
aggregate equity investment in the three ventures amounts to some #3.6m. The
investments comprise a mixed-use development scheme in the centre of Liverpool,
a shopping centre refurbishment opportunity in Peterborough and an investment in
a new private company, which has acquired thirteen properties for an aggregate
consideration of #95m.
The investment horizon for these investments is two to three years and if the
forecast returns are achieved, there will be a significant uplift in the net
asset value due to Capital Shareholders. The investments are currently valued at
their book cost.
Each of these investments is described in more detail in the Investment
Manager's Report.
Real Estate Investment Trusts (REITs)
There has been a great deal of press comment and interest in the Government's
announcement that it would consider the introduction of a tax transparent
property investment trust. It is possible that this legislation could be passed
as early as 2005.
Unlike all UK domiciled quoted property companies, your Company already has many
of the benefits of tax transparency. There is no capital gains taxfor Guernsey
companies; further, there is currently no tax paid on your Company's rental
income and all returns to shareholders are distributed gross.
Notwithstanding this, the Board will monitor the progress of REIT legislation
and will considera change of domicile, if REITs are introduced and it is in
shareholders' interests to convert your Company into a UK REIT.
2004 Outlook
The resilience of the UK commercial property market was demonstrated again in
2003 with the IPD Monthly Index producing total returns averaging in excess of
11%. There is a similar outlook for 2004 although we remain cautious due to the
high level of personal indebtedness and its potential knock-on effects on the UK
economy as a whole, particularly in an environment of rising interest rates.
Your Company is well placed and on target to meet its forecast returns but, in
light of the current economic climate, covenant strength and lease length will
again remain the overriding strategic focus for 2004.
Given the strong track record in the performance of your Company since its
flotation in April 2002, your Board is now encouraging the Investment Manager to
seek out further property acquisitions which could be funded by increasing the
Company's equity base. By enlarging the Company, your Board believes that share
liquidity would improve and all shareholders would benefit from the fixed
operating costs being supported by an expanded rent roll.
Shareholder Communication
In addition to theAnnual and Interim Reports, the Investment Manager also
publishes a two-page Monthly Performance Report on the activities of the
Company. This is distributed to shareholders by email. Any shareholder who does
not currently receive this document and wishes to do so should contact info
@berringtonfm.com.
Rodney Baker-Bates
Chairman
27th February 2004
Investment Objective and Policy
The Company's investment objective is to achieve income and capital growth
primarily from a diversified portfolio of commercial properties situated in the
UK. The Company's investment policy is to acquire good quality properties let on
long leases to strong tenants so as to provide an income yield at least
sufficient to pay the Income Share dividend and otherwise to provide good
prospects for growth in both rental income and capital value for the long term
benefit of the Capital Shareholders.
To achieve this, the Investment Manager engages the services of best in class
property fund managers, as well as experienced property company professionals,
in order to utilise these individual talents and experience into a highly
effective team serving your Company.
Performance
On a year on year basis, the net asset value due to Capital Shareholders has
been increased by just over 20% to 115.96p. This increase has been achieved
after taking account of the full costs of running your Company and all dividends
paid to the Income Shareholders.
By way of comparison with other funds, your Company has consistently been in the
top quartile of fifty-eight peer group property funds and has achieved a total
return during 2003 of 13.5% versus the IPD Monthly Index of 11.4%.
Activity - Balanced Portfolio
As at 31 December 2003, the propertywas independently valued by Knight Frank at
#64.5m. These assets have a rent roll of close to #5m and a running yield of
circa 7.5%. As at 31 December 2003, the Company's balanced property portfolio
contained fourteen properties diversified across all three commercial sectors.
The properties were let to thirty-six tenants.
The Company has completed three acquisitions for the balanced portfolio for an
aggregate consideration, including costs, of #14.9m. These comprise three
separate distribution units let to three different tenants in three locations:
Worcester (completion in 2004), Southampton and Tipton.
Pursuant to the arrangements set out in the Prospectus, the Company disposed of
the Wickes unit at Eastbourne for #3.75m. On 23 January 2004, the Company also
disposed of one of its Sheffield office properties for #875,000.
Following some minor construction delays, the pre-let development at Worcester
and the Health and Fitness Centre at Guildford are due for final legal
completion shortly.
Activity - Venture Portfolio
A particular emphasis this year has been on the seeking out, negotiation and
completion of a variety of venture investments. We have been offered and have
reviewed a considerable number of such opportunities and we are pleased to
report that, during the course of the year, we completed three investments for
an aggregate consideration of #3.6m.
Venture property investments are an important component to the long term
performance of your Company's Capital Shares. The Company's venture investments
have been structured to provide strong returns within a relatively short time
horizon (two to three years) so as to complement the performance of the balanced
portfolio. These investments are by definition more risky and the Company is
limited to investing not more than 10% of gross assets in such investments. In
addition, all of the venture investments are in special purpose companies or
limited liability partnerships where any debt secured
by those entities is completely non-recourse to The Westbury Property Fund. The
amount invested in ventures as at 31 December 2003 represented approximately 5%
of your Company's gross assets.
Ropewalks One Limited Liability Partnership
In September 2003, your Company invested #0.5m in a limited liability
partnership in exchange for a circa 50% interest. It has also provided #1.3m of
temporary funding which will be extinguished on draw down of an agreed banking
facility with HBOS which willbe non-recourse to The Westbury Property Fund.
The investment consists of the acquisition and development of a mixed use scheme
in the centre of Liverpool with planning consent for a 10,700 square foot
medical centre, a suite of private consultingrooms, six retail units and
fifty-five predominately two bedroom apartments.
Demolition work is in progress and it is intended that the main building works
will commence in April 2004 with completion scheduled for 2005.
The other joint venture partners in the scheme are Barlows PLC, London &
Palatine Estates Limited and a private investor group.
Lunar Partnership Limited
In September 2003, your Company invested #2m in exchange for a 12.5% equity
interest in a new private company formed to acquire thirteen commercial
properties for an aggregate consideration of #95m. Bradford & Bingley have
provided a non-recourse debt facility of #80m.
The properties are geographically spread throughout the UK and offer a good
blend of retail, office and industrial property. The average net initial yield
is 7.5%. There are a number of significant asset management opportunities and
there is a three year business plan with a phased programme of disposals.
The other joint venture partners are Merrill Lynch, Royal Bank of Scotland and a
private investor.
Orton Shopping Centre Limited Liability Partnership
In October 2003, your Company invested #1.1m in a limited liability partnership
in exchange for a 33.3% interest. This limited partnership has acquired the
Orton Shopping Centre in Peterborough and has raised sufficient capital to fund
its refurbishment. A non-recourse debt facility has been provided by Anglo Irish
Bank.
The existing centre extends to 125,200 square feet of retail space, there are
currently 112 flats and the entire site occupies approximately twelve acres.
There is a significant opportunity to improve tenant mix (with consequential
enhancements to pedestrian flow and increased rental levels), regenerate and
provide additions to adjoining residential units (possibly in conjunction with a
partner) and generally improve the visual amenity of the Centre.
The initial phase of the project involves the securing of pre-lets to retailers
with a view to submitting a planning application for the refurbishment in April
2004. Construction is scheduled to commence before the end of 2004 and the
entire project is estimated to take three years to complete.
The other joint venture partners in the scheme include Barlows Holdings Limited,
London & Palatine Estates Limited and three other private investor groups.
The Property Market Outlook
We are starting 2004 on a much more optimistic note than 2003, the economy is
improving, interest rates remainhistorically low and employment levels are
high. Whilst we remain generally cautious, due to the high level of personal
indebtedness, the macro environment still bodes well for the property market
which continues to produce strong and stable returns. Demand for commercial
property investments from both institutional and private investors remains
strong with the high level of income return a key factor underpinning future
returns.
Our decision during 2003 to maintain an overweight position in the retail
warehouse sector and not invest in the weak London and South East office markets
proved beneficial. In 2004 we will begin to look for selective opportunities in
the London and South East office markets although we may delay acquisitions
until 2005 when the market is expected to be showing clearer signs of recovery.
We remain strongly in favour of investments in properties which produce high
income returns such as provincial offices and industrials with a bias towards
properties where active management can add value. 2004 is likely to see the
property market produce a total return in the region of 7-9% with its income
characteristics remaining a key factor for investors.
Richard Burrell
Berrington Fund Management Limited
27th February 2004
The Directors of The Westbury Property Fund Limited ("the Company") and its
subsidiaries (together "the Group") are pleased to submit the Audited
Consolidated Financial Statements of the Group for the year from 1 January 2003
to 31 December 2003.
Investment Policy
The primary investment objective of the Group is to achieve income and capital
growth primarily from a diversified portfolio of commercial properties situated
in the United Kingdom. The Company also investsup to 10% of its gross assets in
property related venture investments. The Company has two classes of Share
Capital, Income Shares and Capital Shares.
Listing
The Shares of the Company were admitted to the Official List of The London Stock
Exchange on 18 April 2002 and to the Official List of The Channel Islands Stock
Exchange on 18 April 2002.
Results
The results for the year are shown in the Consolidated Statement of Operations
on page 18.
Dividend
During the year the Company has declared and paid the following interim
dividends to its Income Shareholders:
Dividend Number Pay Date Rate
First interim 31 March 2003 3.0p
Second interim 30 June 2003 2.0p
Third interim 30 September 2003 2.0p
Fourth interim 31 December 2003 2.0p
Directors' and Other Interests
The following Directors including persons connected with them held the following
number of share at 31 December 2003:
Name Number of % of Issued Number of % of Issued
Capital Shares Capital Shares Income Shares Income Shares
R. Baker-Bates 200,000 2.04 - -
P. Dickson 56,667 0.58 33,333 0.16
W. Kay 18,000 0.18 - -
No Director holding office at 31 December 2003 or his associates had any
beneficial interest in the Company's Shares, nor had any such interest between
the end of the year and the date of this Report. None of the Directors had a
service contract with the Company during the year.
As at 31 December 2003, Berrington Fund Management Limited owned 250,000 Capital
Shares.
Corporate Governance
As a Guernsey incorporated company, the Company is not required to comply with
the Code of Best Practice published by the Committee on the Financial Aspects of
Corporate Governance (the "Combined Code"). However, the Directors place a high
degree of importance on ensuring that high standards of Corporate Governance are
maintained.
GoingConcern
The Directors believe it is appropriate to adopt the going concern basis in
preparing the financial statements as, after due consideration, the Directors
consider that the Group has adequate resources to continue in operational
existence for the foreseeable future.
Substantial Shareholdings
At 9 February 2004 Directors were aware that the following shareholders owned 3%
or more of the issued Capital Shares of the Company.
Number of Capital Shares % of Capital Shares
BNY (OCS) Nominees Limited 4,025,000 41.00
Barlows Holdings Limited 2,000,000 20.37
HSBC Global Custody Nominee
(UK) Limited 565,900 5.76
Credit Suisse First Boston
(Nominees) Limited 500,000 5.09
Directors' Responsibilities
The Directors are responsible for preparing Accounts for each financial period
which give a true and fair view of the state of affairs of the Group and of the
profit and loss of the Group for that period and are in accordance with
applicable laws. In preparing those Accounts the Directors are required to:-
* select suitable accounting policies and apply them consistently;
* make judgements and estimates that are reasonable and prudent; and
* prepare the Accounts on the going concern basis unless it is inappropriate to
presume that the Company will continue in business.
The Directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
Group and to enable them to ensure that the Accounts comply with the Companies
(Guernsey)Law, 1994. They are also responsible for safeguarding the assets of
the Group and hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
The Directors are responsible for ensuring that the Report of the Directors and
other information included in the Annual Report is prepared in accordance with
applicable company law. They are also responsible for ensuring that the Annual
Report includes information required by the Listing Rules of the Financial
Services Authority.
Status for Taxation
The Income Tax Authority in Guernsey has granted the Company exemption from
Guernsey income tax under the Income Tax (Exempt Bodies) (Guernsey) Ordinance
1989 and the income of the Company may be distributed or accumulated without
deduction of Guernsey income tax. Exemption under the above mentioned Ordinance
entails payment by the company of an Annual Fee of #600.
The property subsidiaries will be subject to United Kingdom tax on income
arising on investment properties, after deduction of its debt financing costs
and allowable expenses.
Auditors
Ernst & Young LLP have indicated their willingness to continue in office.
Tim Chesney, Director
Iain Stokes, Director
27th February 2004
We have audited the Group's financial statements for the year ended 31 December
2003 which comprise the Consolidated Statement of Operations, Consolidated
Balance Sheet, Company Balance Sheet, Consolidated Statement of Changes in
Equity, Consolidated Cash Flow Statement and the related notes 1 to 25. These
financial statements have been prepared on the basis of the accounting policies
set out therein.
This report is made solely to the Company's members, as a body, in accordance
with Section 64 of the Companies (Guernsey) Law, 1994. Our audit work has been
undertaken so that we might state to the Company's members those matters we are
required to state to them in an auditors' report and for no other purpose. To
the fullest extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company and the Company's members as a body, for our
audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
The directors are responsible for preparing the financial statements in
accordance with Guernsey law as described in the Statement of Directors'
Responsibilities.
Our responsibility is to audit the financial statements in accordance with
relevant legal and regulatory requirements, United Kingdom Auditing Standards
and the Listing Rules of the Financial Services Authority.
We report to you our opinion as to whether the financial statements, which have
been prepared in accordance with International Financial Reporting Standards,
give a true and fair view and are properly prepared in accordance with the
Companies (Guernsey) Law, 1994. We also report to you if, in our opinion, the
Directors' Report is not consistent with the financial statements, if the
Company has not kept proper accounting records, if we have not received all the
information and explanations we require for our audit or if information
specified by the Listing Rules regarding Directors' transactions with the Group
is not disclosed.
We read the other information contained in the Annual Report and consider
whether it is consistent with the audited financial statements. This other info
rmation comprises the Chairman's Statement, Investment Manager's Report and
Report of the Directors. We consider the implications for our Report if we
become aware of any apparent misstatements or material inconsistencies with the
financial statements. Our responsibilities do not extend to any other info
rmation.
Basis of audit opinion
We conducted our audit in accordance with United Kingdom Auditing Standards
issued by the Auditing Practices Board. An audit includes examination, on a test
basis, of evidence relevant to the amounts and disclosures in the financial
statements. It also includes an assessment of the significant estimates and
judgments made by the Directors in the preparation of the financial statements,
and of whether the accounting policies are appropriate to the Group's
circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
Opinion
In our opinion the financial statements give a true and fair view of the state
of affairs of the Group as at 31 December 2003 and of the profit of the Group
for the year then ended and have been properly prepared in accordance with the
Companies(Guernsey) Law, 1994.
Ernst & Young LLP
Guernsey, Channel Islands
27th February 2004
1/01/2003 10/01/2002
to to
31/12/2003 31/12/2002
Notes # #
Income 2
Rent receivable 4,247,937 2,172,872
Bank interest 49,811 66,871
--------- ---------
Total Income 4,297,748 2,239,743
--------- ---------
Expenses 2
Interest payable and similar charges,
including
dividends on income shares 5 3,981,812 2,082,509
Investment Manager's fees 3 (i) 922,381 632,125
Legal and professional fees 261,571 284,204
Property management expenses 177,180 115,397
Administration fee 3 (ii) 96,250 71,000
Directors' fees 4 66,375 47,388
General expenses 151,969 41,087
Bank charges 23,104 25,606
Audit fee 22,835 20,500
--------- ---------
Total Expenses 5,703,477 3,319,816
--------- ---------
Net loss before investment result (1,405,729) (1,080,073)
Realised (loss)/gain on sale of investment
properties (75,964) 326,638
Movement in unrealised gain on revaluation of
investment properties 3,477,827 821,209
--------- ---------
Net profit for the year/period 1,996,134 67,774
========= =========
UK taxation 7 (50,486) -
--------- ---------
Profit transferred to reserves 1,945,648 67,774
========= =========
Basic and diluted profit per Capital Share 8 19.82p 0.69p
========= =========
All items in the abovestatement are derived from continuing operations. The
accompanying notes on pages 23 to 32 form an integral part of the financial
statements.
31/12/2003 31/12/2002
Notes # #
Non-current Assets
Investment properties 10 64,479,348 49,426,650
Investments 11 4,939,001 -
--------- ---------
68,418,349 49,426,650
========= =========
Current Assets
Cash and cash equivalents 13 3,261,222 2,033,744
Debtors 14 625,628 361,853
--------- ---------
3,886,850 2,395,597
--------- ---------
Total Assets 73,305,199 51,822,247
--------- ---------
Current Liabilities
Creditors 15 993,535 599,926
Non-current Liabilities
Long term loan 16 40,799,228 21,770,514
Income Shares17 20,129,506 20,014,525
--------- ---------
60,928,734 41,785,039
--------- ---------
Total Liabilities 61,922,269 42,384,965
--------- ---------
Net Assets 11,382,930 9,437,282
========= =========
Represented by:
Capital and Reserves
Share capital 18 981,615 981,615
Share premium 19 8,387,893 8,387,893
Reserves 20 2,013,422 67,774
--------- ---------
Issued capital and reserves11,382,930 9,437,282
========= =========
Net Asset Value per Capital Share 21 115.96p 96.14p
========= =========
The financial statements on pages 18 to 32 were approved at a meeting of the
Board of Directors held on 27th February 2004 and signed on its behalf by:
Tim Chesney, Director
Iain Stokes, Director
The accompanying notes on pages 23 to 32 form an integral part of the financial
statements.
31/12/2003 31/12/2002
Notes # #
Non-current Assets
Investment in subsidiary companies 9 10,000,002 10,000,002
Investments 11 2,000,000 -
Loans to subsidiary companies 12 56,537,661 39,997,981
--------- ---------
68,537,663 49,997,983
--------- ---------
Current Assets
Cash and cash equivalents 20,496 711,237
--------- ---------
Total Assets 68,558,159 50,709,220
--------- ---------
Current Liabilities
Creditors 15 170,471 192,400
Non-current Liabilities
Long term loan 16 40,799,228 21,770,514
Income shares 17 20,129,506 20,014,525
--------- ---------
60,928,734 41,785,039
--------- ---------
Total Liabilities 61,099,205 41,977,439
--------- ---------
Net Assets 7,458,954 8,731,781
========= =========
Represented by:
Capital and Reserves
Share capital 18 981,615 981,615
Share premium 19 8,387,893 8,387,893
Reserves 20 (1,910,554) (637,727)
--------- ---------
Issued capital and reserves 7,458,954 8,731,781
========= =========
The financial statements on pages 18 to 32 were approved at a meeting of the
Board of Directors held on 27th February 2004 and signed on its behalf by:
Tim Chesney, Director
Iain Stokes, Director
The accompanying notes on pages 23 to 32 form an integral part of the financial
statements.
1/01/2003 10/01/2002
to to
31/12/2003 31/12/2002
# #
Equity at 1 January 2003 9,437,282 -
Net profit for the year/period 1,945,648 67,774
Issue of Capital Shares, net of issue costs - 9,369,508
Equity at 31 December 2003 11,382,930 9,437,282
The accompanying notes on pages 23 to 32 form an integral part of the financial
statements.
1/01/2003 10/01/2002
to to
31/12/2003 31/12/2002
Notes # #
Operating Activities
Rent received 4,372,393 2,163,555
Bank interest received 49,811 66,871
Expenses paid (1,806,179) (1,125,461)
Interest paid and similar charges, including
dividends on Income Shares (3,841,911) (1,916,248)
--------- ---------
Net cash outflow from operating activities 22 (1,225,886) (811,283)
--------- ---------
Investing Activities
Purchase of investments (4,939,001) -
Purchase of investment properties (15,226,671) (52,457,553)
Sales of investment properties 3,674,036 4,229,528
---------- ----------
Net cash outflow from investing activities (16,491,636) (48,228,025)
---------- ----------
Financing Activities
Issue of Capital Shares - 9,816,146
Issue costs paid on issuance of Capital
Shares (17,606) (429,032)
Issue of Income Shares - 20,848,140
Issue costspaid on issuance of Income (37,394) (911,202)
Shares
Draw down of long term loan 19,000,000 22,000,000
Issue costs paid on long term loan - (251,000)
---------- ----------
Net cash inflow from financing activities 18,945,000 51,073,052
---------- ----------
Increase in cash and cash equivalents 1,227,478 2,033,744
---------- ----------
Cash and cash equivalents at 01 January 2003 2,033,744 -
---------- ----------
Cash and cash equivalents at 31 December 3,261,222 2,033,744
2003 ========== ==========
The accompanying notes on pages 23 to 32 form an integral part of the financial
statements.
1. Operations
The Westbury Property Fund Limited is a closed-ended investment Company
incorporated in Guernsey whose investment objective is to achieve income and
capital growth primarily from a diversified portfolio of commercial properties
situated in the United Kingdom. The Company also invests up to 10% of its gross
assets in property related venture investments. The Company has no employees.
2. Principal Accounting Policies
Basis of Preparation
The accounts of the Group have been prepared in conformity with International
Financial Reporting Standards ("IFRS") issued by the International Accounting
Standards Board, interpretations issued by the International Financial Reporting
Interpretations Committee and applicable legal and regulatory requirements of
Guernsey Law, and reflect the following policies:
Convention
The accounts have been prepared on a going concern basis under the Historical
Cost Convention except for the measurement at fair value of investment
properties.
Basis of Consolidation
The Group financial statements consolidate the financial statements of The
Westbury Property Fund Limited and its subsidiary undertakings, Westbury
Properties Limited, Westbury (Yorkshire) Limited, Westbury (Hull) Limited, WPL
Ventures Limited and WPL Investments Limited, drawn up to 31 December 2003.
Segmental Reporting
The Directors are of the opinion that the Group is engaged in a single segment
of business, being investment business. The Group invests in commercial
properties situated in the United Kingdom.
Income
Interest receivable is included in the financial statements on an accruals
basis. Rental income is included in the financial statements on an accruals
basis and is shown gross of any UK income tax.
Expenses
All expenses are accounted for on an accruals basis.
Issue Costs
The placing expenses incurred amounted to #1,646,234 of which #251,000 related
to bank loan issue costs. The remainder has been allocated on a pro-rata basis
to the Capital and Income Shares, as follows:
Capital Shares #446,638
Income Shares #948,596
Bank Loan #251,000
The placing expenses allocated to the Capital Shares have been written off in
full against the share premium account.
The placing expenses allocated to the Income Shares and Bank Loan are being
amortised through the Consolidated Statement of Operations over the term of
these instruments.
Taxation
The Company and its Guernsey registered subsidiary, Westbury Properties 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 on bank interest
receivable in Guernsey. Each Company is, therefore, only liable to a fixed fee
of #600 per annum. The Directors intend to conduct the Group's affairs such that
it continues toremain eligible for exemption.
2. Principal Accounting Policies (continued)
Westbury Properties Limited is subject to United Kingdom income tax on income
arising on the investment properties, after deduction of its debt financing
costs, allowableexpenses and capital allowances.
Investment in subsidiary companies
The investment in subsidiary companies are included in the Company Balance Sheet
at cost.
Investment properties
Investment properties are initially recognised at cost, being the fair value of
consideration given, including transaction costs associated with the investment
property.
After initial recognition, freehold investment properties are measured at fair
value, with unrealised gains and losses recognised in the Consolidated Statement
of Operations. Fair value is based upon the open market valuations of the
properties as provided by Knight Frank, a firm of independent chartered
surveyors, as at the balance sheet date.
Investments
Investments are initially recognised at cost, being the fair value of the
consideration given. After initial recognition, investment in joint ventures are
carried at the Company's share in the net asset value of the joint venture.
Loans to subsidiary companies
The unsecuredsubordinated loans that have been granted to Westbury Properties
Limited and the other subsidiaries at various times during the accounting
period, have been accounted for as an originated loan under IFRS. These loans
are accounted for on an amortised cost basis with intercompany interest being
recognised under the effective interest rate method. These loans are reviewed
regularly for impairment.
Cash and cash equivalents
Cash on hand and deposits in banks are carried at cost. Cash and cash
equivalents are defined as cash on hand, demand deposits, and highly liquid
investments readily convertible to known amounts of cash and subject to
insignificant risk of changes in value. For the purposes of the Consolidated
Statement of Cash Flows, cash and cash equivalents consist of cash on hand and
deposits in banks.
Bank loans and borrowings
All bank 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.
Income Shares
Income Shares, which exhibit characteristics of liabilities, are recognised as
liabilities in the Balance Sheet in accordance with IAS 32. Income Shares are
initially recognised at cost, being the fair value of the consideration
received, less issue costs. After initial recognition, Income Shares are
subsequently measured at amortised cost. The corresponding dividends on these
shares are charged as interest expense in the Consolidated Statement of
Operations over the term of these shares.
3. Material Agreements
(i)Under the terms of an appointment made by the Board on 11 January 2002,
Westbury Fund Management Limited was appointed as Investment Manager to the
Company. The Investment Management Agreement was novated to Berrington Fund
Management Limited ("BFML") on 30 September 2003. With effect from 11 January
2002 the Investment Manager is paid a fee of 0.1% of Gross Assets (including the
total amount available under the loan facility) per calendar month payable
monthly in arrears. In addition, BFML is entitled to receive a performance fee
of 15% of any return above an 8% per annum (compound) hurdle as stated in the
Prospectus. The Investment Management Agreement is terminable by the Company on
36 months' notice, save in circumstances where the Fund's performance, as
measured annually by reference to the Investment Property Databank ("IPD"), is
consistently materially below the IPD Monthly Benchmark. In such circumstances
the agreement can be terminated by the Company, at the discretion of theBoard,
on 6 months' notice.
3. Material Agreements (continued)
The Investment Manager has sub-delegated the management of the investment
properties to Insight Investment Management Limited and Barlows Asset Management
Limited.
(ii) Under the terms of an Administration Agreement dated 11 January 2002, the
Company appointed Guernsey International Fund Managers Limited ("GIFM") as
Administrator, Secretary and Channel Island Sponsor. GIFM is paid by reference
to the number of hours spent on work for the Company at its standard hourly
charging rates in force from time to time, in addition to an annual fixed fee of
between #50,000 and #75,000 payable quarterly in arrears.
4. Directors' Fees 1/01/2003 10/01/2002
to to
31/12/2003 31/12/2002
During the period each of the Directors was entitled to # #
the following fees:
R. Baker-Bates (Chairman) 20,000 14,055
T. Chesney 15,000 10,541
P. Dickson 15,000 10,541
W. Kay 15,000 10,541
I. Stokes 1,375 1,710
--------- ---------
66,375 47,388
========= =========
5. Interest Payable and Similar Charges 1/01/2003 10/01/2002
to to
31/12/2003 31/12/2002
# #
Long term loan:
Interest payable 1,906,373 846,358
Non-utilisation fee 55,411 57,249
Amortisation of loan issue costs 28,714 21,514
Income Shares:
Dividends payable (Note 6) 1,876,333 1,042,407
Amortisation of issue costs 114,981 114,981
--------- ---------
3,981,812 2,082,509
========= =========
6. Dividends Payable on
Income Share 1/01/2003 10/01/2002
to to
No. of 31/12/2003 31/12/2002
Income Rate # Rate #
Shares pence pence
First interim dividend paid
31 March 2003 20,848,140 3.00 625,444 - -
Second interim dividend
paid 30 June 2003 20,848,140 2.00 416,963 - -
Third interim dividend paid
30 September 2003 20,848,140 2.00 416,963 2.00 416,963
Fourth interim dividend
paid 31 December 2003 20,848,140 2.00 416,963 3.00 625,444
------ --------- ------ ---------
Dividends payable (Note5) 9.00 1,876,333 5.00 1,042,407
====== ========= ====== =========
7. Taxation
Prior to the sale of Westbury (Eastbourne) Ventures Limited on 23 December 2003
(see Note 9 below),UK income taxation was incurred at 30% on the rental income
received by that Company.
8. Basic and Diluted Profit per Capital Share
The basic and diluted profit per Capital Share is based on the net profit for
the year of #1,945,648 and on 9,816,146 Capital Shares, being the number of
Capital Shares in issue throughout the year.
9. Investment in Subsidiary Companies
The Company owns the whole of the issued ordinary share capital of Westbury
Properties Limited, specially formed to act as the property investment holding
company for the Group, and WPL Ventures Limited, both of which are incorporated
and registered in Guernsey. Westbury Properties Limited owns the whole of the
issued ordinary share capital of WPL Investments Limited, incorporated and
registered in Guernsey, and of the following United Kingdom registered
companies:
- Westbury (Yorkshire) Limited (dormant)
- Westbury (Hull) Limited (dormant)
Westbury Properties Limited sold its entire interest in Westbury (Eastbourne)
Limited and Westbury (Eastbourne) Ventures Limited* on 23 December 2003.
* Westbury (Eastbourne) Ventures Limited is wholly owned by Westbury
(Eastbourne) Limited.
10. Investment Properties
Investment properties are stated at fair value,which has been determined based
on valuations performed by Knight Frank as at 31 December 2003, on the basis of
open market value, supported by market evidence, in accordance with
International Valuation Standards.
31/12/2003 31/12/2002
Consolidated # #
At 1 January 2003 49,426,650 -
Additions at cost 15,324,871 52,491,831
Disposals (3,750,000) (3,886,390)
Movement in unrealised gain from revaluation of
investment properties 3,477,827 821,209
--------- ---------
At 31 December 2003 64,479,348 49,426,650
========= =========
At the time of Admission to the London Stock Exchange, one asset, Admiral Retail
Park, Eastbourne, represented more than 15% of the gross assets of the Group. In
order to comply with section 21.27 (e) of the FSA Listing Rules, a Put Option
Agreement, was entered into, and subsequently, in 2003, was exercised under
which the Group sold one of the units at Admiral Retail Park to Barlows Holdings
Limited for a consideration of #3.75m. Under this agreement Barlows Holdings
Limited also benefits from a 25% share of the profit arising on any sale of the
whole of the retail park (including the unit owned by them).
In all other respects, the Group has complied with Sections 21.27 (f) to 21.27
(i) of the FSA Listing Rules.
11. Investments
31/12/2003 31/12/2002
Consolidated # #
Joint Ventures:
Ropewalks One LLP (i) 500,000 -
Orton Shopping Centre LLP (ii) 1,100,017 -
1,600,017 -
Loans receivable:
Ropewalks One LLP (i) 1,338,984 -
Investment:
Lunar Partnership Limited (iii) 2,000,000 -
4,939,001 -
Company Investment
Lunar Partnership Limited (iii) 2,000,000 -
11. Investments (continued)
(i) The Group has invested #500,000 of capital in, and made available a
temporary loan to, Ropewalks One LLP. The Group benefits from 50% of the profit
from the partnership after the promoters' performance related profit share.
The loan earns interest at 10% and is repayable on or before 31 March 2004.
(ii) The Group has invested #1.1m of capital in Orton Shopping Centre LLP and
benefits from 33% of the profit from the partnership after the promoters'
performance related profit share.
(iii) The Company holds 1,250 ordinary shares comprising 12.5% of the share
capital of the Lunar Partnership Limited.
12. Loans to Subsidiary Companies
During the year, unsecured subordinated loans of #54,659,599 (2002 -
#39,997,981) were issued to Westbury Properties Limited and #1,878,062 (2002 -
Nil) to WPL Ventures Limited by the Company in support of property acquisitions.
Interest charged, included within the loan balances, amounts to #3,761,250 on
the Westbury Properties Limited loan and #39,078 on the WPL Ventures Limited
loan. The loans are repayable in 2010 and interest is charged at LIBOR plus a
margin of 3% (2002 - 4%).
13. Cash and Cash Equivalents
Cash balances include #2,750,000(2002 - Nil) held to the bank's order pending
additional security being mortgaged to the bank.
14. Debtors
31/12/2003 31/12/2002
Consolidated # #
Property purchase deposit - 166,200
VAT recoverable 325,628 154,333
Other debtors - 32,003
Rent receivable 300,000 9,317
--------- ---------
625,628 361,853
========= =========
15. Creditors 31/12/2003 31/12/2002
# #
Consolidated
Other taxation 230,000 230,000
Amounts payable in respect of investment
properties purchased 49,500 117,500
Investment Manager's fees 77,515 66,774
Issue costs payable - 55,000
Other creditors 76,533 40,306
Non-utilisation fee - 25,972
Property management expenses 26,848 22,580
Administration fee 83,000 20,000
Audit and taxation fee 35,000 18,000
Loan interest payable - 3,794
Rents received in advance 415,139 -
--------- ---------
993,535 599,926
========= =========
Company
Investment Manager's fees 77,515 66,774
Issue costspayable - 55,000
Non-utilisation fee - 25,972
Administration fee 60,000 20,000
Audit fee 20,000 18,000
Loan interest payable - 3,794
Other creditors 12,956 2,860
--------- ---------
170,471 192,400
========= =========
16. Long Term Loan
31/12/2003 31/12/2002
Consolidated and Company # #
Long term loan at 1 January 22,000,000 -
Amount drawn down in year 19,000,000 22,000,000
Total loan drawn down at 31 December 41,000,000 22,000,000
Allocation of loan issue costs (251,000) (251,000)
Amortisation of loan issue costs - 2002 21,514 21,514
Amortisation of loan issue costs - 2003 28,714 -
40,799,228 21,770,514
The Company has a loan facility agreement with Bradford & Bingley PLC totalling
#46,000,000. As at 31 December 2003, the Company had drawn down #41,000,000
(2002 - #22,000,000) under this agreement leaving an undrawn balance of
#5,000,000. This loan is due for repayment on 31 December 2010. Of the loan,
#35,000,000 (2002 - #22,000,000) is fixed at interest rates averaging 6.1% until
June 2009.
International Financial Reporting Standards (IAS32) require the disclosure of
the fair value of the loan at 31 December 2003. No fair value has been disclosed
because it is not practicable within constraints of timeliness or cost to obtain
an appropriate risk rate from the market that would apply to the loan and the
particular circumstances surrounding it.
During the year, the Company's bank borrowings were subject to the following
financial covenants:
* Loan to value ratio - the aggregate outstanding loan to current valuation of
investment properties should not exceed the following percentages:-
Up to 2nd Anniversary 80%
From 2nd to 4th Anniversary 75%
From 4th to 6th Anniversary 70%
From 6th Anniversary to final repayment 65%
* Quarterly rental cover - net rental income shall be at least 140% of loan
interest payable.
* Period of occupational leases - at least 45% of net rental income shall arise
from occupational leases with unexpired terms of 8 years or more.
* No single property shall exceed #25 million.
The Company has been in compliance with the financial covenants throughout the
year.
17. Income Shares
31/12/2003 31/12/2002
Consolidated and Company # #
As at 1 January 20,014,525 -
20,848,140 shares issued at 100p each - 20,848,140
Allocationof issue costs - (948,596)
Amortisation of issue costs 114,981 114,981
As at 31 December 20,129,506 20,014,525
17. Income Shares (continued)
In accordance with International Financial Reporting Standards, the Income
Shares are treated as a liability as described under accounting policies in note
2.
The Income Shares are entitled to a fixed preferential dividend of 8% per annum
over the life of the Income Shares and are due to be redeemed by the Company on
31 March 2010 at their issue price together with arrears of dividend (if any).
The fair value of the Income Shares at 31 December 2003 was #21,265,102 (2002 -
#22,099,028) based on a market offer price of 102p (2002 - 106p) per share.
18. Share Capital
Consolidated and Company Authorised #
50,000,000 Capital Shares of 10p each 5,000,000
Number of Share
Shares Capital
Capital shares of 10p each issued and fully paid #
Balance at 1 January and at 31 December 2003 9,816,146 981,615
The Capital Shares will be entitled to all of the assets of the Company after
satisfaction of all debt and other liabilities of the Company and the
entitlement of Income Shareholders. Capital Shareholders (but not Income
Shareholders) will have the right at the Annual General Meeting in 2009 to vote
on the continuation of the Company and, if that vote is passed, at intervals of
five years thereafter. If the continuation vote is not passed, a special
resolution for the Company to be wound up will be proposed by 31 March 2010.
19. Share Premium
31/12/2003 31/12/2002
# #
Share premium at 1 January 8,387,893 -
--------- ---------
Proceeds on Capital Shares issued - 8,834,531
--------- ---------
Allocation of issue costs - (446,638)
--------- ---------
Share premium at 31 December 8,387,893 8,387,893
========= =========
20. Reserves Profit and Loss Reserves
31/12/2003 31/12/2002
# #
Consolidated
Reserves at 1 January 67,774 -
Net profit for the year 1,945,648 67,774
--------- ---------
Reserves at 31 December 2,013,422 67,774
========= =========
Company
Reserves at 1 January (637,727) -
Net loss for the year (1,272,827) (637,727)
--------- ---------
Reserves at 31 December (1,910,554) (637,727)
========= =========
21. Net Asset Value per Capital Share
The net asset value per Capital Share is based on the net assets attributable to
the Capital Shareholders of #11,382,930 (2002 - #9,437,282) and on 9,816,146
Capital Shares in issue at the balance sheet date.
22. Note to the Consolidated Cash Flow Statement
1/01/2003 10/01/2002
to to
31/12/2003 31/12/2002
# #
Reconciliation of net loss before investment to net cash outflow from operating
activities:
Net loss before investment result (1,405,729) (1,080,073)
UK taxation charge (50,486) -
Adjustment for non-cash items
Amortisation of Income Share issue costs 114,981 114,981
Amortisation ofloan issue costs 28,714 21,514
(Increase) in debtors (429,975) (41,320)
Increase in creditors 516,609 173,615
--------- ---------
Net cash outflow from operating activities (1,225,886) (811,283)
========= =========
23. Financial Instruments and Investment Properties
The Group's financial instruments largely comprise property investments. In
addition, the Group holds cash and liquid resources as well as having debtors
and creditors that arise directly from its operations. The Group has not entered
into any derivative transactions during the period under review.
The main risks arising from the Group's financial instruments and investment
properties are market price risk, credit risk, liquidity risk and interest rate
risk. The Board regularly reviews and agrees policies for managing each of these
risks and these are summarised below.
Market Price Risk
The Group's exposure to market price risk is comprised mainly of movements in
the value of the Group's investment in property. Property and property related
assets are inherently difficult to value due to the individual nature of each
property. As a result, valuations are subject to uncertainty. There is no
assurance that the estimates resulting from the valuation process will reflect
the actual sales price even where a sale occurs shortly after the valuation
date.
Rental income and the market value for properties are generally affected by
overall conditions in the local economy, such as growth 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
the bankruptcy or the insolvency of tenants or otherwise, the periodic need to
renovate, repair and release space and the costs thereof, the costs of
maintenance and insurance, and increased operating costs.
The Directors monitor market value by having independent valuations carried out
quarterly by Knight Frank.
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. In the
event of a default by an occupational tenant, the Group will suffer a rental
income shortfall and incur additional costs, including legal expenses, in
maintaining, insuring and re-letting the property.
23. Financial Instruments and Investment Properties (continued)
Liquidity Risk
Liquidity risk is the risk that the Group will encounter in realising assets or
otherwise raising funds to meet financial commitments. Investments in property
are relatively illiquid, however, the Group has tried to mitigate this risk by
investing in desirable properties in prime locations.
Interest Rate Risk
The Group's exposure to market risk for changes in interest rates relates
primarily to the Group's long-term debt obligations. The Group's policy is to
manage its interest cost using fixed rate debt.
The interest rate profile of the Group at 31 December 2003 is as follows:
Total Variable Assets on Weighted
Rate which no average
interest interest
is rate
received per annum
# # # %
Financial assets
Freehold
investment
properties 64,479,348 - 64,479,348 -
Investments* 4,939,001 - 4,939,001 -
--------- ---------
Non-current
assets 69,418,349 - 64,418,349 -
--------- ---------
Cash and cash
equivalents 3,261,222 3,261,222 - 3.5
Debtors 625,628 - 625,628 -
--------- --------- --------- ---------
Total assets
as per Balance
Sheet 73,305,199 3,261,222 70,043,977
========= ========= ========= =========
Total Variable Fixed Liabilities Weighted Weighted
on
Rate Rate which no average average
interest interest until
is rate
paid per annum maturity
# # # # % Years
Financial
liabilities
Bank loans 40,799,228 6,000,000 34,799,228 - 5.95 7
Income 20,129,506 - 20,129,506 - 8.00 7
Shares
Creditors 993,535 - - 993,535 - -
--------- -------- --------- --------- ---------- --------
Total
liabilities
as per
Balance 61,922,269 6,000,000 54,928,734 993,535
Sheet ========= ======== ========= ========= ========== ========
* Included in investments is a short term debtor amounting to #1,338,984 upon
which interest is received at a fixed rate of 10%.
The interest rate profile of the Group at 31 December 2002 was as follows:
Total Variable Assets on Weighted
Rate which no average
interest interest
is rate
received per annum
# # # %
Financial assets
Freehold investment 49,426,650 - 49,426,650 -
properties
Investments - - - -
--------- ---------
Non-current assets 49,426,650 - 49,426,650 -
--------- ---------
Cash and cash equivalents 2,033,744 2,033,744 - 3.0
Debtors 361,853 - 361,853 -
--------- --------- --------- --------
Total assets as per Balance 51,822,247 2,033,744 49,788,503
Sheet ========= ========= ========= ========
23. Financial Instruments and Investment Properties (continued)
Total Variable Fixed Liabilities Weighted Weighted
on
Rate Rate which no average average
interest interest until
is rate
paid per maturity
annum
# # # # % Years
Financial
liabilities
Bank loans 21,770,514 - 21,770,514 - 6.29 8
Income 20,014,525 - 20,014,525 - 8.00 8
Shares
Creditors 599,926 - - 599,926 - -
--------- -------- --------- -------- -------- --------
Total
liabilities
as per
Balance 42,384,965 - 41,785,039 599,926
Sheet ========= ======== ========= ======== ======== ========
24. Commitments
The Company's subsidiary is committed to pay a final sum of around #0.9m on
completion of a 93,000 sq ft warehouse unit in Worcester which has been let at
circa #477,000 per annum. In December 2002 the Company's subsidiary acquired
land in Guildford for #1.5m and is committed to acquiring a 25,500 sq ft Health
& Fitness club being developed on the land and pre-let to Esporta Health &
Fitness Limited at an initial rent of circa #306,000 per annum. The costs which
will be incurred in 2004 amount to circa #2.3m.
25. Related party
Included in property management expenses is an amount of #83,300 (2002 -
#66,000) payable to Barlows Holdings Limited, a major shareholder in the
Company, in accordance with their property management agreement with the
Company's subsidiary. During the year the Company's subsidiary sold its interest
in Westbury (Eastbourne) Limited to Barlows Holdings Limited for #1 incurring a
loss of #75,964. The debt of #3,987,000 due to the Group from Westbury
(Eastbourne) Limited was repaid n full upon completion of the sale.
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END
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