Post on 04-Oct-2018
Annual report and financial statementsFor the year ended 31 March 2015 2015
Alp
ha Real Trust Lim
itedFo
r the year ended
31 March 2015
Annual rep
ort and
financial statements
1 Highlights
2 Trust summary and objective
3 Chairman’s statement
6 Investment review
24 Directors
25 Directors’ and corporate governance report
29 Directors’ statement pursuant to the Disclosure and Transparency Rules
30 Independent auditors’ report
31 Consolidated statement of comprehensive income
32 Consolidated balance sheet
33 Consolidated cash flow statement
34 Consolidated statement of changes in equity
35 Notes to the financial statements
59 Directors and Company information
60 Shareholder information
60 Financial calendar
Contents
www.alpharealtrustlimited.com
Alpha Real Trust Limited : Annual report 2015 1
• NAVpershare113.2p:31 March2015(107.0p:31 March2014)
• Adjustedearningspershareof7.5pfortheyearended31 March2015(40%upfromprioryear5.3p)
• Continuedearningsgrowth:incomefromcoreandnon-coreinvestments,bothequityandhighyielddebtcontinuetoaddtotheGroup’searningsposition
• Declarationofanincreaseddividendof0.6ppershare,expectedtobepaidon17July2015
• Saleofnon-coreinvestments:saleofthefinalassetsinBCPreleased£2.7millionforreinvestmentinopportunitiesacrosstheasset-backedspectrumthatofferhighrisk-adjustedtotalreturns
• GalaxiaarbitrationawardedintheGroup’sfavour:awardfortheoriginalamountinvested,pluspenaltyinterestandcosts.AwardsubjecttoSection34challengeinIndianCourtsbyLogix
• AUREloanrefinance:aspartofawiderrefinancingofAURE’sloanfacilities,inwhichtheCompanywasrepaid£2.3million,ARTprovidedanewmezzanineloanfacilityof£10.3 millionforatwoyeartermexpiringNovember2016.Theloanearnsacouponof9%plusentry,exitandextensionfees.Theloanwasrepaidduringthequarterto£9.6million
• Europiploanrefinance:ARTextendeditsloantoEuropipfor2years.Thenewloanearnsacouponof9%perannumplusentry,exitand,whereapplicable,earlyprepaymentfees;the loanwasrepaidduringthequarterto£1.3million
• Europipcapitalrecycling:£3.5millionofcapitalreturnedtoARTforreinvestmentasaresultofstrategicassetsalesandrenegotiatedbankfinanceterms
• H2O:asaresultofassetmanagementinitiatives,includinganimprovedtenantmixandphysicalupgradesundertakenbyART,theMadridshoppingcentreattractedrecordvisitor numbers
• H2O:17newleasecontractssignedin2014,with5newcontractsalreadysignedin2015
• 93%oftheGroup’sinvestmentportfolioisinincomeproducinginvestmentsintheUKand Europe
0.6p Declaration of an increased dividend of 0.6p per share
40% 40% increase in adjusted earnings per share to 7.5p
113.2p NAV per share 113.2p
93% 93% of the Group’s investment portfolio is in income producing investments in the UK and Europe
Highlights
Alpha Real Trust Limited targets investment
opportunities across the asset-backed
spectrum, including real estate operating
companies, securities, services and
other related businesses that offer
high risk-adjusted total returns.
Alpha Real Trust Limited : Annual report 20152
Trust summary and objective
Strategy
AlphaRealTrustLimited(“theCompany”or“ART”)targetsinvestmentopportunitiesacrosstheasset-backedspectrum,includingrealestateoperatingcompanies,securities,servicesandotherrelatedbusinessesthatofferhighrisk-adjustedtotalreturns.
ARTcurrentlyfocusesonhigh-yieldingpropertydebtandequityinvestmentsinWesternEuropethatbenefitfromunderlyingstrongcashflows.Thecurrentportfoliomix,excludingsundryassets/ liabilities,isasfollows:
Highyieldingdebt 28.4%
Highyieldingequityinpropertyinvestments 26.4%
Groundrentinvestments 19.7%
Otherinvestments 9.0%
Cash 16.5%
Management
TheCompany’sInvestmentManagerisAlphaRealCapitalLLP(“ARC”)whoseteamofinvestmentandassetmanagementprofessionalsfocusesonthepotentialtoenhanceearningsandaddvaluetotheunderlyingassets,andontheriskprofileofeachinvestmentwithinthecapitalstructuretobestdeliverhighrisk-adjustedreturns.
ControloftheCompanyrestswiththenon-executiveGuernseybasedBoardofDirectors.
Dividends
ThecurrentintentionoftheDirectorsistopayadividend quarterly.
Listing
TheCompany’ssharesaretradedontheSpecialistFundMarket(“SFM”)oftheLondonStockExchange(“LSE”),withthetickercodeARTL:LSE.
Financialhighlights
Year ended 31 March 2015
6 months ended 30 September 2014
Year ended 31 March 2014
Net asset value (£’000) 79,935 76,473 75,693
Net asset value per share 113.2p 108.3p 107.0p
Earnings per share (adjusted - basic and diluted)* 7.5p 3.0p 5.3p
Earnings per share (basic and diluted) 10.2p 3.3p 2.2p
Dividend per share (paid during the period) 2.1p 1.1p 2.6p
* Theadjustedearningspershareincludesadjustmentsfortheeffectofthefairvaluerevaluationofinvestmentpropertiesandindirectpropertyinvestmentsandthefairvaluemovementsonfinancialassets.Fullanalysisisprovidedinnote9tothefinancialstatements.
Hig
h yi
eldi
ng equity in
pro
perty
in
vestments
Cash investm
ents
Ground rent
Other
High yielding
debt
IMPT equity1.0%
Europip loan1.6%
AURE loans12.2%
IMPT loan14.6%
FIAF19.7%
Cash16.5%
Galaxia6.1%
HLP 2.5%
Cambourne2.0%
H2O19.3%
Europipproperty
4.1%
Other 0.4%
26.4%
9.0%
28.4%
16.5%16.5%
Group’s assets allocation by sector and investment (by percentage of Group’s NAV)
Alpha Real Trust Limited : Annual report 2015 3
IampleasedtopresenttheCompany’sannualreportfortheyearended31March2015.
IthasbeenaveryactiveperiodforARTacrossallofitsinvestmentsectorswithactiveassetmanagement,newinvestmentandcapitalrecyclingallplayinganimportantrolein ayearofconsolidationandgrowth.
ThebackdropofanimprovingeconomicenvironmenthasassistedtheCompanyinachievingsuccessfuldisposalsofnon-coreassets.ARTisinastrongpositionwiththecashresourcesatyearendtocontinuetoprudentlyinvest.Theflexibilityprovidedbyourstrategyoffocusingonhigh-yieldingpropertydebtandequityinvestmentsinWesternEuropethatbenefitfromunderlyingstrongcashflowsorscopeforhighrisk-adjustedtotalreturnshasmeantthatARTiswellplacedtoadapttoopportunitiesandtakeadvantageofnewinvestments.Wecontinuetoremaindisciplinedaboutnewinvestmentsandassetselection.Whilstselective,wealsoremaincreativeandarealerttoopportunitiesthatrequirecomplexinvestmentstructures.Thisapproachhasserveduswellinthepastandprovidesanadvantageinselectedmarketsinwhichinvestmentactivityandassetpricingcouldbeperceivedtoberunningslightlyaheadofcurrentlydemonstrableoccupationalmarketfundamentals,makingdirectassetpurchaseslessattractive.
TheCompany’searningscontinuetoincreaseasaconsequenceofART’sinvestmentpolicyoftargetinginvestmentsandallocationofcapitaltoincomefocusedinvestmentsorinvestmentswhichwillgeneratestrongandgrowingcashflows.TheCompanyhasmaintaineditspolicyof
payingquarterlydividendsduringtheperiodandIampleasedtoannouncethat,supportedbyimprovingearnings,theCompanydeclaresanincreasedquarterlydividendof0.6ppershare,relatingtothequarterended31March2015,whichisexpectedtobepaidon17July2015.
Equity investments
ART’sdirectandindirectlyheldequityinvestmentsinrealestatecontinuetoperformstrongly.ThisisevidentbothintheUKandinothermarketsacrossEurope.InSpain,theH2OshoppingcentreinvestmentinMadridattractedarecordnumberofannualvisitorsin2014andalsorecordedincreasinglypositivelike-for-liketenantsalesgrowth.ThisreflectstheassetmanagementimprovementsimplementedundertheCompany’sownershipwhichincludeanimprovedcommercialmix,upgradedpublicareas,anewlakesideleisureareaanduniquemarketingevents.TherearesignsthateconomicgrowthinSpainisalsobuilding,whichbodeswellfortheasset’sfutureperformance.
Duringtheyear,underlyingassetvalueincreaseshavebeenreportedwithintheCompany’sIndustrialMultiPropertyTrustplc(“IMPT”)andActiveUKRealEstateFund(“AURE”)investmentsintheUK.Inadditiontoinvestorsentimentimprovingasriskpremiumsreduceandpricingimproves,increasedleasingactivityalsopointstoanimprovementintheunderlyingoccupiermarket.TheCompany’sinvestmentinFreeholdInvestmentAuthorisedFund(“FIAF”),whosestablecashflowsprovidesupporttotheCompany’searningsandportfoliobalance,performedstronglydeliveringatotalreturnof8.6%duringtheyear.
David Jeffreys
Chairman
Chairman’s statement
Alpha Real Trust Limited : Annual report 20154
Debt investments
ARTrefinancedorextendedthetermsofitshighyieldingdebtinvestmentsinEuropipandAUREduringtheperiod.Ingeneral,thebroadeningofthedebtmarketsupplyhasmeantthatART’sdebtinvestmentsareinsomecasesnowyieldingreturnsinexcessofthemarket.
Underlyingassetvalueshavebenefitedfromanimprovementinthewiderinvestmentmarketresultinginenhancedcreditqualityasloantovalueratioshaveeitherimprovedoraremorefirmlysupportedasaresultofbothgreaterliquidityanddebtavailability.Theincreasedrealestateinvestorsentimentandliquidityinthemarkethasfacilitatedsalesofnon-coreassetsfromtheEuropipportfolio,whichhaveenabledART’sinvestmentloantoberepaidfrom£4.3millioninDecember2014to£1.3millioninMarch2015.
Capital recycling
Recyclingofcapitalfrommatureandnon-coreinvestmentshascontinued,providingtheopportunityfornewinvestmentthatoffersscopeforhigherrisk-adjustedreturns.Tothisend,theremaininginvestmentinBusinessCentrePropertiesLimited(“BCP”)wassubstantiallyredeemed.BCPwasacquiredinlate2012aspartofthelargerPropertyInvestmentPortfolioPlcportfolioandwasoneoftheassetswithintheportfoliodeemedtobenon-core.Asuccessfulmanagedsell-downoftheassetswithinBCPhasnowbeencompleted.
TherehavebeenfurtherstrategicassetsalesintheCompany’sEuropipinvestmentinNorwaywhereproceedsfromthesaleofnon-coreassetswillallowfurtheramortisationofART’shighyieldingloantoEuropipinadditiontoamortisationofEuropip’sseniorbankloanfacility.
Arbitration process in India
Duringtheyear,theInternationalChamberofCommerce(“ICC”)ArbitrationdeclaredanawardinfavouroftheCompanywithrespecttoitsGalaxiainvestment,ajointventurewiththeLogixGroup(“Logix”)locatedinan11.2acreSpecialEconomicZone,inNOIDA,theNationalCapitalRegion,India.TheArbitralTribunalbyamajoritydecreedthatLogixanditsprincipalshadbreachedtheTermsoftheShareholdersAgreementandhasawardedtheCompany:
● ReturnofitsentirecapitalinvestedofINR450Million(equivalentto£4.9millionatyearendexchangerateof£1:INR92.756)alongwithinterestat18%perannumfrom31January2011to20January2015.
● AllcostsincurredtowardstheArbitration.
Thetotalawardamountsto£9.2millionbasedonyearendexchangerates.Additionally,afurther15%perannuminterestonallsumswasawardedtotheCompanyfrom20January2015untiltheactualdateofpaymentbyLogixoftheaward.TheArbitralTribunalhasalsoruledthattheCompanyhasno
obligationorliabilitytofundtheoutstandingNOIDAleaserentundertheShareholdersAgreement.
Followingthedeterminationofthearbitrationnotedabove,theawardtotheCompanyrepresentsapotentialrealisationofapproximately£9.2million.TheDirectorscontinuetoholdtheindirectinvestmentatINR450million(£4.9million)inthefinancialstatementsduetouncertaintyovertimingandfinal value.
Aspreviouslyannounced,theCompanyhasbeennotifiedthatLogixhasfiledapetitionunderSection34oftheIndianArbitrationandConciliationAct,1996beforetheDelhiHighCourtchallengingtheaward.ThematterhasbeenadjournedforahearingplannedforJuly2015.ThismatterwillcontinuetoberobustlypursuedbytheCompanytoseekfullrecoveryofthesumsawarded.
Continued growth
TheCompanyiscontinuouslyevaluatingnewinvestmentopportunities.ART’sinvestmentpolicytotargetbothassetbackedinvestmentsandinvestmentinhighyielddebtmarketswillallowittocontinuetocapitaliseonnewinvestmentopportunitiesandoptimisereturns.TheCompany’sliquidreservesandabilitytotransactquicklymakeitwellplacedtosecuresuitableopportunities.
ARTiscommittedtoitsdisciplinedstrategyandinvestmentprincipleswhichfocusonopportunitiesthatcandeliverhighrisk-adjustedtotalreturns,whileseekingtomanageriskthroughacombinationofoperationalcontrols,diversificationandpreferredcapitalpositions.FortheCompany’sinvestmentsthatsitoutsidethecoreportfolioofequityinvestmentsandpreferredloanfacilities,amanagedexitisanticipatedoveraphasedperiodinordertorecyclecapitalintonewinvestmentopportunities.
TheCompanyisactivelyseekingtoincreasetheyieldandunderlyingcapitalvalueofitsportfoliobyenhancedperformancefromexistinginvestments,assetmanagementinitiativesandbyadditionalinvestment,fundedfromitscashandliquidholdings,strongcashflowandcapitalrecycling.
AdetailedsummaryoftheCompany’sinvestmentsiscontainedwithintheinvestmentreviewsectionofthisannualreport.
Chairman’s statement (continued)
The Company’s earnings continue to increase as a consequence of ART’s investment policy of targeting investments and allocation of capital to income focused investments or investments which will generate strong and growing cashflows.
Alpha Real Trust Limited : Annual report 2015 5
Results and dividends
Dividends
Adjustedearningsfortheyearshowaprofitafterinterestandtaxof£5.3millionandadjustedearningspersharefortheyearof7.5pence(seenote9ofthefinancialstatements).Thiscompareswithadjustedearningspershareof5.3penceforthepreviousyearended31March2014.TheincreaseismainlytheresultoftheincrementalincomereceivedfromtheCompany’sinvestmentsinIMPTandFIAFtogetherwithanimprovedperformanceatH2OandlowercostsincurredfortheGalaxiainvestmentarbitrationproceedings.
Inlinewithitsaimtopaydividendsquarterly,theBoardannouncesadividendof0.6pencepersharewhichisexpectedtobepaidon17July2015(Exdividenddate2July2015andrecorddate3July2015).
Thedividendspaidanddeclaredforthetwelvemonthsto31March2015total2.175pencepershare,representingadividendyieldof4.0%perannumonaveragesharepriceovertheperiodand1.9%oncurrentnetassetvalue.
Thenetassetvaluepershareat31March2015is113.2pence(31March2014:107.0pencepershare)(seenote10ofthefinancialstatements).
Financing
SomeofART’sunderlyinginvestmentsarepartfundedthroughnon-recourseloanfacilitieswithexternaldebtproviders.
FortheH2Oshoppingcentre,bankborrowingsnowstandat€71.7million(£52.5million),which,followingrepayments,representsareductionof€3.3millionfromtheinitial€75.0millionborrowed.Thebankfacilitiesdonothaveanyloantovaluecovenantsandthereissufficientheadroominrelationtotheinterestcoverratiocovenants.Therecontinuestobeasubstantialsurplusofrentalincomeinexcessoffinancecharges.
Furtherdetailsofindividualassetfinancingcanbefoundundertheindividualinvestmentreviewsectionslaterinthisreport.
Foreign currency
TheBoardmonitorsforeignexchangeexposuresandconsidershedgingwhereappropriate.Allforeigncurrencybalanceshavebeentranslatedattheperiod-endratesof£1:€1.367,£1:NOK11.853and£1:INR92.756.
Share buyback
On13August2014,theCompanypublishedacirculargivingnoticeofitsAnnualGeneralMeetingon5September2014.Theproposedresolutions,includingthoseinrelationtotheTakeoverPanelWaiverandtheSharePurchaseAuthoritywereapprovedbyshareholders.ThisallowstheCompanytoacquireupto24.99%oftheVotingShareCapitalduringtheperiodexpiringontheearlierof(i)theconclusionoftheAnnualGeneralMeetingoftheCompanyin2016,and(ii)4March2016.
Summary
ARThashadapositiveyearwithearningscontinuingtogrow.ValueaddingassetmanagementandimprovedleasinghavecontributedtothevalueincreasesrecordedintheCompany’sdirectlyandindirectlyheldinvestments.
TheCompanyhassuccessfullyreneweditsdebtinvestmentsinEuropipNorwayandinAURE,maintainingbroadlythesamelevelofreturnswithimprovingcreditquality.
Takingadvantageoftheimprovingeconomicbackdropandincreasedinvestmentmarketactivityandpricing,theCompanyhassoldanumberofitsnon-coreinvestments.SalesofassetsfromEuropip’sNorwegianportfolioandoftheremainingassetsintheBCPinvestmenthasallowedcapitaltoberecycledallowingforreinvestmentintohighyieldingopportunitiesinlinewithART’sstrategy.
AsART’scurrentinvestmentportfolioisbeingimproved,wecontinuetoseeknewopportunitiesfocusedaroundthetwinstrategyofinvestingindebtinvestmentswherecapitalcanbenefitfromapreferredriskpositionandassetinvestmentsandco-investmentswithsubstantialcashflowsorscopeforhighrisk-adjustedreturns.TheCompanyisactivelysourcingandanalysingnewinvestmentopportunitiesandhastheagilityandfinancialreservestocapitaliseonthosethatmeetitsinvestmentcriteria.OurimprovingearningsandenhancedcashreservespositiontheCompanystronglyforcontinuedprogressintheyearahead.
David Jeffreys Chairman 18June2015
Chairman’s statement (continued)
Alpha Real Trust Limited : Annual report 20156
Investment review
Portfoliosummary
Investment Investment value
Income return p.a.
Investment location
Property type / underlying security
Investment notes
% of portfolio 1
High yielding debt (28.4%)
Active UK Real Estate Fund plc (“AURE”)Mezzanineloan £9.8m2 9.0%3 UK High-yielddiversifiedportfolio Preferredcapitalstructure 12.2%
Industrial Multi Property Trust plc (“IMPT”)Subordinateddebt £11.8m2 15.0%3 UK High-yielddiversifiedportfolio Unsecuredsubordinateddebt 14.6%
Europip plcMezzanineloan £1.3m2 9.0%3 Norway Logistics,officeandretail Securedmezzanineloan 1.6%
High yielding equity in property investments (26.4%)
H2O shopping centreDirectproperty £15.6m
(€21.3m)13.5%4 Spain High-yield,dominantMadrid
shoppingcentreDebtfacilitywithnoLTVcovenantanda1.1xICRcovenant
19.3%
Europip plcIndirectproperty £3.3m
(€4.5m)7.6%4 Norway Agearedpropertyinvestment
vehicleinvestedinlogistics,officeandretailproperties
Recentlyextendedseniorandmezzanineloanposition
4.1%
Cambourne Business ParkIndirectproperty £1.6m 12.5%4 UK High-yieldbusinesspark
locatedinCambridgeBankfacilityat50%LTV(currentinterestcoverof2.4timescovenantlevel)
2.0%
Industrial Multi Property Trust plcEquity £0.8m n/a UK High-yielddiversifiedportfolio 19%ofordinarysharesinfund
withmediumtermdebt1.0%
Ground rent investments (19.7%)
Freehold Income Authorised FundGroundrentfund £15.9m 3.9%5 UK Highlydefensiveincome;
freeholdgroundrentsNogearing;monthlyliquidity 19.7%
Other investments (9.0%)
Galaxia Indirectproperty £4.9m
(INR 450m)n/a India SpecialEconomicZone
developmentsitelocatedinNOIDA,Delhi,NCR
Legalprocessunderwaytorecoverinvestmentbyenforcingarbitrationaward
6.1%
Healthcare & Leisure Property LimitedIndirectproperty £2.0m 8.8%6 UK Leisurepropertyfund Noexternalgearing 2.5%
Other £0.3m n/a Varied Varied Varied 0.4%
Cash (16.5%)
Cash (Companyonly) £13.3m 0.1-1% UK Currentor‘oncall’accounts 16.5%
1 PercentageshareshownbasedonNAVexcludingparentcompany’ssundryassets/ liabilities
2 Includingaccruedinterestatthebalancesheetdate
3 Annualcoupon4 Over12monthsto31 March20155 12monthsincomereturn;posttax
6 Returnontheaverageinvestmentduringtheownershipperiod
Alpha Real Trust Limited : Annual report 2015 7
Highyieldingdebt
Market overview
Overthepastyear,therehasbeenamarkedchangeinintheavailabilityofdebtfinance.Althoughstillnotatthelevelsreachedin2007,ageneralsentimentthattherealestatemarketshavenormalisedhasleadtohigherloantovalueratiosaccompaniedbylowerfinancingmargins.
Thereisaconsensusviewthatthenextmoveforbaseinterestrateswillinevitablybeupwards,althoughtheforecastedtimingofsuchamoveisregularlypostponed.Whilstmovingoffhistoricinterestratelowsisalmostinevitable,theinitialincreaseislikelytobegreaterinsymbolismthaninquantum.Fromthecurrentlowbase,evenamoderateincreaseinbaserateswillstillleaveinterestratesatcomparativehistoriclows.Thisoutlook,combinedwithrecentreductionsinlendingmargins,ishelpingtosupportapositiveoutlookforassetsgenerallyandrealestateinparticular.ThistrendispositivenewsforART’sequityinvestmentswhosevaluesandliquidityarefurtherenhanced,andfortheCompany’sdebtinvestmentswhichhaveincreasinglyprotectedexitpositionsuponrefinancing.
Whilstthereisincreasedcompetitionwithinthelendingmarket,itremainslesscompetitiveforsmallertransactionsinnon-primesectorswhereastrongknowledgeoftheunderlyingassetsisrequired.TheacquisitionandrefinancingneedsofmanyrealestateinvestmentvehiclesthroughoutEuroperemainhighandopportunitiesforlenderswithrealestatedebtexpertisecontinuetoremainattractivealthoughthisremainsacompetitiveenvironment.
TheincreasedliquidityindebtmarketsandnumberofnewlendersenteringthemarkethelpsunderwriteexitassumptionsforART’scurrentdebtandmezzanineinvestmentswhilstalsocontributingtoimprovingassumptionsforreturnsonnetassetvalueswhichwillbenefitthevaluationsoftheCompany’sequityinvestmentportfolio.AsevidencedbytherefinanceandextensionoftheEuropipandAUREloanfacilitiesduringtheyear,ARTremainswellpositionedtotakeadvantageoffurtherdebtinvestmentopportunitiesastheyareidentified.
Investment review (continued)
Brad Bauman
Joint fund managerGordon Smith
Joint fund manager
The Company continues to source new investment opportunities with strong cash-flows and/or managed risk profiles that are accretive to its earnings position.
Sector Irish Stock Exchange listed
Underlying assets UK offices, industrial and retail property
Description AURE is an Irish Stock Exchange listed UK property fund with gross property assets of £47.9 million (as at 31 March 2015).
AURE has a regionally diversified portfolio of UK office, industrial and retail properties.
Alpha Real Trust Limited : Annual report 20158
Active UK Real Estate Fund plc AURE
Alpha Real Trust Limited : Annual report 2015 9
Investment review (continued)
Active UK Real Estate Fund plc (“AURE”)
Investment Investment type Investment value Income return Property type / underlying security
Investment notes
AlphaUKRealEstateFundplc Mezzanineloan £9.8m* 9.0%p.a.** High-yielddiversifiedUKportfolio
Preferredcapitalstructure
* Includingaccruedinterestatthebalancesheetdate**Annualcoupon
DuringNovember2014,AURErefinanceditsborrowingsaddingasecondtranchetoitsbankdebtandreducingtheoverallcostofthedebt.
AspartofalargerrefinancingofAURE’sloanfacilities,inwhich£2.3millionwasrepaidtoART,ARTprovidedanewmezzanineloanfacilityof£10.3millionforatwoyeartermexpiringNovember2016.Sincefunding,theloanprincipalhasbeenrepaidto£9.6million.
Theloanearnsacouponof9%perannumplusupfrontandexitfeesinadditiontoanextensionfeeiftheloanisnotrepaidwithinthefirstyear.
BaseduponthevalueoftheunderlyingAUREportfolioof£47.9millionasat31March2015andthebalanceofthebankdebtof£22.1millionasat31March2015,theseniorlender’sloantovalueratiois46.1%.ART’sloanpositionsitsbetween46.1%and66.1%loantovalue.
Demand from occupiers across the Company’s investment markets is showing signs of improvement. This is evident across the Company’s portfolio with a high volume of new leases signed in the AURE and IMPT portfolios in the UK and also at H2O in Spain.
Sector LSE listed
Underlying assets UK offices and industrial property
Description IMPT is a London Stock Exchange listed UK property fund with gross property assets of £80.8 million (as at 31 March 2015).
IMPT has a regionally diversified portfolio of UK light industrial and office property.
Alpha Real Trust Limited : Annual report 201510
Industrial Multi Property Trust plc IMPT
Alpha Real Trust Limited : Annual report 2015 11
Industrial Multi Property Trust plc (“IMPT”)
Investment Investment type Investment value Income return Property type / underlying security
Investment notes
IndustrialMultiPropertyTrustplc Subordinateddebt
£11.8m* 15.0%p.a.** High-yielddiversifiedUK portfolio
Unsecuredsubordinated debt
* Includingaccruedinterestatthebalancesheetdate** Annualcoupon
Furthertoitsequityinvestment(describedbelow)ARThasprovidedaloantoIMPT.
AspartoftherefinancingofIMPTinDecember2013,ARTprovidedanewsubordinateddebtfacilityof£11.5million(£11.8millionincludingaccruedinterest).Theloanhasafive-yearterm,expiringinDecember2018,andearnsacouponof15%perannum.
BasedonthevalueoftheIMPTportfolioof£80.8million(31March2015valuation),andthebalanceofthebankandmezzaninefinanceof£53.2millionasat31March2015,thisreflectsaloantovalueratioof65.8%.ART’ssubordinatedloansitsbetween65.8%and80.1%loantovalue.
European Property Investment Portfolio plc (“Europip”)
Investment Investment type Investment value Income return Property type / underlying security
Investment notes
Europiploan Mezzanineloan £1.3m* 9.0%p.a.** Officeandlogistics Securedmezzanineloan
* Includingaccruedinterestatthebalancesheetdate**Annualcoupon
Furthertotheequityinvestment(describedbelow)ARThasprovidedmezzaninefinancetoEuropip.ARThasachargeoverEuropip’sportfolioofcommercialassetsrankingaftertheseniorlender’schargeovertheNorwayportfolioandMosaicinvestments.Inaddition,ARThastherighttotakeachargeoverasingleunencumberedpropertywithintheNorwayportfolio,whichisoutsidetheseniorlender’ssecuritypoolofassets.
DuringNovember2014ARTextendedthetermofthecurrentloanfacilitytoEuropipamountingto£4.3millionuntil27November2016.Inadditiontoanupfrontfeepaidatthetimeofsigning,thenewloanearnsacouponof9%perannumplusanexitfeeof1%;additionally,a2%feewillapplyshouldthefacilitynotberepaidwithin12months.
FollowingthesaleoftheRoykenveienproperty,£2.1millionoftheARTloanwaspartiallyrepaidduringJanuary2015.Afurther£0.9millionwaspaiddowninDecember2014following
thereleaseofacashreserveheldbytheseniorlender.ThesetworepaymentshavereducedtheARTloanbalanceto£1.3million(NOK15.4million)includingaccruedinterest,asat31March2015.
Thevalueoftheportfoliooffiveassetswas£24.4million(NOK 289million)basedonthe31December2014valuation,andthebalanceofthebankdebtwas£14.4million(NOK171.2million).Asat31March2015,includingthepropertywhichisoutsidetheseniorlender’ssecuritypoolofassets,ART’sloanpositionsitsbetween59.2%and64.5%loantovalue.
Postbalancesheet,followingthesaleoftheHvamsvingenproperty,£0.8oftheARTloanwasrepaid,reducingtheARTloanbalanceto£0.5million(NOK5.9million).
Investment review (continued)
Sector Business parks
Underlying assets Office
Tenants Regus, Citrix Systems, Netcracker Technology
Area 9,767 square metres
Description The asset consists of three Grade A specification modern office buildings located in the town of Cambourne.
Phase 1000 is situated at the front of the business park. It is an institutional quality asset with Open B1 Business user planning.
Alpha Real Trust Limited : Annual report 201512
Cambourne Business Park Cambridge
Alpha Real Trust Limited : Annual report 2015 13
Highyieldingequityinpropertyinvestments
Commercial property market overview
TheUKandEuropeaneconomiesinwhichARToperateshavecontinuedtoprogresstowardseconomicstabilisationandgrowthdespitehesitantmacro-economicindicatorsfromtheEurozoneandheadwindsfrompoliticaluncertainties.Investorsentimentremainsoptimisticandthereappearstobeanincreasinglyconfidentviewthattherecoverywillcontinue.Astheyearhasprogressed,therehasnotonlybeenanincreasedlevelofmarkettransactionvolumesandpricingforrealestateandassetbackedinvestmentsbutalsoabroadeningofinvestmentsearchesforbothassettypesandgeography,indicatingamoreoptimisticmarketoutlook.
Thenarrowinvestorfocusonprimeassetsthatprevailedinrecentyearsisincreasinglygivingwaytoanobjectiveanalysisofstrengthsandweaknessofbroadercommercialpropertyandassetbackedinvestments.Anacceptanceofastabilisationofassetvaluesinmostmarkets,thelowinterestrateenvironmentandthegreateravailabilityofdebtfundinghasledtoinvestorsbroadeningtheirinvestmentcriteriatoseekhigheryieldingassetsintandemwithahigherappetiteforriskwiththeconfidencethattotalreturnsinthesemarketsarelikelytooutstripreturnsfromlowyieldingprimeassets,particularlyonarisk-adjustedbasis.ThisbodeswellforART’sportfolio.ThereboundinassetvaluesinSpainhascontinuedandthisisevidentattheCompany’sH2OshoppingcentreinMadridwherevalueinEurohasincreasedby6%duringthe year.
DemandfromoccupiersacrosstheCompany’sinvestmentmarketsisshowingsignsofimprovement.ThisisevidentacrosstheCompany’sportfoliowithahighvolumeofnewleasessignedintheAUREandIMPTportfoliosintheUKandalsoatH2OinSpain.Whilstoccupierdemandandleasingactivityhasincreased,rentalgrowthremainssubdued.Increasedleasingactivityishoweverlayingthefoundationforimprovingrentalgrowthprospects.Fornowhowever,withtheexceptionofprimeassetsinprimelocations,itappears“weightofmoney”,availabilityofdebtfinanceandarelativescarcityofqualityavailableinvestmentstockandnotrentalgrowthisdrivinginvestmenttransactionvalues.
ARTcontinuestoremainfocusedoninvestmentsthatofferpotentialtodeliverhighrisk-adjustedreturnsviavalueenhancementthroughactiveassetmanagement,improvementofnetrentalincome,selectivedeploymentofcapitalexpenditureandtheabilitytoundertakestrategicsaleswhentheachievablepriceisaccretivetoreturns.
Investment review (continued)
ART remains well placed to find value for its investors and to capitalise on new investment opportunities across asset backed investment and debt markets in the UK and Europe.
Sector Retail
Asset Shopping centre
Tenants include Nike, Zara, Mango, Cortefiel, H&M, C&A and Massimo Dutti
Area 51,825 square metres
Description The property is located in the Rivas-Vaciamadrid district of Madrid.
H2O has a primary catchment area of 166,000 people but the location, due to the concentration of complementary retail, has a total catchment of 2.2 million people.
The weighted average lease length as at 30 April 2015 is 10.3 years to expiry and 1.9 years to next break.
Centre occupancy 90.1% as at 30 April 2015.
Alpha Real Trust Limited : Annual report 201514
H2O Madrid-Spain
Top ten tenants (30 April 2015)
13%
12%11%
8%
8%
8%
6%
6%4%
24%
n InditexGroup
n Yelmo
n C&A
n CortefielGroup
n GrupoVIPS
n Mercadona
n SferaSportown
n H&M
n Ozone
n MuerdeLaPasta
Alpha Real Trust Limited : Annual report 2015 15
Investment review (continued)
H2O Shopping Centre, Madrid
Investment Investment type Investment value Income return Property type / underlying security
Investment notes
H2O Directproperty £15.6m(€21.3m)
13.5%p.a.* High-yield,dominantshoppingcentre
DebtfacilitywithnoLTVcovenantanda1.1xICRcovenant
* Over12monthsto31March2015.
H2OwasopenedinJune2007andbuilttoahighstandardprovidingshopping,restaurantsandleisurearoundacentralthemeoflandscapedgardensandanartificiallake.H2Ohasagrosslettableareaof51,825squaremetrescomprising118 retailunits.Inadditiontoamultiplexcinema,supermarket(let toleadingSpanishsupermarketoperatorMercadona)andrestaurantsithasalargefashionretailerbase,includingsomeofthestrongestinternationalfashionbrands,suchasNike,Zara,Mango,Cortefiel,H&M,C&AandMassimoDutti.
TheH2OshoppingcentrewasacquiredinApril2010andtodateARThascommitted€5.3millionincapitalimprovements.
Assetmanagementhighlightsareasfollows:
● Centreoccupancy:90.1%byrentalvalue(82.2%byarea)asat30April2015.
● Footfall:thevisitornumbersatH2Oreachedrecordlevelsin2014withfootfallcontinuingtobeassistedbythepresenceofthenewbrandsandanimprovedcommercialmix;thispositivetrendhascontinuedinto2015.
● Salesgrowth:tenantsalesperformanceisimprovingandthepositivegrowthregisteredin2014hascontinuedinto2015;thisreflectsthegreatervisitornumbersatthecentreandtheimprovingeconomicenvironmentinSpain.
● Leaselength:weightedaverageleaselengthof1.9yearstonextbreakand10.3yearstoexpiry(asat30April2015).
● Leasing:2014wasahighlysuccessfulyearfornewleasingwith17newleasessigned(including4currenttenantexpansions/relocations).Thepositivemomentumhascontinuedinto2015with5newleasessigned,3ofwhicharetoupgradecurrenttenants.
● Lakesideexperience:thenewlakeside“funboulevard”andcafeandbarskiosksthatwerecreatedunderART’sownershiphavebeenenlargedandnowserveasasocialdestinationforthelocalpopulation;thisofferwasreinforcedwiththelettingtotwoleadingrestaurantbrandsin2014.
● Costcontrol:anactivecostmanagementexercisecontinuestobeimplementedtoreducethecentre’soperatingcostsandimprovethequalityandefficiencyofservices,in2014thebuildingmanagementsystemandanumberoflargesuppliercontractswererenegotiated.
● Marketing:innovativeeventscontinuetobecarriedouttoattractnewvisitors,buildcustomerloyaltyandincreasedwelltime;anextendedkid’ssummercamphasbeenheldduringrecentmonthsandtheexclusiveLegothemedplayareacontinuestoperformstrongly.
The visitor numbers at H2O reached record levels in 2014 with footfall continuing to be assisted by the presence of the new brands and an improved commercial mix; this positive trend has continued into 2015.
Alpha Real Trust Limited : Annual report 201516
Investment review (continued)
Industrial Multi Property Trust plc (“IMPT”)
Investment Investment type Investment value Income return Property type / underlying security
Investment notes
IndustrialMultiPropertyTrustplc Equity £0.8m n/a High-yielddiversifiedUK portfolio
19%ofordinarycapital
ARThas19%ofIMPT’sordinarysharecapital,representing£0.8millioninequityvaluebasedonIMPT’sshareprice,asat31March2015.
IMPT,listedontheSFM,isaUKpropertyfundwitharegionallydiversifiedUKportfolioofover50multi-letlightindustrialandofficepropertiesvaluedat£80.8million(at31March2015).
ThefollowinghighlightswereincludedinIMPT’stradingstatementforthequarterended31March2015(published May 2015):
● Adjustednetassetvalueperordinaryshare-227penceasat31March2015(220penceat31December2014),an increaseof7pence(+3.1%).
● Adjustedearningsperordinaryshare-lossof3.6penceforthethreemonthsto31March2015(lossof19.4penceforthetwelvemonthsto31December2014).
● Portfoliovaluationincreased-thegroup’spropertyportfoliowasvaluedat£80.8millionasat31March2015(£79.9millionasat31December2014),anincreaseof£0.9million(+1.1%).
● Occupancyimproved-theoccupancylevelbyestimatedrentalvaluestoodat87.3%asat31March2015,comparedwith86.5%asat31December2014,anincreaseof0.8%.
● Newlettingsachieved-22newlettingsand13leaserenewalsachievedduringthequarterended31March2015(representing7.6%oftheestimatedrentalvalueofthetotalportfolio,basedonthefinalachievableannualrentincludingsteppedrent).
ARCistheinvestmentmanagerofIMPT.ARCispursuingvalueenhancementopportunitiesintheIMPTportfolioassetstoincreasenetincomeandimprovetheprofileofthisincomethroughleaseextensions,renewalsandreducingunrecoverablevoidcosts.
The Company continues to implement its active management policy and this has seen encouraging results in both directly and indirectly held investments.
Alpha Real Trust Limited : Annual report 2015 17
Investment review (continued)
Cambourne Business Park, Phase 1000, Cambridge
Investment Investment type Investment value Income return Property type / underlying security
Investment notes
CambourneBusinessPark Indirectproperty £1.6m 12.5%p.a.* High-yieldbusinesspark Bankfacilityat50%LTV(currentinterestcoverof2.4timescovenantlevel)
*Over12monthsto31March2015.
TheCompanyhasinvested£1.2millioninajointventurethatownsPhase1000ofCambourneBusinessPark.ThepropertyconsistsofthreeGradeAspecificationmodernofficebuildingsconstructedin1999andlocatedinthetownofCambourne,approximately8mileswestofCambridgecitycentre.Thepropertycomprises9,767squaremetresoflettablearea,isself-containedandhas475carparkingspaces.Phase1000issituatedatthefrontofthebusinessparkwithgoodaccessandvisibility.
Phase1000isahighqualityasset,fullylettoNetcrackerTechnologyEMEALtd,CitrixSystemsandRegus.ThepropertyhasopenB1Businessuserplanningpermissionandhaspotentialvalue-addopportunities.
Phase1000waspurchasedinajointventurepartnershipwithamajoroverseasinvestorfor£23.0millionincludingacquisitioncosts.Bankfinanceof£10.8millionwasobtained.ART’sequitycontributionof£1.2million,whichrepresents10%ofthetotalequitycommitment,wasinvestedintoanewlyformedjointventureentity,asubsidiaryofwhichholdstheproperty.Thepropertywasacquiredforan8.5%netinitialyieldandiscurrentlydeliveringanannualisedincomereturnof12.9%asat30September2014.
ARCistheinvestmentmanagertothejointventureowningtheCambournepropertyandcontinuestopursueopportunitiestoaddvaluetotheinvestment.
The Company remains active in both its target investment sectors of high yield debt and equity in assets with high risk-adjusted returns typically when there is scope to add value through active asset management and/or the restructuring or recapitalisation of property investment vehicles.
Sector A 47% stake in an Isle of Man domiciled open ended investment company which invests in a geared property investment vehicle invested in Norway and a minority stake in a Central European commercial property fund called Mosaic Property CEE Limited.
Underlying assets The investment predominately comprises industrial and office properties in Norway, with a minority stake in a fund invested in commercial property in Central Europe.
Description The Norwegian portfolio is concentrated around Oslo.
Mosaic indirectly invests in a portfolio of commercial assets in Poland.
Alpha Real Trust Limited : Annual report 201518
European Property Investment Portfolio plc Europip
Alpha Real Trust Limited : Annual report 2015 19
European Property Investment Portfolio plc (“Europip”)
Investment Investment type Investment value Income return Property type / underlying security
Investment notes
EuropipNorway Indirectproperty £3.3m(€4.5m)
7.6%p.a.* AgearedpropertyinvestmentvehicleinvestedinofficesandlogisticspropertiesinNorway
Recentlyrefinancedseniorandmezzanineloanposition
EuropipMosaic Indirectproperty £0.3m(€0.4m)
n/a MinorityinvestmentinacentralEuropeancommercialpropertyfund
Propertyheldviainvestmentvehicles,varyingdebtlevels
* Over12monthsto31March2015
AspartofthePropertyInvestmentPortfoliotransaction,ARTacquireda47%stakeinEuropip(sharesarenon-voting),anIsleofMandomiciledopenendedinvestmentcompany.EuropipinvestsinadirectlyownedcommercialpropertyportfolioinNorwayandholdsaminorityinterestinMosaicPropertyCEELimited(“Mosaic”),aCentralEuropeanfocusedcommercialpropertyfund.
TheNorwegianportfolioofdirectlyownedcommercialpropertiesisconcentratedaroundOslo.Thevalueofthefiveassetportfolioasat31March2015isNOK289million(£24.4million),basedonthe31December2014valuation,withapassingrentallevelofNOK27.6million(£2.3million).TheNorwegianportfolio’soccupancyratewas98%byrentalvalueandtheweightedaverageleaselengthwas3.5yearsasat31March2015.
InJanuary2015atwoyearextensionofthebankfacilityandareductionofthemarginto1.95%wasnegotiatedwiththeEuropiplendingbank.Therevisedloanmaturitydateis15January2020.Thefacilityistobeamortisedat3%oftheloanbalanceperannumfromcashflows,soreducingpro-rataintheeventofpropertysales.£17.7million(NOK210million)ofthisfacilityhasbeenfixedforfiveyearsataNIBORrateof2.49%perannum.Asat31March2015,thedebtbalancewas£14.4million(NOK171.2million);reflectingaLTVof59.2%.
AsubsidiaryofARC,AlphaRealPropertyInvestmentAdvisersLLP(“ARPIA”)istheinvestmentmanagerfortheNorwayportfolioandMalling&Co.isresponsibleforthedaytodaypropertymanagement.
Investment review (continued)
Sector Freehold ground rents (UK)
Underlying assets Freehold residential ground rents
Description FIAF is an open-ended investment company that provides secure and stable investment returns from acquiring freehold residential ground rents, which offer an attractive income stream, capital growth prospects and attractive risk-adjusted returns.
FIAF owns over 64,000 freeholds in the UK with a gross annual rent income of over £8.1 million.
Alpha Real Trust Limited : Annual report 201520
Freehold Income Authorised Fund FIAF
Alpha Real Trust Limited : Annual report 2015 21
GroundrentinvestmentsTheCompanyholdsaninvestmentinafundwhichholdsadiversifiedportfolioofUKresidentialpropertyfreeholdgroundrentswithaviewtoachievingsteadyandpredictablereturns,aconsistentincomestreamandprospectsforgrowth.
Agroundrentisthepaymentmadebythelesseeofapropertytothefreeholderofthatproperty.Itrepresentstheunderlyingfreeholdinterestinapropertywhichissubjecttoaleaseforaperiodoftimeusuallybetween99and999years.
Freehold Income Authorised Fund (“FIAF”)
Investment Investment type Investment value Income return Property type / underlying security
Investment notes
FreeholdIncomeAuthorisedFund Equityingroundrentfund
£15.9m 3.9%p.a.* Highlydefensiveincome;freeholdgroundrents
Nogearing;monthlyliquidity
* 12monthsincomereturn;posttax.
TheCompanyhasinvestedatotalof£15.9millionasat31March2015inFIAF,anopen-endedfundthatinvestsinUKfreeholdgroundrentswithanetassetvalueof£230.6millionasat31March2015.
ThefollowinghighlightswerereportedintheFIAFfactsheetasat31March2015(publishedinApril2015):
● FIAFcontinuesitsunbroken22yeartrackrecordofpositiveinflationbeatingreturns,generatingatotalreturnfortheyearended31March2015of9.64%(basedonGrossAAccumulationshareclass)*ofwhich2.20%wasdistributedasincomeattheendofNovember2014,with2.72%expectedtobedistributedattheendofMay2015i.e.anincomedistributionfortheyearof4.92%.
● 81%ofitsfreeholdshaveaformofinflationprotectionthroughperiodicupliftslinkedtoRetailPriceIndex,propertyvaluesorfixeduplifts.
● Nodebthadbeendrawnandcashreservesare£38.7millionasat31March2015.
● Asof13October2014a5%dilutionlevyappliestoallnewsubscriptionsintoFIAF.
*Note:ARTholdsadifferentclassofshares.ARTtotalreturnonitsinvestmentis8.6%fortheperiod.
ARCistheAuthorisedCorporateDirectorandARPIA,asubsidiaryofARC,istheinvestmentmanagerofFIAF.
Investment review (continued)
Alpha Real Trust Limited : Annual report 201522
Cash
Investment Investment type Investment value Income return Property type / underlying security
Investment notes
Cashbalance Cash £13.3m 0.1%-1%p.a. Cashdeposits/current accounts
Heldbetweenbankswitharangeofdepositmaturities
Asat31 March2015,theCompanyhadcashbalancesof£13.3 million.
Otherinvestments
Galaxia, National Capital Region, NOIDA
Investment Investment type Investment value Income return Property type / underlying security
Investment notes
Galaxia Indirectproperty £4.9m(INR450m)
n/a SpecialEconomicZonedevelopmentsite
Assetheldforsale
ARTinvestedINR450million(£4.9million)intheGalaxiaproject,adevelopmentsiteextendingto11.2acreswhichenjoysSEZstatuswiththepotentialtodevelop1.2millionsquarefeet.GalaxiaislocatedinNOIDA,anestablished,wellplannedsuburbofDelhithatcontinuestobenefitfromnewinfrastructureprojectsandisoneoftheprincipalofficemicro-marketsinIndia.TheCompanyhasa50%shareholdingintheSPVwhichcontrolstheGalaxiasite.Therearenobankborrowingsontheasset.
On2February2011,ARTrecommencedarbitrationproceedingsagainstitsdevelopmentpartnerLogixGroupinordertoprotectitsGalaxiainvestment.
DuringJanuary2015,theArbitralTribunal,byamajority,decreedthatLogixanditsprincipalshadbreachedthetermsoftheshareholdersagreementandhasawardedtheCompany:
● ReturnofitsentirecapitalinvestedofINR450Million(equivalentto£4.9 millionusinganexchangerateof92.756asat31March2015)alongwithinterestat18%perannumfrom31January2011to20January2015.
● Allcostsincurredtowardsthearbitration.
● Afurther15%interestperannumonallsumswasawardedtotheCompanyfrom20January2015untiltheactualdateofpaymentbyLogixoftheaward.
TheArbitralTribunalhasalsoruledthattheCompanyhasnoobligationorliabilitytofundtheoutstandingNOIDAleaserentundertheShareholdersAgreement.
TheCompanywillactivelyseekfullrecoveryofthesumsawarded.TothisendtheCompanyhasbeenawardedbythecourtsofIndiaachargeovertheprivateresidenceoftheprincipalsofLogix:ShaktiNath,MeenaNathandVikramNath.
InApril2015,theCompanyhasbeennotifiedthatLogixhasfiledapetitionunderSection34oftheIndianArbitrationandConciliationAct,1996beforetheDelhiHighCourtchallengingtheAwardmadeinfavouroftheCompanybytheInternationalCourtofArbitrationinJanuary2015.
Followingthedeterminationofthearbitrationnotedabove,theawardtotheCompanyrepresentsapotentialrealisationofapproximately£9.2million.ARTcontinuestoholdtheindirectinvestmentatINR450million(£4.9million)inthefinancialstatementsduetouncertaintyovertimingandfinalvalue.
Investment review (continued)
Alpha Real Trust Limited : Annual report 2015 23
Investment review (continued)
Healthcare & Leisure Property Limited (“HLP”)
Investment Investment type Investment value Income return Property type / underlying security
Investment notes
Healthcare&LeisurePropertyLimited
Indirectproperty £2.0m 8.8%p.a.* Leisurepropertyfund Noexternalgearing
*Returnovertheaverageinvestmentduringtheownershipperiod.
HLPhasinvestedincompaniesoperatinginthehotel,carehome,housebuildingandleisuresectorsthroughouttheUK.HLP’sinvestmentsarepredominantlyun-geared.
HLPismanagedbyAlbionVenturesLLP,aspecialistUKventurecapitalmanager.NonewinvestmentsarebeingmadebyHLP.
Asat31March2015,ARThad£2.0millioninvestedinHLP.HLPsubsequentlyholdsminoritystakesintheunderlyinginvestments.
Postbalancesheet,ARTreceived£0.5millionasredemptionfromHLP,whichreducedART’sinvestmentinHLPto£1.5million.
ARTcontinuestoreceiveincomefromitsinvestmentwhileHLP’sunderlyingassetsaresold.HLPhasdeliveredareturnof8.8%overtheaverageinvestmentduringART’sownershipperiod,andARTwillcontinuetobenefitfromitsshareofnetproceedsfromthesalesoftheunderlyingassetsastheyareprogressed.
SummaryRealestateinvestmentmarketsinwhichtheCompanyoperateshavebecomemorestableoverthepastyear.AlthoughdegreesofvariancestillexistbetweenART’sinvestmentmarkets,therehasbeenamarkedimprovementinrealestateinvestmentvolumesandvaluesinlinewithamorepositiveinvestorsentiment.InvestmentactivityhascontinuedtowidenbeyondprimeassetsandmarketstobroadergeographicmarketsandassettypeswhichbodeswellforthevalueoftheCompany’sportfolio.
TheCompanyhashadanactiveyearacrossitshighyieldingdebtandhighyieldingequityinvestmentportfolio.Twoofthehighyieldingdebtinvestmentshavebeenrefinanced,anddespiteadditionalcompetition,loantermshavebeenbroadlymaintained.
AssetmanagementoftheunderlyingrealestateequityinvestmentshasyieldedsuccessesacrosstheUK,NorwayandSpain,withrecordvisitornumbersrecordedintheH2OshoppingcentreinMadrid.OccupierdemandisincreasingwithleasingactivityacrosstheCompany’sportfolio,withpositiveresultsrecordedatIMPTandH2O.Improvingoccupierdemandisgenerallyaprecursortorentalgrowthalthoughthisisnotyetprevalentoutsidetheprimemarketsandassets.
ARTbenefitsfromthedepthofexperience,strengthandsizeoftheInvestmentManager’sbusinesswithvariousfundsundermanagementanddebtstructuring,investmentandassetmanagementprofessionalsbasedthroughoutEurope.
The Companycontinuestosourcenewinvestmentopportunitieswithstrongcash-flowsand/ormanagedriskprofilesthatareaccretivetoitsearningsposition.
TheCompanyremainsactiveinbothitstargetinvestmentsectorsofhighyielddebtandequityinassetswithhighrisk-adjustedreturnstypicallywhenthereisscopetoaddvaluethroughactiveassetmanagementand/ortherestructuringorrecapitalisationofpropertyinvestmentvehicles.
ARTremainswellplacedtofindvalueforitsinvestorsandtocapitaliseonnewinvestmentopportunitiesacrossassetbackedinvestmentanddebtmarketsintheUKandEurope.
Brad Bauman and Gordon Smith For and on behalf of the Investment Manager 18June2015
Alpha Real Trust Limited : Annual report 201524
David Jeffreys
Chairman
Aged 55
DavidJeffreysqualifiedasaCharteredAccountantwithDeloitteHaskinsandSellsin1985.Heworksasanindependentnon-executivedirectortoanumberofGuernseybasedinvestmentfundcompaniesandmanagersandisaGuernseyresident.
From2007until2009DavidwastheManagingDirectorofEQTFundsManagementLimited,theGuernseymanagementofficeoftheEQTgroupofprivateequityfunds.HewaspreviouslytheManagingDirectorofAbacusFundManagers(Guernsey)Limitedbetween1993and2004,athirdpartyadministrationserviceprovidertoprimarilycorporateandfundclients.
InadditiontotheCompany,Davidisadirectorofthefollowinglistedcompanies:AlphaPyreneesTrustLimitedandTetragonFinancialGroupLimited.
Serena Tremlett
Director
Aged 50
Serenahasover25years’experienceinfinancialservices,specialisinginclosed-endedpropertyandprivateequityfundsandfundadministrationoverthelast18years.
Sheisanon-executivedirectoronthelistedcompanyboardofAlphaPyreneesTrustLimited,inadditiontovariousunlistedpropertyandprivatefundsandgeneralpartners.Serenawaspreviouslycompanysecretary(andadirector)ofAssuraGroup,atthattimeaFTSE250companylistedontheLondonStockExchange,investinginprimaryhealthcarepropertyandranAssura’sGuernseyheadoffice.
PriortoworkingforAssura,SerenawasheadofGuernseypropertyfundsatMourantInternationalFinanceAdministration(nowStateStreet)fortwoyearsandworkedforGuernseyInternationalFundManagers(nowNorthernTrust)forsevenyearswhereshesatonanumberoflistedandunlistedfundboards.Since2008,Serenahasbeenco-founderandmanagingdirectorofMorganSharpeAdministration,aspecialistclosed-endedfundadministrator.
Phillip Rose
Director
Aged 55
PhillipRoseisaFellowoftheSecuritiesInstituteandholdsaMasterofLawdegree.Hehasover30years’experienceintherealestate,fundsmanagementandbankingindustriesinEurope,theUSAandAustralasia.HehasbeentheHeadofRealEstateforABNAMROBank,ChiefOperatingOfficerofEuropeanshoppingcentreinvestoranddeveloperTrizecHahnEurope,ManagingDirectorofretailandcommercialpropertydeveloperandinvestorLendLeaseGlobalInvestmentandExecutiveManageroflistedfundGeneralPropertyTrust.
PhillipiscurrentlyCEOofAlphaRealCapitalLLPandisamemberoftheManagementCommitteeforHermesPropertyUnitTrustanditsAuditCommittee.
Jeff Chowdhry
Director
Aged 55
JeffChowdhryiscurrentlyHeadofEmergingMarketEquitiesatF&CAssetManagementplc,withoverallresponsibilityforinvestmentsinglobalemergingmarkets.Previously,hewasadirectorofSunF&CAssetManagement(India)LimitedandalsomanagedtheIndianInvestmentCompanySICAV,anopenendedinvestmentfundregisteredinLuxembourg.Priortothis,JeffmanagedtheIndiaFundInc,aclosedendedinvestmentfundlistedinNewYorkthatseekslong-termcapitalappreciationthroughinvestingprimarilyinIndianequities.
Roddy Sage
Director
Aged 62
RoddySageiscurrentlyChiefExecutiveOfficeroftheAFPgroupofcompanies,providingcorporateandtaxationadvisoryservicesinAsia.Priortothat,hespent20yearswithKPMGHongKong,10yearsofwhichwereasSeniorTaxPartnerforHongKongandChina.HehasheldChairmanshipswithinKPMGandoutsideasChairmanoftheHongKongGeneralChamberofCommerce’sTaxationCommitteeandisanon-executivedirectorofTaiPingCarpetsInternationalandGuocoGroupLimited.
Directors
Alpha Real Trust Limited : Annual report 2015 25
TheDirectorspresenttheirreportandfinancialstatementsoftheAlphaRealTrustLimitedgroup(“theGroup”)fortheyearended31March2015.
Principal activities and status
Duringtheyear,theCompany,anauthorisedclosed-endedGuernseyregisteredinvestmentcompany,carriedonbusinessasapropertyinvestmentanddevelopmentcompany,investingincommercialproperty.
TheCompany’ssharesaretradedontheSpecialistFundMarketoftheLondonStockExchange.
Business review, results and dividend
AreviewofthebusinessduringtheyeariscontainedintheChairman’sStatementonpages3to5.
Theresultsfortheyearto31March2015aresetoutinthefinancialstatements.
On13February2015,theCompanydeclaredadividendof0.525ppershare,whichwaspaidtoshareholderson20March2015.ThecurrentintentionoftheCompanyistopayadividendquarterly.Furtherdetailsondividendsaregiveninnote8ofthefinancialstatements.
Corporate governance
AsaGuernseyregisteredcompanytradedonSFM,theCompanyisnotrequiredtocomplywithTheUKCorporateGovernanceCode(“UKCode”).However,asacompanyauthorisedbytheGuernseyFinancialServicesCommission(“GFSC”),itisrequiredtofollowtheprinciplesandguidancesetoutintheFinanceSectorCodeofCorporateGovernanceissuedbytheGFSCandeffectivefrom1January2012(“GuernseyCode”).CompliancewiththeGuernseyCodeandgeneralprinciplesofgoodcorporategovernancearereviewedbytheBoardatleastannuallyand,atthedateofsigningthesefinancialstatements,theBoardissatisfiedthattheCompanyisfullycompliantwiththeGuernseyCode.TheGuernseyCodeisavailableforconsultationontheGFSCwebsite:www.gfsc.gg.
The Board
BiographiesoftheDirectorsaresetoutonpage15.AlloftheDirectorswereappointedon15May2006.
TheDirectors’interestsinthesharesoftheCompanyasat31March2015aresetoutbelowandtherehavebeennochangesinsuchinterestsuptothecurrentdate:
Number of ordinary shares 31 March 2015
Number of ordinary shares 31 March 2014
DavidJeffreys 10,000 10,000
PhillipRose 139,695 139,695
SerenaTremlett 15,000 15,000
JeffChowdhry 40,000 40,000
RoddySage - -
Non-executivedirectorsarenotappointedforspecifiedterms;appointmentsofBoardmemberscanbeterminatedatanytimewithoutpenaltyandtheCompany’sArticlesofAssociation(“Articles”)requireeachDirectortoretireandsubmithimself/herselftore-electionbytheshareholdersateverythirdyear.Inaddition,theBoardbelievesthatcontinuityandexperienceaddstoitsstrength.
TheAnnualGeneralMeetingoftheCompanywilltakeplaceon12August2015.Atthismeeting,SerenaTremlettandDavid Jeffreyswillretireandsubmitthemselvesforre-election.TheremainderoftheBoardrecommendtheirre-appointmentandconfirmtheirindependence.
IndividualDirectorsmayseekindependentlegaladviceinrelationtotheirdutiesonbehalfoftheCompany.
Directors’ and corporate governance report
Alpha Real Trust Limited : Annual report 201526
Directors’ and corporate governance report (continued)
Operations of the Board
TheBoardhasdeterminedthatitsroleistoconsideranddeterminethefollowingprincipalmatterswhichitconsidersareofstrategicimportancetotheCompany:
1) ReviewtheoverallobjectivesfortheCompanyandsettheCompany’sstrategyforfulfillingthoseobjectiveswithinanappropriateriskframework
2) Consideranyshiftsinstrategythatitconsidersmaybeappropriateinlightofmarketconditions
3) ReviewthecapitalstructureoftheCompanyincludingconsiderationofanyappropriateuseofgearingbothfortheCompanyandinanyjointventuresinwhichtheCompanymayinvestfromtimetotime
4) AppointtheInvestmentManager,Administratorandotherappropriatelyskilledserviceprovidersandmonitortheireffectivenessthroughregularreportsandmeetings
5) ReviewkeyelementsoftheCompany’sperformanceincludingNetAssetValueandpaymentofdividends.
AtBoardmeetings,theBoardensuresthatallthestrategicmattersareconsideredandresolvedbytheBoard.CertainissuesassociatedwithimplementingtheCompany’sstrategyaredelegatedeithertotheInvestmentManagerortheAdministrator.SuchdelegationisoverminorincidentalmattersandtheBoardcontinuallymonitorstheservicesprovidedbytheseindependentagents.TheBoardconsidersthereareimplementationmattersthataresignificantenoughtobeofstrategicimportanceandshouldbereservedsolelyfortheBoard(e.g.allacquisitions,alldisposals,significantcapitalexpenditure,leasinganddecisionsaffectingtheCompany’sfinancialgearing).
TheBoardmeetsatleastquarterlyandasrequiredfromtimetotimetoconsiderspecificissuesreservedfordecisionbytheBoardincludingallpotentialacquisitionsandinvestments.
AttheBoard’squarterlymeetingsitconsiderspaperscirculatedinadvanceincludingreportsprovidedbytheInvestmentManagerandtheAdministrator.TheInvestmentManager’sreportcommentson:
● ThepropertymarketsoftheUK,EuropeandIndiaincludingrecommendationsforanychangesinstrategythattheInvestmentManagerconsidersmaybeappropriate
● PerformanceoftheGroup’sportfolioandkeyassetmanagementinitiatives
● Transactionalactivityundertakenoverthepreviousquarterandbeingcontemplatedforthefuture
● TheGroup’sfinancialpositionincludingrelationshipswithbankersandlenders.
ThesereportsenabletheBoardtoassessthesuccesswithwhichtheGroup’spropertystrategyandotherassociatedmattersarebeingimplementedandalsoconsideranyrelevantrisksandtoconsiderhowtheyshouldbeproperlymanaged.
TheBoardalsoconsidersreportsprovidedfromtimetotimebyitsvariousserviceprovidersreviewingtheirinternalcontrols.
Inbetweenitsregularquarterlymeetings,theBoardhasalsometonanumberofoccasionsduringtheyeartoapprovespecifictransactionsandforothermatters.
Board and Directors’ appraisals
TheBoardcarriesoutanannualreviewofitscompositionandperformance(includingtheperformanceofindividualDirectors)andthatofitsstandingcommittees.SuchappraisalincludesreviewingtheperformanceandcompositionoftheBoard(andwhetherithasanappropriatemixofknowledge,skillsandexperience),therelationshipsbetweentheBoardandtheInvestmentManagerandAdministrator,theprocessesinplaceandtheinformationprovidedtotheBoardandcommunicationbetweenBoardmembers.
Board Meeting attendance
ThetablebelowshowstheattendanceatBoardmeetingsduringtheyearto31March2015:
Director No of meetings attended
DavidJeffreys 13
PhillipRose 4
SerenaTremlett 11
JeffChowdhry 8
RoddySage 9
No. of meetings during the year 13
Directors’ and officers’ insurance
AnappropriatelevelofDirectors’andofficers’insuranceismaintainedwherebyDirectorsareindemnifiedagainstliabilitiestothirdpartiestotheextentpermittedbyGuernseycompanylaw.
Board Committees
TheBoardhasestablishedthreestandingcommittees,allofwhichoperateunderdetailedtermsofreference,copiesofwhichareavailableonrequestfromtheCompanySecretary.
Alpha Real Trust Limited : Annual report 2015 27
Directors’ and corporate governance report (continued)
Audit Committee
TheAuditCommitteeconsistsofDavidJeffreys(Chairman),RoddySageandSerenaTremlett.TheBoardissatisfiedthatDavidJeffreyscontinuestohavetherequisiterecentandrelevantfinancialexperiencetofulfilhisroleasChairmanoftheAuditCommittee.
Role of the Committee
TheroleoftheAuditCommittee,whichmeetsatleasttwiceayear,includes:
● Theengagement,reviewoftheworkcarriedoutbyandtheperformanceoftheGroup’sexternalauditors
● Tomonitorandreviewtheindependence,objectivityandeffectivenessoftheexternalauditors
● Todevelopandapplyapolicyfortheengagementoftheexternalauditfirmstoprovidenon-auditservices
● ToassisttheBoardindischargingitsdutytoensurethatfinancialstatementscomplywithalllegalrequirements
● ToreviewtheGroup’sfinancialreportingandinternalcontrolpoliciesandtoensurethattheproceduresfortheidentification,assessmentandreportingofrisksareadequate
● Toreviewregularlytheneedforaninternalauditfunction
● TomonitortheintegrityoftheGroup’sfinancialstatements,includingitsannualandhalf-yearreportsandannouncementsrelatingtoitsfinancialperformance,reviewingthesignificantfinancialreportingissuesandjudgementswhichtheycontain
● Toreviewtheconsistencyofaccountingpoliciesandpractices
● ToreviewandchallengewherenecessarythefinancialresultsoftheGroupbeforesubmissiontotheBoard.
TheAuditCommitteemakesrecommendationstotheBoardwhicharewithinitstermsofreferenceandconsidersanyothermattersastheBoardmayfromtimetotimerefertoit.
MembersoftheAuditCommitteemayalso,fromtimetotime,meetwiththeGroup’sindependentpropertyvaluertodiscussthescopeandconclusionsoftheirwork.
Committee meeting attendance
Director No of meetings attended
DavidJeffreys 4
RoddySage 3
SerenaTremlett 3
No. of meetings during the year 4
Policy for non audit services
TheCommitteehasadoptedapolicyfortheprovisionofnon-auditservicesbytheCompany’sexternalauditor,BDOLimited,andreviewsandapprovesallmaterialnon-auditrelatedservicesinaccordancewiththeneedtoensuretheindependenceandobjectivityoftheexternalauditors.Noservices,otherthanaudit-relatedones,werecarriedoutbyBDOLimitedduringtheyear.
Internal audit
TheBoardreliesuponthesystemsandproceduresemployedbytheInvestmentManagerandtheAdministratorwhichareregularlyreviewedandareconsideredtobesufficienttoprovideitwiththerequireddegreeofcomfort.Therefore,theBoardcontinuestobelievethatthereisnoneedforaninternalauditfunction,althoughtheAuditCommitteeconsidersthisannually,reportingitsfindingstotheBoard.
Nomination Committee and attendance
TheNominationCommitteeconsistsofRoddySage(Chairman),PhillipRoseandSerenaTremlett.
TheCommittee’sprincipaltaskistoreviewthestructure,sizeandcompositionoftheBoardinrelationtoitssizeandpositioninthemarketandtomakerecommendationstofillBoardvacanciesastheyariseanditmeetsatleastannually.ItmetonceduringtheyearandallCommitteememberswerepresent.
Remuneration Committee and attendance
TheRemunerationCommitteeconsistsofSerenaTremlett(Chairman),JeffChowdhryandDavidJeffreys.
TheBoardhasapprovedformaltermsofreferencefortheCommitteeandacopyoftheseisavailableonrequestfromtheCompanySecretary.
AstheCompanycomprisesonlynon-executivedirectors,theCommittee’smainroleistodeterminetheirremunerationwithinthecapsetoutintheCompany’sArticles.ItmetonceduringtheyearandallCommitteememberswerepresent.
Remuneration report
TheaggregatefeespayabletotheDirectorsarelimitedto£200,000perannumundertheCompany’sArticlesandtheannualfeespayabletoeachDirectorhavenotmateriallychangedsincetheCompany’sshareswerelistedin2006.ThefeespayabletotheDirectorsareexpectedtoreflecttheirexpertise,responsibilitiesandtimespentonthebusinessoftheGroup,takingintoaccountmarketequivalents,theactivities,thesizeoftheGroupandmarketconditions.Undertheirrespectiveappointmentletters,eachDirectorisentitledtoanannualfeetogetherwithaprovisionforreimbursementforanyreasonableoutofpocketexpenses.
Alpha Real Trust Limited : Annual report 201528
Directors’ and corporate governance report (continued)
DuringtheyeartheDirectorsreceivedthefollowingemolumentsintheformoffeesfromGroupcompanies:
Year ended 31 March 2015
£
Year ended 31 March 2014
£
DavidJeffreys 31,500 31,500
PhillipRose 22,000 22,000
SerenaTremlett 34,500 32,583
JeffChowdhry 22,000 22,000
RoddySage 22,000 22,000
Total 132,000 130,083
Internal control and risk management
TheBoardunderstandsitsresponsibilityforensuringthattherearesufficient,appropriateandeffectivesystems,procedures,policiesandprocessesforinternalcontroloffinancial,operational,complianceandriskmanagementmattersinplaceinordertomanagetheriskswhichareaninherentpartofbusiness.SuchrisksaremanagedratherthaneliminatedinordertopermittheCompanytomeetitsfinancialandotherobjectives.
TheBoardreviewstheinternalproceduresofbothitsInvestmentManageranditsAdministratoruponwhichitisreliant.TheInvestmentManagerhasascheduleofmatterswhichhavebeendelegatedtoitbytheBoardanduponwhichitreportstotheBoardonaquarterlybasis.Thesemattersincludequarterlymanagementaccountsandreportingbothagainstkeyfinancialperformanceindicatorsanditspeergroup.Further,acompliancereportisproducedbytheAdministratorfortheBoardonaquarterlybasis.
TheCompanymaintainsariskmanagementframeworkwhichconsidersthenon-financialaswellasfinancialrisksandthisisreviewedbytheAuditCommitteepriortosubmissiontotheBoard.
Investment management agreement
TheCompanyhasanagreementwiththeInvestmentManager.ThissetsouttheInvestmentManager’skeyresponsibilities,whichincludeproposingapropertyinvestmentstrategytotheBoard,identifyingpropertyinvestmentstorecommendforacquisitionandarrangingappropriatelendingfacilities.TheInvestmentManagerisalsoresponsibletotheBoardforallissuesrelatingtopropertyassetmanagement.
Substantial shareholding
Shareholderswithholdingsofmorethan3percentofthevotingrightsoftheCompanyasat20May2015wereasfollows:
Name of investor No. of voting rights % held
AlphaGlobalPropertySecuritiesFundPte.Ltd 22,550,000 32.01
BillienLimited 14,154,593 20.10
ArmstrongInvestments 4,000,000 5.68
IPGLLimited 3,010,100 4.27
MitonAssetManagement 2,780,000 3.95
CharlesStanley 2,741,966 3.89
AmiyaCapital 2,600,000 3.69
Shareholder relations
TheBoardplaceshighimportanceonitsrelationshipwithitsshareholders,withmembersoftheInvestmentManager’sInvestmentCommitteemakingthemselvesavailableformeetingswithkeyshareholdersandsectoranalysts.ReportingofthesemeetingsandmarketcommentaryisreceivedbytheBoardonaquarterlybasistoensurethatshareholdercommunicationfulfilstheneedsofbeinguseful,timelyandeffective.OneormoremembersoftheBoardandtheInvestmentManagerwillbeavailableattheAnnualGeneralMeetingtoansweranyquestionsthatshareholdersattendingmaywishtoraise.
Directors’ Responsibilities’ Statement
CompanylawrequirestheDirectorstopreparefinancialstatementsforeachfinancialyear,whichgiveatrueandfairviewofthestateofaffairsoftheGroupattheendoftheyearandoftheprofitorlossoftheGroupforthatyear.
Inpreparingthosefinancialstatements,theDirectorsarerequiredto:
(1) selectsuitableaccountingpoliciesandthenapplythemconsistently;
(2) makejudgementsandestimatesthatarereasonableandprudent;
(3) statewhetherapplicableaccountingstandardshavebeenfollowed,subjecttoanymaterialdeparturesdisclosedandexplainedinthefinancialstatements;and
(4) preparethefinancialstatementsonthegoingconcernbasisunlessitisappropriatetoassumethattheCompanyandGroupwillnotcontinueinbusiness.
SofaraseachoftheDirectorsisaware,thereisnorelevantinformationofwhichtheCompany’sauditorisunaware,andtheyhavetakenallthestepstheyoughttohavetakenasDirectorstomakethemselvesawareofanyrelevantinformationandtoestablishthattheCompany’sauditorisawareofthatinformation.
Alpha Real Trust Limited : Annual report 2015 29
TheDirectorsareresponsibleforkeepingproperaccountingrecordswhichdisclosewithreasonableaccuracyatanytimethefinancialpositionoftheCompanyandoftheGroupandtoenablethemtoensurethatthefinancialstatementscomplywiththeCompanies(Guernsey)Law,2008.TheyarealsoresponsibleforsafeguardingtheassetsoftheCompanyandGroupandhencefortakingreasonablestepsforthepreventionanddetectionoffraudandotherirregularities.
TheDirectorsconfirmthattheyhavecompliedwiththeaboverequirementsinpreparingthefinancialstatements.
Going concern
Aftermakingenquiries,andbearinginmindthenatureoftheGroup’sbusinessandassets,theDirectorsconsiderthattheCompanyandGrouphaveadequateresourcestocontinueinoperationalexistencefortheforeseeablefuture.Forthisreason,theycontinuetoadoptthegoingconcernbasisinpreparingthefinancialstatements.
Annual General Meeting
TheAGMoftheCompanywillbeheldinGuernseyat9.00amon12August2015atOldBankChambers,LaGrandeRue,StMartin’s,Guernsey.ThemeetingwillbeheldtoreceivetheAnnualReportandFinancialStatements,re-electDirectorsandproposethereappointmentoftheauditorandthattheDirectorsbeauthorisedtodeterminetheauditor’sremuneration.
Independent Auditor
BDOLimitedhasexpresseditswillingnesstocontinueinofficeasauditor.
David Jeffreys
DirectorSerena Tremlett Director
ByorderoftheBoard,
18June2015
Directors’ statement pursuant to the Disclosure and Transparency RulesEachoftheDirectors,whosenamesandfunctionsarelistedintheDirectors’andcorporategovernancereportconfirmthat,tothebestofeachperson’sknowledgeandbelief:
● Thefinancialstatements,preparedinaccordancewithIFRSsasadoptedbytheEU,giveatrueandfairviewoftheassets,liabilities,financialpositionandprofitoftheGroup,and
● TheChairman’sstatementandtheinvestmentreviewincludeafairreviewofthedevelopmentandperformanceofthebusinessandthepositionoftheGroupandnote23tothefinancialstatementsprovidesadescriptionoftheprincipalrisksanduncertaintiesthattheGroupfaces.
David Jeffreys
DirectorSerena Tremlett Director
ByorderoftheBoard,
18June2015
Directors’ and corporate governance report (continued)Directors’ and corporate governance report (continued)
Alpha Real Trust Limited : Annual report 201530
To the Members of Alpha Real Trust Limited
WehaveauditedtheconsolidatedfinancialstatementsofAlphaRealTrustLimitedfortheyearended31March2015whichcomprisetheConsolidatedStatementofComprehensiveIncome,theConsolidatedBalanceSheet,theConsolidatedCashFlowStatement,theConsolidatedStatementofChangesinEquityandtherelatednotes1to25.ThefinancialreportingframeworkthathasbeenappliedintheirpreparationisapplicablelawandInternationalFinancialReportingStandards(IFRSs)asadoptedbytheEuropeanUnion.
ThisreportismadesolelytotheCompany’smembers,asabody,inaccordancewithSection262oftheCompanies(Guernsey)Law,2008.OurauditworkisundertakensothatwemightstatetotheCompany’smembersthosematterswearerequiredtostatetotheminanauditor’sreportandfornootherpurpose.Tothefullestextentpermittedbylaw,wedonotacceptorassumeresponsibilitytoanyoneotherthantheCompanyandtheCompany’smembersasabody,forourauditwork,forthisreport,orfortheopinionswehaveformed.
Respective responsibilities of the directors and auditor
AsexplainedmorefullyintheDirectors’ResponsibilitiesStatementwithintheDirectors’Report,thedirectorsareresponsibleforthepreparationoftheconsolidatedfinancialstatementsandforbeingsatisfiedthattheygiveatrueandfairview.
OurresponsibilityistoauditandexpressanopinionontheconsolidatedfinancialstatementsinaccordancewithapplicablelawandInternationalStandardsonAuditing(UKandIreland).ThosestandardsrequireustocomplywiththeFinancialReportingCouncil’s(FRC’s)EthicalStandardsforAuditors.
Scope of the audit of the financial statements
Anauditinvolvesobtainingevidenceabouttheamountsanddisclosuresinthefinancialstatementssufficienttogivereasonableassurancethatthefinancialstatementsarefreefrommaterialmisstatement,whethercausedbyfraudorerror.Thisincludesanassessmentof:whethertheaccountingpoliciesareappropriatetotheGroup’scircumstancesandhavebeenconsistentlyappliedandadequatelydisclosed;thereasonablenessofsignificantaccountingestimatesmadebythedirectors;andtheoverallpresentationofthefinancialstatements.Inaddition,wereadallthefinancialandnonfinancialinformationintheDirectors’Reporttoidentifymaterialinconsistencieswiththeauditedfinancialstatementsandtoidentifyanyinformationthatisapparentlymateriallyincorrectbasedon,ormateriallyinconsistentwith,theknowledgeacquiredbyusinthecourseofperformingtheaudit.Ifwebecomeawareofanyapparentmisstatementsorinconsistenciesweconsidertheimplicationsforourreport.
Opinion on the financial statements
Inouropinionthefinancialstatements:
● giveatrueandfairviewofthestateoftheGroup’saffairsasat31March2015andoftheGroup’sprofitfortheyearthenended;
● havebeenproperlypreparedinaccordancewithIFRSsasadoptedbytheEuropeanUnion;and
● havebeenproperlypreparedinaccordancewiththerequirementsoftheCompanies(Guernsey)Law,2008.
Matters on which we are required to report by exception
WehavenothingtoreportinrespectofthefollowingmatterswheretheCompanies(Guernsey)Law,2008requiresustoreporttoyouif,inouropinion:
● properaccountingrecordshavenotbeenkeptbytheCompany;or
● thefinancialstatementsarenotinagreementwiththeaccountingrecords;or
● wehavefailedtoobtainalltheinformationandexplanations,which,tothebestofourknowledgeandbelief,arenecessaryforthepurposesofouraudit.
Richard Michael Searle FCA For and on behalf of BDO LimitedCharteredAccountantsandRecognisedAuditorPlaceduPré,RueduPré,StPeterPort,Guernsey18June2015
Independent auditors’ report
Alpha Real Trust Limited : Annual report 2015 31
For the year ended 31 March 2015 For the year ended 31 March 2014
Notes
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
Income
Revenue 3 8,178 - 8,178 8,243 - 8,243
Changeintherevaluationofinvestmentproperty 13 - 2,721 2,721 - (658) (658)
Netgains/(losses)onfinancialassetsandliabilitiesheldatfairvaluethroughprofitorloss
23 1,407 (1,131) 276 1,253 (1,539) (286)
Total income 9,585 1,590 11,175 9,496 (2,197) 7,299
Expenses
Propertyoperatingexpenses 3 (3,615) - (3,615) (3,940) - (3,940)
InvestmentManager’sfee (1,581) - (1,581) (1,707) - (1,707)
Otheradministrationcosts 4 (823) - (823) (1,244) - (1,244)
Total operating expenses (6,019) - (6,019) (6,891) - (6,891)
Operating profit /(loss) 3,566 1,590 5,156 2,605 (2,197) 408
Shareofprofitofjointventure 131 342 473 135 15 150
Financeincome 5 3,496 - 3,496 3,116 4 3,120
Financecosts 6 (1,899) (2) (1,901) (2,098) - (2,098)
Profit /(loss) before taxation 5,294 1,930 7,224 3,758 (2,178) 1,580
Taxation 7 (10) - (10) (10) - (10)
Profit /(loss) for the year 5,284 1,930 7,214 3,748 (2,178) 1,570
Other comprehensive expense for the year
Itemsthatmaybeclassifiedtoprofitandlossinsubsequentperiods
Exchangedifferencesarisingontranslationofforeign operations
- (1,338) (1,338) - (1,176) (1,176)
Other comprehensive expense for the year - (1,338) (1,338) - (1,176) (1,176)
Total comprehensive income/(expense) for the year 5,284 592 5,876 3,748 (3,354) 394
Earnings per share (basic & diluted) 9 10.2p 2.2p
Adjusted earnings per share (basic & diluted) 9 7.5p 5.3p
ThetotalcolumnofthisstatementrepresentstheGroup’sstatementofcomprehensiveincome,preparedinaccordancewithIFRS.TherevenueandcapitalcolumnsaresuppliedassupplementaryinformationpermittedunderIFRS(seepages36and37).Allitemsintheabovestatementderivefromcontinuingoperations.
Theaccompanyingnotesonpages35to58formanintegralpartofthefinancialstatements.
Consolidated statement of comprehensive income
Alpha Real Trust Limited : Annual report 201532
Notes
31 March 2015
£’000
31 March 2014
£’000
Non-current assets
Investmentproperty 13 65,544 69,942
Indirectpropertyinvestmentheldatfairvalue 14 4,851 4,525
Investmentsheldatfairvalue 15 6,566 11,275
Investmentinjointventure 12 1,563 1,214
Derivativesheldatfairvaluethroughprofitorloss 23 11 63
Tradeandotherreceivables 16 22,443 11,500
100,978 98,519
Current assets
Investmentsheldatfairvalue 15 15,868 13,145
Derivativesheldatfairvaluethroughprofitorloss 23 388 159
Tradeandotherreceivables 16 2,303 19,135
Cashandcashequivalents 14,817 5,444
33,376 37,883
Total assets 134,354 136,402
Current liabilities
Tradeandotherpayables 17 (2,347) (1,374)
Bankborrowings 18 (515) (595)
(2,862) (1,969)
Total assets less current liabilities 131,492 134,433
Non-current liabilities
Bankborrowings 18 (51,557) (58,740)
Total liabilities (54,419) (60,709)
Net assets 79,935 75,693
Equity
Sharecapital 19 - -
Specialreserve 20 80,277 80,296
Translationreserve 20 (3,423) (2,085)
Capitalreserve 20 (8,560) (10,358)
Revenuereserve 20 11,641 7,840
Total equity 79,935 75,693
Net asset value per ordinary share 10 113.2p 107.0p
ThefinancialstatementswereapprovedbytheBoardofDirectorsandauthorisedforissueon18June2015.TheyweresignedonitsbehalfbyDavidJeffreysandSerenaTremlett.
Theaccompanyingnotesonpages35to58formanintegralpartofthefinancialstatements.
Consolidated balance sheet
David Jeffreys
Director
Serena Tremlett Director
Alpha Real Trust Limited : Annual report 2015 33
For the year ended 31 March 2015
£’000
For the year ended 31 March 2014
£’000
Operating activities
Profitfortheyearaftertaxation 7,214 1,570
Adjustments for:
Changeinrevaluationofinvestmentproperty (2,721) 658
Net(gains)/lossesonfinancialassetsandliabilitiesheldatfairvaluethroughprofitorloss (276) 286
Taxation 10 10
Shareofprofitofjointventure (473) (150)
Financeincome (3,496) (3,120)
Financecost 1,901 2,098
Operating cash flows before movements in working capital 2,159 1,352
Movements in working capital:
(Increase)/decreaseintradeandotherreceivables (1,574) 286
Decrease/(increase)intradeandotherpayables 969 (1,650)
Cash from/(used in) operations 1,554 (12)
Interestreceived 58 91
Interestpaid (1,763) (1,938)
Taxationpaid (6) (118)
Cash flows used in operating activities (157) (1,977)
Investing activities
Acquisitionofinvestments (2,000) -
Redemptionofinvestments 2,595 2,500
Redemptiononpreferenceshares’investment 350 100
Capitalexpenditureoninvestmentproperty (602) (417)
Loangrantedtorelatedparties - (8,880)
Loanrepaymentsfromrelatedparties 7,266 4,347
Loaninterestreceived 2,747 736
CULSinterestreceived 352 240
Dividendincomefromjointventure 124 139
Dividendincomefromotherinvestments 711 779
Cash flows from/(used in) investing activities 11,543 (456)
Financing activities
Bankloanrepayments (426) (916)
Sharebuyback - (1,659)
Sharebuybackcosts - (4)
Shareissuecosts (19) (29)
Currencyoptionsettlement - 142
Foreignexchangeforwardsettlement 322 -
Foreignexchangeforwardcollateralreceived/(paid) 62 (362)
SpecialdividendpaidtoAshareholders (132) -
Dividendspaid (1,483) (1,876)
Cash flows used in financing activities (1,676) (4,704)
Net increase/(decrease) in cash and cash equivalents 9,710 (7,137)
Cash and cash equivalents at beginning of year 5,444 12,602
Exchangetranslationmovement (337) (21)
Cash and cash equivalents at end of year 14,817 5,444
Theaccompanyingnotesonpages35to58formanintegralpartofthefinancialstatements.
Consolidated cash flow statement
Alpha Real Trust Limited : Annual report 201534
For the year ended 31 March 2014
Special reserve
£’000
Translation reserve
£’000
Capital reserve
£’000
Revenue reserve
£’000
Total equity
£’000
At 1 April 2013 81,381 (909) (8,180) 5,968 78,260
Total comprehensive income/(expense) for the year
Profit /(loss)fortheyear - - (2,178) 3,748 1,570
Othercomprehensiveexpensefortheyear - (1,176) - - (1,176)
Total comprehensive (expense)/income for the year - (1,176) (2,178) 3,748 394
Transactions with owners
Dividends - - - (1,876) (1,876)
Shareissuecosts (29) - - - (29)
Sharebuyback (1,053) - - - (1,053)
Sharebuybackcosts (3) - - - (3)
Total transactions with owners (1,085) - - (1,876) (2,961)
At 31 March 2014 80,296 (2,085) (10,358) 7,840 75,693
Notes19,20
For the year ended 31 March 2015
Special reserve
£’000
Translation reserve
£’000
Capital reserve
£’000
Revenue reserve
£’000
Total equity
£’000
At 1 April 2014 80,296 (2,085) (10,358) 7,840 75,693
Total comprehensive income/(expense) for the year
Profitfortheyear - - 1,930 5,284 7,214
Othercomprehensiveexpensefortheyear - (1,338) - - (1,338)
Total comprehensive (expense)/income for the year - (1,338) 1,930 5,284 5,876
Transactions with owners
Dividends - - (132) (1,483) (1,615)
Shareissuecosts (19) - - - (19)
Sharebuyback - - - - -
Sharebuybackcosts - - - - -
Total transactions with owners (19) - (132) (1,483) (1,634)
At 31 March 2015 80,277 (3,423) (8,560) 11,641 79,935
Notes19,20
Theaccompanyingnotesonpages35to58formanintegralpartofthefinancialstatements.
Consolidated statement of changes in equity
Alpha Real Trust Limited : Annual report 2015 35
1. General informationTheCompanyisalimitedliability,closed-endedinvestmentcompanyincorporatedinGuernsey.Theaddressoftheregisteredofficeisgivenonpage59.ThenatureoftheGroup’soperationsanditsprincipalactivitiesaresetoutintheChairman’sStatementonpages3to5.Thefinancialstatementswereapprovedandauthorisedforissueon18June2015andsignedbyDavidJeffreysandSerenaTremlettonbehalfoftheBoard.
2(a). Significant accounting policiesAsummaryoftheprincipalaccountingpoliciesissetoutbelow.Thepolicieshavebeenconsistentlyappliedforallperiodspresentedunlessotherwisestated.
ThepreparationoffinancialstatementsinconformitywithIFRS,asadoptedbytheEU,requirestheuseofcertaincriticalaccountingestimates.Italsorequiresmanagementtoexerciseitsjudgementintheprocessofapplyingtheaccountingpolicies.Theareasinvolvingahighdegreeofjudgementorcomplexity,orareaswheretheassumptionsandestimatesaresignificanttothefinancialstatementsaredisclosedinthisnote.
Basis of preparation
ThesefinancialstatementshavebeenpreparedinaccordancewithIFRS,whichcomprisestandardsandinterpretationsapprovedbytheInternationalAccountingStandardsBoard(“IASB”),andInternationalAccountingStandardsandStandardsInterpretationsCommittee’sinterpretationsapprovedbytheInternationalAccountingStandardsCommittee(“IASC”)thatremainineffect,andtotheextentthattheyhavebeenadoptedbytheEuropeanUnion.
Duringtheyear,theDirectorshavereconsideredthelayoutoftheconsolidatedstatementofcomprehensiveincome.Accordingly,theorderthatcertainitemsappearhasbeenchangedandtwoitemshavebeenreclassified.Thecomparativeshavebeenamendedonaconsistentbasiswhichhasrequiredthetransferof£1,412,000ofgainsoninvestmentsheldatfairvalueandonthesettlementoftheforeignexchangeforwardcontractfromfinanceincometonetgainsonfinancialassetsandliabilitiesheldatfairvaluethroughprofitorlossandthetransferof£1,698,000oflossesoninvestmentsheldatfairvalueandoncurrencyoptionsandinterestratecapcontractstonetlossesonfinancialassetsandliabilitiesheldatfairvaluethroughprofitorloss.ThishashadnoimpactonthereportedprofitbeforetaxoronnetassetssoathirdconsolidatedstatementoffinancialpositionhasnotbeenpresentedaswouldordinarilyberequiredbyIAS1:10(f).
a) Adoption of new and revised StandardsAnumberofnewandrevisedstandardsandinterpretationsissuedbytheIASBandtheInternationalFinancialReportingInterpretationsCommitteebecameeffectiveforthecurrentyear.Thesewere:
Revised and amended Standards
IAS32: FinancialInstruments:Presentation-Amendmentstoapplicationguidanceontheoffsettingoffinancialassetsandfinancialliabilities-foraccountingperiodscommencingonorafter1January2014
IAS36: ImpairmentofAssets-AmendmentsforRecoverableAmountDisclosuresforNon-FinancialAssets-foraccountingperiodscommencingonorafter1January2014
IAS39: FinancialInstruments:RecognitionandMeasurement-AmendmentsforNovationofDerivativesandContinuationandHedgeAccounting–effectivewhenIFRS9isapplied*.
Interpretations
Nointerpretations,relevantfortheGroup,wereissuedorrevisedduringtheyear.
TheadoptionofthesestandardsandinterpretationshasnotledtoanychangesintheGroup’saccountingpolicies.
b) Standards and Interpretations in issue and not yet effectiveAtthedateofauthorisationofthesefinancialstatements,thefollowingstandardsandinterpretations,whichhavenotbeenappliedinthesefinancialstatements,wereinissuebutnotyeteffective:
IFRS9: FinancialInstruments–foraccountingperiodscommencingonorafter1January2018*
IFRS15:RevenuefromContractswithCustomers-foraccountingperiodscommencingonorafter1January2017*
Revised and amended Standards
IFRS7: FinancialInstruments:Disclosures-AmendmentsrequiringdisclosuresabouttheinitialapplicationofIFRS9-foraccountingperiodscommencingonorafter1January2018*
IFRS10: ConsolidatedFinancialStatements-amendedforsaleorcontributionofassetsbetweenaninvestoranditsassociateorjointventure-foraccountingperiodscommencingonorafter1January2016*
IFRS11: JointArrangements-amendedbyaccountingforacquisitionsofinterestinjointoperations-foraccountingperiodscommencingonorafter1January2016*
IAS27: SeparateFinancialStatements-amendedbyequitymethodinseparatefinancialstatements-foraccountingperiodscommencingonorafter1January2016*
IAS28: InvestmentsinAssociatesandJointVentures-amendedforsaleorcontributionofassetsbetweenaninvestoranditsassociateorjointventure-foraccountingperiodscommencingonorafter1January2016*
*StilltobeendorsedbytheEU
Notes to the financial statementsFor the year ended 31 March 2015
Alpha Real Trust Limited : Annual report 201536
Notes to the financial statements (continued)For the year ended 31 March 2015
Interpretations
Nointerpretations,relevantfortheGroup,arecurrentlyinissue.
InDecember2013,theIASBissuedfurtherimprovementstoIFRS,whichhavebecomeeffectiveforaccountingperiodscommencingonorafter1July2014.Thesecoveramendmentstoninestandards.
InSeptember2014,theIASBissuedfurtherimprovementstoIFRS,whichwillbecomeeffectiveforaccountingperiodscommencingonorafter1January2016(stilltoreceiveendorsementbytheEU).Thesecoveramendmentstofivestandards.
TheDirectorsanticipatethat,withtheexceptionofIFRS9,theadoptionofthesestandardsandinterpretationsinfutureperiodswillnothaveamaterialimpactonthefinancialstatementsoftheGroup.
IFRS9usesasingleapproachtodeterminewhetherafinancialassetismeasuredatamortisedcostoratfairvalue,replacingthemanydifferentrulesinIAS39.TheapproachinIFRS9isbasedonhowanentitymanagesitsfinancialinstruments(itsbusinessmodel)andthecontractualcashflowcharacteristicsofthefinancialassets(paymentsthataresolelypaymentsofprincipalandinterest).Therecognitionandde-recognitionrequirementsforfinancialassetsandfinancialliabilitiesareunchangedfromthosesetoutinIAS39.
TheclassificationandmeasurementrequirementsoffinancialliabilitiesarebroadlysimilartoIAS39althoughtherequirementsrelatingtofinancialliabilitiesmeasuredatfairvaluehavebeenamendedsothatchangesinfairvaluerelatedtoanentity’sowncreditriskaregenerallyrecogniseddirectlyinothercomprehensiveincome.IFRS9requiresoneimpairmentmethodwhichwouldreplacethevariousdifferentmethodsindicatedbyIAS39thatarisefromthedifferentcategories’classification.AtthetimeofadoptionofthenewstandarditisexpectedonlythattheGroup’sfinancialassetswillberequiredtobeclassifiedinaccordancewiththenewstandardandnochangesinmeasurementwillberequired.
Theprincipalaccountingpoliciesadoptedaresetoutbelow.
Basis of consolidation
a) SubsidiariesTheconsolidatedfinancialstatementsincorporatethefinancialstatementsoftheCompanyandthesubsidiaryundertakingscontrolledbytheCompany,madeupto31Marcheachyear.ControlisachievedwheretheCompanyhaspowerovertheinvestee,exposureorrights,tovariablereturnsfromitsinvolvementwiththeinvesteeandtheabilitytouseitspowertoaffecttheamountoftheinvestor’sreturns.
Theresultsofsubsidiaryundertakingsacquiredordisposedofduringtheyearareincludedintheconsolidatedstatementofcomprehensiveincomefromtheeffectivedateofacquisitionsoruptotheeffectivedateofdisposalasappropriate.
Whennecessary,adjustmentsaremadetothefinancialstatementsofsubsidiaryundertakingstobringtheaccountingpoliciesusedintolinewiththoseusedbytheGroup.
Allintra-grouptransactions,balances,incomeandexpensesareeliminatedonconsolidation.
b) Joint venturesTheGroupappliesIFRS11toitsjointarrangement.UnderIFRS11investmentsinjointarrangementsareclassifiedaseitherjointoperationsorjointventuresdependingonthecontractualrightsandobligationseachinvestor.TheGrouphasassessedthenatureofitsjointarrangementsanddeterminedthemtobejointventures.Jointventuresareaccountedforusingtheequitymethod
Undertheequitymethodofaccounting,interestsinjointventuresareinitiallyrecognisedatcostandadjustedthereaftertorecognisetheGroup’sshareofthepost-acquisitionprofitsorlossesandmovementsinothercomprehensiveincome.WhentheGroup’sshareoflossesinajointventureequalsorexceedsitsinterestsinthejointventures(whichincludesanylong-termintereststhat,insubstance,formpartoftheGroup’snetinvestmentinthejointventures),theGroupdoesnotrecognisefurtherlosses,unlessithasincurredobligationsormadepaymentsonbehalfofthejointventures.
UnrealisedgainsontransactionsbetweentheGroupanditsjointventuresareeliminatedtotheextentoftheGroup’sinterestinthejointventures.Unrealisedlossesarealsoeliminatedunlessthetransactionprovidesevidenceofanimpairmentoftheassettransferred.
Presentation of statement of comprehensive incomeInordertobetterreflecttheactivitiesofaninvestmentcompanyandinaccordancewithguidanceissuedbytheAssociationofInvestmentCompanies(“AIC”),supplementaryinformation,whichanalysesthestatementofcomprehensiveincomebetweenitemsofarevenueandcapitalnature,hasbeenpresentedalongsidethestatementofcomprehensiveincome(seenote20).
Revenue recognitionRentalincomeandservicechargeincomefrominvestmentpropertyleasedoutunderanoperatingleasearerecognisedinthestatementofcomprehensiveincomeonastraightlinebasisoverthetermofthelease.Leaseincentivesgrantedarerecognisedasanintegralpartofthenetconsiderationfortheuseofthepropertyandarethereforealsorecognisedonthesamestraightlinebasis.Rentalrevenuesareaccountedforonanaccrualsbasis.Therefore,deferredrevenuegenerallyrepresentsadvancepaymentsfromtenants.RevenueisrecognisedwhenitisprobablethattheeconomicbenefitsassociatedwiththetransactionwillflowtotheGroupandtheamountofrevenuecanbemeasuredreliably.Uponearlyterminationofaleasebythelessee,thereceiptofasurrenderpremium,netofdilapidationsandnon-recoverableoutgoingsrelatingtotheleaseconcerned,isimmediatelyrecognisedasrevenue.
Interestincomeisaccruedonatimebasis,byreferencetotheprincipaloutstandingandtheeffectiveinterestrateapplicable.
Otherincomeisrecognisedwhenreceived.
2(a). Significant accounting policies (continued)
Alpha Real Trust Limited : Annual report 2015 37
Notes to the financial statements (continued)For the year ended 31 March 2015
Leasing Leasesareclassifiedasfinanceleaseswheneverthetermsoftheleasetransfersubstantiallyalltherisksandrewardsofownershiptothelessee.Allotherleasesareclassifiedasoperatingleases.
Foreign currencies
a) Functional and presentation currencyItemsincludedinthefinancialstatementsofeachoftheGroupentitiesaremeasuredinthecurrencyoftheprimaryeconomicenvironmentinwhichtheentityoperates(the“functionalcurrency”).TheconsolidatedfinancialstatementsarepresentedinSterling,whichistheCompany’sfunctionalandpresentationcurrency.
b) Transactions and balancesTransactionsincurrenciesotherthanthefunctionalcurrencyarerecordedattheratesofexchangeprevailingonthedatesofthetransactions.Ateachbalancesheetdate,monetaryassetsandliabilitiesthataredenominatedinforeigncurrenciesareretranslatedattheratesprevailingonthebalancesheetdate.Gainsandlossesarisingonretranslationareincludedinnetprofitorlossfortheyear,exceptforexchangedifferencesarisingonnon-monetaryassetsandliabilitieswherethechangesinfairvaluearerecogniseddirectlyinothercomprehensiveincome/(expense).
c) Group companiesTheresultsandfinancialpositionofalltheGroupentitiesthathaveafunctionalcurrencywhichdiffersfromthepresentationcurrencyaretranslatedintothepresentationalcurrencyasfollows:
(i) assetsandliabilitiesforeachbalancesheetpresentedaretranslatedattheclosingrateatthedateofthebalancesheet
(ii) incomeandexpensesforeachstatementofcomprehensiveincomearetranslatedattheaverageexchangerateprevailingintheperiod,and
(iii) allresultingexchangedifferencesarerecognisedasaseparatecomponentofequity.
Onconsolidation,theexchangedifferencesarisingfromthetranslationofthenetinvestmentinforeignentitiesaretakentoequity.Whenaforeignoperationissold,suchexchangedifferencesarerecognisedinthestatementofcomprehensiveincomeaspartofthegainorlossonsale.
ForEurobasedbalancestheyearendexchangerateusedis£1:€1.367(2014:£1:€1.210)andtheaverageratefortheyearusedis£1:€1.274(2014:£1:€1.186).Theyear-endexchangerateusedforIndianrupee(INR)balancesis£1:INR92.756(2014:£1:INR99.418)andtheaverageratefortheyearusedis£1:INR98.408(2014:£1:INR95.890).
ExpensesAllexpensesareaccountedforonanaccrualsbasisandincludefeesandotherexpensespaidtotheAdministrators,theInvestmentManagerandtheDirectors.Inrespectoftheanalysisbetweenrevenueandcapitalitems,presentedwithinthestatementofcomprehensiveincome,allexpenseshavebeenpresentedasrevenueitemsexceptexpenseswhichareincidentaltotheacquisitionofaninvestmentpropertywhichareincludedwithinthecostofthatinvestmentproperty.
Borrowing costsBorrowingcostsdirectlyattributabletotheacquisitionorconstructionofpropertyareaddedtothecostsofthoseassetsuntilsuchtimeastheassetsaresubstantiallyreadyfortheirintendeduse.Thecapitalisationrateisarrivedatbyreferencetotheactualratepayableonborrowingacquiredforatargetedproperty,ortotheaverageratewithregardtoanacquisitionfinancedoutofgeneralborrowings.Allotherborrowingcostsarerecognisedinthestatementofcomprehensiveincomeintheperiodinwhichtheyareincurred.
TaxationTheCompanyisexemptfromGuernseytaxationonincomederivedoutsideofGuernseyandbankinterestearnedinGuernsey.Afixedannualfeeof£600waspayabletotheStatesofGuernseyinrespectofthisexemptionfortheyear.NochargetoGuernseytaxationarisesoncapitalgains.TheGroupisliabletoforeigntaxarisingonactivitiesintheoverseassubsidiaries.TheGrouphassubsidiaryoperationsinCyprusandIndia.TheGroupalsoholdsinvestmentsinSpain,ownedthroughinvestmententitiesinLuxembourgandtheNetherlands,andintheUnitedKingdom,ownedthroughaninvestmententityincorporatedinJersey.TheGroupisthereforeliabletotaxationintheseoverseasjurisdictions.
Thetaxexpenserepresentsthesumofthetaxcurrentlypayableanddeferredtax.
Thetaxcurrentlypayableisbasedontaxableprofitfortheyear.Taxableprofitdiffersfromnetprofitasreportedinthestatementofcomprehensiveincomebecauseitexcludesitemsofincomeandexpensethataretaxableordeductibleinotheryearsanditfurtherexcludesitemsthatarenevertaxableordeductible.TheGroup’sliabilityforcurrenttaxiscalculatedusingtaxratesthathavebeenenactedatthebalancesheetdate.
2(a). Significant accounting policies (continued)
Alpha Real Trust Limited : Annual report 201538
Notes to the financial statements (continued)For the year ended 31 March 2015
Deferredtaxisthetaxexpectedtobepayableorrecoverableondifferencesbetweenthecarryingamountofassetsandliabilitiesinthefinancialstatementsandthecorrespondingtaxbasesusedinthecomputationoftaxableprofit,andisaccountedforusingthebalancesheetliabilitymethod.Deferredtaxliabilitiesaregenerallyrecognisedforalltaxabletemporarydifferencesanddeferredtaxassetsarerecognisedtotheextentthatitisprobablethattaxableprofitswillbeavailableagainstwhichdeductibletimingdifferencescanbe utilised.
Thecarryingamountofdeferredtaxassetsisreviewedateachbalancesheetdateandreducedtotheextentthatitisnolongerprobablethatsufficienttaxableprofitswillbeavailabletoallowallorpartoftheassettoberecovered.Deferredtaxiscalculatedatthetaxratesthatareexpectedtoapplyintheyearwhentheliabilityissettledortheassetrealised.Deferredtaxischargedorcreditedinthestatementofcomprehensiveincome,exceptwhenitrelatestoitemschargedorcrediteddirectlytoequity,inwhichcasethedeferredtaxisalsodealtwithinequity.
DividendsDividendsarerecognisedasaliabilityintheGroup’sfinancialstatementsintheperiodinwhichtheybecomeobligationsoftheGroup.
Fair value measurementTheGroupmeasurescertainfinancialinstrumentssuchasderivatives,andnon-financialassetssuchasinvestmentproperty,atfairvalueattheendofeachreportingperiod,usingrecognisedvaluationtechniquesandfollowingtheprinciplesofIFRS13.Inaddition,fairvaluesoffinancialinstrumentsmeasuredatamortisedcostaredisclosedinthefinancialstatements.
Fairvalueisthepricethatwouldbereceivedtosellanassetorpaidtotransferaliabilityinanorderlytransactionbetweenmarketparticipantsatthemeasurementdate.Thefairvaluemeasurementisbasedonthepresumptionthatthetransactiontoselltheassetortransfertheliabilitytakesplaceeither:
● intheprincipalmarketfortheassetorliability
or
● intheabsenceofaprincipalmarket,inthemostadvantageousmarketfortheassetorliability.
TheGroupmustbeabletoaccesstheprincipalorthemostadvantageousmarketatthemeasurementdate.Thefairvalueofanassetoraliabilityismeasuredusingtheassumptionsthatmarketparticipantswouldusewhenpricingtheassetorliability,assumingthatmarketparticipantsactintheireconomicbestinterest.
Afairvaluemeasurementofanon-financialassettakesintoaccountamarketparticipant’sabilitytogenerateeconomicbenefitsbyusingtheassetinitshighestandbestuseorbysellingittoanothermarketparticipantthatwouldusetheassetinitshighestandbestuse.
TheGroupusesvaluationtechniquesthatareappropriateinthecircumstancesandforwhichsufficientdataareavailabletomeasurefairvalue,maximisingtheuseofrelevantobservableinputsandminimisingtheuseofunobservableinputssignificanttothefairvaluemeasurementasawhole:
● Level1—Quoted(unadjusted)marketpricesinactivemarketsforidenticalassetsorliabilities.
● Level2—Valuationtechniquesforwhichthelowestlevelinputthatissignificanttothefairvaluemeasurementisdirectlyorindirectly observable.
● Level3—Valuationtechniquesforwhichthelowestlevelinputthatissignificanttothefairvaluemeasurementisunobservable.
Forassetsandliabilitiesthatarerecognisedinthefinancialstatementsonarecurringbasis,theGroupdetermineswhethertransfershaveoccurredbetweenlevelsinthehierarchybyre-assessingcategorisation(basedonthelowestlevelinputthatissignificanttothefairvaluemeasurementasawhole)attheendofeachreportingperiod.
Investment propertyInvestmentproperty,whichispropertyheldtoearnrentalsand/orforcapitalappreciation,isinitiallyrecognisedatcostbeingthefairvalueofconsiderationgivenincludingrelatedtransactioncosts.Afterinitialrecognitionatcost,investmentpropertyiscarriedattheirfairvaluesbasedonhalfyearlyprofessionalvaluationsmadebyindependentvaluers.ThevaluationsareinaccordancewithstandardscomplyingwiththeRoyalInstitutionofCharteredSurveyorsAppraisalandValuationmanualandtheInternationalValuationStandardsCommittee.
Gainsorlossesarisingfromchangesinfairvalueofinvestmentpropertyareincludedinthestatementofcomprehensiveincomeintheperiodinwhichtheyarise.PropertiesaretreatedasacquiredwhentheGroupassumesthesignificantrisksandreturnsofownershipandasdisposedofwhenthesearetransferredtothebuyer.
Allcostsdirectlyassociatedwiththepurchaseandconstructionofapropertyandallsubsequentexpendituresqualifyingasacquisitioncostsarecapitalised.
2(a). Significant accounting policies (continued)
Alpha Real Trust Limited : Annual report 2015 39
Notes to the financial statements (continued)For the year ended 31 March 2015
Segmental reportingOperatingsegmentsarereportedinamannerconsistentwiththeinternalreportingprovidedtothechiefoperatingdecision-maker.Thechiefoperatingdecision-maker,whichisresponsibleforallocatingresourcesandassessingperformanceoftheoperatingsegments,hasbeenidentifiedastheBoardofDirectorsoftheCompany.
TheinvestingpolicymeanstheGroupmayinvestinrealestateopportunitiesunconstrainedbygeography,butwithaparticularfocusontheUK,EuropeandAsia.Atpresent,formanagementpurposes,theGroupisorganisedintoonemainoperatingsegmentbeingEurope.
AlloftheGroup’srevenueisfromentitiesthatareincorporatedinEurope.
WiththeexceptionoftheGalaxiainvestment(note14),alloftheGroup’snon-currentassetsarelocatedinEurope.
Financial instrumentsFinancialassetsandfinancialliabilitiesarerecognisedontheGroup’sbalancesheetwhentheGroupbecomesapartytothecontractualprovisionsoftheinstrument.TheGroupshalloffsetfinancialassetsandfinancialliabilitiesiftheGrouphasalegallyenforceablerighttosetofftherecognisedamountsandinterestsandintendstosettleonanetbasis.
(a) Financial assetsTheGroup’sfinancialassetsfallintothecategoriesdiscussedbelow,withtheallocationdependingtoanextentonthepurposeforwhichtheassetwasacquired.AlthoughtheGroupusesderivativefinancialinstrumentsineconomichedgesofcurrencyandinterestraterisk,itdoesnothedgeaccountforthesetransactions.TheGrouphasnotclassifiedanyofitsfinancialassetsasheldtomaturityorasavailableforsale.
Unlessotherwiseindicated,thecarryingamountsoftheGroup’sfinancialassetsareareasonableapproximationoftheirfairvalues.
(a)(i) Investments held at fair value through profit or lossInvestmentsareclassifiedas“fairvaluethroughprofitorloss”andareinitiallyrecognisedatcost,beingthefairvalueoftheconsiderationgiven.
FinancialassetsdesignatedatfairvaluethroughprofitorlossatinceptionarethosethataremanagedandtheirperformanceevaluatedonafairvaluebasisinaccordancewiththeGroup’sinvestmentstrategy.TheGroup’spolicyisfortheInvestmentManagerandtheBoardofDirectorstoevaluatetheinformationaboutthesefinancialassetsonafairvaluebasistogetherwithotherrelatedfinancialinformation.
Recognition
Purchasesandsalesofinvestmentsarerecognisedonthetransactiondate,thedateonwhichtheGroupcommitstopurchaseorselltheinvestment.
Measurement
Financialassetsatfairvaluethroughprofitorlossareinitiallyrecognisedatfairvaluewithtransactioncostsbeingexpensedinthestatementofcomprehensiveincome.Subsequenttoinitialrecognition,allfinancialassetsatfairvaluethroughprofitorlossaremeasuredatfairvalue.Gainsandlossesarisingfromchangesinthefairvalueofthe‘financialassetsatfairvaluethroughprofitorloss’categoryarepresentedinthestatementofcomprehensiveincomeintheperiodinwhichtheyarise.
(a)(ii) Loans and receivablesTheseassetsarenon-derivativefinancialassetswithfixedordeterminablepaymentsthatarenotquotedinanactivemarket.Theymainlyrelatetointerestbearingloansgrantedtothirdpartiesbutalsoarisethroughrentalleaseswithtenants(e.g.tradereceivablesandcashandcashequivalents)andincorporateothertypesofcontractualmonetaryassets.Theyareinitiallyrecognisedatfairvalueplustransactioncoststhataredirectlyattributabletotheacquisitionorissueandsubsequentlycarriedatamortisedcostusingtheeffectiveinterestratemethod,lessprovisionforimpairment.
Theeffectofdiscountingonthesefinancialinstrumentsisnotconsideredtobematerial.
Impairmentprovisionsarerecognisedwhenthereisobjectiveevidence(suchassignificantfinancialdifficultiesonthepartofthecounterpartyordefaultorsignificantdelayinpayment)thattheGroupwillbeunabletocollectalloftheamountsdueunderthetermsofthereceivable,theamountofsuchaprovisionbeingthedifferencebetweenthenetcarryingamountandthepresentvalueofthefutureexpectedcashflowsassociatedwiththeimpairedreceivable.Fortradereceivables,suchimpairmentsdirectlyreducethecarryingamountoftheimpairedassetandarerecognisedagainsttherelevantincomecategoryinthestatementofcomprehensiveincome.
Cashandcashequivalentsarecarriedatcostandconsistofcashinhandandshorttermdepositsinbankswithanoriginalmaturityofthreemonthsorless.
(a)(iii) Derivatives at fair value through profit or lossThiscategorycomprisesonly‘inthemoney’financialderivatives.Theyarecarriedinthebalancesheetatfairvaluewithchangesinfairvaluerecognisedinthestatementofcomprehensiveincome.
ThefairvalueoftheGroup’sderivativesisbasedonvaluationsasdescribedinnote24.
2(a). Significant accounting policies (continued)
Alpha Real Trust Limited : Annual report 201540
Notes to the financial statements (continued)For the year ended 31 March 2015
(a)(iv) Derecognition of financial assetsAfinancialasset(inwholeorinpart)isderecognisedeither:
● whentheGrouphastransferredsubstantiallyalltherisksandrewardsofownership,or
● whenithasneithertransferrednorretainedsubstantiallyalltherisksandrewardsandwhenitnolongerhascontrolovertheassetoraportionoftheasset,or
● whenthecontractualrighttoreceivecashflowhasexpired.
(b) Financial liabilities TheGroupclassifiesitsfinancialliabilitiesintooneoftwocategories,dependingonthepurposeforwhichtheliabilitywasissuedanditscharacteristics.AlthoughtheGroupusesderivativefinancialinstrumentsineconomichedgesofcurrencyandinterestraterisk,itdoesnothedgeaccountforthesetransactions.
Unlessotherwiseindicated,thecarryingamountsoftheGroup’sfinancialliabilitiesareareasonableapproximationoftheirfairvalues.
(b)(i) Derivatives at fair value through profit or lossThiscategorycomprisesonly‘out-of-the-money’financialderivatives.Theyarecarriedinthebalancesheetatfairvaluewithchangesinfairvaluerecognisedinthestatementofcomprehensiveincome.Otherthanderivativefinancialinstruments,theGroupdoesnothaveanyliabilitiesheldfortradingnorhasitdesignatedanyotherfinancialliabilitiesasbeingatfairvaluethroughprofitorloss.
ThefairvalueoftheGroup’sderivativesisbasedonthevaluationsasdescribedinnote24.
(b)(ii) Financial liabilities measured at amortised costOtherfinancialliabilitiesincludethefollowingitems:
● Tradepayablesandothershort-termmonetaryliabilities,whichareinitiallyrecognisedatfairvalueandsubsequentlycarriedatamortisedcostusingtheeffectiveinterestmethod
● Bankborrowingsareinitiallyrecognisedatfairvaluenetofattributabletransactioncostsincurred.Suchinterestbearingliabilitiesaresubsequentlymeasuredatamortisedcostusingtheeffectiveinterestratemethod.
(b)(iii) Derecognition of financial liabilitiesAfinancialliability(inwholeorinpart)isderecognisedwhentheCompanyorGrouphasextinguisheditscontractualobligations,itexpiresoriscancelled.Anygainorlossonderecognitionistakentothestatementofcomprehensiveincome.
(c) Share capitalFinancialinstrumentsissuedbytheGrouparetreatedasequityonlytotheextentthattheydonotmeetthedefinitionofafinancialliability.TheCompany’sordinarysharesandclassAsharesareclassifiedasequityinstruments.Forthepurposesofthedisclosuresgiveninnote23theGroupconsidersallitssharecapital,sharepremiumandallotherreservesasequity.TheCompanyisnotsubjecttoanyexternallyimposedcapitalrequirements.
(d) Effective interest rate methodTheeffectiveinterestratemethodisamethodofcalculatingtheamortisedcostofafinancialassetorliabilityandofallocatinginterestincomeorexpenseovertherelevantperiod.Theeffectiveinterestrateistheratethatexactlydiscountsestimatedfuturecashreceiptsorpayments(includingallfeesonpointspaidorreceivedthatformanintegralpartoftheeffectiveinterestrate,transactioncostsandotherpremiumsordiscounts)throughtheexpectedlifeofthefinancialassetorliability,or,whereappropriate,ashorterperiod.
2(b). Significant accounting estimates and judgementsTheGroupmakesestimatesandassumptionsconcerningthefuture.Theresultingaccountingestimateswill,bydefinition,seldomequaltherelatedactualresults.Theestimatesandassumptionsthathaveasignificantriskofcausingamaterialadjustmenttothecarryingamountsofassetsandliabilitieswithinthenextfinancialyeararediscussedbelow.
Estimatesandjudgementsarecontinuallyevaluatedandarebasedonhistoricalexperienceandotherfactors,includingexpectationsoffutureeventsthatarebelievedtobereasonableunderthecircumstances.
(a) Investment propertyTheGroupusesthevaluationcarriedoutbyitsindependentvaluersasthefairvalueofitsinvestmentproperty.Thevaluationisbaseduponassumptionsincludingfuturerentalincome,anticipatedmaintenancecosts,futuredevelopmentcostsandtheappropriatediscountrate.Thevaluersalsomakereferencetomarketevidenceoftransactionpricesforsimilarproperties.Refertonote13forfurtherdetails.
2(a). Significant accounting policies (continued)
Alpha Real Trust Limited : Annual report 2015 41
Notes to the financial statements (continued)For the year ended 31 March 2015
(b) Estimate of fair value of indirect property investment - Galaxia ThepropertyinterestinGalaxiaisclassifiedasanindirectpropertyinvestmentheldatfairvaluethroughprofitorlossandhasbeenincludedwithinthefinancialstatementsbasedonthecurrentestimateofrealisablevaluetotheGroup.InJanuary2015,theInternationalChamberofCommerce(‘ICC’)ArbitrationconcludeditsarbitrationproceedingsanddeclaredinfavouroftheGroup’sclaimsagainstLogixGroup,whichwasfoundtohavebreachedtheTermsoftheShareholdersAgreementwiththeGroup.TheICCawardedtheGroupthereturnofitsentirecapitalinvestedofINR450Million,withinterestat18%perannumfrom31January2011to20January2015,andtherefundofallcostsincurredtowardstheArbitration.Thetotalawardamountsto£9.2 million(the“Award”)basedonyearendexchangerates.Additionally,afurther15%perannuminterestonallsumswasawardedtotheGroupfrom20January2015untiltheactualdateofpaymentbyLogixoftheAward.InApril2015,theGroupwasnotifiedthatLogixhasfiledapetition,underSection34oftheIndianArbitrationandConciliationAct1996,beforetheDelhiHighCourtchallengingtheAward.Thematterhasbeenadjournedforahearingon15July2015.TheDirectors,takingintoconsiderationlegaladvicereceivedfollowingLogix’schallengeoftheAward,consideritprudenttocontinuetovaluetheindirectinvestmentatINR450millionduetouncertaintyovertimingandfinalvalueoftheAward.
(c) Fair value of derivative contracts
(c)(i) Interest rate capTheGroupestimatesthefairvalueofitsderivativeinterestratecapcontractsbasedonvaluationtechniquesemployedbythecontractualcounterparties.Thesetechniquesaresignificantlyaffectedbytheassumptionsused,includingdiscountratesandfuturecashflows.Furtherdetailsaregiveninnote23.
(c)(ii) Fair value of foreign exchange forward contractTheGroupestimatesthefairvalueofitsforeignexchangeforwardcontractbyreferencetothedifferencebetweenthecontractedrateasperthecontractwiththecontractualcounterpartyandtherelevantforwardexchangerateatthebalancesheetdate.Furtherdetailsaregiveninnote23.
(d) Income and deferred taxationTheGroupissubjecttoincomeandcapitalgainstaxesinnumerousjurisdictions.Significantjudgementisrequiredindeterminingthetotalprovisionforincomeanddeferredtaxes.Therearemanytransactionsandcalculationsforwhichtheultimatetaxdeterminationandtimingofpaymentisuncertainduringtheordinarycourseofbusiness.TheGrouprecognisesliabilitiesforanticipatedtaxissuesbasedonestimatesofwhetheradditionaltaxeswillbedue.Wherethefinaltaxoutcomeofthesemattersisdifferentfromtheamountsthatwereinitiallyrecordedsuchdifferenceswillimpacttheincomeanddeferredtaxprovisionsintheperiodinwhichthedeterminationis made.
3. Revenue
Year ended 31 March 2015
£’000
Year ended 31 March 2014
£’000
Rentalincome 5,981 6,084
Servicechargeincome 2,182 2,138
Otherincome 15 21
Total 8,178 8,243
At31March2015,theGrouprecognisednonrecoverablepropertyoperatingexpenditureasfollows:
Year ended 31 March 2015
£’000
Year ended 31 March 2014
£’000
Servicechargeincome 2,182 2,138
Propertyoperatingexpenditure (3,615) (3,940)
Non recoverable property operating expenditure (1,433) (1,802)
TheGrouprecognisesrevenuefromitsinvestmentinoneproperty:theH2OShoppingCentreinMadrid,Spain.
TheH2OShoppingCentre,acquiredon31March2010viaajointventure,isleasedonstandardinstitutionalSpanishretailoperatingleaseswithaminimumguaranteedmonthlyrentandthepossibilityforthelandlordtoearnadditionalincomeifthetenants’turnoverexceedscertainpre-setlevelsonmostleases.Theleasesaretypicallyforaminimumguaranteedtermof5yearsfromtheopeningofthecentreinmid-2007with5yearrenewaloptionsthereafter,e.g.5+5+5,andgenerallya10to15yearterm.
2(b). Significant accounting estimates and judgements (continued)
Alpha Real Trust Limited : Annual report 201542
Notes to the financial statements (continued)For the year ended 31 March 2015
At31March2015,theGrouphadcontractedwithtenantsattheH2OShoppingCentreforthefollowingfutureminimumleasepayments:
Year ended 31 March 2015
£’000
Year ended 31 March 2014
£’000
Withinoneyear 5,025 5,158
Inthesecondtofifthyearsinclusive 8,966 9,050
Afterfiveyears 2,343 2,797
Total 16,334 17,005
4. Other administration costs
Year ended 31 March 2015
£’000
Year ended 31 March 2014
£’000
Auditors’remunerationforauditservices 83 98
Accountingandadministrativefees 293 333
Non-executivedirectors’fees 132 130
Otherprofessionalfees 315 683
Total 823 1,244
TheGrouphasnoemployees.
5. Finance income
Year ended 31 March 2015
£’000
Year ended 31 March 2014
£’000
Bankinterestreceivable 58 91
Interestreceivableonconvertibleloanstock 516 1,011
Interestreceivableonloanstorelatedparties 2,922 2,014
Foreignexchangegain - 4
Total 3,496 3,120
6. Finance costs
Year ended 31 March 2015
£’000
Year ended 31 March 2014
£’000
Interestonbankborrowings 1,899 2,098
Foreignexchangeloss 2 -
Total 1,901 2,098
Theabovefinancecostsariseonfinancialliabilitiesmeasuredatamortisedcostusingtheeffectiveinterestratemethod.Nootherlosseshavebeenrecognisedinrespectoffinancialliabilitiesatamortisedcostotherthanthosedisclosedabove.
3. Revenue (continued)
Alpha Real Trust Limited : Annual report 2015 43
Notes to the financial statements (continued)For the year ended 31 March 2015
7. Taxation
(a) Parent CompanyTheParentCompanyisexemptfromGuernseytaxationonincomederivedoutsideofGuernseyandbankinterestearnedinGuernsey.Afixedannualfeeof£600waspayabletotheStatesofGuernseyinrespectofthisexemptionfortheyear.NochargetoGuernseytaxationarisesoncapitalgains.TheGroupisliabletoforeigntaxarisingonactivitiesinitsoverseassubsidiaries.TheCompanyhasinvestments,subsidiariesandjointventureoperationsinLuxembourg,UnitedKingdom,theNetherlands,Spain,Cyprus,JerseyandIndia.
InDecember2013,theCompany’ssubsidiaryinSpain,AlphaTigerSpain1,SLU(‘ATS1’),whichownstheH2Oproperty,enteredintoanewSpanishtaxregime:SociedadesAnónimasCotizadasdeInversiónenelMercadoInmobiliario(“SOCIMI”).Underthisregime,thereisnoCorporateIncomeTaxalthoughATS1issubjecttodistributionrulesonincomeandgains.
(b) GroupTheGroup’staxexpensefortheyearcomprises:
Year ended 31 March 2015
£’000
Year ended 31 March 2014
£’000
Deferredtax - -
Currenttax 10 10
Tax Expense 10 10
Thechargefortheyearcanbereconciledtotheprofit/(loss)pertheconsolidatedstatementofcomprehensiveincomeasfollows:
Year ended 31 March 2015
£’000
Year ended 31 March 2014
£’000
Tax expense reconciliation
Profitfortheyear 7,224 1,580
Less:incomenottaxable (8,057) (7,156)
Add:expenditurenotdeductible 4,021 4,782
Un-provideddeferredtaxasset (3,149) 837
Total 39 43
Year ended 31 March 2015
£’000
Year ended 31 March 2014
£’000
Analysed as arising from
Indiaentity - -
Cyprusentities 39 43
Luxembourgentities - -
UKinvestment - -
Total 39 43
Taxatdomesticratesapplicabletoprofitsinthecountriesconcernedisasfollows:
Year ended 31 March 2015
£’000
Year ended 31 March 2014
£’000
Indiataxationat22.66% - -
Cypriottaxationat12.50% 5 5
Luxembourgentitiesatanaveragerateof29.22%* 5 5
UKtaxationat20% - -
Total 10 10
* ThetaxationincurredinLuxembourgmainlyrelatestotheminimumcorporatetaxchargeof€3,210perentity.
Alpha Real Trust Limited : Annual report 201544
Notes to the financial statements (continued)For the year ended 31 March 2015
(c) Deferred taxationThefollowingisthedeferredtaxrecognisedbytheGroupandmovementsthereon:
Revaluation of Investment Property
£’000
Accelerated tax depreciation
£’000
Tax Losses
£’000
Other temporary differences
£’000
Total
£’000
At 31 March 2013 (712) 578 (411) 545 -
Releasetoincome 712 (578) 376 (510) -
At 31 March 2014 - - (35) 35 -
Releasetoincome - 3 (237) 234 -
At 31 March 2015 - 3 (272) 269 -
Certaindeferredtaxassetsandliabilitieshavebeenoffset.Thefollowingistheanalysisofthedeferredtaxbalances(afteroffset)forfinancialreportingpurposesavailableforoffsetagainstfutureprofits.
2015
£’000
2014
£’000
Deferredtaxliabilities 272 35
Deferredtaxassets (272) (35)
Total - -
AtthebalancesheetdatetheGrouphasunusedtaxlossesof£1.7million(2014:£1.5million).Duetotheunpredictabilityoffuturetaxableprofits,theDirectorsbelieveitisnotprudenttorecogniseadeferredtaxassetfortheunusedtaxlosses.
UnusedtaxlossesinLuxembourg,SpainandtheUnitedKingdomcanbecarriedforwardindefinitely.UnusedtaxlossesinTheNetherlandscanbecarriedforwardfor9years.UnusedtaxlossesinCypruscanbecarriedforwardfor5years.
8. Dividends
Dividend reference period Shares
’000
Dividend
pershare
Paid
£
Date
Quarterended31March2014 70,614 0.525p 370,723 1August2014
Quarterended30June2014 70,614 0.525p 370,723 26September2014
Quarterended30September2014 70,614 0.525p 370,723 19December2014
Quarterended31December2014 70,614 0.525p 370,723 20March2015
Total 1,482,892
Inaddition,duringtheyearended31March2014,ACEdisposedofitspropertyportfolio,which,followingtheliquidationofACE,generatedapproximately£0.1 millionforARTAshareholders:thisamountwasthereforepaidtoARTAshareholdersasaspecialdividendon15August2014.
TheCompanywillpayadividendforthequarterended31March2015on17July2015.InaccordancewithIAS10,thisdividendhasnotbeenincludedinthesefinancialstatementsasthedividendwasdeclaredandpaidaftertheyearend.ThecurrentintentionoftheCompanyistopayadividendquarterly.
7. Taxation (continued)
Alpha Real Trust Limited : Annual report 2015 45
Notes to the financial statements (continued)For the year ended 31 March 2015
9. Earnings per shareThecalculationofthebasicanddilutedearningspershareisbasedonthefollowingdata:
1 April 2014 to 31 March 2015
1 April 2014 to 30 September 2014
1 April 2013 to 31 March 2014
Earningsperstatementofcomprehensiveincome(£’000) 7,214 2,362 1,570
Basic and diluted earnings pence per share 10.2p 3.3p 2.2p
Earningsperincomestatement(£’000) 7,214 2,362 1,570
Netchangeintherevaluationofinvestmentproperty (2,721) (683) 658
Movementinfairvalueofinvestmentinordinaryshares 409 409 (944)
Movementinfairvalueofinvestmentsinredeemablepreferenceshares 1,225 272 2,438
Movementinfairvalueofinterestratecap(marktomarket) 48 52 94
Movementinfairvalueofcurrencyswaps(marktomarket) - - 110
Movementinfairvalueoftheforeignexchangeforward(marktomarket) (551) (247) (159)
Movementinfairvalueofthejointventure’sinterestrateswap(marktomarket) (7) (4) (15)
Netchangeintherevaluationofthejointventure’sinvestmentproperty (335) (20) -
Foreignexchangeloss/(gain) 2 (3) (4)
Adjusted earnings 5,284 2,138 3,748
Adjusted earnings per share 7.5p 3.0p 5.3p
Weighted average number of ordinary shares (000’s) 70,614 70,614 71,110
TheadjustedearningsarepresentedtoprovidewhattheBoardbelievesisamoreappropriateassessmentoftheoperationalincomeaccruingtotheGroup’sactivities.Hence,theCompanyadjustsbasicearningsforincomeandcostswhicharenotofarecurrentnatureorwhichmaybemoreofacapitalnature.
10. Net asset value per share
31 March 2015 30 September 2014 31 March 2014
Netassetvalue(£’000) 79,935 76,473 75,693
Net asset value per ordinary share 113.2p* 108.3p* 107.0p*
Total number of shares (000’s) 70,614 70,614 70,614
*Thenetassetvalueperordinarysharefortheyearended31March2014hasbeencalculatedbydeductingfromthenetassetvaluetheproceedsrealisedfromACE’sportfoliodisposal(£0.1m),whichwereduetoART’sAshareholders,whowereformerlyshareholdersinPIP.ThenetassetvalueperAsharesasat31March2014was107.9p.Followingdistributionofthe£0.1mproceedstoART’sAshareholderson15August2014,thenetassetvaluepershareasat30September2014andasat31March2015isthesameforallART’sshareholders.
11. Investment in subsidiary undertakingsAlistofthesignificantinvestmentsinsubsidiariesasat31March2015,includingthename,countryofincorporationandtheproportionofownershipinterestisgivenbelow.
Name of subsidiary undertaking Class of share % of class held with voting rights
Country of incorporation
Principal activity
AlphaTigerCyprusHoldingsLimited Ordinary 100 Cyprus HoldingCompany
AlphaTigerCyprusInvestmentsNo.1Limited Ordinary 100 Cyprus HoldingCompany
AlphaTigerCyprusInvestmentsNo.2Limited Ordinary 100 Cyprus HoldingCompany
AlphaTigerCyprusInvestmentsNo.3Limited Ordinary 100 Cyprus HoldingCompany
Luxco114SARL Ordinary 100 Luxembourg Financecompany
Luxco111SARL Ordinary 100 Luxembourg HoldingCompany
KMSHoldingBV Ordinary 100 Netherlands HoldingCompany
AlphaTigerSpain1,SLU Ordinary 100 Spain PropertyCompany
AlphaTigerSpain2,SLU Ordinary 100 Spain PropertyCompany
Alpha Real Trust Limited : Annual report 201546
Notes to the financial statements (continued)For the year ended 31 March 2015
12. Investment in joint venture ThejointventureintheScholarPropertyHoldingsLimitedgroup(Cambourne)isaccountedforbyequityaccounting.
ThemovementintheGroup’sshareofnetassetsofthejointventurecanbesummarisedasfollows:
Year ended 31 March 2015
£’000
Year ended 31 March 2014
£’000
As at 1 April 1,214 1,203
Group’sshareofjointventureprofitsbeforefairvaluemovementsanddividends 131 135
Fairvalueadjustmentforinterestrateswap 7 15
Fairvalueadjustmentforinvestmentproperty 335 -
DividendspaidbyjointventuretotheGroup (124) (139)
As at 31 March 1,563 1,214
13. Investment property
Year ended 31 March 2015
£’000
Year ended 31 March 2014
£’000
Fair value of investment property at 1 April 69,942 71,433
Subsequentcapitalexpenditureafteracquisition 602 417
Movementinrentincentives/ initialcosts 576 226
Fairvalueadjustmentintheyear 2,721 (658)
Foreignexchangemovement (8,297) (1,476)
Fair value of investment property at 31 March 65,544 69,942
ThefairvalueoftheH2OpropertyhasbeenarrivedatonthebasisofanindependentvaluationcarriedoutatthebalancesheetdatebyAguirreNewmanValoracionesyTasacionesS.A.(“Aguirre”).AguirreareindependentvaluersandarenotconnectedtotheGroup.
ThevaluationbasisusedisfairvalueasdefinedbytheRoyalInstitutionofCharteredSurveyorsAppraisalandValuationsStandards(“RICS”).TheapprovedRICSdefinitionoffairvalueis“thepricethatwouldbereceivedtosellanasset,orpaidtotransferaliability,inanorderlytransactionbetweenmarketparticipantsatthemeasurementdate”.Seenote24fordetailsofthepropertyvaluation.
TheH2OpropertyhasbeenpledgedassecurityfortheborrowingsintheSpanishSPVinwhichthepropertyisheld(note18).
Foreignexchangemovementisrecognisedinothercomprehensiveincome/(expense).
14. Indirect property investment held at fair value
Year ended 31 March 2015
£’000
Year ended 31 March 2014
£’000
As at 1 April 4,525 5,451
Foreignexchangemovement 326 (926)
As at 31 March 4,851 4,525
TheGalaxiainvestmentiscarriedatafairvalueofINR450million(£4.9million).
Seenote2(b)(b)formoredetails.
Foreignexchangemovementisrecognisedinothercomprehensiveincome/(expense).
Alpha Real Trust Limited : Annual report 2015 47
Notes to the financial statements (continued)For the year ended 31 March 2015
15. Investments held at fair value
Year ended 31 March 2015
£’000
Year ended 31 March 2014
£’000
Non-current
As at 1 April 11,275 12,869
Additionsduringtheyear - -
Redemptionsduringtheyear (2,945) (100)
Distributedinvestmentincomeduringtheyear (130) -
Movementinfairvalueofinvestments (1,634) (1,494)
As at 31 March 6,566 11,275
On3December2012,theGroupcompletedtheacquisitionofthemajorityoftheinvestmentportfolioofPIP.
Theacquiredinvestments,whicharedisclosedasnon-currentinvestmentsheldatfairvalue,canbedetailedasfollows:
● £0.5 millioninordinarysharesofIMPT;theordinarysharesaretradedontheLSEandarethereforevaluedquarterlybymarketprice;themarketpriceoftheinvestmentasat31March2015was£0.8 million(2014:£1.2 million).
● £3.2 millioninparticipatingredeemablepreferencesharesofBCP;thefundprovidesquarterlyvaluationsofthenetassetvalueofitsshares;duringtheyearended31 March2015,BCP,followingthedisposalofitspropertyportfolio,redeemedatotalof£2.6 millionofshares(circa95%ofART’sholding)andenteredintoavoluntaryliquidationprocess;thenetassetvalueoftheinvestmentasat31 March2015of£0.1 millionreflectstheestimatedamountreceivablebyARTattheendofBCP’sliquidationprocess.
● £6.4 millioninparticipatingredeemablepreferencesharesofEuropip,whichprovidesquarterlyvaluationsofthenetassetvalueofitsshares;thenetassetvalueoftheinvestmentasat31 March2015was£3.6 million(2014:£5.0 million).
● £3.7 millioninparticipatingredeemablepreferencesharesofHLP,whichprovideshalfyearlyvaluationsofthenetassetvalueofitsshares;duringtheyearended31 March2015,HLPredeemedatotalof£0.4 millionofshares(2014:£0.1 million);thenetassetvalueoftheinvestmenthasbeencalculatedbyusingtheunauditedvalueprovidedbythedirectorsofHLPon5March2015,thisbeingtheclosestpointtotheGroup’sbalancesheetdate;theresultingvalueoftheinvestmentwas£2.0 million(2014:£2.3 million).
ARThasalsoacquiredfromPIP,atanascribedzerovalue,theinvestmentsinACEandRomulus.AnyrealisedvaluefromtheseinvestmentsispassedexclusivelytoARTAshareholders.
Duringtheyearended31 March2014,ACEdisposedofitspropertyportfolio,which,followingtheliquidationofACE,generated£0.1 millionforARTAshareholders:thisamountwasthereforepaidtoARTAshareholdersasaspecialdividendon15August2014.ACEwasformallydissolvedon29October2014.
Asat31 March2015,thenetassetvalueofART’sinvestmentinRomuluswasnil(2014:nil).
TheBoardconsidersthattheaboveinvestmentswillbeheldforthelongtermandhasthereforedisclosedthemasnon-currentassets.
Investments held at fair value Year ended 31 March 2015
£’000
Year ended 31 March 2014
£’000
Current
As at 1 April 13,145 15,252
Additionsduringtheyear 2,000 -
Redemptionsduringtheyear - (2,500)
Distributedinvestmentincomeinyear (250) (454)
Undistributedinvestmentincomeinyear 973 847
As at 31 March 15,868 13,145
TheGrouphasinvestedinincomeunitsofFIAF.FIAFallowsmonthlyredemptionsandhencetheinvestmentisreportedasacurrentasset.On20June2012,theGroupinvestedafurther£4 millioninFIAF.On3December2012,followingthecompletionofthePIPacquisition,theGroupacquiredanadditional£4.6 millionofFIAFunits.Duringtheyearended31 March2014,ARTmadenetredemptionsofFIAFunitsamountingto£2.5 million.On12August2014,theGroupinvestedafurther£2 millioninFIAF.FIAFprovidesmonthlyvaluationsofthenetassetvalueofitsunits.TheinvestmenthasbeenvaluedatthenetassetvalueofFIAFasat31 March2015.
Alpha Real Trust Limited : Annual report 201548
Notes to the financial statements (continued)For the year ended 31 March 2015
16. Trade and other receivables
31 March 2015
£’000
31 March 2014
£’000
Non-current
Loangrantedtorelatedparty 22,443 11,500
Total 22,443 11,500
Current
ConvertibleLoan - 7,823
Tradedebtors 1,225 73
VAT 99 81
Loansgrantedtorelatedparties - 9,080
Otherdebtors 518 650
Interestreceivablefromloansgrantedtorelatedparties 461 482
InterestreceivablefromCULSandConvertibleLoan - 946
Total 2,303 19,135
On9August2010,theCompanysubscribedfor£4.75millionofCULSinIMPT.TheCULScarriedanannualcouponof4.75%andcouldhavebeenconvertedatanytimeuptoandincluding30June2013intoOrdinarySharesataConversionPriceof31pence.ThesettlementoftheCULSannualcouponwasmadeasaPaymentInKind(“PIK”)bytheissuanceoffurtherCULSateachrelevantdate.TheCULSattractedan18%redemptionpremiumifnotconverted.Additionally,IMPThadissued4millionshareoptionstotheCompanyatanexercisepriceof50pencepershare.
On1July2013,ARTannouncedtheredemptionofalloutstandingIMPTCULSinfullatparplusthepaymentofthepremiumof18percent.ThePreferenceSharesstapledtotheCULShaveautomaticallybeenredeemedandtheassociatedoptionshaveexpiredwithoutbeingexercised.Theredemptionamountwas£6.4million,whichARTagreedtoprovidetoIMPTasunsecuredloan,earningacouponof15%perannumcompoundedquarterly.On6December2013,ARTagreedtoprovideIMPTwithanetadditionalinvestmentof£4.6million,whichwasincorporatedwiththeexisting£6.4millionloanplus£0.5millionofaccruedinterestintoanewunsecuredloanamountingto£11.5million.ThenewunsecuredloanisforfiveyearsexpiringinDecember2018andcarriesacouponof15%perannum.TheIMPTloanbalanceasat31 March2015is£11.8million,whichreflectstheprincipalagreedforthenewunsecuredloanof£11.5millionplusaccruedinterestof£0.3million.
On18October2011,theCompanycompletedtheinvestmentof£7.5millionbywayofathreeyearConvertibleLoaninAURE.Theloancouldhavebeenconvertedatanytimeuptoexpiry(20November2014)intoordinarysharesataneffectivepriceof41.4pperFundshare.TheConvertibleLoanhadanannualcouponof6%payablequarterlyincashandwasredeemableatapremiumof14%toitsfacevalue.InNovember2014,theConvertibleLoanexpiredandtheconversionoptionwasnotexercised.Atthatdate,theredemptionamountoftheConvertibleLoanwas£8.9millionand,aspartofalargerrefinancingofAURE’sloanfacilities,theConvertibleLoanwasrolledupintoanewmezzanineloanfacilityprovidedbyARTtoAUREof£10.3million.Aspartofthisrestructuringprocess,ARTreceived£2.3millionincash.ThenewloanfacilityisfortwoyearsexpiringinNovember2016andearnsacouponof9%perannumplusapplicablefees.TheloanisunsecuredbutARThastheabilitytorequestAUREtoprovideafirstlegalchargesecurityoveritsnon-coreassets,oncecertainconditionsonAURE’sbankborrowingsaremet,andasecondprioritychargeoverAURE’sotherassets.
On27September2013,theCompanygranteda£6.0milliononeyearloantoAURE.Theloanhadanannualcouponof9%andwasunsecured.TheloanwaspartlyrepaidinNovember2013by£1.8millionandbyafurther£0.8millionuptoNovember2014,atwhichpointtheloan,withanoutstandingbalanceof£3.5million,wasincludedaspartoftherestructuringintoanewmezzanineloanfacilityprovidedbyARTtoAUREof£10.3million,asdescribedabove.
On3December2012,followingthecompletionofthePIPacquisition,theCompanyacquiredaoneyearloanreceivablegrantedtoEuropipamountingto£6.8million.On27November2012theCompanyhadalsoadvancedanadditional£2millionloantoEuropip,whichwasfullyrepaidbyApril2013.Theremainingloanhadanannualcouponof9%,whichwascapitalisedquarterlyifunpaid,andhadsharepledges,assecurity,overtwooftheun-gearedEuropipNorwegianassetsandadditionalrightsoverproceedsreleasedfromtheEuropip’sMosaicinvestment.InNovember2013,theloanwasextendedbyoneyear.Duringtheyearended31 March2014,Europipmadepartrepaymentstowardstheloanof£2.6millionandinOctober2014afurtherrepaymentof£0.6million.InNovember2014theloanwasrolledupintoanew£4.3millionfacilitygrantedforafurthertwoyearsonsubstantiallythesameterms.Upto31 March2015,Europipmadefurtherrepaymentsamountingto£3.0million.Asat31 March2015,thebalanceoftheloangrantedtoEuropipistherefore£1.3million(2014:£5.0million,including£0.1millionofaccruedinterest).
TheDirectorsconsiderthatthecarryingamountoftradeandotherreceivablesapproximatestotheirfairvalue.
Alpha Real Trust Limited : Annual report 2015 49
Notes to the financial statements (continued)For the year ended 31 March 2015
17. Trade and other payables
31 March 2015
£’000
31 March 2014
£’000
Tradecreditors 1,685 607
InvestmentManager’sfeepayable 390 432
Accruals 252 333
Othercreditors 15 -
Corporationtax 5 2
Total 2,347 1,374
Tradecreditorsandaccrualsprimarilycompriseamountsoutstandingfortradepurchasesandongoingcosts.TheGrouphasfinancialmanagementpoliciesinplacetoensurethatallpayablesarepaidwithinthecredittimeframe.
TheDirectorsconsiderthatthecarryingamountoftradeandotherpayablesapproximatestotheirfairvalue.
18. Bank borrowings
31 March 2015
£’000
31 March 2014
£’000
Currentliabilities:interestpayable 118 146
Currentliabilities:repayments 397 449
Total current liabilities 515 595
Non-currentliabilities:bankborrowings 51,557 58,740
Total liabilities 52,072 59,335
The borrowings are repayable as follows:
Interestpayable 118 146
Ondemandorwithinoneyear 397 449
Inthesecondtofifthyearsinclusive 51,557 58,740
Afterfiveyears - -
Total 52,072 59,335
MovementsintheGroup’snon-currentbankborrowingsareanalysedasfollows:
Year ended 31 March 2015
£’000
Year ended 31 March 2014
£’000
As at 1 April 58,740 60,736
Repaymentofborrowings (426) (916)
Reclassificationtocurrentliabilities 52 9
Deferredfinancecosts (194) -
Amortisationofdeferredfinancecosts 151 160
Foreignexchangemovement (6,766) (1,249)
As at 31 March 51,557 58,740
ThebankborrowingsrepresentthesyndicatedloanfinanceprovidedtotheSpanishSPV,owneroftheH2OpropertyinMadrid,Spain.
TheSpanishSPVloanwasoriginallyprovidedbyasyndicateofthreebanks(EurohypoAG,DeutscheHypothekenbankandLandesbankHessen-ThuringenGirozentrale).InAugust2014,DeutscheHypothekenbanktransferreditsshareoftheloantoMHBBankAG,asubsidiaryoftheLoneStargroup.Theloanhastwotranchesofdebtofwhichonetranchehasanagreedscheduleofamortisationasreflectedintherepaymenttableabove;thebalanceoftheloansafteramortisationisrepayableon4October2017.TheloansaresecuredbyafirstchargemortgageagainsttheSpanishproperty.
TheSpanishpropertyowningSPVhasenteredintoaninterestratecapunderwhichthefloatingrateelementoftheinterestchargeiscappedat2.85%forthefulltermoftheloanon€50millionoftheprincipalborrowingsof€75million(note23).
Foreignexchangemovementisrecognisedinothercomprehensiveincome/(expense).
Alpha Real Trust Limited : Annual report 201550
Notes to the financial statements (continued)For the year ended 31 March 2015
19. Share capital
Number of shares
Authorised
Ordinarysharesofnoparvalue Unlimited
Issued and fully paid Ordinary treasury
Ordinary external
Ordinary total
A shares external
Total shares
At 1 April 2014 6,009,974 55,465,727 61,475,701 15,148,128 76,623,829
Shareconversion - 5,297,702 5,297,702 (5,297,702) -
Sharescancelledfollowingbuyback - - - - -
Sharesboughtback - - - - -
At 31 March 2015 6,009,974 60,763,429 66,773,403 9,850,426 76,623,829
TheCompanyhasoneclassofordinaryshareswhichcarriesnorighttofixedincomeandclassAshares,whichcarrythesamerightsasordinarysharessavethatclassAsharescarrytheadditionalrighttoparticipationintheCompany’sinvestmentinRomulusandtherighttoconvertintoordinarysharesonaoneforonebasis.
TheCompanyhastherighttoreissueorcanceltheremainingtreasurysharesatalaterdate.
On13August2014,theCompanypublishedacirculargivingnoticeofitsAnnualGeneralMeetingon5September2014.ConsistentwiththeCompany’scommitmenttoshareholdervalue,theCompanyaskeditsshareholderstoapproveageneralauthorityallowingtheCompanytoacquireupto24.99%oftheVotingShareCapitalduringtheperiodexpiringontheearlierof(i)theconclusionoftheAnnualGeneralMeetingoftheCompanyin2016and(ii)4March2016.Theshareholdersapprovedtheproposal.
Duringtheyearended31March2015,theCompanymadenosharebuybacksand5,297,702Ashareswereconvertedintoordinaryshares.Asat31March2015,theordinarysharecapitaloftheCompanywas66,763,429(including6,009,974sharesheldintreasury).TheCompanyalsohad9,850,426Asharesinissue.ThetotalvotingrightsinARTwere76,623,829.
Postyearend,theCompanyhasmadenosharebuybacksand532,750Ashareswereconvertedintoordinaryshares.AtthedateofsigningthesefinancialstatementstheordinarysharecapitaloftheCompanywas67,306,153(including6,009,974sharesheldintreasury).TheCompanyalsohas9,317,676Asharesinissue.ThetotalvotingrightsinARTareunchangedat76,623,829.
20. ReservesThemovementsinthereservesfortheGroupareshownonpage34.
Special reserveThespecialreserveisadistributablereservetobeusedforallpurposespermittedunderGuernseycompanylaw,includingthebuy-backofsharesandpaymentofdividends.
Translation reserveThetranslationreservecontainsexchangedifferencesarisingonconsolidationoftheGroup’soverseasoperations.Theseamountsmaybesubsequentlyreclassifiedtoprofitorloss.
Capital reserveThecapitalreservecontainsincreasesanddecreasesinthefairvalueoftheGroup’sinvestmentproperty,gainsandlossesonthedisposalofproperty,gainsandlossesarisingfromindirectpropertyinvestmentatfairvaluetogetherwithexpensesallocatedtocapital.
Revenue reserveAnysurplusarisingfromnetprofitaftertaxistakentothisreserve,whichmaybeutilisedforthebuy-backofsharesandpaymentofdividends.
21. Events after the balance sheet dateAfterthebalancesheetdate,atotalof532,750AShareswereconvertedintoOrdinaryShares(Note19).InApril2015,ARTreceiveda£0.5 millionredemptionfromHLP,bringingART’scurrentinvestmentinHLPdownto£1.6million.InMay2015,ARTalsoreceiveda£0.8 millioncapitalrepaymentfromEuropip,reducingART’sloaninvestmentinEuropipto£0.5million.
Alpha Real Trust Limited : Annual report 2015 51
Notes to the financial statements (continued)For the year ended 31 March 2015
22. Related party transactionsPartiesareconsideredtoberelatedifonepartyhastheabilitytocontroltheotherpartyorexercisesignificantinfluenceovertheotherpartyinmakingfinancialoroperationaldecisions.ARCistheInvestmentManagertotheCompanyunderthetermsoftheInvestmentManagerAgreementandisthusconsideredarelatedpartyoftheCompany.
Duringtheprioryear,theCompanyannouncedtheextensionofitsmanagementagreementwiththeInvestmentManagerforafurthertermofeightyearsexpiringon21December2022.
TheInvestmentManagerisentitledtoreceiveafeefromtheCompanyatanannualrateof2percentofthenetassetsoftheCompany,payablequarterlyinarrears.TheInvestmentManagerisalsoentitledtoreceiveanannualperformancefeecalculatedwithreferencetototalshareholderreturn(“TSR”),wherebythefeeis20percentofanyexcessoveranannualisedTSRof15percentsubjecttoarolling3yearhighwatermark.
TheInvestmentManagerhasamanagementagreementdirectlywiththeH2Opropertycompany,AlphaTigerSpain1,SLUunderwhichitearnsafeeof0.9%perannumbaseduponthegrossassetsofAlphaTigerSpain1,SLU.InordertoavoiddoublechargingfeestotheCompany,theInvestmentManagerwillprovidearebatetotheCompanyofaproportionofitscurrentfeeequivalenttothevalueoftheCompany’snetassetvalueattributabletotheH2Oinvestment.
TheCompanyhasinvestedinIMPTwhereARCistheInvestmentManager.MarkRattigan,aspartnerofARC,isaDirectorontheBoardofIMPT.ARCrebatesfeesearnedinrelationtotheCompany’sinvestmentinIMPT.
TheCompanyhasinvestedinFIAFwhereARPIA,asubsidiaryofARC,istheInvestmentManager.ARCistheAuthorisedCorporateDirectorofFIAF.ARCrebatesfeesearnedinrelationtotheCompany’sinvestmentinFIAF.
TheCompanyhasinvestedinAURE,whereARCistheInvestmentManager.MarkRattiganandBradBauman,partnersofARC,areDirectorsontheBoardofAURE.ARCrebatesfeesearnedinrelationtotheCompany’sinvestmentinAURE.
TheCompanyhasinvestedinEuropip,whereARPIA,asubsidiaryofARC,istheInvestmentAdviser.ARCrebatesfeesearnedinrelationtotheCompany’sinvestmentinEuropip.
TheCompanyhasinvestedinBCP,whereARPIA,asubsidiaryofARC,istheIndustryAdviser.ARCrebatesfeesearnedinrelationtotheCompany’sinvestmentinBCP.
TheCompanyhasinvestedinRomulus,whereARPIA,asubsidiaryofARC,isTrustManagerandPropertyManager.ARCrebatesfeesearnedinrelationtotheCompany’sinvestmentinRomulus.
TheCompanyhadinvestedinACE,whereARPIA,asubsidiaryofARC,waspropertyinvestmentadviser.ARCrebatedfeesearnedinrelationtotheCompany’sinvestmentinACE.ACEwasdissolvedon29October2014.
TheCompanyhasinvestedinPhase1000,CambourneBusinessPark,Cambridge,andARCwasappointedasAssetandPropertyManagerofthejointventureentity.ARCrebatestoARTtherelevantproportionoffeesearnedbyARC,whichapplytotheCompany’sinvestment.
LoansgrantedtorelatedpartiesincludeloansgrantedtoIMPT,AUREandEuropip.Detailsoftheloanamountsoutstandingandinterestreceivableasatyearendareprovidedinnote16.
DetailsoftheInvestmentManager’sfeesfortheyeararedisclosedonthefaceoftheconsolidatedstatementofcomprehensiveincomeandthebalancepayableat31March2015isprovidedinnote17.
AlphaGlobalPropertySecuritiesFundPte.Ltd,awhollyownedsubsidiaryofARCregisteredinSingapore,held22,550,000sharesintheCompanyat31March2015(31March2014:20,000,000).
ARCdidnotholdanysharesintheCompanyat31March2015(31March2014:2,550,000).Thefollowing,beingpartnersoftheInvestmentManager,haveinterestsinthefollowingsharesoftheCompanyat31March2015:
31 March 2015
Numberofsharesheld
31 March 2014
Numberofsharesheld
IPGLLimited 3,010,100 3,010,100
BrianFrith 1,125,000 1,125,000
PhillipRose 139,695 139,695
BradBauman 55,006 55,006
RonaldArmist 500 500
DetailsoftheDirectors’feesandshareinterestsintheCompanyareincludedintheDirectorsReport.
SerenaTremlettisalsotheManagingDirectorandamajorshareholderofMorganSharpeAdministrationLimited,theCompany’sAdministratorandSecretary.DuringtheyeartheCompanypaidMorganSharpeAdministrationLimitedfeesof£81,000(2014:£77,000)andnoamountwasoutstandingatyearend.
Alpha Real Trust Limited : Annual report 201552
Notes to the financial statements (continued)For the year ended 31 March 2015
23. Financial instruments risk exposure and managementIncommonwithsimilarbusinesses,theGroupisexposedtorisksthatarisefromitsuseoffinancialinstruments.ThisnotedescribestheGroup’sobjectives,policiesandprocessesformanagingthoserisksandthemethodsusedtomeasurethem.Furtherquantitativeinformationinrespectoftheserisksispresentedthroughoutthesefinancialstatements.
TherehavebeennosubstantivechangesintheGroup’sexposuretofinancialinstrumentrisks,itsobjectives,policiesandprocessesformanagingthoserisksorthemethodsusedtomeasurethemfrompreviousperiodsunlessotherwisestatedinthisnote
Principal financial instrumentsTheprincipalfinancialinstrumentsusedbytheGroupfromwhichfinancialinstrumentriskarises,areasfollows:
Financial assets and liabilities carrying value 31 March 2015
£’000
31 March 2014
£’000
Current financial assets
Investmentheldatfairvalue 15,868 13,145
Tradeandotherreceivables 2,303 19,135
Cashandcashequivalents 14,817 5,444
Derivatives held at fair value through profit or loss
Foreignexchangeforwardcontract 388 159
Total current financial assets 33,376 37,883
Non-current financial assets
Derivatives held at fair value through profit or loss
Interestratecap 11 63
Total derivatives held at fair value through profit or loss 11 63
Investmentsheldatfairvalue 6,566 11,275
Indirectpropertyinvestmentatfairvalue 4,851 4,525
Tradeandotherreceivables 22,443 11,500
Total non-current financial assets 33,871 27,363
Total financial assets 67,247 65,246
Current financial liabilities
Tradeandotherpayables (2,347) (1,374)
Bankborrowings (515) (595)
Total current financial liabilities (2,862) (1,969)
Non-current financial liabilities
Bankborrowings (51,557) (58,740)
Totalnon-currentfinancialliabilities (51,557) (58,740)
Total financial liabilities (54,419) (60,709)
Alpha Real Trust Limited : Annual report 2015 53
Notes to the financial statements (continued)For the year ended 31 March 2015
Netchangesinrealisedandunrealisedgainsorlossesonfinancialinstrumentscanbesummarisedasfollows:
Year ended 31 March 2015
£’000
Year ended 31 March 2014
£’000
Realised gains or losses on loans and receivables
Bankinterestreceivable 58 91
Interestreceivableonconvertibleloanstock 516 1,011
Interestreceivableonloansgrantedtorelatedparties 2,922 2,014
Impairmentoftradeandotherreceivables (67) 33
Net realised gains on loans and receivables 3,429 3,149
Unrealised gains and losses on financial assets and liabilities held at fair value through profit or loss
Movementinfairvalueofinterestratecap (48) (94)
Movementinfairvalueofcurrencyswap - (110)
Movementinfairvalueofforeignexchangeforwardcontract 551 159
Movementinfairvalueofinvestments (1,634) (1,494)
Undistributedinvestmentincome 831 474
Realised gains and losses on financial assets and liabilities held at fair value through profit or loss
Dividendreceivedfrominvestmentsheldatfairvalue 64 88
Distributedinvestmentincome 512 691
Net gains/(losses) on financial assets and liabilities held at fair value through profit or loss 276 (286)
Netinterestincomecanbesummarisedasfollows:
Year ended 31 March 2015
£’000
Year ended 31 March 2014
£’000
Bankinterestreceivable 58 91
Interestreceivableonconvertibleloanstock 516 1,011
Interestreceivableonloansgrantedtorelatedparties 2,922 2,014
Interestonbankborrowings (1,899) (2,098)
Net interest income 1,597 1,018
General objectives, policies and processesTheBoardhasoverallresponsibilityforthedeterminationoftheGroup’sriskmanagementobjectivesandpoliciesand,whilstretainingultimateresponsibilityforthem,ithasdelegatedtheauthorityfordesigningandoperatingprocessesthatensuretheeffectiveimplementationoftheobjectivesandpoliciestotheGroup’sfinancefunction.
TheoverallobjectiveoftheBoardistosetpolicesthatseektoreduceriskasfaraspossiblewithoutundulyaffectingtheGroup’scompetitivenessandflexibility.Furtherdetailsregardingthesepoliciesaresetoutbelow.
Project monitoringProjectsaremonitoredthroughregularProjectControlMeetingsheldwithdevelopmentpartnerstodiscussprogressandmonitorrisks.TheInvestmentManagerattendsthesemeetingsandreportstotheBoardonaquarterlybasis.
23. Financial instruments risk exposure and management (continued)
Alpha Real Trust Limited : Annual report 201554
Notes to the financial statements (continued)For the year ended 31 March 2015
Credit riskCreditriskariseswhenafailurebycounterpartiestodischargetheirobligationscouldreducetheamountoffuturecashinflowsfromfinancialassetsonhandatthebalancesheetdate.
Thecarryingamountoffinancialassetsrecordedinthefinancialstatements,whichisnetofimpairmentlosses,representstheGroup’smaximumexposuretocreditrisk.
TheGrouppolicyistomaintainitscashandcashequivalentbalanceswithanumberoffinancialinstitutionsasameansofdiversifyingcreditrisk.TheGroupmonitorstheplacementofcashbalancesonanongoingbasisandhaspoliciestolimittheamountofcreditexposuretoanyfinancialinstitution.
Withregardstotheinvestmentpropertybusiness,apropertyadvisormonitorsthetenantsinordertoanticipateandminimisetheimpactofdefaultbyoccupationaltenants.Wherepossible,tenants’riskismitigatedthroughrentalguarantees.TheGroupmeetswiththetenantfrequentlyandmonitorsitsfinancialperformanceclosely.
Withregardtoitsotherinvestments,theGroupreceivesregularupdatesfromtherelevantInvestmentManagerastotheperformanceoftheunderlyinginvestmentsandassessesitscreditriskasaresult.
Liquidity riskLiquidityriskistheriskthatariseswhenthematurityofassetsandliabilitiesdoesnotmatch.Anunmatchedpositionpotentiallyenhancesprofitability,butcanalsoincreasetheriskoflosses.TheGrouphasprocedureswiththeobjectofminimisingtheseriskssuchasmaintainingsufficientcashandotherhighlyliquidcurrentassets.CashandcashequivalentsareplacedwithfinancialinstitutionsonashorttermbasisreflectingtheGroup’sdesiretomaintainahighlevelofliquidityinordertoenabletimelycompletionofinvestmenttransactions.
ThefollowingtableillustratesthecontractualmaturityanalysisoftheGroup’sfinancialliabilities.
31 March 2015 Within 1 year
£’000
1-2 years
£’000
2-5 years
£’000
Over 5 years
£’000
Total
£’000
Tradeandotherpayables 2,342 - - - 2,342
Interestpayableonbankborrowings 1,509 1,498 761 - 3,768
Bankborrowings 397 397 51,687 - 52,481
Total 4,248 1,895 52,448 - 58,591
31 March 2014 Within 1 year
£’000
1-2 years
£’000
2-5 years
£’000
Over 5 years
£’000
Total
£’000
Tradeandotherpayables 1,372 - - - 1,372
Interestpayableonbankborrowings 1,877 1,863 2,793 - 6,533
Bankborrowings 449 449 58,842 - 59,740
Total 3,698 2,312 61,635 - 67,645
Market risk
(a) Foreign exchange riskTheGroupoperatesinIndiaandSpainandisexposedtoforeignexchangeriskarisingfromcurrencyexposureswithrespecttoIndianRupeesandEuros.Foreignexchangeriskarisesfromfuturecommercialtransactions,recognisedmonetaryassetsandliabilitiesandnetinvestmentsinforeignoperations.
TheGroup’spolicyis,wherepossible,toallowGroupentitiestosettleliabilitiesdenominatedintheirfunctionalcurrencywiththecashgeneratedfromtheirownoperationsinthatcurrency.
TheGroupdoesnotcurrentlyhedgeitsIndianforeigncurrencyexposureandonlypartiallyhedgesitsEurocurrencyexposurethroughaforeignexchangeforwardcontract:theGroupenteredintothiscontracttohedge€5millionofEuroexposure.
TheBoardmonitorstheGroup’sexposuretoforeigncurrenciesonaquarterlybasisaspartofitsRiskManagementreview.
AstrengtheningoftheRupeeby5RupeesagainstSterling(representingmanagement’sassessmentofareasonablypossiblechange)wouldincreasethenetassetsby£276,000(2014:£240,000).AweakeningoftheRupeeby5Rupeeswoulddecreasenetassetsby£248,000(2014:£217,000).AstrengtheningoftheEuroby5centswouldincreasethenetassetsby£578,000(2014:£500,000).AweakeningoftheEuroby5centswoulddecreasenetassetsby£537,000(2014:£544,000).
23. Financial instruments risk exposure and management (continued)
Alpha Real Trust Limited : Annual report 2015 55
Notes to the financial statements (continued)For the year ended 31 March 2015
b) Cash flow and fair value interest rate riskTheGroup’sinterestrateriskarisesprimarilyfromlongtermborrowings.TheGrouphasinterestratecaps,enteredintobytheSpanishpropertyowningSPV,underwhichthefloatingrateelementoftheinterestchargeiscappedat2.85%forthefulltermoftheloanon€50millionoftheprincipalborrowingsof€75million.
TheGroupalsoholdssignificantcashbalancesandloanassetswhichaccrueinterestbasedonvariableinterestrates.
TheGroup’scashflowisperiodicallymonitoredbytheBoard.
Thesensitivityanalysisbelowisbasedonachangeinanassumptionwhileholdingallotherassumptionsconstant.Inpractice,thisisunlikelytooccur,andchangesinsomeoftheassumptionsmaybecorrelated–forexample,changesininterestrateandchangesinmarketvalue.
FortheGroup,adecreaseof100basispointsininterestrateswouldresultinanincreaseinpost-taxprofitsof£386,000(2014: £555,000).Anincreaseof100basispointsininterestrateswouldresultinadecreaseinposttaxprofitsof£386,000(2014: £555,000).
c) Price riskTheCompanyannouncedon28May2010thatithadenteredintoaSettlementAgreementwithLogixGroupunderwhichithassolditsinterestinitsTechnovainvestmentandhasagreedafloorpricemechanismforthesaleoftheGalaxiaproject.TheSettlementAgreementlapsedon28May2011returningthepartiestothepre-existingagreement.Thetermsofthepre-existingagreementprovideforaminimumreturnofINR450millionandanadditionalpreferredreturnandprofit.Asdetailedinnote14,inJanuary2015,theICCArbitrationconcludeditsarbitrationproceedingsanddeclaredinfavouroftheGroup’sclaimsagainstLogixGroup.TheAwardgrantedbytheICCtotheGroupequals£9.2 million,basedonyearendexchangerates;plus15%perannuminterestonallsumsawardeduntiltheactualdateofpaymentbyLogix.TheDirectors,takingintoconsiderationlegaladvicereceivedfollowingLogix’schallengeoftheAward,consideritprudenttocontinuetovaluetheindirectinvestmentatINR450millionduetouncertaintyovertimingandfinalvalueofthe Award.
TheGrouphasinvestedinincomeunitsofFIAF,afundofferingmonthlyredemptions(note15).FIAFisanopenendedunauthorisedunittrustwhichoperatesamonthlydealingfacilitytoprovideinvestmentliquidity.Thevalueoftheincomeunitsareassessedmonthlyandaresubjecttofluctuation.
TheGrouphasinvestedinIMPT’sordinaryshares,whicharetradedontheLSEsoaresubjecttomarketfluctuation.
TheGrouphasinvestedinParticipatingRedeemablePreferenceSharesinEuropip,BCPandHLP;thevalueofthesesharesisassessedregularlyandissubjecttofluctuation:EuropipandBCPprovidepricingquarterlyandHLPprovidespricinghalfyearly.
IfthepriceoftheaggregatedinvestmentsinParticipatingRedeemablePreferenceShareshadincreasedby5%,withallothervariablesheldconstant,thiswouldhaveincreasedthenetassetsvalueoftheGroupby£287,000(31March2014:£495,000).Conversely,ifthepriceoftheaggregatedinvestmentsinParticipatingRedeemablePreferenceShareshaddecreasedby5%thiswouldhavedecreasedthenetassetsvalueoftheGroupby£287,000(31March2014:£495,000).
d) Fair valuesThefollowingmethodsandassumptionswereusedtoestimatefairvalues:
● Cashandshort-termdeposits,tradereceivables,tradepayables,andothercurrentliabilitiesapproximatetheircarryingamountsduetotheshort-termmaturitiesoftheseinstruments
● Thefairvalueofthederivativeinterestratecapcontractsisdeterminedbyreferencetoanapplicablevaluationmodelemployedbythecontractualcounterparties;valuationsareprovidedquarterly
● Thefairvalueoftheforeignexchangeforwardcontractisdeterminedbyreferencetothequarterendoneyearforwardmarketrateprovidedbythecontractualcounterparty
● ThefairvalueoftheGalaxiainvestmentisbasedonquarterlyDirectors’estimateoftherecoverableamountbaseduponlegaladvice
● ThefairvalueoftheinvestmentinIMPT’sordinaryshares,whicharetradedontheLSE,isbaseduponthemidpriceoftheordinarysharesatthebalancesheetdate
● ThefairvalueoftheFIAF,BCP,HLPandEuropip’sinvestmentsisbaseduponthepriceprovidedbytheissuersfortherelevantshareclassowned:thisiscalculatedbyreferencetothenetassetvalueoftherespectiveinvestment.Thesenetassetvaluesarebasedonobservableinputsandthereforearedeemedtobelevel2financialassets(seenote24).
Asaresultthecarryingvalueslessimpairmentprovisionofloansandreceivablesandfinancialliabilitiesmeasuredatamortisedcostareapproximatetotheirfairvalues.
Note24containsdetailsregardingthefairvaluemeasurementoftheinterestratecapcontracts.
Capital risk managementTheBoard’sobjectiveswhenmanagingcapitalaretosafeguardtheGroup’sabilitytocontinueasagoingconcerninordertoprovidereturnsforshareholdersandbenefitsforotherstakeholdersandtomaintainanoptimalcapitalstructuretoreducethecostofcapital.
Inordertomaintainoradjustthecapitalstructure,theGroupmayadjusttheamountofdividendspaidtoshareholders,returncapitaltoshareholders,issuenewsharesorsellassetstoreducedebt.
TheBoard’sregularlyreviewstheadequacyoftheGroup’slevelofborrowingsbymonitoringitscompliancewiththerelevantbankcovenants.
23. Financial instruments risk exposure and management (continued)
Alpha Real Trust Limited : Annual report 201556
Notes to the financial statements (continued)For the year ended 31 March 2015
24. Fair value measurement IFRS13requiresdisclosureofthefairvaluemeasurementoftheGroup’sassetsandliabilities,therelatedvaluationtechniques,thevaluations’recurrenceandtheinputsusedtoassessanddevelopthosemeasurements.
TheGroupdisclosesfairvaluemeasurementsbylevelofthefollowingfairvaluemeasurementhierarchy:
● Quotedprices(unadjusted)inactivemarketsforidenticalassetsorliabilities(level1).
● Inputsotherthanquotedpricesincludedwithinlevel1thatareobservablefortheassetorliability,eitherdirectly(thatis,asprices)orindirectly(thatis,derivedfromprices)(level2).
● Inputsfortheassetorliabilitythatarenotbasedonobservablemarketdata(thatis,unobservableinputs)(level3).
Thelevelinthefairvaluehierarchywithinwhichtheassetorliabilityiscategorisedisdeterminedonthebasisofthelowestinputthatissignificanttothefairvaluemeasurement.Assetsandliabilitiesareclassifiedintheirentiretyintooneofthethreelevels.
Investmentpropertyisvaluedonarecurringbasis:halfyearly.
TheGroup’svaluersderivethefairvalueoftheinvestmentpropertybyapplyingthemethodologyandvaluationguidelinesassetoutbytheRoyalInstitutionofCharteredSurveyorsintheUnitedKingdom.Thisapproachisbasedondiscountingthefuturenetincomereceivablefrompropertiestoarriveatthenetpresentvalueofthatfutureincomestream.Futurenetincomecomprisestherentsecuredunderexistingleases,lessanyknownorexpectednon-recoverablecostsandthecurrentmarketrentattributabletovacantunits.Theconsiderationbasisforthiscalculationexcludestheeffectsofanytaxesonthenetincome.Thediscountfactorsusedtocalculatefairvalueareconsistentwiththoseusedtovaluesimilarproperties,withcomparableleasesineachoftherespectivemarkets.Adecreaseinthenetrentalincomeoranincreaseinthediscountratewilldecreasethefairvalueoftheinvestmentproperty.
Indirectpropertyinvestmentatfairvalue,investmentsheldatfairvalue,derivativecontractsandtheConvertibleLoan’soptionarevaluedonarecurringbasisasindicatedinnote23.
Thefollowingtableshowsananalysisofthefairvaluesofassetsandliabilitiesrecognisedinthebalancesheetbylevelofthefairvaluehierarchydescribedabove:
31 March 2015 Assets and liabilities measured at fair value
Level 1
£’000
Level 2
£’000
Level 3
£’000
Total
£’000
Assets measured at fair value
Non-current
Investmentproperty(note13) - - 65,544 65,544
Indirectpropertyinvestmentatfairvalue(note14) - - 4,851 4,851
Investmentsheldatfairvalue 834 5,732 - 6,566
Interestratecap - 11 - 11
Current
Investmentsheldatfairvalue - 15,868 - 15,868
Foreignexchangeforwardcontract - 388 - 388
Assets for which fair values are disclosed
Non-current
Tradeandotherreceivables - 22,443 - 22,443
Current
Tradeandotherreceivables - 2,303 - 2,303
Liabilities for which fair values are disclosed
Current
Tradeandotherpayables - (2,347) - (2,347)
Bankborrowings - (515) - (515)
Non-current
Bankborrowings - (51,557) - (51,557)
Alpha Real Trust Limited : Annual report 2015 57
Notes to the financial statements (continued)For the year ended 31 March 2015
31 March 2014 Assets and liabilities measured at fair value
Level 1
£’000
Level 2
£’000
Level 3
£’000
Total
£’000
Assets measured at fair value
Non-current
Investmentproperty(note13) - - 69,942 69,942
Indirectpropertyinvestmentatfairvalue(note14) - - 4,525 4,525
Investmentsheldatfairvalue 1,243 10,032 - 11,275
Interestratecap - 63 - 63
Current
Investmentsheldatfairvalue - 13,145 - 13,145
Foreignexchangeforwardcontract - 159 - 159
Assets for which fair values are disclosed
Non-current
Tradeandotherreceivables - 11,500 - 11,500
Current
Tradeandotherreceivables - 19,135 - 19,135
Liabilities for which fair values are disclosed
Current
Tradeandotherpayables - (1,374) - (1,374)
Bankborrowings - (595) - (595)
Non-current
Bankborrowings - (58,740) - (58,740)
TheGroupdetermineswhethertransfershaveoccurredbetweenlevelsinthehierarchybyre-assessingcategorisation(basedonthelowestlevelinputthatissignificanttothefairvaluemeasurementasawhole)attheendofeachreportingperiod.
Movementsinlevel3ofthefairvaluemeasurements,duringtheyearended31March2015,canbesummarisedasfollows:
Investment property
£’000
Indirect property investment at fair
value
£’000
At 1 April 2014 69,942 4,525
Subsequentcapitalexpenditureafteracquisition 602 -
Movementinrentincentives/ initialcosts 576 -
Fairvalueadjustment 2,721 -
Effectofforeignexchange (8,297) 326
At 31 March 2015 65,544 4,851
Therewerenotransfersbetweenlevel1andlevel2fairvaluemeasurementsandnotransfersintooroutoflevel3fairvaluemeasurementsduringtheyearended31March2015.
24. Fair value measurement (continued)
Alpha Real Trust Limited : Annual report 201558
Notes to the financial statements (continued)For the year ended 31 March 2015
Thefairvalueofinvestmentpropertyisbasedonunobservableinputsanditisthereforedisclosedaslevel3.Thefollowingmethods,assumptionsandinputswereusedtoestimatefairvaluesofinvestmentproperty:
31 March 2015
Class of investment property Carrying amount / fair value
’000
Area
(squaremeters)
Valuation technique Significant unobservable inputs Range/value
Europe £65,544(€89,598) 51,825 Discountedcashflow GrossEstimatedRentalValue(‘ERV’)persqmp.a.
€6.00/€129.50
Discountrate 11.75%
31 March 2014
Class of investment property Carrying amount / fair value
’000
Area
(squaremeters)
Valuation technique Significant unobservable inputs Range/value
Europe £69,942(€84,630) 51,825 Discountedcashflow GrossERVpersqmp.a. €6.00/€129.50
Discountrate 11.75%
ThehighrageofERVsreflectsthenatureoftheshoppingcentreassetswhichtypicallycompriseunitsrangingfromin-mallkiosksoflessthan10squaremetrestolargefloorplateretailerswhichcanoccupyunitsinexcessof3,000squaremetres.
TheDirectorsassessedatthebalancesheetdatewhethertheGroup’sinvestmentpropertyisbeingexploitedaccordingtoitshighestandbestuseandtheyaresatisfiedthatthisisthecase.
25. Commitments
TheGrouphadnoun-providedmaterialcommitmentswithinitsGroupundertakings.
24. Fair value measurement (continued)
Alpha Real Trust Limited : Annual report 2015 59
Directors
DavidJeffreys(Chairman)JeffChowdhryRoddySagePhillipRoseSerenaTremlett
Registered office
OldBankChambersLaGrandeRueStMartin’sGuernseyGY46RT
Investment Manager
AlphaRealCapitalLLPLevel6,338EustonRoadLondonNW13BG
Administrator and secretary
MorganSharpeAdministration LimitedOldBankChambersLaGrandeRueStMartin’sGuernseyGY46RT
Broker
PanmureGordon(UK)LimitedOneNewChangeLondonEC4M9AF
Independent valuers in India
ColliersInternational(Hong Kong)LimitedSuite5701CentralPlaza18HarbourRoadWanchaiHongKong
Independent valuers in Spain
AguirreNewmanValoracionesyTasacionesS.A.U.CalledeGeneralLacy,23Madrid,28045Spain
Independent Auditor
BDOLimitedPlaceduPréRueduPréStPeterPortGuernseyGY13LL
Tax advisors in Europe
Ernst&YoungLLP1MoreLondonPlaceLondonSE12AF
Tax advisors in India
BMRAdvisorsTheGreatEasternCentreFirstFloor70,NehruPlaceNewDelhi–110019India
Legal advisors in Guernsey
CareyOlsenPOBox98,CareyHouseLes BanquesStPeterPortGuernseyGY14BZ
Legal advisors in the UK
NortonRose3MoreLondonRiversideLondonSE12AQ
Legal advisors in India
AZB&PartnersPlotA-8Sector4NOIDA201301India
Legal advisors in Spain
PerezLlorcaAlcalá,6128014MadridSpain
Registrar
ComputershareInvestorServices(Jersey)LimitedQueenswayHouseHilgroveStreetStHelierJerseyJE11ES
Directors and Company information
Alpha Real Trust Limited : Annual report 201560
Shareholder information FurtherinformationontheCompany,compliantwiththeSFMregulations,canbefoundattheCompany’swebsite:www.alpharealtrustlimited.com
Share price
TheCompany’sOrdinarySharesarelistedontheSFMoftheLondonStockExchange.
Change of address
Communicationswithshareholdersaremailedtotheaddressesheldontheshareregister.Intheeventofachangeofaddressorotheramendment,pleasenotifytheCompany’sRegistrarunderthesignatureoftheregisteredholder.
Investment Manager
TheCompanyisadvisedbyAlphaRealCapitalLLPwhichisauthorisedandregulatedbytheFinancialConductAuthorityintheUnitedKingdom.
Financial calendar
Financial reporting Reporting/Meeting dates Dividend period Ex-dividend date Record date Payment date
Annualreportpublished 26June2015 Quarterending31March2015
2July2015 3July2015 17July2015
AnnualGeneralMeeting 12August2015
Tradingupdatestatement(Qtr1)
13August2015 Quarterending30June2015
27August2015 28August2015 25September2015
Halfyearreport 11November2015 Quarterending30September2015
3December2015 4December2015 18December2015
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www.alpharealtrustlimited.com