24 Apr 2009 07:00
23 April 2009
The Advantage Property Income Trust Limited
(the "Company")
Preliminary Results for the Year to 31 December 2008
The Advantage Property Income Trust Limited (LSE: TAP), a company focused on investment in a diversified portfolio of income-producing commercial property in the United Kingdom and the Channel Islands, presents its results for the year ended 31 December 2008.
Highlights
Source: Investment Property Databank Annual Benchmark Report excluding Central London December 2008
2 Source: Investment Property Databank UK Annual Property Index results for the year to 31st December 2008
3 Source: Investment Property Databank UK Annual Property Index results for the year to 31st December 2008
For further information, please visit www.tapincome.com or contact:
| Christopher Carter Keall, Valad Asset Management (UK) Ltd | 020 7659 6666 |
| James Maxwell / Daniel Horwood, Singer Capital Markets Ltd | 020 3205 7500 |
| Jeremy Carey, Gemma Bradley Tavistock Communications Ltd | 020 7920 3150 |
| Anson Fund Managers Limited, Secretary | 01481 722260 |
Chairman's Statement
"TAP's strategy for 2008 was to increase income, reduce debt and realise assets where we have concluded initiatives. In addition, we adjusted the dividend in line with profits, cut costs, reduced capital expenditure, maintained a suitable debt strategy, kept in close touch with our debt providers and liaised regularly with our shareholders.
We have concluded 27 rent reviews and lease renewals in 2008, more than any other year since the Company was launched, we have completed 12 new lettings, adding close to £390,000 to our rental income, and completed 7 sales, realising over £8 million at levels over 5.6% in excess of the preceding valuation.
Notwithstanding this, 2008 was the annus horribilis for real estate and, although this time last year my statement concluded that further capital falls would be seen, the level of fall and the severity of the economic downturn have been significantly greater than any predictions.
TAP saw capital value falls of 21.1% in 2008. This compares with the market fall of 26.3% as measured by the Investment Property Databank (IPD) Annual Index. The debt in the Company increased the fall in the Net Asset Value to 41.9% despite the Company selling 7 assets and applying the proceeds, along with the Buncefield insurance claim monies, to the repayment of £14 million of its debt (11% of the outstanding debt as at 31 December 2007).
As at the end of 2008 the market continues to discount the Company's share price from its NAV and as at 31 December 2008 the discount was 84%. Under normal circumstances a reduction in the discount to NAV should occur. However, such a reduction will only occur when capital values are seen as representing the bottom of the cycle and the retail investor is confident that he is investing through the right medium given recent liquidity problems. At this time, forecasts indicate a further 10-15% fall from December values and certain open-ended vehicles remain closed to withdrawals.
The TAP discount more than accounts for this level of future reduction. However, the confidence of the retail market remains badly dented by the perceived correlation to residential house pricing and the current poor view of commercial property. The falls in capital values have put strain on loan to value covenants across geared funds and companies. Furthermore, these falls have significantly affected the appetite of our investors and forced some shareholders to sell at an inopportune time.
Encouragingly, the TAP portfolio has continued its outperformance against the IPD index due to its sector weightings, the small lot sizes, the higher income yield helping outperformance and the added value initiatives that continue to provide regular contributions to capital and income returns.
Gearing
At the end of December, the Group had bank debt of £111.8 million, equivalent to 56.9% of gross property assets. Of this debt, the interest rate on £79.1 million has been fixed at blended rate of 5.2% (before margin) and the interest rate on the remaining £32.7 million is floating. The weighted average cost of debt during 2008 was 5.95%.
The bank debt is made up of two facilities: one from the Bank of Scotland for £98.3 million of which £76.5 million had been drawn down at the financial reporting date and one from Capmark for £35.3 million which has been fully drawn down. Following the year end, the Group has completed an amendment of the terms of the revolving bank facility with the Bank of Scotland. The amendment provides for revised margins over the 3 month London Interbank Offer Rate on the basis of a sliding scale of loan to value ratios up to a maximum of 70%. The facility has also been reduced from £98.3 million to £78.0 million.
Dividends
When the Company was established it was expected that dividends would be funded partly from recurring income and partly from capital gains from sales of properties where management initiatives had been completed. In current market conditions it is not realistic to rely on such gains and the dividend policy was amended in November 2008 to one based on recurring income.
TAP continues to offer among the highest dividend yields of all UK listed property investment companies. The dividend as at 31 December was 115% covered. Going forward, in line with the revised dividend policy, the dividend will be at the level of profits and will therefore be fully covered. The Board will continue to review the dividend policy each quarter as a matter of course.
The Board will continue to give consideration to making market purchases of the Company's own shares, subject to the Company's authority to make such purchases being renewed at the forthcoming general meeting to be held under section 199 of The Companies (Guernsey) Law, 2008, as amended.
Future Prospects
The commercial property market's expectations are for a likely stabilisation in the investment markets in 2009 following recent price falls and volatility and some measured improvement in the discount to NAV as sentiment improves and the underlying fundamentals of the property market are reflected in share prices.
The economic recession to the end of December has seen 1.8% of our occupiers enter into administration. However, with a little over 220 occupiers and just under 70 assets we are highly diversified. The Company has undertaken through our Property Fund Adviser a significant amount of research in respect of our occupiers. We have provided 10% of the occupiers with short-term monthly rental payments. These arrangements have been conceded when we are able to review management accounts and understand exactly where such a plan can help.
The forecasts of future capital growth remain subject to macro economic factors. However, with deposit rates at an all time low and property yields at a cyclical high, it is probable that investors will begin to return and enjoy the benefits of this gap.
At present, TAP will continue to maintain a defensive stance. During 2009 we anticipate the market will reach its low point. With this in mind we are prepared to make further debt repayments and the Company's assets continue to be appraised in detail to identify added value and growth prospects. Where the assets do not meet required returns, they will be considered for sale.
We firmly believe that the Company can deliver long term income and income growth. Short-term issues are challenging and painful but, much as the yield hardening of the early 2000's occurred, property yields will return to a realistic level and commercial property status as a long term investment medium will return."
CHRISTOPHER N FISH
Chairman
23 April 2009
Property Fund Adviser's Report
Property Market Background
The commercial property market recorded its worst year on record in 2008 according to IPD with a marked increase in the speed and extent of capital value declines in the second half of the year, which was driven by continued outward yield shift across all sectors. Global property consultancy, CB Richard Ellis (CBRE) recorded an All Property equivalent yield of 8.6% as at 31 December 2008. This reflects a 35.5% price correction from the June 2007 peak in capital values when the CBRE All Property Equivalent yield was at 5.4%. Many commentators are now suggesting a fall in capital values from peak to trough of 50%.
The market total return for the preceding 12 months now stands at -22.1% IPD Annual Index with an all property capital decline of -26.3% over the same period underlining this performance. According to CBRE, all property rental growth ended 2.4% down in 2008, illustrating the growing weakness in occupier markets. This was due mainly to the office sector which saw -6.8% rental growth in 2008, the majority of these falls were in central London office rents.
Market transaction volumes continue to be very low and are likely to remain so in the short term, with debt driven purchasers still struggling to secure lending. However, declining interest rates are making the returns on other asset classes significantly less appealing and causing investors to look again at real estate, particularly given the lack of competing buyers. There is growing optimism that some degree of traction will return to the UK real estate market in the latter half of 2009 as equity investors look to place their cash.
Portfolio Activity
The income return of 6.6 % for the year ended 31 December 2008 is significantly in excess of the IPD Annual Property Index at 5.6%. The income is well diversified across 221 tenants with an average unexpired lease term of 6.6 years. The portfolio remains broadly spread across the main commercial sectors and has maintained its focus on the core strategy of income and income growth from a balanced portfolio.
The Company made seven asset disposals during the course of the year, achieving an average premium to preceding valuation of 5.6%. The sales in 2008 were part of a strategy of exiting stabilised low yielding or vacant assets. The receipts from these sales amounted to over £8.1 million showing a profit above the preceding valuations of just over £0.4 million, and these receipts were applied to the repayment of debt.
The disposals included three retail premises, two industrial properties, one office building and the converted upper parts of another. In Morecambe, the sale of the retail premises were split and sold as three individual units in order to maximise the price achieved. All three units were let with shortening income profiles and the disposal completed in January 18% above valuation. In March, TAP sold their asset in Beastfair Pontefract. This secondary retail shop was let with seven years unexpired to a national multiple and was successfully sold at 2% above valuation. In June, the sale of the Company's retail shop in Lincoln, let to a national retailer, completed at auction which provided further cash to the Company. Furthermore, the upper parts of the Company's retail holding in Aberdeen were sold. These were converted into two residential flats in 2007 and then sold off on a long-leasehold basis, again at a significant premium to valuation.
In Bradford, the Company sold a small rack-rented office premises, with a shortening income profile in May. In August, an industrial estate in Stroud let to the local council was sold at a 3% premium to the preceding valuation, reflecting a net initial yield of 6.5% to the purchaser. These sales provided cash to the Company and reduced management costs on our small assets as per our stated fund strategy. Finally, in October, a 47,000sq ft industrial unit on Brackmills Industrial Estate in Northampton was sold to an owner occupier at a 4.5% premium to valuation.
Other cash generating initiatives have included the settlement, after prolonged and detailed negotiation between the PFA and the loss adjuster, of the outstanding insurance claim following the Buncefield explosion and the destruction of the Company's premises at Hemel Hempstead. A settlement was agreed at £7.87 million. The monies have now been recovered in full and the claim concluded.
No acquisitions were made in 2008. In line with the wider commercial property market, the TAP portfolio net value has fallen over the period by 22.5% on a like for like basis to £196.3 million but when one takes into account capital receipts resulting from asset management and sales, the capital growth fall for the year is -21.1 % (as measured by IPD).
A further programme of sales is planned for 2009 following the completion of asset management initiatives. This will enable the Company to continue its strategy of repaying debt. Since the year end, a vacant shop in Leicester and an industrial estate in Stoke on Trent have been sold for a combined consideration of £1.2 million.
The portfolio remains balanced with a slight bias towards retail, with retail warehousing (20.1%), high street retail (17.9%), office (37.0%), industrial (21.0%) and leisure (4.0%) continuing to provide good sector diversification.
The net lettable void of the portfolio at 31 December 2008 was 5.66% whilst the total void when taking into account the vacancy created through the implementation of asset management initiatives is at 11.20%. The current unexpired lease term of 6.63 years has improved relative to the December 2007 figure of 6.44 years.
Asset Management
An additional £0.54 million of headline rental income was secured during 2008 through the completion of new lettings, lease renewals and rent reviews.
A total of 12 new lettings were agreed, which have provided the company with in excess of £0.39 million of new income. A further 27 rent reviews and lease renewals settled in 2008 resulted in an uplift in income £0.15 million which equated to an average uplift on the preceding rent of 10%.
Transactions of note include that at Silver Court in Welwyn Garden City where serviced office provider Hot Office took a 10 year lease of 4,000 sq ft of newly refurbished office accommodation at an initial rent of £52,500 per annum. The lease includes break clauses at the end of the fifth and seventh years and the rent rises to £61,500 per annum on the fifth anniversary of the lease. Hot Office carried out extensive improvements including air conditioning and since opening for business, the occupier has been trading well above expectations.
At Runcorn, a new lease of a 13,500 sq ft industrial unit was agreed with CJ Services following the exercise of a break clause. A flexible three year lease was entered into at a rent of £70,790 per annum, a 4% premium to the previous passing rent.
The Company has continued to have notable success with retaining its occupiers at lease expiries and break clauses. During 2008, 69 per cent of tenants opted to remain in occupation following a lease event. This is down slightly from the 75 per cent tenant retention rate recorded for 2007.
Examples of this include the lease renewal that has been completed with Britannia Building Society at the Company's Torquay property. The occupier has completed a new 10 year lease at £58,750 per annum, providing the Company with a 38% uplift on the previous passing rent.
A new reversionary lease has been completed at the Company's Kettering property along with an assignment of the current lease to Travis Perkins (Properties) Limited, providing an unexpired term of 15 years. No rent free period was granted to the occupier. The outstanding rent review was also settled at £61,635 per annum, an 8% uplift on the passing rent.
Further rent reviews agreed during the year include that at the William Hill unit in Palmers Green that was settled at £50,000 per annum, achieving a 38% uplift on the previous passing rent; and on the three retail warehouse units at Sutton in Ashfield let to Halfords, Brantano and Frozen Value where rental uplifts were secured of 26%, 21% and 18% respectively.
Future performance is also being created through the substantial refurbishment and repositioning of AdVantage Reading (formally Associates House), a 25,000 sq ft office building situated on the inner distribution road. This project has now been delivered into the central Reading market, which is currently experiencing limited supply. During the year, refurbishment projects have also been completed at Advantage One, Milton Keynes, Caswell Road, Northampton, and The Swan Centre, Stratford Upon Avon, where we currently have good interest from potential occupiers and owners.
Elsewhere, asset management initiatives are currently ongoing at Southgate Retail Park in Derby, Kingscourt Leisure Park in Dundee, and within a number of our Halfords units where we anticipate adding value over the medium term. Additionally, the Company is currently progressing an insurance claim with Norwich Union following the loss of its 43,000 sq ft industrial unit on Brackmills, Northampton that was destroyed by fire in September 2008.
The asset management initiatives during the period have made a positive contribution to the performance of the underlying assets. The PFA continues to identify and execute added value initiatives to continue to provide income and income growth to investors.
Asset management has played a key part in income creation throughout the year and in particular, at Hemel Hempstead where the insurance claim on Fujifilm House has provided an ungeared total return of 290.9% (IPD). In addition, the Company's asset in Bakewell has performed well, providing a 1.6 % total return to the Company as a result of rental growth and yield movement as a result of asset management.
Overall, the diverse characteristics of the portfolio offer a number of opportunities to add value through asset management and in an environment of forecast income based returns TAP is well placed.
Fund Strategy
The PFA continues to implement the investment strategy with an emphasis on asset management with a view to maximising income returns and seeking out capital value growth. Selective disposals will continue to be made where capital growth has been maximised through asset management or where assets are forecast to under-perform in the future, whilst in turn generating profits for the Company.
It is the Company's strategy to utilise receipts to reduce the level of its gearing and to work towards the reduction in the discount to NAV that currently exists.
The portfolio is broadly balanced across the main sectors and the future asset management strategy will focus on maintaining higher income yielding opportunities and assets that provide the opportunity to achieve higher income returns through active management.
Portfolio Distribution %
| Retail | 17.9 |
| Retail Warehousing | 20.1 |
| Offices | 37.0 |
| Industrial | 21.0 |
| Leisure | 4.0 |
Lease Expiry Profile
| 0-3 yrs | 23.2 |
| 3-5 yrs | 14.9 |
| 5-10 yrs | 41.1 |
| 10-15 yrs | 16.9 |
| 15 yrs + | 3.9 |
Regional Distribution %
| South East | 37.3 |
| Scotland | 11.6 |
| East Midlands | 9.2 |
| West Midlands | 9.5 |
| Yorkshire & Humberside | 7.5 |
| North West | 6.9 |
| Channel Islands | 4.8 |
| South West | 4.4 |
| Outer London | 4.4 |
| Eastern | 2.6 |
| Wales | 1.4 |
| North East | 0.4 |
Valad Property Group
23 April 2009
Management Report
Detailed in the Chairman's Statement, the Property Fund Adviser's Report and the notes to the financial statements are a description of important events that have occurred during the financial year, their impact on the performance of the Group as shown in the financial statements and a description of the principal risks and uncertainties facing the Group, which are incorporated herein by reference.
There were no material related party transactions which took place in the financial year.
Responsibility Statement
The Board of directors jointly and severally confirm that, to the best of their knowledge:
(a) The financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and
(b) This Management Report includes or incorporates by reference a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.
Nicholas C M Renny
Director
Charles N K Parkinson
Director
Group income statement
For the year ended 31 December 2008
| Year to 31 December 2008 | Year to 31 December 2007 | ||||
| Notes | £ | £ | |||
| Revenue | |||||
| Rental income from investment properties | 16,501,552 | 16,566,782 | |||
| Lease incentive charge | (496,619) | (475,785) | |||
| Net rental income | 16,004,933 | 16,090,997 | |||
| Other income | 155,664 | - | |||
| Expenditure | |||||
| Property outgoings | 4 | (1,342,429) | (1,100,468) | ||
| Property fund adviser's fee | (1,706,373) | (2,279,743) | |||
| Other expenses | 4 | (875,270) | (745,191) | ||
| (3,924,072) | (4,125,402) | ||||
| Net operating profit for the year before finance costs | 12,236,525 | 11,965,595 | |||
| (Loss)/Gain from investments | |||||
| Realised (loss)/gain on sale of investment properties | (322,019) | 802,214 | |||
| Movement on unrealised loss on revaluation of investment properties | 10 | (50,779,878) | (24,279,124) | ||
| (51,101,897) | (23,476,910) | ||||
| Finance income/(costs) | |||||
| Interest receivable | 6 | 370,652 | 365,875 | ||
| Interest payable and similar charges | 7 | (7,375,256) | (7,028,459) | ||
| Fair value loss on interest rate swaps | (4,678,299) | (288,286) | |||
| (11,682,903) | (6,950,870) | ||||
| Net loss on ordinary activities before taxation | (50,548,275) | (18,462,185) | |||
| Taxation on net loss on ordinary activities | 8 | (19,977) | (121,809) | ||
| Net loss for the year |
|
| (50,568,252) | (18,583,994) | |
| Dividend per share | 5.69p | 6.50p | |||
| Loss per share (diluted & basic) | 9 | (35.43p) | (13.02p) | ||
| The accompanying notes form an integral part of this income statement | |||||
Group balance sheet as at 31 December 2008
| As at 31 December 2008 | As at 31 December 2007 | ||||||
| Notes | £ | £ | |||||
| Non-current assets | |||||||
| Investment properties | 193,063,084 | 257,232,687 | |||||
| Reverse lease premium | 3,206,916 | 3,565,313 | |||||
| 10 | 196,270,000 | 260,798,000 | |||||
| Current assets | |||||||
| Cash and cash equivalents | 2,331,331 | 4,922,431 | |||||
| Debtors | 11 | 5,047,171 | 5,770,956 | ||||
|
|
| 7,378,502 | 10,693,387 | ||||
| Total assets | 203,648,502 | 271,491,387 | |||||
| Current liabilities | |||||||
| Financial liabilities | 12 | (6,944,634) | (7,017,870) | ||||
| Income tax payable | (50,652) | (169,625) | |||||
|
| (6,995,286) | (7,187,495) | |||||
| Non-current liabilities | |||||||
| Bank loan | 16 | (111,759,705) | (125,754,332) | ||||
| Debt issue costs | 1,317,368 | 1,582,711 | |||||
| Fair value of swap instrument | 16 | (4,861,731) | (183,432) | ||||
| Deferred tax | 8 | (435,802) | (348,488) | ||||
|
| (115,739,870) | (124,703,541) | |||||
| Net Assets | 80,913,346 | 139,600,351 | |||||
| Represented by: | |||||||
| Share capital | 13 | 1,427,473 | 1,427,473 | ||||
| Share premium | 13 | 68,878,048 | 68,878,048 | ||||
| Reserves | 13 | 10,607,825 | 69,294,830 | ||||
| Shareholders' funds |
| 80,913,346 | 139,600,351 | ||||
| Net asset value per share | 56.68p | 97.80p | |||||
| The accompanying notes form an integral part of this balance sheet. | |||||||
Approved by:
Nicholas C M Renny Charles N K Parkinson
Director Director
23 April 2009 Group statement of changes in equity
For the year ended 31 December 2008
| Issued Share Capital | Revenue Reserve | Total | ||||
| Notes | Share Premium | Other Reserve | ||||
| £ | £ | £ | £ | £ | ||
| Opening at 1 January 2008 | 1,427,473 | 68,878,048 | 69,706,994 | (412,164) | 139,600,351 | |
| Net loss for the year | - | - | 211,626 | (50,779,878) | (50,568,252) | |
| Current year crystallisation of unrealised property gains | - | - | 1,947,045 | (1,947,045) | - | |
| Dividends paid | 17 | - | - | (8,118,753) | - | (8,118,753) |
| At 31 December 2008 | 1,427,473 | 68,878,048 | 63,746,912 | (53,139,087) | 80,913,346 |
Group statement of changes in equity
For the year ended 31 December 2007
| Issued Share Capital | Revenue Reserve | Total | ||||
| Notes | Share Premium | Other Reserve | ||||
| £ | £ | £ | £ | £ | ||
| Opening at 1 January 2007 | 1,427,473 | 68,844,113 | 72,588,604 | 24,568,792 | 167,428,982 | |
| Share issue expenses | - | 33,935 | - | - | 33,935 | |
| Net loss for the year | - | - | 5,695,130 | (24,279,124) | (18,583,994) | |
| Current year crystallisation of unrealised property gains | - | - | 304,510 | (304,510) | - | |
| Prior year crystallisation of unrealised property gains | 397,322 | (397,322) | - | |||
| Dividends paid | 17 | - | - | (9,278,572) | - | (9,278,572) |
| At 31 December 2007 | 1,427,473 | 68,878,048 | 69,706,994 | (412,164) | 139,600,351 |
Group cash flow statement
For the year ended 31 December 2008
| Year to 31 December 2008 | Year to 31 December 2007 | |||||||||
| £ | £ | |||||||||
| Operating activities | ||||||||||
| Net operating profit for the period before finance costs | 12,236,525 | 11,965,595 | ||||||||
| Adjustment for: | ||||||||||
| Decrease/(increase) in operating debtors | 576,943 | (1,376,031) | ||||||||
| (Decrease)/increase in operating creditors | (218,481) | 667,684 | ||||||||
| Reverse premium amortisation | 496,619 | 475,785 | ||||||||
| 13,091,606 | 11,733,033 | |||||||||
| Taxation paid | (29,608) | (111,961) | ||||||||
| Net cash inflow from operating activities |
|
| 13,061,998 | 11,621,072 | ||||||
| Investing activities | ||||||||||
| Purchase of investment properties | (2,706,861) | (36,826,941) | ||||||||
| Proceeds from sale of investment properties | 7,923,965 | 11,288,674 | ||||||||
| Proceeds from insurance settlement | 7,849,449 | - | ||||||||
| Net cash inflow/(outflow) from investing activities |
|
| 13,066,553 | (25,538,267) | ||||||
| Financing activities | ||||||||||
| Interest received | 370,652 | 365,875 | ||||||||
| Interest paid | (6,968,929) | (6,388,889) | ||||||||
| Share issue costs | - | (4,065) | ||||||||
| Drawdown of bank loans | - | 30,164,482 | ||||||||
| Repayment of bank loans | (13,994,627) | (948,750) | ||||||||
| Dividends paid | (8,118,753) | (9,278,572) | ||||||||
| Debt issue costs | (7,994) | (153,797) | ||||||||
| Net cash (outflow)/inflow from financing activities |
|
| (28,719,651) | 13,756,284 | ||||||
| Net decrease in cash and cash equivalents | (2,591,100) | (160,911) | ||||||||
| Opening cash and cash equivalents | 4,922,431 | 5,083,342 | ||||||||
| Closing cash and cash equivalents |
|
| 2,331,331 | 4,922,431 | ||||||
Notes to the Financial Statements
1 Corporate information
The consolidated financial statements of The Advantage Property Income Trust Limited for the year ended 31 December 2008 were authorised for issue by the board of directors on 23 April 2009. The Company was incorporated with limited liability in Guernsey on 16 June 2004. The Company's shares have been admitted to the official lists of and to trading on the London Stock Exchange's Main Markets for Listed Securities and the Channel Islands Stock Exchange. The registered office is located at Anson Place, Mill Court, La Charroterie, St Peter Port, Guernsey, GY1 1EJ.
2 Principal accounting policies
The principal accounting policies are summarised below. They have all been applied consistently throughout the year.
Statement of compliance
The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards issued by the International Accounting Standards Board (the "IASB"), applicable legal and regulatory requirements of Guernsey Law and the Listing Rules of the UK Listing Authority and the Channel Islands Stock Exchange.
IFRS 8 "Operating segments" was issued in November 2008 and is effective for financial years beginning on or after 1 January 2009. IFRS 8 requires entities to disclose segment information based on the information reviewed by the entity's chief operating decision maker. As this is a disclosure standard, it will have no impact on the financial position or financial performance of the Group when implemented in 2009.
Basis of preparation
The financial statements have been prepared under the historical cost convention, except for the measurement at fair value of investment properties and interest rate swap agreements.
The Group's business activities together with the factors likely to affect its future development, performance and position are set out in the Property Fund Adviser's report. The Group's financial position, cash flows and borrowing facilities are described in the Chairman's Statement, the Property Fund Adviser's Report, the Report of the Directors and in note 16 of the accounts. Following the year end, the Group has also completed an amendment to the terms of the revolving bank facility with the Bank of Scotland to increase the loan to value ratio from 55% to 70% with a corresponding margin increase on a sliding scale which reduces the risk considerably of a loan to value breach.
The Directors have reviewed the current and projected financial position of the Group, making reasonable assumptions about future trading performance and believe that the Group has adequate financial resources and is well placed to manage its business risks successfully despite the uncertain economic conditions. After due consideration, the directors consider that the Group has adequate resources to continue in operational existence for the foreseeable future and accordingly they continue to adopt the going concern basis in preparing the Annual Financial Report.
Changes in accounting policy
The accounting policies adopted are consistent with those of the previous financial year.
Significant accounting judgements, estimates and assumptions
The preparation of the Group's financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future.
Judgements
In the process of applying the Group's accounting policies, management has made the following judgements, apart from those involving estimations, which have the most significant effect on the amounts recognised in the financial statements:
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
Impairment of trade and other debtors
The Group tests for impairment of trade and other debtors when there are indicators that the carrying amounts may not be recoverable. The provision for impairment of debtors comprises credit note provisions and allowances for doubtful debts. In determining the recoverability of trade and other debtors the Group considers any change in the credit quality and the recoverable amount of the debtor at the reporting date.
Basis of consolidation
The Group's financial statements consolidate the accounts of the Company and its subsidiary undertakings drawn up to 31 December 2008. The results of subsidiaries acquired or sold are consolidated for the periods from or to the date on which control passed. Acquisitions are accounted for under the acquisition method.
Rental income
Rental income is accounted for on a straight line basis over the lease term of ongoing leases and is shown net of any sales tax. Any premiums or rent-free periods are spread evenly over the terms of the lease.
Expenses
All expenses are accounted for on an accruals basis. The Group's asset management and administration fees, finance costs (including interest on the bank facility) and all other expenses are charged through the Group income statement, with the exception of share issue expenses, which are charged to the share premium account.
Segmental reporting
The directors are of the opinion that the Group is engaged in a single segment of business, being that of a property investment business and substantially in one geographical area, the United Kingdom.
Investment properties
In accordance with IAS 40 (Revised), both long leasehold and freehold properties have been accounted for as investment properties.
Investment properties are initially recognised at cost, being the fair value of the consideration given, including acquisition costs associated with the investment property. Subsequent costs, including reverse lease premiums, are capitalised to the extent that such costs have an ongoing benefit to the property.
After initial recognition, investment properties are measured at fair value, with unrealised gains and losses recognised in the Group income statement. Fair value is based on the open market value, at the balance sheet date, of the properties as provided by Cushman & Wakefield, Healey & Baker, a firm of independent chartered surveyors, in accordance with the Practice Statements contained in the RICS Appraisal and Valuation Standards published by the Royal Institution of Chartered Surveyors ('Red Book') in May 2003. The valuation has been prepared by an appropriate valuer who conforms to the requirements as set out in the Red Book, acting in the capacity of external valuer.
Leases
The Group has entered into commercial property leases as lessor of its investment property portfolio. The Group has determined, based on an evaluation of the terms and conditions of the arrangements, that it retains all the significant risks and rewards of ownership of these properties and so accounts for the contracts as operating leases. Rental income, including the effect of lease incentives is recognised on a straight line basis over the lease term.
Cash and cash equivalents
For the purposes of the Group cash flow statement, cash and cash equivalents consist of cash at bank.
Taxation
The Company is exempt from Guernsey taxation on income derived outside Guernsey under the Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989. A fixed annual fee of £600 is payable to the States of Guernsey in respect of this exemption. No Guernsey taxation will arise on capital gains. The directors intend to conduct the Group's affairs such that the management and control of the Group is not exercised in the United Kingdom. Accordingly, the Company and its subsidiaries will not be liable for United Kingdom taxation on their income or gains other than certain income deriving from a United Kingdom source. The Company and its subsidiaries are subject to United Kingdom income tax on income arising on the Property Portfolio after deduction of its allowable debt financing costs and its allowable expenses.
Deferred income tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax liabilities are measured at the tax rates that are expected to apply to the period when the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.
Deferred income tax assets are recognised to the extent it is probable that taxable profit will be available against which those assets can be utilised.
Bank loans, borrowings and debt issue costs
All bank loans and borrowings are initially recognised at cost, being principal amounts received less debt issue costs paid. After initial recognition, all interest bearing loans and borrowings are subsequently measured at amortised cost. Amortised cost is calculated by taking into account any loan arrangement costs and any discount or premium on settlement. Debt issue costs incurred in obtaining loan finance are recognised over the estimated life of the loan using the effective interest rate method and charged to the income statement as part of interest expense.
Interest rate swaps
Interest rate swaps are used to reduce the Group's exposure to changes in interest rates. Swaps are initially recorded at cost (being their fair value on acquisition), and are subsequently measured at fair value. Fair value is calculated and provided by the HBOS Treasury plc.
Changes in the fair value of interest rate swaps are recognised in the Income Statement as they arise.
Earnings per share
Earnings per share have been calculated with reference to the weighted average number of shares in issue during the year.
Net asset value per share
Net asset value per share has been calculated using the net assets of the Group at the year end, and the number of shares in issue at the year end.
Trade debtors
Trade debtors, which are due on demand, are recognised and carried at the lower of their original invoiced value and recoverable amount. Provision is made when there is objective evidence that balances will not be recovered in full. Bad debts are written off when identified.
3 Staff and directors' fees
The Group did not employ staff during the year. For the year ending 31 December 2008 directors' fees of £121,250 (2007 £102,500) accrued to Ms Burton and Messrs Fish, Bould, Renny and Parkinson. On 10 January 2008 the Board resolved to reduce the directors' fees payable to each director to £24,000 per annum with effect from 1 April 2008.
4 Property outgoings and other expenses
During the year the Group incurred £1,342,429 (2007: £1,100,468) property outgoing costs and £875,270 (2007: £745,191) of other expenses that did not generate rental income. Included within these costs is the provision of impairment of trade receivables of £204,314 (2007: £198,656). During the year, the Group incurred £55,823 (2007: £44,498) of audit fees and £81,848 (2007: £86,389) of non-audit fees, which were paid to Ernst and Young LLP.
5 Debt issue costs
Debt issue costs are amortised over the loan periods. During the year £273,337 (2007 £256,910) was amortised to the group income statement.
| 6 Interest receivable | ||||||||
| Year ended 31 December 2008 | Year ended 31 December 2007 | |||||||
| Group | Group | |||||||
|
| £ | £ | ||||||
| Bank interest receivable | 362,874 | 361,313 | ||||||
| Other interest receivable | 7,778 | 4,562 | ||||||
| 370,652 | 365,875 | |||||||
| 7 Interest payable and similar charges | ||||||||
| Year ended 31 December 2008 | Year ended 31 December 2007 | |||||||
| Group | Group | |||||||
| £ | £ | |||||||
| Bank loan interest and charges | 7,101,919 | 6,771,549 | ||||||
| Amortised debt issue costs | 273,337 | 256,910 | ||||||
| 7,375,256 | 7,028,459 | |||||||
| 8 Taxation | ||
| (a) Tax on profit on ordinary activities | ||
| Year ended 31 December 2008 | Year ended 31 December 2007 | |
| Current income tax: | £ | £ |
| UK Income Tax | - | (137,280) |
| Adjustments in respect of prior years | (67,337) | (89,399) |
| (67,337) | (226,679) | |
| Deferred Tax: | ||
| Origination and reversal of timing differences | 87,314 | 348,488 |
| Total deferred tax | 87,314 | 348,488 |
| Tax charge in the income statement | 19,977 | 121,809 |
| (b) Reconciliation of the total tax charge | |||||||||
| A reconciliation of the tax charge applicable to the net loss on ordinary activities before income tax at the UK statutory income tax rate (as most income derives from UK trading) for the year ended 31 December 2008 is as follows: | |||||||||
| Year ended 31 December 2008 | Year ended 31 December 2007 | ||||||||
| Group | Group | ||||||||
| £ | £ | ||||||||
| Net loss before income tax | (50,548,275) | (18,462,185) | |||||||
| At UK statutory income tax rate of 20% (2007: 22%) | (10,109,655) | (4,061,681) | |||||||
| Income not taxable | (74,131) | (80,493) | |||||||
| Guernsey income taxable rate at 20% | - | (4,706) | |||||||
| Permanent differences - disallowed items | 104,766 | 109,259 | |||||||
| Intercompany loan interest | (977,335) | (979,515) | |||||||
| Capital allowances in excess of depreciation | (12,371) | - | |||||||
| Capital gains and losses not taxable | 11,156,040 | 5,228,344 | |||||||
| Current income tax adjustment in respect of prior years | (67,337) | (89,399) | |||||||
| Total tax expense reported in the income statement | 19,977 | 121,809 |
(c) Factors affecting future tax charge
The deferred tax provision arises due to accelerated capital allowances. However, it is the Group's experience that such temporary differences do not reverse since, when investment properties are sold an election is made to transfer the plant and machinery at its tax written down value. Accordingly, the deferred tax provision is not an indication of the actual tax that the Group may have to pay.
| 9 Loss Per Share | |||||||
| The calculations of losses per share are based on the following losses and numbers of shares. | |||||||
| 31 December 2008 | 31 December 2007 | ||||||
| £ | £ | ||||||
| Loss for the period attributable to members of parent company used to calculate basic earnings per share | (50,568,252) | (18,583,994) | |||||
| 2008 | 2007 | ||||||
| Number | Number | ||||||
| Weighted average number of shares for basic and diluted earnings per share | 142,747,300 | 142,747,300 | |||||
10 Investment properties
| Group | Freehold | Long Leasehold | Total | |||||
| Cost | £ | £ | £ | |||||
| At 1 January 2008 | 238,452,576 | 16,935,058 | 255,387,634 | |||||
| Additions during the year at cost | 2,555,933 | 287,997 | 2,843,930 | |||||
| Disposals during the year at cost | (11,601,313) | (2,547,075) | (14,148,388) | |||||
| Cost at 31 December 2008 | 229,407,196 | 14,675,980 | 244,083,176 | |||||
| Revaluation | ||||||||
| At 1 January 2008 | 243,303,000 | 17,495,000 | 260,798,000 | |||||
| Additions during the year at cost | 2,555,933 | 287,997 | 2,843,930 | |||||
| Disposals during the year at valuation | (13,270,433) | (2,825,000) | (16,095,433) | |||||
| Reverse lease premium | (471,547) | (25,072) | (496,619) | |||||
| Revaluation movement in the year | (47,271,953) | (3,507,925) | (50,779,878) | |||||
| Valuation at 31 December 2008 | 184,845,000 | 11,425,000 | 196,270,000 | |||||
| Group | Freehold | Long Leasehold | Total | |||||
| Cost | £ | £ | £ | |||||
| At 1 January 2007 | 217,902,850 | 10,793,366 | 228,696,216 | |||||
| Additions during the year at cost | 30,731,677 | 6,141,692 | 36,873,369 | |||||
| Disposals during the year at cost | (10,181,951) | - | (10,181,951) | |||||
| Cost at 31 December 2007 | 238,452,576 | 16,935,058 | 255,387,634 | |||||
| Revaluation | ||||||||
| At 1 January 2007 | 246,711,000 | 12,455,000 | 259,166,000 | |||||
| Additions during the year at cost | 30,731,677 | 6,141,692 | 36,873,369 | |||||
| Disposals during the year at cost | (10,486,460) | - | (10,486,460) | |||||
| Reverse lease premium | (450,691) | (25,094) | (475,785) | |||||
| Revaluation movement in the year | (23,202,526) | (1,076,598) | (24,279,124) | |||||
| Market valuation at 31 December 2007 | 243,303,000 | 17,495,000 | 260,798,000 | |||||
| Valuation at 31 December 2007 | 243,303,000 | 17,495,000 | 260,798,000 | |||||
| Adjustment for lease incentive | 72,000 | - | 72,000 | |||||
| Market valuation per external valuation | 243,375,000 | 17,495,000 | 260,870,000 | |||||
| Cushman & Wakefield Healey & Baker, a firm of independent chartered surveyors, completed a valuation of the properties at the year end on an open market basis in accordance with the Practice Statements contained in the RICS Appraisal and Valuation Standards published by the Royal Institution of Chartered Surveyors ('Red Book') in May 2003. The valuation has been prepared by an appropriate valuer who conforms to the requirements as set out in the Red Book, acting in the capacity of external valuer. In addition to the cost of the investment properties, the Group has paid £4,834,068 in respect of reverse lease premiums and associated costs for a number of properties. This allowed the Group to renegotiate the terms of the leases, thereby improving the ongoing value of the properties. These costs have been capitalised as shown in the Balance Sheet. The reverse lease premiums are amortised over the period to the first break clause. For the year ended 31 December 2008 £496,619 (2007 £475,785) been amortised to the Income Statement. The remaining capitalised amount is £3,206,916 (2007: £3,565,313). | ||||||||
| 11 Debtors | ||||||||
| 31 December 2008 | 31 December 2007 | |||||||
| £ | £ | |||||||
| Trade debtors | 1,282,916 | 1,228,325 | ||||||
| Other debtors | 3,199,525 | 4,193,897 | ||||||
| Prepayments | 359,821 | 239,502 | ||||||
| Accrued income | 204,909 | 109,232 | ||||||
| 5,047,171 | 5,770,956 | |||||||
Trade debtors are non-interest bearing and are generally payable on demand. These are shown net of a provision for impairment. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off when identified. As at 31 December 2008, trade debtors at nominal value of £204,314 (2007: £198,656) were impaired and fully provided for. Movements in the provision for impairment of trade debtors were as follows:
| 31 December 2008 | 31 December 2007 | |
| £ | £ | |
| At 1 January | 198,656 | 252,203 |
| Charge for the year | 183,899 | 126,228 |
| Amounts written off | (178,241) | (179,775) |
| At 31 December | 204,314 | 198,656 |
As at 31 December, the analysis of trade debtors that were past due but not impaired is as follows:
| Past due but not impaired | ||||||
| Total |
| 30-60 days | 60-90 days | 90-120 days | >120 days | |
| £ | £ | £ | £ | £ | £ | |
| 2008 | 1,282,916 | 987,256 | 52,545 | 69,640 | 38,978 | 134,497 |
| 2007 | 1,228,325 | 119,284 | 790,331 | 90,520 | 32,267 | 195,923 |
Credit risk is discussed in note 16.
| 12 Financial liabilities | |||||||
| 31 December 2008 | 31 December 2007 | ||||||
| £ | £ | ||||||
| Trade creditors | 44,078 | 3,630 | |||||
| Rents received in advance | 3,616,784 | 3,923,646 | |||||
| Other creditors | 521,942 | 287,713 | |||||
| VAT | 725,345 | 526,456 | |||||
| Accrued bank interest payable | 1,399,225 | 1,266,235 | |||||
| Other accruals | 637,260 | 1,010,190 | |||||
| 6,944,634 | 7,017,870 | ||||||
| 13 Called up share capital and reserves | |||||||
| 31 December 2008 | 31 December 2007 | ||||||
| Authorised | £ | £ | |||||
| Ordinary shares of £0.01 each | 1,750,000 | 1,750,000 | |||||
| 1,750,000 | 1,750,000 | ||||||
| Allotted, called up and fully paid | |||||||
| Ordinary Shares of £0.01 each | 1,427,473 | 1,427,473 | |||||
| 1,427,473 | 1,427,473 | ||||||
Revenue reserve
Any surplus arising from the net profit on ordinary activities after taxation, any profit/loss on the sale of investment properties, payment of dividends, realised gains and losses on the disposal of investment properties and gains and losses in the fair value of hedging instruments are taken to this reserve.
Other reserve
This reserve is used to record increases or decreases in the fair value of investment properties held at the year end.
14 Related party transactions
The Group has undertaken transactions with companies related by virtue of their shareholding in The Advantage Property Income Trust Limited.
Valad Asset Management (UK) Limited, a subsidiary company of Valad Holdings (UK) plc, charged the Group property fund adviser's fees of £1,806,240 (2007: £2,382,390 in the year. As at 31 December 2008, Valad Asset Management (UK) Limited was owed £346,183 (2007: £584,513).
15 Obligations under leases
The Group holds retail, office, industrial and leisure buildings as investment properties which are let to third parties. These are non-cancellable leases and the average unexpired lease term across the portfolio is 6.63 years as at 31 December 2008. The majority of leases include a provision for five-yearly upward rent reviews according to prevailing market conditions.
The income based on the unexpired lease length at the period end on non-cancellable operating leases was as follows (based on annual rents).
| 31 December 2008 | 31 December 2007 | ||||||
| Group | Group | ||||||
| £ | £ | ||||||
| Less than one year | 525,828 | 848,548 | |||||
| Between two and five years | 14,824,035 | 12,315,168 | |||||
| Over five years | 89,420,382 | 105,905,356 | |||||
| Total | 104,770,245 | 119,069,072 | |||||
16 Financial Instruments
The Group's investment objective is to provide ordinary shareholders with a high level of income together with the prospect of income and capital growth from investing in commercial property. The Group's financial instruments principally comprise borrowings and related interest rate swaps and cash, as well as having debtors and creditors that arise directly from its operations. The Group also holds commercial property investments. The Group has not entered into any derivative transactions during the year under review other than interest rate swaps as described below.
As rental income is relatively stable, changes in interest rates would directly impact upon the Group's profit. Therefore fixed interest rate swaps have been used to reduce the Group's exposure to changes in interest rates. The interest rate swap is an economic hedge for £43.8 million of the total loan facility of £98.32 million for cash flows from 5 May 2005 to 17 February 2015.
The main risks arising are credit risk, market price risk, liquidity risk and interest rate risk. The Board reviews and agrees policies for managing its risk exposure. These policies are summarised below and have remained unchanged for the period under review.
Credit Risk
Credit risk is the risk that an issuer or counterparty will be unable or unwilling to meet a commitment that it has entered into with the Group. The Group's credit risk is attributable to its trade debtors, cash and cash equivalents.
Trade debtors consist principally of rents due from tenants. The balance of trade debtors is low in relation to the balance sheet and the Group's tenant base is well diversified with over 220 tenants. The majority of tenant leases are long-term contracts with rents payable quarterly in advance and the average unexpired lease term at 31 December 2008 was 6.6 years (2007: 6.4 years). Rent deposits are also held in respect of some leases. In the event of default by an occupational tenant, the Group will suffer a rental shortfall and incur additional costs including legal expenses, in maintaining, insuring and re-letting the property until it is re-let. The Board receives regular reports on the portfolio's income risk which covers lease structure, expiry profile, covenant strength, income concentration and tenant arrears. The Property Fund Adviser monitors such reports in order to anticipate, and minimise the impact of, defaults by occupational tenants. As at 31 December 2008, 15% of rental income is from a Company rated as negligible risk and the remainder of rental income is receivable from tenants who individually do not account for more than 5% of rental income. Taking these factors into account the credit risk of trade debtors is considered low.
The maximum credit risk from trade debtors of the Group at 31 December 2008 is £1,282,916 (2007 £1,228,325).
With respect to credit risk arising from other financial assets of the Group, which comprise cash and cash equivalents, the Group's exposure to credit risk arises from default of the counterparty with a maximum exposure equal to the carrying value of these instruments. There are no significant concentrations of credit risk within the Group.
Market price risk
The Group's exposure to market price risk is comprised mainly of movements in the value of the Group's investments in property. The Group's investment portfolio is managed within the investment parameters set out in the Company's prospectus.
Liquidity risk
Liquidity risk is the risk that the Group will encounter in realising assets or otherwise raising funds to meet financial commitments. The Group's investments principally comprise UK commercial property. Property and property related assets are inherently difficult to value due to the individual nature of each property. As a result, valuations are subject to substantial uncertainty. There is no assurance that the estimates resulting from the valuation process will reflect the actual sales price even where such sales occur shortly after the valuation date. In certain circumstances, the terms of the Group's bank loan entitle the lender to require early repayment and in such circumstances the Group's ability to maintain dividend levels and the net asset value attributable to the ordinary shares, could be adversely affected.
The table below summarises the maturity profile of the Group's financial liabilities at 31 December 2008 based on contractual undiscounted payments. In the table below interest rates on variable rate loans have been based on 3 month LIBOR as at 31 December 2008 and 31 December 2007 for prior year.
| Year ended 31 December 2008 | On demand | Less than 3 months | 3 to 12 months | 1 to 5 years | Over 5 years | Total |
| £000 | £000 | £000 | £000 | £000 | £000 | |
| Financial liabilities | - | 5,916 | 1,029 | - | - | 6,945 |
| Bank loan | - | 1,159 | 4,201 | 55,817 | 80,237 | 141,414 |
| Interest rate swap | - | 260 | 779 | 4,157 | 1,039 | 6,235 |
| - | 7,335 | 6,009 | 59,974 | 81,276 | 154,594 | |
| Year ended 31 December 2007 | On demand | Less than 3 months | 3 to 12 months | 1 to 5 years | 5 years | Total |
| £000 | £000 | £000 | £000 | £000 | £000 | |
| Financial liabilities | - | 6,801 | 217 | - | - | 7,018 |
| Bank loan | - | 2,008 | 6,024 | 32,130 | 137,866 | 178,028 |
| Interest rate swap | - | (93) | (280) | (1,491) | (746) | (2,610) |
| - | 8,716 | 5,961 | 30,639 | 137,120 | 182,436 |
Interest rate risk
The Group's exposure to interest rate risk relates primarily to the Group's long-term debt obligations. The Group's policy is to manage its cost of borrowing using a mix of fixed and variable rate debt. To manage this the Group enters into interest rate swaps, in which the Group agrees to exchange, at specified intervals, the difference between fixed and variable interest amounts calculated by reference to an agreed-upon notional principal. At 31 December, after taking into account interest rate swaps, approximately 71% of the Group's borrowings were at a fixed rate of interest (2007: 65%).
The interest rate profile of the Group at 31 December 2008 was as follows:
| Interest rate | Maturity | 31 December 2008 £ | 31 December 2007 £ | ||||
| Bank of Scotland - Senior facility LIBOR + | 0.74% | * | More than 5 years | 32,693,082 | 44,493,082 | ||
| Bank of Scotland SWAP | 5.94% | ** | More than 5 years | 22,000,000 | 22,000,000 | ||
| Bank of Scotland SWAP | 5.925% | ** | More than 5 years | 21,800,000 | 21,800,000 | ||
| CapMark Bank Europe plc | 5.24% | *** | 2 to 5 years | 30,051,250 | 30,051,250 | ||
| CapMark Bank Europe plc | 5.425% | **** | 2 to 5 years | 5,215,373 | 7,410,000 | ||
| 111,759,705 | 125,754,332 | ||||||
* The senior bank facility attracts interest at floating rate, and is held for 10 years from 27 January 2005.
** The Company purchased two swaps to fix the interest from 15 March 2005 until 17 February 2015.
*** The senior bank facility attracts interest at a fixed rate and is held until 18 January 2013.
**** The senior bank facility attracts interest at a fixed rate and is held until 18 January 2013.
Interest rate risk table
The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the Group's profit before tax (through the impact on floating rate borrowings). There is no impact on the Group's equity.
| Increase/decrease in basis points | Effect on profit before tax | |
| 2008 | +25 | £(94,405) |
| -25 | £94,405 | |
| 2007 | +25 | £(76,010) |
| -25 | £76,010 | |
Fair values of financial assets and financial liabilities
Set out below is a comparison by category of carrying amounts and fair values of all the Group's financial instruments that are carried in the financial statements.
| Book value | Fair value | |||
| 2008 | 2007 | 2008 | 2007 | |
| £ | £ | £ | £ | |
| Financial assets | ||||
| Cash | 2,331,331 | 4,922,431 | 2,331,331 | 4,922,431 |
| Financial liabilities | ||||
| Interest bearing loans and borrowings: | ||||
| Floating rate borrowings | 32,693,082 | 44,493,082 | 32,693,082 | 44,493,082 |
| Fixed rate borrowings | 79,066,623 | 81,261,250 | 82,807,710 | 82,513,146 |
| Interest rate swap | 4,861,731 | 183,432 | 4,861,731 | 183,432 |
Loans and receivables
As at 31 December 2008 TAPP Property Limited maintained a revolver facility with the Bank of Scotland of up to £98,320,000 under which an aggregate principal amount of £76,493,082 had been drawn down. This facility is repayable on or before 27 January 2015 and is secured by fixed and floating charges over the assets of the Group (the "HBOS Facility").
Following the year end, the Group has also completed an amendment to the terms of the revolving bank facility with the Bank of Scotland to increase the loan to value ratio from 55% to 70% with a corresponding margin increase on a sliding scale. The facility has also been reduced from £98.3m to £78.0m.
As at 31 December 2008 TOPP Property Limited maintained a facility with CapMark Bank Europe plc of £35,266,623 which has been fully drawn down. £30,051,250 of this amount is fixed at a rate of 5.24% and £5,215,373 is fixed at 5.425%.
Fair values
At 31 December 2008, the fair value of the Swaps was valued at a deficit of £4,861,731 (2007: deficit £183,432). The valuation of the Swaps was provided by the HBOS Treasury plc, and represents the change in fair value since execution.
| 17 Dividends and other appropriations | ||||||
| 31 December 2008 | 31 December 2007 | |||||
| £ | £ | |||||
| Declared and paid during the year | ||||||
| - Equity dividends on ordinary shares: | ||||||
| Fourth Interim dividend for 2006: 1.625p | 2,319,643 | |||||
| First Interim dividend for 2007: 1.625p | 2,319,643 | |||||
| Second Interim dividend for 2007: 1.625p | 2,319,643 | |||||
| Third Interim dividend for 2007: 1.625p | 2,319,643 | |||||
| Fourth Interim dividend for 2007: 1.625p | 2,319,643 | |||||
| First Interim dividend for 2008: 1.625p | 2,319,643 | |||||
| Second Interim dividend for 2008: 1.625p | 2,319,643 | |||||
| Third Interim dividend for 2008: 0.8125p | 1,159,824 | |||||
| 8,118,753 | 9,278,572 | |||||
| Declared during the year - Equity dividends on ordinary shares: Fourth Interim dividend for 2009 / 2008: 0.8125p / 1.625p | 1,159,824 | 2,319,643 | ||||
A pdf version of the annual financial report will be available for download from the Company's web-site www.tapincome.com on 30 April 2009.
E&OE - in transmission