Tritax Polska No.1 Fund Limited

Transcription

1 Tritax Polska No.1 Fun Limite Annual Report an Financial Statements For the year ene 5 April 2010 Company registration number: 46273

2 Contents 02 Officers an Professional Avisers Chairman s Statement Fun Manager s Report Boar of Directors 11 Directors Report 12 Inepenent Auitor s Report 13 Consoliate Statement of Comprehensive Income 14 Consoliate Statement of Financial Position 15 Consoliate Statement of Cash Flows 16 Consoliate Statement of Changes in Equity Notes to the Financial Statements Tritax Polska No.1 Fun Limite Page 01

3 Officers an Professional Avisers Directors Anrew Howat Michael McKean Mark Shaw Aministrator, Company Secretary, Designate Manager an Registrar Praxis Property Fun Services Limite Sarnia House Le Truchot St Peter Port Guernsey GY1 4NA Asset Manager Stanmark Asset Management Polska Sp. z o.o. Nowy Swiat 61 apt. 3 Warsaw Polan Auitor Saffery Champness La Tonnelle House Les Banques St Sampson Guernsey GY1 3HS Fun Manager TFS (Polska 1) Limite The Loge, Oell Befor MK43 7BB Promoter, Sponsor an Distributor Tritax Securities 1 Limite The Loge, Oell Befor MK43 7BB Banker Royal Bank of Scotlan International Legal an Tax Avisers Carey Olsen (Guernsey) Oostvogels Pfister Roemers (Luxembourg) Warynski & Partners (Polan) Registere Office Sarnia House Le Truchot St Peter Port Guernsey GY1 4NA Tritax Polska No.1 Fun Limite Page 02

4 Chairman s Statement Dear Investor The uncertainty cause by the rapi an severe ownturn in the global economy continues to be felt across the whole financial an business environment. The global property market in 2008 an early 2009 saw mature markets such as the UK witness a substantial an transparent fall in values estimate at more than 40% from peak to trough. Encouragingly Polan, whilst not immune to the ownturn, has not witnesse such a substantial fall in values. The Fun property values are own only 3.28% uring the last 12 months an remain at an 11.53% premium to net purchase cost. It is true however that Polan has not been a major focus for international opportunity capital allocate back into property over the past twelve months as such investors have tene to focus on their own markets an markets where falls in value have been more acute. In the last twelve months therefore the Polish market has become rather illiqui, with few active buyers. The UK property market has seen a significant rally in the latter half of 2009 an early 2010 recovering a significant proportion of the large losses as investors seek to capitalise on the fall in values from their peak. These inflows however were not necessarily reflective of improving market funamentals but rather of relatively attractive yiels against other asset classes. Whilst the recession might officially be over, rental values in the UK in general have continue to fall ue to poor tenant eman. Polan however benefits from a very soli platform for growth, projecte to grow quicker than the majority of its European Union neighbours over the next two years (see chart in Fun Manager s report). A return to commercial property investment, whilst slower to materialise than most commentators expecte, is set to occur as enthusiasm for the country as a whole remains uniminishe. We are aware of a number of UK funs an investors who are gearing up for a return to investment in Polan. There s not a lot of activity because investors are still sorting out portfolios an banks are reluctant to len. But there has been an improvement over the last quarter. Polan stans out as the most attractive country. But other countries, such as the Baltic states, are another story. Financial Times, Polan shows signs of real estate recovery (15th February 2010) Spreas between property yiels an bon yiels shoul, amongst other things, reflect ifferences in prospects for growth in rental values. Over the next ten years, we expect growth in rental values to be strongest in Polan an France. Both countries seem to be further through their rental value corrections, while their economies are forecast to show reasonable recoveries. In 2010 an 2011, we expect GDP growth in Polan to average 2.5%, an in France to average 1.5%. European Commercial Property Focus, Capital Economics (13th January 2010) Against this backrop we remain confient that improving investor sentiment an transaction volumes will return to Polan in the short term an will result in improve values an liquiity for the Fun s assets. This view has been supporte by commentators forecasting the current low volume market to improve slightly in the secon half of Next Christmas shoul see a more positive attitue to real estate investment in Polan an be supporte by more lening banks. Savills, Polan (June 2010) As communicate in April, the principal lening bank to the Fun (Bank Zachoni WBK) tightene its lening policy ue to its own group pressures, thus restricting the implementation of the Fun s istribution policy to investors. I am please to report that the Fun has now agree an extension of the current loans which will provie more certainty for investors through to the en of the Fun s life. This will however mean a reuction of the istribution, which is ue to the bank s policy on repayment of capital uring the loan term. Whilst we appreciate this oes not reflect the obvious preference of the investor, ultimately the outstaning ebt is being reuce quicker uring the term an therefore the interest buren on the Fun lowere an profitability increase. Savills are appointe as valuers to the Fun an recore a value for the investment properties at April 2010 of 77.9 million. Three of the properties within the Fun witnesse increases in value which is very encouraging, whilst overall this represents a fall across the portfolio of 3.28% on values recore at April Approximately two thirs of the rop in value can be attribute to the Foron Gallery Shopping Centre in Bygoszcz, of which more etail can be foun in the Fun Manager s report. In summary the Fun has experience a challenging tenant market with one of the anchor tenants going into aministration. New leases are being agree an all efforts possible are going into improving the footfall to the centre. It is the primary objective of the Asset Manager to stabilise the tenant position in this property an progress is being mae. Two other properties which suffere minor ecreases in value were City Park, Poznan an Okecie, Warsaw, both unfortunately causing a breach of loan to value ( LTV ) covenant. As part of the negotiations with the bank they have agree to waive their right to seek remey of this LTV breach, instea applying a slightly higher amortisation requirement in respect of these loans. The tenant situation at City Park has improve consierably ue to an active marketing campaign an we are confient this will be reflecte in an increase in value in the near future. As shown in the Statement of Financial Position, the Net Asset Value ( NAV ) of the Fun as at 5 April 2010 was 1.03, with the ajuste NAV being The ajuste NAV for the previous perio was 1.29, the reuction being ue in part to a fall in the unerlying value of the properties state above. The ajuste NAV per share removes Tritax Polska No.1 Fun Limite Page 03

5 an accumulate eferre CGT liability (relating to a property owne by one taxable entity controlle by the Fun) from the NAV per share as calculate uner IFRS, in accorance with common practice. It is anticipate that this property will be switche to a non-taxable structure in the course of the next financial year. In conclusion the Fun consists of a well iversifie portfolio of core property assets in a country champione to be one of the fastest growing economies in the European Union. Therefore, espite the current lack of liquiity in the market we anticipate an improvement over the next 12 months both in terms of property yiels an also the tenant market (rents). The value of the properties continues to be higher than the net purchase cost an preservation of this position an enhancement of value will be at the centre of the Fun an Asset Managers objectives uring the next twelve months. Yours sincerely Mark Shaw Tritax Polska No.1 Fun Limite Page 04

6 Fun Manager s Report In this thir report, TFS (Polska 1) Lt as Fun Manager to the Tritax Polska No.1 Fun is please to provie investors with an upate in respect of the Polish economy, property market an the Fun portfolio. Economy GDP: 1.8% (2009) Inflation: 3.5% (2009) Exchange rate: 1 EUR = High 4.33 PLN, Low 3.82 PLN (July July 2010) 3 month EURIBOR: 0.827% (7/12/2010) (Base borrowing cost for Fun) Unemployment: 11.6% (June 2010) In 2009 Polan was the only European Union Member State to have recore positive GDP growth an is forecast this year to be the fastest eveloping country within the European Union with GDP growth of approximately 2.3%. In the long term the sustaine growth preicte in the chart below will be epenent on the performance of the worl s largest economies an the stability of the global financial markets, however strong omestic eman an rising inwar investment will unerpin growth in the country Real GDP Forecast Across EU (July 2010) Real GDP (0%) EU Average France Germany Italy Polan Spain Unite Kingom Following the epreciation of the Polish zloty (PLN) in late 2008 an early 2009, the PLN strengthene in mi 2009 an now stans at PLN 4.08 against the Euro (July 2010). The consierable reuction in the value of the PLN cushione the consequences of the financial crisis an protecte exports against large ownturns, but it also le to an increase in prices of importe goos, incluing many commoities, most recently crue oil. Despite the economic slowown in 2009, the annual inflation rate i not rop consierably an stoo at 3.5%, which was largely ue to the epreciation of the Polish zloty. The National Bank of Polan forecasts that the inflation rate in 2010 will be approximately 2.5%, whilst interest rates have remaine stable uring the perio currently at 3.5%. In 2010 the improve situation in capital markets le to a more positive outlook on lening, however terms remain significantly ifferent to those pre-crisis. During 2009, approximately 9.6 billion was investe in Polan, most of which came from European Union countries. The goo financial staning of Polan strengthene its positive image in the eyes of entrepreneurs, an it is hope this will subsequently translate into a growing volume of foreign irect investments in the coming years. Polan is alreay rate as one of the best investment locations by many analysts an foreign capital remains one of the main riving forces behin the economic evelopment of regional cities an local commercial real estate markets. The 2012 European Football Championships in Polan are proving to be a tremenous catalyst for the completion of infrastructure projects in the country (roas, railways, hotels etc) an it is clear that Polan is relishing the opportunity to host its European neighbours in what will be its first opportunity to show the European community the scale of its avancement over the last 10 years. Tritax Polska No.1 Fun Limite Page 05

7 Fun Manager s Report (continue) Property Market Upate 2009 has been characterise by a low volume of commercial property transactions in Polan. It is estimate that the total value of transactions was circa 700 million, less than half those in In the first three quarters of 2009 many institutional investors were still hesitant to return to the Polish market, instea concentrating on their omestic markets an other more mature markets where there have been significant falls in values. Debt finance investors ha problems with access to bank lening as this was expensive an ifficult to obtain. Another important factor limiting the number of transactions was the lack of force or willing sellers in the market as falls in value were not nearly as ramatic as in other countries such as the UK. Commentators suggest 2010 is seeing improving investor sentiment an that the illiquiity experience in the property market coul be close to an en. Cushman & Wakefiel project 2010 to be similar to the fourth quarter of 2009 in terms of the investment activity, which will result in an increase in the number of agreements signe an also in slightly improving yiels. The memories of the recent crisis are, however, still fresh an therefore likely to hol back investors an banks from pursuing overly aggressive strategies, which is hope will create a more sustainable an prolonge return to investment in Polan. Office The office market in Polan has been recovering from quite a sharp ownturn which occurre in late 2008/2009. Since then however there has been steaily improving eman with leasing transaction volumes increasing on the back of lower rents an attractive incentive packages. In 2009 the value of transactions mae in the office investment market totalle approximately 354 million, which was own by over 64% compare to the previous year. Nevertheless, forecasts for 2010 remain optimistic. The office sector continues to be perceive as the most attractive of the three main market segments. After nearly two years of sitting on the sielines institutional investors are becoming active again. The inustrial sector market has prove vulnerable to economic fluctuations. A combination of cautious tenant eman an a reuction in the supply of moern warehouse schemes has resulte in limite leasing activity. As a irect result of the low eman yiels have risen in this sector, however commentators consier that ue to the limite number of transactions in place, this is not a reliable inex. It is expecte that there coul be an improvement in market conitions in 2010/2011. This will result from either the finalisation of sale agreement negotiations currently taking place an from the release of some assets by the largest evelopers (ProLogis, Panattoni an Segro) who are likely to want to use the recovery to sell some evelopments starte in the last few years. Retail In general, eman from retail occupiers remains fairly stagnant. High street rental levels have remaine stable across all the major centres, mainly ue to the lack of quality space. Shopping centre rents however have seen the biggest reuction with rental levels falling quite significantly in some cases. Substantial recovery will be hampere by the aition of new space uner construction. It is hope however that Polan s emergence from the economic slow own will translate into improve retail sales an subsequent occupier eman. Investment activity in the retail sector has shown steay signs of improving. The biggest regional property eal since 2007 was MGPA (a real estate company backe by Australia s Macquarie Group) who acquire two Polish shopping centres for 187 million accounting for nearly 78.5% of the value of all the agreements signe in this market in In 2010 further transactions are expecte to be mae on a similar scale. With the economic recovery investors are beginning to show interest in retail property again, which is likely to be reflecte in more portfolio investments. Inustrial The warehouse market has been marke by the lowest investment activity among all sectors of the commercial property market. In 2009 only a few transactions with a total value of approximately 45 million, a rop of 67% compare with Tritax Polska No.1 Fun Limite Page 06

8 Fun Manager s Report (continue) Portfolio S.K.A. (*) Property Sector Total Lettable Area (m 2 ) Purchase Price (excluing purchase costs) Valuation April 2009 Valuation April Piekna, Warsaw 2 Wola Plaza, Warsaw 3 Szajnochy, Bygoszcz 4 Ratajczaka, Poznan 5 Dwor Hamburski, Poznan Office Retail Office Retail Office Warehouse Office Retail Office Retail 1,500 3,340,000 4,280,000 4,740,000 8,500 17,100,000 19,000,000 18,800,000 2,200 2,600,000 2,375,000 2,619,759 2,370 7,500,000 6,360,000 6,480,000 3,409 8,300,000 10,210,000 9,810,000 7 City Park, Poznan Retail 3,409 6,500,000 7,350,000 6,920,000 8 Okecie (Builing B), Warsaw Okecie (Builing A), Warsaw (**) Warehouse Office Warehouse Office 5,562 5,243,000 5,750,000 5,300,000 2,939 3,270,000 3,280,000 3,070,000 9 Foron Gallery, Bygoszcz (***) Retail 5,041 10,000,000 13,795,117 12,070, Jasna, Warsaw Office Restaurant 2,427 6,000,000 8,155,000 8,100,000 TOTAL: 69,853,000 80,555,117 77,910,381 % Reuction on April 2009 values 3.28% % Premium on net purchase price 11.53% (*) S.K.A. is the property owning vehicle. (**) This acquisition was pening at April 2009 an was complete in July (***) This acquisition an loan are value in PLN as the majority of leases are in PLN. The scheule above etails the properties owne by the Fun as at April It is evient from this scheule that espite an increase in value of three properties, overall the rop in value is 3.28% from those recore in April It ha been hope that the positive economic forecast for Polan, relative to competing markets woul result in improve activity in the investment market. Unfortunately this has not translate into transactions as investors remain cautious. Valuers therefore have little in the way of comparable transactions upon which to base improve values. The rop in values in the Fun therefore reflects in part the illiquiity in the market an also the challenging tenant markets. Of particular note is the impact of the tenant market in the retail sector. Tritax Polska No.1 Fun Limite Page 07

9 Fun Manager s Report (continue) Portfolio (continue) Two thirs of the fall in value can be attribute to the Foron Gallery, Bygoszcz. Here, one of the main tenants (electrical retailer - Domar) went into aministration espite being a large retailer present throughout Polan. This has ha the effect of both reucing the income (they accounte for 10% of the total rent) but also has impacte the footfall an therefore other occupiers in the centre. Domar occupie the top floor of the centre an therefore acte as a raw for customers throughout the centre. The Asset Manager has been successful in leasing half of the space vacate by Domar an extensive efforts are being mae to stabilise the tenancy position an improve footfall in the centre. In aition to active marketing of vacant units, this has inclue community events such as Chilren s Day, Fashion Shows an Art exhibitions, initiatives which have been very successful in City Park, Poznan. The property values remain at a premium (11.53%) to the net purchase cost. Asset Management Objectives The importance of pro-active asset management is never more vital than uring ifficult economic conitions an the Asset Manager has therefore been focuse on intensively working the portfolio to maximise the returns achievable. During the perio between April 2009 up to the ate of this report, some of the notable asset management achievements by SAMP inclue: 1. Piekna, Warsaw The groun floor tenant, Quinlan Private Golub (Estate Agent) vacate the property in summer of Their lease was ue to expire in September 2010, however SAMP resiste a request from Quinlan to terminate their lease. Instea they worke with Quinlan to fin a tenant to take the space. They were successful an foun a large stock broker, liste on the Polish stock exchange to agree to a reversionary lease on expiry of the Quinlan lease. This avoie any voi perios or lease incentives normally require to attract a new tenant. 2. City Park, Poznan An intensive marketing campaign has been unertaken to improve the footfall in this centre, which like many others has suffere in the current climate. The events have been very successful an have inclue fashion shows, art exhibitions an chilren s activities. Feeback from the tenants has been very positive an the centre is now almost fully occupie with only two units (80m 2 ) vacant. 4. Wola Plaza, Warsaw A lease re-gear has been agree with Tesco. The result is: an increase in rent from the en of their current agreement from circa 7.00 psm pm to psm pm; a lease extension of 10 years from this ate; an a commitment by Tesco to extensively refurbish the unit to a UK style Tesco Express at their own expense. Strategy The priorities of the Fun Manager an Asset Manager over the next 12 months are as follows: 1. Continue active interaction with tenants to ensure retention an preservation over current/future income streams; 2. Continually monitor potential isposal of properties an reinvestment into new opportunities if it is consiere this will maximise returns to investors; 3. Finalise re-finance with the lening banks to permit reinstatement of a istribution to investors; 4. Drive efficiencies throughout the Fun through regular review of all thir party avisors an professionals. Despite the current lack of activity in the market we believe the Fun remains well place to perform uring the remainer of the Fun life. Finalising of the ebt terms will provie certainty for investors an permit a controlle approach to the asset management an ultimate realisation of value of the properties. The close co-operation of the Polish base Asset Manager is essential to this success an together with the Fun Manager they will take all steps necessary to preserve an improve values over the next twelve months. TFS (Polska 1) Lt July City Park, Poznan A lease was agree just before this property was acquire with PolBank, one of the largest retail banks in Polan. The unit was the secon largest in the centre, but ue to the ownturn PolBank never occupie. Whilst this cause no issues with income as they are oblige to pay rent, it i mean that there was no footfall to this unit. SAMP therefore worke with PolBank to fin an occupier an a eal has been agree with a restaurant operator who will take the unit on a sub-lease from PolBank. This result means the fun retains the income security of a lease to the bank, but benefits from the unit being occupie proviing a vital amenity in the centre. Tritax Polska No.1 Fun Limite Page 08

10 Boar of Directors Anrew Howat, age 46, has over 20 years experience within the financial services arena. Currently, Anrew is Managing Director of Butterfiel Fulcrum in Guernsey, Channel Islans. Previously he was the Managing Director of Capita Financial Group in the Channel Islans an prior to that Managing Director of Investec Aministration Services base in Guernsey. Anrew also has extensive international experience, having spent the best part of a ecae living an working in Asia, base in Hong Kong. During this perio Anrew hel a irector level position at ING Financial Markets responsible for operational activities across the Asia Pacific region before completing his Asian tour at UBS. Anrew has previously ha extensive experience working in the offshore banking & fun services inustry in the Channel Islans. Michael McKean, age 78, is an English solicitor who after many years of practice in Englan, establishe Welake Bell McKean in Guernsey. He retire from that firm in He has extensive experience both as a solicitor an irector of several funs. In aition he hols a number of acaemic appointments. Mark Shaw, age 63, is a Chartere Accountant who has a backgroun in property evelopment investment, merchant banking an investment management. Mark became involve in tax base property investments in 1985, working uner the umbrella of Lonon & Einburgh Trust Plc ( LET ), in eveloping an popularising the investment market for Enterprise Zone Property Unit Trusts. In 1990, LET was sol to a Sweish institution an Mark forme Tritax (formerly CIL) to continue with this activity an to evelop other property base investment proucts. Tritax Polska No.1 Fun Limite Page 09

11 Tritax Polska No.1 Fun Limite Page 10

12 Directors Report The Boar of Directors present their annual report an auite financial statements for the year ene 5 April Company status an principal activity Tritax Polska No.1 Fun Limite ( the Company ) was incorporate in Guernsey on 23 January 2007 an was grante Guernsey exempt company status for taxation purposes. The principal activity of the Company an its subsiiaries (together the Group ) is investing in property in Polan. The Company is a Guernsey authorise close-ene investment scheme an is subject to the Authorise Close-Ene Investment Schemes Rules Results an iviens The results of the Group are state on page 15. The Company eclare an pai an interim ivien of 3p per share uring the year, however the Boar of Directors has recommene that no final ivien be pai for the year. Directors The members of the Boar of Directors uring the year an to ate are shown on page 9. Directors interests Mark Shaw is a shareholer in, an serve as a irector of, the sponsor an istributor Tritax Securities 1 Limite throughout the year. Directors responsibilities The Directors are require by The Companies (Guernsey) Law, 2008, to prepare financial statements for each financial perio, which give a true an fair view of the state of affairs of the Company an of the Group as at the en of the financial perio. In preparing those financial statements the Directors are require to: select suitable accounting policies an then apply them consistently; make jugements an estimates that are reasonable an pruent; state whether applicable accounting stanars have been followe; an prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Group will continue in business. The Directors further confirm that: so far as each Director is aware, there is no relevant auit information of which the Company s auitor is unaware; an each Director has taken all the steps he ought to have taken as a Director to make himself aware of any relevant auit information an to establish that the Company s auitor is aware of that information. The Directors are responsible for keeping proper accounting recors, which isclose with reasonable accuracy at any time the financial position of the Company an of the Group an to enable them to ensure that the financial statements comply with The Companies (Guernsey) Law, They are also responsible for the system of internal control an for safeguaring the assets of the Group an hence for taking reasonable steps for the prevention an etection of frau an other irregularities. Auitor The auitor of the Company, Saffery Champness, has expresse its willingness to continue in office an a resolution giving authority to the Boar of Directors to fix its remuneration will be propose at the Annual General Meeting. Approve on behalf of the Boar Anrew Howat Director 5 October 2010 The Directors confirm that they have complie with the above requirements in preparing the financial statements. Tritax Polska No.1 Fun Limite Page 11

13 Inepenent Auitor s Report to the Shareholers We have auite the financial statements on pages 13 to 33. These financial statements have been prepare in accorance with the financial policies set out therein. This report is mae solely to the Company s members, as a boy, in accorance with section 262 of The Companies (Guernsey) Law, Our auit work has been unertaken so that we might state to the Company s members those matters we are require to state to them in an auitor s report an for no other purpose. To the fullest extent permitte by law, we o not accept or assume responsibility to anyone other than the Company or the Company s members, as a boy, for our auit work, for this report, or for the opinions we have forme. Respective responsibilities of irectors an auitor As escribe in the statement of irectors responsibilities on page 11, the Company s Directors are responsible for the preparation of the financial statements in accorance with applicable law an International Financial Reporting Stanars. Our responsibility is to auit the financial statements in accorance with relevant legal an regulatory requirements an International Stanars on Auiting (UK an Irelan). We report to you our opinion as to whether the financial statements give a true an fair view an are properly prepare in accorance with applicable law. We also report to you if, in our opinion, the Directors Report is not consistent with the financial statements, if the Company has not kept proper accounting recors or if we have not receive all the information an explanations we require for our auit. We rea the Directors Report an other information accompanying the financial statements an consier the implications for our report if we become aware of any apparent misstatements within it. Basis of auit opinion We conucte our auit in accorance with International Stanars on Auiting (UK an Irelan) issue by the Auiting Practices Boar. An auit inclues examination, on a test basis, of evience relevant to the amounts an isclosures in the financial statements. It also inclues an assessment of the significant estimates an jugements mae by the Directors in the preparation of the financial statements, an of whether the accounting policies are appropriate to the Company s circumstances, consistently applie an aequately isclose. We planne an performe our auit so as to obtain all the information an explanations which we consiere necessary in orer to provie us with sufficient evience to give reasonable assurance that the financial statements are free from material misstatement, whether cause by frau or other irregularity or error. In forming our opinion we also evaluate the overall aequacy of the presentation of information in the financial statements. Opinion In our opinion: the financial statements give a true an fair view, in accorance with International Financial Reporting Stanars, of the state of affairs of the Group as at 5 April 2010 an of the Group s loss for the year then ene; an the financial statements have been properly prepare in accorance with The Companies (Guernsey) Law, Saffery Champness Chartere Accountants, Guernsey 5 October 2010 Tritax Polska No.1 Fun Limite Page 12

14 Consoliate Statement of Comprehensive Income For the year ene 5 April 2010 Notes Year ene 5 April 2010 Year ene 5 April 2009 Revenue 6 7,465,684 5,782,716 Property operating expenses 8 (2,500,895) (2,008,345) Operating profit before aministrative expenses 4,964,789 3,774,371 Aministrative expenses 8 (2,084,213) (2,277,388) Operating profit before loss on change in fair value of investment properties 2,880,576 1,496,983 (Loss)/gain on change in fair value of investment properties 11 (4,676,467) 708,940 Loss on change in fair value of investment property uner construction 12 (173,788) (279,012) Operating (loss)/profit (1,969,679) 1,926,911 Finance income 52, ,672 Finance costs (2,767,979) (3,055,621) Operating loss after net finance costs (4,685,038) (430,038) Gains/(losses) on erivatives 753,610 (1,536,847) Gains on foreign exchange 363, ,214 Other gains an losses 1,116,948 (1,054,633) Loss before taxation (3,568,090) (1,484,671) Taxation creit/(charge) 9 1,233,843 (603,912) Loss for the year (2,334,247) (2,088,583) Basic an ilute earnings per share 10 y(0.083) y(0.075) Other comprehensive income Exchange ifferences on translation of foreign operations 368,415 (3,801,727) Total comprehensive income for the year (1,965,832) (5,890,310) The accompanying notes are an integral part of these financial statements. Tritax Polska No.1 Fun Limite Page 13

15 Consoliate Statement of Financial Position As at 5 April 2010 Notes 5 April April 2009 Non-current assets Investment property Investment property uner construction Deferre tax asset ,817,300 1,093,081 20,353 76,045,117 1,230, ,776 77,930,734 77,495,893 Current assets Trae an other receivables Cash an cash equivalents 15 1,982,097 4,331,387 2,151,797 7,803,020 6,313,484 9,954,817 Total assets 84,244,218 87,450,710 Non-current liabilities Bank loans Deferre tax liability Derivative liabilities ,876,011 2,373, ,414 42,290,210 3,431,941 1,544,765 19,684,285 47,266,916 Current liabilities Bank loans Derivative liabilities Trae an other payables ,662, ,659 2,363,993 4,955,331 2,386,644 35,554,862 7,341,975 Total liabilities 55,239,147 54,608,891 Net assets 29,005,071 32,841,819 Equity Share capital Share premium Retaine earnings Translation reserve ) 36,078,224) (5,020,827) (2,052,326) ) 36,078,224) (815,664) (2,420,741) Total equity 29,005,071 32,841,819 Net asset value per share y1.03 y1.17 The accounts on pages 13 to 33 were approve by the Boar of Directors an signe on its behalf on 5 October 2010 by: Anrew Howat Director The accompanying notes are an integral part of these financial statements. Tritax Polska No.1 Fun Limite Page 14

16 Consoliate Statement of Cash Flows For the year ene 5 April 2010 Notes Year ene 5 April 2010 Year ene 5 April 2009 Cash flows from operating activities Operating (loss)/profit Ajustments for: Loss/(gain) on change in fair value of investment properties Loss on change in fair value of investment property uner construction Exchange ifferences Decrease in operating trae an other receivables Decrease in operating trae an other payables Taxation pai (1,969,679) 4,676,467) 173,788) 130,970) 272,127) (34,729) (3,848)) 1,926,911) (708,940) 279,012) (1,711,470) 1,131,954) (28,100) ) Net cash inflow from operating activities 3,245, ,367 Cash flows from investing activities Acquisition of investment properties an capitalise costs Bank interest receive 11, 12 (3,658,972) 61,447) (23,467,855) 689,842) Net cash outflow from investing activities (3,597,525) (22,778,013) Cash flows from financing activities Diviens pai Procees from interest bearing loans Repayments of interest bearing loans Finance costs (1,870,916) 2,286,691) (767,000) (2,767,979) (2,135,624) 12,119,590) ) (3,055,621) Net cash (outflow)/inflow from financing activities (3,119,204) 6,928,345) Net ecrease in cash an cash equivalents (3,471,633) (14,960,301) Opening cash an cash equivalents 7,803,020 22,763,321 Closing cash an cash equivalents 4,331,387 7,803,020 The accompanying notes are an integral part of these financial statements. Tritax Polska No.1 Fun Limite Page 15

17 Consoliate Statement of Changes in Equity For the year ene 5 April 2010 Notes Share Premium Retaine Earnings Translation Reserve Total For the year ene 5 April 2009 Balance brought forwar 20 36,078,224 3,607,786) 1,380,986) 41,066,996) Prior year ajustment 20 (199,243) ) (199,243) Total comprehensive income for the year 20 (2,088,583) (3,801,727) (5,890,310) Diviens pai 21 (2,135,624) ) (2,135,624) At 5 April ,078,224 (815,664) (2,420,741) 32,841,819 For the year ene 5 April 2010 Total comprehensive income for the year 20 (2,334,247) 368,415 (1,965,832) Diviens pai 21 (1,870,916) (1,870,916) At 5 April ,078,224 (5,020,827) (2,052,326) 29,005,071 The accompanying notes are an integral part of these financial statements. Tritax Polska No.1 Fun Limite Page 16

18 Notes to the Financial Statements For the year ene 5 April Incorporation an principal activity Tritax Polska No.1 Fun Limite ( the Company ) was incorporate in Guernsey on 23 January The principal activity of the Company an its subsiiaries (together the Group ) is investing in property in Polan. The Company s subsiiaries are etaile in note 14. The Directors consier that the Group s functional currency is Euro, as this is the currency in which the majority of the Group s assets an liabilities an significant transactions are enominate. The Directors have selecte Euro as the Group s presentation currency. 2. Aoption of new an revise Stanars The following Stanars are effective for the current perio an have been applie in these financial statements: IAS 1 (Revise), Presentation of financial statements (effective 1 January 2009); IAS 23 (Revise), Borrowing Costs (effective 1 January 2009). In May 2008 the IASB complete its first annual improvements project. This project amene a number of existing stanars with effect from 1 January 2009, amongst them IAS 40 (Revise), Investment Property, which require investment property uner construction to be shown at fair value, where this can be reliably measure. The Group, however, chose to early aopt IAS 40 in the previous financial year. None of the other amenments has ha a material impact on the Group. The following interpretations issue by the International Financial Reporting Interpretations Committee ( IFRIC ) are effective for the current perio but are not relevant to the Group s operations: IFRIC 13, Customer Loyalty Programmes (effective 1 July 2009); IFRIC 15, Agreements for construction of real estates (effective 1 January 2009); IFRIC 16, Heges of a net investment in a foreign operation (effective 1 October 2008); IFRIC 18, Transfers of assets from customers (effective for transfers after 1 July 2009). At the year en ate, the following Stanars an Interpretations, which have not been applie in these financial statements, were in issue but not yet effective: IAS 27, Consoliate an separate financial statements (effective 1 July 2009); IAS 39, Financial instruments: Recognition an measurement (effective 1 July 2009); IFRS 2, Share-base Payment (effective 1 January 2010); IFRS 3, Business Combinations (effective 1 July 2009); IFRS 9, Financial Instruments Classification an Measurement (effective 1 January 2013); IFRIC 17, Distributions of non-cash assets to owners (effective 1 July 2009); IFRIC 19, Extinguishing Financial Liabilities with Equity Instruments (effective 1 July 2010). In aition the IASB complete its secon an thir annual improvements projects in April 2009 an May 2010 respectively. These projects amene a number of existing stanars an interpretations effective for accounting perios commencing between 1 July 2009 an 1 January The Directors anticipate that the aoption of these Stanars an Interpretations in future perios will have no material impact on the financial statements of the Group except as follows: IFRS 9 will introuce new requirements for classifying an measuring financial assets. There were no Stanars an Interpretations issue by the International Financial Reporting Interpretations Committee ( IFRIC ) effective for the current perio which were relevant to the Group s operations. 3. Significant accounting policies Basis of preparation The financial statements have been prepare in accorance with International Financial Reporting Stanars ( IFRS ) as aopte by the European Union an IFRIC Interpretations that remain in effect, an The Companies (Guernsey) Law, Basis of consoliation The consoliate financial statements incorporate the financial statements of the Company an the entities controlle by the Company (ie its subsiiaries) mae up to 5 April each year. Control is achieve where the Company has the power to govern the financial an operating policies of an investee company so as to obtain benefits from its activities. On acquisition, the assets an liabilities an contingent liabilities of a subsiiary are measure at their fair values at the ate of acquisition. Any excess of the cost of acquisition over the fair values of the ientifiable net assets acquire is recognise as goowill. Any eficiency of the cost of acquisition below the fair values of the ientifiable net assets acquire (ie iscount on acquisition) is creite to the Statement of Comprehensive Income in the perio of acquisition. The results of subsiiaries acquire or ispose of uring the perio are inclue in the consoliate Statement of Comprehensive Income from the effective ate of acquisition or up to the effective ate of isposal, as appropriate. Where necessary, ajustments are mae to the financial statements of subsiiaries to bring the accounting policies use into line with those use by the Group. All intra-group transactions, balances, income, expenses, profits an losses are eliminate on consoliation. Tritax Polska No.1 Fun Limite Page 17

19 Notes to the Financial Statements (continue) For the year ene 5 April Significant accounting policies (continue) Revenue recognition Rental revenues are accounte for on a straight line basis. Amenments to rental revenues ue to rent reviews are recognise once the rent reviews have been formally agree. Service charge revenues are bille in avance an then allocate to the perio to which they relate. Revenue is recognise when it is probable that the economic benefits associate with the transaction will flow to the Group an the amount of revenue can be measure reliably. Leases Leases are classifie as finance leases whenever the terms of the lease transfer substantially all the risks an rewars of ownership to the lessee. All other leases are classifie as operating leases. Rental income from operating leases is recognise on a straight-line basis over the term of the relevant lease. Foreign currency transactions Transactions in currencies other than the Euro are recore at the rates of exchange prevailing on the ates of the transactions. At each year en ate, monetary assets an liabilities that are enominate in foreign currencies are revalue at the rates prevailing at the year en ate. Non-monetary assets an liabilities carrie at fair value that are enominate in foreign currencies are revalue at the rates prevailing at the ate when the fair value was etermine. Gains an losses arising on revaluation are recognise in the Statement of Comprehensive Income. On consoliation, the assets an liabilities of the Group s overseas operations are translate at exchange rates prevailing on the year en ate. Income an expenses are translate at the average exchange rates for the perio unless exchange rates fluctuate significantly, in which case items of income an expeniture are translate at the rate ruling on the ate of the transaction. Exchange ifferences arising, if any, are recognise as other comprehensive income in the Statement of Comprehensive Income an are transferre to the Group s translation reserve. Such translation ifferences are inclue in profit or loss in the perio in which the operation is ispose of. Goowill an fair value ajustments arising on the acquisition of a foreign entity are treate as assets an liabilities of the foreign entity an translate at the closing rate. Taxation During the year the Company was exempt from Guernsey taxation on income erive from outsie of Guernsey. The tax expense represents the sum of the tax currently payable an eferre tax for the Group. The tax currently payable is base on taxable profit for the perio. Taxable profit iffers from net profit as reporte in the Statement of Comprehensive Income because it exclues items of income an expense that are taxable or euctible in other perios or that are never taxable or euctible. The Group s liability for current tax is calculate using tax rates that have been enacte by the year en ate. Deferre tax is the tax arising on ifferences on the carrying amounts of assets an liabilities in the financial statements an the corresponing tax bases use in the computation of taxable profit, an is accounte for using the liability metho. Deferre tax liabilities are generally recognise for all taxable temporary ifferences an eferre tax assets are recognise to the extent that it is probable that taxable profits will be available against which euctible temporary ifferences can be utilise. Such assets an liabilities are not recognise if the temporary ifference arises from goowill or from the initial recognition (other than in a business combination) of other assets an liabilities in a transaction that affects neither the tax profit nor the accounting profit. Deferre tax liabilities are recognise for taxable temporary ifferences arising on investments in subsiiaries, except where the Group is able to control the reversal of the temporary ifference an it is probable that the temporary ifference will not reverse in the near future. The carrying amount of eferre tax assets is reviewe at each year en ate an reuce to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovere. Deferre tax is calculate at the tax rates that are expecte to apply in the perio when the liability is settle or the asset realise. Deferre tax is charge or creite in the Statement of Comprehensive Income, except when it relates to items charge or creite irectly to equity, in which case the eferre tax is also ealt with in equity. Investment property Investment property, which is property hel to earn rentals an/ or for capital appreciation, is state at its fair value at the year en ate. Fair value is etermine as the market value as etermine by professionally qualifie external valuers. Gains or losses arising from changes in fair value of investment property are inclue in profit or loss for the perio in which they arise. Investment property uner construction Property that is in the process of being constructe or evelope for future use as investment property is classifie as investment property uner construction an state at its fair value as at the year en ate, where this can be reliably measure. On completion of construction or evelopment it is reclassifie an subsequently accounte for as investment property. All costs irectly associate with the purchase an construction of a property an all subsequent capital expeniture for the evelopment are capitalise as part of the cost. Fair value is etermine as the market value as etermine by professionally qualifie external valuers. Gains or losses arising from changes in fair value of investment property are inclue in profit or loss for the perio in which they arise. Tritax Polska No.1 Fun Limite Page 18

20 Notes to the Financial Statements (continue) For the year ene 5 April Significant accounting policies (continue) Impairment Assets that have an inefinite useful life are not subject to amortisation an are teste annually for impairment. Assets that are subject to amortisation or epreciation are reviewe for impairment whenever events or changes in circumstance inicate that the carrying amount may not be recoverable. An impairment loss is recognise for the amount by which the asset s carrying amount excees its recoverable amount. The recoverable amount is the higher of an asset s fair value less costs to sell an value in use. For the purposes of assessing impairment, assets are groupe at the lowest levels for which there are separately ientifiable cash flows (cash-generating units). Borrowing costs Borrowing costs are recognise in the Statement of Comprehensive Income in the perio in which they are incurre. Interest bearing bank loans an borrowings Interest bearing bank an other loans are recore at the procees receive, net of irect issue costs. Finance charges, incluing premiums payable on settlement or reemption an irect issue costs, are accounte for on an accruals basis in the Statement of Comprehensive Income using the effective interest metho an are ae to the carrying amount of the instrument to the extent that they are not settle in the perio in which they arise. Expenses Expenses are accounte for on an accruals basis. The Group s property management an aministration fees, finance costs an all other expenses are charge through the Statement of Comprehensive Income. Segmental reporting The irectors are of the opinion that the Group is engage at 5 April 2010 in a single segment of business being property investment business, an in one geographical area being Polan. Financial instruments Financial instruments are recognise on the Group s Statement of Financial Position when the Group becomes party to the contractual provisions of the instrument. Financial instruments are initially measure at acquisition cost, which inclues transaction costs. Subsequent to initial recognition, they are measure as set out below. Cash an cash equivalents Cash an cash equivalents consist of cash in han an balances with banks an investments in money market instruments which are reaily realisable. Financial liabilities Non-erivative financial liabilities are recognise at amortise cost, comprising original ebt less principal repayments an amortisations. Derivative financial instruments The Group uses interest rate swaps to manage its exposure to movements in interest rates on a portion of each ebt incurre to acquire investment property. Such erivative financial instruments are initially recognise as assets or liabilities at fair value an subsequently revalue on each year en ate accoring to market conitions. Changes in the fair value of erivatives which have not been esignate as heges for hege accounting purposes are taken irectly to the consoliate Statement of Comprehensive Income as part of finance income or expenses. The Group oes not use erivative financial instruments for speculative purposes. The use of erivative instruments is subject to limits an the positions are regularly monitore an reporte to senior management. Trae payables Trae payables an other short-term monetary liabilities are initially recognise at fair value an subsequently carrie at amortise cost using the effective interest rate metho. The effect of iscounting on these financial instruments is not consiere to be material. The Group has not classifie any of its financial liabilities as at fair value through profit or loss. Equity instruments Equity instruments issue by the Company are recore at the procees receive, net of irect issue costs. Use of estimates in the preparation of the financial statements In preparing the financial statements, management is require to make estimates an assumptions which affect reporting income, expenses, assets, liabilities an isclosure of contingent assets an liabilities. Use of available information an application of jugement are inherent in the formation of estimates. Actual results in the future coul iffer from such estimates. Trae an other receivables Trae receivables an other short-term monetary assets are initially recognise at fair value an subsequently carrie at amortise cost using the effective interest rate metho, less any provisions for oubtful ebts. The effect of iscounting on these financial instruments is not consiere to be material. Tritax Polska No.1 Fun Limite Page 19

21 Notes to the Financial Statements (continue) For the year ene 5 April Financial instruments The Group is expose to creit risk, currency risk, liquiity risk, capital risk an interest rate risk arising from the financial instruments it hols. The risk management policies employe by the Group to manage these risks are iscusse below. The Group s principal financial liabilities comprise bank loans an trae payables. The main purpose of these financial liabilities is to raise finance for the Group s acquisitions of assets an investments in subsiiaries. The Group has various financial assets such as cash an cash equivalents an receivables. Creit risk Creit risk arises when a failure by counterparties to ischarge their obligations coul reuce the amount of future cash flows from financial assets on han at the year en ate. Rent receivables are ue from iverse government an corporate tenants with strong creit ratings. Accoringly, the Directors o not anticipate losses in respect of these receivables. In the event of a efault by a tenant in occupation, the Group will suffer a rental shortfall an incur aitional costs, incluing legal expenses in maintaining, insuring an reletting the property until it is relet. The Group utilises property managers to monitor the tenants in orer to anticipate, an minimise the impact of, efaults by tenants in occupation. The maximum exposure relating to efault by tenants an other ebtors at the year en ate was 139,598 (2009: 29,907). Cash, cash equivalents an bank eposits are investe with major banks. The irectors believe that the financial institutions that hol the Company s investments are financially soun an, accoringly, minimal creit risk exists with respect to these investments. Derivative instruments hel for heging purposes are unertaken with the banks proviing the ebt finance. The Directors believe that these financial institutions are financially soun, an, accoringly, minimal creit risk exists in respect of these contracts. Currency risk Currency risk is the risk that the value of financial instruments will fluctuate ue to changes in foreign exchange rates. Currency risk arises when future commercial transactions an recognise assets an liabilities are enominate in a currency that is not the Group s reporting currency. The Group s subsiiaries finance the acquisition of property assets in the currency in which the asset is enominate so that the Group s exposure to changes in the Euro value of its assets is minimise. The Group is expose to foreign exchange risk arising from currency exposures with respect to the Polish Zloty an Sterling. The Group s management monitors exchange rate fluctuations on a continuous basis an if appropriate may use forwar foreign exchange contracts to hege the currency exposure. The tables below summarise the Group s exposure to foreign currency risk at the year en ate. The Group s assets an liabilities are shown at their Euro carrying amounts, categorise by their currency of enomination. Currency of enomination Euro Polish Zloty Sterling Total As at 5 April 2010 Investment property 63,220,000 13,597,300 76,817,300 Investment property uner construction 1,093,081 1,093,081 Deferre tax assets 20,353 20,353 Trae an other receivables 75,554 1,874,123 32,420 1,982,097 Cash an cash equivalents 2,658,767 1,098, ,186 4,331,387 Total assets 65,954,321 17,683, ,606 84,244,218 Bank loans 43,809,902 5,728,319 49,538,221 Derivative liabilities 900,991 62, ,073 Deferre tax liabilities 2,373,860 2,373,860 Trae an other payables 463,123 1,736, ,927 2,363,993 Total liabilities 45,174,016 9,901, ,927 55,239,147 Net assets 20,780,305 7,782, ,679 29,005,071 Tritax Polska No.1 Fun Limite Page 20

22 Notes to the Financial Statements (continue) For the year ene 5 April Financial instruments (continue) Currency risk (continue) Currency of enomination Euro Polish Zloty Sterling Total As at 5 April 2009 Investment property 62,250,000 13,795,117 76,045,117 Investment property uner construction 1,230,000 1,230,000 Deferre tax assets 220, ,776 Trae an other receivables 36,599 2,095,343 19,855 2,151,797 Cash an cash equivalents 6,083, , ,786 7,803,020 Total assets 69,599,960 17,109, ,641 87,450,710 Bank loans 42,290,210 4,955,331 47,245,541 Derivative liabilities 1,544,765 1,544,765 Deferre tax liabilities 3,431,941 3,431,941 Trae an other payables 408,577 1,784, ,981 2,386,644 Total liabilities 44,243,552 10,171, ,981 54,608,891 Net assets 25,356,408 6,937, ,660 32,841,819 The sensitivity analyses below are base on a change in assumption while holing all other assumptions constant. In practice this is unlikely to occur an changes in some of the assumptions may be correlate for example, change in interest rate an change in foreign exchange rates. The Group manages foreign currency risk on an overall basis. The sensitivity analysis prepare by management for foreign currency risk illustrates how changes in the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign currency rates. If the Euro weakene/strengthene by 10% against the Polish Zloty with all other variables hel constant, the net asset value at the year en ate woul be 707,462 higher/lower (2009: 630,705 higher/lower). If the Euro weakene/strengthene by 10% against Sterling with all other variables hel constant, the net asset value at the year en ate woul be 45,645 higher/lower (2009: 56,650 lower/higher). No other currencies have a material effect upon the profitability of the Group. Liquiity risk Liquiity risk is the risk that arises when the maturity of assets an liabilities oes not match. An unmatche position potentially enhances profitability, but can also increase the risk of losses. The Group has proceures with the object of minimising such losses, such as maintaining sufficient cash an other highly liqui current assets an by having available an aequate amount of committe creit facilities. The Group s liquiity position is monitore on a weekly basis by the Fun Manager an is reviewe on a quarterly basis by the Boar of Directors. A summary table with maturity of financial assets an liabilities presente below is use by key management personnel to manage liquiity risks. Tritax Polska No.1 Fun Limite Page 21

23 Notes to the Financial Statements (continue) For the year ene 5 April Financial instruments (continue) Liquiity risk (continue) Financial assets current Trae an other receivables maturity within one year Cash an cash equivalents maturity within one year ,561,120 4,331, ,825,527 7,803,020 5,892,507 9,628,547 Financial liabilities current Trae an other payables maturity within one year Borrowings maturity within one year 2,136,142 32,662,210 2,170,871 4,955,331 34,798,352 7,126,202 Financial liabilities non-current Borrowings Between 1 an 2 years Between 2 an 5 years 11,147,691 5,728,320 33,329,210 8,961,000 16,876,011 42,290,210 Fair value hierarchy The table below analyses instruments carrie at fair value, by valuation metho. The ifferent levels have been efine as follows: Level 1: quote prices (unajuste) in active markets for ientical assets or liabilities; Level 2: inputs other than quote prices inclue within Level 1 that are observable for the asset or liability, either irectly (ie as prices) or inirectly (ie erive from prices); Level 3: inputs for the asset or liability that are not base on observable market ata (unobservable inputs). As at 5 April 2010 Level 1 Level 2 Level 3 Total Derivative financial liabilities 963, ,073 As at 5 April 2009 Level 1 Level 2 Level 3 Total Derivative financial liabilities 1,544,765 1,544,765 Tritax Polska No.1 Fun Limite Page 22

24 Notes to the Financial Statements (continue) For the year ene 5 April Financial instruments (continue) Capital risk The Group s objectives when managing capital are to safeguar the Group s ability to continue as a going concern in orer to provie returns for shareholers an benefits for other stakeholers an to maintain an optimum capital structure to reuce the cost of capital. In orer to maintain or ajust the capital structure, the Group may ajust the amount of iviens pai to shareholers, return capital to shareholers, issue new shares or sell assets to reuce ebt. Consistent with others in the inustry, the Group monitors capital on the basis of the gearing ratio. This ratio is calculate as net ebt ivie by total capital. Net ebt is calculate as total borrowings, as shown in the consoliate Statement of Financial Position, less cash an cash equivalents. Total capital is calculate as equity, as shown in the consoliate Statement of Financial Position, plus net ebt. The gearing ratio at the year en ate was as follows: Total borrowings Less: cash an cash equivalents ,538,221) (4,331,387) ,245,541) (7,803,020) Net ebt 45,206,834 39,442,521 Total equity 29,005,071 32,841,819 Total capital 74,211,905 72,284,340 Gearing ratio 61% 55% Interest rate risk Interest rate risk is the risk that the value of financial instruments will fluctuate ue to changes in market interest rates. The Group is expose to interest rate risk in relation to its borrowings. Borrowings issue at variable rates expose the Group to cash flow interest rate risk. Borrowings issue at fixe rates expose the Group to fair value interest rate risk. The Group seeks to mitigate cash flow interest rate risk by means of interest rate swap contracts, which effectively fix the interest rates on the Group s variable rate rawn-own borrowings. As a result of this the Group s exposure to cash flow interest rate risk is limite, however this oes expose the Group to fair value interest rate risk. The Group monitors interest rates on an ongoing basis an uses interest rate swaps where appropriate. At 5 April 2010, 31,053,084 (2009: 26,161,002) of the Group s borrowings were at effectively fixe rates of interest an 18,485,137 (2009: 21,084,539) were at variable rates of interest. Ha these balances existe for the whole of the year, the effect on the Statement of Comprehensive Income of an increase of 1%/ecrease of 0.5% in short term interest rates woul have been a ecrease of 184,851/increase of 92,425 in post-tax profit for the year (2009: ecrease/increase of 210,845 resulting from increase/ecrease of 1%) in relation to the Group s variable rate borrowings, an an increase of 271,919/ecrease of 135,960 in post-tax profit for the year (2009: increase/ecrease of 1,836,873 resulting from increase/ecrease of 1%) in relation to the Group s fixe rate borrowings. 5. Critical accounting estimates an assumptions Management makes estimates an assumptions concerning the future. The resulting accounting estimates will, by efinition, selom equal the relate actual results. The estimates an assumptions that have a significant risk of causing a material ajustment to the carrying amounts of assets an liabilities within the next financial year are outline below. Estimate of fair value of investment properties The Group has engage Savills Sp. z o.o., Chartere Surveyors ( Savills or the valuers ), as professional valuers of the investment properties, with the exception of Wola Plaza which has been value by Polish Properties. In forming their opinion on the values of the investment properties the valuers will be minful of the following factors: The best evience of fair value is current prices in an active market for similar lease an other contracts. In the absence of such information, the amount will be etermine within a range of reasonable fair value estimates. Tritax Polska No.1 Fun Limite Page 23

25 Notes to the Financial Statements (continue) For the year ene 5 April Critical accounting estimates an assumptions (continue) Estimate of fair value of investment properties (continue) In making their jugement, the valuers will consier information from a variety of sources, incluing: current prices in an active market for properties of a ifferent nature, conition or location (or subject to ifferent lease or other contracts), ajuste to reflect those ifferences; recent prices of similar properties in less active markets, with ajustments to reflect any changes in economic conitions since the ate of the transactions that occurre at those prices; an iscounte cash flow projections base on reliable estimates of future cash flows, erive from the terms of any existing lease an other contracts an (where possible) from external evience such as current market rents for similar properties in the same location an conition, an using iscount rates that reflect current market assessments of the uncertainty in the amount an timing of cash flows. Principal assumptions for the estimation of fair value If information on current or recent prices or assumptions unerlying the iscounte cash flow approach to investment property valuations are not available, then the fair values of investment properties are etermine using iscounte cash flow valuation techniques. Any assumptions use will be mainly base on market conitions existing at the year en ate. The principal assumptions unerlying the estimation of fair value are those relate to: the receipt of contractual rentals; expecte future market rentals; voi perios; maintenance requirements; an appropriate iscount rates. These valuations are regularly compare to actual market yiel ata an actual transactions in the market. The expecte future market rentals are etermine on the basis of current market rentals for similar properties in the same location an conition. Income taxes The Group is potentially subject to income taxes in ifferent jurisictions. Significant estimates are require in etermining the worlwie provision for income taxes. There are some transactions an calculations for which the ultimate tax etermination is uncertain. The Group recognises liabilities for anticipate tax issues base on estimates of whether aitional taxes will be ue. Where the final tax outcome of these matters is ifferent from the amounts that were originally recore, such ifferences will impact the income tax an eferre tax provisions in the perio in which such etermination is mae. 6. Revenue The Group s revenue erives principally from rental income an lease-relate aministration service charges as follows: Rental income Service charge income Other income ,488,048 1,520, , ,269,900 1,205, ,616 7,465,684 5,782, Operating lease receivables Not later than 1 year Between 1 an 5 years Later than 5 years ,855,392 10,226,758 2,002, ,174,051 13,121,042 2,018,900 17,084,970 20,313,993 Tritax Polska No.1 Fun Limite Page 24

26 Notes to the Financial Statements (continue) For the year ene 5 April Aministrative expenses an other operating expenses Direct property operating expenses Auit fees Other aministrative an operating expenses ,500,895 69,904 2,014, ,008, ,761 2,169,627 4,585,108 4,285, Taxation The tax creit/(charge) for the year comprises: Current tax Deferre tax 2010 (10,695) 1,244,538) 2009 ) (603,912) 1,233,843 (603,912) The tax on the Group s profit before tax iffers from the theoretical amount that woul arise using the weighte average tax rate of the applicable profits of the consoliate companies as follows: Loss before tax (3,568,090) (1,484,671) Tax creit/(charge) calculate at omestic tax rates applicable to profits in the respective countries Ajustment in respect of: Deferre tax write back Losses not allowable for tax 567,973) 1,244,538) (578,667) (1,296,348) 692,436) ) 1,233,844 (603,912) The weighte average applicable tax rate was 4.36% (2009: 2.35%). 10. Basic an ilute earnings per share Loss attributable to the shareholers of the parent (2,334,247) (2,088,583) Weighte average number of shares uring the year 28,029,365 28,029,365 Basic an ilute earnings per share 2(0.083) 2(0.075) Tritax Polska No.1 Fun Limite Page 25

27 Notes to the Financial Statements (continue) For the year ene 5 April Investment properties Balance brought forwar Acquisitions uring the year Capitalise costs uring the year Fair value ajustment in the year Transfer to investment property uner construction Exchange ifferences ,045,117) 3,336,379) 285,724) (4,676,467) ) 1,826,547) ,394,000) 22,906,284) 557,559) 708,940) (1,505,000) (2,016,666) 76,817,300 76,045,117 The Directors have engage Savills Sp. z o.o., Chartere Surveyors, as valuers of the majority of the investment properties. Wola Plaza is value by Polish Properties. The Directors have etermine the fair value of the investment properties with reference to the valuers valuations at the year en ate. As at 5 April 2010 the Group owne the following investment properties: Office builing at ul. Piekna 68, Warsaw Office builing Wola Plaza at ul. Mlynarska 8/12, Warsaw Storage/office builing at ul. Szajnochy 11, Bygoszcz Office builing at ul. Ratajczaka 19, Poznan Office builing at ul. Wierzbiecice 1, Poznan Office builing at ul. Jasna 24, Warsaw Warehouse builings at ul. Dzialkowa 85, Warsaw Galeria Foron shopping centre at ul. Skazynskiego, Bygoszcz During the year the Group acquire a secon warehouse builing at ul. Dzialkowa 85, Warsaw. 12. Investment property uner construction Balance brought forwar Transfer from investment property Capitalise costs uring the year Fair value ajustment in the year ,230,000) ) 36,869) (173,788) 2009 ) 1,505,000) 4,012) (279,012) 1,093,081 1,230,000 The Directors have etermine the fair value of the investment property uner construction with reference to the valuers valuation at the year en ate. Investment property uner construction comprises a lan site esignate for evelopment at ul. Szajnochy 11, Bygoszcz. Tritax Polska No.1 Fun Limite Page 26

28 Notes to the Financial Statements (continue) For the year ene 5 April Deferre taxation Deferre tax assets an liabilities arising as follows have been recognise at the year en ate: Deferre tax assets Carrie forwar losses 20, ,776 Deferre tax liabilities Balance brought forwar (Creit)/charge for the year Exchange ifferences 3,431,941) (1,244,538) 186,457) 3,526,489) 603,912) (698,460) 2,373,860 3,431,941 The Group has incurre losses of 11,327,539 (2009: 10,613,622) in respect of which no eferre tax asset has been recognise in the Statement of Financial Position. 14. Investments in subsiiaries The financial statements of the Group consoliate the results, assets an liabilities of the subsiiary companies liste below: Jurisiction Ownership Principal activity Direct Tritax Polska No. 1 Investment Company S.à.r.l. Luxembourg 100% Holing company Inirect CC1 Funusz Inwestycyjny Zamknięty Polan 100% Investment fun Numer 1 Tritax Polska (GP) Sp. z o.o. S.K.A. Polan 99% Investment property holing Numer 2 Tritax Polska (GP) Sp. z o.o. S.K.A. Polan 99% Holing company Numer 3 Tritax Polska (GP) Sp. z o.o. S.K.A. Polan 99% Investment property holing Numer 4 Tritax Polska (GP) Sp. z o.o. S.K.A. Polan 99% Investment property holing Numer 5 Tritax Polska (GP) Sp. z o.o. S.K.A. Polan 99% Investment property holing Numer 6 Tritax Polska (GP) Sp. z o.o. S.K.A. Polan 99% Dormant Numer 7 Tritax Polska (GP) Sp. z o.o. S.K.A. Polan 99% Investment property holing Numer 8 Tritax Polska (GP) Sp. z o.o. S.K.A. Polan 99% Investment property holing Numer 9 Tritax Polska (GP) Sp. z o.o. S.K.A. Polan 99% Investment property holing Numer 10 Tritax Polska (GP) Sp. z o.o. S.K.A. Polan 99% Holing company Numer 11 Tritax Polska (GP) Sp. z o.o. S.K.A. Polan 99% Investment property holing Numer 12 Tritax Polska (GP) Sp. z o.o. S.K.A. Polan 99% Dormant Numer 14 Tritax Polska (GP) Sp. z o.o. S.K.A. Polan 99% Dormant Numer 15 Tritax Polska (GP) Sp. z o.o. S.K.A. Polan 99% Dormant Wola Plaza Sp. z o.o. Polan 100% Investment property holing Jasna Sp. z o.o. Polan 100% Holing company Tritax Polska No.1 Fun Limite Page 27

29 Notes to the Financial Statements (continue) For the year ene 5 April Trae an other receivables Trae ebtors VAT receivable Accrue income Sunry ebtors an prepayments ,143, ,754 15, , ,233, ,508 9, ,869 1,982,097 2,151, Derivative assets an liabilities The Group utilises interest rate swaps to hege its exposure to movements in interest rates. Interest rate swap contracts are value by iscounting the anticipate future cash flows, base on the market interest rates applicable for the remaining term of the contract. Changes in the fair value of erivatives are isclose in the Statement of Comprehensive Income. At the year en ate the fair value of unsettle contracts was as follows: Current erivative liabilities 528,659 Non-current erivative liabilities 434,414 1,544,765 The following erivative contracts were open at the year en ate: Interest rate swap contracts Various contracts with a total principal amount of 31,053,084. Uner these contracts the Fun has agree to make fixe rate interest payments at rates between 1.55% an 5.55% against receipt of either 1 month EURIBOR or 1 month WIBOR plus a specifie margin between 1.2% an 3.5%. The contracts in place at the year en ate have maturity ates between July 2010 an December 2012, fixe to coincie with the repayment ates of the loans to which they relate. 17. Bank loans HSBC Bank Polska S.A. Bank Zachoni WBK S.A ,608,319 40,929, ,835,331 39,410,210 49,538,221 47,245,541 The loans are repayable as follows: Within one year After one year ,662,210 16,876, ,955,331 42,290,210 49,538,221 47,245,541 Tritax Polska No.1 Fun Limite Page 28

30 Notes to the Financial Statements (continue) For the year ene 5 April Bank loans (continue) The weighte average effective interest rate at the year en ate is % (2009: %). In the opinion of the Directors, the carrying amounts of the loans are materially the same as their fair value. The Group uses interest rate swaps to manage its exposure to interest rate movements on its bank borrowings. At the year en ate the Group hel interest rate swap contracts that convert 31,053,084 (2009: 26,161,002) of floating rate ebt to fixe rate ebt. These arrangements were entere into alongsie the loan agreements with Bank Zachoni WBK an HSBC Bank Polska. The loans payable comprise separate facilities as follows: Bank Zachoni WBK S.A. 12,642,210 investment loan facility at the 1 month EURIBOR rate plus 1.2%, maturing 12 September The above facility is secure on the assets of the Company s subsiiary Numer 2 Tritax Polska (GP) Sp. z o.o. S.K.A. an on the other properties in the Bank Zachoni WBK portfolio. An interest rate swap expiring 13 September 2010 was entere into with Bank Zachoni WBK capping 7,585,326 of the loan at a rate of 4.75%. The total balance outstaning on the above facility at 5 April 2010 was 12,642,210. 1,015,000 investment loan facility at the 1 month EURIBOR rate plus 1.45%, maturing 1 October The above facility is secure on the assets of the Company s subsiiary Numer 3 Tritax Polska (GP) Sp. z o.o. S.K.A. an on the other properties in the Bank Zachoni WBK portfolio. An interest rate swap expiring 1 October 2010 was entere into with Bank Zachoni WBK capping 609,000 of the investment loan at a rate of 4.5%. The total balance outstaning on the above facility at 5 April 2010 was 1,015,000. 5,119,000 investment loan facility at the 1 month EURIBOR rate plus 1.2%, maturing 1 September The above facility is secure on the assets of the Company s subsiiary Numer 4 Tritax Polska (GP) Sp. z o.o. S.K.A. an on the other properties in the Bank Zachoni WBK portfolio. An interest rate swap expiring 6 September 2010 was entere into with Bank Zachoni WBK capping 3,071,400 of the investment loan at a rate of 4.75%. During the year 667,000 of the loan was repai. The total balance outstaning on the above facility at 5 April 2010 was 4,452,000. 6,549,000 investment loan facility at the 1 month EURIBOR rate plus 1.3%, maturing 18 January The above facility is secure on the assets of the Company s subsiiary Numer 5 Tritax Polska (GP) Sp. z o.o. S.K.A. an on the other properties in the Bank Zachoni WBK portfolio. An interest rate swap expiring 18 January 2011 was entere into with Bank Zachoni WBK capping 3,798,600 of the investment loan at a rate of 4.5%. The total balance outstaning on the above facility at 5 April 2010 was 6,549,000. 5,108,000 investment loan facility at the 1 month EURIBOR rate plus 1.5%, maturing 23 July The above facility is secure on the assets of the Company s subsiiary Numer 7 Tritax Polska (GP) Sp. z o.o. S.K.A. an on the other properties in the Bank Zachoni WBK portfolio. An interest rate swap expiring on 22 July 2011 was entere into with Bank Zachoni WBK capping 3,049,476 of the investment loan at a rate of 5.45%. The total balance outstaning on the above facility at 5 April 2010 was 5,108,000. 3,853,000 investment loan facility at the 1 month EURIBOR rate plus 1.5%, maturing 1 September ,286,691 aitional investment loan facility on the same terms as above. The above facilities are secure on the assets of the Company s subsiiary Numer 8 Tritax Polska (GP) Sp. z o.o. S.K.A. an on the other properties in the Bank Zachoni WBK portfolio. Tritax Polska No.1 Fun Limite Page 29

31 Notes to the Financial Statements (continue) For the year ene 5 April Bank loans (continue) Bank Zachoni WBK S.A. (continue) Interest rate swaps expiring on 31 August 2011 have been entere into with Bank Zachoni WBK capping 2,311,800, 1,372,015 an 914,676 of the investment loans at rates of 2.15%, 5.2% an 1.55% respectively. During the year 100,000 of the initial loan was repai, an a further loan in the sum of 2,286,691 was rawn own. The total balance outstaning on the above facilities at 5 April 2010 was 6,039,691. 5,124,000 investment loan facility at the 1 month EURIBOR rate plus 1.4%, maturing 26 March The above facilities are secure on the assets of the Company s subsiiary Numer 10 Tritax Polska (GP) Sp. z o.o. S.K.A. an on the other properties in the Bank Zachoni WBK portfolio. An interest rate swap expiring on 25 March 2011 was entere into with Bank Zachoni WBK capping 3,074,400 of the investment loan at a rate of 5.5%. The total balance outstaning on the above facility at 5 April 2010 was 5,124,000. HSBC Bank Polska S.A. 2,670,000 investment loan facility at the 1 month LIBOR rate plus a margin between 1.5% an 2% (epening on the level of the annualise interest cover ratio), maturing 31 July ,000 moernisation loan facility at the 1 month LIBOR rate plus a margin between 1.5% an 2% (epening on the level of the annualise interest cover ratio), maturing 31 July The above facilities are secure on the assets of the Company s subsiiary Numer 1 Tritax Polska (GP) Sp. z o.o. S.K.A. An interest rate swap expiring on 30 July 2010 was entere into with HSBC Bank Polska capping the investment loan at a rate of 4.65%. The total balance outstaning on the above facilities at 5 April 2010 was 2,880,000. PLN 22,062,622 investment loan facility at the 1 month WIBOR rate plus 3.5%, maturing 14 December The above facility is secure on the assets of the Company s subsiiary Numer 9 Tritax Polska (GP) Sp. z o.o. S.K.A. An interest rate swap expiring on 22 December 2012 was entere into with HSBC Bank Polska capping PLN 10,000,000 of the investment loan at a rate of 4.65%. The total balance outstaning on the above facility at 5 April 2010 was PLN 22,062, Trae an other payables Trae creitors Sunry creitors an accruals ,012 1,445, ,319,638 1,067,006 2,363,993 2,386,644 The fair values of trae an other payables ue within one year approximate to their carrying amounts as shown above. Tritax Polska No.1 Fun Limite Page 30

32 Notes to the Financial Statements (continue) For the year ene 5 April Share capital Authorise share capital: The authorise share capital of the Company is mae up of an unlimite number of shares of no par value, which may be enominate in any currency an issue as: Voting reeemable participating shares; Non-voting non-participating reeemable performance shares; or Non-voting non-participating non-reeemable orinary shares. Issue share capital: 2 orinary shares of no par value 28,029,363 participating shares of no par value 1,000 performance shares of no par value The orinary shares carry no right to iviens or other istributions. Participating shares carry the right to receive istributions at the iscretion of the Directors. 20. Reserves Share Premium Retaine Earnings Translation Reserve Total Balance brought forwar 36,078,224 (815,664) (2,420,741) 32,841,819) Loss for the year (2,334,247) ) (2,334,247) Diviens pai (see note 21) (1,870,916) ) (1,870,916) Exchange ifference on translation of foreign operations ) 368,415) 368,415) 36,078,224 (5,020,827) (2,052,326) 29,005, Diviens Final ivien for the perio ene 5 April 2009 of 3p per share pai on 20 April 2009 Interim ivien for the year ene 5 April 2010 of 3p per share pai on 20 October , , ,048,828 1,086,796 1,870,916 2,135,624 No final ivien has been eclare or pai for the year ene 5 April Tritax Polska No.1 Fun Limite Page 31

33 Tritax Polska No.1 Fun Limite Page 32

34 Notes to the Financial Statements (continue) For the year ene 5 April Relate party transactions Fees payable to the aministrator Praxis Property Fun Services Limite ( PPFSL ) of 77,315 (2009: 103,994) are inclue in these financial statements. At 5 April 2010 there was an outstaning balance ue to PPFSL of 19,441 (2009: 20,320). Mark Shaw, a Director of the Company, is a shareholer in an serve as a irector of the promoter, sponsor an istributor Tritax Securities 1 Limite throughout the year. All intra-group transactions, balances, income an expenses are eliminate on consoliation. 23. Post year en events In July 2010 an agreement was finalise with HSBC Bank Polska to exten the Euro loan facility relating to the Piekna property to 31 July A similar agreement was reache with Bank Zachoni WBK extening all loan facilities to 5 April 2014, which has been approve by the respective boars of the Bank an the Fun in September Tritax Polska No.1 Fun Limite Page 33

35 THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any oubt as to any aspect of this notice, you shoul consult your stockbroker or other registere ealer in securities, bank manager, solicitor, professional accountant or other professional aviser. When consiering what action you shoul take, you are recommene to seek your own personal financial avice from a suitable aviser. If you sell or have sol or transferre all your shares in Tritax Polska No 1 Fun Limite, you shoul han this ocument an the ocuments accompanying it to the purchaser or agent through whom the sale was affecte for transmission to the purchaser. TRITAX POLSKA NO 1 FUND LIMITED (Company Registration Number 46273) NOTICE OF ANNUAL GENERAL MEETING Tritax Polska No.1 Fun Limite Page 34

36 TRITAX POLSKA NO 1 FUND LIMITED (Company Number: 46273) NOTICE OF ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN THAT an Annual General Meeting of shareholers of Tritax Polska No 1 Fun Limite (the Company ) will be hel at Sarnia House, Le Truchot, St Peter Port, Guernsey GY1 4NA on 1st December 2010 at a.m. for the purpose of consiering an, if thought fit, passing the following resolutions: ORDINARY BUSINESS 1. To receive an aopt the Financial Statements an Directors Report for the year ene 5th April To re-appoint Mr Anrew Howat as a Director of the Company 3. To re-appoint Saffery Champness as auitors of the Company 4. To authorise the irectors to fix the remuneration of the Company s auitors By orer of the boar For an on behalf of Praxis Property Fun Services Limite Company Registration Number: As Company Secretary Date: 5th October 2010 Registere office: Sarnia House, Le Truchot, St Peter Port, Guernsey GY1 4NA, Channel Islans Notes: 1. Any shareholer entitle to atten an vote at the meeting is entitle to appoint one or more proxies to atten an vote instea of him. A proxy nee not be a shareholer of the Company. 2. The form of proxy, together, if appropriate, with the power of attorney or other authority (if any) uner which it is signe, must be eposite at the office of the Company s registere office not later than 48 hours before the time appointe for holing the meeting. 3. Return of a complete form of proxy will not preclue a shareholer from attening an voting personally at the meeting. 4. The notice sets out the resolutions to be propose at the meeting. The meeting will be chaire by a person nominate by the shareholers present in person or by proxy at the meeting. It is anticipate that the chairman of the meeting will be Mr Michael McKean or, in his absence, Mr Anrew Howat. 5. The quorum for a general meeting shall be four members present in person or by proxy. 6. If, within fifteen minutes from the appointe time for the meeting, a quorum is not present, then the meeting will be ajourne for seven ays at the same aress or to such other ay an at such other time an place as the Boar may etermine an no notice of ajournment nee be given. At that meeting, those shareholers present in person or by proxy will form a quorum whatever their number an the number of shares hel by them. Tritax Polska No.1 Fun Limite Page 35

37 TRITAX POLSKA NO 1 FUND LIMITED (Company Number: 46273) FORM OF PROXY Form of proxy for use by holers of Orinary Shares at the Annual General Meeting of the Company convene for 1st December 2010 at am. I/We (Please complete the full name of your investment in block capitals) of (Please complete your full aress in block capitals) hereby appoint/s 1 the chairman of the meeting (see note 1 overleaf) or 2 (Shoul you wish to appoint a representative, please complete the name an aress of proxy/representative in block capitals) as my/our proxy to atten, an on a poll, vote for me/us an on my/our behalf at the Annual General Meeting of the Company to be hel on 1st December 2010 at am an at any ajournment thereof. I/We wish my/our proxy to vote as inicate below in respect of the resolutions to be propose at the meeting. Please inicate which way you wish your proxy to vote by ticking the appropriate box alongsie each resolution. (see note 2 overleaf). ORDINARY RESOLUTIONS FOR AGAINST VOTE WITHHELD DISCRETIONARY 1. That the Financial Statements an Directors Report for the year ene 5th April 2010 be receive an aopte. 2. That Anrew Howat be re-appointe as a Director of the Company. 3. That Saffery Champness be re-appointe as auitors of the Company. 4. That the Directors be authorise to fix the remuneration of the Company s auitors. Signature... (see note 3 overleaf) Date Tritax Polska No.1 Fun Limite Page 36

38 TRITAX POLSKA NO 1 FUND LIMITED (Company Number: 46273) FORM OF PROXY Notes: 1. If you wish to appoint as your proxy someone other than the chairman of the meeting, cross out the wors the chairman of the meeting an write on the line the full name an aress of your proxy. The change can be initialle. 2. In the absence of instructions, the person appointe proxy may vote or abstain from voting as he or she thinks fit on the specifie resolutions an, unless instructe otherwise, the person appointe proxy may also vote or abstain from voting as he or she thinks fit on any other business (incluing amenments to resolutions) which may properly come before the meeting. 3. This form must be signe an ate by the shareholer or his/her attorney uly authorise in writing. If the shareholer is a company, it may execute uner its common seal or by the signature of a uly authorise officer or attorney. In the case of joint holings, any one holer may sign this form. The vote of the senior joint holer who teners a vote, whether in person or by proxy, will be accepte to the exclusion of the votes of the other joint holers an for this purpose seniority will be etermine by the orer in which the names stan in the register of members in respect of the joint holing. 4. To be vali, this form must be complete an loge with Praxis Property Fun Services Limite, PO Box 296, Sarnia House, Le Truchot St. Peter Port, Guernsey, Channel Islans GY1 4NA, together with the power of attorney or other authority (if any) uner which it is signe or a copy of such authority certifie notarially, not less than 48 hours before the time fixe for holing the meeting. 5. The vote withhel option is provie to enable you to abstain on any particular resolution however it shoul be note that a vote withhel is not a vote in law an will not be counte in the calculation of the proportion of the votes for an against a resolution. Tritax Polska No.1 Fun Limite Page 37

39 Tritax Polska No.1 Fun Limite Page 38 Annual report an financial statements for the year ene to 5 April 2010

40 Tritax Securities 1 Lt The Loge, Oell, Befor MK43 7BB t f Authorise an Regulate by the Financial Services Authority. Registere Office: The Loge, Oell, Befor, MK43 7BB. Company No