Tritax Quorum EZ Unit Trust. Financial statements for the year ended 5 April 2012

Transcription

1 Financial statements for the year ended 5 April 2012

2 CONTENTS Officers and Professional Advisors 1 2 Trustee's report 3 Trustee's responsibilities statement 4 Independent auditors' report 5 6 Income and expenditure account 7 Capital account 8 Notes to the accounts 9 15 Page

3 OFFICERS AND PROFESSIONAL ADVISORS Sponsor and distributor: Manager and promoter: Trustee and custodian: Auditors: Solicitors: England: Tritax Securities 1 Limited The Lodge Odell Bedfordshire MK43 7BB IOMA Fund and Investment Management Limited IOMA House, Hope Street Douglas Isle of Man IM1 1AP Standard Bank Isle of Man Limited Standard Bank House, One Circular Road Douglas Isle of Man IM1 1SB Moore Stephens, Chartered Accountants PO Box Athol Street Douglas Isle of Man IM99 1BD Fladgate LLP 16 Great Queen Street London WC2B 5DG Goodman Harvey LLP Old Colony House 6 South King Street Manchester M2 6DQ Restructure: IoM: Ashurst LLP Broadwalk House 5 Appold Street London. EC2A 2HA Appleby (Isle of Man) LLC Athol Street Douglas Isle of Man IM1 1LB 1

4 OFFICERS AND PROFESSIONAL ADVISORS Valuer: Bank: Property manager: Tax advisers: CB Richard Ellis Bank House 27 King Street Leeds LS1 2HL Bank of Scotland Corporate Banking (Scotland) 1 st Floor, Lochrin Square Fountainbridge Edinburgh EH3 9QE Tritax Management LLP Aberdeen House South Road Haywards Heath West Sussex RH16 4NG Fladgate LLP 16 Great Queen Street London WC2B 5DG B+M Tax Accountants Aberdeen House South Road Haywards Heath West Sussex RH16 4NG Restructure: Ashurst LLP Broadwalk House 5 Appold Street London. EC2A 2HA 2

5 TRUSTEE'S REPORT We are pleased to attach the accounts for the Tritax Quorum EZ Unit Trust ("the Trust") for the year ended 5 April The Trust is an Enterprise Zone property unit trust, an investment which enables individual and corporate investors to acquire an interest in commercial property, the cost of which attracts capital allowances at a 100% initial rate. The Trust was established on 8 January 2008 and acquired long leasehold interests, at peppercorn rents, in land and buildings to be constructed at Quorum Business Park, Newcastle upon Tyne. The properties have the benefit of Developer licences for 17 years commencing 19 March The annual licence fees are 7,647,806. As described in the Information Memorandum issued to Unit Holders when the Trust was constituted, investors contributed their equity to the Investor Trust which applied the same, together with a Loan from the Bank of Scotland, to subscribe for units in the Trust. This arrangement allowed the investors to claim enterprise zone allowances by reference to the total investment of 175,285,000. Licence Fee Deposits were put in place by the Developer to guarantee annual income of 7,647,806 payable quarterly to the Trust. These deposits were charged to both the Trust and the Bank of Scotland under terms to the facility agreement. The monies, when received each quarter by the Trust, were applied by it to meet costs and service the debt due from the Investor Trust. Savills valued the Property on behalf of the Bank of Scotland in December 2010 and again in January Bank of Scotland advised that each valuation evidenced a breach of the loan to value covenant contained in the facility agreement The Licence Fee Deposits were taken by Bank of Scotland by enforcement of their security on 6 and 7 December 2011 and applied in part payment of the outstanding loan to the Quorum Investor Trust. The Developer was therefore unable to pay the licence fee due on 15 January A loan assignment from Bank of Scotland to an entity advised by Cerberus completed on 20 December The effect of Bank of Scotland taking almost 89 million in deposits from the developers was to replace a corresponding amount of the debt due To Bank of Scotland by debt in favour of the developer. This is reflected in the accounts of the Tritax Quorum Investor Trust. The Trustee made distributions of 7,447,806 in the year to the Quorum Investor Trust which paid the money to Bank of Scotland in accordance with the facility agreement. 3

6 TRUSTEE'S RESPONSIBILITIES STATEMENT The Trustee has elected to prepare accounts for the period which give a true and fair view of the financial position of the Trust at the end of that period and of its income and expenditure for the period and contain a statement whether the accounts have been prepared in accordance with applicable law and United Kingdom Generally Accepted Accounting Practice. In preparing the accounts, the Trustee is required to: select suitable accounting policies and apply them consistently; make judgements and, where applicable, estimates that are both prudent and reasonable; state that applicable accounting standards have been followed, subject to any material departures disclosed and explained in the accounts; prepare accounts on the basis that the Trust will continue in operation unless such presumption is inappropriate; report to the Unit Holders; satisfy itself that the Trust is, and continues to be, managed and maintained in accordance with the Trust Deed and any investment or borrowing powers are complied with; satisfy itself that the Trust Manager maintains sufficient accounting and other records; and safeguard the property and rights attaching thereto of the Trust. The Trustee is also responsible for the general administration and operation of the Trust. The Trustee, or its duly appointed agents, is required to maintain proper accounting records, effect distributions, procure valuations, as necessary, and take reasonable steps for the prevention and detection of fraud and other irregularities. TRUSTEE DECLARATION So far as the Trustee is aware, there is no relevant audit information of which the Trust's auditors are unaware, and the Trustee has taken all the relevant steps that it ought to have taken as a Trustee in order to make itself aware of any relevant audit information and to establish that the Trust's auditors are aware of that information. 4

7 INDEPENDENT AUDITORS' REPORT TO THE UNIT HOLDERS OF TRITAX QUORUM EZ UNIT TRUST We have audited the financial statements of the Tritax Quorum EZ Unit Trust for the year ended 5 April 2012, which comprise the income and expenditure account, capital account and related notes. The financial reporting framework that has been applied in their preparation is applicable law and Financial Reporting Standards. This report is made solely to the Unit Holders in accordance with the Trust Deed. Our audit work has been undertaken so that we might state to the Unit Holders those matters we are required to state to them in an auditors' report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Trust and the Unit Holders, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of the Trustee and Auditors As explained more fully in the Trustee s responsibilities statement, the Trustee is responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for Auditors. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Trust's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Trustee; and the overall presentation of the financial statements. In addition, we read all the financial and non financial information in the Trustee s report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent misstatements or inconsistencies we consider the implications for our report. Opinion on the financial statements In accordance with United Kingdom Generally Accepted Accounting Practice, investment properties should be stated in the financial statements at open market value. In accordance with the Information Memorandum, the investment properties will not be regularly revalued. On 14 December 2011 the bank requested a valuation of the properties and the valuation of 21,060,000 is reflected in these financial statements. As the market is changeable in the current economic climate and no valuation was obtained at the last balance sheet date, accordingly the evidence available to us as to the appropriateness of the carrying values of the investment properties was limited. 5

8 INDEPENDENT AUDITORS' REPORT TO THE UNIT HOLDERS OF TRITAX QUORUM EZ UNIT TRUST Except for the financial effects of any adjustment that might have been determined to be necessary had we been able to satisfy ourselves as to the open market value of investment properties, in our opinion the financial statements: (a) the amount available for allocation in respect of units for the accounting period; (b) (c) the movements on the capital account during the period. Opinion on other matters Matters on which we report by exception In respect of the limitation on our work relating to investment property values: we have not obtained all the information and explanations that were necessary for the purpose of the audit. give a true and fair view of the state of the Trust s affairs as at 5 April 2012 and of its deficit for the year then ended; have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and have been prepared in accordance with the Trust Deed in respect of: the capital of the deposited property and the liabilities relating thereto at the end of the accounting period; In our opinion the information given in the Trustee's report for the financial period for which the financial statements are prepared is consistent with the financial statements. We have nothing to report in respect of the following matters where we are required to report to you, if, in our opinion: adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or the financial statements are not in agreement with the accounting records and returns; or certain disclosures of Trustee's remuneration specified by law are not made. 6

9 INCOME AND EXPENDITURE ACCOUNT for the year ended 5 April 2012 Year ended 5 April 2012 Year ended 5 April 2011 Per Unit Per Unit Note pence pence RENTAL INCOME ,746, ,679,631 EXPENSES Trustee and Custodian fees 3 (0.0143) (25,067) (0.0143) (25,025) Manager and Promoter fees 4 (0.0134) (23,550) (0.0134) (23,535) Property Manager costs 5 (0.1143) (200,373) (0.1147) (201,127) Other professional fees 6 (0.0417) (73,084) (0.0188) (32,884) Property costs 7 (0.0482) (84,501) (0.0214) (37,590) Bank charges (0.0001) (169) (0.0002) (431) OPERATING PROFIT 7,340,248 7,359,039 Gross interest received INCOME BEFORE TAX 7,340,415 7,359,146 Taxation 8 (0.0000) (33) (21) Loss on revaluation of fixed asset ( ) (75,320,000) ( ) (78,917,384) DEFICIT BEFORE DISTRIBUTIONS (67,979,618) (71,558,259) DISTRIBUTIONS Income distributions 9 (4.2490) (7,447,806) (7,447,806) Capital distributions (7,447,806) (7,447,806) APPROPRIATION ACCOUNT Brought forward (77,333,180) 1,672,885 Deficit before distributions (67,979,618) (71,558,259) Distributions (7,447,806) (7,447,806) (152,760,604) (77,333,180) STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES There have been no recognised gains or losses in the period of account, except for the deficit of income over expenditure for the period as reported above. 7

10 CAPITAL ACCOUNT at 5 April 2012 FIXED ASSETS Note Investment property 1, 10 21,060,000 96,380,000 21,060,000 96,380,000 CURRENT ASSETS Debtors: amounts falling due within one year 11 9,574,955 7,705,708 Debtors: amounts falling due in more than one year 12 93,125, ,772,940 Cash at bank 117,081 2, ,817, ,481,638 CREDITORS: amounts falling due within one year 13 (9,946,097) (7,861,492) NET CURRENT ASSETS 92,871, ,620,146 CREDITORS: due after one year 14 (91,406,677) (99,048,326) NET ASSETS 22,524,396 97,951,820 TRUST CAPITAL Units of 1 each, issued at par and fully paid 175,285, ,285,000 Appropriation account (152,760,604) (77,333,180) 22,524,396 97,951,820 Approved and signed on behalf of the Trustee Standard Bank Isle of Man Limited by: 8

11 NOTES TO THE ACCOUNTS Year ended 5 April ACCOUNTING POLICIES Basis of accounting The Trust was constituted by a Trust Deed dated 8 January The accounts are prepared under the historical cost convention, modified to include the revaluation of certain fixed assets and investments, and in accordance with the applicable Financial Reporting Standards. Rental income guarantee The Developers' liabilities under the licences commenced on 19 March The first payments were due in arrears on 15 July 2008 and quarterly thereafter on each 15 October, 15 January, 15 April and 15 July. Fixed asset investments All fixed assets were initially recorded at cost and no depreciation was provided for. In order to minimise annual costs, and preserve potential returns to investors, regular revaluations of the properties were not envisaged by the Trustee during the Initial Trust Life which is to 1 April 2015, in accordance with the Information Memorandum. The policy for fixed asset investments adopted by the Trust does not follow United Kingdom Generally Accepted Accounting Practice (UKGAAP). Under UKGAAP fixed asset investment property should be stated in the financial statements at open market value. The Trustee obtained a valuation report by CB Richard Ellis, dated 14 December The report values the Trust Properties at 21,060,000. This value is recognised in the capital account and the write down from the previous valuation recognised in the income and expenditure account as it is considered to be permanent. 2 RENTAL INCOME The Trustee charged licence fees to each developer totalling 7,647,806 per annum for 17 years. The accounting treatment of rent and similar charges is to apportion the total amount due evenly over the period to which they relate. The amount for the period represents the licence fees and rents for the period 6 April 2011 to 5 April The developers made deposits into accounts, charged to the Trust and Bank of Scotland, to guarantee the licence fees. These monies, when received by the Trust, were applied by it to paying costs and making distributions to the Quorum Investor Trust to meet costs and repayments of the loan from Bank of Scotland. Following a valuation by Savills in January 2012, Bank of Scotland advised a breach of the loan to value covenant contained in the facility agreement with Quorum Investor Trust. Bank of Scotland took the Licence Fee Deposits, by enforcement of their security, on 6 and 7 December 2011 and applied them in part payment of the loan. 9

12 NOTES TO THE ACCOUNTS Year ended 5 April 2012 Rental income includes insurance charged to licensees and tenants as additional fees or additional rent. The income for the year was Licence fee due for year (366 days) 7,665,730 7,641,648 Insurance 81,262 37,983 7,746,992 7,679,631 The Trustee granted full repairing and insuring leases to the following tenants on the following terms Tenant Building Annual rent Term Lease commenced Rent commencement Convergys CMG UK Ltd Q13 873, years 1 02/11/ /11/2012 Balfour Beatty Group Q14 694, years 2 03/09/ /05/2013 Home Group Ltd Q15 2nd floor 183, years 3 31/01/ /02/2016 In the period between the lease commencement date and the rent commencement date, the Developer's obligations under the rent guarantee apply Tenant break option at 1 November 2014, rent review on the last day of the contractual term Tenant break option at 3 September 2015, rent review on fifth anniversary of the commencement date. Rent review on fifth anniversary of the commencement date. 3 TRUSTEE AND CUSTODIAN FEES The charges for the year were Annual fee 25,000 25,000 Disbursements ,067 25,025 4 MANAGER AND PROMOTER FEES The charges for the year were Annual fee 23,000 23,000 Disbursements ,550 23,535 10

13 NOTES TO THE ACCOUNTS Year ended 5 April PROPERTY MANAGER COSTS The charges for the year were Annual fee 200, ,395 Disbursements , ,127 6 OTHER PROFESSIONAL FEES The charges for the year were Audit Provision for 2012 accounts 5,165 5,045 (Over)/under provision in earlier years (30) 965 Disbursements 187 Accounting and taxation advice 2012 accounts 5,500 16,299 Earlier years 6,850 7,031 Advice to trustee regarding taxation of rent 1,238 Investor trust 2,306 Valuation Savills 39,000 CB Richard Ellis (share of costs) 14,250 Legal fees Legal fees (advice re change of trustee) 10,064 Cost in registration of 2 nd charge 2,480 Bank legal fees (payable by Trustee) 1,791 Refund of prior years legal fees (12,173) 73,084 32,884 7 PROPERTY COSTS The expense was property insurance of 84,289 and property owners' liability insurance of 212. The property insurance was charged to the licensees and tenant as additional fees and additional rent (note 2). 8 TAXATION The trust is not subject to UK income tax or corporation tax. The trust has no beneficiaries resident in the Isle of Man, therefore neither the beneficiaries nor the trust is liable to Isle of Man tax on income arising outside the Isle of Man. The tax paid 11

14 NOTES TO THE ACCOUNTS Year ended 5 April 2012 on interest earned is UK income tax deducted from the Trusts' bank accounts held in the UK. 9 DISTRIBUTIONS The trustee made the following distributions in the year 15 April July November 2011 Accrued at 5 April April July October January ,861,952 1,861,952 1,861,951 1,861,951 1,911,952 1,861,952 1,811,951 1,861,951 7,447,806 7,447, INVESTMENT PROPERTY Valuation brought forward 96,380, ,297,384 Valuation adjustment (note 1) (75,320,000) (78,917,384) Valuation carried forward 21,060,000 96,380, DEBTORS: AMOUNTS FALLING DUE WITHIN ONE YEAR Analysed as follows Quorum Developers (MP1.1) LLP Quorum 3 555, ,973 Quorum Developers (MP3.5) LLP Quorum 9 637, ,178 Quorum Developers (MP5.7) LLP Quorum 10 2,128,369 1,750,189 Quorum Developers (MP5.6) LLP Quorum 11 1,661,957 1,337,863 Quorum Developers (MP6.4) LLP Quorum 12 1,959,375 1,540,399 Quorum Developers (MP4.8) LLP Quorum 13 1,066, ,755 Quorum Developers (MP4.1) LLP Quorum , ,407 Quorum Developers (MP4.15) LLP Quorum , ,043 Quorum Developers (MP5.6) LLP (insurance) 252 Quorum Developers (MP6.4) LLP (insurance) 18,790 Isle of Man Government, Customs & Excise Division 2,102 12,147 Sundry debtor 4,644 Prepaid insurance 72,334 22,068 9,574,955 7,705,708 12

15 NOTES TO THE ACCOUNTS Year ended 5 April DEBTORS: AMOUNTS FALLING AFTER ONE YEAR Analysed as follows Quorum Developers (MP1.1) LLP Quorum 3 5,442,644 5,889,613 Quorum Developers (MP3.5) LLP Quorum 9 6,248,823 6,762,002 Quorum Developers (MP5.7) LLP Quorum 10 21,311,550 23,061,739 Quorum Developers (MP5.6) LLP Quorum 11 16,290,779 17,628,643 Quorum Developers (MP6.4) LLP Quorum 12 18,756,995 20,297,395 Quorum Developers (MP4.8) LLP Quorum 13 10,456,810 11,315,565 Quorum Developers (MP4.1) LLP Quorum 14 8,297,296 8,978,704 Quorum Developers (MP4.15) LLP Quorum 15 6,320,237 6,839,279 93,125, ,772, CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR Analysed as follows Creditors Tritax Management LLP 282, ,971 Fladgate LLP 3,203 15,495 IOMA Fund & Investment Management 17,800 13,691 Willis Ltd 1,964 Dundas & Wilson CS LLP Quorum Development Partners llp 32,153 JLT Speciality Ltd 5,396 Sundry creditor (insurance Quorum 12) 517 Prepaid rents falling due within one year Property Quorum 3 446, ,835 Quorum 9 512, ,170 Quorum 10 1,748,780 1,753,572 Quorum 11 1,336,786 1,340,449 Quorum 12 1,539,159 1,543,376 Quorum , ,414 Quorum , ,724 Quorum , ,046 7,641,648 7,679,478 Insurance (6 April to 29 October 2012) 72,216 29,370 Carried forward 8,055,834 7,843,314 13

16 NOTES TO THE ACCOUNTS Year ended 5 April 2012 Brought forward 8,055,834 7,843,314 Accruals Bank charges Audit fees 5,165 5,020 Property manager 52,838 2,745 Trustee fees 8,681 6,660 Manager and promoter 6, Taxation and advisory 5,500 3,375 Distribution 1,811,951 9,946,097 7,861, CREDITORS: DUE AFTER ONE YEAR Prepaid rents falling due after one year Quorum 3 5,342,209 5,788,821 Quorum 9 6,133,513 6,646,277 Quorum 10 20,918,284 22,667,064 Quorum 11 15,990,162 17,326,949 Quorum 12 18,410,869 19,950,028 Quorum 13 10,263,848 11,121,912 Quorum 14 8,144,185 8,825,043 Quorum 15 6,203,607 6,722,232 91,406,677 99,048, CONTINGENCIES The Trustee and the Manager have confirmed there were no contingent liabilities which should be disclosed at 5 April CAPITAL COMMITMENTS The Trustee and the Manager have confirmed there were no capital commitments which should be disclosed at 5 April SECURITY The loan to the Unit Holders of the Trust is held in the Quorum Investor Trust. This loan is secured against a charge on the units with a third party charge on the properties and other assets of the Trust. 14

17 NOTES TO THE ACCOUNTS Year ended 5 April POST BALANCE SHEET EVENT The restructuring of the 'Trust' was completed on 20 December 2012 as part of the arrangements under which Bank of Scotland sold the debt to it from the Quorum Investor Trust to Promontoria Holding 46 BV ('Prom 46'). In December 2011 Bank of Scotland used its security to apply deposits held by the Developers in payment of swap break costs and part payment of the debt. It was therefore only the amount which remained due to it after that repayment which was assigned to Prom 46. However, in addition to its liability to Prom 46, the Investor Trust is liable to the Developers for the monies extracted from the deposits in 2011 so that the assigned loan, together with the debt to the Developers, now represent the loan balance in the books of the Investor Trust. The refinancing of the 'Trust' allows for the licence fees payable by the Developers to be discharged by set off against interest and capital due from the Investor Trust in respect of its debt to the Developers. 15