Annual Report and Financial Statements Year ended 31 March 2017 Company number: 05987141
Meadownhall Finance PLC CONTENTS Page 1 Strategic Report 3 Directors Report 5 Independent Auditor s Report to the Members of Meadowhall Finance PLC 7 Profit and Loss Account 8 Statement of Comprehensive Income 9 Balance Sheet 10 Statement of Changes in Equity 11 Notes to the Accounts
STRATEGIC REPORT The directors present their Strategic Report. Business review and principal activities Meadowhall Finance PLC (the company ) is a subsidiary of Meadowhall Limited Partnership, which itself is wholly owned by MSC Property Intermediate Holdings Limited. MSC Property Intermediate Holdings Limited and its subsidiaries ( the group ) operate as a joint venture between The British Land Company PLC and NBIM Victoria Partners LP. The company s principal activity is to provide funding to fellow subsidiaries of MSC Property Intermediate Holdings Limited. As shown in the company s Profit and Loss Account on page 7 the company made a profit of 2,336 (2016: profit of 2,854), which has remained consistent with prior year. No dividends (2016: nil) were paid in the year. The Balance Sheet on page 9 shows the company s financial position at the year end is, in net liability terms, an increase from the prior year, primarily due to movement in the fair value of the interest rate derivative. Details of significant events since the balance sheet date, if any, are contained in note 13. The expected future developments of the company are determined by the strategy of the group. There are no future developments outside of the company s current operations planned. The Mortgaged Property, Meadowhall Shopping Centre, as referred to in note 9, has been undergoing a refurbishment during the year. Key performance indicators The directors measure how the group is delivering its strategy through the key performance indicators. The directors consider the primary measure of performance of the group to be turnover and net asset value. These are discussed above. The expected future developments of the company are determined by the strategy of the group. There are no future developments outside of the company s current operations planned. Principal risks and uncertainties This company is part of a large property investment group. As such, the fundamental underlying risks for this company are those of the property group as discussed below. The group generates returns to shareholders through long-term investment decisions requiring the evaluation of opportunities arising in the following areas: demand for space from occupiers against available supply; identification and execution of investment and development strategies which are value enhancing; availability of financing or refinancing at an acceptable cost; economic cycles, including their impact on tenant covenant quality, interest rates, inflation and property values; legislative changes, including planning consents and taxation; engagement of development contractors with strong covenants; and environmental and health and safety policies. These opportunities also represent risks, the most significant being change to the value of the property portfolio. This risk has high visibility to directors and is considered and managed on a continuous basis. Directors use their knowledge and experience to knowingly accept a measured degree of market risk. The group s preference for prime assets and their secure long term contracted rental income, primarily with upward only rent review clauses, presents lower risks than many other property portfolios. Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. In order to manage this risk, management regularly monitors all amounts that are owed to the company to ensure that amounts are paid in full and on time. Liquidity risk is the risk that the entity will encounter difficulty in raising funds to meet commitments associated with financial liabilities, This risk is managed through day to day monitoring of future cash flow requirements to ensure that the company has enough resources to repay all future amounts outstanding. The company s activities expose it primarily to interest rate risk. The company uses interest rate swap contracts to hedge these exposures. The company does not use derivative financial instruments for speculative purposes. The company finances its operations through public debt issues. The company borrows in Sterling at both fixed and floating rates of interest, using interest rate derivatives to hedge the interest rate risk on variable rate debt.
STRATEGIC REPORT (continued) Principal risks and uncertainties (continued) The company holds one derivative as at 31 March 2017 (2016: one) to fix the interest rates on external debt at approximately 4.65% (2016: 4.65%). The fair value of interest rate derivatives at the year end is a liability of 18.Om (2016: 17.8m liability) and has been accounted for using hedge accounting through the Statement of Comprehensive Income, with the ineffective portion recognised in the profit and loss account. This report was approved by the Board on 7 t4 t4 and signed by the order of the board by: 20i Director 2
DIRECTORS REPORT The directors present their Annual Report on the affairs of the company, together with the audited financial statements and independent Auditor s Report. Going concern The directors consider the company to be a going concern and the accounts are prepared on this basis. Details of this are shown in note 1 of the financial statements. Environment The company recognises the importance of its environmental responsibilities, monitors its impact on the environment; and designs and implements policies to reduce any damage that might be caused by the company s activities. The company operates in accordance with best practice policies and initiatives designed to minimise the company s impact on the environment including safe disposal of manufacturing waste, recycling and reducing energy consumption. Directors The directors who were in office during the year and up to the date of signing the financial statements, unless otherwise stated, were: C A Barber (alternate H Shah) R J Ford (resigned 17 July 2017) J Patel R J Wise (alternate C M J Forshaw resigned 10 April 2017) F Strysse (appointed 17 July 2017) Company secretary N Ekpo (Resigned 6 December 2016) British Land Company Secretarial Limited (appointed 6 December 2016) Directors responsibilities statement The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law) including FRS 101 Reduced Disclosure Framework. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to: select suitable accounting policies and then apply them consistently; make judgements and accounting estimates that are reasonable and prudent; state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. 3
Disclosure of information to auditors Meadowhall Finance PLC DIRECTORS REPORT (continued) Each of the persons who is a director at the date of approval of this report confirms that: (a) so far as the director is aware, there is no relevant audit information of which the company s auditor is unaware; and (b) the director has taken all the steps that he/she ought to have taken as a director in order to make himself/herself aware of any relevant audit information and to establish that the company s auditor is aware of that information. This confirmation is given and should be interpreted in accordance with the provisions of s41 8 of the Companies Act 2006. Independent auditor A resolution to reappoint Deloitte LLP as the company s auditor will be proposed at the Annual General Meeting. This report was approved by the Board on 71_IL V 2.o( and signed by the order of the board by: /44/1 V Director Nw2f( JHAbJ 4
INDEPENDENT AUDITOR S REPORT TO THE MEMBERS OF Meadowhall Finance PLC We have audited the financial statements of Meadowhall Finance PLC which comprise the Profit and Loss Account, the Statement of Comprehensive Income, the Balance Sheet, the Statement of Changes in Equity and the related notes 1 to 14. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including FRS 101 Reduced Disclosure Framework. This report is made solely to the company s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company s members those matters we are required to state to them in an auditor s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditor As explained more fully in the Directors Responsibilities Statement, the directors are 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 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 company s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Opinion on financial statements In our opinion the financial statements: give a true and fair view of the state of the company s affairs as at 31 March 2017 and of its profit 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 requirements of the Companies Act 2006. Opinion on other matters prescribed by the Companies Act 2006 In our opinion, based on the work undertaken in the course of the audit: the information given in the Strategic Report and the Directors Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and the Strategic Report and the Directors Report have been prepared in accordance with applicable legal requirements. In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified any material misstatements in the Strategic Report and the Directors Report. 5
INDEPENDENT AUDITORS REPORT TO THE MEMBERS OF Meadowhall Finance PLC (continued) Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us 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 directors remuneration specified by law are not made; or we have not received all the information and explanations we require for our audit. Matthew Hall FCA (Senior statutory auditor) for and on behalf of Deloitte LLP Statutory Auditor Cambridge 26 July 2017 6
PROFIT AND LOSS ACCOUNT Note 2017 2016 Interest receivable and similar income 3 34,639,249 36074024 Interest payable and similar charges 3 (34,636,329) (36,070457) Profit on ordinary activities before taxation 4 2,920 3,567 Tax on profit on ordinary activities 6 (584) (713) Profit for the financial year 2,336 2,854 Results are derived from continuing operations within the United Kingdom. 7
STATEMENT OF COMPREHENSIVE INCOME 2017 2016 Profit for the financial year 2,336 2,854 (Losses)/gains on cash flow hedge (256,044) 66,814 Tax relating to components of other comprehensive expense (134,246) (271,363) Total comprehensive expense for the year (387,954) (201,695) 8
BALANCE SHEET as at 31 March2017 Note 2017 2016 Current assets Debtors - due within one year 7 34,721,524 34,128,021 Debtors - due after more than one year 7 645,606,962 673,066,708 Cash and deposits 31,437 28,533 680,359,943 707,223,262 Creditors due within one year 8 (52,233,077) (51,382,962) Net current assets (including long term debtors) 628,126,866 655,840.300 Total assets less current liabilities 628,126,866 655,840,300 Creditors due after one year 9 (642,545,810) (669,871,290) Net liabilities (14,418,944) (14,030,990) Capital and reserves Called up share capital 11 12,502 12,502 Hedging and translation reserve (13,929,746) (13,539,456) Profit and loss account (501,700) (504,036) Total equity (14,418,944) (14,030,990) The financial statements of Meadowhall Finance PLC, company number 05987141, on pages 7 to 19, were approved by the Board of Directors and authorised for issued on and signed on its behalf by: 26 Director //LdIQJ jl/ SiiAH 9
(256,044) (134,246) Meadowhall Finance PLC STATEMENT OF CHANGES IN EQUITY Called up Hedging and Profit and loss Total equity shares capital translation account reserve Balance as at 1 April 2015 12502 (13334907) (506,890) (13,829295) Profit for the year - - 2,854 2,854 Gain on cash flow hedge - Tax relating to components of other comprehensive expense - 66,814 (271363) - - 66,814 (271363) Balance as at 31 March 2016 12,502 (13,539,456) (504,036) (14,030,990) Profit for the year - - 2,336 2,336 Loss on cash flow hedge - Tax relating to components of other comprehensive expense - - - (256,044) (134,246) Balance as at 31 March 2017 12,502 (13,929,746) (501,700) (14,418,944) 10
NOTES TO THE ACCOUNTS 1. Accounting policies This company is incorporated and domiciled in the United Kingdom under the Companies Act 2006. The address of the registered office is York House. 45 Seymour Street, London. Wi H 7LX. The principal accounting policies adopted by the directors are summarised below. They have been applied consistently throughout the current and previous year. Basis of preparation These financial statements were prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101 ). In preparing these financial statements, the company applies the recognition, measurement and disclosure requirements of International Financial Reporting Standards as adopted by the EU (Adopted IFRS5 ), but makes amendments where necessary in order to comply with Companies Act 2006 and has set out below where advantage of the FRS 101 disclosure exemptions has been taken. The financial statements have been prepared under the historical cost convention. Historical cost is generally based on the fair value of the consideration given in exchange for the assets. These financial statements are separate financial statements. The company is exempt from the preparation of consolidated financial statements, because it is included in the group accounts of MSC Property Intermediate Holdings Limited. The company has taken advantage of the following disclosure exemptions under FRS 101: (a) The requirements of las 1 to provide a Balance Sheet at the beginning of the year in the event of a prior year adjustment; (b) The requirements of las 1 to provide a Statement of Cash flows for the year; (c) The requirements of las 1 to provide a statement of compliance with IFRS; (d) The requirements of las 1 to disclose information on the management of capital; (e) The requirements of paragraphs 30 and 31 of las 8 Accounting Policies, Changes in Accounting Estimates and Errors to disclose new IFRS s that have been issued but are not yet effective; (f) The requirements in las 24 Related Party Disclosures to disclose related party transactions entered into between two or more members of a group, provided that any subsidiary which is a party to the transaction is wholly owned by such a member; (g) The requirements of paragraph 17 of las 24 Related Party Disclosures to disclose key management personnel compensation; (h) The requirements of IFRS 7 to disclose financial instruments; and (i) The requirements of paragraphs 91-99 of IFRS13 Fair Value Measurement to disclose information of fair value valuation techniques and inputs. Disclosure exemptions for subsidiaries are permitted where the relevant disclosure requirements are met in the consolidated financial statements. Where required, equivalent disclosures are given in the group accounts of MSC Property Intermediate Holdings Limited. The group accounts of MSC Property Intermediate Holdings Limited are available to the public and can be obtained as set out in note 14. The company s financial statements are presented in pounds sterling, which is the functional currency of the company. 11
NOTES TO THE ACCOUNTS (continued) 1. Accounting policies (continued) Basis of preparation (continued) Going concern The net liability position of the balance sheet at the year end is as a result of market swap rates being below the fixed rate payable on the companys interest rate swaps. This has had a detrimental effect on the fair value of the company s interest rate derivatives at the year end. The interest rate swaps fix the rate payable on the company s liabilities at a rate slightly below the interest on loans receivable. The change in mark to market is not envisaged to have an impact on the company s cash flow for the foreseeable future. Having reviewed the company s forecast working capital and cash flow requirements, in addition to making enquiries and examining areas which could give risk to financial exposure, the directors have a reasonable expectation that the company has adequate resources to continue its operations for the foreseeable future. As a result they continue to adopt the going concern basis in preparing the accounts. All financing covenant requirements in place have been met and are forecast to continue to be met in the future. Financial assets and liabilities Trade debtors and creditors are initially recognised at fair value and subsequently measured at amortised cost and discounted as appropriate. Debt instruments and borrowings are stated at their net proceeds on issue. Finance charges including premiums payable on settlement or redemption of bonds and associated direct issue costs are spread over the period to redemption, using the effective interest method. As defined by IAS39, cash flow hedges are carried at fair value in the balance sheet. Changes in the fair value of derivatives that are designated and qualify as effective cash flow hedges are recognised directly in the hedging reserve. Any ineffective portion is recognised in the profit and loss account. Interest payable and receivable Interest payable and receivable is recognised as incurred under the accruals concept. Interest payable includes financing charges which are spread over the period to redemption, using the effective interest method. Commitment fees on non-utilised facilities are also included within interest payable. Investments Fixed asset investments are stated at the lower of cost and the underlying net asset value of the investments. Taxation Current tax Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Current tax is based on taxable profit for the year and is calculated using tax rates that have been enacted or substantively enacted at the balance sheet date. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are not taxable (or tax deductible). Deferred tax Deferred tax is provided on items that may become taxable at a later date, on the difference between the balance sheet value and tax base value, on an undiscounted basis. The company recognises deferred tax assets on derivative revaluations to the extent that future matching taxable profits are expected to arise. 12
NOTES TO THE ACCOUNTS (continued) 2. Critical accounting judgements and estimation uncertainty Determining the carrying amount of some assets requires estimation of the effect of uncertain future events. The major sources of estimation uncertainty that have a significant risk of resulting in a material adjustment to the carrying amounts of assets are noted below. Hedge accounting The key source of estimation uncertainty relates to the valuation of derivatives. The potential for management to make judgements or estimates relating to those items which would have a significant impact on the financial statements is considered, by the nature of the group s business to be limited. The derivatives have been valued by calculating the net present value of future cashflows, using appropriate market discount rates, by an independent treasury advisor. 3. Interest payable and receivable 2017 2016 Interest payable on Bonds and related facilities (32,419,184) (33,803,530) Derivatives (2,217,145) (2,266,927) Total interest payable (34,636,329) (36,070,457) Interest receivable on Group loans and receivables 34,639,249 36,074,024 Total interest receivable 34,639,249 36,074,024 4. Profit on ordinary activities before taxation Auditor s remuneration A notional charge of 5,706 (2016: 5,518) per company is deemed payable to Deloitte LLP in respect of the audit of the financial statements. Actual amounts payable to Deloitte LLP are paid by MSC Property Intermediate Holdings Limited. No non-audit fees (2016: nil) were paid to Deloitte LLP. 5. Staff costs No director received any remuneration for services to the company in either year. The remuneration of the directors were borne by another company within the group, for which no apportionment recharges were made. Average number of employees, excluding directors, of the company during the year was none (2016: none). 13
NOTES TO THE ACCOUNTS (continued) 6. Taxation 2017 2016 Current tax UK corporation tax 584 713 Total current taxation charge 584 713 Deferred tax Deferred tax on cash flow hedge - - deferred tax charge - - Total taxation charge 584 713 Tax reconciliation Profit on ordinary activities before taxation 2,920 3567 Tax on profit on ordinary activities at UK corporation tax rate of 20% (2016: 20%) 584 713 Total tax charge 584 713 Reductions to the UK corporation tax rate from 20% to 19% (effective from 1 April 2017) were substantively enacted on 26 October 2015. A further reduction to 17% (effective 1 April 2020) was substantively enacted on 6 September 2016. These rate reductions have been reflected in the calculation of deferred tax at the Balance Sheet date, where relevant. 14
current loan Meadowhall Finance PLC NOTES TO THE ACCOUNTS (continued) 7. Debtors 2017 2016 Current debtors (receivable within one year) Amounts owed by group companies - accounts - 14,717 Prepayments and accrued income 7,382,052 7,687,824 Amounts owed by group companies - due for repayment 27,339,472 26,425,480 34,721,524 34,128,021 Long-term debtors (receivable after more than one year) Deferred tax asset (see note 10) 3,061,172 3,195,418 Amounts owed by group companies - Long term loans 642,545,810 669,871,290 645,606,982 673,066,708 8. Creditors due within one year 2017 2016 Amounts owed to group companies - current accounts 1,825 1,825 Secured bonds (see note 9) 27,325,480 26,425,480 Interest rate derivative liability* 18,006,892 17,752,322 Corporation tax 166 713 Other taxation and social security 1,144 784 Accruals and deferred income 6,897,570 7,201,838 52,233,077 51,382,962 *lncludes contracted cash flow with a maturity greater than one year at fair value. 15
NOTES TO THE ACCOUNTS (continued) 9. Creditors due after one year (including borrowings) 2017 2016 Secured bonds due 1 to 2 years 29,414,600 27325480 due 2 to 5 years 93,861,560 90632680 due after 5 years 519,269,650 551913,130 642,545,810 669871290 Borrowings repayment analysis Repayments due: Within one year 27,325,480 26,425,480 1-2 years 29,414,600 27,325,480 2-5 years 93,861,560 90,632,680 150,601,640 144,383,640 After 5 years 519,269,650 551,913,130 Total borrowings 669,871,290 696,296,770 Fair value of interest rate derivatives 18,006,892 17,752,322 Net debt 687,878,182 714,049,092 Secured bonds on the assets of the Meadowhall Limited Partnership 2017 2016 Class Al 4.986% Bonds due 2037 484,004,840 503,253,520 Class A2 Floating Rate Bonds due 2037 52,080,000 54,480,000 Class B 4.988% Bonds due 2037 133,786,450 138,563,250 Total borrowings 669,871,290 696,296,770 Fair value of interest rate derivative liabilities 18,006,892 17,752,322 Total secured borrowings 687,878,182 714,049,092 The 52m (2016: 54m) floating rate loan is fully hedged by a swap to 2032. At 31 March 2017, taking into account the effect of derivatives, 100% of the bonds were fixed (2016: 100%) until expected maturity. The bonds amortise between 2007 to 2032, and are secured on the properties of group valued at 1,797m (2016: 1,741m). The weighted average interest rate of the bonds is 5.00% (2016: 5.00%). The weighted average maturity of the bonds is 9.7 years (2016: 10.4 years). The secured bonds as detailed in this note are issued by Meadowhall Finance PLC ( Issuer ) and the proceeds are on-lent to Meadowhall Limited Partnership ( Borrower ) under the Issuer/Borrower Loan Agreement. Under this agreement Meadowhall Limited Partnership will grant security over its beneficial interest in Meadowhall Shopping Centre ( Mortgaged Property) and selected other interests and assets. At 31 March 2017, the company was financed by 669.9m bonds (2016: 696.3m). 16
NOTES TO THE ACCOUNTS (continued) 9. Creditors due after one year (including borrowings) continued Except as detailed below, the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the financial statements are approximately equal to their fair values 2017 2016 m Bonds fair value 824 823 Comparison of fair values and book values and fair value hierarchy The table below provides a comparison of fair value and book value along with the classification per the fair value hierarchy. The different levels are defined Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs). Level Fair Book Fair Book value value value value 2017 2017 2016 2016 Secured bonds 2 824 670 823 696 Interest rate derivative liability 2 18 18 18 18 842 688 841 714 The fair values of the bonds have been established by obtaining quoted market prices from brokers. The derivatives have been valued by calculating the present value of future cash flows, using appropriate market discount rates, by an independent treasury advisor. The Class Al and B Loan notes expose the entity to fair value interest rate risk while the Class A2 Loan notes expose the company to cash flow interest rate risk. The ineffectiveness recognised in the income statement on cash flow hedges in the year ended 31 March 2017 was nil (2016: nil). The table below summarises variable rate debt hedged at 31 March 2017. 2017 2016 Outstanding: after one year 48,780,000 52,080,000 after two years 46,140,000 48,780,000 after five years 41,220,000 42,780,000 Hedge accounting The company uses interest rate swaps to hedge exposure to the variability in cash flows on floating rate debt. At 31 March 2017, the fair value of these derivatives, which have been designated cash flow hedges under las 39, is a liability of 18.Om (2016: 17.8m liability). The valuation movement reflects the reduction in Sterling interest rates since the beginning of the year. The derivatives have been valued by calculating the net present value of future cashflows, using appropriate market discount rates, by an independent treasury advisor. The effective portion of changes in fair value of the designated hedging instrument is recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in the profit and loss. Amounts previously recognised in other comprehensive income and accumulated in equity are reclassified to the profit and loss in the periods in which the hedged item affects profit or loss or when the hedging relationship ends. The Treasury Function The company finances its operations through public debt issues. The company borrows in Sterling at both fixed and floating rates of interest, using interest rate derivatives where appropriate to generate a suitably prudent mixture of fixed and variable rate debt. 17
NOTES TO THE ACCOUNTS (continued) 9. Creditors due after one year (including borrowings) (continued) Risk Management Capital risk management: The company finances its operations through public debt issues to ensure that sufficient competitively priced finance is available to support the property strategy of the MSC Property Intermediate Holdings Limited group. The approach adopted has been to engage in debt financing with long term maturity dates and as such the bonds issued are due in 2037, but are expected to be repaid in 2032. Including debt amortisation 77.5% (2016: 79.3%) of the total borrowings are due for payment after 5 years. There are no immediate debt refinancing requirements. The company maintains undrawn revolving liquidity facilities which provide financial liquidity. These facilities are only available for the requirements of the Meadowhall securitisation. At 31 March 2017 this facility was 75.Qm (2016: 75.Om). The company aims to ensure that potential debt providers understand the business and a transparent approach is adopted with lenders so they can understand the level of their exposure within the overall context of the MSC Property Intermediate Holdings Limited group. Details of bond covenants are authorised in the bonds Offering Circular, accessible via http://www.britishland.com/investors/strategic-partnerships/meadowhall-finance-plc.aspx. Credit risk: Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The carrying amount of financial assets recorded in the financial statements represents the company s maximum exposure to credit risk without taking account of the value of any collateral obtained. Cash and deposits at 31 March 2017 amounted to 31,437 (2016: 28,533) and are placed with European Financial institutions with BBB+ or better credit ratings. At 31 March 2017, prior to taking account of any offset arrangements, the largest combined credit exposure to a single counterparty arising from money market deposits and interest rate swaps was nil (2016: nil). This represents 0% (2016: 0%) of gross assets. The company s principal credit risk relates to an intra-group loan to Meadowhall Limited Partnership. At 31 March 2017 this loan stood at 669.9m (2016: 696.3m). The purpose of this loan is to provide funding to fellow subsidiaries of the MSC Property Intermediate Holdings Limited group. At 31 March 2017, the fair value of all interest rate derivatives which had a positive value was nil (2016: nil). In order to manage this risk, management regularly monitors all amounts that are owed to the company to ensure that amounts are paid in full and on time. Liquidity risk: Liquidity risk is the risk that the entity will encounter difficulty in raising funds to meet commitments associated with financial liabilities. This risk is managed through day to day monitoring of future cash flow requirements to ensure that the company has enough resources to repay all future amounts outstanding. Interest rate risk: The company s activities expose it primarily to interest rate risk. The group uses interest rate swap contracts to hedge these exposures. The group does not use derivative financial instruments for speculative purposes. 10. Deferred tax asset 2017 2016 1 April 3,195,418 3,466,781 Debited to hedging and translation reserve (134,246) (271,363) 31 March 3,061,172 3,195,418 18
NOTES TO THE ACCOUNTS (continued) II. Called up share capital Issued share capital - allotted, called up and fully paid 2017 2016 Ordinary shares of1 each Balance as at 1 April and 31 March: 1 shares 2 2 Ordinary Shares of 1 each partly paid up to 0.25 per share Balance as at 1 April and as at 31 March: 49998 shares 12,500 12,500 Total issued share capital 12,502 12,502 12. Contingent liabilities The company is jointly and severally liable with MSC (Cash Management) Limited and fellow subsidiaries for all monies falling due under the group VAT registration. 13. Subsequent events There have been no significant events since the year end. 14. Immediate parent and ultimate holding company The immediate controlling party is Meadowhall Limited Partnership. The ultimate holding company is MSC Property Intermediate Holdings Limited, a joint venture between The British Land Company PLC and NBIM Victoria Partners LP. MSC Property Intermediate Holdings Limited is the smallest and largest group for which group accounts are available and which include the company. The accounts of MSC Property Intermediate Holdings Limited can be obtained from The British Land Company PLC, York House, 45 Seymour Street, London Wi H 7LX. 19