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REG-Eurocastle Inv. Ltd Final Results - Part 1
RNS Number:9742I
Eurocastle Investment Limited
24 February 2005
EUROCASTLE INVESTMENT LIMITED
PRELIMINARY RESULTS FOR THE QUARTER AND YEAR ENDED 31 DECEMBER 2004
Year End 2004 Highlights
-Initial public offering completed in June 2004, raising net proceeds of
e74.3 million.
-Total assets ended at e1,627.6 million, a e1,568.0 million increase from
31 December 2003.
-Equity book value total of e206.4 million, or e11.18 per share.
-Net earnings of e12.0 million, or e0.78 per diluted share, despite having
a significant amount of uninvested cash during the year.
-Declared total dividends of e0.63 per share.
Fourth Quarter 2004 Highlights
-Total assets increased 87.3% from e869.0 million to e1,627.6 million
during the quarter.
-Net earnings of e5.1 million for the quarter, or e0.27 per diluted share.
-Increased fourth quarter dividend of e0.33 per share, or annualised rate
of e1.32 per share.
-Deployed substantially all of the IPO equity.
-Term financed a e318.5 million purchase of credit leased real estate
assets
----------------------------- ------------ -------------
Selected Financial Data Three Months Year Ended
Ended 31 31 December
(amounts in e'000, except share data and December 2004 2004
supplemental data)
----------------------------- ------------ -------------
Operating Data
----------------------------- ------------ -------------
Net profit 5,062 12,031
----------------------------- ------------ -------------
Earnings per diluted share 0.27 0.78
----------------------------- ------------ -------------
Weighted average number of shares
outstanding, diluted 19,088,970 15,495,783
----------------------------- ------------ -------------
----------------------------- ------------ -------------
Balance Sheet Data As of As of
31 December 30 September
2004 2004
----------------------------- ------------ -------------
Available-for-sale assets (includes
cash to be invested) 1,286,422 858,192
----------------------------- ------------ -------------
Investment Properties 318,514 -
----------------------------- ------------ -------------
Cash and cash equivalents 10,293 1,619
----------------------------- ------------ -------------
Total assets 1,627,619 868,961
----------------------------- ------------ -------------
Debt obligations 1,154,310 654,027
----------------------------- ------------ -------------
Shareholders' equity 206,420 203,315
----------------------------- ------------ -------------
----------------------------- ------------ -------------
Supplemental Total Real Estate and Other ABS Securities and Real Estate Loans
Data as of 31 December 2004*
Weighted average asset yield 4.18%
Weighted average liability cost 2.73%
Weighted average net spread 1.45%
Weighted average credit rating BBB+
Weighted average asset credit spread (above 1.99%
Euribor)
Percentage investment grade 93%
Number of securities 85
* excludes short term investments with a maturity of less than 3 months and
rated A-1+ by Standard & Poor's and P-1 by Moody's
EUROCASTLE INVESTMENT LIMITED
PRELIMINARY RESULTS FOR THE QUARTER AND YEAR ENDED 31 DECEMBER 2004
Overview
Eurocastle Investment Limited (LSE: ECT) reported net earnings for the quarter
ended 31 December 2004 of e5.1 million or e0.27 per diluted share. Net earnings
for the year ended 31 December 2004 totaled e12.0 million or e0.78 per diluted
share. As of 31 December 2004, the Company's shareholders' equity was e206.4
million or e11.18 per outstanding share.
Eurocastle's core business strategy is to invest in a diverse portfolio
consisting primarily of European real estate asset-backed securities and other
European real estate related assets which we finance in a manner designed to
match the terms of our assets and liabilities. In the year ended 31 December
2004, Eurocastle purchased approximately e1,061 million of asset backed
securities, e22 million of real estate related loans, and e318.5 million of
credit leased real estate assets.
Despite credit spreads of European asset backed securities at historically tight
levels, we continue to find attractive opportunities to deploy capital at
superior risk adjusted returns. We anticipate there will be increased supply of
European CMBS in 2005. During the past 12 months there has been a substantial
increase in activity with several new conduit programs being formed by a number
of investment banks. The B-Note market is also developing in line with this
increased securitisation activity and should offer investment possibilities
during the current year.
In addition to acquiring real estate and other asset backed securities and real
estate related loans during the quarter, Eurocastle also completed its first
sale-leaseback transaction in December for e318.5 million. The investment
allowed us to substantially deploy the capital we raised in our IPO and generate
attractive risk adjusted returns. It represents a long-term investment for
Eurocastle and reflects our interest in Germany as well as other opportunities
in Western Europe to acquire real estate leased to high credit tenants.
Fourth Quarter 2004 Dividend
The Board of Directors of Eurocastle declared a dividend of e0.33 per share for
the quarter ended 31 December 2004. The record date for this dividend will be 4
March 2005 and the payment date will be on 11 March 2005. Eurocastle paid a
dividend of e0.30 per share for the third quarter on 5 November 2004.
Our aim is to pay out all or substantially all of Eurocastle's earnings in the
form of dividends to shareholders. Eurocastle intends to pay quarterly dividends
to shareholders.
Fourth Quarter Investment Activity
During the fourth quarter of 2004, we acquired e534.8 million of real estate and
other asset backed securities and real estate related assets.
Real Estate and Other Asset Backed Securities and Real Estate Loans
Total purchases in the quarter were e216.3 million in face amount of real estate
securities, other asset backed securities and real estate loans, excluding short
term investments (asset backed commercial paper). The securities purchased had
an average credit rating of A- and an average credit spread above Euribor of
1.64%. Purchases of CMBS amounted to e88.0 million with an average spread of
1.25% and average rating of BBB+. RMBS purchases amounted to e30.3 million with
an average spread of 1.62% and average rating of BBB. Other ABS purchases
amounted to e75.8 million with an average spread of 0.76% and average rating of
A+. Real estate related loans amounted to e22.2 million with an average spread
of 6.17%. After allowing for sales of securities and principal redemptions, the
net increase in face amount of real estate and other asset backed securities and
real estate related loans during the quarter was approximately e181 million.
Other Real Estate Related Assets
Eurocastle also acquired a portfolio of 96 properties from Deutsche Bank AG for
e318.5 million on 24 December 2004. The properties predominantly consist of
office buildings and are largely occupied by Deutsche Bank. Deutsche Bank will
continue to occupy most of their current space on a medium to long-term basis.
The properties, totaling 300,000 square meters of leasable space, are located in
90 cities and towns throughout Germany. The properties are generally in city
centre pedestrian areas and are among the best located and highest quality
assets in their respective markets. The portfolio has been term financed as
described below.
Capital Markets
Eurocastle completed its initial public offering on 29 June 2004 with a net
capital raise of approximately e74.3 million, despite difficult equity markets
in Europe at that time. Further capital raises are expected during the current
year.
Consistent with the Company's funding discipline a e400 million non-recourse
term debt offering was completed by Eurocastle CDO I in June 2004 to finance a
portfolio of commercial mortgage backed securities and other asset backed
securities.
In December 2004, Eurocastle entered into a 8.4 year term loan of e246.5 million
with a major real estate lending bank to finance the acquisition of properties
from Deutsche Bank. The term loan was set at a cost of Euribor plus 1.15%. After
allowing for the cost of a term fixed rate interest rate swap on e210 million of
the loan, the average cost of financing these properties at the year end was
4.53%.
Eurocastle also entered into a revolving 364 day credit facility in December
2004 for e35.0 million as a means of securing access to temporary working
capital. The interest rate on drawn amounts was priced at Euribor plus 2.5%,
with a commitment fee of 0.5% on undrawn amounts.
Investment Portfolio
As of 31 December 2004, Eurocastle's total securities and loans portfolio of
e1,286.4 million, which represents 79.0% of the Company's total assets, included
e526.2 million of commercial mortgage backed securities, e254.1 million of asset
backed commercial paper, e475.0 million of other asset backed securities, e21.9
million of loans, and e9.2 million of cash held within Eurocastle CDO I pending
investment in additional real estate securities and other asset backed
securities during the ramp-up period.
The investment portfolio is well diversified with 85 issues and an average life
of 4.0 years; 95% of the portfolio comprises floating-rate securities. The
portfolio is geographically diversified with direct exposures of 39% in the UK,
25% in Italy, 13% Pan European, 10% in Germany, and 6% in France. The average
credit quality of the securities portfolio is BBB+ and 93% of the securities are
rated investment grade. The weighted average credit spread was 1.99% as of 31
December 2004. The weighted average credit spread represents the yield premium
on our securities over Euribor.
Credit
Our real estate securities portfolio continues to perform. As of 31 December
2004, none of our securities or loans defaulted, and there have been no
principal losses to date. We continue to seek investments that will generate
superior risk adjusted returns with a long-term objective of capital
preservation and earnings stability in varying interest rate and credit cycles.
With the exception of Germany, where developments have reflected a cautious view
of economic prospects, major property markets in Europe have been benign for
investors, with falling yield expectations reflecting unsatisfied demand for
stable, good quality assets. Our expectations are for continued stability with
moderate growth prospects.
About Eurocastle
Eurocastle Investment Limited is an investment company that invests in and
manages a diverse portfolio consisting primarily of European real estate related
asset-backed securities and other European real estate related assets.
Eurocastle is managed by Fortress Investment Group LLC, a global alternative
investment and asset management firm with approximately US$12 billion of equity
capital currently under management.
Conference Call
Management will conduct a conference call on Thursday 24 February 2005 to review
the Company's financial results for the year ended 31 December 2004. The
conference call is scheduled for 1:30 P.M. London time (8:30 A.M. New York
time). All interested parties are welcome to participate on the live call. You
can access the conference call by dialing US (888) 428-4473 or International
(612) 332-0923 ten minutes prior to the scheduled start of the call; please
reference "Eurocastle Fourth Quarter 2004 Earnings Call."
For those who are not available to listen to the live call, a replay will be
available until 11:59 P.M. New York time on 3 March 2005 by dialing US (800)
475-6701 or International (320) 365-3844; please reference access code "771573."
EUROCASTLE INVESTMENT LIMITED AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT
Notes Unaudited 8 August 2003
Year Ended (Formation
31 December 2004 Date) to
31 December 2003
e'000 e'000
--------------------------- ------ ------------- --------------
Operating income
Interest income 23,902 50
Rental income 344 -
Realised gain on securities portfolio
contract 15 4,141 611
Loss on foreign currency translation (613) -
Realised gain on disposal of
available-for-sale securities 1,356 -
--------------------------- ------ ------------- --------------
Total operating income 29,130 661
--------------------------- ------ ------------- --------------
Operating expenses
Interest expense 13,663 -
Property operating expense 33 -
Other operating expenses 3 3,403 759
--------------------------- ------ ------------- --------------
Total operating expenses 17,099 759
--------------------------- ------ ------------- --------------
--------------------------- ------ ------------- --------------
Net profit (loss) 12,031 (98)
=========================== ====== ============= ==============
Earnings per ordinary share
(adjusted for share consolidation)
Basic 12 0.79 (0.01)
Diluted 12 0.78 (0.01)
Weighted average ordinary shares
outstanding
(adjusted for share consolidation)
Basic 13 15,214,818 11,857,670
Diluted 13 15,495,783 11,857,670
=========================== ====== ============= ==============
See notes to the consolidated financial statements
EUROCASTLE INVESTMENT LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
Notes Unaudited 31 December
31 December 2003
2004
e'000 e'000
----------------------------- ------- ---------- ---------
Assets
Cash and cash equivalents 10,293 1,690
Restricted cash 2,812 -
Securities portfolio contract 15 - 57,611
Asset backed securities,
available-for-sale (includes cash to be
invested) 4 1,264,484 -
Real estate related loans,
available-for-sale 5 21,938 -
Investment property 7 318,514 -
Other assets 6 9,578 316
----------------------------- ------- ---------- ---------
Total assets 1,627,619 59,617
============================= ======= ========== =========
Equity and Liabilities
Capital and Reserves
Issued capital, no par value, unlimited
number of shares authorised, 18,463,670
shares issued and outstanding at 31
December 2004
(11,857,670 at 31 December 2003, adjusted
for share consolidation) 13 192,709 59,027
Net unrealised gain on
available-for-sales securities and
hedge instruments 4, 5 7,317 -
Accumulated profit (loss) 6,394 (98)
----------------------------- ------- ---------- ---------
Total equity 206,420 58,929
----------------------------- ------- ---------- ---------
Minority Interests 2 -
Liabilities
CDO bonds payable 8 347,877 -
Bank borrowings 9 608,849 -
Repurchase agreements 10 197,584 -
Trade and other payables 11 266,887 688
----------------------------- ------- ---------- ---------
Total liabilities 1,421,197 688
----------------------------- ------- ---------- ---------
Total equity and liabilities 1,627,619 59,617
============================= ======= ========== =========
See notes to the consolidated financial statements
EUROCASTLE INVESTMENT LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Year 8 August 2003
Ended (Formation Date)
to
31 December 31 December
2004 2003
e'000 e'000
---------------------------- ------------ ------------
Cash Flows From Operating Activities
Net profit (loss) 12,031 (98)
Adjustments for:
Unrealised gain on securities portfolio
contract - (611)
Unrealised gain on foreign currency
contracts (275) -
Accretion of discounts on securities (790) -
Amortisation of borrowing costs 224 -
Gain on disposal of available-for-sale
securities (1,356) -
Gain on securities portfolio contract (4,141) -
Shares granted to Directors 72 -
Net change in operating assets and
liabilities:
Increase in restricted cash (2,812) -
Increase in other assets (8,271) (113)
Increase in trade and other payables 9,223 688
---------------------------- ------------ ------------
Net cash flows used in operating
activities 3,905 (134)
---------------------------- ------------ ------------
Cash Flows From Investing Activities
Purchase of investment property (315,589) -
Securities portfolio contract deposit
paid (59,000) (57,000)
Proceeds on securities portfolio
contract deposit 120,752 -
Purchase of available-for-sale
securities/loans (1,082,651) -
Proceeds from sale of available-for-sale
securities 39,667
Repayment of security principal 19,363 -
---------------------------- ------------ ------------
Net cash flows used in investing (1,277,458) (57,000)
activities
---------------------------- ------------ ------------
Cash Flows From Financing Activities
Proceeds from issuance of ordinary
shares 138,488 59,288
Costs related to issuance of ordinary
shares (4,878) (261)
Issuance of bonds 347,658 -
Borrowings under repurchase agreements 197,584 -
Proceeds from bank borrowings 608,843 -
Payment of deferred financing costs - (203)
Dividends paid to shareholders (5,539) -
---------------------------- ------------ ------------
Net cash flows from financing activities 1,282,156 58,824
---------------------------- ------------ ------------
Net Increase in Cash and Cash
Equivalents 8,603 1,690
Cash and Cash Equivalents, Beginning of
Year 1,690 -
Cash and Cash Equivalents, End of Year 10,293 1,690
---------------------------- ------------ ------------
EUROCASTLE INVESTMENT LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Issued Capital
Ordinary Net Hedging Accumulated Total
Shares Unrealised Reserves Profit Equity
(adjusted for Gains (Loss)
share Amount
consolidation) e'000 e'000 e'000 e'000 e'000
--------------- ---------- ------- -------- ------- --------- --------
At 8 August 2003
(Date of Formation) - - - - - -
Issuance of
ordinary shares 11,857,670 59,288 - - - 59,288
Costs related
to issuance of
ordinary shares - (261) - - - (261)
Net loss - - - - (98) (98)
--------------- ---------- ------- -------- ------- --------- --------
At 31 December 2003 11,857,670 59,027 - - (98) 58,929
--------------- ---------- ------- -------- ------- --------- --------
At 1 January 2004 11,857,670 59,027 - - (98) 58,929
Second capital
call on existing
shares - 59,288 - - - 59,288
Issuance of
ordinary
shares on IPO 6,600,000 79,200 - - - 79,200
Costs related
to issuance of
ordinary
shares on IPO - (4,878) - - - (4,878)
Issuance of
ordinary
shares to
Directors 6,000 72 - - - 72
Net unrealised
gain on
available-for-
sale
securities - - 6,604 - - 6,604
Net unrealised
gain on hedge
instruments - - - 713 - 713
Dividends paid - - - - (5,539) (5,539)
Net profit - - - - 12,031 12,031
--------------- ---------- ------- -------- ------- --------- --------
At 31 December
2004 (unaudited) 18,463,670 192,709 6,604 713 6,394 206,420
=============== ========== ======= ======== ======= ========= ========
EUROCASTLE INVESTMENT LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BACKGROUND
Eurocastle Investment Limited (the "Company") was incorporated in Guernsey,
Channel Islands on 8 August 2003 and commenced its operations on 21 October
2003. The principal activities of the Company include the investing in,
financing and managing of European real estate securities and other real estate
related assets and other asset backed securities. The directors consider the
Company to operate in three business segments, being real estate and other asset
backed securities, real estate related loans, and investment properties, and one
geographical segment, being Europe.
The Company is externally managed by its manager, Fortress Investment Group LLC
(the "Manager"). The Company has entered into a management agreement (the
"Management Agreement") under which the Manager advises the Company on various
aspects of its business and manages its day-to-day operations, subject to the
supervision of the Company's Board of Directors. The Company has no direct
employees. For its services, the Manager receives an annual management fee
(which includes a reimbursement for expenses) and incentive compensation, as
described in the Management Agreement. The Company has no ownership interest in
the Manager.
In October 2003, the Company issued 118,576,700 ordinary shares through a
private offering to qualified investors at a price of e1 per share. Pursuant to
a written resolution of the Company dated 18 June 2004, the shareholders
resolved to receive one share in exchange for every ten shares previously held
by them. Immediately following this resolution, the Manager and its employees
held 1,356,870 ordinary shares. In June 2004 the Company issued 6,600,000
ordinary shares in its initial public offering at a price of e12.00 per share,
for net proceeds of e74.3 million.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Statement of Compliance
The consolidated financial statements of the Company have been prepared in
accordance with International Financial Reporting Standards (IFRS), which
comprise standards and interpretations approved by the International Accounting
Standards Board (IASB), and International Accounting Standards and Standing
Interpretations Committee interpretations approved by IASB's predecessor, the
International Accounting Standards Committee, that remain in effect. In
preparing financial statements, the same accounting principles and methods of
computation are applied as in the financial statements as at 31 December 2003
and for the period then ended. The consolidated financial statements are
presented in euros, the functional currency of the Company, because the Company
conducts its business predominantly in euros.
Basis of Preparation
The consolidated financial statements are prepared on a fair value basis for
derivative financial instruments, financial assets and liabilities held for
trading, and available-for-sale assets. Other financial assets and liabilities
and non-financial assets and liabilities are stated at amortised or historical
cost.
Basis of Consolidation
The consolidated financial statements comprise the financial statements of
Eurocastle Investment Limited and its subsidiaries for the year ended 31
December 2004.
Subsidiaries are consolidated from the date on which control is transferred to
the Company and cease to be consolidated from the date on which control is
transferred out of the Company.
At 31 December 2004, the Company's subsidiaries consisted of its investment in
Eurocastle Funding Limited ("EFL"), a limited company incorporated in Ireland,
Eurocastle CDO I PLC ("CDO I"), Eurocastle CDO II PLC ("CDO II") and Eurocastle
CDO III PLC ("CDO III"), all limited companies incorporated in Ireland. The
ordinary share capital of EFL held by outside parties has no associated voting
rights. The Company retains control over EFL as the sole beneficial holder of
secured notes issued by EFL. In accordance with the Standards Interpretation
Committee Interpretation 12 Consolidation - Special Purpose Entities the Company
consolidates CDO I, CDO II and CDO III as it retains control over these entities
and retains the residual risks of ownership of these entities.
Eurocastle acquired its real estate properties through two German limited
liability companies, Longwave Acquisition GmbH ("Longwave") and Shortwave
Acquisition GmbH ("Shortwave") which are held through two Luxembourg companies
(Eurobarbican and Luxgate), set up as societes a responsabilite limitee.
Longwave and Shortwave each own German companies which have been used to hold
one or several of the investment properties. These companies were established as
special purpose vehicles limited to holding the single or multiple real estate
investment properties acquired at the end of December 2004. Longwave has 60
subsidiaries and Shortwave has 2 subsidiaries. Luxgate owns all of the ordinary
share capital of Eurobarbican which in turn owns all of the share capital of
Longwave and Shortwave. Also see Note 19.
Financial Instruments
Classification
Financial assets and liabilities held for trading are those instruments that the
Company principally holds for the purpose of short-term profit taking. These
include securities portfolio contracts and forward foreign exchange contracts
that are not designated as effective hedging instruments.
Available-for-sale assets are financial assets that are not held for trading
purposes, originated by the Company, or held to maturity. Available-for-sale
instruments include real estate and other asset backed securities and real
estate related loans.
Recognition
The Company recognises financial assets held for trading and available-for-sale
assets on the date it commits to purchase the assets (trade date). From this
date any gains and losses arising from changes in fair value of the assets are
recognised.
A financial liability is recognised on the date the Company becomes party to
contractual provisions of the instrument.
Measurement
Financial instruments are measured initially at cost, including transaction
cost.
Subsequent to initial recognition all trading instruments and available-for-sale
assets are measured at fair value, except that any instrument that does not have
a quoted market price in an active market and whose fair value cannot be
reliably measured is stated at cost, including transaction costs, less
impairment losses.
All financial assets other than trading instruments and available-for-sale
assets are measured at amortised cost less impairment losses. Amortised cost is
calculated on the effective interest rate method. Premiums and discounts,
including initial transaction costs, are included in the carrying amount of the
related instrument and amortised based on the effective interest rate of the
instrument.
Fair value measurement principles
The fair value of financial instruments is based on their quoted market price at
the balance sheet date without any deduction for transaction costs. If a quoted
market price is not available, the fair value of the instrument is estimated
using pricing models or discounted cash flow techniques, as applicable.
Where discounted cash flow techniques are used, estimated future cash flows are
based on management's best estimates and the discount rate is a market related
rate at the balance sheet date for an instrument with similar terms and
conditions. Where pricing models are used, inputs are based on market related
measures at the balance sheet date.
The fair value of derivatives that are not exchange traded is estimated at the
amount that the Company would receive or pay to terminate the contract at the
balance sheet date taking into account current market conditions and the current
creditworthiness of the counterparties.
Gains and losses on subsequent measurement
Gains and losses arising from a change in the fair value of trading instruments
are recognised directly in the income statement. Gains and losses arising from a
change in the fair value of available-for-sale securities are recognised
directly in equity until the investment is derecognised (sold, collected, or
otherwise disposed of) or impaired, at which time the cumulative gain or loss
previously recognised in equity is included in the income statement for the
period.
Derecognition
A financial asset is derecognised when the Company loses control over the
contractual rights that comprise that asset. This occurs when the rights are
realised, expire or are surrendered. A financial liability is derecognised when
it is extinguished.
Assets held for trading and available-for-sale assets that are sold are
derecognised and corresponding receivables from the buyer for the payment are
recognised as of the date the Company commits to sell the assets. The Company
uses the specific identification method to determine the gain or loss on
derecognition.
Impairment
Financial assets are reviewed at each balance sheet date to determine whether
there is objective evidence of impairment. If any such indication exists, the
asset's recoverable amount is estimated. Impairment loss is the difference
between the net carrying value of an asset and its recoverable amount. Any such
impairment loss is recognised in the income statement.
Securities and loans are considered to be impaired, for financial reporting
purposes, when it is probable that the Company will be unable to collect all
principal or interest when due according to the contractual terms of the
original agreements, or, for securities or loans purchased at a discount for
credit losses, when it determines that it is probable that it will be unable to
collect as anticipated. Upon determination of impairment an allowance is
established based on the recoverable amount of the underlying investment using a
discounted cash flow analysis.
Hedge accounting
Where there is a hedging relationship between a derivative instrument and a
related item being hedged, the hedging instrument is measured at fair value. The
fair value of a derivative hedging instrument is calculated in the same way as
the fair value of trading instruments (refer to accounting policy above).
Where a derivative financial instrument hedges the exposure to variability in
the cash flows of recognised assets or liabilities, the effective part of any
gain or loss on remeasurement of the hedging instrument is recognised directly
in equity. The ineffective part of any gain or loss is recognised in the income
statement.
The gains or losses that are recognised in equity are transferred to the income
statement in the same period in which the hedged firm commitment affects the net
profit and loss.
Cash and Cash Equivalents
Cash and cash equivalents comprise cash at banks and in hand and short-term
deposits with an original maturity of three months or less.
Available-For-Sale Securities
Securities available-for-sale which are owned directly by the consolidated
special purpose vehicles as shown separately in Note 5.
Investment Properties
Investment properties comprise land and buildings. In accordance with IAS 40,
property held to earn rentals and/or for capital appreciation is categorised as
investment property. Investment property acquired at the end of December 2004
has been recognised at cost, being the fair value of the consideration given,
including real estate transfer taxes, professional advisory fees and other
acquisition costs. After initial recognition, investment properties are measured
at fair value, with unrealised gains and losses recognised in the consolidated
income statement. Fair values for the properties have been assessed by the
company to be in line with the initial cost of the properties including
acquisition costs, and as such, no profit or loss arising from changes in value
has been brought to account in the current period.
The value of investment property incorporates five properties which are
considered finance or operating leases. As the company has assumed substantially
all the risks and rewards associated with these assets, and it has treated these
as investment property under IAS 17 and IAS 40. These properties have been
recognised at fair value in the same manner as freehold property. An associated
liability representing the present value of lease payments to the freehold owner
has been included in the balance sheet.
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small e before a number denotes euros