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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
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European Conv. | LSE:ECPC | London | Ordinary Share | GB00B0B7ZC68 | ORD EUR1.00 |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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0.00 | 0.00% | 0.00105 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
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0 | 0 | N/A | 0 |
RNS Number:8372J European Convergence Property CoPLC 03 October 2006 3 October 2006 European Convergence Property Company PLC Results for the thirteen months ended 30 June 2006 European Convergence Property Company PLC ("ECPC", the "Company" or the "Group"), the property investment company specialising in countries that are seeking accession to the European Union, today announces results for the thirteen months ended 30 June 2006. Highlights Successful launch raising EUR62m of inward investment into the Company Purchase of PGV Tower in central Bucharest for EUR24m Investments or contractual commitments made on properties to the value of c. EUR112m during the period Anticipated successful completion of investment programme over the coming financial year Enquiries: Charlemagne Capital (IOM) Limited Tel. + 44 (0)1624 640200 Anderson Whamond Panmure Gordon Tel. + 44 (0)20 7614 8388 Hugh Morgan Stuart Gledhill Chairman's Statement This announcement reflects European Convergence Property Company plc's (the "Company" or the "Group") first thirteen months of investment activity since the incorporation and successful listing of the Company on the London Stock Exchange's Alternative Investment Market (AIM) in June 2005. The launch raised EUR62m of inward investment into the Company and during the past year we have been very active in the commercial property markets of South East Europe. The anticipated accession of Bulgaria and Romania into the European Union has attracted a lot of investment interest into the area and capital appreciation has been strong, with a corresponding compression of rental yields, so making the investment process more challenging. As at the date of this report we are pleased to confirm that the Company has substantially achieved its original investment strategy with investments or contractual commitments being made on properties to the value of EUR112m. This reflects the Company's stated strategy of increasing returns on equity through long term borrowing to leverage its investment portfolio. In addition to those investments already committed to, the Company has a number of high quality property targets which should see the successful completion of its investment programme over the coming financial year. The Company made a loss in the reporting period of EUR0.326m, reflecting its initial investment phase and associated set up costs, and consequently the Board will not be declaring a dividend at this stage. The objective of the Company remains, however, to provide enhanced returns to its shareholders both through sustained growth of its net assets per share and through profit distribution. Erwin Brunner Chairman 28 September 2006 Report of the Manager Since launch the Manager has been actively pursuing grade A / B+ investment properties throughout South East Europe. As a result we have successfully extended our network of contacts in the region allowing us to target both established properties and also participate in the launch of larger commercial properties. Although the market yields in the region have been somewhat compressed due to the capital appreciation caused by a steady flow of foreign investment in the property market, interest still remains strong and the property market remains buoyant. Property Portfolio Completed Acquisitions PGV Tower, an office building in central Bucharest, was purchased in February 2006 at a price of EUR24.0 million. It is currently the head office of Bancpost SA, a Romanian subsidiary of the EFG banking group. It has a net lettable area of 9,989 sqm, 93% of which is let to members of the EFG Group. Committed Acquisitions Mall Veliko Turnovo (MVT), is a new shopping centre located in Veliko Turnovo, one of the largest cities in Bulgaria, situated in the central northern region of the country. Full completion is expected during October 2006. The completion price will be c. EUR29m. The site comprises a gross area of 33,000 sqm, which includes 16,000 sqm of retail floor area. It is the first major modern shopping centre in the city and has pre-let 90% of its lettable area to a mixture of local business and large well known brands. The mall was officially opened on the 15 September 2006. Construdava, a newly constructed office building in Bucharest with a gross lettable area of 9,200 sqm has been developed by one of Romania's leading property developers, Impact SA. It is situated in Pipera, a predominantly upmarket residential area of northern Bucharest. Completion is expected during October at a price of c. EUR19.0 million. Millennium Business Centre, an office building in its final stages of construction. The building is in central Bucharest and its 19 floors make it a new landmark for the city. It has a gross lettable area of 14,310 sqm and the final consideration will be dependent on full leasing, however the estimated purchase price is c. EUR40 million. Completion is expected in November 2006. Investment Market Overview Office Market: The yield compression experienced in the South Eastern European property investment market during 2005 has continued into 2006 although at a slower rate. Through 2005 this was most notable in Bucharest where yields were estimated to have compressed by 200 bhp through the year from just over 10% to just over 8%. By mid 2006 prime Grade A office yields are being benchmarked at c.7.5% and are expected to approach 7% by the end of 2006 beginning 2007. The picture is similar for Sofia and the rest of Bulgaria as the weight of money initially attracted to the Romanian market has sought out alternative opportunities amongst its neighbours. Benchmarking the Sofia market is less transparent due to the comparative scarcity of institutional grade investment properties however, grade A developments are now being valued at around 8%. Retail Market: The retail shopping centre market has mostly been characterised by transactions which have completed in the Romanian provinces, the opening of Bulgaria's first two modern shopping facilities and the number of retail projects which seem to be entering the development pipeline in Bulgaria's secondary cities with expected yields in the 7.5-8% range. The overall property market will be increasingly developer led. The shortage of available sites in both Sofia and Bucharest's central city districts is driving new development further to the north in Bucharest and further to the east in Sofia. Not surprisingly, given the acceleration of yield compression for the provinces in both markets, developer's attention is orientating more towards the principle secondary cities of both markets. There is currently a notable increase in the number of new mall development projects being discussed for Bulgaria which will have a considerable impact on the availability of investment properties of the next two to three years. Turkey: The office market is dominated by high vendor price expectations against a background of often fragmented property ownership and lower than desired building specifications in addition to dollar based cashflows and correspondingly higher than Euro based borrowing rates. The retail market has seen a scarcity of available transactions of a size which would fit with the Company's target portfolio. As a consequence the Manager has been unable to source any suitable investment opportunities. Debt Market Overview In both the Romanian and Bulgarian property investment markets certain key banks provide competitive rates for investment product debt funding for the Class A to B+ segments. The differential in rates is greater in Sofia, perhaps pointing to the higher sophistication that characterises the Bucharest property market Despite the above, concerns remain over the general prognosis for Euro rates over the coming year and the impact they may have on the Company's running yield forecasts, although it is expected that any increases in Euro based rates will be partly offset by compression of lending spreads. Outlook The economic outlook for the region remains buoyant, with growth rates in excess of European Union averages, and while this is encouraging more investment and further compressing yields we are activity seeking to complete our investment programme in the coming financial year. The current pipeline, although not extensive, is robust in the quality of the assets and would satisfy the requirements for full roll out of the investment programme. Charlemagne Capital (IOM) Limited Manager 28 September 2006 Consolidated Income Statement Note For the period from 1 June 2005 (date of incorporation) to 30 June 2006 EUR'000 ________________________________________________________________________________ Net rent and related income 5 913 Manager's fees 8.3 (865) Audit and professional fees 9.6 (345) Other expenses 9 (899) ________________________________________________________________________________ Administrative expenses (2,109) ________________________________________________________________________________ ________________________________________________________________________________ Net operating loss before net financing income (1,196) ________________________________________________________________________________ Financial income 6 1,286 Financial expenses 6 (388) ________________________________________________________________________________ Net financing income 898 ________________________________________________________________________________ Loss before tax (298) Income tax expense 19 (28) ________________________________________________________________________________ Retained loss for the period (326) ________________________________________________________________________________ ________________________________________________________________________________ Basic and diluted loss per share (EUR) 14 (0.0052) ________________________________________________________________________________ Consolidated Balance Sheet Note At 30 June 2006 EUR'000 ________________________________________________________________________________ Investment property 10 24,522 ________________________________________________________________________________ Total non-current assets 24,522 ________________________________________________________________________________ Trade and other receivables 11 6,181 Cash and cash equivalents 12 43,572 ________________________________________________________________________________ Total current assets 49,753 ________________________________________________________________________________ Total assets 74,275 ________________________________________________________________________________ Issued share capital 13 62,696 Retained losses (3,213) Foreign currency translation reserve (122) ________________________________________________________________________________ Total equity 59,361 ________________________________________________________________________________ Interest-bearing loans and borrowings 15 13,750 ________________________________________________________________________________ Total non-current liabilities 13,750 ________________________________________________________________________________ Trade and other payables 16 1,164 ________________________________________________________________________________ Total current liabilities 1,164 ________________________________________________________________________________ Total liabilities 14,914 ________________________________________________________________________________ Total equity & liabilities 74,275 ________________________________________________________________________________ Company Balance Sheet Note At 30 June 2006 EUR'000 ________________________________________________________________________________ Investment in subsidiaries 2 - ________________________________________________________________________________ Total non-current assets - ________________________________________________________________________________ Intragroup balances 21,190 Trade and other receivables 41 Cash and cash equivalents 12 39,577 ________________________________________________________________________________ Total current assets 60,808 ________________________________________________________________________________ Total assets 60,808 ________________________________________________________________________________ Issued share capital 13 62,696 Retained losses (1,969) ________________________________________________________________________________ Total equity 60,727 ________________________________________________________________________________ Interest-bearing loans and borrowings - ________________________________________________________________________________ Total non-current liabilities - ________________________________________________________________________________ Trade and other payables 16 81 ________________________________________________________________________________ Total current liabilities 81 ________________________________________________________________________________ Total liabilities 81 ________________________________________________________________________________ Total equity & liabilities 60,808 ________________________________________________________________________________ The profit earned by the Company for the period ended 30 June 2006 was EUR917,698. Consolidated Statement of Changes in Equity Share capital Retained Foreign Total earnings currency translation reserve EUR'000 EUR'000 EUR'000 EUR'000 ________________________________________________________________________________ Balance at beginning of period - - - - Shares issued in the period 62,696 - - 62,696 Foreign exchange translation differences - (122) (122) Share issue expenses - (2,887) - (2,887) Retained loss for the period - (326) - (326) ________________________________________________________________________________ Balance at end of period 62,696 (3,213) (122) 59,361 ________________________________________________________________________________ Consolidated Cash Flow Statement Note For the period from 1 June 2005 (date of incorporation) to 30 June 2006 EUR'000 ________________________________________________________________________________ Operating activities Group loss for the period (326) Adjustments for: Investment income (1,286) Investment expense 388 Income tax expense 28 ________________________________________________________________________________ Operating loss before changes in working capital (1,196) (Increase)/Decrease in trade and other receivables (140) Increase/(Decrease) in trade and other payables 302 ________________________________________________________________________________ Cash used in operations (1,034) Interest paid (388) Income and corporation tax paid (104) Interest received 1,286 ________________________________________________________________________________ Cash flows used in operating activities (240) ________________________________________________________________________________ Investing activities Acquisition of subsidiaries net of cash acquired 21 (7,874) Repayment of loan acquired on acquisition (2,173) Staged payments relating to property acquisitions (5,900) ________________________________________________________________________________ Cash flows used in investing activities (15,947) ________________________________________________________________________________ Financing activities Proceeds from the issue of ordinary share capital 62,696 Repayment of long term loans (50) Share issue expenses (2,887) ________________________________________________________________________________ Cash flows generated from financing activities 59,759 ________________________________________________________________________________ Net increase in cash and cash equivalents 43,572 Cash and cash equivalents at 1 June 2005 - ________________________________________________________________________________ Cash and cash equivalents at 30 June 2006 12 43,572 ________________________________________________________________________________ Notes to the Consolidated Financial Statements 1 The Company European Convergence Property Company plc (the "Company") was incorporated and registered in the Isle of Man under the Isle of Man Companies Acts 1931 to 2004 on 1 June 2005 as a public company with registered number 113616C. Pursuant to a prospectus dated 15 June 2005 there was an original placing of up to 100,000,000 Ordinary Shares. Following the close of the placing on 24 June 2005 62,696,333 Shares were issued. The Shares of the Company were admitted to trading on the Alternative Investment Market of the London Stock Exchange ("AIM") on 28 June 2005 when dealings also commenced. The Company's agents and the Manager perform all significant functions. Accordingly, the Company itself has no employees. Duration In accordance with the Company's Articles of Association, Shareholders will be given the opportunity to vote on the life of the Company after approximately 7 years. At the annual general meeting of the Company to be held in 2012, the Directors are obligated to propose an ordinary resolution that the Company ceases to continue in existence. If the resolution is not passed then it shall be proposed at every fifth annual general meeting thereafter. If the resolution is passed then the Directors shall, within 3 months after the date of the resolution, put forward proposals to shareholders to the effect that the Company be wound up, liquidated, reorganised or unitised. Dividend Policy The Directors anticipate that in respect of any 12 month accounting period they will recommend the payment as a dividend of substantially all of the Company's net profits (excluding profits arising from unrealised gains). The Directors may pay half-yearly interim dividends if they believe that the financial position of the Company justifies it. If the Company's funds are fully invested, the Directors may be required to re-invest some of the Company's profits into the maintenance of the Company's property portfolio. Debt amortisation payments may cause actual dividends to be less than net profits. Property Valuation Policy The Directors are in the process of appointing an internationally recognised firm of surveyors as property valuers for properties in Romania. It is the Directors' intention that approximately half of the Company's property portfolio will receive a valuation from the Company's appointed property valuer in each annual financial period. Financial Year End The financial year end of the Company is 30 June in each year. For the financial period ending 30 June 2006 the Company will present financial statements covering a 13 month period since incorporation. 2 The Subsidiaries During the period and for efficient portfolio management purposes, the Company established the following subsidiary companies:- ________________________________________________________________________________ Country of Percentage of incorporation shares held ________________________________________________________________________________ European Convergence Property Company Bulgaria EOOD Bulgaria 100% European Convergence Property Company (Cayman) Limited Cayman Islands 100% ECPC Cyprus Limited Cyprus 100% European Convergence Property Company (Malta) Limited Malta 100% European Convergence Property Com. SRL Romania 100% European Property Development Invest S.R.L. Romania 100% Orange Convergence Finance BV The Netherlands 100% European Property Millenium SRL Romania 100% European Convergence Property Real Estate Trading and Management Limited Turkey 100% S.C. Paris Developments SRL Romania 100% ________________________________________________________________________________ 3 Significant Accounting Policies The principal accounting policies adopted in the preparation of the consolidated financial statements are set out below. The annual report of the Company for the period ended 30 June 2006 comprises the Company and its subsidiaries (together referred to as the "Group"). The annual report was compiled by the Administrator and Registrar and authorised for issue by the Directors on 28 September 2006. 3.1 Basis of presentation These financial statements have been prepared in accordance with International Financial Reporting Standards promulgated by the International Accounting Standards Board ("IFRS"). Management has concluded that the report fairly represents the entity's financial position, financial performance and cash flows. The Company is denominated in Euros ("EUR") and therefore the amounts shown in these financial statements are presented in EUR. 3.2 Foreign currency translation Monetary assets and liabilities denominated in foreign currencies as at the date of these financial statements are translated to EUR at exchange rates prevailing on that date. Realised and unrealised gains and losses on foreign currency transactions are charged or credited to the income statement as foreign currency gains and losses. Expenses are translated into EUR based on exchange rates on the date of the transaction. 3.3 Investment property Investment properties are those which are held either to earn rental income or for capital appreciation or both. Investment properties are stated at fair value. Any gain or loss arising from a change in fair value is recognised in the income statement. 3.4 Deposit interest Deposit interest is accounted for on an accruals basis. 3.5 Cash and cash equivalents Cash and cash equivalents comprise cash deposited with banks and bank overdrafts repayable on demand. 3.6 Revenue and expense recognition Interest income is recognised in the financial statements on an accruals basis. Dividend income is recorded when declared. Rental income from investment property leased out under operating lease is recognised in the income statement on a straight-line basis over the term of the lease. Expenses are accounted for on an accrual basis. Expenses are charged to the income statement except for expenses incurred on the acquisition of an investment property which are included within the cost of that investment. Expenses arising on the disposal of an investment property are deducted from the disposal proceeds. 3.7 Basis of consolidation Subsidiaries Subsidiaries are those enterprises controlled by the Company. Control exists where the Company has the power, directly or indirectly, to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control effectively commences until the date that control effectively ceases. Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealised gains arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Financial statements of foreign operations The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated to EUR at the foreign currency exchange rates ruling at the balance sheet date. Foreign exchange differences arising on translation are recognised directly in equity. 3.8 Dividends Dividends are recognised as a liability in the period in which they are declared and approved. There was no dividend declared as at 30 June 2006. 3.9 Other receivables Trade and other receivables are stated at their cost. 3.10 Trade and other payables Trade and other payables are stated at their cost. 3.11 Interest-bearing borrowings Interest-bearing borrowings are recognised initially at fair value, less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the income statement over the period of the borrowings on an effective interest basis. 4 Segment Reporting Segment information is presented in respect of the Group's business and geographical segments. The segments are managed on a worldwide basis, but operate in two principal geographical areas, Bulgaria and Romania. The location of the customers is the same as the location of the assets. Bulgaria Romania Unallocated Total EUR'000 EUR'000 EUR'000 EUR'000 ________________________________________________________________________________ Net rent and associated income - 913 - 913 ________________________________________________________________________________ Segment results (80) 232 (478) (326) ________________________________________________________________________________ Segment assets 3,155 28,424 42,696 74,275 ________________________________________________________________________________ Segment liabilities (5) (14,517) (392) (14,914) ________________________________________________________________________________ There has been one property acquisition completed during the period for an office building in Romania. 5 Net Rent and Related Income 2006 EUR'000 ________________________________________________________________________________ Gross lease payments collected/accrued 913 ________________________________________________________________________________ The group leases out its investment property under operating leases. The future minimum lease payments under non-cancellable leases are as follows: EUR'000 ________________________________________________________________________________ Less than one year - Between one and five years 2,138 More than five years 133 ________________________________________________________________________________ 2,271 ________________________________________________________________________________ The Group has raised specific provisions for doubtful debts of EUR70,884 against rental income due from two tenants. 6 Net Financing Income 2006 EUR'000 ________________________________________________________________________________ Interest income 1,286 ________________________________________________________________________________ Financial income 1,286 ________________________________________________________________________________ Gross interest expense (287) Bank facility fee (90) Bank charges (11) ________________________________________________________________________________ Financial expenses (388) ________________________________________________________________________________ Net financing income 898 ________________________________________________________________________________ 7 Net Asset Value per Share The net asset value per share as at 30 June 2006 is EUR0.9468 based on 62,696,333 ordinary shares in issue as at that date. 8 Related Party Transactions 8.1 Directors of the Company Anderson Whamond is a director of the Manager. Mr Whamond is a shareholder of Charlemagne Capital Limited ("CCL") the parent of the Manager and the Placing Agent. Save as disclosed above, none of the Directors had any interest during the period in any material contract for the provision of services which was significant to the business of the Company. 8.2 Directors of the Subsidiaries James Houghton is a director of the Manager. Adrian Jones is an employee of the Placing Agent. Malcolm Sargeant is an employee of the Manager. In compliance with local regulations, certain subsidiaries have appointed directors who are employees of or are associated with, the relevant registered office service provider. 8.3 Manager fees Annual fees The Manager is entitled to an annual management fee of 1.25% of the net asset value of the Company from time to time plus borrowings of the group, payable quarterly in arrears. The Manager shall also be entitled to recharge to the Company all and any costs and disbursements reasonably incurred by it in the performance of its duties including costs of travel save to the extent that such costs are staff costs or other internal costs of the Manager. Accordingly, the Company shall be responsible for paying all the fees and expenses of all valuers, surveyors, legal advisers and other external advisers to the Company in connection with any investments made on its behalf. All amounts payable to the Manager by the Company shall be paid together with any value added tax, if applicable. Annual management fees payable during the period ended 30 June 2006 amounted to EUR865,120. Performance fees The Manager is entitled to a performance fee equal to 15% of the total profits generated by the Company. In order for the performance fee to be payable, the Company must firstly have returned to its Shareholders an amount equal to the amount subscribed pursuant to the Placing (ignoring any initial charge paid by Shareholders). Thereafter the Manager shall be entitled to 15% of any further distributions of profit or capital. In determining amounts paid to Shareholders and the amount payable to the Manager pursuant to the performance fee full account will be taken of any dividends paid, other distributions made and distributions made on a winding up of the Company. Payment of the Manager's annual fees and any performance fees shall be paid by a subsidiary of the Company. Performance fees payable during the period ended 30 June 2006 amounted to EUR Nil. 8.4 Placing agent In accordance with the terms of the Placing, the Placing Agent was entitled to charge investors an initial charge of up to 3% of the value of their investment. The Placing Agent was also entitled to receive from the Company an amount equal to 4% of the amount raised by the Placing Agent on behalf of the Company. Placing fees payable by the Company during the period ending 30 June 2006 amounted to EUR2,507,853. This amount has been charged to equity as a share issue expense. 9 Charges and Fees 9.1 Nominated Adviser and Broker fees Pursuant to the Placing and in its capacity as AIM Sponsor, the Nominated Adviser and Broker was entitled to receive a fee of #75,000. The payment of this fee was conditional upon admission of the Company's Shares to AIM taking place on or before 28 June 2005 or such later date as may have been agreed. As Nominated Adviser and Broker to the Company for the purposes of the AIM Rules, the nominated advisor and broker is entitled to receive an annual fee of #30,000. Advisory fees payable to the Nominated Advisor and Broker for the period ending 30 June 2006 amounted to EUR180,575. 9.2 Custodian fees The Custodian is entitled to receive fees calculated as 1 basis point per annum of the value of the debt securities held on behalf of the Company, subject to a minimum monthly fee of EUR500, payable quarterly in arrears. The Custodian expects to review and, subject to written agreement between the Company and the Custodian, may amend the foregoing fees six months after Admission and annually thereafter. Custodian fees payable for the period ending 30 June 2006 amounted to EUR7,638. 9.3 Administrator and Registrar fees The Administrator is entitled to receive a fee of 4 basis points of the net assets of the Company plus borrowings, subject to a minimum monthly fee of EUR5,000, payable quarterly in arrears. The Administrator shall assist in the preparation of the financial statements of the Company for which it shall receive a fee of EUR2,500 per set. The Administrator shall provide general secretarial services to the Company for which it shall receive a minimum annual fee of EUR7,500. Additional fees based on time and charges, will apply where the number of Board meetings exceeds four p.a. For attendance at meetings not held in the Isle of Man, an attendance fee of EUR500 per day or part thereof will be charged. The Administrator may utilise the services of a CREST accredited registrar for the purposes of settling share transactions through CREST. The cost of this service will be borne by the Company. It is anticipated that the cost will be in the region of #6,000 per annum subject to the number of CREST settled transactions undertaken. The Administrator expects to review and, subject to written agreement between the Company and the Administrator, may amend the foregoing fees six months after Admission and annually thereafter. Administration fees payable for the period ending 30 June 2006 amounted to EUR76,375. 9.4 Other operating expenses It is anticipated that the costs of managing any properties in the Company's investment portfolio will be satisfied out of the service charges generated by tenants. However, to the extent that this is not the case, all such costs, to include the costs of all other third party service providers, shall be chargeable to and payable by the Company. The costs associated with maintaining the Company's subsidiaries, to include the costs of incorporation and third party service providers shall be chargeable to each subsidiary and payable by the Company. 9.5 Preliminary (formation) expenses The estimated total costs and expenses payable by the Company in connection with the Placing and Admission (including professional fees, the costs of printing and the other fees payable including commission payable to the Placing Agent) was approximated to equal 4.5% of the gross amount raised. The actual total amount of preliminary expenses paid was EUR2,886,625 representing 4.60% of the gross amount raised. 9.6 Audit fees Audit fees payable for the period ending 30 June 2006 amounted to EUR82,838. 10 Investment Property Group ________________________________________________________________________________ EUR'000 ________________________________________________________________________________ At beginning of period - Additions through: direct acquisitions of property - acquisition of subsidiary companies (see note 21) 24,522 ________________________________________________________________________________ Balance at 30 June 2006 24,522 ________________________________________________________________________________ Security At 30 June 2006, there was a first rank mortgage on the above property securing the bank loan of EUR13.75 million (see note 15). 11 Trade and Other Receivables Trade and other receivables includes two contractual staged payments of EUR2.9 million for Mall Veliko Turnovo and EUR3.0 million for the Construdava Office Centre (see note 22). 12 Cash and Cash Equivalents Group Company 30 June 2006 30 June 2006 EUR'000 EUR'000 ________________________________________________________________________________ Bank balances 43,572 39,577 Bank overdrafts - - ________________________________________________________________________________ Cash and cash equivalents 43,572 39,577 ________________________________________________________________________________ 13 Capital and Reserves Share capital Ordinary Shares of EUR1.00 each Number EUR'000 ________________________________________________________________________________ In issue at the start of the period - - Issued during the period 62,696,333 62,696 ________________________________________________________________________________ In issue at 30 June 2006 62,696,333 62,696 ________________________________________________________________________________ At incorporation the authorised share capital of the Company was EUR300 million divided into 300 million Ordinary Shares of EUR1.00 each. The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company's assets. 14 Basic and Diluted Loss per Share Basic and diluted loss per share are calculated by dividing the loss attributable to equity holders of the Company by the number of ordinary shares in issue during the period. 2006 ________________________________________________________________________________ Loss attributable to equity holders of the Company (EUR'000) 326 Number of ordinary shares in issue (thousands) 62,696 ________________________________________________________________________________ Basic and diluted loss per share (EUR per share) 0.0052 ________________________________________________________________________________ 15 Interest-Bearing Loans and Borrowings This note provides information about the contractual terms of the Group's interest-bearing loans and borrowings. For more information about the Group's exposure to interest rate and currency risk see note 20. Non-current liabilities Group 30 June 2006 EUR'000 ________________________________________________________________________________ Secured bank loans 13,750 ________________________________________________________________________________ Terms and debt repayment schedule The Group has obtained a loan of EUR13.75 million from Bancpost SA in Romania (see note 10). As at 30 June 2006 the effective interest rate was 5.156%. The final maturity date is September 2009. 16 Trade and Other Payables Group Company 30 June 2006 30 June 2006 EUR'000 EUR'000 ________________________________________________________________________________ Taxation 7 - Trade payables 26 - Rental deposits 459 - Accruals 645 81 Other 27 - ________________________________________________________________________________ Total 1,164 81 ________________________________________________________________________________ 17 Exchange Rates The following exchange rates were used to translate assets and liabilities into the reporting currency at 30 June 2006: Bulgarian Lev 1.9710 Romanian Lei 3.6027 Turkish Lira 2.0259 18 Directors' Remuneration The Company The maximum amount of remuneration payable to the Directors permitted under the Articles of Association is EUR300,000 p.a. Each Director currently is paid a fee of EUR22,500 p.a. The Directors are each entitled to receive reimbursement of any expenses incurred in relation to their appointment. Total fees and expenses paid to the Directors for the period ended 30 June 2006 amounted to EUR97,500. The Subsidiaries No fees are paid to the directors of the subsidiaries except in circumstances where a director is appointed in compliance with local regulations and in such cases the fees payable are nominal. 19 Taxation The income tax expense of EUR28,131 in the consolidated income statement relates to a profit before tax of EUR327,828 in S.C. Paris Developments SRL in Romania. The outstanding tax liability as at 30 June 2006 for this company was EUR6,657. There are no other group companies with taxable profits during the period. Isle of Man The Company has received confirmation of tax exempt status from the Assessor of Income Tax in the Isle of Man for the year of assessment ending 5 April 2006. The effect of tax exempt status is that the Company will have no liability to Manx income tax on its income or gains and that there will be no requirement to deduct withholding tax from payments of dividends to shareholders. The current annual fee for tax exempt status is #475. With effect from 6 April 2006 the general tax rate for companies in the Isle of Man is zero per cent. As such the Company does not intend to renew its tax exempt status for the 2006/07 year of assessment. There are no corporation, capital gains or inheritance taxes payable in the Isle of Man. No Isle of Man stamp duty or stamp duty reserve tax will be payable on the issue, transfer, conversion or redemption of Ordinary Shares. Shareholders resident outside the Isle of Man will not suffer any income tax in the Isle of Man on any income distributions to them. United Kingdom The affairs of the Company are conducted so that the central management and control of the Company is not exercised in the UK and so that the Company does not carry out any trade in the UK (whether or not through a permanent establishment situated there). On this basis, the Company should not be liable for UK taxation on its income and gains, other than certain income deriving from a UK source. Other The subsidiaries of the Company are taxed in accordance with the applicable tax laws in the countries in which they were incorporated. 20 Financial Instruments The Group's activities expose it to a variety of financial risks: market risk (including currency risk and price risk), credit risk, liquidity risk and cash flow interest rate risk. Market risk Property and property related assets are inherently difficult to value due to the individual nature of each property. As a result, valuations may be subject to substantial uncertainty. There is no assurance that the estimates resulting from the valuation process will reflect the actual sales price even where such sales occur shortly after the valuation date. The performance of the Company would be adversely affected by a downturn in the property market in terms of higher capitalisation rates/yields or a weakening of rent levels. Any future property market recession could materially adversely affect the value of properties. Foreign exchange risk The Company's operations are conducted in jurisdictions which generate revenue, expenses, assets and liabilities in currencies other than Euros. As a result, the Company is subject to the effects of exchange rate fluctuations with respect to these currencies. The currencies giving rise to this risk are primarily Romanian Lei, Bulgarian Lev and Turkish Lira. ________________________________________________________________________________ Net Assets EUR 000s ________________________________________________________________________________ Romanian Lei 27,539 Bulgarian Lev 2,895 Euro 28,927 ________________________________________________________________________________ Total 59,361 ________________________________________________________________________________ Price risk The Group is exposed to property price and market rental risks. The value of the property held at 30 June 2006 is disclosed in note 10. Credit risk The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet. Management does not expect any counterparty to fail to meet its obligations. Liquidity risk The Company maintains sufficient cash balances for working capital, and obtains secured bank loans to fund purchases of investment property. Interest rate risk The Company is exposed to risks associated with the effects of fluctuations in prevailing market interest rates on its cash balances and borrowings. Cash is invested at short-term market interest rates. The terms of the borrowings are disclosed in note 15. Fair values All assets and liabilities at 30 June 2006 are considered to be stated at fair value. 21 Business Combinations During the period the Group acquired 100% of S.C. Paris Developments S.R.L. in relation to its investment in PGV Tower, Bucharest. The subsidiary acquired contributed a profit of EUR299,697 to the consolidated results for the period. The assets and liabilities arising from this acquisition are as follows: Fair value EUR'000 ________________________________________________________________________________ Investment property 24,522 Cash and cash equivalents 426 Interest bearing loans (13,800) Net current liabilities (2,406) Long term liabilities - rental deposits (442) ________________________________________________________________________________ Net assets acquired 8,300 ________________________________________________________________________________ Purchase consideration, settled in cash 8,300 Cash and cash equivalents in subsidiary acquired (426) ________________________________________________________________________________ Cash outflow on acquisition 7,874 ________________________________________________________________________________ 22 Commitments as at the Balance Sheet Date Prior to the balance sheet date, and in addition to the completed property acquisition, the Group had entered into sales purchase agreements for two further properties; Mall Veliko Turnovo in Bulgaria and Construdava in Romania. The Group has made staged payments of EUR2.9 million and EUR3.0 million respectively (see note 11), with remaining contractual commitments as at the balance sheet date of c. EUR26.1 million relating to Mall Veliko Turnovo and c. EUR16.0 million for Contrudava. These acquisitions are both expected to be completed during October 2006. 23 Post Balance Sheet Events Millennium Business Centre On 27 July 2006 the Company announced its commitment to acquire the Millennium Business Centre, in Bucharest ("Millennium"). A city centre grade A office development, the Millennium purchase is subject to construction completion which is expected to be in November 2006. The gross floor area of the property is 21,386 sqm accommodating 13,189 sqm of rentable area with a purchase price of EUR40 million. The transaction is also subject to the developer achieving a minimum 38% leasing which was very soon secured after execution - total leasing currently stands at over 90% with the World Bank being the property's principle anchor. The figures set out above are derived from the audited consolidated financial statements of the Company and its subsidiaries for the period ended 30 June 2006. The Annual report and audited consolidated financial statements of the Company will be sent to shareholders within the next 7 business days and will be available for at least one month from the date of publication in electronic form at www.europeanconvergencepropertycompany.com, and in hard copy at the Company's registered office, Jubilee Buildings, Victoria Street, Douglas, IM1 2SH, Isle Of Man. This information is provided by RNS The company news service from the London Stock Exchange END FR UUUWRNRRRRAA
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