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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
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Westbury Inc | LSE:WPFI | London | Ordinary Share | GB0031367971 | INC SHS 10P |
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% | 104.00 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
RNS Number:9088R Westbury Property Fund Limited 27 February 2007 The Westbury Property Fund Limited Annual Report and Consolidated Financial Statements For the year from 1 January 2006 to 31 December 2006 Chairman's Statement I have pleasure in presenting the Annual Report and Consolidated Financial Statements for the year ended 31 December 2006. This has been another excellent year for The Westbury Property Fund (Group) with progress being made the Group's port operations and strong performance from the balanced and venture property assets. In August 2006, the Company undertook a successful placing and open offer raising #57.6m net of expenses and at the same time broadened its investment policy. This repositioned the Fund as a commercial property and ports business with the ability to invest in asset backed operating businesses in addition to property and property joint ventures. Net Asset Value I am pleased to report the audited net asset value per share due to ordinary shareholders was 169.10p at 31 December 2006. This is calculated after all property acquisition costs, dividends paid, accrual for the Investment Manager's performance fee (see below) and the #2.6m of costs incurred in connection with the placing and open offer. The 2006 year end net asset value compares favourably with the comparable figure as at 31 December 2005 of 126.99p per Ordinary Share. This represents a 33.2% improvement over the year (2005: 21.5%). Performance Fee The investment manager is entitled to a performance fee, payable in 2010, equivalent to 15% of any out-performance over an NAV based total return hurdle of 8% in respect of the period from April 2002 until 31st December 2009. The Company has consistently delivered strong returns for shareholders since its launch in April 2002. On a three year basis to December 2006, the Company achieved a total return, as measured by IPD, of 26.6% (2005: 18.4%) per annum compared to the benchmark which returned 18.0% (2005: 16.1%) per annum. This placed the Company first out of a peer group of 56 over the period. The performance fee shown in the Consolidated Income Statement in respect of the year to 31 December 2006 amounts to #7,706,139 (2005: #1,467,323) and is a clear reflection of the strong performance of the Company to date. Company Strategy Whilst to date the Group has been successful in meeting its objectives and delivering strong performance for shareholders, the Board believes that the continued strength of total returns achieved by the UK commercial property market generally is unlikely to be sustainable going forward. With this view, the Board has instigated the sale of the majority of the Group's balanced or wholly owned property portfolio to realise the outstanding returns which have been achieved for shareholders to date. A disposal of this importance will be subject to shareholder approval and it is only likely if a disposal price can be achieved at a premium to the valuation of those properties as at 31 December 2006. The Board believes that the Group's stated strategy of investing in joint ventures and asset backed operating businesses will continue to achieve good returns for shareholders. The Board will aim to reinvest the proceeds from the forthcoming disposal in these types of investments whilst recognising the higher risk profile of asset backed operating businesses Dividends In respect of the year to 31 December 2006, the Board declared quarterly dividends on Ordinary Shares at the rate of 1.5p per quarter, totalling 6p. The dividend for the December 2006 quarter was paid in January 2007. The Board has also declared and paid four quarterly dividends totalling 8p during the year for each Income Share, fulfilling income shareholders' entitlement to receive a fixed preferential dividend of 8% per annum over the life of the shares. The Companies (Guernsey) Law, 1994 (Law) permits dividends to be paid out of profits available for the purpose and the Company's Articles of Association state that such profits available for distribution do not include realised or unrealised profits on capital assets. A portion of the 2005 dividend and the 2006 dividends paid during the year were in excess of these distributable profits as defined above. In order for these dividends to comply with the Law, the Directors intend to convert the entire share premium reserve of #99,925,500 to a distributable reserve. This requires shareholders' approval at the Company's Annual General Meeting on 18 May 2007 and application to the Royal Court of Guernsey immediately thereafter. The Directors are confident of obtaining the requisite approval and consent of the Royal Court of Guernsey. Bank Borrowings As at 31 December 2006, the Company had fixed rate borrowings drawn down with Bradford & Bingley amounting to #79.48m at an average all-in-cost of 6.0% per annum fixed until 25 June 2009. The market currently anticipates a further interest rate increase in the short-term. The Group's policy remains not to expose itself to any material interest rate risk. On a blended basis, the Company's all in cost of bank debt is approximately 6.0% per annum. The Board anticipates that should it achieve a disposal of its directly owned property portfolio, all of the Company's current bank debt will be repaid pending re-investment into property joint ventures and asset backed operating businesses. Asset Backed Operating Businesses - Westlink Group Following the acquisition of the freehold interest in Weston Point Docks in April 2006, good progress is being made in meeting the business plan in terms of both the development and site operations. The site, which amounts to circa 50 acres of land and water, is being developed as an inter-modal port facility with road, mainline rail, inland waterway and deep sea access via the Manchester Ship Canal. In excess of 400,000 sq ft of buildings will be constructed on the site with operational and storage contracts, rather than traditional occupational leases, entered into with customers. The development will incorporate industrial, process and high bay units, offices and some hard standing areas. I am pleased to announce that Mark Forrest, formerly of PD Ports, has joined the Westlink Group as Chief Executive Officer. Mark brings considerable sales and operational expertise from a ports background and he will be central to both the development of operations from Weston Point Docks as well as the expansion of the Westlink Group. In December 2006 Westlink Group incorporated a subsidiary, Victa Westlink Rail Limited (VWR), which then acquired a rail freight operating business. Although the contract will not complete until VWR has obtained its own rail operating licence, an interim management agreement enables the Westlink Group to operate immediately and generate income from the provision of rail freight services. Agreement has also been reached (subject to contract) for the acquisition of the business and assets of Victa Railfreight Limited in return for a minority stake in VWR. This will give VWR exclusive access to its business and experienced rail operating management team. Looking forward, the careful acquisition of selected rail connected sites is now core to the Group's strategy. In addition, a number of very interesting non port related asset backed operating business opportunities are currently being considered for acquisition by the Fund and announcements to shareholders will be made when appropriate. Venture Property Investments I am delighted to report that in addition to the two investments which were purchased in early 2006, as reported in the 2005 Annual Report, two further joint venture investments with other experienced investors have been made during the year. The Group now has a portfolio of eight joint ventures in which it has made equity investments. All debt is structured on a non-recourse basis to the Company. The aggregate equity held at the year end in these joint ventures amounted to #57.2m. In addition, the Group has made loans of a further #13.2m to three of these joint ventures. The investments comprise a 21.9% interest in Plantation Place, London EC3, a 19.7% interest in Mid City Place, London WC1, a mixed use development in central Liverpool, a retail warehouse unit adjacent to the Metro Centre in Gateshead, a site with significant redevelopment potential in Ware, a health and fitness centre in Hull, and two sites with development potential through a change of planning consent in Banstead and Guildford. The investment horizon for these investments varies and, if the forecast returns are achieved, there will be a significant uplift in the net asset value due to Ordinary Shareholders. Further joint venture investments will be made as suitable opportunities materialise. Board of Directors Finally, I am pleased to announce that Nick Watts has recently joined the Board as a non executive Director. Nick has over 30 years experience in the investment business and was formerly head of investment consulting at Watson Wyatt. He is a trustee Board member of two large corporate UK pension funds and a non executive Director of Legal & General Investment Management. Nick's extensive experience will, I believe, be of significant benefit to the Fund in its future development and I join the exists in welcoming Nick to the Board. Shareholder Communication In addition to the Annual and Interim Reports, the Investment Manager publishes a Performance Report in March and September on the activities of the Fund which is distributed electronically to shareholders. Any shareholder who does not currently receive this document but wishes to do so should contact info@westburypropertyfund.com. Rodney Baker-Bates Chairman 26 February 2007 Investment Manager's Report Investment Objective and Policy With the Group's objective to create income and capital appreciation by investing in UK commercial property and asset backed operating businesses, I am delighted with the excellent progress being made in fulfilling this objective with both the development of the Group's ports business and the implementation of individual asset business plans across the property portfolio. Performance After all costs incurred in running the Group and dividends paid to shareholders, the net asset value has increased by 33.2% over the year (2005: 21.5%). Taking account of the dividend this represents a total return to ordinary shareholders for 2006 of 37.9% (2005: 27.2%). The performance, as measured by IPD, of the underlying property portfolio incorporating the Company's venture portfolio investments, has remained strong achieving a total return of 38.6% for 2006 (2005: 21.9%). This placed the Fund third out of the 68 funds in its peer group and compares very favourably with the Fund's benchmark, the quarterly version of the IPD Monthly Index funds, which returned 17.7% over the same period. The IPD Annual Index is anticipated to return 18.2% for 2006. The Company has consistently delivered strong returns for shareholders since its launch in April 2002. On a three year basis to December 2006, the Company achieved a total return, as measured by IPD, of 26.6% (2005: 18.4%) per annum compared to the benchmark which returned 18.0% (2005: 16.1%) per annum. This placed the Company first out of a peer group of 56 over the period. Activity - Asset Backed Operating Businesses Westlink Group In April 2006 the Westlink Group, in which the Group then held a 39.5% interest, acquired the freehold of the Weston Point Docks site in Runcorn for #10.25m. In August 2006, the Fund acquired the remaining interests in the Westlink Group which is now a wholly owned subsidiary. The year has seen the existing operational team being supplemented by a new Chief Executive Officer, Mark Forrest, who brings a considerable amount of port related experience. In addition the on-site management team has been boosted by the recruitment of a financial controller, a human resources manager and an administration assistant. The business operates from a large site which will benefit from road, rail, sea and inland waterway access and good progress is being made in the development of a fully operational port with the first phase of demolition works now complete. The first phase of the development including an initial 25,000 sq ft of storage sheds, dock improvements and securing the new access for both road and rail is anticipated to commence in April 2007 with the next phase of the development to commence on completion of the necessary Harbour Revision Orders which will in part confer on the Westlink Group statutory powers as the designated Authority for the port. In the meantime necessary infrastructure works are progressing and agreement has now been reached with the adjoining owner regarding the joint development of a new road and rail access into the site. This is key to the overall development. Construction is expected to commence later in 2007. In addition, discussions have commenced with interested parties regarding the acquisition of further surrounding land holdings to increase the site area and enhance the capacity of the completed port. Occupancy levels remain encouraging with all site sheds currently let to capacity on a variety of contract and license terms. There is also a good level of enquiries from a variety of potential customers for open storage, bulk liquid handling, the handling of aggregates, as well as general storage and handling of goods. Discussions with these interested parties continue for a variety of near and medium term contracts. Following the year end, the Westlink Group formed a strategic joint venture, Victa Westlink Rail (VWR) with Victa Railfreight, a small rail freight operator. VWR has exchanged contracts for the acquisition of a rail freight operating business for #0.5m and now benefits, under an interim management agreement, from its own freight and passenger operating licenses, together with a track access agreement and safety certificate, pending regulatory approval. This strategic acquisition also brings an experienced team of rail operating staff and will enable the Westlink Group to benefit from income derived from the operation of rail freight services from the Weston Point Docks site and any other sites that can be acquired in the UK and connected via the rail network. A number of further corporate acquisitions are currently being investigated both by the Westlink Group and in non port and rail sectors by the Fund. Activity - Venture Portfolio Venture investments, which are made into separately capitalised special purpose vehicles, are an important component of performance and are structured to provide strong returns within a relatively short time horizon. The Company holds a 19.7% interest in the joint venture company that owns Mid City Place, High Holborn, London WC1 and excellent progress is being made with the business plan for this property. In March 2006 a beneficial re-gear was negotiated with the principal tenant and in April 2006 the asset was refinanced which resulted in the release of equity to the joint venture shareholders. At the end of 2006 a lease was agreed with a tenant with excellent covenant strength for a ten year unbroken term at what is believed to be a record rent for the Mid Town market. This lease concluded shortly after the year end and is expected to have a positive impact on value. In March 2006, the Company acquired a 21.9% interest in a unit trust that owns Plantation Place, Fenchurch Street, London EC3. The property, which consists of circa 550,000 sq ft of office and retail accommodation, is leased to a number of strong tenants. In August 2006 the investors concluded a beneficial loan securitisation. During the year, the Company made two further investments, totalling #0.4m. The first was in a company that acquired a 526 acre site in Banstead, Surrey. Whilst located in the greenbelt, the site offers the potential for significant value enhancement through a change of use over part of the site for a variety of alternative uses. The second, which concluded shortly after the year end, was made into a joint venture company set up to acquire a 1.7 acre site in Stoughton Grange, near Guildford, Surrey. The site is a former school and also has potential for significant value enhancement through a change of use now being sought. Good progress is being made with the business plans for the Group's other venture portfolio investments, most notably: Endeavour Ware Limited, the company which owns a five acre site in Ware and in which a 47.5% interest is held, acquired, during 2006, the freehold of the multi storey car park on the site (previously held by way of a lease) together with a residential unit at the southern entrance to the site. Terms have been agreed and conditional contracts signed with two parties for the onward sale of two parcels of land. Terms have also been agreed on a similar basis for the sale of a further part of the site. A revised planning application for the change of use and redevelopment of the site is likely to be submitted in the third quarter 2007. The residential and medical centre development in the centre of Liverpool, in which the Group holds a 50% interest, reached practical completion in June 2006, some months later than planned. The completion of the sale of a number of residential units and two commercial units remain outstanding and there is also a claim being pursued against the main contractor for this delay. In spite of this, a profit on this investment is expected to be realised during the course of 2007. Although at this stage no trading figures are available the tenant, ILVA Furniture, of the 150,000 sq ft retail warehouse unit at the Metro Centre, Gateshead in which the Company owns a 50% stake commenced trading in November 2006. The property has undergone a significant fit-out and once ILVA has established its market position in the UK, it is expected that this property will be valued more in line with similarly well established retail warehouse properties. Activity - Balanced Portfolio On 24 January 2007, the Company announced that it intends to dispose of the majority of its portfolio of directly owned properties. The portfolio comprises 19 assets, located across the UK and offers exposure to the retail, retail warehousing, office, industrial and educational use sectors. The average weighted unexpired lease term is in excess of nine years and there is a good spread of tenant risk, with a number of tenants having excellent financial covenant strengths. There remain further value added opportunities to be undertaken and the portfolio is approximately 15% reversionary with the majority of this achievable by the end of 2007. This offers the purchaser a rising income stream and the opportunity to add value going forward. A disposal of this magnitude will be subject to shareholder approval and a further announcement will be made should a conditional agreement be concluded. Outlook Given the prognosis for the UK commercial property market, we believe the strategy of expanding the Group's ports and joint venture businesses to be the right one for the Group going forward. Joint venture investments are generally made into leveraged special purpose vehicles where forecast total returns are above average assuming business plans are successfully concluded. The Group is building a strong track record in joint venture investments and anticipates making two further equity investments shortly. The ability to acquire asset backed operating businesses offers the Company the potential to achieve sustainable superior returns for shareholders. Victa Westlink Rail, the strategic joint venture set up by the Group's port business in which the Group has a majority stake, and its subsequent conditional acquisition of a rail freight operator is a good example of this as income is expected to be received from the freight operation itself, associated storage and handling facilities and adjacent property development opportunities. Richard Burrell Assura Fund Management LLP 26 February 2007 Property Holdings as at 31 December 2006 Set out below is the schedule of properties together with net annual rents receivable. The individual valuations shown are the Prospectus values or purchase price, but exclude the actual costs of acquisition. PORTFOLIO LISTINGS AS AT 31 DECEMBER 2006 Address Use Tenure Area Current net Prospectus Value annual rent or Net purchase Sq M receivable cost 14-20 Watergate Street, Town centre retail Freehold 1,949 #335,000 #4,775,000 Chester Carr Office Village, 3/6 Multi-let offices Freehold 2,616 #359,580 #3,415,000 White Rose Way, Doncaster Admiral Retail Park, Retail warehouse Freehold 6,865 #1,004,787 #12,300,000 Lottbridge Drove, Park Eastbourne B&Q Warehouse, Stoneferry Retail warehouse Freehold 6,764 #833,716 #10,100,000 Road, Kingston upon Hull Park Hallamshire Court, Multi-let offices Freehold 1,512 #234,908 #2,460,000 Summerfield Street, Sheffield 34 Regent Street, Swindon Town centre retail Freehold 646 #140,000 #1,374,000 66/68 High Street, Staines Town centre retail Freehold 315 #0 #1,795,000 Comau Estil Unit, 10 Industrial/Warehouse Freehold 4,311 #192,000 #1,920,000 Midland Road, Luton The Whitbread Centre, Hedge Industrial/Warehouse Freehold 10,505 #655,064 #7,860,000 End, Southampton WRTL Premises, Waterside Industrial/Warehouse Long leasehold* 2,380 #137,990 #1,665,000 Park, Great Bridge, Tipton Area 7, Pershore Road, Industrial/Warehouse Freehold 8,630 #477,302 #5,820,000 Worcester 2/18 Torrington Drive, Town centre retail Long leasehold 3,412 #251,017 #3,250,000 Debden Lynx Express & Exel Units, Multi-let industrial Freehold 8,737 #320,000 #3,475,000 Widford Trading Estate, Chelmsford 1-4 Bethune Road, Park Industrial/Warehouse Freehold 9,341 #781,250 #10,100,000 Royal, London Mid City Place, High Multi-let offices & SPV*** 32,604 n/a #3,400,000 Holborn, London WC1 retail Lane Group PLC Unit, Industrial Long leasehold 3,579 #324,990 #3,950,000 Garonor Way, Royal Portbury Dock, Bristol 37 Soho Square, London W1 Single-let offices Freehold 881 #317,500 #5,175,000 22 Soho Square, London W1 Multi-let offices Freehold 1,218 #304,655 #6,212,000 15/28 Adler Industrial Multi-let industrial Long leasehold**1,496 #149,125 #2,510,000 Estate, Hayes Plantation Place, Fenchurch Multi-let offices & SPV**** 50,594 n/a #16,500,000 Street, London EC3 retail 90/92 Queen's Gate, London Educational Freehold 1,373 #450,000 #8,550,000 SW7 Units 1&2 Centuria Business Multi-let industrial Freehold 5,997 #256,688 #3,800,000 Park, Bromborough Balanced Portfolio Total #7,525,572 #120,406,000 Mid City Place, High Holborn and Plantation Place, Fenchurch Street are treated as part of the Balanced Portfolio for fund management purposes, given the characteristics of the underlying property investment assets. Westlink Group Limited Port/Industrial/ Freehold c50 acres n/a #13,600,000 Warehouse Ropewalks One LLP Joint Venture SPV n/a n/a #500,000 Westar Limited & Westar 2 Joint Venture SPV n/a n/a #2,250,000 Limited Endeavour Ware Limited Joint Venture SPV n/a n/a #1,252,000 Westbury Fitness Limited Joint Venture SPV n/a n/a #1,120,000 Whitecote Limited Investment SPV n/a n/a #250,000 Endeavour Guildford Joint Venture SPV n/a n/a #140,000 Limited TOTAL #7,525,572 #139,518,000 SPV = Special purpose vehicle * Option to purchase the freehold for #1 in 2027. ** Option to purchase the freehold for #1 in 2011. *** The Company holds a 19.73% equity interest. **** The Company holds a 21.9% interest. LATEST PORTFOLIO VALUATION (excluding Joint Ventures but including the Company's share of Mid City Place & Plantation Place) as at 31 DECEMBER 2006 #201,290,000 Report of the Directors The Directors of the Company are pleased to submit the Audited Consolidated Financial Statements of the Group for the year from 1 January 2006 to 31 December 2006. Investment Policy The investment objectives of the Group are to achieve income and capital growth from a diversified portfolio of commercial properties situated in the United Kingdom from investment in property related venture investments and asset backed operating businesses including ports. Listing The Capital and Income Shares of the Company were admitted to the Official List of The London Stock Exchange on 18 April 2002 and to the Official List of The Channel Islands Stock Exchange on 18 April 2002. On 20 December 2004 the Company's Ordinary Shares were admitted to the Official List of The London Stock Exchange and The Channel Islands Stock Exchange. On 6 September 2006 the Company's Ordinary Shares were admitted to The London Stock Exchange's All Share Index. Share Issue On 9 March 2006, the Company issued 5,173,461 Ordinary Shares for gross consideration of #6,725,498. On 8 August 2006, the Company issued 42,857,143 Ordinary Shares for gross consideration of #60m. Also on 8 August 2006, the Company issued 721,428 Ordinary Shares with a value of #1,010,000 in return for 21% of the share capital of Westlink Group Limited and 50% of the members' interest in Westlink Investment Syndicate LLP (which in turn held 79% of the share capital of Westlink Group Limited). Results The results for the year are shown in the Consolidated Income Statement on page 20. Dividend During the year the Company has declared and paid the following dividends to its Income Shareholders: Dividend Number Date Declared Rate Final dividend for 2005 20 December 2005 2.0p First interim 15 March 2006 2.0p Second interim 15 June 2006 2.0p Third interim 21 September 2006 2.0p On 14 December 2006, the Directors declared a final dividend of 2.0p which was paid on 24 January 2007. During the year the Company has declared and paid the following interim dividends to its Ordinary Shareholders: Dividend Number Date Declared Rate Final dividend for 2005 20 December 2005 1.5p First interim 15 March 2006 1.5p Second interim 15 June 2006 1.5p Third interim 21 September 2006 1.5p A final dividend of 1.5p was declared on 14 December 2006 and paid on 24 January 2007. The Companies (Guernsey) Law, 1994 (Law) permits dividends to be paid out of profits available for the purpose and the Company's Articles of Association state that such profits available for distribution do not include realised or unrealised profits on capital assets. A portion of the 2005 dividend and the 2006 dividends paid during the year were in excess of these distributable profits as defined above. In order for these dividends to comply with the Law, the Directors intend to convert the entire share premium reserve of #99,925,500 to a distributable reserve. This requires shareholders' approval at the Company's Annual General Meeting on 18 May 2007 and application to the Royal Court of Guernsey immediately thereafter. The Directors are confident of obtaining the requisite approval and consent of the Royal Court of Guernsey. Directors' and Other Interests The current Directors of the Company are listed on page 10. Nick Watts was appointed a Director with effect from 1 February 2007. The following Directors including persons connected with them held the number of shares listed below at 31 December 2006: Name Number of Ordinary % of Issued Number of Income % of Issued Income Shares Ordinary Shares Shares Shares R. Baker-Bates 282,897 0.28 - - W. Kay 53,887 0.05 - - T. Chesney 10,000 0.01 - - None of the Directors had a service contract with the Company during the year. Corporate Governance As a Guernsey incorporated company, the Company is not required to comply with the Code of Best Practice published by the Committee on the Financial Aspects of Corporate Governance (the Combined Code). However, the Directors place a high degree of importance on ensuring that high standards of Corporate Governance are maintained. Corporate Governance should not mean only compliance but also be a system to ensure that the Company follows the purpose for which it has been incorporated and also undertakes strategies which promote long term shareholder value. The Board of the Company is accountable to the shareholders and communicates with them on a regular basis in a number of ways. These include: * Annual General and Extraordinary Meetings; * Announcements on the London and Channel Islands Stock Exchanges; and * Presentations to institutional shareholders on a semi-annual basis. In addition to acting as a conduit between its shareholders and the Investment Manager of the Company, the Board has determined that its role primarily relates to dealing with matters of strategy, such as: * Compliance with the Investment Policy set out above and reviewing this on a periodical basis, whilst taking account of how this policy is fulfilled within a risk framework appropriate to the size of the Company; * Being alert to market and other prevalent conditions; * Ongoing review of the performance of the Company; * Consideration of capital structure and use of bank or other debt funding both within the Company and its subsidiaries; and * Appointment, delegation to and monitoring of the Investment Manager and Investment Advisers of the Company. The Board meets on a quarterly basis and also as required in order to fulfil its obligations to consider matters of strategy. Matters which are considered by the Board to be non-strategic are generally delegated to the Investment Manager, although the Board reserves the right to meet to discuss larger property transactions (exceeding #10 million) and those deemed to be of a sufficient size to have the potential to impact on the Company's future prospects. In addition to considering Group strategy at its quarterly Board meetings, the Board also discusses transactions which have taken place during the quarter, the performance of each of its balanced and venture portfolios and asset backed operating businesses, financial performance and prospects and compliance. The Board comprises only Non Executive Directors whose tenure may be terminated at any time and so the Board does not believe that the Combined Code recommendation of each Director being subject to a fixed term of office need apply. Remuneration of the Company's Directors is a maximum of #150,000 per annum in aggregate, as set out in the Company's Articles of Association or such greater amount as has been approved by an ordinary resolution of the Company at general meeting. As a result of this, and the fact that the Company has no employees, the Board has not deemed it necessary to establish a Remuneration Committee. The Audit Committee comprises the entire Board, with its first meeting in 2007 taking place prior to the Board Meeting on 23 February 2007. The Audit Committee is required, amongst other matters, to consider the integrity of the Company's Financial Statements, critical accounting policies and practices and changes to them, review and challenge significant financial actions and judgments of management in relation to the Annual and Interim Financial Statements and to consider compliance with relevant accounting, UKLA and legal standards and requirements. Going Concern The Directors believe it is appropriate to adopt the going concern basis in preparing the financial statements as, after due consideration, the Directors consider that the Group has adequate resources to continue in operational existence for the foreseeable future. Substantial Shareholdings At 9 February 2007, Directors were aware that the following shareholders owned 3% or more of the issued Ordinary Shares of the Company. Number of Ordinary Number of Shares Ordinary Shares (%) SMA PLC 3,225,000 3.21 Artemis High Income Fund 3,453,541 3.44 Moore Macro Fund LP Main Equities 3,500,000 3.48 Jupiter High Income Fund 4,028,007 4.01 City Asset Management Clients 4,137,399 4.12 St James Place UK Public Co 5,155,000 5.13 Invesco Perpetual Income Fund 7,698,745 7.66 Artemis Income Fund 8,237,857 8.20 Invesco Perpetual High Income Fund 12,132,569 12.07 Directors' Responsibilities The Directors are responsible for preparing financial statements in accordance with applicable Guernsey law and generally accepted accounting principles. Guernsey company law requires the directors to prepare financial statements for each financial period which 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 and are in accordance with applicable laws. In preparing those financial statements the Directors are required to:- * Select suitable accounting policies and apply them consistently; * Make judgements and estimates that are reasonable and prudent; 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 proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies (Guernsey) Law, 1994. 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 ensuring that the Report of the Directors and other information included in the Annual Report are prepared in accordance with applicable company law. They are also responsible for ensuring that the Annual Report includes information required by the Listing Rules of the Financial Services Authority. Status for Taxation The Income Tax Authority in Guernsey has granted the Company exemption from Guernsey income tax under the Income Tax (Exempt Bodies) (Guernsey) Ordinance 1989 and the income of the Company may be distributed or accumulated without deduction of Guernsey income tax. Exemption under the above mentioned Ordinance entails payment by the Company of an Annual Fee of #600. The property subsidiaries are subject to United Kingdom tax on income arising on investment properties, after deduction of their debt financing costs and allowable expenses. Westlink Group Limited and subsidiaries are subject to corporation tax in the UK. Investment Manager In the Directors' opinion the continuing appointment of the Investment Manager is in the best interests of the shareholders in view of the excellent performance of the Group in recent years. Auditors Ernst & Young LLP have indicated their willingness to continue in office. Tim Chesney, Director Iain Stokes, Director 26 February 2007 Independent Auditor's Report to the Members of The Westbury Property Fund Limited We have audited the Group's financial statements for the year ended 31 December 2006 which comprise the Consolidated and Parent Company Income Statement, Consolidated and Parent Company Balance Sheet, Consolidated and Parent Company Statement of Changes in Equity, Consolidated and Parent Company Cash Flow Statement and the related notes 1 to 30. These financial statements have been prepared under the accounting policies set out therein. This report is made solely to the Company's members, as a body, in accordance with Section 64 of the Companies (Guernsey) Law, 1994. 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 auditors' report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the 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 Auditors The Directors are responsible for the preparation of the financial statements in accordance with applicable Guernsey law and Listing Rules of the Financial Services Authority as set out in the Statement of Directors' Responsibilities. Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements, International Standards on Auditing (UK and Ireland) and the Listing Rules of the Financial Services Authority. We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Companies (Guernsey) Law 1994. We also report to you if, in our opinion, the Directors' Report is not consistent with the financial statements, if the Company has not kept proper accounting records or if we have not received all the information and explanations we require for our audit or if information specified by the Listing Rules regarding Directors' transactions with the Group is not disclosed. We read the other information contained in the Annual Report and consider whether it is consistent with the Audited Financial Statements. This other information comprises the Chairman's Statement, Investment Manager's Report, Directors' Profiles, Management and Administration and Report of the Directors. We consider the implications for our Report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not extend to any other information. Basis of Audit Opinion We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgments made by the Directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Group's circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. Opinion In our opinion the financial statements give a true and fair view, in accordance with International Financial Reporting Standards, of the state of affairs of the Group and Parent Company as at 31 December 2006 and of the Group and Parent Company's profit for the year then ended; and have been properly prepared in accordance with the Companies (Guernsey) Law 1994. Ernst & Young LLP Guernsey, Channel Islands 26 February 2007 Note: The maintenance and integrity of The Westbury Property Fund Limited web site is the responsibility of the directors, the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the Financial Statements since they were initially presented on the web site. Consolidated Income Statement 1/01/2006 1/01/2005 to to 31/12/2006 31/12/2005 (as restated) Notes # # Income Rent receivable 7,229,943 6,371,690 Bank and other interest 2,296,230 1,221,726 Storage and handling sales 137,440 - Total Income 9,663,613 7,593,416 Expenses Interest payable and similar charges, including distributions on Income Shares 5 5,278,069 3,514,939 Investment Manager's fees 3 (i) 2,747,203 1,535,996 Performance fee 3 (i) 7,706,139 1,467,323 Legal and professional fees 397,367 172,315 Share reorganisation expenses - 2,284 Property management expenses 325,017 245,007 Administration fee 3 (ii) 169,150 119,497 Salaries 73,418 - Depreciation 13 12,656 - Directors' fees 4 91,268 111,951 General expenses 289,274 140,146 Bank charges 25,509 18,102 Audit fees 97,710 62,327 Tax consultancy fees 39,832 18,102 Storage and handling costs 292,524 - Total Expenses 17,545,136 7,407,989 Net (loss)/profit before investment result (7,881,523) 185,427 Realised (loss)/gain on sale of investment properties (15,776) 763,133 Realised gain on sale of investments - 1,380,681 Movement in unrealised gain on revaluation of investment properties 11 12,678,466 11,418,613 Share of profits after taxation/(losses) of associates and joint ventures 12 37,989,671 (49,797) Profit before taxation 42,770,838 13,698,057 Taxation 7 5,863 (4,259) Profit attributable to equity holders 42,776,701 13,693,798 Basic and diluted earnings per Ordinary Share 8 58.29p 26.48p All items in the above statement are derived from continuing operations. The accompanying notes form an integral part of the financial statements. Consolidated Balance Sheet 31/12/2006 31/12/2005 (as restated) Notes # # Non-current Assets Investment Property 11 139,445,750 116,873,062 Investments in associates and joint ventures 12 70,612,226 14,883,260 Property, Plant and Equipment 13 11,084,111 - Other investment 14 250,000 - Goodwill 15 3,812,597 - 225,204,684 131,756,322 Current Assets Cash and cash equivalents 39,830,507 6,395,313 Debtors 16 3,292,798 4,135,452 43,123,305 10,530,765 Total Assets 268,327,989 142,287,087 Current Liabilities Creditors 17 4,209,329 4,046,801 Non-current Liabilities Creditors 18 9,618,133 1,911,994 Long term loan 19 79,399,740 65,484,804 Income Shares 20 5,177,184 5,148,110 94,195,057 72,544,908 Total Liabilities 98,404,386 76,591,709 Net Assets 169,923,603 65,695,378 Represented by: Capital and Reserves Share capital 21 10,048,665 5,173,462 Share premium 22 99,925,500 39,698,503 Revaluation Reserve 23 339,885 - Retained earnings 24 59,609,553 20,823,413 Issued capital and reserves 169,923,603 65,695,378 Net Asset Value per Ordinary Share 25 169.10p 126.99p The financial statements were approved at a meeting of the Board of Directors held on 26 February 2007 and signed on its behalf by: Tim Chesney, Director Iain Stokes, Director The accompanying notes form an integral part of the financial statements. Consolidated Statement of Changes in Equity Share Share Premium Revaluation Retained Reserves Capital Reserve Earnings # # # # # Balance at 1 January 2006 5,173,462 39,698,503 - 20,823,413 65,695,378 Issue of Ordinary Shares 4,875,203 62,860,295 - - 67,735,498 Issue costs paid on issuance of Ordinary Shares - (2,633,298) - - (2,633,298) Dividends on Ordinary Shares - - - (3,990,561) (3,990,561) Profit attributable to equity holders - - - 42,776,701 42,776,701 Revaluation of land and buildings - - 339,885 - 339,885 Balance at 31 December 2006 10,048,665 99,925,500 339,885 59,609,553 169,923,603 Share Share Revaluation Retained Reserves Capital Premium Reserve Earnings # # # # # Balance at 1 January 2005 5,138,349 39,733,558 - 9,576,733 54,448,640 On Conversion of Capital Shares 35,107 (35,107) - - - Issue of Ordinary Shares 6 52 - - 58 Dividends on Ordinary Shares - - - (2,447,118) (2,447,118) Profit attributable to equity - - - 14,173,798 14,173,798 holders - Balance at 31 December 2005 5,173,462 39,698,503 - 21,303,413 66,175,378 Prior year adjustment (note 9) - - - (480,000) (480,000) Balance Restated at 31 December 2005 5,173,462 39,698,503 - 20,823,413 65,695,378 The accompanying notes form an integral part of the financial statements Consolidated Cash Flow Statement 1/01/2006 1/01/2005 To To 31/12/2006 31/12/2005 Notes # # Operating Activities Rent received 6,949,002 6,413,029 Bank and other interest received 2,302,761 528,855 Storage and handling sales 137,440 - Expenses paid (2,770,176) (2,606,878) Storage and handling costs (292,524) - Interest paid and similar charges, including distributions on Income (5,032,709) (3,440,497) Shares Net cash inflow from operating activities 26 1,293,794 894,509 Investing Activities Purchase of investments (18,453,602) (2,646,476) Proceeds from sale of investments - 2,930,698 Net loans advanced to investments (13,349,909) (10,595,644) Acquisition of subsidiary - net cash received 60,687 - Other investment acquired (250,000) - Purchase of investment properties (22,084,222) (35,072,874) Sales of investment properties 12,484,224 3,866,558 Property, Plant and equipment (175,287) - Net cash (outflow) from investing activities (41,768,109) (41,517,738) Financing Activities Issue of Ordinary Shares 66,725,498 58 Issue costs paid on issuance of Ordinary Shares (2,633,298) - Dividends paid on Ordinary Shares (3,990,561) (2,447,118) Draw down of long term loan 16,500,000 22,328,000 Loan repaid (2,500,000) - Additional loan issue costs (192,130) (216,506) Net cash inflow from financing activities 73,909,509 19,664,434 Increase/(decrease) in cash and cash equivalents 33,435,194 (20,958,795) Cash and cash equivalents at 1 January 6,395,313 27,354,108 Cash and cash equivalents at 31 December 39,830,507 6,395,313 The accompanying notes form an integral part of the financial statements Notes to the Consolidated Financial Statements 1. Operations The Westbury Property Fund Limited is a closed-ended investment Company incorporated in Guernsey whose investment objective is to achieve income and capital growth from a diversified portfolio of commercial properties situated in the United Kingdom, property related venture investments and asset backed operating businesses including ports. 2. Principal Accounting Policies Basis of Preparation The financial statements of the Group have been prepared in conformity with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board, interpretations issued by the International Financial Reporting Interpretations Committee and applicable legal and regulatory requirements of Guernsey Law, and reflect the following policies: Convention The financial statements have been prepared on a going concern basis under the Historical Cost Convention except for the measurement at fair value of investment properties and land and buildings. Basis of Consolidation The Group financial statements consolidate the financial statements of The Westbury Property Fund Limited and its subsidiary undertakings drawn up to 31 December 2006. All intra-group balances, transactions, income and expenses and profits and losses resulting from intra-group transactions that are recognised in assets, are eliminated in full. Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. Investments in Associates The Group's investments in associates are accounted for under the equity method of accounting. An associate is an entity in which the Group has significant influence and which is neither a subsidiary nor a joint venture. Under the equity method, investments in the associates are carried in the balance sheet at cost plus post-acquisition changes in the Group's share of net assets of the associates. After application of the equity method, the Group determines whether it is necessary to recognise additional impairment loss with respect to the Group's net investment in the associates. The consolidated statement of operations reflects the share of the results of operations of the associates after tax. Where there has been a change recognised directly in the equity of the associates, the Group recognises its share of any changes and discloses this, when applicable, in the statement of changes in equity. The financial statements of the associates are prepared for the same reporting year as the Group or with a maximum difference of no more than three months,. Investments in Joint Ventures The Group has interests in joint ventures which are jointly controlled entities. A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control, and a jointly controlled entity is a joint venture that involves the establishment of a separate entity in which each venturer has an interest. The Group recognises its interest in joint ventures using equity accounting. The equity accounting method is described in the 'Investments in Associates' accounting policy above. The financial statements of the joint ventures are prepared for the same reporting year as the Group or with a maximum difference of no more than three months. Other Investment Other investments are non-derivative financial assets that are not quoted in an active market. After initial measurement at fair value, other investments are subsequently carried at amortised cost using the effective interest method less any allowance for impairment. Amortised cost is calculated taking into account any discount or premium on acquisition and includes fees that are an integral part of the effective interest rate and transaction costs. Gains and losses are recognised in the Income Statement when the loans and receivables are derecognised or impaired, as well as through the amortisation process. Investment in Subsidiaries Investments in subsidiaries are initially recognised and subsequently carried at cost in the company financial statements. Segmental Reporting The Directors are of the opinion that the Group is engaged in a single segment of business, being property investment and related business. The Group has two elements of this being the Balanced Portfolio and Venture Portfolio. The Group's venture investments are principally commercial property investments in separately capitalised special purpose vehicles, in joint venture with other investors. They share the characteristics of the Group's core Balanced Portfolio properties. However, shareholders should be aware that the higher gearing in some of these special purpose vehicles causes the Group's equity held in such investments to be more susceptible to variations in the gross values of the underlying property assets therein. Impact of revisions to International Financial Reporting Standards The following International Financial Reporting Standard has been revised for periods commencing 1 January 2006 and has been adopted by the Group: IAS39 Amendments - Financial Instruments: Recognition and Measurement The Company has decided not to early adopt the following standard: IAS1 - Presentation of Financial Statements These revised standards have not had an impact on the Group's equity. IASB and IFRIC have issued the following standards and interpretations with an effective date after the date of these financial statements: International Accounting Standards (IAS / IFRSs) Effective date IFRS 7 Financial Instruments: Disclosures 1 January 2007 IFRS 8 Operating Segments 1 January 2009 IAS 1 Amendment - Presentation of Financial Statements: Capital Disclosures 1 January 2007 International Financial Reporting Interpretations Committee (IFRIC) IFRIC 7 Applying the Restatement Approach under IAS 29 Financial Reporting in 1 March 2006 Hyperinflationary Economies IFRIC 8 Scope of IFRS 2 1 May 2006 IFRIC 9 Reassessment of Embedded Derivatives 1 June 2006 IFRIC 10 Interim Financial Reporting and Impairment 1 November 2006 IFRIC 11 IFRS 2 - Group and Treasury Share Transactions 1 March 2007 IFRIC 12 Service Concession Arrangements 1 January 2008 The Directors do not anticipate that the adoption of these standards and interpretations will have a material impact on the Group's financial statements in the period of initial application. Upon adoption of IFRS 7, the Group will have to disclose additional information about its financial instruments, their significance and the nature and extent of risks that they give rise to. More specifically the Group will need to disclose the fair value of its financial instruments and its risk exposure in greater detail. There will be no effect on reported income or net assets. IAS 1 Presentation of Financial Statements This amendment is required for accounting period beginning after 1 January 2007 and requires the Group to make new disclosures to enable users of the financial statements to evaluate the Group's objectives, policies and processes for managing capital. Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received, excluding discounts, rebates, and other sales taxes or duty. The following specific recognition criteria must also be met before revenue is recognised: Interest income - Revenue is recognised as interest accrues (using the effective interest method that is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument to the net carrying amount of the financial asset). Dividends - Revenue is recognised when the Company's right to receive the payment is established. Rental income - Rental income arising from operating leases on investment properties is accounted for on a straight line basis over the lease terms and is shown gross of any UK income tax. Storage and handling income is recognised when invoiced and in accordance with the contractual terms and is accounted for net of VAT. Expenses All expenses are accounted for on an accruals basis. Dividends In accordance with IAS 10 Events after the Balance Sheet Date, dividends on ordinary shares declared before the year end but remaining unpaid are not accrued for. Issue Costs The original placing expenses incurred amounted to #1,646,234 of which #251,000 related to bank loan issue costs. The remainder was allocated on a pro-rata basis to the Capital and Income Shares, as follows: Capital Shares #446,638 Income Shares #948,596 Bank Loan #251,000 The placing expenses allocated to the Capital Shares were written off in full against the share premium account. The placing expenses allocated to the Income Shares and Bank Loan are being amortised through the Consolidated Statement of Operations based on the effective interest rate method. The placing expenses incurred in March and August 2006 in relation to the Ordinary Shares issued in the year amounted to #2,633,298 and have been written off in full against the share premium account. Business Combinations and Goodwill Business combinations are accounted for using the acquisition accounting method. This involves recognising identifiable assets (including previously unrecognised intangible assets) and liabilities (including contingent liabilities and excluding future restructuring) of the acquired business at fair value. Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of the business combination over the Group's interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group's cash generating units, or groups of cash generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units. Each unit or group of units to which the goodwill is allocated: * represents the lowest level within the Group at which the goodwill is monitored for internal management purposes; and * is not larger than a segment based on either the Group's primary or the Group's secondary reporting format determined in accordance with IAS 14 Segment Reporting. Impairment of non-financial assets The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or cash-generating unit's fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used. Impairment losses of continuing operations are recognised in the income statement in those expense categories consistent with the function of the impaired asset, except for land and buildings previously revalued where the revaluation was taken to equity. In this case the impairment is also recognised in equity up to the amount of any previous revaluation. For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group makes an estimate of recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot ''exceed' the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the income statement unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase. Impairment losses recognised in relation to goodwill are not reversed for subsequent increases in its recoverable amount. The following criteria are also applied in assessing impairment of specific assets: Impairment of Goodwill Goodwill is allocated to cash generating units for the purpose of impairment testing. This allocation is made to those cash generating units that are expected to benefit from the business combination in which the goodwill arose. An impairment review is conducted annually. The recoverable amount of a cash generating unit is determined based on value-in-use calculations. These calculations use cash flow projections based on detailed financial models prepared by management, with all anticipated future cash flows discounted to current day values. Investment Property - Freehold Freehold properties are initially recognised at cost, being the fair value of consideration given, including transaction costs associated with the property. After initial recognition, freehold properties are measured at fair value, with unrealised gains and losses recognised in the Consolidated Income Statement of Operations. Fair value is based upon the open market valuations of the properties as provided by Knight Frank, a firm of independent chartered surveyors, as at the balance sheet date. Investment Property - Long Leasehold Long leasehold properties are initially recognised as both an asset and lease creditor at the present value of the ground rents payable over the term of the lease. They are subsequently revalued in accordance with IAS 40 up to the fair value as advised by the independent valuer as noted above for freehold properties. The lease creditor is amortised over the term of the lease using the effective interest method. Property, Plant & Equipment Plant and equipment are stated at cost, excluding the costs of day to day servicing, less accumulated depreciation and any accumulated impairment in value. Such cost includes the cost of replacing part of the plant and equipment when that cost is incurred, if the recognition criteria are met. Land and buildings are measured at fair value less depreciation on buildings and impairment charged subsequent to the date of the revaluation. Depreciation is provided at rates calculated to write off the cost less estimated residual value of each asset over its expected useful life, as follows: * Plant & machinery - 20% reducing balance * Fixtures, fittings & equipment - 20% reducing balance * Buildings - 2% reducing balance Valuations are performed frequently enough to ensure that the fair value of a revalued asset does not differ materially from its carrying amount. Any revaluation surplus is credited to the asset revaluation reserve included in the equity section of the balance sheet, except to the extent that it reverses a revaluation decrease of the same asset previously recognised in the Income Statement, in which case the increase is recognised in the Income Statement. A revaluation deficit is recognised in the Income Statement, except that a deficit directly offsetting a previous surplus on the same asset is directly offset against the surplus in the asset revaluation reserve. An annual transfer from the asset revaluation reserve to retained earnings is made for the difference between depreciation based on the revalued carrying amount of the assets and depreciation based on the assets original cost. Additionally, accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. Upon disposal, any revaluation reserve relating to the particular asset being sold is transferred to retained earnings. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are initially recognised at fair value. After initial recognition loans and receivables are subsequently carried at amortised cost using the effective interest method less any allowance for impairment. Amortised cost is calculated taking into account any discount or premium on acquisition and includes fees that are an integral part of the effective interest rate and transaction costs. Gains and losses are recognised in the income statement when the loans and receivables are derecognised or impaired, as well as through the amortisation process. Cash and Cash Equivalents Cash and cash equivalents are defined as cash in hand, demand deposits, and highly liquid investments readily convertible to known amounts of cash and subject to insignificant risk of changes in value. For the purposes of the Consolidated Cash Flow Statement, cash and cash equivalents consist of cash in hand and deposits in banks. Bank Loans and Borrowings All bank loans and borrowings are initially recognised at fair value, less issue costs where applicable. After initial recognition, all interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Amortised cost is calculated by taking into account any discount or premium on settlement. Income Shares Income Shares, which exhibit characteristics of liabilities, are recognised as liabilities in the Balance Sheet in accordance with International Accounting Standard 32. Income Shares are initially recognised at cost, being the fair value of the consideration received, less issue costs. After initial recognition, Income Shares are subsequently measured at amortised cost using the effective interest method. The corresponding distributions on these shares are charged as interest expense in the Consolidated Statement of Operations over the term of these shares and are accrued for from the date they are declared. 3. Material Agreements (i) Under the terms of an appointment made by the Board on 11 January 2002, Westbury Fund Management Limited was appointed as Investment Manager to the Company. The Investment Management Agreement was novated to Berrington Fund Management Limited on 30 September 2003, and then to Assura Fund Management LLP ("AFML") on 15 May 2006. With effect from 11 January 2002 the Investment Manager is paid a fee of 0.1% of Gross Assets (including the total amount available under the loan facility) per calendar month payable monthly in arrears. In addition, AFML is entitled to receive a performance fee of 15% of any return above an 8% per annum (compound) hurdle as stated in the Prospectus dated 15 April 2002. Provision is made in the financial statements for the amount of performance fee accrued to date based on the year end net asset value of the Group. The Investment Manager's fees for 2006 include accrued performance fees amounting to #7,706,139 (2005 - #1,467,323 - as restated). The Investment Management Agreement is terminable by the Company on 36 months' notice, save in circumstances where the Group's performance, as measured annually by reference to the Investment Property Databank ("IPD"), is consistently materially below the IPD Monthly Benchmark. In such circumstances the agreement can be terminated by the Company, at the discretion of the Board, on six months' notice. The Investment Manager has sub-delegated certain investment activities to Invista Real Estate Management Limited (formerly Insight Investment Management Ltd) and Barlows Asset Management Limited. (ii) Under the terms of an Administration Agreement dated 11 January 2002, the Company appointed Guernsey International Fund Managers Limited as Administrator, Secretary and Channel Islands Stock Exchange Sponsor. This agreement was terminated with effect from 1 May 2004. The Company entered into an Administration Agreement dated 28 April 2004 with Mourant Guernsey Limited (Mourant) under which Mourant agreed to provide services to the Company as Administrator and Secretary to the Company. This agreement terminated on 11 September 2006 when Assura Administration Limited was appointed. Assura Administration Limited is entitled to an annual fee calculated as to 0.09% on the first #100m of Gross Assets and 0.07% of Gross Assets on the next #50m, subject to an annual minimum of #75,000 per annum and such fees being invoiced monthly in arrears. Following the termination of the relationship with GIFM, the Company entered into an agreement with Mourant Capital Markets Services Limited (MCMS) on 4 May 2004 under which MCMS provided services to the Company in relation to the Company's listing on the Channel Islands Stock Exchange. This agreement was terminated on 11 September 2006. The Company entered into a Sponsorship Agreement (with effect from 11 September 2006) with Cenkos Channel Islands Limited (CCI) under which CCI agreed to provide services to the Company in relation to the Company's listing on The Channel Islands Stock Exchange 4. Directors' Fees 1/01/2006 1/01/2005 to to 31/12/2006 31/12/2005 During the year each of the Directors was entitled to the following # # fees: R. Baker-Bates (Chairman) 28,000 28,000 T. Chesney 20,000 20,000 P. Dickson - 20,000 W. Kay 20,000 20,000 I. Stokes 23,268 23,951 91,268 111,951 No other compensation was received by the Directors during 2005 or 2006. 5. Interest Payable and Similar Charges 1/01/2006 1/01/2005 to to 31/12/2006 31/12/2005 # # Long term loan: Interest payable 4,586,278 2,983,485 Non-utilisation and related fees 133,915 34,945 Amortisation of loan issue costs 107,066 45,368 Other interest - 333 Income Shares: Distributions paid (Note 6) 421,736 421,734 Amortisation of issue costs 29,074 29,074 5,278,069 3,514,939 6. Dividends Paid on Income Shares 1/01/2006 1/01/2005 No. of to to Income Rate 31/12/2006 Rate 31/12/2005 Shares pence # pence # First interim dividend paid 20 April 2006 5,271,678 2.00 105,434 2.00 105,434 Second interim dividend paid 21 July 2006 5,271,678 2.00 105,434 2.00 105,433 Third interim dividend paid 27 October 2006 5,271,678 2.00 105,434 2.00 105,433 Final dividend paid 24 January 2007 5,271,678 2.00 105,434 2.00 105,434 Distributions paid 8.00 421,736 8.00 421,734 Dividends Paid on Ordinary Shares 1/01/2006 1/01/2005 No. of to to Ordinary Rate 31/12/2006 Rate 31/12/2005 Shares pence # pence # Final dividend for 2005 paid 25 January 2006 51,734,625 1.50 776,019 - - First interim dividend paid 20 April 2006 56,908,086 1.50 853,621 1.5 895,080 Second interim dividend paid 21 July 2006 56,908,086 1.50 853,621 1.5 776,019 Third interim dividend paid 27 October 2006 100,486,657 1.50 1,507,300 1.5 776,019 Dividends paid 6.00 3,990,561 4.5 2,447,118 A final dividend of 1.5p was declared on 14 December 2006 and paid on 24 January 2007. The Companies (Guernsey) Law, 1994 permits dividends to be paid out of profits available for the purpose and the Company's Articles of Association state that such profits available for distribution do not include realised or unrealised profits on capital assets. A portion of the 2005 dividend and the 2006 dividends paid during the year were in excess of these distributable profits as defined above. In order for these dividends to comply with the Law, the Directors intend to convert the entire share premium reserve of #99,925,500 to a distributable reserve. This requires shareholders' approval at the Company's Annual General Meeting on 18 May 2007 and application to the Royal Court of Guernsey immediately thereafter. The Directors are confident of obtaining the requisite approval and consent of the Royal Court of Guernsey. 7. Taxation A reconciliation of the income tax charge applicable to the results from ordinary activities at the statutory income tax rate to income tax expense at the Group's effective income tax rate for the year is as follows: 2006 2005 # # Net profit before taxation 42,770,838 13,698,057 UK Income tax at rate of 22% 9,409,584 3,013,573 Effects of: Realised losses/(gains) on disposal of investment properties 3,470 (167,889) Realised gains on disposal of investments - (303,750) Capital gains on revaluation of investment properties not taxable (2,789,263) (2,512,095) Income not taxable including interest receivable and share of profits of associates and joint ventures (8,862,898) (257,824) Net effect of inter company loan interest (509,285) (474,380) Losses arising not relievable against current tax 464,266 13,001 Expenses incurred not relievable against current tax 2,289,989 693,623 5,863 (4,259) The Company and its Guernsey registered subsidiaries, Westbury Properties Limited, Westbury Schools Limited and Endeavour Guernsey Limited, have obtained exempt company status in Guernsey under the terms of the Income Tax (Exempt Bodies) (Guernsey) Ordinance 1989 so that they are exempt from Guernsey taxation on income arising outside Guernsey and on bank interest receivable in Guernsey. Each Company is, therefore, only liable to a fixed fee of #600 per annum. The Directors intend to conduct the affairs of these Guernsey registered companies such that they continue to remain eligible for exemption. Westbury Properties Limited, Westbury Schools Limited and Endeavour Guernsey Limited are subject to United Kingdom income tax on income arising on the investment properties, after deduction of debt financing costs, allowable expenses and capital allowances. WPL Investments Limited and WPL Ventures Limited are subject to taxation in Guernsey. The taxation credit of #5,863 arises in Guernsey. Westlink Group Limited and its subsidiaries are subject to corporation tax in the UK. 8. Basic and Diluted Profit per Ordinary Share The basic and diluted profit per Ordinary Share is based on profit attributable to equity holders for the year of #42,776,701 and on 73,389,865 weighted average number of Ordinary Shares in issue during the year. The basic and diluted profit per equivalent Ordinary Share in 2005 is based on profit attributable to equity holders for the year of #13,693,798 and on 51,710,843 Ordinary Shares, being the weighted average number of equivalent Ordinary Shares in issue during the year. 9. Prior Year Adjustment The accrual for the performance fee payable to the Investment Manager was understated by #480,000 at 31 December 2005 and the charge to profit and loss account understated by that amount for the year ended 31 December 2005. The basic and diluted earnings per share in 2005 was disclosed as 127.91p in last year's Annual Report and Financial Statements compared with the restated figure of 126.99p. 10. Investments in Subsidiary Companies The Company owns the whole of the issued Ordinary Share capital of Westbury Properties Limited, specially formed to act as the property investment holding company for the Group, and WPL Ventures Limited, an investment holding company, both of which are incorporated and registered in Guernsey. Westbury Properties Limited owns the whole of the issued Ordinary Share capital of WPL Investments Limited, Westbury Schools Limited and Endeavour Guernsey Limited, which are property and related investment companies and are incorporated and registered in Guernsey, and of the following United Kingdom registered companies: * Westbury (Yorkshire) Limited (dormant) * Westbury (Hull) Limited (dormant) The Company owns 21% of the share capital of Westlink Group Limited. WPL Investments Limited owns the entire members' capital of Westlink Investment Syndicate LLP which in turn holds 79% of the shares in Westlink Group Limited. Westlink Group Limited, which is incorporated in the United Kingdom, holds the entire share capital of Westlink Holdings Limited, Westlink Storage & Shipping Company Limited and Inhoco 3185 Limited. It also holds the entire share capital of Victa Westlink Rail Limited but agreement has been reached to divest a minority stake in the equity in this company in return for the acquisition of the business and assets of Victa Railfreight Limited from the current shareholders, two of whom have become full time management employees of Victa Westlink Rail Limited, subject to contract. A table listing all the subsidiaries is below: Name of Subsidiary Place of incorporation Share-holding Share- Business Activity 2006 holding 2005 Westbury Properties Limited Guernsey 100% 100% Property investment WPL Ventures Limited Guernsey 100% 100% Investment in property related ventures WPL Investments Limited Guernsey 100% 100% Investment in property related ventures Westbury (Yorkshire) England 100% 100% Dormant Limited Westbury (Hull) Limited England 100% 100% Dormant Endeavour Guernsey Limited Guernsey 100% 100% Property investment Westbury Schools Limited Guernsey 100% N/A Property investment (formerly Westbury Retail Limited) Westlink Investment England 100% 50% Investment holding Syndicate LLP Westlink Group Limited England 100% 39.5% Holding Company Inhoco 3185 Limited England 100% 39.5% Holding Company Westlink Holdings Limited England 100% 39.5% Property investment Westlink Storage & Shipping England 100% 39.5% Storage, shipping and handling Company Limited of goods Victa Westlink Rail Limited England 100% N/A Rail freight In 2005 the share capital owned by the Group in Westlink Group Limited of #150,765 was impaired and provided for. In the current year this impairment was reversed. The loss in the prior year was charged to share of profits after taxation/(losses) of associates and joint ventures. The reversal in the current year has been credited to cost of investment in subsidiary (see Note 15). 11. Investment Property Properties are stated at fair value, which has been determined based on valuations performed by Knight Frank as at 31 December 2006, on the basis of open market value, supported by market evidence, in accordance with International Valuation Standards. 31/12/2006 31/12/2005 # # At 1 January 116,873,062 73,485,000 Additions at cost 22,394,222 35,072,874 Disposals (12,500,000) (3,103,425) Movement in unrealised gain on revaluation of investment 12,678,466 11,418,613 properties At 31 December 139,445,750 116,873,062 At the time of original Admission to The London Stock Exchange, one asset, Admiral Retail Park, Eastbourne, represented more than 15% of the gross assets of the Group. In order to comply with Section 21.27 (e) of the FSA Listing Rules, a Put Option Agreement was entered into, and subsequently in 2003, was exercised under which the Group sold one of the units at Admiral Retail Park to Barlows Holdings Limited for a consideration of #3.75m. Under this agreement Barlows Holdings Limited also benefits from a 25% share of the profit arising on any sale of the whole of the retail park (including the unit owned by them). During the year ended 31 December 2006, the Group has complied with Sections 21.27 (f) to 21.27 (i) of the FSA Listing Rules. 12. Investments in associates and joint ventures Business Year End Issued Residence Percentage of nominal Ordinary value of issued Shares of #1 shares or members' each capital held Ropewalks One LLP(2) 30 September n/a UK 50% One Plantation Place Unit Trust(1) n/a Jersey 21.9% Westbury Fitness Limited 31 December 10,000 Guernsey 50%. Westbury Fitness Hull Limited 1 Isle of Man 50% (wholly owned by Westbury Fitness Limited). DV3 Mid City Limited (1) (3) 31 March 10,000 BVI 19.73% Westar Limited 31 December 10,000 Guernsey 50% Westar 2 Limited 31 December 10,000 Guernsey 50% Endeavour Ware Limited(1) 31 December 10,000 Guernsey 47.5% Endeavour Guildford Limited 4 31 December 2 Guernsey 50% Weston Point Studios Limited 31 August 2 UK 50% The Group's share of accumulated profits, revaluation gains and taxation has benefited in 2006 from very sizeable and beneficial surpluses on revaluation of properties owned in the DV3 Mid City Limited, Westar Limited and One Plantation Place Unit Trust joint ventures. (1) These entities are associates, all others are joint ventures. (2) As at 31 December 2006, the Group had invested #500,000 as Member's capital and advanced #7 million as loans to Ropewalks One LLP. In 2006, the Group has not recognised any profits from the investment due to the estimation uncertainties involved in establishing the Group's share of the profits. These estimation uncertainties are a result of the following: * The Ropewalks project has not reached final completion of construction, snagging and all residential sales and the development costs cannot be finalised until completion has been achieved * Ropewalks One LLP is in dispute with the contractor over the final account which cannot be determined with certainty. The Group has assessed whether there are any indicators as at the balance sheet date that the investment may be impaired and have concluded that the amounts recoverable from the investment are in excess of the carrying amount. Therefore the carrying amount as at the balance sheet date is appropriate. (3) Treated as an associated company, given the Group's right to enforce a sale of the company's underlying property asset. 4 Acquired a property and commenced trading post year end with a further 9,998 shares being issued in January 2007. The above investments comprise: 2006 2005 Group Group # # Cost of shares or member's capital 19,608,171 1,537,358 Loans 13,202,600 13,395,699 Share of accumulated profits, revaluation gains/(deficits) and taxation 37,801,455 (49,797) 70,612,226 14,883,260 The following information is given in respect of the Group's share of all associates and joint ventures: 2006 2005 Group Group # # Fixed Assets 231,506,545 69,618,671 Current Assets 13,506,688 6,781,090 245,013,233 76,399,761 Liabilities due within one year 12,307,222 7,358,472 Liabilities due after one year 175,509,961 66,956,253 187,817,184 74,314,725 Share of net assets 57,196,049 2,085,036 Add back loans 13,202,600 13,395,699 Adjustment for provisions 213,577 (597,475) Carrying amount of associates and joint ventures 70,612,226 14,883,260 Share of associates and joint ventures revenue and profit: Revenue 11,011,734 5,334,725 Profit/(Loss) 38,913,845 (95,204) The movement on investments in associates and joint ventures during the year was as follows: 2006 2005 Group Group # # Balance at 1 January 14,883,260 3,240,954 Acquired in year 18,453,602 2,646,476 Disposal proceeds - (2,930,698) Net loans advanced 13,349,909 10,595,644 Transfer to subsidiary (14,064,216) - Profits realised - 1,380,681 Share of accumulated profits, revaluation gains/(deficits) and taxation 37,989,671 (49,797) Balance at 31 December 70,612,226 14,883,260 #12.3m was advanced to Westlink Holdings Ltd in the period prior to it becoming a wholly owned subsidiary largely to enable it to acquire the freehold of the Weston Point docks site. 13. Property, Plant and Equipment Land & Plant & Fixtures, Total Buildings machinery fittings & equipment # # # # Cost At 31 December 2005 - - - - At acquisition 12,061,202 71,309 10,286 12,142,797 Adjustment to fair value at acquisition (1,561,202) - - (1,561,202) Fair Value 10,500,000 71,309 10,286 10,581,595 Additions in period post acquisition 160,115 5,823 9,349 175,287 Movement in unrealised gain on revaluation at 31 December 2006 339,885 - - 339,885 At 31 December 2006 11,000,000 77,132 19,635 11,096,767 Depreciation At 31 December 2005 - - - - Charge for the period - 9,239 3,417 12,656 At 31 December 2006 - 9,239 3,417 12,656 Net Book Value At 31 December 2006 11,000,000 67,893 16,218 11,084,111 At acquisition 12,061,202 71,309 10,286 12,142,797 Land and buildings are stated at fair value, which has been determined based on valuations performed by Knight Frank as at 31 December 2006, on the basis of open market value, supported by market evidence, in accordance with International Valuation Standards. The land and buildings are located at Weston Point Docks in Runcorn and were acquired through the acquisition of the Westlink Group Limited. The valuation assumes that all buildings will be demolished in due course as development of the port progresses. No depreciation will be charged until the redeveloped land and buildings are ready for use. 14. Other Investment 31/12/2006 31/12/2005 # # Investment in Whitecote Limited (incorporated in Jersey) 250,000 - 250,000 - The investment in Whitecote Limited is made up of 10 Ordinary Shares of #1 each (being 4.3% of the total equity) plus 250,000 unsecured loan notes of #1 each. Whitecote Limited owns the Banstead Estate comprising approximately 526 acres of agricultural land in Surrey with prospects for added value through selective planning gain in due course. 15. Goodwill On 8 August 2006 the Group acquired the 50% interest in the member's capital of Westlink Investment Syndicate LLP not already owned by the Group. On the same date the Group acquired the 21% interest in the equity of Westlink Group Limited not already owned by Westlink Investment Syndicate LLP. As a result, Westlink Group Limited became a wholly-owned subsidiary of the Group. The net assets acquired, fair value of consideration paid and goodwill arising on these transactions are set out in the table below. Total # Land & buildings - book value 12,061,202 Revaluation to fair value at acquisition (1,561,202) Fair value 10,500,000 Plant and equipment 81,595 10,581,595 Debtors 570,503 Cash 60,687 Current assets 631,190 Amount due to holding company (13,600,000) Current liabilities (415,382) (13,384,192) Net liabilities acquired (2,802,597) Fair value of shares in The Westbury Property Fund Limited 1,010,000 Cost of investment already held 150,765 Release of provision made against investment in associate previously (150,765) Net consideration 1,010,000 Goodwill arising on acquisition 3,812,597 Net cash acquired with subsidiary 60,687 A provision of #150,765 was made against the investment in Westlink Group Limited in 2005 due to its net liabilities and uncertainty about its bid to acquire the freehold of the Weston Point docks site at that time. Westlink Group Limited's future was secured when the latter bid was successful in April 2006. 721,428 Ordinary Shares in the Group were issued to fund the acquisition of Westlink Group Limited. The fair value of the consideration was based on the share price of the Group at the date the Group gained control of Westlink Group Limited. Westlink Group Limited and subsidiaries incurred a loss of #333,000 in the period post acquisition on sales of #137,400 from storage and handling operations at its existing land and buildings pending redevelopment of the site. The Company tests annually whether goodwill has suffered any impairment. These calculations use cash flow projections based on detailed financial models prepared by management covering a five year period, with all anticipated future cash flows discounted at rates of 7.5% and above, to current day values. Based on the Company's assessment of the value of the business, development prospects and future profitability of Westlink Group Limited, no adjustment is considered necessary at 31 December 2006. Other key assumptions include property yields ranging between 5.0% - 7% and property development profits of 7.5% on development costs, discounted to current day values. The goodwill arising and at the year end is as follows: 2006 2005 # # At 1 January - - Arising in the year as above 3,812,597 - Goodwill at 31 December 3,812,597 - 16. Debtors 31/12/2006 31/12/2005 # # Trade debtors 92,427 - VAT recoverable - 152,699 Other debtors 309,030 222,103 Rent receivable 2,205,001 2,757,779 Property purchase deposits - 310,000 Interest receivable 686,340 692,871 3,292,798 4,135,452 17. Creditors 31/12/2006 31/12/2005 # # Trade creditors 36,955 - Other taxation - 95,222 Investment Manager's fees 259,017 134,237 VAT payable 300,582 - Other creditors 681,441 452,160 Income distributions 105,434 105,434 Rent deposits 519,388 381,875 Interest payable and similar charges 401,762 272,542 Property management expenses 87,591 93,390 Administration fee 15,719 10,311 Audit and taxation fee 100,200 49,000 Rents received in advance 1,701,240 2,452,630 4,209,329 4,046,801 18. Creditor due after more than one year 31/12/2006 31/12/2005 (as restated) # # Performance fee accrual due to the Investment Manager 9,618,133 1,911,994 19. Long Term Loan 31/12/2006 31/12/2005 Consolidated and Company # # Long term loan at 1 January 65,828,000 43,500,000 Amount drawn down in year 16,500,000 26,000,000 Amount repaid in year (2,500,000) (3,672,000) Total loan drawn down at 31 December 79,828,000 65,828,000 Allocation of loan issue costs (251,000) (251,000) Additional loan issue costs (408,636) (216,506) Amortisation of loan issue costs - prior years 78,942 50,228 Amortisation of loan issue costs - 2005 45,368 28,714 Amortisation of loan issue costs - 2006 107,066 45,368 79,399,740 65,484,804 The Company has a loan facility agreement with Bradford & Bingley PLC which increased during the year from #73,000,000 to #115,000,000. As at 31 December 2006, the Company had drawn down #79,828,000 (2005 - #65,828,000) under this agreement leaving an undrawn balance of #35,172,000. This loan is due for repayment on 31 December 2010. Of the loan, #79,828,000 (2005 - #63,000,000) is fixed at interest rates averaging 6.0% until 25 June 2009. The fair value of the loan at 31 December 2006 was approximately #79,828,000 (compared with the principal of #79,828,000). The loan is secured by way of a debenture and fixed charge over the wholly owned investment property assets of the Group. During the year, the Company's bank borrowings were subject to the following financial covenants: * Loan to value ratio - the aggregate outstanding loan to current valuation of investment properties should not exceed the following percentages:- Up to 2nd Anniversary 80% From 2nd to 4th Anniversary 75% From 4th to 6th Anniversary 70% From 6th Anniversary to final repayment 65% * Quarterly rental cover - net rental income shall be at least 140% of loan interest payable. * Period of occupational leases - at least 45% of net rental income shall arise from occupational leases with unexpired terms of eight years or more. * No single property shall exceed #25 million. The Company has been in compliance with the financial covenants throughout the year. 20. Income Shares 31/12/2006 31/12/2005 Consolidated and Company # # As at 1 January 5,148,110 5,119,036 Amortisation of issue costs 29,074 29,074 As at 31 December 5,177,184 5,148,110 In accordance with International Financial Reporting Standards, the Income Shares are treated as a liability as described under Accounting Policies in Note 2. The Income Shares are entitled to a fixed preferential distribution of 8% per annum over the life of the Income Shares and are due to be redeemed by the Company on 31 March 2010 at their issue price together with arrears of distribution (if any). The fair value of the Income Shares at 31 December 2006 was #5,561,620 (2005 - #5,956,996) based on a market offer price of 105.5p (2005 - 113p) per share. 21. Share Capital 31/12/2006 31/12/2005 Authorised share capital - Capital Shares # # Authorised at 1 January - 888,939 shares of 10p each - 88,894 Reduction during the year - (88,894) Authorised at 31 December - nil - - Authorised share capital - Ordinary Shares Authorised at 1 January - 218,839,381 shares of 10p 21,883,938 21,883,938 each Authorised at 31 December - 218,839,381 shares of 10p each 21,883,938 21,883,938 Authorised share capital - Deferred Shares Authorised at 1 January - 1,000 shares of 0.1p each 1 1 Authorised at 31 December - 1,000 shares of 0.1p each 1 1 31/12/2006 31/12/2005 Number of Share Number of Share Shares Shares Capital Capital # # Capital Shares of 10p each issued and fully paid Balance at 1 January - - 888,939 888,894 Converted to Ordinary Shares in the year - - (888,939) (888,894) Balance at 31 December - - - - 31/12/2006 31/12/2005 Number of Share Number of Share Shares Shares Capital Capital # # Ordinary Shares of 10p each issued and fully paid Balance at 1 January 51,734,625 5,173,462 51,383,491 5,138,349 Issued during the year 48,030,604 4,803,060 56 6 Issued on 8 August in exchange for shares in Westlink Group Limited and members capital in Westlink Investment Syndicate LLP 721,428 72,143 - - Issued on the conversion of Capital Shares to - - 351,078 35,107 Ordinary Shares in the year Balance at 31 December 100,486,657 10,048,665 51,734,625 5,173,462 Total share capital at 31 December 100,486,657 10,048,665 51,734,625 5,173,462 Voting Rights Ordinary Shareholders are entitled to vote at all general meetings. The Deferred Shares have no voting rights. Dividends After the payment of the fixed cumulative preference distribution of the Income Shares, the Ordinary Shareholders are entitled to the balance of profit made available for distribution by the Company. The Deferred Shares carry no entitlement to dividends or other distributions out of the profits of the Group. Capital Entitlement The Ordinary Shareholders are entitled to all capital once the holders of Income Shares have been paid their entitlement of #1 of capital per Income Share. The Deferred Shareholders are entitled to the repayment of the amounts paid up on the Deferred Shares after payment in respect of each Ordinary Share and #1m. 22. Share Premium 31/12/2006 31/12/2005 # # Share premium at 1 January 39,698,503 39,733,558 Proceeds on Ordinary Shares issued 61,922,439 - Arising on shares issued in exchange for shares in 937,857 - Westlink Group Limited and members capital in Westlink Investment Syndicate LLP Utilised on conversion of Capital Shares - (35,055) Share issue expenses (2,633,299) - Share premium at 31 December 99,925,500 39,698,503 23. Revaluation Reserve 31/12/2006 31/12/2005 # # Revaluation reserve at 1 January - - Movement in unrealised gain on revaluation at 31 December 339,885 - Revaluation reserve at 31 December 339,885 - 24. Retained earnings 31/12/2006 31/12/2005 # # Retained earnings at 1 January 20,823,413 9,576,733 Profit attributable to equity holders 42,776,701 14,173,798 Dividends on Ordinary Shares (3,990,561) (2,447,118) Retained earnings at 31 December 59,609,553 21,303,413 Prior year adjustment (Note 9) - (480,000) 25. Net Asset Value per Ordinary Share The net asset value per Ordinary Share is based on the net assets attributable to the Ordinary Shareholders of #169,923,603 (2005 - #65,695,378) and on 100,486,657 (2005 - 51,734,625) Ordinary Shares in issue at the balance sheet date. 26. Note to the Consolidated Cash Flow Statement 1/01/2006 1/01/2005 to to 31/12/2006 31/12/2005 # # Reconciliation of net (loss)/profit before investment result to net cash inflow from operating activities: Net (loss)/profit before investment result (7,881,523) 185,427 Taxation received/(paid) 5,863 (4,259) Adjustment for non-cash items: Depreciation 12,656 - Amortisation of Income Share issue costs 29,074 29,074 Amortisation of loan issue costs 107,066 45,368 Decrease/(increase) in debtors 842,654 (2,630,663) Increase in creditors 7,868,667 3,269,562 Other gains & losses 309,337 - Net cash inflow from operating activities 1,293,794 894,509 Cash of #519,388 is not available for use by the Group being rent deposits held on behalf of tenants (see Note 17). 27. Financial Instruments and Properties The Group holds cash and liquid resources as well as having debtors and creditors that arise directly from its operations. The Group has not entered into any derivative transactions during the year under review. The main risks arising from the Group's financial instruments and properties are market price risk, credit risk, liquidity risk and interest rate risk. The Board regularly reviews and agrees policies for managing each of these risks and these are summarised below. Market Price Risk The Group's exposure to market price risk is comprised mainly of movements in the value of the Group's investment in property. Property and property related assets are inherently difficult to value due to the individual nature of each property. As a result, valuations are subject to uncertainty. There is no assurance that the estimates resulting from the valuation process will reflect the actual sales price even where a sale occurs shortly after the valuation date. Rental income and the market value for properties are generally affected by overall conditions in the local economy, such as growth in gross domestic product, employment trends, inflation and changes in interest rates. Changes in gross domestic product may also impact employment levels, which in turn may impact the demand for premises. Furthermore, movements in interest rates may also affect the cost of financing for real estate companies. Both rental income and property values may also be affected by other factors specific to the real estate market, such as competition from other property owners, the perceptions of prospective tenants of the attractiveness, convenience and safety of properties, the inability to collect rents because of the bankruptcy or the insolvency of tenants or otherwise, the periodic need to renovate, repair and release space and the costs thereof, the costs of maintenance and insurance, and increased operating costs. The Directors monitor market value by having independent valuations carried out quarterly by Knight Frank. Credit Risk Credit risk is the risk that an issuer or counterparty will be unable or unwilling to meet a commitment that it has entered into with the Group. In the event of a default by an occupational tenant, the Group will suffer a rental income shortfall and incur additional costs, including legal expenses, in maintaining, insuring and re-letting the property. Given the enhanced rights of landlords who can issue proceedings and enforcement by bailiffs, defaults are rare and potential defaults are managed carefully by the credit control department of the property manager. The maximum credit exposure in aggregate is one quarter's rent of circa #2.6m, however this amount derives from all the tenants in the portfolio and such a scenario is hypothetical. The Group's credit risk is well spread across circa 55 tenants at any one time. Liquidity Risk Liquidity risk is the risk that the Group will encounter in realising assets or otherwise raising funds to meet financial commitments. Investments in property are relatively illiquid however the Group has tried to mitigate this risk by investing in desirable properties in prime locations. Interest Rate Risk The Group's exposure to market risk for changes in interest rates relates primarily to the Group's long-term debt obligations. The Group's policy is to manage its interest cost using fixed rate debt. The interest rate profile of the Group at 31 December 2006 is as follows: Total Variable rate Assets on which no Weighted average interest is received interest rate per annum # # # % Financial assets Properties 139,445,750 - 139,445,750 - Land & buildings 11,000,000 - 11,000,000 - Investments 70,862,226 - 70,862,226 - Goodwill 3,348,381 - 3,348,381 - Tangible fixed assets 84,111 - 84,111 - Non-current assets 224,740,468 - 224,740,468 - Cash and cash equivalents 39,830,507 39,830,507 - 5.0 Debtors 3,292,798 - 3,292,798 - Total assets as per Balance Sheet 267,863,773 39,830,507 228,033,266 Total Variable Fixed Liabilities Weighted Weighted rate rate on which average average no interest interest until is paid rate maturity per annum # # # # % Years Financial liabilities Bank loans 79,399,740 - 79,399,740 - 6.0 4 Income Shares 5,177,184 - 5,177,184 - 8.0 4 Creditors 13,827,462 - - 13,827,462 - - Total liabilities as per Balance Sheet 98,404,386 - 84,576,924 13,827,462 - - The interest rate profile of the Group at 31 December 2005 was as follows: Total Variable Assets on Weighted Rate which no Average interest is interest rate received per annum # # # % Financial assets Properties 116,873,062 - 116,873,062 - Investments 14,883,260 - 14,883,260 - Non-current assets 131,756,322 - 131,756,322 - Cash and cash equivalents 6,395,313 6,395,313 - 4.1 Debtors 4,135,452 - 4,135,452 - Total assets as per Balance Sheet 142,287,087 6,395,313 135,891,774 Total Variable Fixed Liabilities on Weighted Weighted Rate Rate which no average Average interest is interest rate until paid per annum maturity # # # # % Years Financial liabilities Bank loans 65,484,804 2,828,000 62,656,804 - 5.9 5 Income Shares 5,148,110 - 5,148,110 - 8 5 Creditors 5,478,795 - - 5,478,795 - - Total liabilities as per Balance Sheet 76,111,709 2,828,000 67,804,914 5,478,795 - - 28. Commitments and Contingencies On 19 December 2006, Victa Westlink Limited entered into a contract to acquire the business of FM Rail Limited (in administration) for #500,000. The contract is conditional upon Victa Westlink Rail Limited being granted a rail operating license and, in due course, rail safety certificate. A deposit of #50,000 has been paid pending completion which will take place in six months. Victa Westlink Rail Limited is currently operating the business of FM Rail Limited under an interim management agreement with the administrator. Victa Westlink Rail Limited is 100% owned by Westlink Group Limited but has agreed, subject to contract, to acquire the business of Victa Railfreight Limited in return for 40% of the shares of Victa Westlink Rail Limited. The Company has given a guarantee to British Waterways that certain heritage structures including dock walls at Weston Point Docks will be maintained in good order. This guarantee falls away once Westlink Holdings Limited has #20m or more of net assets for two consecutive years. Westlink Holdings Limited had net assets of over #20m at 31 December 2006. The Company has given a guarantee to the joint administrators of FM Rail Limited that Westlink Holdings Limited will retain net assets of #20m or more for the period of the interim management agreement regarding the business of FM Rail Limited (in administration). 29. Related Parties Included in property management expenses is an amount of #132,208 (2005 - #156,283) payable to Barlows Holdings Limited, a shareholder in the Company, in accordance with their property management agreement with the Company's subsidiary. Barlows Holdings Limited also has an interest in Ropewalks One LLP, Endeavour Guildford Limited, Endeavour Ware Limited and Admiral Retail Park. The Group was charged administration fees of #131,643 (2005 - #119,497) by Mourant Guernsey Limited, #7,500 (2005 - #10,311) of which was outstanding at the balance sheet date. Iain Stokes, who is a Director of the Company, is also a Director of Mourant Guernsey Limited. The Company was charged investment managers fees totalling #803,013 (2005 - #1,535,996) by Assura Administration Limited (formerly Berrington Fund Management Limited), #15,719 (2005 - #134,237) of which was outstanding at the balance sheet date. At 31 December 2005, Assura Administration Limited held 812,000 Ordinary Shares in the Company, which were sold in the year. The Company was charged investment managers fees totalling #1,769,868 (2005 - #nil) by Assura Fund Management LLP (formerly Berrington Fund Management LLP), #nil (2005 - #nil) of which was outstanding at the balance sheet date. Messrs R. Burrell and N. Rawlings, who are members of the Investment Committee of the Company, are also representatives of Assura Fund Management LLP and hold shares in the latter entity's ultimate holding company, Assura Group Limited. Provision has been made for a performance fee payable to Assura Fund Management LLP, in respect of the year ended 31 December 2006 of #7,706,139 (2005 - #1,467,323). Ropewalks One LLP, of which WPL Ventures Limited is a member, exchanged contracts for the sale of part of its development to Assura Property Limited, a subsidiary of Assura Group Limited, which is the parent company of Assura Fund Management LLP, for #4,031,000 in 2005. This contract completed in January 2007. Ropewalks One LLP sold one apartment, at full market price, to Iain Stokes for completion in 2007. Iain Stokes had paid a 10% deposit of #16,800 at 31 December 2005 and 2006. 30. Post Balance Sheet Events Endeavour Guildford Limited completed its acquisition of land and buildings at Guildford on 15 February 2007 for #2,200,000. On 24 January 2007, the Company announced that it intends to dispose of the majority of its portfolio of directly owned properties, subject to shareholder approval. Offers are being sought with a view to a sale being agreed in March subject to shareholder approval and completion, if approved in April. Company Income Statement 1/01/2006 1/01/2005 to to 31/12/2006 31/12/2005 Notes # # Income Dividends received from subsidiary companies 10,000,000 - Interest receivable from subsidiary companies 7,702,659 5,632,923 Management charge to subsidiary companies 684,189 408,606 Bank and other interest 699,092 393,496 Total Income 19,085,940 6,435,025 Expenses Interest payable and similar charges, including A 5,393,555 3,514,606 distributions on Income Shares Investment Manager's fees 3(i) 2,572,881 1,535,996 Performance fee 3(i) 7,706,139 1,467,323 Provision for impairment of loan due from a subsidiary C 1,500,000 - Legal and professional fees 138,482 25,693 Share reorganisation expenses - 2,284 Administration fee 3(ii) 169,150 119,497 Directors' fees 4 91,268 111,951 General expenses 186,032 148,844 Bank charges 2,278 15,757 Audit fees 36,800 21,185 Tax consultancy fees 5,660 18,102 Total Expenses 17,802,245 6,981,238 Net profit/(loss) for the year 1,283,695 (546,213) Dividends on Ordinary Shares 6 (3,990,561) (2,447,118) Loss transferred to reserves (2,706,866) (2,993,331) Where applicable, the accounting policies for the Company are the same as those of the Group. The are an integral part of these financial statements . Where the same items appear in the Group Financial Statements, reference is made to the notes. Company Balance Sheet 31/12/2006 31/12/2005 Notes # # Non-current Assets Investments in subsidiary companies B 27,950,002 21,094,802 Loans to subsidiary companies C 130,475,789 84,924,751 158,425,791 106,019,553 Current Assets Cash and cash equivalents 24,771,655 6,233,206 Loans to subsidiary companies D 13,319,597 - Other debtors 79,333 39,768 38,170,585 6,272,974 Total Assets 196,596,376 112,292,527 Current Liabilities Creditors E 875,222 616,856 Non-current Liabilities Performance fee provision 18 9,618,133 1,911,994 Long term loan 19 79,399,740 65,484,804 Income Shares 20 5,177,184 5,148,110 94,195,057 72,544,908 Total Liabilities 95,070,279 73,161,764 Net Assets 101,526,097 39,130,763 Represented by: Capital and Reserves Share capital 21 10,048,665 5,173,462 Share premium 22 99,925,500 39,698,503 Retained earnings F (8,448,068) (5,741,202) Issued capital and reserves 101,526,097 39,130,763 The financial statements were approved at a meeting of the Board of Directors held on 26 February 2007 and signed on its behalf by: Tim Chesney, Director Iain Stokes, Director Where applicable, the accounting policies for the Company are the same as those of the Group. The notes are an integral part of these financial statements . Where the same items appear in the Group Financial Statements, reference is made to the notes. . Company Statement of Changes in Equity Share Share Premium Retained Earnings Reserves Capital # # # # Balance at 1 January 2006 5,173,462 39,698,503 (5,741,202) 39,130,763 Issue of Ordinary Shares 4,875,203 62,860,295 - 67,735,498 Issue costs paid on issuance of Ordinary Shares - (2,633,298) - (2,633,298) Dividends on Ordinary Shares - - (3,990,561) (3,990,561) Profit attributable to equity holders - - 1,283,695 1,283,695 Balance at 31 December 2006 10,048,665 99,925,500 (8,448,068) 101,526,097 Share Share Premium Retained Earnings Reserves Capital # # # # Balance at 1 January 2005 5,138,349 39,733,558 (2,747,871) 42,124,036 On Conversion of Capital Shares 35,107 (35,107) - - Issue of Ordinary Shares 6 52 - 58 Dividends on Ordinary Shares - - (2,447,118) (2,447,118) Loss attributable to equity holders - - (66,213) (66,213) Balance at 31 December 2005 5,173,462 39,698,503 (5,261,202) 39,610,763 Prior year adjustment (Note 9) - - (480,000) (480,000) 5,173,462 39,698,503 (5,741,202) 39,130,763 Where applicable, the accounting policies for the Company are the same as those of the Group. The notes are an integral part of these financial statements . Where the same items appear in the Group Financial Statements, reference is made to the notes. . Company Cash Flow Statement 1/01/2006 1/01/2005 to To 31/12/2006 31/12/2005 Note # # Operating Activities Dividends received 10,000,000 - Bank and other interest received 8,401,751 5,949,654 Expenses paid (3,112,970) (1,977,117) Interest paid and similar charges, including distributions on Income (5,128,195) (3,440,164) Shares Management charges received 684,189 408,606 Net cash inflow from operating activities G 10,844,775 940,979 Investing Activities Purchase of investments (5,845,200) (7,094,801) Net loans advanced to investments (60,370,635) (27,798,288) Net cash (outflow) from investing activities (66,215,835) (34,893,089) Financing Activities Issue of Ordinary Shares 66,725,498 58 Issue costs paid on issuance of Ordinary Shares (2,633,298) - Dividends paid on Ordinary Shares (3,990,561) (2,447,118) Draw down of long term loan 16,500,000 22,328,000 Repayment of long term loan (2,500,000) - Additional loan issue costs (192,130) (216,506) Net cash inflow from financing activities 73,909,509 19,664,434 Increase/(decrease) in cash and cash equivalents 18,538,449 (14,287,676) Cash and cash equivalents at 1 January 6,233,206 20,520,882 Cash and cash equivalents at 31 December 24,771,655 6,233,206 Where applicable, the accounting policies for the Company are the same as those of the Group. The notes are an integral part of these financial statements . Where the same items appear in the Group Financial Statements, reference is made to the notes. Notes to the Company Financial Statements A. Interest Payable and Similar Charges 1/01/2006 1/01/2005 to to 31/12/2006 31/12/2005 # # Long term loan: Interest payable 4,681,764 2,983,485 Non-utilisation and related fees 153,915 34,945 Amortisation of loan issue costs 107,066 45,368 Income Shares: Distributions paid (Note 6) 421,736 421,734 Amortisation of issue costs 29,074 29,074 5,393,555 3,514,606 B. Investments in Subsidiary Companies 31/12/2006 31/12/2005 # # Westbury Properties Limited 26,810,000 21,094,800 WPL Ventures Limited 130,002 2 Westlink Group Limited 1,010,000 - 27,950,002 21,094,802 C. Loans to Subsidiary Companies 2006 2005 # # Westbury Properties Limited 101,745,417 84,278,960 Westlink Group Limited 22,500,000 - WPL Ventures Limited 7,730,372 645,791 Less provision for impairment (1,500,000) - 130,475,789 84,924,751 At the year end, unsecured subordinated loans outstanding were #115,033,573 (2005 - #84,278,960) with Westbury Properties Limited, #22,500,000 (2005 - #nil) with Westlink Group Limited and #7,761,813 (2005 - #645,791) with WPL Ventures Limited, in support of property acquisitions and related ventures. Interest charged for the year, included within the loan balances, amounted to #7,413,437 (2005 - #5,505,737) on the Westbury Properties Limited loan and #289,222 (2005 - #50,421) on the WPL Ventures Limited loan. The loans are repayable in 2010 and interest is charged on the loans at the fixed rate for that period plus a margin of 3% (2005 - 3%). The loan to Westlink Group is interest free. The provision for impairment of #1,500,000 has been made against the loan due to the Company from the Westlink Group Limited. D. Loans to Subsidiary Companies 2006 2005 # # Westbury Properties Limited 13,288,156 0 WPL Ventures Limited 31,441 0 13,319,597 0 At the year end, unsecured subordinated loans outstanding were #13,288,156 (2005 - #nil) with Westbury Properties Limited and #31,441 (2005 - #nil) with WPL Ventures Limited, in support of property acquisitions and related ventures. The loans are repayable upon demand and interest free. E. Creditors 31/12/2006 31/12/2005 # # Investment Manager's fees 259,017 134,237 Administration fee 15,719 10,311 Audit fee 25,000 10,000 Income distributions 105,434 105,434 Interest payable and similar charges 401,762 272,542 Other creditors 68,290 84,332 875,222 616,856 F. Retained earnings 31/12/2006 31/12/2005 # # Retained earnings at 1 January (5,741,202) (2,747,871) Net profit/(loss) for the year 1,283,695 (66,213) Dividends on ordinary shares (3,990,561) (2,447,118) Retained earnings at 31 December (8,448,068) (5,261,202)) Prior year adjustment (Note 9) - (480,000) (8,448,068) (5,741,202) G. Note to the Cash Flow Statement 1/01/2006 1/01/2005 to to 31/12/2006 31/12/2005 # # Reconciliation of net profit/(loss) for the year to net cash inflow/(outflow) from operating activities: Net profit/(loss) for the year 1,283,695 (546,213) Adjustment for non-cash items: Amortisation of Income Share issue costs 29,074 29,074 Amortisation of loan issue costs 107,066 45,368 (Increase) in debtors (39,565) (29,069) Increase in creditors 7,964,505 1,441,819 Provision for impairment of loan from a subsidiary 1,500,000 - Net cash inflow from operating activities 10,844,775 940,979 This information is provided by RNS The company news service from the London Stock Exchange END FR UNVRRBURUUUR
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