Final Results - Part 2

20th Jun 2006 07:02

Warner Estate Holdings PLC20 June 2006 PART 2 NOTES TO THE FINANCIAL STATEMENTS 1. TRANSITION TO IFRS In previous years, Warner Estate Holdings PLC ('Warner Estate' or the 'Group')has prepared its financial statements under UK Generally Accepted AccountingPrinciples ('UK GAAP'). Under European legislation, all companies listed in theEuropean Union ('EU') are required to prepare consolidated financial statementsunder International Financial Reporting Standards as adopted by the EU ('IFRS')for financial periods beginning on or after 1 January 2005. As a result theGroup is required to prepare its consolidated financial statements in accordancewith IFRS. These are the Group's first full financial statements under IFRS. This report is prepared in accordance with the transitional provisions set outin IFRS 1 - 'First-time Adoption of International Financial Reporting Standards'in order to provide a starting point for reporting under IFRS. The date oftransition to IFRS is 1 April 2004 and all information in these financialstatements has been restated to reflect the Group's adoption of IFRS. The Group has also adopted International Accounting Standards (IAS) 32 "Financial Instruments: Disclosure and Presentation" and IAS 39 "FinancialInstruments: Recognition and Measurement" from 1 April 2004. Advantage has been taken of certain exemptions afforded by IFRS 1 "First-timeadoption of International Financial Reporting Standards" as follows: • The accounting for business combinations prior to 1 April 2004 has not been amended; and • The Group has applied IFRS 2 "Share-based Payment" retrospectively only to awards made after 23 June 2003 that had not vested at the balance sheet date. Details with respect to the Group's transition from UK GAAP to IFRS, includingaccounting policies used, reconciliations and descriptions of the effect of thetransition on the Group's net income, equity and cash flows are provided in thesection "Reconciliations between IFRS and UK GAAP". 2. ACCOUNTING POLICIES Basis of preparation The Financial Statements comprise the consolidated financial statements of theGroup for the year ended 31 March 2006 and have been prepared in accordance withInternational Financial Reporting Standards and IFRIC interpretations endorsedby the European Union ("EU") and with those parts of the Companies Act 1985applicable to companies reporting under IFRS. The basis of accounting and format of presentation is subject to changefollowing any further interpretative guidance that may be issued by theInternational Accounting Standards Board ("IASB") and the InternationalFinancial Reporting Interpretation Committee ("IFRIC") from time to time. Additionally, IFRS is being applied in the United Kingdom and in a large numberof countries simultaneously for the first time. Furthermore, due to a number ofnew and revised standards included within the body of standards that compriseIFRS, there is not yet a significant body of established practice on which todraw in forming options regarding interpretation and application. Accordingly,practice is continuing to evolve. The consolidated financial statements have been prepared under the historicalcost convention, as modified by the revaluation of certain assets andliabilities, which are carried at fair value, and in accordance with those IFRSstandards and IFRIC interpretations issued and effective or issued and earlyadopted as at the time of preparing these accounts. The parent company's financial statements have also been prepared in accordancewith IFRS, as applied in accordance with the provisions of the Companies Act1985. The Directors' have taken advantage of the exemption offered by Section230 of the Companies Act not to present a separate income statement for theparent company. The preparation of financial statements in conformity with IFRS requires the useof certain critical accounting estimates. It also requires management toexercise judgment in the process of applying the Group's accounting policies.Although these estimates are based on management's best knowledge of the amount,events or actions, actual results ultimately may differ from those estimates. Standards, interpretations and amendments to published standards that are notyet effective Certain new standards, amendments and interpretations to existing standards havebeen published that are mandatory for the Group's accounting periods beginningon or after 1 April 2006 or later periods but which the Group has not earlyadopted, as follows: IFRS 7, Financial Instruments: Disclosures, and a complementary amendment to IAS1, Presentation of Financial Statements - Capital Disclosures (effective from 1January 2007 IFRS 7 introduces new disclosures to improve the information about financialinstruments. It requires the disclosure of qualitative and quantitativeinformation about exposure to risks arising from financial instruments,including specified minimum disclosures about credit risk, liquidity risk andmarket risk, including sensitivity analysis to market risk. It replaces IAS 30,Disclosures in the Financial Statements of Banks and Similar FinancialInstitutions, and disclosure requirements in IAS 32, Financial Instruments:Disclosure and Presentation. It is applicable to all entities that report underIFRS. The amendment to IAS 1 introduces disclosures about the level of anentity's capital and how it manages capital. The Group assessed the impact ofIFRS 7 and the amendment to IAS 1 and concluded that the main additionaldisclosures will be the sensitivity analysis to market risk and the capitaldisclosures required by the amendment of IAS 1. The Group will apply IFRS 7 andthe amendment to IAS 1 from annual periods beginning 1 April 2006. IFRIC 8, Scope of IFRS 2 (effective from 1 May 2006) IFRIC 8 is not relevant as the only share-based payments issued by the Group arein relation to employee services which are already accounted for in accordancewith IFRS 2. Consolidation (a) Subsidiary undertakings Subsidiaries are all entities over which the Group has the power to govern thefinancial and operating policies generally accompanying a shareholding of morethan one half of the voting rights. The existence and effect of potential voting rights that are currentlyexercisable or convertible are considered when assessing whether the Groupcontrols another entity. Subsidiaries are fully consolidated from the date onwhich control is transferred to the Group. They are de-consolidated from thedate control ceases. All inter-company transactions, balances and unrealisedgains on transactions between Group companies are eliminated upon consolidation. (b) Interests in joint ventures Interests in jointly controlled entities are accounted for using the equitymethod. Unrealised gains and losses on transactions between the Group and itsjoint ventures are eliminated to the extent of the Group's interest in the jointventures. The Group's share of profit of joint ventures represents the Group'sshare of the joint venture's profit after tax. (c) Associates Investments in associates are accounted for using the equity method. Associatesare all entities over which the Group is in the position to exercise significantinfluence but not control, generally accompanying a shareholding of between 20%and 50% of the voting rights. The Group's share of profit of associatesrepresents the Group's share of the associates profit before tax. The aboveprinciples regarding joint ventures are also applicable to associatedundertakings. Segment reporting The Group's primary reporting format is business activity, being propertyinvestment and asset management. A business segment is a group of assets and operations engaged in providingproducts or services that are subject to risks and returns that are differentfrom those of other business segments. Plant and equipment Plant and equipment is initially measured at cost. After initial recognition,the fixed assets are carried at cost less subsequent depreciation andimpairment. Cost includes expenditure that is directly attributable to theacquisition of the items. Subsequent costs are included in the asset's carrying amount or recognised as aseparate asset, as appropriate, only when it is probable that the futureeconomic benefits associated with the item will flow to the Group and the costof the item can be measured reliably. All other repairs and maintenance arecharged to the income statement during the financial period in which they areincurred. Plant and equipment is depreciated by equal annual instalments over theirestimated useful lives of between three and ten years and are carried athistoric cost less accumulated depreciation. Where the carrying amount of a fixed asset is greater than its estimatedrecoverable amount, it is written down immediately to its recoverable amount.Recoverable amount is the higher of fair value less costs to sell and value inuse and is determined for an individual asset. After initial recognition, theitem is carried at its cost less any accumulated depreciation and anyaccumulated impairment losses. Goodwill Business combinations are accounted for by applying the purchase method. Theexcess of the cost of the business combination over the acquirer's interest inthe net fair value of the identifiable assets, liabilities and contingentliabilities, recognised in accordance with IFRS 3, Business Combinations,constitutes goodwill, and is recognised as an asset. Goodwill on acquisition ofsubsidiaries is included in "Goodwill". Goodwill on acquisition of associatesis included in "Investments in associates". After initial recognition, goodwillis measured at cost less any accumulated impairment losses, until disposal ortermination of the previously acquired business (including planned disposal ortermination where there are indications that the value of the goodwill has beenpermanently impaired), when the profit or loss on disposal or termination willbe calculated after charging the book amount of any such goodwill through theincome statement. Goodwill arising on acquisitions before 1 April 2004, thedate of transition to International Financial Reporting Standards, has beenretained at the previous UK GAAP amounts, subject to being tested for impairmentat that date. Assets that have an indefinite useful life are not subject to amortisation andare tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment wheneverevents or changes in circumstances indicate that the carrying amount may not berecoverable. An impairment loss is recognised for the amount by which theasset's carrying amount exceeds its recoverable amount. The recoverable amountis the higher of an asset's fair value less costs to sell and value in use. Forthe purposes of assessing impairment, assets are grouped at the lowest levelsfor which there are separately identifiable cash flows (cash-generating units). The assets' residual values and useful lives are reviewed, and adjusted ifappropriate, at each balance sheet date. Investment property (a) Initial recognition Property that is held for long-term rental yields or for capital appreciation orboth, and that is not occupied by the Group, is classified as investmentproperty. Investment property comprises freehold land, freehold buildings, land held underoperating leases and buildings held under finance leases. When the Group beginsto redevelop an existing investment property for continued future use as aninvestment property, the property remains an investment property and isaccounted for as such. When the Group begins to redevelop an existing investment property with a viewto sale, the property is transferred to trading properties and held as a currentasset. The property is re-measured to fair value as at the date of the transferwith any gain or loss being taken to profit or loss. The re-measured amountbecomes the deemed cost at which the property is then carried in tradingproperties. Property that is being constructed or developed for future use as an investmentproperty, but which has not previously been classified as such, is classified asproperties under the course of development within assets under course ofdevelopment. This is recognised initially at cost but is subsequentlyre-measured to fair value at each reporting date. Any gain or loss onre-measurement is taken direct to equity unless any loss in the period exceedsany net cumulative gain previously recognised in equity. In the latter case, theamount by which the loss in the period exceeds the net cumulative gainpreviously recognised is taken to profit or loss. On completion, the property istransferred to investment property with any final difference on re-measurementaccounted for in accordance with the foregoing policy. Land held under operating leases is classified and accounted for as investmentproperty when the rest of the definition of investment property is met. In suchcases, the operating lease is accounted for as if it were a finance lease. Investment property is measured initially at its cost, including relatedtransaction costs. (b) Fair value After initial recognition, investment property is carried at fair value. Fairvalue is based on active market prices, adjusted, if necessary, for anydifference in the nature, location or condition of the specified asset. If thisinformation is not available, the Group uses alternate valuation methods such asrecent prices on less active markets or discounted cash flow projections. Thesevaluations are performed in accordance with the guidance issued by theInternational Valuation Standards Committee. These valuations are reviewed ateach financial reporting period end by external valuers. Investment propertythat is being redeveloped for continuing use as investment property, or forwhich the market has become less active, continues to be measured at fair value. The fair value of investment property reflects, among other things, rentalincome from current leases and assumptions about rental income from futureleases in the light of current market conditions. The fair value also reflects, on a similar basis, any cash outflows that couldbe expected in respect of the property. Some of those outflows are recognised as a liability, including finance leaseliabilities in respect of land classified as investment property; others,including contingent rent payments, are not recognised in the financialstatements. (c) Subsequent expenditure Subsequent expenditure is charged to the asset's carrying amount only when it isprobable that future economic benefit associated with the item will flow to theGroup and the cost of the item can be measured reliably. All repairs andmaintenance costs are charged to the income statement during the financialperiod in which they are incurred. Gross borrowing costs associated with directexpenditure on properties under development or undergoing major refurbishmentare capitalised. With specific developments, the amount capitalised is thegross interest incurred on those borrowings less any investment income arisingon their temporary investment. Interest is capitalised as from the commencementof the development work until the date of practical completion. Thecapitalisation of finance costs is suspended if there are prolonged periods whendevelopment activity is interrupted. Interest is also capitalised on thepurchase cost of a site or property acquired specifically for redevelopment inthe short term but only where activities necessary to prepare the asset forredevelopment are in progress. (d) Changes and transfers Changes in fair values are recorded in the income statement for investmentproperties. If an investment property becomes owner-occupied, it is reclassified asproperty, plant and equipment, and its fair value at the date ofreclassification becomes its cost for accounting purposes. Property that isbeing constructed or developed for future use as investment property isclassified as properties under the course of development and stated at costuntil construction or development is complete, at which time it is reclassifiedand subsequently accounted for as investment property. Inventories Property inventories are stated at the lower of cost and estimated netrealisable value. No interest is capitalised within inventories. Propertiesthat are acquired and subsequently developed for future sales are reclassifiedas inventories at their deemed cost, which is the carrying amount at the date ofreclassification. They are subsequently carried at the lower of cost and netrealisable value. Net realisable value is the estimated selling price in theordinary course of business less cost to complete redevelopment and sellingexpenses. Cash and cash equivalents Cash and cash equivalents comprises cash balances, deposits held at call withbanks and other short-term highly liquid investments with original maturities ofthree months or less. Bank overdrafts that are repayable on demand and form anintegral part of the Group's cash management are included as a component of cashand cash equivalents for the purpose of the statement of cash flows. Bankoverdrafts are disclosed in current and non-current liabilities. Employee benefits The Group accounts for pensions under IAS 19 'Employee Benefits'. In respect ofdefined benefit pension schemes, obligations are measured at discounted presentvalue while scheme assets are measured at their fair value. The operating and financing costs of such plans are recognised separately in theincome statement. Service costs are spread systematically over the working livesof the employees concerned with the charge for the period included in operatingcosts in the income statement. Financing costs are recognised in the periods in which they arise and areincluded in interest expense. Actuarial gains and losses arising from eitherexperience differing from previous actuarial assumptions or changes to thoseassumptions are recognised immediately in the statement of recognised income andexpense. Contributions to defined contribution schemes are expensed as incurred. Income taxes The charge for current taxation is based on the results for the year as adjustedfor items which are non-assessable or disallowed. It is calculated using ratesthat have been enacted or substantively enacted by the balance sheet date. Taxpayable upon realisation of fair value gains recognised in prior periods isrecorded as a current tax charge with a release of the associated deferred tax. Deferred tax is provided using the balance sheet liability method in respect oftemporary differences between the carrying amount of assets and liabilities inthe financial statements and the corresponding tax bases used in computation oftaxable profit with the exception of deferred tax on revaluation surpluses wherethe tax basis used is the accounts historic cost. Provision is made fortemporary differences between the carrying value of assets and liabilities inthe consolidated financial statements and the values used for tax purposes.Temporary differences are not provided for when they arise from initialrecognition of assets and liabilities that do not affect accounting or taxableprofit. When distributions are controlled by the Group, and it is probable the temporarydifference will not reverse in the foreseeable future, deferred tax which wouldarise on the distribution of profits realised in subsidiaries, associates andjoint ventures is provided in the same period as the liability to pay thedistribution is recognised in the financial statements. Deferred tax is determined using tax rates that have been enacted orsubstantially enacted by the balance sheet date and are expected to apply whenthe related deferred tax asset is realised or the deferred tax liability issettled. It is recognised in the income statement except when it relates toitems credited or charged directly to equity, in which case the deferred tax isalso dealt with in equity. Deferred tax assets are recognised to the extent that it is probable that futuretaxable profit will be available against which the temporary differences can beutilised. Deferred tax assets and liabilities are offset only when they relate to taxeslevied by the same authority, with a legal right to set off and when the groupintends to settle them on a net basis. Provisions Provisions are recognised when the Group has a present legal or constructiveobligation as a result of past events, it is more likely than not that anoutflow of resources will be required to settle the obligation, and the amounthas been reliably estimated. Where the Group, as lessee, is contractually required to restore a leasedproperty to an agreed condition, prior to release by a lessor, provision is madefor such dilapidation costs as they are identified. (a) Onerous contracts Provision is made in respect of costs incurred on vacant leasehold properties orfor leasehold properties sublet at a level which renders the propertiesloss-making over the length of the lease, being the net cash outflow committedto be incurred over the lives of the leases. Any increase or decrease in theprovision is taken to the income statement each financial period. Since theseprovisions have only been held for a period of three months, the movement in theprovision only reflects the net amount which has been utilised. The provisionwill be valued by discounting net future cash flows at the next balance sheetdate. (b) Share-based payments The cost of granting share options and other share based remuneration toemployees and directors is recognised through the income statement withreference to the fair value at the date of the grant. The Group has used theBlack-Scholes option valuation model and a stochastic model to establish therelevant costs. The resulting values are amortised through the income statementover the vesting period of the options and other grants. The charge is reversedif it appears probable that applicable performance criteria will not be met. Own shares held in connection with employee share plans or other share basedpayment arrangements are treated as treasury shares and deducted from equity.No profit or loss is recognised in the income statement on their sale, re-issueor cancellation. Revenue recognition Revenue is measured at the fair value of the consideration received orreceivable and is stated net of sales taxes and value added taxes. Revenueincludes 'Rental and similar income', 'Turnover from property tradingactivities', 'Service charge and similar income' and 'Turnover from assetmanagement activities'. Revenue is recognised as follows: (a) Rental and similar income Rental income from operating lease income is recognised on a straight-line basisover the lease term. When the Group provides incentives to its customers, the cost of incentives arerecognised over the lease term, on a straight-line basis, as a reduction ofrental income. (b) Service charge and similar income Service and management charge income is recognised on a gross basis in theaccounting period in which the services are rendered. Where the Group is actingas an agent, the commission rather than gross income is recorded as revenue. (c) Income from investments Dividend income from investments is recognised when the shareholders' rights toreceive payment have been established. (d) Income from property trading Profits or losses arising from the sale of trading and investment properties areincluded in the income statement of the Group where an exchange of contracts hastaken place under which any outstanding conditions are entirely within thecontrol of the Group. Profits or losses arising from the sale of trading andinvestment properties are calculated by reference to their carrying value andare included in operating profit. (e) Income from asset management activities Management fees earned are calculated on an accruals basis. Asset managementincome is recognised in the accounting period in which the services arerendered. Leases (a) A Group company is the lessee (i) Operating lease - leases in which substantially all risks and rewards ofownership are retained by another party, the lessor, are classified as operatingleases. Payments, including prepayments, made under operating leases (net of anyincentives received from the lessor) are charged to the income statement on astraight-line basis over the period of the lease. (ii) Finance lease - leases of assets where the Group has substantially all therisks and rewards of ownership are classified as finance leases. Finance leasesare capitalised at the lease commencement date at the lower of the fair value ofthe leased property and the present value of the minimum lease payments. Eachlease payment is allocated between the liability and finance charges so as toachieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included incurrent and non-current borrowings. The interest element of the finance cost ischarged to the income statement over the lease period so as to produce aconstant periodic rate of interest on the remaining balance of the liability foreach period. The investment properties acquired under finance leases are carriedat the fair value. (b) A Group company is the lessor (i) Operating lease - properties leased out under operating leases are included in investment property in the balance sheet. (ii) Finance lease - when assets are leased out under a finance lease,the present value of the lease payments is recognised as a receivable. Thedifference between the gross receivable and the present value of the receivableaccrues as finance income. Lease income is recognised over the term of the leaseusing the net investment method before tax, which reflects a constant periodicrate of return. Financial instruments and hedging activities Derivatives IAS 32 and IAS 39 have been adopted as at 1 April 2004. The Group uses derivatives to help manage its interest rate and foreign exchangerate risk. In accordance with its treasury policy, the Group does not hold orissue derivatives for trading purposes. Derivatives are recognised at fair value. The method of recognising theresulting gain or loss depends on whether the derivative is designated as ahedging instrument, and if so, the nature of the hedge relationship. Hedge accounting Where a financial instrument is designated as a hedge, the Group formallydocuments the relationship between the hedging instrument and the hedged item aswell as its risk management objectives and its strategy for undertaking thevarious hedging transactions. The Group also documents its assessment, both athedge inception and on an ongoing basis, of whether the derivatives that areused in the hedging transactions are highly effective in offsetting the changesin fair values or cash flows of the hedged items. Where hedge accounting requirements were not met, changes in fair value ofderivatives are recognised through the income statement. Investments The Group classifies its investments in the following categories: financialassets at fair value through profit or loss, loans and receivables,held-to-maturity investments, and available-for-sale financial assets. Theclassification depends on the purpose for which the investments were acquired.Management determines the classification of its investments at initialrecognition and reviews this designation at each reporting date. (a) Financial assets at fair value through profit or loss This category has two sub-categories: financial assets held for trading, andthose designated at fair value through profit or loss at inception. A financialasset is classified in this category if acquired principally for the purpose ofselling in the short term or if so designated by management. Derivatives arealso classified as held for trading unless they are designated as hedges. Assetsin this category are classified as current assets if they are either held fortrading or are expected to be realised within 12 months of the balance sheetdate. (b) Loans and receivables Loans and receivables are non-derivative financial assets with fixed ordeterminable payments that are not quoted in an active market. They arise whenthe Group provides money, goods or services directly to a debtor with nointention of trading the receivable. They are included in current assets, exceptfor maturities greater than 12 months after the balance sheet date. These areclassified as non-current assets. Loans and receivables are included in tradeand other receivables in the balance sheet. Purchases and sales of investments are recognised on trade-date - the date onwhich the Group commits to purchase or sell the asset. Investments are initiallyrecognised at fair value plus transaction costs for all financial assets notcarried at fair value through profit or loss. Investments are derecognised whenthe rights to receive cash flows from the investments have expired or have beentransferred and the Group has transferred substantially all risks and rewards ofownership. Available-for-sale financial assets and financial assets at fairvalue through profit and loss are subsequently carried at fair value. Realised and unrealised gains and losses arising from changes in the fair valueof the 'financial assets at fair value through profit or loss' category areincluded in the income statement in the period in which they arise. The fair values of quoted investments are based on current bid prices. If themarket for a financial asset is not active (and for unlisted securities), theGroup establishes fair value by using valuation techniques. These include theuse of recent arm's length transactions, reference to other instruments that aresubstantially the same, discounted cash flow analysis, and option pricing modelsrefined to reflect the issuer's specific circumstances. The Group assesses at each balance sheet date whether there is objectiveevidence that a financial asset or a group of financial assets is impaired. Trade and other receivables Trade receivables are recognised initially at fair value and subsequentlymeasured at amortised cost using the effective interest method, less provisionfor impairment. A provision for impairment in trade receivables is establishedwhen there is objective evidence that the Group will not be able to collect allamounts due according to the original terms of receivables. The amount of theprovision is the difference between the asset's carrying amount and the presentvalue of estimated future cash flows, discounted at the effective interest rate.The changes to the provision are recognised in the income statement. Borrowings Borrowings are initially recognised at the fair value of consideration received,net of transaction costs incurred. Borrowings are subsequently stated atamortised cost; any difference between the proceeds (net of transaction costs)and the redemption value is recognised in the income statement over the periodof the borrowings using the effective interest method. Borrowings are classified as current liabilities unless the Group has anunconditional right to defer settlement of the liability for at least 12 monthsafter the balance sheet date. Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or optionsare shown in equity as a deduction, net of tax, from the proceeds. Incrementalcosts directly attributable to the issue of new shares or options, or for theacquisition of a business, are included in the cost of acquisition as part ofthe purchase consideration. Where any Group company purchases the Company's equity share capital (treasuryshares), the consideration paid, including any directly attributable incrementalcosts (net of income taxes) is deducted from equity attributable to theCompany's equity holders until the shares are cancelled, reissued or disposedof. Where such shares are subsequently sold or reissued, any considerationreceived, net of any directly attributable incremental transaction costs and therelated income tax effects, is included in equity attributable to the Company'sequity holders. Critical accounting policies and judgements The preparation of the Consolidated Financial Statements requires management tomake estimates and assumptions that affect the reported amounts of revenues,expenses, assets and liabilities, and disclosure of contingencies at the date ofthe Consolidated Financial Statements. If in the future such estimates andassumptions, which are based on management's best judgement at the date of theConsolidated Financial Statements, deviate from the actual circumstances, theoriginal estimates and assumptions will be modified, as appropriate, in theperiod in which the circumstances change. The following policies are consideredto be of greater complexity and / or particularly subject to the exercise ofjudgement. (a) Goodwill As required by IAS 36, Impairment of Assets, the Group regularly monitors thecarrying value of its assets, including goodwill. Impairment reviews comparethe carrying values to the present value of future cash flows that are derivedfrom the relevant asset or cash-generating unit. These reviews therefore dependon management estimates and judgements, in particular in relation to theforecasting of future cash flows and the discount rate applied to the cashflows. (b) Post-employment benefits Application of IAS 19, Employee Benefits, requires the exercise of judgement inrelation to setting the assumptions used by the actuaries in assessing thefinancial position of each scheme. The Group determines the assumptions to beadopted in discussion with its actuaries, and believe these assumptions to be inline with IAS generally accepted practice. (c) Provisions The Group carries balance sheet provisions in respect of onerous contracts anddilapidations amongst other exposures. Judgement is involved in assessing theexposure in these area and hence in setting the level of the requiredprovisions. (d) Estimate of fair value of investment properties The best evidence of fair value is current prices in an active market forsimilar lease and other contracts. In the absence of such information, theGroup determines the amount within a range of reasonable fair value estimates.In making its judgement, the Group considers information from a variety ofsources including: i) current prices in an active market for properties of a differentnature, condition or location (or subject to different lease or othercontracts), adjusted to reflect those differences; ii) recent prices of similar properties in less active markets, withadjustments to reflect any changes in economic conditions since the date of thetransactions that occurred at those prices; and iii) discounted cash flow projections based on reliable estimates of futurecash flows, derived from the terms of any existing lease and other contracts,and (where possible) from external evidence such as current market rents forsimilar properties in the same location and condition, and using discount ratesthat reflect current market assessments of the uncertainty in the amount andtiming of the cash flows. (e) Principal assumptions for management's estimation of fair value ofinvestment properties If information on current or recent prices of assumptions underlying thediscounted cash flow approach investment properties are not available, the fairvalues of investment properties are determined using discounted cash flowvaluation techniques. The Group uses assumptions that are mainly based onmarket conditions existing at each balance sheet date. The principal assumptions underlying management's estimation of fair value arethose related to: the receipt of contractual rentals; expected future marketrentals; void periods; maintenance requirements; and appropriate discount rates.These valuations are regularly compared to actual market yield data, andactual transactions by the Group and those reported by the market. The expected future market rentals are determined on the basis of current marketrentals for similar properties in the same location and condition. 3. SEGMENTAL REPORTING Business Segments For management purposes the Group is organised into two operating divisions,Property investment and Asset management: Property Asset Unallocated and Group Total Investment Management other activities £'000 £'000 £'000 £'000Year ended 31 March 2006Rental and similar income 24,003 - - 24,003Turnover from property trading activities 31,167 - - 31,167Cost of sales of property trading activities (24,584) - - (24,584)Service charge and similar income 2,972 - - 2,972Service charge expense and similar charges (3,591) - - (3,591)Net rental and trading income 29,967 - - 29,967Turnover from asset management activities Management fee income - 6,065 - 6,065 Performance fee income - 3,271 - 3,271 - 9,336 - 9,336Asset management expenses - (3,512) - (3,512)Administrative expenses (2,390) - - (2,390)Property management expenses (7,517) - - (7,517)Operating profit before net gain on investments 20,060 5,824 - 25,884Net gain from fair value adjustments on investment 27,101 - - 27,101propertiesNet gain from fair value adjustments on investments - 14,968 1,082 16,050Profit on sale of investment properties 3,102 - - 3,102Profit on sale of investments - 98 2,926 3,024Operating profit 50,263 20,890 4,008 75,161 Total assets 361,886 223,477 133,160 718,523Total liabilities (26,799) (24,577) (27,709) (79,085)Borrowing, including finance leases (1,514) - (284,004) (285,518)Net assets 333,573 198,900 (178,553) 353,920 Other segment items:Capital expenditure 9,255 - - 9,255Depreciation - - 139 139 Property Asset Unallocated Group Total Investment Management and other activities £'000 £'000 £'000 £'000Year ended 31 March 2005Rental and similar income 26,521 - - 26,521Turnover from property trading activities 12,446 - - 12,446Costs of sales of property trading activities (10,788) - - (10,788)Service charge and similar income 2,170 - - 2,170Service charge expense and similar charges (2,773) - - (2,773)Net rental and trading income 27,576 - - 27,576Turnover from asset management activities Management fee income - 2,265 - 2,265 Performance fee income - 1,650 - 1,650 - 3,915 - 3,915Asset management expenses - (1,437) - (1,437)Administrative expenses (1,755) - - (1,755)Property management expenses (4,453) - - (4,453)Operating profit before net gain on investments 21,368 2,478 - 23,846Net gain from fair value adjustments on investment 21,871 - - 21,871propertiesNet gain from fair value adjustments on investments - - 2,397 2,397Profit on sale of investment properties 2,260 - - 2,260Profit on sale of investments - - - -Operating profit 45,499 2,478 2,397 50,374 Total assets 337,999 106,873 134,037 578,909Total liabilities (22,697) (5,378) (14,572) (42,647)Borrowings, including finance leases (1,515) - (262,392) (263,907)Net assets 313,787 101,495 (142,927) 272,355 Other segment items:Capital expenditure 74 - - 74Depreciation - - 109 109 All turnover and operating profit has arisen from continuing operations. (a) Rents receivable includes a charge of £25,000 (2005 : £803,000 income) which represents the net effect of rent allocated to rent free periods and the write off of previous adjustments due to the sale of investment properties. (b) Service charge and similar income includes monies received from tenants in respect of service charge costs the tenants bear on their properties. Service charge costs not recovered ("void costs") are included within service charge expense and similar charges of £348,000 (2005 : £603,000 restated). 2006 2005 £'000 £'000Operating profit is stated after charging:Depreciation 139 109Loss on disposal of plant and equipment 1 1Operating lease charges - properties 478 454Employee benefits 576 429 During the year the following amounts were charged to the profit and lossaccount in respect of auditors' remuneration: 2006 2005 £'000 £'000Audit services (Company: £232,000 (2005: £139,000)) 232 150Audit related services(1) 181 24Non-audit services: Taxation 131 171 544 345 (1) These include the cost of the interim audit, audit certifications for debtcovenant purposes and IFRS transition work. In addition £138,000 was charged by the Auditors for audit services to the jointventures (2005: £149,000) and £135,000 for tax work (2005: £194,000). In 2006£150,000 was charged by the Auditors for tax and accounting work to the jointventures in connection with the setting up of the new unit trusts. During the year, £115,000 was charged by the Auditors for work related to theacquisition of Ashtenne Holdings PLC. 4. EMPLOYEES 2006 2005 £'000 £'000Staff costsWages and salaries 7,010 4,391Social security costs 781 498Other pension costs 397 342 8,188 5,231 2006 2005 Number NumberThe average number of persons employed during the year was:Management and administrative 73 45Repairs and service 30 21 103 66 The parent company had no employees during the year (2005: Nil). RETIREMENT BENEFIT OBLIGATIONS The Group operates and contributes to pension schemes for certain Directors andemployees and makes some discretionary allowances. The costs charged to theincome statement for the year to 31 March 2006 in respect of these amounted to£397,000 (2005: £342,000). Pension premiums paid in advance were £70,000(2005: £70,000). The Group operated a defined benefit scheme in the UK, The Warner Estate GroupRetirement Benefits Scheme. A full valuation was carried out at 1 April 2005.The values at 31 March 2006 were updates of the 1 April 2005 valuation carriedout by a qualified independent actuary. It has been agreed with the Trustees that the Group contributes 26.8% ofpensionable salary plus £68,000 per annum. The discount rate used to calculate the funding target is equal to the yield onfixed interest gilts of appropriate term at the valuation date plus 2% per annumfor active and deferred members over the period to retirement. The inflationassumption is derived from the difference between the yield on fixed interestgilts and the yield on indexed-linked gilts at the valuation date. The following assumptions were made by the Company: 2006 2005 % per annum % per annumDiscount rate 4.9 5.5Rate of increase in pensionable salaries 3.5 3.4Rate of increases to pensions in payment 2.9 2.8Price inflation 3.0 2.8 Mortality assumptions are based on standard actuarial tables. The market value of the assets of the Scheme together with the expected rates ofreturn at the beginning and end of the year were as follows: Long-term Value at 31 Long-term Value at rate of March 2006 rate of return return 31 March expected at expected at 31 March 2006 31 March 2005 2005 % £'000 % £'000Equities 7.5 1,338 7.8 906Fixed interest 4.9 4,357 5.5 4,032Cash 4.8 125 5.0 123Total market value of assets 5,820 5,061 Reconciliation of funded status to balance sheet Value at Value at 31 March 2006 31 March 2006 £'000 £'000Fair value of Scheme assets 5,820 5,061Present value of non-insured defined benefit of (2,025) (1,449)obligationsLiability in respect of insured pensioners (4,276) (3,948)Liability recognised on the balance sheet (481) (336)Related deferred tax asset 144 101Net pension liability (337) (235) Changes to the present value of the defined benefit obligation 2006 2005 £'000 £'000Opening defined benefit obligation 5,397 5,373Current service cost 44 42Interest cost 290 288Contributions by plan participants 12 12Actuarial losses on Scheme liabilities* 890 4Net benefits paid out (332) (322)Closing defined benefit obligation 6,301 5,397 *Includes changes to the actuarial assumptions Changes to the fair value of Scheme assets 2006 2005 £'000 £'000Opening fair value of Scheme assets 5,061 4,926Expected return on assets 294 279Actuarial gains on Scheme assets 671 54Contributions by the employer 114 112Contributions by plan participants 12 12Net benefits paid out (332) (322)Closing fair value of Scheme assets 5,820 5,061 Actual return on Scheme assets 2006 2005 £'000 £'000Expected return on Scheme assets 294 279Actuarial gains on Scheme assets 671 54Actual return on Scheme assets 965 333 Analysis of income statement charge 2006 2005 £'000 £'000Current service cost 44 42Interest cost 290 288Expected return on plan assets (294) (279)Expense recognised in income statement 40 51 Analysis of amounts recognised in statement of recognised income and expense 2006 2005 £'000 £'000Total actuarial (losses) / gains (219) 50Related deferred tax 43 (33)Total (loss) / gain in statement of recognised income and expense (176) 17 Cumulative amount of (losses) / gains recognised in statement of recognised income (159) 17and expense History of asset values, defined benefit obligation, surplus / (deficit) inScheme and experience gains and losses 2006 2005 £'000 £'000Fair value of Scheme assets 5,820 5,061Defined benefit obligation (6,301) (5,397)Deficit in Scheme (481) (336)Experience gains on Scheme assets 671 54Experience losses on Scheme liabilities (890) (4) The estimated amounts of contributions expected to be paid to the Scheme during2007 are £163,000. 5. DIRECTORS' REMUNERATION A summary of Directors' remuneration, including disclosures required by theCompanies Act 1985 and those specified by the Financial Services Authority, iscontained in the Report and Accounts which will be published in due course. 6. PROFIT ON SALE OF INVESTMENT PROPERTIES 2006 2005 £'000 £'000Surplus over book value and fair value gains:Investment properties 3,102 1,711Arising on disposal of properties into joint ventures - 549 3,102 2,260 7. PROFIT ON SALE OF INVESTMENTS 2006 2005 £'000 £'000Surplus over book value:Listed investments 2,975 -Unlisted investments 98 -Other (49) - 3,024 - The profit on sale of listed investments of £2.975million has arisen on thedisposal of the Group's investment in East Surrey Holdings plc for aconsideration of £14million in November 2005. 8. FINANCE INCOME 2006 2005 £'000 £'000Income from investmentsDividends from listed investments 422 533Distributions from funds (see note 18) 3,363 - 3,785 533Interest receivable and similar income:From joint ventures 3,540 5,842Other interest 977 323Other finance income Expected return on pension scheme assets 294 - Interest on pension scheme liabilities (290) - 4 - 8,306 6,698 9. FINANCE EXPENSE 2006 2005 £'000 £'000Interest payable on bank loans and overdrafts, mortgages 13,575 14,239and other loans:Charges in respect of cost of raising finance 1,732 458 15,307 14,697Less: Interest capitalised (991) - 14,316 14,697Interest payable under finance leases 129 242 14,445 14,939Other finance costExpected return on pension scheme assets - (279)Interest on pension scheme liabilities - 288 - 9 14,445 14,948 Included within interest payable is £222,000 (2005: £222,000) in respect ofamortisation of the fair value adjustment to the debt acquired from the formerWinglaw Group Limited on 1 March 2000, and £46,000 relating to debtreorganisation costs (2005: £1,164,000). Interest is capitalised at an average interest rate of 6.48% which is equal tothe average cost of borrowing on the development work at Folkestone. 10. TAXATION 2006 2005 £'000 £'000Taxation on profit on ordinary activitiesUK corporation tax: Current at 30 % (2005: 30%) 13,755 3,982 (Over) / under provision in respect of prior (913) 116year's tax charge 12,842 4,098 Deferred taxation 3,659 6,109 16,501 10,207 Reconciliation of taxation charge 2006 2005 Profit on ordinary activities before taxation 90,956 55,163Tax @ 30% 27,287 16,548Share of joint ventures' post tax profits (6,387) (3,817)Share of associates post tax profits (215) -Net tax on assets sold during the year (421) (653)Dividends received not taxable (127) (185)Net capital allowances on asset disposals (4,290) (520)Disallowable expenses 289 117Other differences (39) 216Share Scheme timing difference 669 -Net tax on fair value gains of assets 648 (1,615)Adjustment in respect of prior years (913) 116 16,501 10,207 11. PROFIT OF WARNER ESTATE HOLDINGS PLC The Company has taken advantage of the exemption provided by Section 230 of theCompanies Act 1985 from presenting its own profit and loss account. Profitattributable to members includes £8,438,000 (2005: £7,696,000) which has beendealt with in the accounts of the Company. 12. DIVIDENDS Group and Company 2006 2005 £'000 £'000On Ordinary 5p sharesFinal 9.5p at 31 March 2005 paid 5 September 2005 (Final at 31 5,065 4,418March 2004: 8.75p)Interim 9.5p at 30 September 2005 paid 21 February 2006 (Interim 5,069 4,423at 30 September 2004: 8.75p) 10,134 8,841 A final dividend of 10.0p per share amounting to a total of £5,336,000 isproposed by the Board. The dividend proposed is not accounted for until it hasbeen approved at the Annual General Meeting. The amount will be accounted for asan appropriation of revenue reserves in the year ending 31 March 2007. 13. EARNINGS PER SHARE Earnings per share of 140.17p (2005: 89.2p) are calculated on the profit forthe year of £74,432,000 (2005: £44,954,000) and the weighted average of53,100,390 (2005: 50,399,047) shares in issue throughout the year. Diluted earnings per share of 138.79p (2005: 88.59p) are calculated on theprofit for the year as above divided by the weighted average number of shares inissue, being 53,628,509 (2005 : 50,707,241) after the dilutive impact of shareoptions granted. A reconciliation of the weighted average number of shares used to calculateearnings per share and to that used to calculate diluted earnings per share isshown below: 2006 2005 Earnings per share: weighted average number of shares 53,100,390 50,399,047Weighted average ordinary shares to be issued under employee 528,119 308,194incentive arrangementsDiluted earnings per share: weighted average number of shares 53,628,509 50,707,241 14. GOODWILL £'000GroupCostAt 31 March 2005 -Additions 11,205At 31 March 2006 11,205Impairments -At 31 March 2006 -Net book value at 31 March 2006 11,205 The goodwill was as a result of the acquisition of the remaining 50% ofIndustrial Funds Limited as shown in Note 37. Goodwill is not amortised but issubject to an annual impairment test. The goodwill of £11,205,000 is allocatedto the cash generating unit ("CGU") defined as the fund management businessowned by Industrial Funds Limited. The recoverable amount of the CGU has beencalculated based on the value-in-use calculations. These calculations use cashflow projections based on financial projections approved by management coveringa five year period. 15. INVESTMENT PROPERTIES AND PROPERTIES UNDER THE COURSE OF DEVELOPMENT Freehold Leasehold Total Properties with over Investment Under the 50 years Properties Course of unexpired Development £'000 £'000 £'000 £'000GroupAt 31 March 2005 276,169 51,568 327,737 -Acquired during the year from business combinations 21,804 - 21,804 -Additions 48,323 - 48,323 3,200Capital Expenditure 30 164 194 9,061Disposals (89,941) (2,020) (91,961) -Net gain from fair value adjustments on investment 23,148 3,953 27,101 -propertyAt 31 March 2006 279,533 53,665 333,198 12,261 The properties under the course of development relate to the Group's investmentin a shopping centre development at Folkestone. Properties purchased within twelve months of the balance sheet date are includedat Directors' valuation. The remainder of the Group's investment portfolio wasvalued externally principally by Cushman & Wakefield Healey & Baker on an openmarket basis in accordance with the recommended guidelines of the RoyalInstitution of Chartered Surveyors as at 31 March 2006. Investment properties were valued as follows: £'000DTZ Debenham Tie Leung 7,675Cushman & Wakefield Healey & Baker 275,561King Sturge 533Directors' valuation 48,323 332,092 A reconciliation of investment property valuations to the balance sheet carryingvalue of property is shown below: 2006 2005 £'000 £'000Investment property at market value as determined by external valuers and 332,092 326,593Directors' valuationAdd minimum payment under head leases separately included as a creditor in the 1,515 1,515balance sheetLess accrued lease incentives separately accrued as a debtor in the balance sheet (409) (371)Balance sheet carrying value of investment property 333,198 327,737 Included within investment properties is interest capitalised of £991,000 at 31March 2006 (2005 : £Nil). All repairs and maintenance costs are charged to the income statement during thefinancial period in which they are incurred. Therefore, no costs in respect ofrepairs and maintenance are included within the above figures (2005: £Nil) On an historical cost basis the investment properties which have been includedabove at valuation would have been shown at cost as £288,435,000 (2005:£288,094,000). 16. PLANT AND EQUIPMENT £'000GroupCostAt 31 March 2005 996Acquired during the year from business combinations 104Additions 154Disposals (1)At 31 March 2006 1,253 DepreciationAt 31 March 2005 649Charge for year 139At 31 March 2006 788Net book value at 31 March 2006 465Net book value at 31 March 2005 347 Plant and equipment include plant, machinery, fixtures, fittings, motor vehiclesand equipment. 17. INVESTMENTS IN JOINT VENTURES Group £'000Share of joint venturesAt 31 March 2005 102,517Share of post-tax profits for the year 21,291Net equity movements 15,415Net loan movements (35,851)At 31 March 2006 103,372 2006 2005 £'000 £'000Unlisted shares at cost less amounts written off 27,632 11,040Group's share of post acquisition retained profits and reserves 37,929 17,815 65,561 28,855Amounts owed by joint ventures 37,811 73,662 103,372 102,517 Included in share of joint ventures' gross assets and liabilitiesare: Agora Skipper Radial Bareway Industrial Agora Max Others Total Shopping Offices Distribution Industrial Funds Limited Centres Limited Limited Properties Limited (f) (g) Limited (a) (b) (c) (d) (e) £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000Year to 31 March 2006Group share of resultsRevenue 14,178 2,086 5,372 686 3,962 2,863 1,261 30,408Operating profit before netgains on investments 8,153 996 4,896 564 284 1,582 (361) 16,114Net gain from fair valueadjustments on investmentproperties 13,936 - 7,856 - - 7,123 - 28,915Net gain from fair valueadjustments on investments - - - - 1,063 - - 1,063 Profit / (loss) on sale ofinvestment properties 4,023 (810) 892 664 (80) 11 - 4,700Profit on sale of fixed asset - - - - 77 - - 77investmentsOperating profit 26,112 186 13,644 1,228 1,344 8,716 (361) 50,869Net finance expense (10,110) (1,486) (4,731) (584) (832) (1,796) 18 (19,521)Change in fair value ofderivative financialinstruments (1,454) (305) (308) - - 51 - (2,016)Share of associate's post tax - - - - (200) - - (200)lossProfit / (loss) before income 14,548 (1,605) 8,605 644 312 6,971 (343) 29,132taxTaxation - current (1,067) (375) (321) (320) (421) (262) (6) (2,772)Taxation - deferred (1,735) 839 (2,429) 267 - (2,180) - (5,238)Profit / (loss) after income 11,746 (1,141) 5,855 591 (109) 4,529 (349) 21,122taxMinority interests (4) - - - 185 (12) - 169Profit / (loss) for the period 11,742 (1,141) 5,855 591 76 4,517 (349) 21,291 Amounts receivable by GroupAsset management fees 1,082 150 596 68 57 208 840 3,001Performance fees 1,947 - - - - - - 1,947Interest receivable 674 537 516 370 1,443 - - 3,540 Group share ofNon-current assetsInvestment properties 122,561 - 81,802 - - 171,179 - 375,542Investments in unlisted shares - - - - - - 25 25Finance lease assets - - 4,085 - - - - 4,085Deferred income tax assets - - 87 - - - - 87Derivative financial assets 1,147 - - - - 51 - 1,198Other non-current assets 272 - - - - - - 272 123,980 - 85,974 - - 171,230 25 381,209Current assetsFinance lease assets - - 250 - - - - 250Other current assets 25,812 - 4,245 2,000 - 9,449 4,063 45,569 25,812 - 4,495 2,000 - 9,449 4,063 45,819Total assets 149,792 - 90,469 2,000 - 180,679 4,088 427,028Non-current liabilitiesDeferred income tax (8,087) - (3,518) - - (2,180) - (13,785)liabilitiesBorrowings, including finance (86,181) - (73,731) - - (131,024) - (290,936)leasesDerivative financial - - (289) - - - - (289)liabilities (94,268) - (77,538) - - (133,204) - (305,010)Current liabilitiesDeferred income tax - - - - - - - -liabilitiesBorrowings, including finance (4,704) - - (108) - (7) - (4,819)leasesOther current liabilities (15,412) - (4,543) (512) - (27,049) (4,122) (51,638) (20,116) - (4,543) (620) - (27,056) (4,122) (56,457)Total liabilities (114,384) - (82,081) (620) - (160,260) (4,122) (361,467)Share of net assets / 35,408 - 8,388 1,380 - 20,419 (34) 65,561(liabilities)Effective Group share 50% 50% 50% 50% 50% 50% 50% Potential recourse to the Nil Nil Nil Nil Nil Nil NilGroup Agora Skipper Radial Bareway Others Total Shopping Offices Distribution Industrial Centres Limited Limited Properties (a) (b) (c) Limited (d) £'000 £'000 £'000 £'000 £'000 £'000Year to 31 March 2005Group share of resultsTurnover 12,593 5,743 4,374 818 - 23,528Operating profit before net gains on 9,510 4,599 3,932 726 - 18,767investmentsNet gain from fair value adjustments 8,295 1,673 2,679 883 - 13,530on investment propertiesProfit on sale of investment 5,152 263 - - - 5,415propertiesOperating profit 22,957 6,535 6,611 1,609 - 37,712Net finance expense (9,724) (4,990) (4,724) (676) - (20,114)Change in fair value of derivative (764) (658) 19 - - (1,403)financial instrumentsProfit before income tax 12,469 887 1,906 933 - 16,195Taxation - current (544) 175 (36) (24) - (429)Taxation - deferred (2,546) 741 (970) (267) - (3,042)Profit for the year 9,379 1,803 900 642 - 12,724 Amounts receivable by GroupAsset management fees 1,116 551 520 78 - 2,265Performance fees 1,650 - - - - 1,650Interest receivable 1,031 2,875 1,503 433 - 5,842 Group share ofNon-current assetsInvestment properties 190,896 87,410 76,931 10,801 - 366,038Finance lease assets - - 5,384 - - 5,384Deferred income tax assets - - 11 - - 11Derivative financial assets 2,601 305 54 - - 2,960Other non-current assets 290 - - 11 - 301 193,787 87,715 82,380 10,812 - 374,694Current assetsFinance lease assets - - 289 - - 289Other current assets 5,461 1,965 2,563 693 - 10,682 5,461 1,965 2,852 693 - 10,971Total assets 199,248 89,680 85,232 11,505 - 385,665Non-current liabilitiesDeferred income tax liabilities (6,351) (839) (1,013) (267) - (8,470)Borrowing including finance leases (126,228) (83,054) (78,824) - - (288,106)Derivative financial liabilities - - (35) - - (35) (132,579) (83,893) (79,872) (267) - (296,611)Current liabilitiesBorrowings including finance leases (35,490) - - (9,823) - (45,313)Other current liabilities (8,008) (3,420) (2,827) (631) - (14,886) (43,498) (3,420) (2,827) (10,454) - (60,199)Total liabilities (176,077) (87,313) (82,699) (10,721) - (356,810)Share of net assets 23,171 2,367 2,533 784 - 28,855 Effective Group share 50% 50% 50% 50% 50% Potential recourse to the Group Nil Nil Nil 7,150 Nil (a) Agora Shopping Centres was set up on 5 March 2003 and subsequentlyacquired the Pyramids, Birkenhead on 25 June 2003 and The Grange, Birkenhead on30 September 2004. On 7 March 2006, The Pyramids, Birkenhead and The Grange,Birkenhead were disposed of into the Agora Max joint venture group. (b) Skipper Offices Limited was set up on 23 July 2003. In June 2005, theproperties were disposed of into the Apia Regional Offices Fund and the Groupsubsequently acquired the remaining 50% interest of Skipper Offices Limited. (c) Fairway Industrial Limited was set up on 29 August 2003 and changed itsname to Radial Distribution Limited on 14 October 2004. (d) Bareway Industrial Properties Limited was set up on 29 August 2003. InNovember 2005, the properties were disposed of into the Ashtenne IndustrialFund. (e) Industrial Funds Limited was set up in March 2005 and completed theacquisition of Ashtenne Holdings PLC on 13 July 2005. On 1 December 2005, theGroup acquired the remaining 50% interest. (f) Agora Max Limited was set up on 16 September 2005 and subsequentlyacquired The Pallasades, Birmingham on 25 October 2005. The Pyramids and TheGrange, both in Birkenhead, were acquired from Agora Shopping Centres on 7 March2006. (g) Net assets relate to £25k investment in the general partner of ApiaRegional Office Fund and a net liability of £59k which is the investment insmaller joint ventures acquired through Ashtenne. Joint venture investment properties are valued by DTZ Debenham Tie Leung. Amounts owed by joint ventures comprise: 2006 2005Group £'000 £'000Agora Shopping Centres Limited 25,687 25,687Skipper Offices Limited - 29,916Radial Distribution Limited 12,016 12,675Bareway Industrial Properties Limited 108 5,384 37,811 73,662 During the year the transactions on the loan accounts between the Group and thejoint ventures were as follows: Repaid Loaned Total £'000 £'000 £'000 Skipper Offices Limited (29,916) - (29,916) Radial Distribution Limited (659) - (659) Bareway Industrial Properties Limited (6,984) 1,708 (5,276) (37,559) 1,708 (35,851) 18. INVESTMENTS IN FUNDS Group £'000As at 1 April 2005 -Acquired during the year from business combinations 23,105Additions 66,910Disposals (902)Net gain from fair value adjustments 14,968At 31 March 2006 104,081 Fund information: AIF Apia Others Total (a) (b) (c) £'000 £'000 £'000 £'000Year to 31 March 2006 Distributions receivable 1,468 1,886 9 3,363 Net assets at 31 March 2006 546,780 223,774 -Percentage share at 31 March 2006 7.09% 28.77% -Group share of net assets 38,752 64,374 955 104,081 (a) The Group invested £12,000,000 in the Ashtenne Industrial Fund inAugust 2005 which is included in additions. A £23,105,000 investment wasacquired on the purchase of the remaining 50% of Industrial Funds Limited. (b) Apia was set-up on 7 June 2005 and the Group invested an initial£44,088,000. A further £10,000,000 was invested in December 2005, of which£902,000 was disposed of in March 2006. It is treated as an investment ratherthan an associate as the Group does not have the power to exert significantcontrol as a Trustee which is independent of the Group is responsible for thestrategic decisions of the unit trust and the Group's investment holding in theunit trust will continue to reduce over the short-term. (c) This relates to minority interest holdings in Apia IV Unit Trust, AgoraMax Unit Trust, Agora Max Birkenhead Unit Trust and The Pallasades BirminghamUnit Trust which were acquired during the year. The units held in AIF valued at £13,235,000 are used as security for grouploans. 19. INVESTMENTS IN LISTED AND UNLISTED SHARES Group Company 2006 2005 2006 2005 £'000 £'000 £'000 £'000Subsidiary undertakings (a) - - 113,476 113,476Listed investments (b) 5,115 15,518 - - 5,115 15,518 113,476 113,476 (a) SUBSIDIARY UNDERTAKINGS Shares in Loans to subsidiary subsidiary Company undertakings undertakings total £'000 £'000 £'000CostAt 31 March 2005 and 31 March 2006 61,876 51,600 113,476 (b) LISTED INVESTMENTS Group Company £'000 £'000Listed on the London Stock ExchangeAt 31 March 2005 15,518 -Disposals (11,485) -Net gain from fair value adjustments 1,082 -At 31 March 2006 5,115 - Group Company £'000 £'000Historic cost of listed investmentsAt 31 March 2006 6,689 -At 31 March 2005 7,013 - Included within listed investments above is the investment in McKay SecuritiesPLC of £3,898,000 which is used as security for group loans.. 20. INVESTMENTS IN ASSOCIATESAssociates Group Company Bride Hall Other Total Bride Hall Group Limited Group Limited £'000 £'000 £'000 £'000CostAt 1 April 2005 1,491 - 1,491 1,491Acquired during the year from business - 9,185 9,185 -combinations (a)Share of profits 677 38 715 677Equity movements (995) (8,714) (9,709) (995)At 31 March 2006 1,173 509 1,682 1,173 Goodwill arising on acquisitionAt 1 April 2005 3,836 - 3,836 3,836Additions (b) 10,000 - 10,000 10,000At 31 March 2006 13,836 - 13,836 13,836 At 31 March 2006 15,009 509 15,518 15,009At 1 April 2005 5,327 - 5,327 5,327 (a) These are investments in associates acquired through the acquisition ofthe Industrial Funds Group which consist of a 33.3% share in Ashtenne Industrial(General Partner) Limited, and a 17% share of the t3 Partnership, whichsubsequently disposed of its assets, repaid any outstanding loans and made anequity distribution of its profits. (b) The additional £10million payment was made during the year under theterms of the original acquisition of the 25% stake in Bride Hall Group Limited.The share of profits and net assets of Bride Hall Group Limited have beenobtained from audited statutory accounts for the year ended 30 September 2005,and management accounts for the three months ended 31 December 2005. 21. TRADE AND OTHER RECEIVABLES Group Company 2006 2005 2006 2005 £'000 £'000 £'000 £'000Amounts falling due within one year:Trade receivables 2,558 1,514 - -Amounts owed by Group undertakings - - 247,724 167,742Other debtors 12,364 2,051 167 482Lease incentive debtors 68 67 - -Prepayments and accrued income 8,106 5,419 1,212 1,114 23,096 9,051 249,103 169,338Amounts falling due after more than oneyear:Lease incentive debtors 363 350 - - Total trade and other receivables 23,459 9,401 249,103 169,338 22. BORROWINGS, INCLUDING FINANCE LEASES Group Company 2006 2005 2006 2005 £'000 £'000 £'000 £'000Amounts falling due after more than oneyear:Bank overdrafts 176,021 97,994 75,915 -Bank loans 58,020 73,668 - -Mortgages and other loans 48,070 22,461 - -Finance lease obligations (see note 23) 1,514 1,515 - - 283,625 195,638 75,915 -Amounts falling due within one year:Bank overdrafts 9 8,719 - 48,238Bank loans 1,500 2,250 - -Mortgages and other loans 384 57,300 - -Finance lease obligations (see note 23) - - - - 1,893 68,269 - 48.238 Total borrowings, including finance 285,518 263,907 75,915 48,238leasesCash and cash equivalents (98,358) (109,366) - -Net borrowings 187,160 154,541 75,915 48,238 Bank loans and overdrafts are secured on properties and listed and unlistedinvestments owned by the Group. Mortgages and other loans are all secured oncertain properties owned by the Group and by floating charges on assets ofcertain subsidiary companies. During the year the Group repaid a loan amounting to £43,730,000 acquired withIndustrial Funds Limited. Group 2006 2005 £'000 £'000Repayable otherwise than by instalments between two and five yearsLoan repayable in 2009 at an interest rate of 1.0% over LIBOR 22,351 -Repayable otherwise than by instalments in more than five yearsLoan repayable in 2009 at an interest rate of 1.0% over LIBOR - 24,90411.655% First Mortgage Debenture Stock 2015 (reducing to 9.75% from 10,000 10,0002009)9.635% First Mortgage Debenture Stock 2015 12,471 12,461Mortgage repayable in 2019 at an interest rate of 0.9% over LIBOR - 50,000(a) 44,822 97,365Other mortgages and loansRedeemable in quarterly instalments of £250,000 maturing 2006: - 21,427Redeemable in quarterly instalments of £150,000 maturing 2009:At an interest rate of 6.29% 20,000 20,000At an interest rate of 6.89% 6,229 10,454Redeemable in quarterly instalments of £125,000 maturing 2014 at an - 4,597interest rate of 9.15% (a)Redeemable in quarterly instalments of £74,000 maturing 2014 at an - 2,703interest rate of 9.06% (a)Redeemable in quarterly instalments maturing 2011 at an interest 25,983 -rate of 1.3% over GILT rate 97,034 156,546 (a) These loans were terminated early due to refinancing and have all beenrepaid. Summary of borrowings Bank loans and overdrafts Other borrowings 2006 2005 2006 2005 £'000 £'000 £'000 £'000GroupWithin one year or on demand 1,509 10,969 384 57,346Between one and two years 13,362 22,000 406 -Between two and five years 221,076 149,895 1,362 -In five years or more - - 46,556 22,500 235,947 182,864 48,708 79,846Future finance costs (397) (233) (254) (85) 235,550 182,631 48,454 79,761 CompanyWithin one year or on demand - 48,238 - -Between two and five years 75,915 - - - 75.915 48,238 - - Of the borrowings at 31 March 2006 £48,700,000 were non-recourse loans (2005:£55,358,000). 23. FINANCE LEASE OBLIGATIONS 2006 2005 £'000 £'000(a) Minimum lease payments under finance leases fall due:Not later than one year - -Later than one year and not later than five years - -Later than five years 1,514 1,515 1,514 1,515Future finance charges on finance leases - -Present value of finance lease liabilities 1,514 1,515(b) Present value of minimum finance lease obligations:Not later than one year - -Later than one year and not later than five years - -Later than five years 1,514 1,515 1,514 1,515 Finance lease obligations are in respect of leased investment property. Finance lease liabilities are effectively secured as the rights to the leasedasset revert to the lessor in the event of default. 24. DERIVATIVE FINANCIAL INSTRUMENTS IAS 32 and IAS 39 have been adopted as at 1 April 2004. TREASURY POLICY The Group enters into derivative transactions such as interest rate swaps andcaps in order to manage the financial risks arising from the Group's activities.The main financial risks arising from the Group's financing structure areinterest rate risk, liquidity risk and market price risk. The policies formanaging each of these risks and the principal effects of these policies on theresults for the year are set out below. INTEREST RATE RISK One quarter of the Group's debt is fixed and the remainder is floating. Thefloating debt is either linked to LIBOR or the Base Rate. The Group's policy isto eliminate substantially all the exposure to interest rate fluctuations inorder to provide certainty over the amount of interest payable both in theshort-term and the long-term, given the current level of borrowings. LIQUIDITY RISK The Group's policy is to ensure that there is always sufficient working capitalfacilities available to meet the requirements of the business. At 31st March2006, the maturity profile of Group debt showed that the fixed rate debt has amaturity of more than five years and the floating rate debt will mature betweentwo to five years. The revolving credit facilities are for three years each,the intention being to renew these facilities and extend them for a furtherthree years before they mature. The effect is to minimise any refinancing risk. Capital expenditure to be incurred by the Group is funded through the revolvingcredit facilities. In the Joint Ventures, capital expenditure is funded throughdedicated capital expenditure facilities. This policy ensures that adequatefunds are always available to meet any capital expenditure commitments as andwhen they fall due. MARKET PRICE RISK The Group is exposed to market price risk through interest rate movements. Asdemonstrated in the section on Hedging in the Finance Review, the Group's policyis to substantially eliminate the risk arising from changes in interest rates byhedging the floating rate debt to provide certainty as to how much the interestcost will be, such that in the long term any fluctuations in interest rates willhave little or no impact on reported profits. The Group is, however, exposed tomarket price risk in respect of the fair value of its fixed rate financialinstruments. FOREIGN CURRENCY RISK The Group had no material foreign currency exposure. CREDIT RISK The Group has no significant concentration of credit risk as exposure is spreadover a large number of counterparties. The credit risk in liquid funds and derivative financial instruments is limiteddue to the counterparties being banks with high credit ratings assigned byinternational credit rating agencies. As at the balance sheet date the bookvalue of loans (see note 22) and the fair values of swaps and caps approximatesthe maximum credit risk the Group is exposed to. FINANCIAL LIABILITIES The interest rate profile of the Group's financial liabilities at 31 March aftertaking account of interest rate instruments taken out by the Group was: 2006 2005 £'000 £'000Capped rate financial liabilities 13,669 85,574Fixed rate financial liabilities 194,968 90,654 208,637 176,228 The above balances are net of cash balances of £79,018,000 (2005: £86,482,000)which can be offset under the Group's borrowing arrangements. The benchmark rate for determining interest payments for the floating ratefinancial liabilities was LIBOR/base rate depending upon the facility. The weighted average interest rate on the fixed rate debt and the averagematurity of that debt was as follows: 2006 2005 % %Weighted average interest rateGroup 7.37 8.01Joint Ventures 5.66 4.89 Weighted average period for which interest rate is fixed Years YearsGroup 7.08 5.16Joint Ventures 2.75 3.60Maturity of financial liabilities 2006 2005 £'000 £'000 Group Within one year or on demand 1,893 68,315 Between one and two years 13,768 22,000 Between two and five years 222,438 149,895 In five years or more 46,556 22,500 284,655 262,710 Company Within one year or on demand - 48,238 Between two and five years 75,915 - 75,915 48,238 Borrowing facilities The Group has various borrowing facilities that were not fully utilised at theyear end in which the conditions for utilising those facilities were met. 2006 2005 £'000 £'000 Expiring in one year or less: Total facilities - 73,073 Unutilised - 52,842 Expiring between two and five years: Total facilities 137,741 - Unutilised 43,691 - Fair values of financial assets and liabilities Financial assets and liabilities comprise long-term borrowings and otherpayables, derivative instruments, cash, receivables and investments. The table below sets out by category the book values and the fair values of theGroup's financial assets and liabilities. Where no amount is disclosed in thetable below, there is no material difference between the book value and the fairvalue. 2006 2006 2006 2005 Book Value Fair Value Difference Difference between book and between book and fair values fair values £'000 £'000 £'000 £'000GroupPrimary Financial InstrumentsLiabilitiesFixed long-term debt (over one year) 75,008 82,294 (7,286) (8,500)AssetsFinancial assetsLong-term loan notes (over one year) (25,591) (25,056) 535 (990)Fixed rate loan - - - (67) Joint venturesPrimary Financial InstrumentsLong-term loan notes 25,591 25,056 (535) 990Fixed rate loan - - - 34 The effect on net assets per share of the total fair value adjustment(£7,286,000 less tax of £2,186,000) would be a decrease of 9.6 pence (2005 : 11.8 pence). The calculation of the fair values has been arrived at as follows: Debt has been calculated by discounting cash flows at prevailing rates ofinterest. The equity assets have been valued at bid price. Interest rate swaps have been valued at the relevant current active market ratefor such swaps. Interest rate derivatives to manage interest rate profile are analysed asfollows: Group: £9,000,000 swapped at 7.52% fixed to February 2007 (1) £19,350,000 swapped at 5.965% fixed to June 2009 (1) £2,254,688 swapped at 5.88% fixed to March2009 (1) £100,000,000 capped at 7.25% to June 2007 £90,000,000 callable swap at 3.50% to September 2006 (2) £90,000,000 callable swap at 4.19% from September 2006 to March 2016 (2) Joint Ventures: £175,000,000 swapped at 4.1% to April 2008 (1) £109,505,000 swapped at 4.5775% to February 2021 (1) £10,000,000 capped at 6.00% to October 2006 (1) £124,160,000 capped at 5.00% to November 2008 (3) £124,160,000 swapped at 4.54% to February 2021 (1) £94,640,000 swapped at 4.96% to December 2009 (1) £27,040,000 capped at 5.5% to December 2009 (1) & (4) Note (1) The quarterly payment / receipt is the difference between 3 monthLIBOR and the rate quoted Note (2) RBS has the right to call the SWAP on 30th September 2006 and eachquarter end thereafter Note (3) Should LIBOR fall below 4.45% the fixed rate of 4.7% will be charged Note (4) Should LIBOR fall below 4.18% the fixed rate of 4.68% will be charged Gains and Losses on Derivatives held to Manage Debt The Group uses interest rate derivatives to manage its interest rate profile.Changes in the fair value of these derivatives are recognised in the incomestatement. An analysis of these derivatives and gains / (losses) thereon is asfollows: Derivative Derivative financial financial assets liabilities £'000 £'000Fair value at 31 March 2005 (11) 1,162Change in fair value of derivative financial instruments during the year 11 199Fair value at 31 March 2006 - 1,361 25. DEFERRED INCOME TAX Group Company 2006 2005 2006 2005 £'000 £'000 £'000 £'000Deferred taxation assetsDeferred taxation arising from unrealised derivative 408 349 - -financial instruments valuationsDeferred taxation arising from retirement benefit 144 101 - -obligations 552 450 - -Deferred taxation liabilitiesDeferred taxation arising from the temporary differencesnoted below:Short term temporary differences (108) (23) - -Capital and industrial buildings allowances claimed on (2,107) (3,763) - -investment propertiesUnrealised property and investment valuations (27,348) (16,326) - - (29,563) (20,112) - - The movement in deferred tax assets and liabilities during the year is asfollows: Derivative Retirement Group financial benefit Total instruments obligations £'000 £'000 £'000Deferred tax assets at 31 March 2005 349 101 450Charged to income statement 59 - 59Charged to reserves - 43 43Total impact 59 43 102Deferred tax assets at 31 March 2006 408 144 552 Unrealised Capital Short-term Group property and allowances timing Total revaluation differences surpluses £'000 £'000 £'000 £'000Deferred tax liabilities at 31 March 2005 (16,326) (3,763) (23) (20,112)Charged to income statement (4,930) 1,297 (85) (3,718)Acquired during the year from business (6,092) 359 - (5,733)combinationsTotal impact (11,022) 1,656 (85) (9,451)Deferred tax liabilities at 31 March 2006 (27,348) (2,107) (108) (29,563) 26. PROVISIONS FOR OTHER LIABILITIES AND CHARGES Share-based Onerous Total payments contracts £'000 £'000 £'000GroupAt 31 March 2005 128 - 128Charged to consolidated income statement: 375 - 375Additions during the year - 13,750 13,750Released during the year - (1,750) (1,750)At 31 March 2006 503 12,000 12,503 Share-based Total payments £'000 £'000CompanyAt 31 March 2005 128 128Charged to consolidated income statement: 375 375At 31 March 2006 503 503 Provisions have been analysed between current and non-current as follows: Group Company 2006 2005 2006 2005 £'000 £'000 £'000 £'000Non-current 12,503 128 503 128Current - - - - 12,503 128 503 128 The provision for share-based payments represents the cost of granting shareoptions and other share-based remuneration to employees and Directors. Thecharge is reversed if it appears probable that applicable performance criteriawill not be met. The onerous lease provision is made in relation to onerous leases on propertieswhich are vacant or sublet at a level which renders the properties loss-makingover the remaining life of the lease. The provision represents the Directors'estimate of the net cash flows on the properties. 27. TRADE AND OTHER PAYABLES Group Company 2006 2005 2006 2005 £'000 £'000 £'000 £'000Amounts falling due within one year:Trade payables 2,480 1,335 97 46Amounts owed to Group undertakings - - 97,462 50,734Amounts owed to joint ventures 4,969 4,965 - -Other taxation and social security 467 791 35 103Other creditors 6,758 938 5,000 -Accruals and deferred income 14,895 10,762 1,563 896 29,569 18,791 104,157 51,779 28. SHARE CAPITAL 2006 2005Group and Company £'000 £'000Authorised60,000,000 Ordinary shares of 5p 3,000 3,000Allotted, called up and fully paidOrdinary shares of 5pAt 1 April 2,548 2,548Allotted through placing of shares (2,547,738 shares) 127 -At 31 March (2006: 53,502,508 shares, 2005: 50,954,770 shares) 2,675 2,548 During the year 2,547,738 new Ordinary shares of 5p each were allotted for acash consideration of £13,757,785 through a placing of shares at 540p per shareon 5 April 2005. At 31 March 2006 there were share options to subscribe for Ordinary shares underthe Warner Estate Holdings 1995 Share Option Scheme as follows:At 303.5p per share between 16 August 2004 and 15 August 2011 127,405 sharesAt 319p per share between 17 July 2005 and 16 July 2012 156,687 sharesAt 367.5p per share between 27 June 2006 and 26 June 2013 308,631 sharesAt 495p per share between 8 July 2007 and 7 July 2014 247,288 shares 29. OTHER RESERVES Non-distributable Reserves Distributable Reserves Share Revaluation Other *Retained Premium Reserve Reserve Earnings Total £'000 £'000 £'000 £'000 £'000GroupAt 31 March 2005 5,559 70,966 7,996 186,701 271,222Premium on shares issued 13,493 - - - 13,493Retained profit for the year - - - 74,432 74,432Realised on disposal of investment properties - (14,167) - 14,167 -Realised on disposal of investments - (11,211) - 11,211 -Realised on disposal of joint ventures' investment - (4,803) - 4,803 -propertiesNet gain from fair value adjustment on investment - 27,101 - (27,101) -propertiesShare of joint ventures' net gain from fair valueadjustment on investment properties - 28,915 - (28,915) -Net gain from fair value adjustment on listed - 969 - (969) -investmentsNet gain from fair value adjustment on unlisted - 14,968 - (14,968) -investmentsShare of joint ventures' net gain from fair valueadjustment on investments - 1,063 - (1,063) -Change in fair value of derivative financial - (51) - 51 -instrumentsChange in fair value of joint ventures' derivative - (1,412) - 1,412 -financial instrumentsDividends paid - - - (10,134) (10,134)Actuarial losses on pension scheme assets - - - (219) (219)Deferred tax movement on pension assets - - - 43 43AT 31 MARCH 2006 19,052 112,338 7,996 209,451 348,837 \* The closing balance on the profit and loss account includes £337,000 liability (2005 : £235,000) stated after adeferred tax asset of £144,000 (2005 : £101,000) in respect of the Group's defined benefit pension scheme asset out in note 4 to the accounts. Non-distributable Reserves Distributable Reserves Share Revaluation Other *Retained Premium Reserve Reserve Earnings TotalCompany £'000 £'000 £'000 £'000 £'000At 31 March 2005 5,559 934 7,078 176,528 190,099Premium on shares issued 13,493 - - - 13,493Retained profit for the year - - - 8,438 8,438Change in fair value of derivative financial - 89 - (89) -instrumentsDividends paid - - - (10,134) (10,134)AT 31 MARCH 2006 19,052 1,023 7,078 174,743 201,896 The Company's distributable reserves include £108,309,000 (2005: £108,309,000)derived from capital profits in subsidiary undertakings. 30. INVESTMENT IN OWN SHARES Group and Company Number Cost £'000At 31 March 2005 532,200 1,667Additions 28,214 139Disposals (282,402) (880)At 31 March 2006 278,012 926 Included in investment in own shares are shares relating to the Inland RevenueApproved All-Employee Share Ownership Plan, as follows: 2006 2005 Number Cost Market Number Cost Market value value £'000 £'000 £'000 £'000Partnership shares purchased by 26,830 - 204 28,122 - 155employees, not yet vestedMatching and Free shares not 104,812 470 796 100,226 404 552yet vested 131,642 470 1,000 128,348 404 707 The vesting of Matching and Free shares is conditional on meeting the conditionsof the scheme which are summarised on in the Report and Accounts which will bepublished in due course. 31. DIRECTORS' INTERESTS AND RELATED PARTY TRANSACTIONS Transactions between the company and subsidiaries, which are related parties,have been eliminated on consolidation for the Group. Compensation of key management personnel is disclosed in the Report and Accountswhich will be published in due course. Transactions between the parent company and its subsidiaries are shown below: 2006 2005Subsidiary Nature of transaction £'000 £'000Cardiff and Provincial Properties Limited Dividend 500 500Clay Estates Limited Dividend 76 -Clay Group Limited Dividend 2,900 3,800Lancaster Holdings Limited Dividend 2,400 1,500Lancaster Investments Limited Dividend 800 1,000Lotkeep Limited Dividend 3,000 -Mainscene Limited Dividend - 800Warner Estate, Limited Dividend 2,000 1,200Warner Investments Limited Dividend 324 1,200 Balances outstanding between the parent company and its subsidiaries are shownbelow: Amounts owed by Amounts owed to subsidiaries subsidiaries 2006 2005 2006 2005Subsidiary £'000 £'000 £'000 £'000Alliance Holdings Four Limited - 4 - -Alliance Holdings Limited 10 10 - -Alliance Holdings One Limited - 4 - -Alliance Holdings Three Limited - 4 - -Alliance Holdings Two Limited - 4 - -Apia Asset Management Limited 130 25 - -Cardiff and Provincial Properties Limited - - (16,447) (3,197)Clay Estates Limited - 19 (1,781) -Clay Group Limited 8,843 5,943 - -Clay Investments Limited 22 23 - -Clay Property Limited - - (25,542) (25,542)Hulburds (Sittingbourne) Limited - 4 - -Industrial Funds Limited 836 - - -Lancaster Holdings Limited 61,504 64,269 - -Lancaster Investments (West Bromwich) Limited 132 71 - -Lancaster Investments Limited 144 4,083 - -Lotkeep Limited - 2,375 (25,794) -Mainscene Limited - - (13,665) (6,009)Market Place (Jersey) Limited 8 8 - -Market Place Holdings (Jersey) Limited 9 10 - -Middleton Jersey One Limited 9 9 - -Middleton Jersey Two Limited 8 8 - -Park Street Properties Limited 7 7 - -Principal Leasehold Properties Limited 3,002 2 - -Skipper Holdings Four Limited - 3 - -Skipper Holdings One Limited - 3 - -Skipper Holdings Three Limited - 3 - -Skipper Holdings Two Limited - 3 - -Skipper Offices Limited 1,685 - - -Skipper Regional Office Holdings Limited 5 5 - -Vere Street (Jersey) Limited 167 167 - -Vere Street Investments Limited 5,499 - - (2,501)Warner Active Management No 2 Limited - 12 (3,806) -Warner Active Management No 3 Limited - - - -Warner Alliance (Jersey) Limited 47 20 (176) -Warner Estate (Folkestone) Limited - 1,629 - -Warner Estate (Jersey) Limited 1,646 363 - -Warner Estate, Limited 10,304 29,124 - -Warner Estate Management Limited 78,828 9,802 - -Warner Funds Limited 14,505 49,300 - -Warner Industrial Acquisition Limited 60,257 115 - -Warner Industrial Investments Limited 115 309 (5,608) -Warner Investments Limited - - (4,643) (12,634)Warner Regional Offices Holdings Limited 2 2 - -Warner Shopping Centre (Jersey) Limited - - - (851) No fees were paid in respect of contracts, which provided services in theordinary course of business to the Group, and in which Directors have or hadinterests. During the year there were loan transactions between the Group and jointventures, as set out in note 17. Interest payable on these loans andmanagement charges, payable by the joint ventures, are also set out in note 17. 32. RECONCILIATION OF OPERATING PROFIT TO NET CASH FLOW Group Company 2006 2005 2006 2005 £'000 £'000 £'000 £'000 Operating profit before net gains on investments 25,884 23,846 (1,921) (1,424)Depreciation of plant and equipment 139 109 - -Loss on sale of plant and equipment 1 1 (49) -Decrease in inventories 19,292 9,242 - -Decrease / (increase) in trade and other receivables 2,682 (782) (67,765) (3,274)(Decrease) / increase in trade and other payables (23,295) 1,604 47,319 (1,537)Cash generated from operations 24,703 34,020 (22,416) 313 33. CONTINGENT ASSETS 2006 2005 £'000 £'000Potential performance fees arising under joint venture agreementsAgora Shopping Centres 5,000 -Radial Distribution 1,000 - 6,000 - These assets have not been recognised on the balance sheet. 34. CONTINGENT LIABILITIES 2006 2005 £'000 £'000Contingent liabilities in respect of guarantees given by theCompany in respect of borrowings of its subsidiaries as follows:Bank overdrafts 100,108 58,475Mortgage debenture and loans 22,500 79,846Bank loans of joint ventures - 14,300 122,608 152,621 These liabilities have not been recognised on the balance sheet. 35. OPERATING LEASE COMMITMENTS 2006 2005 £'000 £'000GroupAnnual commitments in respect of operating leases on properties are asfollows:Expiring between two and five years 45 -Expiring after five years 435 454 480 454 36. MINORITY INTEREST This represents investments held by The FI5 Partnership in Balmcrest EstatesLimited. 37. ACQUISITIONS Industrial Funds Limited was set up as a 50-50 joint venture with Anglo IrishBank and acquired the entire share capital of Ashtenne Holdings PLC on 31 May2005. Ashtenne Holdings PLC is principally involved in property fund management. Acquisition of Ashtenne Holdings PLC by Industrial Fund Limited Fair value Book value adjustments Fair value £'000 £'000 £'000 Net assets / (liabilities) acquired Investment property 30,288 2,408 32,696Plant and equipment 105 - 105Investments in joint ventures (114) - (114)Investment in funds 20,815 1,053 21,868Investments in associates 6,748 3,015 9,763Inventories 13,338 9,771 23,109Trade and other receivables 7,386 3,516 10,902Cash and cash equivalents 38,660 - 38,660Borrowings including finance leases (460) - (460)Deferred income tax liabilities - (6,092) (6,092)Trade and other payables (10,169) (2,008) (12,177)Current income tax liabilities (3,013) 1,547 (1,466)Minority interests (4,592) (406) (4,998) 98,992 12,804 111,796 50% acquired 55,898 Goodwill 5,219 Consideration 61,117 Satisfied by 100% 50% Cash consideration 119,742 59,871Directly attributable acquisition costs 2,493 1,246Cash consideration 122,235 61,117 On 1 December 2005, the Group acquired the remaining 50% of ordinary sharecapital in Industrial Funds Limited (and its subsidiaries), which had previouslybeen accounted for as a joint venture. On the acquisition date 100% of the netliabilities were brought on to the balance sheet. Acquisition of remaining 50% of Industrial Funds Limited Fair value Book value adjustments Fair value £'000 £'000 £'000 Net assets / (liabilities) acquired Goodwill 10,439 (10,439) -Investment property 21,804 - 21,804Plant and equipment 104 - 104Investments in joint ventures 290 - 290Investments in funds 23,105 - 23,105Investments in associates 9,185 - 9,185Inventories 21,996 - 21,996Trade and other receivables 15,083 - 15,083Cash and cash equivalents 12,633 - 12,633Borrowings including finance leases (41,824) (1,994) (43,818)Deferred income tax liabilities (5,731) - (5,731)Trade and other payables (61,438) - (61,438)Current income tax liabilities (1,768) 598 (1,170)Minority interests (3,315) - (3,315) 563 (11,835) (11,272) 50% acquired (5,636) Goodwill 5,986 Consideration 350 Satisfied by Cash consideration 350 Total goodwill relating to acquisition of AshtenneHoldings PLC Initial acquisition treated as a joint venture 5,219Acquisition of remaining 50% of Industrial Funds Limited 5,986 Goodwill 11,205 On 30 June 2005, the Group acquired the remaining 50% of ordinary share capitalin Skipper Offices Limited (and its subsidiaries), which had previously beenaccounted for as a joint venture. On the acquisition date 100% of the netliabilities were brought on to the balance sheet. Skipper Offices Limited was set up as a 50-50 joint venture with Royal Bank ofScotland and disposed of its properties to the Apia Regional Offices Fund on 7June 2005. Acquisition of remaining 50% of Skipper Offices Limited Fair value Book value adjustments Fair value £'000 £'000 £'000 50% net assets / (liabilities) acquired Trade and other receivables 5,893 - 5,893Cash and cash equivalents 10,401 - 10,401Trade and other payables (15,545) - (15,545)Current income tax liabilities (581) - (581) 168 - 168 50% acquired 84 Goodwill - Consideration 84 Satisfied by Cash consideration 84 Skipper Offices Limited contributed £nil to revenue and a loss of £10,000 to theGroup's profit before tax for the period between the date of acquisition and 31March 2006.Cash acquired £'000 £'000 Industrial Funds Limited 12,633 Skipper Offices Limited 10,401 23,034 Cash paid on acquisition: Industrial Funds Limited (350) Skipper Offices Limited (84) (434) Net cash acquired 22,600 38. DETAILED TRANSITION TO IFRS BASIS OF PREPARATION This financial information has been prepared on the basis of management'sinterpretation of IFRS currently. It is possible that conventions which differfrom our current interpretation will evolve generally within the propertysector, and IFRS are subject to ongoing amendment; accordingly, the amountsdisclosed in this note may be subject to revision. PRESENTATION OF FINANCIAL STATEMENTS UNDER IFRS Under IFRS, with effect from 1 April 2004, the Group has prepared its financialstatements in accordance with IAS 1 - 'Presentation of financial statements'.Where IAS 1 does not provide definitive guidance on presentation, for example inrelation to aspects of the income statements, the Group proposes to adopt aformat consistent, where possible, with UK GAAP. The presentation of theprimary statements are likely to develop over time through industry practice. Key changes include: • The 'profit and loss account' is renamed the 'income statement'. • All assets and liabilities are required to be analysed between current and non-current items. • Deferred tax assets have been presented separately from deferred tax liabilities. • A 'statement of recognised income and expense' replaces the 'statement of group total recognised gains and losses'. UK GAAP comparative information has been reformatted to reflect IFRS reportingrequirements. OVERVIEW OF IMPACT The principal changes arising from the adoption of IFRS for the financialstatements under review are: • Property revaluations - surpluses and deficits on investment properties are shown in the income statement, rather than as a movement in reserves. • Deferred tax - is provided in respect of property valuation surpluses and is accrued as a deferred tax liability. Under UK GAAP, no deferred tax provision was made in respect of property revaluation surpluses. • Share based payments - the fair value of share options and other share based payments is recognised as an expense through the income statement over the vesting period. • Goodwill - positive goodwill is no longer amortised, but is now subject to an impairment review. • Head leases - where the Group is the lessee of a finance lease arrangement, the rental obligations have been capitalised and shown as a liability on the balance sheet. • Lease incentives - are amortised over the term of the lease, in each case typically longer than under UK GAAP, which was to the first rent review. MAIN CHANGES IN ACCOUNTING UNDER IFRS IAS 40 - INVESTMENT PROPERTY Under this standard, investment property is recognised in the accounts at fairvalue, with fair value gains and losses being taken directly to the incomestatement rather than to the revaluation reserve as was the case under UK GAAP. Accumulated revaluation surpluses relating to the investment properties at thedate of transition to IFRS have been reallocated to retained earnings. Thistreatment does not, however, have any impact on the distributable profits. Full provision for tax on the valuation surpluses has been provided under IAS12. IAS 12 - INCOME TAXES This standard requires full provision to be made for deferred income tax ontemporary differences. The main difference compared to the deferred taxprovided under UK GAAP is that provision has been made in full for the deferredincome tax arising from the revaluation of investment properties. The deferredincome tax has been calculated on the basis that the gain (or loss) on theproperties will be realised through the income generated by holding theproperties. The tax base for each property has been compared to the valuationfor that property. Since the deferred income tax liabilities have been calculated on the basis ofcontinued use of the properties, no account has been taken of the way in whichproperties may be sold or of the tax which the Group would expect to be payableon the sale of the properties in practice. Indexation allowance which would beavailable to further reduce the taxable capital gains when properties subject toUK corporation tax are sold has similarly not been taken into account. Deferred income tax is provided as appropriate on the other adjustments whichhave been made to convert the UK GAAP accounts to IFRS. IAS 31 - FINANCIAL REPORTING OF INTERESTS IN JOINT VENTURES Under UK GAAP, the Group accounted for interests in joint ventures under theequity accounting method. Under IFRS, IAS 31 allows companies to make aone-time choice as to whether joint ventures will be accounted under the equitymethod or proportionally consolidated. The Group has opted for the equity accounting method of joint venture assets andliabilities as this is consistent with past treatment and, more closely reflectsthe substance of the Group's joint venture arrangements. Therefore, the Group'sshare of individual assets and liabilities of the joint venture are shown as oneline in the balance sheet and income statement. IFRS 2 - SHARE BASED PAYMENTS Under IFRS 2, the fair value of share options and other share based payments isrecognised as an expense through the income statement over the vesting period. The Group has elected to apply the IFRS 1, share-based payment transitionexemption, therefore the Group has applied IFRS 2 from 1 January 2004 to thoseoptions that were issued after 7 November 2002 but have not vested by 1 January2005. IFRS 3 - BUSINESS COMBINATIONS Under IFRS 3, goodwill on acquisition is no longer amortised, but is held at itsUK GAAP carrying value at the transition date, or acquisition date, asappropriate, and is then subject to impairment review at each reporting date. Under IFRS, the acquisition of properties, whether by outright purchase or bycorporate acquisition, are carefully considered on a case by case basis todetermine whether they are, in substance, an acquisition of assets or abusiness. The Group has elected to apply the IFRS 1, business combination transitionexemption, therefore the Group has not applied IFRS 3 retrospectively to pastbusiness combinations transition exemption. IFRS 17 - LEASES Under UK GAAP, leases to occupational tenants were almost invariably treated asoperating leases, because the risks and rewards in the underlying freehold wereusually assessed as remaining with the landlord. However, while IAS 17 is basedon a similar principle, it lists a number of situations that individually or incombination would require a lease to be classified as a finance lease and, inparticular, it requires an entity to consider land and buildings separately,even if the occupational lease is of the property as a whole and does not makesuch a distinction. This means that it is more likely that a lease term couldbe viewed as being for the major part of the economic life of an asset,resulting in finance lease classification of the building element. The Group has carefully reviewed each of its leases and has concluded that thelease classification and treatment under UK GAAP is consistent with IFRS. Where an investment property is itself subject to a head or ground lease, thathead lease must be treated as if it were a finance lease and accounted foraccordingly. In total only thirteen properties are affected, of which three areheld by joint ventures leading to the recognition of a finance lease liabilityand an increase in the carrying value of the Group's investment properties. SIC 15 - OPERATING LEASE INCENTIVES Under SIC 15, the cost of rent free periods and other incentives given totenants under operating leases must be spread over the term of the lease ratherthan, as under UK GAAP, to the first review to market rents. Further, there are no transitional provisions, so that incentives granted beforethe UK standard came into effect have now been brought back into account. Thiswill therefore change the timing but not the aggregate amount recognised inrelation to lease incentives. For the investment property business, the changes amount to a minorreclassification between rent and revaluation surpluses in the income statementand, in the balance sheet, between investment properties and receivables. IAS 32 AND IAS 39 HEDGE ACCOUNTING Where a financial instrument is designated as a hedge, the Group formallydocuments the relationship between the hedging instrument and the hedged item aswell as its risk management objectives and its strategy for undertaking thevarious hedging transactions. The Group also documents its assessment, both athedge inception and on an ongoing basis, of whether the derivatives that areused in the hedging transactions are highly effective in offsetting the changesin fair values or cash flows of the hedged items. Where hedge accounting requirements are not met, changes in fair value ofderivatives are recognised through the income statement. INVESTMENTS Investments will be carried at fair value on the balance sheet, with changes inthe fair value being recognised either in the income statement or in equity andrecycled through the income statement when the investments are realised, asappropriate. Under UK GAAP these investments were carried at the lower of costand market value. OTHER FINANCIAL INSTRUMENTS Movements in the fair value of those derivative financial instruments which arenot accounted for as hedging instruments are recognised on the face of theincome statement and not by way of a note, as is the case under UK GAAP. BORROWINGS The version of IAS 39 adopted by the European Union limits the option to carryborrowings at their fair values, and consequently, for the time being, the Groupwill continue to include borrowings in the balance sheet at amortised cost. Thefair value of borrowings will be disclosed under IAS 32, as is the case under UKGAAP. EXEMPTIONS FROM FULL RETROSPECTIVE APPLICATION The Group has applied the following optional exemptions from retrospectiveapplication: (a) Share based payment transaction exemption The Group has elected to apply this exemption. The Group has applied IFRS 2from 1 April 2004 to those options that were issued after 7 November 2002 butthat have not vested by 1 January 2005. (b) Designation of previously recognised financial instruments The Group has elected to apply this exemption. Therefore, financial instrumentswill be designated at the date of transition as at fair value through profit orloss or as available-for-sale. The following optional exemptions from retrospective application are notapplicable to the Group; (c) Fair value as deemed cost exemption (d) Cumulative translation difference exemption (e) Business combinations exemption (f) Employee benefits exemption (g) Compound financial instruments (h) Assets and liabilities of subsidiaries, associates and joint ventures exemption (i) Insurance contracts exemption (j) Decommissioning liabilities included in the cost of property, plant and equipment exemption (k) Fair value measurement of financial assets or liabilities at initial recognition EXCEPTIONS FROM FULL RETROSPECTIVE APPLICATION The Group has applied the following mandatory exception from retrospectiveapplication: (a) Estimates exception Estimates under IFRS at 1 April 2004 should be consistent with estimates madefor the same date under previous GAAP, unless there is evidence that thoseestimates were in error. RECONCILIATIONS BETWEEN IFRS AND UK GAAP RECONCILIATION OF CONSOLIDATED IFRS BALANCE SHEET AT 31 MARCH 2005 Events after Previously Share balance Investments reported base sheet Income Lease in Financial Investment Restated under UK payments date taxes Leases incentives associates instruments property Total under GAAP* IFRS 2 IAS 10 IAS 12 IAS 17 SIC 15 IAS 28 IAS 39 IAS 40 adjustments IFRS £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 ASSETSNon-currentassetsInvestment 326,593 - - - - (371) - - 1,515 1,144 327,737propertyOther 347 - - - - - - - - - 347tangible assetsInvest 111,250 - - (7,023) (3,568) (190) - 2,048 - (8,733) 102,517ments in joint venturesInvest 21,135 - - - - - (5,327) (290) - (5,617) 15,518ments in listed andunlisted sharesInvestment - - - - - - 5,327 - - 5,327 5,327in associatesDeferred 101 - - - - - - 349 - 349 450income tax assetsDerivative - - - - - - - 11 - 11 11financial assetsTrade - - - - - 350 - - - 350 350and other receivables 459,426 - - (7,023) (3,568) (211) - 2,118 1,515 (7,169) 452,257Current assetsInventory 8,235 - - - 8,235Trade and 9,597 - - - - (235) - (311) - (546) 9,051other receivablesCash and 22,884 - - - - - - 86,482 - 86,482 109,366cash equivalents 40,716 - - - - (235) - 86,171 - 85,936 126,652Total 500,142 - - (7,023) (3,568) (446) - 88,289 1,515 78,767 578,909assets LiabilitiesNon-currentliabilitiesBorrow (114,008) - - - - - - (80,115) (1,515) (81,630) (195,638)ings, includingfinance leasesDerivative - - - - - - - (1,162) - (1,162) (1,162)financialliabilitiesDeferred (3,786) - - (16,326) - - - - - (16,326) (20,112)income tax liabilitiesRetirement (336) - - - - - - - - - (336)benefitobligationsProvisions - (128) - - - - - - - (128) (128)for otherliabilities andcharges (118,130) (128) - (16,326) - - - (81,277) (1,515) (99,246) (217,376)CurrentliabilitiesBorrow (61,902) - - - - - - (6,367) - (6,367) (68,269)ings, includingfinance leasesTrade (23,638) - 4,847 - - - - - - 4,847 (18,791)and other payablesCurrent (2,197) - - - - (11) - 90 - 79 (2,118)income tax liabilities (87,737) - 4,847 - - (11) - (6,277) - (1,441) (89,178)Total (205,867) (128) 4,847 (16,326) - (11) - (87,554) (1,515) (100,687) (306,554)liabilitiesNet 294,275 (128) 4,847 (23,349) (3,568) (457) - 735 - (21,920) 272,355assets EQUITYCapital andreservesattributable tothe Company'sequity holdersShare 2,548 - - - - - - - - - 2,548capital Reserves 293,142 (128) 4,847 (23,349) (3,568) (457) - 735 - (21,920) 271,222Invest (1,667) - - - - - - - - - (1,667)ment in own sharesEquity 294,023 (128) 4,847 (23,349) (3,568) (457) - 735 - (21,920) 272,103shareholders'fundsMinority 252 - - - - - - - - - 252interestTotal 294,275 (128) 4,847 (23,349) (3,568) (457) - 735 - (21,920) 272,355equity Notes a b c d e f g h*Reformatted to reflect IFRS reporting requirements RECONCILIATIONS BETWEEN IFRS AND UK GAAP RECONCILIATION OF CONSOLIDATED IFRS INCOME STATEMENT FOR THE YEAR ENDED 31 MARCH 2005 Events after Previously Share balance Investments reported base sheet Income Lease in Financial Investment Restated under UK payments date taxes Leases incentives associates instruments property Total under GAAP* IFRS 2 IAS 10 IAS 12 IAS 17 SIC 15 IAS 28 IAS 39 IAS 40 adjustments IFRS £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Rental and 26,387 - - - - 134 - - - 134 26,521similar incomeTurnover 12,446 - - - - - - - - - 12,446from property tradingactivitiesCost of (10,788) - - - - - - - - - (10,788)sales of property tradingactivitiesService 2,170 - - - - - - - - - 2,170charge and similarincomeService (2,773) - - - - - - - - - (2,773)charge expense andsimilar incomeNet rental 27,442 - - - - 134 - - - 134 27,576and trading incomeTurnover 3,915 - - - - - - - - - 3,915from asset managementactivitiesCost of (1,437) - - - - - - - - - (1,437)sales of asset managementactivitiesNet income 2,478 - - - - - - - - - 2,478from asset managementactivitiesAdminis (1,660) (95) - - - - - - - (95) (1,755)trative expensesProperty (4,695) - - - - - - - 242 242 (4,453)expensesOperating 23,565 (95) - - - 134 - - 242 281 23,846profit before net gainson investmentsNet gain from - - - - - (273) - - 22,144 21,871 21,871fair valueadjustments oninvestmentpropertyNet gain from - - - - - - - 2,397 - 2,397 2,397fair valueadjustments onfixed assetinvestmentsProfit on sale 2,260 - - - - - - - - - 2,260of investmentpropertyOperating 25,825 (95) - - - (139) - 2,397 22,386 24,549 50,374profit Finance 6,698 - - - - - - - - - 6,698income Finance (14,706) - - - - - - - (242) (242) (14,948)expense Change in fair - - - - - - - 315 - 315 315value ofderivativefinancialinstrumentsShare of joint 4,723 - - (4,521) (805) (36) - (982) 14,345 8,001 12,724venture post taxprofitsProfit before 22,540 (95) - (4,521) (805) (175) - 1,730 36,489 32,623 55,163income taxTaxation - (4,117) - - - - (7) - 26 - 19 (4,098)currentTaxation - (290) - - (5,698) - - - (121) - (5,819) (6,109)deferredProfit for 18,133 (95) - (10,219) (805) (182) - 1,635 36,489 26,823 44,956the yearAttributable to:Equity 18,131 (95) - (10,219) (805) (182) - 1,635 36,489 26,823 44,954holders Minority 2 - - - - - - - - - 2interestsNotes a b c d e f g h*Reformatted to reflect IFRS reporting requirements RECONCILIATIONS BETWEEN IFRS AND UK GAAP RECONCILIATION OF COMPANY IFRS BALANCE SHEET AT 31 MARCH 2005 Events Share after Previously base balance reported payments sheet Investments Financial Total Restated under UK IFRS 2 date IAS in associates instruments adjustments under IFRS GAAP* £'000 £'000 10 £'000 IAS 28 £'000 IAS 39 £'000 £'000 £'000 ASSETSNon-current assetsInvestments in joint - - - - - - -venturesInvestments in listed 118,803 - - (5,327) - (5,327) 113,476and unlisted sharesInvestment in associate - - - 5,327 - 5,327 5,327Derivative financial - - - - 11 11 11assets 118,803 - - - 11 11 118,814Current assetsTrade and other 181,649 - (12,000) - (311) (12,311) 169,338receivablesCurrent income tax 2,883 - - - 90 90 2,973assets 184,532 - (12,000) - (221) (12,221) 172,311Total assets 303,335 - (12,000) - (210) (12,210) 291,125LiabilitiesNon-current liabilitiesProvisions for other - (128) - - - (128) (128)liabilities and charges - (128) - - - (128) (128)Current liabilitiesBorrowings, including (48,238) - - - - - (48,238)finance leasesTrade and other (56,626) - 4,847 - - 4,847 (51,779)payables (104,864) - 4,847 - - 4,847 (100,017)Total liabilities (104,864) (128) 4,847 - - 4,719 (100,145)Net assets 198,471 (128) (7,153) - (210) 7,491 190,980EQUITYCapital and reservesattributable to theCompany's equityholdersShare capital 2,548 - - - - - 2,548Reserves 197,590 (128) (7,153) - (210) 7,491 190,099Investment in own (1,667) - - - - - (1,667)sharesTotal equity 198,471 (128) (7,153) - (210) (7,491) 190,980Notes a b f g*Reformatted to reflect IFRS reporting requirements RECONCILIATIONS BETWEEN IFRS AND UK GAAP RECONCILIATION OF CONSOLIDATED IFRS BALANCE SHEET AT 1 APRIL 2004 Events after Previously Share balance Investments reported base sheet Income Lease in Financial Investment Restated under UK payments date taxes Leases incentives associates instruments property Total under GAAP* IFRS 2 IAS 10 IAS 12 IAS 17 SIC 15 IAS 28 IAS 39 IAS 40 adjustments IFRS £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 ASSETSNon-currentassetsInvestment 317,453 - - - - (208) - - 3,038 2,830 320,283propertiesPlant and 429 - - - - - - - - - 429equipmentInvestments 89,012 - - (2,596) (2,763) (154) - 3,030 - (2,483) 86,529in joint venturesInvest 13,371 - - - - - - (250) - (250) 13,121ments in listed andunlisted sharesDeferred 134 - - - - - - 469 - 469 603income tax assetsDerivative - - - - - - - 234 - 234 234financial assetsTrade - - - - - 191 - - - 191 191and other receivables 420,399 - - (2,596) (2,763) (171) - 3,483 3,038 991 421,390Current assetsInven 17,477 - - - - - - - - - 17,477tories Trade and other 9,580 - - - - (100) - (449) - (549) 9,031receivablesCash and cash 16,647 - - - - - - 72,406 - 72,406 89,053equivalents 43,704 - - - - (100) - 71,957 - 71,857 115,561Total assets 464,103 - - (2,596) (2,763) (271) - 75,440 3,038 72,848 536,951LiabilitiesNon-currentliabilitiesBorrow (155,061) - - - - - - (3,038) (3,038) (158,099)ings, includingfinance leasesDerivative - - - - - - - (1,562) - (1,562) (1,562)financialliabilitiesDeferred (3,496) - - (10,628) - - - - - (10,628) (14,124)income tax liabilitiesRetirement (447) - - - - - - - - - (447)benefitobligationsProvisions - (33) - - - - - - - (33) (33)for otherliabilities andcharges (159,004) (33) - (10,628) - - - (1,562) (3,038) (15,261) (174,265)CurrentliabilitiesBorrow (36,146) - - - - - - (72,406) - (72,406) (108,552)ings, includingfinance leasesTrade (21,413) - 4,458 - - - - - - 4,458 (16,955)and other payablesCurrent income (1,289) - - - - (4) - 65 - 61 (1,228)tax liabilities (58,848) - 4,458 - - (4) - (72,341) - (67,887) (126,735)Total (217,852) (33) 4,458 (10,628) - (4) - (73,903) (3,038) (83,148) (301,000)liabilitiesNet assets 246,251 (33) 4,458 (13,224) (2,763) (275) - 1,537 - (10,300) 235,951EQUITYCapital andreservesattributable tothe Company'sequity holdersShare capital 2,548 - - - - - - - - - 2,548Reserves 245,392 (33) 4,458 (13,224) (2,763) (275) - 1,537 - (10,300) 235,092Investment in (1,689) - - - - - - - - - (1,689)own sharesTotal equity 246,251 (33) 4,458 (13,224) (2,763) (275) - 1,537 - (10,300) 235,951Notes a b c d e f g h*Reformatted to reflect IFRS reporting requirements RECONCILIATIONS BETWEEN IFRS AND UK GAAP RECONCILIATION OF COMPANY IFRS BALANCE SHEET AT 1 APRIL 2004 Events after Previously Share base balance Restated reported payments sheet date Financial Total Under under UK GAAP IFRS 2 IAS 10 instruments adjustments IFRS * £'000 £'000 £'000 IAS 39 £'000 £'000 £'000 ASSETSNon-current assetsInvestments in joint 3,968 - - - - 3,968venturesInvestments in listed and 113,476 - - - - 113,476unlisted sharesDerivative financial - - - 234 234 234assets 117,444 - - 234 234 117,678Current assetsTrade and other 173,058 - (10,000) (449) (10,449) 162,609receivablesCurrent income tax assets 1,701 - - 65 65 1,766 174,759 - (10,000) (384) (10,384) 164,375Total assets 292,203 - (10,000) (150) (10,150) 282,053LiabilitiesNon-current liabilitiesProvisions for other - (33) - - (33) (33)liabilities and charges - (33) - - (33) (33)Current liabilitiesBorrowings, including (36,538) - - - - (36,538)finance leasesTrade and other payables (57,837) - 4,458 - 4,458 (53,379) (94,375) - 4,458 - 4,458 (89,917)Total liabilities (94,375) (33) 4,458 - 4,425 (89,950)Net assets 197,828 (33) (5,542) (150) (5,725) 192,103EQUITYCapital and reservesattributable to theCompany's equity holdersShare capital 2,548 - - - - 2,548Reserves 196,969 (33) (5,542) (150) (5,725) 191,244Investment in own shares (1,689) - - - - (1,689)Total equity 197,828 (33) (5,542) 150 (5,725) 192,103Notes a b g*Reformatted to reflect IFRS reporting requirements RECONCILIATIONS BETWEEN IFRS AND UK GAAP NOTES TO THE IFRS RECONCILIATIONS (a) IFRS 2 - Share based payments Share option plans are fair valued at the date of grant and costs taken to theincome statement over the vesting period. IFRS 1 transitional exemption hasbeen applied. A corresponding release from equity means that there is no effecton the balance sheet or NAV. (b) IAS 10 - Events after balance sheet date Only dividends actually declared at balance sheet date should be provided for,therefore proposed dividends have been reversed, and are reinstated on payment. (c) IAS 12 - Income taxes Provision is now made for the deferred tax liability associated with therevaluation of investment properties. This was not required under UK GAAP.Capital gains tax which was previously charged directly to reserves is nowincluded in the income statement, but this has no impact on net assets. (d) IAS 17 - Leases This adjustment represents those leases that have been classified as financelease assets. (e) Statements of Investment Circular (SIC) 15 - Lease incentives Lease incentives are now amortised over the lease term rather than to the firstrent review. As the value of lease incentives is included within the propertyvaluation, investment property and reserves have been adjusted by the value ofthe lease incentive debtor to prevent double counting. (f) IAS 28 - Investments in associates Under IFRS an investment in associate is where the investor has the power toexercise significant influence. Previously under UK GAAP an investor had toactually exercise significant influence. Therefore the investment in Bride Hallwas previously treated as a fixed asset investment, and has now been equityaccounted. (g) IAS 32 & 39 - Financial instruments Financial assets and liabilities such as interest rate swaps and caps, have beenincluded in the balance sheet at fair value. Investments are carried at fairvalue on the balance sheet. (h) IAS 40 - Investment Property Investment property valuation movements and tax thereon has been taken throughthe income statement. Investment property head leases, which are deemed finance leases, the rentalobligations are capitalised and shown as a corresponding finance lease creditor. This information is provided by RNS The company news service from the London Stock Exchange

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