17th May 2006 08:59
ING UK Real Estate Income Trust Ltd17 May 2006 17 May 2006 ING UK Real Estate Income Trust Limited Re: Interim Report and Consolidated Financial Statements for the period 15September to 31 December 2005 Further to the announcement made on the 10 March 2006 there follows the fulltext of the Interim Results in respect of the period 15 September to 31 December2005 Company Summary The Company was incorporated on 15 September 2005 and was launched on the Londonand Channel Islands Stock Exchanges on 25 October 2005. The investment objectiveof the Company is to provide shareholders with an attractive level of incometogether with the potential for capital growth from directly or indirectlyinvesting in a diversified portfolio of UK, Isle of Man and Channel Islandsproperties. Investment Manager: ING Real Estate Investment Management (UK) Limited Total Assets less Current Liabilities: £ 520.8 million Shareholders' Funds: £ 320.8 million The Company has three wholly owned subsidiaries which were incorporated toprovide a tax efficient structure for the Company to invest in the underlyingproperty investments. Financial Highlights and Performance Summary •Share price rose by 8% over the period •Dividend of 1.16 pence declared post year end •Net asset value per share rose by 5.1% to £1.05 over the period (equivalent to £1.04 post dividend) Chairman's Statement I am pleased to welcome shareholders to the Company following the successfullaunch and to report the consolidated interim results and some positive news inthe short time of operation. Since launch on 25 October 2005 the Company's consolidated net asset value hasgrown by 5.1% with a first dividend paid on 28 February 2006 in respect of theperiod to 31 December 2005 of 1.16 pence per share. This is in line with theprojected dividend payment equating to 6.25 pence per share per annum but aheadof the projection in the Prospectus due to the earlier than forecast launchdate. Strong performance continued in the UK property market throughout 2005 andparticularly in the latter part with the weight of money and competition forproperties driving yields lower and producing strong capital growth. Themajority of the Company's performance in the short period since launch on thewhole reflected capital growth movements. The fundamentals favouring the UK property market remain positive with themajority of forecasts predicting continued capital growth during the course ofthe forthcoming year, albeit at more subdued levels than of late. The Company is weighted towards South East offices and it is pleasing to notethat the first signs of an office market rental recovery starting in CentralLondon were being seen at the end of 2005. The majority of investment houses arenow projecting office returns to be the strongest of all the property sectorsover the course of 2006. The Company is well placed to benefit from this upturnover the medium term, in our opinion, with the office market recovery spreadingthrough the South East region. Business plans have been prepared for each property to identify and maximiseindividual asset potential, and to ensure that the Company benefits from theprojected upturn in rental growth. Whilst the asset management initiatives arein the early stages of implementation, I am confident that they will beproducing positive returns over the course of 2006. I am also pleased to advise the successful securitisation of the £200 milliondebt facility which was concluded prior to the end of the period. This facilitynot only provides a very competitive level of interest at marginally over 5% perannum as an all inclusive cost fixed for 7 years, but also a good degree offlexibility allowing the manager opportunities to enhance rental and capitalgrowth from the portfolio going forward. The forthcoming year promises to be an exciting one for this new Company withasset management opportunities to be progressed and value extracted from therecently acquired portfolio. Nick Thompson Chairman of the Board 10 March 2006 Investment Manager's Commentary The UK Property Market The IPD Monthly Index reports that the All-Property total return for 2005 was18.8%, comprising an income return of 6% plus capital growth in excess of 12%.This good performance was due to continued strong investor demand and fallingyields driving up capital values. Across the three main sectors, retail totalreturns were best (19.3%), closely followed by offices (18.4%) and industrials(18.2%). UK economic growth fell to 1.8% per annum in 2005. This was largely due toslower consumer spending growth. However, retail rents held up better than mightnormally be expected in these circumstances - uplifts averaged 4% per annum lastyear. In the office sector, the Central London recovery gathered pace with sharpfalls in the vacancy rate. Rents have been back on an upward trajectory forsometime in the West End and this is now beginning to occur for the very bestquality space in the City as well. Industrial occupier markets also continued torecover in 2005. However, the rate of decline in available stock has been slowerthan anticipated. Nevertheless, the average rate of rental growth remainspositive at around 1-2% per annum. Looking ahead, we expect commercial propertyrents will experience the highest growth in locations where supply conditionsare tightening the fastest. A considerable weight of capital is still targeting UK commercial property. Withinflation now below its 2% per annum target, the scope for interest ratereductions exist. Most forecasters expect UK economic growth to recover and areincorporating modest cuts in base lending rates over the next 12 months. Lowerinterest rates are supportive of further yield driven capital appreciation in2006, albeit probably at a reduced pace compared with the last 2 years. (Source: Investment Property Databank ("IPD") December 2005 and Office ofNational Statistics January 2006) Portfolio Activity As at 25 December 2005 the value of the Group's portfolio was £505.6 millionwith an annual net income of £31.8 million showing a running yield at a propertylevel of 6.3%. The portfolio comprises 55 properties with an average unexpiredlease term in excess of 9 years. The void level at 31 December 2005 represented4.1% of total income (excluding Watford where the Group benefits from a rentguarantee until August 2007). During the period the Group completed the securitisation of the £200 milliondebt facility and no acquisitions and disposals were made. Asset managementinitiatives commenced providing a number of opportunities for lease regearing,lettings and surrenders, which are expected to continue as we work through theportfolio. The largest asset within the Group was subject to a substantial fire in November2005. The lease remains in place and insurers have accepted the claim. TheCompany has already instructed work to demolish and rebuild the existingbuilding. The valuation of the property remained unchanged at the end of theperiod. The portfolio is weighted positively towards the South East office sector whichalso holds a high proportion of the portfolio's lease expiries occurring overthe first five years. A number of discussions are already taking place withexisting tenants regarding potential lease renewals and, against the backgroundof an improving tenant market in this sector, we are confident of concluding anumber of these transactions during the course of this year and beyond. The future strategy is to progress and conclude active management initiativescontained within the individual property business plans, with the focus onimproving the income return of the portfolio. We are also looking to invest themonies available and are actively seeking investment product which will offerthe potential to improve the capital and rental growth potential of theportfolio over the medium term. ING Real Estate Investment Management (UK) Limited Portfolio Statistics Geographical As at 31 December 2005 the regional weightings of the Property Portfolio, as apercentage of current capital value, are summarised as follows: Central London 5.1%South East & Greater London 37.3%Midlands 18.6%South West 4.8%North 17.7%Wales 7.2%Scotland 4.4%Northern Ireland 3.2%Offshore UK 1.7% Sector As at 31 December 2005 the sector weightings of the Property Portfolio, as apercentage of current capital value, are summarised as follows: Offices 40.4%Industrial 22.1%Retail 20.6%Retail Warehouses 9.2%Leisure 7.7% Covenant Strength The covenant strength as at 30 September 2005 is summarised as follows (based asa percentage of current passing rent): Group IPD Quarterly benchmarkNegligible and Government risk 29.7% 36.5%Low risk 43.1% 31.0%Low-medium risk 11.7% 11.5%Medium-high risk 7.0% 10.6%High risk 2.6% 5.0%Ineligible/not matched 5.9% 5.4% Covenant strength data is produced by IPD and, as at 10 March 2005, is notavailable for 31 December 2005. Lease expiry As at 31 December 2005 the length of the leases to the first termination issummarised as follows (based as a percentage of current net annual rent): 0 - 5 years 36.4%5 - 10 years 26.3%10 - 15 years 24.8%15 - 25 years 10.6%25 + years 1.9% List of Properties by Value Band Properties in excess of £20mColchester Business Park, The Crescent, Colchester Office36-42 Frodsham Street and Frodsham Square, Chester RetailUnit 5320, Magna Park, Lutterworth, IndustrialPhase II, Parc Tawe, Link Road, Swansea Retail Warehouse Properties between £15m to £20mScottish Provident Buildings Donegall Square, Belfast RetailRegency Wharf II, Broad Street, Birmingham LeisureLincoln Place (Block 2),Farringdon Road, London EC1 Office Properties between £10m to £15mScots Corner, High St/Institute Rd, Birmingham RetailAngouleme Way Retail Park, Bury Retail WarehouseAngel Gate Office Village, City Road, London EC1 OfficeArena Court, Crown Lane, Maidenhead Office401 Grafton Gate East, Milton Keynes Office17/19 Fishergate, Preston RetailUnit 2, 9 Hedera Road, Ravensbank Back, Redditch IndustrialThe Business Centre, Units 2-13, Molly Millars Lane, Wokingham IndustrialScorpio Inns Pub Portfolio Leisure Properties between £5m to £10mDownmill Road, Bracknell Industrial9/12 St James Parade, Bristol OfficeLongcross Court, Newport Road, Cardiff OfficeCity Link House & Tolley House, Addiscombe Road, Croydon Office72/78 Murrygate, Dundee RetailQueens House,17/29 St Vincent Place, Glasgow OfficeLeys House, 86/88 Woodbridge Road, Guildford Office6/12 Parliament Row, Hanley RetailUnits 1- 3, 18/28 Victoria Lane, Huddersfield RetailProvident House, Ballacottier Business Park, Isle Of Man OfficeWaterside House, Kirkstall Road, Leeds Office1-3 Chancery Lane, London WC2 Office134/52 Balham High Road, London, SW12 Retail Strathmore Hotel, Arndale Centre, Luton LeisureUnits 1-13 Dencora Way, Sundon Park, Luton IndustrialHeron Industrial Estate, Spencers Wood, Reading IndustrialHaynes Way, Swift Valley Industrial Estate, Rugby Industrial171 Bath Road, Slough OfficeTrident House, 42/48 Victoria Street, St Albans OfficeNorthampton Business Park, 800 Pavilion Drive, Northampton OfficeAtlas, Third Avenue, Globe Park, Marlow OfficeEaster Court, Gemini Park, Warrington Industrial3 The Boulevard, Croxley Green, Watford Office1 Boulevard Shire Park, Welwyn Garden City OfficeLawson Mardon Buildings, Kettlestring Lane, York Industrial Properties under £5mUnit 1 Oakwell Park Industrial Estate, Birstall IndustrialRiverside Business Centre, Aberdeen OfficeWren House, Hedgerows Business Park, Chelmsford OfficeMerchants House, Crook Street, Chester OfficeKwik Save, Gorgie Road, Edinburgh Retail477 Alexandra Parade, Glasgow Retail593/599 Fulham Road , London SW6 RetailTrafford Park, Ashburton Road East, Manchester Industrial9/17,Western Road, Mitcham Retail Warehouse40 Garsington Road, Oxford Industrial69/75 Queensway, 2-12,Park Place, Stevenage Retail7&9 Warren Street, Stockport RetailGlobe House, Madeira Road, West Byfleet Office Consolidated income statement for the period from 15 September to 31 December 2005 Notes Income Capital Total £000 £000 £000IncomeRental income 3 7,152 - 7,152Service charge recharged to tenants 737 - 737Other operating income 60 - 60 --------- -------- ---------Total operating income 7,949 - 7,949 Gains and losses on investmentsUnrealised gains on revaluation ofinvestment properties - 18,371 18,371 --------- -------- --------- - 18,371 18,371 ExpensesProperty Management fee (848) - (848)Property expenses (66) - (66)Service charge cost of properties (737) - (737)Amortisation of finance costs (8) - (8)Swap arrangement fee (247) - (247)Other (133) - (133) --------- -------- ---------Total operating expenses 5 (2,039) - (2,039) Profit before finance costs and tax 5,910 18,371 24,281 Bank and deposit interest receivable 191 - 191Loan interest expense (1,915) - (1,915) --------- -------- --------- (1,724) - (1,724)Profit before tax 4,186 18,371 22,557 Tax 6 (300) - (300) --------- -------- ---------Profit for the period 3,886 18,371 22,257 ========= ======== ========= Earnings per share 7Basic (p) 7.3Diluted (p) 7.3 The total column of this statement represents the Group's Income Statement,prepared in accordance with IFRS. The supplementary revenue return and capitalreturn columns are both prepared under guidance published by the Association ofInvestment Trust Companies. All items in the above statement derive fromcontinuing operations. Notes 1 to 19 form part of these financial statements. Consolidated statement of changes in equityfor the period from 15 September to 31 December 2005 Share Share Distributable Retained Total Capital Premium Reserves Earnings £000 £000 £000 £000 £000 Profit for theperiod - - - 22,257 22,257 --------- ------- --------- ---------- ----------Totalrecognisedincome andexpenses - - - 22,257 22,257 Issue of sharecapital - 298,544 - - 298,544Transfer - (298,544) 298,544 - - --------- ------- --------- ---------- ----------Balance as at31 December2005 - - 298,544 22,257 320,801 ========= ======= ========= ========== ========== All income is attributable to the equity holders of the parent company. Thereare no minority interests. By way of a special resolution dated 30 September 2005, the amount standing tothe credit of the share premium account was cancelled and transferred to adistributable reserve. See Note 17. Consolidated Balance Sheetas at 31 December 2005 Assets Notes £000Non-current assetsInvestment properties 9 505,630 ----------Total non-current assets 505,630 Current assetsOther receivables 10 4,638Cash and cash equivalents 11 32,696 ----------Total current assets 37,334 Total assets 542,964 Current liabilitiesAccrued expenses and deferred income 13 (11,812)Other payables 14 (10,351) ----------Total current liabilities (22,163) Non-current liabilitiesBorrowings 12 (200,000) ----------Total non-current liabilities (200,000) Total liabilities (222,163) ----------Net assets 320,801 ========== Ordinary share capital 16 -Distributable Reserve 17 298,544Retained earnings 22,257 ----------Net assets 320,801 ========== Net Asset Value per share £1.05 ========== The interim report was approved by the Board of Directors on 10 March 2006 andsigned on its behalf by: Trevor Ash Robert Sinclair Consolidated cash flow statementfor the period from 15 September to 31 December 2005 £000 Profit before tax 22,557 Adjusted forInterest received (191)Interest paid 1,656Amortisation of finance costs 8Realised and unrealised surplus on investment properties (18,371) ------------Operating profit before working capital changes 5,659 Increase in trade and other receivables (2,689)Increase in trade and other payables 21,864 ------------ Net cash flows from operating activities 24,834 Cash flows from investing activitiesPurchase of investment property (487,259) ------------Net cash from investing activities (487,259) Cash flows from financing activitiesEquity raised 305,000Proceeds from long term borrowings 200,000Issue costs of borrowing & equity raising (8,414)Interest paid (1,656)Interest received 191 ------------Net cash flows from financing activities 495,121 ------------Net increase in cash and cash equivalents 32,696 ============ Cash and cash equivalents at beginning of period - ------------Cash and cash equivalents at end of period 32,696 ============ Notes to the financial consolidated statements for the period ended 31 December 2005 1. General information ING UK Real Estate Income Trust Limited was incorporated in 15 September 2005and is registered as a closed ended Guernsey investment company. The address ofthe registered office is given on page 23. The interim consolidated financial statements are prepared for the period from15 September to 31 December 2005. The first accounting period and auditedfinancial statements of the Group will be prepared for the period ending 31December 2006. These financial statements are presented in pounds sterling because that is thecurrency of the primary economic environment in which the Group operates. 2. Significant accounting policies Basis of accounting The financial statements of the Group have been prepared in accordance withInternational Financial Reporting Standards ("IFRS"), which comprise standardsand interpretations approved by the International Accounting Standards Board("IASB"), and International Accounting Standards and Standing InterpretationsCommittee interpretations approved by the International Accounting StandardsCommittee ("IASC") that remain in effect, and to the extent that they have beenadopted by the European Union. The financial statements have been prepared on the historical cost basis, exceptfor the revaluation of investment properties. The principal accounting policiesadopted are set out below. Where presentational guidance set out in theStatement of Recommended Practice ('SORP') for investment trusts has been issuedby the 'Association of Investment Trusts ('AITC') in December 2005 and isconsistent with the requirements of IFRS, the Directors have sought to preparethe financial statements on a basis compliant with the recommendations of theSORP. Basis of consolidation The consolidated financial statements incorporate the financial statements ofthe Company and entities controlled by the Company made up to 31 December.Control is achieved where the Company has the power to govern the financial andoperating policies of an investee entity so as to obtain benefits from itsactivities. All intra-group transactions, balances, income and expenses areeliminated on consolidation. Presentation of the income statement In order to better reflect the activities of an investment trust company and inaccordance with guidance issued by the AITC, supplementary information whichanalyses the income statement between items of a revenue and capital nature hasbeen presented alongside the income statement. Investment properties Following the initial recognition at cost, land and buildings are carried at arevalued amount which is the fair value at the date of the revaluation. Fairvalue is determined by reference to market-based evidence, which are the amountsfor which the assets could be exchanged between a knowledgeable willing buyerand a knowledgeable willing seller in arm's length transactions as at thevaluation date. The fair value of investment property is based on valuation by an independentvaluer who holds a recognised and relevant professional qualification and whohas recent experience in the location and category of the investment propertybeing valued. The property subject to fire damage has been valued on the basisthat the capital expenditure provided for within creditors had occurred.Movements in fair value are included in the income statement. An item of investment property is derecognised upon disposal or when no futureeconomic benefits are expected to arise from the continued use of the asset. Anygain or loss arising on derecognition of the asset (calculated as the differencebetween the net disposal proceeds and the carrying amount of the item) isincluded in the income statement in the year the item is derecognised.Properties are not depreciated. Realised and unrealised gains in investment properties have been presented ascapital items within the income statement. The loan has a first ranking mortgage over all the properties. See Note 12. In line with industry practice, properties are held in nominee companies. Leases An operating lease is a lease other than a finance lease. Lease income isrecognised in income on a straight-line basis over the lease term. Indirectcosts incurred in negotiating and arranging an operating lease are added to thecarrying amount of the lease asset and recognised as an expense over the leaseterm on the same basis as the lease income. The financial statements reflect the requirements of SIC15, "Operating Leases -Incentives" to the extent that they are material. Lease income and expenses have been presented as revenue items in the incomestatement. The rental revenue consists of rent charged, exclusive of VAT, in the periodunder review. Service costs charged to tenants The income charged to tenants for property service charges and the costsassociated with such service charges are shown separately in the profit and lossaccount to reflect that notwithstanding this money is held on behalf of tenantsoccupying the properties, the ultimate risk for paying and recovering thesecosts rests with the property owner. Income and expenses Income and expenses are included in the Income Statement on an accruals basis.All of the Group's income and expenses are derived from continuing operations. Revenue is recognised to the extent that it is probable that the economicbenefit will flow to the Group and the revenue can be reliably measured. Property expenses Property operating costs include the costs of professional fees on letting andother non-recoverable costs. Active management costs represent the costs ofpayments made to enhance property value or income from re-configuring space orre-gearing leases. Cash and cash equivalents Cash includes cash in hand and cash with banks. Cash equivalents are short-term,highly liquid investments that are readily convertible to known amounts of cashwith original maturities in three months' or less and that are subject to aninsignificant risk of change in value. Trade receivables Trade receivables are stated at their nominal amount as reduced by appropriateallowances for estimated irrecoverable amounts. Interest bearing loans and borrowings All loans and borrowings are initially recognised at cost, being the fair valueof the consideration received net of issue costs associated with the borrowing.After initial recognition, interest-bearing loans and borrowings aresubsequently measured at amortised cost using the effective interest ratemethod. Amortised cost is calculated by taking into account any issue costs, andany discount or premium on settlement. Gains and losses are recognised in theincome statement when the liabilities are derecognised, as well as through theamortisation process. Finance Costs Finance costs incurred relating to the arrangement of the loan are written offto the income statement over the term of the loan. Other assets/payables Other assets/payables are not interest bearing and are stated at their nominalvalue. Taxation The Company is exempt from Guernsey taxation on income derived outside Guernseyunder the Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989. A fixed annualfee of £600 is payable to the States of Guernsey income tax authorities inrespect of this exemption. No charge to Guernsey taxation will arise on capital gains. The Directors intend to conduct the affairs of the Group such that themanagement and control of the Group is not exercised in the United Kingdom andthat the Group does not carry on a trade in the United Kingdom. Accordingly theGroup will not be liable to United Kingdom taxation on its income or capitalgains other than certain income deriving from a United Kingdom source. The Group is subject to United Kingdom taxation on income arising on theProperty Portfolio after deduction of allowable debt financing costs andallowable expenses. Principles for the cash flow statement The cash flow statement has been drawn up according to the indirect method,separating the cash flows from operating activities, investment activities andfinancing activities. The net result has been adjusted for amounts in the incomestatement and movements in the balance sheet which have not resulted in cashincome or expenditure in the period. The cash amounts in the cash flow statement include those assets that can beconverted into cash without any restrictions and without any material risk ofdecreases in value as a result of the transaction. Dividends that have beenproposed and declared are included in the cash flow from financing activities. Risk management The Group invests in commercial properties in the United Kingdom, the Isle ofMan and Northern Ireland. The following describes the involved risks and theapplied risk management. Real estate risks The yields available from investments in real estate depend primarily on theamount of revenue earned and capital appreciation generated by the relevantproperties as well as expenses incurred. If properties do not generatesufficient revenues to meet operating expenses, including debt service andcapital expenditures, the Group's revenue will be adversely affected. Revenuefrom properties may be adversely affected by the general economic climate, localconditions such as oversupply of properties or a reduction in demand ofproperties in the market in which the Group operates, the attractiveness of theproperties to tenants, the quality of the management, competition from otheravailable properties and increased operating costs (including real estatetaxes). In addition, the Group's revenue would be adversely affected if a significantnumber of tenants were unable to pay rent or its properties could not be rentedon favourable terms. Certain significant expenditure associated with each equityinvestment in real estate (such as external financing costs, real estate taxesand maintenance costs) generally are not reduced when circumstances cause areduction in revenue from properties. By diversifying in regions, sectors, risk categories and tenants, the Managerexpects to lower the risk profile of the portfolio. Risks of leverage The Group has external borrowings in connection with its investments to increasethe potential equity performance. There can be no assurance that the Group willbe able to secure the necessary external financing. Although the use of leveragemay enhance returns and increase the number of investments that can be made, itmay also increase the risk of loss. This includes the risk that available fundswill be insufficient to meet required payments and the risk that existingindebtedness will not be able to be refinanced or that terms of such refinancingwill not be as favourable as the terms of existing indebtedness. Interest rate risk The following table sets out the carrying amount, by maturity, of the Group'sfinancial instruments. Less than one year 1 to 5 More than 5 years Total £000 years £000 £000 £000Cash and cashequivalents 32,696 - - 32,696Term loan - - 200,000 200,000 Credit risk Credit risks, or the risk of counter-parties defaulting, are controlled by theapplication of credit approvals, limits and monitoring procedures. Whereappropriate, the Group obtains collateral in the form of rent deposits. Theextent of the Group's credit exposure is represented by the aggregate balance ofamounts receivable, reduced by the effect of any netting arrangements withcounter-parties. Liquidity risk Liquidity risk arises from the possibility that customers may not be able tosettle obligations within the normal terms of trade. To manage this risk, theGroup periodically assesses the financial viability of customers. 3. Rental income Rent receivable is stated exclusively of Value Added Tax and arose wholly fromcontinuing operations in the United Kingdom, Northern Ireland and the Isle ofMan. 4. Business and Geographical segments The Directors are of the opinion that the Group, through its subsidiaryundertakings, operates in one reportable industry segment, namely real estateinvestment, and across one primary geographical area, namely the United Kingdom,Northern Ireland and the Isle of Man and therefore no segmental reporting isrequired. The portfolio consists of 54 commercial properties, comprising office,retail and industrial sectors, and one Public House Portfolio (the "PubPortfolio"). 5. Staff numbers and costs The Company has no employees. 6. Tax 2005 £000UK income tax at 22% on UK rental income 300 7. Earnings per share From continuing operations, the calculation of the basic and diluted earningsper share is based on the following data: Earnings for the purposes of basic earnings per share being netprofit attributable to equity holders: £22,257,000The average number of share in issue during the period: 305,000,000 8. Subsidiaries ING UK Real Estate Income Trust Limited owns 100% of the share capital of: - ING UK Real Estate (Property) Limited, PO Box 255, Trafalgar Court,Les Banques, St Peter Port, Guernsey GY1 3QL; and - ING (UK) REIT (SPV) Limited, PO Box 255, Trafalgar Court, LesBanques, St Peter Port, Guernsey GY1 3QL. ING UK Real Estate (Property) Limited and ING (UK) REIT (SPV) Limited own 100%of the units in ING (UK) Listed Real Estate, a Guernsey Property Unit Trust (The"GPUT") The subsidiaries and the GPUT were incorporated to provide a tax efficientstructure for the Company to invest in the underlying property investments. 9. Investment properties 2005 £000Costs of properties as at 15 September -Additions 487,259Surplus on revaluation 18,371At 31 December 505,630 The investment properties were valued by King Sturge, Chartered Surveyors, as at31 December 2005, applied on the basis of open market value in accordance withthe Appraisal and Valuation Manual of the Royal Institute of CharteredSurveyors. The historical cost of investment property included in the valuation above was£487,259,000. The loan facility is secured by a first ranking fixed charge over all propertiesheld. The Pub Portfolio tenant has an option to purchase one third of the pubproperties in 2006, one half in 2011 and the whole in 2016. This option price isat market valuation and has been accounted for in the above valuation. Theoption has not been exercised to date. 10. Other receivables 2005 £000Trade debtors 2,609Capitalised finance costs 1,949Other receivables 80 4,638 The unamortised loan arrangement costs as at 31 December 2005 are £1,949,000.These are amortised over the life of the loan. For the period ended 31 December2005 £8,000 of these costs were written off to the income statement. 11. Cash and cash equivalents 2005 £000Cash at bank and in hand 9,761Short term deposits 22,935 32,696 Cash at bank and in hand earns interest at floating rates based on daily bankdeposit rates. Short-term deposits are made for varying periods of between oneday and one month depending on the immediate cash requirements of the group, andearn interest at the respective short-term deposit rates. The fair value of cashand cash equivalents is £32,696,000. 12. Interest bearing loans and borrowings Type Rate 2005 Maturity % £000 DateFixed 4.805 £200,000 Jan 2013 On 20 December 2005 the Group entered into a seven year fixed rate loan with ING(UK) Listed Real Estate Issuer PLC, a newly set up Special Purpose Vehiclewhich, back-to-back, issued £200 million of AAA seven year loan notes to thedebt market. The loan has a fixed interest rate of 4.805%. The debt proceedswere used to repay the £200 million bridge loan which was due to expire in April2006. 13. Accrued expenses and deferred income 2005 £000Property management fees 848Other accruals 3,416Deferred rental income 7,548 11,812 14. Other payables 2005 £000VAT liability 2,366Trade creditors - capital expenses 7,700Other 284 10,350 15. Contingencies and capital commitments There are none as at 31 December 2005. 16. Ordinary Share Capital Authorised: 305 million of ordinary shares of nil par value Issued and fully paid: 305 million ordinary shares of nil par value 17. Share Premium and distributable reserve Share Distributable Premium Reserve 2005 2005 £000 £000Premium arising on issue of equity shares 305,000 -Expenses of issue of equity shares (6,456) - 298,544 - Transfer to distributable reserve (298,544) 298,544 - 298,544 By way of a special resolution dated 30 September 2005, the amount standing tothe credit of the share premium account was cancelled and transferred to adistributable reserve. 18. Related party transactions Under the terms of the Investment Management Agreement, ING Real EstateInvestment Management (UK) Limited (the "Investment Manager") receivesremuneration for property management and administration services. The managementfee is payable quarterly in arrears and is equal to the aggregate of thefollowing: a) one quarter of 90 basis points of gross property assets up to and including £600 million b) one quarter of 82.5 basis points of gross property assets in excess of £600 million and up to and including £800 million c) one quarter of 75 basis points of gross property assets in excess of £800 million d) one quarter of 40 basis points of cash assets ING Real Estate Investment Management (UK Funds) Limited (the "Fund Manager") ispaid a quarterly fee of £150,000 per annum by the Group in respect of theadministration services. This is deducted from the fee referred to above. Duringthe period the Investment Manager and Fund Manager were paid a total of £842,000in respect of the above services. ING UK Real Estate Income Trust Limited acquired the units of the GPUT on 25October 2005 from Nationale Nederlanden Intervest XII B.V, a member of the INGGroup, and certain discretionary clients of the Investment Manager. Under theterms of the GPUT Acquisition Agreement (the "Agreement") the vendors wereentitled to consideration of approximately £55.7 million, satisfied by the issueof shares in ING UK Real Estate Income Trust Limited and cash. Consideration of£55.3 million was paid on 25 October 2005, with a further £0.4 million payablewithin six months on undertaking an independent completion review. The Agreementalso entitles the Investment Manager to fees for arranging the initialacquisition (£5.2 million), the financing (£0.8 million) and the onward sales(£0.8 million), as well as a brokerage fee (£2.0 million). These fees were paidduring the period. ING UK Real Estate Income Trust Limited has no controlling parties. 19. Events after the balance sheet date A dividend of £3,538,000 (1.16 pence per share) was approved by the Board on 9February 2006. INDEPENDENT REVIEW REPORT ING UK REAL ESTATE INCOME TRUST LIMITED ("The Fund") Introduction We have been instructed by the Fund to review the financial information for theperiod from 15 September to 31 December 2005 which comprises the ConsolidatedIncome Statement, the Consolidated Statement of Changes in Equity, theConsolidated Balance Sheet, the Consolidated Cash Flow Statement and RelatedNotes to the Consolidated Financial Information 1 to 19. We have read the otherinformation contained in the interim report and considered whether it containsany apparent misstatements or material inconsistencies with the financialinformation. This report is made solely to the Fund, in accordance with Bulletin 1999/4issued by the Auditing Practices Board. Our work has been undertaken so that wemight state to the Fund those matters we are required to state to them in anindependent review report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other thanthe Fund, for our review work, for this report, or for the conclusions we haveformed. Director's responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the Directors. The Directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority. The Directors are also responsiblefor ensuring that the accounting policies and presentation applied to theinterim figures are consistent with those which will be applied in preparing thefirst annual accounts except where any changes, and the reasons for them, aredisclosed. International Financial Reporting Standards The interim report has been prepared in accordance with International AccountingStandard 34, "Interim Financial Reporting". Review work performed We conducted our review in accordance with the guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the United Kingdom. Areview consists principally of making enquiries of management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with International Standards on Auditing (UK andIreland) and therefore provides a lower level of assurance than an audit.Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the period from 15September to 31 December 2005. Deloitte & ToucheChartered Accountants, 10 March 2006 Company Information Directors: Registered Office:Nicholas Thompson (Chairman) Trafalgar CourtTrevor Ash Les BanquesDavid Blight St. Peter PortJohn Gibbon GuernseyRobert Sinclair Investment and Property Manager: Auditors:ING Real Estate Investment Management (UK) Limited Deloitte & Touche6th Floor Regency Court60 London Wall Glategny EsplanadeLondon EC2M 5TQ St Peter Port Guernsey GY1 3HWFund Administrator, Registrar and Secretary: Property Valuers:Northern Trust International Fund Administration King Sturge LLPServices (Guernsey) Limited 7 Stratford PlacePO Box 255 LondonTrafalgar Court W1C 1STLes BanquesSt. Peter PortGuernseyGY1 3LQ Receiving Agent and UK Transfer/Paying Agent: Solicitors to the Company:Computershare Investor Services Plc As to English LawPO Box 859 Norton RoseThe Pavilions Kempson HouseBridgewater Road Camomile StreetBristol BS99 1XZ London EC3A 7AN Tax Advisers: As to Guernsey LawDeloitte and Touche LLP Carey OlsenHill House PO Box 981 Little New Street 7 New StreetLondon EC4A 3TR St Peter Port Guernsey GY1 4BZ This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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