Tritax Polska No.1 Fund Limited · 2017. 11. 2. · Saffery Champness La Tonnelle House Les Banques...

Tritax Polska No.1 Fund Limited

Annual Report and Audited Consolidated Financial StatementsFor the year ended 5 April 2012

Company registration number: 46273

Tritax Polska No.1 Fund Limited Page 01

Annual report and audited consolidated financial statements for the year ended 5 April 2012

Contents02 Officers and Professional Advisers

03-04 Chairman’s Statement

05-10 Fund Manager’s Report

11 Board of Directors

13-14 Directors’ Report

15 Independent Auditor’s Report

16 Consolidated Statement of Comprehensive Income

17 Consolidated Statement of Financial Position

18 Consolidated Statement of Cash Flows

19 Consolidated Statement of Changes in Equity

20-35 Notes to the Consolidated Financial Statements



Officers and Professional Advisers

Directors

Andrew HowatMichael McKeanMark Shaw (Chairman)

Administrator, Company Secretary, Designated Manager and Registrar

Praxis Fund Services LimitedSarnia HouseLe TruchotSt Peter PortGuernseyGY1 3NA

Asset Manager

Stanmark Asset Management Polska Sp. z o.o.Nowy Swiat61 apt. 3WarsawPoland

Auditor

Saffery ChampnessLa Tonnelle HouseLes BanquesSt SampsonGuernseyGY1 3HS

Fund Manager

Tritax Financial Services (Polska 1) LimitedThe Lodge, OdellBedfordMK43 7BB

Promoter, Sponsor and Distributor

Tritax Securities 1 LimitedThe Lodge, OdellBedfordMK43 7BB

Banker

Royal Bank of Scotland International

Legal and Tax Advisers

Carey Olsen (Guernsey)Oostvogels Pfister Roemers (Luxembourg)Wardynski & Partners (Poland)

Registered Office

Sarnia HouseLe TruchotSt Peter PortGuernseyGY1 3NA

Company Registration Number

46273



Chairman’s Statement

Dear Investor

IntroductionI am pleased to announce the full year results for the Tritax Polska No.1 Fund Ltd for the period to 5 April 2012. The period has witnessed a number of asset management and letting successes, which have unfortunately been set against a weakening of the economic situation in Poland and a commercial property market characterised by low transaction volumes and downward pressure on rents.

The effect this situation has had on the property valuations, which are down by 9%, has been the main contributing factor to a fall in the NAV per share for the Fund to €0.84 from €1.12 in April 2011.

Economic BackdropWhilst a recovery is considered to be on the horizon for Europe as a whole, it is likely to be some time before this is considered sustained growth. The situation remains fragile, and the risk of a renewed crisis is ever present.

Against this backdrop, growth in Poland has continued, but at a slower pace. GDP growth in Q2 2012 was estimated at 2.4%, slowing for a second straight quarter and at a faster than expected rate. Poland is still set to register the highest economic growth in the EU in 2012 despite this moderate slowdown, and projected to continue in 2013. Domestic demand continues to be the main driver of growth.

The continued volatility of the Euro currency means Poland has paused in their pursuit of adopting the single currency. By retaining the Zloty, Poland has the ability to defend its economy in the case of a market upheaval, instead of relying on the embattled ECB. Historically this would have been considered a negative, but because the financial health of Poland is stronger than so many Euro zone states, this can now be considered a positive.

Property MarketsDespite the majority of commentators reporting last year that they expected a significant weight of investment into the Polish commercial property market, the reality has been a period of historically low transaction volumes and a polarisation in the values and liquidity of ‘prime’ and ‘non-prime’ property.

Of the transactions taking place, the majority have been very large (€50 million +), concentrated predominantly on prime shopping centres and Warsaw offices. The market for smaller properties has been limited, due in a large part to a lack of finance for new purchases, blocking would-be buyers in the market.

Three properties were identified for sale during the period, but unfortunately the only buyers present in the market were predatory purchasers seeking distressed situations. These properties were therefore withdrawn, though the Fund and Asset Managers continue to closely monitor active purchasers in the market.

The Fund has successfully retained a significant majority of existing tenants during the period and attracted new tenants to vacant space. However this has been done against a backdrop of falling rents and increasing incentives being offered to tenants, making value creation through these events increasingly challenging.

A further challenge has been the collection of rents and service charge from tenants. Increasingly tenants are going to extreme measures to delay or withhold payments due under their lease obligations. Appropriate and robust systems are in place to recover all debts, but Poland is a very litigious society and increasingly many tenants are opting to refer matters to court to delay payments. This is having a significant impact on cashflow. To actively try to resolve this, Estate Fellows were appointed as the new Property Manager in August 2012. In addition to a cost saving for the Fund, the incoming manager has significant experience in debt recovery from such tenants.

Changes to Tax LegislationThe Polish Ministry of Finance has published a proposal that would make Polish Joint Stock Limited Partnerships (‘SKAs’) subject to corporation tax. The Fund’s investment properties are owned by separate SKAs which at present are tax transparent with the tax liability falling on the partners. Since the Closed Ended Fund CC1 is a tax exempt vehicle, the profits attributable to it in respect of its direct holding in the SKAs are not at present subject to tax. Only the profits attributable to the intermediate general (unlimited) partner are at present taxable income of the general partner. The Ministry has not as yet published proposals for any transitional relief or the basis on which the disposal of assets acquired prior to the change would be taxable. The Board is actively looking at a number of possible solutions which would legally minimise any future tax exposure in Poland. The Board notes that the bulk of any potential tax liability would arise on the future disposal of the investment properties.

Fund PerformanceThe combined value of the investment properties at April 2012 was recorded at €70,280,518. This represented an overall fall in values of 9% on those recorded at April 2011.

Consistent with the market commentary, the office properties in Warsaw saw the smallest drop in value of 2.5%, underpinned by a stronger occupational market. The retail, industrial and regional office markets, however, saw a larger fall of 13.7% on 2011 values. The lack of transactional data upon which to establish market trends has made the exercise of valuing properties a much more subjective and academic exercise.

The largest drop in value was witnessed at the Fordon Gallery, Bydgoszcz, where tenant demand has been limited. To ensure the commercialisation of the centre, replacement tenancies have been at well below market rental levels. The drop of 27% in Euro terms is exaggerated by the conversion rate of PLN to Euro, the actual value difference in PLN being 20% (this property’s leases are predominantly denominated in PLN, so it is valued in PLN and converted). With the ground and first floors now largely fully let, the Asset Manager is now able to start building rents back towards market levels.



The property valuations have been the biggest contributor to the drop in NAV per share from €1.12 to €0.84.

A further negative influence on the NAV has been the revaluation of the interest rate swaps (fixed rate elements of the bank loans). It was a requirement of the bank that these were taken out and the continued low interest rate environment means that these are categorised as losses in the financial statements.

The Board regularly scrutinises the costs of the service providers to the Fund and one of the decisions made has been to terminate the agreement with Praxis Fund Services Limited as administrator in favour of a more cost effective solution to be provided by Ardel Fund Services Limited. This change will become effective not later than 19 January 2013.

In conclusion we expect the property market will remain challenging for the next 2 years or so and as such, the Fund must adopt a diligent focus on implementation of asset management initiatives to preserve and enhance value, in the anticipation that liquidity will return to the market to enable realisation of the assets with effect from 2014.

Yours sincerely

Mark Shaw



Fund Manager’s Report

In this fifth report, TFS (Polska 1) Ltd as Fund Manager to the Tritax Polska No.1 Fund is pleased to provide investors with an update in respect of the portfolio.

Macroeconomic OverviewAfter a sharp rebound in 2010 from the trough of the economic and financial crisis, economic growth in Poland strengthened further in 2011, reaching 4.3%. All components of domestic demand supported this performance, but private investment was particularly strong, on the back of growing profitability and easy access to credit. Private consumption was robust, although its growth was somewhat lower than in 2010, while public investment benefited from a large inflow of EU structural funds.

However, during the second half of 2011, Poland felt the repercussions of the Global slowdown. External demand suffered and consumer and producer confidence waned. At the same time, a considerable depreciation of the zloty partially offset the negative impact of weakening external demand.

Real GDP growth is projected to slow down considerably to 2.7% in 2012 on the back of deteriorating global demand. It is set to remain at a similar level in the following year. Domestic demand is projected to remain the main driver of growth, but the focus is expected to continue to shift from consumption to investment. Growth in private consumption is likely to decelerate constrained by a slowdown in real wage developments and by declining consumer credit.

Both government consumption and investment are planned to stabilise in 2012. Public investment peaked prior to the European football championship in June 2012, and is expected to decrease sharply thereafter in line with the completion of major infrastructure projects by the end of 2012.

The main risks to the stability of the financial sector and sustained credit supply to the economy stem from the uncertain international environment through large foreign ownership of the banking sector and continued, but diminishing, reliance on foreign funding for liquidity provision.

The general government debt increased notably in 2011, mainly due to a significant depreciation in the Polish currency, raising concerns about exceeding the legally binding threshold of 55% of GDP. However, in 2012, thanks to the slight increase in the zloty’s exchange rate, further reduction in the headline deficit and prudent government’s debt management strategy, the general government debt is expected to start decreasing for the first time since 2007.

(Souce: European Economic Forecast 2012 – European Commission)

Commercial Property MarketThe total estimated property investment volume in Poland remains high and in Q1 2012 the volume was close to €800 million. In 2011 the total investment volume was circa €2.5 billion which was the highest number since 2007.

(Souce: Polish Investment Market Overseas – Polish Properties)

The largest share of investment volumes in Q1 2012 were retail transactions which constituted 76% of total volume. The share of office and warehouse properties in the total investment volume was the same and accounted for circa 10%. The largest transaction in Poland in Q1 2012 was a share deal of Złote Tarasy shopping centre in Warsaw for €475 million. This transaction constituted 59% of the total investment volume in Q1 2012.

Number of transactions

OfficeTotal Warehouse Retail Hotel

2004 2005 2006 2007 2008 2009 2010 2011 1st H 2012

90

80

70

60

50

40

30

20

10

0

26

37

66

86

68

52

24

47

80



Fund Manager’s Report (continued)

2012 Q1 Investment Activity by Location

(Souce: Polish Investment Market Overseas – Polish Properties)

The property market data, whilst encouraging in its overall outlook, does contain items of concern. The key risks to the recovery and stabilisation of the market are continued polarisation of the market between Warsaw and the regional cities and continued low transaction volumes.

The occupational markets in Warsaw, particularly the office market have proved relatively resilient to the downturn, largely due to a lack of new development. This is in contrast to the less mature regional markets which have seen a more significant fall in rents as supply of modern accommodation is more readily available. This contrast in supply and underlying tenant demand has caused investors to focus on the more established Warsaw market.

The total volume of transactions which compares well against previous years is distorted by a number of very large transactions, some commentators estimate there to have been only 12 investment transactions in Poland during the first half of 2012, evidence of the stark lack of activity outside the bigger deals.

A lack of available finance is a contributing factor to the low transaction volumes. As the economic commentary suggests, foreign ownerships of many of the banks in Poland means that issues outside of Poland are driving the lending appetite of some of the largest and traditionally most active banks.

Appetite for properties owned by the Fund, where the average lot size is circa €7.5 million, is particularly limited by the lack of debt finance. Likely purchasers such as private individuals and domestic and overseas property companies typically seek to utilise debt finance to enhance returns.

The outlook for realisation of the properties within the portfolio against this backdrop is uncertain. Investor appetite will be reliant on a combination of improved appetite for lending by the banks and from a stabilisation of the occupational markets. From a macro perspective, Poland remains a target for new capital and a frontrunner in the region, however this needs to be translated into transactions.

Prime yields in Poland

Office Warehouse Retail

2004 2005 2006 2007 2008 2009 2010 2011 1st H 2012

9

8

7

6

5




Portfolio

The schedule above details the properties owned by the Fund as at April 2012. It is evident from the schedule that there has been a drop in the values of the portfolio since April 2011, the overall result being a 9% reduction.

As the market data supports, the office properties in Warsaw have proved to be the most resilient, falling 2.5% during the period. The portfolio weighting based on the acquisition costs is 38% in favour of Warsaw offices.

The regional offices in Poznan where occupational and investor demand are currently less prevalent have seen a larger fall of 6%. This reflects the reducing rents/increasing void periods and uncertainty due to the lack of transactions as to where yields/pricing is in these markets.

The two warehouses fell by 12.5% due to a combination of vacancy and short term income in Dzialkowa, Warsaw which has since been let. There has also been a reduction in value of the development site at Szajnochy, Bydgoszcz due to the lack of appetite for speculative development.

The two retail assets have been worst hit, falling by 20%. This has been driven by an exceptionally tough occupier market where tenants are seeking short term, flexible leases at reduced rental levels.

S.K.A. (*) Property SectorTotal

LettableArea (m2)

Purchase Price(excluding

purchase costs)

ValuationApril 2011

ValuationApril 2012

1 68 Piekna, WarsawOffice

1,500 d3,340,000 d4,800,000 d4,300,000(Retail)

3 Szajnochy, BydgoszczWarehouse

2,200 d2,600,000 d2,400,000 d1,942,518(Office)

4 Ratajczaka, PoznanOffice

2,370 d7,500,000 d6,180,000 d6,000,000(Retail)

5 Dwor Hamburski, PoznanOffice

3,409 d8,300,000 d9,930,000 d9,100,000(Retail)

6 Wola Plaza, WarsawOffice

8,500 d17,100,000 d18,600,000 d18,400,000(Retail)

7 City Park, Poznan Retail 3,409 d6,500,000 d7,090,000 d6,300,000

8

Okecie (Building B), Warsaw

Okecie (Building A), Warsaw

Warehouse (Office)

Warehouse (Office)

5,562

d8,513,000 d8,500,000 d7,600,000

2,939

9Fordon Gallery, Bydgoszcz

Retail5,041 d10,000,000 d11,273,452 d8,368,000

(Supermarket)

11 Jasna, WarsawOffice

2,427 d6,000,000 d8,350,000 d8,270,000(Restaurant)

TOTAL: d69,853,000 d77,123,452 d70,280,518

(*) S.K.A. is the property owning vehicle.

Portfolio summaryPortfolio Value by Property Portfolio Value by Region




Val

uati

on

(r)

Net

Ope

rati

ng In

com

e(r

)

20

18

16

14

12

10

8

6

4

2

–

Mill

ions

1,400,000

1,200,000

1,000,000

800,000

600,000

400,000

200,000

–

2011 Value (£)

2011 Rental income (£)

2012 Value (£)

2012 Rental income (£)

Dzialko

waWola

Jasna

Piekna

City Pa

rk

Dzialko

wa

Rajtacz

aka

Fordon

Szjanoch

y

City Park Gallery

Dwor Hamburski

Dzialkowa

9%

13%

11%

15%11%

6%

8%

3%

24%

Fordon Galleria

Jasna 24

Piekna 68

Ratajczaka 19

Szjanochy

Wola Plaza

Portfolio (continued)

The chart above confirms that the Fund successfully improved the net income in 6 out of 9 properties. The down valuation is therefore a reflection of the uncertainty around capitalisation rates due to a lack of transactional evidence and the adoption of more pessimistic void periods and lower rental levels.

Overall the property values still represent a small premium against the net purchase cost.

Bydgoszcz

Poznan

Warsaw30%

18%

52%




Portfolio summary (continued)Portfolio Vacancy Rate

The vacancy rate of 7% across what is a mixed portfolio in respect of asset class and location compares favourably with recent research indicating the vacancy rate in Warsaw CBD (offices), one of the best performing sectors, is 9%.

Asset ManagementThe illiquidity of the investment market means that a sale of the three properties identified for disposal at anything other than distressed prices has not been possible. The Asset Manager continues to monitor closely all new entrants and active participants in the market to try and establish appropriate exit scenarios for the Fund properties.

In the interim, the focus has been on the retention of existing tenants and the securing of new tenants for the vacant space. Against a difficult market backdrop of falling rents and increasing incentives, SAMP have been successful in securing a number of new lettings and some significant lease re-gears with existing tenants.

Maintaining and improving value with these lease events remains difficult. The availability of alternative space in most markets makes the tenants negotiation position very strong. As such they are requiring short term, flexible leases, lower rents and larger incentive packages.

One of the greatest challenges facing the Fund is that of tenant arrears. Whilst there are established systems in place and indeed the property manager has been replaced to try and improve results, there remains a reluctance of many tenants to honour their lease obligations in a timely manner.

Furthermore Poland has become an increasingly litigious society, with tenants often challenging in the courts their obligations under their lease agreements. This is a time consuming and costly process, but one which is ultimately unavoidable. The Asset Manager continues to work through ways to improve this, but in the interim this will impinge on the surplus cashflows within the structure.

Some of the highlights in the period between April and the date of this report include:

Ratajczaka, Poznan – LEASE RE-GEAR

386 sq m 1st Floor. Let to ING. Re-geared prior to existing lease expiry at:

€12.00 psm per month on a new 3 year lease with 3 months rent free. Previous rent was €14.22 psm pm.

(April 2012)

Wola Plaza – LEASE RE-GEAR

420 sq m 3rd Floor. Let to ING. Re-geared prior to existing lease expiry at:

€11.00 psm per month on a new 3 year lease with 3 months rent free. Previous rent was €13.10 psm pm.

(April 2012)

Occupied

Vacant

93%

7%

Asset Management (continued)Dzialkowa, Warsaw – NEW LETTING

720 sq m warehouse/office. Let to Bank Komórek Macierzystych on a new 10 year lease.

€5.00 (warehouse) and €11.00 (offices), 20 months rent free spread over the term.

(August 2012)

Piekna, Warsaw – NEW LETTING

258.09 sq m 4th Floor. Let to Reinhold Polska on a new 3 year lease.

€17.00 psm pm, 4.5 months rent free spread over the term.

(May 2012)

StrategyThe priorities of the Fund Manager and Asset Manager over the next 12 months are:

• Continuedpro-activepursuitofallarrearsintheportfolio;

• Continuedinteractionwithexistingtenantstorenewandextendexistingleases;

• Activemarketingofanyvacantspaceintheportfolio;

• MonitoringofinvestordemandfortheFundproperties.

TFS (Polska 1) LtdSeptember 2012






Board of Directors

Andrew Howat has over 25 years experience within the financial services arena. Andrew was Managing Director of Butterfield Fulcrum (Guernsey), having previously been Managing Director of Capita Financial Group in the Channel Islands and Investec Administration Services in Guernsey. Prior to this he spent over a decade living and working in Asia, based in Hong Kong. During this period Andrew was Operations Director for ING Financial Markets, responsible for activities across the Asia Pacific region, before completing his Asian tour at UBS. Andrew has extensive experience acting as a Director of a number of offshore funds and management companies specialising in investments across a variety of sectors. Andrew is a Chartered Member of the Chartered Institute for Securities and Investments.

Michael McKean is an English solicitor who, after many years of practice in England, established Wedlake Bell McKean in Guernsey. He retired from that firm in 1996. He has been involved in a number of major town centre and other significant property developments and also has extensive experience both as a solicitor and director of several funds. In addition he holds a number of academic appointments.

Mark Shaw is a Chartered Accountant who has a background in property development investment, merchant banking and investment management. Mark became involved in tax based property investments in 1985, working under the umbrella of London & Edinburgh Trust Plc (‘LET’), in developing and popularising the investment market for Enterprise Zone Property Unit Trusts. In 1990, LET was sold to a Swedish institution and Mark formed Tritax (formerly CIL) to continue with this activity and to develop other property based investment products.



Directors’ Report

The Directors present their annual report and audited consolidated financial statements (‘the financial statements’) for the year ended 5 April 2012.

Company status and principal activityTritax Polska No.1 Fund Limited (‘the Company’) was incorporated in Guernsey on 23 January 2007 and was granted Guernsey exempt company status for taxation purposes.

In accordance with the Articles of the Company, the Company has an initial life of 7 years from the closing date of 31 March 2007. At any time on or prior to 31 March 2014 (and, if appropriate, every 2 years thereafter), an extraordinary resolution, requiring a 75% majority of those voting, will be put to shareholders proposing to extend the life of the Company for a further 2 years.

The Company is a Guernsey authorised closed-ended investment scheme and is subject to the Authorised Closed-Ended Investment Schemes Rules 2008.

The principal activity of the Company and its subsidiaries (together ‘the Group’) is investing in property in Poland.

Results and dividendsThe results of the Group are stated on page 16. The Company declared and paid an interim dividend of 1p per share during the year (2011: interim dividend of 3p per share) and the Board of Directors has not recommended a final dividend for the year (2011: final dividend of 1.5p per share).

DirectorsThe Directors who held office during the year and to date are shown on page 2. All Directors are independent and non-executive.

Directors’ interestsMark Shaw is a shareholder in and served throughout the year as a director of Tritax Securities 1 Limited, the promoter, sponsor and distributor of the Company.

Statement of Directors’ responsibilitiesThe Directors are responsible for keeping proper accounting records, which disclose with reasonable accuracy at any time the financial position of the Company and of the Group, for safeguarding the assets of the Company, for taking reasonable steps for the prevention and detection of fraud and other irregularities and for the preparation of a Directors’ Report, which complies with the requirements of The Companies (Guernsey) Law, 2008.

The Directors are responsible for preparing the Annual Report and consolidated financial statements in accordance with The Companies (Guernsey) Law, 2008 and The Protection of Investors (Bailiwick of Guernsey) Law, 1987. The Directors have chosen to prepare consolidated financial statements for the Group in accordance with International Accounting Standards (IFRSs) as adopted for use in the European Union.

International Accounting Standard 1 requires that consolidated financial statements present fairly for each financial year the Group’s financial position, financial performance and cash flows. This requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the International Accounting Standards Board’s ‘Framework for the preparation and presentation of consolidated financial statements’. In virtually all circumstances, a fair presentation will be achieved by compliance with all applicable IFRSs. A fair presentation also requires the Directors to:

• consistentlyselectandapplyappropriateaccountingpolicies;

• presentinformation,includingaccountingpolicies,inamannerthat provides relevant, reliable, comparable and understandable information;and

• provideadditionaldisclosureswhencompliancewiththespecificrequirements in IFRSs is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance.

The Directors confirm that they have complied with the above requirements in preparing the financial statements.

The Directors further confirm that:

• sofaraseachDirectorisaware,thereisnorelevantauditinformationofwhichtheCompany’sauditorisunaware;

• eachDirectorhastakenallthestepsheoughttohavetakenasaDirector to make himself aware of any relevant audit information and toestablishthattheCompany’sauditorisawareofthatinformation;and

• thefinancialstatementsgiveatrueandfairviewandhavebeenprepared in accordance with International Financial Reporting Standards (as adopted by the European Union), The Companies (Guernsey) Law, 2008 and The Protection of Investors (Bailiwick of Guernsey) Law, 1987.

Corporate governanceFollowing the publication by the GFSC of the Finance Sector Code of Corporate Governance in September 2011 (the “Code”), the Directors have considered the effectiveness of their corporate governance practices with regard to the principles set out in the Code. Subsequently, the Directors are satisfied with their degree of compliance with the principles set out in the Code in the context of the nature, scale and complexity of the business.



Directors’ Report (continued)

Anti-bribery and corruptionThe Company adheres to the requirements of the Prevention of Corruption (Bailiwick of Guernsey) Law, 2003. In consideration of the recently enacted UK Bribery Act 2010 which came into force on 1 July 2011, the Board abhors bribery and corruption of any form and expects all the Company’s business activities to be undertaken, whether directly by the Directors themselves or on the Company’s behalf by third parties to be transparent, ethical and beyond reproach.

On discovery of any activity or transaction that breaches the requirements of the Prevention of Corruption (Bailiwick of Guernsey) Law, 2003 or the UK Bribery Act 2010, such discovery will be reported to the relevant authorities in accordance with prescribed procedures. The Company is committed to regularly reviewing its policy and procedures to uphold good business practice.

AuditorThe auditor of the Company, Saffery Champness, has expressed its willingness to continue in office and a resolution giving authority to the Board of Directors to fix its remuneration will be proposed at the Annual General Meeting.

Approved on behalf of the Board

Michael McKeanDirector3 October 2012



Independent Auditor’s Report to the Shareholders

We have audited the consolidated financial statements of Tritax Polska No. 1 Fund Limited (‘the financial statements’) on pages 16 to 35. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (as adopted by the European Union).

This report is made solely to the Company’s members, as a body, in accordance with section 262 of The Companies (Guernsey) Law, 2008. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of Directors and AuditorAs explained more fully in the Statement of Directors’ Responsibilities set out on page 13, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the United Kingdom Auditing Practices Board’s Ethical Standards for Auditors.

Scope of the audit of the financial statementsAn audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Company’s circumstances and have been consistently applied and adequatelydisclosed;thereasonablenessofsignificantaccountingestimatesmadebytheDirectors;andtheoverallpresentationofthe financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies, we consider the implications for our report.

Opinion on financial statementsIn our opinion the financial statements:

• giveatrueandfairview;

• areinaccordancewithInternationalFinancialReportingStandards(asadoptedbytheEuropeanUnion);and

• complywithTheCompanies(Guernsey)Law,2008.

Matters on which we are required to report by exceptionWe have nothing to report in respect of the following matters where The Companies (Guernsey) Law, 2008 requires us to report to you if, in our opinion:

• properaccountingrecordshavenotbeenkeptbytheCompany;

• thefinancialstatementsarenotinagreementwiththeaccountingrecords;or

• wehavefailedtoobtainalltheinformationandexplanations,which, to the best of our knowledge and belief, are necessary for the purposes of our audit.

Saffery ChampnessChartered Accountants, Guernsey

3 October 2012



Consolidated Statement of Comprehensive IncomeFor the year ended 5 April 2012

NotesYear ended

5 April 2012 dYear ended

5 April 2011 d

Revenue

Property operating expenses

5

7

7,405,835 7,517,719

(2,700,646) (2,763,966)

Operating profit before administrative expenses 4,705,189 4,753,753

Administrative expenses 7 (1,597,535) (2,012,132)

Operating profit before loss on change in fair value of investment property 3,107,654 2,741,621

Loss on change in fair value of investment property

Loss on change in fair value of investment property under construction

10

11

(6,056,297) (291,350)

(493,421) (29,181)

Operating (loss)/profit (3,442,064) 2,421,090

Basic and diluted (loss)/earnings per share 9 y(0.243) y0.112

The accompanying notes are an integral part of these financial statements.

Finance income

Finance costs

32,401 76,571

(2,399,495) (2,504,698)

Operating loss after net finance costs (5,809,158) (7,037)

(Losses)/gains on derivatives

Losses on foreign exchange

16 (852,759) 1,074,653

(117,218) (174,547)

Other (losses)/ gains (969,977) 900,106

(Loss)/profit for the year before taxation

Taxation (charge)/credit 8

(6,779,135) 893,069

(23,757) 2,245,379

(Loss)/profit for the year after taxation (6,802,892) 3,138,448

Other comprehensive (loss)/income

Exchange differences on translation of foreign operations (112,984) 181,324

Total comprehensive (loss)/income for the year (6,915,876) 3,319,772



Consolidated Statement of Financial PositionAs at 5 April 2012

Current assets

Trade and other receivables

Cash and cash equivalents

15 2,468,045

1,729,519

2,083,007

3,159,502

4,197,564 5,242,509

Total assets 74,480,144 82,639,819

The financial statements on pages 16 to 35 were approved by the Board of Directors and signed on its behalf on 3 October 2012 by:

Michael McKean Director


Notes 5 April 2012d

5 April 2011d

Non-current assets

Investment property

Investment property under construction

Deferred tax asset

Plant and equipment

Derivative assets

10

11

12

14

16

69,710,039

570,479

–

2,062

–

76,059,552

1,063,900

755

2,725

270,378

70,282,580 77,397,310

Non-current liabilities

Bank loans

Derivative liabilities

17

16

41,547,841

713,700

48,077,061

20,441

42,261,541 48,097,502

Current liabilities

Bank loans


Trade and other payables

17

16

18

6,351,975

8,248

2,245,539

936,398

107,347

2,162,941

8,605,762 3,206,686

Total liabilities 50,867,303 51,304,188

Net assets 23,612,841 31,335,631

Equity

Share capital

Share premium

Retained earnings

Translation reserve

19

19

–

36,078,224

(10,481,397)

(1,983,986)

–

36,078,224

(2,871,591)

(1,871,002)

Total equity 23,612,841 31,335,631

Net asset value per share y0.84 y1.12



Consolidated Statement of Cash FlowsFor the year ended 5 April 2012


NotesYear ended

5 April 2012 dYear ended

5 April 2011 d

Cash flows from operating activities

Operating (loss)/profit

Adjustments for:

Loss on change in fair value of investment property

Loss on change in fair value of investment property under construction

Depreciation

Increase in operating trade and other receivables

Increase/(decrease) in operating trade and other payables

Taxation paid

10

11

14

(3,442,064)

6,056,297

493,421

573

(387,497)

88,125

(28,380)

2,421,090

291,350

29,181

259

(104,812)

(201,052)

(31,289)

Net cash inflow from operating activities 2,780,475 2,404,727

Cash flows from investing activities

Capitalised investment property costs

Bank interest received

10 (79,930)

34,860

(52,281)

80,473

Net cash (outflow)/inflow from investing activities (45,070) 28,192

Cash flows from financing activities

Dividends paid

Repayments of interest bearing loans

Finance costs

20 (806,914)

(943,319)

(2,399,495)

(989,212)

(277,220)

(2,504,698)

Net cash outflow from financing activities (4,149,728) (3,771,130)

Net decrease in cash and cash equivalents (1,414,323) (1,338,211)

Effect of foreign exchange rate movements

Opening cash and cash equivalents

(15,660)

3,159,502

166,326

4,331,387

Closing cash and cash equivalents 1,729,519 3,159,502



Consolidated Statement of Changes in EquityFor the year ended 5 April 2012

Notes Share Premiumd

Retained Earningsd

Translation Reserved

Totald

For the year ended 5 April 2011

Balance brought forward

Total comprehensive income for the year

Dividend paid 20

36,078,224

–

–

(5,020,827)

3,138,448

(989,212)

(2,052,326)

181,324

–

29,005,071

3,319,772

(989,212)

At 5 April 2011 36,078,224 (2,871,591) (1,871,002) 31,335,631


For the year ended 5 April 2012

Total comprehensive loss for the year

Dividends paid 20

–

–

(6,802,892)

(806,914)

(112,984)

–

(6,915,876)

(806,914)

At 5 April 2012 36,078,224 (10,481,397) (1,983,986) 23,612,841



Notes to the Consolidated Financial StatementsFor the year ended 5 April 2012

1. Incorporation and principal activity

Tritax Polska No.1 Fund Limited (‘the Company’) was incorporated in Guernsey on 23 January 2007.

The principal activity of the Company and its subsidiaries (together ‘the Group’) is investing in property in Poland. The Company’s subsidiaries are detailed in note 13.

2. Significant accounting policies

Basis of preparation

The financial statements have been prepared in accordance with International Financial Reporting Standards (‘IFRS’) as adopted by the European Union and IFRIC Interpretations that remain in effect, The Companies (Guernsey) Law, 2008 and the Protection of Investors (Bailiwick of Guernsey) Law, 1987 as amended.

New, revised and amended standards

At the date of authorisation of these financial statements, the following standards and interpretations, which have not been applied in these financial statements, were in issue but not yet effective:

• IAS1(amended),“PresentationofFinancialStatements”(effectiveforperiodscommencingonorafter1July2012);

• IAS12(amended),“IncomeTaxes”(effectiveforperiodscommencingonorafter1January2012);

• IAS27(revised),“SeparateFinancialStatements”(revisedversioneffective for periods commencing on or after 1 January 2013 on adoptionofIFRS10,IFRS11andIFRS12);

• IAS28(revised),“InvestmentsinAssociatesandJointVentures”(revised version effective for periods commencing on or after 1 January2013onadoptionofIFRS10,IFRS11andIFRS12);

• IAS32(amended),“FinancialInstruments:Presentation”(effectiveforperiodscommencingonorafter1January2014);

• IFRS7(amended),“FinancialInstruments:Disclosures”(variousamendments effective for periods commencing on or after 1 July 2011,1January2013and1January2015);

• IFRS9,“FinancialInstruments-ClassificationandMeasurement”(effectiveforperiodscommencingonorafter1January2015);

• IFRS10,“ConsolidatedFinancialStatements”(effectiveforperiodscommencingonorafter1January2013);

• IFRS11,“Jointarrangements”(effectiveforperiodscommencingonorafter1January2013);

• IFRS12,“DisclosureofInterestinOtherEntities”(effectiveforperiodscommencingonorafter1January2013);

• IFRS13,“FairValueMeasurement”(effectiveforperiodscommencing on or after 1 January 2013).

In addition the IASB completed its most recent annual improvements project in May 2012. This project amended a number of existing standards and interpretations effective for accounting periods commencing 1 January 2013.

The Directors anticipate that the adoption of these standards and interpretations in future periods (except for IAS 12 (amended)) will not have a material impact on the financial statements of the Group. A formal assessment has not been undertaken by the Directors to assess if the adoption of IAS 12 in future periods will or will not have a material impact on the financial statements of the Group.

New accounting policies effective and adopted

The following new standard, which has had no material effect on the Group, has been applied for the first time in these financial statements.

• IAS24(amended),“RelatedPartyDisclosures”hasrevisedthedefinition of related parties.

Basis of consolidation

The consolidated financial statements of the Group incorporate the financial statements of the Company and the entities controlled by the Company (ie its subsidiaries) made up to 5 April each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee company so as to obtain benefits from its activities.

On acquisition, the assets, liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. Any deficiency of the cost of acquisition below the fair values of the identifiable net assets acquired (ie discount on acquisition) is credited to the Consolidated Statement of Comprehensive Income in the period of acquisition.

The results of subsidiaries acquired or disposed of during the period are included in the Consolidated Statement of Comprehensive Income from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the Group.

All intra-group transactions, balances, income, expenses, profits and losses are eliminated on consolidation.

Revenue recognition

Rental revenues are accounted for on a straight line basis. Amendments to rental revenues due to rent reviews are recognised once the rent reviews have been formally agreed.

Service charge revenues are billed in advance and then allocated to the period to which they relate.

Revenue is recognised when it is probable that the economic benefits associated with the transaction will flow to the Group and the amount of revenue can be measured reliably.



Notes to the Consolidated Financial Statements (continued)For the year ended 5 April 2012

2. Significant accounting policies (continued)

Leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease.

Foreign currency translation

The Directors consider that the Group’s functional currency is Euro, as this is the currency in which the majority of the Group’s assets and liabilities and significant transactions are denominated. The Directors have selected Euro as the Group’s presentation currency.

Foreign currency transactions

Transactions in currencies other than the Euro are recorded at the rates of exchange prevailing on the dates of the transactions. At each year end date, monetary assets and liabilities that are denominated in foreign currencies are revalued at the rates prevailing at the year end date. Non-monetary assets and liabilities carried at fair value that are denominated in foreign currencies are revalued at the rates prevailing at the date when the fair value was determined. Gains and losses arising on revaluation are recognised in the Consolidated Statement of Comprehensive Income.

On consolidation, the assets and liabilities of the Group’s overseas operations are translated at exchange rates prevailing on the year end date. Income and expenses are translated at the average exchange rates for the period unless exchange rates fluctuate significantly, in which case items of income and expenditure are translated at the rate ruling on the date of the transaction. Exchange differences arising, if any, are recognised as other comprehensive income in the Consolidated Statement of Comprehensive Income and are transferred to the Group’s translation reserve. Such translation differences are included in profit or loss in the period in which the operation is disposed of.

Taxation

During the year the Company was exempt from Guernsey taxation on income derived from outside of Guernsey.

The tax expense represents the sum of the tax currently payable and deferred tax for the Group.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the Consolidated Statement of Comprehensive Income because it excludes items of income and expense that are taxable or deductible in other periods or that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted by the year end date.

Deferred tax is the tax arising on differences on the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the near future.

The carrying amount of deferred tax assets is reviewed at each year end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised. Deferred tax is charged or credited in the Consolidated Statement of Comprehensive Income, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Investment property

Investment property, which is property held to earn rentals and/or for capital appreciation, is stated at its fair value at the year end date. Fair value is determined as the market value as determined by professionally qualified independent external valuers. Gains or losses arising from changes in fair value of investment property are included in profit or loss for the period in which they arise.


Property that is in the process of being constructed or developed for future use as investment property is classified as ‘investment property under construction’ and stated at its fair value as at the year end date, where this can be reliably measured. On completion of construction or development it is reclassified and subsequently accounted for as investment property. All costs directly associated with the purchase and construction of a property and all subsequent capital expenditure for the development are capitalised as part of the cost. Fair value is determined as the market value as determined by professionally qualified external valuers. Gains or losses arising from changes in fair value of investment property are included in profit or loss for the period in which they arise.




2. Significant accounting policies (continued)

Impairment

Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation or depreciation are reviewed for impairment whenever events or changes in circumstance indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).

Borrowing costs

Borrowing costs are recognised in the Consolidated Statement of Comprehensive Income in the period in which they are incurred.

Interest bearing bank loans and borrowings

Interest bearing bank and other loans are recorded at the proceeds received, net of direct issue costs. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are accounted for on an accruals basis in the Consolidated Statement of Comprehensive Income using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.

Expenses

Expenses are accounted for on an accruals basis. The Group’s property management and administration fees, finance costs and all other expenses are charged through the Consolidated Statement of Comprehensive Income.

Segmental reporting

The Directors are of the opinion that the Group is engaged at 5 April 2012 in a single segment of business being property investment business, and in one geographical area being Poland.

Financial instruments

Financial instruments are recognised in the Consolidated Statement of Financial Position when the Group becomes party to the contractual provisions of the instrument. Financial instruments are initially measured at acquisition cost, which includes transaction costs. Subsequent to initial recognition, they are measured as set out below.

Derivative financial instruments

The Group uses interest rate swaps to manage its exposure to movements in interest rates on a portion of each debt incurred to acquire investment property. Such derivative financial instruments are initially recognised as assets or liabilities at fair value and subsequently revalued on each year end date according to market conditions. Changes in the fair value of derivatives which have not been designated as hedges for hedge accounting purposes are taken directly to the Consolidated Statement of Comprehensive Income as part of finance income or expenses. The Group does not use derivative financial instruments for speculative purposes. The use of derivative instruments is subject to limits and the positions are regularly monitored and reported to senior management.


Trade receivables and other short-term monetary assets are initially recognised at fair value and subsequently carried at amortised cost using the effective interest rate method, less any provisions for doubtful debts. The effect of discounting on these financial instruments is not considered to be material.


Cash and cash equivalents consist of cash in hand, balances with banks and investments in money market instruments, which are readily realisable.

Financial liabilities

Non-derivative financial liabilities are recognised at amortised cost, comprising original debt less principal repayments and amortisations.

Trade payables

Trade payables and other short-term monetary liabilities are initially recognised at fair value and subsequently carried at amortised cost using the effective interest rate method. The effect of discounting on these financial instruments is not considered to be material. The Group has not classified any of its financial liabilities as at fair value through profit or loss.

Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

Use of estimates in the preparation of the financial statements

In preparing the financial statements, management is required to make estimates and assumptions which affect reporting income, expenses, assets, liabilities and disclosure of contingent assets and liabilities. Use of available information and application of judgement are inherent in the formation of estimates. Actual results in the future could differ from such estimates.




3. Financial instruments

The Group is exposed to credit risk, currency risk, liquidity risk, capital risk and interest rate risk arising from the financial instruments it holds. The risk management policies employed by the Group to manage these risks are discussed below.

The Group’s principal financial liabilities comprise bank loans and trade payables. The main purpose of these financial liabilities is to raise finance for the Group’s acquisitions of assets and investments in subsidiaries. The Group has various financial assets such as cash and cash equivalents and receivables.

Credit risk

Credit risk arises when a failure by counterparties to discharge their obligations could reduce the amount of future cash flows from financial assets on hand at the year end date. Rent receivables are due from diverse government and corporate tenants with strong credit ratings. Accordingly, the Directors do not anticipate losses in respect of these receivables. In the event of a default by a tenant in occupation, the Group will suffer a rental shortfall and incur additional costs, including legal expenses in maintaining, insuring and reletting the property until it is relet. The Group utilises property managers to monitor the tenants in order to anticipate, and minimise the impact of, defaults by tenants in occupation. The maximum exposure relating to default by tenants and other debtors at the year end date was €130,109 (2011: €186,276).

Cash, cash equivalents and bank deposits are invested with major banks. The Directors believe that the financial institutions that hold the Group’s investments are financially sound and, accordingly, minimal credit risk exists with respect to these investments.

Derivative instruments held for hedging purposes are undertaken with the banks providing the debt finance. The Directors believe that these financial institutions are financially sound, and, accordingly, minimal credit risk exists in respect of these contracts.

Currency risk

Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates. Currency risk arises when future commercial transactions and recognised assets and liabilities are denominated in a currency that is not the Group’s reporting currency. The Group’s subsidiaries finance the acquisition of property assets in the currency in which the asset is denominated so that the Group’s exposure to changes in the Euro value of its assets is minimised.

The Group is exposed to foreign exchange risk arising from currency exposures with respect to the Polish Zloty and Sterling. The Group’s management monitors exchange rate fluctuations on a continuous basis and, if appropriate, may use forward foreign exchange contracts to hedge the currency exposure.

The tables below summarise the Group’s exposure to foreign currency risk at the year end date. The Group’s assets and liabilities are shown at their Euro carrying amounts, categorised by their currency of denomination.

Currency of denomination Eurod

Polish Zlotyd

Sterlingd

Totald

As at 5 April 2012

Investment property


Plant and equipment



59,970,000

–

–

86,094

912,483

9,740,039

570,479

2,062

2,354,443

350,956

–

–

–

27,508

466,080

69,710,039

570,479

2,062

2,468,045

1,729,519

Total assets 60,968,577 13,017,979 493,588 74,480,144

Bank loans



42,589,152

713,700

156,289

5,310,664

8,248

1,932,638

–

–

156,612

47,899,816

721,948

2,245,539

Total liabilities 43,459,141 7,251,550 156,612 50,867,303

Net assets 17,509,436 5,766,429 336,976 23,612,841



3. Financial instruments (continued)

Currency risk (continued)

The sensitivity analyses below are based on a change in assumption while holding all other assumptions constant. In practice this is unlikely to occur and changes in some of the assumptions may be correlated - for example, change in interest rate and change in foreign exchange rates.

The Group manages foreign currency risk on an overall basis. The sensitivity analysis prepared by management for foreign currency risk illustrates how changes in the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign currency rates.

If the Euro weakened/strengthened by 10% against the Polish Zloty with all other variables held constant, the net asset value at the year end date would be €524,221 higher/lower (2011: €846,698 higher/lower).

If the Euro weakened/strengthened by 10% against Sterling with all other variables held constant, the net asset value at the year end date would be €30,634 higher/lower (2011: €86,594 higher/lower).

No other currencies have a material effect upon the profitability of the Group.

Liquidity risk

Liquidity risk is the risk that arises when the maturity of assets and liabilities does not match. An unmatched position potentially enhances profitability, but can also increase the risk of losses. The Group has procedures with the object of minimising such losses, such as maintaining sufficient cash and other highly liquid current assets and by having available an adequate amount of committed credit facilities.

The Group’s liquidity position is monitored on a weekly basis by the Fund Manager and is reviewed on a quarterly basis by the Board of Directors. A summary table with maturity of financial assets and liabilities presented below is used by key management personnel to manage liquidity risks.


Currency of denomination Eurod

Polish Zlotyd

Sterlingd

Totald

As at 5 April 2011

Investment property


Deferred tax assets

Plant and equipment

Derivative assets



63,440,000

–

–

–

270,378

73,000

1,084,847

12,619,552

1,063,900

755

2,725

–

1,980,125

1,005,019

–

–

–

–

–

29,882

1,069,636

76,059,552

1,063,900

755

2,725

270,378

2,083,007

3,159,502

Total assets 64,868,225 16,672,076 1,099,518 82,639,819

Bank loans



43,532,471

107,347

158,982

5,480,988

20,441

1,856,974

–

–

146,985

49,013,459

127,788

2,162,941

Total liabilities 43,798,800 7,358,403 146,985 51,304,188

Net assets 21,069,425 9,313,673 952,533 31,335,631


Liquidity risk (continued)

Fair value hierarchy

The table below analyses instruments carried at fair value, by valuation method. The different levels have been defined as follows:

• Level1:quotedprices(unadjusted)inactivemarketsforidenticalassetsorliabilities

• Level2:inputsotherthanquotedpricesincludedwithinLevel1thatareobservablefortheassetorliability,eitherdirectly(ieasprices)orindirectly (ie derived from prices)

• Level3:inputsfortheassetorliabilitythatarenotbasedonobservablemarketdata(unobservableinputs)




As at 5 April 2012 Level 1d

Level 2d

Level 3d

Totald

Derivative financial liabilities – (721,948) – (721,948)

– (721,948) – (721,948)

2012d

2011d

Financial assets – current

Trade and other receivables – maturity within one year

Cash and cash equivalents – maturity within one year

2,043,325

1,729,519

1,676,476

3,159,502

3,772,844 4,835,978

Financial liabilities – current

Trade and other payables – maturity within one year

Borrowings – maturity within one year

1,599,246

6,351,975

1,984,270

936,398

7,951,221 2,920,668

Financial liabilities – non-currentBorrowings

Between 1 and 2 years


41,547,841

–

6,462,299

41,614,762

41,547,841 48,077,061

As at 5 April 2011 Level 1d

Level 2d

Level 3d

Totald

Derivative financial assets

Derivative financial liabilities

–

–

270,378

(127,788)

–

–

270,378

(127,788)

– 142,590 – 142,590




Capital risk

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings, as shown in the Consolidated Statement of Financial Position, less cash and cash equivalents. Total capital is calculated as equity, as shown in the Consolidated Statement of Financial Position, plus net debt.

The gearing ratio at the year end date was as follows:

Interest rate risk

Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest rates. The Group is exposed to interest rate risk in relation to its borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. The Group seeks to mitigate cash flow interest rate risk by means of interest rate swap contracts, which effectively fix the interest rates on the Group’s variable rate drawn-down borrowings. As a result of this the Group’s exposure to cash flow interest rate risk is limited, however this does expose the Group to fair value interest rate risk. The Group monitors interest rates on an ongoing basis and uses interest rate swaps where appropriate.

At 5 April 2012, €28,283,035 (2011: €29,358,656) of the Group’s borrowings were at effectively fixed rates of interest and €19,616,781 (2011: €19,654,803) were at variable rates of interest. Had these balances existed for the whole of the year, the effect on the Consolidated Statement of Comprehensive Income of an increase of 1%/decrease of 0.5% in short term interest rates would have been a decrease of €196,168/increase of €98,084 in post-tax profit for the year (2011: decrease of €196,548/increase of €98,274) in relation to the Group’s variable rate borrowings, and an increase of €391,272/decrease of €195,636 in post-tax profit for the year (2011: increase of €36,733/decrease of €18,367) in relation to the Group’s fixed rate borrowings.

4. Critical accounting estimates and assumptions

Management makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below.

Estimate of fair value of investment properties

The Group has engaged Polish Properties Sp. z o.o., Chartered Surveyors as professional valuers of the investment properties, with the exception of Galeria Fordon, which has been valued by CBRE Sp. z o.o. In forming their opinion on the values of the investment properties, the valuers will be mindful of the following factors:

The best evidence of fair value is current prices in an active market for similar leases and other contracts. In the absence of such information, the amount will be determined within a range of reasonable fair value estimates.


2012d

2011d

Total borrowings

Less: cash and cash equivalents

47,899,816

(1,729,519)

49,013,459

(3,159,502)

Net debt 46,170,297 45,853,957

Total equity 23,612,841 31,335,631

Total capital 69,783,138 77,189,588

Gearing ratio 66% 59%

4. Critical accounting estimates and assumptions (continued)

Estimate of fair value of investment properties (continued)

In making their judgement, the valuers will consider information from a variety of sources, including:

• currentpricesinanactivemarketforpropertiesofadifferentnature,conditionorlocation(orsubjecttoadifferentleaseorothercontracts),adjustedtoreflectthosedifferences;

• recentpricesofsimilarpropertiesinlessactivemarkets,withadjustmentstoreflectanychangesineconomicconditionssincethedateofthetransactionsthatoccurredatthoseprices;and

• discountedcashflowprojectionsbasedonreliableestimatesoffuturecashflows,derivedfromthetermsofanyexistingleaseandothercontracts and (where possible) from external evidence such as current market rents for similar properties in the same location and condition, and using discount rates that reflect current market assessments of the uncertainty in the amount and timing of cash flows.

Principal assumptions for the estimation of fair value

If information on current or recent prices or assumptions underlying the discounted cash flow approach to investment property valuations are not available, then the fair values of investment properties are determined using discounted cash flow valuation techniques. Any assumptions used will be mainly based on market conditions existing at the year end date.

Theprincipalassumptionsunderlyingtheestimationoffairvaluearethoserelatedto:thereceiptofcontractualrentals;expectedfuturemarketrentals;voidperiods;maintenancerequirements;andappropriatediscountrates.Thesevaluationsareregularlycomparedtoactualmarketyielddata, and actual transactions in the market.

The expected future market rentals are determined on the basis of current market rentals for similar properties in the same location and condition.

Income taxes

The Group is potentially subject to income taxes in different jurisdictions. Significant estimates are required in determining the worldwide provision for income taxes. There are some transactions and calculations for which the ultimate tax determination is uncertain. The Group recognises liabilities for anticipated tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were originally recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

5. Revenue

The Group’s revenue derives principally from rental income and lease-related administration service charges as follows:

Whilst rental income and total revenue have fallen in Euro terms from the prior year, this is due to movements in the Euro/Polish Zloty exchange rate. In Zloty terms, rental income and total revenue have risen by 4.0% and 3.6% respectively.

6. Operating lease receivables




2012d

2011d

Rental income

Service charge income

Other income

5,148,416

1,669,523

587,896

5,204,338

1,607,282

706,099

7,405,835 7,517,719

2012d

2011d

Not later than 1 year


Later than 5 years

4,419,892

6,890,003

1,329,274

4,774,148

7,877,388

1,868,386

12,639,169 14,519,922



7. Administrative expenses and other operating expenses

2012d

2011d

Direct property operating expenses

Audit fees

Other administrative and operating expenses

2,700,646

69,602

1,527,933

2,763,966

64,367

1,947,765

4,298,181 4,776,098

The direct property operating expenses shown above include a significant proportion of costs which are rechargeable to tenants. These costs are recovered from tenants through the raising of a service charge (see note 5).

8. Taxation

The tax charge for the year comprises:

2012d

2011d

Current tax charge

Deferred tax charge/(credit)

23,031

726

29,647

(2,275,026)

23,757 (2,245,379)

The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the weighted average tax rate of the applicable profits of the consolidated companies as follows:

The weighted average applicable tax rate was 0.26% (2011: 0.36%).

9. Basic and diluted (loss)/earnings per share


(Loss)/profit before tax (6,779,135) 893,069

Tax (credit)/charge calculated at domestic tax rates applicable to profits in the respective countries

Adjustment in respect of:

Deferred tax write back

Deferred tax asset utilised

Profits not subject to tax

Losses not allowable for tax

(24,944)

–

726

–

47,975

66,141

(2,275,026)

–

(36,494)

–

23,757 (2,245,379)

2012d

2011d

(Loss)/profit attributable to the shareholders of the parent (6,802,892) 3,138,448

Weighted average number of shares during the year 28,029,365 28,029,365

Basic and diluted (loss)/earnings per share t(0.243) t0.112

10. Investment property

2012d

2011d


Capitalised costs during the year

Fair value adjustment in the year

Foreign exchange differences

76,059,552

79,930

(6,056,297)

(373,146)

76,817,300

52,281

(291,350)

(518,679)

69,710,039 76,059,552

The Directors have engaged Polish Properties Sp. z o.o., Chartered Surveyors, as valuers of the majority of the investment properties. Galeria Fordon is valued by CBRE Sp. z o.o. The Directors have determined the fair value of the investment properties with reference to the valuers’ valuations at the year end date.

As at 5 April 2012 the Group owned the following investment properties:

Office building at ul. Piekna 68, Warsaw

‘Wola Plaza’ office building at ul. Mlynarska 8/12, Warsaw

Storage/office building at ul. Szajnochy 11, Bydgoszcz

Office building at ul. Ratajczaka 19, Poznan

Office building at ul. Wierzbiecice 1, Poznan

‘City Park’ shopping centre at ul. Stanislawa Wyspianskiego 26, Poznan

Office building at ul. Jasna 24, Warsaw

Warehouse buildings at ul. Dzialkowa 85, Warszawa

‘Galeria Fordon’ shopping centre at ul. Skazynskiego, Bydgoszcz

11. Investment property under construction

2012d

2011d


Fair value adjustment in the year

1,063,900

(493,421)

1,093,081

(29,181)

570,479 1,063,900

The Directors have determined the fair value of the investment property under construction with reference to the valuers’ valuation at the year end date.

Investment property under construction comprises a land site designated for development at ul. Szajnochy 11, Bydgoszcz.






12. Deferred taxation

Deferred tax assets and liabilities arising as follows have been recognised at the year end date:

The Group has incurred losses of €7,869,832 (2011: €2,646,592) in respect of which no deferred tax asset has been recognised in the Consolidated Statement of Financial Position.

13. SubsidiariesThe financial statements of the Group consolidate the results, assets and liabilities of the subsidiary companies listed below:

* Jasna Sp. z o.o. was liquidated on 3 January 2012.


2012d

2011d

Deferred tax assets


Carried forward losses

Utilised during the year


755

–

(726)

(29)

–

755

–

–

– 755

Deferred tax liabilities


Credit for the year


–

–

–

2,373,860

(2,275,026)

(98,834)

– –

Jurisdiction Ownership Principal activity

Direct

Tritax Polska No. 1 Investment Company S.à.r.l. Luxembourg 100% Holding company

Indirect

CC1 Fundusz Inwestycyjny Zamkniety

Numer 1 “Tritax Polska (GP) Sp. z o.o.” S.K.A.














Wola Plaza Sp. z o.o.

Jasna Sp. z o.o. *

Poland

Poland

Poland

Poland

Poland

Poland

Poland

Poland

Poland

Poland

Poland

Poland

Poland

Poland

Poland

Poland

Poland

100%

99%

99%

99%

99%

99%

99%

99%

99%

99%

99%

99%

99%

99%

99%

100%

100%

Investment fund

Investment property holding

Holding company








Holding company


Dormant

Dormant

Dormant

Holding company

Liquidated

14. Plant and equipment

15. Trade and other receivables

2012d

2011d

Trade debtors

VAT receivable

Accrued income

Sundry debtors and prepayments

1,800,788

108,618

10,189

548,450

1,451,783

112,015

12,648

506,561

2,468,045 2,083,007

The fair values of trade and other receivables due within one year approximate to their carrying amounts as shown above.

16. Derivative assets and liabilities

Under the terms of its bank loan agreements the Group is required to utilise interest rate swaps to hedge a fixed proportion of its loan balances against movements in interest rates. Interest rate swap contracts are valued by discounting the anticipated future cash flows, based on the market interest rates applicable for the remaining term of the contract. Changes in the fair value of derivatives are disclosed in the Consolidated Statement of Comprehensive Income. At the year end date the fair value of unsettled contracts was as follows:–




d

Cost:

As at 5 April 2011


2,981

(93)

As at 5 April 2012 2,888

Depreciation:

As at 5 April 2011

Charge for the year


256

573

(3)

As at 5 April 2012 826

Net book value:

As at 5 April 2012 2,062

As at 5 April 2011 2,725

2012d

2011d

Non-current derivative assets – 270,378

Current derivative liabilities 8,248 107,347

Non-current derivative liabilities 713,700 20,441



16. Derivative assets and liabilities (continued)

As a result of movements in market interest rates during the year, principally 3 month EURIBOR, losses have arisen during the year on the revaluation of these interest rate swap contracts as follows:

The following derivative contracts were open at the year end date:–

Interest rate swap contracts

Various contracts with a total principal amount of €28,283,035. Under these contracts the Group has agreed to make fixed rate interest payments at rates between 2.14% and 2.31% against receipt of 3 month EURIBOR, and at a rate of 5.55% against 1 month WIBOR, plus a specified margin between 2.45% and 3.5%. The contracts in place at the year end date have maturity dates between December 2012 and April 2014, fixed to coincide with the repayment dates of the loans to which they relate.

17. Bank loans

2012d

2011d

HSBC Bank Polska S.A.

Bank Zachodni WBK S.A.

8,090,664

39,809,152

8,320,988

40,692,471

47,899,816 49,013,459

The loans are repayable as follows:

2012d

2011d

Within one year

After one year

6,351,975

41,547,841

936,398

48,077,061

47,899,816 49,013,459

The weighted average effective interest rate at the year end date is 4.5976% (2011: 4.7947%).

In the opinion of the Directors, the carrying amounts of the loans are materially the same as their fair value.

The Group uses interest rate swaps to manage its exposure to interest rate movements on its bank borrowings. At the year end date the Group held interest rate swap contracts that convert €28,283,035 (2011: €29,358,656) of floating rate debt to fixed rate debt. These arrangements were entered into alongside the loan agreements with Bank Zachodni WBK and HSBC Bank Polska.

The loans payable comprise separate facilities as follows:

HSBC Bank Polska S.A.

• €2,880,000 loan facility at the 3 month LIBOR rate plus 2.75% maturing 31 March 2014.

The above facility is secured on the assets of the Company’s subsidiary Numer 1 “Tritax Polska (GP) Sp. z o.o.” S.K.A. During the year €60,000 of the loan was repaid. The total balance outstanding on the above facility at 5 April 2012 was €2,780,000.


2012d

2011d

(Losses)/gains on revaluation of interest rate swaps (852,759) 1,074,653




17. Bank loans (continued)

HSBC Bank Polska S.A. (continued)

• PLN22,062,622loanfacilityatthe1monthWIBORrateplus3.5%,maturing14December2012.

The above facility is secured on the assets of the Company’s subsidiary Numer 9 “Tritax Polska (GP) Sp. z o.o.” S.K.A. An interest rate swap expiring on 22 December 2012 was entered into with HSBC Bank Polska capping PLN 10,000,000 of the loan at a rate of 5.55%. The total balance outstanding on the above facility at 5 April 2012 was PLN 22,062,622.

Bank Zachodni WBK S.A.

Portfolio 1

• €12,642,000 loan facility at the 3 month EURIBOR rate plus 2.45%, maturing 5 April 2014.

The above facility is secured on the assets of the Company’s subsidiary Numer 6 “Tritax Polska (GP) Sp. z o.o.” S.K.A. and on the other properties in Bank Zachodni WBK portfolio 1. An amortising interest rate swap expiring 4 April 2014 was entered into with Bank Zachodni WBK capping 65% of the outstanding loan balance at a rate of 4.59%. During the year €252,840 of the loan was repaid. The balance outstanding on the above facility at 5 April 2012 was €12,262,740.


The above facility is secured on the assets of the Company’s subsidiary Numer 3 “Tritax Polska (GP) Sp. z o.o.” S.K.A. and on the other properties in Bank Zachodni WBK portfolio 1. An amortising interest rate swap expiring 4 April 2014 was entered into with Bank Zachodni WBK capping 65% of the outstanding loan balance at a rate of 4.59%. During the year €20,300 of the loan was repaid. The balance outstanding on the above facility at 5 April 2012 was €984,550.



• €6,549,000 investment loan facility at the 3 month EURIBOR rate plus 2.45%, maturing 5 April 2014.


Portfolio 2







As at 5 April 2012 loan portfolio 2 was in breach of its LTV covenants, however Bank Zachodni WBK S.A. has issued a waiver in respect of this breach.



18. Trade and other payables

2012d

2011d

Trade creditors

Tenants’ deposits

Deferred income

Sundry creditors and accruals

584,875

480,120

166,173

1,014,371

653,604

482,977

178,671

847,689

2,245,539 2,162,941

The fair values of trade and other payables due within one year approximate to their carrying amounts as shown above.

19. Share capital

Authorised share capital:

The authorised share capital of the Company is made up of an unlimited number of shares of no par value, which may be denominated in any currency and issued as voting redeemable participating shares, non-voting non-participating redeemable performance shares or non-voting non-participating non-redeemable ordinary shares.

2012d

2011d

Issued share capital:

2 ordinary shares of no par value

28,029,363 participating shares of no par value

1,000 performance shares of no par value

–

–

–

–

–

–

– –

The ordinary shares carry no right to dividends or other distributions. Participating shares carry the right to receive distributions at the discretion of the Directors.


2012d

2011d

Share premium

Balance brought forward 36,078,224 36,078,224

Balance carried forward 36,078,224 36,078,224




20. Dividends

2012d

2011d

Interim dividend for the year ended 5 April 2011 of 3p per share paid on 15 December 2010

Final dividend for the period ended 5 April 2011 of 1.5p per share paid on 28 April 2011

Interim dividend for the year ended 5 April 2012 of 1p per share paid on 23 December 2011

–

471,777

335,137

989,212

–

–

806,914 989,212

No final dividend has been declared or paid for the year ended 5 April 2012.

21. Related party transactions

Mark Shaw, a Director of the Company, is a shareholder in and served as a director of the promoter, sponsor and distributor Tritax Securities 1 Limited (‘TS1L’) throughout the year.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

22. Post year end events

On 19 July 2012 the Company served 6 months’ notice on the Administrator to terminate the Administration Agreement.

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to any aspect of this notice, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional advisor.

When considering what action you should take, you are recommended to seek your own personal financial advice from a suitable adviser.

If you sell or have sold or transferred all your shares in Tritax Polska No 1 Fund Limited, you should hand this document and the documents accompanying it to the purchaser or agent through whom the sale was affected for transmission to the purchaser.

TRITAX POLSKA NO 1 FUND LIMITED(Company Registration Number 46273)NOTICE OF ANNUAL GENERAL MEETING



TRITAX POLSKA NO 1 FUND LIMITED(Company Number: 46273)

NOTICE OF ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN THAT an Annual General Meeting of shareholders of Tritax Polska No 1 Fund Limited (the “Company”) will be held at Sarnia House, Le Truchot, St Peter Port, Guernsey GY1 4NA on Tuesday 27th November 2012 at 10.00 a.m. for the purpose of considering and, if thought fit, passing the following resolutions:

ORDINARY BUSINESS

1. To receive and adopt the Financial Statements and Directors’ Report for the year ended 5th April 20122. To re-appoint Mr Michael McKean as a Director of the Company3. To re-appoint Saffery Champness as auditors of the Company4. To authorise the Directors to fix the remuneration of the Company’s auditors

By order of the board

Praxis Fund Services LimitedFor and on behalf ofPraxis Fund Services LimitedCompany Registration Number: 43046As Company Secretary

Date: 5th August 2012

Registered office: Sarnia House, Le Truchot, St Peter Port, Guernsey GY1 4NA, Channel Islands

Notes:

1. Any shareholder entitled to attend and vote at the meeting is entitled to appoint one or more proxies to attend and vote instead of him. A proxy need

not be a shareholder of the Company.

2. The form of proxy, together, if appropriate, with the power of attorney or other authority (if any) under which it is signed, must be deposited at the

office of the Company’s registered office not later than forty-eight hours before the time appointed for holding the meeting.

3. Return of a completed form of proxy will not preclude a shareholder from attending and voting personally at the meeting.

4. The notice sets out the resolutions to be proposed at the meeting. The meeting will be chaired by a person nominated by the shareholders present in

person or by proxy at the meeting. It is anticipated that the chairman of the meeting will be Mr Michael McKean or, in his absence, Mr Andrew Howat.

5. The quorum for a general meeting shall be four members present in person or by proxy.

6. If, within fifteen minutes from the appointed time for the meeting, a quorum is not present, then the meeting will be adjourned for seven days at the

same address or to such other day and at such other time and place as the Board may determine and no notice of adjournment need be given. At that

meeting, those shareholders present in person or by proxy will form a quorum whatever their number and the number of shares held by them.




FORM OF PROXY

Form of proxy for use by holders of Ordinary Shares at the Annual General Meeting of the Company convened for Tuesday 27th November 2012 at 10.00 am.

I/We __________________________________________________________________________________________________

(Please complete the full name of your investment in block capitals)

of __________________________________________________________________________________________________

(Please complete your full address in block capitals)

hereby appoint/s

1 the chairman of the meeting (see note 1 overleaf)

or

2 __________________________________________________________________________________________________

(Should you wish to appoint a representative, please complete the name and address of proxy/representative in block capitals)

as my/our proxy to attend, and on a poll, vote for me/us and on my/our behalf at the Annual General Meeting of the Company to be held on Tuesday 27th November 2012 at 10.00 am and at any adjournment thereof.

I/We wish my/our proxy to vote as indicated below in respect of the resolutions to be proposed at the meeting. Please indicate which way you wish your proxy to vote by ticking the appropriate box alongside each resolution. (see note 2 overleaf).

ORDINARY RESOLUTIONS

FOR AGAINST

VOTE DISCRETIONARY

WITHHELD

1. That the Financial Statements and Directors’ Report for the year ended 5th April 2012 be received and adopted.

2. That Michael McKean be re-appointed as a Director of the Company.

3. That Saffery Champness be re-appointed as auditors of the Company.

4. That the Directors be authorised to fix the remuneration of the Company’s auditors.

Signature ……………............................................................…………………… (see note 3 overleaf) Date …….................................……. 2012




FORM OF PROXY

Notes:

1. If you wish to appoint as your proxy someone other than the chairman of the meeting, cross out the words “the chairman of the meeting” and write

on the line the full name and address of your proxy. The change can be initialled.

2. In the absence of instructions, the person appointed by proxy may vote or abstain from voting as he or she thinks fit on the specified resolutions and,

unless instructed otherwise, the person appointed by proxy may also vote or abstain from voting as he or she thinks fit on any other business (including

amendments to resolutions) which may properly come before the meeting.

3. This form must be signed and dated by the shareholder or his/her attorney duly authorised in writing. If the shareholder is a company, it may execute

under its common seal or by the signature of a duly authorised officer or attorney. In the case of joint holdings, any one holder may sign this form. The

vote of the senior joint holder who tenders a vote, whether in person or by proxy, will be accepted to the exclusion of the votes of the other joint holders

and for this purpose seniority will be determined by the order in which the names stand in the register of members in respect of the joint holding.

4. To be valid, this form must be completed and lodged with Praxis Fund Services Limited, PO Box 296, Sarnia House, Le Truchot St. Peter Port, Guernsey,

Channel Islands GY1 4NA, together with the power of attorney or other authority (if any) under which it is signed or a copy of such authority certified

notarially, not less than 48 hours before the time fixed for holding the meeting.

5. The ‘vote withheld’ option is provided to enable you to abstain on any particular resolution however it should be noted that a ‘vote withheld’ is not a

vote in law and will not be counted in the calculation of the proportion of the votes ‘for’ and ‘against’ a resolution.

6. To appoint more than one proxy you may photocopy this form. Please indicate the proxy holder’s name and number of shares in relation to which

they are authorised to act as your proxy (which, in aggregate, should not exceed the number of shares held by you). Please also indicate if the proxy

instruction is one of multiple instructions being given. All forms must be signed and should be returned together in the same envelope.



Tritax Securities 1 Ltd

The Lodge, Odell, Bedford MK43 7BB

t 01234 720188 f 01234 721219 www.tritax.co.ukAuthorised and Regulated by the Financial Services Authority. Registered Office: The Lodge, Odell, Bedford, MK43 7BB. Company No. 2619789.

Tritax Polska No.1 Fund Limited · 2017. 11. 2. · Saffery Champness La Tonnelle House Les Banques...

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Transcript of Tritax Polska No.1 Fund Limited · 2017. 11. 2. · Saffery Champness La Tonnelle House Les Banques...