FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2013
REAL ESTATE INVESTORS PLC
FINANCIAL STATEMENTS
For the year ended 31 December 2013
Company Registration Number:
5045715
Registered Office:
Directors:
Secretary:
Auditor:
Solicitors:
Nominated Adviser:
Broker:
Bankers:
Registrars:
Cathedral Place, 3rd Floor
42-44 Waterloo Street
Birmingham
B2 5QB
J R A Crabtree OBE: Chairman
W Wyatt: Non Executive Director
P P S Bassi CBE: Chief Executive
M H P Daly: Finance Director
M H P Daly
Grant Thornton UK LLP
Chartered Accountants
Registered Auditor
Colmore Plaza
20 Colmore Circus
Birmingham
B4 6AT
Gateley
One Eleven
Edmund Street
Birmingham
B3 2HJ
Smith & Williamson Corporate Finance Limited
25 Moorgate
London
EC2R 6AY
Liberum Capital Limited
Ropemaker Place, Level 12
25 Ropemaker Street
London
EC2Y 9LY
Lloyds Banking Group
55 Temple Row
Birmingham
B2 5LS
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
REAL ESTATE INVESTORS PLC
PROPERTY PORTFOLIO
For the year ended 31 December 2013
CATHEDRAL PLACE, BIRMINGHAM
REAL ESTATE INVESTORS PLC
PROPERTY PORTFOLIO
For the year ended 31 December 2013
LUNN POLY HOUSE, LEAMINGTON
75-77 COLMORE ROW, BIRMINGHAM
GATEWAY HOUSE, BIRMINGHAM
REAL ESTATE INVESTORS PLC
PROPERTY PORTFOLIO
For the year ended 31 December 2013
85/89 COLMORE ROW, BIRMINGHAM
GUARDIAN HOUSE, WEST BROMWICH
REAL ESTATE INVESTORS PLC
PROPERTY PORTFOLIO
For the year ended 31 December 2013
PEAT HOUSE, LEICESTER
AVON HOUSE, BROMSGROVE
REAL ESTATE INVESTORS PLC
OUR PORTFOLIO AND PROPERTY LOCATIONS
For the year ended 31 December 2013
OUR PORTFOLIO
BIRMINGHAM CITY CENTRE PROPERTY LOCATIONS
REAL ESTATE INVESTORS PLC
CONTENTS
For the year ended 31 December 2013
INDEX
Chairman’s and Chief executive’s statement
Directors’ report
Group strategic report
Corporate governance report
Directors' remuneration report
Independent auditor’s report
Consolidated statement of comprehensive income
Consolidated statement of changes in equity
Consolidated statement of financial position
Consolidated statement of cashflows
Notes to the financial statements
Company statutory financial statements (prepared under UK GAAP)
PAGE
2 - 6
7 - 8
9
10
11 - 13
14
15
16
17 - 18
19
20 - 45
46 - 56
1
REAL ESTATE INVESTORS PLC
CHAIRMAN’S AND CHIEF EXECUTIVE’S REPORT
For the year ended 31 December 2013
Financial Highlights
Profit before tax of £5.0 million (2012: £1.0 million) up 400%
Dividend of 1p, paid in October 2013, in respect of 2013 financial year – increase of 100%
EPRA EPS 0.4p (2012: 0.8p)
Portfolio valuation of £75.2 million (2012: £77.4 million)
EPRA NAV per share up 5.3% to 59.1p (2012: 56.1p)
EPRA NNNAV per share 58.6p (2012: 54.6p) up 5%
•
•
•
•
•
•
• Net loan to value 47.3% (2012: 49.0%) gross debt £44.1 million (2012: £40.6 million)
•
Cash £8.5 million (2012: £2.7 million) weighted average debt maturity 7 years (2012: 8.6 years)
Operational Highlights
Revenue £6.6 million (2012: £6.1 million) up 8%
Property sale proceeds totalling £7.0 million
Acquisitions totalling £2.3 million
Surrender premium £0.4 million (2012: £0.6 million)
•
• Gross property assets valued at £75.2 million (2012: £77.4 million)
•
•
•
• Overall occupancy 83.6% and WAULT 3.7 years
•
•
•
Total ownership of 650,000 sq ft over 46 buildings with 150 tenants
Prime Birmingham City centre ownership 143,408 sq ft across 9 buildings – 37.2% of portfolio by value
Contracted rental income £5.8 million (2012: £6.6 million)
*EPRA = European Public Real estate Association
**WAULT = Weighted Average Unexpired Lease Term
Overview
After several years, the market appears to have recognised that there is more to the UK economy than Central London
and the South East. The regional economy in the West Midlands, where we are focussed, has had its challenges like
most regions in the UK and abroad, however, during the period under review, it has strengthened and re-established
itself as a major economic centre.
This improved sentiment towards the region, which was more visible in Q4 and particularly in the property sector, has
revealed the early signs of improving investor appetite and economic activity. We believe property values and
occupancy will see further positive improvement in 2014 and 2015.
Investor appetite, in particular from funds, insurance companies, public companies and specialist equity, has been very
strong, with a number of properties attracting multiple offers, and achieving prices significantly higher than the guide
price. This activity has and will more so, act as comparable evidence and support growing valuations for our portfolio.
We anticipate other buyers, namely private companies, pension funds, trusts, overseas buyers and HNW’s also returning
to the regional market, in order to benefit from superior yields and rising capital values. We have seen some
revaluation uplift in a number of assets, through a combination of asset management, lettings and yield compression,
and anticipate that this will continue in 2014-15.
Whilst we have picked up our fair share of distressed assets, where we can add value, the long awaited volume of
distressed disposals of regional property did not happen during 2013. It is already clear during the first few months of
2014, that the ‘distressed disposals’ into an improving property market, now supported by bank lending, is finally in full
swing. We anticipate capitalising on these opportunities, particularly those that cannot support traditional debt, due to
the short term lease profile or properties that are vacant and require refurbishment before they can be sold or let.
Indeed, we believe that the scale of the opportunity available to REI is greater than our existing resource, yet REI
remains uniquely positioned to benefit from our existing ownership and the opportunities that our reputation and track
record will attract.
Financial markets are starting to take the view that interest rates will rise, hence we have seen a positive move in the
fair value of our financial instruments resulting in a credit to our income statement of £2.1 million, which is a non cash
item, leaving us with approx £3.3 million more to recover. With rising interest rates or maturing of our interest rate
term, we anticipate recovering the entire amount in due course.
Results
Against this improving backdrop, we are delighted to report our results for the year in which we made a profit before
tax of £5 million (2012: £1.0 million – up 400%). The results are after providing for £345,000 as a result of one of our
tenants, Challinors, solicitors, entering administration. This charge represents a provision against rental income of
2
REAL ESTATE INVESTORS PLC
CHAIRMAN’S AND CHIEF EXECUTIVE’S REPORT
For the year ended 31 December 2013
£280,000 as a reversal of the rent free debtor under IFRS, which is a non cash item, and a provision of £65,000 for bad
debts. We anticipate recovering monies via personal guarantees from the former partners of Challinors.
Dividend
We were pleased to have doubled our dividend payment to our shareholders, with a payment of 1.0 pence in October
2013 in respect of the 2013 financial year. The Board intends to follow a progressive dividend policy in the future and
move to a more conventional interim and final payment schedule.
Regional Review
We are absolutely committed to investing in the Central England regions, with a focus on the West Midlands, as this is a
market place and environment in which the management have a longstanding association and network. This is why we
are able to build a business that will generate profits, capital growth and dividends for our shareholders. Despite media
articles and negative sentiment over the last few years, our region is very much alive, robust and growing. We have
listed below some of the facts that reveal the improving level of activity and confidence in the region:
•
•
•
•
Automotive strength will see the West Midlands outstrip Germany on export growth, growing three times faster
than Germany.
Jaguar Land Rover (JLR) is to create 1,700 new jobs with a £1.5 billion investment in Solihull. JLR achieved
record global sales of 425,000 new vehicles.
Profits at JLR more than doubled in the last three months of 2013. The UK company made profits of £842 million,
up from £404 million for the same quarter in 2012, on revenues of £5.3 billion.
The West Midlands region has outstripped the rest of the UK in job boosting investment from foreign investors.
After London, Birmingham is the biggest city for foreign direct investment.
• Unemployment in the West Midlands has shown the largest percentage fall in the country with 31,000 fewer
people now out of work (February 2014).
•
The West Midlands six Local Enterprise Partnerships have attracted a further £730 million of European funding.
• HM Revenue and Customs reveals that the West Midlands is the top performing region for international trade, with
18% year on year growth.
•
The West Midlands property market has outperformed the rest of the UK, other than the South East.
• House prices in the West Midlands saw the biggest annual increase in the English regions, other than London and
the South East, with a 4.4% increase.
•
•
Annual take up of office space in Birmingham in 2013 was 664,147 sq ft, an increase of almost 33% on 2012.
Prime yields across the year contracted from 6.25% to 5.75% and continue to trend in.
Birmingham has seen the opening of a brand new £640 million New Street station, a £193 million new Central
Library and the expansion of Birmingham Airport.
• West Midlands has the largest rental growth in England (PwC).
Property portfolio overview
Over the last few years, we have established REI as a recognised regional landlord. The majority of our portfolio has
been acquired during the downturn, and all acquisitions have met our criteria. We now have assets throughout the
Midlands in Birmingham City Centre, Edgbaston, Leicester, Derby, Bromsgrove, West Bromwich, Walsall, Kings Heath,
Coventry and Rugeley.
Our criteria remain:
Focus on our region – West Midlands/Central England
Shops, offices, land or opportunities
Vacant – part vacant or fully let with asset management opportunities
Add value via letting, lease renewals, rent reviews, planning and refurbishment
Lot sizes £500,000 - £10,000,000
Target yields of 10-20% plus, excluding capital growth
Assets unable to support traditional debt
No tenant should be more than 5% of our overall ERV.
i.
ii.
iii.
iv.
v.
vi.
vii.
viii.
3
REAL ESTATE INVESTORS PLC
CHAIRMAN’S AND CHIEF EXECUTIVE’S REPORT
For the year ended 31 December 2013
The total portfolio valuation is now £75.2 million after sales in Derby, Edgbaston, Crawley and Wakefield, totalling £7.0
million, and the acquisition of 37a Waterloo Street, Birmingham City Centre for £1.8 million, and Tudor House, Bridge
Street, Walsall for £500,000.
Over the last few years, our underperforming assets have been prime City Centre assets, these have now seen some
valuation uplifts, and improved occupation and demand. We now have 143,408 sq ft in the City Centre business
district, with a valuation of £28.0 million – representing 37.2% of our total portfolio, across 9 buildings.
Overall occupancy is 83.6% (2012: 86.49%) and our WAULT is 3.7 years to break (2012: 4.2 years), both of these have
been impacted by 75-77 Colmore Row, a prime 18,000 sq ft office building, which was returned to us by PwC at the end
of their lease, in good tenantable condition and is available to let for a total ERV of £400,000 p.a. Additionally, we
secured £0.4 million surrender premium from Bank of Scotland at Apex House, and have since sold this building to a
third party.
Our total ownership is now approximately 650,000 sq ft across 46 buildings and presently with 150 occupiers and the
gross yield on our investment properties at 31 December 2013 was 8.09%.
Rental deals completed in the last few years have also been on relatively soft terms and provide REI with rental growth
prospects, as quality stock is becoming occupied and new supply is limited. Investor appetite for City Centre assets is
vastly improved and we will consider sales, once we have completed asset management initiatives and capitalised on
any rental growth. It is our view that this will coincide with the return of HNW/private pension funds/overseas
investors and property company buyers that have remained inactive until now.
Core Portfolio
Offices
Birmingham
Other West Midlands
Total Offices
Total Retail
Total Core Portfolio
Non Core Portfolio
Total Portfolio
£m
%
28.0
26.3
54.3
10.1
64.4
10.8
75.2
37.2%
35.0%
72.2%
13.4%
85.6%
14.4%
100%
Our non City Centre investments have remained stable and secure throughout the downturn, and continue to trade
well. Indeed demand for good town centre stock was demonstrated when Challinors went into administration and we
immediately re-let floor space to Sandwell Inspired Partnership, a ‘not for profit co-operative’ formed by the local
councils and schools, for a 10 year term, with a 5 year 6 month break, for a gross rental of £251,793 p.a. This fully
demonstrated the benefits of our close working association with local agents.
Other activity across our portfolio is as follows:
85/89 Colmore Row, Birmingham
A listed building, in a prime location in the City Centre, was acquired in December 2012 from PwC (acting as receivers).
We have let some of the vacant space to the Royal College of Surgeons, on a new 10 year lease at a rental of £74,320
p.a. We have additional asset management activity ongoing that will further improve our tenant profile, lease terms,
rental income and capital growth. The contracted rent is now £346,393 with an ERV of £548,648.
293/310 High Street, West Bromwich
A former Allied Carpets property, acquired in June 2012 with vacant possession for the sum of £475,000. We have
obtained planning approval to create 5 ground floor units, with a separate upper floor. The refurbishment has been
completed at a cost of approximately £100,000. Three units are let with offers and interest in the others, and our ERV
is approximately £140,000 p.a.
2/30 Alcester Road, Kings Heath
A prime unbroken retail parade of 16 shops, directly adjoining a Sainsbury’s supermarket store and near to the King
Edwards Schools Foundation. Acquired in November 2008, at the height of the financial crisis, with a number of short
leases and outstanding lease renewals. All leases have been renewed, and the investment continues to trade well with
a healthy pipeline of requirement for this parade of shops.
4
REAL ESTATE INVESTORS PLC
CHAIRMAN’S AND CHIEF EXECUTIVE’S REPORT
For the year ended 31 December 2013
75/77 Colmore Row, Birmingham
A listed prime City Centre building previously let to PricewaterhouseCoopers at £400,000 p.a, with a FRI lease that
expired on 25th December 2013. The property has been vacated and will be brought to the market following necessary
works. The 18,000 sq ft building is on the market with Knight Frank at an asking rental of £25 per sq ft (an uplift on the
previous letting).
Southgate Retail Park, Derby
This multi-let retail park was acquired for £4.8 million in September 2011, providing an approximate 10% yield. We
gained planning consent for a 45,000 sq ft food store during the year, and subsequently sold units 1,2 and 3 to Lidl
supermarkets for the sum of £4.25 million, and retained the remainder that is let or under offer with an ERV of
£250,000 p.a.
Colmore Row/Bennetts Hill/Waterloo Street, Birmingham
These are also listed buildings, within the Central business district, where we have attracted a number of new tenants
throughout the year including Goodchilds Estate Agents, Redleaf Ltd and Open Executive Recruitment.
Tudor House, Bridge Street, Walsall
A four shop retail parade, acquired in December 2013 from a receiver for the sum of £500,000. The property is let to
Ladbrokes, Hambro Countrywide and 2 regional multiples. Successful lease renewals and lettings at this town centre
parade will produce approximately £80,000 p.a.
Gateway House, Birmingham
A strategically located prime building, offering long term re-development potential. In the interim, the key tenant,
Arcadia Group, occupies over 11,000 sq ft in a prime retail unit. Nearby, Marks and Spencers operates a key store and
Primark is committing to its largest UK store, a giant 200,000 sq ft unit, by taking over The Pavilions Shopping Centre.
REI has achieved annual breaks in the Arcadia lease offering flexibility to capitalise on the retail market at the correct
time and we are looking to submit a change of use application or create three retail units on the ground floor.
More generally, across the portfolio, we continue to achieve positive lease renewals, rent reviews and new lettings.
With very few exceptions, tenants across the portfolio are renewing, and we are benefitting from improving market
sentiment.
Sales
For several years, it has been very much a buyer’s market and we have capitalised on the opportunities made available
to us.
It remains our intention to build a business with a strong underlying rental income, however when we have completed
our planned asset management, or when we receive favourable interest, we will also consider selling assets. The part
sale of Southgate Retail Park provided us with such an opportunity, and we successfully sold.
We have also sold properties from the historical portfolio in Wakefield and Crawley and some locally at Apex in
Edgbaston.
We anticipate growing capital values, from yield compression, growing rental income and will remain open minded to
sales opportunities that provide value for REI.
Over the next few years, we are likely to become a more active seller as the market shifts to the benefit of a seller,
and plan to achieve REIT status, which will be more tax efficient for the Company and our shareholders.
Acquisitions
We have an extensive network that allows us to acquire assets ‘off market’ or through a privileged and known network.
In Q4, we began to see criteria assets and secured 37a Waterloo Street/7 Bennetts Hill, Birmingham City Centre, a
listed building fully let and providing £188,000 p.a., with tenants including W H Ireland stock brokers, Triton Global and
Systra Limited. The purchase price was £1.8 million in cash. This acquisition is criteria compliant and an excellent
addition to our City Centre portfolio. We additionally acquired Tudor House in Walsall for £500,000 with an ERV in
excess of £80,000.
In Q4, we have seen a significant number of opportunities that we will seek to acquire, predominantly from receivers
acting for banks, who appear to be starting the long awaited distressed stock sales. It is these assets that cannot
support traditional debt, and as a cash buyer, will provide REI with our greatest opportunity for capital growth and
double digit yields.
5
REAL ESTATE INVESTORS PLC
CHAIRMAN’S AND CHIEF EXECUTIVE’S REPORT
For the year ended 31 December 2013
Since the year end, we have acquired 770/772 Bristol Road South, Northfield, Birmingham for the sum of £1.25 million
in cash. The rental income is £115,800 p.a. plus a vacant flat. Tenants are HSBC bank (£80,800) with a lease expiring
in July 2018 and West Bromwich Building Society (£35,000) with a lease expiring in February 2023 (subject to a tenant
break in February 2019).
Finance
At 31 December 2013, the Group’s gross debt was £44.1 million (2012: £40.6 million) with cash and undrawn facilities of
£8.5 million (2012: £4.2 million). The weighted average debt maturity was 7.0 years (2012: 8.6 years) with a weighted
average cost of debt of 6.2% (2012: 6.3%) at year end - 94% fixed or hedged (2012: 100%).
Net loan to value was 47.3% (2012: 49.0%) and net interest cover based on adjusted earnings before interest and tax as
a ratio of finance costs was 2.1 (2012: 1.6). Both loan to value and interest cover fall comfortably within the banking
covenants.
During the year, we drew down £1.5 million of our undrawn facility and secured a further facility of £2.7 million on a
variable basis of 2.75% above base with Lloyds, secured against a previously un-encumbered asset, a listed City centre
building at 85/89 Colmore Row, Birmingham.
Our £20 million facility with Lloyds is due for renewal in October 2014. We are currently in the process of agreeing
terms for the renewal of these facilities, and whilst they remain subject to Credit approval, at the present time the
bank is proposing to extend the facilities at a similar level for a period of three to five years from the expiry of the
facilities.
REI has continued to receive excellent support from our principal bankers throughout the last few years, namely Lloyds
Banking Group, Aviva, Handelsbanken and Nationwide.
Outlook & Summary
Clearly, we are now in an improved economic environment and the region in which we invest and run our business is
well placed to grow and prosper. This backdrop is essential in order for us to see the continued improvement in
occupier demand, and investor appetite.
We anticipate that during 2014-15 we will experience greater demand for investment property in our region, as
investors seek higher yields and capital growth and this improving demand will naturally inflate capital values. The
additional contributor to capital growth will be rental growth, reducing incentives and tenants beginning to accept
longer lease terms with fewer tenant break options.
The real forward opportunity is to capitalise on our market reputation and existing resource and acquire the distressed
stock that the financial institutions have mothballed throughout the recession. REI is able to access these opportunities
and successful acquisitions should result in capital growth and increased rental income which, in turn, will facilitate the
Board’s intention to pay a progressive dividend.
Over the next few years, as our portfolio matures, and our asset management programme completes, we will dispose of
some of our assets, into an environment in which the banks are lending, and HNW individuals, property companies and
pension funds join the existing funds, public companies, insurance companies and overseas buyers from Singapore and
China who are buying in our region to secure quality returns and capital growth.
It is our intention to change our status to a REIT as soon as is appropriate for the Company and its shareholders to
benefit from REIT status and we anticipate that is likely to be 2015.
Finally, we would like to thank all our staff, advisors and Board for the support over the last few challenging years, and
now look forward to growing REI into a substantial regional public company.
JOHN CRABTREE OBE DL D.UNIV
CHAIRMAN
14 MARCH 2014
PAUL BASSI CBE DL D.UNIV Dsc
CHIEF EXECUTIVE
14 MARCH 2014
6
REAL ESTATE INVESTORS PLC
DIRECTORS’ REPORT
For the year ended 31 December 2013
The directors present their report together with the audited consolidated financial statements for the year ended
31 December 2013.
Directors
The directors who served during the year were as follows:
J R A Crabtree
J J Jack (retired 30 June 2013)
W Wyatt
P P S Bassi
M H P Daly
Chairman – Non-Executive
Deputy Chairman – Non-Executive
Non-Executive Director
Chief Executive
Finance Director
W Wyatt will retire and submit himself for re-election at the forthcoming Annual General Meeting.
Substantial shareholdings
The Company has been notified of the following interests that represent 3% or more of the issued share capital of
the Company at 11 February 2014.
Caledonia Investments Plc
P P S Bassi
Ruffer
Henderson Global Investors
Friends Provident International
Miton Asset Management
Number
20,154,812
9,050,000
8,690,716
6,390,132
4,969,257
2,700,000
%
28.22
12.67
12.17
8.95
6.96
3.78
Matters covered in the Strategic Report
Financial risk management objectives and policies are included in note 15 to the financial statements.
7
REAL ESTATE INVESTORS PLC
DIRECTORS’ REPORT
For the year ended 31 December 2013
Statement of directors’ responsibilities
The directors are responsible for preparing the Strategic Report, Directors’ Report and the financial statements in
accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the
directors have elected to prepare Group financial statements in accordance with International Financial Reporting
Standards as adopted by the European Union (IFRSs). Under company law the directors must not approve the
financial statements unless they are satisfied that they give a true and fair view of the state of affairs and profit or
loss of the Group for that period. In preparing those financial statements, the directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgments and estimates that are reasonable and prudent;
• state whether applicable IFRSs have been followed, subject to any material departures disclosed and explained
in the financial statements;
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group
will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company
and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also
responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The directors confirm that:
• so far as each director is aware, there is no relevant audit information of which the company’s auditor is
unaware; and
• the directors have taken all the steps that they ought to have taken as directors in order to make themselves
aware of any relevant audit information and to establish that the auditors are aware of that information.
The directors are responsible for the maintenance and integrity of the corporate and financial information included
on the company’s website. Legislation in the United Kingdom governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.
Annual General Meeting
The Annual General Meeting will be held at Cathedral Place, 3rd Floor, 42-44 Waterloo Street, Birmingham, B2 5QB
on 20 June 2014 at 11 am.
Auditor
Grant Thornton UK LLP offer themselves for re-appointment as auditor in accordance with Section 489 of the
Companies Act 2006.
BY ORDER OF THE BOARD
M H P Daly
Secretary
Date: 14 March 2014
Company No 5045715
8
REAL ESTATE INVESTORS PLC
GROUP STRATEGIC REPORT
For the year ended 31 December 2013
Review of business
Real Estate Investors PLC is a commercial property investment company specialising in the established and proven
markets of the greater Midlands area. The Group’s business model is based on generating rental and capital growth
from an active approach to the management and development of a portfolio of quality buildings, predominantly
within the office and retail sectors.
Recurring rental income from the portfolio underpins profits, which are supplemented by gains from the sale of
investment properties. Disposal proceeds are recycled into new acquisitions with better growth prospects, whilst
maintaining compliance with the terms of flexible secured bank finance.
The Group has built up a portfolio of good quality assets concentrated in these resilient established markets,
without reliance on one sector or location (see pages 3 to 6).
Principal risks and uncertainties
The directors consider the principal risks of the Group and the strategy to mitigate these risks, as follows:
Risk area
Investment portfolio
• Tenant default
• Change in demand for space
• Market pricing affecting value
Financial
• Reduced availability or increased cost of
debt
Interest rate sensitivity
•
People
• Retention/recruitment
Key performance indicators (“KPIs”)
Mitigation
• Not reliant on one single tenant or business sector
• Focused on established business locations for investment
• Monitor asset concentration
• Portfolio diversification between office and retail
properties
• Building specifications not tailored to one user
• Continual focus on current vacancies and expected
changes
• Low gearing policy
• Fixed rate debt and hedging in place
• Existing facilities sufficient for spending commitments
• On-going monitoring and management of the forecast
cash position
Internal procedures in place to track compliance
•
• Remuneration structure reviewed
• Regular assessment of performance
The following KPIs are some of the tools used by management to monitor the performance of the Group against the
aim of creating sustainable long-term returns for shareholders.
Indicator
Earnings per share
Profit – actual
Net assets per share
2013
5.04p
£4.9m
58.6p
2012
0.51p
£1.0m
54.6p
The above continue to be the key performance indicators of the Group, but last year was a year of unprecedented
economic, bank and property turmoil which meant that these targets were not achieved. In our focus area of
Birmingham and the wider West Midlands, we have been one of very few active investors and believe we have
acquired assets favourably.
BY ORDER OF THE BOARD
Date: 14 March 2014
9
M H P Daly
Secretary
REAL ESTATE INVESTORS PLC
CORPORATE GOVERNANCE REPORT
For the year ended 31 December 2013
Directors’ statement on corporate governance
The Board of Directors is accountable to shareholders for the good corporate governance of the Group. Under the
AIM rules for companies, the Group is not required to comply with the UK Corporate Governance Code (June 2010)
and does not comply with the Code. However, the Board is aware of the best practice defined by the Code and
seeks to adopt procedures to institute good governance insofar as practical and appropriate for a Group of its size
while retaining its focus on the entrepreneurial success of the business. The main elements of the Group’s
governance procedure are documented below.
Application of principles
Directors
The composition of the Board is set out on page 7. The Board currently comprises two non-executive directors and
two executive directors. The Board aims to meet monthly and is provided with relevant information on financial,
business and corporate matters prior to meetings. The Board is responsible for overall Group strategy, approval of
property and corporate acquisitions and disposals, approval of substantial items of capital expenditure, and
consideration of significant operational and financial matters. The Board has established both an Audit and
Remuneration Committee. Given the small size of the Board, it is not considered necessary to establish a separate
Nominations Committee. All members of the Board are fully consulted on the potential appointment of a new
director. All directors are subject to re-election every three years.
Accountability and audit
The Audit Committee comprises two non-executive directors, J R A Crabtree and W Wyatt, and the finance director,
by invitation. The committee oversees the adequacy of the Group’s internal controls, accounting policies and
financial reporting and provides a forum through which the Group’s external auditor reports to the non-executive
directors.
Going concern
The Group has prepared and reviewed forecasts and made appropriate enquiries which indicate that the Group has
adequate resources to continue in operational existence for the foreseeable future. These enquiries considered the
following:
• the significant cash balances the Group holds and the low levels of historic and projected operating cashflows
• any property purchases will only be completed if cash resources or loans are available to complete those
purchases
• the Group’s bankers have indicated their continuing support for the Group. The Group’s £20 million facility with
Lloyds Banking Group is due for renewal in October 2014. The Group is currently in the process of agreeing terms
for the renewal of these facilities, and whilst they remain subject to credit approval, at the present time the
bank is proposing to extend the facilities at a similar level for a period of three to five years from the expiry of
the facilities.
For these reasons, the directors continue to adopt the going concern basis in preparing the financial statements.
Internal control
The Board has overall responsibility for ensuring that the Group maintains systems of internal control to provide it
with reasonable assurance regarding the reliability of financial information used within the business and that the
assets of the business are safeguarded. It is acknowledged that such systems can only provide reasonable and not
absolute assurance against material misstatements or loss. Key areas of internal control, which are overseen by the
finance director, are listed below:
• the preparation of monthly financial information which reports actual performance and continuously updates
monthly forecasts of revenue, expense, cash flows and assets and liabilities for the remainder of the current
financial accounting period
• appraisal and approval of property and corporate investment proposals in the context of their cash flow profile,
potential profitability and fit with the Group’s overall strategy
• ongoing review of the Group’s property portfolio and issues arising therefrom
• the close involvement of the executive directors in the day to day running of the business.
The Board has considered the need for an internal audit function but has decided the size and complexity of the
Group does not justify it at present. However, it will keep this decision under annual review.
10
REAL ESTATE INVESTORS PLC
DIRECTORS' REMUNERATION REPORT
For the year ended 31 December 2013
Remuneration Committee
As a company trading on AIM, the Company is not obliged to comply with the provisions of the Directors’ Remuneration
Reports Regulations. However, as part of its commitment to good corporate governance practice the Company
provides the following information.
The Remuneration Committee is made up of two non-executive directors, J R A Crabtree and W Wyatt, and the chief
executive, by invitation. The terms of reference of the committee are to review and make recommendations to the
Board regarding the terms and conditions of employment of the executive directors.
Service agreements
No director has a service agreement with a notice period that exceeds 12 months.
Policy on directors’ remuneration
The executive directors’ remuneration packages are designed to attract, motivate and retain directors of the high
calibre needed to help the Group successfully compete in its market place. The Group’s policies are to pay executive
directors a salary at market levels for comparable jobs in the sector whilst recognizing the relative size of the Group.
The executive directors do not receive any benefits apart from their basic salaries and any bonuses.
The performance management of the executive directors and the determination of their annual remuneration package
is undertaken by the Remuneration Committee. No director plays a part in any decision about his own remuneration.
Annual bonuses will be paid at the discretion of the Remuneration Committee as an incentive and to reward
performance during the financial year pursuant to specific performance criteria. In exercising its discretion the
committee will take into account (among other things) performance against budget and improving shareholder value
and believes that incentive compensation should recognize the growth and profitability of the business.
Directors’ remuneration (forming part of the financial statements and subject to audit)
The remuneration of directors for the year ended 31 December 2013 was as follows:
Salary in
lieu of
benefits
£000
-
87
50
-
-
137
Salary
£000
-
350
200
-
-
550
Fees
£000
Total
£000
13
-
-
30
25
68
13
437
250
30
25
755
Employers’
national
insurance
contributions
£000
2013
Total
£000
2012
Total
£000
Share
options
2013
Number
Share
options
2012
Number
-
59
31
-
-
90
13
496
281
30
25
845
22
425
254
25
22
748
-
-
-
-
-
-
-
-
-
-
-
-
J J Jack
P P S Bassi
M H P Daly
J Crabtree
W Wyatt
Salary in lieu of benefits is paid in recognition for the fact that the Directors do not receive any benefits in kind.
The Group does not make pension contributions on behalf of the Directors.
No bonuses have been awarded to the directors.
11
REAL ESTATE INVESTORS PLC
DIRECTORS' REMUNERATION REPORT
For the year ended 31 December 2013
Policy on non-executive directors’ remuneration
The remuneration of the non-executive directors is determined by the Board and based upon independent surveys of
fees paid to non-executive directors of similar companies. The non-executive directors do not receive any benefits
apart from their fees which are paid directly to the individual involved.
Share warrants
Certain directors were granted share warrants on 29 June 2006 in respect of 2,127,500 Ordinary shares and on 25 July
2006 in respect of 475,000 Ordinary shares. The share warrants are exercisable from two years from the date of the
grant of the option and will lapse within seven years if not exercised. The warrants were granted on the basis of 1 for
2 shares held at the date of grant, in proportion to their shareholding and are exercisable at 120p per share. No
warrants were exercised and they have now lapsed.
Long Term Incentive Plan
At the Annual General Meeting held in June 2010 a resolution was passed approving the adoption of a new Long Term
Incentive Plan (LTIP). The proposed LTIP is designed to promote retention and incentivise the executive directors to
grow the value of the Group and to maximise returns:
• The LTIP has a ten year life from January 2010 to December 2019.
• Awards become payable to the extent that shareholder return defined as net asset value (“NAV”) growth adjusted
for dividends and other returns to shareholders exceed a compound growth rate of 10% per annum (Hurdle Return).
If shareholder returns exceed the Hurdle Return, 20% of such excess will be payable in Ordinary shares under the
LTIP.
•
• Participants will have the opportunity to take up to 30% of the amount accrued under the LTIP at the end of year
three, with the portion able to be taken up each year thereafter increasing by 10% each year and the full amount
(100%) being available only after the end of the ten year period.
• Only executive directors are eligible to participate in the LTIP.
• The baseline for the commencement of the LTIP is the NAV per Ordinary share at 31 December 2009 adjusted for
the impact of the placing of Ordinary shares in 2010 and 2011.
• Subject to the time limits set out above, awards may be taken up in the 20 business day period following the
announcement of full year or interim results.
• Amounts payable will be satisfied in full (save as below) by the issue of Ordinary shares or the grant of
zero/nominal cost options to any participant. The price at which shares will be issued will be the higher of NAV per
share as reported in the latest full year results and the weighted average mid-market closing price for the first 20
business days following announcement of the latest full year results. On issue, the Ordinary shares will rank pari
passu with the existing issued Ordinary shares.
• The number of Ordinary shares which can be issued under the LTIP is limited to 10% of the Company’s then issued
share capital. Any excess earned above this level will be paid in cash provided that the remuneration committee
consider it prudent to do so at that stage, otherwise payment will be deferred until the remuneration committee
deem it prudent.
• The remuneration committee may from time to time make any alteration to the plan which it thinks fit, including
for legal, regulatory or tax reasons, in order to ensure the smooth workings of the plan in line with its objectives.
The LTIP was implemented in December 2010. On 3 December 2010, the Group granted each of P P S Bassi and M H
P Daly an option under the scheme which entitles them to subscribe for or acquire ordinary shares in the company
at a price of 1p per share (in the case of new ordinary shares) or 0p per share (in the case of a transfer of existing
shares). The grant and exercise of the options is subject to the rules of the LTIP and cannot be exercised unless the
relevant performance criteria are met, as discussed above.
The number of ordinary shares to be awarded under the option will be determined at the relevant trigger date
based on the net asset value of the Group and will be calculated with reference to the prevailing net asset value
per share or market price per share, whichever is higher. The first trigger date is 1 January 2013 and subsequent
trigger dates occur annually thereafter until 1 January 2020. No options were granted, forfeited or exercised during
the period.
12
REAL ESTATE INVESTORS PLC
DIRECTORS' REMUNERATION REPORT
For the year ended 31 December 2013
Long Term Incentive Plan (continued)
No expense has been recognised in respect of the LTIP for the year ended 31 December 2013 as no options are
expected to vest.
APPROVED BY THE BOARD OF DIRECTORS – J R A Crabtree
Chairman, Remuneration Committee
Date: 14 March 2014
13
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
REAL ESTATE INVESTORS PLC
We have audited the consolidated financial statements of Real Estate Investors plc for the year ended 31 December
2013 which comprise the consolidated statement of comprehensive income, the consolidated statement of changes in
equity, the consolidated statement of financial position, the consolidated statement of cashflows and the related
notes. The financial reporting framework that has been applied in their preparation is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European Union.
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. 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 auditors
As explained more fully in the Statement of Directors’ Responsibilities set out on page 8, the directors are responsible
for the preparation of the consolidated 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 consolidated financial statements in accordance with
applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with
the Auditing Practices Board’s (APB’s) Ethical standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the APB’s website at
www.frc.org.uk/apb/scope/private.cfm.
Opinion on financial statements
In our opinion the consolidated financial statements:
• give a true and fair view of the state of the Group’s affairs as at 31 December 2013 and of its profit for the year
then ended;
• have been properly prepared in accordance with IFRS as adopted by the European Union; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion the information given in the Group Strategic Report and the Directors’ Report for the financial year for
which the consolidated financial statements are prepared is consistent with the consolidated financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following where under the Companies Act 2006 we are required to report
to you if, in our opinion:
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Other matter
We have reported separately on the parent Company financial statements of Real Estate Investors plc for the year
ended 31 December 2013.
David White
Senior Statutory Auditor
For and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Birmingham
Date: 14 March 2014
14
REAL ESTATE INVESTORS PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2013
Revenue
Cost of sales
Gross profit
Administrative expenses
Share of profit of joint venture
Surplus on sale of investment property
Net surplus on valuation of investment properties
Profit from operations
Finance income
Finance costs
Profit/(loss) on financial liabilities at fair value through profit and loss
Profit on ordinary activities before taxation
Income tax charge
Net profit after taxation and total comprehensive income
Total and continuing earnings per ordinary share
Basic
Diluted
Note
2013
£000
2012
£000
6,638
6,122
(2,069)
4,569
(1,434)
4,688
(1,675)
(1,874)
19
459
2,096
5,468
21
(2,595)
2,062
-
64
822
3,700
26
(2,404)
(320)
4,956
1,002
(1,355)
(635)
3,601
367
5.04p
5.04p
0.51p
0.51p
11
9
5
5
16
3
6
7
7
The results of the Group for the period related entirely to continuing operations.
The accompanying notes form an integral part of these financial statements.
15
REAL ESTATE INVESTORS PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2013
At 1 January 2012
Dividends
Transactions with owners
Profit for the year and total
comprehensive income
Share
capital
£000
7,142
-
-
-
At 31 December 2012
7,142
Dividends
Transactions with owners
Transfer to retained earnings
Profit for the year and total
comprehensive income
-
-
-
-
At 31 December 2013
7,142
Share
premium
account
£000
Capital
redemption
reserve
£000
Other
reserves
£000
Retained
earnings
£000
Total
£000
61
-
-
-
61
-
-
-
-
61
45
-
-
-
45
-
-
-
-
45
121
31,612
38,981
-
-
-
(357)
(357)
(357)
(357)
367
367
121
31,622
38,991
-
-
(714)
(714)
(714)
(714)
(121)
121
-
-
-
3,601
3,601
34,630
41,878
The accompanying notes form an integral part of these financial statements.
16
REAL ESTATE INVESTORS PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 31 December 2013
Assets
Non current
Intangible assets
Investment properties
Property, plant and equipment
Deferred tax
Investment in joint venture
Current
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Liabilities
Current
Bank loans and overdraft
Provision for current taxation
Trade and other payables
Non current
Bank loans
Liabilities at fair value through profit and loss
Total liabilities
Net assets
Note
2013
£000
2012
£000
8
9
10
17
11
12
13
15
14
15
16
171
69,551
7
2,900
72,629
816
73,445
5,601
4,392
8,482
171
70,441
18
4,255
74,885
236
75,121
6,935
3,151
2,685
18,475
12,771
91,920
87,892
(25,006)
(18)
(2,716)
(27,740)
(19,050)
(3,252)
(22,302)
(50,042)
(3,106)
(18)
(2,938)
(6,062)
(37,525)
(5,314)
(42,839)
(48,901)
41,878
38,991
The accompanying notes form an integral part of these financial statements.
17
REAL ESTATE INVESTORS PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)
At 31 December 2013
Equity
Share capital
Share premium account
Capital redemption reserve
Other reserves
Retained earnings
Total Equity
Net assets per share
Note
2013
£000
2012
£000
18
7,142
7,142
61
45
-
61
45
121
34,630
31,622
41,878
38,991
58.6p
54.6p
These financial statements were approved by the Board of Directors on 14 March 2014.
Signed on behalf of the Board of Directors
J R A Crabtree – Chairman
M H P Daly – Finance Director
Company No 5045715
The accompanying notes form an integral part of these financial statements.
18
REAL ESTATE INVESTORS PLC
CONSOLIDATED STATEMENT OF CASHFLOWS
For the year ended 31 December 2013
Cash flows from operating activities
Profit after taxation
Adjustments for:
Depreciation
Net surplus on valuation of investment property
Surplus on sale of investment property
Share of profit of joint venture
Finance income
Finance costs
(Profit)/loss on financial liabilities at fair value through profit and loss
Income tax charge
Decrease in inventories
Increase in trade and other receivables
(Decrease)/increase in trade and other payables
Interest paid
Net cash from operating activities
Cash flows from investing activities
Purchase of investment properties
Proceeds from sale of property, plant and equipment
Proceeds from sale of investment property
Investment in joint venture
Interest received
Cash flows from financing activities
Proceeds from issue of share capital net of expenses
Equity dividends paid
Proceeds from new bank loans
Payment of bank loans
Net Increase/(decrease) in cash and cash equivalents
Cash, cash equivalents and bank overdrafts at beginning of period
Cash, cash equivalents and bank overdrafts at end of period
2013
£000
3,601
11
(2,096)
(459)
(19)
(21)
2,595
(2,062)
1,355
1,334
(744)
(222)
3,273
(2,595)
678
(2,552)
-
5,500
(561)
21
2,408
-
(714)
4,200
(479)
3,007
6,093
687
6,780
2012
£000
367
11
(822)
(64)
-
(26)
2,404
320
635
860
(682)
886
3,889
(2,404)
1,485
(6,471)
(1)
350
(88)
26
(6,184)
-
(357)
10,303
(6,807)
3,139
(1,560)
2,247
687
NOTES:
Cash and cash equivalents consist of cash in hand, bank overdrafts and balances with banks only.
The accompanying notes form an integral part of these financial statements.
19
REAL ESTATE INVESTORS PLC
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
1. Accounting policies
The consolidated financial statements have been prepared under the historical cost convention, except for the
revaluation of properties and financial instruments held at fair value through profit and loss, and in accordance with
International Financial Reporting Standards (IFRS) adopted by the European Union. Separate financial statements of
Real Estate Investors PLC (the Company) have been prepared, on pages 46 to 56, under the historical cost convention
except for the revaluation of investment properties and in accordance with applicable accounting standards under UK
GAAP.
The principal accounting policies of the Group are set out below and are consistent with those applied in the 2012
financial statements, except as disclosed on pages 25 and 26 where there are new standards applicable for the year
ended 31 December 2013.
Going concern
The Group has prepared and reviewed forecasts and made appropriate enquiries which indicate that the Group has
adequate resources to continue in operational existence for the foreseeable future. These enquiries considered the
following:
• the significant cash balances the Group holds and the low levels of historic and projected operating cashflows
• any property purchases will only be completed if cash resources or loans are available to complete those
purchases
• the Group’s bankers have indicated their continuing support for the Group. The Group’s £20 million facility with
Lloyds Banking Group is due for renewal in October 2014. The Group is currently in the process of agreeing terms
for the renewal of these facilities, and whilst they remain subject to credit approval, at the present time the
bank is proposing to extend the facilities at a similar level for a period of three to five years from the expiry of
the facilities.
For these reasons, the directors continue to adopt the going concern basis in preparing the financial statements.
Business combinations
Subsidiaries are all entities over which the Group has the power to control the financial and operating policies. The
Group obtains and exercises control through voting rights. The consolidated financial statements of the Group
incorporate the financial statements of the parent Company as well as those entities controlled by the Group by full
consolidation.
Acquired subsidiaries are subject to application of the acquisition method. The consideration transferred by the Group
to obtain control of a subsidiary is calculated as the sum of the acquisition-date fair values of the assets transferred,
liabilities incurred and the equity interests issued by the Group, which includes the fair value of any asset or liability
arising from a contingent consideration arrangement. Acquisition costs are expensed as incurred.
The Group recognises identifiable assets acquired and liabilities assumed in a business combination regardless of
whether they have been previously recognised in the acquiree’s financial statements prior to the acquisition. Assets
acquired and liabilities assumed are generally measured at their acquisition-date fair values.
Goodwill is stated after separate recognition of identifiable intangible assets. It is calculated as the excess of the sum
of the fair value of consideration transferred, the recognised amount of any non-controlling interest in the acquiree
and the acquisition-date fair value of any existing equity interest in the acquiree, over the acquisition-date fair values
of identifiable net assets. If the fair values of the identifiable net assets exceed the sum calculated above, the excess
amount (i.e. gain on a bargain purchase) is recognised in profit or loss immediately.
Intra-group balances and transactions, and any unrealised gains or losses arising from intra-group transactions, are
eliminated in preparing the consolidated financial statements.
20
REAL ESTATE INVESTORS PLC
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
Investment in joint ventures
Entities whose economic activities are controlled jointly by the Group and by other ventures independent of the Group
are accounted for using the equity method.
In the consolidated financial statements the Group's interest in joint ventures is initially recognised at cost and
adjusted thereafter for further investment and the post-acquisition changes in the Group's share of results and
movement in reserves of the joint venture.
All subsequent changes to the share of interest in the joint venture are recognised in the Group's carrying amount of
the investment. Changes resulting from the profit or loss generated by the joint venture are reported in "share of
profit/(loss) of joint venture" in the consolidated statement of comprehensive income and therefore affect the net
results of the Group.
Items that have been recognised directly in the joint venture's other comprehensive income are recognised in the
consolidated other comprehensive income of the Group. However, when the Group's share of losses in a joint venture
equals or exceeds its interest in the joint venture, including any unsecured receivables, the Group does not recognise
further losses, unless it has incurred obligations or made payments on behalf of the joint venture. If the joint venture
subsequently reports profits, the investor resumes recognising its share of those profits only after its share of the
profits equals the share of losses not recognised.
Unrealised gains and losses on transactions between the Group and its joint ventures are eliminated to the extent of
the Group’s interest in the joint venture. Where unrealised losses are eliminated, the underlying asset is also tested
for impairment from the Group's perspective.
Income recognition
Revenue is recognised to the extent that it is probable that economic benefits will flow to the Group and the revenue
can be reliably measured. Revenue is measured at the fair value of the consideration received, excluding discounts,
rebates, VAT and other sales taxes or duties. The following criteria must be met before income is recognised:
Rental income
Rental income arising from operating leases on properties owned by the Group is accounted for on a straight line basis
over the period commencing on the later of the start of the lease or acquisition of the property by the Group, and
ending on the earlier of the end of the lease and next break point, unless it is reasonably certain that the break option
will not be exercised. Rental income revenue excludes service charges and other costs directly recoverable from
tenants.
Sale of properties
Revenue from the sale of properties is recognised when the significant risks and rewards of ownership of the
properties have passed to the buyer, usually when legally binding contracts which are irrevocable and unconditional
are exchanged. Revenue is, therefore, recognised when legal title passes to the purchaser, typically upon exchange.
Surrender premiums
Where contractually entitled, upon receipt of a surrender premium for the early determination of a lease, the profit,
net of dilapidations and non-recoverable outgoings relating to the lease concerned, is immediately reflected in
income.
21
REAL ESTATE INVESTORS PLC
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
Impairment
The Group’s goodwill, office equipment, leasehold improvements and investment in joint venture are subject to
impairment testing.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately
identifiable cash flows (cash-generating units). As a result, some assets are tested individually for impairment and
some are tested at cash generating unit level. Goodwill is allocated to those cash generating units that are expected
to benefit from synergies of the related business combination and represent the lowest level within the Group at
which management controls related cash flows.
Cash-generating units that include goodwill are tested for impairment at least annually. All other individual assets or
cash generating units are tested for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset’s or cash-generating unit’s carrying amount
exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less
costs to sell and value in use, using future expected revenues from the asset or cash-generating unit. Impairment
losses recognised for cash-generating units, to which goodwill has been allocated, are credited initially to the carrying
amount of goodwill. Any remaining impairment loss is charged pro rata to the other assets in the cash-generating unit.
With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss
previously recognised may no longer exist. An impairment loss on other assets is reversed if there has been a
favourable change in the estimates used to determine the asset's recoverable amount and only to the extent that the
asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation, if
no impairment loss had been recognised.
Investment properties
Investment properties are properties held to earn rentals and/or for capital appreciation.
Investment properties are initially recognised at cost including direct transaction costs.
Investment properties are subsequently valued externally or by the directors on an open market basis at the balance
sheet date and recorded at valuation. Any surplus or deficit arising on revaluing investment properties is recognised in
profit or loss in the period in which they arise.
Dilapidation receipts are held in the balance sheet and offset against subsequent associated expenditure. Any ultimate
gains or shortfalls are recognised in profit or loss, offset against any directly corresponding movement in fair value of
the investment property to which they relate.
Leasehold improvements and office equipment
Leasehold improvements and office equipment are carried at acquisition cost less subsequent depreciation and
impairment losses. Depreciation is charged on the cost of these assets less their residual value on a straight line basis
over the estimated useful economic life of each asset, by equal annual instalments over the following periods:
Leasehold improvements
Office equipment
-
-
length of lease
four years
Residual values and useful lives are reassessed annually.
Inventories
Trading properties, which are held for resale, are included in inventories at the lower of cost and net realisable value.
Cost includes all fees relating to the purchase of the property and improvement expenses. Net realisable value is
based on estimated selling price less future costs expected to be incurred to sale. Any provisions to impair trading
properties below cost are reversed in future periods if market conditions subsequently support a higher fair value but
only up to a maximum of the original cost. Property acquisitions are accounted for when legally binding contracts
which are irrevocable and effectively unconditional are exchanged.
22
REAL ESTATE INVESTORS PLC
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
Operating leases
Group company is the lessee
Leases in which substantially all risks and rewards of ownership are retained by another party, the lessor, are
classified as operating leases. Payments, including prepayments, made under operating leases (net of any incentives
received from the lessor) are charged as an expense on a straight line basis over the period of the lease.
Group company is the lessor
Properties leased out to tenants under operating leases are included in investment properties in the statement of
financial position when all the risks and rewards of ownership of the property are retained by the Group.
Taxation
Current income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating to
the current or prior reporting period, that are unpaid at the year end date. They are calculated according to the tax
rates and tax laws enacted and substantively enacted at the year end date, based on the taxable profit for the year.
Deferred income taxes are calculated using the liability method on temporary differences. This involves the
comparison of the carrying amounts of assets and liabilities in the consolidated financial statements with their
respective tax bases. However, in accordance with the rules set out in IAS 12, no deferred taxes are recognised on the
initial recognition of goodwill, or on initial recognition of an asset or liability unless the related transaction is a
business combination or affects tax or accounting profit. This applies also to temporary differences associated with
shares in subsidiaries if reversal of these temporary differences can be controlled by the Group and it is probable that
reversal will not occur in the foreseeable future. In addition, tax losses available to be carried forward as well as
other income tax credits to the Group are assessed for recognition as deferred tax assets.
Deferred income taxes on investment properties relates to temporary differences between the carrying value of these
assets and their tax base. In calculating deferred income taxes on investment properties the Directors are required to
consider the manner in which the value of the properties will be recovered, whether through use or through sale. The
Directors consider that the value of investment properties (which are held to earn rentals and for capital appreciation)
will be recovered through a mixture of rental income and sale. The Directors then consider whether there would be
any deductions which could be made against future sales proceeds. The deferred income tax represents the tax effect
of the difference between the valuation of the investment property and its tax base.
Deferred tax liabilities are provided for in full. Deferred tax assets are recognised to the extent that it is probable that
they will be able to offset against future taxable income. Deferred tax assets and liabilities are calculated, without
discounting, at tax rates that are expected to apply to their respective period of realisation, provided that they are
enacted or substantively enacted at the balance sheet date.
Most changes in deferred tax assets or liabilities are recognised as a component of tax expense in the statement of
comprehensive income. Only changes in deferred tax assets or liabilities that relate to a change in the value of assets
or liabilities that is charged directly to other comprehensive income are charged or credited directly to other
comprehensive income.
Financial assets
The Group’s financial assets include cash and cash equivalents and trade and other receivables.
All financial assets are initially recognised at fair value plus transaction costs, when the Group becomes party to the
contractual provisions of the instrument.
Interest resulting from holding financial assets are recognised in the statement of comprehensive income using the
effective interest method.
Loans and receivables are measured subsequent to initial recognition at amortised cost using the effective interest
method, less provision for impairment. Provision for impairment of trade, loan receivables and other receivables is
made when objective evidence is received that the Group will not be able to collect all amounts due to it in
accordance with the original terms of the receivable. The amount of the impairment is determined as the difference
between the assets’ carrying amount and the present value of estimated future cash flows, discounted at the original
effective interest rate. Any change in their value through impairment or reversal of impairment is recognised in profit
or loss.
23
REAL ESTATE INVESTORS PLC
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
Financial assets (continued)
A financial asset is derecognised only where the contractual rights to the cash flows from the asset expire or the
financial asset is transferred and that transfer qualifies for derecognition.
A financial asset is transferred if the contractual rights to receive the cash flows of the asset have been transferred or
the Group retains the contractual rights to receive the cash flows of the asset but assumes a contractual obligation to
pay the cash flows to one or more recipients. A financial asset that is transferred qualifies for derecognition if the
Group transfers substantially all the risks and rewards of ownership of the asset.
Cash and cash equivalents
Cash and cash equivalents include cash at bank and in hand as well as short term highly liquid investments such as
bank deposits, that are readily convertible into known amounts of cash and which are subject to an insignificant risk of
changes in value.
Equity
• Share capital represents the nominal value of equity shares that have been issued.
• Share premium represents the excess over nominal value of the fair value of the consideration received for equity
shares, net of expenses of the share issue.
• Other reserves represent the cumulative amount of the share based payment expense.
• Retained earnings include all current and prior period results as disclosed in the statement of comprehensive
income.
• The capital redemption reserve represents the nominal value of shares cancelled on the purchase of own shares in
order to maintain the capital base of the Group.
Financial liabilities
The Group’s financial liabilities include bank loans and overdrafts, trade and other payables and liabilities at fair value
through profit and loss.
Financial liabilities are recognised when the Group becomes a party to the contractual agreement of the instrument.
All interest related charges are recognised as an expense in “finance costs” in the statement of comprehensive income
using the effective interest method.
Bank overdrafts are raised for support of the short term funding of the Group’s operations.
Bank loans are raised for support of the long term funding of the Group’s operations. They are recognised initially at
fair value, net of direct issue costs and subsequently measured at amortised cost using the effective interest method,
with interest-related charges recognised as an expense in finance costs in the statement of comprehensive income.
Finance charges, including premiums payable on settlement or redemption and direct issue costs, are recognised in
profit or loss on an accruals basis 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.
Trade and other payables are recognised initially at their fair value and subsequently measured at amortised cost less
settlement payments.
All derivative financial instruments are valued at fair value through profit and loss. No derivative financial instruments
have been designated as hedging instruments. All interest related charges are included within finance costs or finance
income. Changes in an instrument's fair value are disclosed separately in the statement of comprehensive income.
Fair value is determined by reference to active market transactions or using a valuation technique where no active
market exists.
A financial liability is derecognised only when the obligation is extinguished, that is when the obligation is discharged
or cancelled or expires.
Classification as equity or financial liability
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements
entered into.
24
REAL ESTATE INVESTORS PLC
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
Classification as equity or financial liability (continued)
A financial liability exists where there is a contractual obligation to deliver cash or another financial asset to another
entity or to exchange financial assets or financial liabilities under potentially unfavourable conditions. In addition
contracts which result in the entity delivering a variable number of its own equity instruments are financial liabilities.
Shares containing such obligations are classed as financial liabilities.
An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of
its liabilities. Dividends and distributions relating to equity instruments are debited directly to equity.
Share warrants and share options
All goods and services received in exchange for the grant of any share-based payment are measured at their fair
values. Where employees are rewarded using share-based payments, the fair values of employees’ services are
determined indirectly by reference to the fair value of the instrument granted to the employee. This fair value is
appraised at the grant date and excludes the impact of non-market vesting conditions (for example, profitability and
sales growth targets).
All equity-settled share based payments are ultimately recognised as an expense in the statement of comprehensive
income with a corresponding credit to other reserves.
Upon exercise of share warrants or share options the proceeds received net of attributable transaction costs are
credited to share capital, and where appropriate share premium.
When the share warrants or share options have vested and then lapsed, the amount previously recognised in other
reserves is transferred to retained earnings.
Share based payments
The fair value of granting awards under the long Term Incentive Plan to directors is recognised through the
consolidated statement of comprehensive income. The value of shares awarded is calculated by using the Black
Scholes model. The resulting fair value is amortised through the consolidated statement of comprehensive income
on a straight line basis over the vesting period. The charge is reversed if it is likely that any non-market based
criteria will not be met.
Segmental reporting
An operating segment is a distinguishable component of the Group that engages in business activities from which it
may earn revenues and incur expenses, whose operating results are regularly reviewed by the Group’s chief operating
decision maker to make decisions about the allocation of resources and assessment of performance and about which
discrete financial information is available.
As the chief operating decision maker reviews financial information for and makes decisions about the Group’s
investment properties and properties held for trading as a portfolio, the directors have identified a single operating
segment, that of investment in and trading of commercial properties.
Application of new and revised IFRS and interpretations thereof issued by the International Financial Reporting
Interpretations Committee ("IFRIC")
The Group has adopted the new provisions of the following amended standards but there is no impact on the amounts
reported or the disclosures in the financial statements:
•
•
IAS 12 (amended 2010)
IAS 1 (amended 2011)
Income Taxes
Presentation of Financial Statements
IFRS 13 Fair Value Measurement (effective 1 January 2013)
The Group has also adopted the following standard:
•
IFRS 13 clarifies the definition of fair value and provides related guidance and enhanced disclosures about fair value
measurements. It does not affect which items are required to be fair-valued. The scope of IFRS 13 is broad and it
applies for both financial and non-financial items for which other IFRS require or permit fair value measurements or
disclosures about fair value measurements except in certain circumstances.
25
REAL ESTATE INVESTORS PLC
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
IFRS 13 applies prospectively for annual periods beginning on or after 1 January 2013. Its disclosure requirements need
not be applied to comparative information in the first year of adoption. The Group hs applied IFRS 13 for the first
time in the current year, see note 16.
Standards and interpretations in issue, not yet effective
The Group has not early adopted the following new standards, amendments or interpretations that have been issued
but are not yet effective:
IFRS 9 Financial Instruments (effective date to be confirmed)
IFRS 10 Consolidated Financial Statements (effective 1 January 2014)
IFRS 11 Joint Arrangements (effective 1 January 2014)
IFRS 12 Disclosure of Interests in Other Entities (effective 1 January 2014)
Investment Entities - Amendments to IFRS 10, IFRS 12 and IAS 27 (effective 1 January 2014)
•
•
•
•
•
• Offsetting Financial Assets and Financial Liabilities - Amendments to IAS 32 (effective 1 January 2014)
• Mandatory Effective Date and Transition Disclosures - Amendments to IFRS 9 and IFRS 7 (effective 1 January 2015)
The Group has commenced assessment of the impact of the above standards on presentation and disclosure but is not
yet in a position to state whether any of these standards would have a material impact on its results of operations and
financial position.
Critical accounting estimates and assumptions
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by
definition, seldom equal 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 accounting year are as follows:
Investment property valuation
The Group uses the valuations performed by its independent valuers or the directors as the fair value of its investment
properties. The valuation is based upon assumptions including future rental income, anticipated maintenance costs
and on the appropriate discount rate. The valuer and directors also make reference to market evidence of transaction
prices for similar properties. The impact of changes in property yields used to ascertain the valuation of investment
properties are considered in note 15.
Trade and other receivables
The Group is required to judge when there is sufficient objective evidence to require the impairment of individual
trade and other receivables. It does this on the basis of the age of the relevant receivables, external evidence of the
credit status of the debtor entity and the status of any disputed amounts. Further details with regard to the potential
impairment of trade and loan receivables are provided in note 13.
Deferred taxation
The Group has a deferred tax asset of £2,900,000 at 31 December 2013 (2012: £4,255,000) as detailed in note 17. The
Directors make assessments as to the likely future values of investment properties and indications of when the
devaluation of investment properties will reverse and taxable gains will arise through increases in the value of the
property portfolio, such that the assets will crystallise in the foreseeable future. They also monitor the interest rate
swap for potential crystallisation of a loss by reviewing interest rates, and also the rental income stream to assess the
potential utilisation of trading losses.
Surrender premiums
The Group is required to judge whether amounts due under lease surrenders are sufficiently irrevocable that income
can be accrued. Judgment is also required in establishing whether income relates to an exit fee for terminating the
leased asset (recognised immediately), or whether it represents accelerated rental income (recognised over the
remaining lease term). Surrender premiums received during the year are shown in note 2.
Critical judgements in applying the Group’s accounting policies
The Group makes judgements in applying the accounting policies. The critical judgement that has been made is as
follows:
Categorisation of properties
26
REAL ESTATE INVESTORS PLC
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
Properties held by the subsidiary company 3147398 Limited are classified as inventories, being properties held for
resale in the ordinary course of business. These properties generate rental income but are being actively marketed for
sale and are therefore categorised as properties held for resale and carried at the lower of cost and net realisable
value. Investment properties held for own use are classified as leasehold property only when intended for long term
use within the business.
27
REAL ESTATE INVESTORS PLC
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
2.
Segmental information
The segmental information is provided to the Chief Executive, who is the chief operating decision maker.
Segment revenues – Rental income
- Surrender premiums
- Sale of assets held as inventory
Cost of sales – Direct costs
- Cost of property
- Loss on valuation of assets held as inventory
Administrative expenses
Share of profit of joint venture
Surplus on disposal of investment property
Net profit on valuation of investment properties
Segment operating profit
Segment assets
The segmental information provided to the Chief Executive also includes the following:
Finance income
Finance costs
Depreciation
Income tax charge
Investment in and trading of
properties
2013
£000
2012
£000
5,234
374
1,030
(718)
(1,051)
(300)
5,482
640
-
(574)
-
(860)
(1,675)
(1,874)
19
459
2,096
5,468
91,919
-
64
822
3,700
87,892
2013
£000
2012
£000
21
(2,595)
(11)
(1,200)
26
(2,404)
(11)
(635)
Revenue from external customers and non current assets arises wholly in the United Kingdom. All revenue for the
year is attributable to the principal activities of the Group. Revenue from the largest customer represented 9%
(2012: 8%) of the total rental income revenue for the period.
3. Profit on ordinary activities before taxation
Profit on ordinary activities before taxation is stated after:
Auditors' remuneration:
Fees payable to the Company's auditor for the audit
of the financial statements
Fees payable to the Company's auditor for other services:
Audit of the financial statements of the Company's
subsidiaries pursuant to legislation
Depreciation of owned property and equipment
Operating lease payments
28
2013
£000
2012
£000
16
15
16
11
129
15
11
115
REAL ESTATE INVESTORS PLC
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
4. Directors and employees
Staff costs during the period were as follows:
Wages and salaries
Social security costs
2013
£000
864
110
974
2012
£000
785
100
885
The average number of employees (including executive directors) of the Group during the period was six, all of
whom were engaged in administration (2012: seven). The executive and non-executive directors are also the key
management personnel and details of their remuneration are included within the directors' remuneration report on
page 11.
5. Finance income/finance costs
Finance income:
Interest receivable
Finance costs:
Interest payable on bank loans
6.
Income tax charge
Result for the year before tax
Tax rate
Expected tax charge
Adjustment for non deductible expenses
Capital allowances claim
Adjustments prior year
Actual tax charge
Tax charge comprises:
Current tax
Deferred tax charge (note 17)
2013
£000
2012
£000
21
26
(2,595)
(2,404)
%
2013
£000
4,956
20%
991
-
-
364
1,355
-
1,355
1,355
%
2012
£000
1,002
23%
230
-
-
405
635
-
635
635
The prevailing rate of corporation tax has reduced to 23 % from 24% and therefore there is an adjustment in respect
of prior years with regards to the deferred taxation asset shown in the accounts.
29
REAL ESTATE INVESTORS PLC
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
7. Earnings per share
The calculation of earnings per share is based on the result for the year after tax and on the weighted average number
of shares in issue during the year.
Reconciliations of the earnings and the weighted average numbers of shares used in the calculations are set out below.
2013
Average
number of
shares
Earnings per
Share
2012
Average
number of
shares
Earnings
per share
Earnings
£000
Earnings
£000
Basic earnings per
share
3,601
71,420,598
5.04pp
367
71,420,598
0.51p
The European Public Real Estate Association indices below have been included in the financial statements to allow
more effective comparisons to be drawn between the Group and other business in the real estate sector.
EPRA EPS per share
Basic earnings per share
Fair value of investment
properties
Profits on disposal of
investment properties
Tax on profits on disposals
Fair value of inventory
properties
Change in fair value of
derivatives
Deferred tax
EPRA Earnings
2013
2012
Earnings
£000
Shares
Earnings per
share p
Earnings
Shares
£000
Earnings
per share
p
3,601
71,420,598
5.04
367
71,420,598
0.51
(2,096)
(459)
92
300
(2,061)
887
264
71,420,598
0.37
(822)
(64)
15
860
320
(82)
594
71,420,598
0.83
30
REAL ESTATE INVESTORS PLC
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
EPRA NAV per share
2013
2012
Net Assets
£000
Net asset
value per
share p
Shares
Net Assets
£000
Net asset
value per
share p
Shares
Basic
Dilutive impact of share
options and warrants
Diluted
Adjustment to fair value
of derivatives
Deferred tax
EPRA NAV
Adjustment to fair value
of derivatives
Deferred tax
EPRA NNNAV
41,878
71,420,598
58.6
38,991
71,420,598
54.6
-
-
-
41,878
71,420,598
58.6
38,991
71,420,598
54.6
3,252
(2,900)
42,230
(3,252)
2,900
41,878
-
-
71,420,598
59.1
-
-
71,420,598
58.6
5,314
(4,255)
40,050
(5,314)
4,255
38,991
-
-
71,420,598
56.1
-
-
71,420,598
54.6
8.
Intangible assets
Gross carrying amount
Cost
At 1 January 2013 and 31 December 2013
Accumulated impairment losses
At 1 January 2013 and 31 December 2013
Net book amount at 31 December 2012 and 31 December 2013
Goodwill
£000
171
-
171
The directors have reviewed the carrying value of the goodwill at the year end and consider no impairment provision is
required.
31
REAL ESTATE INVESTORS PLC
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
9.
Investment properties
Investment properties are those held to earn rentals and for capital appreciation.
The carrying amount of investment properties for the periods presented in the consolidated financial statements as at
31 December 2013 is reconciled as follows:
Carrying amount at 1 January 2012
Additions – acquisition of new properties
Additions – subsequent expenditure
Disposals
Revaluation
Carrying amount at 31 December 2012
Additions – acquisition of new properties
Additions – subsequent expenditure
Disposals
Revaluation
Carrying amount at 31 December 2013
The figures stated above for the gross carrying amount include valuations as follows:
At professional valuation
At directors' valuation
£000
63,434
6,456
15
(286)
822
70,441
2,294
258
(5,538)
2,096
69,551
£000
65,469
4,082
69,551
All of the Group’s investment properties are held as either freehold or long leasehold and are held for use in operating
leases. The Group uses the fair value model for all its investment properties.
If investment properties had not been revalued they would have been included on the historical cost basis at the
following amounts:
2013
£'000
2012
£'000
Cost and net book amount at 31 December
82,483
85,342
In accordance with IAS40, the Group’s policy is that investment properties should be valued by an external valuer at
least every three years. The valuation at 31 December 2013 has in the main been carried out by DTZ and Gerald Eve
LLP, professional valuers, on certain properties and the directors on the remaining properties.
Rental income from investment properties in the year ended 31 December 2013 was £5,608,000 (2012: £6,122,000)
and direct operating expenses in relation to those properties were £714,000 (2012: £574,000).
32
REAL ESTATE INVESTORS PLC
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
10. Property, plant & equipment
Gross carrying amount
At 1 January 2012
Additions
At 31 December 2012 and 31 December 2013
Depreciation and Impairment
At 1 January 2012
Charge for the year
At 31 December 2012
Charge for the year
At 31 December 2013
Net book carrying amount
At 31 December 2013
At 31 December 2012
11. Joint venture
Leasehold
Improvements
£000
Office
Equipment
£000
Total
£000
108
-
108
84
10
94
9
103
5
14
53
1
54
49
1
50
2
52
2
4
161
1
162
133
11
144
11
155
7
18
The joint venture relates to the Group's 50% (2012: 50%) share of Menin Works which is an unincorporated business
which undertakes property investment in the United Kingdom.
The investment is accounted for using the equity method in accordance with IAS 28.
At 1 January
Further investments
Group's share of the profit for the year
At 31 December
2013
£000
236
561
19
816
2012
£000
148
88
-
236
A reconciliation of the summarised financial information set out below to the carrying amount of the investment in
Menin Works is as follows:
Total net assets of Menin Works
Proportion of ownership interests held by the Group
Carrying amount of the investment in Menin Works
2013
£000
2.804
50%
816
2012
£000
2.100
50%
236
33
REAL ESTATE INVESTORS PLC
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
The financial information relating to the joint venture is as follows:
Non current assets
Current assets (a)
Total assets
Non current liabilities (b)
Current liabilities (c)
Total liabilities
(a) Includes cash and cash equivalents
(b) Includes financial liabilities (excluding trade and other payables and provisions)
(c) Includes financial liabilities (excluding trade and other payables and provisions)
Revenue for the year
Profit for the year
Other comprehensive income for the year
Total comprehensive income for the year
Depreciation
Interest income
Interest expense
Tax expense
2013
£000
2,100
704
2,804
(1,172)
-
(1,172)
2012
£000
2,100
-
2,100
(1,628)
-
(1,628)
2013
£000
158
19
-
-
-
-
(84)
-
2012
£000
144
-
-
-
-
-
(114)
-
There were no capital commitments at 31 December 2013 and 31 December 2012 in respect of the joint venture.
There were no contingent liabilities at 31 December 2013 and 31 December 2012 in respect of the joint venture, and
there are no significant restrictions on the ability of the joint venture to transfer funds.
34
REAL ESTATE INVESTORS PLC
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
12. Inventories
Properties and land held for trading
2013
£000
2012
£000
5,601
6,935
All properties held for trading are included at the lower of cost and net realisable value. The amount of inventories
recognised as a charge in the year ended 31 December 2013 is £1,051,000 (2012: £nil), which is after charging an
impairment of £300,000 (2012: £860,000). All of the properties held for trading are pledged as security for bank
loans.
Properties held at fair value less costs to sell at 31 December 2013 are £3,235,000 (2012: £4,570,000)
13. Trade and other receivables
Trade receivables
Loans receivable
Other receivables
Prepayments and accrued income
2013
£000
567
-
2,742
1,083
4,392
2012
£000
1,456
108
641
946
3,151
All of the Group’s trade and other receivables have been reviewed for indicators of impairment. Certain trade
receivables were found to be impaired and a provision of £95,000 (2012: £30,000) has been recorded accordingly. The
movement in the provision for impairment during the year is as follows:
At 1 January
Increase in provision
At 31 December
2013
£000
30
65
95
2012
£000
30
-
30
In addition, some of the trade receivables not impaired are past due as at the reporting date. The age of financial
assets past due but not impaired is as follows:
Not more than three months past due
More than three months but no more than six months past due
2013
£000
8
44
52
2012
£000
17
134
151
35
REAL ESTATE INVESTORS PLC
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
13. Trade and other receivables (continued)
Financial assets by category
The IAS 39 categories of financial asset included in the balance sheet and the headings in which they are included
are as follows:
Loans and
receivables
£000
567
-
2,742
-
8,482
11,791
2013
Non
financial
assets
£000
-
-
-
1,083
-
1,083
2012
Balance
sheet total
£000
Loans and
receivables
£000
Non financial
Assets
£000
Balance
sheet total
£000
567
-
2,742
1,083
8,482
12,784
1,456
108
641
-
2,685
4,890
-
-
-
946
-
946
2013
£000
509
218
260
1,729
2,716
1,456
108
641
946
2,685
5,836
2012
£000
747
388
240
1,563
2,938
Trade receivables
Loans receivable
Other receivables
Prepayments and
accrued income
Cash and cash equivalents
14. Trade and other payables
Trade payables
Other payables
Social security and taxation
Accruals and deferred income
36
REAL ESTATE INVESTORS PLC
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
14. Trade and other payables (continued)
Financial liabilities by category
The IAS 39 categories of financial liabilities included in the balance sheet and the headings in which they are included
are as follows:
2013
Financial
liabilities
at fair
value
through
profit and
loss
Other
financial
liabilities
at
amortised
cost
Liabilities
not
within
the scope
of IAS39
2012
Financial
liabilities
at fair
value
through
profit and
loss
Other
financial
liabilities
at
amortised
cost
Liabilities
not within
the scope
of IAS39
Balance
sheet
total
£000
£000
£000
£000
£000
£000
£000
-
-
-
-
-
-
-
-
3,252
3,252
3,252
25,006
-
25,006
-
509
218
18
-
-
-
260
18
509
218
260
719
26,452
1,010
1,288
1,729
27,740
19,050
-
19,050
-
-
-
45,502
1,288
19,050
3,252
22,302
50,042
-
-
-
-
-
-
-
-
5,314
5,314
5,314
3,106
-
747
388
-
1,563
5,804
37,525
-
37,525
-
18
-
-
240
-
258
-
-
-
43,329
258
Balance
sheet
total
£000
3,106
18
747
388
240
1,563
6,062
37,525
5,314
42,839
48,901
Current
Bank loans and
overdrafts
Provision for
current taxation
Trade payables
Other payables
Social security
and taxation
Accruals and
deferred income
Non-current
Bank loans
Financial
instruments
15. Financial risk management objectives and policies
The Group’s financial instruments are bank borrowings, cash, bank deposits, interest rate swap agreements and
various items such as short-term receivables and payables that arise from its operations. The main purpose of these
financial instruments is to fund the Group’s investment strategy and the short-term working capital requirements of
the business.
The main risks arising from the Group’s financial instruments are credit risk, liquidity risk, interest rate risk and
property yield risk. The Board reviews and agrees policies for managing each of these risks and they are summarised
below. These policies have remained unchanged throughout the period.
Credit risk
The Group’s principal financial assets are bank balances and trade and other receivables. The Group’s credit risk is
primarily attributable to its trade and other receivables. The amounts presented in the balance sheet are net of
allowance for doubtful receivables. An allowance for impairment is made where there is objective evidence that the
Group will not be able to collect all amounts due according to the original terms of the receivables concerned. The
credit risk for liquid funds is considered negligible, since the counterparties are reputable banks with high quality
external credit ratings.
37
REAL ESTATE INVESTORS PLC
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
15. Financial risk management objectives and policies (continued)
The Group’s exposure to credit risk is limited to the carrying amount of financial assets recognised at the balance
sheet date, as summarised below:
Cash and cash equivalents
Trade and other receivables
2013
£000
8,482
3,309
11,791
2012
£000
2,685
2,205
4,890
The Group continuously monitors defaults of customers and other counterparties, identified either individually or by
group, and incorporates this information into its credit risk controls. External credit ratings and/or reports on
customers and other counterparties are obtained and used. The Group’s policy is to deal only with credit worthy
counterparties.
The Group’s management considers that all the above financial assets that are not impaired for each of the reporting
dates under review are of good credit quality, including those that are past due. In respect of trade and other
receivables, the Group is not exposed to any significant risk exposure to any single counterparty or any group of
counterparties having similar characteristics.
Liquidity risk
The Group seeks to manage financial risk by ensuring sufficient liquidity is available to meet foreseeable needs and to
invest cash assets safely and profitably. The Group does this by taking out loans with banks to build up cash resources
to fund property purchases.
Bank loans and overdrafts
The Group borrowings analysis (all of which are undiscounted) at 31 December 2013 is as follows:
In less than one year:
Bank overdraft
Bank borrowings
In more than one year but less than two years:
Bank borrowings
In more than two years but less than five years:
Bank borrowings
In more than five years
Bank borrowings
Financial instruments
Deferred arrangement costs
38
2013
£000
2012
£000
1,702
23,304
1,998
1,108
1,289
19,104
1,906
1,890
16,045
3,252
47,498
16,838
5,314
46,252
(190)
(307)
47,308
45,945
REAL ESTATE INVESTORS PLC
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
15. Financial risk management objectives and policies (continued)
Split
Current liabilities
-bank overdraft
-bank loans
Non-current liabilities
-bank loans
-financial liabilities at fair value through profit and loss
Maturity of financial liabilities
The gross contractual cashflows relating to non-derivative financial liabilities are as follows:
In less than one year:
Bank overdraft
Trade payables
Other payables
Accruals
Bank borrowings
In more than one year but less than two years:
Bank borrowings
In more than two years but less than five years:
Bank borrowings
In more than five years
Bank borrowings
2013
£000
1,702
23,304
2012
£000
1,998
1,108
19,050
37,525
3,252
47,308
5,314
45,945
2013
£000
1,702
509
218
719
23,304
2012
£000
1,998
747
388
1,563
1,108
1,289
19,104
1,906
1,890
16,045
16,531
45,692
43,329
In February 2008 the Group entered into interest rate swap agreements to cover £20 million of its bank borrowings.
These contracts are considered by management to be part of economic hedge arrangements but have not been
formally designated. The effect of these agreements is to fix the interest payable on a notional £10 million at a rate
of 4.95%; unless the actual rate is between 3.65% and 4.95% in which case the actual rate is paid or unless the rate is
above 4.95% in which case 3.65% is paid and to fix interest payable on a notional £10 million at 3.85% plus a margin of
2.75%. At 31 December 2013 the fair value of this arrangement based on a valuation provided by the Group's bankers
was a liability of £3,252,000 (2012: £5,314,000). All of the interest rate swap agreements terminate in more than five
years (2012: more than five years).
Borrowing facilities
The Group has undrawn committed borrowing facilities at 31 December 2013 of £nil (2012: £1,500,000).
Market risk
Interest rate risk
The Group finances its operations through retained profit, cash balances and the use of medium term borrowings.
When medium term borrowings are used either fixed rates of interest apply or where variable rates apply, interest
rate swap arrangements are entered into. When the Group places cash balances on deposit, rates used are fixed in the
short term and for sufficiently short periods that there is no need to hedge against implied risk.
39
REAL ESTATE INVESTORS PLC
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
15. Financial risk management objectives and policies (continued)
The interest rate exposure of the financial liabilities of the Group at 31 December 2013 was:
Interest %
Expiry
Date
2013
£000
2012
£000
October 2019
10,000
10,000
Fixed until October 2019
Fixed until October 2019
Fixed until January 2019
Fixed until August 2028
Fixed until January 2030
Fixed until March 2030
Fixed until May 2030
Fixed until March 2031
Fixed until March 2027
Cap and collar agreement until January
2018
Variable rate
Loan arrangement fees
6.600
6.230
6.295
6.550
6.040
6.270
5.780
5.470
5.160
October 2019
January 2019
August 2028
January 2030
March 2030
May 2030
March 2031
March 2027
4.95% cap
January 2018
734
955
715
4,403
729
1,493
757
10,059
10,000
2,700
42,545
(190)
42,355
774
1,080
743
4,550
747
1,511
771
10,264
8,500
-
38,940
(307)
38,633
The Directors consider the fair value of the loans not to be significantly different from their carrying value.
The following table illustrates the sensitivity of the net result after tax and equity to a reasonably possible change in
interest rates of + half a percentage point (2012: + two/- point two percentage points) with effect from the beginning
of the year:
(Decrease)/increase in result after tax and equity
2013
2012
+0.5%
£000
135
+0.5%
£000
-
The interest rate change above will not have a material impact on the valuation of the interest rate swap.
Property yield risk
The valuation of investment properties is dependent on the assumed rental yields. However, the impact on the net
result after tax and equity is difficult to estimate as it inter relates with other factors affecting investment property
values.
40
REAL ESTATE INVESTORS PLC
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
15. Financial risk management objectives and policies (continued)
Capital risk management
The Group’s objectives when managing capital are:
• to safeguard the Group’s ability to continue as a going concern, so that it continues to provide returns and benefits
for shareholders;
• to ensure that key bank covenants are not breached
• to maintain sufficient facilities for operating cashflow needs and to fund future property purchases
• to support the Group’s stability and growth;
• to provide capital for the purpose of strengthening the Group’s risk management capability;
• to provide capital for the purpose of further investment property acquisitions; and
• to provide an adequate return to shareholders.
The Group actively and regularly reviews and manages its capital structure to ensure an optimal capital structure and
equity holder returns, taking into consideration the future capital requirements of the Group and capital efficiency,
prevailing and projected profitability, projected operating cash flows, projected capital expenditures and projected
strategic investment opportunities. The management regards total equity as capital and reserves, for capital
management purposes. At 31 December 2013 the Group had unused bank facilities of £1.5 million.
16. Fair value disclosures
The methods and techniques used for the purpose of measuring fair value are unchanged compared to the previous
reporting period. The Group has applied IFRS 13 prospectively for the first time in the current accounting period.
Fair value measurement of financial instruments
Financial assets and financial liabilities measured at fair value in the consolidated statement of financial position are
grouped into three levels of a fair value hierarchy. The three levels are defined based on the observability of
significant inputs to the measurement, as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities
Level 2: inputs other than quoted prices included in level 1 that are observable for the asset or liability, either
directly (ie as prices) or indirectly (ie derived from prices) and
Level 3 : inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The level within which the financial asset or liability is classified is determined based on the lowest level of significant
input to the fair value measurement.
The financial liabilities measured at fair value in the statement of financial position, which relate to interest rate
swaps, are grouped into the fair value hierarchy as follows:
Interest rate swap agreements:
At 1 January 2012
Income statement
At 3I December 2012
Income statement
At 31 December 2013
Level 1
£000
Level 2
£000
Level 3
£000
-
-
-
-
-
4,994
320
5,314
(2,062)
3,252
-
-
-
-
-
Total
£000
4,994
320
5,314
(2,062)
3,252
The fair value of the Group’s interest rate swap agreements has been determined using observable interest rates
corresponding to the maturity of the instrument. The effects of non-observable inputs are not significant for these
agreements.
41
REAL ESTATE INVESTORS PLC
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
16. Fair value disclosures (continued)
Measurement of other financial instruments
The measurement methods for financial assets and liabilities accounted for at amortised cost are described below:
Trade and other receivables, cash and cash equivalents and trade and other payables
The carrying amount is considered a reasonable approximation of fair value due to the short duration of these
instruments.
Bank loans and overdrafts
Fair values are considered to be equivalent to book value as loans and overdrafts were obtained at market rates.
Fair value measurement of non-financial assets
The following table shows the levels within the hierarchy of non-financial assets measured at fair value on a recurring
basis at 31 December 2013:
Investment property:
- held to earn rentals and for capital appreciation
Level 1
£000
Level 2
£000
Level 3
£000
Total
£000
-
-
69,551
69,551
The reconciliation of the carrying value of non-financial assets classified within level 3 are as follows:
Balance at 1 January 2013
Acquired during the year
Disposals during the year
Gains recognised in profit and loss
- increase in fair value
Investment Properties
£000
70,441
2,552
(5,538)
2,096
69,551
Fair value of the Group’s property assets is estimated based on appraisals performed by independent, professionally
qualified property valuers on certain properties and the directors on the remaining properties. The significant inputs
and assumptions are developed in close consultation with management. The valuation processes and fair value changes
are reviewed by the directors and audit committee at each reporting date.
Measurement of fair value of investment property held to earn rentals and for capital appreciation
Properties valued by external valuers are valued on an open market basis based on active market prices adjusted
for any differences in the nature, location or condition of the specified asset such as plot size, encumbrances and
current use. Properties valued by the directors use the same principles as the external valuers. If this information is
not available, alternative valuation methods are used such as recent prices on less active markets, or discounted
cashflow projections. The significant unobservable input is the adjustment for factors specific to the properties in
question. The extent and direction of this adjustment depends on the number and characteristics of the observable
market transactions in similar properties that are used as the starting point for the valuation. Although this input is
a subjective judgement, management consider that the overall valuation would not be materially altered by any
reasonably alternative assumptions.
The market value of the investment properties has been supported by comparison to that produced under income
capitalisation technique applying a key unobservable input, being yield. The range of yield applied is 7.5% to 11.0%.
The fair value of an investment property reflects, among other things, rental income from current leases and
assumptions about future rental lease income based on current market conditions and anticipated plans for the
property.
42
REAL ESTATE INVESTORS PLC
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
17. Deferred taxation
The movement in deferred taxation assets is as follows:
At 1 January
Income statement (note 6)
At 31 December
2013
£000
4,255
(1,355)
2,900
2012
£000
4,890
(635)
4,255
Deferred tax arising from temporary differences and unused tax losses can be summarised as follows:
Investment property
Financial instrument
Unused trading tax losses
Deferred
tax asset
£'000
Deferred
tax asset
£'000
1,610
650
640
2,900
2,334
1,222
699
4,255
No temporary differences resulting from investments in subsidiaries or interests in joint ventures qualified for
recognition as deferred tax assets or liabilities. Under the current fiscal environment, these entities are exempt from
capital gains taxes. See note 6 for information on the Group’s tax expense.
Deferred tax has been provided on all temporary differences for the following reasons:
•
•
•
the Directors are confident that the devaluation of the investment properties will at least fully reverse;
the interest rate swap liability will ultimately reverse regardless of movements in future interest rates; and
the rental income stream of the Group will continue to grow, without significant cost increases, and the unused
trading losses will therefore be fully utilised in the foreseeable future
43
REAL ESTATE INVESTORS PLC
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
18. Share capital
Allotted, issued and fully paid:
Ordinary shares of 10p
2013
Number of
shares
2013
£000
2012
Number of
Shares
2012
£000
71,420,598
7,142
71,420,598
7,142
Certain directors were granted share warrants on 29 June 2006 in respect of 2,127,500 Ordinary shares and on 25 July
2006 in respect of 475,000 Ordinary shares. The share warrants are exercisable from two years from the date of the
grant of the warrants and will lapse within seven years if not exercised. The warrants were granted on the basis of 1
for 2 shares held at the date of the grant and are exercisable at 120p. No warrants were exercised and they have now
lapsed.
At the Annual General meeting held in June 2010 a resolution was passed approving the adoption of a new Long Term
Incentive Plan (LTIP). The proposed LTIP is designed to promote retention and incentivise the executive directors to
grow the value of the Group and to maximise returns:
• The LTIP has a ten year life from January 2010 to December 2019.
• Awards become payable to the extent that shareholder return defined as net asset value (“NAV”) growth adjusted
for dividends and other returns to shareholders exceed a compound growth rate of 10% per annum (Hurdle Return).
If shareholder returns exceed the Hurdle Return, 20% of such excess will be payable in Ordinary shares under the
LTIP.
•
• Participants will have the opportunity to take up to 30% of the amount accrued under the LTIP at the end of year
three, with the portion able to be taken up each year thereafter increasing by 10% each year and the full amount
(100%) being available only after the end of the ten year period.
• The baseline for the commencement of the LTIP is the NAV per Ordinary share at 31 December 2009 adjusted for
the impact of the placing of Ordinary shares in February 2010.
• Amounts payable will be satisfied in full (save as below) by the issue of Ordinary shares or the grant of
zero/nominal cost options to any participant. The price at which shares will be issued will be the higher of NAV per
share as reported in the latest full year results and the weighted average mid-market closing price for the first 20
business days following announcement of the latest full year results. On issue, the Ordinary shares will rank pari
passu with the existing issued Ordinary shares.
• The number of Ordinary shares which can be issued under the LTIP is limited to 10% of the Company’s then issued
share capital. Any excess earned above this level will be paid in cash provided that the remuneration committee
consider it prudent to do so at that stage, otherwise payment will be deferred until the remuneration committee
deem it prudent.
• The remuneration committee may from time to time make any alteration to the plan which it thinks fit, including
for legal, regulatory or tax reasons, in order to ensure the smooth workings of the plan in line with its objectives
Details of options granted during the year under the LTIP are included in the Report on Remuneration. No expense has
been recognised in respect of the options granted as no options are expected to vest.
As described in the Directors' Remuneration Report, 2 options were issued under the 2010 LTIP on inception. The
weighted average fair value of the awards made is £0.59 per option, calculated applying the Black-Scholes option
pricing model with a volatility of 21% (based on the weighted average share price movements over the last 3 years), a
dividend yield of 0%, a risk free rate of 4.4%, an expected weighted average life of 5 years, a weighted average
exercise price of 0.5p and a market value of underlying shares at the date of grant of £0.595. As at the date of grant
no further shares were expected to be issued under the LTIP based on forecasts available at that time. At 31
December 2013, no options were expected to vest (2012: no options), therefore the charge to the income statement in
the years ended 31 December 2012 and 2013 is £nil.
44
REAL ESTATE INVESTORS PLC
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
19. Operating lease commitments
Operating lease commitments relating to land and buildings expire within two to five years and amount to £71,000
(2012: £71,000).
Non-cancellable operating lease commitments receivable:
Within one year
Later than one year but not later than five years
Later than five years
2013
£000
262
5,594
21,783
27,639
2012
£000
660
7,596
26,733
34,989
Rent receivable by the Group under current leases from tenants is from commercial and retail property held.
20. Contingent liabilities
There were no contingent liabilities at 31 December 2013 or at 31 December 2012.
21. Capital commitments
Capital commitments authorised at 31 December 2013 were £nil (2012: £nil).
22. Pension scheme
There was no pension scheme for the benefit of employees or directors in operation at 31 December 2013 or 31
December 2012.
23. Related party transactions
During the period the Group paid agency fees of £69,720 (2012: £105,000) in respect of professional services to Bond
Wolfe, a partnership in which P P S Bassi is a partner, and rent and service charges of £129,000 (2012: £115,000) to
Bond Wolfe Estates Limited, a company in which P P S Bassi is a director and shareholder.
During the period the Group paid professional fees of £10,330 (2012: £1,000) to CP Bigwood Chartered Surveyors, a
company in which P P S Bassi and M H P Daly are directors and shareholders.
During the period the Group received rental income of £52,000 (2012: £52,000) from CP Bigwood Chartered Surveyors.
No amounts were outstanding at 31 December 2013 (2012:£nil).
During the period the Group paid dividends to its directors in the capacity as shareholders, as follows:
J R Crabtree
J Jack (retired 30 June 2013)
W Wyatt
P P S Bassi
M H P Daly
45
2013
£000
2012
£000
1
-
-
90
7
-
1
-
45
4
REAL ESTATE INVESTORS PLC
COMPANY FINANCIAL STATEMENTS
For the year ended 31 December 2012
REAL ESTATE INVESTORS PLC
COMPANY STATUTORY FINANCIAL STATEMENTS (PREPARED UNDER UK GAAP)
FOR THE YEAR ENDED 31 DECEMBER 2013
COMPANY NUMBER 5045715
46
REAL ESTATE INVESTORS PLC
STATEMENT OF DIRECTORS' RESPONSIBILITIES
For the year ended 31 December 2013
Statement of directors’ responsibilities
The directors are responsible for preparing the Company financial statements (“financial statements”) in accordance
with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the
directors have elected to prepare financial statements in accordance with United Kingdom Accounting Standards
(United Kingdom Generally Accepted Accounting Practice and applicable laws). Under company law the directors must
not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs
and profit and loss of the company for that period. In preparing these financial statements, the directors are required
to:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• state whether applicable UK Accounting Standards have been followed, subject to any material departures
disclosed and explained in the financial statements;
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company
will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible
for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
The directors confirm that:
• so far as each director is aware, there is no relevant audit information of which the company’s auditor is unaware;
and
• the directors have taken all the steps that they ought to have taken as directors in order to make themselves aware
of any relevant audit information and to establish that the auditors are aware of that information.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on
the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
47
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF REAL ESTATE INVESTORS PLC
We have audited the parent Company financial statements of Real Estate Investors plc for the year ended 31
December 2013 which comprise the principal accounting policies, the balance sheet and the related notes. The
financial reporting framework that that has been applied in their preparation is applicable law and United Kingdom
Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. 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 auditors
As more fully explained in the Statement of Directors’ Responsibilities set out on page 47 the directors are responsible
for the preparation of the parent Company 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 parent Company financial statements in accordance
with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply
with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of the audit of financial statements is provided on the APB’s website at
www.frc.org.uk/apb/scope/private.cfm.
Opinion on financial statements
In our opinion the parent Company financial statements:
• give a true and fair view of the state of the Company’s affairs as at 31 December 2013;
• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion the information given in the Group Strategic Report and the Directors’ Report for the financial year for
which the financial statements are prepared is consistent with the parent Company financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to
you if, in our opinion:
• adequate accounting records have not been kept by the parent Company, or returns adequate for our audit have
not been received from branches not visited by us; or
• the parent Company financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Other matter
We have reported separately on the consolidated financial statements of Real Estate Investors plc for the year ended
31 December 2013.
David White
Senior Statutory Auditor
For and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Birmingham
Date: 14 March 2014
48
REAL ESTATE INVESTORS PLC
PRINCIPAL ACCOUNTING POLICIES
For the year ended 31 December 2013
Accounting policies
The financial statements have been prepared in accordance with the Companies Act 2006 and UK accounting standards
except as noted below in respect of the true and fair override in respect of investment properties.
The Company's principal accounting policies have remained unchanged from the previous year.
Accounting convention
The financial statements are prepared under the historical cost convention as modified by the revaluation of
investment properties.
Going concern
The Company has prepared and reviewed forecasts and made appropriate enquiries which indicate that the Company
has adequate resources to continue in operational existence for the foreseeable future. These enquiries considered
the following:
• the significant cash balances the Group holds and the low levels of historic and projected operating cashflows
• any property purchases will only be completed if cash resources or loans are available to complete those
purchases
• the Group’s bankers have indicated their continuing support for the Group. The Group’s £20 million facility with
Lloyds Banking Group is due for renewal in October 2014. The Group is currently in the process of agreeing terms
for the renewal of these facilities, and whilst they remain subject to credit approval, at the present time the
bank is proposing to extend the facilities at a similar level for a period of three to five years from the expiry of
the facilities.
For these reasons, the directors continue to adopt the going concern basis in preparing the financial statements.
Turnover
Turnover, which excludes value added tax, comprises rental income which is recognised evenly over the term of the
lease to which it relates.
Investment properties
Certain of the Company’s properties are held for long term investment and are included in the balance sheet on the
basis of open market value in accordance with SSAP 19. The surpluses or deficits on annual revaluations of such
properties are transferred to the revaluation reserve, unless a deficit results in a revaluation below cost or is a
permanent deficit in which case the amount of the deficit is charged to the profit and loss account. If a revaluation
reverses previous losses recognised in the profit and loss account, the gain up to the amount of the losses previously
recognised in the profit and loss account is credited to the profit and loss account. Depreciation is not provided in
respect of freehold investment properties. Leasehold investment properties are not depreciated where the unexpired
term is over 20 years.
This policy represents a departure from the Companies Act 2006 which require depreciation to be provided on all fixed
assets. The directors consider this policy is necessary in order that the financial statements give a true and fair view,
because current values and changes in current values are of prime importance rather than the calculation of
systematic annual depreciation. Depreciation is only one of many factors reflected in the annual valuation and the
amount, which might otherwise be shown, cannot be separately identified or quantified.
Stock
Trading properties, which are held for resale, are included in inventories at the lower of cost and net realisable value.
Cost includes all fees relating to the purchase of the property and improvement expenses. Net realisable value is
based on estimated selling price less future costs expected to be incurred to sale. Any provisions to impair trading
properties below cost are reversed in future periods if market conditions subsequently support a higher fair value but
only up to a maximum of the original cost. Property acquisitions are accounted for when legally binding contracts
which are irrevocable and effectively unconditional are exchanged.
Depreciation
Depreciation is calculated to write down the cost to residual value of all tangible fixed assets, excluding investment
properties, by equal instalments over their expected useful economic lives over the following periods:
Leasehold improvements:
Office equipment:
49
length of lease
four years
REAL ESTATE INVESTORS PLC
PRINCIPAL ACCOUNTING POLICIES
For the year ended 31 December 2013
Investments
Investments in subsidiary undertakings are recorded at cost less provision for impairment.
Financing costs
The costs of arranging finance for the Company are written off to the profit and loss account over the terms of the
associated finance using the effective interest method.
Operating leases
Annual rentals under operating leases are charged to the profit and loss account as incurred.
Deferred tax
Deferred tax is recognised on all timing differences where the transactions or events give the Company an obligation
to pay more tax in the future, or a right to pay less tax in the future, and have occurred by the balance sheet date.
Deferred tax assets are recognised on an undiscounted basis when it is more likely than not that they will be
recovered. Deferred tax is measured using the rates of tax that have been enacted or substantively enacted by the
balance sheet date.
Deferred taxation is not provided on gains recognised on revaluing investment properties. Unprovided deferred
taxation will crystallise on the sale of assets at their balance sheet value.
Financial instruments
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements
entered into. An equity instrument is any contract that evidences a residual interest in the assets of the entity after
deducting all of its financial liabilities.
Where the contractual obligations of financial instruments (including share capital) are equivalent to a similar debt
instrument, those financial instruments are classed as financial liabilities within the balance sheet. Finance costs and
gains or losses relating to financial liabilities are included in the profit and loss account. Finance costs are calculated
so as to produce a constant rate of return on the outstanding liability.
Where the contractual terms of share capital do not have any terms meeting the definition of a financial liability then
this is classed as an equity instrument. Dividends and distributions relating to equity instruments are debited direct to
equity.
Share warrants and share options
All goods and services received in exchange for the grant of any share-based payment are measured at their fair
values. Where employees are rewarded using share-based payments, the fair values of employees’ services are
determined indirectly by reference to the fair value of the instrument granted to the employee. This fair value is
appraised at the grant date and excludes the impact of non-market vesting conditions (for example, profitability and
sales growth targets).
All equity-settled share based payments and share options are ultimately recognised as an expense in the profit and
loss account with a corresponding credit to other reserves.
Upon exercise of share warrants or share options the proceeds received net of attributable transaction costs are
credited to share capital, and where appropriate share premium.
When the share warrants or share options have vested and then lapsed, the amount previously recognised in other
reserves is transferred to retained earnings.
50
REAL ESTATE INVESTORS PLC
BALANCE SHEET
As at 31 December 2013
Fixed assets
Tangible assets
Investments
Note
1
2
Current assets
Stock
Debtors 3
Cash at bank
Creditors: amounts falling due within one year
4
Net current assets
Total assets less current liabilities
Creditors: amounts falling due after more than one year
Net assets
Capital and reserves
Ordinary share capital
Share premium account
Capital redemption reserve
Other reserves
Revaluation reserve
Profit and loss account
Shareholders' funds
2013
£000
61,705
4,521
66,226
2,365
8,156
7,198
17,719
(28,865)
(11,146)
55,080
2012
£000
59,256
5,366
64,622
2,365
12,336
1,222
15,923
(7,172)
8,751
73,373
5
(13,992)
41,088
(32,194)
41,179
7
8
8
8
8
8
7,142
61
45
-
2,932
30,908
41,088
7,142
61
45
121
1,835
31,975
41,179
These financial statements were approved by the Board of Directors on 14 March 2014.
Signed on behalf of the Board of Directors
J R A Crabtree – Chairman
M H P Daly – Finance Director
Company No 5045715
The accompanying principal accounting policies and notes form an integral part of these financial statements.
51
REAL ESTATE INVESTORS PLC
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
1. Tangible fixed assets
Cost or valuation:
At 1 January 2013
Additions
Disposals
Revaluation
At 31 December 2013
Accumulated depreciation
At 1 January 2013
Charge for the period
At 31 December 2013
Net book amount
At 31 December 2013
At 31 December 2012
Leasehold
Investment
Properties Improvements
£000
£000
Office
Equipment
£000
59,238
2,574
(2,080)
1,966
61,698
-
-
61,698
59,238
108
-
-
-
108
94
9
103
5
14
54
-
-
-
54
50
2
52
2
4
Total
£000
59,400
2,574
(2,080)
1,966
61,860
144
11
155
61,705
59,256
Of the revaluation surplus of £1,966,000 the amount credited to the revaluation reserve is £1,097,000 with the
balance of £869,000 credited to the profit and loss account.
The figures stated above for cost or valuation include valuations as follows:
At valuation
Investment properties
2013
£000
2012
£'000
61,698
59,238
All of the Company’s investment properties are held as either freehold or long leasehold and are held for use in
operating leases.
If investment properties had not been revalued they would have been included on the historical cost basis at the
following amounts:
Cost and net book amount at 31 December
Investment properties
2013
£'000
2012
£000
70,562
69,941
In accordance with SSAP 19, the Company’s policy is that investment properties should be valued by an external valuer
at least every three years. The valuation at 31 December 2013 has been carried out by DTZ Chartered Surveyors and
Gerald Eve LLP, Chartered Surveyors on the basis of fair value on certain properties and by the directors on the
remaining properties.
No provision has been made for deferred taxation assets, in accordance with FRS 19, in respect of the devaluation of
investment properties but it is expected that this devaluation will reverse in future years.
52
REAL ESTATE INVESTORS PLC (the "Company")
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
2. Fixed asset investments
Cost
At 1 January 2013
Provision for impairment
At 31 December 2013
Investment in subsidiary
Undertakings
2013
£000
2012
£000
5,366
(845)
4,521
5,892
(526)
5,366
At 31 December 2013 the Company wholly owned the following subsidiaries:
Name
Boothmanor Limited
Eurocity (Crawley) Limited
3147398 Limited
Rightforce Limited
Metro Court (WB) Limited
Southgate Derby Retail Limited
Principal Activity
Property investment
Property investment
Property trading
Property investment
Property investment
Property investment
Country of incorporation
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
3. Debtors
Trade debtors
Amounts owed by subsidiary undertakings
Other debtors
Deferred tax asset
Prepayments and accrued income
4. Creditors: amounts falling due within one year
Bank overdraft
Bank loans
Amounts owed to subsidiary undertakings
Trade creditors
Other creditors
Corporation tax
Social security and taxation
Accruals and deferred income
2013
£000
466
4,429
1,278
640
1,343
8,156
2013
£000
1,702
23,033
1,824
470
194
-
220
1,422
28,865
2012
£000
674
9,242
828
736
856
12,336
2012
£000
1,998
852
1,934
599
192
-
194
1,403
7,172
Bank loans are secured against the Company’s property assets.
The Company’s policy is to settle all agreed liabilities within 30 days of receipt of invoice or provision of goods or
services if later. At 31 December 2013 trade creditors represented 38 days (2012: 42 days) purchases based on the
total purchases for the year.
53
REAL ESTATE INVESTORS PLC (the "Company")
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
5. Creditors: amounts falling due after more than one year
Bank loans
Less: deferred arrangement costs
2013
£000
14,154
(162)
13,992
2012
£000
32,457
(263)
32,194
Bank loans are secured against the Company’s property assets and bear interest at rates between 5.3% and 6.7% per
annum.
The Company borrowings analysis at 31 December 2013 is as follows:
In less than one year:
Bank borrowings
Bank overdraft
In more than one year but less than two years:
Bank borrowings
In more than two years but less than five years:
Bank borrowings
In more than five years
Bank borrowings
Deferred arrangement costs
Split
Current liabilities - bank loans and overdrafts
Non current liabilities - bank loans
2013
£000
23,033
1,702
2012
£000
852
1,998
1,011
18,844
1,056
1,110
12,087
38,889
(162)
38,727
24,735
13,992
38,727
12,503
35,307
(263)
35,044
2,850
32,194
35,044
6. Deferred tax
No provision has been made for deferred tax on gains recognised on revaluing investment properties to their market
value in accordance with FRS 19. The total amount unprovided at an estimated tax rate of 20% (2012: 23%), for the
year ended 31 December 2013 is £586,000 (2012: £422,000). A deferred taxation asset of £640,000(2012: £736,000) has
been recognised in full on losses due to the directors now expecting future taxable profits in the foreseeable future to
fully utilise them.
7. Share capital
2013
2012
Number
Number
Of shares
Of shares
2013
£000
2012
£000
71,420,598
71,420,598
7,142
7,142
Allotted, issued and fully paid:
Ordinary shares of 10p each
54
REAL ESTATE INVESTORS PLC (the "Company")
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
7. Share capital (continued)
The directors were granted share warrants on 29 June 2006 in respect of 21,275,000 Ordinary shares and on 25 July
2006 in respect of 4,750,000 Ordinary shares. The share warrants are exercisable from two years from the date of the
grant of the warrants and will lapse within seven years if not exercised. The warrants were granted on the basis of 1
for 2 shares held at the date of the grant and are exercisable at 120p. No warrants were exercised and they have now
lapsed.
At the Annual General meeting held in June 2010 a resolution was passed approving the adoption of a new Long Term
Incentive Plan (LTIP). The proposed LTIP is designed to promote retention and incentivise the executive directors to
grow the value of the Group and to maximise returns:
• The LTIP has a ten year life from January 2010 to December 2019.
• Awards become payable to the extent that shareholder return defined as net asset value (“NAV”) NAV growth
adjusted for dividends and other returns to shareholders exceed a compound growth rate of 10% per annum (Hurdle
Return).
If shareholder returns exceed the Hurdle Return, 20% of such excess will be payable in Ordinary shares under the
LTIP.
•
• Participants will have the opportunity to take up to 30% of the amount accrued under the LTIP at the end of year
three, with the portion able to be taken up each year thereafter increasing by 10% each year and the full amount
(100%) being available only after the end of the ten year period.
• The baseline for the commencement of the LTIP is the NAV per Ordinary share at 31 December 2009 adjusted for
the impact of the placing of Ordinary shares in February 2010.
• Amounts payable will be satisfied in full (save as below) by the issue of Ordinary shares or the grant of
zero/nominal cost options to any participant. The price at which shares will be issued will be the higher of NAV per
share as reported in the latest full year results and the weighted average mid-market closing price for the first 20
business days following announcement of the latest full year results. On issue, the Ordinary shares will rank pari
passu with the existing issued Ordinary shares.
• The number of Ordinary shares which can be issued under the LTIP is limited to 10% of the Company’s then issued
share capital. Any excess earned above this level will be paid in cash provided that the remuneration committee
consider it prudent to do so at that stage, otherwise payment will be deferred until the remuneration committee
deem it prudent.
Details of options granted during the year under the LTIP are included in the Report on Remuneration. No expense has
been recognised in respect of the options granted as no options are expected to vest. As described in the Directors’
Remuneration Report, 2 options were issued under the 2010 LTIP on inception. The weighted average fair value of the
awards made is £0.59 per option, calculated applying the Black-Scholes option pricing model with a volatility of 21%
(based on the weighted average share price movements over the last 3 years), a dividend yield of 0%, a risk free rate
of 4%, an expected weighted average life of 5 years, a weighted average exercise price of 0.5p and a market value of
underlying shares at the date of the grant of £0.585. As at the date of the grant no further shares were expected to be
issued under the LTIP based on forecasts available at that time. At 31 December 2013, no options were expected to
vest (2012: no options), therefore the charge to the income statement in the years ended 31 December 2012 and 2013
is £nil.
55
REAL ESTATE INVESTORS PLC (the "Company")
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
8. Movement in reserves
Share
premium
account
£000
Capital
redemption
reserve
£000
Other
reserves
£000
Revaluation
reserve
£000
At 1 January 2013
Loss for the year
Transfer to profit and loss
account
Dividends
Surplus on revaluation of
investment properties
At 31 December 2013
9. Profit for the financial year
61
-
-
-
-
61
45
-
-
-
-
45
121
-
(121)
-
-
-
Profit
and loss
account
£000
31,975
(474)
121
(714)
Total
£000
34,037
(474)
-
(714)
1,835
-
-
-
1,097
2,932
-
30,908
1,097
33,946
The Company has taken advantage of section 408 of the Companies Act 2006 and has not included its own profit and
loss account in these financial statements. The Company’s loss for the year was £474,000 (2012: £908,000).
Auditor's remuneration incurred by the Company during the year for audit services totalled £8,000 (2012: £7,000).
10. Directors and employees remuneration
Details of Directors’ remuneration are disclosed within the Directors' Remuneration Report on page 10.
11. Contingent liabilities
There were no contingent liabilities at 31 December 2013 or at 31 December 2012.
12. Capital commitments
Capital commitments authorised at 31 December 2013 were £nil (2012: £nil).
13. Related party transactions
During the period the Company paid agency fees of £69,720 (2012: £105,000) in respect of professional services to
Bond Wolfe, a partnership in which P P S Bassi is a partner, and rent and service charges of £129,000 (2012:
£115,000) to Bond Wolfe Estates Limited, a company in which P P S Bassi is a director and shareholder.
During the period the Company paid professional fees of £10,330 (2012: £1,000) to, and received rental income of
£52,000 (2012: £52,000) from CP Bigwood Chartered Surveyors, a company in which P P S Bassi and M H P Daly are
directors and shareholders.
Related party transactions with subsidiary undertakings are not disclosed as 100% of the voting rights are controlled
within the group.
56
REAL ESTATE INVESTORS PLC (the "Company")
NOTICE OF ANNUAL GENERAL MEETING
For the year ended 31 December 2013
Notice is hereby given that the 2014 Annual General Meeting of the Company will be held at Cathedral Place, 3rd Floor,
42-44 Waterloo Street, Birmingham, B2 5QB on 20 June 2014 at 11:00 am for the following purposes:
To consider and, if thought fit, to pass the following resolutions 1 to 5, which will be proposed as ordinary resolutions.
1. To receive the audited financial statements for the year ended 31 December 2013, and the reports of the directors and
the auditor thereon.
2. To receive and, if thought fit, approve the report of the Remuneration Committee.
3. To re-elect W Wyatt, who retires by rotation in accordance with the Company’s Articles of Association, as a director.
4. To reappoint Grant Thornton UK LLP as auditor of the Company to hold office until the conclusion of the next general
meeting at which audited financial statements are laid before the Company and to authorise the directors to fix their
remuneration.
5.
(i) To generally and unconditionally authorise the directors pursuant to Section 551 of the Companies Act 2006 (the “Act”)
to exercise all powers of the Company to allot shares or rights to subscribe for or to convert any security into shares
(“Shares”) up to an aggregate nominal amount of £3,714,019 (which represents one third of the issued share capital of the
Company), provided that this authority shall expire at the conclusion of the next Annual General Meeting of the Company
save that the Company may before such expiry make an offer or agreement which would or might require Shares to be
allotted after such expiry and the Board may allot Shares in pursuance of such an offer or agreement as if the authority
conferred hereby had not expired;
and further,
(ii) To generally and unconditionally authorise the directors pursuant to Section 551 of the Act to exercise all powers of the
Company to allot Shares in connection with a rights issue in favour of shareholders where the Shares respectively
attributable to the interests of all shareholders are proportionate (as nearly as may be) to the respective numbers of shares
held by them up to an aggregate nominal amount of £3,714,019 (which represents one third of the issued share capital of
the Company), provided that this authority shall expire at the conclusion of the next Annual General Meeting of the
Company save that the Company may before such expiry make an offer or agreement which would or might require Shares
to be allotted after such expiry and the Board may allot Shares in pursuance of such an offer or agreement as if the
authority conferred hereby had not expired.
To consider and, if thought fit, pass the following resolutions 6 and 7, which will be proposed as special resolutions.
6. Subject to the passing of resolution 5, to generally empower the directors pursuant to Section 571 of the Act to allot equity
securities (within the meaning of Section 560 of the Act) for cash pursuant to the authority conferred by the previous
resolution as if Section 561 of the Act did not apply to any such allotment provided that this power shall be limited:
(i) to the allotment of equity securities in connection with a rights issue, open offer or otherwise in favour of shareholders
where the equity securities respectively attributable to the interests of all shareholders are proportionate (as nearly as may
be) to the respective numbers of shares held by them but subject to the directors having a right to make such exclusions or
other arrangements in connection with the offering as they deem necessary or expedient:
(A)
(B)
to deal with equity securities representing fractional entitlements; and
to deal with legal and practical problems arising in any overseas territory under the laws of any territory or the
requirements of a regulatory body or stock exchange or any other matters; and
(ii) to the allotment (otherwise than pursuant to sub-paragraph (i) above) of equity securities up to an aggregate nominal
amount of £557,103 (which represents five per cent. of the issued share capital of the Company),
and this power shall expire at the conclusion of the next Annual General Meeting of the Company save that the Company
may before such expiry make an offer or agreement which would or might require equity securities to be allotted after such
expiry and the board may allot equity securities in pursuance of such an offer or agreement as if the authority conferred
hereby had not expired.
7. To authorise the Company generally and unconditionally for the purposes of Section 701 of the Act to make market
purchases (within the meaning of Section 693 of the Act) of ordinary shares of 10 pence each in the capital of the Company
(“Ordinary Shares”) provided that:
57
REAL ESTATE INVESTORS PLC (the "Company")
NOTICE OF ANNUAL GENERAL MEETING
For the year ended 31 December 2013
(i) the maximum number of Ordinary Shares hereby authorised to be purchased is 11,142,059 (which represents
approximately 10 per cent. of the current issued share capital of the Company);
(ii) the minimum price which may be paid for an Ordinary Share is 10 pence (exclusive of expenses) being the nominal
value of each such share; and
(iii)
the maximum price at which an Ordinary Share may be purchased is an amount (exclusive of expenses) equal to
105 per cent. of the average middle market quotations for such shares as derived from the AIM Appendix to the
Official List of the London Stock Exchange plc for each of the five business days immediately preceding the date on
which the purchase is made, and shall, unless it is (prior to its expiry) duly revoked or is renewed, expire at the
conclusion of the next Annual General Meeting, save that the Company may make a contract to purchase Ordinary
Shares under this authority before such expiry which will or may be executed wholly or partly after such expiry,
and may make purchases of Ordinary Shares pursuant to any such contract as if such authority had not expired.
By order of the Board
MHP Daly
Secretary
Dated: 28 May 2014
Notes
Registered Office:
Cathedral Place, 3rd Floor,
42-44 Waterloo Street, Birmingham,
B2 5QB
Registered number: 5045715
1. W Wyatt retires by rotation in accordance with article 23.4 of the Company’s Articles of Association and offers himself for
re-election pursuant to resolution 3 set out in this notice of Annual General Meeting.
2. You can only appoint a proxy using the procedures set out in these notes and the notes to the proxy form. A member
entitled to attend, speak and vote at the meeting is entitled to appoint one or more proxies to attend, speak and vote
instead of him, provided each proxy is appointed to exercise rights attached to different shares. You may not appoint
more than one proxy to exercise rights attached to any one share. To appoint more than one proxy you may photocopy
the form of proxy. The proxy need not be a member of the Company. Details of how to appoint the Chairman of the
meeting or another person as your proxy using the form of proxy are
set out in the notes to the form of proxy. If
you wish your proxy to speak on your behalf at the meeting you will need to appoint your own choice of proxy (not the
Chairman) and give your instructions directly to them.
3. The notes to the form of proxy explain how to direct your proxy how to vote on each resolution. If no voting indication
is given, your proxy will vote or abstain from voting at his or her discretion. Your proxy will vote (or abstain from voting)
as he or she thinks fit in relation to any other matter which is put before the meeting. Completion of the form of proxy
will not preclude a member from attending and voting in person.
4. A form of proxy is enclosed with this notice. To be valid, the form must be deposited at the offices of the Company’s
Registrars, Capita Asset Services, PXS 1, 34 Beckenham Road, Beckenham, Kent, BR3 4ZF not less than 48 hours
(excluding, in the calculation of such time period, any part of a day that is not a working day) before the time fixed for
holding the meeting or any adjourned meeting.
5. Subject to the following principles, where more than one proxy is appointed, where a form of proxy does not state the
number of shares to which it applies (a “blank proxy”) then that proxy is deemed to have been appointed in relation to
the total number of shares registered in your name (the member’s “entire holding”). In the event of a conflict
between a blank proxy and a form of proxy which does state the number of shares to which it applies (a “specific
proxy”), the specific proxy shall be counted first, regardless of the time it was sent or received (on the basis that as far
as possible, the conflicting forms of proxy should be judged to be in respect of different shares) and remaining shares
will be apportioned to the blank proxy (pro rata if there is more than one).
6. Where there is more than one proxy appointed and the total number of shares in respect of which proxies are appointed
is no greater than your entire holding, it is assumed that proxies are appointed in relation to different shares, rather
than that conflicting appointments have been made in relation to the same shares. When considering conflicting
proxies, later proxies will prevail over earlier proxies, and which proxy is later will be determined on the basis of which
proxy is last delivered. Proxies in the same envelope will be treated as sent and delivered at the same time, to
minimise the number of conflicting proxies.
7. If conflicting proxies are sent or delivered at the same time in respect of (or deemed to be in respect of) your entire
holding, none of them shall be treated as valid.
58
REAL ESTATE INVESTORS PLC (the "Company")
NOTICE OF ANNUAL GENERAL MEETING
For the year ended 31 December 2013
8. Where the aggregate number of shares in respect of which proxies are appointed exceeds your entire holding and it is
not possible to determine the order in which they were sent or delivered (or they were all sent or delivered at the same
time), the number of votes attributed to each proxy will be reduced pro rata (on the basis that as far as possible,
conflicting forms of proxy should be judged to be in respect of different shares). Where this gives rise to fractions of
shares, such fractions will be rounded down.
9. If you appoint a proxy or proxies and then decide to attend the meeting in person and vote, on a poll, using your poll
card, then your vote in person will override the proxy vote(s). If your vote in person is in respect of your entire holding
then all proxy votes will be disregarded. If, however, you vote at the meeting in respect of less than your entire
holding, if you indicate on your polling card that all proxies are to be disregarded, that shall be the case; but if you do
not specifically revoke proxies, then your vote in person will be treated in the same way as if it were the last delivered
proxy and earlier proxies will only be disregarded to the extent that to count them would result in the number of votes
being cast exceeding your entire holding.
10. In relation to note 9 above, in the event that you do not specifically revoke proxies, it will not be possible for the
Company to determine your intentions in this regard. However, in light of the aim to include votes wherever and to the
fullest extent possible, it will be assumed that earlier proxies should continue to apply to the fullest extent possible.
11. In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the appointment
submitted by the most senior holder will be accepted. Seniority is determined by the order in which the names of the
joint holders appear in the Company's register of members in respect of the joint holding (the first-named being the
most senior).
12. To change your proxy instructions simply submit a new proxy appointment using the method set out above. Note that
the cut-off time for receipt of proxy appointments (see note 4 above) also applies in relation to amended instructions;
any amended proxy appointment received after the relevant cut-off time will be disregarded.
13. In order to revoke a proxy instruction you will need to inform the Company by sending a signed notice clearly stating
your intention to revoke your proxy appointment to Capita Asset Services at the address set out at note 4. The
revocation notice must be received by Capita Asset Services no later than 8.00 am on 20 June 2014. If you attempt to
revoke your proxy appointment but the revocation is received after the time specified then your proxy appointment will
remain valid.
14. In the case of a member which is a company, the form of proxy and any revocation notice must be executed under its
common seal or signed on its behalf by an officer of the company or an attorney for the company. Any power of
attorney or any other authority under which the form of proxy and any revocation notice is signed (or a duly certified
copy of such power or authority) must be included with the form of proxy and any revocation notice.
15. Pursuant to Regulation 41 of the Uncertified Securities Regulations 2001, the time by which a person must be entered on
the register of members in order to have the right to attend, speak and vote at the Annual General Meeting is 6.00 pm
on 18 June 2014 (being not more than 48 hours (excluding, in the calculation of such time period, any part of a day that
is not a working day) prior to the time fixed for the meeting), or, if the meeting is adjourned, 48 hours (excluding, in
the calculation of such time period, any part of a day that is not a working day) prior to the time fixed for the
adjourned meeting. Changes to entries on the register of members after that time will be disregarded in determining
the right of any person to attend, speak or vote at the meeting.
16. The following documents will be available for inspection at the Company’s registered office address from the date of
this notice until the time of the meeting and for at least 15 minutes prior to the meeting and during the meeting:
(i) copies of contracts of service of executive directors with the Company; and
(ii) copies of the letters of appointment of the non-executive directors of the Company.
17. Except as provided above, members who have general queries about the meeting should contact Marcus Daly, Company
Secretary on 0121 212 3446 (no other methods of communication will be accepted). You may not use any electronic
address provided either:
(i) in this notice of Annual General Meeting; or
(ii) any related documents (including the form of proxy), to communicate with the Company for any purposes other than
those expressly stated.
59
75-77 COLMORE ROW,
BIRMINGHAM
60