Annual Report 2006 - Tamar European Industrial Fund

Notes to the Accounts
5. Taxation (continued)
The group applicable income tax rate represents a blended rate across the tax jurisdictions in which the group
operates.
The Company is exempt from Guernsey taxation on dividend income derived outside Guernsey under the Income
Tax (Exempt Bodies) (Guernsey) Ordinance, 1989. A fixed annual fee of £600 is payable to the States of Guernsey in
respect of this exemption. No charge to Guernsey taxation will arise on capital gains.
The Directors intend to conduct the Company’s affairs such that the management and control is not exercised in
the United Kingdom and so that the Company does not carry on any trade in the United Kingdom. Accordingly, the
Company will not be liable for United Kingdom taxation on its income or gains other than certain income deriving from a
United Kingdom source. The Company’s subsidiaries are subject to local income tax on income arising on the property
portfolio after deduction of its allowable debt financing costs and other allowable expenses, dependent upon the
residence of each subsidiary.
As noted in accounting policy note 1(e), deferred income tax is not recognised on temporary differences at the time of
initial recognition arising from transactions treated as asset acquisitions. This policy is different from that used in the
pro-forma financial information contained in the prospectus dated 8 September 2006 which recognised deferred tax on
such differences on the balance sheet in order to calculate net assets per share.
6. Dividends
An interim dividend of 1.5 pence per share, totalling £2,100,000 will be paid on 25 April 2007 to shareholders on the
register on 10 April 2007. Although this payment relates to the period ended 31 December 2006, under International
Financial Reporting Standards it will be accounted for in the year ending 31 December 2007, being the year during
which it becomes unconditionally payable.
7. Earnings per share
The earnings per Ordinary Share are based on the net profit for the period of £4,897,000 and on 140,000,000 Ordinary
Shares, being the weighted average number of shares in issue during the period.
8. Investment properties Company Group
£’000 £’000
Freehold and leasehold properties
Purchases at cost - 275,950
Development costs - 2,258
Reclassification - (270)
Surplus on revaluation to fair value - 5,072
Closing valuation - 283,010
Included within the above is one leasehold, or the local equivalent, property with a closing market valuation of
£14,384,000.
Savills SA, who have appropriate professional qualifications and recent experience in the location and category of the
property being valued, completed a valuation of Group investment properties at 31 December 2006 on an open market
basis in accordance with the requirements of the Appraisal and Valuation Manual published by the Royal Institution of
Chartered Surveyors, which is deemed to equate to fair value. Fair value is determined by reference to market based
evidence, which is the amounts for which the assets could be exchanged between a knowledgeable, willing buyer
and a knowledgeable, willing seller in an arm’s length transaction as at the valuation date. The market value of these
investment properties amounted to £287,855,000.
On the acquisition of certain properties, the Group negotiated a purchase price adjustment for contingent deferred tax.
The aggregate amount of such adjustments obtained to 31 December 2006 was £4,845,000. It is assumed that in the
case of a future sale, any prospective buyer would seek a similar adjustment and so the closing valuation has been
reduced to reflect this.
The Group has adopted IAS 40, allowing leasehold properties to be carried at fair value rather than amortised over the
term of the lease. The same valuation criteria are therefore applied to leasehold as freehold properties. The property
valuer is independent and external to the Group. The property valuer takes account of deleterious materials included
in the construction of the investment properties in arriving at its estimate of open market valuation, when the Managers
advise the presence of such materials.
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Notes to the Accounts
8. Investment properties (continued)
The Group has entered into leases on its property portfolio as lessor (see note 19 for further information). No one
property accounts for more than 15 per cent of the gross assets of the Group. The 10 largest properties per open
market value are shown on page 10. The only leasehold property which the Group holds as lessee has more than 30
years remaining on the lease term.
There are no restrictions on the realisability of the Group’s investment properties or on the remittance of income or
proceeds of disposal. However, the Group’s investments comprise European commercial property, which may be
difficult to realise as described in Liquidity risk, note 17. The majority of leases are on a full repairing basis and as such
the Group is not liable for costs in respect of repairs, maintenance or enhancements to its investment properties.
9. Investment in subsidiary undertakings
The Company owns 100 per cent of the issued ordinary share capital of KEIF Luxembourg Sarl and KEIF Luxembourg
Scandi Sarl, both companies incorporated in Luxembourg whose principal business is that of intermediary holding
companies.
Significant subsidiaries of KEIF Luxembourg Sarl and KEIF Luxembourg Scandi Sarl include:
Country of Incorporation Ownership
KEIF Norge AS Norway 100
KEIF Sweden AB Sweden 100
Feldrien Investments BV The Netherlands 100
10. Deferred tax assets and liabilities
(a) Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following items:
Group Group
Assets Liabilities
£’000 £’000
Investment property – on revaluation surplus - (2,583)
Tax loss carry-forwards 159 -
159 (2,583)
(b) Unrecognised deferred tax assets and liabilities
At 31 December 2006, deferred tax liabilities of £29,948,000 on temporary differences at the time of initial recognition
arising from transactions treated as asset acquisitions have not been recognised in accordance with IAS 12. Included
within this is an amount of £2,135,000 which is potentially payable under the initial acquisition agreement in the event of
certain subsidiaries being sold in the future.
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