KPMG - IERE

higher immediately following Admission as a result of funds raised under the Offer. Such funds are
intended to be used to finance property acquisitions and repay A51.7 million of senior secured
borrowings under the Bank Facility. Under the terms of the Bank Facility, the cash balances in the
bank accounts of the Company and those subsidiaries which are obligors are pledged to the facility
agent.
Taxation
Taxation for the period ended 30 September 2006 was A6.9 million. Taxation consists of A0.5 million
of current income tax, A6.8 million of deferred tax charge, A(0.8) million of deferred tax asset, A0.1
million of net wealth tax and A0.3 million of capital taxes. For the period ended 30 September 2006
the Company’s effective tax rate was 6.6 per cent, excluding the impact of deferred tax. The level of
taxation for the period ended 30 September 2006 was determined in part by the impact of deferred
tax incurred, the Company’s initial organisation as a société anonyme under Luxembourg laws and
favourable tax treatment pursuant to double tax treaties with certain jurisdictions concluded by
Luxembourg. In August 2006, a protocol amending the France-Luxembourg double tax treaty dated 1
April 1958 (as amended) was signed. The changes effected by this protocol and the Company’s
conversion to a SICAF may cause income tax expense to increase in future periods. Historically, the
Group has not been subject to capital gains tax although it would be subject in the event of a direct
asset sale.
Liquidity and Capital Resources
From 5 June 2005 to 30 September 2006, the Company’s primary sources of liquidity have been cash
flows from operating activities, borrowings under the A450 million Bank Facility with Bank of
Scotland, a subsidiary of HBOS, as facility agent, and capital contributions from certain shareholders,
including Uberior ENA Limited, an indirect wholly owned subsidiary of HBOS, which subsequently
transferred its interests to Uberior Europe Limited, also an indirect wholly owned subsidiary of
HBOS, and Chelsfield Partners LLP, in which HBOS holds a minority interest.
To fund its property acquisitions during the period ended 30 September 2006, the Group raised funds
through borrowings under the Bank Facility and Shareholder Loans, which are variable rate loans.
Financing under the Bank Facility is generally made available to the relevant special purpose property
holding company. The balance of the Group’s financing needs is made available directly or indirectly
by the Company through intra-Group equity or intra-Group loans as is deemed appropriate on a
case by case basis.
The Company’s working capital requirements historically have been met through cash flows from
operating activities and A0.8 million of interest free loans from the Existing Shareholders which were
repaid before 30 September 2006.
Due to the Investment Manager’s plans to continue acquiring properties until the Group is fully
invested and the Group’s intention to borrow up to a 60 per cent. gearing level, the Company
anticipates that it will have substantial liquidity needs in future periods.
The Company expects that the main uses of cash will be to satisfy its debt service obligations, fund
future property acquisitions (including Committed to be Acquired properties), provide working capital
and pay dividends to Shareholders.
In November 2006 the Company amended the terms of the current Bank Facility (conditional upon
Admission) under which A420 million was made available until 31 December 2008s. Prior to
Admission, future property acquisitions will continue to be funded through a combination of
borrowings under the Bank Facility and Shareholder Loans. Shortly prior to Admission, the
Company intends to convert the Shareholder Loans into Shares as set out in paragraph 2.1 of Part
XII of this Prospectus and on the basis of a valuation to be provided by the Company. The
Company intends to seek an alternative form of long-term financing in the first year following
Admission.
Following Admission, and on the basis of the Assumptions, the Company intends to use
approximately A51.7 million in proceeds from the Offer to repay part of the senior secured debt
under the Bank Facility in order to reduce the Company’s loan to property value ratio.
The Company regularly monitors its liquidity position, including cash levels and capital expenditures.
At 30 September 2006, the Company held total cash and cash equivalents of A4.3 million. The
Company believes that borrowings available under the current Bank Facility (as amended, conditional
upon Admission), together with anticipated operating cash flows and the net proceeds of the Offer,
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