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15 July 2009

Nordic Land plc

 Preliminary Announcement of Results

For the year ended 31 March 2009

Nordic Land plc ('Nordic Land' or the 'Company', or together with its subsidiaries, the 'Group') is a Jersey-registered, property investment company established in April 2007 to invest principally in retail real estate in the Nordic region including Sweden, Norway and Finland.  The Manager is Lathe Investments (Nordic) LLP.

HIGHLIGHTS

• EPRA NAV per share* of £0.91 (2008: £1.17)
  
  
• Portfolio value of £64.2 million (2008: £67.9 million)
  
  
• Loss for the period attributable to equity shareholders of £3.8 million (2008: profit of £0.7 million), mainly due to a loss on revaluation of the portfolio of £3.7 million (2008: gain of £2.9 million)
  
  
• Good progress on asset management:
  
  
• • Upward rent indexation of 4% for all the properties in January 2009
    
    
  • Increasing rental income at Helsingborg through letting vacant space, increasing mall income and improving cost recovery from tenants
    
    
  • Advancement of valuable development opportunities at Helsingborg with the support of the local Municipality
    
    
  • Planning permission granted, pre-let secured and construction started, for a new 1,130 m2 unit at Borlänge
    
    
  • 100% occupancy achieved in the office accommodation in Borlänge

* EPRA NAV, the measure recommended by the European Public Real Estate Association ('EPRA'), is the Net Asset Value per share of the Company adjusted to exclude the effect of deferred tax relating to the revaluation of investment properties and the fair value of derivative financial instruments net of attributable taxation.

For further information please contact:

Nordic Land plc

Ray Horney                                         +44 (0) 1273 775225

Ian Knight                                            +44 (0) 1892 752005

SP Angel Corporate Finance LLP

John Mackay                                        +44 (0) 7647 9642

Matrix Corporate Capital LLP

Stephen Mischler                                   +44 (0) 20 3206 7000

Bankside Consultants

Simon Rothschild/Oliver Winters            +44 (0) 20 7367 8888

  CHAIRMAN'S STATEMENT

I am pleased to present the results for your Company for the year ended 31 March 2009.

Despite the worst economic conditions seen for many years, the Nordic real estate markets have performed significantly better than many other countries, and, in particular, the UK.  

Nordic Land remains the only AIM-listed company exclusively investing in commercial real estate in the Nordic region and thus offers its investors a unique exposure to a market that is performing relatively well, compared to other countries, and offers attractive opportunities going forward.

Property valuations

The value of our portfolio has decreased by some 4.9% to SEK 761 million (£64.2 million) from SEK 800 million (£67.9 million) at 31 March 2008.  The Company has benefitted from the relatively defensive nature of the Nordic property markets, from the performance of the Nordic economies during this recessionary period, and from the results achieved by your Manager's active asset management. Details of the successful programmes implemented to add value, particularly at Terminalen 1 in Helsingborg and Lackeraren 3 in Borlänge, are outlined in the Managing Director's Review.

As a result, although the EPRA NAV per share of the Company has decreased over the period by some 22% to £0.91 per share (2008: £1.17 per share), it is still above the EPRA NAV of £0.90 per share at the date of Admission to AIM.  In the light of global economic conditions and real estate markets around the world this is a satisfactory performance.

Share price

The Company's share price does not reflect the Company's performance or the asset value behind the shares. Sentiment towards the real estate sector has been poor, reflecting concerns over both the impact of economic conditions on the direction of commercial property values and refinancing risk. This has been further compounded in the case of your Company by the lack of liquidity in its shares.

However, your Board considers that the Swedish real estate sector has intrinsic defensive qualities in general, as has the Nordic Land portfolio specifically (as outlined in this report), and would expect any positive changes in sentiment towards the sector as a whole to result in a narrowing of the discount of the share price to NAV. The Board also takes some comfort from the fact that the Group's borrowings, which are all secured on the Group's properties, are operating within bank covenants. None are repayable until 2012, with an option to extend for a further year, and all are on a fixed-interest basis, with a weighted-average, all-in interest rate of 5.45% per annum.

Your Board is working closely with the Company's brokers to introduce new shareholders and to examine other ways to improve liquidity in the Company's shares.

Dividend

In line with the statement made at the time of admission to AIM in 2007, no dividend has been declared.

Outlook

The retail property market in Sweden continues to offer an attractive combination of low rents and relatively robust retail sales.  Your Board will, therefore, continue to focus on further building our investment platform in Sweden when the timing is right.

Inevitably, the Nordic economies are not totally immune to the effects of the financial crises afflicting world economies. In particular, the Swedish banking market is continuing to show signs of strain, particularly regarding the banks' exposure to the economies of the Baltic countries, and this is reducing their appetite for lending for either refinancing existing transactions or financing new acquisitions. Notwithstanding this, your Company has continued to show progress in very challenging conditions, which bodes well for the Company's future, particularly when the markets improve.

As we reported last year, pending recovery of the capital markets, expansion of the business is most likely to be achieved by way of joint venturing with financial partners or through a merger with or the acquisition of other investment vehicles. 

I would like to thank the management team and the Group's professional advisers for their considerable efforts in producing these results despite the poor economic conditions.

RAY HORNEY

Chairman

7 July 2009

  MANAGING DIRECTOR'S REVIEW 

THE NORDIC PROPERTY MARKET

Sweden's economy has not been immune to the effects of the global economic crisis but has fared well relative to many other European countries. It experienced negative GDP growth of 0.2% in 2008. 

The National Institute of Economic Research forecasts a fall of 3.9% in 2009 and a recovery of 0.9% in 2010. In comparison to the rest of Europe, Sweden is forecast to have a somewhat higher than average growth than the EU area in 2009.

Retail sales performed better than many EU countries and increased by 3.4% during 2008.  However, consumers are now more cautious, given the weaker labour markets, and growth is now expected to be much lower in 2009, growing only by a forecast 1%. Demand from retailers for new space has decreased, if not halted, and proposed new retail property developments have largely been put on hold. 

Swedish banks are lending, albeit cautiously, having had to manage a large exposure to the Baltic countries.

Investment activity in 2008 was slightly down at SEK103 billion for all property. Shopping centres accounted for approximately 12% of the total retail investment transaction volume, down from 66% in 2007. Retail warehouses accounted for approximately 78%. 

This year the investment market has been very subdued, largely because of limited access to funding and property owners not wishing to be perceived as distressed sellers.

As in the UK, the significant shift in economic and property fundamentals creates opportunities for opportunistic buyers.  

OUR BUSINESS MODEL

We focus on multi-let investment properties with a strong retail element. This forms the basis of our strategy of seeking to add value whilst having a well-spread mix of tenants.  

The Company's acquisition process is stringent and based on local knowledge. For each property, and further development thereof, detailed business plans are prepared to manage risk and to add real value through both development and asset management. 

Acquisition financing is carefully structured to provide sufficient headroom to operate within loan covenants.  Protection against future interest-rate movements is achieved by fixed-rate funding, which, in turn, matches the timing of the contracted income flows from occupational leases.

Nordic Land's financial controls are equally rigorous and detailed working capital forecasts are maintained to assist in the planning of property acquisitions and subsequent developments.

As far as property operations are concerned, we engage local Swedish property professionals, experienced in the real estate markets, to advise us on our investment and asset management strategy.  The Board includes a Swedish property professional, Olle Arnoldsson, and offices are maintained in Gothenburg.

Day-to-day property management and leasing is now contracted to DTZ, with offices throughout Sweden, with whom the Group and the Manager have long-standing relationships.  

The Board meets quarterly to review the Manager's comprehensive management reports and to make further decisions thereon. 

 

PROPERTY REVIEW

Each of the Group's properties provides a range of profitable asset management and development opportunities, which we expect to convert into increases in cashflow and net asset value per share. 

The portfolio is currently well secured on 102 tenants, of which 73% are municipalities and national multiples, including market leaders such as Willy:s, Rusta, Scandlines, Sportex, Espresso House, Expert and McDonalds. 

The quality and size of the tenant base is important to us in terms of a diversified cashflow as well as opening up multiple prospects for adding value on lease renewals.  

Retail leases in Sweden are typically fairly short, at between three and five years, although terms may be longer (up to ten years), particularly on new lettings of larger retail boxes. It is commonplace for retailers to have the right to renew their leases.  Rents are annually indexed to the Consumer Price Index.

Nordic Land's assets comprise Terminalen 1 in Helsingborg, which is a regionally-important, mixed-use, retail and transport hub serving the west coast of Sweden and Denmark, a prime-located retail park in Borlänge with additional development opportunities and a multi-let retail property in an affluent part of Greater Stockholm.

Terminalen 1, Helsingborg

This long-leasehold interest was acquired in May 2007 for SEK 540 million (excluding purchase costs) to reflect an initial yield of 5.7% at purchase. 

Helsingborg is a major port city in south-west Sweden, opposite Denmark. The property itself is in central Helsingborg, unique for the area's transportation systems, serving rail, road, ferry and bus routes, and in a prime office location.

The building was constructed in 1991 and is the region's central transport terminal. 

It comprises the terminal area (which provides ticket sales, waiting halls and a passenger link to the main Sweden to Denmark ferry terminal), a shopping centre with a number of restaurants above, and offices in the 5-6 levels above. The total lettable area is some 19,500 m².  

Underneath the building are the main, west-coast-line, railway station and the town's main bus terminal, both of which the Group owns.

The property has both a multi-storey, roof-top, car park (303 spaces) and a surface roof-top car park (399 spaces), which benefit from being directly adjacent to the ferry and train terminals and which together provide a strong income stream.

In total there are currently some 87 tenants.

The South Harbour area, directly to the south of the property, is to be redeveloped into a major 'docklands-style' development (called H+), comprising 1,000,000 m2 of land to cater for living, working, studying and leisure facilities. This project has been subject to an international tender and five teams have been selected to submit their proposals in 2009. In addition to the H+ project, the railway will in the future be underground and thus further enhance the quality of the area. The construction of the railway tunnel is estimated to start in early 2012, for completion in 2017.  These projects would further improve the location around the building and benefit the property.  Terminalen is the 'gateway' property by virtue of its location and hosting of the major transport links and thus gives Nordic Land the opportunity to become involved in the development of this area.

We are particularly encouraged by our ongoing meetings with officials of the Municipality and its efforts to make a positive contribution to the H+ scheme.

We are in the final stages of installing some energy-efficient equipment to achieve significant cost savings as well as implementing an energy-saving programme, and are already seeing an increase in net operating income.  In due course this will enhance the property valuation.

We have let our previously-vacant space to new tenants so as to increase income, and there is further under-utilised or vacant space at the property which has now been made ready for leasing.  The leasing team, led by DTZ, has been strengthened with the appointment of a local experienced agent who has excellent knowledge of the local market.

We have completed plans with our architects for a new, vibrant, restaurant area at first floor level, and, potentially, new offices above. 

In parallel with the ongoing discussions with the Municipality regarding the approval and planning process, the first stage of the refurbishment is now in hand, involving the upgrading of all lifts and, later in the year, the replacement and repositioning of escalators leading to core areas.

Rent recovery levels are very strong and there are no significant arrears or bad debts.

Lackeraren 3, Borlänge 

This freehold interest was acquired in May 2007 for SEK 140 million (excluding purchase costs) to reflect an initial yield of 5.8% at purchase.

Borlänge is a major regional town 120 km to the north west of Stockholm with large corporate employers and a strong local economy.  The property itself is located next to the regionally-dominant Kupolen Shopping Centre. 

The property comprises a prime, retail-warehouse park and two small, free-standing office buildings, all of some 10,000 m², plus a 327-space surface car park and extensive servicing areas. The income is well secured by major national retailers including Willy:s and Rusta.

Over the last 12 months we have secured a building permit to build a new 1,130 m2 unit, acquired additional land so as to meet car park standards for more space on site, and signed a pre-let with a national retailer, Expert. The construction of the additional retail unit is well underway and in line with budget and schedule. The new tenant, which will take occupation in August 2009, will further enhance the quality of the tenant mix at the property.  We expect the remaining development profit to be included in the next valuation in September when the project will have been completed.

We are currently in discussions with the Municipality to secure for the Group the possibility for further extension of the retail and office areas and to potentially acquire land adjacent to our existing property in order to enlarge the car park areas.

The property is now fully let and there are no arrears or bad debts.

Sicklaön 117, Nacka, Stockholm

This freehold interest was acquired in September 2007 for SEK 64 million (excluding purchase costs) to reflect an initial yield of 5.9% at purchase.

The property is well-located in the Sickla shopping quarter which, as the main retail location for the Nacka community, generates some of the highest sales per square metre in Sweden.  This area is amongst the most affluent regions in Sweden, featuring high per capita income and strong population growth.  

The immediate location benefits from recent and substantial improvements to local infrastructure. New retail developments and car parking facilities have recently been completed adjacent to the building, and a new road connection is being planned.

The property comprises 3,400 m² of retail, storage and office accommodation in one building, predominantly let to national multiple retailers, plus a villa and land for re-development.  

We have a number of asset-management initiatives in hand, including improvement to the retail elements and a property-cost reduction programme so as to increase net operating income.

The property currently has one small vacant area which is being marketed. There are no arrears or bad debts.

      

VALUATIONS

As at 31 March 2009, the value of the Group's property portfolio had decreased by some £3.7 million to £64.2 million, compared to the value at 31 March 2008 of £67.9 million.

This follows the completion of its formal year-end valuation, which was carried out by DTZ, in accordance with the Appraisal and Valuation Standards of RICS:

Property		Valuation as at 31 March  2009	Valuation as at 31 March  2008	Increase/ (decrease)	%
Helsingborg	£ million SEK million	46.4 550	48.8  575	(2.4) (25)	(4.9) (4.3)
Lackeraren	£ million SEK million	13.0 154	13.2 155	(0.2) (1)	(1.5) (0.6)
Sicklaön	£ million SEK million	4.8 57	5.9 70	(1.1) (13)	(18.6) (18.6)
Total	£ million SEK million	64.2 761	67.9 800	(3.7)  (39)	(5.4) (4.9)
Blended yield		6.2%	5.7%

Note: SEK:GBP exchange rate was 11.85 as at 31 March 2009 (11.8 as at 31 March 2008).

The SEK property valuations have fallen by 4.9%. This is mainly due to valuers moving yields out to reflect current market conditions in the real estate sector; however, a good contribution was made from our asset-management activities:

• an increase in net operating income at Helsingborg through letting vacant space, increasing mall income and implementing energy cost savings

• the achievement of 100% occupancy in the office accommodation in Borlänge

• starting construction on the pre-let development at Borlänge

• upward rent indexation of 3.99% for all of the properties in January 2009

  FINANCIAL REVIEW

Results

Net rental income for the year was £3.4 million (2008: £2.6 million), representing a full year's contribution after the acquisition of the Helsingborg and Borlänge properties in May 2007 and the Sicklaön property in September 2007.  Operating loss for the year was £1.6 million (2008: profit of £3.5 million), after allowing for administrative expenses of £1.2 million (2008: £1.9 million) and the loss on the revaluation of investment properties of £3.7 million (2008: gain of £2.9 million).

Loss before tax for the year was £4.5 million (2008: profit before tax of £1.9 million), after allowing for the net interest payable of £2.7 million (2008: £1.9 million) and the writing off of the fair value of derivative financial instruments of £0.3 million (2008: gain of £0.3 million).

The tax credit for the year was £0.7 million (2008: charge of £1.2 million), principally due to the deferred tax on the revaluation of investment properties.

Loss after tax for the year was therefore £3.8 million (2008: profit after tax of £0.7 million).  EPRA earnings per share, excluding the loss on revaluation of investment properties, the change in fair value of derivative financial instruments and exceptional items, all net of attributable taxation, was a loss of 2.6 p per share (2008: loss of 6.8 p).

Dividend

As reported in the Chairman's Statement, no dividend has been declared, in line with the statement made by the directors at the time of Admission.

Cash flow

 

Balance sheet

 

EPRA net asset value per share was as follows:

	As at	As at
	31 March 2009	31 March 2008
Basic net asset value per share	£0.84	£1.07
EPRA net asset value per share	£0.91	£1.17

 

EPRA net asset value per share is a property industry measure which excludes deferred tax relating to the revaluation of investment properties and the fair value of derivative financial instruments net of attributable taxation.

Financing

As at 31 March 2009 the Group's net debt totalled £44.4 million (2008: £43.0 million). The Group's bank borrowings are all secured on the Group's properties and are operating well within bank loan covenants.

The loans are repayable in 2012, with an option to extend for a further year, and are on a fixed-interest basis, with a weighted-average, all-in interest rate of 5.45% per annum. 

At the year end the net debt/property gearing ratio was 69.1% (2008: 63.4%).

The loans to acquire the properties were originally provided by Lehman Brothers Bankhaus AG ('Lehman'). On 23 May 2008 the loans were transferred to a commercial-mortgage-backed-securities ('CMBS') vehicle, Excalibur Funding No 1 PLC ('Excalibur'), set up by Lehman to be the lender of a portfolio of loans. Excalibur took over all the rights and obligations under the Lehman loan agreement, including the capital expenditure commitment facility of SEK 110 million (£9.3 million).

The loan agreement states that Nordic Land pays interest to Excalibur on a fixed-interest basis.  The Group does not have any floating-rate obligations under the terms of the loan.  Lehman previously advised that Nordic Land benefitted from movements in interest rates in relation to the underlying derivative financial instruments put in place within the Lehman group of companies (and thus subsequently Excalibur) to achieve the fixed interest rates on our loans. We accounted for the value of these derivative financial instruments in the Balance Sheet on the advice of Lehman. However, since the loans were transferred to Excalibur, we have been advised that there are no underlying derivative financial instruments within Excalibur to which Nordic Land is a party to the derivative contract. Hence the value of the derivative financial instruments has been removed from the Balance Sheet.

The loans have been accounted for at amortised cost at the Balance Sheet date, in accordance with IFRS, and the fair value is disclosed in the notes to the accounts (note 15).  Nordic Land's only obligation is to pay interest at fixed rates and repay loans at par value at maturity.

Loan covenant compliance at 31 March 2009 is as follows:

        

Property	Interest cover
Helsingborg	128%
Lackeraren	150%
Sicklaön	127%
Combined - actual		132%
Loan covenant		115%

There are no covenants in relation to ongoing compliance with, and monitoring of, loan to value percentages, except in relation to drawdowns under the capital expenditure loan facility.

All loans are therefore performing within covenant.

As stated above, Excalibur took over the commitment to provide a capital expenditure loan facility of some £9.3 million (2008: £9.3 million). We had intended to use this facility to fund part of the costs for the development project at Borlänge and have submitted a drawdown notice to Excalibur to receive the funds. To date we have not received either the funds or confirmation that the facility exists.  Therefore there is some doubt as to whether we will receive the funds. Until such time that either the funds are received or we receive confirmation that the facility exists, we will continue to use our existing cash resources.  We will also seek to either refinance the existing loans or raise additional bank funding as required.

The Manager routinely prepares working capital forecasts as part of its operational activities and its regular reporting to the Board, and monitors the effect of changing assumptions on the forecasts and loan covenant compliance.

OUTLOOK

The Board, together with the Manager and the Company's advisers, regularly reviews the potential opportunities available to the Company regarding raising capital and pursuing strategic investment actions with the aim of growing the Company and maximising returns to shareholders.  To date these have been limited because of the effective closure of the equity capital markets for companies of our size, and the limited bank funding available.

Given the current global economic environment, and the reduction in available bank and equity funding, we are concentrating our resources, in the short-term, on maximising the asset management potential of our existing properties.

Overall, we are satisfied with our progress to date and look forward to confidence returning to the capital markets.

IAN KNIGHT

Managing Director

  Consolidated Financial Statements

Consolidated Income Statement for the year ended 31 March 2009

		Year ended 31 March 2009		3 April 2007   to 31 March  2008
	Note	£000		£000
Gross rental income		5,122		3,883
Property operating expenses		(1,723)		(1,279)
Net rental income	4	3,399		2,604
Administrative expenses		(1,238)		(1,941)
Loss on abortive transaction		-		(104)
(Loss)/gain on revaluation of investment properties	10	(3,721)		2,947
Operating (loss)/profit	5	(1,560)		3,506
Financial income Financial expenses	6 7	191 (2,862)		291 (2,183)
Change in fair value of derivative financial
instruments	11	(272)		272
(Loss)/profit before tax		(4,503)		1,886
Income tax	8	700		(1,154)
(Loss)/profit for the year/period attributable to equity shareholders		(3,803)		732

Earnings per share - basic and diluted	9	(19.4)p		4.2p
EPRA earnings per share - basic and diluted	9	(2.6)p		(6.8)p

 

The notes form part of these consolidated financial statements.

  Consolidated Balance Sheet as at 31 March 2009

		31 March  2009		31 March  2008
	Note	£000		£000
ASSETS
Non-current assets
Investment properties	10	64,203		67,878
Derivative financial instruments	11	-		272
		64,203		68,150
Current assets
Trade and other receivables	12	378		363
Cash and cash equivalents	13	5,336		6,838
		5,714		7,201
Total assets		69,917		75,351
LIABILITIES
Current liabilities
Trade and other payables	14	2,154		2,798
Income tax provision		19		9
			2,173		2,807
Non-current liabilities
Borrowings	15	49,696		49,860
Deferred tax liability	17	1,403		2,138
		51,099		51,998
Total liabilities		53,272		54,805
Net assets		16,645		20,546
EQUITY
Ordinary share capital	18	199		192
Share premium		17,523		17,059
Foreign currency translation reserve Retained earnings		1,859 (2,936)		2,037 1,258
Total shareholders' equity		16,645		20,546
Net asset value per value	19	£0.84		£1.07
EPRA net asset value per share	19	£0.91		£1.17

The notes form part of these consolidated financial statements.

  Consolidated Cash Flow Statement for the year ended 31 March 2009

		Year ended 31 March 2009			3 April 2007 to   31 March  2008
	Note	£000			£000
Cash flows from operating activities
(Loss)/profit for the year/period		(3,803)			732
Interest receivable		(191)			(291)
Interest payable and other finance costs		2,862			2,183
Income tax		(700)			1,154
Adjustments for non-cash items:
Loss/(gain) on revaluation of investment properties		3,721			(2,947)
Change in fair value of derivative financial instruments		272			(272)
Share-based payments		77			526
Operating profit before changes in working capital			2,238				1,085
Other movements arising from operations:
Increase in trade and other receivables		(15)			(248)
(Decrease)/increase in trade and other payables		(634)			1,393
Tax paid		-			(9)
Net cash generated from operations				1,589		2,221
Interest received		203			264
Interest paid		(2,760)			(922)
Net cash flows (used in)/from operating activities				(968)		1,563
Cash flows used in investing activities
Acquisition and development of investment properties		(486)			(57,352)
Cash flows used in investing activities				(486)		(57,352)
Cash flows from financing activities
Proceeds from the issue of share capital at a premium		-			19,173
Cost of issue of shares at a premium		-			(1,922)
Net drawdown of borrowings		-			44,829
Cash flows from financing activities				-		62,080
Net (decrease)/increase in cash and cash equivalents		(1,454)			6,291
Opening cash and cash equivalents		6,838			-
Exchange (losses)/gains on cash balances		(48)			547
Closing cash and cash equivalents	13			5,336		6,838

 

The notes form part of these consolidated financial statements.

  Consolidated Statement of Changes in Equity for the year ended 31 March 2009

	Ordinary share capital	Share premium	Foreign currency translation reserve	Retained earnings	Total equity
	£000	£000	£000	£000	£000
2009
Loss for the year	-	-	-	(3,803)	(3,803)
Foreign exchange differences recognised directly in equity	-	-	(178)	-	(178)
Total recognised income and expense	-	-	(178)	(3,803)	(3,981)
Share-based payments	-	-	-	(391)	(391)
Ordinary shares issued at a premium	7	464	-	-	471
Balance at 1 April 2008	192	17,059	2,037	1,258	20,546
Balance at 31 March 2009	199	17,523	1,859	(2,936)	16,645
2008
Profit for the period	-	-	-	732	732
Foreign exchange differences recognised directly in equity	-	-	2,037	-	2,037
Total recognised income and expense	-	-	2,037	732	2,769
Share-based payments	-	-	-	526	526
Ordinary shares issued at a premium	192	18,981	-	-	19,173
Cost of issue of shares at a premium	-	(1,922)	-	-	(1,922)
Balance at 3 April 2007	-	-	-	-	-
Balance at 31 March 2008	192	17,059	2,037	1,258	20,546

 

The notes form part of these consolidated financial statements.

  Notes to the accounts

Note 1 General Information

Nordic Land plc (the 'Company') is a Jersey incorporated company which invests principally in retail property in the Nordic region. The Company was incorporated on 3 April 2007. The consolidated financial statements have been prepared for the year ended 31 March 2009.

The audited consolidated financial statements were authorised for issuance on 7 July 2009.

These statements are not statutory accounts and have been extracted from the full statutory accounts for the year ended 31 March 2009, on which the auditors' report is unqualified.

Note 2 Basis of preparation

The financial information has been prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union and is presented in sterling.

The preparation of financial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities, income and expense. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

Information about significant areas of estimation, uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements is included in the following notes:

Note 10 - Investment properties

Note 15 - Borrowings

Note 22 - Share-based payments

The consolidated financial statements have been prepared on the historical cost basis except for investment properties and derivative financial instruments which are both measured at fair value.

New standards and interpretations not yet adopted

A number of new standards, amendments to standards and interpretations are not yet effective for the year ended 31 March 2009, and have not been applied in preparing these consolidated financial statements.

• IFRIC 13, Customer loyalty programmes (effective date: financial year beginning 1 July 2008)

• IFRIC 16, Hedges of a net investment in a foreign operation (effective date: financial year beginning 1 October 2008)

• IFRS 8, Operating segments (effective date: financial year beginning 1 January 2009)

• Revised IAS 1, Presentation of financial statements (effective date: financial year beginning 1 January 2009)

• Revised IAS 23, Borrowing costs (effective date: financial year beginning 1 January 2009)

• Amendment to IFRS 2, Share-based payment - Vesting conditions and cancellations (effective date: financial year beginning 1 January 2009)

• Amendment to IAS 32, Financial instruments: Presentation and IAS 1, Presentation of financial statements - Puttable financial instruments and obligations arising on liquidation (effective date: financial year beginning 1 January 2009)

• Amendment to IFRS 1, First-time adoption of IFRS, and IAS 27, Consolidation and separate financial statements - Cost of an investment in a subsidiary, jointly-controlled entity or associate (effective date: financial year beginning 1 January 2009)

• Improvements to IFRSs (effective date: financial year beginning 1 January 2009 or 1 July 2009)

• IFRIC 15, Agreements for the construction of real estate (effective date: financial year beginning 1 January 2009)

• Revised IFRS 1, First-time adoption of IFRS (effective date: financial year beginning 1 July 2009)

• Basis for conclusion on revised IFRS 1, First-time adoption of IFRS

• Implementation guidance on revised IFRS 1, First-time adoption of IFRS

• Revised IFRS 3, Business combinations (applies to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009)

• Amendment to IAS 27, Consolidated and separate financial statements (effective date: financial year beginning 1 July 2009)

• Amendment to IAS 39, Financial instruments; Recognition and measurement - Eligible hedged items (effective date: financial year beginning 1 July 2009)

• IFRS 17, Distribution of non-cash assets to owners (effective date: financial year beginning 1 July 2009)

• IFRIC 18, Transfer of assets from customers (effective date: applies to transfers of assets from customers received on or after 1 July 2009)

The standards and interpretations addressed above will be applied for the purposes of the Group consolidated financial statements with effect from the dates listed.

Revised IAS 1, which becomes mandatory for the 2010 financial statements, is expected to have significant impact on the presentation of the financial statements.

Upon adoption of IFRS 8 'Operating Segments', the Group will disclose additional segmental reporting information. The adoption of the revised IAS 23 is not expected to have any impact as the Group currently capitalises the interest on all qualifying assets.

Upon the adoption of the above new standards it is not expected that there will be an effect on reported income or net assets.

The consolidated financial statements have been prepared on a going concern basis which assumes the Group will be able to meet its liabilities as they fall due.  The Group's working capital forecasts show that the Group has sufficient cash resources to meet its funding requirements over the next 12 months and to continue in operational existence for the foreseeable future.

Note 3 Significant Accounting Policies

The principal accounting policies adopted in the preparation of the financial statements are set out below. The accounting policies have been consistently applied by the Company and its subsidiaries (together the 'Group').

Basis of consolidation

The financial statements incorporate the net assets and liabilities of the Group at the balance sheet date and its results for the year then ended. Results of subsidiaries acquired or disposed during a period are included from the effective date of acquisition or up to the effective date of disposal as appropriate.  The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences up to the date that control ceases. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

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

Functional and presentational currency

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates (the 'functional currency'). The consolidated financial statements are presented in sterling, which is the Company's and Group's functional and presentational currency.

Share capital

Shares are classified as equity to the extent that they meet the following two conditions:

• they include no contractual obligations upon the Company to deliver cash or other financial assets or to exchange financial assets or financial liabilities with another party under conditions that are potentially unfavourable to the Company; and

• where the instrument will or may be settled in the Company's own equity instruments, it is either a non-derivative that includes no obligation to deliver a variable number of the Company's own equity instruments or is a derivative that will be settled by the Company exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments.

Share issue expenses

The costs incurred by the Company in connection with the issue of shares are written off against the share premium account.

Share-based payments

Options

The grant-date fair value of options granted to employees of the Manager and Directors of the Company are recognised as an expense, with a corresponding increase in equity, over the period that the employees and Directors become unconditionally entitled to the options. The amount recognised as an expense is adjusted to reflect the actual number of share options that vest.

Performance carry

The Manager is entitled to receive a performance carry equal to 20 per cent. of the Total Shareholder Return (defined as the sum of the increase in adjusted net asset value per share and dividends per share,    divided by the adjusted net asset value per share at the beginning of the relevant financial period) in excess of 8 per cent. per annum for the relevant period, subject to a high watermark, to which a performance carry relates. This cost will be recorded on an accruals basis. To the extent it is payable by the issue of shares in the Company, the cost of such share-based payments is recognised in the Consolidated Income Statement by reference to the fair value at the date of payment, together with a corresponding increase in equity.

Revenue

Revenue represents amounts receivable calculated on an accruals basis in respect of property rental income earned in the normal course of business, net of sales-related taxes.  

Investment property

Investment properties are properties owned or leased by the Group which are held for long-term rental income and for capital appreciation. Investment property is initially recognised at cost and re-valued at the balance sheet date to fair value, as determined by professionally qualified external valuers.

Any gain or loss arising from the change in fair value is reported in the Income Statement. No depreciation is provided in respect of investment property.

Borrowing costs associated with direct expenditure on investment properties under development or undergoing refurbishment are capitalised using the average rate of interest paid on the relevant debt outstanding until the date of practical completion.

Sales of investment property are recognised when contracts have been unconditionally exchanged during the period and the significant risks and rewards of ownership have been transferred.

Acquisitions of corporate interests in investment property are accounted for on consolidation as if the Group had acquired the underlying property asset directly. Accordingly, no goodwill arises on such acquisitions as any difference between the fair values of the assets acquired and the acquisition consideration are allocated to the investment property asset, which is subject to subsequent revaluation under IAS 40.

Impairment of assets

The Group assesses at each reporting date whether there is objective evidence that an asset may be impaired.  If any such indication exists the Group makes an estimate of the asset's recoverable amount.  An asset's recoverable amount is the higher of the asset's fair value less costs to sell and its value in use and is determined on an asset by asset basis.  When the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased.  If such an indication exists, the recoverable amount is estimated and the corresponding impairment loss that was previously booked is reversed.

Financial instruments

Classification

Management determines the classification of financial instruments at initial recognition.  The Group classifies its financial assets into the following categories:

• Financial assets at fair value through profit and loss

• Loans and receivables

The Group classifies its financial liabilities into the following categories:

• Financial liabilities at fair value through profit and loss

• Financial liabilities measured at amortised cost

Derecognition

The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the financial asset and the transfer qualifies for derecognition in accordance with IAS 39.

A financial liability is derecognised when the obligation specified in the contract is discharged, cancelled or expired.

Trade and other receivables

Trade and other receivables are reported at their fair value. As trade and other receivables have a short expected term, they are valued at face value without discounting. Trade and other receivables are reported at the amount they are expected to realise after a deduction for doubtful debts, which is made on a case by case basis.

A provision for impairment is made when there is objective evidence (such as the probability of insolvency or significant financial difficulties of the debtor) that the Group will not be able to collect all the amounts due under the original terms of the invoice. Impaired debts are derecognised when they are assessed as uncollectable.

Cash and cash equivalents

Cash and cash equivalents comprise cash in hand and on demand deposits that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. In order to be classified as cash and cash equivalents, the maturity of the cash and cash equivalents instruments is three months or less at the time of acquisition.

Interest-bearing loans and borrowings

All loans and borrowings are initially recognised at their issue proceeds, net of issue costs associated with the borrowing.

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method.  Amortised cost is calculated by taking into account any issue costs, and any discount or premium on settlement.  Borrowing costs are recognised on an accruals basis in the Income Statement using the effective interest rate method.

Gains and losses are recognised in the Income Statement when the liabilities are derecognised, as well as through the amortisation process.

Derivative financial instruments

The Group may use derivative financial instruments such as interest rate swaps to hedge its risks associated with interest rate fluctuations.  Such derivative financial instruments are stated at fair value, based on market prices, estimated future cash flows and forward rates as appropriate. Any gains or losses arising from changes in fair value are taken directly to the Income Statement.

In accordance with its treasury policy, the Group does not hold or issue derivative financial instruments for trading purposes.

Trade and other payables

Trade and other payables are non-interest bearing and are reported at their amortised cost. As trade payables have a short expected term, they are valued at their face value without discounting.

Taxation

With effect from the 2009 year of assessment, Jersey abolished the exempt company regime for existing companies. Profit arising in the Company for the 2009 year of assessment and future periods will be subject to tax at the rate of 0%. In the prior year the Company was exempt from taxation under the provisions of Article 123A of the Income Tax (Jersey) Law 1961 as amended.  Certain subsidiary undertakings are subject to foreign taxes in respect of foreign source income; provision for such taxes is made on the basis of taxable profits.

Deferred taxation

Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements, with the following exceptions:

• where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss;

• in respect of temporary differences associated with investments in subsidiaries, where the timing of the reversal of the temporary difference can be controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future; and

• deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, carry-forward of unused tax assets and unused tax losses can be utilised.

Deferred income tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply when the related asset is realised or liability is settled, based on tax rates and laws enacted or substantially enacted at the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.  Deferred income tax is recognised in the Income Statement except when it relates to items that are credited or charged directly to equity, in which case the deferred tax is also dealt with in equity.

Segmental analysis

The Group has a single geographical and business segment, being investment in property in the Nordic region.

Management fees

Under the terms of the Management Agreement, the Manager, Lathe Investments (Nordic) LLP, is entitled to receive an annual management fee dependent on the consolidated gross assets of the Group.  Fees are recorded on an accruals basis.

Foreign currencies

The assets and liabilities of foreign entities are translated into sterling at the rate of exchange ruling at the balance sheet date and their income statements and cash flows are translated at the average rate for the year. Exchange differences arising from the retranslation of the net investment in foreign entities are dealt with in reserves. Transactions in currencies other than the Group's functional currency are recorded at the exchange rate prevailing at the transaction dates. Foreign exchange gains and losses resulting from settlement of these transactions and from retranslation of monetary assets and liabilities denominated in foreign currencies are recognised in the Income Statement except when qualifying as hedges, in which case they are dealt with in reserves.

Note 4 Net rental income

The Group engages in only one class of business activity, being investment in retail property. All operations are continuing and are based in the Nordic region.

Note 5 Operating (loss)/profit

Operating (loss)/profit is stated after charging:

	31 March 2009		3 April 2007 to 31 March 2008
	£000		£000
Auditors' remuneration for audit and non-audit services	54		67
Asset management fees payable to the Manager (note 20)	458		382
Performance fee payable to the Manager (note 20)	-		468
Share-based payments (note 22)	77		526

 

The analysis of auditors' remuneration is as follows:

	31 March 2009			3 April 2007 to 31 March 2008
	£000			£000
Audit fees payable to the Company's auditors and their associates for the audit of the Company's and Group financial statements	33			30
Non-audit fees payable to the Company's auditors and their associates for: - Tax services - Other services	17 4			14 23
Total auditors' remuneration			54						67

        

In addition to the fees disclosed above, fees amounting to £nil (2008: £104,000) were paid to associates of KPMG Channel Islands Limited for due diligence services relating to property acquisitions, and £nil (2008: £312,000) for financial reporting and taxation advice relating to the admission to AIM.

Note 6 Financial income

	31 March 2009		3 April 2007 to 31 March 2008
	£000		£000
Interest receivable	191		291

 

Note 7 Financial expenses

	31 March 2009		3 April 2007 to 31 March 2008
	£000		£000
Interest on bank loans	2,749		2,102
Other finance costs	113		81
Interest payable and other finance costs	2,862		2,183

 

Note 8 Income tax

	31 March 2009		3 April 2007 to 31 March 2008
	£000		£000
Current income tax charge/(credit)	10		(38)
Deferred taxation	(710)		1,192
Tax (credit)/charge	(700)		1,154

With effect from 1 January 2009, the income tax rate for companies in Jersey was reduced from 20% to 0% and exempt company status for all companies was abolished. The existing exempt company status of the Company and its Jersey subsidiary remained in place until 31 December 2008 at which time they moved to a 0% rate of income tax. The current tax (credit)/charge and deferred tax calculations represent corporate income tax on income arising in Sweden, that is subject to income tax at 26.3%, and Luxembourg, at 29.63%.

  The tax on the Group's (loss)/profit before tax differs from the theoretical amount that would arise using the tax rates applicable to the consolidated entities as follows:

	31 March 2009		3 April 2007 to 31 March 2008
	£000		£000
(Loss)/profit before tax	(4,503)		1,886
Income tax calculated at the Jersey income tax rate of 0%	-		-
Effects of: Taxation of income in other countries Deferred taxation arising from temporary differences in the period	10 (710)		(38) 1,192
Tax (credit)/charge	(700)		1,154

Note 9 Earnings per share

Earnings per share and EPRA earnings per share have been calculated, using the weighted average number of shares in issue during the year of 19,645,000 (2008: 17,433,213), as follows:

	31 March 2009 Loss After tax		31 March 2009 Earnings per share		3 April  2007 to 31 March 2008 Profit After tax		3 April  2007 to 31 March  2008 Earnings per share
	£000		pence		£000		pence
(Loss)/profit for the year/period	(3,803)		(19.4)p		732		4.2p
Loss/(gain) on revaluation of investment properties	3,721		18.9p		(2,947)		(16.9)p
Change in fair value of derivative instruments	272		1.5p		(272)		(1.5)p
Deferred tax on revaluation of investment properties	(710)		(3.6)p		1,192		6.8p
Loss on abortive transaction	-		-		104		0.6p
EPRA loss	(520)		(2.6)p		(1,191)		(6.8)p

Basic and diluted earnings per share are the same, as the issued share options are currently 
anti-dilutive.

EPRA earnings per share, excluding the (loss)/gain on revaluation of investment properties, the change in fair value of derivative financial instruments and exceptional items, all net of attributable taxation, is an accepted property industry measure for reporting recurring profits.

  

Note 10 Investment properties

	As at 31 March  2009		As at 31 March  2008
	£000		£000
Opening balance	67,878		-
Investment properties acquired	-		64,511
Capital expenditure on properties	486		89
Foreign exchange (losses)/gains	(440)		331
(Loss)/gain on revaluation	(3,721)		2,947
	64,203		67,878

        

The fair value of investment properties is based on a valuation at 31 March 2009 by DTZ Sweden AB performed in accordance with the Appraisal and Valuation Standards of RICS, on the basis of market value.

Note 11 Derivative financial instruments

At 31 March 2008, the fair value of derivative financial instruments had been calculated by discounting the expected future cash flows at prevailing interest rates.  As explained in note 15, all loans are on a fixed interest rate basis and the Group does not currently have any direct derivative financial instruments with the lender or any other third parties.  Therefore, the value previously attributable to derivative financial instruments has been derecognised.  

	As at 31 March  2009		As at 31 March  2008
	£000		£000
Derivative financial instruments	-		272

Note 12 Trade and other receivables

	As at 31 March  2009		As at 31 March  2008
	£000		£000
Rental debtors	281		189
Prepayments and accrued income	97		130
Other debtors	-		44
	378		363

        

The carrying amount of trade and other receivables approximate their fair value.

The Group's credit risk is primarily the risk that a rental debtor will be unable to pay amounts in full when due, with a maximum exposure equal to the carrying amount of the debtor. As at 
31 March 2009 (31 March 2008: £nil) no provision had been made for any doubtful debts.

Note 13 Cash and cash equivalents

	As at 31 March  2009		As at 31 March  2008
	£000		£000
Cash and cash equivalents	5,336		6,838

Cash and cash equivalents comprise cash held by the Group and short-term deposits with an original maturity of three months or less. The carrying value of these assets equals their fair value.

The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings.

Note 14 Trade and other payables

	As at 31 March  2009		As at 31 March  2008
	£000		£000
Accounts payable - trade	329		244
Deferred income	879		987
Accruals	926		931
Other creditors	20		168
Performance fee payable to the Manager	-		468
	2,154		2,798

The Directors consider that the carrying amount of trade and other payables approximate to their fair value.

Note 15 Borrowings

	As at 31 March  2009		As at 31 March  2008
	£000		£000
Amounts falling due after more than one year:
Bank loans	50,013		50,285
Unamortised borrowing costs	(317)		(425)
	49,696		49,860

The bank loans represent borrowings of SEK 592.7 million.  The weighted-average interest rate is 5.45% per annum. The interest rates on all loans are fixed until maturity of the borrowings in April 2012, with an option to extend for a further year.

The bank loans are secured on the shares of the borrowing subsidiaries and their investment properties.

The loans to acquire the properties were originally provided by Lehman Brothers Bankhaus AG ('Lehman'). On 23 May 2008 the loans were transferred to a commercial-mortgage-backed-securities ('CMBS') vehicle, Excalibur Funding No 1 PLC ('Excalibur'), set up by Lehman to be the lender of a portfolio of loans. Excalibur took over all the rights and obligations under the Lehman loan agreement, including the capital expenditure commitment facility of SEK 110 million (£9.3 million).

The loan agreement states that Nordic Land pays interest to Excalibur on a fixed-interest basis. The Group does not have any floating-rate obligations under the terms of the loan. Lehman previously advised that Nordic Land benefitted from movements in interest rates in relation to the underlying derivative financial instruments put in place within the Lehman group of companies (and thus subsequently Excalibur) to achieve the fixed interest rates on our loans.  The value of these derivative financial instruments was accounted for in the Balance Sheet on the advice of Lehman. However, since the loans were transferred to Excalibur, the service agent has advised that there are no underlying derivative financial instruments within Excalibur to which Nordic Land is a party to the derivative contract. Hence the value of the derivative financial instruments has been derecognised.

The loans have been accounted for at amortised cost at the Balance Sheet date, in accordance with IFRS, and the fair value is disclosed below.  Nordic Land's only obligation is to pay interest at fixed rates and repay loans at par value at maturity.

As stated above, Excalibur took over the commitment to provide a capital expenditure loan facility of some £9.3 million (2008: £9.3 million).  This facility had been intended to be used to fund part of the costs for the development project at Borlänge and a drawdown notice has been submitted to Excalibur to receive the funds.  Neither the funds nor confirmation that the facility exists have yet been received.  

The Directors estimate that the book value and fair value of the Group's bank loans are:

	Book value	Fair value	Book value	Fair value
	31 March 2009	31 March 2009	31 March 2008	31 March 2008
	£000	£000	£000	£000
Bank loans	50,013	54,013	50,285	50,013

Note 16 Financial instruments

Financial risk management objectives and policies

The Group's activities expose it to a variety of market, capital and financial risks, including:

• market risk (including currency risk, price risk and interest rate risk)

• credit risk

• liquidity risk

The main risks arising from the Group's financial instruments are detailed below together with the policies adopted by the Board to manage these risks.

These risks are managed by the Group under policies approved by the Board of Directors. The Group's risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies are reviewed regularly to reflect changes in market conditions and the Group's operational activities.

 

Financial risks relate to trade and other receivables, trade and other payables, cash and cash equivalents and borrowings.  The Group may also enter into derivative transactions, primarily fixed interest rate swaps, for the purpose of managing the interest rate risk arising from funding the acquisition of the Group's properties.

In accordance with its treasury policy, the Group does not hold or issue derivative financial instruments for trading purposes.

Capital risk management

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain satisfactory levels of financial resources to mitigate against financial risk.

The capital structure of the Group consists of a mixture of bank loans, cash and cash equivalents and retained earnings, all as disclosed in the Balance Sheet. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by the value of the Group's properties. Net debt is calculated as bank loans less cash and cash equivalents.

The gearing ratio at the year end is as follows:

	As at 31 March  2009		As at 31 March  2008
	£000		£000
Bank loans	49,696		49,860
Cash and cash equivalents	(5,336)		(6,838)
Net debt	44,360		43,022
Value of investment properties	64,203		67,878
Net gearing ratio	69.1%		63.4%
Gross gearing ratio	77.4%		73.5%

        

Categories of financial instruments

The Group's financial instruments relate to trade and other receivables, derivative financial instruments, cash and cash equivalents, trade and other payables and borrowings.    

In all cases, the Directors consider that the carrying amount of the Group's financial instruments approximate to their fair value, except for Borrowings (see note 15).

Currency risk

The Group operates in the Nordic region and is exposed to foreign exchange risk arising primarily with respect to the Swedish krona and Euros.  Foreign exchange risk arises from future commercial transactions, recognised monetary assets and liabilities and net investment in foreign operations.

The Group's approach to managing its foreign currency exposure is to match, as far as possible, local currency assets with local currency liabilities.  The Group's policy is not to undertake any speculative currency hedging arrangements.

At the reporting date the Group had the following exposure, measured as a proportion of net non-monetary and monetary assets:

	As at 31 March 2009	As at 31 March 2008
Currency
Swedish krona	81.9%	82.9%
Euro	(0.1%)	0.1%

 

 

The following table sets out the Group's total exposure to foreign currency risk and the net exposure to foreign currencies of monetary assets and liabilities:

        

	Monetary assets	Monetary liabilities	Net exposure	Monetary assets	Monetary liabilities	Net exposure
	2009	2009	2009	2008	2008	2008
	£000	£000	£000	£000	£000	£000
Swedish krona	2,550	53,119	(50,569)	3,275	54,114	(50,839)
Euro	7	19	(12)	60	85	(25)

Amounts in the above table are based on the carrying value of the monetary assets and liabilities.

Foreign exchange sensitivity analysis

At 31 March 2009, had sterling strengthened by 5% in relation to all currencies, with all other variables held constant, net assets attributable to shareholders, with a corresponding effect on profit and loss, would have decreased by the amounts shown below. 

	As at 31 March  2009		As at 31 March  2008
	£000		£000
Swedish krona	649		811
Euro	(1)		(1)
	648		810

A 5% weakening of sterling against the above currencies would have resulted in an equal but opposite effect on the net assets attributable to shareholders and the net loss for the year, on the basis that all other variables remain constant.

Interest rate risk management

The Group's interest rate risk arises from long-term borrowings used when acquiring property. The Group limits its exposure to interest rate risk when acquiring property by raising finance at fixed rates of interest. A movement in market interest rates will result in a decrease/increase in the fair value of the bank loan drawn to fund the acquisition of the property.

As the Group does not have any derivative financial instruments there is no sensitivity on profit or net assets in relation to interest rate risk management. The only sensitivity is in relation to the fair value of the bank loans.

Fair value interest rate risk sensitivity analysis on bank loans

At 31 March 2009, had the market interest rate increased by 0.5%, with all other variables held constant, the fair value of the bank loans would have decreased by £749,000 (2008: £753,000).

A 0.5% decrease in the market interest rate, with all other variables held constant, would result in an equal but opposite effect on the fair value of the bank loans by the same amount.

However, Nordic Land's only obligation is to pay interest at fixed rates and repay loans at par value at maturity.

Price risk

The Group is exposed to property price and property rental risks.  The Group is not exposed to the price risk with respect to financial instruments as it does not hold any equity securities.

Credit risk

Credit risk is the risk that a counterparty will be unable to pay amounts in full when due and relates principally to trade and other receivables and cash and cash equivalents.

The Directors believe there is no significant credit risk to the Group as the rental debtors are not reliant on a single rental contract or customer. The Group also ensures that rental contracts are made with customers with an appropriate credit history.

The Directors also believe there is no significant risk associated with the cash and cash equivalents balance as the banks are reputable multinational corporate banks which are regulated in various jurisdictions. Cash deposits are held with approved financial institutions with high credit ratings.

With respect to credit risk arising from the other financial assets of the Group, the Group's exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments.

Liquidity risk

The Directors limit the Group's liquidity risk by ensuring that sufficient cash resources are available to fund its working capital requirements and that committed bank facilities are available to fund its development project capital expenditure programme.

The contractual maturities of financial liabilities are disclosed in note 14 regarding Trade and other payables, and note 15 regarding Borrowings.

 

Note 17 Deferred tax liability

The following are the major deferred tax liabilities recognised during the year:

	Revaluation of investment properties as at 31 March 2009			Accelerated tax depreciation as at 31 March 2009			Total as at 31 March 2009			Revaluation of investment properties as at 31 March 2008			Accelerated tax depreciation as at 31 March 2008			Total as at 31 March 2008
	£000			£000			£000			£000			£000			£000
At start of period	1,305			833			2,138			-			-			-
Acquired	-			-			-			255			558			813
Charge to Income	(999)			289			(710)			944			248			1,192
Foreign exchange differences	(27)			2			(25)			106			27			133
At the end of the period	279			1,124			1,403			1,305			833			2,138

Note 18 Ordinary share capital

	As at	As at
	31 March 2009	31 March 2008
	£000	£000
Authorised
250,000,000 ordinary shares of £0.01 each	2,500	2,500
	As at	As at
	31 March 2009	31 March 2008
	£000	£000
Issued and fully paid
19,859,561 (2008: 19,172,588)
ordinary shares of £0.01 each	199	192

 

 

On 24 July 2008, 686,973 shares were issued and credited as fully paid in part settlement of the performance fee payable to the Manager for the period ended 31 March 2008.

  

Note 19 Net asset value per share

Net asset value per share has been calculated by dividing the net assets attributable to the equity holders of the Company by the number of ordinary shares in issue at the period end of 19,859,561 (2008: 19,172,588).

	As at 31 March  2009		As at 31 March  2008
	£000		£000
Net assets	16,645		20,546
Adjust for:
Fair value of derivative financial instruments	-		(272)
Deferred tax on investment properties		1,403		2,138
EPRA net assets	18,048		22,412
Net asset value per share	£0.84		£1.07
EPRA net asset value per share	£0.91		£1.17

EPRA net asset value is the net asset value per share of the Company adjusted to exclude the effect of deferred tax relating to the revaluation of investment properties and the fair value of derivative financial instruments net of attributable taxation.

Basic and diluted net asset value per share are the same, as the issued share options are currently anti-dilutive.

Note 20 Related party transactions

The following related party transactions were conducted during the period:

• asset management fees of £458,000 (2008: £382,000) have been charged in accordance with the management agreement. The Manager receives a fee of 0.65% based on the consolidated gross assets of the Group; and

• a performance fee is payable to the Manager equal to 20% of the Total Shareholder Return in excess of 8% in any relevant period, subject to a high watermark.  At 31 March 2009, this amounted to £nil (2008: £936,000).  Payment of the performance fee consists of not more than 50% in cash and not less than 50% in new shares in the Company.

  Note 21 Group entities

Details of all of the Group's subsidiaries at 31 March 2009 are as follows:

	Place of	Proportion of	Proportion of
	incorporation	ownership	voting power
		interest	held
		%	%
Nordic Land Holdings Limited	Jersey	100	100
Nordic Land Holding (Luxembourg) Sàrl	Luxembourg	100	100
Nordic Land (Luxembourg) Sàrl	Luxembourg	100	100
Nordic Land Finance (Luxembourg) Sàrl	Luxembourg	100	100
Nordic Land AB	Sweden	100	100
Nordic Land Terminalen AB	Sweden	100	100
Nordic Land Borlänge AB	Sweden	100	100
Nordic Land Sicklaön Holding AB	Sweden	100	100

 

Each of the undertakings listed above is engaged in investment in retail property.

Note 22 Share-based payments

On 25 July 2007 the Company established a share option programme (the 'Nordic Land Share Option Plan') that entitles Directors and representatives of the Manager to purchase shares in the Company. The share-based payment scheme is equity settled by the award of options to acquire ordinary shares.

The number and weighted-average exercise prices of share options are as follows:

	Weighted average exercise price 2009		Number of options 2009			Weighted average exercise price 2008		Number of options 2008
Outstanding at the beginning of the period			455,686					-
Granted during the period	106 p		23,984			106 p		479,670
Lapsed during the period	106 p		(95,934)			106 p		(23,984)
Outstanding at the end of the period			383,736					455,686

The Nordic Land Share Option Plan is open to certain Directors of the Company, employees and partners of the Manager and any local property adviser as engaged by a member of the Group, at the discretion of the Directors.

Options over 23,984 shares were granted, as a reallocation of previously issued share options, on 27 March 2008 at an exercise price of 106 p. The first day on which these options may be exercised is 27 March 2010; the last day on which the options may be exercised is 26 March 2018.  Options for 95,934 shares, which had been issued to a former partner of the Manager, have since lapsed.

Options over 455,686 were granted in the period ended 31 March 2008. The first day on which those options may be exercised is 6 September 2009; the last day on which the options may be exercised is 5 September 2017.

The options are not subject to performance conditions. If the options remain unexercised after a period of 10 years from the date of grant, the options expire. Options are normally forfeited if the optionholder leaves the Group or the Manager before the options vest.

In accordance with IFRS 2 'Share-based Payment', the fair value of equity-settled share-based payments is determined at the date of grant and is expensed on a straight-line basis over the vesting period, based on the Group's estimate of options that will eventually vest. Fair value is calculated using the standard Black-Scholes pricing model, with the following inputs:

• Share price                                 106 p    

• Exercise price                             106 p

• Expected volatility                         33%

• Expected option life                  6 years

• Expected dividend yield                   0%

• Risk-free interest rate                  5.1%

Expected volatility is estimated by considering historic average share price volatility for a group of comparable companies within the same sector and with a similar market capitalisation as the Company. 

The aggregate of the fair values of the outstanding options is £135,000 (2008: £205,000).

The total share-based payment charge relating to shares of the Company is:

 

	31 March	3 April 2007 to
	2009	31 March 2008
	£000	£000
Share options	77	58
Performance fee payable to the Manager (note 20)	-	468
Total	77	526

        

Note 23 Capital commitments

Future capital expenditure, contracted for and approved by the Directors, but not provided for in these consolidated financial statements, is as follows:

	As at 31 March  2009		As at 31 March  2008
	£000		£000
Contracted for	1,357		-
Authorised but not contracted for	1,032		-
Total		2,389		-

Of the £1,357,000 (2008: £nil) contracted capital expenditure, £987,000 (2008: £nil) relates to obligations to develop investment property and £370,000 (2008: £nil) relates to enhancements.

 

Note 24 Annual Report

The Annual Report for the year ended 31 March 2009 will be sent to shareholders in due course and will be available on the Company's website: www.nordicland.com

ENDFR GUUCWMUPBGAC