4 Investment Property Financial Statements

International Accounting StandardsIllustrative Investment Property Financial Statements

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PricewaterhouseCoopers 1

International Accounting Standards Illustrative Investment Property Financial StatementsYear ended 31 December 2001This publication by PricewaterhouseCoopers provides an illustrative set of consolidated financialstatements, prepared in accordance with International Accounting Standards, for a fictitious InvestmentProperty company. The example disclosures in these illustrative financial statements should not beconsidered to be the only acceptable form of presentation. The form and content of the reporting entity’sfinancial statements are the responsibility of the entity’s management, and other forms of presentation whichare equally acceptable may be preferred and adopted, provided they include the specific disclosuresprescribed in International Accounting Standards.

In particular, these financial statements focus on the disclosures required by IAS 40 – Investment Property.Because of this specific focus, the company illustrated does not have associates, joint ventures, minorityinterests, finance leases, intangible assets, government grants, defined benefit plans, derivatives, fixed rateborrowings, related party transactions, treasury shares, preferred shares, convertible debt and share options.Further, there were no acquisitions or disposals of subsidiaries, and no issues of shares in the two yearspresented. Please refer to the IAS Illustrative Corporate Financial Statements for disclosures relating to theseitems. The company illustrated is listed and therefore disclosures on segments and EPS are included.

These illustrative financial statements are not a substitute for reading the Standards themselves or forprofessional judgement as to fairness of presentation. They do not cover all possible disclosures required byInternational Accounting Standards, nor do they take account of any specific legal framework. Dependingon the circumstances, further specific information may be required in order to ensure fair presentation underInternational Accounting Standards and we recommend that reference is made to our separate publications‘International Accounting Standards – Illustrative Corporate Financial Statements’ and ‘InternationalAccounting Standards’ – Disclosure Checklist 2001’. Additional accounting disclosures may be required inorder to comply with local laws and national accounting standards and stock exchange regulations.

Structure of publication Page

General information 2Consolidated income statement 3Consolidated statement of changes in shareholders’ equity 4Consolidated balance sheet 5Consolidated cash flow statement 6Accounting policies 7Notes to the consolidated financial statements 12Report of the auditors 23Index of International Accounting Standards disclosure requirements 24

2 PricewaterhouseCoopers

International Accounting Standards – Illustrative Investment Property Financial StatementsABCIP Group – Year ended 31 December 2001

General information1p102(b) ABCIP Group is an investment property group with a major portfolio in Europe and the Far

East. It is principally involved in leasing out investment property under operating leases andis also involved in property development.

1p102(a) ABCIP is listed on [name] stock exchange.

Operating and financial reviewInternational Accounting Standards do not address the requirements for information to be included in adirectors’ report or financial review. Generally such requirements are determined by local laws andregulations.

An investment property group might consider discussing the following subjects:

• The long-term strategic focus for example in terms of business, location of properties, expansionpossibilities and tenant profile.

• The current development of the investment property portfolio in each segment, for example occupancylevel, tenant profile by area occupied, average rent, % of new developed property that has been pre-let.

• A discussion about the financial results for the current period, for example explanation for variations inthe income statement and balance sheet compared with the previous year, analysis of the return onshareholders’ equity and of the return on each property portfolio, weighted average cost of capital, etc.

• The outlook in the following year considered against the background of likely developments in theproperty market.

Other publications on IASThe following publications on International Accounting Standards have been published byPricewaterhouse-Coopers and are available from your nearest PricewaterhouseCoopers office:

International Accounting Standards – A Pocket GuideInternational Accounting Standards – Disclosure Checklist – 2001International Accounting Standards – Illustrative Corporate Financial Statements – 2001International Accounting Standards – Illustrative Bank Financial Statements – 2001 International Accounting Standards – Understanding IAS 29International Accounting Standards – Understanding IAS 39 International Accounting – Similarities & Differences – IAS, US GAAP and UK GAAP

and on wider aspects of international reporting :Audit Committees – Good Practices for Meeting Market ExpectationsReporting Progress – Good Practices for Meeting Market ExpectationsThe Board Agenda – Good Practices for Meeting Market ExpectationsWorldwatch (newsletter) – Governance and Corporate Reporting

You can find latest news, discussions and publications on our website athttp://www.pwcglobal.com/corporatereporting



Consolidated income statementYear ended 31 December

1p75 (all amounts in [name of currency] thousands) Notes 2001 2000

40p66(d) Revenue 2 42,256 40,016

1p80 Ground rent costs (1,312) (1,488)

40p66(d) Repairs and maintenance costs (3,156) (3,013)

1p80 Other direct property operating expenses (1,212) (1,315)

1p83 Staff costs 4 (1,448) (1,400)

40p67(d) Changes in fair value of investment property 8 6,400 4,218

8p16 Profit on sale of investment property 8 2,080 –

1p80 Amortisation of up-front lease payment 9 (104) (104)

1p80 Depreciation of property, plant and equipment 10 (4,397) (1,954)

1p80 Amortisation of goodwill 11 (852) (852)

1p80 Other operating expenses (2,800) (2,113)

1p75(b) Operating profit 35,455 31,995

1p75(c) Finance costs – net 3 (9,872) (8,464)

Profit before tax 25,583 23,531

12p77 Tax 5 (6,056) (6,152)

1p75(i) Net profit 19,527 17,379

33p47 Basic and diluted earnings per share (LC per share) 6 0.49 0.43

The income statement for the year ended 31 December 2000 has been restated to take account ofthe adoption of IAS 40 Investment Property at 1 January 2001; fair value gains on investmentproperty for the year ended 31 December 2000 of LC 4,218 and the attributable deferred incometax charge of LC 843 have been reclassified from shareholders’ equity to the income statement.



Consolidated statement of changes in shareholders’ equity1p86(f) (all amounts in [name of 1p86(e) currency] thousands) Notes Share Share Translation Revaluation Retained Total

capital premium reserve reserve earnings

Year ended 31 December 2000

1p86(c) Balance at 1 January 2000

8p53(b) – as previously reported 18 40,000 22,720 3,538 112,910 311,217 490,385

8p53(b) – effect of adopting IAS 40 – – – (112,910) 112,910 –

1p86(c) – as restated 40,000 22,720 3,538 – 424,127 490,385

21p30(c) Currency translation differences – – 1,247 – – 1,247

1p86(d) Dividend relating to 1999 7 – – – – (11,379) (11,379)

1p86(a) Net profit – – – – 17,379 17,379

Balance at 31 December 2000 40,000 22,720 4,785 – 430,127 497,632


1p86(c) Balance at 1 January 2001

8p53(b) – as previously reported 40,000 22,720 4,785 116,284 313,843 497,632

8p53(b) – effect of adopting IAS 40 – – (116,284) 116,284 –

1p86(c) – as restated 40,000 22,720 4,785 – 430,127 497,632

1p86(b) Currency translation differences – – (3,242) – – (3,242)

1p86(d) Dividend relating to 2000 7 – – – – (16,373) (16,373)

1p86(a) Net profit – – – – 19,527 19,527

Balance at 31 December 2001 40,000 22,720 1,543 – 433,281 497,544

40p72 The revaluation reserve related to accumulated fair value gains on investment property at 31December 1999 and 2000 have been reclassified as retained earnings on the adoption of IAS 40. Onsubsequent disposal of investment property, this amount is kept in retained earnings and is nottransferred to the income statement.



Consolidated balance sheet31 December 31 December

1p66 (all amounts in [name of Notes 2001 2001 2000 2000currency] thousands)

ASSETS

1p53 Non-current assets

1p67 Investment property 8 562,328 500,782

1p67 Prepaid operating lease payments 9 9,809 9,928

1p66(a) Property, plant and equipment 10 55,678 97,689

1p66(b) Goodwill 11 4,657 5,489

1p66(i) Deferred tax asset 16 834 750

633,306 614,638

1p53 Current assets

1p67 Inventories 12 25,345 –

1p66(f) Receivables 13 3,608 5,800

1p66(g) Cash and cash equivalents 6,197 35,152

35,150 40,952

Total assets 668,456 655,590

EQUITY AND LIABILITIES

1p66(m) Capital and reserves

1p73(e) Ordinary shares 18 40,000 40,000

1p73(e) Share premium 18 22,720 22,720

1p73(e) Translation reserve 1,543 4,785

1p73(e) Retained earnings 433,281 430,127

497,544 497,632

1p53 Non-current liabilities

1p66(k) Borrowings 15 109,416 105,392

1p66(i) Deferred tax liabilities 16 24,581 22,763

133,997 128,155

1p53 Current liabilities

1p66(h) Trade and other payables 14 31,221 23,530

1p66(i) Current tax liabilities 5,144 4,672

1p66(j) Provisions 17 550 1,601

36,915 29,803

Total liabilities 170,912 157,958

Total equity and liabilities 668,456 655,590

10p16 On [date] 2002 ABCIP Group’s Board of Directors authorised these financial statements for issue.



Consolidated cash flow statementYear ended 31 December

7p10 (all amounts in [name of currency] thousands) Notes 2001 2000

7p18(b)

Cash flows from operating activities

Cash generated from operations 19 40,748 32,732

7p31 Interest received 543 1,075

7p31 Interest paid (10,645) (10,324)

7p35 Tax paid (5,978) (6,425)

Net cash from operating activities 24,668 17,058

7p21 Cash flows from investing activities

7p16(a) Purchase of investment property 8 (5,567) –

7p16(b) Proceeds from sale of investment property 8 12,644 –

7p16(a) Purchase of property, plant and equipment 10 (17,322) (2,134)

7p16(a) Expenditure on property under construction 10 (30,247) (10,267)

Net cash used in investing activities (40,492) (13,246)

7p21 Cash flows from financing activities

7p17(c) Proceeds from borrowings 15 10,763 8,234

7p17(d) Repayments of borrowings 15 (6,739) (10,345)

7p31 Dividend paid 7 (16,373) (11,379)

Net cash used in financing activities (12,349) (2,111)

(Decrease)/increase in cash and cash equivalents (28,173) 1,701

Movement in cash and cash equivalents

At start of year 35,152 34,621

(Decrease)/increase (28,173) 1,701

Effects of exchange rate changes (782) (1,170)

At end of year 6,197 35,152



Accounting policies1p91(a) The principal accounting policies adopted in the preparation of these consolidated financial1p97(b) statements are set out below:

A Basis of preparation

1p11 The consolidated financial statements have been prepared in accordance with International 1p97(a) Accounting Standards. The consolidated financial statements have been prepared under the

historical cost convention except that investment property is carried at fair value.

In 2001 the Group adopted IAS 39 – Financial Instruments: Recognition and Measurementand IAS 40 – Investment Property. The Group does not hold derivatives or significantfinancial assets. The Group also already complied with the requirements on borrowings.Thus the adoption of IAS 39 had no effect. The effects of adopting IAS 40 is summarised inthe consolidated statement of changes in shareholders’ equity (on page 4), and furtherinformation is disclosed in accounting policy C Investment property.

B Group accounting

(1) Subsidiary undertakings

1p99(b) Subsidiary undertakings, which are those entities in which the Group has an interest of 27p11 more than one half of the voting rights or otherwise has power to exercise control over the 1p99(c) operations, are consolidated. Subsidiaries are consolidated from the date on which control

is transferred to the Group and are no longer consolidated from the date that control ceases.27p17 All intercompany transactions, balances and unrealised gains on transactions between

group companies are eliminated. Unrealised losses are also eliminated unless the groupcarrying value cannot be recovered. Where necessary, accounting policies for subsidiarieshave been changed to ensure consistency with the policies adopted by the Group.

(2) Foreign currency translation

1p99(p) Income statements of foreign entities are translated into the Group’s reporting currency at 21p30 the weighted average exchange rates for the year and balance sheets are translated at the 21p17 exchange rates ruling on 31 December. Exchange differences arising from the retranslation 21p19 of the net investment in foreign entities and of financial instruments which are designated as 1p74(b) and are effective hedges of such investments, are taken to shareholders’ equity. On disposal 21p37 of a foreign entity, accumulated exchange differences are recognised in the income

statement as part of the gain or loss on sale.

21p45 Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treatedas local currency assets and liabilities of the foreign entity and are translated at the closingrate.

1p99(p) Foreign currency transactions are accounted for at the exchange rates prevailing at the dateof the transactions. Gains and losses resulting from the settlement of such transactions andfrom the translation of monetary assets and liabilities denominated in foreign currencies arerecognised in the income statement.



C Investment property

1p99(h) Property held for long-term rental yields which is not occupied by the companies in the 40p66 (a-b) consolidated Group is classified as investment property.

40p39 [Note: Investment property includes properties that companies in a consolidated grouplease out to an associate or joint venture which occupies the property.]

40p66(c) Investment property comprises freehold land and buildings. Investment property is carriedat fair value. Fair value is based on active market prices, adjusted, if necessary, for anydifference in the nature, location or condition of the specific asset. If this information is notavailable, the Group uses alternative valuation methods such as discounted cash flowprojections or recent prices on less active markets. These valuations are reviewed annuallyby [name of the external valuers]. Investment property being redeveloped for continuinguse as investment property or for which the market has become less active continues to bemeasured at fair value.

40p70(a) Under IAS 40 – Investment Property, which the Group adopted at 1 January 2001, changesin fair values are recorded in the income statement.

[Note: IAS 40 only permits carrying investment properties at revaluation with gains andlosses taken to income or at cost less depreciation.]

Previously the Group had recorded such fair value changes net of deferred income taxes in 40p72 a revaluation reserve in shareholders’ equity. The fair value amounts for 2000 were

determined in accordance with IAS 40 and the balance of the revaluation reserve at 1January 2000 has been reclassified to retained earnings; such amounts are not transferred tothe income statement on the disposal of the investment property. In 2001, the comparativeamounts for the year ended 31 December 2000 have been restated.

40p70(b) [Note: if an entity had disclosed or used fair values that were not on an IAS 40 basis, onadoption of IAS 40 the comparatives should not be restated.]

Where a building is located on land which is held under operating lease, the building isaccounted for as a separate asset only if the lease of land extends beyond the expected lifeof the building and there are no provisions in the lease to return the land with the buildingremaining intact. Otherwise, the building is accounted for as an operating lease.

Land held under an operating lease (including such land on which investment property islocated) is accounted for as an operating lease (note 9): where up-front payments for

17p11 operating leases of land are made, these up-front payments are capitalised as non-currentassets and in subsequent periods are presented at amortised cost so as to record a constantannual charge to the income statement over the lease term. These non-current assets are notrevalued.

40p54 If an investment property becomes owner-occupied, it is reclassified as property, plant andequipment and its fair value at the date of reclassification becomes its cost for accountingpurposes of subsequent recording. Property that is being constructed or developed forfuture use as investment property is classified as property, plant and equipment and statedat cost until construction or development is complete, at which time it is reclassified andsubsequently accounted for as investment property.

40p56 If an item of property, plant and equipment becomes an investment property because its usehas changed, any difference resulting between the carrying amount and the fair value of this

40p56(b) item at the date of transfer is recognised in equity as a revaluation of property, plant andequipment under IAS 16. However, if a fair value gain reverses a previous impairment loss,the gain is recognised in the income statement. Upon the disposal of such investmentproperty, any surplus previously recorded in equity is transferred to retained earnings; thetransfer is not made through the income statement.



D Property, plant and equipment

16p60(a) Property which is occupied by the companies in the consolidated Group is stated athistorical cost less depreciation.

[Note: If it is carried at fair value under IAS 16, then revaluation gains must be reported inequity and it must still be depreciated and a full year’s depreciation charge included in theincome statement]

16p60(b) Depreciation is calculated on the straight line method to write off the cost of each asset to 1p99(e) their residual values over their estimated useful life as follows:

16p60(c) Land Nil Buildings 25-40 years

36p58 Where the carrying amount of an asset is greater than its estimated recoverable amount, it iswritten down immediately to its recoverable amount.

1p99(f) All borrowing costs are expensed.

E Goodwill

1p99(c) Goodwill represents the excess of the cost of an acquisition over the fair value of theGroup’s share of the net assets of the acquired subsidiary/associated undertaking at the dateof acquisition. Goodwill on acquisitions of subsidiary undertakings occurring on or after 1January 1995 is included in intangible assets. Goodwill is amortised using the straight-linemethod over its estimated useful life. Goodwill on acquisitions that occurred prior to 1January 1995 has been charged in full to retained earnings in shareholders’ equity; suchgoodwill has not been retroactively capitalised and amortised.

22p88(a) Goodwill arising on major strategic acquisitions of the Group to expand its portfolio orgeographical market coverage is amortised over a maximum period of 15 years. For allother acquisitions goodwill is generally amortised over 5 years. [Where in rare

22p88(b) circumstances goodwill is amortised over a period exceeding 20 years, the Group shoulddisclose the specific reasons including describing the factor(s) that played a significant rolein determining the useful life of the goodwill.]

The gain or loss on disposal of an entity includes the unamortised balance of goodwillrelating to the entity disposed of or, for pre 1 January 1995 acquisitions, the goodwillcharged to equity.

F Leases

(1) A group company is the lessee

SIC-15p5 The Group leases land under various long-term operating leases. Up-front payments made 17p11,25 under operating leases (net of any incentives received from the lessor) are capitalised as

prepaid operating lease payments and subsequently amortised on a straight-line basis overthe period of the lease. Otherwise, recurring lease payments are charged to the incomestatement on a straight-line basis over the period of the lease. The Group does not hold anyassets under finance leases.

(2) A group company is the lessor

1p99(j) Assets leased out under operating leases are included in investment property in the 32p47(b) balance sheet (Note 8). The Group does not lease assets out under finance leases.



G Inventories

40p51(b) Investment properties being developed for future sale are reclassified as inventories. They2p5,34(a) are carried at the lower of cost and net realisable value. Net realisable value is the estimated

selling price in the ordinary course of business less cost to complete redevelopment andselling expenses.

H Trade receivables

39p73 Trade receivables are carried at the original invoice amount less an estimate made for 1p99(i) doubtful receivables based on a review of all outstanding amounts at the year end. Bad 32p47(b) debts are written off when identified.

I Cash and cash equivalents

39p66, 73 Cash and cash equivalents are carried in the balance sheet at cost. For the purposes of the7p46 cash flow statement, cash and cash equivalents comprise cash on hand, deposits held at 1p99(r) call with banks, other short-term highly liquid investments, and bank overdrafts. In the

balance sheet, bank overdrafts are included in borrowings in current liabilities.

J Share capital

32p47(b) (1) Ordinary shares are classified as equity. External costs directly attributable to the issue of newshares, other than on a business combination, are shown as a deduction, net of tax, in equityfrom the proceeds. Share issue costs incurred directly in connection with a businesscombination are included in the cost of acquisition.

10p11 (2) Dividends are accounted for when they have been proposed and declared. They are 31p30 charged to equity.

K Borrowings

32p47(b) Borrowings are recognised initially at the proceeds received, net of transaction costs 39p66,93 incurred. In subsequent periods, borrowings are stated at amortised cost using the effective

yield method; any difference between proceeds (net of transaction costs) and theredemption value is recognised in the income statement over the period of the borrowings.

L Deferred income taxes

1p99(m) Deferred income tax is provided in full, using the liability method, on temporary differencesarising between the tax bases of assets and liabilities and their carrying amounts in thefinancial statements. The principal temporary difference is between the fair values of

12p46 investment property and the tax base. Tax rates enacted or substantively enacted by thebalance sheet date are used to determine deferred income tax.

12p24 Deferred tax assets are recognised to the extent that it is probable that future taxable profitwill be available against which the temporary differences can be utilised.

M Pensions

1p99(o) The Group operates a number of defined contribution plans throughout the world, theassets of which are generally held in separate trustee-administered funds. The pension plansare generally funded by payments from employees and by the relevant Group companies,taking account of the recommendations of independent qualified actuaries.

1p99(o) The Group’s contributions to defined contribution pension plans are charged to the 19p46 income statement in the period to which the contributions relate.



N Provisions

1p99(n) Provisions are recognised when the Group has a present legal or constructive obligation asa result of past events, it is probable that an outflow of resources will be required to settlethe obligation, and a reliable estimate of the amount can be made. Where the Groupexpects a provision to be reimbursed, for example under an insurance contract, thereimbursement is recognised as a separate asset but only when the reimbursement isvirtually certain.

O Revenue

1p99(a) Revenue includes gross rental income, service charges and management charges from 18p35(a) properties and income from property trading. Revenue is recorded on an accrual basis.18p30



Notes to the consolidated financial statements1p46(d,e) (In the notes all amounts are shown in [name of currency] thousands unless otherwise stated)

1 Segment information

14p50 Primary reporting format – business segments

Year ended

31 December 2001 Industrial Offices Hotels Retail Group

14p51,67 Revenue 3,381 16,399 17,405 5,071 42,256

14p52 Segment result 2,511 15,364 14,582 4,132 36,589

Unallocated costs (1,134)

14p67 Operating profit 35,455

Finance costs – net (9,872)

Profit before tax 25,583

Tax (6,056)

14p67 Net profit 19,527

14p55 Segment assets 39,075 284,218 254,911 83,221 661,425

Unallocated assets 7,031

14p67 Total assets 668,456

14p56 Segment liabilities 1,561 14,362 11,552 3,746 31,221

Unallocated liabilities 139,691

14p67 Total liabilities 170,912

14p57 Capital expenditure 3,139 22,833 20,479 6,685 53,136

14p58 Depreciation 220 2,023 1,627 527 4,397

14p58 Amortisation – 956 – – 956



Notes to the consolidated financial statements1p46(d,e) (In the notes all amounts are shown in [name of currency] thousands unless otherwise stated)

1 Segment information (continued)

14p50 Primary reporting format – business segments

Year ended 31 December 2000 Industrial Offices Hotels Retail Group

14p51,67 Revenue 3,202 15,006 17,006 4,802 40,016

14p52 Segment result 2,263 13,747 13,141 3,723 32,874

Unallocated costs (879)

14p67 Operating profit 31,995

Finance costs – net (8,464)

Profit before tax 23,531

Tax (6,152)

14p67 Net profit 17,379

14p55 Segment assets 36,610 266,284 238,826 77,968 619,688

Unallocated assets 35,902

14p67 Total assets 655,590

14p56 Segment liabilities 1,176 10,824 8,706 2,824 23,530

Unallocated liabilities 134,428

14p67 Total liabilities 157,958

14p57 Capital expenditure 782 5,692 5,105 1,667 13,246

14p58 Depreciation 98 899 723 234 1,954

14p58 Amortisation 956 956

14p81 The Group is organised on a world-wide basis into four main business segments determined 1p99(q) in accordance with the type of investment property:

• Industrial – principally warehouses• Offices – mainly in large cities• Hotels – principally big city hotels (5 Star hotels) and a few leisure hotels• Retail – mainly shops, supermarkets and shopping centres

14p51 There are no transactions between the business segments. Unallocated costs representcorporate expenses. Segment assets consist primarily of investment property, property plantand equipment and receivables. Unallocated assets comprise deferred tax assets and cash

14p57 and cash equivalents. Segment liabilities comprise operating liabilities. Unallocatedliabilities mainly comprise litigation provisions, taxation liabilities and borrowings. Capitalexpenditure comprises additions to investment property (Note 8) and property, plant andequipment (Note 10).



1 Segment information (continued)

Secondary reporting format – geographical segments

14p69 Revenue Total assets Capital expenditure

2001 2000 2001 2000 2001 2000

United Kingdom 13,522 12,405 167,114 163,898 10,322 1,567

France 10,564 10,004 147,060 144,230 30,247 7,126

Other European countries 7,184 6,803 127,007 124,562 4,568 1,365

Hong Kong 4,648 4,802 100,268 98,339 5,345 2,654

Other countries in Asia 6,338 6,002 93,584 91,783 2,654 534

42,256 40,016 635,033 622,812 53,136 13,246

Unallocated assets 33,423 32,778

Total assets 668,456 655,590

14p69 With the exception of these countries, no other individual country contributed more than 10% ofconsolidated sales or assets.

Revenue is based on the country in which the customer is located. There are no transactionsbetween the segments. Total assets and capital expenditure are where the assets are located.

2 Revenue

2001 2000

40p66(d)(i) Rental income 40,144 38,215

18p35(b) Service and management charges 2,112 1,801

42,256 40,016

17p48(c) The Group leases out all its investment property under operating leases. The leases are for terms

17p48(b) of three years or more. Contingent rents are LC 1,234 in 2001 (LC 1,115 in 2000).

17p48(a) The future aggregate minimum rentals receivable under non-cancellable operating leases are asfollows:

2001 2000

Not later than 1 year 32,534 30,971

Later than 1 year and not later than 5 years 45,989 43,779

Later than 5 years 3,198 3,045

81,721 77,795

3 Finance costs – net

2001 2000

39p170(c)(i) Interest expense on bank borrowings 10,020 9,100

21p42(a) Net foreign exchange transaction losses 412 460

39p170(c)(i) Interest income (560) (1,096)

9,872 8,464



4 Staff costs

2001 2000

Wages and salaries 1,064 1,008

Social security costs 104 96

19p46 Pension costs – defined contribution plans 280 296

1,448 1,400

1p102(d) The average number of employees in 2001 was 76 (2000:74), of whom 10 (2000:9) were part-time.

5 Tax

2001 2000

12p79 Current tax 4,524 4,828

12p79 Deferred tax (Note 16) 1,532 1,324

6,056 6,152

12p81(c) The tax on the Group’s profit before tax differs from the theoretical amount that would arise usingthe tax rate of the home country of the Company as follows:

2001 2000

Profit before tax 25,583 23,531

Tax calculated at a tax rate of 30% (2000 : 30%) 7,675 7,059

Expenses not deductible for tax purposes 201 250

Income not subject to tax (1,654) (1,087)

Different tax rates (166) (70)

Tax charge 6,056 6,152

12p51 The different tax rates are mainly due to the use of the capital gain tax rate (20% in 2000 and2001) to compute deferred tax on the change in fair value of investment property.

6 Earnings per share

Basic earnings per share is calculated by dividing the net profit attributable to shareholders by theweighted average number of ordinary shares outstanding during the year.

2001 2000

33p49(a) Net profit attributable to shareholders (LC 000) 19,527 17,379

33p49(b) Weighted average number of ordinary shares in issue (thousands) 40,000 40,000

33p47 Basic earnings per share (LC per share) 0.49 0.43

The Company has no dilutive potential ordinary shares, therefore the diluted earnings per share isthe same as the basic earnings per share.

7 Dividend

1p85 At the Annual General Meeting on [date] 2002, a dividend in respect of 2001 of LC 0.31 per 1p74(c) share amounting to a total dividend of LC 12,400 is to be proposed. These financial

statements do not reflect this dividend payable, which will be accounted for inshareholders’ equity as an appropriation of retained earnings in the year ending 31December 2002. The dividends declared in respect of 2000 and 1999 were, respectively,LC 16,373 and LC 11,379.



8 Investment property

Year ended 31 December 2001 2000

40p67,69(d) At beginning of year 500,991 505,171

Net exchange differences (8,731) (8,607)

Additions 5,567 –

Transfer from property, plant and equipment (Note 10) 109,355 –

Transfer to property, plant and equipment (Note 10) (25,456)

Transfer to inventories (Note 12) (15,234) –

Disposal (10,564) –

Fair value gains/(losses) 6,400 4,218

At end of year 562,328 500,782

40p67 [Note: The comparative information is not required for the reconciliation.]

The Group acquired in November 2001 a property in Hong Kong for LC 5,567, which hasbeen rented out since December 2001.

40p51(e) In July 2001, the Group completed the construction of the 5 Star ABCIP Hotel located inFrance and reclassified this item from property, plant and equipment (Note 10) toinvestment property.

40p51(a) A warehouse in the United Kingdom, previously leased out under an operating lease, hasbeen used for administration purposes from April 2001 and was therefore reclassified frominvestment property to property, plant and equipment (Note 10).

40p51(b) An office building located in Switzerland was redeveloped in 2001 prior to sale. It wasreclassified from July 2001 from investment property to inventories (Note 12). It was sold on

10p20 31 January 2002 for LC 29,567, yielding a gain on disposal of LC 4,222.

An investment property located in Hong Kong was sold in July 2001 for LC 12,644 yieldinga gain on disposal of LC 2,080.

In Singapore, the Group owns a shopping centre which is situated on land held under anoperating lease (Note 9). As the expected life of the building (60 years) is shorter than thelong-term operating lease (99 years) and there is no provision for ABCIP to return thebuilding at the end of the lease, this property is recorded as a separate asset at fair value.

17p11 The prepaid operating lease payments on the land are recorded separately at amortised cost(Note 9).

There were no additions, disposals or transfers of investment property in 2000.

Bank borrowings are secured on investment property to the value of LC 174,395 (2000: LC 155,307) (Note 15).

40p66(c) The Group’s investment properties were revalued at 31 December 2001 by independentprofessionally qualified valuers. Valuations were based on current prices on an activemarket for all properties except for the properties located in [name of country] because thisinformation is not available there. For these properties the Group used discounted cash flowprojections.

40p66(f) At 31 December 2001, the Group had unprovided contractual obligations for future repairsand maintenance of LC 3,765 (2000: LC 3,796).

40p66(d)(iii) In the income statement direct operating expenses include LC 456 (2000: LC 412) relatingto investment property that was unlet.



9 Prepaid operating lease payments

Year ended 31 December 2001 2000

Opening net book amount 9,928 10,052

Exchange differences (15) (20)

Amortisation of up-front lease payments (104) (104)

Closing net book amount 9,809 9,928

17p27 The up-front payments for an operating lease of land in Singapore (LC 10,260), paid in January1998, are amortised over 99 years, the period of the lease (Note 8).

10 Property, plant and equipment

1p73(a) Land & Property Totalbuildings under

construction

16p60(e),61(c) Year ended 31 December 2000

Opening net book amount 17,224 69,348 86,572

Exchange differences 398 (573) (175)

Additions 2,568 10,678 13,246Depreciation charge (1,954) – (1,954)Closing net book amount 18,236 79,453 97,689

16p60(e),61(c) At 31 December 2000

Cost 40,679 79,453 120,132Accumulated depreciation (22,443) – (22,443)Net book amount 18,236 79,453 97,689

16p60(e),61(c) Year ended 31 December 2001

Opening net book amount 18,236 79,453 97,689

Exchange differences (939) (345) (1,284)

Additions 17,322 30,247 47,569

Transfers to investment property (Note 8) – (109,355) (109,355)

Transfer from investment property (Note 8) 25,456 – 25,456Depreciation charge (4,397) – (4,397)Closing net book amount 55,678 – 55,678

16p60(e),61(c) At 31 December 2001

Cost 82,518 – 82,689Accumulated depreciation (26,840) – (26,840)Net book amount 55,678 – 55,678

16p60(e) The comparative information is not required for the movements on PPE.

There were no impairment charges in 2000 and 2001.



11 Goodwill


22p88(e) Opening net book amount 6,377

Exchange differences (36)

Amortisation charge (852)

Closing net book amount 5,489

At 31 December 2000

22p88(e) Cost 8,560

Accumulated amortisation (3,071)

Net book amount 5,489


22p88(e) Opening net book amount 5,489

Exchange differences 20

Amortisation charge (852)

Closing net book amount 4,657

At 31 December 2001

22p88(e) Cost 8,560

Accumulated amortisation (3,903)

Net book amount 4,657

22p88 [Note: The comparative information is not required for the reconciliation of movements onintangible assets including goodwill.]

12 Inventories

2001 2000

40p51(b) Transfer from investment property (Note 8) 15,234 –

Redevelopment expenditures 10,111 –

Closing amount 25,345 –

An office building situated in Switzerland, which was classified as investment property (Note 8)

10p20 in 2000, was redeveloped starting in July 2001 prior to sale and was therefore reclassified as

2p5 inventories. The property was sold on 31 January 2002 for LC 29,567, yielding a gain on disposalof LC 4,222.

13 Receivables

2001 2000

Trade receivables 3,930 6,040

39p170(f) Less: Provision for bad and doubtful debts (322) (240)

3,608 5,800

39p170(f) The charge in the income statement for bad and doubtful debts was LC 82 (2000: LC 113).



14 Trade and other payables

2001 2000

Trade payables 20,459 16,456

Social security and other taxes 4,568 3,478

Other payables 6,194 3,596

31,221 23,530

Trade payables are interest free and have settlement dates within one year.

15 Borrowings

39p169(b) All the Group’s borrowings are at floating rates of interest. The Group takes on exposure to theeffects of fluctuations in the prevailing levels of market interest rates on its financial position andcash flows. Interest costs may increase as a result of such changes but may reduce or create lossesin the event that unexpected movements arise. The Board has decided that the Group should notbe exposed to changes in fair values of borrowings.

[As mentioned earlier these illustrative financial statements do not include fixed rate borrowingsor derivatives. Where such arrangements exist, further disclosures are required under IAS 39.Please refer to Note 22 and Note 28 of the IAS Illustrative Corporate Financial Statements]

2001 2000

Non-current

Bank borrowings 85,764 87,654

Debentures and other loans 23,652 17,738

109,416 105,392

The borrowings include secured liabilities on investment property to the value of LC 174,395 (2000: LC 155,307) (Note 8).

32p56(b) The weighted average effective interest rates at the balance sheet date were as follows:

2001 2000

Bank borrowings 7.0% 6.8%

Debentures and other loans 7.2% 7.0%

32p56(a) Maturity of non-current borrowings

2001 2000

Between 1 and 2 years 74,897 83,456

Between 2 and 5 years 22,054 12,060

Over 5 years 12,465 9,876

109,416 105,392

32p77 The fair value of these floating rate borrowings approximated their carrying values at the balancesheet date.



16 Deferred income taxes

Deferred income taxes are calculated in full on temporary differences under the liability methodusing a principal corporate tax rate of 30% (2000: 30%).

The movement on the deferred income tax account is as follows:

2001 2000

At beginning of year 22,013 20,257

Exchange differences 202 432

Income statement (credit)/charge (Note 5) 1,532 1,324

At end of year 23,747 22,013

12p81(g)(i)(ii) The movement in deferred tax assets and liabilities (prior to offsetting of balances within the same

12p81(a) tax jurisdiction) during the period is as follows:

Deferred tax liabilities Accelerated Fair Totaltax value

depreciation gains

At 31 December 2000 679 22,209 22,888

Charged / (credited) to P/L 288 1,356 1,644Exchange differences 34 239 273At December 2001 1,001 23,804 24,805

Deferred tax assets Provisions Other Total

At 31 December 2000 (480) (395) (875)

Credited to P/L (36) (76) (112)Exchange differences (12) (59) (71)At 31 December 2001 (528) (530) (1,058)

12p74 Deferred income tax assets and liabilities are offset when there is a legally enf orceableright to set off current tax assets against current tax liabilities and when the deferred incometaxes relate to the same fiscal authority. The following amounts, determined afterappropriate offsetting, are shown in the consolidated balance sheet:

2001 2000

Deferred tax assets (834) (750)

Deferred tax liabilities 24,581 22,763

23,747 22,013

The amounts shown in the balance sheet include the following:

1p54 Deferred tax assets to be recovered after more than 12 months (167) (120)

1p54 Deferred tax liabilities to be settled after more than 12 months 21,678 20,764



17 Provisions

37p84(a) At 31 December 2000 1,601

Exchange differences 59

37p84(b) Additional provisions – charged to income statement 302

37p84(c) Utilised during year (1,412)

37p84(a) At 31 December 2001 550

37p85(a) The amounts shown are for certain legal claims relating to disputes over service andmaintenance changes brought against ABCIP by certain tenants in [name of country]. Thebalance at 31 December 2001 is expected to be utilised in the first half of 2002. In theopinion of the directors, after taking appropriate legal advice, the outcome of these legalclaims will not give rise to any significant loss beyond the amounts provided at 31December 2001.

18 Ordinary shares and share premium

1p74(a) Number of Ordinary Shareshares shares premium Total

(thousands) LC 000 LC 000 LC 000

At 31 December 1999, 2000 and 2001 40,000 40,000 22,720 62,720

1p74(a) The total authorised number of ordinary shares is 40 million shares (2000: 40 millionshares) with a par value of LC 1 per share. All issued shares are fully paid.

19 Cash generated from operations

2001 2000

7p18(b) Net profit 19,527 17,379

7p20

Adjustments for:

Tax (note 5) 6,056 6,152

Depreciation of property, plant and equipment 4,397 1,954

Amortisation of up-front operating lease payments 104 104

Amortisation of goodwill 852 852

(Profit)/loss on sale of investment property (2,080) –

Fair value (gains) / losses on investment property (6,400) (4,218)

Interest income (Note 3) (560) (1,096)

Interest expense (Note 3) 10,020 9,100

Changes in working capital:

Trade and other receivables 2,192 (8,431)

Payables 7,691 10,045

Provisions (1,051) 891

Cash generated from operations 40,748 32,732



20 Principal subsidiary undertakings

27p32(a) Europe Country of incorporation Asia Country of incorporation

Name UK Name Hong KongName UK Name SingaporeName France Name KoreaName Switzerland Name ThailandName ItalyName SpainName BelgiumName Germany

All subsidiaries are wholly owned. All holdings are in the ordinary share capital of theundertaking concerned and are unchanged from 2000.



Report of the auditorsTo the Members of ABCIP

We have audited the accompanying balance sheet of ABCIP (the Company) and its subsidiaries (the Group)as of 31 December 2001 and the related income and cash flow statements for the year then ended. Thesefinancial statements set out on pages 3 to 22 are the responsibility of the Company’s management. Ourresponsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with International Standards on Auditing. Those Standards requirethat we plan and perform the audit to obtain reasonable assurance about whether the financial statementsare free of material misstatement. An audit includes examining, on a test basis, evidence supporting theamounts and disclosures in the financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by management, as well as evaluating the overall financialstatement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion the financial statements give a true and fair view of [or ‘present fairly in all material respects’]the financial position of the Group as of 31 December 2001 and of the results of its operations and its cashflows for the year then ended in accordance with International Accounting Standards.

Date

Address

The format of the audit report will need to be tailored to reflect the legal framework of particular countries.In certain countries the audit report covers both the current year and the comparative year.



Index of International Accounting Standards disclosure requirementsThis Index identifies the financial statement, or note to the financial statements, in which the disclosurerequirements of a particular International Accounting Standard have been demonstrated in this publication.As these financial statements focus on the disclosures required by IAS 40 – Investment Property, thefollowing standards are not applicable to these financial statements: IAS 2 (in part), IAS 11, IAS 19 (in part),IAS 20, IAS 22 (in part), IAS 24, IAS 28, IAS 29, IAS 31, IAS 32 (in part), IAS 35, IAS 38, IAS 39 (in part).

The SIC are not shown as they do not contain any disclosure requirements.

Key G = General Information CF = Cash Flow StatementIS = Income Statement AP = Accounting PoliciesBS = Balance Sheet 7 = Note 7 to the Financial StatementsSE = Statement of Movements in NA = Not applicable to these financial

Shareholders’ Equity statements

Para Refer Para Refer Para Refer Para Refer Para Refer

IAS 1 Presentation of Financial Statements

7 ................... G 44,46 ............ G 72 ...... 13,14,21 74(b) ....…. AP 85...............….711 ............... AP 49 .............. NA 73(a) ...........10 74(c) ..............7 86 ….....…… SE13,19.......... NA 53 ............... BS 73(b–c)…….NA 74(d) ......... NA 91(a)…….….AP23 .............. NA 54 ...... 15,16,18 73(d)....…….18 75,77 .......... IS 97,99,101.... AP38 ................. G 60,63……..NA 73(e) ..... SE,BS 80,82 .......... IS 102(a–b) .......G40 ............... AP 66–67 .......... BS 74(a) ............ 20 83 ................ 4 102(d) ............4

IAS 2 Inventories (portion relating to accounting policies)

34 (a)………….AP

IAS 7 Cash Flow Statements

10 ............... CF 18(b) ..... CF,21 29 .............. NA 39,40...........NA 46 .........…..AP18(a) .......... NA 21 ............... CF 31,35 .......... CF 43,45.....…. NA 48 ...............NA

IAS 8 Net Profit or Loss for the Period, Fundamental Errors, Changes in Accounting Policies

10 ................ IS 16 .................IS 34,37 ......... NA 46 ............... AP 54,57 ......... NA11 ...............NA 30 .............. NA 38,40 ......... NA 49,53 .... AP,SE

IAS 10 Events Occurring After the Balance Sheet Date

16 ................BS 20 ....……….. 8

IAS 12 Income Taxes

69 ............... BS 79 .................. 5 81(b) ...........NA 81(d) ...........NA 81 (h–i) …. NA77 ................ IS 81(a) .....……16 81(c) ..........….5 81(e–g) ........ 16 82 ….....…. NA

IAS 14 Segment Reporting

50–52 .....….NA 61 ...............NA 66–67 ......…NA 70–72 ......... NA 81,84...........NA55–58 .....….NA 64 ...............NA 69 .............…..1 74–76 ......... NA

IAS 16 Property, Plant and Equipment

60(a–c) ....... AP 60(d–e) ........ 10 61(a–c) ........NA 61(d) ...........NA 64……........NA

IAS 17 Leases

23…............NA 27…......……..9 39…………NA 48(a–c).......…2 56,59.......... NA



Para Refer Para Refer Para Refer Para Refer Para Refer

IAS 18 Revenue

35(a) .......... AP 35(b) ........….2 35(c) ...........NA

IAS 19 Employee Benefits (portion relating to defined contribution plans)

23 …………. 4 46 .................17

IAS 21 The Effects of Change in Foreign Exchange Rates

42(a) .............. 3 42(b) ............SE 42(c) .......... NA 43–47.......... NA

IAS 22 Business Combinations (portion relating to goodwill)

88 (a–b)……AP 88 (e)………11

IAS 23 Borrowing Costs

9 ................. AP 29(a) .......... AP 29(b–c) ........NA

IAS 27 Consolidated Financial Statements and Accounting for Investments in Subsidiaries

8,21 ........... NA 26 ..........….NA 32(a) ............ 22 32(b–c)….…NA

IAS 32 Financial Instruments: Disclosure and Presentation (portion relating to borrowings)

56(a)………..15 56(b)………15 77………….15

IAS 33 Earnings Per Share

43 .............. NA 45 ……......NA 47.................IS 49 ….............. 6 51................NA

IAS 36 Impairment of Assets

113…….... NA 116…..........NA 117…...…..NA

IAS 37 Provisions, Contingent Liabilities and Contingent Assets

84(a–d) ........ 18 85(a) ............ 18 86(a–c) ........NA 89,91...........NA 93,95…..…NA84(e) .......... NA 85(b–c) ....... NA

IAS 39 Financial Instruments; Recognition and Measurement (portion relating to borrowings and impairment

charges for financial assets)

169(b)..........15 170(c)(i)..........3 170(f)………13

IAS 40 Investment Property

66(a–b) …... AP 66(d)(i) …..…2 66(d)(iii) ….... 8 66(f) ……......8 68–69 ….… NA66(c) ............8 66(d)(ii) ……IS 66(e)…….. NA 67 …………..8

International Accounting Standards – Illustrative Investment Property Financial Statements is designed forthe information of readers. While every effort has been made to ensure accuracy, information contained inthis publication may not be comprehensive or may have been omitted which may be relevant to a particularreader. In particular, this publication is not intended as a study of all aspects of International AccountingStandards, nor as a substitute for reading the actual Standards when dealing with specific issues. Noresponsibility for loss to any person acting or refraining from acting as a result of any material in thispublication can be accepted by PricewaterhouseCoopers. Recipients should not act on the basis of thispublication without seeking professional advice



PageAmortisation 3,17,18

Borrowings 5, 10, 19

Cash and cash equivalents 5,10Cash flow statement 6

Deferred tax 10,15,20Depreciation 3, 8, 9,13,17Development expenditure 6Development property 8,16Dividends 4,10,18

Earnings per share 3, 15

Fair value 3, 8,16Finance costs 3,12,13Foreign currency translation 4,7

Goodwill 5, 9, 18

Impairment 9Interest expense 14, 21Interest income 14, 21Inventories 5, 10,16,18Investment property 5, 8, 16

Land held under operating lease 5, 8, 16,17Leases 9,14Long term operating lease 8,16,17

Pension 10,15Property, plant and equipment 9,17Provisions 10,21

Repairs and maintenance 3,16Revaluation reserve 4Revenue 3, 13

Segment information 12,13,14Staff costs 3, 15Subsequent events 16Subsidiary undertakings 22

Valuers 8, 16

Copyright © 2001 PricewaterhouseCoopers. All rights reserved. PricewaterhouseCoopers is authorised by the Institute of CharteredAccountants in England and Wales to carry on investment business. Designed by the studio 12506. Printed in the UK.

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4 Investment Property Financial Statements

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