TR Property Investment Trust plc
Report & Accounts for the year ended 31 March 2021
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TR Property Investment
Trust plc is managed by
TR Property Investment Trust plc
Report & Accounts for the year ended 31 March 2021
OVERVIEW
1
2
3
Company Summary
Financial Highlights and Performance
Historical Performance
STRATEGIC REPORT
Chairman’s Statement
Portfolio
Investment Portfolio by Country
Twelve Largest Equity Investments
Investment Properties
Investment Objective and Benchmark
4
8 Manager’s Report
17
18
19
23
24
24 Business Model
25
26 Key Performance Indicators
28
33 Viability Statement
35
Strategy and Investment Policies
Corporate Responsibility
Principal and Emerging Risks and Uncertainties
GOVERNANCE
38 Directors
40 Managers
41 Report of the Directors
44 Corporate Governance Report
51
53
55 Directors’ Remuneration Report
58 Report of the Audit Committee
61
Report of the Nomination Committee
Report of the Management Engagement Committee
Statement of Directors’ responsibilities in relation to the
Group financial statements
Independent auditor’s report to the members of TR
Property Investment Trust plc
62
FINANCIAL STATEMENTS
Group Statement of Comprehensive Income
Group and Company Statement of Changes in Equity
69
70
71 Group and Company Balance Sheets
72
73 Notes to the Financial Statements
Group and Company Cash Flow Statements
GLOSSARY AND AIFMD DISCLOSURE
98 Glossary and AIFM disclosure
NOTICE OF ANNUAL GENERAL MEETING
100 Notice of Annual General Meeting
104 Explanation of Notice of Annual General Meeting
SHAREHOLDER INFORMATION
108 Directors and Other Information
109 General Shareholder Information
111
112 How to Invest
Investing in TR Property Investment Trust plc
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TR Property Investment Trust plc
The investment objective of TR Property
Investment Trust plc is to maximise
shareholders’ total returns by investing
in the shares and securities of property
companies and property related businesses
internationally and also in investment
property located in the UK.
INTRODUCTION
INDEPENDENT BOARD
TR Property Investment Trust plc (the “Company” or the
“Trust”) was formed in 1905 and has been a dedicated
property investor since 1982. The Company is an
Investment Trust and its shares are premium listed on the
London Stock Exchange.
BENCHMARK
The benchmark is the FTSE EPRA/NAREIT Developed
Europe Capped Net Total Return Index in Sterling.
INVESTMENT POLICY
The Company seeks to achieve its objective by investing in
shares and securities of property companies and property
related businesses on an international basis, although,
with a Pan-European benchmark, the majority of the
investments will be located in that geographical area. The
Company also invests in investment property located in
the UK only.
Further details of the Investment Policies, the Asset
Allocation Guidelines and policies regarding the use of
gearing are set out in the Strategic Report on page 25 and
the entire portfolio is shown on page 18.
INVESTMENT MANAGER
BMO Investment Business Limited acts as the Company’s
alternative investment fund manager (“AIFM”) with
portfolio management delegated to Thames River Capital
LLP (“the Portfolio Manager” or “the Manager”). Marcus
Phayre-Mudge has managed the portfolio since 1 April
2011 and been part of the Fund Management team since
1997.
The Directors are all independent of the Manager and
meet regularly to consider investment strategy, to monitor
adherence to the stated objective and investment policies
and to review performance. Details of how the Board
operates and fulfils its responsibilities are set out in the
Report of the Directors on page 41.
PERFORMANCE
The Financial Highlights for the current year are set out
opposite and Historical Performance can be found on
page 3. Key Performance Indicators are set out in the
Strategic Report on pages 26 and 27.
RETAIL INVESTORS ADVISED BY IFAS
The Company currently conducts its affairs so that its
shares can be recommended by Independent Financial
Advisers (“IFAs”) in the UK to ordinary retail investors in
accordance with the Financial Conduct Authority (“FCA”)
rules in relation to non-mainstream investment products
and intends to continue to do so. The shares are excluded
from the FCA’s restrictions, which apply to non-mainstream
investment products, because they are shares in an
authorised investment trust.
FURTHER INFORMATION
General shareholder information and details of how to
invest in TR Property Investment Trust plc, including an
investment through an ISA or saving scheme, can be
found on pages 111 and 112. This information can also be
found on the Trust’s website www.trproperty.com
TR PROPERTY INVESTMENT TRUST
1
OVERVIEWSTRATETIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION Financial Highlights and Performance
Balance Sheet
Net asset value per share
Shareholders’ funds (£’000)
Shares in issue at the end of the year (m)
Net debt1,6
Share Price
Share price
Market capitalisation
Revenue
Revenue earnings per share
Dividends2
Interim dividend per share
Final dividend per share
Total dividend per share
Performance: Assets and Benchmark
Net Asset Value total return3,6
Benchmark total return6
Share price total return4,6
Ongoing Charges5,6
Including performance fee
Excluding performance fee
Excluding performance fee and direct property costs
Year ended
31 March
2021
417.97p
1,326,433
317.4
16.5%
Year ended
31 March
2020
358.11p
1,136,453
317.4
7.6%
Change
+16.7%
+16.7%
+0.0%
392.50p
£1,246m
317.50p
£1,008m
+23.6%
+23.6%
Year ended
31 March
2021
Year ended
31 March
2020
Change
12.25p
14.62p
-16.2%
+0.0%
+2.3%
+1.4%
5.20p
9.00p
14.20p
+20.7%
+15.9%
+28.3%
+1.40%
+0.65%
+0.63%
5.20p
8.80p
14.00p
-11.5%
-14.0%
-16.8%
+0.80%
+0.61%
+0.59%
1.
Net debt is the total value of loan notes, loans (including notional exposure to CFDs and Total Return Swap) less cash as a proportion of net asset value.
2.
Dividends per share are the dividends in respect of the financial year ended 31 March 2021. An interim dividend of 5.20p was paid in January 2021. A final dividend of
9.00p (2020: 8.80p) will be paid on 4 August 2021 to shareholders on the register on 18 June 2021.
The shares will be quoted ex-dividend on 17 June 2021.
3.
The NAV Total Return for the year is calculated by reinvesting the dividends in the assets of the Company from the relevant ex-dividend date. Dividends are deemed
to be reinvested on the ex-dividend date as this is the protocol used by the Company’s benchmark and other indices.
4. The Share Price Total Return is calculated by reinvesting the dividends in the shares of the Company from the relevant ex-dividend date.
5.
Ongoing Charges are calculated in accordance with the AIC methodology. The Ongoing Charges ratios provided in the Company’s Key Information Document are
calculated in line with the PRIIPs regulation which is different to the AIC methodology.
6. Considered to be an Alternative Performance Measure as defined on page 98.
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Historical Performance
For the years ended 31 March
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Performance for the year:
Total Return (%)
NAV(A)
Benchmark(B)
Share Price(C)
Shareholders’ funds (£’m)
Total
Ordinary shares
Sigma shares(D)
Ordinary shares
15.4
15.2
12.6
670
531
139
-8.5
-8.9
-9.5
588
470
118
Net revenue (pence per share)
21.5
17.8
25.8
22.4
14.9
37.7
28.3
23.3
29.5
8.2
5.4
-1.6
8.0
6.5
9.1
15.5
10.2
25.5
9.1
5.6
6.2
-11.5
-14.0
-16.8
20.7
15.9
28.3
684
684
809
809
1,010
1,065
1,118
1,256
1,328
1,136
1,326
1,010
1,065
1,118
1,256
1,328
1,136
1,326
-
-
-
-
-
-
-
-
-
Earnings
Dividends(E)
6.94
6.00
7.07
6.60
6.74
7.00
8.09
7.45
8.89
7.70
8.36
8.35
11.38
10.50
13.22
12.20
14.58
13.50
14.62
14.00
12.25
14.20
NAV per share (pence)
207.10
183.60
215.25
254.94
318.12
335.56
352.42
395.64
418.54
358.11
417.97
Share price (pence)
177.10
154.50
186.30
247.50
310.50
297.50
314.50
382.50
394.00
317.50
392.50
Indices of growth
Share price(F)
Net Asset Value(G)
Dividend Net(E)
RPI
Benchmark(H)
100
100
100
100
100
87
89
110
104
87
105
104
117
107
99
140
123
124
110
105
175
154
128
111
126
168
162
139
112
130
178
170
175
116
134
216
191
203
120
144
222
202
225
123
147
179
173
233
126
123
222
202
237
128
140
Figures have been prepared in accordance with IFRS.
(A) The NAV Total Return for each year is calculated by reinvesting the dividends in the assets of the Company from the relevant ex-dividend date. Dividends are
deemed to be reinvested at the ex-dividend date as this is the protocol used by the Company’s benchmark and other indices. This is considered to be an Alternative
Performance Measure as defined on page 98.
(B)
Benchmark Index: composite index comprising the FTSE EPRA/NAREIT Developed Europe TR Index up to March 2013, and thereafter the FTSE EPRA/NAREIT Developed
Europe Capped Index. Source: Thames River Capital.
(C) The Share Price Total Return is calculated by reinvesting the dividends in the shares of the Company from the relevant ex-dividend date.
(D) The Sigma share class was launched in 2007 and Sigma shares were redesignated as Ordinary shares on 17 December 2012.
(E) Dividends per share in the year to which their declaration relates and not the year they were paid.
(F) Share prices only. These do not reflect dividends paid.
(G) Capital only values. These do not reflect dividends paid.
(H) Price only value of the indices set out in (B) above.
TR PROPERTY INVESTMENT TRUST
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Chairman’s Statement
David Watson
Chairman
Whilst underlying earnings were initially
impacted by the pandemic, the message
from the vast majority of our invested
companies, which largely excludes
owners of retail property, has been a
considered and strong resumption in
dividends.
4
TR PROPERTY INVESTMENT TRUST
INTRODUCTION
The start of this reporting period was very close to the
recent COVID-19 influenced nadir of global equity markets
in March 2020. Since then equity markets have been
determinedly focused on the future rather than reflecting
on the more immediate economic data and human
tragedy of the pandemic. As a result, I’m able to report
healthy returns for the year with a net asset value (“NAV”)
total return of 20.7%, well ahead of the benchmark total
return of 15.9%. The share price total return was even
stronger at 28.3% as the discount narrowed over the year.
Stock markets have taken great comfort from the huge
amount of central bank stimulus and state aid for both
corporates and individuals. Since November 2020, this
sense of support has been augmented by optimism
following the announcements and subsequent rollout of a
range of vaccine programmes.
The crisis has forced a dramatic change in the way we work,
consume and relax. Over the last year our management team
has pondered not only the pace of these changes across a
wide range of property sectors but also their sustainability
once the world reverts to “the new normal”.
Over the last quarter of the financial year under review
and into the start of the new one, we have seen very
dramatic share price movements as investors rotated
from companies offering the safety of secure income
towards those offering greater risk, particularly where the
companies were trading at large discounts to their asset
value. Your manager’s report will examine in more detail
how the portfolio structure has evolved through these
thematic rotations.
REVENUE RESULTS AND DIVIDEND
REVENUE OUTLOOK
Within our portfolio, the manager anticipates income
for the year to March 2022 to be split into three broadly
equal parts with one third suffering a reduction and in
some cases significant cuts or even suspensions, a third
with income returning to pre-pandemic levels, and the
balance offering some level of increase. We do not expect
total income levels to return to pre-COVID-19 levels within
the current financial year although we do expect an
improvement relative to 2020/21.
TR Property Net Asset Value Total Return
After allowing for the proposed dividend, revenue reserves
will still amount to 12.18p per share giving plenty of
capacity for the board to supplement the dividend again
in 2021/22, providing a return to pre-Covid levels can
reasonably be anticipated in the medium term.
Earnings for the year were 12.25p per share, 16% lower
than the prior year earnings of 14.62p.
The headline earnings per share figure is slightly deceptive,
earnings before tax were 24% lower than the previous year,
but a significant tax refund and some further prior period
withholding tax recoveries reduced the revenue tax charge
from an effective rate of 11.3% in 2020 to just 1.9% for the
financial year to March 2021. Further details of this are set
out in the Manager’s Report.
Benchmark Total Return
The Board has announced a final dividend of 9.00p per
TR Property Share Price Total Return
share, bringing the full year dividend to 14.20p per share
400
(2020: 14.00p) an overall increase of 1.4% on the prior year
350
dividend. The Board is conscious of the income aspirations
300
of some of our investor base and, although this dividend
is not fully covered, the Company has significant revenue
250
reserves available. As long as the Board has a reasonable
200
expectation of income returning to previous levels in the
150
medium term, the Board is happy to maintain a modest
level of dividend progression.
100
50
Ordinary Share Class Performance: Total Return over 10 years (rebased)
Benchmark Total Return
TR Property Share Price Total Return
TR Property Net Asset Value Total Return
200
180
160
140
120
100
80
60
40
20
0
Mar-10
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
Mar-19
Mar-20
Mar-21
TR PROPERTY INVESTMENT TRUST
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OVERVIEWSTRATETIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION Chairman’s Statement continued
NET DEBT AND CURRENCIES
Gearing at the end of the year stood at 16.5% having
started the year at 7.6%. Gearing fluctuated considerably
throughout the year, ranging between around 7.6% and
17.8% as market sentiment ebbed and flowed. This
demonstrates the benefit of the flexibility of our borrowing
structure, with a base level supported by our fixed
longer-term debt and the majority achieved through the
revolving credit facilities and exposure through contracts
for difference (“CFDs”).
Sterling reached a low against the Euro in September
2020 driven by fears of a no deal Brexit and remained
relatively weak until January 2021. As the new year arrived
and despite issues with bureaucracy for goods flowing
between the UK and Europe, Brexit issues took a back
seat in investors’ minds as they focused on the route to
normalisation across the UK and Europe as the vaccine
programmes rolled out. The UK is clearly ahead of the
curve in this respect and Sterling strengthened steadily
towards our year end in March 2021.
Our policy is to maintain a hedged currency exposure in
line with the benchmark. Sterling represents around 27%
of the benchmark, therefore strengthening Sterling is a
headwind to the NAV.
Income is unhedged and around 66% of our income
is received in currencies other than Sterling, therefore
stronger Sterling reduces our income. Slightly more income
is received in the first half of the year than the second, so
for the current year more was received in a period when
Sterling was weaker.
DISCOUNT AND SHARE REPURCHASES
The prior year end fell only two weeks after the market
lows following the announcement of the global COVID-19
pandemic and the shares started the new financial year
at a discount of 11.3%. The discount then moved around
between 5% and 15% as market sentiment changed
through the roller coaster ride of lockdowns, easings and
vaccine news. The average over the year was 10.2% but
closed at 6.1%. This closing of the discount over the year
meant that the share price return of 28.3% was well
ahead of the NAV return.
No share buy-backs were made in the period, although
the discount was wide at various points during the year.
Many of our underlying stocks were also trading on wide
discounts and our manager focused our capital on those
opportunities.
THE BOARD
I am grateful to my Board colleagues and to the team
at TR for their support and commitment this year. We
have met in person whenever the law and common
sense allowed and “virtually” when necessary. Though
small, I believe the Board has an excellent balance and
spread of skills and experience appropriate for the Trust’s
objectives. With two relatively new members, and a
change in Chair, I have been keen to allow us all time
to settle into our roles. Even so, I am conscious of the
term of our SID, Simon Marrison whose independence,
skills and commitment are exemplary. He brings a unique
contribution with his continental property investment
expertise that is highly valued by us all and that will be
hard to replace. Equally we always enjoy and benefit from
the introduction of a fresh and enquiring mind so we will
start the process of looking for his replacement later this
year to allow an orderly succession.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
FACTORS (‘ESG’)
This year we have added more information on our
responsible investment approach. For many years we
have maintained a strong position in terms of voting
and engagement supported by our significant stakes in a
number of property companies. Our size in this specialist
area of the equity market has helped ensure that our
views are heard. This engagement has been augmented
by the strength of BMO’s Corporate Governance team and
their broader engagement record. We fully intend to keep
up and heighten pressure on our investee companies
to enhance their standards of governance and we will
be increasing our expectations on both the provision of
data and on the Social and Environmental outcomes that
they deliver. Any long term support for management will
require companies to exhibit positive momentum across
relevant measures.
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All at a time when fixed income yields are at historically
low levels and much long duration sovereign debt offers
negative yields to redemption.
Real estate offers a substantial margin over fixed income
with the opportunity to reflect any economic recovery
through rental growth. As a real asset it also has some
inflation proofing credentials. However, as the last fifteen
months has reminded us, sentiment can often override
fundamentals in liquid equity markets and our managers
will continue to focus on the assessment of earnings
sustainability and medium term growth potential.
David Watson
Chairman
3 June 2021
AWARDS
The Trust was the winner in the Specialist Equities
category of the Citywire Investment Trust Awards. This is
particularly pleasing as we were in competition with Trusts
specialising in a broad range of equities and alternatives.
OUTLOOK
The pandemic has had a dramatic impact on the world
and on all aspects of real estate. In some instances this
was an acceleration of trends that were well underway
such as the structural shift to omnichannel retailing. For
others, such as increased remote working, it has been a
very fast gestation period of an embryonic trend. Airport
hotel occupancy and business travel will likely suffer a
long-term negative shift as companies embrace not only
a new generation of communication tools but also their
environmental credentials. The main common feature
across these examples is the difficulty in predicting the
scale and permanency of this evolution. What will be ‘the
new normal’ for these asset classes is the challenge for
our management team as we look forward to the post
pandemic world. What we can be sure about is that the
economic backdrop is a world with hugely elevated levels
of government debt, ongoing central bank / governmental
stimulus packages and higher levels of domestic savings.
TR PROPERTY INVESTMENT TRUST
7
Manager’s Report
Marcus Phayre-Mudge
Fund Manager
Capital is clearly seeking real assets.
There has been several recent instances
of private equity acquiring listed
properties companies. This will continue
if public companies are undervalued.
Such market dynamics provides us with
a strong valuation underpin.
8
TR PROPERTY INVESTMENT TRUST
PERFORMANCE
The Net Asset Value total return for the year to 31 March
2021 was 20.7%, ahead of the benchmark total return of
15.9%. At the interim stage, I reported that Continental
European property companies had significantly
outperformed their UK counterparts (returns of 11.3% v
2.1%). The second half saw the complete reverse. The UK’s
performance in the second half was so strong that the
12 month performance of 19.1% (in GBP) outperformed
Continental Europe at 18.7% (in EUR).
The initial impact of the pandemic on European real estate
equities saw the benchmark fall 36% from the pre-Covid
peak of 19th February to the trough on 18 March 2020. Our
financial year therefore started close to these depressed
levels and the steady recovery since then is reflected in
the healthy figures for the year under review. However it
is worth noting that collectively the sector remains nearly
15% below the pre-Covid peak.
This extraordinary year has clearly been like no other and
the gulf in performance of the different real estate sectors
(and their respective listed companies) requires the same
adjective. The year can be neatly divided into pre and post
the vaccine announcement.
From March to October investors focused on owning
sustainable, pandemic proof income such as residential,
supermarkets and healthcare alongside logistics,
warehousing and industrial where the underlying tenants’
businesses had remained open and in many cases
were thriving. Consumer facing sectors such as retail,
restaurants, hotel and leisure were shunned. We divide our
universe of pan European real estate companies into 26
bespoke groups and over the 7 months from the trough on
18th March 2020 our logistics / industrial group returned
+54% , German residential +60%, healthcare +36% whilst
UK retail fell 45% and European retail returned just 1%.
London retail also suffered falling 26% as tourism levels
(both domestic and international) collapsed.
However, from November onwards we saw a complete
volte face as investors focused on the possibility of
a normalising economic outlook post the vaccine
breakthrough. In our world that meant buying back into
the consumer facing sectors. Stocks exposed to these
sectors had been standing at large discounts given the
market’s expectation of further asset value declines and
they enjoyed significant price recovery. Stocks such as
Hammerson and Shaftesbury, who had both carried out
emergency capital raises (more on this later), enjoyed
100% and 85% price appreciation from their respective
(pre-vaccine announcement) capital raise prices.
The Trust was defensively positioned as we entered the
pandemic with overweights to European PRS (private
rented sector) particularly in Germany, supermarkets
(UK and Nordics), healthcare (mainly UK) and logistics /
industrial across both the UK and Europe. These exposures
drove much of the relative outperformance from March to
November.
London exposed stocks suffered particularly as office
workers have not returned (we estimate office utilisation
rates at c25% versus a Continental average of over 50%)
and this combined with the collapse in tourism (both
domestic and international) has temporarily hollowed out
our global city. Our UK office exposure was concentrated
in decentralised offices through CLS and McKay whilst
we avoided London retail focused names such as Capco
and Shaftesbury as well as those businesses with short
occupational leases such as Workspace.
As the ‘relief / reopening / reflation’ trade gathered
momentum, I closed our underweight exposure to
European shopping centres, bought back into some Central
London retail and renewed our exposure to office markets
particularly those cities with the shorter commute times.
Essentially I was still shying away from the largest two
conurbations (London and Paris) whilst adding to smaller
ones such as Madrid and Dublin and maintaining exposure
to decentralised office sectors in the UK, Sweden and
Germany.
The pandemic has turned much ‘on its head’ and in our
corner of the equity market it was the performance of
Swiss property companies which was much weaker than
history would have predicted. Traditionally a safe haven,
these stocks did not initially recover from the March lows
with investors focused on the problematic retail exposure
of the largest listed companies. We continue to be
underweight the group.
Another positive surprise has been in self-storage which
reported very steady numbers through the worst of the
year. Whilst our stock selection in the UK was correct
(Safestore total return +27% versus Big Yellow +14%), the
runaway success was Shurguard, the Continental player
returning +48%, which we didn’t own. In our defence, the
stock enjoyed strong demand from index trackers as it
entered various benchmarks midyear.
Most of 2020 was an understandably subdued
period for M&A corporate activity with one particular
exception, Norwegian offices. Entra (where we were a
top 20 shareholder) was the subject of a bidding war
between two Swedish listed players, Castellum and
Samhallsbyggnadsbolaget (also known as SBB). Whilst
neither successfully gained control, the share price total
return was 57%, our most successful investment in the
period.
The portfolio has some gearing. This was reduced in
February and March 2020 but has subsequently returned
to pre-pandemic levels. Why have gearing in volatile
times? The Trust continues to take advantage of its
closed ended structure and holds a number of illiquid
small cap stocks. These well-run companies (even when
exposed to outperforming subsectors) often suffer from
limited investor attention, being deemed too small. As a
consequence, in rising markets they often underperform
their larger brethren (in market parlance their ‘beta’ is less
than one). Adding some gearing helps compensate for
these lower beta names. Our experience is that over time
the underlying property fundamentals will be recognised
and, if not, then the market will take them private or
merge them together. Our physical property exposure also
sits outside our benchmark and additional gearing ensures
that we are not underexposed to equities versus our
benchmark given that a proportion of capital is invested in
physical property.
OFFICES
Of all the segments of the commercial real estate
landscape, the future demand for offices remains the
hardest to forecast. The two undeniable consequences of
the pandemic, for this asset class, has been the realisation
that employees of corporates of all sizes can work
remotely (for long periods) if required and secondly that
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OVERVIEWSTRATETIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION Manager’s Report continued
the next generation of ‘best in class’ office accommodation
will be utilised very differently with tenants having new
priorities. Built into these demands will be the overarching
need for energy efficiency, carbon neutrality and
sustainability through the life cycle of the building.
a 27% decline in planning applications for buildings
over 20 storeys in 2020 when compared with 2019. We
were surprised that the fall wasn’t larger but 73% of all
applications were in the latter part of the year and hints at
developer confidence regarding demand for new build.
The take up figures for the last year (across the 15 major
cities we monitor) offers little comparative value given the
inability for businesses to physically relocate in many of
these markets from March 2020. Taking London as a case
in point, Savills reported that West End take up fell from
4.4m sq ft in 2019 to 1.7m in 2020. Office utilisation rates
through 2020 and into 2021 have varied hugely. A broad
rule of thumb was that the larger the city (and the longer
the average commute time) the lower the office utilisation
rate. Generally the smaller cities also had higher levels of
commuting by private transport or where workers were
using overground public transport. Scandinavian and Swiss
cities have seen almost normalised utilisation rates whilst
London and Paris remain sub 30%. Looking forward, what
is important to us is the amount of new space which was
scheduled to complete (construction was halted for very
short periods in most markets) and whether there are
signs of demand as we move into the post vaccine period.
Looking across Europe as a whole, the combined effect of
reduced leasing activity and construction completions led
to 100bps increase in vacancy to an average of 6.9% (BNP
data). This single statistic clearly hides a wide range of
levels. Unsurprisingly, London and Paris have experienced
the greatest increases from 5% to nearly 8% but Dublin
collects the wooden spoon with vacancy increasing to
over 9%. This is a good example of a small market where
a (temporary) demand strike meets a number of large
completions and refurbishments. However the historically
low levels of vacancy in many cities prior to the pandemic
have insulated most markets, with modest downward
movements in prime rents recorded across the German
Big 6, Milan, Madrid, Oslo, Amsterdam and Stockholm.
The delivery of new office buildings has also been
deferred, particularly for tall buildings. The New London
Architecture’s Annual Tall Buildings Survey recorded
Investment demand has remained very resilient almost
regardless of short-term weakness in occupational
markets. The weight of capital seeking real assets is
a theme which will recur through this report. The rise
in the long end of the curve as the reflation theme
gathers momentum is proving very damaging for fixed
income structures. High quality offices – offering large lot
sizes – with secure income delivering 3.5-4% net yield
is attractive versus negative yielding sovereign bonds.
Further up the risk curve, opportunistic capital also remains
very active and listed development specialists such as
Great Portland Estates and Derwent London have found it
hard to deploy capital amidst fierce competition.
The 2021 CBRE EMEA Investor Intentions Survey highlights
London as still the most attractive city for investment
in Europe with an estimated €40-45bn of global equity
looking to be deployed into the market across all types
of buildings. This is the highest figure since the survey
starting tracking demand in 2012. Whilst transaction
volumes slowed last year, the first two months of 2021
(traditionally a quiet time) have seen volumes reach
£875m greater than the same period in 2019. Part of the
London attraction is that yields didn’t compress during
the Brexit uncertainty making the city look much cheaper
than other big European cities. Post the EU-UK Trade and
Cooperation Agreement we expect this gap to narrow.
RETAIL
The MSCI / IPD data for the 12 months to March 2021 saw
all retail property capital values fall 12.8% with a serious
acceleration in the decline of shopping centre values
which fell 25.5% over the last 12 months. In the interims,
I commented that we felt the valuation community were
behind the times due to their requirement to look at deal
evidence. Essentially, in fast moving markets the published
figures will already be out of date. Stock markets know
10
TR PROPERTY INVESTMENT TRUST
this and retail landlords across the globe have been
trading at very large discounts to their (no longer valid)
last published figures.
The woes of retail are well understood. The pandemic
has accelerated trends which were well established.
Reopening of economies will see footfall return to
shopping centres but the levels of sustainable rents
remain the subject of market forces. In the UK the loss
of a huge number of well known brands either through
bankruptcy or retreat has resulted in average vacancy
levels in shopping centres reaching over 15% (MSCI data).
This means the negotiation boot remains firmly on the
tenants’ foot and we predict a further 15% falls in rental
values. The one area where there are clear signs of price
stabilisation is in retail warehousing. Open air with plenty
of free parking, this type of retail asset sits well in an
omni-channel environment where retailer margins are
maximised through click and collect. Affordability is the
eternal watchword and whilst there are some parks with
very high rents (often fashion retailer led) the majority will
see modest declines in rental values. Occupancy cost ratios
are also not burdened by escalating service charges.
Across Europe, the picture is more nuanced. Valuers are
even more conservative than their UK counterparts and
capitalisation rates are yet to move materially. In some
countries, retailers have been given huge amounts of
government support and as a result rental delinquency
is generally lower than in the UK. In addition, many
shopping centres are anchored by hypermarkets (which
have remained open) and not department stores (a UK/
US concept no longer fit for purpose beyond a handful
of tourist destinations such as Selfridges and Galeries
Lafayette). There have been lower levels of retailer
bankruptcy across Continental Europe and we put
this down to two factors: less overrenting and the UK
insolvency legislation. On this latter point, a huge number
of UK retailers have taken advantage of the CVA (company
voluntary administration) to force landlords (generally a
large creditor) to accept corporate reconstructions which
unduly damage their interests. A recent High Court ruling
involving the overly indebted retailer New Look, reinforced
this tenant friendly legislation.
Investors remain very circumspect towards this asset class.
Income insecurity has resulted in investors requiring much
higher initial yields. CBRE estimate that UK prime shopping
centre yields have moved from 4.5% to 7% in the last
5 years with poorer secondary schemes in the high teens
or literally unsaleable. Retail warehousing has bucked the
depressing trend at least from an investor perspective.
Investors are increasingly confident that they are able
to measure tenant affordability and this is the key to
determining pricing. In the last couple of months we have
seen competitive bidding for a number of retail warehouse
schemes, something not seen since 2018.
DISTRIBUTION AND INDUSTRIAL
UK industrial and logistics take up hit a record 59.7m sq ft
in 2020. Whilst the pandemic suppressed demand in many
other parts of the property market, it clearly stimulated
logistics and business activity which utilised industrial
property. Amazon again accounted for a sizeable (20%)
portion of the activity and it was this XL segment (250,000 +
sq ft) which was the major beneficiary of the surging online
demand. The online share of retail sales rose from 19.2% in
2019 to 27.9% in 2020 hitting a new high of 36.3% in January
2021 as we returned to lockdown. This will scale back as we
reopen but the boost to online scale and efficiency is here to
stay. Supply has responded but has been more than matched
by this demand. As a consequence, supply has fallen to
73.4m sq ft, down 6% on the year, and this tightening has
occurred in every size bracket.
Rental growth continues to march on but there has been
a broadening of growth rates across the regions. Greater
London and the East Midlands recorded growth of over
7% whilst average rates across the country at 3.9%. Such
strong rental growth, the secure income and the positive
outlook has driven both domestic and international buyers
to pay record prices for this sector whether it is last mile
urban units, XL big boxes or terraces of well located
industrial units. Prime yields are 3.5 to 4% and even short
income is not deterring investors as evidenced by the sale
of our Bristol distribution unit at 4.5% initial yield with
3.5 years unexpired.
The same picture of rude health is evident across
Continental Europe. According to BNP, take up increased
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OVERVIEWSTRATETIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION Manager’s Report continued
14% across the 6 largest European economies and vacancy
rates dropped to 5.5%, their lowest and all against a
backdrop of a sharp contraction in GDP. Again it was a
surge in e-commerce and home delivery which drove
demand. Prime yields across Europe tightened 25bps in
2020, matching the UK with no signs of decompression
even as the long end of the curve rises. Investment
demand is truly global with US and Asian institutional
capital competing with more domestic long term capital
all determined to participate in this structural shift.
RESIDENTIAL
As expected the sector has remained highly resilient
during the pandemic. The majority of our investments are
in German and Swedish housing where rents are subject
to state control. The remaining exposure is Finland and the
UK where rents are open-market. The former offer greater
security with rents tied to indexation whilst the latter
offers more opportunity to capture market growth but
with the commensurate risk if vacancy rises and market
rents fall. During the crisis, the security of income and very
high occupancy levels resulted in the sector retaining its
popularity. German housing has experienced price rises in
virtually all its sub-markets.
As explained earlier, Berlin remained the outlier
as the State of Berlin imposed a 5 year rent freeze
(Mietendeckel). The subsequent Constitutional Court ruling,
which confirmed that rent controls are determined at the
Federal, not State level, came just after the year end in
mid-April. We are pleased with this outcome and the share
prices of both Deutsche Wohnen (4.4% of net assets) and
Phoenix Spree (2.5% of net assets) responded positively.
New construction of apartments in Berlin had all but dried
up as developers awaited the outcome of the appeal.
Berlin remains the cheapest capital city in Western Europe
in which to rent an apartment (if you can find one). The
desire of a left-wing local authority to keep it that way
regardless of the side effect of shutting out new migrants
through the consequential collapse in the supply of new
homes has been suitably rebuffed.
those which have not (student accommodation, hotels).
Share price performance was an amplified reflection of
not only the underlying property performance but also
the dramatic shift in investor sentiment. Self storage
share prices have traditionally performed poorly in
slowing economic conditions as the income is considered
short term and volatile. However the pandemic has
focused investors’ minds on the emerging strength of
this sector where a small group of operators (mostly
listed companies) have the financial muscle to dominate
the price comparison websites. Another emerging trend
has been the increasing business usage of a product
traditionally seen as the domain of private customers.
Businesses have seen the merits of immediate, hassle free
access to short or longer term storage. The supply chain
disruption during the pandemic heightened the need for
space as the mantra became ‘a little more just in case and
a little less just in time’. Our self storage group returned
+46% from the low point (18th March 2020) to the end
of October. However, from November 2020 to the end of
March 2021 they have collectively returned just +4.1%.
A classic example of a switch in sentiment as investors
rotated away from the ‘Covid relative winners‘ group into
the value names which had underperformed and looked
very cheap on historic metrics.
In another ‘alternatives’ sub-sector we experienced the
complete reverse. Student accommodation businesses
suffered a collapse in income and Unite (our only
exposure) led the field in refunding rents which was the
correct PR strategy but depleted their top line. The well
documented difficulties for students through the last
two academic years and the complete inability for many
overseas students to enroll physically impacted investor
sentiment with the sub-sector falling 46% between 19th
February and 18th March 2020 and then staging a weak
recovery of just +17% from then to the end of October.
Whilst this performance compares poorly with self storage,
since the beginning of November the sub-sector has
rallied 30% as the likelihood of the reopening of tertiary
education improved.
ALTERNATIVES
This group encompasses sectors that have thrived
(supermarkets, healthcare, self-storage) in the crisis and
Supermarkets have continued to attract investor
attention. Our exposure is through Supermarket Income
REIT (UK) and Cibus (Sweden and Finland). Supermarket
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TR PROPERTY INVESTMENT TRUST
Income REIT raised a total of £490m in three separate
transactions through the year and now has a market
cap of over £900m. Cibus also raised capital (SEK
900m) in two tranches to make further acquisitions. The
larger supermarket operators have been able to attract
customers through their online network which the hard
discounters (Lidl, Aldi) are not able to offer. Volumes
and margins will normalise post the pandemic but these
operators have had the opportunity to prove the resilience
of their omni-channel model which utilises last mile
distribution from their network of stores. It is one of the
few parts of the retail landscape where physical stores are
truly integral to the online journey.
DEBT AND EQUITY MARKETS
Property companies remained busy on debt refinancings
throughout the pandemic and the huge amount of central
bank support and government stimulus ensured a healthy,
liquid market where pricing did not weaken. According to
EPRA, €15.2bn was raised in 2019 at an average coupon of
1.8% and 2020 saw €15.6bn at a cost of 1.6%. These figures
are not directly comparable as the mix of debt offerings in
each period was different but they are a clear indicator as to
the health and price stability in the debt markets. German
residential companies were again busy with Vonovia raising
€2.5bn in four transactions borrowing 10-year money at 1%.
Later in October, Gecina, Europe’s largest office REIT raised
€200m in a 2034 term bond at 0.86%.
Early in the crisis, we saw a number of strong businesses
trading at premiums raise equity capital for opportunistic
expansion. This was in sectors with clear underlying
demand, namely healthcare (Assura, Aedifica, Primary
Health Properties), self-storage (Big Yellow), logistics/
industrial (LondonMetric, Segro, VGP ), supermarkets
(Supermarket Income REIT, Cibus) and German residential
(Vonovia, ADO Properties, LEG). The Autumn saw
opportunistic raises in Sweden and Norway (Balder,
Klovern and Norwegian Properties) a region which had
experienced low levels of lockdown restrictions. More
recently in February and March this year we saw renewed
activity in the UK, as the vaccine rollout improved
sentiment, with raises from Target Healthcare, LXI, Tritax
Eurobox and Supermarket Income REIT again. Continental
European raises in 2021 have so far been confined to
healthcare (Cofinimmo) and student accommodation (Xior).
Post the summer we saw the beginning of an expected
surge of more defensive raises as companies finally
came under cashflow and valuation pressure. In the end
it was just a handful of retail focused names who had
been mismanaging their balance sheets long before
the pandemic. Hammerson’s £600m raise effectively
recapitalised the balance sheet with a 24 for 1 rights issue
accompanied by the (previously announced) departure of
the CEO completing the overdue C-suite shuffle of Chair,
CEO and CFO. In late October, Shaftesbury announced a
£300m placing and open offer. Looking back their timing
was spectacularly unfortunate as the announcement of the
first vaccines came less than a fortnight later.
These game changing announcements immediately
altered expectations and there is nowhere better to
illustrate the point than the corporate saga at Unibail-
Rodamco-Westfield (URW). URW had announced a €9bn
‘Reset’ plan comprising €3.5bn capital raise, dividend
cancellation and a planned €4bn of disposals. A group
of activist shareholders lead by Leon Bressler (the CEO
of Unibail from 1992 to 2006) launched a campaign to
oppose these AGM proposals and launch an alternative
strategy which did not include a deeply discounted capital
raise. They proposed the sale of the US (ex Westfield)
portfolio and a return to their roots as an owner of
prime European shopping centres. Their timing was
fortunate, with the 10th November AGM coming just
after the vaccine announcement and the improvement in
investor sentiment even for deeply indebted businesses.
Essentially convincing investors that they didn’t need
to put ‘good money after bad’ and that the self help
strategy would succeed. They were successful in their
campaign and shareholders voted against the ‘Reset’
plan. This led to the departure of the Chairman, CEO
and CFO and the promotion of existing senior managers
to the Board. The share price, which had troughed at
€35 per share, subsequently doubled amidst the closing
of short positions. This corporate tale neatly encapsulates
the dramatic change in investor sentiment (and pricing
of previously unloved businesses) which we saw from
November onwards.
INVESTMENT ACTIVITY – PROPERTY SHARES
Turnover (purchases and sales divided by two) totalled
£468m equating to 36% of the average net assets over
the period. This was broadly in line with last year’s
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OVERVIEWSTRATETIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION Manager’s Report continued
equivalent figure (32%) which itself was well ahead of
the year to March 2019 (20%). It has therefore been two
years of elevated portfolio rotation due to market volatility.
The rapid reduction in leverage in February and March
2020 was followed by a swift reinvestment in the portfolio
which occurred in April and May as share prices recovered
from their March lows and this reinvestment was boosted
by our participation in the majority of the large number of
offensive capital raises as described earlier.
trade perpetually at a discount to its asset value. The exit
price therefore looked a fair one.
The precedent has been set and other small, deeply
discounted companies should look to merge and generate
improved operational metrics for their shareholders.
The corporate activity around Entra in Norway (covered
earlier) was an important contributor to performance given
our holding (2.5% of net assets).
Whilst a number of sought after businesses were standing
at premiums to asset value and therefore were able
to raise capital accretively, the ‘Covid’ world meant that
another smaller cohort of companies required emergency
(defensive) capital raises. After Hammerson’s raise in
September came Shaftesbury’s £300m raise at 400p per
share, a 20% discount to the undisturbed share price
and 55% below where it had started 2020. We didn’t
own Shaftesbury prior to the capital raise but took the
opportunity to participate. Given that part of the company’s
rationale for the raise was to give comfort to their banks
and secure waivers over potential covenant breaches, one
wonders if the Board would have felt so pressurised just a
few days later. The share price finished our financial year
at 641p which reflects the enormous change in sentiment
around the reopening of the economy.
Private equity continues to stalk listed property
companies and I reiterate the statement made many
times in these reports over the last decade – if the listed
market persistently undervalues its companies, private
capital won’t be shy about buying it. This year we have
seen various firms build positions in listed companies:
Brookfield (British Land), KKR (Great Portland Estates)
and Starwood (RDI, CA Immo). It is the latter which has
been most active with its stakes. Having acquired 30%
of RDI from its South African based parent company, it
launched an agreed bid for the remainder in February. The
interesting point is that the offer (recommended by the
Board at 121p) was 20% below the last published asset
value but 30% ahead of the undisturbed share price. The
board were acknowledging two things – firstly that the
asset valuation was historic and likely to fall further and
secondly that the mixed portfolio, whilst on the road to
improvement under refreshed management, was set to
The interest in listed real estate continues to strengthen
as we move into the Spring with a range of existing
companies taking the opportunity to raise capital whilst
their shares trade at premiums to their asset value. This
was capped in March by the first major IPO for over 3
years. CTP, a Central European logistics owner/developer
raised €1bn with the founder diluting from 100%
ownership to 83%. The company has a market cap of
€5.6bn.
INVESTMENT ACTIVITY – DIRECT PROPERTY
PORTFOLIO
The physical property portfolio returned 2.8% with a
capital return of -0.7% and an income return of 3.4% for
the 12 months to March 2021. In what was a difficult year
for real estate, the portfolio remained resilient with rent
collection in excess of 90% for all four quarters and with
only limited concessions given to two retail tenants.
During the period the Trust sold its freehold interest in
the Yodel Distribution Centre in North Bristol for £10m
which reflected a net initial yield of 4.5% and a capital
value of £200 per sq ft. This followed the successful
regearing of the lease at the beginning of 2020. The sale
was concluded at a 25% premium to the September 2020
valuation and is 118% above the July 2014 purchase price.
The Trust also had a successful period of asset management
completing a number of leases including the letting of the
vacant restaurant unit at The Colonnades. The 3,500 sq ft
unit has been let to Happy Lamb Hot Pot on a 20 year lease.
Happy Lamb is the latest edition of a hugely successful
Asian and US chain which produces authentic Mongolian
hot pot cuisine. This is their third restaurant opening after
Holborn and Birmingham. This letting concludes a 10 year
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transformation of this Bayswater asset where we have
added 16,000 sq ft of new retail space (bringing exciting
brands like Graham & Green and 1 Rebel to the area) as
well as doubling the Waitrose footprint from 20,000 to
40,000 sq ft.
At Wandsworth, following the successful granting of
planning in November 2019, we have continued to work
with Wandsworth Borough Council and the Greater London
Authority to deliver the complex and detailed s.106
agreement. As anticipated this will take time. Meanwhile,
we continue to let any of units on the estate which come
vacant on short term leases. The demand for industrial
space has continued to grow over the past 12 months
and central London is no exception. New rents across the
estate are in the high £20s per sq ft and post the year end
we have let the only vacancy to Sweaty Betty, the highly
successful UK leisure and fashion retailer.
REVENUE AND REVENUE OUTLOOK
Revenue earnings for the current year of 12.25p were 16%
lower than the prior year.
Earnings were enhanced by a tax refund and some further
prior period withholding tax recoveries which reduced the
revenue tax charge rate to only 1.9%. The most significant
contribution by far was a tax refund and interest thereon
resulting from the final settlement of our long running
FII GLO claim with HMRC. The tax refund and interest
amounted to £1.7m, and that, together with the ability
to release some associated provisions meant an overall
contribution of 0.71p to the revenue account.
Long standing investors may recall that this claim was
first mentioned in our reports for the year ended March
2010 following a change in UK tax law that all overseas
dividend receipts were non-taxable in the UK from 1 July
2009. There were various challenges running through
the European courts that this treatment of overseas
dividends should be applied to earlier periods. These
have ultimately had some degree of success and last
year HMRC announced that they would settle on the open
computations. We reached agreement with HMRC on our
own open computations just before the financial year end
and the tax repayment has been received.
In addition to the tax refund received we were able to
reinstate losses which had been utilised for the relevant
periods. These will now be available going forward,
although use will be subject to current restrictions.
Our underlying income over the year fell by around 24%.
Some companies cancelled dividends payable early in
the financial year in reaction to the COVID-19 pandemic,
or reduced distributions and this was documented in the
Interim Report. The second half saw a similar level of
income reduction as that seen in the first half. In addition,
in the final quarter of the year some of our overseas
income was impacted by sterling strength.
The longer-term outlook is still not clear. The UK has rolled
out a successful vaccination programme and at the time
of writing the easing of restrictions is progressing along
the government roadmap timetable. This has enabled us
to be a little more confident about our UK earnings with
all companies (excluding some small cap retail focused
businesses) recommencing dividends for FY22.
There have been clear real estate winners and losers and the
portfolio remains well positioned towards those sectors which
have maintained robust earnings through the pandemic. Our
exposure to index-linked income remains high and we will
see dividend increases here alongside those names exposed
to buoyant conditions such as industrial and logistics. Other
areas will remain under pressure.
On balance we expect the income from our portfolio to
increase over the current financial year as both the UK and
Continental Europe experience strong post vaccine recoveries.
However, it should be noted that stronger sterling would
reduce the income from our overseas holdings and any
reductions in gearing would also lead to lower income.
GEARING AND DEBT
The Chairman has already commented on gearing levels
and also highlighted the benefits of our flexible borrowing
structure.
This flexibility has been crucial in such a volatile year. Our
gearing oscillated in a 10% range as we responded to
the dramatic changes in market sentiment through the
year. Over the period we utilised both our revolving loan
facilities and our CFD capability in order to achieve this.
TR PROPERTY INVESTMENT TRUST
15
Manager’s Report continued
We increased the capacity on our ICBC loan facility during
the year and the remaining loans were renewed at
existing levels. We did see small increases on margins
on some renewals. We also looked at the potential to
take out new or extend our longer-term debt. Our Euro
denominated loan note is due for repayment in 2026 and
the Sterling note in 2031, however the flexibility of the
short- term facilities is valuable in more volatile markets
and has certainly worked well for us in the current year.
We continue to explore new options in all markets.
OUTLOOK
As economies emerge from the grip of the pandemic,
investors have focused on assessing whether the damage
(or growth) was temporary, longer lasting or permanent.
Real estate investors are no exception and the range
of premiums / discounts to net asset values of listed
companies highlights the breadth of expectations across
the property spectrum. The difficulty is that there is no
precedent for the profile of recovery in tenant demand
across so much of this asset class. Clearly existing
structural shifts have been accelerated and new ones have
emerged which may prove more permanent than the
markets currently expect. All of this uncertainty leads us to
focus on income sustainability and those markets where –
if demand does return – supply is constrained.
Whilst tenant demand is hard to gauge we do benefit
from a benign financing environment. Debt markets are as
accommodating as they have ever been, even if the long
end of the curve is rising. We see no reason for margins to
widen in the near term. Inflationary pressures are building
and fixed income asset values reflect these expectations.
Property offers income which is tied either directly
(index-linked) or indirectly (rental growth) to economic
expansion. Our intention is to remain focused on areas
where that income is both sustainable and where it offers
growth.
In the near term, we aim to maintain the exposure to the
private rented residential sector (particularly in Germany
and Sweden) as the market continues to undervalue not
only the quality of those earnings but also the steady
growth profile. There is risk – in Germany – that a left
wing coalition government would amend the current
federal law resulting in local cities getting more control
over rents. However the rent freeze in Berlin (over the
last 18 months) resulted in a reduction in the number of
available apartments as well as a slowing in the pace of
new apartment delivery. We trust that common sense
will prevail over political dogma. Elsewhere, undervalued
income streams are evident in supermarkets and in
parts of the healthcare market. Alongside index-linked
sustainability we will also maintain exposure to the
greatest growth opportunities. The structural shifts in
retail behaviour are still ongoing. Evolution in the speed
of delivery and post pandemic supply chain dynamics
will drive growth across the logistics landscape from ‘big
box’ to ‘last mile’. We will continue to own the developers
where we see increases in the value of landbanks as well
as growing development margins. Investor demand for the
end product shows no sign of abating.
Office markets will remain volatile. Businesses will spend
time working out their requirements in a post pandemic
world. Interaction and collaboration will drive office usage.
Tasks that can be fulfilled without physical interaction will
be timetabled for remote working. A new balance will
develop with one sure fire certainty, the premium being
attached to best in class newly built space with complete
environmental credentials. Developers will respond to
this demand and we expect an acceleration in buildings
being identified for refurbishment earlier than previously
envisaged. Obsolescence of the existing office stock will
accelerate.
Post the year end in early May, St Modwen Properties
announced that an offer of 542p per share from
Blackstone, a 24% premium to the last published NAV
had the support of the board. This company has a large
strategic landbank, a high quality logistics portfolio and
a growing housebuilding unit and whilst it was trading
close to its asset value, private equity clearly feels it is
undervalued. This is a reminder, as stated in a number of
previous reports, that the depth of both equity and debt
availability underpins listed company valuations.
Marcus Phayre-Mudge
Fund Manager
3 June 2021
16
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Portfolio
Distribution of Investments
as at 31 March
UK Securities
– quoted
UK Investment Properties
UK Total
Continental Europe Securities
– quoted
2021
£’000
395,644
83,071
478,715
2021
%
28.3
5.9
34.2
2020
£’000
352,188
94,510
446,698
921,801
65.8
708,597
Investments held at fair value
1,400,516
100.0
1,155,295
– CFD (creditor)/debtor1
– TRS creditor2
(141)
-
-
-
8,698
(3,808)
Total Investment Positions
1,400,375
100.0
1,160,185
100.0
Distribution of Investments
Investment Exposure
2020
%
30.4
8.1
38.5
61.1
99.6
0.7
(0.3)
28.3%
5.9%
65.8%
UK Securities
UK Property
Continental Europe
5.5%
94.5%
Equities
UK Property
Investment Exposure
as at 31 March
UK Securities
– quoted
– CFD exposure3
– TRS exposure4
UK Investment Properties
UK Total
Continental Europe Securities
– quoted
– CFD exposure3
Total investment exposure5
Portfolio Summary
as at 31 March
Total investments
Net assets
UK quoted property shares
Overseas quoted property shares
Direct property (externally valued)
Net Currency Exposures
as at 31 March
GBP
EUR
CHF
SEK
NOK
2021
£’000
395,644
45,441
-
83,071
524,156
921,801
100,560
1,546,517
Distribution of Investments
Investment Exposure
2021
%
25.6
2.9
-
5.5
34.0
59.5
2020
£’000
28.3%
2020
%
352,188
28.9
5.5%
32,257
6,598
94,510
485,553
65.8%
708,597
2.6
0.5
7.8
39.8
5.9%
94.5%
Net Currency Exposures
58.2
6.5
UK Securities
24,471
100.0
1,218,621
UK Property
2.0
100.0
Equities
1
0
0
UK Property
2
0
3
0
4
0
5
0
6
0
27.0%
26.8%
53.0%
53.1%
Continental Europe
2021
£’000
£1,401
£1,326
28%
66%
6%
2020
£’000
£1,155m
£1,136m
31%
61%
8%
2019
£’000
£1,291m
£1,328m
33%
59%
8%
2018
£’000
£1,316m
£1,256m
31%
62%
7%
2017
£’000
£1,145m
£1,118m
29%
63%
8%
GBP
EUR
CHF
SEK
7.9%
7.9%
11.0%
11.3%
NOK
1.1%
0.9%
Company
Benchmark
Net Currency Exposures
2020
Company
%
27.0
27.0%
26.8%
53.0
2021
Benchmark
%
28.3
GBP
50.9
4
0
3
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2
0
1
0
0
2020
Benchmark
%
26.8
6
0
5
0
2021
Company
%
27.9
51.2
6.7
12.9
1.3
6.6
EUR
12.9
CHF
1.3
SEK
7.9
11.0
1.1
7.9%
7.9%
11.0%
11.3%
1.1%
0.9%
Benchmark
53.1
53.0%
7.9
53.1%
11.3
0.9
TR PROPERTY INVESTMENT TRUST
17
1 Net unrealised (loss)/gain on CFD contracts held as balance sheet (creditor)/debtor.
2 Net unrealised loss on total return swap (TRS) contract held as balance sheet creditor.
3 Gross value of CFD positions.
4 Gross value of TRS position.
5
Total investments illustrating market exposure including the gross value of CFD and TRS positions.
Company
NOK
Investment Portfolio by Country
as at 31 March 2021
Austria
CA Immobilien
Belgium
Warehousing and Distribution de Pauw
Aedifica
Cofinimmo
VGP
Xior
Care Property
Montea
Intervest Offices & Warehouses
Wereldhave
Finland
Kojamo
Citycon
France
Argan
Gecina
Covivio
Klépierre
Altarea
Germany
Vonovia
LEG
Deutsche Wohnen
Aroundtown
VIB Vermoegen
TAG Immobilien
Alstria
Deutsche Euroshop
Ireland
Hibernia REIT
Irish Residential Properties
Netherlands
Eurocommercial Properties
Unibail-Rodamco-Westfield
NSI
Norway
Entra
Spain
Arima Real estate
Merlin
£’000
9,092
9,092
24,771
16,502
13,677
8,070
5,926
4,841
2,329
1,923
247
78,286
17,500
2,170
19,670
53,987
24,036
13,457
10,364
1,351
103,195
145,982
63,904
54,499
39,306
37,980
33,294
8,811
5,283
389,059
20,998
2,990
23,988
25,077
14,499
4,099
43,675
16,199
16,199
21,102
19,901
41,003
Market
value
%
0.6
0.6
1.8
1.2
1.0
0.6
0.4
0.3
0.2
0.1
-
5.6
1.2
0.2
1.4
3.9
1.7
1.0
0.7
0.1
7.4
10.4
4.6
3.9
2.8
2.7
2.4
0.6
0.4
27.8
1.5
0.2
1.7
1.8
1.0
0.3
3.1
1.2
1.2
1.5
1.4
2.9
18
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Sweden
Kungsleden
Wihlborgs
Cibus
Fabege
Castellum
Fastighets Balder
Nyfosa
Catena
Samhalls
Pandox
Switzerland
PSP
United Kingdom
SEGRO
Derwent London
Safestore Holdings
Landsec
Stenprop
Phoenix
Unite Group
Sirius
Picton
CLS Holdings
Londonmetric Property
McKay Securities
Secure Income REIT
Supermarket Income REIT
Tritax Eurobox
PRS REIT
Assura
Target Healthcare
Primary Health Properties
Atrato Capital
Capital & Regional
Capital & Counties
Direct Property
Market
value
%
2.5
1.7
1.3
1.2
1.2
1.2
0.9
0.6
0.3
0.2
11.1
3.0
3.0
4.3
2.4
2.3
2.2
2.2
1.8
1.8
1.6
1.5
1.4
1.4
1.3
1.1
0.7
0.6
0.4
0.4
0.3
0.3
0.1
0.1
0.1
28.3
5.9
£’000
36,061
23,390
18,201
17,594
16,805
16,216
12,008
8,933
3,737
2,690
155,635
41,999
41,999
60,357
33,584
32,193
31,327
30,477
25,213
25,143
22,241
21,330
20,077
19,903
18,104
15,551
9,614
7,634
6,189
5,194
4,418
3,848
1,468
1,062
717
395,644
83,071
CFD Positions
(included in current liabilities)
(141)
0.0
Total Investment Positions
1,400,375
100.0
Companies shown by country of listing.
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Twelve Largest Equity Investments
1. VONOVIA (GERMANY)
2. SEGRO (UK)
3. LEG (GERMANY)
31 March
2021
31 March
2020
31 March
2021
31 March
2020
31 March
2021
31 March
2020
Shareholding value
£146.0m (£144.4m)
Shareholding value
£67.8m
(£38.7m)
Shareholding value
£63.9m
(£75.3m)
% of investment
portfolio†
9.4%
(11.8%)
% of investment
portfolio†
4.4%
(3.2%)
% of investment
portfolio†
4.1%
(6.2%)
% of equity owned
0.5%
(0.7%)
% of equity owned
0.6%
(0.5%)
% of equity owned
0.9%
(1.2%)
Share price
€55.70
(€44.86)
Share price
938.0p (764.0p)
Share price
€112.2
(€102.7)
Vonovia is a German listed residential
company and the largest real estate
company in Continental Europe by market
capitalization.
At the end of 2020, the company owned
a portfolio of EUR56.8bn split between
Germany (84%), Sweden (11%) and
Austria (5%). Vonovia has developed a
large in-house craftsman organization
which allows the company to run a
strategy focusing on modernizing its
portfolio. The company is involved in the
whole value chain of the residential sector
via its rental business (81% of group
EBITDA), its value-add branch (energy
and multimedia related services, 8%),
its third-party development business
(6%) and its recurring sales program
(5%). Finally, the residential sector is
subject to strict regulations in Germany
in particular. Vonovia’s management has
been particularly pro-active with public
authorities, complying with regulations
and assuming a social role which should
allow them to benefit from critical political
goodwill in the future. In 2020, Vonovia
delivered again strong results in absolute
and relative terms. The company delivered
a +17% total accounting return (computed
as the growth in NAV + dividend paid over
the year) against +14% on average for the
main listed residential peers. The like for
like rental growth at +3.1% was resilient
and one of the highest in the residential
sector despite the impact of the Berlin
rental freeze which implied a negative
rental adjustment in November 2020. The
total shareholder return since listing in
July 2013 has been +314%.
Segro has become the largest UK REIT by
market cap, and is the largest operator
of logistics and industrial property listed
in the UK, with a total portfolio of £13bn
(split 53% in the UK, 47% in Continental
Europe, with 66% urban warehouses,
32% big boxes and 2% other uses). In
the UK, the group is mainly exposed to
Greater London industrial and logistics.
Rental growth in these markets has
been extremely strong as there remains
an acute supply-demand imbalance,
fuelled by tenants’ requirements to
deal with the growth in e-commerce.
In Europe, Germany and France are the
group’s largest markets with Italy third;
these markets have a lower, but still
positive, rental growth outlook (and are
geographically less space-constrained)
but continue to see yield compression
as investors have paid keener yields for
access to strong income. The logistics
sector has proved particularly resilient
during the COVID crisis, with high
rent collection. Segro has extensive
development exposure that it manages
to largely pre-let and develop at yields
significantly in excess of investment
values (c.6-7% yield on cost vs. an EPRA
net initial yield of 3.8% at FY20). We
expect this to drive both earnings and
NAV growth, as well as high shareholder
total returns. The five-year total
shareholder return has been 177%.
LEG is a German residential company
focused on the economically strong
region of North Rhine-Westphalia. It is
one of the largest real estate companies
in Germany with more than 144,000 units
under management and a combined
value of €14.6bn. In addition to the
strong focus on NRW, the company
is exploring opportunities on B and C
locations in adjacent states with the view
to leverage their market access as well
as their existing platform still within strict
and conservative financial criteria. The
company has a distinct advantage to be
less exposed to regulatory risk than peers
with a Berlin exposure and to benefit
from a relatively high share of state
subsidised tenants (25% of the total).
The very low average rent per sqm at
EUR5.96 as well as the relatively low value
per sqm of EUR,1503 make the company
particularly well suited to weather any
potential macro-economic shock. In
addition, the company has shown over
the years a conservative management
on the liabilities side which continued to
be the case in 2020 with a LTV of 37.6%
(maximum target set at 43% for 2021),
an average debt maturity of 7.4 years (8.1
years in 2019) and a net debt to adjusted
EBITDA of 11.8x. In 2020, LEG delivered
a strong total accounting return of 20%
ahead of the sector average at 14%. The
five-year total shareholder return has
been +106%.
Notes:
> The percentage of investment portfolio positions set out above include exposures through CFD for both the individual positions and the portfolio
> The Investment Portfolio by Country positions set out on page 18 are the physical holdings only included in the investments held at fair value in the Balance Sheet. The
profit or loss positions on the CFD contracts (i.e. not the investment exposure) are also shown on page 18 and are included in the Balance Sheet as debtors or creditors
in the Current assets.
TR PROPERTY INVESTMENT TRUST
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Twelve Largest Equity Investments continued
4. DEUTSCHE WOHNEN
(GERMANY)
5. ARGAN (FRANCE)
6. GECINA (FRANCE)
31 March
2021
31 March
2020
31 March
2021
31 March
2020
31 March
2021
31 March
2020
Shareholding value
£54.5m
(£36.4m)
Shareholding value
£54.0m
(£46.8m)
Shareholding value
£53.9m
(£47.5m)
% of investment
portfolio†
3.5%
(3.0%)
% of investment
portfolio†
3.5%
(3.8%)
% of investment
portfolio†
3.5%
(3.9%)
% of equity owned
0.5%
(0.3%)
% of equity owned
3.5%
(3.5%)
% of equity owned
0.7%
(0.6%)
Share price
€39.78
(€34.71)
Share price
€80.4
(€67.6)
Share price
€117.4
(€120.7)
Deutsche Wohnen is Germany’s second
largest residential company with the bulk
of its exposure to Greater Berlin (76%
of the total portfolio FV). The company
owns a high-quality portfolio consisting of
more than 155,000 units with a combined
value of €26bn. In addition to the rental
business, the company is present in the
Nursing and Assisted Living business
which around represented 12% of the
Group EBITDA in 2020 (target to get to
15% in the medium-term).The company
benefits from its development exposure
with a total investment cost of EUR6.9bn
(27% of GAV) split between build-to-hold
(EUR4.3bn, 62% of the pipeline) and build-
to-sell (EUR2.6bn, 38% of the pipeline).
In a context of the implementation of
the rental freeze in Berlin, the company
showed a resilient financial performance
in 2020 with a total accounting return of
14% in line with German residential peers.
The Greater Berlin portfolio was valued
at EUR2,853 per sqm on average which
leaves significant upside potential in the
future. As expected, post FY20 results we
had the positive unequivocal decision
from the court that the rental freeze
was anti-constitutional and therefore
cancelled. The five-year total shareholder
return has been +62%.
Argan is a French company, created in
2000 by Jean-Claude Le Lan, which has
been listed since 2007. The objective
of the company has been to build a
portfolio of premium logistic assets which
guarantee a stable and high occupancy
rate at around 100%. The company is
vertically integrated and has full control
of the entire value chain by identifying
future needs of prospective and current
tenants and developing assets on their
behalf. Therefore, Argan is able to capture
the developer margin while having little
to no risk on the letting side. In 2020,
the portfolio value amounted to EUR3bn
(100% exposed to France, 27% exposed to
Greater Paris region, 16% to the North of
France and 13% around Lyon).
The company delivered solid 2020 results
with an EPRA NRV per share up 19%
YoY and a DPS up 11%. The funding of
the company is based on a conservative
mix of 90% amortizable mortgage loans
with an average maturity of 8 years
and 10% of bonds. The relatively low
dividend payout at below 50% allows the
company to retain cash and reinvest in
new development projects while repaying
debts. The management of the company
has been assumed by its founder Jean-
Claude Le Lan who owns alongside family
members 40% of the share capital which
is a strong guarantee of alignment. The
five-year total shareholder return has
been +307%
Gecina is the largest office landlord in
Europe with a portfolio of more than
€14bn focused almost exclusively on
the Paris region (97% of the total office
value) and with a high share in Paris city
(60% of the total office value). It owns
also a portfolio of €3.6bn of residential
assets (of which EUR367m in student
housing) predominantly located in
the Paris region. Finally, the company
owns a portfolio of exclusive high
street retail assets for a value of €1.6bn
located in Paris city. The management is
capitalizing on a development pipeline
of more than €3.5bn (17% of GAV) to be
delivered in the next five years. This is a
continuation of the total return strategy
which has been implemented by the
company over the last couple of years:
in essence, redeveloping assets where
the management sees value creation
potential and disposing mature assets
to crystalize capital gains. Since the end
of 2014, the company has delivered 30
projects and generated EUR1.1bn of value
creation (EUR15 per share). In 2020, the
company showed resilience with 99% rent
collection, stable portfolio valuation and
Like for like rental growth of +2.3%. The
financial position of the company is very
solid with an LTV at 35.6% and an average
debt maturity of 7.1 years.
The five-year shareholder total return has
been +21.6%.
Notes:
> The percentage of investment portfolio positions set out above include exposures through CFD for both the individual positions and the portfolio
> The Investment Portfolio by Country positions set out on page 18 are the physical holdings only included in the investments held at fair value in the Balance Sheet. The
profit or loss positions on the CFD contracts (i.e. not the investment exposure) are also shown on page 18 and are included in the Balance Sheet as debtors or creditors
in the Current assets.
20
TR PROPERTY INVESTMENT TRUST
7. KLEPIERRE (FRANCE)
8. SAFESTORE (UK)
9. PSP (SWITZERLAND)
31 March
2021
31 March
2020
31 March
2021
31 March
2020
31 March
2021
31 March
2020
Shareholding value
£51.3m
(Nil)
Shareholding value
£44.0m (£27.9m)
Shareholding value
£42.0m
(£m)
% of investment
portfolio†
3.3%
(0%)
% of investment
portfolio†
2.8% (2.3%)
% of investment
portfolio†
2.7%
(2.3%)
% of equity owned
1.0%
(0%)
% of equity owned
Share price
€19.89
(€17.57)
Share price
2.6%
796p
(1.9%)
% of equity owned
1.0%
(0.6%)
(641p)
Share price
€115.20
(€120.70)
Klepierre is a European shopping
center operator, managing around 140
centers with a total portfolio valuation
of EUR22bn. The main exposures are
in France/Belgium (39% of total), Italy
(18%), Scandinavia (17%) and Iberia
(10%). The company, like the rest of
shopping center owners, was impacted
by the COVID crisis in 2020 and therefore
reported an EPS down 27% YoY and an
EPRA NTA per share down 15% YoY. On
a relative basis, the company benefits
from its focus on Continental Europe
where shopping centers are anchored
by food retailers contrary to UK or US
centers anchored by department stores
which have been undergoing significant
challenges (partly driven by online
competition). The financial position of
the company is also more solid than its
direct peers with an LTV of 41.4% and
a net debt to EBITDA ratio of 10.8x. The
board benefits from the experience of
David Simon (Chairman of the Supervisory
Board), Chairman and CEO of Simon
Property Group which owns a 21%
stake in Kleppierre. The five-year total
shareholder return has been -34%.
Safestore is the UK’s largest self-storage
operator, owning c.125 UK stores,
weighted towards London and the South
East (c.60%). In addition the company has
a large footprint in the Paris market and
has recently been expanding into new
European cities (through both JV structures
and outright ownership) taking footholds
in Holland, Spain and Belgium. Safestore
has a best in class operating platform
which, along with peer Big Yellow, allows
it to dominate the UK storage market,
particularly in terms of online search.
The company has driven consistent
earnings growth both organically (through
like-for-like occupancy and rate growth,
opening new developments) and through
acquisitions, a trend we expect to
continue over the medium term; the self-
storage market has proved remarkably
resilient during the COVID-19 pandemic.
The five-year total shareholder return has
been 172%.
PSP Swiss Property is one of Switzerland’s
leading real estate companies owning
properties valued at around CHF8.6bn.
These are mainly office and business
premises in prime locations in
Switzerland’s key economic centers.
Zurich represents 51% of the company’s
exposure (Geneva at 14%). Vacancy rate
has consistently trended downward from
a level at 8.5% in 2018 to an historic
low of 3.0% at FY20. The company
reported solid results in 2020 with EPS
(excl revaluation) stable and NAV per
share growing by 3%. The company will
benefit from a development pipeline
adding EUR34m of rents (11% of current)
in the next three years. The pipeline is
mostly exposed to Zurich (85% of total
investment) and has a current pre-let
ratio of 77%. The financial profile of the
company is very conservative with an LTV
of 35%, average cost of debt of 0.47% and
a loan maturity of 5.5 years. The five-year
total shareholder return has been 48%.
Notes:
> The percentage of investment portfolio positions set out above include exposures through CFD for both the individual positions and the portfolio
> The Investment Portfolio by Country positions set out on page 18 are the physical holdings only included in the investments held at fair value in the Balance Sheet. The
profit or loss positions on the CFD contracts (i.e. not the investment exposure) are also shown on page 18 and are included in the Balance Sheet as debtors or creditors
in the Current assets.
TR PROPERTY INVESTMENT TRUST
21
OVERVIEWSTRATETIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION Twelve Largest Equity Investments continued
10. AROUNDTOWN (GERMANY)
11. VIB VERMOEGEN (GERMANY)
12. DERWENT LONDON (UK)
31 March
2021
31 March
2020
31 March
2021
31 March
2020
31 March
2021
31 March
2020
Shareholding value
£39.3m
(£20.3m)
Shareholding value
£38.0m (£22.9m)
Shareholding value
£37.6m
% of investment
portfolio†
2.5%
(1.7%)
% of investment
portfolio†
2.5%
(1.9%)
% of investment
portfolio†
2.4%
% of equity owned
0.5%
(0.3%)
% of equity owned
5.5%
(4.1%)
% of equity owned
1.0%
(Nil)
(0%)
(0%)
Share price
€6.07
(€4.55)
Share price
€29.25
(€22.80)
Share price
3228p
(3270p)
Aroundtown is a diversified German-
based property company that owns a
EUR24.5bn portfolio. It has a diversified
commercial portfolio with exposure to
Office (60% of the commercial portfolio),
Hotels (28%), Retail (9%) and Logistics
(3%). The majority of its exposure is
in Germany and the Netherlands (86%
together). The company is also exposed
to German Residential (14% of total GAV)
through its 39% holding in Grand City. The
portfolio has grown significantly since
Aroundtown was listed in 2015, through a
series of deals, in particular, the takeover
completed in early 2020 of listed German
peer TLG Immobilien. Mr Yakir Gabay
(advisory board deputy Chairman) who
founded the company, still owns a 10%
stake in the company via its vehicle Avisco
Group (down from 27% pre TLG deal). In
2020, the company closed EUR2.3bn of
disposals at a +3% margin to book value.
This year, the company will continue to
streamline the portfolio with a disposal
pipeline of EUR500m while buying
back shares for a maximum amount of
EUR500m. The five-year total shareholder
return has been 58%.
VIB is a German company developing,
buying and holding commercial
properties, primarily in the high-growth
regions of Southern Germany. The
company pursues a develop or buy
and hold strategy aiming at growing
its earning base while maintaining a
solid financial structure. The real estate
portfolio (EUR1.4bn) includes logistics and
light industrial properties (70% of total
rents), garden centers and DIY stores
(11%), grocery and discounters (7.5%). The
company benefits from a higher yielding
portfolio than peers at 6.8% implying
a superior EPS yield and more potential
for yield compression and therefore NAV
growth in a mid to long-term horizon. The
vacancy rate has averaged 1.26% over the
last five years. Between 2016 and 2020,
FFO per share increased by 41%, NAV per
share increased by 42% and DPS increased
by 36%. In 2020, the company maintained
a solid momentum with EPS growing by
+3% and NAV per share growing by 9%.
The five-year total shareholder return has
been 93%.
Derwent London is a London Office
owner and developer, with a £5.4bn
portfolio covering c.5.5m sq ft, focused
primarily in the West End and “tech belt”
(Old Street, Clerkenwell etc.) areas of
London. 2020 has been a difficult year
for office landlords following the impact
of COVID-19, which both brought the
transaction market and occupier market
to a halt, and left ongoing uncertainty
over future office use as the necessity and
popularity of working from home grew.
We believe the role of the office remains
important however, and think that
Derwent London is the best placed London
Office landlord to weather the COVID-19
storm given a) its very defensive balance
sheet (LTV 18%), b) the ongoing spread
between prime office yields in London
and other European cities (c.100bp), which
we believe will support valuations even
as ERVs soften and c) the company’s high
quality development capabilities which
continue to create value as schemes like
Soho Place, The Featherstone Building and
19-35 Baker Street complete. The five-year
total shareholder return has been 18%.
Notes:
> The percentage of investment portfolio positions set out above include exposures through CFD for both the individual positions and the portfolio
> The Investment Portfolio by Country positions set out on page 18 are the physical holdings only included in the investments held at fair value in the Balance Sheet. The
profit or loss positions on the CFD contracts (i.e. not the investment exposure) are also shown on page 18 and are included in the Balance Sheet as debtors or creditors
in the Current assets.
22
TR PROPERTY INVESTMENT TRUST
Investment Properties
as at 31 March 2021
Spread of Direct Portfolio by Capital Value (%)
as at 31 March 2021
West End of London
Inner London*
South West
Total
*Inner London defined as inside the North and South Circular.
Retail
42.9%
1.6%
–
44.5%
Industrial
–
31.2%
9.2%
40.4%
Residential
and
Ground Rents
14.5%
–
–
Other
0.6%
–
–
Total
58.0%
32.8%
9.2%
14.5%
0.6%
100.0%
Lease Lengths within the Direct Property Portfolio
as at 31 March 2021
Contracted Rent
as at 31 March
0 to 5 years
5 to 10 years
10 to 15 years
15 to 20 years
20+ years
Gross rental income
24%
17%
53%
0%
6%
Year 1
Years 2-5
Years 5+
£3,000,000
£10,000,000
£19,000,000
VALUE IN EXCESS OF £10 MILLION
VALUE LESS THAN £10 MILLION
The Colonnades, Bishops Bridge
Road, London W2
Ferrier Street Industrial Estate,
Wandsworth, London SW18
IO Centre, Gloucester Business
Park, Gloucester GL3
Sector
Tenure
Mixed Use
Freehold
Size (sq ft) 64,000
Sector
Tenure
Industrial
Freehold
Size (sq ft)
36,000
Principal
tenants
Waitrose Ltd, Graham & Green,
Happy Lamb Hot Pot,
1Rebel, Specsavers
Principal
tenants
Kougar Tool Hire Ltd
Page Lacquer
Lockdown Baker
Sector
Tenure
Industrial
Freehold
Size (sq ft) 63,000
Principal
tenants
Infusion GB
The property comprises a large mixed-
use block in Bayswater, constructed
in the mid-1970s. The site extends to
approximately 2 acres on the north
east corner of the junction of Bishops
Bridge Road and Porchester Road,
close to Bayswater tube station and
the Whiteleys Shopping Centre. The
commercial element was extended
and refurbished in 2015 with a new
20 year lease being agreed with
Waitrose.
Site of just over an acre, 50
metres from Wandsworth Town
railway station in an area that is
predominantly residential. The estate
comprises 16 small industrial units
generally let to a mix of small to
medium-sized private companies.
Planning permission granted in
December 2019 for a mixed-use
employment led redevelopment.
The IO Centre comprises six industrial
units occupied by two tenants and sits
on a 4.5-acre site. Gloucester Business
Park is located to the east of Junction
11A of the M5 and one mile to the
east of Gloucester City Centre. The
property also has easy access to the
A417 providing good links to the M4
via junction 15.
TR PROPERTY INVESTMENT TRUST
23
OVERVIEWSTRATETIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION Investment Objective and Benchmark
The Company’s Objective is to maximise shareholders’ total return
by investing in the shares and securities of property companies
and property related businesses internationally and also in
investment property located in the UK.
The benchmark is the FTSE EPRA/NAREIT Developed Europe
Capped Net Total Return Index in Sterling. The index, calculated
by FTSE, is free-float based and as at 31 March 2021 had 105
constituent companies. The index limits exposure to any one
company to 10% and reweights the other constituents pro-rata.
The benchmark website www.epra.com contains further details
about the index and performance.
Business Model
The Company’s business model follows that of an externally managed
investment trust.
The Company has no employees. Its wholly non-executive Board of Directors
retains responsibility for corporate strategy; corporate governance; risk and
control assessment; the overall investment and dividend policies; setting limits
on gearing and asset allocation and monitoring investment performance.
The Board has appointed BMO Investment Business Limited as the Alternative
Investment Fund Manager (“AIFM”) with portfolio management delegated to
Thames River Capital LLP. Marcus Phayre-Mudge acts as Fund Manager to the
Company on behalf of Thames River Capital LLP and Alban Lhonneur is Deputy
Fund Manager. George Gay is the Direct Property Manager and Joanne Elliott the
Finance Manager. They are supported by a team of equity and portfolio analysts.
Further information in relation to the Board and the arrangements under the
Investment Management Agreement can be found in the Report of the Directors
on pages 41 to 43.
In accordance with the Alternative Investment Fund Managers Directive
(“AIFMD”), BNP Paribas has been appointed as Depositary to the Company.
BNP Paribas also provide custodial and administration services to the Company.
Company secretarial services are provided by Link Company Matters.
The specific terms of the Investment Management Agreement are set out on
pages 53 and 54.
24
TR PROPERTY INVESTMENT TRUST
Strategy and Investment Policies
The investment selection process seeks to identify well
managed companies of all sizes. The Manager generally
regards future growth and capital appreciation potential
more highly than immediate yield or discount to asset
value.
Although the investment objective allows for investment
on an international basis, the benchmark is a Pan-
European Index and the majority of the investments
will be located in that geographical area. Direct property
investments are located in the UK only.
As a dedicated investor in the property sector the
Company cannot offer diversification outside that sector,
however, within the portfolio there are limitations, as set
out below, on the size of individual investments held to
ensure diversification within the portfolio.
ASSET ALLOCATION GUIDELINES
The maximum holding in the stock of any one issuer or of
a single asset is limited to 15% of the portfolio at the point
of acquisition. In addition, any holdings in excess of 5%
of the portfolio must not in aggregate exceed 40% of the
portfolio.
The Manager currently applies the following guidelines for
asset allocation:
UK listed equities
Continental European listed equities
Direct Property – UK
Other listed equities
Listed bonds
Unquoted investments
25 – 50%
45 – 75%
0 – 20%
0 – 5%
0 – 5%
0 – 5%
GEARING
The Company may employ levels of gearing from time
to time with the aim of enhancing returns, subject to an
overall maximum of 25% of the portfolio value.
In certain market conditions the Manager may consider it
prudent not to employ gearing on the balance sheet at all,
and to hold part of the portfolio in cash.
The current asset allocation guideline is 10% net cash to
25% net gearing (as a percentage of portfolio value).
PROPERTY VALUATION
Investment properties are valued every six months by an
external independent valuer. Valuations of all the Group’s
properties as at 31 March 2021 have been carried out on
a “RICS Red Book” basis and these valuations have been
adopted in the accounts.
ALLOCATION OF COSTS BETWEEN REVENUE &
CAPITAL
On the basis of the Board’s expected long-term split
of returns in the form of capital gains and income, the
Group charges 75% of annual base management fees and
finance costs to capital. All performance fees are charged
to capital.
HOLDINGS IN INVESTMENT COMPANIES
It is the Board’s current intention to hold no more than
15% of the portfolio in listed closed-ended investment
companies.
Some companies investing in commercial or residential
property are structured as listed externally managed
closed-ended investment companies and therefore form
part of our investment universe. Although this is not
a model usually favoured by our Fund Manager, some
investments are made in these structures in order to
access a particular sector of the market or where the
management team is regarded as especially strong. If
these companies grow and become a larger part of our
investment universe and/or new companies come to the
market in this format the Manager may wish to increase
exposure to these vehicles. If the Manager wishes to
increase investment to over 15%, the Company will make
an announcement accordingly.
TR PROPERTY INVESTMENT TRUST
25
OVERVIEWSTRATETIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION Key Performance Indicators
The Board assesses the performance of the Manager in meeting the Trust’s objective against
the following Key Performance Indicators (“KPIs”):
KPI
Board monitoring and outcome
Net Asset Value Total Return relative to the benchmark
The Directors regard the out-performance of the
Company’s net asset value total return in performance
in comparison with the benchmark as being an overall
measure of value delivered to the shareholders’ over the
longer-term.
•
The Board reviews the performance in detail at each
meeting and discusses the results and outlook with the
Manager.
Outcome
1 year
5 years
NAV Total Return* (Annualised)
20.7%
7.7%
Benchmark Total Return (Annualised)
15.9%
4.3%
* NAV Total Return is calculated by re-investing the dividends in the assets and
the Company from the relevant ex-dividend date. Dividends are deemed to be
re-invested on the ex-dividends date for the benchmark.
Delivering a reliable dividend which is growing over the longer term
The principal objective of the Company is a total return
objective, however, the Fund Manager also aims to
deliver a reliable dividend with growth over the longer
term.
•
The Board reviews statements on income received to date
and income forecasts at each meeting.
Outcome
1 year
5 years
Compound Annual Dividend Growth*
1.4% 11.2%
Compound Annual RPI
1.5%
2.6%
* The final dividend in the time series divided by the initial dividend in the
period raised to the power of 1 divided by the number of years in the series.
The Discount or Premium at which the Company’s shares trade compared with Net Asset Value
•
Whilst expectation of investment performance is a key
driver of the share price discount or premium to the Net
Asset Value of an investment trust over the longer-term,
there are periods when the discount can widen. The
Board is aware of the vulnerability of a sector-specialist
trust to a change of investor sentiment towards that
sector, or to periods of wider market uncertainty, and the
impact that can have on the discount.
The Board takes powers at each AGM to buy-back and
issue shares. When considering the merits of share buy-
back or issuance, the Board looks at a number of factors in
addition to the short and longer-term discount or premium
to NAV to assess whether action would be beneficial to
shareholders overall. Particular attention is paid to the
current market sentiment, the potential impact of any
share buy-back activity on the liquidity of the shares and
on Ongoing Charges over the longer term.
Average discount*
Outcome
1 year
5 years
10.2%
6.3%
Total number of shares repurchased
Nil 150,000
* Average daily discount throughout the period of share price to
NAV. with income. Source: Bloomberg.
26
TR PROPERTY INVESTMENT TRUST
KPI
Board monitoring and outcome
Level of Ongoing Charges
The Board is conscious of expenses and aims to deliver a
balance between excellent service and costs.
•
The AIC definition of Ongoing Charges includes any direct
property costs in addition to the management fees and
all other expenses incurred in running a publicly listed
company. As no other investment trusts hold part of their
portfolio in direct property (they either hold 100% of their
portfolio as property securities or as direct property), in
addition to Ongoing Charges as defined by the AIC, this
statistic is shown without direct property costs to allow
a clearer comparison of overall administration costs with
other funds investing in securities.
The Board monitors the Ongoing Charges, in comparison
to a range of other Investment Trusts of similar size, both
property sector specialists and other sector specialists.
Investment Trust Status
The Company must continue to operate in order to meet
the requirements for Section 1158 of the Corporation Tax
Act 2010.
Expenses are budgeted for each financial year and the
Board reviews regular reports on actual and forecast
expenses throughout the year.
Ongoing charges excluding
performance fees
Outcome
1 year
5 years
0.65% 0.65%
Ongoing charges excluding performance
fees and Direct Property Costs
0.63% 0.62%
•
The ongoing charges are competitive when compared to
the peer group.
•
•
The Board reviews financial information and forecasts at
each meeting which set out the requirements outlined in
Section 1158.
The Directors believe that the conditions and ongoing
requirements have been met in respect of the year to
31 March 2021 and that the Company will continue to
meet the requirements.
The KPIs are considered to be Alternative Performance Measures as defined later in the Annual Report.
TR PROPERTY INVESTMENT TRUST
27
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION Principal and Emerging Risks and Uncertainties
In delivering long-term returns to shareholders, the Board must also identify and monitor the risks that have been taken
in order to achieve that return. The Board has included below details of the principal and emerging risks and uncertainties
facing the Company and the appropriate measures taken in order to mitigate these risks as far as practicable.
The Board also considers new and emerging risks adding appropriate monitoring and mitigation measures accordingly.
The impact of the COVID-19 pandemic, the response of financial markets, the unknown duration of the pandemic and
ongoing impact on economies around the world together with operational changes in response to government guidelines
continues to increase some of the risks listed below in comparison with prior years.
Risk Identified
Board monitoring and mitigation
Share price performs poorly in comparison to the underlying NAV
The shares of the Company are listed on the London
Stock Exchange and the share price is determined by
supply and demand. The shares may trade at a discount
or premium to the Company’s underlying NAV and this
discount or premium may fluctuate over time.
•
•
•
The Board monitors the level of discount or premium at
which the shares are trading over the short and longer-
term.
The Board encourages engagement with the shareholders.
The Board receives reports at each meeting on the activity
of the Company’s brokers, PR agent and meetings and
events attended by the Fund Manager.
The Company’s shares are available through the BMO
share schemes and the Company participates in the active
marketing of these schemes. The shares are also widely
available on open architecture platforms and can be held
directly through the Company’s registrar.
•
The Board takes the powers to buy-back and to issue
shares at each AGM.
Poor investment performance of the portfolio relative to the benchmark
The Company’s portfolio is actively managed. In addition
to investment securities the Company also invests in
commercial property and accordingly, the portfolio may
not follow or outperform the return of the benchmark
•
•
The Manager’s objective is to outperform the benchmark.
The Board regularly reviews the Company’s long-term
strategy and investment guidelines and the Manager’s
relative positions against these.
The Management Engagement Committee reviews the
Manager’s performance annually. The Board has the
powers to change the Manager if deemed appropriate.
28
TR PROPERTY INVESTMENT TRUST
Risk Identified
Market risk
Board monitoring and mitigation
The Board receives and considers a regular report from
the Manager detailing asset allocation, investment
decisions, currency exposures, gearing levels and rationale
in relation to the prevailing market conditions.
The report considers the potential impact of Brexit and the
Manager’s response in positioning the portfolio.
The report considers the current and potential future
impact of the COVID-19 pandemic and the ongoing
implication for the property market and valuations overall
and by each sector.
•
•
•
Both share prices and exchange rates may move rapidly
and adversely impact the value of the Company’s
portfolio.
Although the portfolio is diversified across a number of
geographical regions, the investment mandate is focused
on a single sector and therefore the portfolio will be
sensitive towards the property sector, as well as global
equity markets more generally.
Property companies are subject to many factors which
can adversely affect their investment performance, these
include the general economic and financial environment
in which their tenants operate, interest rates, availability
of investment and development finance and regulations
issued by governments and authorities.
Although we have now exited the European Union the
structure of our future relationship with Continental
Europe is still evolving and there could be an impact on
occupation across each sector.
The COVID-19 global pandemic dominated the financial
year. This has changed the way we live and work,
creating unprecedented uncertainty regarding the impact
on economies and property markets around the world
both in the short and longer term.
Any strengthening or weakening of Sterling will have
a direct impact as a proportion of our Balance Sheet is
held in non-GBP denominated currencies. The currency
exposure is maintained in line with the benchmark and
will change over time. As at 31 March 2021, 72.1% of the
Trust’s exposure lies to currencies other than GBP.
TR PROPERTY INVESTMENT TRUST
29
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION Principal Risks and Uncertainties continued
Risk Identified
Board monitoring and mitigation
•
•
•
•
The Board receives and considers regular income
forecasts.
Income forecast sensitivity to changes in FX rates is also
monitored.
The Company has substantial revenue reserves which can
be drawn upon when required.
The Board will continue to monitor the impact of COVID-19
and the long term implications for income generation.
The Company is unable to maintain dividend growth
Lower earnings in the underlying portfolio putting
pressure on the Company’s ability to grow the dividend
could result from a number of factors:
•
•
•
•
•
lower earnings and distributions in investee
companies. Companies in some property sectors
continue to be negatively impacted by the COVID-19
pandemic. Companies in some sectors cancelled or
reduced dividends during the last financial year as a
precautionary measure to protect their balance sheets
in the short term. Although most have returned to
paying dividends, some are at a lower level than
previously and others are continuing to withhold
dividends;
prolonged vacancies in the direct property portfolio
and lease or rental renegotiations as a result of
COVID-19;
strengthening Sterling reducing the value of overseas
dividend receipts in Sterling terms. The Company
has seen a material increase in the level of earnings
in recent years. A significant factor in this was the
weakening of Sterling following the Brexit decision.
Sterling strengthened in the last quarter of the
financial year. This may continue or reverse again
in the near or medium term as the longer term
implications of Brexit and the COVID-19 pandemic and
the impact on the UK and European economies are
understood. Strengthening of Sterling would lead to a
fall in earnings;
adverse changes in the tax treatment of dividends or
other income received by the Company; and
changes in the timing of dividend receipts from
investee companies.
30
TR PROPERTY INVESTMENT TRUST
Risk Identified
Board monitoring and mitigation
Accounting and operational risks
Disruption or failure of systems and processes
underpinning the services provided by third parties and
the risk that these suppliers provide a sub-standard
service.
The impact of the COVID-19 pandemic and the
operational response from the manager and service
providers has been closely monitored.
Financial risks
The Company’s investment activities expose it to a
variety of financial risks which include counterparty
credit risk, liquidity risk and the valuation of financial
instruments. Any impact of the COVID-19 pandemic has
been considered.
Loss of Investment Trust Status
The Company has been accepted by HM Revenue &
Customs as an investment trust, subject to continuing
to meet the relevant eligibility conditions. As such the
Company is exempt from capital gains tax on the profits
realised from the sale of investments.
Any breach of the relevant eligibility conditions could
lead to the Company losing investment trust status and
being subject to corporation tax on capital gains realised
within the Company’s portfolio.
•
•
•
•
•
•
•
Third party service providers produce periodic reports to
the Board on their control environments and business
continuation provisions on a regular basis.
The Management Engagement Committee considers the
performance of each of the service providers on a regular
basis and considers their ongoing appointment and terms
and conditions.
The Custodian and Depository are responsible for the
safeguarding of assets. In the event of a loss of assets
the Depository must return assets of an identical type
or corresponding amount unless able to demonstrate
that the loss was the result of an event beyond their
reasonable control.
Monitoring the quality and timeliness of service as
service providers respond to COVID-19 regulations and
guidelines, in particular with widespread home working
and consideration of the durability of the arrangements.
Many organisations are now planning to incorporate
home working into their operational structure as a
permanent feature.
Details of these risks together with the policies for
managing these risks are found in the Notes to the
Financial Statements in the full Annual Reports and
Accounts.
The Investment Manager monitors the investment
portfolio, income and proposed dividend levels to ensure
that the provisions of CTA 2010 are not breached. The
results are reported to the Board at each meeting.
The income forecasts are reviewed by the Company’s tax
advisor through the year who also reports to the Board
on the year-end tax position and reports on CTA 2010
compliance.
TR PROPERTY INVESTMENT TRUST
31
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION Principal Risks and Uncertainties continued
Risk Identified
Board monitoring and mitigation
Legal, regulatory and reporting risks
Failure to comply with the London Stock Exchange
Listing Rules and Disclosure Guidance and Transparency
rules; failure to meet the requirements under the
Alternative Investment Funds Directive, the provisions
of the Companies Act 2006 and other UK, European
and overseas legislation affecting UK companies.
Failure to meet the required accounting standards or
make appropriate disclosures in the Interim and Annual
Reports.
Inappropriate use of gearing
Gearing, either through the use of bank debt or through
the use of derivatives may be utilised from time to time.
Whilst the use of gearing is intended to enhance the NAV
total return, it will have the opposite effect when the
return of the Company’s investment portfolio is negative
or where the cost of debt is higher than the return from
the portfolio.
Personnel changes at Investment Manager
Loss of portfolio manager or other key staff.
•
•
•
•
•
•
The Board receives regular regulatory updates from
the Manager, Company Secretary, legal advisors and
the Auditors. The Board considers these reports and
recommendations and takes action accordingly.
The Board receives an annual report and update from the
Depository.
Internal checklists and review procedures are in place at
service providers.
The Board receives regular reports from the Manager on
the levels of gearing in the portfolio. These are considered
against the gearing limits set in the Investment Guidelines
and also in the context of current market conditions and
sentiment. The cost of debt is monitored and a balance
sought between term, cost and flexibility.
The Chairman conducts regular meetings with the Fund
Management team.
The fee basis protects the core infrastructure and depth
and quality resources. The fee structure incentivises
outperformance and is fundamental in the ability to retain
key staff.
32
TR PROPERTY INVESTMENT TRUST
Viability Statement
In accordance with provision 31 of the UK Corporate
Governance Code, which requires the Company to assess
the prospects of the Company over the longer term, the
Directors have assessed the prospects of the Company
over the coming five years. This period is used by the
Board during the strategic planning process and the Board
consider this period of time appropriate for a business of
our nature and size.
This assessment takes account of the Company’s current
position and the policies and processes for managing the
principal and emerging risks set out on pages 28 to 32 and
the Company’s ability to continue in operation and meet its
liabilities as they fall due over the period of assessment.
In making this statement the Board carried out a robust
assessment of the principal and emerging risks facing the
Company, including those that might threaten its business
model, future performance, solvency and liquidity.
In reaching their conclusions the Directors have reviewed
five-year forecasts for the Company with sensitivity
analysis to a number of assumptions; investee company
dividend growth, interest rate, foreign exchange rate, tax
rate and asset value growth.
In the assessment of the viability of the Company
the Directors have noted that:
•
•
•
•
The Company has a long-term investment strategy
under which it invests mainly in readily realisable,
publicly listed securities and which restricts the level of
borrowings.
Of the current portfolio, 50% could be liquidated within
five trading days and 69% within 10 trading days.
On a Group basis, Current assets exceed current
liabilities at the Balance Sheet Date.
The Company invests in real estate related companies
which hold real estate assets, and invests in commercial
real estate directly. These investments provide cash
receipts in the form of dividends and rental income.
•
•
•
•
•
•
The Company is able to take advantage of its closed-
ended Investment Trust structure and able to hold a
proportion of its portfolio in less liquid direct property
with a view to long-term outperformance.
At the Balance Sheet Date the Company had
£35 million undrawn on its revolving loan facilities.
The structure has also enabled the Company to
secure long-term financing. EUR 50 million loan notes
issued in 2016 are due to mature at par in 2026 and
GBP15 million loan notes issued on the same date are
due to mature at par in 2031.
The impact of COVID-19 on the UK and European
commercial property markets remains a consideration.
This resulted in a reduction in dividend receipts from
investee companies in the year to 31 March 2021 with
some companies withholding or reducing dividends.
The majority of companies have returned to paying
dividends, although some at lower levels than before
the pandemic. As a result an improvement in income
is anticipated in the forthcoming year. The longer
term impact on some sectors is still difficult to assess,
however the company has low exposure to these
sectors.
The direct property portfolio has been well positioned
in respect of the COVID-19 crisis and rental collection to
date has been robust. We have very limited exposure
to retail and some smaller occupiers in the hospitality
sector, however, overall the expected drop in income
from the direct portfolio in 2020/21 was not material
and likewise is not expected to be in the forthcoming
year.
The expenses of the Company are predictable and
modest in comparison with the assets. Regular and
robust monitoring of revenue and expenditure forecasts
are undertaken throughout the year. The Company
could suffer a reduction in earnings of 95% and still be
able to meet its liabilities as they fell due.
TR PROPERTY INVESTMENT TRUST
33
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION Viability Statement continued
•
•
•
The Company has no employees and consequently
does not have redundancy or other employment
related liabilities or responsibilities.
The Company retains title to its assets held by the
Custodian which are subject to further safeguards
imposed on the Depositary.
The impact of Brexit and COVID-19 have been
considered in terms of the potential effect on Sterling.
72% of the portfolio is exposed to currencies other than
Sterling.
The following assumptions have been made in
assessing the longer-term viability:
•
•
•
Real Estate will continue to be an investable sector of
international stock markets and investors will continue
to wish to have exposure to that sector.
Closed-ended Investment Trusts will continue to be
wanted by investors and regulation or tax legislation
will not change to an extent to make the structure
unattractive in comparison to other investment
products.
The performance of the Company will continue to be
satisfactory. Should the performance be less than the
Board deems to be satisfactory, it has the appropriate
powers to replace the Investment Manager.
The Board has concluded that the Company will be
able to continue in operation and meet its liabilities
as they fall due over the coming five years. The
Company’s business model, capital structure and
strategy have enabled the Company to operate
over many decades, and the Board expects this to
continue into the future.
34
TR PROPERTY INVESTMENT TRUST
Corporate Responsibility
Approach
Environmental, Social and Governance (“ESG”) factors
can present both opportunities and threats to the
performance we aim to deliver to our shareholders. The
Board is therefore committed to taking a responsible
approach on ESG matters. This covers the Company’s own
responsibilities on governance and reporting and, the most
material way in which the Company can have an impact,
through responsible ownership of the investments that are
made on its behalf by its Manager.
As a long-term investor, governance and sustainability
considerations have always been embedded in our
Manager’s Investment Process. ESG risk assessments
and considerations are integrated into the detailed
fundamental investment research and analysis that takes
place on any potential investment before it is considered
for inclusion in the portfolio and continues on an ongoing
basis for all investments held.
This approach is in line with the definition of an Article
6 Fund under the EU’s Sustainable Finance Disclosure
Regulations. Whilst this is currently European not UK
regulation it is nonetheless a widely utilised definition.
There are two fundamental considerations to investment
in property companies: the assets themselves and their
management. The Manager seeks to invest in sustainable
assets which are managed by quality teams in a well
governed corporate structure. As a result, there has
been a long-standing and strong culture of stewardship
in the Manager’s investment approach. The Manager
believes that engaging with companies is best in the
first instance, rather than simply divesting or excluding
investment opportunities. However, there are instances
where governance matters have driven a decision not to
invest in a company. As one of the largest teams investing
in Pan-European real estate equities, our Manager meets
with a significant number of the management teams of
investee and potential investee companies each year and
has a robust record of engagement with an agenda of
reducing risk, improving performance and encouraging
best practice. Whilst likely an elevated number reflecting
the impact of Covid, over the course of the year, our
management team participated in 380 individual or group
meetings with companies and their management teams.
Corporate Governance disclosure requirements have
increased transparency enormously in recent years
and enabled informed engagement, with social and
employment practices also gaining increased focus and
disclosure. Environmental measures are now rapidly
coming to the fore and with wider disclosure requirements
being placed upon our investee companies, as a result the
Manager is able to scrutinise more easily other measures
such as climate change and sustainability policies and
outcomes.
Company Corporate Governance and Reporting
The Board also recognises the importance of the
Company’s own Governance and disclosures. The
Company’s compliance with the revised AIC Code of
Corporate Governance is detailed in the Corporate
Governance Statement on page 44 of this Annual Report.
Under Section 414 of the Companies Act 2006 there is the
requirement to detail information about employee and
human rights; including information about any policies
it has in relation to these matters and effectiveness
of these policies. As the Trust has no employees, this
requirement does not apply. The Company is not within
the scope of the UK Modern Slavery Act 2015 because it
has not exceeded the turnover threshold and is therefore
not obliged to make a slavery and human trafficking
statement. The Directors are satisfied that, to the best of
their knowledge, the Company’s principal suppliers, which
are listed on page 108, comply with the provisions of the
UK Modern Slavery Act 2015.
The Board currently comprises three male Directors and
two female Directors. The activities of the Nomination
Committee in relation to the board changes are referred
to in the Nomination Committee Report on pages 51 and
52. The Board’s diversity policy is outlined in more detail
in the Corporate Governance Report. The Manager has an
equal opportunity policy which is set out on its website
www.bmo.com
Governance of Investee Companies and Exercise of
Voting Power
The Board has approved a corporate governance voting
policy which, in its opinion, accords with current best
practice whilst maintaining a primary focus on financial
returns.
The exercise of voting rights attached to the portfolio
has been delegated to the Manager. Where practicable,
all shareholdings were voted at all company meetings
in the financial year in accordance with BMOGAM’s
own corporate governance policies. This ensures that
a strong, consistent approach is taken to proxy voting
TR PROPERTY INVESTMENT TRUST
35
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION Corporate Responsibility continued
which backs up and reinforces engagement, takes a
robust line on key governance issues such as executive
pay and integrates environmental, social & diversity
issues and sustainability practices into the voting process.
The Manager regularly engages with companies on
Governance matters, supported by our significant stakes in
large property companies. Our size in this specialist area
of the equity market has helped ensure our views are
heard, augmented by the strength of BMO’s Responsible
Investment team and their broader engagement.
BMO’s Responsible Investment Annual Review provides
more information on its firm-level stewardship policies,
as well as how these comply with the expectations of
the UK Stewardship Code 2020. This is available at
www.bmogam.com
During the financial year, the company voted against at
least one management proposal at 37% of shareholder
meetings and engaged with 19 companies (17 companies
engaged on corporate governance issues).
Environmental
Environmental policies in the property sector focus largely
on sustainability and climate change. Climate change is
one of the defining challenges of modern times.
The management team have sourced data and research
from several providers, including the BMO Responsible
Investment team, MSCI and GRESB. The quantity and
depth of data available in our sector varies greatly; the
larger companies now have teams dedicated to providing
environmental impact data and reporting, however many
of our companies are small and do not currently contribute
data to the organisations providing analysis to the investor
community. With environmental issues coming to the fore
and inevitable increased legislation we expect to see fairly
rapid improvements and standardisation in data provision,
increasing our ability to engage with companies on these
matters.
GRESB
GRESB is a mission driven and investor led organization
providing standardised and validated Environmental,
Social and Governance (ESG) data to the capital markets.
Established in 2009, GRESB now covers over $5 trillion
in real estate assets, publishing i) an annual real estate
assessment score for participating companies, and ii) a
public disclosure score for all listed real estate companies.
The real estate assessment score ranks Environment,
Social and Governance metrics based on data contributed
directly from participating companies, whilst the public
disclosure score evaluates the level of ESG disclosure by
36
TR PROPERTY INVESTMENT TRUST
listed property companies and REITS. Further detail on
GRESB can be found at www.gresb.com
MSCI
MSCI ESG research covers a wide range of environmental
impact measures including CO2 and greenhouse gas
emissions, energy and water usage, in addition to wider
corporate governance scores. Further detail can be found
at www.msci.com/our-solutions/esg-investing/esg-ratings
Coverage of our sector is set out in the table below. Where
coverage is based on public data, a significant proportion
is included, whereas where specific data has to be
submitted by companies the coverage is currently much
thinner.
ESG data coverage by % weight
GRESB
MSCI
Real Estate Assessment
Public Disclosure
Company Rating
Rated
Unrated
Total
Fund Benchmark
Fund Benchmark
Fund Benchmark
54%
46%
55%
45%
96%
4%
99%
1%
83%
17%
98%
2%
100%
100%
100%
100%
100%
100%
Source: GRESB, MSCI, BMO Global Asset Management. Data as at 31.03.2021. Fund
exposure calculated as the % weight of the invested equity portfolio.
Portfolio-weighted carbon intensity
For the first year, we are disclosing, as best we can, the
portfolio-weighted carbon intensity of the total portfolio.
However, we still only have data on 82% of our equity
portfolio and 97% of the index. As far as the data allows,
we have mapped the Carbon Intensity (measured in terms
of CO2 Scope 1 and 2 emissions per $m of sales) against
the benchmark and for comparative purposes against a
wider equity index.
Source: MSCI, FTSE, BMO Global Asset Management. Data as at 31.03.2021
Environmental Audits are conducted on all our buildings
prior to purchase. The Company will take remedial
action or enforce tenant obligations to do so wherever
appropriate. In managing Environmental, Social and
Governance issues across the direct portfolio – our
Manager engages with occupiers, external managers and
suppliers. As a responsible steward of the Company’s
assets, our Manager is committed to improving
sustainability characteristics through interventions that are
carefully planned and executed.
Our Manager has strong, direct relationships with
occupiers and is committed to working with them to
develop the data, measurement tools and resources to
set and achieve meaningful sustainability targets for the
assets in the portfolio. As part of this, and working with
the portfolio property managers, a Sustainability Roadmap
is being implemented which targets biodiversity net gain
across the portfolio by 2025, improving energy, water and
waste efficiency, transitioning to 100% renewable energy
and reducing greenhouse gas emissions in line with
climate science.
By order of the Board
David Watson
Chairman
3 June 2021
As can be seen in the chart above, the fund’s portfolio
weighted carbon intensity was broadly in line with that of
the benchmark, whilst significantly lower than the wider
global equity index. This reflects the fact that for property,
this is largely measuring the impact of ongoing emissions
from running a building whereas the wider index includes
operating companies with manufacturing capabilities and
the need to distribute goods worldwide.
For the property sector, the focus is currently on the
energy efficiency of buildings once they are occupied,
but we expect in time more attention will be paid to
the carbon emitted in getting them built and eventually
dismantled which accounts for a large proportion of a
building’s emissions over its lifespan.
The message is that this is still an area where it is difficult
to make fully informed decisions. The assessments from
the various data providers reach different conclusions
as they do not all score in a consistent way. We expect
this to improve and change but it will be a journey. Our
Manager is dedicating a lot of resource to the analysis
of the information available and also has the benefit
of the knowledge of BMOs award winning Responsible
Investment Team. As data coverage improves, our
Manager will in turn be able to engage with our investee
companies on environmental matters and report to our
shareholders in more depth.
Direct Property Portfolio
The Management team recognises the importance of
sustainability in our business and in the direct property
assets which we invest in, hold and manage on behalf of
our investors. Property impacts upon the environment,
the health and wellbeing of occupiers, and the
communities in which they are situated. Specific issues
relevant to physical property investment portfolio include,
for example, responsible and sustainable refurbishment
practices, efficient use of resources throughout their
operation, and design and services to support the health
and wellbeing of occupiers and local communities.
TR PROPERTY INVESTMENT TRUST
37
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION Directors
DAVID WATSON
Chairman
Appointed:
April 2012
KATE BOLSOVER
Non-Executive Director
SARAH-JANE CURTIS
Non-Executive Director
Appointed:
October 2019
Appointed:
January 2020
Experience:
David became Chairman following
the retirement of Hugh Seaborn on
28 July 2020. Since 30 September
2018 David had served as the Board’s
Senior Independent Director when he
simultaneously handed Chairmanship
of the Audit Committee to Tim, a
position he was appointed to on 1
January 2013. He spent 9 years as
Finance Director of M&G Group plc,
where he was a director of four
equity investment trusts, and more
recently at Aviva plc as Chief Finance
Officer of Aviva General Insurance.
He is a Chartered Accountant and
has had a distinguished career in the
Financial Services Industry.
Skills and Contribution to the Board:
Throughout his executive career, David
has accumulated relevant skills in
finance, audit and risk management
and experience in the investment
industry. His experience as SID and
Chair in a number of boards have built
significant experience in shareholder
and investor engagement.
Other Appointments:
David is currently Chairman of
Aegon Asset Management UK plc
and he is a Director and Chairs the
Audit Committee at the Prudential
Assurance Company.
Experience:
Kate previously worked for Cazenove
Group and J.P. Morgan Cazenove
between 1995 and 2005 where she
was Managing Director of the mutual
fund business, and latterly director of
Corporate Communications. Prior to
this, she worked extensively in the
investment fund industry and was
managing Director of Baring’s mutual
fund group. Kate was also previously
a non-executive director of JPMorgan
American Investment Trust plc until
2016, Senior Independent Director of
Montanaro UK Smaller Companies
Trust until 2019 and Chairman and
Trustee of Tomorrow’s People until
2017.
Skills and Contribution to the Board:
From her executive experience, Kate
contributes significant and relevant
skills of the investment industry to
the Trust. Kate’s role in various boards
also gives her the relevant experience
in investor and shareholder
engagement.
Other Appointments:
Kate is currently Chairman of
Fidelity Asian Values PLC and Senior
Independent Director of Invesco Bond
Income Plus Limited. She is also a
non-executive Director of Baillie
Gifford & Co Ltd.
Experience:
Sarah-Jane is a Member of the Royal
Institution of Chartered Surveyors.
Sarah-Jane was previously Business
Director at Bicester Village for Value
Retail. Before this, Sarah-Jane was
Director, Covent Garden for Capital
and Counties PLC. She has also
worked for Grosvenor for 24 years
including as London Estate Director
(retail/Residential) and Fund Manager
for LiverpoolONE.
Skills and Contribution to the Board:
Sarah-Jane has gained extensive
experience during her varied
career, particularly in the retail, and
experience sectors and for Fund and
Investment management activities.
Other Appointments:
Sarah-Jane is currently Property
Director of Bicester Motion as well as
a consultant to Value Retail PLC.
38
TR PROPERTY INVESTMENT TRUST
SIMON MARRISON
Senior Independent Director
TIM GILLBANKS
Chairman of the Audit Committee
Appointed:
September 2011
Appointed:
January 2018
Experience:
Tim is a Chartered Accountant, with
30 years’ experience in the financial
services and investment industry.
Most recently he spent 13 years at
Columbia Threadneedle Investments,
initially as Chief Financial Officer, then
Chief Operating Officer and finally as
interim Chief Executive Officer.
Experience:
Simon joined the Board of the
Company on 28 September 2011 and
became Senior Independent Director
on 28th July 2020. He has over 30
years’ experience in the European
property investment industry. He is
currently senior advisor for European
Real Estate at KKR (Kohlberg Kravis
Roberts). Prior to this he spent 19 years
at LaSalle Investment Management
where he was European CEO for 12
years with responsibility for a portfolio
of over €20 billion across Europe.
Simon has been based in Paris since
1990 having started his career in
London. Until 1997 he was a partner
at Healey & Baker (now Cushman &
Wakefield) and from 1997 to 2001 he
was at Rodamco where he became
Country Manager for France. He joined
LaSalle in 2001 as Managing Director
for Continental Europe.
Skills and Contribution to the Board:
Simon brings in a wealth of
experience, particularly in the
European property market. He has
gained leadership and management
skills in his executive roles and
relevant skills in investment
management.
Skills and Contribution to the Board:
Tim brings a wide experience,
particularly in financial services
and investment management. His
previous financial experience during
his executive career informs him in
his role as the Chairman of the Audit
Committee.
Other Appointments:
Senior advisor for European Real Estate
at KKR (Kohlberg Kravis Roberts)
Other Appointments:
Tim is currently a Non-Executive
Director for Henderson Global
Investors Limited and Henderson
Group Holdings Asset Management
Limited. He is also Vice-Chair of the
Board of Trustees of Blood Cancer UK.
All directors are independent of the manager and are members of the Audit Committee.
TR PROPERTY INVESTMENT TRUST
39
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION Managers
MARCUS PHAYRE-MUDGE
JO ELLIOTT
Marcus Phayre-Mudge, Fund Manager, joined the
Management team for the Company at Henderson Global
Investors in January 1997, initially managing the Company’s
direct property portfolio and latterly focusing on real estate
equities, managing a number of UK and Pan European real
estate equity funds in addition to activities in the Trust.
Marcus moved to Thames River Capital in October 2004
where he is also fund manager of Thames River Property
Growth & Income Fund Limited. Prior to joining Henderson,
Marcus was an investment surveyor at Knight Frank
(1990) and was made an Associate Partner in the fund
management division (1995). He qualified as a Chartered
Surveyor in 1992 and has a BSc (Hons) in Land Management
from Reading University.
Jo Elliott, Finance Manager, has been Finance Manager
since 1995, first at Henderson Global Investors then, since
January 2005, at Thames River Capital, when she joined
as CFO for the property team. She joined Henderson
Global Investors in 1995, where she most recently held
the position of Director of Property, Finance & Operations,
Europe. Previously she was Corporate Finance Manager
with London and Edinburgh Trust plc and prior to that was
an investment/treasury analyst with Heron Corporation
plc. Jo has a BSc (Hons) in Zoology from the University of
Nottingham and qualified as a Chartered Accountant with
Ernst & Young in 1988. Jo is a Non-Executive Director and
Audit Committee Chair of Polar Capital Global Financials
Trust plc.
GEORGE GAY
ALBAN LHONNEUR
George Gay, Direct Property Fund Manager, has been the
Direct Property Fund Manager since 2008. He joined Thames
River Capital in 2005 as assistant direct property manager
and qualified as a Chartered Surveyor in 2006. George was
previously at niche City investment agent, Morgan Pepper
where as an investment graduate he gained considerable
industry experience. He has an MA in Property Valuation and
Law from City University.
Alban Lhonneur, Deputy Fund Manager, joined Thames
River Capital in August 2008. He was previously at Citigroup
Global Markets as an Equity Research analyst focusing on
Continental European Real Estate. Prior to that he was at
Societe Generale Securities, where he focused on transport
equity research. He has a BSc in Business and Management
from the ESC Toulouse including one year at the Brunel
University, London. He also attended CERAM Nice High
Business School. In 2005 he obtained a post-graduate
Specialised Master in Finance in 2005 from ESCP-EAP.
40
TR PROPERTY INVESTMENT TRUST
Report of the Directors
The Directors present the audited financial statements of
the Group and the Company and their Strategic Report
and Report of Directors for the year ended 31 March
2021. The Group comprises TR Property Investment Trust
plc and its wholly owned subsidiaries. As permitted by
legislation, some matters normally included in the Report
of the Directors have been included in the Strategic Report
because the Board considers them to be of strategic
importance. Therefore, the review of the business of the
Company, recent events and outlook can be found on
pages 4 to 35.
STATUS
The Company is an investment company, as defined in
Section 833 of the Companies Act 2006 and operates as
an investment trust in accordance with Section 1158 of the
Corporation Tax Act 2010.
The Company has a single share class, Ordinary shares,
with a nominal value of 25p each which are premium
listed on the London Stock Exchange.
The Company has received confirmation from HM Revenue
& Customs that the Company has been accepted as
an approved investment trust for accounting periods
commencing on or after 1 April 2012 subject to the
Company continuing to meet the eligibility conditions of
Section 1158 Corporation Tax Act 2010 and the ongoing
requirements for approved companies in Chapter 3
of Part 2 Investment Trust (Approved Company) (Tax)
Regulations 2011 (Statutory Instrument 2011/2999).
The Directors are of the opinion that the Company has
conducted and will continue to conduct its affairs so as
to maintain investment trust status. The Company has
also conducted its affairs, and will continue to conduct
its affairs, in such a way as to comply with the Individual
Savings Accounts Regulations. The Ordinary shares can be
held in Individual Savings Accounts (ISAs).
RESULTS AND DIVIDENDS
At 31 March 2021 the net assets of the Company amounted
to £1,326 million (2020: £1,136 million), on a per share
basis 417.97p (2020: 358.11p) per share.
Revenue earnings per share for the year amounted to
12.25p (2020: 14.62p) and the Directors recommend the
payment of a final dividend of 9.00p (2020: 8.80p) per
share bringing the total dividend for the year to 14.20p
(2019: 14.00p). In arriving at their dividend proposal, the
Board also reviewed the income forecasts for the year to
March 2022.
Performance details are set out in the Financial Highlights
on page 2 and the outcome of what the Directors consider
to be the Key Performance Indicators on pages 26 and 27.
The Chairman’s Statement and the Manager’s Report give
full details and analysis of the results for the year.
SHARE CAPITAL AND BUY-BACK ACTIVITY
At 31 March 2021 the Company had 317,350,980
(2020: 317,350,980) Ordinary shares in issue.
At the AGM in 2020 the Directors were given power to
buy back 47,570,911 Ordinary shares. Since this AGM the
Directors have not bought back any Ordinary shares at
the nominal value of 25p each under this authority. The
outstanding authority is therefore 47,570,911 shares.
This authority will expire at the 2021 AGM. The Company
will seek to renew the power to make market purchases
of Ordinary shares at this year’s AGM.
Since 1 April 2021 to the date of this report, the Company
has made no market purchases for cancellation. The Board
has not set a specific discount at which shares will be
repurchased.
MANAGEMENT ARRANGEMENTS AND FEES
Details of the management arrangements and fees are
set out in the Report of the Management Engagement
Committee beginning on page 53. Total fees paid
to the Manager in any one year (Management and
Performance Fees) may not exceed 4.99% of Group
Equity Shareholders’ Funds. Total fees payable for the
year to 31 March 2021 amount to 1.2% (2020: 0.8%) of
Group Equity Shareholders’ Funds. Included in this were
performance fees earned in the year ended 31 March 2021
of £9,659,000 (2020: £2,683,000).
BASIS OF ACCOUNTING AND IFRS
The Group and Company financial statements for the year
ended 31 March 2021 have been prepared on a going
concern basis in accordance with International Financial
Reporting Standards (IFRS), which comprise standards and
interpretations approved by the International Accounting
Standards Board (IASB), together with interpretations
of the International Accounting Standards and Standing
Interpretations Committee approved by the International
Accounting Standards Committee (IASC) that remain in
effect, to the extent that they have been adopted by the
European Union and as regards the Group and Company
financial statements, as applied in accordance with the
provisions of the Companies Act 2006.
The accounting policies are set out in note 1 to the
Financial Statements on pages 73 to 77.
TR PROPERTY INVESTMENT TRUST
41
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION Report of the Directors continued
FINANCIAL INSTRUMENTS
The Company’s Financial Instruments comprise its
investment portfolio, cash balances, borrowings and
debtors and creditors that arise directly from its operations
such as sales and purchases awaiting settlement, profit
or loss balances on derivative instruments and accrued
income and expenses. The financial risk management
objectives and policies arising from its financial
instruments and exposure of the Company to risk are
disclosed in note 11 to the financial statements.
GOING CONCERN
The Directors’ assessment of the longer-term viability of
the Company is set out on pages 33 and 34.
In assessing Going Concern, the Board has made a detailed
assessment of the ability of the Company and Group to
meet its liabilities as they fall due, including stress and
liquidity tests which considered the effects of substantial
falls in investment valuations, substantial reductions
in revenue received and reductions in market liquidity
including the effects and potential effects of the continued
economic impact caused by the Coronavirus pandemic. The
Board is satisfied with the operational resilience of service
providers despite COVID-19 and continues to monitor their
performance throughout the pandemic.
In light of testing carried out, the overall levels of the
investment liquidity held by the Company and the
significant net asset portfolio position, and despite the
small net current liability position of the Parent Company
and Group, the Directors are satisfied that the Company
and the Group have adequate financial resources to
continue in operation for at least the next 12 months
following the signing of the financial statements and
therefore it is appropriate to adopt the going concern basis
of accounting.
INTERNAL CONTROLS
The Board has overall responsibility for the Group’s
systems of internal controls and for reviewing their
effectiveness. The Portfolio Manager is responsible for the
day to day investment management decisions on behalf
of the Group. Accounting and company secretarial services
have both been outsourced.
The internal controls aim to ensure that the assets of the
Group are safeguarded, proper accounting records are
maintained, and the financial information used within
the business and for publication is reliable. Control of the
risks identified, covering financial, operational, compliance
and risk management, is embedded in the controls of
the Group by a series of regular investment performance
and attribution statements, financial and risk analyses,
AIFM and Portfolio Manager reports and quarterly control
reports. Key risks have been identified and controls put in
place to mitigate them, including those not directly the
responsibility of the AIFM or Portfolio Manager. The key
risks are explained in more detail in the Strategic Report
on pages 28 to 32.
The effectiveness of each third party provider’s internal
controls is assessed on a continuing basis by the Compliance
and Risk departments of the AIFM and Portfolio Manager,
the Administrator and the Company Secretary. Each
maintains its own system of internal controls, and the Board
and Audit Committee receive regular reports from them.
The control systems are designed to provide reasonable, but
not absolute, assurance against material misstatement or
loss and to manage, rather than eliminate, risk of failure to
achieve objectives.
As the Company has no employees and its operational
functions are undertaken by third parties, the Audit
Committee does not consider it necessary for the Company
to establish its own internal audit function. Instead, the
Audit Committee relies on internal control reports received
from its principal service providers to satisfy itself as to the
controls in place.
The Board has established a process for identifying,
evaluating and managing any major risks faced by the
Group. The Board undertakes an annual review of the
Group’s system of internal controls in line with the Turnbull
guidance. Business risks have also been analysed by
the Board and recorded in a risk map that is reviewed
regularly. Each quarter the Board receives a formal
report from each of the AIFM, Portfolio Manager, the
Administrator and the Company Secretary detailing the
steps taken to monitor the areas of risk, including those
that are not directly their responsibility, and which report
the details of any known internal control failures.
The Board also considers the flow of information and the
interaction between the third party service providers and
the controls in place to ensure accuracy and completeness
of the recording of assets and income. The Board receives
a report from the Portfolio Manager setting out the key
controls in operation.
The Board also has direct access to company secretarial
advice and services provided by Link Company Matters
which, through its nominated representative, is
responsible for ensuring that the Board and Committee
procedures are followed and that applicable regulations
are complied with.
These controls have been in place throughout the period
under review and up to the date of signing the accounts.
42
TR PROPERTY INVESTMENT TRUST
Key risks identified by the Auditors are considered by the
Audit Committee to ensure robust internal controls and
monitoring procedures are in place in respect of these
risks on an ongoing basis.
ANNUAL GENERAL MEETING (THE “AGM”)
The AGM will be held on 27 July 2021 at 2.30pm at the Royal
Automobile Club, 89/91 Pall Mall, London SW1Y 5HS. The Notice
of AGM is set out on pages 100 and 101. The full text of the
resolutions and an explanation of each is contained in the
Notice of AGM and explanatory notes on pages 104 to 107.
MATERIAL INTERESTS
There were no contracts subsisting during or at the end
of the year in which a director of the Company is or was
materially interested and which is or was significant in
relation to the Company’s business. No Director has a
contract of service with the Company. Further details
regarding the appointment letters can be found on page 52.
DONATIONS
The Company made no political or charitable donations
during the year (2020: £nil).
LISTING RULE DISCLOSURE
The Company confirms that there are no items which
require disclosure under Listing Rule 9.8.4R in respect of
the year ended 31 March 2021.
VOTING INTERESTS
Rights and Obligations Attaching to Shares
Subject to applicable statutes and other shareholders’ rights,
shares may be issued with such rights and restrictions as
the Company may by ordinary resolution decide, or (if there
is no such resolution or so far as it does not make specific
provision) as the Board may decide. Subject to the Articles,
the Companies Act 2006 and other shareholders’ rights,
unissued shares are at the disposal of the Board.
Voting
At a general meeting of the Company, when voting is
undertaken by way of a poll, each share affords its owner
one vote.
Restrictions on Voting
No member shall be entitled to vote if he has been
served with a restriction notice (as defined in the Articles)
after failure to provide the Company with information
concerning interests in those shares required to be
provided under the Companies Act 2006.
Deadlines for Voting Rights
Votes are exercisable at the general meeting of the Company
in respect of which the business being voted upon is being
heard. Votes may be exercised in person, by proxy, or in
relation to corporate members, by corporate representatives.
The Articles provide a deadline for submission of proxy
forms of not less than 48 hours (or such shorter time
as the Board may determine) before the meeting (not
excluding non-working days).
Transfer of Shares
Any shares in the Company may be held in uncertificated
form and, subject to the Articles, title to uncertificated shares
may be transferred by means of a relevant system. Subject
to the Articles, any member may transfer all or any of his
certificated shares by an instrument of transfer in any usual
form or in any other form which the Board may approve.
Significant Voting Rights
At 31 March 2021, no shareholders held over 3% of voting
rights on a discretionary basis. However, at 31 March 2021
the following shareholders held over 3% of the voting
rights on a non-discretionary basis:
Shareholder
Brewin Dolphin Ltd
Retail Investors - UK
Interactive Investor Share Dealing Services
Rathbone Investment Management Ltd
Hargreaves Lansdown Asset Management Ltd
Quilter Cheviot Investment Management Ltd
Investec Wealth & Investment Ltd
Charles Stanley Group plc
% of
Ordinary
share voting
rights*
11.1%
8.9%
7.4%
5.1%
5.1%
3.9%
3.8%
3.0%
* See above for further information on the voting rights of Ordinary shares.
Since 31 March 2021 to the date of this report, the
Company has not been informed of any notifiable changes
with respect to the Ordinary shares.
Articles of Association
The Company’s Articles of Association may only be
amended by a special resolution at a General Meeting of
the shareholders.
Amendments to the Articles of Association will be
proposed at the 2021 AGM and further details are set out
on page 106 to 107.
Corporate Governance
Full details are given in the Corporate Governance Report
on pages 44 to 50. The Corporate Governance Report forms
part of this Directors’ Report.
TR PROPERTY INVESTMENT TRUST
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OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION Corporate Governance Report
The Board of Directors is accountable to shareholders for
the governance of the Company’s affairs.
This statement describes how the principles of the 2018
edition of UK Corporate Governance Code (“the Code”)
issued by the Financial Reporting Council (the “FRC”) in
2018 have been applied to the affairs of the Company. The
Code can be viewed at www.frc.org.uk.
Application of the AIC Code’s Principles
In applying the principle of the Code, the Directors
have also taken account of the 2019 Code of Corporate
Governance published by the AIC (the “AIC Code”), of which
the Company is a member. The AIC Code establishes the
framework of best practice specifically for the Boards of
investment trust companies. Furthermore, the AIC Code
has full endorsement of the FRC, which means that AIC
members who report against the AIC Code, on the whole,
meet their obligations under the Code and the related
disclosure requirements contained in the Listing Rules. The
AIC Code can be viewed at www.theaic.co.uk.
The Directors believe that during the period under review
they have complied with the main principles and relevant
provisions of the Code, insofar as they apply to the
Company’s business, and with the provisions of the AIC Code.
Compliance Statement
The Directors note that the Company did not comply with
the following provisions of the Code in the year ended
31 March 2021:
Provision 9. Due to the nature and structure of the
Company the Board of non-executive directors does not
feel it is appropriate to appoint a chief executive.
Provision 24. The Board believes that all Directors,
including the Chairman, should sit on all of the Board’s
Committees.
Provision 26. As the Company has no employees and its
operational functions are undertaken by third parties, the
Audit Committee does not consider it appropriate for the
Company to establish its own internal audit function. The
Company’s service providers provide assurance of their
effective internal processes and controls.
Provision 32. The Board does not have a separate
Remuneration Committee. The functions of a
Remuneration Committee are carried out by the
Management Engagement Committee.
Composition and Independence of the Board
The Board currently consists of five directors, all of whom
are non-executive. The Board’s independence, including
that of the Chairman, has been considered and all of the
Directors are deemed to be independent in character and
have no relationships or circumstances which are likely to
affect their judgement.
The Board subscribes to the view expressed in the AIC
Code that long-serving Directors should not be prevented
from forming part of an independent majority. It does not
consider that the length of a Director’s tenure, in isolation,
reduces his or her ability to act independently. The
Board’s policy on tenure is that continuity and experience
add significantly to the strength of the Board although
the Board believes in the merits of an ongoing and
progressive refreshment of its composition.
Diversity
The Board recognises the benefit of diversity and as of the
date of this report the Board consists of three men and
two women.
Diversity is taken into account as part of the recruitment,
appointment and succession planning process and
the Board is also aware of the developing corporate
governance with regard to ethnicity of individual
Directors. The Board is committed to appointing the most
appropriate candidate, regardless of gender or other forms
of diversity and therefore no targets have been set against
which to report.
Powers of the Directors
Subject to the Company’s Articles of Association, the
Companies Act 2006 and any directions given by special
resolution, the business of the Company is managed
by the Board who may exercise all the powers of the
Company, whether relating to the management of the
business of the Company or not. In particular, the Board
may exercise all the powers of the Company to borrow
money and to mortgage or charge any of its undertakings,
property, assets and uncalled capital and to issue
debentures and other securities and to give security for
any debt, liability or obligation of the Company to any third
party.
There are no contracts or arrangements with third parties
which affect, alter or terminate upon a change of control
of the Company.
44
TR PROPERTY INVESTMENT TRUST
DIRECTORS
The Chairman is Mr Watson and the Senior Independent
Director is Mr Marrison. Mr Watson succeeded Mr Seaborn
as Chairman when he retired from the Board of Director
following the AGM on 28 July 2020. Mr Marrison succeeded
Mr Watson as the Senior Independent Director on this
date. The Directors’ biographies, on pages 38 and 39,
demonstrate the breadth of investment, commercial and
professional experience relevant to their positions as
Directors of the Company.
Directors’ retirement by rotation and re-election is subject
to the Articles of Association. In accordance with the Code,
all directors will be subject to annual re-election.
Ms Bolsover, Ms Curtis, Mr Gillbanks, Mr Marrison,
Mr Watson will all retire at the forthcoming AGM in
accordance with the Code and, being eligible, will offer
themselves for re-election. All Directors are regarded as
being free of any conflicts of interest and no issues in
respect of independence arise. The Board has concluded
that all Directors continue to make valuable contributions
BOARD MEETINGS
and believe that they remain independent in character
and judgement.
Directors are not compensated by the Company for loss of
office in an event of a takeover bid.
BOARD COMMITTEES
The Board has established an Audit Committee, a
Nomination Committee and a Management Engagement
Committee, which also carries out the functions of
a Remuneration Committee. All the Directors of the
Company are non-executive and serve on each Committee
of the Board. It has been the Company’s policy to
include all Directors on all Committees. This encourages
unity, clear communication and prevents duplication of
discussion between the Board and the Committees.
The roles and responsibilities of each Committee are set
out on the individual Committee reports which follow. Each
Committee has written terms of reference which clearly
define its responsibilities and duties. These can be found
on the Company’s website, are available on request and
will also be available for inspection at the AGM.
The number of meetings of the Board and Committees held during the year under review, and the attendance of
individual Directors, are shown below:
Board
Audit
MEC
Nomination
Attended
Eligible
Attended
Eligible
Attended
Eligible
Attended
Eligible
David Watson
Tim Gillbanks
Simon Marrison
Kate Bolsover
Sarah-Jane Curtis
6
6
6
6
6
6
6
6
6
6
2
2
2
2
2
2
2
2
2
2
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
In addition to formal Board and Committee meetings, the Directors also attend a number of informal meetings to
represent the interests of the Company, and to discuss operational markets and succession planning.
THE BOARD
The Board is responsible for the effective stewardship of the Company’s affairs. Certain strategic issues are monitored
by the Board at meetings against a framework which has been agreed with the Manager. Additional meetings may
be arranged as required. The Board has a formal schedule of matters specifically reserved for its decision, which are
categorised under various headings, including strategy, management, structure, capital, financial reporting, internal
controls, gearing, asset allocation, share price discount, contracts, investment policy, finance, risk, investment restrictions,
performance, corporate governance and Board membership and appointments.
In order to enable them to discharge their responsibilities, all Directors have full and timely access to relevant information.
At each meeting, the Board reviews the Company’s investment performance and considers financial analyses and other
reports of an operational nature. The Board monitors compliance with the Company’s objectives and is responsible for
setting asset allocation and investment and gearing limits within which the Portfolio Manager has discretion to act and
thus supervises the management of the investment portfolio, which is contractually delegated to the Portfolio Manager.
TR PROPERTY INVESTMENT TRUST
45
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION Corporate Governance Report continued
The Board has responsibility for the approval of
investments in unquoted investments and any
investments in funds managed or advised by the Portfolio
Manager. It has also adopted a procedure for Directors,
in the furtherance of their duties, to take independent
professional advice at the expense of the Company.
CONFLICTS OF INTEREST
In line with the Companies Act 2006, the Board has the
power to authorise any potential conflicts of interest that may
arise and impose such limits or conditions as it thinks fit. A
register of potential conflicts is maintained and is reviewed at
every Board meeting to ensure all details are kept up-to-date.
Appropriate authorisation will be sought prior to the
appointment of any new Director or if any new conflicts arise.
RELATIONS WITH SHAREHOLDERS
Shareholder relations are given high priority by the Board,
the AIFM and the Portfolio Manager. The prime medium
by which the Company communicates with shareholders
is through the Interim and Annual Reports which aim to
provide shareholders with a clear understanding of the
Company’s activities and their results. This information is
supplemented by the daily calculation of the Net Asset
Value of the Company’s Ordinary shares which is published
on the London Stock Exchange.
This information is also available on the Company’s
website, www.trproperty.com together with a monthly
factsheet and Manager commentary.
It is the intention of the Board that the Annual Report and
Accounts and Notice of the AGM be issued to shareholders
so as to provide at least twenty working days’ notice of
the AGM. Shareholders wishing to lodge questions in
advance of the AGM, or to contact the Board at any other
time, are invited to do so by writing to the Company
Secretary at the registered address given on page 108.
General presentations are given to both shareholders and
analysts following the publication of the annual results.
All meetings between the Manager and shareholders are
reported to the Board.
SECTION 172 COMPANIES ACT 2006
Section 172 of the Companies Act 2006 requires directors
to act in good faith and in a way that is the most likely
to promote the success of the Company. In accordance
with the requirements of the Companies (Miscellaneous
Reporting) Regulations 2018, below, the Company
explains how the Directors have discharged their duty
under section 172 during the reporting period. Fulfilling
this duty naturally supports the Company in achieving its
Investment Objective and helps to ensure that all decisions
are made in a responsible and sustainable way.
Upon appointment, Directors’ are provided with a detailed
induction outlining their duties, legally and regulatory, as
a Director of a UK public limited company and continue to
regularly receive relevant technical updates and training.
Under their letter of appointment, the Directors also have
access to the advice and services of the Company Secretary,
and when deemed necessary, the Directors have the
opportunity to seek independent professional advice in the
furtherance of their duties as a director, at the Company’s
expense. The Company has a schedule of Matters Reserved
for the Board which clearly describes the Board’s duties
and responsibilities. In addition, there are also the Terms
of References of the Board’s Committees which outline
the responsibilities that are delegated from the Board.
The Terms of References are reviewed at least annually to
consider any regulatory and best practice developments.
DECISION MAKING
The importance of stakeholder considerations, in
particular in the context of decision-making, is regularly
brought to the Board’s attention by the Company
Secretary and taken into account at every Board
meeting, and a paper reminding Directors of that is
tabled at the start of every Board meeting. The Board
considers the impact that any material decision will
have on all relevant stakeholders to ensure that it is
making a decision that promotes the long-term success
of the Company, whether this be, for example, in
relation to dividends, new investment opportunities or
the Company’s forward strategy, In addition, the Board,
along with the Manager, hold a meeting focused on
strategy on an annual basis to look ahead in the market
and anticipate potential scenarios and how this may
impact the Company’s stakeholders.
STAKEHOLDERS
The Board recognises the needs and importance of
the Company’s stakeholders and ensures that they are
considered during all its discussions and as part of its
decision-making. Since the Company is an investment
trust that is externally managed, the Company does
not have any employees (the Directors have a Letter of
Appointment and are not employees of the Company),
nor does it have a direct impact on the community
or environment in the conventional sense. The Board
recognises its key stakeholders and explains below
why these stakeholders are considered important to
the Company and the actions taken to ensure that their
interests are taken into account.
46
TR PROPERTY INVESTMENT TRUST
Stakeholder Group and why
they are important
Board engagement
Shareholders
Shareholder support is
essential to the existence of
the Company and delivery
of long term strategy of the
business.
The Manager
Holding the Company’s
shares offers investors a
liquid investment vehicle
through which they can obtain
exposure to the Company’s
diversified portfolio. The
Investment Manager’s
performance is critical for
the Company to successfully
deliver its investment strategy
and meet its objective.
The Company has over 3,000 Shareholders, including institutional and retail investors. The
Board is committed to maintaining open channels of communication and to engage with
Shareholders in a manner they find most meaningful in order to gain an understanding of
their views. These include the channels below:
•
•
•
•
•
Annual General Meeting – the Company welcomes and encourages attendance and
participation from Shareholders at its AGM. Shareholders have the opportunity to meet the
Directors and Manager and to address questions to them directly. The Manager attends the
AGM and provides a presentation on the Company’s performance and the future outlook. The
Company values any feedback and questions it may receive from Shareholders ahead of and
during the AGM and takes action or makes changes, when and as appropriate.
Publications – The annual and half year reports are made available on the website
and sent to shareholders. These publications provide information on the Company and
its portfolio of investments and a better understanding of the Trust’s financial position.
This is supplemented by daily publication of the NAV on the Stock Exchange and
monthly factsheets on the Company’s website. The Company is open to feedback from
shareholders to improve its publications.
Shareholder meetings – The Manager meets with shareholders periodically and often and
feedback is shared with the Board.
Working with the Brokers – The Manager and Brokers work together to maintain dialogue
with shareholders and prospective investors at scheduled meetings. The Board is provided
with regular updates at meetings and outside meetings if required.
Shareholder concerns – in the event that Shareholders wish to raise issues or concerns
with the Board, they are welcome to do so at any time by writing to the Chairman at the
registered office. The Senior Independent Director is also available to Shareholders if they
have concerns that contact through the normal channel of the Chairman has failed to resolve
or for which such contact is inappropriate.
Maintaining a close and constructive working relationship with the Manager is crucial, as
the Board and the Manager both aim to continue to achieve consistent, long-term returns in
line with the Company’s investment objective. Important components in the collaboration
with the Manager, representative of the Company’s culture include those listed below.
•
•
Encouraging open, honest and collaborative discussions at all levels, allowing time and
space for original and innovative thinking.
Ensuring that the impact on the Manager is fully considered and understood before any
business decision is made.
• Ensuring that any potential conflicts of interest are avoided or managed effectively.
The Board holds detailed discussions with the Manager on all key strategic and operational
topics on an ongoing basis. In addition, the Chairman regularly meets with the Manager to
ensure a close dialogue is maintained.
TR PROPERTY INVESTMENT TRUST
47
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION Corporate Governance Report continued
Stakeholder Group and why
they are important
Board engagement
External Service Providers, particularly the Company Secretary, the Administrator, the Registrar and the
Depository and the Broker
The Board maintains regular contact with its key external providers and receives regular
reporting from them through the Board and committee meetings, as well as outside of
the regular meeting cycle. Their advice, as well as their needs and views are routinely
taken into account. The Management Engagement Committee formally assesses their
performance, fees and continuing appointment at least annually to ensure that the
key service providers continue to function at an acceptable level and are appropriately
remunerated to deliver the expected level of service. The Audit Committee reviews and
evaluates the control environments in place at each service provider as appropriate.
The Board needs to demonstrate to lenders that it is a well-managed business, capable of
consistently delivering long-term returns.
The Board regularly considers how it meets various regulatory and statutory obligations and
follows voluntary and best-practice guidance, including how any governance decisions it
makes can have an impact on its stakeholders, both in the shorter and in the longer-term.
The Manager communicates regularly with portfolio companies and is an engaged
shareholder (on behalf of the Company).
The Board monitors the Manager’s stewardship arrangements and receives regular feedback
on meetings with the management of portfolio companies and voting at their general
meetings.
A range of advisers enables
the Company to function as
an investment trust and a
constituent of the FTSE 250 to
ensure it meets its relevant
obligations.
Lenders
Availability of funding and
liquidity are crucial to the
Company’s ability to take
advantage of investment
opportunities as they arise.
Regulators
The Company can only
operate with the approval
of its regulators who have
a legitimate interest in how
the Company operates in
the market and treats its
shareholders.
Investee Companies
Portfolio companies are
ultimately shareholders
assets and the Board
recognises the importance
of good stewardship and
communication with investee
companies in meeting the
Company’s investment
objective and strategy.
The Board is always mindful of the requirement to act in
the best interests of shareholders as a whole and to have
regard to other applicable section 172 factors which form
part of Board’s decision-making process. The following
key decisions taken by the Board during the year ended
31 March 2021 are examples of this:
GEARING
During the financial year, the Company continued to utilise
its existing revolving annual loan facilities and following
a review of the available options each were renewed on
broadly similar terms as the renewals fell due throughout the
year. The Board is keen to maintain a wide range of banking
relationships to ensure that it has access to a diverse range
of terms and is not reliant on any one provider. The facilities
provide flexibility and complement the longer-term private
placement fixed term debt that is in place.
Using revenue reserves to support the dividends paid
to shareholders.
Subject to shareholder approval of the proposed final
dividend, the Company paid a total dividend of 14.20p for the
financial year, representing an increase of 1.40% compared
to the previous year. The financial year was a period of
uncertainty, when many companies, particularly within the
UK and Europe, either cut, postponed or cancelled their
48
TR PROPERTY INVESTMENT TRUST
dividends. The Board recognises the importance of dividends
to shareholders and after careful review of the Company’s
revenue forecasts and reserves together with the investment
outlook with the Manager, the Board decided that,
notwithstanding the exceptional market conditions, it would
draw on the revenue reserve to support the dividend.
PORTFOLIO MANAGEMENT
During the year the Board continued to focus on the
performance of the Manager in achieving the Company’s
investment objective within an appropriate risk framework.
Following the emergence of the COVID-19 pandemic in March
2020, the focus widened to consider the potential impact of
COVID-19 on the Company (including portfolio activity, risks and
opportunities, gearing, revenue forecasts and the operations
of other third party providers) to ensure that the portfolio had
sufficient resilience together with the Company’s operational
structure to meet the unprecedented circumstances.
DIRECTORATE
The Board’s policy on tenure was reviewed during the
year. The stability of the Board during one of the most
challenging periods was considered important particularly
as appointments had been made to the Board in October
2019 and January 2020. Therefore, no changes were made
to the Board composition during the financial year. However,
the Board is mindful of the importance of having a suitable
succession plan especially as David Watson has served on
the Board since 2012 and Simon Marrison since 2011.
CULTURE AND BUSINESS CONDUCT
The Board is in agreement that having a good corporate
culture, particularly in its engagement with the Manager,
shareholders and other key stakeholders will aid delivery
of its long term strategy. The Board promotes a culture
of openness, in line with this purpose through ongoing
engagement with its service providers and the Manager.
The Directors agree that establishing and maintaining
a healthy corporate culture within the Board and in its
interaction with the Manager, Shareholders and other
stakeholders will support the delivery of its purpose, values
and strategy. The Board seeks to promote a culture of
openness, debate and integrity through ongoing dialogue
and engagement with its service providers, principally the
Manager. The Board strives to ensure that its culture is in
line with the Company’s purpose, values and strategy.
The Company has a number of policies and procedures
in place to assist with maintaining a culture of good
governance including those relating to diversity,
Directors’ conflicts of interest and Directors’ dealings in
the Company’s shares. The Board assesses and monitors
compliance with these policies as well as the general
culture of the Board regularly through Board meetings and
in particular during the annual evaluation process which is
undertaken by each Director (for more information see the
Board evaluation section on page 51).
The Board seeks to appoint the best possible service
providers and evaluates their service on a regular basis
as described on page 53. The Board considers the culture
of the Manager and other service providers, including
their policies, practices and behaviour, through regular
reporting from these stakeholders and in particular during
the annual review of the performance and continuing
appointment of all service providers.
EMPLOYEE, SOCIAL IMPACT AND WIDER
COMMUNITY
The Board recognises the requirement under the Companies
Act 2006 to detail information about human rights,
employees and community issues, including information
about any policies it has in relation to these matters and
the effectiveness of these policies. These requirements,
practically, are not applicable to the Company as it has no
employees, all the Directors are non-executive and it has
outsourced all operational functions to third-party service
providers. Therefore, the Company has not reported further
in respect of these provisions.
DIRECTORS’ INDEMNITY
Directors’ and Officers’ liability insurance cover is in
place in respect of the Directors. The Company’s Articles
of Association provide, subject to the provisions of UK
legislation, an indemnity for Directors in respect of costs
which they may incur relating to the defence of any
proceedings brought against them arising out of their
positions as Directors, in which they are acquitted or
judgement is given in their favour by the court.
To the extent permitted by law and by the Company’s
Articles of Association, the Company has entered into
deeds of indemnity for the benefit of each Director of
the Company in respect of liabilities which may attach to
them in their capacity as Directors of the Company. These
provisions, which are qualifying third party indemnity
provisions as defined by section 234 of the Companies
Act 2006, were introduced in January 2007 and currently
remain in force.
TR PROPERTY INVESTMENT TRUST
49
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION Corporate Governance Report continued
DIRECTORS’ STATEMENT AS TO DISCLOSURE OF
INFORMATION TO AUDITORS
The Directors who were members of the Board at the time
of approving the Directors’ report are listed on pages 38
and 39. Having made enquiries of fellow directors and of
the Company’s auditors, each of these Directors confirms
that:
•
•
to the best of each Director’s knowledge and belief,
there is no information (that is, information needed by
the Company’s auditors in connection with preparing
their report) of which the Company’s auditors are
unaware; and
each Director has taken all the steps a Director might
reasonably be expected to have taken to be aware of
relevant audit information and to establish that the
Company’s auditors are aware of that information.
This information is given and should be interpreted in
accordance with the provisions of Section 418 of the
Companies Act 2006.
By order of the Board
David Watson
Chairman
3 June 2021
50
TR PROPERTY INVESTMENT TRUST
Report of the Nomination Committee
NOMINATION COMMITTEE
Chairman: Mr Watson
KEY RESPONSIBILITIES
•
Review the Board and its Committees and make
recommendations in relation to structure, size and
composition, the balance of knowledge, experience
and skill ranges;
•
Consider succession planning and tenure policy and
oversee the development of a diverse pipeline;
• Consider the re-election of Directors; and
• Review the outcome of the board evaluation process.
The Nomination Committee meets at least on an annual
basis, and more frequently as and when required and last
met in March 2021.
ACTIVITY DURING THE YEAR
The Committee discussed succession planning of the
Board, the tenure and diversity policies.
The Committee annually reviews the size and structure
of the Board and will continue to review succession
planning and further recruitment and take into account the
recommendations of external Board evaluations.
BOARD EVALUATION
Following the engagement of Tim Stephenson of
Stephenson & Co, to facilitate an independent evaluation
of the effectiveness of the Board, its committees and
the performance of each director for the year ended
31 March 2020. The annual evaluation for the year ended
31 March 2021 was carried out by the Company. This
took the form of questionnaires followed by discussions
to identify the effectiveness of the Board’s activities,
including its Committees.
The Chairman also reviewed with each Director their
individual performance, contribution and commitment.
The appraisal of the Chairman followed the same format
and was led by Simon Marrison. The results of the
evaluation process were presented to and considered by
the Board. There were no significant actions arising from
the evaluation process and it was agreed that the current
composition of the Board and its Committees reflected a
suitable mix of skills and experience, and that the Board
as a whole, the individual Directors and its Committees
were functioning effectively.
After careful consideration, particularly of the Board’s Policy
Governing Board Members’ Tenure and Reappointment, all
of the directors, will be offering themselves for re-election
at the forthcoming AGM. It is considered that each of them
merit re-election by shareholders. Further information on
each directors’ skills and their contribution to the Board are
outlined in the directors’ biographies on pages 38 and 39.
In accordance with the provisions of the Code, it is the
intention of the Board to engage an external facilitator to
assist with the performance evaluation every three years
and the next external evaluation will be carried out for
the year ended 31 March 2023. The Board will continue to
complete an internal board evaluation annually within the
intervening years.
BOARD’S POLICY ON TENURE
In line with the update of the Code in 2018, the AIC has
updated its Code of Corporate Governance in 2019. The AIC
recommended, under Provision 24, a different approach to
tenure in relation to investment companies, considering
how they differ to chairs of operating companies, where
the Board does not have a chief executive. The Board took
into consideration the approach and introduced the ‘Policy
Governing Board Members’ Tenure and Reappointment’.
This policy outlines the Company’s approach to tenure and
reappointment of non-executive directors. It highlights the
Board’s belief that the value brought through continuity
and experience of Directors with longer periods of service
is not only desirable, but essential in an investment
company. The Board did not feel that it would be
appropriate to set a specific tenure limit for individual
Directors or the Chairman of the Board or its committees.
Instead, the Board will seek to recruit a new Director on
average every three years so as regularly to bring the
challenge of fresh thinking into the Board’s discussions,
ensuring that on each occasion that the Board enters into
new investment commitments, at least half the Board
members have direct personal experience of negotiating
previous commitments with the Manager.
DIRECTORS’ TRAINING
When a new Director is appointed, he/she is offered
training to suit their needs. Directors are also provided
with key information on the Company’s activities on
a regular basis, including regulatory and statutory
requirements and internal controls. Changes affecting
Directors’ responsibilities are advised to the Board as they
arise. Directors ensure that they are updated on regulatory,
statutory and industry matters.
TR PROPERTY INVESTMENT TRUST
51
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION Report of the Nomination Committee continued
LETTERS OF APPOINTMENT
No Director has a contract of employment with the
Company. Directors’ terms and conditions for appointment
are set out in letters of appointment which are available
for inspection at the registered office of the Company and
will be on display at the AGM.
David Watson
Chairman of the Nomination Committee
3 June 2021
52
52
TR PROPERTY INVESTMENT TRUST
TR PROPERTY INVESTMENT TRUST
Report of the Management Engagement Committee
MANAGEMENT ENGAGEMENT COMMITTEE
Chairman: Mr Watson
KEY RESPONSIBILITIES
•
•
•
•
Monitor and review the performance of the AIFM and
Portfolio Manager;
Review the terms of the Investment Manager
Agreement;
Annually review the contract of terms and agreements
of each external third party service provider; and
Review, on an annual basis, the remuneration of the
Directors.
In addition to the Investment Management role, the Board
has delegated to external third parties the depositary
and custodial services (which include the safeguarding of
assets), the day to day accounting, company secretarial
services, administration and registration services. Each
of these contracts was entered into after full and proper
consideration of the quality of the services offered,
including the control systems in operation insofar as they
relate to the affairs of the Company. The Management
Engagement Committee (the “MEC”) determines and
approves Directors’ fees following proper consideration,
having regard to the level of fees payable to non-
executive Directors in the industry generally, the role
that individual directors fulfil in respect of Board and
Committee responsibilities and the time committed to
the Company’s affairs. For further details please see the
Directors’ Remuneration Report on pages 55 to 57.
The MEC meets at least on an annual basis, towards the
end of the financial year and last met in March 2021.
ACTIVITY DURING THE YEAR
At the MEC meeting in March 2021, the Committee
reviewed the overall performance of the AIFM
and Portfolio Manager and considered both the
appropriateness of the Manager’s appointment and the
contractual arrangements (including the structure and
level of remuneration) with the Manager.
In addition to the reviews by the MEC, the Board reviewed
and considered performance reports from the Portfolio
Manager at each Board meeting. The Board also received
regular reports from the Administrator and Company
Secretary.
The Board believe that the Manager’s track record and
performance remains outstanding. As a result, the MEC
confirmed that the AIFM and Portfolio Manager should
be retained for the financial year ending 31 March 2021
being in the best interests for all shareholders. A summary
of the significant terms of the Investment Management
Agreement and the third party service providers who
support the Trust are set out below.
During the year the MEC also reviewed the performance
of all their third party service providers including BNP
Paribas, Link Company Matters, Computershare, both the
Company’s brokers and PwC (as tax advisors). The Portfolio
Manager provides regular updates on the performance of
all third party providers during the year and attended this
part of the MEC Meeting. The MEC confirmed that they
were satisfied with the level of services delivered by each
third party provider.
MANAGEMENT ARRANGEMENTS AND FEES
On 11 July 2014, the Board appointed BMO Investment
Business Limited as the Alternative Investment Fund
Manager (in accordance with the Alternative Investment
Fund Managers Directive) with portfolio management
delegated to the Investment Manager, Thames River
Capital LLP.
The significant terms of the Investment Management
Agreement with the Manager are as follows:
On 12 April 2021 BMO announced that it had reached
an agreement to sell its asset management business in
Europe, the Middle East and Africa, which will, subject
to completion, become part of Columbia Threadneedle
Investments, the global asset management business
of Ameriprise Financial, Inc. Details have not yet been
finalised and published but both companies have
confirmed the importance of maintaining the stability
and continuity of the teams which presently support our
company. The transaction is expected to close near the
end of the calendar year.
NOTICE PERIOD
The Investment Management Agreement (“IMA”) provides
for termination of the agreement by either party without
compensation on the provision of not less than 12 months’
written notice.
TR PROPERTY INVESTMENT TRUST
53
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION be used for offset purposes only and therefore cannot
have the effect of creating a fee in a year where a fee
would not otherwise be payable or increasing the fee
in that year. At 31 March 2021 there is a carry forward of
outperformance of 1.8% (2020: 1.8%).
No fee will be payable unless the adjusted net assets
outperform the hurdle rate, after taking into account
any accumulated percentage underperformance
brought forward at the beginning of the financial year.
Performance fees earned in the year ended 31 March
2021 were £9,659,000 (2020: £2,683,000). Total fees
paid to the Manager in any one year (Management and
Performance Fees) may not exceed 4.99% of Group Equity
Shareholders’ Funds. Total fees payable for the year to 31
March 2021 amount to 1.2% (2020: 0.8%) of Group Equity
Shareholders’ Funds.
DEPOSITARY ARRANGEMENTS AND FEES
BNP Paribas was appointed as Depositary on 14 July 2014
in accordance with the AIFMD. The Depositary’s
responsibilities include: cash monitoring; segregation and
safe keeping of the Company’s financial instruments; and
monitoring the Company’s compliance with investment
and leverage requirements. The Depositary receives
for its services a fee of 2.0 basis points per annum on
the first £150 million of the Company’s assets, 1.4 basis
points per annum on assets above £150 million and
below £500 million and 0.75 basis points on assets above
£500 million.
REVIEW OF THIRD PARTY PROVIDERS’ FEES
Custody and Administration Services are provided by
BNP Paribas and Company Secretarial Services by Link
Company Matters. The fees for these services are charged
directly to the Company and are contained within
other administrative expenses disclosed in notes to the
accounts.
David Watson
Chairman of the Management Engagement Committee
3 June 2021
MANAGEMENT FEES
The fee for the period under review was a fixed fee of
£3,745,000 plus an ad valorem fee of 0.20% pa based on
the net asset value (determined in accordance with the
AIC method of valuation) on the last day of March, June,
September and December, payable quarterly in advance.
The fee arrangements have been reviewed by the Board
for the year to 31 March 2022 and the fixed element of the
fee and the ad valorem rate will remain unchanged.
The Board continues to consider that the fee structure
aligns the interests of the shareholder and the Manager as
well as being highly competitive.
The fee arrangements will continue to be reviewed on an
annual basis.
PERFORMANCE FEES
In addition to the management fees, the Board has agreed
to pay the Manager performance related fees in respect of
an accounting period if certain performance objectives are
achieved.
A performance fee is payable if the total return of adjusted
net assets (after deduction of all Base Management
Fees and other expenses), as defined in the IMA, at
31 March each year outperforms the total return of the
Company’s benchmark plus 1% (the “hurdle rate”); this
outperformance (expressed as a percentage) is known
as the “percentage outperformance”. Any fee payable
will be the amount equivalent to the adjusted net assets
at 31 March each year multiplied by the percentage
outperformance, then multiplied by 15%. The maximum
performance fee payable for a period is capped at 1.5%
of the adjusted net assets. However, if the adjusted
net assets at the end of any period are less than at the
beginning of the period, the maximum performance fee
payable will be limited to 1% of the adjusted net assets.
If the total return of shareholders’ funds for any
performance period is less than the benchmark for the
relevant performance period, such underperformance
(expressed as a percentage) will be carried forward to
future performance periods.
If any fee exceeds the cap, such excess performance
(expressed as a percentage) will be carried forward and
applied to offset any percentage underperformance
in future performance periods. In the event that the
benchmark is exceeded but the hurdle is not, that
outperformance of the benchmark can be used to offset
past or future underperformance. These amounts can
54
TR PROPERTY INVESTMENT TRUST
Directors’ Remuneration Report
INTRODUCTION
The Board has prepared this report and the Directors’
Remuneration Policy, in accordance with the requirements
of Schedule 8 of the Large and Medium Sized Companies
and Groups (Accounts and Reports) Regulations 2013. An
ordinary resolution for the approval of this report will be
put to the members at the forthcoming Annual General
Meeting.
The law requires the Company’s Auditors, KPMG LLP,
to audit certain of the disclosures provided. Where
disclosures have been audited, they are indicated as such.
The Auditor’s opinion is included in the ‘Independent
Auditor’s Report’.
ANNUAL STATEMENT FROM THE CHAIRMAN OF
THE COMMITTEE
The MEC met in March 2021 and considered the results
and feedback from the board evaluation alongside
other factors. The MEC also considered the frequency of
remuneration increases for the Trust, feedback from the
market and investors on the level of frequency and the
current impact of the outbreak of coronavirus (COVID-19).
Following the MEC meeting in March 2021, it was agreed
that the current level of remuneration for the Board of the
Trust remained appropriate. It was also agreed that the
Non-executive Director’s fee would remain at £35,000 per
annum with effect from 1 April 2021. It was further agreed
that the Directors holding the role of the Audit Committee
Chairman and Senior Independent Director would continue
to receive an additional £5,000 to reflect the increase in
their responsibilities. Moreover, it was agreed that the
Chairman’s remuneration would remain at £70,000.
DIRECTORS’ REMUNERATION POLICY
The Company’s policy is that the fees payable to the
Directors should reflect the time spent by the Board on
the Company’s affairs and the responsibilities borne by the
Directors and should be sufficient to enable candidates of
high calibre to be recruited. The policy is for the Chairman
of the Board, the chairman of the Audit Committee and
the Senior Independent Director to be paid higher fees
than the other Directors in recognition of their more
onerous roles. This policy was approved by the members
at the 2020 AGM, and the Directors’ intention is that this
will continue for the year ending 31 March 2023.
The Directors are remunerated in the form of fees,
payable monthly in arrears, to the Director personally or
to a third party specified by that Director. There are no
long-term incentive schemes, share option schemes or
pension arrangements and the fees are not specifically
related to the Directors’ performance, either individually or
collectively.
The Board consists entirely of Non-executive Directors,
who are appointed with the expectation that they will
serve for a period of three years. Directors’ appointments
are reviewed formally every three years thereafter by the
Board as a whole. None of the Directors have a contract
of service and a Director may resign by notice in writing
to the Board at any time; there are no notice periods. The
terms of their appointment are detailed in a letter to them
when they join the Board. As the Directors do not have
service contracts, the Company does not have a policy on
termination payments.
There is no notice period and no payments for loss of
office were made during the period. The Company’s
Articles of Association currently limit the total aggregate
fees payable to the Board to £300,000 per annum.
Shareholders’ views in respect of Directors’ remuneration
are communicated at the Company’s AGM and are taken
into account in formulating the Directors remuneration
policy. At the last AGM, over 99.6% of shareholders voted
for the resolution approving the Directors’ Remuneration
Report (0.4% against). At the 2020 AGM, over 99% voted
for the resolution approving the Directors’ Remuneration
Policy (0.4% against), showing significant shareholder
support.
The components of the remuneration package for
Non-executive Directors, which are comprised in the
Directors’ remuneration policy of the Company are set out
below, with a description and approach to determination.
TR PROPERTY INVESTMENT TRUST
55
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION Fixed Fees
Additional Fees
Expenses Fees
Other
Remuneration Type
The Directors are entitled
to be paid all reasonable
expenses properly incurred
by them attending meetings
with shareholders or other
Directors or otherwise
in connection with the
discharge of their duties as
Directors.
Board members are not
eligible for bonuses, pension
benefits, share options,
long-term incentive schemed
or other non-cash benefits or
taxable expenses.
The aggregate limit for the
Fees for the Board as a whole
is £300,000 per annum, in
accordance to the Articles of
Association, which is divided
between the Directors as
they may deem appropriate.
Additional fees may be paid
to any Director who fulfils the
role of the Chairman, who
chairs any committee of the
Board or who is appointed
as the Senior Independent
Director.
These fees will be set
at a competitive level to
reflect experience and time
commitment.
Annual fees are set to
reflect the experience of
each board member and
time commitment required
by Board members to carry
out their duties and is
determined with reference to
the appointment of Directors
of similar investment
companies.
ANNUAL REMUNERATION REPORT
For the year ended 31 March 2021, Directors’ fees were paid at the annual rates of Chairman: £70,000 (2020: £70,000)
and all other directors: £35,000 (2020: £35,000). An additional £5,000 is paid per annum for each of the roles of Audit
Committee Chairman and Senior Independent Director. The actual amounts paid to the Directors during the financial year
under review are as shown below.
AMOUNT OF EACH DIRECTOR’S EMOLUMENTS (AUDITED)
The fees payable in respect of each of the Directors who served during the financial year were as follows:
David Watson(1)
Simon Marrison(2)
Tim Gillbanks
Kate Bolsover
Sarah-Jane Curtis
Hugh-Seaborn(3)
Total
31 March 2021
£
31 March 2020
£
60,461
38,410
40,000
35,000
35,000
23,333
232,204
40,000
35,000
40,000
17,500
6,372
70,000
208,872
All fees are at a fixed rate and there is no variable remuneration Fees are pro-rated where a change takes place during
a financial year There were no payments to third parties included in the fees referred to in the table above There are no
further fees to disclose as the Company has no employees, chief executive or executive directors.
(1)
appointed as Chairman on 28 July 2020
(2) appointed as Senior Independent Director on 28 July 2020
(3)
retired as Chairman on 28 July 2020
56
TR PROPERTY INVESTMENT TRUST
Directors’ Remuneration Report continued
COMPANY PERFORMANCE
Relative Importance of Spend on Pay
The graph below compares, for the ten years ended
31 March 2021, the percentage change over each period
in the share price total return to shareholders compared
to the share price total return of benchmark, which the
Board considers to be the most appropriate benchmark
for investment performance measurement purposes. An
explanation of the performance of the Company is given in
the Chairman’s Statement and Manager’s Report.
Performance Graph – Share Price Total Return for
Ordinary Share Class
2021
£’000
44,429
232
2020
£’000
43,794
209
Change
1.4%
11.0%
Dividends paid
Directors’ fees
Five year change comparison
Over the last five years, Directors’ pay has increased as set
out in the table below:
2021
£’000
2016
£’000
Change
4000
3500
3000
2500
2000
1500
1000
500
Chairman
Audit Committee
Chairman
Senior Independent
Director
Director
70,000
70,000
0%
40,000
35,000
14.3%
40,000
35,000
35,000
30,000
14.3%
16.7%
For and on behalf of the Board
David Watson
Chairman of the Management Engagement Committee
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
Mar-19
Mar-20
Mar-21
3 June 2021
TR Property Share Price Total Return
Benchmark Total Return
Share Price Total Return assuming investment of £1,000 on 31 March 2011 and
reinvestment of all dividends (excluding dealing expenses). (Source: Thames
River Capital)
Benchmark Total Return assuming notional investment into the index of £1,000 on
31 March 2011. (Source: Thames River Capital)
DIRECTORS’ INTERESTS IN SHARES (AUDITED)
The interests of the Directors in the shares of the
Company, at the beginning and at the end of the year, or
date of appointment, if later, were as follows:
Ordinary shares of 25 pence
31 March 2021
31 March 2020
36,083
43,367
–
2,360
–
35,692
42,326
–
2,360
–
David Watson
Simon Marrison
Tim Gillbanks
Kate Bolsover
Sarah-Jane Curtis
Since 31 March 2021 to the date of this report, there have
been no subsequent changes to the Directors’ interests in
the shares of the Company.
TR PROPERTY INVESTMENT TRUST
57
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION Report of the Audit Committee
AUDIT COMMITTEE
Chairman: Mr Gillbanks
KEY RESPONSIBILITIES
•
Review the internal financial and non-financial controls;
•
Review reports from key third party service providers;
•
•
•
•
•
Consider and recommend to the Board for approval the
contents of the draft Interim and Annual Reports;
Review accounting policies and significant financial
reporting judgements;
Monitor, together with the Manager, the Company’s
compliance with financial reporting and regulatory
requirements;
The review and subsequent proposal to the Board of
the interim and final dividends; and
Considering the impact of providing non-audit services
on the external Auditor’s independence and objectivity.
Representatives of the Manager’s internal audit and
compliance departments may attend these committee
meetings at the Committee Chairman’s request.
Representatives of the Company’s Auditor attend the
Committee meetings at which the draft Interim and
Annual Report and Accounts are reviewed, and are given
the opportunity to speak to the Committee members
without the presence of the representatives of the
Manager.
The Board recognises the requirement for the Audit
Committee as a whole to have competence relevant
to the sector and at least one member with recent and
relevant financial experience. The Chairman and Mr
Watson are Chartered Accountants with extensive and
recent experience in the Financial Services Industry. The
other members of the Committee have a combination of
property, financial, investment and business experience
through senior positions held throughout their careers.
ACTIVITY DURING THE YEAR
During the year the Committee met twice with all
members at each meeting and considered the following:
•
Consideration of the Risk Map, any changes to the
likelihood or impact of risks and consequential
changes required to Board Monitoring and mitigation
procedures. Consideration of any new or emerging
58
TR PROPERTY INVESTMENT TRUST
risks and inclusion in the Risk Map if appropriate. This
has included consideration of the ongoing COVID-19
pandemic and impact across a range of risk categories;
The Group’s Internal Controls and consideration of the
Reports thereon;
The ISAE/AAF and SSAE16 reports or their equivalent
from BMO and BNP Paribas;
Whether the Company should have its own internal
audit function;
The External Auditor’s Planning Memorandum setting
out the scope of the annual audit and proposed key
areas of focus;
The reports from the Auditors concerning their audit
of the Financial Statements of the Company and
Consideration of Significant issues in relation to the
Financial Statements;
The appropriateness of, and any changes to, the
accounting policies of the Company, including the
reasonableness of any judgements required by such
policies;
The Viability Statement and consideration of the
preparation of the Financial Statements on a Going
Concern Basis taking account of forward looking income
forecasts, the liquidity of the investment portfolio and
debt profile;
The financial and other disclosures in the Financial
Statements;
The information presented in the Interim and Annual
Reports to assess whether, taken as a whole, the
Reports are fair, balanced and understandable and the
information presented will enable the shareholders to
assess the Company’s position, performance, business
model and strategy;
The performance of the external auditors, to approve
their audit fees and consider the assessment of
independence;
The review and subsequent proposal to the Board of
the interim and final dividends; and
The reviewal of the Committee’s Terms of Reference,
ensuring they remain appropriate and compliant with
the 2018 UK Corporate Governance Code.
•
•
•
•
•
•
•
•
•
•
•
•
Report of the Audit Committee continued
INTERNAL CONTROLS AND MANAGEMENT OF
RISK
The Board has overall responsibility for the Group’s system
of Internal Controls and for reviewing their effectiveness.
Key risks identified by the Auditors are considered by the
Audit Committee to ensure that robust internal controls
and monitoring procedures in respect of these are in place
on an ongoing basis. Further details can be found on
page 28 to 32.
The Audit Committee received and considered reports on
Internal Controls from the key service providers. No areas
of concern were highlighted.
The Company’s Risk Map was considered to identify any
new risks and whether any adjustments were required to
existing risks, and the controls and mitigation measures
in place in respect of these risks. The impact of COVID-19,
the response of financial markets, the ongoing impact
on economies around the world and operational changes
made by our service providers in response to government
guidelines were considered and the risk map adjusted
accordingly.
Based on the processes and controls in place within the
BMO Group and other significant service providers, the
Board has concurred that there is no current need for the
Company to have a dedicated internal audit function.
SIGNIFICANT ISSUES IN RELATION TO THE
FINANCIAL STATEMENTS
The Committee has considered this report and financial
statements and the Viability Statement on pages 33
and 34. The Committee considered the Auditor’s
assessment of risk of material misstatement and reviewed
the internal controls in place in respect of the key areas
identified and the process by which the Board monitors
each of the procedures to give the Committee comfort
on these risks on an ongoing basis. These risks are also
highlighted in the Company’s Risk Map.
•
Carrying amount of listed investments (Group
and Parent Company) – The Group’s investments are
priced for the daily NAV by BNP Paribas. The quoted
assets are priced by the Administrator’s Global Pricing
Platform which uses independent external pricing
sources. The control process surrounding this is set
out in the BNP Paribas AAF 01/06 Internal Controls
Report and testing by the reporting accountant for the
period reported to 31 December 2020 did not reveal
any significant exceptions. The quarterly control report
to the Board from BNP Paribas covering the period up
to 31 March 2021 had no significant issues to report.
In addition the Manager estimates the NAV using
an alternative pricing source on a daily basis as an
independent check.
The Auditors agreed 100% of the listed investments
of the portfolio to externally quoted prices and
independently received third party confirmations from
investment custodians and found the carrying value of
listed investments to be acceptable.
•
Valuation of Direct Property Investments (Group
and Parent Company) – The physical property
portfolio is valued every six months by professional
independent valuers.
Knight Frank LLP value the portfolio on the basis of
Fair Value in accordance with the RICS Valuation –
Professional Standards VPS4 (1.5) Fair Value and VPGA
1 Valuations for Inclusion in Financial Statements,
which apply the definition of Fair Value adopted by
the International Financial Reporting Standards. IFRS 13
defines Fair Value as:
“The amount for which an asset could be exchanged, a
liability settled, or an equity instrument granted could
be exchanged, between knowledgeable, willing parties
in an arm’s length transaction”.
In undertaking their valuation of each property, Knight
Frank make their assessment on the basis of a collation
and analysis of appropriate comparable investments,
rental and sale transactions, together with evidence
of demand within the vicinity of each property. This
information is then applied to the properties, taking
into account size, location, terms, covenant and other
material factors.
The board has reviewed reports from the Manager and
the external valuer and determined the valuation to be
reasonable.
The Auditors have set out their detailed testing and
procedures in respect of the Direct property valuation
and concluded that they found the Company’s valuation
of investment properties to be acceptable.
There has been nothing brought to the Committee’s
attention in respect of the financial statements for the year
ended 31 March 2021, which was material or significant or
that the Committee felt should be brought to shareholders’
attention.
TR PROPERTY INVESTMENT TRUST
59
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION
Following each audit, the Committee reviews the audit
process and considers its effectiveness and the quality
of the services provided to the Company. Within this
process, the Committee takes into consideration their
own assessment, the self-evaluation of the auditor and
the Audit Quality Review Report produced by the FRC in
order to monitor the progress of the Auditor’s performance
comparable with its peer and the targets set by the FRC.
The review following the completion of the 2020 Audit
concluded that the Committee was satisfied with the
Auditor’s effectiveness and performance.
The Committee felt that KPMG had run an effective
and efficient audit process with appropriate challenge.
Subsequently, a resolution to re-appoint KPMG LLP as
the Company’s Auditor will be put to shareholders at the
forthcoming AGM.
Tim Gillbanks
Chairman of the Audit Committee
3 June 2021
AUDITOR ASSESSMENT AND INDEPENDENCE
The Company’s external auditor, KPMG LLP was
appointed as the Company’s auditors at the 2016 AGM.
The Committee expects to repeat a tender process no
later than 2026 in respect of the audit for the following
31 March year end, in line with the latest Corporate
Governance provisions.
During the year, KPMG presented their Audit Plan for
the year end at the interim Committee meeting and the
Committee considered the audit process and fee proposal.
The Committee also reviewed KPMG’s independence
policies and procedures including quality assurance
procedures. It was considered that these policies are fit
for purpose and the Directors are satisfied that KPMG are
independent.
Total fees payable to the Auditor in respect of the audit for
the year to 31 March 2021 were: £80,000 (2020: £80,000),
which were approved by the Audit Committee.
The Committee has approved and implemented a policy
on the engagement of the Auditor to supply non-audit
services, taking into account the recommendations of
the Accounting Practices Board with a view to ensuring
that the external Auditor does not provide non-audit
services that have the potential to impair or appear to
impair the independence of their audit role. In addition,
the Committee reviewed the actions put in place by the
Auditor to ensure there was a clear separation between
audit and advisory services. The Committee does not
believe there to be any impediment to the Auditor’s
objectivity and independence.
The fees for non-audit services for the year to 31 March
2021 were nil (2020: nil).
Full details of the Auditor’s fees are provided in note 6 to
the accounts on page 79.
The Board noted that Mr Kelly, the current partner, was
appointed for the 2017 year-end audit and will continue
as partner only until the conclusion of the 2021 year-end
audit. Mr Merchant will replace Mr Kelly as audit partner
for the 2022 year-end audit. Mr Merchant has considerable
experience in the Financial Services sector and the audit of
Investment Trust Companies.
60
TR PROPERTY INVESTMENT TRUST
Statement of Directors’ responsibilities in relation to the
Group financial statements
The directors are responsible for preparing the Annual
Report, the Strategic Report, the Directors Report and the
financial statements in accordance with applicable law and
regulations.
Company law requires the directors to prepare Group
and Parent Company financial statements for each
financial year. Under that law they are required to
prepare the Group financial statements in accordance
with international accounting standards in conformity
with the requirements of the Companies Act 2006 and
applicable law and have elected to prepare the Parent
Company financial statements on the same basis. In
addition the Group financial statements are required under
the UK Disclosure Guidance and Transparency Rules to
be prepared in accordance with International Financial
Reporting Standards adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the European Union.
Under company law the directors must not approve the
financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the
Group and Parent Company and of the Group’s profit or
loss for that period. In preparing each of the Group and
Parent Company financial statements, the directors are
required to:
its financial statements comply with the Companies Act
2006. They are responsible for such internal control as
they determine is necessary to enable the preparation
of financial statements that are free from material
misstatement, whether due to fraud or error, and have
general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of
the Group and to prevent and detect fraud and other
irregularities.
Under applicable law and regulations, the directors are
also responsible for preparing a Strategic Report, Directors’
Report, Directors’ Remuneration Report and Corporate
Governance Statement that complies with that law and
those regulations.
The directors are responsible for the maintenance and
integrity of the corporate and financial information
included on the Company’s website. Legislation in the
UK governing the preparation and dissemination of
financial statements may differ from legislation in other
jurisdictions.
RESPONSIBILITY STATEMENT OF THE DIRECTORS
IN RESPECT OF THE ANNUAL FINANCIAL REPORT
Each of the directors confirms that to the best of their
knowledge:
select suitable accounting policies and then apply them
consistently;
•
•
•
•
•
•
make judgements and estimates that are reasonable,
relevant and reliable;
state whether they have been prepared in accordance
with international accounting standards in conformity
with the requirements of the Companies Act 2006 and,
as regards the group financial statements, International
Financial Reporting Standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the
European Union;
assess the Group and Parent Company’s ability to
continue as a going concern, disclosing, as applicable,
matters related to going concern; and
use the going concern basis of accounting unless they
either intend to liquidate the Group or the Parent
Company or to cease operations, or have no realistic
alternative but to do so.
the financial statements, prepared in accordance with
the applicable set of accounting standards, give a true
and fair view of the assets, liabilities, financial position
and profit or loss of the Group and Parent Company and
the undertakings included in the consolidation taken as
a whole; and
•
the strategic report includes a fair review of the
development and performance of the business and the
position of the issuer and the undertakings included
in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that
they face.
The Directors consider the annual report and accounts,
taken as a whole, is fair, balanced and understandable
and provides the information necessary for shareholders
to assess the group’s position and performance, business
model and strategy.
By order of the Board
The directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the Parent Company’s transactions and disclose with
reasonable accuracy at any time the financial position
of the Parent Company and enable them to ensure that
David Watson
Chairman
3 June 2021
TR PROPERTY INVESTMENT TRUST
61
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION Independent auditor’s report
to the members of TR Property Investment Trust plc
1. OUR OPINION IS UNMODIFIED
We have audited the financial statements of TR Property
Investment Trust Plc (“the Company”) for the year ended
31 March 2021 which comprise the Group Statement of
Comprehensive Income, Group and Company Statements
of Changes in Equity, Group and Company Balance Sheets,
Group and Company Cash Flow Statements and the related
notes, including the accounting policies in note 1.
In our opinion:
— The financial statements give a true and fair view of
the state of the Company’s affairs as at 31 March 2021
and of the Group’s return for the year then ended;
— The Group financial statements have been property
prepared in accordance with UK-adopted international
accounting standards;
— The Parent Company financial statements have been
properly prepared in accordance with UK-adopted
international accounting standards and as applied in
accordance with the provisions of the Companies Act
2006; and
— The financial statements have been prepared in
accordance with the requirements of the Companies
Act 2006 and, as regards the Group financial
statements, Article 4 of the IAS Regulation to the extent
applicable .
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (“ISAs (UK)”) and applicable
law. Our responsibilities are described below. We believe
that the audit evidence we have obtained is a sufficient
and appropriate basis for our opinion. Our audit opinion is
consistent with our report to the audit committee.
Overview
Materiality:
Financial statements
as a whole
Key audit matters
Recurring risks
£14.9m (2020:£12.5m)
1% (2020: 1%) of Total Assets
vs 2020
Valuation of direct
property investments
Carrying amount of listed
investments
We were first appointed as auditor by the Directors on
2 November 2016. The period of total uninterrupted
engagement is for the 5 financial years ended 31 March
2021. We have fulfilled our ethical responsibilities
under, and we remain independent of the Company in
accordance with, UK ethical requirements including the
FRC Ethical Standard as applied to listed public interest
entities. No non-audit services prohibited by that standard
were provided.
2. KEY AUDIT MATTERS: INCLUDING OUR ASSESSMENT OF RISKS OF MATERIAL MISSTATEMENT
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the
financial statements and include the most significant assessed risks of material misstatement (whether or not due to
fraud) identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of
resources in the audit; and directing the efforts of the engagement team. We summarise below the key audit matters
(unchanged from 2020), in decreasing order of audit significance, in arriving at our audit opinion above, together with
our key audit procedures to address those matters and, as required for public interest entities, our results from those
procedures. These matters were addressed, and our results are based on procedures undertaken, in the context of, and
solely for the purpose of, our audit of the financial statements as a whole, and in forming our opinion thereon, and
consequently are incidental to that opinion, and we do not provide a separate opinion on these matters.
62
TR PROPERTY INVESTMENT TRUST
Independent auditor’s report continued
The risk
Our response
Valuation of direct
property investments
(Group and Parent
Company)
(£83.1 million;
2020: £94.5 million)
Refer to pages 58 to 60
(Audit Committee Report),
page 74 and 75 (accounting
policy), and note 10 on
pages 82 to 85 (financial
disclosures).
Subjective valuation:
5.6% (2020: 7.5%) of the Group’s
total assets (by value) are held in
investment properties.
The fair value of each property
requires significant estimation,
in particular with regard to
the key estimated rental
value and yield assumptions.
The key assumptions will be
impacted by a number of factors
including quality and condition
of the building and tenant
covenant strength.
The effect of these matters
is that, as part of our risk
assessment, we determined
that the valuation of investment
properties has a high degree of
estimation uncertainty, with a
potential range of reasonable
outcomes greater than our
materiality for the financial
statements as a whole. The
financial statements (note 10)
disclose the sensitivity estimated
by the Group.
We performed the detailed tests below rather than
seeking to rely on controls, because the nature
of the balance is such that we would expect to
obtain audit evidence primarily through the detailed
procedures described:
Our procedures included:
— Assessing valuer’s credentials: Using our own
property valuation specialist, we evaluated the
competence, experience and independence of the
external valuer;
— Tests of Detail: We compared the information
provided by the Group to its external property
valuer for a sample of properties, such as rental
income and tenancy data to supporting documents
including lease agreements;
— Methodology choice: We held discussions with
the Group’s external property valuer to determine
the valuation methodology used. We included our
own property valuation specialist to assist us in
critically assessing the results of the valuer’s report
by checking that the valuations were in accordance
with the RICS Valuation Professional Standards
‘the Red Book’ and IFRS and that the methodology
adopted was appropriate by reference to
acceptable valuation practice;
— Benchmarking assumptions: With the
assistance of our own property valuation specialist,
we held discussions with the Group’s external
property valuer to understand movements in
property values. For a sample of properties, we
assessed the key assumptions used by the valuer
upon which the valuations are based, including
those relating to estimated rental value and yield,
by making a comparison to our own understanding
of the market and to industry benchmarks;
— Assessing transparency: We also considered the
adequacy of the Group’s disclosures about the degree
of estimation and sensitivity to key assumption made
when valuing the direct property investments.
Our results:
— We found the valuation of investment properties to
be acceptable (2020: acceptable).
TR PROPERTY INVESTMENT TRUST
63
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION The risk
Our response
— Test of detail: Agreeing the valuation of 100%of
level 1 listed investments in the portfolio to
externally quoted prices; and
We performed the detailed tests below rather than
seeking to rely on controls, because the nature of
the balance is such that detailed testing is determined
to be the most effective manner of obtaining
audit evidence.
Carrying amount of listed
investments
Low risk, high value:
(Group and Parent)
Our procedures included:
(£1,317.4 million;
2020: £1,060.1 million)
Refer to pages 58 to 60
(Audit Committee Report),
page 75 (accounting policy)
and note 10 on pages 82
to 85 (financial disclosures).
The Group’s portfolio of quoted
level 1 investments makes up
88.2% (2020: 84.4%) of the
Group’s total assets (by value)
and is one of the key drivers of
results. We do not consider these
investments to be at a high risk
of significant misstatement, or
to be subject to a significant
level of judgement because
they comprise liquid, quoted
2. Key audit matters: including our assessment of risks of material misstatement (continued)
investments. However, due to
their materiality in the context
of the financial statements as a
whole, they are considered to
be one of the areas which had
The Group’s portfolio of quoted level
1 investments makes up 88.2%
the greatest effect on our overall
(2020: 84.4%) of the Group’s total
audit strategy and allocation
assets (by value) and is one of the
of resources in planning and
key drivers of results. We do not
consider these investments to be at
completing our audit.
a high risk of significant
3. OUR APPLICATION OF MATERIALITY AND AN
misstatement, or to be subject to a
significant level of judgement
OVERVIEW OF THE SCOPE OF OUR AUDIT
because they comprise liquid,
quoted investments. However, due
Materiality for the financial statements as a whole was
to their materiality in the context of
set at £14.9m (2020: £12.5m), determined with reference
the financial statements as a whole,
to a benchmark of total assets, of which it represents
they are considered to be one of the
areas which had the greatest effect
1.0% (2020: 1.0%).
on our overall audit strategy and
allocation of resources in planning
and completing our audit.
Refer to page xx (Audit
Committee Report),
page xx (accounting
policy) and note xx on
pages xx-xx (financial
disclosures).
(£1,317.4 million; 2020:
£1,060.1 million)
Carrying amount of
listed investments
Our procedures included:
Low risk, high value:
(Group and Parent)
Our response
Our results
The risk
Materiality for the Parent Company financial statements as
a whole was at £14.1m (2020: 12.0m) determined as 0.9%
of the total assets of the parent company (2020: 0.9%).
3. Our application of materiality and an overview of the
Our results
We performed the detailed tests below rather than seeking to
rely on controls, because the nature of the balance is such
that detailed testing is determined to be the most effective
manner of obtaining audit evidence.
— We found the carrying amount of listed
investments to be acceptable (2020: acceptable).
— Test of detail: Agreeing the valuation of 100% of level 1
listed investments in the portfolio to externally quoted
prices; and
be expected to influence the Company’s members’
— Enquiry of custodians: Agreeing 100% of level 1 listed
assessment of the financial performance of the Company.
investment holdings in the portfolio to independently
received third party confirmations from investment
We agreed to report to the Audit Committee any corrected or
custodians.
uncorrected identified misstatements exceeding £0.75m
(2020: £0.63m) in addition to other identified misstatements
— We found the carrying amount of listed investments to be
that warranted reporting on qualitative grounds.
acceptable (2020: acceptable).
Our audit of the Company was undertaken to the
materiality level specified above and was performed by a
single audit team.
— Enquiry of custodians: Agreeing 100% of level
1 listed investment holdings in the portfolio to
independently received third party confirmations
from investment custodians.
scope of our audit
In line with our audit methodology, our procedures on
Materiality for the financial statements as a whole was set at
individual account balances and disclosures were performed
£14.9m (2020: £12.5m), determined with reference to a
to a lower threshold, performance materiality, so as to reduce
benchmark of total assets, of which it represents 1.0%
(2020: 1.0%).
to an acceptable level the risk that individually immaterial
misstatements in individual account balances add up to a material
Materiality for the Parent Company financial statements as a
whole was at £14.1m (2020: 12.0m) determined as 0.9% of
amount across the financial statements as a whole. Performance
the total assets of the parent company (2020: 0.9%).
materiality was set at 75% (2019: 75%) of materiality for the
In line with our audit methodology, our procedures on
financial statements as a whole, which equates to £11.1m (2020:
individual account balances and disclosures were performed
£9.4m) for the Group and £10.5m (2020: £9.0m) for the Parent
to a lower threshold, performance materiality, so as to
reduce to an acceptable level the risk that individually
Company. We applied this percentage in our determination of
immaterial misstatements in individual account balances add
performance materiality because we did not identify any factors
up to a material amount across the financial statements as a
indicating an elevated level of risk.
whole. Performance materiality was set at 75% (2019: 75%)
of materiality for the financial statements as a whole, which
equates to £11.1m (2020: £9.4m) for the Group and £10.5m
In addition, we applied materiality of £2.0m (2020:
(2020: £9.0m) for the Parent Company. We applied this
£3.2m) and performance materiality of £1.5m (2020:
percentage in our determination of performance materiality
£2.4m) to investment income, other operating income,
because we did not identify any factors indicating an elevated
level of risk.
gross rental income, service charge income and net
In addition, we applied materiality of £2.2m (2020: £3.2m)
returns on contract for differences for which we believe
and performance materiality of £1.7m (2020: £2.4m) to
misstatements of lesser amounts than materiality for
investment income, other operating income, gross rental
the financial statements as a whole could reasonably
income, service charge income and net returns on contract
for differences for which we believe misstatements of lesser
amounts than materiality for the financial statements as a
whole could reasonably be expected to influence the
Company’s members’ assessment of the financial
performance of the Company.
TR PROPERTY INVESTMENT TRUST
We agreed to report to the Audit Committee any corrected or
uncorrected identified misstatements exceeding £0.70m
(2020: £0.63m) in addition to other identified misstatements
that warranted reporting on qualitative grounds.
64
The audit team performed the audit of the Group as if it was a
single aggregated set of financial information. This approach is
unchanged from the prior year. The audit of the Group was
performed using the Group materiality level set out above.
The audit team performed the audit of the Group as if it was
a single aggregated set of financial information. This approach
is unchanged from the prior year. The audit of the Group was
performed using the Group materiality level set out above.
Total Assets
£1,491m (2020: £1,256m)
Group Materiality
£14.9m (2020: £12.5m)
£14.9m
Whole financial
statements materiality
(2020: £12.5m)
£14.1m
Parent Company
Materiality
(2020: £12.0m)
£0.755m Misstatements
reported to the audit
committee (2020:
£0.63m)
Total Assets
4. Going concern
The Directors have prepared the financial statements on the
going concern basis as they do not intend to liquidate the
Group or Company or to cease its operations, and as they
have concluded that the Group or Company’s financial
position means that this is realistic. They have also
concluded that there are no material uncertainties that
could have cast significant doubt over its ability to continue
as a going concern for at least a year from the date of
approval of the financial statements (“the going concern
Our audit of the Company was undertaken to the materiality
level specified above and was performed by a single audit
period”).
team.
Independent auditor’s report continued
4. GOING CONCERN
The Directors have prepared the financial statements on
the going concern basis as they do not intend to liquidate
the Group or Company or to cease its operations, and
as they have concluded that the Group or Company’s
financial position means that this is realistic. They have
also concluded that there are no material uncertainties
that could have cast significant doubt over its ability to
continue as a going concern for at least a year from the
date of approval of the financial statements (“the going
concern period”).
We used our knowledge of the Group, its industry, and the
general economic environment to identify the inherent
risks to its business model and analysed how those risks
might affect the Group or Company’s financial resources
or ability to continue operations over the going concern
period. The risks that we considered most likely to
adversely affect the Group or Company’s available financial
resources and its ability to operate over this period were:
— The impact of a significant reduction in the valuation
of investments and the implications for the Group or
Company’s debt covenants;
— The liquidity of the investment portfolio and its ability
to meet the liabilities of the Group as and when they
fall due; and
— The operational resilience of key service organisations.
We considered whether these risks could plausibly affect
the liquidity in the going concern period by assessing the
degree of downside assumption that, individually and
collectively, could result in a liquidity issue, taking into
account the Group or Company’s current and projected
cash and liquid investment position (and the results of
their reverse stress testing).
We considered whether the going concern disclosure in
note 1 to the financial statements gives a full and accurate
description of the Directors’ assessment of going concern,
including the identified risks and related sensitivities.
Our conclusions based on this work:
— We consider that the Directors’ use of the going
concern basis of accounting in the preparation of the
financial statements is appropriate;
— We have not identified, and concur with the Directors’
assessment that there is not, a material uncertainty
related to events or conditions that, individually or
collectively, may cast significant doubt on the Group or
Company’s ability to continue as a going concern for
the going concern period;
— We have nothing material to add or draw attention to
in relation to the Directors’ statement in note 1 to the
financial statements on the use of the going concern
basis of accounting with no material uncertainties that
may cast significant doubt over the Group or Company’s
use of that basis for the going concern period, and
we found the going concern disclosure in note 1 to be
acceptable; and
— The related statement under the Listing Rules set out
on pages 41 and 42 is materially consistent with the
financial statements and our audit knowledge.
However, as we cannot predict all future events or
conditions and as subsequent events may result in
outcomes that are inconsistent with judgements that
were reasonable at the time they were made, the
above conclusions are not a guarantee that the Group or
Company will continue in operation.
5. FRAUD AND BREACHES OF LAWS AND
REGULATIONS – ABILITY TO DETECT
Identifying and responding to risks of material
misstatement due to fraud
To identify risks of material misstatement due to fraud
(“fraud risks”) we assessed events or conditions that
could indicate an incentive or pressure to commit fraud
or provide an opportunity to commit fraud. Our risk
assessment procedures included:
— Enquiring of Directors as to the Group’s high-level
policies and procedures to prevent and detect fraud, as
well as whether they have knowledge of any actual,
suspected or alleged fraud;
— Assessing the segregation of duties in place between
the Directors, the Administrator and the Group’s
Investment Manager; and
— Reading Board and Audit Committee minutes
As required by auditing standards, we perform procedures
to address the risk of management override of controls,
in particular to the risk that management may be in
a position to make inappropriate accounting entries.
We evaluated the design and implementation of the
controls over journal entries and other adjustments and
made inquiries of the Administrator about inappropriate
or unusual activity relating to the processing of journal
entries and other adjustments. We substantively tested all
TR PROPERTY INVESTMENT TRUST
65
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION material post-closing entries and, based on the results of
our risk assessment procedures and understanding of the
process, including the segregation of duties between the
Directors and the Administrator, no further high-risk journal
entries or other adjustments were identified.
On this audit we have rebutted the fraud risk related
to revenue recognition because the revenue is non-
judgemental and straightforward, with limited opportunity
for manipulation. We did not identify any significant
unusual transactions or additional fraud risks.
Identifying and responding to risks of material
misstatement due to non-compliance with laws and
regulations
We identified areas of laws and regulations that could
reasonably be expected to have a material effect on the financial
statements from our general commercial and sector experience
and through discussion with the Directors, the Investment
Manager and the Administrator (as required by auditing
standards) and discussed with the Directors the policies and
procedures regarding compliance with laws and regulations.
The potential effect of these laws and regulations on the
financial statements varies considerably.
Firstly, the Company is subject to laws and regulations
that directly affect the financial statements including
financial reporting legislation (including related companies
legislation), distributable profits legislation, and its
qualification as an Investment Trust under UK taxation
legislation, any breach of which could lead to the Group
losing various deductions and exemptions from UK
corporation tax, and we assessed the extent of compliance
with these laws and regulations as part of our procedures
on the related financial statement items.
Secondly, the Group is subject to many other laws and
regulations where the consequences of non-compliance
could have a material effect on amounts or disclosures
in the financial statements, for instance through the
imposition of fines or litigation. We identified the following
areas as those most likely to have such an effect: money
laundering, data protection, bribery and corruption
legislation and certain aspects of company legislation
recognising the financial nature of the Group’s activities
and its legal form. Auditing standards limit the required
audit procedures to identify non-compliance with these
laws and regulations to enquiry of the Directors and the
Administrator and inspection of regulatory and legal
correspondence, if any. Therefore if a breach of operational
regulations is not disclosed to us or evident from relevant
correspondence, an audit will not detect that breach.
Context of the ability of the audit to detect fraud or
breaches of law or regulation
Owing to the inherent limitations of an audit, there is an
unavoidable risk that we may not have detected some
material misstatements in the financial statements, even
though we have properly planned and performed our
audit in accordance with auditing standards. For example,
the further removed non-compliance with laws and
regulations is from the events and transactions reflected
in the financial statements, the less likely the inherently
limited procedures required by auditing standards would
identify it.
In addition, as with any audit, there remained a higher risk
of non-detection of fraud, as these may involve collusion,
forgery, intentional omissions, misrepresentations, or the
override of internal controls. Our audit procedures are
designed to detect material misstatement. We are not
responsible for preventing non-compliance or fraud and
cannot be expected to detect non-compliance with all
laws and regulations.
6. WE HAVE NOTHING TO REPORT ON THE OTHER
INFORMATION IN THE ANNUAL REPORT
The Directors are responsible for the other information
presented in the Annual Report together with the financial
statements. Our opinion on the financial statements does
not cover the other information and, accordingly, we do
not express an audit opinion or, except as explicitly stated
below, any form of assurance conclusion thereon.
Our responsibility is to read the other information and,
in doing so, consider whether, based on our financial
statements audit work, the information therein is
materially misstated or inconsistent with the financial
statements or our audit knowledge. Based solely on that
work we have not identified material misstatements in the
other information.
Strategic report and Directors’ report
Based solely on our work on the other information:
— we have not identified material misstatements in the
Strategic report and the Directors’ report;
— in our opinion the information given in those reports
for the financial year is consistent with the financial
statements; and
— in our opinion those reports have been prepared in
accordance with the Companies Act 2006.
66
TR PROPERTY INVESTMENT TRUST
Independent auditor’s report continued
Directors’ remuneration report
In our opinion the part of the Directors’ Remuneration
Report to be audited has been properly prepared in
accordance with the Companies Act 2006.
Disclosures of emerging and principal risks and
longer-term viability
We are required to perform procedures to identify whether
there is a material inconsistency between the Directors’
disclosures in respect of emerging and principal risks and
the viability statement, and the financial statements and
our audit knowledge.
Based on those procedures, we have nothing material to
add or draw attention to in relation to:
— the Directors’ confirmation within the Viability Statement
on pages 33 and 34 that they have carried out a robust
assessment of the emerging and principal risks facing the
Group, including those that would threaten its business
model, future performance, solvency and liquidity;
— the Principal Risks and Uncertainties disclosures
describing these risks and how emerging risks are
identified, and explaining how they are being managed
and mitigated; and
— the Directors’ explanation in the Viability Statement of
how they have assessed the prospects of the Company,
over what period they have done so and why they
considered that period to be appropriate, and their
statement as to whether they have a reasonable
expectation that the Group will be able to continue
in operation and meet its liabilities as they fall due
over the period of their assessment, including any
related disclosures drawing attention to any necessary
qualifications or assumptions.
We are also required to review the Viability Statement, set
out on pages 33 and 34 under the Listing Rules. Based on
the above procedures, we have concluded that the above
disclosures are materially consistent with the financial
statements and our audit knowledge.
Our work is limited to assessing these matters in the
context of only the knowledge acquired during our
financial statements audit. As we cannot predict all future
events or conditions and as subsequent events may
result in outcomes that are inconsistent with judgements
that were reasonable at the time they were made, the
absence of anything to report on these statements is not a
guarantee as to the Company’s longer-term viability.
Corporate governance disclosures
We are required to perform procedures to identify whether
there is a material inconsistency between the Directors’
corporate governance disclosures and the financial
statements and our audit knowledge.
Based on those procedures, we have concluded that each
of the following is materially consistent with the financial
statements and our audit knowledge:
— the Directors’ statement that they consider that the
annual report and financial statements taken as a
whole is fair, balanced and understandable, and
provides the information necessary for shareholders to
assess the Group’s position and performance, business
model and strategy;
— the section of the annual report describing the work of
the Audit Committee, including the significant issues
that the audit committee considered in relation to
the financial statements, and how these issues were
addressed; and
— the section of the annual report that describes
the review of the effectiveness of the Group’s risk
management and internal control systems.
We are required to review the part of Corporate
Governance Statement relating to the Group’s compliance
with the provisions of the UK Corporate Governance Code
specified by the Listing Rules for our review. We have
nothing to report in this respect.
7. WE HAVE NOTHING TO REPORT ON THE OTHER
MATTERS ON WHICH WE ARE REQUIRED TO
REPORT BY EXCEPTION
Under the Companies Act 2006, we are required to report
to you if, in our opinion:
— adequate accounting records have not been kept, or
returns adequate for our audit have not been received
from branches not visited by us; or
— the financial statements and the part of the Directors’
Remuneration Report to be audited are not in
agreement with the accounting records and returns; or
— certain disclosures of Directors’ remuneration specified
by law are not made; or
— we have not received all the information and
explanations we require for our audit.
We have nothing to report in these respects.
TR PROPERTY INVESTMENT TRUST
67
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION 8. RESPECTIVE RESPONSIBILITIES
Directors’ responsibilities
As explained more fully in their statement set out on
page 61, the Directors are responsible for: the preparation
of the financial statements including being satisfied that
they give a true and fair view; such internal control as
they determine is necessary to enable the preparation
of financial statements that are free from material
misstatement, whether due to fraud or error; assessing
the Company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern;
and using the going concern basis of accounting unless
they either intend to liquidate the Company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and
to issue our opinion in an auditor’s report. Reasonable
assurance is a high level of assurance, but does not
guarantee that an audit conducted in accordance with ISAs
(UK) will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are
considered material if, individually or in aggregate, they
could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial
statements.
A fuller description of our responsibilities is provided on
the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities.
9. THE PURPOSE OF OUR AUDIT WORK AND TO
WHOM WE OWE OUR RESPONSIBILITIES
This report is made solely to the Group’s members, as
a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006 and the terms of our engagement by
the Company. Our audit work has been undertaken so that
we might state to the Group’s members those matters we
are required to state to them in an auditor’s report and for
no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other
than the Group and the Group’s members, as a body, for
our audit work, for this report, or for the opinions we have
formed.
Richard Kelly (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
Saltire Court
15 Canada Square
London
E14 5GL
3 June 2021
68
TR PROPERTY INVESTMENT TRUST
Group Statement of Comprehensive Income
for the year ended 31 March 2021
Notes
Year ended 31 March 2021
Year ended 31 March 2020
Revenue
Return
£’000
Capital
Return
£’000
Total
£’000
Revenue
Return
£’000
Capital
Return
£’000
Income
Investment income
Other operating income
Gross rental income
Service charge income
Gains/(losses) on investments held at
fair value
Net movement on foreign exchange;
investments and loan notes
Net movement on foreign exchange;
cash and cash equivalents
Net returns on contracts for difference
Net return on total return swap
Total Income
Expenses
Management and performance fees
Direct property expenses, rent payable
and service charge costs
Other administrative expenses
Total operating expenses
Operating profit/(loss)
Finance costs
Profit/(loss) from operations before
tax
Taxation
Total comprehensive income
Earnings/(loss) per Ordinary share
2
4
3
3
10
10
10
5
3
6
7
8
9
36,557
67
3,185
1,051
–
–
–
3,320
–
–
–
–
–
36,557
67
3,185
1,051
196,582
196,582
(3,144)
(3,144)
(1,474)
17,978
(188)
(1,474)
21,298
(188)
47,112
35
3,415
1,786
–
–
–
5,724
–
Total
£’000
47,112
35
3,415
1,786
–
–
–
–
(153,614)
(153,614)
11,296
11,296
302
(41,276)
(3,808)
302
(35,552)
(3,808)
44,180
209,754
253,934
58,072
(187,100)
(129,028)
(1,556)
(14,328)
(15,884)
(1,570)
(7,392)
(8,962)
(1,321)
(1,231)
(4,108)
–
(604)
(1,321)
(1,835)
(14,932)
(19,040)
(1,984)
(1,398)
(4,952)
–
(615)
(1,984)
(2,013)
(8,007)
(12,959)
40,072
194,822
234,894
53,120
(195,107)
(141,987)
(416)
(1,969)
(2,385)
(814)
(2,443)
(3,257)
39,656
192,853
232,509
52,306
(197,550)
(145,244)
(767)
2,667
1,900
38,889
12.25p
195,520
234,409
61.61p
73.86p
(5,912)
46,394
14.62p
3,149
(2,763)
(194,401)
(148,007)
(61.26)p
(46.64)p
The Total column of this statement represents the Group’s Statement of Comprehensive Income, prepared in accordance with IFRS. The
Revenue Return and Capital Return columns are supplementary to this and are prepared under guidance published by the Association of
Investment Companies. All items in the above statement derive from continuing operations.
The Group does not have any other income or expense that is not included in the above statement therefore “Total comprehensive
income” is also the profit for the year.
All income is attributable to the shareholders of the parent company.
The notes from pages 73 to 97 form part of these Financial Statements.
TR PROPERTY INVESTMENT TRUST
69
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION
Group and Company Statement of Changes in Equity
GROUP
For the year ended 31 March 2021
Notes
Share
Capital
Ordinary
£’000
Share
Premium
Account
£’000
Capital
Redemption
Reserve
£’000
Retained
Earnings
Ordinary
£’000
Total
£’000
At 31 March 2020
Total comprehensive income
Dividends paid
At 31 March 2021
COMPANY
17
79,338
43,162
43,971
–
–
–
–
–
–
969,982
234,409
1,136,453
234,409
(44,429)
(44,429)
79,338
43,162
43,971
1,159,962
1,326,433
For the year ended 31 March 2021
Notes
Share
Capital
Ordinary
£’000
Share
Premium
Account
£’000
Capital
Redemption
Reserve
£’000
Retained
Earnings
Ordinary
£’000
Total
£’000
At 31 March 2020
Total comprehensive income
Dividends paid
At 31 March 2021
GROUP
17
79,338
43,162
43,971
–
–
–
–
–
–
969,982
234,409
1,136,453
234,409
(44,429)
(44,429)
79,338
43,162
43,971
1,159,962
1,326,433
For the year ended 31 March 2020
Notes
Share
Capital
Ordinary
£’000
Share
Premium
Account
£’000
Capital
Redemption
Reserve
£’000
At 31 March 2019
Total comprehensive income
Dividends paid
At 31 March 2020
COMPANY
17
79,338
43,162
43,971
–
–
–
–
–
–
79,338
43,162
43,971
For the year ended 31 March 2020
Notes
Share
Capital
Ordinary
£’000
Share
Premium
Account
£’000
Capital
Redemption
Reserve
£’000
At 31 March 2019
Total comprehensive income
Dividends paid
At 31 March 2020
17
79,338
43,162
43,971
–
–
–
–
–
–
79,338
43,162
43,971
The notes from pages 73 to 97 form part of these Financial Statements.
Retained
Earnings
Ordinary
£’000
1,161,783
(148,007)
(43,794)
969,982
Retained
Earnings
Ordinary
£’000
1,161,783
(148,007)
(43,794)
969,982
Total
£’000
1,328,254
(148,007)
(43,794)
1,136,453
Total
£’000
1,328,254
(148,007)
(43,794)
1,136,453
70
TR PROPERTY INVESTMENT TRUST
Group and Company Balance Sheets
as at 31 March 2021
Non-current assets
Investments held at fair value
Investments in subsidiaries
Deferred taxation asset
Current assets
Debtors
Cash and cash equivalents
Current liabilities
Net current (liabilities)/assets
Total assets less current liabilities
Non-current liabilities
Net assets
Capital and reserves
Called up share capital
Share premium account
Capital redemption reserve
Retained earnings
Equity shareholders' funds
Net Asset Value per:
Ordinary share
Notes
Group
2021
£’000
Company
2021
£’000
Group
2020
£’000
Company
2020
£’000
10
10
12
12
13
13
14
15
15
16
1,400,516
1,400,516
1,155,295
–
43,312
–
1,400,516
1,443,828
1,155,295
1,155,295
50,429
1,205,724
686
686
–
–
1,401,202
1,444,514
1,155,295
1,205,724
60,990
29,114
90,104
(107,280)
(17,176)
60,520
29,112
89,632
(150,120)
(60,488)
1,384,026
1,384,026
(57,593)
(57,593)
1,326,433
1,326,433
79,338
43,162
43,971
1,159,962
1,326,433
79,338
43,162
43,971
1,159,962
1,326,433
60,094
40,129
100,223
(59,711)
40,512
1,195,807
(59,354)
1,136,453
79,338
43,162
43,971
969,982
1,136,453
59,972
40,127
100,099
(110,016)
(9,917)
1,195,807
(59,354)
1,136,453
79,338
43,162
43,971
969,982
1,136,453
19
417.97p
417.97p
358.11p
358.11p
These financial statements were approved by the directors of TR Property Investment Trust plc (Company No:84492) and authorised for
issue on 3 June 2021.
D Watson
Director
The notes from pages 73 to 97 form part of these Financial Statements.
TR PROPERTY INVESTMENT TRUST
71
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION
Group and Company Cash Flow Statements
for the year ended 31 March 2021
Reconciliation of profit/(loss) from operations before
tax to net cash outflow from operating activities
Profit/(loss) from operations before tax
Finance costs
(Gains)/losses on investments and derivatives held at fair
value through profit or loss
Net movement on foreign exchange; cash and cash
equivalents and loan notes
(Increase)/decrease in accrued income
Sales of investments
Purchases of investments
Decrease/(increase) in sales settlement debtor
(Decrease)/increase in purchase settlement creditor
(Increase)/decrease in other debtors
Increase/(decrease) in other creditors
Scrip dividends included in investment income and net
returns on contracts for difference
Net cash outflow from operating activities before
interest and taxation
Interest paid
Taxation paid
Net cash outflow from operating activities
Financing activities
Equity dividends paid
Drawdown of loans
Net cash from/(used in) financing activities
Decrease in cash
Cash and cash equivalents at start of year
Net movement on foreign exchange; cash and cash
equivalents
Cash and cash equivalents at end of year
Note
Dividends received
Interest received
Group
2021
£’000
Company
2021
£’000
Group
2020
£’000
Company
2020
£’000
232,509
2,385
231,844
2,385
(145,244)
3,257
(145,244)
3,257
(214,372)
(207,255)
198,698
198,711
(179)
(102)
353,167
(370,496)
4,753
(5,781)
(11,436)
2,451
(179)
(102)
353,167
(370,496)
4,753
(5,781)
(11,436)
(4,001)
(8,489)
(8,489)
(15,590)
(2,607)
(1,915)
(20,112)
(44,429)
55,000
10,571
(9,541)
40,129
(1,474)
29,114
(15,590)
(2,607)
(1,915)
(20,112)
(44,429)
55,000
10,571
(9,541)
40,127
(1,474)
29,112
859
584
316,841
(383,674)
(1,417)
4,501
4,447
2,047
(3,818)
(2,919)
(3,421)
(2,321)
(8,661)
(43,794)
40,000
(3,794)
(12,455)
52,282
302
40,129
859
584
316,841
(383,674)
(1,417)
4,501
4,447
2,034
(3,818)
(2,919)
(3,421)
(2,321)
(8,661)
(43,794)
40,000
(3,794)
(12,455)
52,280
302
40,127
38,224
45
38,224
45
52,003
37
52,003
37
The notes from pages 73 to 97 form part of these Financial Statements.
72
TR PROPERTY INVESTMENT TRUST
Notes to the Financial Statements
1 ACCOUNTING POLICIES
The financial statements for the year ended 31 March 2021 have been prepared on a going concern basis, in accordance with
International Financial Reporting Standards (IFRSs) adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European
Union and in conformity with the requirements of the Companies Act 2006. The financial statements have also been prepared in
accordance with the Statement of Recommended Practice (SORP), “Financial Statements of Investment Trust Companies and Venture
Capital Trusts,” to the extent that it is consistent with IFRS.
In assessing Going Concern the Board has made a detailed assessment of the ability of the Company and the Group to meet
its liabilities as they fall due, including stress and liquidity tests which considered the effects of substantial falls in investment
valuations, substantial reductions in revenues received and reductions in market liquidity including the effects and potential effects
of the current and likely ongoing economic impact caused by the Coronavirus pandemic. The Board is satisfied with the operational
resilience of service providers despite COVID-19 and continues to monitor their performance throughout the pandemic.
In light of the testing carried out, the liquidity of the level 1 assets held by the Company and the significant net asset value position,
and despite the net current liability position of the Group and Parent Company (which could be mitigated by the sale of liquid level 1
investments), the Directors are satisfied that the Company and Group have adequate financial resources to continue in operation
for at least the next 12 months following the signing of the financial statements and therefore it is appropriate to adopt the going
concern basis of accounting.
The Group and Company financial statements are expressed in Sterling, which is their functional and presentational currency.
Sterling is the functional currency because it is the currency of the primary economic environment in which the Group operates.
Values are rounded to the nearest thousand pounds (£’000) except where otherwise indicated.
Key estimates and judgements
The preparation of the financial statements necessarily requires the exercise of judgement, both in application of accounting
policies, which are set out below, and in the selection of assumptions used in the calculation of estimates. These estimates and
judgements are reviewed on an ongoing basis and are continually evaluated based on historical experience and other factors.
However, actual results may differ from these estimates. The only key estimate is considered to be the valuation of investment
properties. See section (f) of this note. There are not considered to be any key judgements.
a) Basis of consolidation
The Group financial statements consolidate the financial statements of the Company and its subsidiaries to 31 March 2021. All the
subsidiaries of the Company have been consolidated in these financial statements.
In accordance with IFRS10 the Company has been designated as an investment entity on the basis that:
•
•
•
It obtains funds from investors and provides those investors with investment management services;
It commits to its investors that its business purpose is to invest solely for returns from capital appreciation and investment
income; and
It measures and evaluates performance of substantially all of its investments on a fair value basis.
Each of the subsidiaries of the Company was established for the sole purpose of operating or supporting the investment operations of
the Company (including raising additional financing), and is not itself an investment entity. IFRS 10 sets out that in the case of controlled
entities that support the investment activity of the investment entity, those entities should be consolidated rather than presented as
investments at fair value. Accordingly the Company has consolidated the results and financial positions of those subsidiaries.
Subsidiaries are consolidated from the date of their acquisition, being the date on which the Company obtains control, and continue
to be consolidated until the date that such control ceases. The financial statements of subsidiaries used in the preparation of the
consolidated financial statements are based on consistent accounting policies. All intra-group balances and transactions, including
unrealised profits arising therefrom, are eliminated. This is consistent with the presentation in previous years.
b) Income
Dividends receivable on equity shares are treated as revenue for the year on an ex-dividend basis. Where no ex-dividend date is
available, dividends receivable on or before the year end are treated as revenue for the year. Provision is made for any dividends
not expected to be received. Where the Group has elected to receive these dividends in the form of additional shares rather
than cash the amount of cash dividend foregone is recognised as income. Differences between the value of shares received and
the cash dividend foregone are recognised in the capital returns of the Group Statement of Comprehensive Income. The fixed
returns on debt securities are recognised on a time apportionment basis so as to reflect the effective yield on each such security.
Interest receivable from cash and short term deposits is accrued to the end of the year. Stock lending income is recognised on
an accruals basis. Underwriting commission is taken to revenue, unless any shares underwritten are required to be taken up, in
which case the proportionate commission received is deducted from the cost of the investment.
Recognition of property rental income is set out in section (f) of this note.
Recognition of income from contracts of difference is set out in section (g) of this note.
TR PROPERTY INVESTMENT TRUST
73
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION
Notes to the Financial Statements continued
1 ACCOUNTING POLICIES continued
c) Expenses
All expenses and finance costs are accounted for on an accruals basis. An analysis of retained earnings broken down into
revenue and capital items is given in note 16. In arriving at this breakdown, expenses have been presented as revenue items
except as follows:
•
•
•
•
Expenses which are incidental to the acquisition or disposal of an investment;
Expenses are presented as capital where a connection with the maintenance or enhancement of the value of the
investments can be demonstrated, this includes irrecoverable VAT incurred on costs relating to the extension of residential
leases as premiums received for extending or terminating leases are recognised in the capital account;
One quarter of the base management fee is charged to revenue, with three quarters allocated to capital return to reflect the
Board’s expectations of long term investment returns. All performance fees are charged to capital return;
The fund administration, depositary, custody and company secretarial services are charged directly to the Company and
are included within ‘Other administrative expenses’ in note 6. These expenses are charged on the same basis as the base
management fee; one quarter to income and three quarters to capital.
d) Finance costs
The finance cost in respect of capital instruments other than equity shares is calculated so as to give a constant rate of return on
the outstanding balance. One quarter of the finance cost is charged to revenue and three quarters to capital return.
e) Taxation
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities,
based on tax rates and laws that are enacted or substantively enacted by the balance sheet date.
Income tax is charged or credited directly to equity if it relates to items that are credited or charged to equity. Otherwise income
tax is recognised in the Group Statement of Comprehensive Income.
The tax effect of different items of expenditure is allocated between capital and revenue using the Group’s effective rate of
tax for the year. The charge for taxation is based on the profit for the year and takes into account taxation deferred because of
temporary differences between the treatment of certain items for taxation and accounting purposes.
In accordance with the recommendations of the SORP, the allocation method used to calculate tax relief on expenses presented
against capital returns in the supplementary information in the Statement of Comprehensive Income is the “marginal basis”.
Under this basis, if taxable income is capable of being offset entirely by expenses presented in the revenue return column of the
Statement of Comprehensive Income, then no tax relief is transferred to the capital column.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and
liabilities in the Balance Sheet and the corresponding tax bases used in the computation of taxable profit, and is accounted
for using the balance sheet liability method. Deferred tax liabilities are recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible
temporary differences can be utilised.
The Company is an investment trust under s.1158 of the Corporation Tax Act 2010 and, as such, is not liable for tax on capital
gains. Capital gains arising in subsidiary companies are subject to capital gains tax.
f) Investment property
Investment property is measured initially at cost including transaction costs. Transaction costs include transfer taxes, professional
fees for legal services and initial leasing commissions to bring the property to the condition necessary for it to be capable of
operating. The carrying amount also includes the cost of replacing part of an existing investment property at the time that
cost is incurred if the recognition criteria are met. The purchase and sale of properties is recognised to be effected on the date
unconditional contracts are exchanged.
Subsequent to initial recognition, investment property is stated at fair value. Gains or losses arising from changes in the fair
values are included in the Group Statement of Comprehensive Income in the year in which they arise.
Investment property is derecognised when it has been disposed of or permanently withdrawn from use and no future economic
benefit is expected from its disposal. Any gains or losses on the retirement or disposal of investment property are recognised in
the Group Statement of Comprehensive Income in the year of disposal.
Gains or losses on the disposal of investment property are determined as the difference between net disposal proceeds and the
carrying value of the asset at the date of disposal.
Revaluation of investment properties
The Group carries its investment properties at fair value in accordance with IFRS 13, revalued twice a year, with changes in fair
values being recognised in the Group Statement of Comprehensive Income. The Group engaged Knight Frank LLP as independent
valuation specialists to determine fair value as at 31 March 2021.
74
TR PROPERTY INVESTMENT TRUST
1 ACCOUNTING POLICIES continued
Valuations of investment properties
Determination of the fair value of investment properties has been prepared on the basis defined by the RICS Valuation – Global
Standards (The Red Book Global Standards) as follows:
“The estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing
seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and
without compulsion.”
The valuation takes into account future cash flow from assets (such as lettings, tenants’ profiles, future revenue streams, capital values of
fixtures and fittings, plant and machinery, any environmental matters and the overall repair and condition of the property) and discount
rates applicable to those assets. These assumptions are based on local market conditions existing at the balance sheet date.
In arriving at their estimates of fair values as at 31 March 2021, the valuers have used their market knowledge and professional
judgement and have not only relied solely on historical transactional comparables. Examples of inputs to the valuation can be seen
in the sensitivity analysis disclosed in note 10 (e).
Rental income
Rental income receivable under operating leases is recognised on a straight-line basis over the term of the lease, except for
contingent rental income which is recognised when it arises.
Incentives for lessees to enter into lease agreements or other negotiated rent free periods agreed are spread evenly over the
lease term, even if the payments are not made on such a basis. The lease term is the non-cancellable period of the lease
together with any further term for which the tenant has the option to continue the lease, where, at the inception of the lease,
the directors are reasonably certain that the tenant will exercise that option. Premiums received to terminate or extend leases
are recognised in the capital account of the Group Statement of Comprehensive Income when they arise.
Service charges and expenses recoverable from tenants
Income arising from expenses recharged to tenants is recognised in the period in which the expense can be contractually
recovered. Service charges and other such receipts are included gross of the related costs in revenue as the directors consider
that the Group acts as principal in this respect.
g) Investments
When a purchase or sale is made under contract, the terms of which require delivery within the timeframe of the relevant
market, the investments concerned are recognised or derecognised on the trade date.
All the Group’s investments are defined under IFRS as investments designated as fair value through profit or loss but are also
described in these financial statements as investments held at fair value.
All investments are designated upon initial recognition as held at fair value, and are measured at subsequent reporting dates at
fair value, which, for quoted investments, is deemed to be closing prices for stocks sourced from European stock exchanges and
for SETS stocks sourced from the London Stock Exchange. SETS is the London Stock Exchange electronic trading service covering
most of the market including all the FTSE All -Share and the most liquid AIM constituents. Unquoted investments or investments
for which there is only an inactive market are held at fair value which is based on valuations made by the directors in accordance
with IPEVCA guidelines and using current market prices, trading conditions and the general economic climate.
In its financial statements the Company recognises the fair value of its investments in subsidiaries as being the adjusted net
asset value. The subsidiaries have historically been holding vehicles for direct property investment or financing vehicles. No
assets are currently held through the subsidiary structure and all financing instruments are directly held by the Company.
Changes in the fair value are recognised in the Group Statement of Comprehensive Income. On disposal, realised gains and
losses are also recognised in the Group Statement of Comprehensive Income.
Derivatives
Derivatives are held at fair value based on traded prices. Gains and losses on derivative transactions are recognised in the Group
Statement of Comprehensive Income. Gains and losses on CFDs and total return swaps resulting from movements in the price
of the underlying stock are treated as capital. Dividends from the underlying investment and financing costs of CFDs and total
return swaps are treated as revenue/capital expenses.
Gains and losses on forward currency contracts used for capital hedging purposes are treated as capital.
Contracts for Difference (“CFDs”) are synthetic equities and are valued by reference to the investments’ underlying market values.
The sources of the returns under the derivative contract (e.g. notional dividends, financing costs, interest returns and capital
changes) are allocated to the revenue and capital accounts in alignment with the nature of the underlying source of income and
in accordance with the guidance given in the AIC SORP. Notional dividend income or expenses arising on long or short positions
are apportioned wholly to the revenue account. Notional interest expense on long positions is apportioned between revenue
and capital in accordance with the Board’s long term expected returns of the Company (currently determined to be 25% to the
TR PROPERTY INVESTMENT TRUST
75
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION
Notes to the Financial Statements continued
Notes to the Financial Statements continued
1 ACCOUNTING POLICIES continued
revenue account and 75% to capital reserves). Changes in value relating to underlying price movements of securities in relation
to CFD exposures are allocated wholly to capital reserves.
h) Borrowings, loan notes and debentures
All loans and debentures are initially recognised at the fair value of the consideration received, less issue costs where applicable.
After initial recognition, all interest bearing loans and borrowings are subsequently measured at amortised cost.
Amortised cost is calculated by taking into account any discount or premium on settlement. The costs of arranging any interest
bearing loans are capitalised and amortised over the life of the loan on an effective interest rate basis.
i) Foreign currency translation
Transactions involving foreign currencies are converted at the rate ruling at the date of the transaction.
Foreign currency monetary assets and liabilities are translated into Sterling at the rate ruling on the balance sheet date. Foreign
exchange differences are recognised in the Group Statement of Comprehensive Income.
j) Cash and cash equivalents
Cash and cash equivalents are measured at amortised cost and comprise cash in hand and demand deposits.
k) Dividends payable to shareholders
Interim dividends are recognised in the period in which they are paid and final dividends are recognised when approved by
shareholders.
l) Adoption of new and revised Standards
Standards and Interpretations effective in the current period
The accounting policies adopted are consistent with those of the previous consolidated financial statements except as noted below.
IFRS 3 amendments. The amendments provided more guidance on the definition of a business to assist in determining
whether a transaction results in an asset or a business acquisition. The amendments have not had an impact on the Group’s
financial statements.
Interest Rate Benchmark Reform – Amendments to IFRS 9, IAS 39 and IFRS 7. The amendments provided temporary reliefs
which enable hedge accounting to continue during the period of uncertainty before the replacement of an existing interest
rate benchmark with an alternative risk free interest rate. The amendments have not had a material impact on the Group’s
financial statements.
Amendments to IAS 1 and IAS 8 – Definition of Material. The International Accounting Standards Board refined its definition of
“material” and issued practical guidance on applying the concept of materiality. The amendments have not had a material impact
on the Group’s financial statements.
The Conceptual Framework for Financial Reporting. The Conceptual Framework is not a standard however its purpose is to outline
a set of concepts for financial reporting, standard setting, guidance for preparers in developing consistent accounting policies
and assistance to others in understanding and interpreting the standards. The Framework has not had a material impact on the
Group’s financial statements.
Early adoption of standards and interpretations
The standards issued before the reporting date that become effective after 31 March 2021 are not expected to have a material
effect on equity or profit for the subsequent period. The Group has not early adopted any new International Financial Reporting
Standard or Interpretation. Standards, amendments and interpretations issued but not yet effective up to the date of issuance of
the Group’s financial statements are listed below:
IAS 1 Amendments – Classification of Liabilities as Current or Non-Current (effective date amended to 1 January 2023). The
amendments specify the requirements for classifying liabilities as current or non-current. The amendments are not expected to
have a material impact on the Group’s financial statements.
IAS 1 Amendments – Disclosure of Accounting Policies (effective 1 January 2023). The amendments require an entity to disclose
its material accounting policy information instead of its significant accounting policies. The amendments contain guidance and
examples on identifying material accounting policy information. The amendments are not expected to have a material impact on
the Group’s financial statements.
IAS 8 Amendments – Definition of Accounting Estimates (effective 1 January 2023) The amendments define accounting estimates
as “monetary amounts in financial statements that are subject to measurement uncertainty”. The amendments also clarify the
interaction between an accounting policy and an accounting estimate. The amendments are not expected to have a material
impact on the Group’s financial statements.
IAS 16 Amendments – Proceeds before Intended Use (effective 1 January 2022) The amendments intend to clarify the accounting
for the net proceeds from selling any items produced while bringing an item of property, plant and equipment into use. The
amendments are not expected to have a material impact on the Group’s financial statements.
76
TR PROPERTY INVESTMENT TRUST
1 ACCOUNTING POLICIES continued
IAS 37 Amendments – Onerous Contracts – Cost of fulfilling contract (effective 1 January 2022) The amendments clarify that for
the purpose of assessing whether a contract is onerous, the cost of fulfilling the contract includes both the incremental costs
of fulfilling that contract and an allocation of other costs that relate directly to fulfilling contracts. The amendments are not
expected to have a material impact on the Group’s financial statements.
IAS 39, IFRS 4, 7, 9 and 16 Amendments – Interest Rate Benchmark Reform (Phase 2) (effective 1 January 2021) IBOR reform refers
to the global reform of interest rate benchmarks which includes the replacement of some interbank offered rates (IBOR) with
alternative benchmark rates. To ensure users of financial statements can understand the effect of the reform on a company’s
financial instruments and risk management strategy, additional information on the nature and extent of risks to which the
company is exposed arising from financial instruments subject to IBOR reform is required. In addition, details of the company’s
progress in completing its transitions to alternative benchmark rates is required.
IAS 41, IFRS 1, 9 and 16 Amendments - Annual Improvements 2018-20 Cycle (effective 1 January 2022) The minor improvements,
none of which will have a material impact on the Group’s financial statements, to the standards noted were endorsed in
September 2020.
IFRS 3 Amendments – Reference to the Conceptual Framework (effective 1 January 2022) The amendments require that for
transactions within the scope of IAS 37 or IFRIC 21, an acquirer applies IAS 37 or IFRIC 21 (instead of the Conceptual Framework)
to identify the liabilities it has assumed in a business combination. In addition, IFRS 3 now contains a statement that an acquirer
does not recognise contingent assets acquired in a business combination. The amendments are not expected to have a material
impact on the Group’s financial statements.
IFRS 4 Amendments – Extension of IFRS 9 Deferral (effective 1 January 2023) The option for companies whose business is the
issuance of insurance contracts, to defer the effective date of IFRS 9 Financial Instruments has been extended. The amendment
is not expected to have an impact on the Group’s financial statements.
IFRS 16 Amendments – Covid-19 Related Rent Concessions (effective 1 April 2021) the May 2020 amendments, which introduced
an optional practical expedient that simplifies how a lessee accounts for rent concessions that are a direct consequence of
Covid-19, have been extended to lease payments originally due on or before 30 June 2022.
IFRS 17 – Insurance Contracts (effective 1 January 2023) IFRS 17 replaces IFRS 4 Insurance Contracts and contains several areas that
are covered, including measurement of revenue, insurance performance, onerous contracts and disclosure. The standard is not
expected to have an impact on the Group’s financial statements.
IFRS 17 Amendments – Amendments to IFRS 17 (effective 1 January 2023) In June 2020, amendments to IFRS 17 were issued
which are intended to make financial performance easier to explain and reduce compliance costs by simplifying some
requirements in the standard. The amendments are not expected to have an impact on the Group’s financial statements.
2 INVESTMENT INCOME
Dividends from UK listed investments
Dividends from overseas listed investments
Scrip dividends from listed investments
Property income distributions
3 NET RENTAL INCOME
Gross rental income
Service charge income
Direct property expenses, rent payable and service charge costs
2021
£’000
3,753
18,656
7,482
6,666
36,557
2021
£’000
3,185
1,051
(1,321)
2,915
2020
£’000
4,911
26,631
3,370
12,200
47,112
2020
£’000
3,415
1,786
(1,984)
3,217
TR PROPERTY INVESTMENT TRUST
77
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION
Notes to the Financial Statements continued
Notes to the Financial Statements continued
3 NET RENTAL INCOME continued
Operating leases
The Group has entered into commercial leases on its property portfolio. Commercial property leases typically have lease terms
between 5 and 15 years and include clauses to enable periodic upward revision of the rental charge according to prevailing market
conditions. Some leases contain options to break before the end of the lease term.
Future minimum rentals under non-cancellable operating leases as at 31 March are as follows:
Within 1 year
After 1 year but not more than 5 years
More than 5 years
4 OTHER OPERATING INCOME
Interest receivable
Interest on refund of overseas withholding tax
Underwriting commission
2021
£’000
3,000
10,000
19,000
32,000
2021
£’000
1
44
22
67
2020
£’000
2,950
10,100
15,500
28,550
2020
£’000
32
3
–
35
Underwriting is part of the process of introducing new securities to the market. The Company may participate in the underwriting of
investee companies’ securities, as one of a number of participants, for which compensation in the form of commission is received. The
Company only participates in underwriting having assessed the risks involved and in securities in which it is prepared to increase its
holding should that be the outcome. The commission earned is taken to revenue unless any securities underwritten are required to
be taken up in which case the proportionate commission is deducted from the cost of the investment. During the year the Company
participated in one (2020: nil) underwriting and all commission earned was taken to revenue and shown under Other operating income.
5 MANAGEMENT AND PERFORMANCE FEES
Management fee
Performance fee
2021
Revenue
Return
£’000
1,556
–
1,556
2021
Capital
Return
£’000
4,669
9,659
14,328
2021
Total
£’000
6,225
9,659
15,884
2020
Revenue
Return
£’000
1,570
–
1,570
2020
Capital
Return
£’000
4,709
2,683
7,392
2020
Total
£’000
6,279
2,683
8,962
A summary of the terms of the management agreement is given in the Report of the Directors on page 41.
78
TR PROPERTY INVESTMENT TRUST
6 OTHER ADMINISTRATIVE EXPENSES
Directors' fees (Directors' Remuneration Report on pages 55 to 57)
Auditor's remuneration:
– for audit of the consolidated and parent company financial statements
Legal fees
Taxation fees
Other administrative expenses
Other expenses
Irrecoverable VAT
Expenses charged to Revenue
Expenses charged to Capital
2021
£’000
232
80
15
69
199
454
182
1,231
604
1,835
2020
£’000
209
80
31
103
199
562
214
1,398
615
2,013
Other administrative expenses include depositary, custody and company secretarial services. These expenses are charged on the
same basis as the base management fee; one quarter to income and three quarters to capital. Total other administrative expenses
charged to both income and capital are £797,000 (2020: £796,000).
Other expenses include broker fees, marketing and PR costs, Directors’ National Insurance and recruitment, Registrars and
listing fees, and annual report and other publication printing and distribution costs. These expenses are charged solely to the
revenue account.
VAT on costs incurred in connection with the extension of the residential leases on The Colonnades are charged to the capital account.
7 FINANCE COSTS
Bank loans and overdrafts repayable within 1 year
Loan notes repayable after 5 years
HMRC interest: release of FII GLO provision
Amount allocated to capital return
Amount allocated to revenue return
8 TAXATION
a) Analysis of charge in the year
2021
£’000
1,241
1,384
(240)
2,385
(1,969)
416
2021
Revenue
Return
£’000
1,989
866
2,855
(1,980)
875
(108)
767
2021
Capital
Return
£’000
(1,989)
8
(1,981)
–
(1,981)
(686)
(2,667)
2021
Total
£’000
–
874
874
(1,980)
(1,106)
(794)
(1,900)
2020
Revenue
Return
£’000
3,362
2,606
5,968
(406)
5,562
350
5,912
2020
Capital
Return
£’000
(3,149)
–
(3,149)
–
(3,149)
–
(3,149)
UK corporation tax at 19% (2020: 19%)
Overseas taxation
(Over)/under provision in respect of prior
years
Deferred taxation
Current tax charge for the year
2020
£’000
1,866
1,391
–
3,257
(2,443)
814
2020
Total
£’000
213
2,606
2,819
(406)
2,413
350
2,763
TR PROPERTY INVESTMENT TRUST
79
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION
Notes to the Financial Statements continued
Notes to the Financial Statements continued
8 TAXATION continued
b) Factors affecting total tax charge for the year
The tax assessed for the year is lower (2020: lower) than the standard rate of corporation tax in the UK for a large company of 19%
(2020: 19%).
The difference is explained below:
Net profit/(loss) on ordinary activities
before taxation
Corporation tax charge at 19% (2020:19%)
Effects of:
Non taxable gains on investments
Currency movements not taxable
Tax relief on expenses charged to capital
Non-taxable returns
Non-taxable UK dividends
Non-taxable overseas dividends
Overseas withholding taxes
Deferred tax prior year adjustment
(Over)/under provision in respect of prior
years
Disallowable expenses
Deferred tax not provided
2021
Revenue
Return
£’000
2021
Capital
Return
£’000
2021
Total
£’000
2020
Revenue
Return
£’000
2020
Capital
Return
£’000
2020
Total
£’000
39,656
7,535
192,853
232,509
36,642
44,177
52,306
9,938
(197,550)
(145,244)
(37,535)
(27,597)
–
–
–
(23)
(972)
(4,573)
866
(108)
(1,980)
19
3
767
(37,351)
(37,351)
877
139
(3,380)
–
–
8
(686)
–
–
1,084
(2,667)
877
139
(3,403)
(972)
(4,573)
874
(794)
(1,980)
19
1,087
(1,900)
–
–
–
–
(1,043)
(5,540)
2,606
–
(406)
69
288
5,912
29,187
(2,204)
(1,038)
8,566
–
–
–
–
5
(43)
(87)
29,187
(2,204)
(1,038)
8,566
(1,043)
(5,540)
2,606
–
(401)
26
201
(3,149)
2,763
The Group has not recognised deferred tax assets of £2,703,000 (2020: £nil) arising as a result of losses carried forward.
It is considered too uncertain that the Group will generate profits in the relevant companies that the losses would be available to
offset against and, on this basis, the deferred tax asset in respect of these expenses has not been recognised.
Due to the Company’s status as an Investment Trust, and the intention to continue meeting the conditions required to obtain
approval for the foreseeable future, the Company has not provided deferred tax on any capital gains arising on the revaluation or
disposal of investments.
c) Provision for deferred taxation
The amounts for deferred taxation provided at 19% (2020: 19%) comprise:
Group
2021
Revenue
Return
£’000
–
–
–
2021
Capital
Return
£’000
–
(686)
2021
Total
£’000
–
(686)
2020
Revenue
Return
£’000
108
–
(686)
(686)
108
2020
Capital
Return
£’000
–
–
–
2020
Total
£’000
108
–
108
Accelerated capital allowances
Unutilised losses carried forward
Shown as:
Deferred tax (asset)/liability
80
TR PROPERTY INVESTMENT TRUST
8 TAXATION continued
c) Provision for deferred taxation continued
Company
Accelerated capital allowances
Unutilised losses carried forward
Shown as:
Deferred tax (asset)/liability
2021
Revenue
Return
£’000
–
–
–
2021
Capital
Return
£’000
–
(686)
2021
Total
£’000
–
(686)
2020
Revenue
Return
£’000
108
–
(686)
(686)
108
2020
Capital
Return
£’000
–
–
–
The movement in provision in the year is as follows:
Group
Provision at the start of the year
Accelerated capital allowances
Unutilised losses carried forward
Provision at the end of the year
Company
Provision at the start of the year
Accelerated capital allowances
Unutilised losses carried forward
Provision at the end of the year
2021
Revenue
Return
£’000
2021
Capital
Return
£’000
108
(108)
–
–
–
–
(686)
(686)
2021
Revenue
Return
£’000
2021
Capital
Return
£’000
108
(108)
–
–
–
–
(686)
(686)
2021
Total
£’000
108
(108)
(686)
(686)
2021
Total
£’000
108
(108)
(686)
(686)
2020
Revenue
Return
£’000
2020
Capital
Return
£’000
107
1
–
108
2020
Revenue
Return
£’000
107
1
–
108
(350)
350
–
–
2020
Capital
Return
£’000
(350)
350
–
–
9 EARNINGS/(LOSS) PER SHARE
Earnings/(loss) per Ordinary share
The earnings/(loss) per Ordinary share can be analysed between revenue and capital, as below.
2020
Total
£’000
108
–
108
2020
Total
£’000
(243)
351
–
108
2020
Total
£’000
(243)
351
–
108
Net revenue profit
Net capital profit/(loss)
Net total profit/(loss)
Year ended
31 March 2021
£’000
Year ended
31 March 2020
£’000
38,889
195,520
234,409
46,394
(194,401)
(148,007)
Weighted average number of shares in issue during the year
317,350,980
317,350,980
Revenue earnings per share
Capital earnings/(loss) per share
Earnings/(loss) per Ordinary share
pence
12.25
61.61
73.86
pence
14.62
(61.26)
(46.64)
The Group has no securities in issue that could dilute the return per Ordinary share. Therefore the basic and diluted return per
Ordinary share are the same.
TR PROPERTY INVESTMENT TRUST
81
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION
Notes to the Financial Statements continued
Notes to the Financial Statements continued
10 INVESTMENTS HELD AT FAIR VALUE
a) Analysis of investments
Listed in the United Kingdom
Unlisted in the United Kingdom
Listed Overseas
Investment properties
Investments held at fair value
Investments in subsidiaries at fair value
b) Business segment reporting
Group
2021
£’000
Company
2021
£’000
Group
2020
£’000
Company
2020
£’000
394,176
394,176
351,506
351,506
1,468
921,801
83,071
1,468
921,801
83,071
682
708,597
94,510
682
708,597
94,510
1,400,516
1,400,516
1,155,295
1,155,295
–
43,312
–
50,429
1,400,516
1,443,828
1,155,295
1,205,724
Listed investments
Unlisted investments
Contracts for difference
Total return swap
Total investments segment
Direct property segment
Valuation
31 March
2020
£’000
Net
additions/
(disposals)
£’000
Net
appreciation/
(depreciation)
£’000
Valuation
31 March
2021
£’000
Gross
revenue
31 March
2021
£’000
Gross
revenue
31 March
2020
£’000
1,060,103
58,477
197,397
1,315,977
36,403
46,964
682
8,698
(3,808)
1,065,675
94,510
1,160,185
–
(26,817)
3,996
35,656
(9,838)
25,818
786
17,978
(188)
1,468
(141)
–
215,973
1,317,304
(1,601)
83,071
214,372
1,400,375
154
3,320
–
39,877
4,236
44,113
148
5,724
–
52,836
5,201
58,037
In seeking to achieve its investment objective, the Company invests in the shares and securities of property companies and property
related businesses internationally and also in investment property located in the UK. The Company therefore considers that there
are two distinct reporting segments, investments and direct property, which are used for evaluating performance and allocation of
resources. The Board, which is the principal decision maker, receives information on the two segments on a regular basis. Whilst
revenue streams and direct property costs can be attributed to the reporting segments, general administrative expenses cannot be
split to allow a profit for each segment to be determined. The assets and gross revenues for each segment are shown above.
The property costs included within note 3 are £1,321,000 (2020: £1,984,000) and deducting these costs from the direct property
gross revenue above would result in net income of £2,915,000 (2020: £3,217,000) for the direct property reporting segment.
82
TR PROPERTY INVESTMENT TRUST
10 INVESTMENTS HELD AT FAIR VALUE continued
c) Geographical segment reporting
Valuation
31 March
2020
£’000
Net
additions/
(disposals)
£’000
Net
appreciation/
(depreciation)
£’000
Valuation
31 March
2021
£’000
UK listed equities and convertibles
351,506
(30,616)
73,286
394,176
UK unlisted equities
UK direct property1
Continental European listed equities
UK contracts for difference2
European contracts for difference2
UK total return swap3
682
94,510
708,597
1,155,295
5,071
3,627
(3,808)
1,160,185
–
(9,838)
89,093
48,639
(13,108)
(13,709)
3,996
25,818
786
(1,601)
124,111
1,468
83,071
921,801
196,582
1,400,516
8,621
9,357
(188)
584
(725)
–
Gross
revenue
31 March
2021
£’000
Gross
revenue
31 March
2020
£’000
10,265
154
4,236
26,138
40,793
1,242
2,078
–
16,963
148
5,201
30,001
52,313
2,714
3,010
–
214,372
1,400,375
44,113
58,037
Included in the above figures are purchase costs of £741,000 (2020: £460,000) and sales costs of £184,000 (2020: £199,000).
These comprise mainly stamp duty and commission.
The Company received £329,018,000 (2020: £367,977,000) from investments, including direct property, sold in the year. The book cost
of these investments when they were purchased was £266,450,000 (2020: £317,581,000). These investments have been revalued
over time and until they were sold any unrealised gains/losses were included in the fair value of the investments.
1
2
Net additions/(disposals) includes £465,000 (2020: £981,000) of capital expenditure. Net appreciation/(depreciation) includes
amounts in respect of rent free periods.
Gross revenue for contracts for difference relates to dividends receivable, on an ex dividend basis, on the underlying positions
held. The appreciation/(depreciation) in CFDs relates to the movement in fair value in the year.
3 The depreciation in the TRS relates to the movement in fair value in the year until maturity.
d) Substantial share interests
The Group held interests in 3% or more of any class of capital in 10 companies (2020: 8 companies) in which it invests. None
of these investments is considered significant in the context of these financial statements. See note 21 on pages 96 and 97 for
further details of subsidiary investments.
e) Fair value of financial assets and financial liabilities
Financial assets and financial liabilities are carried in the Balance Sheet either at their fair value (investments) or the balance
sheet amount is a reasonable approximation of fair value (due from brokers, dividends and interest receivable, due to brokers,
accruals and cash at bank).
Fair value hierarchy disclosures
Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value
measurement of the relevant asset as follows:
Level 1 - valued using quoted prices in an active market for identical assets.
Level 2 - valued by reference to valuation techniques using observable inputs other than quoted prices within Level 1.
Level 3 - valued by reference to valuation techniques using inputs that are not based on observable market data.
The valuation techniques used by the Group are explained in the accounting policies in notes 1 (f) and 1 (g).
TR PROPERTY INVESTMENT TRUST
83
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION
Notes to the Financial Statements continued
Notes to the Financial Statements continued
10 INVESTMENTS HELD AT FAIR VALUE continued
e) Fair value of financial assets and financial liabilities continued
The table below sets out fair value measurements using IFRS 13 fair value hierarchy.
Financial assets/(liabilities) at fair value through profit or loss
At 31 March 2021
Equity investments
Investment properties
Contracts for difference
Foreign exchange forward contracts
At 31 March 2020
Equity investments
Investment properties
Contracts for difference
Total return swap
Foreign exchange forward contracts
Level 1
£’000
Level 2
£’000
Level 3
£’000
Total
£’000
1,315,977
–
–
–
1,315,977
–
–
(141)
(1,107)
(1,248)
1,468
1,317,445
83,071
–
–
83,071
(141)
(1,107)
84,539
1,399,268
Level 1
£’000
Level 2
£’000
Level 3
£’000
Total
£’000
1,060,103
–
–
-
-
1,060,103
–
–
8,698
(3,808)
(5,609)
(719)
682
1,060,785
94,510
–
–
–
94,510
8,698
(3,808)
(5,609)
95,192
1,154,576
The table above represents the Group’s fair value hierarchy. The Company’s fair value hierarchy is identical except for the inclusion
of the fair value of the investment in Subsidiaries which at 31 March 2021 was £43,312,000 (2020: £50,429,000). These have been
categorised as level 3 in both years. The movement in the year of £7,117,000 (2020: £13,000) is the change in fair value in the year,
which includes a distribution from a subsidiary company of £6,435,000 and the release of a corporation tax provision of £348,000
in a subsidiary company. The total financial assets at fair value for the Company at 31 March 2021 was £1,443,828,000 (2020:
£1,214,422,000).
Reconciliation of movements in financial assets categorised as level 3
At 31 March 2021
Unlisted equity investments
Investment properties
– Mixed use
– Office & Industrial
682
52,623
41,887
94,510
95,192
31 March
2020
£’000
Purchases
£’000
–
315
150
465
465
Appreciation /
(Depreciation)
£’000
31 March
2021
£’000
Sales
£’000
–
786
1,468
(303)
(10,000)
(10,303)
(10,303)
(4,658)
3,057
(1,601)
(815)
47,977
35,094
83,071
84,539
All appreciation/(depreciation) as stated above relates to movements in fair value of unlisted equity investments and investment
properties held at 31 March 2021.
The Group held one unquoted investment at the year end (see 11.6 overleaf).
Transfers between hierarchy levels
There were no transfers during the year between any of the levels.
84
TR PROPERTY INVESTMENT TRUST
10 INVESTMENTS HELD AT FAIR VALUE continued
Sensitivity information for Investment Property Valuations
The significant unobservable inputs used in the fair value measurement categorised within Level 3 of the fair value hierarchy of
investment properties are:
● Estimated rental value: £6.5 - £65 per sq ft (2020: £6.5- £65)
● Capitalisation rates: 2.0% - 6.0% (2020: 2.0% - 6.0%)
Significant increases (decreases) in estimated rental value and rent growth in isolation would result in a significantly higher (lower)
fair value measurement. A significant increase (decrease) in long-term vacancy rate in isolation would result in a significantly lower
(higher) fair value measurement.
There are interrelationships between the yields and rental values as they are partially determined by market rate condition. The
sensitivity of the valuation to changes in the most significant inputs per class of investment property are shown below:
Estimated movement in fair value of investment properties at
31 March 2021 arising from
Increase in rental value by 5%
Decrease in rental value by 5%
Increase in yield by 0.5%
Decrease in yield by 0.5%
Estimated movement in fair value of investment properties at
31 March 2020 arising from
Increase in rental value by 5%
Decrease in rental value by 5%
Increase in yield by 0.5%
Decrease in yield by 0.5%
11 FINANCIAL INSTRUMENTS
Retail
£’000
310
(250)
(4,040)
5,155
Retail
£’000
1,300
(1,225)
(5,025)
6,750
Office &
Industrial
£’000
1,585
(1,610)
(5,835)
9,505
Office &
Industrial
£’000
1,780
(1,720)
(6,005)
9,355
Other
£’000
50
(25)
Total
£’000
1,945
(1,885)
(925)
(10,800)
1,325
15,985
Other
£’000
–
–
(950)
1,365
Total
£’000
3,080
(2,945)
(11,980)
17,470
Risk management policies and procedures
The Group invests in equities and other instruments for the long term in the pursuit of the Investment Objectives set out on
page 24. The Group is exposed to a variety of risks that could result in either a reduction or an increase in the profits available for
distribution by way of dividends.
The principal risks the Group faces in its portfolio management activities are:
● Market risk (comprising price risk, currency risk and interest rate risk)
● Liquidity risk
● Credit risk
The Manager’s policies and processes for managing these risks are summarised on page 25 and have been applied throughout the
year.
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OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION
Notes to the Financial Statements continued
11 FINANCIAL INSTRUMENTS continued
11.1 Market price risk
By the very nature of its activities, the Group’s investments are exposed to market price fluctuations.
Management of the risk
The Manager runs a diversified portfolio and reports to the Board on the portfolio activity and performance at each Board meeting.
The Board monitors the investment activity and strategy to ensure it is compatible with the stated objectives.
The Group’s exposure to changes in market prices on its quoted equity investments, CFDs and investment property portfolio, was as
follows:
Investments held at fair value
CFD long gross exposure
TRS long gross exposure
2021
£’000
1,400,516
146,001
–
2020
£’000
1,155,295
56,728
6,598
Concentration of exposure to price risks
As set out in the Investment Policies on page 25, there are guidelines to the amount of exposure to a single company, geographical
region or direct property. These guidelines ensure an appropriate spread of exposure to individual or sector price risks. As an
investment company dedicated to investment in the property sector, the Group is exposed to price movements across the property
asset class as a whole.
Price risk sensitivity
The following table illustrates the sensitivity of the profit after taxation for the year and the value of shareholders’ funds to an
increase or decrease of 15% in the fair values of the Group’s equity, fixed interest, CFD and direct property investments. The level of
change is consistent with the illustration shown in the previous year. The sensitivity is based on the Group’s equity, fixed interest,
CFD and direct property exposure at each balance sheet date, with all other variables held constant.
2021
Increase
in fair
value
£’000
2021
Decrease
in fair
value
£’000
2020
Increase
in fair
value
£’000
2020
Decrease
in fair
value
£’000
Statement of Comprehensive Income – profit after tax
Revenue return
Capital return
Change to the profit after tax for the year/shareholders' funds
Change to total earnings per Ordinary Share
(103)
103
(77)
77
209,801
(209,801)
209,698
(209,698)
66.08p
(66.08)p
173,817
173,740
54.75p
(173,817)
(173,740)
(54.75)p
11.2 Currency risk
A proportion of the Group’s portfolio is invested in overseas securities and their Sterling value can be significantly affected by
movements in foreign exchange rates.
Management of the risk
The Board receives a report at each Board meeting on the proportion of the investment portfolio held in Sterling, Euros or other
currencies. The Group may sometimes hedge foreign currency movements outside the Eurozone by funding investments in overseas
securities with unsecured loans denominated in the same currency or through forward currency contracts.
Cash deposits are held in Sterling and/or Euro denominated accounts.
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11 FINANCIAL INSTRUMENTS continued
Foreign currency exposure
At the reporting date the Group had the following exposure:
(Sterling has been shown for reference)
Currency
Sterling
Euro
Swedish Krona
Other
2021
28.0%
51.0%
13.0%
8.0%
2020
27.0%
53.0%
11.0%
9.0%
The following table sets out the Group’s total exposure to foreign currency risk and the net exposure to foreign currencies of the net
monetary assets and liabilities:
2021
Receivables (due from brokers, dividends and other income receivable)
Cash at bank and on deposit
Bank loans, loan notes and overdrafts
Payables (due to brokers, accruals and other creditors)
FX forwards
Total foreign currency exposure on net monetary items
Investments held at fair value
Non-current assets
Non-current liabilities
Total currency exposure
2020
Receivables (due from brokers, dividends and other income receivable)
Cash at bank and on deposit
Bank loans, loan notes and overdrafts
Payables (due to brokers, accruals and other creditors)
FX forwards
Total foreign currency exposure on net monetary items
Investments held at fair value
Non-current assets
Total currency exposure
Sterling
£’000
Euro
£’000
Swedish
Krona
£’000
49,462
22,853
(95,000)
(10,142)
(61,209)
(94,036)
10,668
4,339
–
(1,031)
561
650
–
–
-
13,848
13,976
15,059
478,715
707,968
155,635
686
–
(15,000)
(42,593)
–
–
Other
£’000
299
1,272
–
–
46,254
47,825
58,198
–
–
370,365
679,351
170,694
106,023
Sterling
£’000
31,552
25,602
(40,000)
(8,026)
(133,731)
(124,603)
446,698
(15,108)
Euro
£’000
27,495
11,922
–
(6,076)
62,014
95,355
551,576
(44,246)
Swedish
Krona
£’000
634
962
–
–
22,525
24,121
100,836
–
Other
£’000
413
1,643
–
–
43,583
45,639
56,185
–
306,987
602,685
124,957
101,824
Foreign currency sensitivity
The following table illustrates the sensitivity of the profit after tax for the year on the Group’s equity in regard to the exchange rates
for Sterling/Euro and Sterling/Swedish Krona and other currencies.
It assumes the following changes in exchange rates:
● Sterling/Euro +/- 15% (2020:15%)
● Sterling/Swedish Krona +/- 15% (2020:15%)
● Sterling/Other +/- 15% (2020:15%)
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Notes to the Financial Statements continued
11 FINANCIAL INSTRUMENTS continued
Foreign currency sensitivity continued
If Sterling had strengthened against the currencies shown, this would have had the following effect:
Statement of Comprehensive Income –
profit after tax
Revenue return
Capital return
Change to the profit after tax for the
year/shareholders’ funds
Year ended March 2021
Year ended March 2020
Euro
£’000
Swedish
Krona
£’000
Other
£’000
Euro
£’000
Swedish
Krona
£’000
Other
£’000
(2,726)
(589)
(83,243)
(20,269)
(250)
(7,579)
(3,016)
(71,091)
(340)
(13,132)
(99)
(7,317)
(85,969)
(20,858)
(7,829)
(74,107)
(13,472)
(7,416)
2021
2020
Change to total earnings per Ordinary share
(36.13)p
(29.93)p
If Sterling had weakened against the currencies shown, this would have the following effect:
Year ended March 2021
Year ended March 2020
Euro
£’000
Swedish
Krona
£’000
Other
£’000
Euro
£’000
Swedish
Krona
£’000
Other
£’000
Statement of Comprehensive Income –
profit after tax
Revenue return
Capital return
Change to the profit after tax for the
year/shareholders’ funds
3,411
732
124,633
27,440
318
10,262
4,971
97,685
423
17,780
113
9,909
128,044
28,172
10,580
102,656
18,203
10,022
2021
52.56p
2020
41.24p
Change to total earnings per Ordinary share
11.3 Interest rate risk
Interest rate movements may affect:
● the fair value of any investments in fixed interest securities;
● the fair value of the loan notes;
● the level of income receivable from cash at bank and on deposit;
● the level of interest expense on any variable rate bank loans; and
● the prices of the underlying securities held in the portfolios.
Management of the risk
The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when
making investment decisions. Property companies usually have borrowings themselves and the level of gearing and structure of its
debt portfolio is a key factor when assessing the investment in a property company.
The Group has fixed and has had variable rate borrowings during the year. The interest rates on the loan notes is fixed, details are
set out in note 13. In addition to the loan notes the Group has unsecured, multi-currency revolving loan facilities which carry variable
rates of interest based on the currencies drawn, plus a margin. These facilities total £130,000,000 (2020: £110,000,000).
88
TR PROPERTY INVESTMENT TRUST
11 FINANCIAL INSTRUMENTS continued
Management of the risk continued
The Manager considers both the level of debt on the balance sheet of the Group (i.e. the loan notes and any bank loans drawn)
and the “see-through” gearing, taking into account the assets and liabilities of the underlying investments, when considering the
investment portfolio. These gearing levels are reported regularly to the Board.
The majority of the Group’s investment portfolio is non-interest bearing. As a result the Group’s financial assets are not directly
subject to significant amounts of risk due to fluctuations in the prevailing levels of market interest rates.
Interest rate exposure
The exposure at 31 March of financial assets and financial liabilities to interest rate risk is shown by reference to:
● floating interest rates: when the interest rate is due to be re-set;
● fixed interest rates: when the financial instrument is due to be repaid.
The Group’s exposure to floating interest rates on assets is £80,027,000 (2020: £79,651,000).
The Group’s exposure to fixed interest rates on liabilities is £152,593,000 (2020: £99,246,000).
The Group’s exposure to floating interest rates on liabilities is £nil (2020: £nil).
Interest receivable and finance costs are at the following rates:
● Interest received on cash balances, or paid on bank overdrafts, is at a margin over LIBOR or its foreign currency equivalent
(2020: same).
● Interest paid on borrowings under the multi-currency loan facilities, is at a margin over LIBOR or its foreign currency equivalent for
the type of loan (2020: same).
● The finance charges on the €50m and £15m loan notes are at interest rates of 1.92% and 3.59% respectively.
The year end amounts are not representative of the exposure to interest rates during the year as the level of exposure changes
as investments are made in fixed interest securities, borrowings are drawn down and repaid, and the mix of borrowings between
floating and fixed interest rates changes.
Interest rate sensitivity
A change of 2% on interest rates at the reporting date would have had the following direct impact:
2021
2%
Increase
£’000
2021
2%
Decrease
£’000
2020
2%
Increase
£’000
2020
2%
Decrease
£’000
Change to shareholders’ funds
Change to total earnings per Ordinary share
(1,176)
(0.37)p
1,176
0.37p
(317)
(0.10)p
317
0.10p
This level of change is not representative of the year as a whole, since the exposure changes throughout the period.
This assessment does not take into account the impact of interest rate changes on the market value of the investments the
Group holds.
11.4 Liquidity risk
Unquoted investments in the portfolio are subject to liquidity risk. The Group held one unquoted investment at the year end (see
11.6 below).
In certain market conditions, the liquidity of direct property investments may be reduced. At 31 March 2021, 6% (2020: 8%) of the
Group’s investment portfolio was held in direct property investments.
At 31 March 2021, 94% (2020: 92%) of the Group’s investment portfolio is held in listed securities which are predominantly
readily realisable.
Bank loan facilities are short term revolving loans which it is intended are renewed or replaced but renewal cannot be certain. Loan
notes of €50m and £15m are repayable in February 2026 and 2031 respectively.
The table shows the timing of cash outflows to settle the Group’s current liabilities together with anticipated interest costs.
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OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION
Notes to the Financial Statements continued
11 FINANCIAL INSTRUMENTS continued
Debt and Financing maturity profile
At 31 March 2021
Bank loans*
Loan notes
Projected interest cash flows on
bank and loan notes
Accruals and deferred income
Other creditors
At 31 March 2020
Bank loans
Loan notes
Projected interest cash flows on
bank and loan notes
Accruals and deferred income
Other creditors
Within
1 year
£’000
Within
1-2 years
£’000
Within
2-3 years
£’000
Within
3-4 years
£’000
Within
4-5 years
£’000
More than
5 years
£’000
Total
£’000
95,000
–
2,178
10,719
110
–
–
1,356
–
–
–
–
1,356
–
–
–
–
1,356
–
–
–
–
–
95,000
57,593
57,593
1,356
–
–
2,693
–
–
10,295
10,719
110
108,007
1,356
1,356
1,356
1,356
60,286
173,717
Within
1 year
£’000
Within
1-2 years
£’000
Within
2-3 years
£’000
Within
3-4 years
£’000
Within
4-5 years
£’000
More than
5 years
£’000
Total
£’000
40,000
–
1,388
3,812
294
45,494
–
–
1,388
–
–
1,388
–
–
1,388
–
–
1,388
–
–
1,388
–
–
1,388
–
–
–
40,000
59,246
59,246
1,388
–
–
4,081
–
–
11,021
3,812
294
1,388
63,327
114,373
* A £60m multicurrency facility with RBS was renewed for one year in February 2021. £50m (2020: £10m) was drawn on this facility at the balance sheet date. A
£30m one year facility with ING Luxembourg was renewed in July 2020. £30m (2020: £30m) was drawn on this facility at the balance sheet date. A £40m facility
was renewed with ICBC in November 2020. £15m (2020: £nil) was drawn on this facility at the balance sheet date.
Management of the risk
The Manager sets guidelines for the maximum exposure of the portfolio to unquoted and direct property investments. These are set
out in the Investment Policies on page 25. All unquoted investments with a value over £1m and direct property investments with a
value over £5 million must be approved by the Board for purchase.
The Company maintains regular contact with the banks providing revolving facilities and renewal discussions commence well ahead
of facility renewal dates. In addition the Company is exploring new opportunities for the provision of debt on an ongoing basis.
11.5 Credit risk
The failure of a counterparty to a transaction to discharge its obligations under that transaction could result in the Group suffering
a loss. At the period end the largest counterparty risk, which the Group was exposed to was within Debtors and Cash and cash
equivalents where the total bank balances held with one counterparty was £53,134,000 (2020: £46,731,000 two counterparties).
Management of the risk
Investment transactions are carried out with a number of brokers, whose credit standing is reviewed periodically by the Manager,
and limits are set on the amount that may be due from any one broker. Cash at bank is only held with banks with high quality
external credit ratings.
Credit risk exposure
In summary, compared to the amounts in the Balance Sheet, the maximum exposure to credit risk at 31 March was as follows:
2021
Balance
Sheet
£’000
2021
Maximum
exposure
£’000
2020
Balance
Sheet
£’000
2020
Maximum
exposure
£’000
Debtors
Cash and cash equivalents
90
TR PROPERTY INVESTMENT TRUST
60,990
60,990
29,114
60,094
40,129
60,094
40,129
90,104
100,223
100,223
29,114
90,104
11 FINANCIAL INSTRUMENTS continued
Where the receivables of the Group are exposed to credit risk, the requirement for impairment is assessed at each year end. For
all receivables, in the table above, no impairment has been recognised in relation to expected credit losses as the impact of these
losses is immaterial as at 31 March 2021 (31 March 2020: no impairment).
Offsetting disclosures
In order to better define its contractual rights and to secure rights that will help the Group mitigate its counterparty risk, the Group may
enter into an ISDA Master Agreement or similar agreement with its OTC derivative contract counterparties. An ISDA Master Agreement
is an agreement between the Group and the counterparty that governs OTC derivatives and foreign exchange contracts and typically
contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under
an ISDA Master Agreement, the Group has a contractual right to offset with the counterparty certain derivative financial instruments
payables and/or receivables with collateral held and/or posted and create one single net payment in the event of default including
the bankruptcy or insolvency of the counterparty. However, bankruptcy or insolvency laws of a particular jurisdiction may impose
restrictions on or prohibitions against the right of offset in bankruptcy, insolvency or other events.
The disclosures set out in the following tables include financial assets and financial liabilities that are subject to an enforceable
master netting arrangement or similar agreement.
At 31 March 2021 and 2020, the Group’s derivative assets and liabilities (by type and counterparty) are as follows:
Year ended 2021
Year ended 2020
Net amounts
of financial
assets/
liabilities
presented in
the Balance
Sheet
£’000
Cash collateral
pledged
£’000
Net amounts
of financial
assets/
liabilities
presented in
the Balance
Sheet
£’000
Cash collateral
pledged
£’000
(141)
(141)
50,913
50,913
–
–
–
–
–
(1,107)
–
(1,107)
–
–
–
–
–
–
–
–
8,698
8,698
(3,808)
(3,808)
(2,582)
(2,398)
(620)
–
(9)
(5,609)
31,525
31,525
7,997
7,997
–
–
–
–
–
–
CFD positions:
Goldman Sachs
TRS position:
ING
FX forward contracts:
Bank of Montreal
Barclays
BNP Paribas
HSBC
Westpac
11.6 Fair values of financial assets and financial liabilities
Except for the loan notes which are measured at amortised cost (refer to Note 13), the fair values of the financial assets and
financial liabilities are either carried in the balance sheet at their fair value (investments) or the balance sheet amount is a
reasonable approximation of fair value (debtors, creditors, cash at bank and bank overdrafts, accruals and prepayments).
The fair values of the listed investments are derived from the closing price or last traded price at which the securities are quoted on
the London Stock Exchange and other recognised exchanges.
The fair value of contracts for difference are based on the underlying listed investment value as set out above and the amount due
from or to the counterparty under the contract is recorded as an asset or liability accordingly, which is disclosed in Note 13 for the
current year.
The fair values of the properties are derived from an open market (Red Book) valuation of the properties on the Balance Sheet date
by an independent firm of valuers (Knight Frank).
There was one unquoted investment at the Balance Sheet date, Atrato, with a total value of £1,468,000 (2020: Atrato, £682,000).
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Notes to the Financial Statements continued
11 FINANCIAL INSTRUMENTS continued
In the Parent Company accounts there are investments of £43,312,000 in unlisted subsidiaries which are classified as level 3.
The amounts of change in fair value for investments including net returns on CFDs recognised in the consolidated profit or loss for
the year was a gain of £214,372,000 (2020: loss of £198,698,000).
11.7 Capital management policies and procedures
The Group’s capital management objectives are:
● to ensure that it will be able to continue as a going concern; and
● to maximise the total return to its equity shareholders through an appropriate balance of equity capital and debt.
The equity capital of the Group at 31 March 2021 consisted of called up share capital, share premium, capital redemption
and revenue reserves totalling £1,326,433,000 (2020: £1,136,453,000). The Group does not regard the loan notes and loans as
permanent capital.
The loan notes agreement requires compliance with a set of financial covenants, including:
● Total Borrowings shall not exceed 33% of Adjusted Net Asset Value;
● the Adjusted Total Assets shall at all times be equivalent to a minimum of 300% of Total Borrowings; and
● the Adjusted NAV shall not be less than £260,000,000.
12 DEBTORS
Amounts falling due within one year:
Securities and properties sold for future settlement
Tax recoverable
Prepayments and accrued income1
Amounts receivable in respect of Contracts for Difference
CFD margin cash
TRS margin cash
Other debtors
Non-current assets
Deferred taxation asset
1 Includes amounts in respect of rent free periods.
Group
2021
£’000
Company
2021
£’000
Group
2020
£’000
Company
2020
£’000
267
4,231
5,176
–
267
3,761
5,176
–
5,020
1,414
5,082
8,698
5,020
1,292
5,082
8,698
50,913
50,913
31,525
31,525
–
403
–
403
7,997
358
60,990
60,520
60,094
7,997
358
59,972
686
686
–
–
92
TR PROPERTY INVESTMENT TRUST
13 CURRENT AND NON-CURRENT LIABILITIES
Amounts falling due within one year:
Bank loans and overdrafts
Securities and properties purchased for future settlement
Amounts due to subsidiaries
Amounts payable in respect of Contracts for Difference
Amounts payable in respect of Total Return Swap
Tax payable
Accruals and deferred income
Foreign exchange forward contracts for settlement
Other creditors
Non-current liabilities:
1.92% Euro Loan Notes 2026
3.59% GBP Loan Notes 2031
Deferred taxation
Group
2021
£’000
Company
2021
£’000
Group
2020
£’000
Company
2020
£’000
95,000
194
–
141
–
9
10,719
1,107
110
95,000
194
42,880
141
–
9
10,685
1,107
104
107,280
150,120
42,593
15,000
–
42,593
15,000
–
57,593
57,593
40,000
5,975
–
–
3,808
213
3,812
5,609
294
59,711
44,246
15,000
108
59,354
40,000
5,975
50,342
–
3,808
213
3,783
5,609
286
110,016
44,246
15,000
108
59,354
Loan Notes
On the 10th February 2016, the Company issued 1.92% Unsecured Euro 50,000,000 Loan Notes and 3.59% Unsecured GBP 15,000,000
Loan Notes which are due to be redeemed at par on the 10th February 2026 and 10th February 2031 respectively.
The fair value of the 1.92% Euro Loan Notes was £42,732,000 (2020: £44,418,000) and the 3.59% GBP Loan Notes was £15,219,000
(2020: £15,553,000) at 31 March 2021.
Using the IFRS 13 fair value hierarchy the Loan Notes are deemed to be categorised within Level 2.
The loan notes agreement requires compliance with a set of financial covenants, including:
● Total Borrowings shall not exceed 33% of Adjusted Net Asset Value;
● the Adjusted Total Assets shall at all times be equivalent to a minimum of 300% of Total Borrowings; and
● the Adjusted NAV shall not be less than £260,000,000.
The Company and Group complied with the terms of the loan notes agreement throughout the year.
Multi-currency revolving loan facilities
The Group also had unsecured, multi-currency, revolving short-term loan facilities totalling £130,000,000 (2020: £110,000,000) at
31 March 2021. At 31 March 2021 £95,000,000 was drawn on these facilities (2020: £40,000,000).
The maturity of these facilities is shown in notes 11.3 and 11.4.
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OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION
Notes to the Financial Statements continued
13 CURRENT AND NON-CURRENT LIABILITIES continued
Reconciliation of liabilities arising from financing activities
Group and Company
Long term
debt
£’000
Short term
debt
£’000
Total
£’000
Opening liabilities from financing activities at 31 March 2020
59,246
40,000
99,246
Cash flows:
Drawdown of bank loans
Movement on foreign exchange
Closing liabilities from financing activities at 31 March 2021
14 CALLED UP SHARE CAPITAL
Ordinary share capital
–
55,000
55,000
(1,653)
–
95,000
152,593
(1,653)
57,593
The balance classified as Ordinary share capital includes the nominal value proceeds on the issue of the Ordinary equity share
capital comprising Ordinary shares of 25p.
Ordinary shares of 25p
At 1 April 2020
At 31 March 2021
Number
317,350,980
317,350,980
Issued, allotted
and fully paid
£’000
79,338
79,338
The voting rights are disclosed in the Report of the Directors on page 43.
During the year, the Company made no market purchases for cancellation of Ordinary shares of 25p each (2020: none).
Since 31 March 2021 no Ordinary shares have been purchased and cancelled.
15 SHARE PREMIUM ACCOUNT AND CAPITAL REDEMPTION RESERVE
Share premium account
The balance classified as share premium includes the premium above nominal value from the proceeds on issue of the equity share
capital comprising Ordinary shares of 25p.
Capital redemption reserve
The capital redemption reserve is used to record the amount equivalent to the nominal value of purchases of the Company’s own
shares in order to maintain the Company’s capital.
16 RETAINED EARNINGS
Investment holding gains
Realised capital reserves
Revenue reserve
Group
2021
£’000
Company
2021
£’000
335,322
757,418
360,663
731,167
1,092,740
1,091,830
67,222
68,132
1,159,962
1,159,962
Group
2020
£’000
206,072
691,148
897,220
72,762
969,982
Company
2020
£’000
238,531
664,465
902,996
66,986
969,982
Group investment holding gains at 31 March 2021 include a £143,000 gain (2020: £643,000 loss) relating to unlisted investments and
gains of £45,201,000 (2020: £51,882,000 gains) relating to investment properties.
Company investment holding gains at 31 March 2021 include gains of £70,685,000 (2020: £83,697,000) relating to unlisted and
subsidiary investments with a £44,061,000 revaluation gain (2020: £50,742,000) relating to investment properties. Dividends are
only distributable from the revenue reserve.
94
TR PROPERTY INVESTMENT TRUST
17 DIVIDENDS
Year ended
31 March
2021
£’000
Year ended
31 March
2020
£’000
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 31 March 2020 of 8.80p
27,927
27,292
(2019: 8.60p) per Ordinary share
Interim dividend for the year ended 31 March 2021 of 5.20p
(2020: 5.20p) per Ordinary share
16,502
44,429
16,502
43,794
Amounts not recognised as distributions to equity holders in the year:
Proposed final dividend for the year ended 31 March 2021 of 9.00p
(2020: 8.80p) per Ordinary share
28,562
27,927
The final dividend has not been included as a liability in these financial statements in accordance with IAS 10 “Events after the
Balance Sheet Date”.
Set out below is the total dividend to be paid in respect of the year. This is the basis on which the requirements of s.1158 of the
Corporation Tax Act 2010 are considered.
Interim dividend for the year ended 31 March 2021 of 5.20p
(2020: 5.20p) per Ordinary share
Proposed final dividend for the year ended 31 March 2021 of 9.00p
(2020: 8.80p) per Ordinary share
Year ended
31 March
2021
£’000
16,502
28,562
45,064
Year ended
31 March
2020
£’000
16,502
27,927
44,429
18 COMPANY STATEMENT OF COMPREHENSIVE INCOME
As permitted by Section 408 of the Companies Act 2006, the Company has not presented its own Statement of Comprehensive
Income. The net profit after taxation of the Company dealt with in the accounts of the Group was £234,409,000 (2020: £148,006,000
loss).
19 NET ASSET VALUE PER ORDINARY SHARE
Net asset value per Ordinary share is based on the net assets attributable to Ordinary shares of £1,326,433,000 (2020:
£1,136,453,000) and on 317,350,980 (2020: 317,350,980) Ordinary shares in issue at the year end.
20 COMMITMENTS AND CONTINGENT LIABILITIES
At 31 March 2021 the Group had capital commitments of £144,000 (2020: £132,000) but no contingent liabilities (2020: nil).
TR PROPERTY INVESTMENT TRUST
95
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION
Notes to the Financial Statements continued
21 SUBSIDIARIES
The Group has the following principal subsidiaries, all of which are registered and operating in Scotland, England and Wales:
Name
New England Properties Limited
The Colonnades Limited
Showart Limited
Trust Union Properties Residential Developments Limited
The Property Investment Trust Ltd
The Real Estate Investment Trust Limited
The Terra Property Investment Trust Limited
Trust Union Property Investment Trust Limited
Trust Union Properties (Number Five) Limited
Trust Union Properties (Number Six) Limited
Trust Union Properties (Number Seven) Limited
Trust Union Properties (Number Eight) Limited
Trust Union Properties (Number Nine) Limited
Trust Union Properties (Number Ten) Limited
Trust Union Properties (Number Eleven) Limited
Trust Union Properties (Number Twelve) Limited
Trust Union Properties (Number Thirteen) Limited
Trust Union Properties (Number Fourteen) Limited
Trust Union Properties (Number Fifteen) Limited
Trust Union Properties (Number Sixteen) Limited
Trust Union Properties (Number Seventeen) Limited
Trust Union Properties (Number Eighteen) Limited
Trust Union Properties (Bayswater) Limited
Trust Union Properties (Cardiff) Limited
Trust Union Properties (Theale) Limited
Trust Union Properties (Number Twenty-Two) Limited
Trust Union Properties (Number Twenty-Three) Limited
Skillion Finance Limited
Trust Union Finance (1991) Plc
FGH Developments Limited
FGH Developments (Aberdeen) Limited (E18030)
FGH (Newcastle) Limited
NEP (1994) Limited
New England Developments Limited
New England Investments Limited
New England Retail Properties Limited
New England (Southern) Limited
Sapco One Limited
Trust Union Properties Limited
Trust Union Finance Limited
TR Property Finance Limited
Trust Union Properties (South Bank) Limited
Reg. Number
788895
2826672
2500726
2365875
2415846
2416015
2415843
2416017
2415839
2416018
2415836
2416019
2415833
2416021
2415830
2416022
2415818
2416024
2416026
2415806
2416027
2415768
2416030
2415772
2416031
2415765
2416036
2420758
2663561
1481476
SC68799
1466619
977481
1385909
2613905
1447221
1787371
803940
2134624
1233998
2415941
2420097
96
TR PROPERTY INVESTMENT TRUST
Principal Activities
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Property investment
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Investment financing
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Non-trading company
Investment holding and finance company
Investment holding and finance company
Non-trading company
21 SUBSIDIARIES continued
The Company has provided a guarantee for each of these subsidiaries in order for them to take the exemption from the requirement
of an audit, in line with the requirements of S.479A of the Companies Act 2006.
All the subsidiaries are fully owned and all the holdings are ordinary shares.
All companies have the registered office of 11-12 Hanover Street, London, W1S 1YQ with the exception of FGH Developments
(Aberdeen) Limited which is registered to 50 Lothian Road, Festival Square, Edinburgh EH3 9BY.
22 RELATED PARTY TRANSACTIONS DISCLOSURES
Balances and transactions between the Company and its subsidiaries, which are related parties, have been eliminated on
consolidation. The balances are interest free, unsecured and repayable on demand.
Amounts due by the Company to subsidiaries per note 13
The Colonnades Limited
TR Property Finance Limited
New England Properties Limited
2021
£’000
22,619
20,281
(20)
42,880
2020
£’000
22,619
27,743
(20)
50,342
Remuneration of key management personnel
The remuneration of the directors, who are the key management personnel of the Company for each of the relevant categories
specified in IAS 24: Related Party Disclosures is provided in the audited part of the Directors’ Remuneration Report on page 56.
Directors’ transactions
Transactions in shares by directors are considered to be a related party transaction due to the nature of their role as directors.
Movements in directors’ shareholdings are disclosed within the Directors’ Remuneration Report on page 57.
Dividends totalling £17,000 (2020: £10,000) were paid in the year in respect of shares held by the Company’s directors.
TR PROPERTY INVESTMENT TRUST
97
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION
Ongoing Charges
The Ongoing Charges ratio has been calculated in accordance
with the guidance issued by the AIC as the total of investment
management fees and administrative expenses expressed as a
percentage of the average Net Asset Values throughout the year.
The definition of administrative expenses does include property
related expenses, the Ongoing Charges calculation is shown
inclusive and exclusive of these expenses to allow comparison
of the direct administrative and management charges with
the majority of Investment Trusts which do not hold any direct
property investments.
Including
Performance
Fees
£’000
Excluding
Performance
Fees
£’000
Excluding
Performance
Fees &
Direct
Property Costs
£’000
15,884
6,225
6,225
1,835
270
1,835
270
–
–
1,835
–
–
17,989
8,330
8,060
1,283,051
1,283,051
1,283,051
1.40%
0.65%
0.63%
0.80%
0.61%
0.59%
Management Fee
(note 5)
Other
Administrative
expenses (note 6)
Property Costs
Less: Non
recurring
expenses
Average Net
Assets
Ongoing Charge
2021
Ongoing Charge
2020
The Ongoing charges ratio provided in the Company’s Key
Information Document is calculated in line with the PRIIPs
regulations which is different to the AIC methodology above.
Key Performance Indicators
The Board assesses the performance of the Manager in meeting
the Trust’s objective against a number of Key Performance
Indicators, these are considered to be Alternative Performance
Measures. These are set out on pages 26 and 27 of this report
together with information about any calculations or the source of
data.
Glossary and AIFMD disclosure
1.0 ALTERNATIVE PERFORMANCE MEASURES
Alternative Performance Measures are numerical measures of the
Company’s current or historical performance, financial position or
cash flows, other than the financial measures defined or specified
in the Financial Statements.
The measures defined below are considered to be Alternative
Performance Measures. They are viewed as particularly relevant
and are frequently quoted for closed ended investment
companies.
Total Return
The NAV Total Return is calculated by reinvesting the dividends
in the assets of the Company from the relevant ex-dividend
date. Dividends are deemed to be reinvested on the ex-dividend
date as this is the protocol used by the Company’s benchmark
and other indices. The Share Price Total Return is calculated by
reinvesting the dividends in the shares of the Company from the
relevant ex-dividend date.
NAV/share price per share at
31 March 2020
NAV/share price per share at
31 March 2021
Change in year
Impact of dividends reinvested
Total Return for the year
NAV
Share Price
358.11
317.5
417.97
16.7%
4.0%
20.7%
392.5
23.6%
4.7%
28.3%
Net Debt
Net debt is the total value of loan notes, loans (including notional
exposure to CFDs and TRSs) less cash as a proportion of net asset
value.
The net gearing has been calculated as follows:
Loan notes
Loans
Group
2021
£’000
57,593
95,000
CFD positions (notional exposure)
146,001
TRS position (notional exposure)
–
Group
2020
£’000
59,246
40,000
56,728
10,405
Less: Cash
(29,114)
(40,129)
Less: Cash collateral (included
within ‘Other debtors’ in Note 12)
(50,913)
(39,522)
218,567
86,728
Equity shareholders’ funds
1,326,433
1,136,453
Net gearing
16.5%
7.6%
98
TR PROPERTY INVESTMENT TRUST
Glossary and AIFMD disclosure continued
2.0 GLOSSARY OF TERMS AND DEFINITIONS
AIFMD
The Alternative Fund Managers Directive is European legislation
which created a European wide framework for regulating the
managers of “alternative investment funds” (AIFs). It is designed
to regulate any fund which is not a UCITS (Undertakings for
Collective Investment in Transferable Securities) fund and which
is managed or marketed in the EU.
AIC
The Association of Investment Companies – the AIC is the
representative body for closed-ended investment companies.
Alternative Performance Measure
A financial measure of financial performance or financial position
other than a financial measure defined or specified in the
accounting statements.
Discount
The amount by which the market price of a share of an
investment trust is lower than the Net Asset Value per share
expressed as a percentage of the NAV per share.
Key Information Document
Under the PRIIPs Regulations a short, consumer friendly Key
Information Document is required setting out the key features,
risks, rewards and costs of the PRIIP and is intended to assist
investors to better understand the Trust and make comparisons
between Trusts.
The document includes estimates of investment performance
under a number of scenarios. These calculations are prescribed
by the regulation and are based purely on recent historical data.
It is important for investors to note that there is no judgement
applied and these do not in any way reflect the Board or
Manager’s views.
Key Performance Indicator “KPI”
A “KPI” is a quantifiable measure that evaluates how successful
the trust is in meeting its objectives. The Trust’s KPIs are
discussed on pages 26 and 27.
MiFID
The Markets in Financial Instruments Directive is the EU
legislation that regulates firms who provide services to clients
linked to “financial instruments” (shares, bonds, units in collective
investment schemes and derivatives) and the venues where
those instruments are traded.
Net Asset Value (NAV) per share
The value of total assets less liabilities (including borrowings)
divided by the number of shares in issue.
3.0 ALTERNATIVE INVESTMENT FUND MANAGERS
DIRECTIVE (“AIFMD”)
In accordance with the AIFMD, information in relation to the
Company’s leverage and remuneration of the Company’s AIFM,
F&C Investment Business Limited, is required to be made
available to investors. Detailed regulatory disclosures including
those on the AIFM’s remuneration policy are available on the F&C
website or from F&C on request. The numerical remuneration
disclosures in relation to the AIFM’s first relevant accounting
period will be made available in due course.
Leverage
Under the AIFM Directive, it is necessary for AIFs to disclose their
leverage in accordance with prescribed calculations.
Although leverage is often used as another term for gearing,
under the AIFMD leverage is specifically defined. Two types of
leverage calculations are defined; the gross and commitment
methods. These methods summarily express leverage as a ratio
of the exposure of the AIF against its net asset value. ‘Exposure’
typically includes debt, the value of any physical properties
subject to mortgage, non-Sterling currency, equity or currency
hedging at absolute notional values (even those held purely
for risk reduction purposes, such as forward foreign exchange
contracts held for currency hedging) and derivative exposure
(converted into the equivalent underlying positions). The
commitment method nets off derivative instruments, while the
gross method aggregates them.
The table below sets out the current maximum permitted limit
and the actual level of leverage for the Company as at 31 March
2020:
Leverage exposure
Maximum permitted limit
Actual
Gross
method
Commitment
method
200%
124%
200%
118%
The leverage limits are set by the AIFM and approved by the
Board and are in line with the limits set out in the Company’s
Articles of Association.
This should not be confused with the gearing set out in the
Financial Highlights which is calculated under the traditional
method set out by the Association of Investment Companies. The
AIFM is also required to comply with the gearing parameters set
by the Board in relation to borrowings.
TR PROPERTY INVESTMENT TRUST
99
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION Notice of Annual General Meeting
THIS NOTICE IS IMPORTANT AND REQUIRES YOUR
IMMEDIATE ATTENTION
If you are in any doubt as to the action you should take you
should seek your own advice from a stockbroker, solicitor,
accountant or other independent professional adviser who is
authorised under the Financial Services and Markets Act 2000 if
you are resident in the United Kingdom, or if not, from another
appropriately authorised independent financial adviser.
If you have sold or otherwise transferred all of your shares,
please pass this document, together with the accompanying
documents to the purchaser, or transferee, or to the person who
arranged the sale or transfer so they can pass these documents
to the person who now holds the shares.
Our preference is to welcome shareholders in person to our 2021
AGM, particularly given the constraints we faced in 2020 due to
the COVID-19 pandemic. The Company is continuing to monitor
the current COVID-19 legislation and public health guidance issued
by the UK Government.
We have prepared for this AGM based on the anticipated status
of the UK Government’s roadmap out of lockdown at the date
of the meeting. It is expected that the AGM will be able to go
ahead as normal as a physical meeting.
However, it may be necessary to adapt our arrangements to
respond to any changes in circumstances, including the possibility
of a delay to the further easing of restrictions. Any changes to the
arrangements for the AGM (including any change to the location
of the AGM) will be communicated to shareholders before the
meeting, including through our website (www.trproperty.com)
and via an RNS announcement.
The meeting will be conducted in accordance with legislation
and public health guidance in force at the time of the meeting.
Depending on the circumstances at the time of the meeting, it
may be necessary to limit physical attendance by shareholders.
We regret that it will not be possible to provide refreshments
in the usual way. If new restrictions are imposed, it is possible
that we will not be in a position to accommodate shareholders
beyond the minimum required to hold a quorate meeting.
Regardless of the current expectation for the physical meeting
to proceed as planned, we strongly encourage all shareholders
to vote in advance by proxy and appoint the Chairman of the
meeting as their proxy rather than any other named person,
who may not be permitted to attend the AGM. This will ensure
that their vote will be counted if they (or any other proxy they
might otherwise appoint) are not able to attend the meeting. All
resolutions will be voted on by a poll.
Shareholders intending to attend the AGM are asked to register
their intention as soon as practicable by email to the following
dedicated address: cmuk-trpropertyinvestment@linkgroup.co.uk .
Shareholders who are not able or do not wish to attend the
meeting in person (regardless of an easing of restrictions) will be
able to watch a live webcast of the meeting. This will include the
formal business of the meeting, the Manager’s presentation and
questions and answers. The webcast will not enable shareholders
to participate in the meeting or vote. However, shareholders will
be invited to submit questions through our website, by 12.00
noon on 26 July 2021. Questions of a very similar nature may be
grouped together to ensure the orderly running of the AGM.
Shareholders are asked to consult the website in the period
leading up to the event where any restrictions or changes will
be set out and the format detailed when we know what will be
permitted at that time.
Notice is hereby given that the Annual General Meeting of
TR Property Investment Trust plc (the “Company”) will be held
at 2.30 pm on 27 July 2021 at the Royal Automobile Club, 89/91
Pall Mall, London SW1Y 5HS for the purpose of transacting the
following business:
To consider and, if thought fit, pass the following Resolutions,
of which Resolutions 1 to 11 will be proposed as Ordinary
Resolutions and Resolutions 12 to 14 shall be proposed as Special
Resolutions.
1
To receive the Report of the Directors and the Audited
Accounts for the year ended 31 March 2021.
2 To approve the Directors’ Remuneration Report (other than the
part containing the Directors’ remuneration policy) for the year
ended 31 March 2021.
3 To declare a final dividend of 9.00p per Ordinary share.
4 To re-elect Simon Marrison as a Director.
5 To re-elect David Watson as a Director.
6 To re-elect Tim Gillbanks as a Director.
7 To re-elect Kate Bolsover as a Director.
8 To re-elect Sarah-Jane Curtis as a Director.
9 To re-appoint KPMG LLP (the “Auditor”) as Auditors of the
Company to hold office until the conclusion of the next Annual
General Meeting of the Company.
10 To authorise the Directors to determine the remuneration of
the Auditors.
SPECIAL BUSINESS
Ordinary resolution
11 THAT, in substitution for all such existing authorities, the
Directors be generally and unconditionally authorised
pursuant to and in accordance with Section 551 of
the Companies Act 2006 (the “Act”) to exercise all
the powers of the Company to allot shares in the
Company and to grant rights to subscribe for, or to
convert any security into, shares in the Company up to
a nominal value of £26,181,455 (being approximately
33% of the total issued share capital of the Company
as at the latest practicable date prior to publication of
this Notice) provided that this authority shall expire
at the date of the next Annual General Meeting of
the Company (or, if earlier, at the close of business
on 27 October 2022), save that the Company shall
be entitled to make offers or agreements before the
expiry of this authority which would or might require
shares to be allotted or rights to be granted after
such expiry and the Directors shall be entitled to allot
shares and grant rights pursuant to any such offers or
agreements as if this authority had not expired.
100 TR PROPERTY INVESTMENT TRUST
Notice of Annual General Meeting continued
SPECIAL RESOLUTIONS
12 THAT
(a) (in substitution for all such existing authorities and subject
to the passing of Resolution 11 set out above) the directors
be empowered pursuant to Section 570 and Section 573 of
the Act to allot equity securities (as defined in Section 560
of the Act) for cash pursuant to the authority conferred
by Resolution 11 above and/or to sell shares held by the
Company as treasury shares for cash as if Section 561(1) of
the Act did not apply to any such allotment, provided that
this power shall be limited to:
(i) the allotment of equity securities and sale of treasury
shares for cash in connection with an offer of, or
invitation to apply for, equity securities:
(aa) to shareholders in proportion (as nearly as may be
practicable) to their existing holdings; and
(bb) to holders of other equity securities, as required
by the rights of those securities, or as the Board
otherwise considers necessary,
and so that the Board may impose any limits or restrictions
and make any arrangements which it considers necessary
or appropriate to deal with treasury shares, fractional
entitlements, record dates, legal, regulatory or practical
problems in, or under the laws of, any territory or any other
matter; and
(ii) in the case of the authority granted under Resolution
11 and/or in the case of any sale of treasury shares
for cash, to the allotment (otherwise than under
paragraph (i) above) of equity securities or sale of
treasury shares up to a nominal amount of £3,966,887
(being approximately 5% of the total issued share
capital of the Company as at the latest practicable date
prior to publication of the notice of meeting),
(b) the power given by this resolution shall expire upon the
expiry of the authority conferred by Resolution 11 above,
save that the Company shall be entitled to make offers or
agreements before the expiry of such power which would
or might require equity securities to be allotted after such
expiry and the directors shall be entitled to allot equity
securities pursuant to any such offer or agreement as if the
power conferred hereby had not expired.
(b) the maximum price (exclusive of expenses) which may
be paid for any such share shall not be more than the
higher of:
(i) 105% of the average of the middle market quotations
for an Ordinary share as taken from the London Stock
Exchange Daily Official List for the five business days
immediately preceding the date on which the Company
agrees to buy the shares concerned; and
(ii) the higher of the price of the last independent trade
and the highest current independent bid for an Ordinary
share in the Company on the trading venue where the
purchase is carried out at the relevant time;
(c) the minimum price (exclusive of expenses) which may be
paid for an Ordinary share shall be 25p, being the nominal
value per Ordinary share; and
(d) the authority hereby conferred shall expire at the
conclusion of the Annual General Meeting of the Company
in 2022 (or, if earlier, at the close of business on 27 October
2022), save that the Company shall be entitled to enter
into a contract to purchase Ordinary shares which will, or
may, be completed or executed wholly or partly after the
power expires and the Company may purchase Ordinary
shares pursuant to such contract as if the power conferred
hereby had not expired.
14 THAT, with effect from the conclusion of this meeting,
the Articles of Association produced to the meeting and
initialled by the Chairman of the meeting for the purposes of
identification be hereby approved and adopted as the Articles
of Association of the Company, in substitution for, and to the
exclusion of, the existing Articles of Association.
Registered Office:
Registered in England No: 84492 11–12 Hanover Street
London
W1S 1YQ
By Order of the Board
13 THAT the Company be and is hereby generally and
For and on behalf of
Link Company Matters Limited
Secretary
3 June 2021
unconditionally authorised in accordance with Section 701
of the Act to make market purchases (within the
meaning of Section 693(4) of the Act) of Ordinary shares
of 25p each in the capital of the Company on such terms
and in such manner as the directors may from time to
time determine provided that:
(a) the maximum number of Ordinary shares hereby
authorised to be purchased shall be 14.99% of the
Company’s Ordinary shares in issue at the date of the
Annual General Meeting (equivalent to 47,570,911 Ordinary
shares of 25p each at 3 June 2021, the latest practicable
date prior to publication of this Notice);
TR PROPERTY INVESTMENT TRUST 101
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION
Notice of Annual General Meeting continued
NOTES TO THE NOTICE OF ANNUAL GENERAL
MEETING
1
A member entitled to attend and vote at the meeting
convened by the above Notice is entitled to appoint one
or more proxies to exercise all or any of the rights of the
member to attend, speak and vote in his or her place.
Shareholders are strongly encouraged to appoint the Chairman
of the meeting as their proxy, rather than any other named
person who may not be permitted to attend the AGM in the
event of restrictions or limits on attendance. A proxy need
not be a shareholder of the Company. To appoint more than
one proxy, the proxy form should be photocopied and the
name of the proxy to be appointed indicated on each proxy
form together with the number of shares that such proxy is
appointed in respect of. Completion and submission of a proxy
instruction will not preclude a member from attending and
voting in person at the AGM (subject to any restrictions on
physical attendance).
To be valid any proxy form or other instrument appointing
a proxy must be returned by post, by courier or by hand to
the Company’s Registrars, Computershare Investor Services
PLC, The Pavilions, Bridgwater Road, Bristol BS99 6ZY, or
alternatively, by going to www.eproxyappointment.com
and following the instructions provided. All proxies must
be appointed by no later than 48 hours before the time of
the AGM. In the case of joint holders, where more than one
of the joint holders purports to appoint a proxy, only the
appointment submitted by the most senior holder will be
accepted. Seniority is determined by the order in which the
names of the joint holders appear in the Company’s register
in respect of the joint holding (the first named being deemed
the most senior).
2 In order to be able to attend and vote at the AGM or any
adjourned meeting (and also for the purpose of calculating
how many votes a person may cast), a person must have
his or her name entered on the Register of Members of the
Company by 2.30 pm on 23 July 2021 (or 6.00 pm on the
date two days before any adjourned meeting). Changes to
entries on the Register of Members after this time shall be
disregarded in determining the rights of any person to attend
or vote at the meeting.
Voting will be conducted on a poll at the Meeting. On a poll
vote every shareholder will through their proxy have one vote
for every ordinary share of which he or she is the holder.
3
Shareholders should note that it is possible that, pursuant to
requests made by shareholders of the Company under Section
527 of the Companies Act 2006, the Company may be required
to publish on a website a statement setting out any matter
relating to: (i) the audit of the Company’s accounts (including
the auditor’s report and the conduct of the audit) that are to
be laid before the AGM; or (ii) any circumstance connected
with an auditor of the Company ceasing to hold office since
the previous meeting at which annual accounts and reports
were laid in accordance with Section 437 of the Companies
Act 2006.
The Company may not require the shareholders requesting
any such website publication to pay its expenses in complying
with Sections 527 or 528 of the Companies Act 2006. Where
the Company is required to place a statement on a website
under Section 527 of the Companies Act 2006, it must forward
the statement to the Company’s auditor not later than the
time when it makes the statement available on the website.
The business which may be dealt with at the AGM includes
any statement that the Company has been required under
Section 527 of the Companies Act 2006 to publish on a
website.
4 Any corporation which is a member of the Company can
appoint one or more corporate representatives who may
exercise on its behalf all of its powers as a member provided
that they do not do so in relation to the same shares.
5
The right to appoint a proxy does not apply to persons whose
shares are held on their behalf by another person and who
have been nominated to receive communication from the
Company in accordance with Section 146 of the Companies Act
2006 (“nominated persons”). Nominated persons may have
a right under an agreement with the registered shareholder
who holds shares on their behalf to be appointed (or to
have someone else appointed) as a proxy. Alternatively, if
nominated persons do not have such a right, or do not wish
to exercise it, they may have a right under such an agreement
to give instructions to the person holding the shares as to the
exercise of voting rights.
6 CREST members who wish to appoint a proxy or proxies
through the CREST electronic proxy appointment service
may do so for the AGM to be held on 27 July 2021 and any
adjournment(s) thereof by using the procedures described in
the CREST Manual. CREST personal members or other CREST
sponsored members, and those CREST members who have
appointed a voting service provider should refer to their CREST
sponsors or voting service provider(s), who will be able to
take the appropriate action on their behalf.
In order for a proxy appointment or instruction made by
means of CREST to be valid, the appropriate CREST message
(a “CREST Proxy Instruction”) must be properly authenticated in
accordance with Euroclear UK & Ireland Limited’s specifications
and must contain the information required for such
instructions, as described in the CREST Manual. The message
must be transmitted so as to be received by the Company’s
agent, Computershare Investor Services PLC (CREST Participant
ID: 3RA50), no later than 48 hours before the time appointed
for the meeting. For this purpose, the time of receipt will
be taken to be the time (as determined by the time stamp
applied to the message by the CREST Application Host) from
which the Company’s agent is able to retrieve the message by
enquiry to CREST in the manner prescribed by CREST.
CREST members and, where applicable, their CREST sponsor or
voting service provider should note that Euroclear UK & Ireland
Limited does not make available special procedures in CREST
for any particular messages.
102 TR PROPERTY INVESTMENT TRUST
Notice of Annual General Meeting continued
Normal system timings and limitations will therefore apply
in relation to the input of CREST Proxy Instructions. It is the
responsibility of the CREST member concerned to take (or, if
the CREST member is a CREST personal member or sponsored
member or has appointed a voting service provider, to procure
that his or her CREST sponsor or voting service provider
takes) such action as shall be necessary to ensure that a
message is transmitted by means of the CREST system by any
particular time. In this connection, CREST members and, where
applicable, their CREST sponsor or voting service provider are
referred in particular to those sections of the CREST Manual
concerning practical limitations of the CREST system and
timings. The Company may treat as invalid a CREST Proxy
Instruction in the circumstances set out in Regulation 35(5)(a)
of the Uncertificated Securities Regulations 2001.
7
Any member attending the meeting (subject to any
restrictions in place at the time of the meeting) has the right
to ask questions. The Company must cause to be answered
any such question relating to the business being dealt with at
the meeting but no such answer need be given if: (a) to do so
would interfere unduly with the preparation for the meeting
or involve the disclosure of confidential information; (b) the
answer has already been given on a website in the form of an
answer to a question; or (c) it is undesirable in the interests
of the Company or the good order of the meeting that the
question be answered. Questions of a very similar nature may
be grouped together to ensure the orderly running of the
AGM.
8 A copy of this notice, and other information required by
section 311A of the Companies Act 2006, can be found at
www.trproperty.com.
9 Members satisfying the thresholds in section 338 of the
Companies Act 2006 may require the Company to give, to
members of the Company entitled to receive notice of the
AGM, notice of a resolution which those members intend to
move (and which may properly be moved) at the AGM. A
resolution may properly be moved at the AGM unless:
(i) it would, if passed, be ineffective (whether by reason of
any inconsistency with any enactment or the Company’s
constitution or otherwise); (ii) it is defamatory of any person;
or (iii) it is frivolous or vexatious. A request made pursuant
to this right may be in hard copy or electronic form, must
identify the resolution of which notice is to be given, must
be authenticated by the person(s) making it and must be
received by the Company not later than six weeks before the
date of the AGM.
10 Members satisfying the thresholds in section 338A of the
Companies Act 2006 may request the Company to include
in the business to be dealt with at the AGM any matter
(other than a proposed resolution) which may properly be
included in the business at the AGM. A matter may properly
be included in the business at the AGM unless: (i) it is
defamatory of any person; or (ii) it is frivolous or vexatious.
A request made pursuant to this right may be in hard copy
or electronic form, must identify the matter to be included in
the business, must be accompanied by a statement setting
out the grounds for the request, must be authenticated by the
person(s) making it and must be received by the Company not
later than six weeks before the date of the AGM.
11 Biographical details of the directors are shown on pages 38
and 39 of the Annual Report & Accounts.
12 As at 3 June 2021 (being the latest practicable day prior
to publication of this Notice), the issued share capital of
the Company is 317,350,980 Ordinary shares of 25p each.
Therefore, the total number of voting rights in the Company at
3 June 2021 is 317,350,980.
13 The terms of reference of the Audit Committee, the
Management Engagement Committee, the Nomination
Committee, the New Articles of Association and the Letters of
Appointment for directors will be available for inspection for
at least 15 minutes prior to and during the Company’s AGM.
14 You may not use any electronic address provided either in
this Notice or any related documents to communicate for any
purposes other than those expressly stated.
15 The Company may process personal data of attendees at the
Annual General Meeting. This may include webcasts, photos,
recording and audio and video links, as well as other forms
of personal data. The Company shall process such personal
data in accordance with its privacy policy, which can found at
https://www.trproperty.com/legal
TR PROPERTY INVESTMENT TRUST 103
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION
Explanation of Notice of Annual General Meeting
RESOLUTIONS 1, 2, AND 3: ACCOUNTS,
DIRECTORS’ REMUNERATION REPORT AND
DIVIDEND
These are the resolutions which deal with the presentation of
the audited accounts, the approval of the Directors’ Remuneration
Report and the declaration of the final dividend.
RESOLUTION 12: DISAPPLICATION OF STATUTORY
PRE-EMPTION RIGHTS
This resolution would give the directors the authority to allot
shares (or sell any shares which the Company elects to hold
in treasury) for cash without first offering them to existing
shareholders in proportion to their existing shareholdings.
The vote to approve the Remuneration Report is advisory only
and will not require the Company to alter any arrangements
detailed in the report should the resolution not be passed.
The Board is proposing a final dividend for the year ended
31 March 2021 of 9.00p per ordinary share. If approved at the
AGM, the Company would pay the dividend on 4 August 2021
to those shareholders on the Company’s register at the close of
business on 18 June 2021.
RESOLUTIONS 4, 5, 6, 7, AND 8: RE-ELECTION OF
DIRECTORS
These resolutions deal with the re-election of Simon Marrison,
Tim Gillbanks, David Watson, Kate Bolsover and Sarah-Jane
Curtis. In accordance with the UK Corporate Governance Code, all
directors will retire on an annual basis and have confirmed that
they will offer themselves for re-election.
A performance evaluation has been completed and your Board
has determined that each of the directors continues to be
effective and demonstrates their commitment to their role.
Their biographical details, which are set out on pages 38 and
39, demonstrate how the Board has the appropriate balance
of skills, experience independence and knowledge to lead the
Company’s long-term sustainable success. Accordingly, the Board
unanimously recommends their re-election.
RESOLUTIONS 9 AND 10: AUDITORS
These deal with the reappointment of the Auditors, KPMG
LLP, and the authorisation for the directors to determine their
remuneration.
RESOLUTION 11: ALLOTMENT OF SHARE CAPITAL
Our Board considers it appropriate that an authority be granted
to allot shares in the capital of the Company up to a maximum
nominal amount of £26,445,915 (representing approximately one
third of the Company’s issued share capital as at 3 June 2021,
being the latest practical date prior to publication of this Notice of
the meeting). As at the date of this notice the Company does not
hold any shares in treasury.
The directors have no present intention of exercising this
authority and would only expect to use the authority if shares
could be issued at, or at a premium to, the Net Asset Value per
share.
This authority will expire at the earlier of close of business
on 27 October 2022 and the conclusion of the Annual General
Meeting of the Company to be held in 2022.
This authority would be limited to allotments or sales in
connection with pre-emptive offers and offers to holders of
other equity securities if required by the rights of those shares
or as the board otherwise considers necessary, or otherwise up
to an aggregate nominal amount of £3,966,887. This aggregate
nominal amount represents 5% of the total issued share capital
of the Company as at 3 June 2021, the latest practicable date
prior to publication of this Notice. In respect of this aggregate
nominal amount, the directors confirm their intention to follow
the provisions of the Pre-Emption Group’s Statement of Principles
regarding cumulative usage of authorities within a rolling
3-year period where the Principles provide that usage in excess
of 7.5% should not take place without prior consultation with
shareholders.
The authority will expire at the earlier of close of business on
27 October 2022 and the conclusion of the Annual General
Meeting of the Company to be held in 2022.
RESOLUTION 13: AUTHORITY TO MAKE MARKET
PURCHASES OF THE COMPANY’S ORDINARY
SHARES
At the AGM held in 2020, a special resolution was proposed and
passed, giving the directors authority, until the conclusion of the
AGM in 2021, to make market purchases of the Company’s own
issued shares up to a maximum of 14.99% of the issued share
capital.
Your Board is proposing that they should be given renewed
authority to purchase Ordinary shares in the market. Your
Board believes that to make such purchases in the market at
appropriate times and prices is a suitable method of enhancing
shareholder value. The Company would, within guidelines set
from time to time by the Board, make either a single purchase or
a series of purchases, when market conditions are suitable, with
the aim of maximising the benefits to shareholders.
Where purchases are made at prices below the prevailing Net
Asset Value per share, this will enhance the Net Asset Value
for the remaining shareholders. It is therefore intended that
purchases would only be made at prices below Net Asset Value.
Your Board considers that it will be most advantageous to
shareholders for the Company to be able to make such purchases
as and when it considers the timing to be favourable and
therefore does not propose to set a timetable for making any
such purchases.
The Companies (Acquisition of Own Shares) (Treasury Shares)
Regulations 2003 enable companies in the United Kingdom to
hold in treasury any of their own shares they have purchased
with a view to possible resale at a future date, rather than
cancelling them. If the Company does re-purchase any of its
104 TR PROPERTY INVESTMENT TRUST
Explanation of Notice of Annual General Meeting continued
shares, the directors do not currently intend to hold any of the
shares re-purchased in treasury. The shares so re-purchased will
continue to be cancelled.
The Listing Rules of the UK Listing Authority limit the maximum
price (exclusive of expenses) which may be paid for any such
share. It shall not be more than the higher of:
(i) 105% of the average of the middle market quotations for an
Ordinary share as taken from the London Stock Exchange Daily
Official List for the five business days immediately preceding
the date on which the Company agrees to buy shares
concerned; and
(ii) the higher of the price of the last independent trade and
the highest current independent bid for an Ordinary share in
the Company on the trading venue where the purchase is
carried out.
The minimum price to be paid will be 25p per Ordinary
share (being the nominal value). The Listing Rules also limit
a listed company to purchases of shares representing up to
15% of its issued share capital in the market pursuant to a
general authority such as this. For this reason, the Company is
limiting its authority to make such purchases to 14.99% of the
Company’s Ordinary shares in issue at the date of the AGM; this
is equivalent to 47,570,911 Ordinary shares of 25p each (nominal
value £11,892,727) at 3 June 2021, the latest practicable date
prior to publication this Notice. The authority will last until the
Annual General Meeting of the Company to be held in 2022.
RESOLUTION 14: ADOPTION OF NEW ARTICLES OF
ASSOCIATION
Resolution 14 relates to the adoption of new Articles of
Association (the “New Articles”) in order to update the
Company’s current Articles of Association (the “Current Articles”),
which were adopted on 14 December 2012. The New Articles
reflect developments in best practice, and provide additional
clarification and flexibility. The main changes in the New Articles
are summarised in the Appendix on pages 106 and 107. Other
changes, which are of a minor, technical or clarifying nature have
not been noted in the Appendix. The New Articles showing all
the changes to the Current Articles are available for inspection,
at www.trproperty.com and will also be available at the Annual
General Meeting.
RECOMMENDATION
Your Board believes that the resolutions contained in this Notice
of Annual General Meeting are in the best interests of the
Company and shareholders as a whole and recommends that you
vote in favour of them as your Directors intend to do in respect of
their beneficial shareholdings.
TR PROPERTY INVESTMENT TRUST 105
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION Explanation of Notice of Annual General Meeting continued
APPENDIX
Further information and Explanatory notes regarding
amendments to the Company’s articles of association
Sigma Shares and Deferred Shares
The New Articles amend the Current Articles to remove
provisions and references relating to Sigma Shares and Deferred
Shares. This reflects that on 14 December 2012 all Sigma Shares
were consolidated and redesignated as Ordinary Shares, and
the resulting Deferred Share was purchased by the Company for
cancellation. The Company now has a single class of Ordinary
Shares.
Untraced shareholders
The New Articles amend the position in relation to untraced
shareholders. Rather than requiring the Company to take out
two newspaper advertisements, the New Articles require the
Company to use reasonable efforts to trace the shareholder.
‘Reasonable efforts’ to trace a shareholder may include, if
considered appropriate, the Company engaging a professional
asset reunification company or other tracing agent to search for
a shareholder who has not kept their shareholder details up to
date.
In addition, the New Articles provide that money from the sale
of the shares of an untraced shareholder will be forfeited if not
claimed after two years, rather than six years.
These changes reflect best practice and provide the Company
with appropriate flexibility in connection with locating untraced
shareholders.
Sub-division of shares
The New Articles clarify that any shares resulting from a sub-
division of the Company’s existing shares may, in addition to
having any preference or advantage as compared with the
Company’s other shares, also have deferred or other rights. This
change makes administering any sub-division of shares more
straightforward.
Operation of general meetings
The New Articles contain specific provisions to clarify that the
Company can hold “hybrid” general meetings (including annual
general meetings) and to set out how such meetings are to
be conducted. Under the New Articles, the Company may hold
“hybrid” general meetings in such a way that enables members
to attend and participate in the business of the meeting by
attending a physical location or by attending by means of an
electronic facility. Voting at hybrid meetings will, by default, be
decided on a poll. Hybrid meetings may be adjourned in the
event of a technological failure.
The New Articles allow the Company, where appropriate, to make
changes to the arrangements for general meetings (including the
introduction, change or cancellation of electronic facilities) after
notice of the meeting has been issued. The Company may give
notice of any such changes in any manner considered appropriate
(rather than via an advertisement in two national newspapers).
The New Articles also explicitly allow the Company to introduce
health and safety arrangements at its meetings.
These changes were introduced to provide the Board greater
flexibility to align with technological advances, changes in
investor sentiment and evolving best practice, particularly in light
106 TR PROPERTY INVESTMENT TRUST
of the Covid-19 outbreak and the uncertain duration of social
distancing measures and restrictions on gatherings. The Board
believes that hybrid meetings will allow for greater shareholder
and stakeholder engagement over the coming years in a way
that is more convenient for all parties. Absent exceptional
circumstances, members of the Board intend to continue the
practice of attending general meetings of the Company in person.
In line with the views expressed by the Investment Association
and Institutional Shareholder Services, the changes will not
permit meetings to be held exclusively on an electronic basis, so
a physical meeting will still be required. In deciding whether and
how to hold a hybrid general meeting in future, the Company
will have regard to the views of shareholders and institutional
governance bodies at the relevant time as well as to relevant
guidance or codes of best practice.
The New Articles also specifically refer to the possibility of
satellite/multi-venue meetings, such as the use of overflow
rooms. Satellite meetings are legally valid even without such a
provision but it has been added for clarity.
These changes are primarily contained in articles 47, 48, 50
and 53 in the New Articles. A number of other consequential
amendments have been made to the New Articles.
Objections or Errors in Voting
In relation to the statutory requirement that a proxy must vote
in accordance with any instructions given by the member by
whom the proxy is appointed, the New Articles state explicitly
that the company is not required to check that proxies and
corporate representatives have voted in accordance with their
instructions or that their failure to do so would vitiate the result
of a shareholder vote.
Number of directors
The New Articles reflect the statutory minimum of two directors,
and introduce a maximum of 10 directors.
Reappointment of directors
In line with the requirements of the UK Corporate Governance
Code, the New Articles require directors to retire (and should
they wish to remain in office, seek re-election) at each annual
general meeting. This requirement does not apply to directors in
their first year of appointment who were appointed in the period
between the AGM notice being issued and the AGM itself. This
confirms existing Company practice.
Directors’ fees
The Current Articles provide that the aggregate of all fees paid
to directors shall not exceed £250.000 per annum. Article 88 of
the New Articles increases this amount to £300,000 to reflect the
amount approved by resolution of the Company on 22 July 2014.
Borrowing Powers
The New Articles include in the definition of “borrowings” the
minority proportion of moneys borrowed by a member of the
group and owing to a partly-owned subsidiary undertaking
(with “the minority proportion” meaning a proportion equal to
the proportion of the issued share capital of a partly-owned
subsidiary undertaking which is not attributable to a member of
the group).
Explanation of Notice of Annual General Meeting continued
Forfeiture of unclaimed dividends
The Current Articles provide that if a dividend or other payment
due to members has not been claimed for twelve years after
being declared or becoming due, it will be forfeited to the
Company. Article 122 of the New Articles reduces this period from
twelve to six years.
Payments of dividends and other amounts
The New Articles give the Board greater flexibility to determine
the appropriate method(s) it pays dividends (and other sums)
to shareholders. This flexibility will help the Board take account
of developments in market practice and keep down the
administrative cost of making payments. The New Articles
also provide that where a payment cannot be made because
a shareholder has not provided valid account details to the
company, that amount will treated as unclaimed until the
shareholder provides those details.
Capital Reserve
The New Articles remove Article 132 in the Old Articles, which
was included to ensure that the company qualifies as an
investment trust and is treated as an investment company.
Following the modernisation of the investment trust regime and
amendments to legislation abolishing the restriction on the ability
to distribute capital profits, this provision is no longer necessary.
Strategic report and supplementary materials
The Companies Act 2006 and the Companies (Receipt of Accounts
and Reports) Regulations 2013 allow the Company to send a copy
of its strategic report with supplementary material instead of
its full accounts to a member who has elected or tacitly agreed
to receive these documents, provided that the Company is not
prohibited from doing so in its articles. Article 129 is intended to
make it clear there is no such prohibition. Shareholders should
note that they can always view the full annual report on the
Company’s website or request a hard copy from the Company’s
registrar.
Gender Neutral Drafting
The New Articles amend the Current Articles so that gender
neutral language is used.
General
Other changes which are of a minor, technical or clarifying nature
or which have been made to remove provisions in the Current
Articles which duplicate English company law are not noted.
TR PROPERTY INVESTMENT TRUST 107
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION Directors and Other Information
DIRECTORS
D Watson (Chairman)
K Bolsover
S-J Curtis
T Gillbanks
S Marrison
REGISTERED OFFICE
3rd Floor
11–12 Hanover Street
London W1S 1YQ
REGISTERED NUMBER
Registered as an investment company in England
and Wales No. 84492
AIFM
BMO Investment Business Limited
Exchange House
Primrose Street
London EC2A 2NY
PORTFOLIO MANAGER
Thames River Capital LLP, authorised and regulated by the
Financial Conduct Authority
3rd Floor
11–12 Hanover Street
London W1S 1YQ
Telephone: 020 7011 4100
FUND MANAGER
M A Phayre-Mudge MRICS
FINANCE MANAGER AND INVESTOR RELATIONS
J L Elliott ACA
DEPUTY FUND MANAGER
A Lhonneur
DIRECT PROPERTY MANAGER
G P Gay MRICS
SECRETARY
Link Company Matters Limited
6th Floor, 65 Gresham Street
London EC2V 7NQ
REGISTRAR
Computershare Investor Services PLC
The Pavilions, Bridgwater Road
Bristol BS99 6ZY
Telephone: 0370 707 1355
AUDITOR
KPMG LLP
15 Canada Square
London E14 SGL
STOCKBROKERS
Panmure Gordon (UK) Limited
One, New Change
London EC4M 9AF
Stifel Nicolaus Europe Limited
150 Cheapside
London EC2V 6ET
SOLICITORS
Slaughter and May
One Bunhill Row
London EC1Y 8YY
DEPOSITARY, CUSTODIAN AND FUND
ADMINISTRATOR
BNP Paribas Securities Services
10 Harewood Avenue
London NW1 6AA
WEBSITE
www.trproperty.com
TAX ADVISERS
PricewaterhouseCoopers LLP
Central Square South
Orchard Street
Newcastle upon Tyne NE1 3AZ
108 TR PROPERTY INVESTMENT TRUST
INTERNET
Details of the market price and Net Asset Value of the
Ordinary shares can be found on the Company’s website at
www.trproperty.com.
Shareholders who hold their shares in certificated form can check
their holdings with the Registrar, Computershare Investor Services
PLC, via www.investorcentre.co.uk. Please note that to gain
access to your details on the Computershare site you will need
the holder reference number stated on the top left hand corner of
your share certificate.
DISABILITY ACT
Copies of this Report and Accounts and other documents issued
by the Company are available from the Company Secretary. If
needed, copies can be made available in a variety of formats,
including Braille, audio tape or larger type as appropriate.
You can contact the Registrar, Computershare Investor Services
PLC, which has installed textphones to allow speech and hearing
impaired people who have their own textphone to contact
them directly, without the need for an intermediate operator, by
dialling 0870 702 0005. Specially trained operators are available
during normal business hours to answer queries via this service.
Alternatively, if you prefer to go through a ‘typetalk’ operator
(provided by the Royal National Institute for Deaf People) you
should dial 18001 followed by the number you wish to dial.
General Shareholder Information
RELEASE OF RESULTS
The half year results are announced in late November. The full
year results are announced in early June.
ANNUAL GENERAL MEETING
The AGM is held in London in July.
DIVIDEND PAYMENT DATES
Dividends are usually paid on the Ordinary shares as follows:
Interim: January
Final: August
DIVIDEND PAYMENTS
Dividends can be paid to shareholders by means of BACS
(Bankers’ Automated Clearing Services); mandate forms for
this purpose are available from the Registrar. Alternatively,
shareholders can write to the Registrar (the address is given on
page 108 of this report) to give their instructions; these must
include the bank account number, the bank account title and the
sort code of the bank to which payments are to be made.
DIVIDEND RE-INVESTMENT PLAN (“DRIP”)
TR Property Investment Trust plc offers shareholders the
opportunity to purchase further shares in the Company through
the DRIP. Please note that following Brexit shareholders in Europe
are no longer able to participate in the DRIP. DRIP forms may
be obtained from Computershare Investor Services PLC through
their secure website www.investorcentre.co.uk, or by phoning
0370 707 1694. Charges do apply; dealing commission of 0.75%
(subject to a minimum of £2.50). Government stamp duty of
0.5% also applies.
SHARE PRICE LISTINGS
The market prices of the Company’s shares are published daily
in The Financial Times. Some of the information is published in
other leading newspapers. The Financial Times also shows figures
for the estimated Net Asset Values and the discounts applicable.
SHARE PRICE INFORMATION
ISIN GB0009064097
SEDOL 0906409
Bloomberg TRY.LN
Reuters TRY.L
Datastream TRY
BENCHMARK
Details of the benchmark are given in the Strategic Report
on page 24 of this Report and Accounts. The benchmark index is
published daily and can be found on Bloomberg;
FTSE EPRA/NAREIT Developed Europe Capped Net Total
Return Index in Sterling
Bloomberg: TR0RAG Index
TR PROPERTY INVESTMENT TRUST 109
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION
General Shareholder Information continued
NOMINEE SHARE CODE
Where notification has been provided in advance, the Company
will arrange for copies of shareholder communications to be
provided to the operators of nominee accounts. Nominee
investors may attend general meetings and speak at meetings
when invited to do so by the Chairman.
CGT BASE COST
Taxation of capital gains for shareholders who
formerly held Sigma shares
Upon a disposal of all or part of a shareholder’s holding of
Ordinary shares, the impact on the shareholder’s capital gains
tax base cost of the conversion to Sigma shares in 2007 and the
redesignation to Ordinary shares in 2012 should be considered.
In respect of the conversion to Sigma in 2007, agreement
was reached with HM Revenue & Customs (“HMRC”) to base
the apportionment of the capital gains tax base cost on
the proportion of Ordinary shares that were converted by a
shareholder into Sigma shares on 25 July 2007.
Therefore, if an Ordinary shareholder converted 20% of their
existing Ordinary shares into Sigma shares on 25 July 2007, the
capital gains tax base cost of the new Sigma shares acquired
would be equal to 20% of the original capital gains tax base cost
of the Ordinary shares that they held pre-conversion. The base
cost of their remaining holding of Ordinary shares would then be
80% of the original capital gains tax base cost of their Ordinary
shares held pre-conversion.
As part of the re-designation of the Sigma shares into Ordinary
shares in December 2012, a further shareholder’s agreement
was reached with HMRC that a shareholders capital gains tax
base cost in their new Ordinary shares should be equivalent to
their capital gains base cost in the pre-existing Sigma shares
(i.e. their capital gains base cost under the existing agreement if
applicable).
If in doubt as to the consequences of this agreement with HMRC,
shareholders should consult with their own professional advisors.
110 TR PROPERTY INVESTMENT TRUST
Investing in TR Property Investment Trust plc
MARKET PURCHASES
The shares of TR Property Investment Trust plc are listed and
traded on the London Stock Exchange. Investors may purchase
shares through their stockbroker, bank or other financial
intermediary.
HOLDING SHARES IN CERTIFICATED FORM
Investors may hold their investment in certificated form. Our
registrars, Computershare operate a dealing service which enables
investors to buy and sell shares quickly and easily online without
a broker or the need to open a trading account. Alternatively the
Investor Centre allows investors to manage portfolios quickly and
securely, update details and view balances without annual charges.
Further details are available by contacting Computershare on 0370
707 1355 or visit www. computershare.com.
TR Property Investment Trust plc now offers shareholders the
opportunity to purchase further shares in the company through
the Dividend Re-investment Plan (“DRIP”) through the registrar,
Computershare. Shareholders can obtain further information on
the DRIP through their secure website www.investorcentre.co.uk,
or by phoning 0370 707 1694. Charges do apply. Please note
that to gain access to your details or register for the DRIP on the
Computershare site you will need the holder reference number
stated on the top left hand corner of your share certificate.
SAVING SCHEMES, ISAS AND OTHER PLANS
A number of banks and wealth management organisations
provide Savings Schemes and ISAs through which UK clients can
invest in TR Property Investment Trust plc.
ISA and savings scheme providers do charge dealing and other
fees for operating the accounts, and investors should read the
Terms and Conditions provided by these companies and ensure
that the charges best suit their planned investment profile. Most
schemes carry annual charges but these vary between provider
and product. Where dealing charges apply, in some cases these
are applied as a percentage of funds invested and others as a
flat charge. The optimum way to hold the shares will be different
for each investor depending upon the frequency and size of
investments to be made.
Details are given below of two providers offering shares in
TR Property Investment Trust, but there are many other options.
interactive investor (ii)
Interactive investor provide and administer a range of self-select
investment plans, including tax-advantaged ISAs and SIPPs
(Self-Invested Personal Pension), and Trading Accounts.
For more information, interactive investor can be contacted on
0345 607 6001, or by visiting https://www.ii.co.uk/
Interactive investor offer investors in TR Property and other
investment trusts a free opt-in online shareholder voting and
information service that enables investors to receive shareholder
communications and, if they wish, to vote on the shareholdings
held in their account.
TR Property is also on the interactive super 60 rated list.
BMO Asset Management Limited (“BMO”)
BMO offer a number of Private Investor Plans, Investment Trust
and Junior ISAs and Children’s Investment Plans. Investments
can be made as lump sums or through regular savings. For more
information see inside the back cover. BMO can be contacted on
0800 136 420, or visit www.bmogam.com.
Please remember that the value of your investments and any
income from them may go down as well as up. Past performance
is not a guide to future performance. You may not get back
the amount that you invest. If you are in any doubt as to the
suitability of a plan or any investment available within a plan,
please take professional advice.
Saving Schemes and ISAs transferred from Alliance
Trust Savings (ATS) BNP Paribas
Following the acquisition of Alliance Trust Savings by interactive
investor, ATS self-directed accounts were transferred to the
interactive investor platform on 14th October 2019.
In 2012 BNP Paribas closed down the part of their business that
operated Savings Schemes and ISAs. Investors were given the
choice of transferring their schemes to Alliance Trust Savings
(“ATS”) or to a provider of their own choice, or to close their
accounts and sell the holdings.
If investors did not respond to the letters from BNP Paribas, their
accounts were transferred to ATS.
Following the acquisition of Alliance Trust Savings by interactive
investor, ATS self-directed accounts were transferred to the
interactive investor platform on 14 October 2019.
SHARE FRAUD AND BOILER ROOM SCAMS
Shareholders in a number of Investment Trusts have been
approached as part of a share fraud where they are informed
of an opportunity to sell their shares as the company is
subject to a takeover bid. This is not true and is an attempt to
defraud shareholders. The share fraud also seeks payment of a
“commission” by shareholders to the parties carrying out the fraud.
Shareholders should remain alert to this type of scam and treat
with suspicion any contact by telephone offering an attractive
investment opportunity, such as a premium price for your shares,
or an attempt to convince you that payment is required in order
to release a settlement for your shares. These frauds may also
offer to sell your shares in companies which have little or no
value or may offer you bonus shares. These so called “boiler
room” scams can also involve an attempt to obtain your personal
and/or banking information with which to commit identity fraud.
The caller may be friendly and reassuring or they may take a
more urgent tone, encouraging you to act quickly otherwise you
could lose money or miss out on a deal.
If you have been contacted by an unauthorised firm regarding
your shares the FCA would like to hear from you. You can report
an unauthorised firm using the FCA helpline on 0800 111 6768 or
by visiting their website, which also has other useful information,
at www.fca.org.uk.
If you receive any unsolicited investment advice make sure you
get the correct name of the person and organisation. If the calls
persist, hang up. If you deal with an unauthorised firm, you will
not be eligible to receive payment under the Financial Services
Compensation Scheme.
Please be advised that the Board or the Manager would
never make unsolicited telephone calls of such a nature to
shareholders.
TR PROPERTY INVESTMENT TRUST 111
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSGLOSSARY AND AIFMD DISCLOSURENOTICE OF AGMSHAREHOLDER INFORMATION How to Invest
One of the most convenient ways to invest in TR Property Investment Trust plc is through one of the savings plans run by BMO.
BMO ISA
You can use your ISA allowance to make an annual
tax‑efficient investment of up to £20,000 for the
current tax year with a lump sum from £100 or regular
savings from £25 a month. You can also transfer any
existing ISAs to us whilst maintaining the tax benefits.
BMO JUNIOR ISA (JISA)*
A tax efficient way to invest up to £9,000 per tax year
for a child. Contributions start from £100 lump sum or
£25 a month. JISAs or CTFs with other providers can be
transferred to BMO.
BMO LIFETIME ISA (LISA)
For those aged 18‑39, a Lifetime ISA could help towards
purchasing your first home or retirement in later life.
Invest up to £4,000 for the current tax year and receive
a 25% Government bonus up to £1,000 per year. Invest
with a lump sum from £100 or regular savings from
£25 a month.
BMO CHILD TRUST FUND (CTF)*
If your child already has a CTF you can invest up to
£9,000 per birthday year, from £100 lump sum or £25 a
month. CTFs with other providers can be transferred
to BMO.
BMO GENERAL INVESTMENT ACCOUNT (GIA)
This is a flexible way to invest in our range
of Investment Trusts. There are no maximum
contributions, and investments can be made from
£100 lump sum or £25 a month.
BMO JUNIOR INVESTMENT ACCOUNT (JIA)
This is a flexible way to save for a child in our
range of Investment Trusts. There are no maximum
contributions, and the plan can easily be set up under
bare trust (where the child is noted as the beneficial
owner) or kept in your name if you wish to retain
control over the investment. Investments can be made
from a £100 lump sum or £25 a month per account.
You can also make additional lump sum top‑ups at any
time from £100 per account.
*The CTF and JISA accounts are opened by parents in the child’s name
and they have access to the money at age 18. **Calls may be recorded or
monitored for training and quality purposes.
CHARGES
Annual management charges and other charges apply according to
the type of plan.
How to Invest
ANNUAL ACCOUNT CHARGE
ISA/LISA: £60+VAT
GIA: £40+VAT
One of the most convenient ways to invest in is through one of the savings plans run by BMO.
JISA/JIA/CTF: £25+VAT
You can pay the annual charge from your account, or by direct debit
(in addition to any annual subscription limits).
BMO ISA
You can use your ISA allowance to make an annual tax-
DEALING CHARGES
efficient investment of up to £20,000 for the current tax year
£12 per fund (reduced to £0 for deals placed through the online BMO
with a lump sum from £100 or regular savings from £25 a
Investor Portal) for ISA/GIA/LISA/JIA and JISA. There are no dealing
month. You can also transfer any existing ISAs to us whilst
charges on a CTF.
maintaining the tax benefits.
Dealing charges apply when shares are bought or sold but not on the
reinvestment of dividends or the investment of monthly direct debits.
BMO Junior ISA (JISA)*
Government stamp duty of 0.5% also applies on the purchase of
A tax efficient way to invest up to £9,000 per tax year for
shares (where applicable).
a child. Contributions start from £100 lump sum or £25 a
The value of investments can go down as well as up and you may
month. JISAs or CTFs with other providers can be transferred
not get back your original investment. Tax benefits depend on your
to BMO.
individual circumstances and tax allowances and rules may change.
Please ensure you have read the full Terms and Conditions, Privacy
Policy and relevant Key Features documents before investing. For
BMO Child Trust Fund (CTF)*
regulatory purposes, please ensure you have read the Pre-sales Cost &
If your child already has a CTF you can invest up to £9,000
Charges disclosure related to the product you are applying for, and the
per birthday year, from £100 lump sum or £25 a month. CTFs
relevant Key Information Documents (KIDs) for the investment trusts
with other providers can be transferred to BMO.
you want to invest into.
HOW TO INVEST
BMO General Investment Account (GIA)
To open a new BMO plan, apply online at bmogam.com/apply
This is a flexible way to invest in our range of Investment
Online applications are not available if you are transferring an existing
Trusts. There are no maximum contributions, and
plan with another provider to BMO, or if you are applying for a new
investments can be made from £100 lump sum or £25 a
plan in more than one name but paper applications are available at
month.
bmoinvestments.co.uk/documents or by contacting BMO.
NEW CUSTOMERS
Call:
Email:
0800 136 420** (8.30am – 5.30pm, weekdays)
info@bmogam.com
EXISTING PLAN HOLDERS
Call:
Email:
By post: BMO Administration Centre
BMO Junior Investment Account (JIA)
This is a flexible way to save for a child in our range of
Investment Trusts. There are no maximum contributions,
and the plan can easily be set up under bare trust (where
0345 600 3030** (9.00am – 5.00pm, weekdays)
the child is noted as the beneficial owner) or kept in your
investor.enquiries@bmogam.com
name if you wish to retain control over the investment.
Investments can be made from a £100 lump sum or £25 a
month per account. You can also make additional lump sum
top-ups at any time from £100 per account.
PO Box 11114
Chelmsford
CM99 2DG
You can also invest in the trust through online dealing platforms for
*The CTF and JISA accounts are opened by parents in the child’s name
private investors that offer share dealing and ISAs. Companies include:
and they have access to the money at age 18. **Calls may be recorded or
monitored for training and quality purposes.
Barclays Stockbrokers, EQi, Halifax, Hargreaves Lansdown,
HSBC, Interactive Investor, Lloyds Bank, The Share Centre
bmoinvestments.co.uk
bmoinvestments.co.uk
facebook.com/bmoinvestmentsuk
facebook.com/bmoinvestmentsuk
Charges
Annual management charges and other charges apply according to
the type of plan.
Annual account charge
ISA: £60+VAT
GIA: £40+VAT
JISA/JIA/CTF: £25+VAT
You can pay the annual charge from your account, or by direct debit
(in addition to any annual subscription limits).
Dealing charges
£12 per fund (reduced to £0 for deals placed through the online BMO
Investor Portal) for ISA/GIA/JIA and JISA. There are no dealing charges
on a CTF.
Dealing charges apply when shares are bought or sold but not on the
reinvestment of dividends or the investment of monthly direct debits.
Government stamp duty of 0.5% also applies on the purchase of
shares (where applicable).
The value of investments can go down as well as up and you may
not get back your original investment. Tax benefits depend on your
individual circumstances and tax allowances and rules may change.
Please ensure you have read the full Terms and Conditions, Privacy
Policy and relevant Key Features documents before investing. For
regulatory purposes, please ensure you have read the Pre-sales Cost &
Charges disclosure related to the product you are applying for, and the
relevant Key Information Documents (KIDs) for the investment trusts
you want to invest into.
How to Invest
To open a new BMO plan, apply online at bmogam.com/apply
Online applications are not available if you are transferring an existing
plan with another provider to BMO, or if you are applying for a new
plan in more than one name but paper applications are available at
bmoinvestments.co.uk/documents or by contacting BMO.
New Customers
Call:
Email:
Existing Plan Holders
0800 136 420** (8.30am – 5.30pm, weekdays)
info@bmogam.com
Call:
Email:
By post:
0345 600 3030** (9.00am – 5.00pm, weekdays)
investor.enquiries@bmogam.com
BMO Administration Centre
PO Box 11114
Chelmsford
CM99 2DG
You can also invest in the trust through online dealing platforms for
private investors that offer share dealing and ISAs. Companies include:
Barclays Stockbrokers, EQi, Halifax, Hargreaves Lansdown, HSBC,
Interactive Investor, Lloyds Bank, The Share Centre
BMO ASSET MANAGEMENT LIMITED
BMO Asset Management Limited is authorised and regulated by the Financial Conduct Authority and is a member of BMO Global Asset Management EMEA of which the
ultimate parent company is the Bank of Montreal. 737510_L56_05/21_UK
0345 600 3030, 9.00am – 5.00pm, weekdays, calls may be recorded
0345 600 3030, 9.00am – 5.00pm, weekdays, calls may be
or monitored for training and quality purposes.
recorded or monitored for training and quality purposes.
112 TR PROPERTY INVESTMENT TRUST
BMO Asset Management Limited
company is the Bank of Montreal. 737510_L56_04/21_UK
BMO Asset Management Limited is authorised and regulated by the Financial Conduct Authority and is a member of BMO Global Asset Management EMEA of which the ultimate parent
TR Property Investment Trust plc
Report & Accounts for the year ended 31 March 2021
OVERVIEW
1
2
3
Company Summary
Financial Highlights and Performance
Historical Performance
STRATEGIC REPORT
Chairman’s Statement
Portfolio
Investment Portfolio by Country
Twelve Largest Equity Investments
Investment Properties
Investment Objective and Benchmark
4
8 Manager’s Report
17
18
19
23
24
24 Business Model
25
26 Key Performance Indicators
28
33 Viability Statement
35
Strategy and Investment Policies
Corporate Responsibility
Principal and Emerging Risks and Uncertainties
GOVERNANCE
38 Directors
40 Managers
41 Report of the Directors
44 Corporate Governance Report
51
53
55 Directors’ Remuneration Report
58 Report of the Audit Committee
61
Report of the Nomination Committee
Report of the Management Engagement Committee
Statement of Directors’ responsibilities in relation to the
Group financial statements
Independent auditor’s report to the members of TR
Property Investment Trust plc
62
FINANCIAL STATEMENTS
Group Statement of Comprehensive Income
Group and Company Statement of Changes in Equity
69
70
71 Group and Company Balance Sheets
72
73 Notes to the Financial Statements
Group and Company Cash Flow Statements
GLOSSARY AND AIFMD DISCLOSURE
98 Glossary and AIFM disclosure
NOTICE OF ANNUAL GENERAL MEETING
100 Notice of Annual General Meeting
104 Explanation of Notice of Annual General Meeting
SHAREHOLDER INFORMATION
108 Directors and Other Information
109 General Shareholder Information
111
112 How to Invest
Investing in TR Property Investment Trust plc
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CBP007286
TR Property Investment Trust plc
Report & Accounts for the year ended 31 March 2021
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TR Property Investment
Trust plc is managed by