TR PROPERTY INVESTMENT TRUST PLC
Annual Report
31-03-2022
Financial statements
72
Group Statement of Comprehensive
Income
73 Group and Company Statement of
Changes in Equity
Group and Company Balance Sheets
Group and Company Cash Flow
Statements
Notes to the Financial Statements
74
75
76
Glossary and AIFMD disclosure
102 Glossary and AIFM disclosure
Notice of AGM
106 Notice of Annual General Meeting
111 Explanation of Notice of Annual
General Meeting
Shareholder information
114 Directors and Other Information
115 General Shareholder Information
117 Investing in TR Property Investment
Trust plc
119 How to Invest
Overview
1 Company Summary
2 Financial Highlights and Performance
3 Historical Performance
Strategic report
4 Chairman’s Statement
Manager’s Report
7
15 Portfolio
16
Investment Portfolio by Country
17 Twelve Largest Equity Investments
21
22
22 Business Model
23 Strategy and Investment Policies
24 Key Performance Indicators
26 Principal and Emerging Risks and
Investment Properties
Investment Objective and Benchmark
Uncertainties
30 Long-Term Viability
32 Responsible Investment
Governance
40 Directors
42 Managers
43 Report of the Directors
46 Corporate Governance Report
52 Report of the Nomination Committee
54 Report of the Management
Engagement Committee
56 Directors’ Remuneration Report
59 Report of the Audit Committee
62 Statement of Directors’
Responsibilities in Relation to the
Group Financial Statements
63 Independent Auditor’s Report to
the Members of TR Property
Investment Trust plc
2
TR Property Investment Trust 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
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 23
and the entire portfolio is shown on page 16.
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.
Independent board
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 investment
performance. Details of how the Board operates and
fulfils its responsibilities are set out in the Report of the
Directors on page 43.
Performance
The Financial Highlights for the current year are set out
on page 2 and Historical Performance can be found on
page 3. Key Performance Indicators are set out in the
Strategic Report on pages 24 and 25.
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 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 company.
Further information
General shareholder information and details of how to
invest in the Company, including an investment through
an ISA or saving scheme, can be found on pages 114
onwards. This information can also be found
on the Company’s website www.trproperty.com
1
Annual Report & Accounts 2022OverviewStrategic 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
2022
Year ended
31 March
2021
492.43p
1,562,739
317.4
10.2%
417.97p
1,326,433
317.4
16.5%
Change
+17.8%
+17.8%
0.0%
456.50p
£1,449m
392.50p
£1,246m
+16.3%
+16.3%
Year ended
31 March
2022
Year ended
31 March
2021
Change
13.69p
12.25p
+11.8%
+1.9%
+2.2%
+2.1%
5.30p
9.20p
14.50p
+21.4%
+12.2%
+19.9%
+2.19%
+0.60%
+0.58%
5.20p
9.00p
14.20p
+20.7%
+15.9%
+28.3%
1.40%
0.65%
0.63%
1. Net debt is the total value of loan notes, loans (including notional exposure to CFDs) 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 2022. An interim dividend of 5.30p was paid on 14 January 2022. A final
dividend of 9.20p (2021: 9.00p) will be paid on 2 August 2022 to shareholders on the register on 24 June 2022. The shares will be quoted ex-dividend on
23 June 2022.
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 pages 102 and 103.
2
TR Property Investment Trust Historical performance
for the year ended 31 March 2022
Performance for
the year:
Total Return (%)
NAV(A)
Benchmark(B)
Share Price(C)
Shareholders’ funds
(£’m)
Total
Ordinary shares
Sigma shares(D)
Ordinary shares
Net revenue (pence
per share)
Earnings
Dividends(E)
NAV per share
(pence)
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
-8.5
-8.9
-9.5
588
470
118
21.5
17.8
25.8
684
684
-
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
21.4
12.2
19.9
809
809
-
1,010
1,010
-
1,065
1,065
-
1,118
1,118
-
1,256
1,256
-
1,328
1,328
-
1,136
1,136
-
1,326
1,326
-
1,563
1,563
-
7.07
6.60
183.60
6.74
7.00
215.25
8.09
7.45
254.94
8.89
7.70
318.12
8.36
8.35
335.96
11.38
10.50
352.42
13.22
12.20
395.64
14.58
13.50
418.54
14.62
14.00
358.11
12.25
14.20
417.97
13.69
14.50
492.43
Share price (pence)
154.50
186.30
247.50
310.50
297.50
314.50
382.50
394.00
317.50
392.50
456.50
Indices of growth
(rebased at 31 March 2012)
Share price(F)
Net Asset Value(G)
Dividend Net(E)
RPI
Benchmark(H)
100
100
100
100
100
121
117
106
103
113
160
139
113
106
121
201
173
117
107
145
193
183
127
108
149
204
192
159
112
154
248
215
185
116
165
255
228
205
118
169
206
195
212
122
141
254
228
215
123
160
295
268
218
134
176
Figures have been prepared in accordance with UK-adopted international accounting standards.
(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 pages 102 and 103.
(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.
3
Annual Report & Accounts 2022OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information Chairman’s statement
In a year dominated by
volatility and powerful
global macroeconomic
and political themes, I'm
pleased to report a year
of healthy performance.
Our NAV total return for
the year was 21.4% against
a benchmark of 12.2%
David Watson
CHAIRMAN
4
Introduction
The year was again dominated by powerful global macro-
economic and political themes, propelling the market
in the first half and depressing it in the second. Spring
2021 saw broadly-based market optimism through the
continuation of broad post vaccine recovery across all
economies, aided by the sustained dovish response from
central banks. As inflationary pressures built towards the
second half, particularly due to supply chain disruption
and increasingly tight labour markets, investors began
to build in expectation of increases in base rates and
consequently, credit spreads as expectations of global
growth moderated or evaporated. The central investment
theme became inflationary concerns, with the key
questions being its degree of permanence and the
various key central banks’ responses. Towards the end of
the financial year, risk was elevated further by the tragic
events and unfolding humanitarian disaster in Ukraine.
For global equity markets the cold-hearted financial
repercussions are manifold, evidenced through the rising
prices of energy and the supply and price of a range of
other hard and soft commodities which were mined,
refined or grown in abundance in Ukraine. The longer-
term impact of Russian aggression on commodity prices
and global trade and energy flows are only now starting
to be understood.
It may therefore seem somewhat surprising that against
that back drop I am able to report a year of healthy
performance for the Company. Our net asset value
total return was +21.4%, well ahead of the benchmark
return of +12.2%. The share price total return at +19.9%
was slightly behind the underlying asset growth, as the
discount between the share price and the NAV widened
just before the year end.
At the half year, I highlighted that our Manager continued
to focus on the most sustainable income and had further
tilted the portfolio towards index-linked income. This
continued to be the case in the second half and helped
drive relative performance. Real estate has good inflation
protecting attributes, not least that the vast majority
of our income is, to varying degrees, explicitly linked to
national inflation indices. Inevitably, it is not just public
market investors who have realised the attraction of
steady real income growth. Private equity investment into
real estate continues to be elevated and there has been
much merger and acquisition activity which is detailed
later in the report. The consequences for the Company
are twofold. In the short term, we have made sizeable
gains from our stakes in those companies which have
been taken private or merged. Secondly, investors have
responded, recognising that if listed property companies
share prices are left to drift well below asset value then
the private market will swoop in. This remains a critical
and valuable underpin.
TR Property Investment Trust Revenue outlook
Our Manager is feeling comfortable about the
Company's revenue outlook. Dividends announced
for the first quarter are showing increases on the prior
year. Many of our investee companies have medium
term debt arrangements secured when interest rates
were at historic lows and so will not immediately feel
the impact of higher interest rates. Further ahead,
this will become more of an issue if higher rates
persist. Our own income tax rate will also increase
for the 2022/23 financial year. As always, the Board
will keep an eye to the longer term, but having built
up the revenue reserve over many years, we feel it is
appropriate to maintain dividend levels where we can
easily do so provided a longer term fall in income is
not expected. After the final dividend set out above,
the revenue reserve will be 11.37p per share.
Revenue results and dividend
Earnings for the year were 13.69p per share, 12%
higher than the previous year (12.25p) but still almost
6% behind pre COVID-19 levels.
As anticipated in the Half Year Report, earnings
for the second half were lower than in the previous
year. This was partly because of one-off items in the
second half of the year to March 2021 which did not
recur and partly because of the significant changes in
dividend timetables seen through the year but which
largely impacted the second half. Many companies
moved to more frequent and smaller distributions,
which reduced income in comparison to the prior year
due simply to timing. More details are set out in the
Manager’s Report.
These factors mask a positive underlying trend and,
as described above, our Manager has focused the
portfolio on sources of sustainable income. The
Board is therefore pleased to announce an increase
in the final dividend to 9.20p (2021: 9.00p) bringing
the full year dividend to 14.50p, an increase of just
over 2%. This will require a small contribution from
the Company's revenue reserve. We highlighted in the
last Annual Report that we expected that this would
be the case and that the Board was happy to employ
some of the revenue reserve, providing a return to
pre COVID-19 income levels could be expected in the
medium term.
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
500.00
450.00
400.00
350.00
300.00
250.00
200.00
150.00
100.00
50.00
0.00
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
Mar-19
Mar-20
Mar-21
Mar-22
5
Annual Report & Accounts 2022OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information Chairman’s statement
continued
Net Debt and Currencies
The opening gearing position was 16.5% and closed
at 10.2%. It fluctuated over the year between these
levels as the gearing was actively managed. Our debt
portfolio gives us considerable flexibility to increase
and decrease gearing levels quickly and this has
proved beneficial yet again.
Sterling has traded in a narrow range against
the Euro throughout the year and it closed only
fractionally stronger at the end of the year, so
currencies have not been a significant factor
in this year’s results.
Discount and Share Repurchases
From the starting point of 6.1% the discount, for
the most part, gradually narrowed in the period up
to the beginning of 2022 and then traded at a small
premium through January. With the invasion of
Ukraine and a general worsening of sentiment, the
shares moved back to a discount, its widest at 9.9%
and closing the year at 7.4%. The discount average
for the year was 3.4%. This meant that the share
price return was slightly behind the NAV return.
No share buy-backs or issues were made during
the year.
Awards
The Company was the winner of in the Specialist
Equities category of the Citywire Investment Trust
Awards for the second year running. It has also
been awarded ratings with a number of platforms
and publications and these are included in the
shareholder information section later in this report.
Outlook
The era of cheap money is coming to an end. Inflation
is surging and central banks are reversing their balance
sheet expansion that has defined the period following
the Global Financial Crisis. Consequently, bond markets
are volatile and real (as opposed to nominal) yields
on duration debt are getting even more negative.
Inflation protected income is becoming harder to find
so index-linked property income should remain attractive.
However, rising interest costs are clearly a headwind
for any leveraged asset class.
Our strategy remains the same, identifying asset classes
and sub-markets where demand outstrips supply and
where rents are capable of rising. Build cost inflation and
the regulatory/social pressure to build more sustainably
(higher upfront cost, but lower long-term maintenance
and running costs) has squeezed development margins.
Our Manager expects a subdued development cycle in
many markets and a reduction in risk of oversupply must
be a positive in the medium term. We continue to seek
more exposure to asset classes where rebuild costs are
well above the current prescribed asset values. Equity
market volatility is providing us with some of these
opportunities in the listed space and we hope to enlarge
our physical property portfolio based on the same
investment thesis.
David Watson
Chairman
13 June 2022
6
TR Property Investment Trust Manager’s report
Although the economic
outlook remains unsettled,
property assets, particularly
where the income is index-
linked, should remain
relatively attractive despite
rising interest costs.
Marcus Phayre-Mudge
FUND MANAGER
Performance
The Net Asset Value total return for the year to the end of
March 2022 was +21.4%, ahead of the benchmark total
return of +12.2%.
The Spring and Summer of 2021 saw a benign backdrop
of continuing monetary policy largesse from central banks
coupled with an improving outlook for all economies and
this bode well for many parts of the real estate landscape.
Share prices across our universe responded accordingly
and our NAV grew by 14% from April to August. Post
the summer holidays investors increasingly fretted over
the themes of a global slowdown (breakdown in supply
chains, COVID-19 impacted manufacturing capabilities
in Asia) coupled with rising wage and energy costs. All
of which heightened the risk of stagflation. Share price
volatility increased hugely and we experienced 20% swings
in the value of the benchmark between the beginning of
September and the end of November. Such large swings in
sentiment reflected the changes in expectation of central
banks’ behaviour. In simple terms – would they turn
hawkish (and at what pace) to help control these renewed
inflationary pressures. The last phase of the financial year
(December to March) was marked by a steady decline in
real estate equity prices as the expectation of multiple rate
rises by the US Federal Reserve and the Bank of England
alongside more hawkish rhetoric from the European
Central Bank was priced in. The last month of the financial
year was, of course, overshadowed by the terrible events
in Ukraine immediately adding to energy and other raw
material inflation expectations.
What I have summarised here is the performance of
pan-European real estate equities over the 12 months to
the end of March rather than underlying property values.
Share prices are volatile and react quickly to macro
driven sentiment. Underlying real estate values tend to
adjust when the price of capital changes, as opposed to
the expectation of future price changes. They are also
anchored much more locally being dependent on the
expectation of local rental growth or contraction. Spreads
have widened and debt costs are increasing but they remain
historically low and crucially, at the moment, debt is still
readily available. As I warned in last year’s Annual Report,
if equity markets allow listed companies to trade on large
discounts to their implicit asset value then private vehicles
(who can operate with higher leverage and hence a lower
cost of capital) will take them private. This has been a
key theme this year and the Company's performance has
benefited from a number of transactions. Expectation of
capital growth amongst private owners (be it institutional
or retail investors) is much more important to underlying
pricing than the gyrations of publicly listed share prices. It is
encouraging to see transaction volumes and private market
optimism normalise in many of our sub-markets and this is
examined in more detail later in the report.
7
Annual Report & Accounts 2022OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information Manager’s report
continued
The portfolio positioning had been heavily adjusted
in the immediate ‘post vaccine’ period (Q4 2020, Q1
2021) essentially closing the underweight to European
shopping centres and renewing exposure to office
markets with shorter commute times (i.e. a focus on
the smaller cities, not London and Paris). The year under
review saw that process extended, with the portfolio
further concentrating on capturing the impact of three
key trends. Firstly, those sectors likely to experience
the greatest rental growth in a recovering economic
environment such as logistics, industrial, self-storage
and prime office development continue to be heavily
represented in the portfolio. Secondly, security of income
is crucial. Private rented residential property continues
to enjoy virtually full occupancy, particularly in Germany
and Sweden where rents remain heavily regulated (and
at sub-market levels). The final theme was inflation
protection and seeking to own explicitly index-linked,
high quality income across a broad range of sectors. This
latter theme overlaps with the residential focus given the
highly defensive nature of the earnings.
All of these themes were drivers of relative
outperformance alongside the positive impact of
numerous merger and acquisition ('M&A') situations
over the year (that activity will be detailed later in the
report). However, it is important to clarify that the listed
German residential names have - with one exception -
performed relatively poorly this year. The sector saw the
largest piece of M&A activity with the cash takeover of
Deutsche Wohnen by Vonovia and this was extensively
reviewed in the Half Year Report. We have remained loyal
to our central view that Berlin residential property values
will continue to outperform the rest of Germany with a
continued supply/demand imbalance. Phoenix Spree
Deutschland (total return +18%) was the performance
outlier over the year and ensured that our German
residential portfolio contributed positively to our relative
outperformance of the benchmark.
Offices
The vast majority of office workers have now returned
to the office, at least part of the time. The longer term
consequences of the dramatic increase in remote
working since 2020 are still evolving. However, we are
increasingly confident of a number of key features which
either pre-existed or have emerged. The first is all around
optionality. Most office workers to a greater or lesser
extent can work remotely. This optionality means that the
office environment must become more attractive and/or
more efficient than the alternative for workers. This need
for a better quality workplace coincides with businesses
becoming increasingly focused on their environmental
footprint. At the same time government regulation
across the developed world is driving energy efficiency
improvements. The net result will be an increase in
demand (and the rent achieved) for ‘green’ buildings, in
8
the right locations offering state of the art amenities.
There is already a clear polarisation in favour of CBD
(central business districts) over decentralised or
suburban markets. Central Paris saw take up of +49%
year on year, a drop in immediate supply of 17% over
2020 with vacancy at 3% driving rents up, whilst the
Western Crescent and La Defense saw rents fall and
incentives increase. London experienced a very similar
picture with the West End, Midtown and the City seeing
Q4 2021 take up of 3.8m sq ft, a 7 year quarterly high.
The total take up for 2021 was 10m sq ft, 65% ahead of
2020. Docklands and other suburban markets did not
experience this level of improving statistics. Investors
remain bullish, Knight Frank ('KF') reported a fourfold
increase in Q1, 2022 on the corresponding quarter of
2021 with £5.8bn of transactions (versus £1.2bn).
Savills produced a detailed research note in March 2022,
predicting reductions in office space demand across all
European cities to varying degrees. We have sympathy
with the overall expectation but the crucial point is the
other side of the equation. If this demand is very focused
on quality, where is that supply coming from? If we look
at the UK’s six regional markets (to avoid only discussing
London) we see all six cities as having less than two years’
supply. Cost inflation and the inability to tie down risk
pricing with contractors results in reduced speculative
construction which will exacerbate the problem.
KF's M25 report for Q4 2021 highlights technology, media
and telecom (TMT) and Life Science tenant demand but
generally subdued take up levels versus pre-pandemic
levels. Oxford and Cambridge continue to experience
strong rental growth but Reading, Uxbridge and St Albans
saw little, given greater supply of new buildings. The
traditional occupiers of these strong satellite towns are in
the throes of assessing their office needs. One would have
expected the investment market to also reflect this ‘pause
for thought’ but this has not been the case. According to KF,
South East office volumes reached £4bn in 2021, a record
for the region and 45% ahead of the long term average.
International buyers dominated but they generally have a
longer investment horizon than local buyers. The build cost
inflation we are now seeing may well prove that buying high
quality existing assets was a very sensible strategy.
Retail
Negative sentiment towards this sector had begun
to soften as the post pandemic retail environment
experienced the predicted recovery in sales and footfall.
Across Europe, consumers had rebuilt savings (or
reduced debt) over the last two years and the re-opening
statistics didn’t disappoint the optimists. However,
looking forward the investment community is trying
to establish the likely sales volumes post this initial
re-opening surge. All the major firms of valuers are
reporting stability in yields over the last few quarters
TR Property Investment Trust across both shopping centres and high streets for both
prime and secondary assets. This may well appear
optimistic as it is based on low volumes but the number
of deals is increasing and we are confident of much
higher transaction volumes in 2022 than 2021.
The one area of real valuation recovery has been retail
warehousing. The last year has seen an extraordinarily
competitive landscape in this sub-sector with yields
compressing over 1% at the prime end and even more
amongst secondary assets. What is understandable is
that where tenant demand/affordability has been proven
then investors are happy to own. As retailing evolves into a
seamless ‘clicks and bricks’ omnichannel experience, retail
parks are a key part of the value chain for the retailers. If
the retailer can offer a fast and efficient ‘click and collect’
service which the customer is happy to use, then the sales
margins from selling online improve materially. It is the
‘last mile’ delivery which is so cost inefficient.
The outlook for large, regional shopping centres remains
uncertain. The vast majority are too big for their market in
an omnichannel world. Owners are seeking to demolish
part or repurpose to non-traditional uses, in many cases
trying to redefine themselves as a community hub as
opposed to just a covered retailing arena. The strategy
feels correct but the costs of conversion and the inability
of new users to pay anything like the previous rents
will lead to subdued returns. However, there has been
some price discovery with high profile examples such
as Hammerson’s sale of Silverburn in Glasgow and a
wide range of smaller transactions across Europe from
Eurocommercial, Klepierre and Unibail providing evidence
that buyers believe that rents are stabilising.
Industrial and Logistics
2021 was yet another record year in terms of take up, capital
value growth and, all importantly, further shrinkage in the
amount of vacancy. The UK market saw take up exceed 50
million sq ft and vacancy is now below 3% across the whole
range of ‘big box’ unit sizes. Like for like rental growth for
Segro’s portfolio was in excess of 5% and this has driven
yields nationwide down 75-100 bps leading to huge capital
growth. Yet urban logistics has been even hotter, with
investors focused on the supply inelasticity of infill markets.
Greater London prime industrial transactional evidence
now regularly sees equivalent yields (i.e. based off market
rents which are higher than passing rents) of less than 3%.
This price inflation has been fuelled by evidence of another
year of rental growth exceeding 10%. Segro reported rental
growth averaging 13.1% in its UK portfolio during 2021.
Savills estimate that inner London rents have moved 25% in
the last year alone.
UK industrial transaction volumes reached £16.7bn in
2021, 113% growth on 2020 and 152% growth on the five
year average. Given such an acceleration we must closely
watch the fundamentals, there may well be capital seeking
deployment without due consideration. However, for now,
the demand/supply imbalance at the occupier level is driving
rental growth. The entire UK industrial market recorded a
drop in available space to 18.1million sq ft, a contraction of
one third over the year. No wonder rents are rising.
On the Continent, we have also seen market rental growth
outstrip annual indexation. This is set to continue even with
the printing of record high annualised inflation of 5.1%.
Segro are the only fully pan-European listed player and they
reported 4.1% like for like rental growth across Continental
Europe for 2021. We remain confident that in many key
markets this level of growth will be exceeded in 2022. Across
Continental Europe, online sales penetration now averages
15-18%, still a long way behind the UK at c.28%. Shortening
supply chains and reshoring has driven demand in cheaper
markets such as Poland. Savills European Logistics Survey
2021 showed that 46% of all occupiers canvassed expected
to increase their warehouse requirements over the next year.
Availability continues to shrink, with vacancy down from
5.1% to 3.5%, with record low levels in Dublin (1.1%), the
Netherlands (3.3%), Czech Republic (1.7%) and take up
levels well ahead of decade averages with Madrid (+9%),
Poland (+13%) and the Netherlands (+10%). For the best
space, rents are responding very rapidly and we expect
average rental growth to exceed 5% across the Continent.
However, in early May this year (post the year end)
Amazon announced a dramatic pause in its expansion
programme. Whilst we believe that these comments
were focused on their domestic US market, it has caused
reverberations across all logistics/ecommerce real estate
markets. Major owners and developers such as Segro and
Tritax point to full orderbooks and strong transactional
evidence, forward looking equity markets took fright.
Share prices of these two names are down 22% and 17%
respectively, calendar year to date.
Residential
This sector remains a strong store of value. In the
short-term capital values should be impacted by rising
interest rate expectations. For PRS (private rental sector)
this uncertainty (along with the broader geo-political
backdrop) has probably encouraged would be buyers to
remain renters in the near term. Occupancy rates remain
at record levels across both open-market rental markets
(UK, Finland) and regulated rental markets (Germany and
Sweden). In the latter group of companies, we expect
below market rents to assist in maintaining affordability
even as energy costs rise and consumption is squeezed.
Rent is not a bill which can be reduced particularly when
it is below market. We are not predicting greater vacancy
(the structural issues of demand/supply disequilibrium
are still there) but we are mindful of the potential for
slower rental growth.
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continued
This cost of energy crisis will accelerate the need to
improve the energy efficiency of all residential stock. This
is particularly an issue in Germany where so much of the
housing stock owned by the listed companies requires
upgrading, coupled with the need to find alternatives
to Russian gas (the major domestic energy source).
The cost of these improvements will ultimately be split
between the state, the landlord and the tenant. The
outstanding question is in what proportions. There is
certainly no ‘one size fits all’ solution but if the bulk of this
energy efficiency expenditure is subsidised by the state
and the landlord can, in addition, gain a return on their
share of the investment via higher rents (and reduced
energy bills), this doesn’t have to be a bear investment
case for this sector.
Although these potential headwinds are well flagged,
underlying house (and apartment) prices continue to rise
driven by affordability. Mortgage rates, whilst rising, are
still very low by historical standards and wage inflation is
feeding through, which drives affordability. Major cities
such as Berlin and Stockholm where there is very little
new supply continue to see values rising at c.1% per
month. According to JLL, there was an 11.6% year on
year increase in Berlin condominium prices.
Alternatives
The record occupancy increases and rate growth in self
storage recorded through the pandemic will undoubtably
slow. However, we are confident that growth will continue,
fuelled by the structural drivers of commercial usage (last
mile, business to consumer, supply chain resilience) and
increasing awareness of the product from residential
customers. The Self Storage Association UK reported further
occupancy growth across all its members. This remains a
highly fragmented sector with over 1,900 separate sites and
only 30% are operated by ‘large’ operators (defined as those
with 10 or more stores). The marketing advantage for the
largest operators (the listed companies) is very valuable,
ensuring that almost all potential customers searching via
the internet (the vast majority) will see an offer from one or
more of the largest operators.
Healthcare property had a tougher year. Those focused
on primary healthcare have the benefit of rental underpin
(directly or indirectly) from the state however, in the case of
the UK, rental growth risks being at sub-inflation levels due to
its deferred reference point (historic build cost). In Continental
Europe, the exposure of poor care and financial irregularities
at Orpea, a large listed nursing home operator has highlighted
(amongst many things) the meagre margins which these
businesses are run off. A state investigation is underway
by the French authorities and we maintain very minimal
exposure to this underlying operator. The vast majority of
our Continental European healthcare exposure is in the
Netherlands and Belgium rather than France.
10
Purpose built student accommodation (PBSA) has fared
better as students clearly want the campus experience
and value for money. The structural fundamentals remain
sound underpinned by the combination of the growing
numbers of students (post the recent demographic
dip) coupled with the desire to live in better quality
accommodation than previous student generations.
According to UCAS, 30% of first year students live in
PBSA and this has increased from 22% five years ago.
An encouraging growth rate. Another 40% start their
university life in halls of residence but that percentage
has remained static over the same period, reflecting
the lack of capacity or capability for universities to
add to their own residential real estate portfolios.
Cushman Wakefield have identified 681,000 student
accommodation beds across the UK with a net increase
of just 21,000 over 2020/21. Q1 2022 data has also
revealed a marked slowdown in planning applications
for new PBSA units. Importantly, quality is a key priority
with prices up by 17% since 2019/20 for those with en
suite bathrooms.
We continue to hold Unite (UK) and Xior (Belgium, Spain) and
note the recent takeover of American Campus Communities,
an $8bn market cap US student accommodation REIT by
Blackstone. Yet another privatisation.
Debt and Equity Markets
Debt markets continued to be supportive for real estate
companies throughout the year under review, with central
banks continuing to provide support through quantitative
easing and bond purchases as well as maintaining very
low rates. The start of 2022 brought a change in investor
attitude with a marked shift in expectation of more
hawkish behaviour from central banks, led by the US
Federal Reserve. Reviewing listed European real estate
debt issuance, we may well look back on the €20.9bn
raised in 2021 (alongside the €23bn in 2017) as record
years unlikely to be seen again as the cycle of rising rates
evolves during 2022 and beyond. German residential
businesses were again busy customers of the bond
market with Vonovia’s cheapest deal raising €1,250m at
0.25% for a 7 year bond; whilst they also raised 30 year
money (€750m) at 1.625%. LEG, their smaller competitor,
managed 0.875% for 12 years raising €500m.
Equity markets were also very busy with the ‘deal sheet’
highlight being the record breaking €8bn rights issue by
Vonovia, required to fund the acquisition of Deutsche
Wohnen. Logistics businesses were once again avid
raisers of capital, given their premium rated paper. Tritax
Bigbox raised £350m, Eurobox £215m, VGP €300m and
Aberdeen European Logistics £45m. Elsewhere equity
raisings were focused on stocks with strong underlying
income with LXI raising twice in the year (totalling
£225m) alongside fellow index linked income play
Supermarket Income Reit raising £200m. The latter name
TR Property Investment Trust has already come back to the market shortly after the
year end. Healthcare falls into this secure income camp
with the UK’s Target Healthcare (£125m) and Assura
(£182m) seizing the moment alongside Belgium listed
Aedifica (€285m).
Whilst considerable primary issuance added to the size
of the listed real estate sector, this capital inflow was
dwarfed by the record breaking amount of M&A activity
which in the majority of cases led to privatisation and
shrinkage in the sector’s market capitalisation.
Investment Activity – property shares
Turnover (purchases and sales divided by two) totalled
£549m equating to 36% of the average net assets over
the year. This is, coincidentally, the same as last year’s
equivalent figure (36%) which itself was slightly ahead
of the year to March 2020 (32%). It has therefore now
been three years of elevated portfolio rotation due to
a combination of market volatility, sector rotation and,
importantly, M&A activity.
Last year, this section of the report highlighted several
moves by private equity ('PE') into the listed space with PE
firms such as Brookfield buying into British Land and KKR
into Great Portland Estates (now called GPE). Starwood
had taken RDI (market cap £325m) private in February
2021and this turned out to be a precursor to the elevated
levels of activity seen thereafter.
In June, Blackstone was required to increase its initial bid
for St Modwen Properties, paying a 21% premium to the
net asset value of 463p. Once again, private equity was
able to look beyond the immediate development pipeline
and value the high quality land bank more aggressively
than public markets. In the same month, ABG (alongside
Blackstone again) announced the acquisition of GCP
Student Living (market cap £960m). Blackstone and
ABG were also co-investors in several UK and European
student funds.
Brookfield, another giant private equity firm struck three
times in the year. Firstly, in November in Germany, they
acquired 91% of Alstria (market cap €3bn), the only pure
German only office investor. In Belgium in February this
year, they announced an agreed bid for Befimmo, an
unloved owner of primarily Brussels offices. As if that
was not enough, just before our year end they announced
the agreed take private of Hibernia, Dublin’s only listed
office developer. In each of these deals, Brookfield paid
substantial premiums (+20%) to the undisturbed share
price but still acquired at close to or even below net asset
value. Offices remain out of favour with stock market
investors and therefore these businesses were – in the
eyes of private equity – undervalued in the public domain.
The Company held both Alstria and Hibernia. In the case
of the latter, our holding was 4% of the issued capital. The
transaction is bittersweet: whilst we saw a significant
valuation gain we have lost a well managed company
with strong technical expertise in developing prime office
space. Not easy to replace.
Corporate activity between listed companies was also
much in evidence. In November, Landsec acquired U+I
(previously called Development Securities) for £170m, at
an eyewatering 70% premium to the undisturbed share
price. This small urban regeneration stock’s performance
had been lacklustre as investors worried about its balance
sheet and inability to fund its long dated development
pipeline. For Landsec, this was a precursor to announcing
a strategic initiative in regional regeneration with the
acquisition of 75% of MediaCity in Manchester (£426m).
CTP, the newly listed Eastern European logistics developer
agreed to buy Deutsche Industrie, a small listed German
property company owning secondary industrial assets
and development land across Germany. Whilst the
acquisition currency was shares in CTP, the price reflected
a 48% premium to the undisturbed price. At the time we
felt this transaction was a positive read across to our
other German holdings, Sirius and VIB Vermoegen. A
couple of months later, DIC, a listed manager of property
funds, surprised the market with a partial tender for 51%
of VIB Vermoegen at €51 per share. This well run Bavarian
logistics owner /developer is listed on a local exchange
and not the main market. DIC were therefore able to
acquire over 10% before announcing their intentions and
they quickly reached 25% of the share capital (ahead of
the tender). At this point I chose to sell our holding (3% of
the Company's net assets) at a ‘block premium’ of €54 per
share. I was fearful that DIC’s control would result in the
loss of the highly regarded management team and this
has come to pass with CEO and CFO departing. However,
we have been handsomely rewarded through the
corporate activity. The share price at the beginning of the
financial year was just under €30 per share. This company
has been a key component of our logistics exposure over
more than a decade and warranted more examination,
hence the attached case study.
In Sweden, SBB the highly acquisitive social infrastructure
company, announced control of a small residential
business, Amasten. We had recently completed our own
research on this business and we had begun to build a
holding. The bid price was a 20% premium to where
we were buying shares a month earlier.
Finally, in March we saw the final act in the McKay
Securities saga. Longstanding shareholders will have
been aware of our view that this well run owner of South
East office and industrial property was being materially
undervalued by the equity market. Essentially the company
was too small and the shares too illiquid for today’s stock
market. This company is absolutely not alone in this
11
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continued
regard, there are many companies which are just too
small and need to join forces with fellow minnows.
The key with this business was the high quality of the
portfolio. We were pleased to read that Rothschild
had undertaken a competitive sales process which
culminated in an agreed bid from Workspace, a listed
owner of flexible office space in London. Owning 9%
of the issued capital we were invited to provide an
irrevocable undertaking (subject to no higher offer)
which we provided. The bid was two thirds cash
(209p) and one third shares and reflected a premium
of 30% to the undisturbed price. We will open
a holding in Workspace in May on completion
of the transaction.
Investment Activity –
direct property portfolio
The physical property portfolio produced a total
return for the 12 months of 18.1% made up of a
capital return of 15.4% and an income return of 2.7%.
This can be compared to the return from the MSCI
All Property Index which produced a total return of
23.9% made up of a capital return of 18.0% and an
income return of 5.0%.
The core driver of returns was rental growth at
the two industrial properties in Wandsworth and
Gloucester. At Gloucester, we let the largest unit at
a new headline rent on the estate following a short
marketing period to an online health food business.
This will allow us to move rents forward with other
lease events on the estate scheduled for 2022 and
2023. In Wandsworth we completed a number of
new lettings including a letting to the online leisure
fashion brand Sweaty Betty. They plan to use the
premises as a photographic studio for their online
offering. We are delighted to add them to the tenant
line-up and this not only reflects the diversity of
tenants on the estate but also exemplifies the
versatility of uses in a standard steel portal
industrial building.
At the Colonnades our restaurant operator, Happy
Lamb Hot Pot, completed their fit out and opened for
trading as soon as COVID-19 restrictions were lifted
in May 2021. They have become a successful and
vibrant addition to the local area. We are currently
exploring opportunities to sell this asset.
12
Revenue and Revenue Outlook
Revenue earnings for the current year have increased by
almost 12% over the prior year.
The increase in earnings was attributable to the first half.
At the half year stage we announced earnings some 34%
ahead of the prior year. It was flagged at the time that
this increase would not be repeated in the second half.
The comparison of the first half (April to September
2021) was being made against April to September
2020, which had suffered an extreme fall in income. As
a reaction to the COVID-19 pandemic many companies
suspended dividends and, in some cases even cancelling
ones which had already been announced. Distributions
were very cautious against such an uncertain backdrop.
In the current year, the vaccination programme was well
underway and confidence began to return in the first half.
Comparing second half earnings year to year in isolation,
they fell by around 27%, although this is not a fair
comparison. Just before March 2021 we finally received
a tax refund as a result of a long running reclaim. This
enhanced the earnings for the year to March 2021 so
a more realistic comparison of the second half of the
year shows a fall of around 12% rather than the 27%
highlighted above. The explanation for this 12% fall
is explained largely by the fact that many companies
changed their dividend schedules, not only in timing but
also the frequency, annual payers moved to paying half
yearly, half-yearly to quarterly etc. so the amounts being
paid in each distribution were proportionately lower. The
new payment schedules will have been established for
the forthcoming year so we don’t expect this to have an
ongoing impact.
The overall trend for earnings is positive, the majority of
companies have resumed distributions although there
are some exceptions, mainly in the retail sector where we
are significantly underweight.
Whilst the year to 31 March 2022 earnings result is still
some 6% behind pre COVID-19 levels, we do expect
some further recovery in the year to March 2023. There
are some new clouds on the horizon though, the era
of cheap money is over, inflation is reaching levels not
seen for many years and a cost of living crisis looms
for a number of well documented reasons. However,
many of our companies secured debt at historically
low levels and will enjoy the benefit of this for a while.
Changing market outlook and sentiment is likely to lead
to lower gearing levels from time to time and that in turn
reduces income levels.
TR Property Investment Trust As previously documented, providing the Board is
comfortable with longer term income prospects, it is
prepared to supplement distributions from the revenue
reserve to cover shorter term fluctuations.
Gearing and Debt
The Chairman has already commented on gearing
levels and highlighted the benefits of our flexible
borrowing structure.
This flexibility has been crucial in such a volatile
year. Our gearing oscillated in a 10 - 16% range as
we responded to the dramatic changes in market
sentiment through the year. Over the year we utilised
both our revolving loan facilities and our CFD capability
in addition to our longer-term debt. Although the
shorter-term debt is linked to market rates and therefore
the cost will increase, the flexibility this affords in
adjusting gearing levels is more of an advantage than
the lower cost of fixed term debt. We aim to achieve a
balance between pricing and flexibility which is why our
debt is sourced from a number of providers.
Outlook
As recently as this January, central bankers across
the world were indicating that they believed that
inflationary pressures were transitory. The rise in
energy costs seen in Q4, 2021 were then supercharged
by events in Ukraine in February and March. Supply
chain disruption, particularly around Chinese
shutdowns and post COVID-19 workforce shortages,
have compounded these pressures. The result has
been a period of sustained inflation, Euroland CPI
reached 7.5% in April, its sixth consecutive new
monthly high. The UK’s March figure was 7%. We now
expect these elevated figures to continue into 2023 and
for the central banks to be forced to react quickly with
interest rate rises. The unanswered question is whether
raising mortgage costs, which will cool consumer
demand and house price growth, will do much to
assist in reducing the supply driven pressures. Build
cost inflation is equally strong and we expect much
potential development to be mothballed as the required
return on capital employed evaporates. However,
this drop in potential supply will form an underpin for
rental growth where demand is stable or growing.
Our strategy remains twin-tracked. We will continue
to own long and strong income which offers genuine
index-linked income whilst simultaneously maintaining
exposure to markets where we see tenant demand
remaining robust even in the face of an economic
slowdown. Renewed focus on balance sheet strength,
debt structures and flexibility will help us ensure that
we steer the Company carefully through the terrain of
rising rates.
Writing this outlook in the middle of May, pan-European
real estate equities have already collectively corrected
14% from the start of the new financial year (1st April).
This fall is greater than the FTSE 100, 250 or the
EuroStoxx 600. The most leveraged businesses have,
predictably, been hit hardest but previously highly rated
businesses with strong growth prospects have also
been hit hard and we expect to find value amongst those
with the most secure balance sheets. Much of our world
offers solid earnings from real assets; buildings which
are often crucial to a company’s operation or a basic
necessity for domestic users.
Marcus Phayre-Mudge
Fund Manager
13 June 2022
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continued
Case study
Our holding grew consistently over the next decade (we
only sold shares modestly on 8 separate occasions) and
by the end of 2021 it had reached over 1.5m shares with
a value of €74m. By this time the market cap exceeded
€1.2bn and the longstanding management team
continued to deliver year on year.
In February 2022 DIC Asset AG, a listed property asset
manager announced that they had acquired 10% of the
issued capital and intended to make a partial tender
for up to 50% at €51.5 per share. We did not want to
find ourselves owning equity in a business which was
controlled by a third party. At the same time, DIC were
happy to buy ahead of the tender date and we extracted
an exit price of €54 per share. This turned out to be the
highest price at which the stock traded in its corporate
history. Whilst we were disappointed to lose such a well-
managed and successful business, the returns generated
over a long period of time warranted closer examination.
Over the 11 years of ownership, the return from this
investment had been an astonishing 984% or a compound
return of 26.6% per annum (assuming dividends reinvested).
We began investing in this Bavarian based property
company in 2011 when the share price was €8.50 per
share (market cap of €235m). The founder and CEO
(until 2018) initially focused on a tight geographical
area around the company’s hometown of Ingolstadt.
We were attracted to the deep local knowledge and
excellent links to local banks enabling the company
to secure high quality secured lending. Over the next
decade, the business expanded to a portfolio of €1.4bn
focused on logistics/light industrial (70%) alongside
some roadside retail (mostly garden centres). The
value delivery came primarily from the very astute
purchases of land and industrial assets requiring
refurbishment in the heartland of the booming
automotive industries of Southern Germany. The
company always maintained a conservative balance
sheet and whilst dividends grew consistently the
pay-out ratio never exceeded 50% enabling organic
reinvestment into the development pipeline.
Share Price 2011 to 2022
60
50
40
30
20
10
0
14
TR Property Investment Trust Portfolio
Distribution of Investments
as at 31 March
UK Securities¹
- quoted
UK Investment Properties
UK Total
Continental Europe Securities
- quoted
Investments held at fair value
- CFD (creditor)/debtor²
2022
£’000
518,417
96,255
614,672
940,744
1,555,416
7,657
2022
%
33.2
6.1
39.3
60.2
99.5
0.5
2021
£’000
395,644
83,071
478,715
921,801
1,400,516
(141)
Total Investment Positions
1,563,073
100.0
1,400,375
Investment Exposure
as at 31 March
UK Securities
- quoted
- CFD exposure³
UK Investment Properties
UK Total
Continental Europe Securities
- quoted
- CFD exposure³
2022
£’000
2022
%
2021
£’000
518,417
57,324
96,255
671,996
940,744
87,318
30.5
395,644
3.4
5.7
45,441
83,071
39.6
524,156
55.3
5.1
921,801
100,560
Total investment exposure4
1,700,058
100.0
1,546,517
2021
%
28.3
5.9
34.2
65.8
100.0
-
100.0
2021
%
25.6
2.9
5.5
34.0
59.5
6.5
100.0
Portfolio Summary
as at 31 March
Total investments
Net assets
2022
2021
2020
2019
2018
£1,555m £1,401m £1,155m £1,291m £1,316m
£1,563m £1,326m £1,136m £1,328m £1,256m
UK quoted property shares
Overseas quoted property shares
Direct property (externally valued)
33%
60%
6%
28%
66%
6%
31%
61%
8%
33%
59%
8%
31%
62%
7%
Net Currency Exposure
as at 31 March
GBP
EUR
CHF
SEK
NOK
2022
Company
%
2022
Benchmark
%
2021
Company
%
2021
Benchmark
%
33.9
41.9
7.4
16.3
0.5
33.6
42.3
7.1
16.3
0.4
27.9
51.2
6.7
12.9
1.3
28.3
50.9
6.6
12.9
1.3
¹ UK securities includes one unlisted holding (0.01%)
² Net unrealised (loss)/gain on CFD contracts held as balance sheet (creditor)/debtor.
³ Gross value of CFD positions.
4 Total investments illustrating market exposure including the gross value of CFD and TRS positions.
0.5%
33.2%
6.1%
60.2%
UK Securities
UK Property
Continental Europe
Securities
CFD Debtors
5.7%
94.3%
Securities
UK Property
15
Annual Report & Accounts 2022OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information
Investment portfolio by country
Market
value
%
0.4
0.4
1.8
1.8
1.2
0.8
0.6
0.5
0.2
0.2
7.1
0.9
0.9
5.1
1.5
1.4
0.8
0.5
0.1
9.4
9.6
3.6
2.1
1.3
0.3
0.3
17.2
0.1
0.1
2.8
0.9
0.3
4.0
0.4
0.4
3.1
1.5
4.6
£’000
7,008
7,008
28,661
28,569
18,609
11,976
9,233
7,106
3,134
2,604
109,892
14,783
14,783
79,107
23,214
21,712
13,193
7,097
1,606
145,929
149,893
55,529
32,740
19,557
5,394
4,934
268,047
1,981
1,981
43,104
14,349
4,783
62,236
6,898
6,898
47,799
23,081
70,880
Austria
CA Immobilien
Belgium
Warehouses De Pau
VGP
Cofinimmo
Aedifica
Xior Student Housing
Care Property Invest
Montea
Intervest Offices & Warehouses
Finland
Kojamo
France
Argan
Gecina
Klepierre
Covivio
Carmila
Altarea
Germany
Vonovia
LEG Immobilien
Aroundtown
TAG Immobilien
Adler Group
Deutsche Euroshop
Ireland
Irish Residential Properties
Netherlands
Eurocommercial Properties
Unibail Rodamco Westfield
NSI
Norway
Entra
Spain
Merlin Properties
Arima Real Estate
16
Sweden
Fastighets Balder B
Castellum
Cibus Nordic Real Estate
Samhallsbyggnadsbolaget
Fabege
Wihlborgs
Sagax
Catena
Platzer Fastigheter
Dios Fastigheter
Klarabo Sverige
Atrium Ljungberg
Switzerland
Psp Swiss Property
Swiss Prime Site
United Kingdom
Segro
Safestore Holdings
Industrials REIT
Phoenix Spree Deutschland
Derwent London
Picton Property Income
LandSec
Londonmetric Property
McKay Securities
Ediston Property
Secure Income REIT
Unite Group
Sirius Real Estate
Supermarket Income REIT
CLS Holdings
Tritax Big Box REIT
LXI REIT
Target Health Care
Primary Health Properties
Atrato Cap
Helical
Cap & Regional
Market
value
%
2.7
1.6
1.5
1.5
1.3
0.9
0.8
0.6
0.2
0.2
0.1
0.1
11.5
2.8
1.8
4.6
4.9
3.5
3.2
2.9
2.4
2.3
2.3
2.0
1.4
1.4
1.3
1.2
1.1
0.8
0.6
0.6
0.3
0.3
0.3
0.1
0.1
0.1
33.1
£’000
42,934
25,690
23,553
23,424
20,824
14,533
11,870
9,279
3,723
2,818
1,713
1,094
181,455
44,260
27,375
71,635
77,334
54,228
49,892
43,129
38,242
35,864
35,662
31,524
22,343
22,097
19,574
18,368
17,854
13,125
9,897
9,365
5,321
5,310
3,850
2,341
1,928
1,169
518,417
Direct Property
96,255
6.2
CFD Positions (included
in current liabilities)
7,657
0.5
Total Investment Positions
1,563,073
100.0
Companies shown by country of listing.
TR Property Investment Trust Twelve largest equity investments
1
2
3
31 March
2022
2021
31 March
2022
2021
31 March
2022
2021
Shareholding
value
% of investment
portfolio†
% of equity
owned
Share price
£149.9m £146.0m
8.8%
9.4%
0.5%
€42.31
0.5%
€55.70
Shareholding
value
% of investment
portfolio†
% of equity
owned
Share price
£79.5m £54.0m
4.7%
3.5%
3.6%
€115.6
3.5%
€80.4
Shareholding
value
% of investment
portfolio†
% of equity
owned
Share price
£77.3m £67.8m
4.5%
4.4%
0.5%
1346.0p
0.6%
938.0p
Vonovia (Germany)
Vonovia is a German listed residential
company and the largest real estate
company in Continental Europe by market
capitalisation. At the end of 2021, the
company owned a portfolio of €98bn split
between Germany (90%), Sweden (8%)
and Austria (2%); the portfolio increased
by c.28% following the acquisition of peer
Deutsche Wohnen, which completed in
October 2021. 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 (79% of group
EBITDA), its value-add branch (energy and
multimedia related services, 7%), its third-
party development business (6%) and its
recurring sales program (8%). 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
given the strict regulatory environment
of the German residential sector. In
2021, Vonovia delivered strong results in
absolute and relative terms. The company
delivered EPRA NTA growth of +14% YoY
on a per share basis, and like for like rental
growth at was resilient at +3.2%. The five-
year total shareholder return to 31/03/22
has been +59%.
Argan (France)
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 2021, the
portfolio value amounted to €4bn (100%
exposed to France, with 33% exposed to
the Greater Paris region). The company
delivered strong 2021 results with an
EPRA NRV per share up 40% YoY achieved
with a relatively conservative LTV of 43%.
The relatively low dividend payout at
below 50% of distributable profit 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 +353%.
Segro (UK)
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 £18bn (split
66% in the UK, 34% in Continental Europe,
with 67% urban warehouses, 29% big
boxes and 4% 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 like the UK have
seen yield compression as investors have
paid keener yields for access to strong
income. Segro has extensive development
exposure that it manages largely to 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
3.0% at FY21). This has been a successful
formula to drive both earnings and NAV
growth, as well as high shareholder
returns. The five-year total shareholder
return has been +236%.
† 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 16 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 16 and are included in the Balance Sheet as debtors or
creditors in the Current assets.
17
Annual Report & Accounts 2022OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information Twelve largest equity investments
continued
4
5
6
31 March
2022
2021
31 March
2022
2021
31 March
2022
2021
Shareholding
value
% of investment
portfolio†
% of equity
owned
Share price
£61.5m £51.3m
3.6%
3.3%
1.0%
€24.18
1.0%
€19.89
Shareholding
value
% of investment
portfolio†
% of equity
owned
Share price
£60.4m £44.0m
3.6%
2.8%
2.1%
1340p
2.6%
796p
Shareholding
value
% of investment
portfolio†
% of equity
owned
Share price
£55.5m £63.9m
3.3%
4.1%
0.9%
€103.25
0.9%
€112.2
Safestore (UK)
Safestore is the UK’s largest self-storage
operator, owning c.160 stores, primarily
in the UK (and weighted towards London
and the South East with c.44% of total
group stores). 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. The self- storage market also
proved remarkably resilient during the
COVID-19 pandemic. The five-year total
shareholder return has been +301%.
Klepierre (France)
Klepierre is a European shopping centre
operator, managing around 140 centres
with a total portfolio valuation of EUR21bn.
The main exposures are in France/Belgium
(40% of total), Italy (19%), Scandinavia
(15%) and Iberia (10%). The company,
like all shopping centre owners, has been
impacted by the COVID crisis and ongoing
shift towards e-commerce as a growing
retail channel, which have hurt underlying
operations. However in 2021 the company
was able to post EPS growth of +4.9%
YoY, with EPRA NTA broadly flat YoY. On
a relative basis, the company benefits
from its focus on Continental Europe
where shopping centres are anchored by
food retailers contrary to most UK or US
centers anchored by department stores,
which have been undergoing significant
challenges. The financial position of the
company is also more solid than some
of its direct peers with an LTV of 39% and
a net debt to EBITDA ratio of 8.8x. The
board benefits from the experience of
David Simon (Chairman of the Supervisory
Board), Chairman and CEO of Simon
Property Group which owns a 22% stake
in Klepierre. The five-year total shareholder
return has been -7%.
LEG (Germany)
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 166,000 units under
management and a combined value of
€19bn. In addition to the strong focus on
NRW, the company looks for 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. The very low
average rent per sqm at EUR6.1 as well
as the relatively low value per sqm of
EUR1,706 make the company particularly
well suited to weather any potential macro-
economic shock. In addition, the company
has shown over the years a relatively
conservative management on the
liabilities side which continued to be the
case in 2021 with a LTV of 43%, an average
debt maturity of 7.5 years and a net debt
to adjusted EBITDA of 12.6x. In 2021, LEG
delivered EPRA NTA growth of +19% YoY.
The five-year total shareholder return has
been +57%.
† 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 16 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 16 and are included in the Balance Sheet as debtors or
creditors in the Current assets.
18
TR Property Investment Trust 7
8
9
31 March
2022
2021
31 March
2022
2021
31 March
2022
2021
Shareholding
value
% of investment
portfolio†
% of equity
owned
Share price
£53.3m
3.1%
9.2%
198p
-
-
-
Shareholding
value
% of investment
portfolio†
% of equity
owned
Share price
£51.9m £32.8m
3.1%
2.1%
14.7%
382p
10.4%
330p
Shareholding
value
% of investment
portfolio†
% of equity
owned
Share price
£47.8m £19.9m
2.8%
1.3%
1.1%
€10.59
0.6%
€8.72
Industrials Reit (UK)
Industrials REIT (formerly known as
Stenprop) is a UK focused multi-let
industrial business. The portfolio has
been transformed over a number of
years to focus solely on the UK MLI
sector, and the £570m portfolio is now
c.90% MLI (as at September 2021), and
moving towards 100% in the near term.
The UK MLI asset class has seen strong
capital value growth, driven by both yield
compression and ongoing ERV growth
(to March 2022 Industrials REIT has seen
like-for-like ERV growth of +4.3%), with
rents coming from a low base (average
passing rent in the portfolio was £5.72
at March 2022) In addition to its strong
underlying property fundamentals the
company’s Hive operating platform gives
the company access to data on enquiry
levels and demand, as well as allowing for
innovative operational approaches such as
the use of digital short-form smart leases,
speeding the letting process and reducing
any negative drag from portfolio vacancy.
Total shareholder return since IPO in June
2018 has been +98%.
Phoenix Spree (UK)
Phoenix Spree is a UK listed company
with assets in Germany, specifically Berlin
residential assets. The total valuation
of the company’s property assets was
€802m at FY21, and the company
continues to benefit from the ongoing
supply demand imbalance in Berlin
residential, which has led to a housing
shortage. The Mietendeckel (German
rent restriction regulation) was repealed
in 2021, improving the outlook for free
market rental growth as well as increasing
prices of condominiums, both of which
placed Phoenix Spree in a good position.
In 2021 the company achieved a total
return (EPRA NTA growth + dividends) of
8%, which was aided by the like-for-like
annual valuation uplift of 6.3%. In addition
to strong property fundamentals the
company initiated a share buyback in
2021 at an average discount to 2020 year
end NAV of 17.8%), using the strategy to
improve both its earnings and NAV metrics
on a per share basis. The five-year total
shareholder return has been +80%.
Merlin Properties (Spain)
Merlin is a Spanish diversified REIT with
a €13bn portfolio. The majority of the
company’s assets are offices (49%),
and the company focusses its exposure
on major cities, primarily Madrid and
Barcelona. In addition to the office
portfolio the company owns shopping
centres (17%), logistics (10%), net lease
assets (14%), with 10% of assets in other
uses. In 2021 the logistics assets were
the strongest contributor to valuation
growth, increasing in value by +14% like-
for-like, offsetting a negative move in the
shopping centres of -2%; total portfolio
like-for-like growth was +2%. This helped
drive the company’s EPRA NTA +4% YoY,
and the company was also able to drive
FFO per share growth at a rate of +4%. The
company ensures that growth does not
require excessive financial risk, and LTV for
the year was maintained at 39%. Given the
current rising interest rate environment the
company also looks to protect its earnings
with 100% of its debt at fixed rates, and an
average debt maturity of 5.3 years. The
five-year total shareholder return has
been +21%.
† 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 16 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 16 and are included in the Balance Sheet as debtors or
creditors in the Current assets.
19
Annual Report & Accounts 2022OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information Twelve largest equity investments
continued
10
11
12
31 March
2022
2021
31 March
2022
2021
31 March
2022
2021
Shareholding
value
% of investment
portfolio†
% of equity
owned
Share price
£45.2m £32.8m
2.7%
2.1%
0.8%
786p
0.7%
690p
Shareholding
value
% of investment
portfolio†
% of equity
owned
Share price
£44.6m £42.0m
2.6%
2.7%
1.0%
1.0%
CHF121.5 CHF115.2
Shareholding
value
% of investment
portfolio†
% of equity
owned
Share price
£44.0m £53.9m
2.6%
3.5%
0.6%
€114.3
0.7%
€117.4
Land Securities (UK)
Landsec is one of the UK’s largest REITs,
with a portfolio valued at £11bn. The
company’s assets are a mix of offices
(c.60%), retail assets (c.30% split between
shopping centres, outlets, and retail parks)
and other uses (c.10% such as leisure
assets and hotels); 69% of the assets are in
central London. Since joining the business
in 2020 new CEO Mark Allen has sought to
alter the company’s strategy, pledging to
sell out of its non-core assets (e.g. hotels,
leisure assets and retail parks), while
increasing the size of the development
pipeline to focus on large mixed-use
schemes that others do not have the
capabilities to deliver. In addition to the
established office development pipeline
the company now plans to spend an
additional £1.5bn over five years on mixed
use developments, with a 20% profit on
cost target. Balance sheet management
has been relatively conservative with a very
long debt maturity of 10.9 years, net debt
to EBITDA of 8.1x and LTV at September
2021 of 32%. The company intends to
recycle capital to fund the development
pipeline, avoiding gearing up despite capex
spend, and has a medium-term target of
LTV remaining in the mid-30s. The five-year
total shareholder return has been -9%.
PSP (Switzerland)
PSP Swiss Property is one of Switzerland’s
leading real estate companies owning
properties valued at c.CHF9.1bn.
These are mainly office and business
premises in prime locations in
Switzerland’s key economic centers.
Zurich represents 57% of the company’s
exposure, with Geneva the other major
city at 14%. The portfolio vacancy rate
has moved downward from a level at 8.5%
in 2018 to 3.8% at FY21. The company
reported good results in 2021 with EPRA
EPS increasing +8% YoY, while EPRA NRV
increased +10% YoY. The company will
benefit from a development pipeline with
the potential to add €22m of rent in the
next three years, with a capex requirement
of €123m. The financial profile of the
company remains conservative, and the
company operates with a LTV of 35%. The
cost of debt is very low at an average of
0.4%, and the a weighted average loan
maturity remains long at 5.0 years. The
five-year total shareholder return has
been +58%.
Gecina (France)
Gecina is the largest office landlord in
Europe with a portfolio of more than
€20bn focused almost exclusively on
the Paris region. It owns also a portfolio
of €3.9bn of residential assets (of which
€380m is student housing), again
predominantly located in the Paris region.
The company develops assets to enhance
returns, with the current management is
capitalizing on a development pipeline of
c.€4bn to be delivered in the coming years.
This is a continuation of the total return
strategy the company has historically
implemented. The company looks to
redevelop assets where there are value
creating opportunities, disposing of
mature assets to crystalise capital gains;
€132m of value was created on assets
delivered in 2020 and 2021. In 2021, the
company achieved like-for-like valuation
growth of +3%, with EPRA NTA increasing
+3.7% YoY. The financial position of the
company is very stable with an LTV at 34%
(LTV has been declining consistently since
2017) and an average debt maturity of
7.4 years. The five-year total shareholder
return has been +13%.
† 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 16 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 16 and are included in the Balance Sheet as debtors or
creditors in the Current assets.
20
TR Property Investment Trust Investment properties
Spread of direct portfolio by capital value (%)
as at 31 March 2022
Retail
Industrial
Residential and
ground rents
West End of London
Inner London*
South West
Total
37.3%
1.4%
-
38.7%
*Inner London defined as inside the North and South Circular.
-
37.1%
11.1%
48.2%
12.6%
-
-
12.6%
Other
0.5%
-
-
0.5%
Total
50.4%
38.5%
11.1%
100.0%
Lease lengths within the direct property portfolio
as at 31 March 2022
Contracted rent
as at 31 March 2022
5%
4%
21%
Gross rental
income
13%
53%
0 to 5 years
5 to 10 years
10 to 15 years
15 to 20 years
20+ years
Year 1
Year 2-5
Year 5+
£2.8m
£10.25m
£17.5m
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
10 Centre, Gloucester Business Park,
Gloucester, GL3
Sector: Mixed use
Tenure: Freehold
Size (sq ft): 64,000
Principal tenants: Waitrose Ltd,
Graham & Green, Happy Lamb Hot Pot,
1Rebel, Specsavers
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 ongoing
development of The Whiteley. The
commercial element was extended and
refurbished in 2015 with a new 20 year
lease being agreed with Waitrose.
Sector: Industrial
Tenure: Freehold
Size (sq ft): 36,000
Principal tenants: Sweaty Betty, Richard
Dawes Fine Wines, Lockdown Bakers
Sector: Industrial
Tenure: Freehold
Size (sq ft): 63,000
Principal tenants: Infusion GB, Pulsin Ltd
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.
21
Annual Report & Accounts 2022OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information
Investment objective and benchmark
The Company’s investment objective 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.
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 2022 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 company.
The Company has no employees. Its wholly non-
executive Board of Directors retains responsibility
for corporate strategy; corporate governance;
risk management and internal control; 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 Company’s 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 43 to 45.
In accordance with the Alternative Investment
Fund Managers Directive (‘AIFMD’), BNP Paribas
has been appointed as Depositary to the Company.
BNP Paribas also provides custodial and
administrative services to the Company.
Company Secretarial services are provided
by BMO Investment Business Limited.
A summary of the terms of the Investment
Management Agreement are set out on pages
54 and 55.
22
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.
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.
Although the investment objective allows for
investment on an international basis, the Company’s
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 that there
is 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%
In certain market conditions the Manager may
consider it prudent not to employ gearing 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 2022 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
The Group charges 75% of annual base management
fees and finance costs to capital, in line with the
Board’s expected long-term split of returns in the form
of capital gains and income. 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 those companies grow and
become a larger part of our investment universe and/
or new companies come to the market in this format
the Fund Manager may wish to increase exposure
to those vehicles. If the Manager wishes to increase
investment to over 15%, the Company will make an
announcement accordingly.
23
Annual Report & Accounts 2022OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information Key Performance Indicators
The Board assesses the performance of the Manager in meeting the Company’s
objective against the following Key Performance Indicators ('KPIs'):
Net Asset Value Total Return relative to the benchmark
KPI
The Directors regard the out-performance of the
Company’s net asset value total return relative to
the benchmark as being an overall measure of value
delivered to the shareholders’ over the longer-term.
Board monitoring
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)
Benchmark Total Return (Annualised)
21.4%
12.2%
10.3%
5.4%
* 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
Outcome
1 year
5 years
Compound Annual Dividend Growth*
Compound Annual RPI
2.1%
9.0%
6.7%
3.7%
* 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.
KPI
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.
Board monitoring
The Board reviews statements on income received to
date and income forecasts at each meeting.
Although dividend growth in the current year has not
matched the change in RPI, over 5 years it has been
comfortably exceeded.
The discount or premium at which the Company’s shares trade compared with Net Asset Value
Outcome
1 year
5 years
Average discount*
Total number of shares repurchased
3.3%
NIL
4.6%
NIL
* Average daily discount throughout the period of share price to NAV. with
income. Source: Bloomberg.
KPI
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 company over the
longer-term, there are periods when the discount can
widen. The Board is aware of the vulnerability of a sector-
specialist 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.
Board monitoring
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.
24
TR Property Investment Trust Level of Ongoing Charges
KPI
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 trust
companies 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 in order to allow a clearer
comparison of overall administration costs with those
of other funds investing in securities.
The Board monitors the Ongoing Charges, in
comparison to a range of other investment trust
companies of similar size, both property sector
specialists and other sector specialists.
Board monitoring
Expenses are budgeted for each financial year and
the Board reviews regular reports on actual and
forecast expenses throughout the year.
Investment Trust Status
KPI
The Company must continue to operate in order to meet
the requirements of Section 1158 of the Corporation Tax
Act 2010.
Board monitoring
The Board reviews financial information and forecasts at
each meeting which set out the requirements outlined in
Section 1158.
Outcome
Ongoing charges excluding
performance fees
Ongoing charges excluding
performance fees and Direct
Property Costs
1 year
5 years
0.60%
0.63%
0.58%
0.60%
The ongoing charges are competitive when compared to
the peer group.
Outcome
The Directors believe that the conditions and ongoing
requirements have been met in respect of the year to 31
March 2022 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.
25
Annual Report & Accounts 2022OverviewStrategic 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 ongoing impact of COVID-19 on economies around the world has been recovering
throughout this financial year however the invasion of Ukraine by Russia in February had
a significant effect on global markets and market uncertainty remains. In addition rising
inflation and interest rates bring challenges not seen for many 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.
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 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 issue and to buy back
shares at each AGM.
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.
26
TR Property Investment Trust Risk identified
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 impact of a range of
current issues and sets out the Manager’s response
in positioning the portfolio and the ongoing
implications for the property market, valuations
overall and by each sector.
Market risk
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 relationship with Continental Europe continues
to evolve and there could be an impact on occupation across
each sector.
The COVID-19 global pandemic continued for much of the
financial year. It has changed the way we live and work,
uncertainty remains regarding the impact on economies
and property markets around the world both in the short and
longer term.
The invasion of Ukraine by Russia in February 2022 created
further market volatility and uncertainty which remains.
Inflation and interest rates are rising globally to levels not seen
in over 10 years.
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 2022, 66% of the Company’s exposure was to
currencies other than Sterling.
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:
• The Board receives and considers regular
income forecasts.
• Income forecast sensitivity to changes in FX rates is
• lower earnings and distributions in investee companies.
also monitored.
• The Company has substantial revenue reserves which are
drawn upon when required.
• The Board continues to monitor the impact of Brexit and
COVID-19 and the long term implications for income
generation.
Companies in some property sectors continue to be negatively
impacted by the COVID-19 pandemic although most have
returned to paying dividends, some are at a lower level than
previously and a few are continuing to withhold dividends;
• prolonged vacancies in the direct property portfolio and lease
or rental renegotiations as a result of longer term changes
anticipated following COVID-19;
• strengthening of Sterling reducing the value of overseas
dividend receipts in Sterling terms. The Company did see a
material increase in the level of earnings in the years leading up
to the COVID-19 pandemic. A significant factor in this was the
weakening of Sterling following the Brexit decision. Although
this has now passed, the value of Sterling may continue to
fluctuate in the near or medium term as the longer term
implications of Brexit and COVID-19 and the impact on the
UK and European economies become clearer. The invasion
of Ukraine by Russia has also increased market uncertainty.
The longer term implications will differ across the European
economies. This could lead to currency volatility. 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.
• impact of higher interest rates on distributions from investee
companies.
• negative outlook leading to a reduction in gearing levels in order
to protect capital has an adverse effect on earnings.
27
Annual Report & Accounts 2022OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information Principal and emerging risks and uncertainties
continued
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 longer term
changes in working practices at the administrator and
other service providers.
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 Depositary are responsible for the
safeguarding of assets. In the event of a loss of assets
the Depositary must return assets of an identical type
or corresponding value unless it is 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 adopt widespread home working following the
COVID-19 pandemic and consideration of the durability
of the arrangements. Many organisations have now
incorporated home working into their operational structure
as a permanent feature.
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.
Details of these risks together with the policies for
managing them are found in the Notes to the Financial
Statements in the full Annual Report and Accounts.
Loss of Investment Trust Status
The Company has been accepted by HM Revenue &
Customs as an investment trust company, 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.
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 on CTA
2010 compliance.
28
TR Property Investment Trust 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 of the Alternative
Investment Fund Managers Regulations, 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.
The Board receives regular regulatory updates from
the Manager, Company Secretary, legal advisors and
the Auditor. The Board considers these reports and
recommendations and takes action accordingly.
The Board receives an annual report and update from
the Depositary.
Internal checklists and review procedures are in place at
service providers.
Inappropriate use of gearing
Gearing, either through the use of bank debt or 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.
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.
Personnel changes at Investment Manager
Loss of portfolio manager or other key staff.
The Chairman conducts regular meetings with the Fund
Management team.
The fee basis protects the core infrastructure and depth
and quality of resources. The fee structure incentivises
outperformance and is fundamental in the ability to retain
key staff.
29
Annual Report & Accounts 2022OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information Long-term viability
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 as it considers this period of time to be
appropriate for a business of the Company’s 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 26 to 29 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 rates, foreign exchange rates,
tax rates and asset value growth.
In assessing 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, 63% could be
liquidated within five trading days and 76%
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, Property Income Distributions and
rental income.
30
• The Company is able to take advantage of its
closed- ended investment trust company structure
and able to hold a proportion of its portfolio in less
liquid, direct property and the less liquid securities
of smaller comapies with a view to long-term
outperformance.
• At the Balance Sheet date the Company had £85
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 GBP 15 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 has steadily
diminished through the year. This resulted in
dividend receipts from investee companies in
the current year significantly stronger than the
prior year as the majority of companies have now
returned to paying dividends, although some at
lower levels than before the pandemic. There
was an improvement in income in the year under
review, although changes in dividend timetables
delayed receipt of some income and we expect
further recovery in the forthcoming year.
• The invasion of Ukraine in February created further
market volatility and uncertainty. However the
portfolio remains highly liquid.
• The direct property portfolio was well positioned in
respect of the COVID-19 crisis and rental collection
was robust. We have very limited exposure to retail
and some smaller occupiers in the hospitality
sector, however, overall the drop in income from
the direct portfolio throough the COVID-19 crisis
was not material.
• The expenses of the Company are largely
predictable and modest in comparison with
the assets. Regular and robust monitoring of
revenue and expenditure forecasts are undertaken
throughout the year. Analysis has shown that the
Company could suffer a reduction in earnings of
80% and still be able to meet its liabilities from
revenue cashflow as they fell due. Expenses could
be met entirely from capital if required due to the
liquid nature of the portfolio.
TR Property Investment Trust • 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 a range of factors have been
considered in terms of the potential effect on
Sterling. 66% 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 trust companies
will continue to be in demand 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 Board deem
that performance is less than satisfactory, it
has the appropriate powers to replace the
Investment Manager.
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. The Directors confirm
therefore that they have a reasonable expectation
that the Company will continue in operation and
meet its liabilities in full over the coming five years
to 31 March 2027.
31
Annual Report & Accounts 2022OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information Responsible investment
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. Over the course of
the year, our management team participated in 269
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
32
focus and disclosure. Environmental measures are now
rapidly coming to the fore and with wider disclosure
requirements being placed upon our investee companies,
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 AIC Code of Corporate
Governance is detailed in the Corporate Governance
Statement on page 46 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 Company
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
114, comply with the provisions of the UK Modern
Slavery Act 2015. These are principally professional
advisers and service providers in the financial services
industry, consequently the Board considers the Company
to be low risk in relation to this matter.
The Board currently comprises three male Directors and
two female Directors. The activities of the Nomination
Committee in relation to Board changes are referred to in
the Nomination Committee Report on pages 52 and
53. 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 at www.bmogam.com
The Company has no greenhouse gas emissions to
report from its operations, nor does it have responsibility
for any other emissions producing sources under the
Companies Act 2006 (Strategic Report and Directors’
Reports Regulations 2013). Investment trust companies
are currently exempt from reporting against the Task
Force on Climate-Related Financial Disclosures ('TCFD'),
but the Board will continue to monitor the situation.
TR Property Investment Trust Governance of Investee Companies and Exercise
of Voting Power
The Manager has 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 BMO GAM’s
own corporate governance policies. This ensures that
a strong, consistent approach is taken to proxy voting
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. The Manager is a
signatory of the UK Stewardship Code. Its statement
of compliance can be found on the Managers’ website
at bmogam.com.
During the financial year, the Manager voted against 86
items, resulting in at least one vote against management
proposals at 47% of shareholder meetings. Of the items
voted against, the proposals can be broadly categorised
as follows:
2%
4%
5%
6%
14%
16%
39%
Remuneration
Election / Reelection of
Directors
Increase in capital
Anti-takeover
mechanism
Director terms
Share Repurchase
Other
For the year, the Manager engaged with 28 companies
directly on a range of ESG related matters. These
engagements were conducted at both the board and
senior executive level as well as directly with investor
relations. Topics of engagement were split as follows:
1%1%
5%
39%
6%
16%
Climate Change
Corporate Governance
Labour Standards
Environmental
Standards
Business Conduct
Human Rights
The Manager tracks the milestone of the engagement
strategy and has seen progress this year on a number
of matters. Examples include the publication of net-zero
carbon targets, the publication of sustainability reports,
companies becoming a living wage employer and
improvements in corporate governance, incorporating
changes to remuneration policies.
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 Global ESG Benchmark for
Real Assets ('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 have the resources to contribute
data to the organisations providing analysis to the
investor community. As a consequence, we see strong
correlations between company size, maturity and overall
scores. Since our investment strategy leads us to own
focused mid-sized companies in preference to some
of the larger diversified ones, the portfolios overall ESG
score might tend to be unflattering compared to the
wider benchmark.
With environmental issues coming to the fore and
inevitable increased legislation we expect to see
quite rapid improvements and standardisation in
data provision, increasing our ability to engage with
companies on these matters.
33
Annual Report & Accounts 2022OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information
Responsible investment
continued
GRESB
GRESB is a mission driven and investor led
organization providing standardised and validated
ESG data to the capital markets. Established in
2009, GRESB now covers over USD 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 listed
property companies and REITS.
Further detail on GRESB can be found at
www.gresb.com
A number of the listed German Residential companies
did not participate in the Real Estate Assessment due
to GRESB requiring data to be submitted at the asset or
building level and concerns around fair comparisons of
data aggregation. We accept that this is a reasonable
position to take for large apartment portfolios and have
discussed changes to the Real Estate Assessment with
GRESB to better reflect this asset class and encourage
participation.
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
For 2022 there is reduced GRESB Real Estate
Assessment coverage of the Company's equity
portfolio (50% from 54%). We have provided
feedback to GRESB and a request to identify and
prioritise those companies in the portfolio which are
not covered under the Real Estate Assessment.
Coverage of our sector increased from 98% to 99% and
the Fund’s portfolio from 83% to 89%. 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.
The table below compares coverage by both data
providers year on year.
Data coverage as % of weight of the invested equity portfolio
2022
Rated
Unrated
Total
GRESB
MSCI
Real Estate Assessment
Public Disclosure
Company Rating
Fund
Benchmark
Fund
Benchmark
Fund
Benchmark
50%
50%
100%
54%
46%
100%
97%
3%
100%
97%
3%
100%
89%
11%
100%
99%
1%
100%
Source: GRESB, MSCI, BMO Global Asset Management. Data as at 31.03.2022. Fund exposure calculated as the % weight of the invested equity portfolio.
2021
Rated
Unrated
Total
GRESB
MSCI
Real Estate Assessment
Public Disclosure
Company Rating
Fund
Benchmark
Fund
Benchmark
Fund
Benchmark
54%
46%
100%
55%
45%
100%
96%
4%
100%
99%
1%
100%
83%
17%
100%
98%
2%
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.
34
TR Property Investment Trust One area where we are starting to see more data is
in emissions reporting so we have tentatively begun
to map out some data below with the emphasis
being more on direction of travel than the absolute
measures themselves. This is also an area where we
expect to see change which is also explained.
Portfolio-weighted carbon intensity
Last year, for the first time, we disclosed, as best we
were able to, the portfolio-weighted carbon intensity
of the total portfolio.
Carbon Risk measures exposure to carbon intensive
companies. MSCI’s definition and calculation, with
data based on MSCI CarbonMetrics, is the portfolio
weighted average of issuer carbon intensity. At the
issuer level, Carbon Intensity is the ratio of annual
scope 1 and 2 carbon emissions to annual revenue.
Carbon Risk is categorized as Very Low (0 to <15),
Low (15 to<70), Moderate (70 to <250), High (250 to
<525), and VeryHigh (>=525).
The Carbon Risk of the equity portfolio, measured at
the financial year end, was 63.3 T CO2E/$M Sales,
falling within the low risk MSCI category. The fund’s
portfolio weighted carbon intensity was broadly in
line with that of the benchmark of 60.6.
Comparing against the results from last year shows
a headline c.25% increase in carbon intensity for
both our own equity portfolio and the index. There
are a number of reasons for this. Whilst the ratio is a
snapshot taken at each financial year end reflecting
the change in equity holdings over the period, there is
also wider coverage of data at the 2022 financial year
end (89% for the current year fund holdings versus
82% for the prior year). The latest emissions data for
each company is captured by MSCI on publication of
their data; each company is not releasing their data
at the same point so timing differences will arise. The
ratio will also be impacted by the changing value of
$ Sales, including the impact of FX rates. However,
within these limitations, we can be reasonably
confident that the Carbon Risk of the fund is in line
with the wider benchmark.
T CO2E/$M Sales
70
60
50
40
30
20
10
0
2022
2021
TR Property Investment Trust
FTSE EPRA Nareit Developed Europe Capped Index
In order to attempt to give a picture of the direction
of travel, we have looked at the individual companies
the fund holds to assess which have improving or
deteriorating carbon intensity metrics over 3 and 5
year periods.
This analysis depends upon the integrity of the
underlying data and breadth of data coverage, so
we would flag that this is a work in progress, but it
indicates a positive trend as awareness improves
and companies are obliged to disclose data.
3
10
11
3 yr
momentum
5 yr
momentum
34
29
Improving
Deteriorating
Neutral
By number of companies. Improving where end of period value
is less than start of period. Deteriorating where end of period
value is greater. 3yrs : Data for 47 of 66 stocks. 5yrs : Data for 40
of 66 stocks.
Source: MSCI, BMO Global Asset Management. Data as at 31.03.2022.
35
Annual Report & Accounts 2022OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information
Responsible investment
continued
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 Company is committed to ESG as a core principle
and we expect to increase the visibility of the various
ESG initiatives over time.
We are of the view that the ESG rating industry and
its approach and processes is still immature with
significant limitations making it difficult to draw true
comparisons and make fully informed decisions.
The assessments from the various data providers
reach different conclusions as they do not all score
in a consistent way. Some of the assessments are
subjective and different data provides have different
definitions and criteria.
We expect this to eventually converge into some
form of consensus or standardisation but it still has
a way to go. Conceptually, making ESG comparisons
between companies and portfolios appears simple,
but it is actually rather complex and it is important
to ensure that valid comparisons are being made.
Asset Managers, Wealth Managers and the industry
Gatekeepers are investing a great deal of resource
in this area and scrutinising the data provided more
rigorously. A lot of shortcomings are being uncovered
and the different approaches highlighted. This in turn
will put pressure on the data providers to improve the
quality and clarify the basis of their analysis.
The Manager is dedicating resource to the analysis
of the information available and also has the benefit
of the knowledge of its 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.
36
Direct Property Portfolio
The Management team recognise 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 the 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.
The Trust aims to integrate ESG into all elements of
its business practice through our investments in our
assets directly and through our partnership with our
Managing agents and tenants.
Occupiers are increasingly considering employee
wellbeing when selecting workspace. Natural
light, biophilia, fitness facilities and other occupier
amenities all provide a competitive edge. Through
our occupier focused, opportunity led approach, this
means being a responsible owner of commercial
real estate, helping our occupiers succeed and being
valued by all our stakeholders.
To deliver on our purpose, we have in place three
distinct strategic pillars: Asset Energy Performance
(Environmental), Occupier Engagement (Social) and
Operational Performance (Governance). These pillars
include a range of strategic priorities which guide the
direction of our ESG Strategy and we regularly review
this together with our managing agents.
(Environmental) - Asset Energy Performance
During the year our managing agents joined the
Better Buildings Partnership, a collaboration of the
UK’s leading commercial property owners to support
our mutual focus for the coming year on establishing
our pathway to achieving carbon neutrality by 2050.
Part of this is establishing an energy data baseline
through Automatic Meter Readers (AMRs) across all
assets to set targets against a recognised framework
and our business peers in REEB via the BBP.
Data Management
The Company is implementing software enabled
data management alongside changes in the data
collection processes to obtain greater visibility of our
utility consumption. Having access to good quality
data and the ability to monitor consumption patterns,
supported by more granular reporting at meter level,
will enable us to have a better understanding as to
where to focus in establishing our energy targets.
TR Property Investment Trust The groundwork being undertaken to further develop
the data management processes and improve data
quality will underpin the creation of asset sustainability
action plans.
Energy Performance Certificate ('EPC')
As part of our continuing asset management strategy
we review the EPC ratings of all our assets to identify
opportunities to improve the EPC rating on re-letting of
units or engagement with occupiers to undertake works.
TRPITs exposure to EPC risk has been well managed,
with every applicable UK property having a valid EPC
rating. To future-proof the portfolio, the Managers
Sustainability and Social Responsibility Committee has
established a target to achieve a minimum EPC rating
of D for all planned refurbishments and upgrade works
to the portfolio. We acknowledges the shift towards a
minimum EPC grade of B by 2030.
GRESB
GRESB and our use of data from GRESB has been
described on page 34. For 2022/23 the Company will be
submitting fund data to GRESB for benchmarking against
its peers. 2022/23 will be the first benchmarking year for
the Trust's property portfolio and we are targeting annual
improvements in the GRESB score on our direct portfolio.
(Social) Occupier Engagement
The Trust recognises that despite many sustainability
related activities being devolved to tenants, it still has a
duty to influence their behaviour. Through our hands on
management approach we seek to pro-actively engage
with occupiers and explore ways in which we
can support, encourage and potentially invest in their
ESG-related objectives.
(Governance) Operational Performance
Building Refurbishment
We are, in partnership with our building advisers
establishing an ESG-focused refurbishment checklist.
This will provide a set of guidelines to ensure our
refurbishment process and refurbished buildings meet
the appropriate environmental, social and governance
standards based on the scope and type of refurbishment
works being undertaken. The Trust has already
committed to all major refurbishment projects being
grounded in Performance by Design at developed by the
Better Buildings Partnership.
Green Leases
Our occupiers account for the majority of the energy
consumption of our buildings. In recognition that we need
to partner with our occupiers, in 2021 we developed a
Green Lease toolkit for all new leases. This involves tenant
education into the benefit to working together to reduce
energy and water consumption as well waste generation.
Sustainable Supply Chain
We are aware of the impact via our supply chain and
have formed our ESG strategy way in which we engage
in business with 3rd party suppliers to complement
our Net Carbon Zero goals whilst also making positive
contribution to society, minimizing any negative impact
on people and the environment and to promote safe
and fair working conditions and the responsible
management of social, ethical, and environmental
issues in our supply chain.
Net zero carbon pathway
This year we have completed the review of our
sustainability priorities and material issues. A key
recommendation regarding one of those material issues,
Climate Change Adaptation and Mitigation, was to start
the journey towards net zero carbon and assess its
feasibility. This is a key challenge facing the real estate
sector, with many companies beginning to publish their
own net zero carbon pathways. A related issue is to
develop our reporting under the Task Force on Climate-
related Financial Disclosures recommendations. We have
recognised that to develop our net zero carbon pathway
we will need to partner with a third party specialist, and
are currently working through the selection process. We
intend to define our net zero carbon pathway and targets
in line with the Better Buildings Partnership framework
during the course of this year.
By order of the Board
David Watson
Chairman
13 June 2022
37
Annual Report & Accounts 2022OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information Governance
38
TR Property Investment Trust Directors
Board diversity
40%
60%
Female
Male
David Watson
Chairman
Appointed:
April 2012
Kate Bolsover
Non-Executive Director
Appointed:
October 2019
Experience:
David became Chairman in July 2020,
prior to which he served as the Board’s
Senior Independent Director ('SID')
and Chairman of the Audit Committee.
David 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.
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 that, she worked
extensively in the investment fund industry
and was Managing Director of Baring’s
mutual funds group. Kate was previously
a non-executive director of JPMorgan
American Investment Trust plc, Senior
Independent Director of Montanaro UK
Smaller Companies Trust and Chairman
and Trustee of Tomorrow’s People.
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 on a
number of boards have built significant
experience in shareholder and investor
engagement.
Skills and contribution to the Board:
From her executive experience, Kate
contributes significant and relevant skills
of the investment industry. Her role on
various boards also gives her the relevant
experience in shareholder and investor
engagement.
Other appointments:
David is currently Chairman of Aegon
Asset Management UK plc and a
Director of the Prudential Assurance
Company, where he Chairs the Audit
Committee.
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 and of
Bellevue Healthcare Trust.
40
TR Property Investment Trust
Sarah-Jane Curtis
Non-Executive Director
Simon Marrison
Senior Independent Director
Tim Gillbanks
Chairman of the Audit Committee
Appointed:
January 2020
Appointed:
September 2011
Appointed:
January 2018
Experience:
Sarah-Jane is a Member of the Royal
Institution of Chartered Surveyors. She
was previously Business Director at
Bicester Village for Value Retail. Prior
to that, Sarah-Jane was a director of
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 in fund and
investment management activities.
Experience:
Simon joined the Board in September 2011
and became Senior Independent Director in
July 2020. He has over 30 years’ experience
in the European property investment
industry. He is currently senior advisor for
European Real Estate at Kohlberg Kravis
Roberts ('KKR'). Prior to that 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 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.
Other appointments:
Sarah-Jane is currently Property
Director of Bicester Motion as well as a
consultant to Value Retail PLC.
Other appointments:
Senior advisor for European Real
Estate at KKR.
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.
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:
Tim is currently a Non-Executive Director
of Brown Shipley & Co Limited, Janus
Henderson (UK) Investors Limited and
Janus Henderson Group Holdings Limited.
He is also Vice-Chair of the Board of Trustees
of Blood Cancer UK.
41
Annual Report & Accounts 2022OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information Managers
Marcus Phayre-Mudge
Fund Manager
Jo Elliott
Finance Manager
Marcus Phayre-Mudge 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 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.
George Gay
Direct Property Fund Manager
Alban Lhonneur
Deputy Fund Manager
George Gay 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 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.
42
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
2022. 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 37.
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 it 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 2022 the net assets of the Company
amounted to £1,563 million (2021: £1,326 million), on a
per share basis 492.43p (2021: 417.97p) per share.
Revenue earnings per share for the year amounted to
13.69p (2021: 12.25p) and the Directors recommend
the payment of a final dividend of 9.20p (2021: 9.00p)
per share bringing the total dividend for the year to
14.50p (2021: 14.20p). In arriving at their dividend
proposal, the Board also reviewed the income forecasts
for the year to March 2023.
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 24 and 25.
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 2022 the Company had 317,350,980 (2021:
317,350,980) Ordinary shares in issue.
At the AGM in 2021 the Directors were given power to buy
back up to 47,570,911 Ordinary shares. Since that AGM the
Directors have not bought back any Ordinary shares under
that authority, which will expire at the 2022 AGM. The Board
will seek to renew the authority to make market purchases
of the Company’s Ordinary shares at this year’s AGM.
Since 1 April 2022 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 54. 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 2022
amount to 2.0% (2021: 1.2%) of Group Equity Shareholders’
Funds. Included in this were performance fees earned
in the year ended 31 March 2022 of £24,489,000 (2021:
£9,659,000).
Basis of accounting
The Group and Company financial statements for the
year ended 31 March 2022 have been prepared on a
going concern basis in accordance with UK-adopted
international accounting standards and in conformity with
the requirement of the Companies Act 2006. The financial
statements have also been prepared in accordance with
the Statement of Recommended Practice 'Financial
Statements of Investment Trust Companies and Venture
Capital Trusts' ('SORP') to the extent that is consistent with
UK-adopted international accounting standards.
The accounting policies are set out in note 1 to the
Financial Statements on pages 76 to 79.
43
Annual Report & Accounts 2022OverviewStrategic 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.
Risk management and internal control
The Board has overall responsibility for the Group’s system
of risk management and internal control and for reviewing
its 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 system of risk management and internal control
aims 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 26 to 29.
The effectiveness of each third-party provider’s internal
controls is assessed on an ongoing 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 risk
management and internal control and the Board and
Audit Committee receive regular reports from them. The
risk management and internal control system is 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
44
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. It undertakes an annual review of the Group’s
system of risk management and internal control 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
any identified internal control failures or errors.
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 BMO Investment
Business Limited 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 year
under review and up to the date of signing the accounts.
Key risks identified by the Auditor 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 Company’s AGM will be held at the Royal Automobile
Club, 89/91 Pall Mall, London SW1Y 5HS on Tuesday 26
July 2022 at 2.30pm. The Notice of AGM is set out on
pages 106 and 110. The full text of the resolutions and
an explanation of each is contained in the Notice of AGM
and explanatory notes on pages 106 to 112.
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 Directors' appointment letters can be found
on page 53.
TR Property Investment Trust Significant Voting Rights
At 31 March 2022, no shareholders held over 3% of voting
rights on a discretionary basis. However, 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
Smith & Williamson Investment Managers
% of voting rights*
10.5%
9.3%
8.4%
5.8%
5.5%
3.7%
3.6%
3.2%
3.0%
* See above for further information on the voting rights of Ordinary shares.
Since 31 March 2022 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. They were amended at the 2021 AGM
and are available to view on our website.
Corporate Governance
Full details are given in the Corporate Governance Report
on pages 46 to 51. The Corporate Governance Report
forms part of this Directors’ Report.
Listing Rule 9.8.4R
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 2022.
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
of Association (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 a 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.
45
Annual Report & Accounts 2022OverviewStrategic 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
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.
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 at the date of this report it comprises 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.
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 year under review
the Company has 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 2022:
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 system
of risk management and internal and control.
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.
46
TR Property Investment Trust Directors
There were no changes to the Board of Directors in
the year under review. The Directors’ biographies are
set out on pages 40 and 41. In accordance with the
Code, all Directors are subject to annual re-election.
Therefore all Directors will retire at the forthcoming
AGM in accordance with the Code and, being
eligible, with the exception of Mr Marrison, will offer
themselves for re-election. Mr Marrison will stand
down from the Board at the conclusion of the AGM
and the Board has announced that Andrew Vaughan
will be appointed with effect from 1 August 2022 to
succeed him.
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 avoids duplication of discussion
between the Board and the Committees.
The roles and responsibilities of each Committee
are set out in 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.
Board meetings
The number of meetings of the Board and Committees held during the year under review, and the attendance of
individual Directors, are shown below:
David Watson
Tim Gillbanks
Simon Marrison
Kate Bolsover
Sarah-Jane Curtis
Board
Audit
MEC
Nomination
Attended
Eligible
Attended
Eligible
Attended
Eligible
Attended
Eligible
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.
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.
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.
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
47
Annual Report & Accounts 2022OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information 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 receive regular 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.
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. 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 future strategy. In addition, the Board,
together with the Manager, holds 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 company 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.
Corporate Governance report
continued
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 Half Year 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 107.
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 year. 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.
48
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 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.
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.
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.
External Service Providers, particularly the Company Secretary, the Administrator, the Registrar and the Depository and
the Broker
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.
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.
49
Annual Report & Accounts 2022OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information Corporate Governance report
continued
Stakeholder Group and why
they are important
Board engagement
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.
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 the other requirements of section 172 which form
part of Board’s decision-making process. The following key
decisions taken by the Board during the year ended 31 March
2022 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.
Dividends
Subject to shareholder approval of the proposed final
dividend, the Company paid a total dividend of 14.50p for the
financial year, representing an increase of 2.1% compared
to the previous year. Uncertainty related to the COVID-19
pandemic continued through the 2021-22 financial year.
Income levels improved as companies resumed paying
dividends although still not at pre COVID-19 levels. 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, it would once again draw on
the revenue reserve to support the dividend.
The board is prepared to use revenue reserves to support the
dividends paid to shareholders over short term periods of
income shortfall or volatility for identified reasons.
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.
The Board continued to consider the impact on the Company
(including portfolio activity, risks and opportunities, gearing,
revenue forecasts and the operations of other third party
providers) of a number of events through the financial year
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
50
TR Property Investment Trust succession plan. Simon Marrison will stand down from the
Board at the conclusion of the 2022 AGM and will be replaced
by Andrew Vaughan with effect from 1 August 2022.
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 52).
The Board seeks to appoint the best possible service
providers and evaluates their service on a regular basis as
described on page 54. 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 those matters and
the effectiveness of those 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.
Directors’ statement as to disclosure of
information to the Auditor
The Directors who were members of the Board at the time
of approving the Directors’ Report are listed on pages 40
and 41. Having made enquiries of fellow Directors and of the
Company’s Auditor, each of the Directors confirms that:
• so far as they are aware, there is no information of which
the Company’s Auditor is unaware; and
• each Director has taken all the steps that they ought to
have taken as a Director to make themselves aware of
any relevant audit information and to establish that the
Company’s Auditor is 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
BMO Investment Business Limited
Company Secretary
13 June 2022
51
Annual Report & Accounts 2022OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information Report of the Nomination Committee
Nomination Committee
Chairman: David 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 annually,
and more frequently as and when required and last
met in March 2022.
Activity during the year
The Committee discussed succession planning of the
Board, its tenure and diversity policies. The Committee
reviews annually the size and structure of the Board and
will continue to review succession planning and further
recruitment, taking into account the recommendations
of Board evaluations.
Board evaluation
Following the engagement of Tim Stephenson
of Stephenson & Co, to facilitate an independent,
external 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 2022 was carried out
internally. 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 Directors’ tenure and reappointment,
all Directors, with the exception of Simon Marrison, will
offer themselves for re-election at the forthcoming AGM.
It is considered that each of them merit re-election by
shareholders. Further information on each Director’s
skills, experience and their contribution to the Board are
outlined in the biographies on pages 40 and 41.
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 ending 31 March 2023. The Board will continue
to complete an internal board evaluation annually in the
intervening years.
Board’s policy on tenure
Provision 24 of the AIC Code of Corporate Governance, it
allows a different approach to tenure in relation to investment
companies, reflecting 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 its ‘Policy Governing Board Members’ Tenure and
Reappointment’. This policy outlines the Board’s approach
to tenure and reappointment of non-executive directors. It
states its 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.
Board Succession
Having served as a Director since 2011, Mr Marrison
will stand down from the Board at the conclusion of
the forthcoming AGM. He will be succeeded by Andrew
Vaughan, who joins the Board on 1 August 2022. An
independent third party agency, Egon Zehnder, was
engaged for the recruitment process which resulted
in Andrew’s appointment. Egon Zehnder have no other
connection with the Company.
52
TR Property Investment Trust
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.
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 at the AGM.
David Watson
Chairman of the Nomination Committee
13 June 2022
53
Annual Report & Accounts 2022OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information Report of the Management Engagement Committee
Management engagement
committee (the ‘MEC’)
Chairman: David 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 investment management, 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 share
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 MEC determines and
approves Directors’ fees, 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 56 to 58.
The MEC meets at least annually, towards the end of
the financial year and last met in March 2022.
Activity during the year
At the meeting held in March 2022, the MEC
reviewed the 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
54
ending 31 March 2023, being in the best interests of all
shareholders. A summary of the significant terms of
the Investment Management Agreement and the third
party service providers who support the Company are
set out below.
During the year the MEC also reviewed the
performance of all their third party service providers
including BNP Paribas, Computershare, BMO acting as
Company Secretary, both firms of corporate 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 it
was 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 Company’s 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:
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.
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 2023 and the fixed
element of the fee will increase to £3,895,000 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.
TR Property Investment Trust 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 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 2022 there is a carry forward of
outperformance of 1.9% (2021: 1.8%).
Management company
On 8 November 2021 BMO’s asset management
business in Europe, the Middle East and Africa
became part of Columbia Threadneedle Investments,
the global asset management business of
Ameriprise Financial, Inc. The process of integrating
the two firms is progressing and both companies
have confirmed the importance of maintaining the
stability and continuity of the teams which support
the Company.
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 service
providers fees
Custody and Administration Services are provided
by BNP Paribas and Company Secretarial Services
by BMO Investment Business Limited. 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
13 June 2022
55
Annual Report & Accounts 2022OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information Directors’ Remuneration Report
made for loss of office. The terms of their appointment
are detailed in an appointment letter when they join the
Board. As the Directors do not have service contracts,
the Company does not have a policy on termination
payments. 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 2021 AGM, over 99.6% of shareholders’
votes cast were in favour of the resolution approving the
Directors’ Remuneration Report (0.3% 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.
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 Auditor, 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 2022 and considered the
results and feedback from the Board evaluation.
It was agreed that the Directors’ fees would be
increased, with effect from 1 April 2022, to the following
levels: Chairman £72,000; Audit Committee Chairman
£42,000; Senior Independent Director £42,000; and other
Directors £36,000.
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,
whose appointments are reviewed formally every year.
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 and no payments
56
TR Property Investment Trust
Remuneration Type
Additional Fees
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.
Expenses
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.
Other
Board members are not
eligible for bonuses, pension
benefits, share options, long-
term incentive schemed or
other non-cash benefits or
taxable expenses.
Fixed Fees
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.
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 2022, Directors’ fees were paid at the annual rates of Chairman: £70,000 (2021: £70,000)
and all other Directors: £35,000 (2021: £35,000). An additional £5,000 was 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 2022
£
31 March 2021
£
70,000
40,000
40,000
35,000
35,000
-
220,000
60,461
38,410
40,000
35,000
35,000
23,333
232,204
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
57
Annual Report & Accounts 2022OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information Relative Importance of Spend on Pay
Dividends paid
Directors’ fees
2022
£’000
2021
£’000
45,381
44,129
220
232
Change
+2.8%
-5.2%
Five year change comparison
Over the last five years, Directors’ pay has increased as set
out in the table below:
2022
£’000
2017
£’000
Change
over
5 years
Annualised
Change
70,000
70,000
0%
0%
40,000
37,000
8.1%
1.6%
40,000
37,020
35,000
32,000
8.1%
9.4%
1.6%
1.8%
Chairman
Audit Committee
Chairman
Senior
Independent
Director
Director
For and on behalf of the Board
David Watson
Chairman of the Management Engagement Committee
13 June 2022
Directors’ Remuneration report
continued
Company performance
The graph below compares, for the ten years ended
31 March 2022, 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.
Ordinary Share Class Performance: Total Return
over 10 years (rebased)
4500
4000
3500
3000
2500
2000
1500
1000
500
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
Mar-19
Mar-20
Mar-21 Mar-22
TR Property Share Price Total Return
Benchmark Total Return
Share Price Total Return assuming investment of £1,000 on 31 March 2012
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 2012. (Source: Thames River Capital)
Directors’ shareholdings (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 2022
31 March 2021
36,407
43,991
-
2,360
5,237
36,083
43,367
-
2,360
-
David Watson
Simon Marrison
Tim Gillbanks
Kate Bolsover
Sarah-Jane Curtis
On 9 June 2022, Sarah-Jane Curtis acquired a further 4,772
shares of the Company.
58
TR Property Investment Trust Report of the Audit Committee
Audit committee
Chairman: Tim Gillbanks
Key responsibilities
• Review the internal financial and non-financial controls;
This has included consideration of the ongoing COVID-19
pandemic and towards the end of the year the invasion
of Ukraine, inflationary and interest rate increases and
impact across a range of risk categories,
• The Group’s Internal Controls and consideration of the
• Review reports from key third party service providers;
Reports thereon;
• Consider and recommend to the Board for approval the
• The ISAE/AAF reports or their equivalent from BMO
contents of the draft Interim and Annual Reports;
and BNP Paribas;
• Review accounting policies and significant financial
• Whether the Company should have its own internal
reporting judgements;
audit function;
• Monitor, together with the Manager, the Company’s
compliance with financial reporting and regulatory
requirements;
• The External Auditor’s Planning Memorandum setting
out the scope of the annual audit and proposed key
areas of focus;
• 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.
• The reports from the Auditor concerning their audit
of the Financial Statements of the Company and
Consideration of Significant issues in relation to the
Financial Statements;
Representatives of the Manager’s internal audit and
compliance departments may attend committee
meetings at the Committee Chairman’s request.
• The appropriateness of, and any changes to, the
accounting policies of the Company, including
the reasonableness of any judgements required
by such policies;
Representatives of the Company’s Auditor attend the
Committee meetings at which the draft Half Year 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 Long-Term 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 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.
• The financial and other disclosures in the Financial
Statements;
• The information presented in the Half Year 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;
Activity during the year
During the year the Committee met twice with all
members at each meeting and considered the following:
• The performance of the external auditor, to approve
their audit fees and consider the assessment of
independence;
• 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
risks and inclusion in the Risk Map if appropriate.
• 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.
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Annual Report & Accounts 2022OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information
Report of the Audit Committee
continued
Going concern
In assessing whether it continues to be appropriate
to prepare the Accounts on a Going Concern basis,
the Committee 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.
In light of testing carried out, the overall levels of the
investment liquidity held by the Company and the
significant net asset position, 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.
The long-term viability of the Company was also
assessed as set out on pages 30 and 31.
Risk management and internal control
The Board has overall responsibility for the Group’s
system of Risk Management and Internal Control and for
reviewing their effectiveness. Key risks identified by the
Auditor 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 44.
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 emerging risks and whether any adjustments were
required to existing risks, and the controls and mitigation
measures in place in respect of those 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.
Rising inflation in the latter half of the year, the invasion
of Ukraine in February and the increasing interest rates
were also considered and the risks associated with these
events reflected in the risk map.
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 its own internal audit function.
60
Significant issues in relation to the
financial statements
The Committee has considered this report and financial
statements and the Long-term Viability Statement
on pages 30 and 31. 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 30 September 2021 which did not
reveal any significant exceptions. The quarterly control
report to the Board from BNP Paribas covering the
period up to 31 March 2022 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 Auditor 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’.
TR Property Investment Trust 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 Auditor has 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 2022 that was material
or significant or that the Committee felt should be
brought to shareholders’ attention.
Auditor assessment and independence
The Company’s external auditor, KPMG LLP ('KPMG')
was appointed as the Company’s auditor at the 2016
AGM. The Committee undertook a tender process
during 2021 to ensure that shareholders were getting
the best services and value for money. A number of
firms were invited to express interest and respond
on a small number of key points. The decision
was made for the audit to remain with KPMG. 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 current
audit regulations.
At the half year meeting of the Committee, KPMG
presented their audit plan for the year end 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 is independent.
Total fees payable to the Auditor in respect of
the audit for the year to 31 March 2022 were:
£82,000 (2021: £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 2022 were nil (2021: nil).
Full details of the Auditor’s fees are provided in note 6
to the accounts on page 81.
Mr Merchant, was appointed audit partner for the
2022 year-end audit succeeding Mr Kelly, who was
required to rotate off the Company's account, having
served as audit partner for five years.
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 peers and the targets set by the FRC. The
review following the completion of the 2021 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. 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
13 June 2022
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Annual Report & Accounts 2022OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information 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.
Under applicable law and regulations, the Directors
are also responsible for preparing a Strategic Report,
Directors’ Report, Directors’ Remuneration Report
and Corporate Governance Statement.
Company law requires the Directors to prepare Group
and Parent Company financial statements for each
financial year. Directors are required to prepare the Group
financial statements in accordance with UK-adopted
international accounting standards and applicable
law and have elected to prepare the Parent Company
financial statements on the same basis.
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:
• select suitable accounting policies and 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 UK-adopted international
accounting standards.
• 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 Directors are responsible for maintaining 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 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.
62
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:
• 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.
In accordance with Disclosure Guidance and
Transparency Rule 4.1.14R, the financial statements
willform part of the annual financial report prepared
using the single electronic reporting format under the
TD ESEF Regulation. The auditor's report on these
financial statements provides no assurance over the
ESEF format.
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
David Watson
Chairman
13 June 2022
TR Property Investment Trust Independent auditor’s report
to the members of TR Property Investment Trust plc
01 Our opinion is unmodified
We have audited the financial statements of TR
Property Investment Trust plc (the 'Company') for
the year ended 31 March 2022 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 Group’s and of the Parent
Company’s affairs as at 31 March 2022 and of
the Group’s profit for the year then ended;
• The financial statements have been properly
prepared in accordance with UK adopted
international accounting standards
• The financial statements have been prepared
in accordance with the requirements of the
Companies Act 2006
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.
We were first appointed as auditor by the directors on
2 November 2016. The period of total uninterrupted
engagement is for the six financial years ended 31 March
2022. We have fulfilled our ethical responsibilities under,
and we remain independent of the Group 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.
Overview
Materiality: group
financial statements
as a whole
£16.8m (2021:£14.9m)
1% (2021: 1%) of Total Assets
Key audit matters vs 2021
vs 2021
Recurring risks
Valuation of direct property
investments
Carrying amount of listed
investments
02 Key audit matters: 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 2021), in decreasing order of audit significance, in arriving at our audit opinion above, together with
our key audit procedures to address those matters and our findings from those procedures in order that the Company’s
members, as a body, may better understand the process by which we arrived at our opinion. These matters were
addressed, and our findings 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.
63
Annual Report & Accounts 2022OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information The risk
Our response
Subjective valuation:
5.7% (2021: 5.6%) of the Group’s,
and 5.6% (2021: 5.4%) of the Parent
Company’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
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 any of the Group’s
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 is appropriate. 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
assumptions made when valuing the direct
property investments.
Our findings
We found the Group’s valuation of investment
properties to be balanced (2021: balanced).
Independent auditor’s report
continued
Valuation of direct property
investments (Group and
Parent Company)
(£96.3 million; 2021:
£83.1 million)
Refer to pages 59 to 61
(Audit Committee
Report), pages 77 and
78 (accounting policy),
and note 10 on pages 85
to 88 (financial disclosures).
64
TR Property Investment Trust 02 Key audit matters: our assessment of risks of material misstatement continued
The risk
Our response
Carrying amount of
listed investments
(Group and Parent)
(£1,456.8 million; 2021:
£1,316.0 million)
Refer to pages 59 to 61
(Audit Committee Report),
page 78 (accounting policy)
and note 10 on pages 85 to
88 (financial disclosures).
Low risk, high value:
The Group’s portfolio of listed level 1
investments makes up 86.4% (2021:
88.2%) of the Group’s, and 84.6% (2021:
85.8%) of the Parent Company’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 material misstatement, or to be
subject to a significant level of
judgement because they comprise
liquid, quoted 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 greatest effect on
our overall audit strategy and allocation
of resources in planning and completing
our audit.
We performed the detailed tests below rather
than seeking to rely on any of the Group’s
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:
• Test of detail: Agreeing the valuation of 100%
of level 1 listed investments in the portfolio to
externally quoted prices; and
• Enquiry of custodians: Agreeing 100% of
level 1 listed investment holdings in the
portfolio to independently received third party
confirmations from investment custodians.
Our findings
We found no differences from third party
holdings confirmations nor from the externally
quoted prices of a size to require reporting to the
Audit Committee (2021: no differences).
03 Our application of materiality and an
overview of the scope of our audit
Materiality for the Group financial statements as a whole
was set at £16.8m (2021 : £14.9m), determined with
reference to a benchmark of total assets, of which it
represents 1.0% (2021: 1.0%).
Materiality for the parent company financial statements
as a whole was set at £16.0m (2021: £14.1m), which
is the component materiality for the parent company
determined by the group audit engagement team. This
is lower than the materiality we would otherwise have
determined with reference to parent company total
assets, of which it represents 0.95% (2021: 0.95%).
In line with our audit methodology, our procedures
on individual account balances and disclosures were
performed to a lower threshold, performance materiality,
so as to reduce to an acceptable level the risk that
individually immaterial misstatements in individual
account balances add up to a material amount across
the financial statements as a whole. Performance
materiality was set at 75% (2021: 75%) of materiality
for the financial statements as a whole, which equates
to £ 12.6m ( 2021: £11.1m) for the Group and £12.0m
(2021 : £10.5m) for the Parent Company. We applied
this percentage in our determination of performance
materiality because we did not identify any factors
indicating an elevated level of risk. In addition, we applied
materiality of £2.0m (2021: £2.0m ) and performance
materiality of £1.5m (2021: £1.5m) to investment
income, other operating income , gross rental income,
service charge income and net returns on contracts for
difference 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 Group.
We agreed to report to the Audit Committee any
corrected or uncorrected identified misstatements
exceeding £0.84m (2021: £0.75m) in addition to other
identified misstatements that warranted reporting on
qualitative thresholds.
Total Assets
£1,686m (2021: £14.9m)
Group Materiality
£16.8m (2021: £14.9m)
£16.8m
Whole financial statements
materiality (2021: £14.9m)
£16.0m
Parent Company Materiality
(2021: £14.1m)
£0.84m
Misstatements reported
to the audit committee
(2021: £0.75m)
Total Assets
65
Annual Report & Accounts 2022OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information
Independent auditor’s report
continued
03 Our application of materiality and an overview of the
scope of our audit continued
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 and Parent Company was performed using the
materiality levels set out above and was performed by a
single audit team.
resources or ability to continue operations over the
going concern period. The risks that we considered most
likely to adversely affect the Group’s and Company’s
available financial resources and metrics relevant to debt
covenants over this period were:
• The impact of a significant reduction in the valuation of
investments and the implications for the Group’s and
Company’s debt covenants;
The scope of the audit work performed was fully
substantive as we did not rely upon the Group’s internal
controls over financial reporting.
• The liquidity of the investment portfolio and its ability
to meet the liabilities of the Group as and when they
fall due; and
04 The impact of climate risk on our
audit report
We have performed a risk assessment of how the impact
of climate change may affect the financial statements
and our audit. Level 1 listed investments make up
86.4% of the Group’s total assets, for which fair value
is determined as the quoted market price. Therefore,
we assessed that the financial statement estimate that
is primarily exposed to climate risk is the investment
property portfolio, for which the valuation assumptions
and estimates may be impacted by physical and policy
or legal climate risks, such as flooding or an increase
in climate related compliance expenditure. We held
discussions with our own climate change professionals
to challenge our risk assessment. We assessed that,
whilst climate change posed a risk to the determination
of investment property valuations in the current year,
this risk was not significant when considering both the
nature and domicile of the properties and the tenure of
unexpired leases. Therefore there was no significant
impact of this on our key audit matters.
We have read the disclosure of climate related narrative
in the front half of the financial statements and
considered consistency with the financial statements
and our audit knowledge.
05 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 their operations,
and as they have concluded that the Group’s and the
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
their 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’s and Company’s financial
66
• The operational resilience of key service organisations,
on which the Group is dependent to continue.
We considered whether these risks could plausibly affect
the liquidity or covenant compliance 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’s or Company’s
current and projected cash and liquid investment
position (a reverse stress test ). 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’s
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’s 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 page 60 is materially consistent with the financial
statements and our audit knowledge.
TR Property Investment Trust 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.
06 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 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. As the Parent
Company is regulated, our assessment of risks involved
gaining an understanding of the control environment
including the entity’s procedures for complying with
regulatory requirements.
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.
We assessed the legality of the distributions made by
the Company in the period based on comparing the
dividends paid to the distributable reserves prior to each
distribution.
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.
67
Annual Report & Accounts 2022OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information Independent auditor’s report
continued
06 Fraud and breaches of laws and regulations ability
to detect continued
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.
07 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.
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 Long-Term 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 Long-Term
Viability Statement on pages 30 and 31 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 Long-Term Viability
Statement of how they have assessed the prospects
of the Group, 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 Long-Term Viability
Statement, set out on pages 30 and 31 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 Group's longer
term viability.
68
TR Property Investment Trust 09 Respective Responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on
page 62 , 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 Group and parent 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 Group or the parent Company or to cease
operations, or have no realistic alternative but to do so.
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
The Company is required to include these financial
statements in an annual financial report prepared using
the single electronic reporting format specified in the
TD ESEF Regulation. This auditor’s report provides no
assurance over whether the annual financial report has
been prepared in accordance with that format.
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.
08 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 parent Company 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.
69
Annual Report & Accounts 2022OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information Independent auditor’s report
continued
10 The purpose of our audit work and to
whom we owe our responsibilities
This report is made solely to the Company’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 Company’s members
those matters we are required to state to them in an
auditor’s report and the further matters we are required
to state to them in accordance with the terms agreed
with the company, for no other purpose. To the fullest
extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the
Company’s members, as a body, for our audit work, for
this report, or for the opinions we have formed.
Philip Merchant (Senior Statutory Auditor) for and on
behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
Saltire Court
20 Castle Terrace
Edinburgh
EH1 2EG
13 June 2022
70
TR Property Investment Trust Financial
statements
71
Annual Report & Accounts 2022OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information Group statement of comprehensive income
for the year ended 31 March 2022
Year ended 31 March 2022
Year ended 31 March 2021
Revenue
Return
£’000
Capital
Return
£’000
Total
£’000
Revenue
Return
£’000
Capital
Return
£’000
Notes
Income
Investment income
Other operating income
Gross rental income
Service charge income
Gains 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
Total
£’000
36,557
67
3,185
1,051
44,170
5
2,773
1,103
-
-
-
-
-
-
-
44,170
36,557
5
2,773
1,103
67
3,185
1,051
-
-
-
-
249,038
249,038
1,136
1,136
637
637
-
-
-
196,582
196,582
(3,144)
(3,144)
(1,474)
(1,474)
5,701
16,361
22,062
-
53,752
-
267,172
-
320,924
3,320
-
44,180
17,978
(188)
209,754
21,298
(188)
253,934
(1,663)
(29,477)
(31,140)
(1,556)
(14,328)
(15,884)
(1,435)
(1,621)
-
(1,435)
(608)
(2,229)
(4,719)
(30,085)
(34,804)
49,033
237,087
286,120
(629)
(1,886)
(2,515)
(1,321)
(1,231)
(4,108)
40,072
(416)
-
(604)
(1,321)
(1,835)
(14,932)
(19,040)
194,822
234,894
(1,969)
(2,385)
48,404
(4,967)
235,201
283,605
39,656
192,853
232,509
3,049
(1,918)
(767)
2,667
1,900
43,437
238,250
281,687
38,889
195,520
234,409
13.69p
75.07p
88.76p
12.25p
61.61p
73.86p
The Total column of this statement represents the Group’s Statement of Comprehensive Income, prepared
in accordance with UK-adopted international accounting standards. 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 76 to 100 form part of these Financial Statements.
72
TR Property Investment Trust Group and Company statement of changes in equity
Group
For the year ended 31 March 2022
Notes
At 31 March 2021
Total comprehensive income
Dividends paid
At 31 March 2022
Company
17
For the year ended 31 March 2022
Notes
At 31 March 2021
Total comprehensive income
Dividends paid
At 31 March 2022
Group
17
For the year ended 31 March 2021
Notes
At 31 March 2020
Total comprehensive income
Dividends paid
At 31 March 2021
Company
17
For the year ended 31 March 2021
Notes
At 31 March 2020
Total comprehensive income
Dividends paid
At 31 March 2021
17
Share
Capital
£’000
79,338
-
-
79,338
Share
Capital
£’000
79,338
-
-
79,338
Share
Capital
£’000
79,338
-
-
79,338
Share
Capital
£’000
79,338
-
-
79,338
Share
Premium
Account
£’000
Capital
Redemption
Reserve
£’000
Retained
Earnings
£’000
Total
£’000
43,162
-
-
43,162
43,971
-
-
43,971
1,159,962
281,687
(45,381)
1,396,268
1,326,433
281,687
(45,381)
1,562,739
Share
Premium
Account
£’000
Capital
Redemption
Reserve
£’000
Retained
Earnings
£’000
Total
£’000
43,162
-
-
43,162
43,971
-
-
43,971
1,159,962
281,687
(45,381)
1,396,268
1,326,433
281,687
(45,381)
1,562,739
Share
Premium
Account
£’000
Capital
Redemption
Reserve
£’000
43,162
-
-
43,162
43,971
-
-
43,971
Share
Premium
Account
£’000
Capital
Redemption
Reserve
£’000
43,162
-
-
43,162
43,971
-
-
43,971
Retained
Earnings
£’000
969,982
234,409
(44,429)
1,159,962
Retained
Earnings
£’000
969,982
234,409
(44,429)
1,159,962
Total
£’000
1,136,453
234,409
(44,429)
1,326,433
Total
£’000
1,136,453
234,409
(44,429)
1,326,433
The notes from pages 76 to 100 form part of these Financial Statements.
73
Annual Report & Accounts 2022OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information Group and Company balance sheets
as at 31 March 2022
Group
2022
£’000
1,506,436
-
48,980
1,555,416
903
Company
2022
£’000
1,506,436
36,297
48,980
1,591,713
903
Group
2021
£’000
1,400,516
-
-
1,400,516
686
Company
2021
£’000
1,400,516
43,312
-
1,443,828
686
1,556,319
1,592,616
1,401,202
1,444,514
Non-current assets
Investments held at fair value
Investments in subsidiaries
Investments held for sale
Deferred taxation asset
Current assets
Debtors
Cash and cash equivalents
Notes
10
10
10
12
12
97,673
32,109
129,782
97,208
32,107
129,315
Current liabilities
13
(66,109)
(101,939)
Net current assets/(liabilities)
Total assets plus net current
assets/(liabilities)
63,673
27,376
1,619,992
Non-current liabilities
13
(57,253)
Net assets
1,562,739
60,990
29,114
90,104
(107,280)
(17,176)
1,384,026
(57,593)
1,326,433
79,338
43,162
43,971
1,159,962
1,326,433
60,520
29,112
89,632
(150,120)
(60,488)
1,384,026
(57,593)
1,326,433
79,338
43,162
43,971
1,159,962
1,326,433
1,619,992
(57,253)
1,562,739
79,338
43,162
43,971
1,396,268
1,562,739
Capital and reserves
Called up share capital
Share premium account
Capital redemption reserve
Retained earnings
Equity shareholders’ funds
Net Asset Value per:
Ordinary share
14
15
15
16
79,338
43,162
43,971
1,396,268
1,562,739
19
492.43p
492.43p
417.97p
417.97p
These financial statements were approved by the directors of TR Property Investment Trust plc (Company No:84492) and
authorised for issue on 13 June 2022.
D Watson
Director
The notes from pages 76 to 100 form part of these Financial Statements.
74
TR Property Investment Trust Group and Company cash flow statements
as at 31 March 2022
Reconciliation of profit from operations
before tax to net cash outflow from
operating activities
Profit from operations before tax
Finance costs
Gains on investments and derivatives held
at fair value through profit or loss
Net movement on foreign exchange; cash
and cash equivalents and loan notes
Scrip dividends included in investment
income and net returns on contracts for
difference
Sales of investments
Purchases of investments
Decrease / (increase) in prepayments and
accrued income
(Increase) / decrease in sales settlement
debtor
Increase / (decrease) in purchase
settlement creditor
Decrease / (increase) in other debtors
Increase / (decrease) in other creditors
Net cash (flow/outflow) from operating
activities before interest and taxation
Interest paid
Taxation paid
Net cash (flow/outflow) from
operating activities
Financing activities
Equity dividends paid
(Repayment)/Drawdown of loans
Net cashflow from financing activities
Increase/(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
Group
2022
£’000
Company
2022
£’000
Group
2021
£’000
Company
2021
£’000
283,605
2,515
283,605
2,515
232,509
2,385
231,844
2,385
(265,399)
(258,387)
(214,372)
(207,255)
(977)
(977)
(179)
(179)
(10,839)
544,370
(430,830)
(10,839)
544,370
(430,831)
8
8
(32,871)
(32,871)
5,170
2,951
13,809
111,512
(2,515)
(1,258)
107,739
(45,381)
(60,000)
(105,381)
2,358
29,114
637
32,109
5,170
2,951
6,798
111,512
(2,515)
(1,258)
107,739
(45,381)
(60,000)
(105,381)
2,358
29,112
637
32,107
(8,489)
353,167
(370,496)
(102)
4,753
(5,781)
(11,436)
2,451
(15,590)
(2,607)
(1,915)
(20,112)
(8,489)
353,167
(370,496)
(102)
4,753
(5,781)
(11,436)
(4,001)
(15,590)
(2,607)
(1,915)
(20,112)
(44,429)
(44,429)
55,000
10,571
(9,541)
40,129
(1,474)
29,114
55,000
10,571
(9,541)
40,127
(1,474)
29,112
The notes from pages 76 to 100 form part of these Financial Statements.
75
Annual Report & Accounts 2022OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information Notes to the financial statements
01 Accounting policies
The financial statements for the year ended 31 March 2022 have been prepared on a going concern basis, in accordance with
UK-adopted International accounting standards 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, “Financial Statements of
Investment Trust Companies and Venture Capital Trusts," ('SORP'), to the extent that it is consistent with UK-adopted international
accounting standards.
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 of the likely
ongoing economic impact of the war in Ukraine. The Board is satisfied with the operational resilience of the Company's
third party service providers as working practices change following the COVID-19 pandemic, but continues to monitor
their performance.
In light of the testing carried out, the liquidity of the level 1 assets held by the Company and the significant net asset value,
and the net current asset position of the Group and Parent Company, 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
2022. 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 funds 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.
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 for difference is set out in section (g) of this note.
76
TR Property Investment Trust
01 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 as
independent valuation specialists to determine fair value as at 31 March 2022.
77
Annual Report & Accounts 2022OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information
Notes to the financial statements
continued
01 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 2022, 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).
Held for sale investment are presented separately on the face of the Balance Sheet.
Held for sale
Investment property classified as held for sale is measured fair value.
This condition is regarded as met only when the investment property is available for immediate sale in its present
condition and the sale is highly probable.
Management must be committed to a plan for sale with an active programme to identify a buyer at a reasonable price in
relation to its fair value which should be expected to qualify for recognition as a completed sale within one year from the
date of classification.
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.
78
TR Property Investment Trust
01 Accounting policies continued
Derivatives continued
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 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.
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.
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.
Early adoption of standards and interpretations
The standards issued before the reporting date that become effective after 31 March 2022 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 12 Amendments - Deferred Tax related to Assets and Liabilities arising from a Single Transaction (effective 1 January 2023).
The amendments require entities with certain assets to recognise deferred tax on particular transactions that, on initial recognition,
give rise to equal amounts of taxable and deductible temporary differences.
79
Annual Report & Accounts 2022OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information
Notes to the financial statements
continued
02 Investment income
Dividends from UK listed investments
Dividends from overseas listed investments
Scrip dividends from listed investments
Property income distributions
03 Net rental income
Gross rental income
Service charge income
Direct property expenses, rent payable and service charge costs
2022
£’000
3,101
21,349
10,693
9,027
44,170
2022
£’000
2,773
1,103
(1,435)
2,441
2021
£’000
3,753
18,656
7,482
6,666
36,557
2021
£’000
3,185
1,051
(1,321)
2,915
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
04 Other operating income
Interest receivable
Interest on refund of overseas withholding tax
Underwriting commission
2022
£’000
2,800
10,250
17,500
30,550
2022
£’000
-
5
-
5
2021
£’000
3,000
10,000
19,000
32,000
2021
£’000
1
44
22
67
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 no underwriting (2021 - one
underwriting agreement).
80
TR Property Investment Trust
05 Management and performance fees
Management fee
Performance fee
2022
Revenue
£’000
1,663
-
1,663
2022
Capital
£’000
4,988
24,489
29,477
2022
Total
£’000
6,651
24,489
31,140
2021
Revenue
£’000
1,556
-
2021
Capital
£’000
4,669
9,659
2021
Total
£’000
6,225
9,659
1,556
14,328
15,884
A summary of the terms of the management agreement is given in the Report of the Directors on page 43.
06 Other administrative expenses
Directors’ fees (Directors’ Remuneration Report on pages 56 to 58)
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
2022
£’000
220
82
21
77
199
869
153
1,621
608
2,229
2021
£’000
232
80
15
69
199
454
182
1,231
604
1,835
Other administrative expenses include depositary, custody and company secretarial services. These expenses are
charged on the same basis as the base management fee; 25% to income and 75% to capital. Total other administrative
expenses charged to both income and capital are £807,000 (2021: £797,000).
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.
81
Annual Report & Accounts 2022OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information 2022
£’000
1,162
814
539
-
2,515
(1,886)
629
2021
£’000
1,241
-
1,384
(240)
2,385
(1,969)
416
2021
Total
£’000
-
874
874
(1,980)
(1,106)
(794)
(1,900)
2022
Revenue
£’000
2,832
2,135
4,967
2022
Capital
£’000
(2,832)
-
(2,832)
2022
Total
£’000
-
2,135
2,135
2021
Revenue
£’000
1,989
866
2,855
2021
Capital
£’000
(1,989)
8
(1,981)
-
-
-
(1,980)
-
4,967
(2,832)
-
(217)
2,135
(217)
1,918
875
(108)
767
(1,981)
(686)
(2,667)
Notes to the financial statements
continued
07 Finance costs
Loan notes, bank loans and overdrafts repayable within 1 year
Loan notes repayable between 2 - 5 years
Loan notes repayable after 5 years
HMRC interest: release of FII GLO provision
Amount allocated to Capital
Amount allocated to Revenue
08 Taxation
a) Analysis of charge in the year
UK corporation tax at 19%
(2021: 19%)
Overseas taxation
(Over)/under provision in respect
of prior years
Deferred taxation
Current tax charge for the year
4,967
(3,049)
82
TR Property Investment Trust
08 Taxation continued
b) Factors affecting total tax charge for the year
The tax assessed for the year is lower (2021: lower) than the standard rate of corporation tax in the UK for a large
company of 19% (2021: 19%).
The difference is explained below:
2022
Revenue
£’000
2022
Capital
£’000
2022
Total
£’000
2021
Revenue
£’000
2021
Capital
£’000
2021
Total
£’000
48,404
235,201
283,605
39,656
192,853
232,509
9,197
44,688
53,885
7,535
36,642
44,177
Net profit/(loss) on ordinary
activities before taxation
Corporation tax charge at 19%
(2021:19%)
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 movement
(Over)/under provision in respect
of prior years
Disallowable expenses
Deferred tax not provided
-
-
-
-
(603)
(5,810)
2,135
-
-
26
22
(47,317)
(47,317)
(337)
(337)
3,243
(3,109)
-
-
-
(217)
-
-
-
3,243
(3,109)
(603)
(5,810)
2,135
(217)
-
26
22
4,967
(3,049)
1,918
-
-
-
(23)
(972)
(4,573)
866
(108)
(1,980)
19
3
767
c) Provision for deferred taxation
The amounts for deferred taxation provided at 25% (2021: 19%) comprise:
Group
Accelerated capital allowances
Unutilised losses carried forward
Shown as:
Deferred tax asset
2022
Revenue
£’000
-
-
-
2022
Capital
£’000
-
2022
Total
£’000
-
(903)
(903)
(903)
(903)
2021
Revenue
£’000
-
-
-
(37,351)
(37,351)
877
139
(3,380)
-
-
8
(686)
-
-
1,084
(2,667)
2021
Capital
£’000
-
(686)
877
139
(3,403)
(972)
(4,573)
874
(794)
(1,980)
19
1,087
(1,900)
2021
Total
£’000
-
(686)
(686)
(686)
83
Annual Report & Accounts 2022OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information
Notes to the financial statements
continued
08 Taxation continued
c) Provision for deferred taxation continued
Company
Unutilised losses carried forward
Shown as:
Deferred tax asset
2022
Revenue
£’000
-
-
2022
Capital
£’000
(903)
2022
Total
£’000
(903)
(903)
(903)
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
2022
Revenue
£’000
-
-
-
-
2022
Revenue
£’000
-
-
-
-
2022
Capital
£’000
(686)
-
(217)
(903)
2022
Capital
£’000
(686)
-
(217)
(903)
2022
Total
£’000
(686)
-
(217)
(903)
2022
Total
£’000
(686)
-
(217)
(903)
2021
Revenue
£’000
-
-
2021
Revenue
£’000
108
(108)
-
-
2021
Revenue
£’000
108
(108)
-
-
2021
Capital
£’000
(686)
2021
Total
£’000
(686)
(686)
(686)
2021
Capital
£’000
-
-
(686)
(686)
2021
Capital
£’000
-
-
(686)
(686)
2021
Total
£’000
108
(108)
(686)
(686)
2021
Total
£’000
108
(108)
(686)
(686)
The Group has not recognised deferred tax assets of £8,007,769 (2021: £2,703,000) 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.
09 Earning per share
Earnings/(loss) per Ordinary share
The earnings per Ordinary share can be analysed between revenue and capital, as below.
Net revenue profit
Net capital profit
Net total profit
Year ended
31 March 2022
£’000
Year ended
31 March 2021
£’000
43,437
238,250
281,687
38,889
195,520
234,409
Weighted average number of shares in issue during the year
317,350,980
317,350,980
Revenue earnings per share
Capital earnings per share
Earnings per Ordinary share
pence
13.69
75.07
88.76
pence
12.25
61.61
73.86
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.
84
TR Property Investment Trust
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 for sale
Investments held at fair value
Investments in subsidiaries
at fair value
Group
2022
£’000
516,076
2,341
940,744
47,275
48,980
1,555,416
-
1,555,416
Company
2022
£’000
516,076
2,341
940,744
47,275
48,980
1,555,416
36,297
1,591,713
Group
2021
£’000
394,176
1,468
921,801
83,071
-
1,400,516
-
1,400,516
Company
2021
£’000
394,176
1,468
921,801
83,071
-
1,400,516
43,312
1,443,828
Investments held for sale: Mixed used property, the Colonnades, London, W2, is currently under offer with a sale expected
to complete by the end of June 2022. No impairment losses or reversals are anticipated.
b) Business segment reporting
Listed investments
Unlisted investments
Contracts for difference
Valuation
31 March
2021
£’000
Net
additions/
(disposals)
£’000
Net
appreciation/
(depreciation)
£’000
Valuation
31 March
2022
£’000
Gross
revenue
31 March
2022
£’000
Gross
revenue
31 March
2021
£’000
1,315,977
(94,224)
235,067
1,456,820
43,775
36,403
1,468
(141)
(42)
915
(8,563)
16,361
2,341
7,657
395
5,701
49,871
3,876
53,747
154
3,320
39,877
4,236
44,113
Total investments segment
1,317,304
(102,829)
252,343
1,466,818
Direct property segment
83,071
128
13,056
96,255
1,400,375
(102,701)
265,399
1,563,073
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 £1,435,000 (2021: £1,321,000) and deducting these costs from the direct
property gross revenue above would result in net income of £2,441,000 (2021: £2,915,000) for the direct property
reporting segment.
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Annual Report & Accounts 2022OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information
Notes to the financial statements
continued
10 Investments held at fair value continued
c) Geographical segment reporting
Valuation
31 March
2021
£’000
Net
additions/
(disposals)
£’000
Net
appreciation/
(depreciation)
£’000
Valuation
31 March
2022
£’000
Gross
revenue
31 March
2022
£’000
Gross
revenue
31 March
2021
£’000
UK listed equities and convertibles
394,176
30,844
91,056
516,076
11,731
10,265
UK unlisted equities
UK direct property¹
1,468
83,071
-
128
873
13,056
2,341
96,255
Continental European listed equities
921,801
(125,110)
144,053
940,744
1,400,516
(94,138)
249,038
1,555,416
UK contracts for difference²
European contracts for difference²
584
(725)
(9,227)
664
10,270
6,091
1,627
6,030
395
3,876
32,044
48,046
1,616
4,085
154
4,236
26,138
40,793
1,242
2,078
1,400,375
(102,701)
265,399
1,563,073
53,747
44,113
Included in the above figures are purchase costs of £489,000 (2021: £741,000) and sales costs of £259,000 (2021:
£184,000).
These comprise mainly stamp duty and commission.
The Company received £544,225,000 (2021: £329,018,000) from investments, including direct property, sold in the
year. The book cost of these investments when they were purchased was £356,438,000 (2021: £266,450,000). 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
³
Net additions/(disposals) includes £366,000 (2021: £465,000) 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.
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 8 companies (2021: 10 companies) in which it invests.
None of these investments is considered significant in the context of these financial statements. See note 21 on pages 99
and 100 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).
86
TR Property Investment Trust
10 Investments held at fair value continued
e) Fair value of financial assets and financial liabilities
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 2022
Equity investments
Investment properties
Contracts for difference
Foreign exchange forward contracts
At 31 March 2021
Equity investments
Investment properties
Contracts for difference
Foreign exchange forward contracts
Level 1
£’000
1,456,820
-
-
-
1,456,820
Level 1
£’000
1,315,977
-
-
-
Level 2
£’000
-
-
7,657
2,736
10,393
Level 2
£’000
-
-
(141)
(1,107)
Level 3
£’000
2,341
96,255
-
-
98,596
Level 3
£’000
1,468
83,071
-
-
Total
£’000
1,459,161
96,255
7,657
2,736
1,565,809
Total
£’000
1,317,445
83,071
(141)
(1,107)
1,399,268
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 2022 was £36,297,000 (2021: £43,312,000).
These have been categorised as level 3 in both years. The movement in the year of £7,015,000 (2021: £7,117,000) is the
change in fair value in the year, which includes a distribution from a subsidiary company of £7,000,000. The total financial
assets at fair value for the Company at 31 March 2022 was £1,591,713,000 (2021: £1,443,828,000).
1,315,977
(1,248)
84,539
Reconciliation of movements in financial assets categorised as level 3
At 31 March 2022
31 March
2021
£’000
Purchases
£’000
Appreciation /
(Depreciation)
£’000
Sales
£’000
31 March
2022
£’000
Unlisted equity investments
1,468
-
-
873
2,341
Investment properties
– Mixed use
– Office & Industrial
47,977
35,094
83,071
84,539
372
-
372
372
-
(244)
(244)
(244)
(162)
13,218
13,056
13,929
48,187
48,068
96,255
98,596
All appreciation/(depreciation) as stated above relates to movements in fair value of unlisted equity investments and
investment properties held at 31 March 2022.
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.
87
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Notes to the financial statements
continued
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 (2021: £6.5- £65)
• Capitalisation rates: 2.0% - 6.0% (2021: 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
2022 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
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%
Retail
£’000
306
(294)
(3,865)
4,841
Retail
£’000
310
(250)
(4,040)
5,155
Office &
Industrial
£’000
2,266
(2,266)
(6,343)
8,711
Office &
Industrial
£’000
1,585
(1,610)
(5,835)
9,505
Other
£’000
145
(1)
(832)
1,101
Other
£’000
50
(25)
(925)
1,325
Total
£’000
2,717
(2,561)
(11,040)
14,653
Total
£’000
1,945
(1,885)
(10,800)
15,985
The Group agreed to sell freehold and leasehold interests in The Colannades investment property after a strategic review
of the Direct Property portfolio which has a fair value after costs to sell of £48,187,437 as at 31 March 2022.
The property is currently being marketed for sale and is anticipated to be sold within the next 12 months, therefore it is
being classified as a held for sale. Any changes to the marketing for sale occurring after the year end will be disclosed in
Note 23 Subsequent Events.
No impairment losses have been recognised as at 31 March 2022.
11 Financial instruments
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 22. 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 23 and have been applied
throughout the year.
88
TR Property Investment Trust
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
2022
£’000
1,555,416
144,642
2021
£’000
1,400,516
146,001
Concentration of exposure to price risks
As set out in the Investment Policies on page 23, 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.
2022
Increase
in fair value
£’000
2022
Decrease
in fair value
£’000
2021
Increase
in fair value
£’000
2021
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
(115)
234,176
234,061
73.75p
115
(234,176)
(234,061)
(73.75)p
(103)
209,801
209,698
66.08p
103
(209,801)
(209,698)
(66.08)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.
89
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Notes to the financial statements
continued
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
2022
34.0%
42.0%
16.0%
8.0%
2021
28.0%
51.0%
13.0%
8.0%
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:
2022
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
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
Sterling
£’000
53,912
20,341
(35,000)
(25,642)
(88,280)
(74,669)
614,672
903
(15,000)
525,906
Sterling
£’000
49,462
22,853
(95,000)
(10,142)
(61,209)
(94,036)
478,715
686
(15,000)
370,365
Euro
£’000
27,758
3,247
-
(111)
(10,996)
19,898
680,755
-
(42,253)
658,400
Euro
£’000
10,668
4,339
-
(1,031)
-
13,976
707,968
-
(42,593)
679,351
Swedish
Krona
£’000
12,659
2,883
-
(1,634)
59,877
73,785
181,455
-
-
Other
£’000
608
5,638
-
(3,722)
42,135
44,659
78,534
-
-
255,240
123,193
Swedish
Krona
£’000
561
650
-
-
13,848
15,059
155,635
-
-
Other
£’000
299
1,272
-
-
46,254
47,825
58,198
-
-
170,694
106,023
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% (2021: 15%)
• Sterling/Swedish Krona +/- 15% (2021: 15%)
• Sterling/Other +/- 15% (2021: 15%)
90
TR Property Investment Trust
11 Financial instruments continued
Foreign currency sensitivity continued
If Sterling had strengthened against the currencies shown, this would have had the following effect:
Year ended March 2022
Year ended March 2021
Euro
£’000
Swedish
Krona
£’000
Other
£’000
Euro
£’000
Swedish
Krona
£’000
Statement of Comprehensive
Income – profit after tax
Revenue return
(3,500)
(436)
(276)
(2,726)
(589)
Capital return
Change to the profit after tax for
the year/shareholders’ funds
(89,441)
(23,632)
(10,228)
(83,243)
(20,269)
(92,941)
(24,068)
(10,504)
(85,969)
(20,858)
(7,829)
Other
£’000
(250)
(7,579)
Change to total earnings per Ordinary share
2022
(40.18)p
2021
(36.13)p
If Sterling had weakened against the currencies shown, this would have the following effect:
Year ended March 2022
Year ended March 2021
Euro
£’000
Swedish
Krona
£’000
Other
£’000
Euro
£’000
Swedish
Krona
£’000
Other
£’000
Statement of Comprehensive
Income – profit after tax
Revenue return
4,896
525
345
3,411
732
318
Capital return
Change to the profit after tax for
the year/shareholders’ funds
121,078
31,996
13,847
124,633
27,440
10,262
125,974
32,521
14,192
128,044
28,172
10,580
2022
54.42p
2021
52.56p
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 £92,253,000
(2021: £130,000,000)
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Annual Report & Accounts 2022OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information
Notes to the financial statements
continued
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 £77,242,000 (2021: £80,027,000)
The Group's exposure to fixed interest rates on liabilities is £57,253,000 (2021: £152,593,000)
The Group's exposure to floating interest rates on liabilities is £35,000,000 (2021: £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 SONIA or its foreign currency
equivalent (2021: same)
• Interest paid on borrowings under the multi-currency loan facilities, is at a margin over SONIA or its foreign currency
equivalent for the type of loan (2021: 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:
Change to shareholders’ funds
Change to total earnings
per Ordinary share
2022
Increase
£’000
(243)
(0.08)p
2022
Decrease
£’000
243
0.08p
2021
Increase
£’000
(1,176)
(0.37)p
2021
Decrease
£’000
1,176
0.37p
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 2022, 6% (2021: 6%)
of the Group's investment portfolio was held in direct property investments.
At 31 March 2022, 94% (2021: 94%) 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.
92
TR Property Investment Trust
11 Financial instruments continued
Debt and Financing maturity profile
At 31 March 2022
Bank loans*
Loan notes
Projected interest cash flows on
bank and loan notes
Securities and properties
purchased for future settlement
Accruals and deferred income
Other creditors
At 31 March 2021
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 year
£’000
Within
2-3 year
£’000
35,000
-
-
-
-
-
Within
3-4 year
£’000
-
42,253
Within
4-5 year
£’000
More than
5 year
£’000
-
-
-
15,000
Total
£’000
35,000
57,253
1,350
1,350
1,350
1,241
539
2,124
7,954
5,364
25,523
222
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,364
25,523
222
67,459
1,350
1,350
43,494
539
17,124
131,316
Within
1 year
£’000
Within
1-2 year
£’000
Within
2-3 year
£’000
Within
3-4 year
£’000
Within
4-5 year
£’000
More than
5 year
£’000
Total
£’000
95,000
-
2,178
10,719
110
-
-
-
-
-
-
-
-
-
95,000
57,593
57,593
1,356
1,356
1,356
1,356
2,693
10,295
-
-
-
-
-
-
-
-
-
-
10,719
110
* A £60m multicurrency facility with RBS was renewed for one year in February 2022. £35m (2021: £50m) was drawn on this facility at the balance sheet date.
108,007
1,356
1,356
1,356
1,356
60,286
173,717
* A £30m one year facility with ING Luxembourg was renewed in July 2021. Nil (2021: 30m) was drawn on this facility at the balance sheet date.
* A £40m facility with ICBC was renewed in November 2021. Nil (2021: 15m) 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 23. 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 £50,101,017 (2021: £53,134,000).
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:
93
Annual Report & Accounts 2022OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information
Notes to the financial statements
continued
11 Financial instruments continued
Debtors
Cash and cash equivalents
2022
Balance
Sheet
£’000
97,673
32,109
129,782
2022
Maximum
exposure
£’000
97,673
32,109
129,782
2021
Balance
Sheet
£’000
60,990
29,114
90,104
2021
Maximum
exposure
£’000
60,990
29,114
90,104
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 2022 (31 March 2021: 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 2022 and 2021, the Group’s derivative assets and liabilities (by type and counterparty) were as follows:
Year ended 31 March 2022
Year ended 31 March 2021
Net amounts
of financial
assets/
liabilities
presented in
the Balance
Sheet
£’000
7,657
7,657
2,736
2,736
Cash collateral
pledged
£’000
45,133
45,133
-
-
Net amounts
of financial
assets/
liabilities
presented in
the Balance
Sheet
£’000
(141)
(141)
(1,107)
(1,107)
Cash collateral
pledged
£’000
50,913
50,913
-
-
CFD positions:
Goldman Sachs
FX forward contracts:
HSBC
94
TR Property Investment Trust
11 Financial instruments continued
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 £2,341,000 (2021: Atrato,
£1,468,000).
In the Parent Company accounts there are investments of £36,297,000 (2021: £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 £265,399,000 (2021: £214,372,000 gain).
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 2022 consisted of called up share capital, share premium, capital redemption
and revenue reserves totalling £1,562,739,000 (2021: £1,326,433,000). 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
Foreign exchange forward contracts
for settlement
Tax recoverable
Prepayments and accrued income¹
Amounts receivable in respect of
Contracts for Difference
CFD margin cash
Other debtors
Non-current assets
Deferred taxation asset
¹ Includes amounts in respect of rent free periods.
Group
2022
£’000
Company
2022
£’000
33,138
33,138
2,736
3,344
5,168
7,657
45,133
497
97,673
2,736
2,879
5,168
7,657
45,133
497
97,208
Group
2021
£’000
267
-
4,231
5,176
-
50,913
403
60,990
Company
2021
£’000
267
-
3,761
5,176
-
50,913
403
60,520
903
903
686
686
95
Annual Report & Accounts 2022OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information
Notes to the financial statements
continued
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
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
Group
2022
£’000
35,000
5,364
-
-
-
Company
2022
£’000
35,000
5,364
35,869
-
-
25,523
25,523
-
222
-
183
66,109
101,939
42,253
15,000
57,253
42,253
15,000
57,253
Group
2021
£’000
95,000
194
-
141
9
10,719
1,107
110
107,280
42,593
15,000
57,593
Company
2021
£’000
95,000
194
42,880
141
9
10,685
1,107
104
150,120
42,593
15,000
57,593
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 £42,340,000 (2021: £42,732,000) and the 3.59% GBP Loan Notes was
£14,879,000 (2021: £15,219,000) at 31 March 2022.
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 (2021:
£130,000,000) at 31 March 2022. At 31 March 2022 £35,000,000 was drawn on these facilities (2021: £95,000,000).
The maturity of these facilities is shown in notes 11.3 and 11.4.
96
TR Property Investment Trust
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 2021
57,593
95,000
152,593
Cash flows:
Repayment of bank loans
Non cash-flows:
Movement on foreign exchange
Closing liabilities from financing activities at 31 March 2022
14 Called up share capital
-
(60,000)
(60,000)
(340)
57,253
-
35,000
(340)
92,253
Ordinary share capital
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 2021
At 31 March 2022
Number
Issued, allotted
and fully paid £’000
317,350,980
317,350,980
79,338
79,338
The voting rights are disclosed in the Report of the Directors on page 45.
During the year, the Company made no market purchases for cancellation of Ordinary shares of 25p each (2021: none).
Since 31 March 2022 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
2022
£’000
412,934
918,057
1,330,991
65,277
1,396,268
Company
2022
£’000
431,260
891,806
1,323,066
73,202
1,396,268
Group
2021
£’000
335,322
757,418
1,092,740
67,222
1,159,962
Company
2021
£’000
360,663
731,167
1,091,830
68,132
1,159,962
Group investment holding gains at 31 March 2022 include a £1,015,650 gain (2021: £143,000 gain) relating to unlisted
investments and a gain of £58,386,000 (2021: £45,201,000 gain) relating to investment properties.
Company investment holding gains at 31 March 2022 include a gain of £77,728,000 (2021: £70,685,000 gain) relating to
unlisted and subsidiary investments with a £57,246,000 revaluation gain (2021: £44,061,000 revaluation gain) relating to
investment properties. Dividends are only distributable from the revenue reserve.
97
Annual Report & Accounts 2022OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information
Notes to the financial statements
continued
17 Dividends
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 31 March 2021 of 9.00p (2020:
8.80p) per Ordinary share
Interim dividend for the year ended 31 March 2022 of 5.30p
(2021: 5.20p) per Ordinary share
Year ended
31 March 2022
£’000
Year ended
31 March 2021
£’000
28,562
16,819
45,381
27,927
16,502
44,429
Amounts not recognised as distributions to equity holders in the
year:
Proposed final dividend for the year ended 31 March 2022 of 9.20p
(2021: 9.00p) per Ordinary share
29,196
28,562
The final dividend has not been included as a liability in these financial statements in accordance with IAS 10 "Events after
the reporting period".
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 2022 of 5.30p
(2021: 5.20p) per Ordinary share
Proposed final dividend for the year ended 31 March 2022
of 9.20p (2021: 9.00) per Ordinary share
2022
£’000
16,819
29,196
46,015
2021
£’000
16,502
28,562
45,064
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
£281,687,000 (2021: £234,409,000 profit).
19 Net asset value per ordinary share
Net asset value per Ordinary share is based on the net assets attributable to Ordinary shares of £1,562,739,000 (2021:
£1,326,433,000) and on 317,350,980 (2021: 317,350,980) Ordinary shares in issue at the year end.
20 Commitments and contingent liabilities
At 31 March 2022 the Group had capital commitments of £74,000 (2021: £144,000) but no contingent liabilities (2021: nil).
98
TR Property Investment Trust
21 Subsidiaries
The Group has the following principal subsidiaries, all of which are registered and operating
in Scotland, England and Wales:
Name
Reg. Number
Principal Activities
* New England Properties Limited
* The Colonnades Limited
* Showart Limited
788895
2826672
2500726
* Trust Union Properties Residential Developments Limited
2365875
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
2415846
2416015
2415843
2416017
2415839
2416018
2415836
2416019
2415833
2416021
2415830
2416022
2415818
2416024
2416026
2415806
2416027
2415768
2416030
2415772
2416031
2415765
* Trust Union Properties (Number Twenty-Three) Limited
2416036
* Skillion Finance Limited
* Trust Union Finance (1991) Plc
* FGH Developments Limited
* FGH Developments (Aberdeen) Limited
* 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
2420758
2663561
1481476
SC68799
1466619
977481
1385909
2613905
1447221
1787371
803940
2134624
1233998
2415941
2420097
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
99
Annual Report & Accounts 2022OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information
Notes to the financial statements
continued
21 Subsidiaries continued
All the subsidiaries are fully owned and all the holdings are ordinary shares.
All companies have the registered office of Exchange House, Primrose Street, London EC2A 2HS with the exception of
FGH Developments (Aberdeen) Limited which is registered to 50 Lothian Road, Festival Square, Edinburgh EH3 9BY.
* 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.
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
2022
£’000
22,619
13,270
(20)
35,869
2021
£’000
22,619
20,281
(20)
42,880
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 57.
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 58.
100
TR Property Investment Trust
Glossary
and AIFMD
disclosure
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101
Annual Report & Accounts 2022OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information
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.
Year to
31 March
2022
NAV/share price per share at
31 March 2021 (pence)
NAV/share price per share at
31 March 2022 (pence)
Change in year
Impact of dividends reinvested
Total Return for the year
Year to
31 March
2021
NAV/share price per share at
31 March 2020 (pence)
NAV/share price per share at
31 March 2021 (pence)
Change in year
Impact of dividends reinvested
NAV
Share
Price
417.97
392.50
492.43
456.50
17.8%
16.3%
3.6%
3.6%
21.4%
19.9%
NAV
Share
Price
358.11
317.5
417.97
16.7%
4.0%
392.5
23.6%
4.7%
Total Return for the year
20.7%
28.3%
102
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
omparison of the direct administrative and management
charges with the majority of Investment Trusts which do
not hold any direct property investments.
Year to
31 March
2022
Management
Fee (note 5)
Other
Administrative
expenses
(note 6)
Property
Costs
Less: Non
recurring
expenses
Average Net
Assets
Ongoing
Charge 2022
Year to
31 March
2021
Management
Fee (note 5)
Other
Administrative
expenses
(note 6)
Property
Costs
Less: Non
recurring
expenses
Average Net
Assets
Ongoing
Charge 2021
Including
Performance
Fees
£’000
Excluding
Performance
Fees
£’000
Excluding
Performance
Fees & Direct
Property Costs
£'000
31,140
6,651
6,651
2,220
2,220
2,220
332
332
33,692
9,203
8,871
1,536,825
1,536,825
1,536,825
2.19%
0.60%
0.58%
Including
Performance
Fees
£’000
Including
Performance
Fees
£’000
Excluding
Performance
Fees & Direct
Property Costs
£'000
15,884
6,225
6,225
1,835
1,835
1,835
270
270
-
-
-
-
17,989
8,330
8,060
1,283,051
1,283,051
1,283,051
1.40%
0.65%
0.63%
TR Property Investment Trust
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
2022
£’000
Group
2021
£’000
57,253
57,593
35,000
95,000
CFD positions (notional exposure)
144,642
146,001
Less: Cash
Less: Cash collateral (included within
‘Other debtors’ in Note 12)
(32,109)
(29,114)
(45,133)
(50,913)
159,653
218,567
Equity shareholders’ funds
1,562,739 1,326,433
Net gearing
10.2%
16.5%
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.
Compound Annual Dividend Growth
This is calculated by taking 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.
Average Discount
The sum of each daily discount ( the discount of the
closing share price to the published AIC NAV with
income) divided by the number of days in the given
time period.
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. Details of these
calculations are set out above.
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 24 and 25.
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.
103
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Annual Report & Accounts 2022OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information
Glossary and AIFMD disclosure
continued
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 2022:
Leverage exposure
Maximum permitted limit
Actual
Gross
method
Commitment
method
200%
136%
200%
128%
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.
104
TR Property Investment Trust Notice of AGM
105
Annual Report & Accounts 2022OverviewStrategic 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.
Notice is hereby given that the Annual General Meeting
of TR Property Investment Trust plc (the ‘Company’) will
be held at the Royal Automobile Club, 89/91 Pall Mall,
London SW1Y 5HS on Tuesday 26 July 2022 at 2.30pm
for the purpose of transacting the following business:
To consider and, if thought fit, pass the following
Resolutions, of which Resolutions 1 to 10 will be
proposed as Ordinary Resolutions and Resolutions 11
and 12 shall be proposed as Special Resolutions:
1
To receive the Report of the Directors and the
Audited Accounts for the year ended 31 March 2022.
2
To approve the Directors’ Remuneration Report
(other than the part containing the Directors’
Remuneration Policy) for the year ended 31 March
2022.
3 To declare a final dividend of 9.20p per Ordinary share.
4 To re-elect Kate Bolsover as a Director.
5 To re-elect Sarah-Jane Curtis as a Director.
6 To re-elect Tim Gillbanks as a Director.
7 To re-elect David Watson as a Director.
8
To re-appoint KPMG LLP (the ‘Auditor’) as Auditor of
the Company to hold office until the conclusion of the
next Annual General Meeting of the Company.
9
To authorise the Directors to determine the
remuneration of the Auditor.
106
Special business
Ordinary resolution
10 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 25 October 2023), 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.
Special resolutions
11 THAT in substitution for all such existing authorities
and subject to the passing of Resolution 10 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 10 above and/or to sell shares held by the
Company as treasury shares for cash as if Section
561 of the Act did not apply to any such allotment or
sale, provided that this power shall be limited:
(a) to 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:
(i)
to shareholders in proportion (as nearly
as may be practicable) to their existing
holdings; and
(ii)
to holders of other equity securities, as
required by the rights of those securities, or
as the Board otherwise considers necessary.
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
TR Property Investment Trust
(b) in the case of the authority granted under
(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;
The authority hereby conferred shall expire at
the conclusion of the Annual General Meeting
of the Company in 2023 (or, if earlier, at the close
of business on 25 October 2023), 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.
By Order of the Board
For and on behalf of
BMO Investment Business Limited
Company Secretary
20 June 2022
Registered Office:
Company registered in England and Wales.
Company number: 84492
13 Woodstock Street
London W1C 2AG
Resolution 10 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),
The power given by this resolution shall expire upon
the expiry of the authority conferred by Resolution
10 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.
12 THAT the Company be and is hereby generally and
unconditionally authorised in accordance with
Section 701 of the Act to make one or more 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
13 June 2022, the latest practicable date prior
to publication of this Notice);
(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; and
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Annual Report & Accounts 2022OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information
Notice of Annual General Meeting
continued
Notes
Whilst COVID-19 restrictions have been lifted as
at the date of this Notice of AGM and it is currently
anticipated that shareholders will be permitted to
attend and vote in person at the meeting, the COVID-19
situation continues to evolve and the UK Government
may introduce new restrictions or implement measures
relating to the holding of shareholder meetings which
may mean this is no longer possible. Therefore,
shareholders are encouraged to appoint the Chairman
of the meeting as their proxy for the AGM. If any
other person is appointed as proxy and COVID-19
restrictions are introduced which affect the holding of
the meeting, that proxy may not be permitted to attend
the AGM. Any changes to the arrangements for the
AGM will be communicated to shareholders prior to the
meeting, including through the Company's website, at
www.trproperty.com and by announcement through a
regulatory information service.
Shareholders intending to attend the AGM are
asked to register their intention as soon as practicable
by email to the following dedicated address:
trpitagm@bmogam.com.
Shareholders who are not able or do not wish to attend
the meeting in person 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
to vote. However, shareholders will be invited to
submit questions through our website, by 12.00 noon
on 22 July 2022. Questions of a very similar nature
may be grouped together to ensure the orderly running
of the AGM.
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).
108
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 of members 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
22 July 2022 (or 6.00 pm on the date two business
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.
3
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.
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 Act. 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 of the Act. Where
the Company is required to place a statement on a
website under Section 527 of the Act, 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 Act to publish
on a website.
TR Property Investment Trust
4
5
6
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.
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 Act
('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.
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 26 July 2022 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.
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 Act, can be found at
www.trproperty.com.
109
Annual Report & Accounts 2022OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information
Notice of Annual General Meeting
continued
9
Members satisfying the thresholds in section 338
of the Act 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);
13 The terms of reference of the Audit Committee,
the Management Engagement Committee, the
Nomination Committee and the Directors’ Letters
of Appointment 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.
(ii) it is defamatory of any person; or
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 www.trproperty.com/legal.
(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 Act 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 40 and 41 of this Annual Report & Accounts.
12 As at 13 June 2022 (being the latest practicable day
prior to publication of this Notice), the issued share
capital of the Company was 317,350,980 Ordinary
shares of 25p each. No ordinary shares were held
in treasury.
Therefore, the total number of voting rights in the
Company at 13 June 2022 was 317,350,980.
110
TR Property Investment Trust
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.
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 2022 of 9.20p per Ordinary share.
If approved at the AGM, the Company will pay the
dividend on 2 August 2022 to those shareholders on
the Company’s Register of members at the close
of business on 24 June 2022.
Resolutions 4 to 7: Re-election
of Directors
These resolutions deal with the re-election of Kate
Bolsover, Sarah-Jane Curtis, Tim Gillbanks and
David Watson. In accordance with the UK Corporate
Governance Code, all Directors 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 40 and 41, demonstrate that the Board
has the appropriate balance of skills, experience,
independence and knowledge to lead the Company.
Accordingly, the Board unanimously recommends
their re-election.
Resolutions 8 and 9: Auditor
These deal with the reappointment of the Auditor,
KPMG LLP, and the authorisation for the Directors to
determine their remuneration.
Resolution 10: 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
£26,181,445 is stated in the resolution (representing
approximately one third of the Company’s issued
share capital as at 13 June 2022, 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 25 October 2023 and the conclusion of
the Annual General Meeting of the Company to be
held in 2023.
Resolution 11: 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.
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 13 June 2022,
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 25 October 2023 and the conclusion of
the Annual General Meeting of the Company to be
held in 2023.
111
Annual Report & Accounts 2022OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information 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
13 June 2022, 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 2023 or, if earlier, at the close of business on
25 October 2023.
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
own beneficial shareholdings.
Explanation of Notice of Annual General Meeting
continued
Resolution 12: Authority to make
market purchases of the Company’s
Ordinary shares
At the AGM held in 2021, a special resolution was
passed which gave the Directors authority, until the
conclusion of the AGM in 2022, 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 the Company’s 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.
Therefore 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 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 Financial Conduct 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.
112
TR Property Investment Trust Shareholder
information
113
Annual Report & Accounts 2022OverviewStrategic 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
13 Woodstock Street
London
W1C 2AG
Registered number
Registered as an investment company in
England and Wales No. 84492
AIFM and Company Secretary
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
13 Woodstock Street
London
W1C 2AG
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
114
Registrar
Computershare Investor Services PLC
The Pavilions, Bridgwater Road
Bristol
BS99 6ZY
Telephone: 0370 707 1355
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.
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
TR Property Investment Trust
General Shareholder information
Benchmark
Details of the benchmark are given in the Strategic
Report on page 22 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
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.
Announcement 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 114 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 on 0370
707 1694. Charges 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 estimated Net Asset Value and market price of the
Company’s Ordinary shares, as well as the discount/
premium, are published daily in The Financial Times.
They can also be found on the Company’s website at
www.trproperty.com
Share price information
ISIN GB0009064097
SEDOL 0906409
Bloomberg
TRY.LN Reuters
TRY.L
Datastream TRY
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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 Sig-ma 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.
116
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 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.
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continued
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.
118
TR Property Investment Trust 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.
Charges
Annual management charges and other charges apply according to
the type of plan.
Annual account charge
ISA/LISA: £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/LISA/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.
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.
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.
* 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.
New customers
Call:
Email:
0800 136 420** (8.30am – 5.30pm, weekdays)
info@bmogam.com
Part of
© 2022 BMO Global Asset Management. BMO Global Asset Management
is a registered trading name for various affiliated entities of BMO Global
Asset Management (EMEA) that provide investment management services,
institutional client services and securities products. Financial promotions are
issued for marketing and information purposes; in the United Kingdom by
BMO Asset Management Limited, which is authorised and regulated by the
Financial Conduct Authority. This entity is a wholly owned subsidiary of Columbia
Threadneedle Investments UK International Limited, whose direct parent is
Ameriprise Inc., a company incorporated in the United States. It was formerly part
of BMO Financial Group and is currently using the “BMO” mark under licence.
Existing plan holders
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
bmoinvestments.co.uk
bmoinvestmentsuk
0345 600 3030, 9.00am – 5.00pm, weekdays,
calls may be recorded or monitored for
training and quality purposes.
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Trust plc is managed by