TR Property investment
Trust PLC is managed by
TR PROPERTY INVESTMENT TRUST PLC
Annual Report
31-03-2023
Financial statements
76
Group Statement of Comprehensive
Income
Group and Company Statement of
Changes in Equity
Group and Company Balance Sheets
Group and Company Cash Flow
Statements
Notes to the Financial Statements
77
78
79
80
Glossary and AIFMD disclosure
106 Glossary and AIFM disclosure
Notice of AGM
110 Notice of Annual General Meeting
115 Explanation of Notice of Annual
General Meeting
Shareholder information
118 Directors and other information
119 General Shareholder information
121 Investing
That there will be limitations on what can be achieved but wanting to see a positive direction of travel.
Overview
1 Company Summary
2
3 Historical Performance
Financial Highlights and Performance
Strategic report
4 Chairman’s Statement
7 Manager’s Report
16 Responsible investment
26 Portfolio
27
28
32
33
33 Business Model
34 Strategy and investment policies
35 Key Performance Indicators
37
Principal and emerging risks
41 Long-term viability
Investment Portfolio by country
Twelve largest equity investments
Investment properties
Investment objective and benchmark
Governance
44 Directors
46 Managers
47 Report of the Directors
50 Corporate Governance Report
56 Report of the Nomination Committee
58
Report of the Management
Engagement Committee
Report of the Audit Committee
60
63 Directors’ Remuneration Report
66
Statement of Directors’
Responsibilities in Relation to the
Group Financial Statements
Independent Auditor’s Report to
the Members of TR Property
Investment Trust plc
67
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’) 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 34
and the entire portfolio is shown on page 27.
Investment manager
Columbia Threadneedle 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 47.
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 35 and 36.
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 investment
through an ISA or savings scheme, can be found on
pages 118 onwards. This information can also be
found on the Company’s website www.trproperty.com
1
Annual Report & Accounts 2023OverviewStrategic 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
2023
Year ended
31 March
2022
305.13p
968,346
317.4
12.3%
279.00p
£885m
492.43p
1,562,739
317.4
10.2%
456.50p
£1,449m
Year ended
31 March
2023
Year ended
31 March
2022
Change
-38.0%
-38.0%
+0.0%
-38.9%
-38.9%
Change
17.22p
13.69p
+25.8%
+6.6%
+7.1%
+6.9%
5.65p
9.85p
15.50p
-35.5%
-34.0%
-36.2%
0.73%
0.73%
0.67%
5.30p
9.20p
14.50p
+21.4%
+12.2%
+19.9%
2.19%
0.60%
0.58%
1. Net debt is the total value of loan notes, loans (including notional exposure to CFDs and Total Return Swap) less cash as a proportion of net asset value.
2. Dividends per share are the dividends in respect of the financial year ended 31 March 2023. An interim dividend of 5.65p was paid on 12 January 2023. A final
dividend of 9.85p (2022: 9.20p) will be paid on 1 August 2023 to shareholders on the register on 30 June 2023. The shares will be quoted ex-dividend on
29 June 2023.
3. The NAV Total Return for the year is calculated by reinvesting the dividends in the assets of the Company from the relevant ex-dividend date. Dividends are deemed
to be reinvested on the ex-dividend date as this is the protocol used by the Company’s benchmark and other indices.
4. The Share Price Total Return is calculated by reinvesting the dividends in the shares of the Company from the relevant ex-dividend date.
5. Ongoing Charges are calculated in accordance with the AIC methodology. The Ongoing Charges ratios provided in the Company's Key Information Document are
calculated in line with the PRIIPs regulation which is different to the AIC methodology.
6. Considered to be an Alternative Performance Measure as defined on page 106.
2
TR Property Investment Trust Historical performance
for the year ended 31 March 2023
Performance for the year:
Total Return (%)
NAV(A)
Benchmark(B)
Share Price(C)
Shareholdersʼ funds (£ʼm)
Ordinary shares
Ordinary shares
Net revenue (pence per
share)
Earnings
Dividends(D)
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
21.5
17.8
25.8
22.4
14.9
37.7
28.3
23.3
29.5
8.2
5.4
-1.6
8.0
6.5
9.1
15.5
10.2
25.5
9.1
5.6
6.2
-11.5
-14.0
-16.8
20.7
15.9
28.3
21.4
12.2
19.9
-35.5
-34.0
-36.2
684
809
1,010
1,065
1,118
1,256
1,328
1,136
1,326
1,563
968
6.74
7.00
8.09
7.45
8.89
7.70
8.36
8.35
11.38
13.22
14.58
14.62
12.25
13.69
17.22
10.50
12.20
13.50
14.00
14.20
14.50
15.50
NAV per share (pence)
215.25 254.94 318.12 335.96 352.42 395.64 418.54 358.11 417.97 492.43 305.13
Share price (pence)
186.30 247.50 310.50 297.50 314.50 382.50 394.00 317.50 392.50 456.50 279.00
Indices of growth
(rebased at 31 March 2013)
Share price(E)
Net Asset Value(F)
Dividend Net(D)
RPI
Benchmark(G)
100
100
100
100
100
133
118
106
102
107
167
148
110
103
128
160
156
119
105
131
169
164
150
108
136
205
184
174
112
146
211
194
193
115
149
170
166
200
118
124
211
194
203
119
141
245
229
207
130
155
133
142
221
148
99
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 page 106.
(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) Dividends per share in the year to which their declaration relates and not the year they were paid.
(E) Share prices only. These do not reflect dividends paid.
(F) Capital only values. These do not reflect dividends paid.
(G) Price only value of the indices set out in (B) above.
3
Annual Report & Accounts 2023OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information Chairman’s statement
Markets have had to
absorb huge increases
in the cost of capital and
real estate equities have
suffered consequential price
adjustments. However, this is
an unusual cycle where both
interest rates and rents are
rising. In many of our markets
property fundamentals are
sound and we see few signs
of over-supply.
David Watson
CHAIRMAN
4
Market Backdrop
This has been a very difficult year for the property
market, for property shares and for the Company. Net
asset value total return was -35.5%, slightly worse than
our benchmark at -34.0%. The share price total return
was -36.2% as the discount between the NAV and the
share price widened slightly, reflecting weaker investor
sentiment as a whole. Although the change in the second
half was modest (first half NAV total return of -33.6%
March to September 2022) we have experienced some
very dramatic price action in the intervening six months.
Macro-economic forces continued to dominate. The
drivers and trajectory of inflation remained everyone’s
focus. Central bankers appeared as unsure of the
consequences of their actions as market participants.
Volatility remained elevated. Whilst our total return
figures are clearly very poor, the autumnal rally in
property stocks, somewhat punctured (in the UK) by
political events in November, did resume in earnest in
January. This three month rally, based squarely on a
change in the expected trajectory of interest rates, gave
us, at last, a taste of a more optimistic attitude towards
our asset class. The last few weeks of the financial year
saw market sentiment damaged by the failure of two
regional banks in the US and the final take out of Credit
Suisse. This raised knee-jerk concerns of bank contagion
which here feels sensationalist given the enhanced levels
of regulatory oversight and controls on European banks
post the global financial crisis.
Your investment management team have a long track
record of alpha generation through dynamic stock
selection. It is fair to say that the investment dynamics of
the last 12 months have not been their preferred context.
The dramatic price falls and bear market rallies have
been largely undiscriminating between the good and the
bad. Forced sellers were interested in volume not price.
Small caps, as usual, struggled in these conditions. This
macro-driven environment is hopefully, finally, abating as
investors appear increasingly interested in differentiating
between individual companies’ prospects following the
significant correction.
Our investment universe has now seen a number of
companies who have suspended or reduced dividends.
These were, in the main, the likely suspects and it would
be a surprise to us if many others now emerge given the
economic cycle. One of the core attractions of real estate
investing is the potential of indexed income and this is
showing through and remains our focus.
TR Property Investment Trust Revenue Results and Dividend
Earnings per share increased by 26% from 13.69p per
share to 17.22p. This is an all-time high. Although
company earnings did in general recover to pre-
Covid-19 levels, our headline earnings were further
flattered by changes in the timing of some dividend
payments. More detail of this is set out in the
Manager’s report.
The Board is pleased to announce a final dividend
of 9.85p taking the full year dividend to 15.50p,
representing a 6.9% increase. In determining the
dividend the Board has been very sensitive to investor
appetite for income but has also been conscious
of the underlying income growth and the potential
impact of interest and exchange rates on future
earnings.
Revenue Outlook
Following a record level of earnings in 2022/23, the
Board expect to report a reduction in net income for
the year to 2023/24. This is not only as a result of the
non-recurrence of certain items which enhanced the
current year earnings, but also because of the number
of companies that have announced dividend cuts or
suspensions. All companies have had to adjust to the
change in the price of debt. For some the impact has
been immediate, while for others it will be somewhat
delayed as they continue to benefit from historic
fixed rates. However, on the income side of the
equation, index-linked rents will benefit. Companies
need to balance the pluses and minuses and some
have reacted quickly and cautiously to protect their
balance sheets. The medium to longer-term outlook
for interest rates is difficult to predict so it could be
a while before companies feel confident about the
longer-term outlook.
Net Debt and Currencies
Gearing at 12.3% is an almost identical figure to that
at the half year. Inevitably these numbers are just
snapshots in time; the level of gearing has varied in
response to the market volatility and as investment
opportunities have occurred.
Sterling weakened over the year by just over 4%. This
marginally enhanced our income account as non-
sterling dividends were worth more in sterling terms.
As our balance sheet is denominated in sterling a
weaker pound served to help the reported value of
non-sterling assets. The balance sheet exposure
remains materially in line with the benchmark as we
hedge exposure to match the benchmark.
Discount and Share Repurchases
The discount of the share price to the NAV widened
slightly over the year from -7.3% to -8.6%. However,
the spread over the year has been much wider,
swinging between close to -1% and over -10%.
This volatility is indicative of the rapid changes in
sentiment towards the sector. The average over the
year under review was -5.8%, close to the 10-year
average of -4.9% and an improvement on the -6.6%
average since the invasion of Ukraine.
In light of the transient nature of the discount
volatility, no share buy-backs or issues were made
during the year.
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
400
350
300
250
200
150
100
50
0
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
Mar-19
Mar-21
Mar-22
Mar-23
5
Annual Report & Accounts 2023OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information
Outlook
Macro considerations continue to dominate. Markets
have had to absorb a huge adjustment in the cost of
capital and real estate equities have certainly borne their
share of price adjustments. However, this is an unusual
cycle where both rates and rents are rising. In many of
our areas of focus, real estate market fundamentals are
sound and we see few signs of over-supply. Our central
assumption is that the interest rate cycle will peak this
year but that inflation will remain above central banks’
targets. Listed property companies are generally more
conservatively geared than their private counterparts
and this should stand them in good stead. The sector
has been hit hard and many of our companies are
trading at large discounts to asset values that have
also been recalibrated. As in previous cycles, if the
sector is undervalued then private capital will be quick
to step in. Just after the year end, Industrials REIT, one
of the Company’s 10 largest holdings, announced a
recommended bid for cash at a 40% premium to the
undisturbed share price. More recently in early May,
Civitas, the social housing landlord announced a cash bid
from an Asian conglomerate at a similar premium. These
businesses are chalk and cheese but both have proved
attractive to very different groups of investors. These
events remind us that, for many, real estate is seen as a
crucial part of the investment jigsaw particularly in these
inflationary times.
David Watson
Chairman
1 June 2023
Chairman’s statement
continued
Board Changes
I reported at the half year that we had commenced
the search for a new Director who would broaden
and strengthen the Board and add diversity of age,
experience and ethnicity. In January this year we
were delighted to announce the appointment of
Busola Sodeinde to the Board as an independent
Non-Executive Director and we have greatly
appreciated her early insight and perspective on a
wide range of issues.
We also announced my intention to step down from
the Board with effect from the conclusion of the
forthcoming AGM. As announced, Kate Bolsover
will succeed me as Chairman and Tim Gillbanks will
succeed Kate as Senior Independent Director.
Environmental, Social and
Governance ('ESG')
ESG reports within annual accounts are becoming
longer and contain more and more detail. This
is wholly appropriate for an operating company
and we welcome the additional disclosure. As an
investment trust company and primarily an investor
in companies, we have to think about what ESG
should mean for us.
Our ESG approach covers three areas. Firstly, the
governance and policies which apply directly to the
investment trust as a Company under the direct
control of the Board. Secondly, ESG considerations
as part of the investment process for our equity
portfolio adopted by our Manager. Although our
Manager cannot have any direct control over ESG
policies in underlying investee companies, it can, and
does, use its influence carefully through corporate
voting and engagement with the companies in
which we invest. Thirdly, our Manager does have
control over our direct property portfolio and here we
continue to drive for greater energy efficiency and
environmental care in all that we do.
Our Responsible Investment Report on pages 16 to
25 sets out our approach in each of these areas with
some case study examples. This is of course an area
of active evolution.
6
TR Property Investment Trust
Manager’s report
For a sector where returns are
anchored by income, these
levels of volatility and multiple
directional shifts are almost
unparalleled. The whole
period has been dominated
by the ebbs and flows around
interest rate expectations
and real estate fundamentals
have taken the proverbial
back seat. However, looking
forward, we anticipate a
renewed focus on those
sectors offering rental growth.
Marcus Phayre-Mudge
FUND MANAGER
Performance
The Company’s net asset value (‘NAV’) total return for
the 12 months to 31 March 2023 was -35.5%, whilst the
benchmark, FTSE EPRA/NAREIT Developed Europe TR (in
GBP), fell -34.0%. These figures are clearly disappointing
but not materially different from those reported at the
half year, where the NAV had fallen -33.6% in the first six
months of the financial year. Equally important to note
is that these figures are snapshots in very volatile times.
To illustrate the point, the first four months of the second
half of the financial year (i.e. October to January) saw our
universe rally +14.5% only to then give up all of those gains
in the subsequent nine weeks. The end result was a finish
to the year which was marginally worse than where we
were at the half year stage.
In the half year review, I wrote that shareholders will
no doubt be concerned that given the scale of the
correction, the direction of travel was obvious and more
protective action should have been taken. It always looks
clear in hindsight but as we walk through the year in the
next few paragraphs, the dramatic swings in sentiment
will help explain some of the difficulties we faced in
trying to rotate the portfolio into the headwinds, avoid the
rip currents but then also catch the spring tides of
sentiment recovery
The first quarter of the financial year saw the sector
fall 24% as investors really focused on the impact of
rising interest rates. However, you could still have made
money over a four-week period (in May and early June)
and this highlights the sense of sentiment rather than
facts driving markets in mid-2022. Everyone became
central bank-focused whilst real estate fundamentals
were ignored. July saw a strong reversal (+9.5%) as bond
markets responded to the theme that rising interest rates
were having the required deflationary effect. However,
the summer break was followed by hawkish statements
from the US Federal Reserve at Jackson Hole and our
benchmark fell -30% between mid-August and mid-
October as investors began to believe the ‘higher for
longer’ mantra. This severe bout of pessimism was
then followed by a +25% rally in pan-European property
stocks between mid-October and the end of January.
The tail end of the financial year saw this recovery then
ebb away with the sector falling 13% in the last two
months of the financial year.
7
Annual Report & Accounts 2023OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information Manager’s report
continued
Benchmark Performance
FTSE EPRA/NAREIT Developed Europe Capped Total Return Net GBP (Daily)
5%
0%
-5%
-10%
-15%
-20%
-25%
-30%
-35%
-40%
-45%
Mar-22
Apr-22
May-22
Jun-22
Jul-22
Aug-22
Sep-22
Oct-22
Nov-22
Dec-22
Jan-23
Feb-23
Mar-23
For a ‘value’ sector where returns are driven – year
in, year out – by income, these levels of volatility and
multiple directional shifts are almost unparalleled. What
is happening? Essentially, the whole period has been
dominated by the ebbs and flows around interest rate
expectations and bond market behaviour. Real estate
fundamentals have taken the proverbial back seat. A
longstanding real estate equity market observer with over
30 years’ experience recently wrote to clients ‘I can’t recall
a period of time when capital values have fallen so sharply
and yet occupier demand in most sectors has remained
pretty robust’. I have reproduced the statement verbatim
as it neatly encapsulates the environment we find
ourselves in. In other words, yields are rising but so are
rents, this is atypical. It is now clear that, through 2022, I
placed too much emphasis on this quality of earnings (and
indeed earnings growth) in many of our companies. The
market paid little heed, choosing to focus on the impact of
rising yields/capitalisation rates on asset values.
The speed at which central banks responded, as
inflation gathered pace, took many participants by
surprise. The rising cost of debt affected all property
stocks, but it had the greatest impact on two particular
cohorts of companies. Those companies which had
successfully utilised unsecured bond market financing
now discovered that this source of (re)financing was
effectively shut. German residential businesses,
particularly the larger ones, Vonovia, LEG and the
more diversified Aroundtown (part owner of Grand
City Properties), are all seeing their cost of debt rise
dramatically as the expiry of existing bonds require
refinancing. The other heavily impacted group were
those with higher loan to value compounded by high
levels of floating rate debt. The impact on earnings
for this group has been dramatic and the majority of
Swedish companies fall into this category. Both these
8
cohorts share a couple of similar outcomes; firstly, those
companies which have reduced or suspended dividends
are disproportionately represented and secondly, these
two groups have experienced the greatest volatility within
our universe. To illustrate the point, Swedish property
companies collectively fell 40.5% in the year to 31 March
2023 however, within that period there were three sharp
bear market rallies of +17% (May), +39% (July to mid-
August) and +53% (mid-October to the end of January).
These groups were highly susceptible to changes in
sentiment towards the outlook for rates and margin on
new (or refinanced) debt instruments.
Previously, I have written about the merits of the market
fundamentals of German residential. The vast supply/
demand imbalance and the persistent widening of the
gap between regulated rents and open market values
remains in place. What has been most frustrating is that
our largest relative position in that area is Phoenix Spree
Deutschland, which has no refinancing requirements
until 2026 and is a market minnow (portfolio value less
than €750m) where all sales, however few, will make a
difference performed in line with its larger cousins.
Collectively the market capitalisation of the German
residential businesses reduced by 57%. Meanwhile, the
underlying asset values have corrected less than 10% in the
year and top line earnings have grown with vacancy levels
stable and the ‘mietspegiel’ (the rent table) continuing to
increase rents, albeit at a sub-inflationary rate. The asset
class offers consistently low vacancy, steady rental growth
and the opportunity to move to market rents through
refurbishment or sales to owner-occupiers. As a result,
yields steadily tightened as the cost of finance fell. By the
beginning of 2022, capitalisation rates were below 3%, fully
reflecting the stability and low risk profile of the income. At
such low capitalisation rates, a modest reversal upwards of
100bps has a very dramatic effect on valuation.
TR Property Investment Trust Much the same effect was felt in the valuation of the
other low yielding sector - industrial/logistics. This sector
had enjoyed a surge in investor demand as strong rental
growth fuelled the attractiveness of the asset class and
we saw capitalisation rates tighten dramatically over the
last three years. Again, the impact of the abrupt rise in
the cost of debt led to a quick reversal in yields. However,
unlike regulated residential rents in Germany, which
deliver sub-inflationary growth, we are confident that
strong rental growth will persist in industrial/logistics
property given market fundamentals.
Offices
Offices continue to be the sector most under scrutiny
and rightly so. The repercussions and evolution of
the working from home (‘WFH’) regime are still being
worked through by tenants and landlords. Much has
already been written on the topic and firm conclusions
are hard to pin down given the speed of change.
However, we are confident that since the half year we
have seen more data to support our current thesis.
Offices remain crucial infrastructure for knowledge-
based businesses – physical interaction is a vital part
of business life. However, the amount of space required
has reduced whilst crucially the demand for better
quality space has risen. This demand for better quality
working environment is augmented by the requirement
for better energy efficiency and green credentials. The
result is a historically wide market bifurcation between
best in class, well located, energy efficient buildings
and the rest. Offices account for approximately 15% of
our benchmark and well over 50% of that exposure is to
London and Paris, hence our focus on those markets in
this commentary.
Gecina, our largest European office exposure (see top
12 holdings) in their Q1 2023 results highlighted that
their prime inner Paris assets recorded an eye-catching
30% reversion, whilst their outer ring assets saw negative
reversion. Overall rental growth was positive at 7% but
that statistic highlights the gulf between the growth
achieved in central assets and the rest. Covivio, which
owns offices in Paris, Milan and several German cities
reported the same phenomenon, with central Milan
recording solid demand and rental growth. Central
London office vacancy is elevated at 8%, however the
divide between West End (3.7%) and the City (11.9%)
is almost as stark as it has ever been. The situation in
Docklands is even more dire with a number of major
financial institutions who have announced either a
reduction in their space requirements (including HSBC,
Citi and JPMorgan) or wholesale relocation (e.g. Clifford
Chance). In the case of the latter, the firm is also cutting
its space requirements by 40%. One should be careful
not to read single statistic across to the wider market
as that particular firm has had excess space in Canary
Wharf for several years. This increasing vacancy in
financial services-focused districts such as Canary
Wharf, La Defense and further afield Lower Manhattan is
a reflection of both WFH but also the lack of headcount
growth. This is a particular problem in London where
post Brexit, global financial services businesses continue
to increase their footprint in Paris, Frankfurt and Dublin
at the expense of London.
This bifurcation of ‘best and the rest’ can be clearly
seen in recent valuation in the specialist London office
landlords. Great Portland reported in their H1 2023
results a divergence in performance based on their
buildings’ EPC (energy efficiency) ratings. Those at the
highest levels (A&B) saw value declines of 2.5% whilst
C&D rated were -4.2%. Derwent London produced data
based on values per foot. The most valuable (>£1,500 per
ft) saw capital drift of -3.5% and rental growth of +2%,
whilst the least (<£1,000 per ft) saw value falls of -11.8%
and rental growth of just 0.3%.
Even though the best in class continues to enjoy steady
rental growth, this is partly due to its scarcity. The bulk
of all office markets are made up of much more average
product and take up levels in the post pandemic world
have been weak. Paris Centre West (the core) saw
available supply fall year on year (-19%) whilst it rose in
all other markets. The further out, the greater the supply,
with La Defense just +4% whilst the Inner Rim (+35%).
All of this has fed through into negative sentiment
towards all offices except the best quality in the best
locations. MSCI/IPD’s office sector capital decline in
H2 2022 was -15.7%, underperforming retail which fell
14.5%. Central London initial yield has moved 80bps
from 4.8% (December 2021) to 5.6% (January 2023).
As discussed many times, the UK’s independent valuer
community have always attempted to mark-to-market
rather than the Continental approach which is more
‘mark-to-model’. The latter approach results in a
smoother correction of values but can equally lead to
the criticism that valuations are woefully historic when
markets are correcting fast. As a result, we feel that
highlighting the modest moves in Continental European
valuations in H2 2022 would be misleading. They will
catch up over the course of 2023 and beyond.
Retail
It feels as though this much maligned asset class has
finally passed through the worst of the impact of the
shift to online retailing, the way we search for products
(and pricing) as well as the increasing demand for
entertainment/leisure ahead of more ‘stuff’. The huge
reduction in values has been felt more acutely in the
UK. Alongside the differences between the UK and
Continental European shopping malls, it is also crucial
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to highlight the sub-sectors within retail as they have,
largely, performed very differently over the last few years.
The worst performing group remains the larger malls
which are, quite simply, too big with an excess of floor
space, often a shuttered department store (or two) and
a service charge with a chunky non-recoverable element
(due to voids). None of this is new information I hear you
say. Agreed. However, the update is that we have now
seen capitulation by landlords (and lenders), rents have
re-rated (often halving) and vacant space beginning
to be repurposed for other uses. Malls must become
community hubs with a range of (lower value) uses
such as fitness, medical uses, nurseries, day care etc.
Landsec successfully acquired the 50% of the St David’s
Centre in Cardiff which they did not own. The seller
was the administrator of Intu and Landsec acquired
the outstanding loans on the asset. The price equated
to a yield of over 9% on a rent roll which has dropped
materially over the last decade. We are confident that
at the right rents (and yields) those centres which can
reinvent themselves such as this dominant city centre
asset will deliver acceptable returns.
The strongest sub-sector remains retail warehousing
and outlet malls. For different reasons both offer retailers
sales channels which complement online. In the case
of the former, it is the convenience and pricing of edge
of and out of town retail parks. Free home delivery will
become unsustainable from both a profit and an ESG
perspective. Click and collect and free returns to store
will drive demand for these super convenient locations.
The Company is a large holder of Ediston Property which
has announced a strategic review given the subscale
size of the business. We are hopeful that this will provide
further evidence of supportive valuations in the sector.
Outlets help retailers offload lines without damaging
full price/premium offerings. The success of the likes
of Bicester Village (where Hammerson have a non-
controlling stake) and Gunwharf Quay in Portsmouth
(owned by Landsec) are proof of the concept and we
remain confident about their prospects.
The combining of retail, leisure and food continues,
particularly in tourist destinations. BNP have highlighted
the pick-up in post Covid footfall in the most upmarket
locations such as Regent St, Champs Elysees, Portal
de Angel (Barcelona), Via del Corso (Rome) and
Kaufingerstrasse (Munich) with footfall increasing on
average by 1/3 and, in some cases, more than 65% (Paris
and Munich).
Retail investment has been resilient, particularly in
Continental Europe where investors see affordable rents
and higher yields than other sectors. Whilst investment
levels are unsurprisingly below the 2012 to 2022 decade
average, they did increase year on year to €40.1bn (+2.6%)
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according to BNP. In the UK, retail warehousing continued to
dominate volumes (+60%) over 2021 and 2022. This figure
was lower across Europe and highlights the continued lack
of large shopping centre transactions in the UK.
Industrial and Logistics
UK logistics take-up in Q1 2023 was 8.6m sq ft, a slowing
when compared to a quarterly average of 12.0m sq ft in
2022 and 13.8m sq ft in 2021 but still ahead of the quarterly
average of 8.3m sq ft in the pre-Covid decade. Vacancy
remains at 3% and rents continue to rise. Against this
comfortable backdrop we saw yields rise by 175bps for
prime distribution units between June 2022 and March
2023. Such was the impact of the cost of money, whilst
market fundamentals are deemed less relevant. Even an
asset with strong rental growth prospects cannot have a
capitalisation rate 200bps below the risk-free rate. However,
that pricing adjustment has largely been completed in our
view. We are beginning to see stability in asset prices.
In Continental Europe the picture was very similar. Savills
report 32m sq metres taken up in 2022 across the 13
largest markets, just 6% below the record year of 2021 and
ahead of the 5-year average in virtually all markets. Higher
construction and finance costs led to reduced speculative
construction maintaining the intense supply-demand
imbalance in so many markets. Over €50bn was invested in
2022, again below the record of 2021 but well ahead of the
5-year average. Yield expansion (c 100bps) was much less
than in the UK but again we expect upward pressure to ease
as fundamentals drive capital back into the sector.
We have long been cheerleaders for multi-let industrials
(MLI), generally terraces of smaller units, management
intensive, but often located in dense urban locations.
Very little new stock has been built over the last few
decades with alternative (multi-storey) uses being
far more valuable. Rents remain low in many parts of
the country making new development unviable. The
tenant rosters have evolved hugely in the last 20 years,
undergoing ‘gentrification’ from being the domain
of light industrial ‘metal bashers’ to a much broader
swathe of uses, many born out of internet connectivity
and the ability to access customers directly. Our largest
exposure was through Industrials REIT, where we owned
11% of the company. Just after the year end (3 April)
Blackstone announced an agreed cash bid at a 40%
premium to the undisturbed share price. The private
equity behemoth already has substantial exposure to
this sub-sector but it is a timely reminder that if quality
assets are left undervalued then private capital will
acquire them. Our other MLI exposure is through Sirius
(65% Germany, 35% UK) and diversified names such as
Picton and London Metric (which acquired Mucklow in
2021 where we owned 5%). The healthy supply-demand
imbalance makes it a sub-sector we are keen to maintain
exposure to.
TR Property Investment Trust
Residential
The shortage of private sector rental accommodation
remains acute, yet the listed companies focused on
this sector were amongst the poorest performers in
the financial year. This group of companies (mostly in
Germany and Sweden) highlighted how management
teams were lured into increased leverage given the
stability of the underlying income streams and occupancy
levels. However, very low yielding assets struggle to
provide positive cashflows when interest rates rise.
At the asset level, rental growth has remained well below
current inflation rates given the backward-looking nature
of regulated rents. We fully expect to see these rents
rise at historically fast rates as they factor in some of
the dramatic inflation datapoints. The serious shortage
of housing underpins long-term values. The fly in the
ointment is the cost of improving the energy efficiency of
this housing stock through both insulation and the type
of heating. In open market regimes such as the UK and
Finland, the cost of these improvements will be passed
through to rent prices. In regulated markets where only
a proportion of the capital expenditure can currently be
rentalised, this remains an impediment to rental growth.
Within open market regimes such as the UK we have
seen strong rental growth through the combination of a
shortage of rental stock (amateur landlords leaving the
market due to higher regulation and lower tax efficiency),
high levels of employment/wage inflation and market
timing (where buyers decide to continue to temporarily
rent awaiting price corrections).
Alternatives
Purpose built student accommodation continues to fare well,
with rising numbers of students across the UK and Europe.
The traditional accommodation alternative of private rented
houses (HMOs - Houses in Multiple Occupation) are reducing
as regulation pushes up licensing costs and (correctly) impedes
overcrowding and sub-standard accommodation. Unite, our
largest student accommodation stock was one of the few
companies to see positive capital value appreciation in 2022
with 4% annualised growth. It has recently increased its rental
growth outlook for academic year 2023/24 from 5% to 6-7%.
Self-storage continues to confound the sceptics. Rate
growth and occupancy have begun to normalise post the
‘Covid boom’ but remain encouragingly positive. Safestore,
our largest holding in the sector, enjoyed like-for-like rental
growth of 10.7% in the year to October 2022.
Hotels particularly leisure and tourist focused have also
enjoyed strong growth as consumers continue to make up for
lost opportunities to travel in 2020 and 2021. Recent STR data
highlights London hotels across the quality spectrum showing
RevPAR growth of +22% year on year. UK hotels ex London
was also strong at +11% year on year and 25% versus 2019.
Healthcare was the poorest performer of the alternatives
group. Profitability of private care providers is being
constantly squeezed through wage and cost inflation.
Continental European healthcare operators have been
rocked by the scandal at Orpea. The level of state support,
both direct and indirect, are the crucial figures required by
investors. Even then, the rate of rental growth can be quite
pedestrian as seen at Primary Health Properties and Assura.
Debt and Equity Markets
Both debt and equity markets were very subdued during
the year. The total capital raised in 2022 was €14bn
compared to €32bn in 2021 and €21bn in 2020. Over
€9bn of the total raised in 2022 was debt in the first
quarter. To illustrate the change in pricing over the
last year, we need only review the most prolific issuer,
Vonovia, Europe’s largest property company. In March
2022, it issued 4, 6 and 8 year maturities totalling €2.5bn
priced at 1.375%, 1.875% and 2.375% respectively. By
November, new 2027 and 2030 maturities were costing
4.75% and 5.0%.
Short-dated leverage risked the vicious cycle of
increased interest costs resulting in lower earnings, so
risking credit downgrades leading to even higher cost of
debt. Leverage needed to be reduced to defend earnings;
if asset sales weren’t possible then equity (even when
trading at deep discounts to asset values) needed to be
raised through rights issues.
At the half year, I detailed the capital raising by TAG
Immobilien, who had over stretched themselves with the
acquisition of a Polish housebuilder. They raised €200m
at a 27% discount to the theoretical ex-rights price to
help pay off the bridging loan from the acquisition. In
November, VGP, a Belgium logistics developer raised
€302m. This was more front-footed with the raise
diluting NTA by 10% in a one for four share issuance.
The business is overly dependent on selling assets into
Allianz private funds and this capital makes them less
dependent on one customer. The CEO and CFO own 49%
of the equity and ‘stood their corner’ which reassured
investors. In Sweden, Catena, another logistics developer
raised SEK 1.4bn (£135m) as its share price hovered
close to NTA and, whilst small, it was unusual as it was
an accelerated bookbuild and not a rights issue. Balder
raised SEK 1.8bn which it used to repay a hybrid bond
and strengthen its overall balance sheet.
The only merger and acquisition activity in the 12
months to 31 March (the privatisation of Industrials
REIT was announced on 3 April) were two mergers,
both widely expected but the timing less sure. The
joining of Shaftesbury and Capco finally happened after
a tortuously long period of negotiation, capped off by
a CMA review on whether the combined entity could
be a price setter. The most disappointing aspect for
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shareholders (we do not own either company) was
that the deal results in the repayment of much of
Shaftesbury’s cheap debt due to a change of control
provision. When coupled with further increases in
debt costs next year and some extraordinarily high
advisor fees (given it was an agreed transaction)
there will be precious little earnings benefit from
the anticipated synergies. The other merger was
between LXI and Secure Income REIT on a NAV for
NAV basis. It was a much more straightforward
affair. We were a large shareholder in SIR and
benefited immediately as the 12% discount closed
to NAV. The managers of SIR were also large
shareholders in the company and their excellent
timing in previous property cycles was once again on
display. They even sold the management company
which had a contract to run SIR for the next three
years.
Investment Activity – property shares
Portfolio turnover (purchases and sales divided by
two) totalled £477m in the year, considerably less
than the £549m in the previous year. With average
net assets over the year of £1.18bn, turnover
was 40% of net assets, which was higher than
the previous year’s figure of 36% and reflects the
volatility in the year.
In the half year report, I recorded that each rally then
trended down to a new low and therefore virtually
all buys looked poor and all sells looked clever.
The second half of the year saw the largest and
longest recovery from October to the end of January,
followed by the most dramatic correction back to the
October lows, this new low point virtually coinciding
with the year end. Throughout the year, the renewed
bouts of negative sentiment towards the sector
were based on either a change in the outlook for
interest rates (and the concern that central banks’
behaviour would become more hawkish) or renewed
speculation of a failure in the credit transmission
mechanism. Essentially, investor sentiment was
driven by the expectation of the change in the price
and availability of debt.
In hindsight, maintaining our long-standing
discipline of buying (or adding) to companies where
we felt confident in the resilience of earnings driven
by market fundamentals just wasn’t enough.
As would be expected, we have carefully analysed
all of our companies’ balance sheet capacity (in
terms of the quantum of leverage, cost and duration
of debt). In many cases, the market had quickly
adjusted the earnings expectations but what became
apparent as the year progressed was that we were
being overly rational about these revised earnings
12
forecasts. The market was not interested in supply and
demand at the property/occupational market level or
whether there were still profits to be achieved from the
development pipeline.
The ability of the market pendulum to (over) swing
between exuberance (greed) and melancholy (fear) was
very much in evidence and we battled to
react accordingly.
A good example of this was our collective underweight
to Swedish property companies. Whilst this call was our
largest contributor to positive relative performance over
the year, the volatility in the group resulted in multiple
phases of repositioning. Whilst the broad statement that
Swedish property companies are amongst the most
leveraged in our investment universe is true, some are
obviously more exposed than others. It was therefore
crucial to understand which company would suffer the
fastest earnings degradation from rising interest rates but
also to assess when the market had over reacted. Those
most at risk were those exposed to bond markets rather
than bank lending or had complex hybrid instruments
dreamt up by bankers when money was cheap. The scale
of share price volatility is best explained in a handful
of figures. EPRA Sweden fell -42% in the first quarter
only to recover +33% in the next six weeks followed by
another 40% drop to mid-October and then the long
recovery (+36%) to the end of January, followed by a
renewed bout of nerves sending the sector down almost
to the October lows. These figures are the collective
impact of 18 companies. For the most leveraged (SBB,
Castellum, Corem and Balder) the volatility was far greater.
Underlying property market fundamentals do not drive this
level of price action, this was caused by changes in the
market outlook for the cost/availability of debt impacting
on a tiny market segment (free float capitalisation of just
£20bn).
Our exposure to German residential was the poorest
asset allocation decision of the year. I remained
convinced, for too long, that the market fundamentals of
virtually full occupancy and (sub-market) regulated rents
would underpin investor sentiment. The fact that even at
prices a year ago all of these names were trading below
the reinstatement cost of the underlying assets mattered
not a jot. The market focused exclusively on the impact
of the cost of debt. During the year we reduced exposure
in the larger names (Vonovia, LEG) but maintained
the holding in Phoenix Spree, the small Berlin focused
vehicle. It is an externally managed fund which has an
annually renewed contract with QSix, the manager. Its
assets are all prime Berlin, where open-market rents
continue to grow. The share price total return in the year
was -50%. I remain convinced that once prices stabilise
the smaller companies will benefit disproportionately
from the impact of portfolio sales. With a market cap of
TR Property Investment Trust just £190m and the share price at half the asset value,
it is an excellent example of a portfolio of assets which
are no longer benefiting from being held in a listed
company.
With the price of money rising so rapidly in the year,
it was the lowest yielding assets which saw the most
aggressive repricing and so it was with German (and
Swedish) residential. The compression in yields in
the previous five years was a rational response to
the combination of strong market conditions, (high
occupancy and rental growth) combined with very
low cost of borrowing. This strong yield compression
(and capital value growth) was even greater in the
industrial/logistics sector. The structural tailwinds
have been discussed, ad nauseum, in previous reports.
For many markets these persist but capitalisation
rates had simply been driven too low with insatiable
investor appetite for assets with income growth.
The reversal (yield expansion) described earlier was
dramatic and the sector was hit very hard. Again,
our smaller companies suffered disproportionately
as they fell alongside larger names on the way down
but often failed to catch the bounce in any recovery.
We are confident that these conservatively managed
businesses with the right amount of leverage and
quality portfolios will perform well. However, if the
stock market continues to undervalue them, then no
one should be surprised when more privatisations
occur. In the industrial group in the UK, I would include
Industrials REIT, Picton Property and CT Property
Trust. Whilst in Europe the list would include Argan,
Sirius and Catena.
With the lowest yielding (highest growth) names
suffering from capitalisation rates rising above the
new cost of debt, it was the highest yielding sectors
which suffered the least from this devaluation. Retail
property has clearly been out of favour for many years
as the weakening in tenant demand for physical retail
space continued. In Continental Europe, we focused
on Eurocommercial and Klepierre given their high
earnings yield but crucially their secure balance sheets.
We avoided Unibail-Rodamco and Wereldhave. Here
you have two companies at either ends of the asset
quality spectrum but both suffered from weak balance
sheets and the need to de-leverage. Unibail announced
2 years ago its intention to sell its US portfolio whilst
Wereldhave has continued to sell assets whenever
it can. European retail as a subset outperformed the
full benchmark and our stock selection also added to
performance with Unibail -27.5% and Klepierre -2.5%
over the year.
UK retail is now a small part of the listed universe.
For most investors the only way to gain exposure
is through the diversified portfolios of Landsec
and British Land. The bulk of our exposure is through
Ediston Property which owns only retail warehouses.
However, its market cap at £140m is too small for the
listed market and we applaud the announcement from
the board that they are carrying out a strategic review
for the future of the company. We remain hopeful that
a merger with another listed company is a viable option
which will ensure the assets remain in the listed space.
The company was a relative outperformer in the year
(-18%) as were virtually all the high yielding retail names.
Hammerson remains a play on corporate reconstruction
rather than a bellwether for retail property. We believe
they are on the right path and we opened a holding in
the year. The crown jewels are the minority ownerships
in the premium outlet malls controlled by Value Retail.
Investors will need to remain patient as the breakup will
take time, but value is reappearing.
Investors’ attitudes towards office property has been
highlighted earlier. We fully subscribe to the bifurcation
of returns between the best and the rest. Smaller
European cities have also performed better with lower
WFH and higher occupancy levels. We have sought
greater exposure to those cities through Arima (Madrid),
Wihlborgs (Malmo, Lund) and Fabege (Stockholm). Core
CBD exposure in the largest cities has been through
Gecina (Paris), Great Portland and Landsec (London).
We have also added to the short lease, flexible offering
business model through Workspace (London) and Sirius
(primarily German flexspace). Both of these names
had a poor year with total returns of -35% and -32%
respectively but we found recently published operational
data reassuring. Landsec (-16%) was a top performer as
it continued to reduce leverage through sales of newly
completed prime offices in Central London. We are
strong advocates of capital recycling and expect to see
more sales from non-core assets such as hotels and
leisure.
In the alternatives space, our overweight to self-storage
was entirely through Safestore (-27%) rather than Big
Yellow (-21%). Safestore has outperformed on a three-
year and five-year view but clearly not in this last period.
In fact, we find it hard to choose between these two
very well managed companies. Both own irreplaceable
estates with core holdings in densely populated areas.
Demand for space has been remarkably stable given
the economic backdrop. Unite (-16%), the student
accommodation provider, was another relative winner
in the year. The combination of increased earnings
guidance and solid market evidence on modest yield
movement continues to support the asset class.
Both these asset types have intensive operational
requirements and we are confident that the market
undervalues the platform through the traditional asset
value model. This was certainly the case with Industrials
REIT where Blackstone paid a premium for the operating
business alongside the assets.
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Revenue and Revenue Outlook
As noted in the Chairman’s Statement, the current
year’s income benefited from a number of non-recurring
items. Eurocommercial and Swiss Prime both changed
their pattern of distributions during the year effectively
resulting in an additional half year payment from
each of these companies. The Argan annual dividend
which generally goes ex-dividend on or around the last
business day in March therefore moves between March
and April. In the year to 31 March 2023, we received
dividends in April 2022 and March 2023, resulting in two
full year payments. If the dividend due around 31 March
2024 falls back into next April, there will be no income
recorded from this company in the year to March 2024.
We have no control over these timings and there are
several companies where dividends go ex-div around
the year end. Each of three holdings noted above are
approximately 2.5% of the portfolio so this has had
a significant impact. Without these (and the small
enhancement due to foreign exchange movements), we
estimate the earnings would have been around 1.13p
lower than reported. The dividend for the year to March
2023 is therefore well covered.
The dividend for the previous two years was partly paid
out of revenue reserves as the effects of COVID forced
revenue down. In 2022/23, the earnings, adjusted for the
one-offs set out above, are just over 10% higher than the
last reported period before COVID-19 (being the year to
31 March 2019). The full year dividend to 31 March 2023
is almost 15% ahead of the pre-COVID dividend as the
Board recognises the importance of a growing dividend
to our shareholders.
Looking ahead to the 2023-24 financial year, at this
stage, we expect to report a fall in earnings. This is partly
explained by the one-off adjustments highlighted above.
However, the additional impact is from the number of
the German residential and Swedish companies that
have announced dividend suspensions and/or cuts as
they work to reduce their gearing levels in the face of
rising debt costs. The residential names in particular
are making progress with their disposal programmes
so we expect to see their dividends resuming, although
possibly at a lower level, in the not too distant future.
The impact of higher interest rates will feed through to
earnings as fixed or capped debt structures come up for
refinancing. The impact of this of course depends on the
duration of such debt packages and this varies hugely
across our companies. It is encouraging to note that
for most of them, the majority of their debt is fixed (or
capped) until 2026 and beyond.
14
On a more encouraging note, top line revenue is
benefiting from inflation. All of our European companies
and a significant number of our UK names benefit from
rents linked to some form of indexation. It varies widely
across countries and sectors but is clearly an important
part of our revenue growth trajectory.
Although the revenue for the forthcoming year is likely
to be under some pressure given all these competing
factors, we are optimistic that growth will return over
the medium term. Market fundamentals continue to
drive organic rental growth in so many of our sectors. In
the meantime, the Company still has plentiful revenue
reserves to maintain dividend levels over short term
income falls, as was seen through the COVID-19
pandemic.
Gearing and Debt
Gearing began the year at 10.2%, increased to 12.0% by
the half year and finished the year at 12.2%. This does
not represent the changes in gearing seen throughout
the period as gearing has been actively changed
in response to the very variable market conditions
throughout the year and has ranged between 10%
and 16%.
The cost of our debt has increased through the year
as our revolving credit facilities and CFD financing
are linked to SONIA (or other currency equivalents).
However, an important part of our debt book are the
EUR 50m and GBP 15m loan notes both at fixed rates of
interest. The combination of the fixed and floating rate
debt gives us a high degree of flexibility with some price
stability at lower levels of gearing. Generally, where
higher levels of gearing are appropriate (so drawing on
the floating rate financing) the market conditions are
such that returns are not too sensitive to the pricing.
Physical Portfolio
In the year to the end of March the physical property
portfolio produced a total return of-13.7%, made up of
a capital return of -17.5% and an income return of 3.8%.
The MSCI Monthly UK Property Index returned -14.7%
over the same period, made up of an income return of
5.0% and a capital fall of 18.8%.
TR Property Investment Trust During the year we sold the residential element of the
Colonnades development for £5m on a new 999 year
lease at a peppercorn rent. The value of this element
is determined by the outstanding lease extensions
remaining on the individual flats. During the Company’s
ownership we completed lease extensions over 75% of
the flats and received more than £12.5m in premiums.
In addition, the sale facilitated the simplification of the
leasehold structure of the asset. The Company has
retained the freehold of the island site as well as all the
commercial elements. The locality continues to improve
with the redevelopment of the old Whiteleys shopping
centre nearing completion. This is an important next
phase in the further gentrification of Bayswater.
It was a busy 12 months for asset management at
Ferrier Street, Wandsworth. The strategy remains to let
the estate on a short-term basis, retaining the flexibility
for either a refurbishment of the existing or a more
comprehensive redevelopment under the planning
permission secured in June 2022. During the year the
Company concluded 10 new leases (five renewals and
five new lettings) covering over 60% of the estate. This
secured over £500,000 of rent with the average rent on
new lettings exceeding £30 per sq. ft. The attractiveness
of the estate continues to benefit from the further
reduction in supply of London industrial space, whilst
the depth of demand from occupiers has increased.
The diversity of our occupiers reflect this broad based
demand and range from photographic studios to food
production and even a plant nursery.
Outlook
Inflationary pressures persist. Central banks appear
resolutely determined to remain hawkish with another
round of base rate increases in May. Whilst a relatively
blunt instrument, there are signs that the medicine of
increased interest rates is having the required effect with
reduced retail sales growth. Energy has been a major
driver of cost inflation and the spot price of gas has
fallen back to pre-invasion prices. This will soon begin to
feed into lower headline inflation figures and also reduce
the likelihood of a recession. We expect wage inflation,
driven by high employment levels, to persist, resulting in
inflation remaining ahead of central banks’ target rates.
Against this backdrop real estate fundamentals, in
our preferred sectors, remain solid with little signs of
over-supply and stable demand. Economic growth is
likely to be at best anaemic, for a while, and speculative
development will remain subdued. Income, often index-
linked, will remain the key valuation underpin. We will
maintain our focus on the most judiciously leveraged,
avoiding those with large near-term refinancing
requirements. With such a large number of well financed
listed companies, we also expect opportunities to gather
assets from those struggling to refinance in a world
where debt availability is getting more restricted.
The sector has a long tail of micro-cap companies
and we continue to encourage boards to explore the
opportunities for consolidation where it improves share
liquidity and reduces costs. Otherwise, we will continue
to see the steady stream of privatisations as these
smaller companies are attractive bite sized morsels for
large private real estate owners. Whilst the Company has
often benefited from these premium bids (and continues
to hold a wide range of small caps) we also believe that
growing the number of larger companies is in the best
interests of the sector and investors.
As we go to print at the beginning of June, we are
pleased to report an all-paper bid by London Metric
(market cap. £1,700m) for CT Property Trust (£180m).
The Company owns 10% of CT Property Trust and the
price rose 25% on the announcement.
Marcus Phayre-Mudge
Fund Manager
1 June 2023
15
Annual Report & Accounts 2023OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information Responsible investment
Introduction
The Board recognises the importance of considering
Environmental, Social and Governance ('ESG') factors
when making investments and in acting as a responsible
steward of capital. 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.
1. The Company's own approach to
Corporate Governance and Reporting
Maintaining a high level of Governance and disclosure
in the Company’s own operations and reporting
is extremely important. Our Fund Managers are
encouraging and supporting this from the companies
in which we invest and we cannot fall short of these
standards ourselves.
The Company’s compliance with the AIC Code of
Corporate Governance is detailed in the Corporate
Governance Report on page 50.
Under Section 414 of the Companies Act 2006 there is
a requirement to detail information about employee and
human rights, including information about any policies
in relation to these matters and the 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 120, 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 three female Directors. The Board also meets the
FCA's rules for diversity and inclusion, following the
recommendations of the Parker Review.
The activities of the Nomination Committee in relation
to Board changes are referred to in the Nomination
Committee Report on pages 56 and 57.
The Board’s diversity policy is outlined in more detail in
the Corporate Governance Report.
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
16
Regulations 2013). Investment trust companies are
currently exempt from reporting against the Task Force on
Climate-Related Financial Disclosures ('TCFD'), however,
the Financial Conduct Authority ('FCA') has now published
regulations that require the Company’s Manager, as its
Alternative Investment Fund Manager (‘AIFM’), to report
against TCFD at both the AIFM and product level by June
2024. This means that there will be a TCFD disclosure
specific to the Company’s portfolio available in the future,
which will be published on the Manager’s website. The
Manager has produced a report on its overall climate
change approach, which is structured using the TCFD
categories and is available on its website.
2. Our Portfolio Manager’s Approach to ESG
Our Portfolio Manager’s primary duty is to pursue the
objective set out at the beginning of this annual report,
which is to invest in property and property related
companies with the objective of exceeding the returns of
our benchmark.
The Company has not set out its stall to be an ESG
focused fund, however, 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
factors which feed into the investment decisions. This
reflects the belief that strong governance combined with
a responsible approach to social obligations and the
commitment to protect our environment will enhance
shareholder returns in the long term.
In the part of the portfolio that is invested directly into
commercial real estate we endeavour to "practice what
we preach".
LISTED EQUITY PORTFOLIO
As a dedicated investor in the property sector our Manager
is not having to consider some of the more controversial
areas of what is ethical investment. However we are
investing in buildings where construction and ongoing
management have a direct impact on the environment.
All property is in some way delivering a social purpose.
Modern building practices are very much more focused
on reducing energy consumption and efficiency than in
the past. Properties have varying lifespans but are built
for the long term. Older buildings which are less energy
efficient than their modern counterparts are a fact of
life, their replacement has wider environmental and
social repercussions as well as huge cost implications.
They are going to form part of the investible universe for
the foreseeable future and their efficient improvement
and management is just as important as ensuring new
developments follow the highest possible environmental
standards. Although older buildings will most likely show
inferior "scores" to their more modern counterparts on a
TR Property Investment Trust number of environmental measures, we are looking for
demonstration of best efforts to improve these measures,
recognising that there will be limitations on what can be
achieved but wanting to see a positive direction of travel.
There are two fundamental considerations to investment
in property companies: the assets themselves and their
management. The Manager seeks to invest in long-term
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 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. This is augmented by the strength of
Columbia Threadneedle's Responsible Investment
team and its broader engagement. Over the course of
the year, our management team participated in 227
individual or group meetings with companies and their
management teams.
The Manager is committed to responsible investment
and is actively developing new procedures and ways in
which information is gathered and used to support their
engagement with companies on ESG matters.
Corporate Governance disclosure requirements have
increased transparency enormously in recent years and
enabled closer scrutiny and engagement on Governance
issues for some years. Environmental measures are now
rapidly coming to the fore and, with wider disclosure
requirements being placed upon our investee companies,
the Manager is increasingly able to scrutinise other
measures such as climate change and sustainability
policies and outcomes.
However, the Board and Manager are still of the view that
the ESG rating industry and its approach and processes
has 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 providers have different definitions and
criteria.
This may 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. As the shortcomings
are being uncovered and the different approaches
highlighted we hope that this will put pressure on the
data providers to improve the quality and clarify the basis
of their analysis. The data services are subscribed to so
have to be fit for purpose.
Having noted the shortfalls above with the data collected
from the different providers, our Manager is enhancing
the way in which ESG date is collected and compared.
Their own company database covers financial and
operational information together with extensive
modelling. ESG data is being collated alongside this,
allowing comparisons to be made more easily between
the various data sources for a single company and
interrogated rather than relying on high level “scores”.
Interactions with companies on ESG matters are
noted and progress, or otherwise, can be tracked more
efficiently.
The Manager is therefore dedicating direct resource to
the analysis of the information available and also has
the benefit of input from its award-winning Responsible
Investment Team. This is work in progress and a
significant investment in resource but it will improve the
Manager’s ability to engage with our investee companies
on environmental matters and play out our responsible
investment aims.
It is crucial to disaggregate between quality companies
which also have strong ESG credentials and companies
which may appear to have strong ESG credentials (on
the surface at least) but will make poor investments. One
example of this approach is Home REIT. On the face of it
Home REIT’s ESG credentials appeared strong given the
company’s business model is focused on the provision
of accommodation to help tackle homelessness in the
UK. In addition, its leases are 100% “green”, meaning
Home and its tenants agree to identify and implement
appropriate strategies for the improvement of the
properties’ environmental performance. However, we
elected not to participate in the company’s IPO, and
the fund has never owned the shares subsequently, as
we had reservations about the overall economics of
the business. We were concerned about the covenant
quality of the tenants (often newly-formed charities)
and believed that the long lease structures put in place
by Home REIT risked overstating a realistic value of
the underlying assets. This approach proved correct
– short seller Viceroy published a report on Home
REIT in November 2022 which highlighted numerous
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Annual Report & Accounts 2023OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information Responsible investment
continued
concerns with the business and the company has been
investigated by regulatory bodies on a number of items
in recent months. The shares are currently suspended
pending a decision over the future of the business,
having dropped 61% from the original IPO price.
An example of a large holding where we believe the ESG
credentials complement the investment case is Landsec.
As well as adhering to the governance standards
we would expect from a leading listed company, the
company also has a clearly outlined sustainability
framework. This includes long-term targets, progress
against which is regularly monitored and presented
back to investors, such as operational carbon emissions
reduction of 70% by 2030 (with a 2013/14 baseline) and
average embodied carbon reduction of 50% compared
with a typical building by 2030. The company’s newest
developments, which in our view contribute positively
to the investment case given their ability to contribute
to both earnings and net tangible asset value over time,
are also all net zero buildings, which we believe will
contribute to an improved rental growth tone when the
assets are let. As such there is a symbiotic relationship
between the company’s strong ESG credentials and its
underlying economic performance.
Governance
Governance covers matters such as board structure;
effectiveness, diversity and independence, executive
pay and criteria, shareholder rights and financial and
governance reporting and standards.
Exercise of Voting Power and engagement
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 Columbia
Threadneedle’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.
Columbia Threadneedle’s Stewardship Report 2022
provides more information on its firm-level stewardship
policies, as well as how these comply with the
expectations of the UK Stewardship Code 2020 to which
the Manager is a signatory. Its statement of compliance
can be found on the website at
https://www.columbiathreadneedle.com/en/.
During the financial year, the Manager voted against at
18
least one management proposal at 52% of shareholder
meetings. This represents 13% of total items voted. Of
the items voted against, the proposals can be broadly
categorised as follows:
3% 2%
4%
5%
14%
19%
Remuneration
Shareholder rights
Election / Reelection of
Directors
55%
Share repurchase policy
other
Director terms
Ratify Auditor
For the year, the Manager engaged with 24 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:
4%
12%
22%
26%
36%
Climate Change
Environmental Standards
Labour Standards
Corporate Governance
Human Rights
The Manager tracks the milestones of the engagement
strategy and has seen progress this year on a number
of matters. Examples include the publication of
sustainability reports and board accountability on human
rights risk management.
Social
All buildings have a social function to some extent,
providing places to live, work, eat, shop, store etc.
Management of buildings needs to ensure any social
obligations to the occupants are met in terms of
Health & Safety, employee management and wellbeing
and commitment to communities. Most of these
obligations are the responsibility of the tenant but our
investee companies are obliged to report on matters
affecting their own employees and such statements are
considered.
TR Property Investment Trust
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.
on data contributed directly from participating companies,
whilst the public disclosure score evaluates the level of ESG
disclosure by listed property companies and REITs.
The management team have sourced data and research
from several providers, including the Columbia Threadneedle
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 portfolio's overall ESG score might tend to be
unflattering compared to the wider benchmark. The rigour
of our process ensures that these companies receive
scrutiny by the team.
GRESB
GRESB is a mission-driven and investor-led organisation
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
Further detail on GRESB can be found at
www.gresb.com
For 2023 there is increased GRESB Real Estate
Assessment coverage of the Company's equity portfolio
(66% from 50%).
German residential companies representing 11.6% of the
index do not submit data to GRESB due to the requirement
to submit data at the asset or building level and concerns
around fair comparisons of data aggregation. We continue
to engage with GRESB, encouraging them to modify the
requirements to encourage wider 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
Coverage of our sector reduced from 99% to 96% and the
Company’s portfolio increased from 89% to 96%. 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
2023
Rated
Unrated
Total
GRESB
MSCI
Real Estate Assessment
Public Disclosure
Company Rating
Fund
Benchmark
Fund
Benchmark
Fund
Benchmark
66%
34%
100%
62%
38%
100%
99%
1%
100%
96%
4%
100%
96%
4%
100%
96%
4%
100%
Source: GRESB, MSCI, Columbia Threadneedle Investments. Data as at 31.03.2023. Fund exposure calculated as the % 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%
Source: GRESB, MSCI, Columbia Threadneedle Investments. Data as at 31.03.2022. Fund exposure calculated as the % weight of the invested equity portfolio.
99%
1%
100%
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Annual Report & Accounts 2023OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information Responsible investment
continued
We continue to collect data on emissions and compare
to prior years with the emphasis being more on direction
of travel than the absolute measures themselves. This
is also an area where we expect to see further change
which is also explained.
Portfolio-weighted carbon intensity
For the year ended 31 March 2022, we disclosed, as best
we were able to, the portfolio-weighted carbon intensity
of the total portfolio for the first time.
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 Very High (>=525). The Carbon Risk of the
equity portfolio measured at the financial year end, was
43.6 T CO2E/$M Sales (2022: 63.3 T CO2E/$M Sales),
falling within the low risk MSCI category. The Company’s
portfolio-weighted carbon intensity was lower than that
of the benchmark of 49.8 T CO2E/$M Sales.
Comparing against the results from last year shows a
headline c.31% decrease in carbon intensity for both our
own equity portfolio and -18% for 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 2023 financial year end (98%
for the current year fund holdings versus 89% 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 portfolio is improving and currently better than the
benchmark.
20
T CO2E/$M Sales
70
60
50
40
30
20
10
0
2023
2022
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
Company holds to assess which have improving or
deteriorating carbon intensity metrics over three and
five year periods.
This analysis depends upon the integrity of the
underlying data and breadth of data coverage, so we
would caution that this is a work in progress, but it
indicates a positive trend as awareness improves and
companies are obliged to disclose data.
12
3 yr
momentum
1
12
5 yr
momentum
35
30
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 61 stocks.
5yrs : Data for 43 of 61 stocks.
Source: MSCI, Columbia Threadneedle Investments. Data as at 31.03.2023.
TR Property Investment Trust
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.
DIRECT PROPERTY PORTFOLIO
Sustainability is core to the strategy of the direct property
portfolio which we invest in, hold and manage on behalf
of shareholders and this has been a key focus for the
management team in their asset management approach.
Central to the year’s approach was energy consumption.
As the primary source of carbon emissions within the
portfolio, a priority over the last twelve months has
been to gain a clear understanding of the consumption
intensity across the portfolio, establishing a benchmark
from which we can map the strategy to manage the
environmental impact of these assets through energy
saving interventions. This data collection allows us to
fix the base year from which to set out future targets as
well as a clear path toward a net zero carbon portfolio.
Alongside this we have also worked hard to future-proof
the portfolio against the forthcoming Minimum Energy
Efficiency Standards.
We also recognise that the built environment plays a
fundamental role in the life of local communities. As a
landlord the Company continues to enhance its social
engagement with the local community stakeholders
at our assets. We also strive to work with local supply
chain partners to deliver a best-in-class service for our
occupiers, whilst also supporting the local economies
surrounding our assets. This helps us demonstrate the
social value we bring to communities, occupiers and
shareholders.
The final strand to our approach is governance.
This forms the foundation for how we manage our
properties. The manager operates a Sustainability and
Social Responsibility Committee which focuses on the
implementation and delivery of all ESG initiatives and
provides full transparency on our proactive hands-on
approach. From this we can execute our environmental
and social responsibilities. We are only able to achieve
our goals through a joined-up approach with our property
manager, energy consultant and other key partners with
whom we work.
In last year’s report we identified the three key pillars
to establish the foundation for the delivery of our ESG
strategy. These three pillars, namely Asset Energy
Performance (Environment), Occupier Engagement
(Social) and Operational Performance (Governance)
continue to navigate the Management Team towards the
successful realisation of our ESG strategy.
Whilst the significant progress made over the last 12
months reinforces our commitment to achieve net zero
carbon by 2050, our ultimate goal is to ambitiously
improve on this 2050 target. To that end, we have
instructed net zero audits across the portfolio to facilitate
us in identifying exactly how we can bring this target
forward from 2050. This strategic framework will be
driven by science-based targets in a cost-efficient
manner, and we will be articulating our improved
pathway over the forthcoming year.
Environmental
Accurate data collection and transparent reporting are
integral to our goal of reducing carbon emissions across
our portfolio. We have put in place a number of initiatives
to this end which are outlined below.
Data Management
Reliable and accurate data collection is the cornerstone
to understanding the carbon intensity of our assets. This
gives us the ability to set ambitious targets to reduce
the carbon intensity and Scope 1 and 2 emissions for
both ourselves and our occupiers. To this end we have
been working in collaboration with our stakeholders
to implement a programme to install automatic meter
readers (‘AMRs’) across the portfolio to enable the
accurate measurement and monitoring of each asset’s
energy consumption. This consumption data is now
being collated and analysed by the property industry-
recognised SIERA+ platform. This means we can
measure energy consumption and access live data
which we can analyse and then use to shape our building
operation decisions. The AMRs have also provided the
dataset which will form part of the Company’s inaugural
GRESB submission currently underway, setting the
benchmark for future ESG performance. With ongoing
access to this fully transparent and live dataset we can
take control of our carbon emissions with integrity and
pinpoint exactly where further improvements can be
achieved.
21
Annual Report & Accounts 2023OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information Two significant achievements of note are the
improvement of the two EPC G ratings within the
portfolio to B and C ratings and increasing the
percentage of assets now qualifying for EPC ratings
by over 20%. This has been accomplished through
detailed operational analysis of our assets and the
implementation of energy saving enhancements.
It is important to note that the increase in E rating is
due to changes in the assessment criteria and the
majority of the E and D ratings are at Wandsworth where
the strategy is to either complete a comprehensive
refurbishment or a full-scale redevelopment in the mid
term. Work on this project will complete prior to the 2030
MEES standard which will require a minimum EPC of
B. Once this project has been delivered the percentage
of the portfolio by ERV achieving 2030 compliance will
increase to 88%. This is before any other enhancements
are implemented.
Further to this, the Company has now raised the target
of achieving a minimum EPC rating to the minimum of a
B for all planned refurbishments and upgrade works to
the portfolio. This forms part of the wider ESG-focused
refurbishment checklist.
EPC (% of ERV)
E: 8%
(2022: 6%)
D: 28%
(2022: 32%)
B: 58%
(2022: 47%)
C: 6%
(2022: 13%)
Responsible investment
continued
GRESB
As outlined in the last report a key objective for the Fund
was to commence its first GRESB submission. Now that
we have an accurate dataset of carbon consumption, we
have been able to begin the first GRESB submission for
2022/23. The results of this submission will be available
in October 2023 and from this we will be able to identify
further sustainability opportunities and enhance our
strategy towards net zero. This is a significant milestone
for the Company and GRESB will enable us to measure
our ESG performance within a uniform and globally
established platform.
Green Lease Clauses
Another key element to managing the carbon intensity
of the portfolio is through the implementation of Green
Leases Clauses across the portfolio. It has enabled us
to embed our net zero commitments into the formal
structure within which we lease our assets, setting out
a mutual agreement between landlord and occupier
to strive to improve energy efficiencies and reduce
carbon emissions generated by the assets. They also
provide a formal framework for the Company to work
with occupiers on our data collection workstream in
instances where we are not in control of the utility supply.
This in turn strengthens our ability to enforce carbon
intensity targets and gain further control of Scope 1 and
2 emissions.
Renewable Energy Sources
Further control of carbon emissions has been achieved
through the successful transition of all energy across
landlord areas for the whole portfolio to renewable
sources. This is a portfolio-wide initiative and 100% of
landlord electricity and gas supplies are now contracted
on certified green tariffs, backed by the Ofgem regulated
Renewable Energy Guarantees of Origin (REGO) scheme.
Energy Performance Certificate (EPC) and Minimum
Energy Efficient Standards (‘MEES’)
From 1 April 2023 all commercial rental properties
are required to have an EPC of E or better. The direct
property portfolio currently meets these standards and,
overall, the portfolio’s EPC profile is well placed for the
short-term requirements and improved ratings have been
achieved over the last 12 months.
22
TR Property Investment Trust Case Study: IO Centre Gloucester – Installation of
PV cells
The Company has been working closely with the major
tenant of our industrial estate in Gloucester to install
PV cells on the roof of the building to generate cheap,
low carbon (carbon neutral) energy on site. Infusion,
who package specialist teas for a number of high-end,
3rd party customers have been a key tenant on the
estate since purchase in 2015 and sustainability is key
to the company ethos. The installation of PV cells on
the roof was a critical development for the company in
its path towards net zero carbon. Results to date have
been very positive with 80% of the onsite generation
being consumed on site and the balance being exported
to grid. Infusion project that 75% of their total annual
electricity consumption will be generated on site.
The key facts of the installation are:
• System Size – 244.8kWp
• Year 1 Generation Prediction – 231,752kWh’s
• CO2 Saving per annum – 49 tonnes
• EPC improvement from C rating to B.
This hugely successful project demonstrates our
occupier-focused, opportunity-led approach whereby we
have championed our occupier’s success in achieving
their sustainability goals whilst also improving the
environmental profile for the portfolio. Following this
success we are investigating installing PV onto the
remaining units on the estate.
“Infusion GB are extremely committed to reducing our
environmental footprint and the installation of Solar
PV at Gloucester was a critical step towards this. The
proactive engagement of TRPIT was instrumental to this
and enabled us to install a self-generating power source
to our buildings. This initiative has been incredibly well
received by customers, suppliers and employees alike.”
Bruce Stevens, Commercial Director, Infusion GB.
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Annual Report & Accounts 2023OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information Responsible investment
continued
Social
The management team has continued actively to engage
with occupiers to support and potentially invest in their
ESG objectives. Communication and collaboration plays a
central role in achieving ESG goals.
A quarterly ESG newsletter is now published and
circulated with occupiers to encourage engagement. Key
content for the newsletter includes inviting occupiers
to participate in the AMR installation programme,
community engagement initiatives and raising biodiversity
awareness across the portfolio which include the
installation of bird boxes and bug hotels at Gloucester.
At Wandsworth we have successfully managed to
integrate a critical local community partner into Ferrier
Street through the letting of Unit 16 to the Wandsworth
Foodbank. By letting the unit at nil rent we have enabled
them to continue to support people and families facing
severe hardship across Wandsworth Borough. In the
last year over 11,0000 emergency food parcels were
provided to local households in severe hardship. With a
larger facility at Ferrier St they have been able to increase
their emergency food provision by 71% throughout the
borough and deliver directly to those households who
cannot access their Welcome Centres.
“Wandsworth Foodbank are extremely grateful to TR
Property Investment Trust for enabling our move to
Ferrier St. The warehouse provides us with a space to
receive, sort and store large amounts of donated food,
and dispatch it to our seven Welcome Centres and
directly to people's homes. We are really grateful for this
partnership as we support local households through the
cost-of-living crisis.” Dan Frith, Wandsworth Foodbank
Manager.
24
TR Property Investment Trust The Colonnades is also central to the community
landscape of the Bayswater area and it is vital that it is
fully integrated into this environment. We have continued
to work with our local community partners at the
Colonnades over the last 12 months to help alleviate the
challenges of rough sleepers in the Bayswater area.
In order to further futureproof the portfolio against MEES
we will continue to track our exposure to inefficient
assets through regular EPC analysis. By reducing the
portfolio’s reliance on fossil fuels and implementing
further renewable energy sources through solar PV, we
will continue to drive down the higher EPC rated assets.
Over the next twelve months we will strengthen our
management of Scope 3 emissions. We will continue to
collaborate with our suppliers and occupiers to adopt
more sustainable practices, reduce their reliance on
fossil fuels and deliver best in class asset management
to improve our pathway to net zero carbon through
carefully planned and delivered interventions.
By successfully achieving these objectives over the
forthcoming year we expect to be able to declare
an ambitious improvement on our net zero carbon
commitment, bringing it forward from 2050.
Governance
In order to deliver our ESG targets it is essential that our
internal management structure is fully aligned with our
strategy. The Sustainability and Social Responsibility
Committee meets on a bimonthly basis to ensure that we
are on track with our Sustainability Roadmap objectives
through the thorough review of current initiatives and
implementation. The Committee works in partnership
with our managing agents (Stiles Harrold Williams)
to ensure we maintain a sustainable supply chain
which complements our net zero carbon goals. This is
demonstrated through objectives set to ensure 100%
of waste material under landlord control is not sent to
landfill. The accreditation of our managing agent to Safe
Contractor also demonstrates our commitment to paying
all directly employed staff on our assets a real Living
Wage. In addition, the management team attend regular
ESG training events and seminars, continuing our internal
education around ESG and making sure that all avenues
are being explored to achieve positive outcomes across
the portfolio.
Net Zero Carbon Pathway
This significant progress over the last twelve months
demonstrates our firm commitment to bring forward our
net zero carbon 2050 strategy. Through our thorough
carbon consumption data management, GRESB
submission and MEES improvements we will be able
to clearly set out our key objectives for the forthcoming
year.
We will continue to expand our AMR programme to
maximise our comprehensive dataset on Sierra+. This
will provide further insight into how we can identify and
implement energy saving measures, targeting Scope 1
and 2 emissions.
In October 2023 we will have the Company’s inaugural
GRESB rating. From this we will be able analyse the
results to formulate a robust strategy to strengthen this
rating and target an increase of at least one star for the
next submission.
25
Annual Report & Accounts 2023OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information
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
Total Investment Positions
Investment Exposure
as at 31 March
UK Securities
- quoted
- CFD exposure³
UK Investment Properties
UK Total
Continental Europe Securities
- quoted
- CFD exposure³
Total investment exposure4
Portfolio Summary
as at 31 March
Total investments
Net assets
2023
£’000
385,876
73,957
459,833
488,839
948,672
4,662
953,334
2023
£’000
385,876
75,963
73,957
535,796
488,839
54,943
2023
%
40.5
7.7
48.2
51.3
99.5
0.5
2022
£’000
7.0%
518,417
96,255
614,672
940,744
1,555,416
93.0%
7,657
2022
%
33.2
6.1
39.3
60.2
99.5
0.5
100.0
1,563,073
100.0
2023
%
35.7
7.0
7.0
49.7
45.2
5.1
2022
£’000
518,417
57,324
96,255
671,996
940,744
87,318
2022
%
25.6
2.9
5.5
34.0
59.5
6.5
100.0
1,079,578
100.0
1,700,058
2023
2022
2021
2020
2019
£949m £1,555m £1,401m £1,155m £1,291m
£968m £1,563m £1,326m £1,136m £1,328m
0.5%
51.3%
60.2%
33.2%
40.5%
6.1%
7.7%
UK Securities
UK Property
Continental Europe
Securities
CFD Debtors/Creditors
7.0%
93.0%
Securities
UK Property
0.5%
51.3%
40.5%
7.7%
UK quoted property shares
Overseas quoted property shares
Direct property (externally valued)
41%
51%
8%
33%
60%
6%
28%
66%
6%
31%
61%
8%
33%
59%
8%
Net Currency Exposure
as at 31 March
GBP
EUR
CHF
SEK
NOK
2023
Company
%
2023
Benchmark
%
2022
Company
%
2022
Benchmark
%
33.6
42.3
9.9
13.8
0.4
35.1
41.3
9.5
13.8
0.3
33.9
41.9
7.4
16.3
0.5
33.6
42.3
7.1
16.3
0.4
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 positions.
26
TR Property Investment Trust
Investment portfolio by country
Belgium
Xior Student Housing
Aedifica
Care Property Invest
Icade
Intervest Offices & Warehouses
Montea
Warehouses De Pau
Shugard Self Storage
France
Gecina
Klepierre
Argan
Covivio
Carmila
Altarea
Germany
Vonovia
LEG Immobilien
TAG Immobilien
Aroundtown
Netherlands
Eurocommercial Properties
NSI
Unibail Rodamco Westfield
Norway
Entra
Spain
Merlin Properties
Arima Real Estate
Inmobiliaria Colonial
£’000
15,267
8,959
7,191
5,457
3,476
1,732
1,429
601
44,112
34,321
29,984
22,445
16,785
5,741
1,170
110,446
72,456
14,868
13,014
4,310
104,648
24,767
2,902
2,110
29,779
3,509
3,509
26,908
10,531
4,161
41,600
Market
value
%
1.6
0.9
0.7
0.6
0.4
0.2
0.1
0.1
4.6
3.6
3.1
2.4
1.8
0.6
0.1
11.6
7.6
1.6
1.3
0.5
11.0
2.6
0.3
0.2
3.1
0.4
0.4
2.8
1.1
0.4
4.3
Sweden
Wihlborgs
Fastighets Balder B
Catena
Sagax
Samhallsbyggnadsbolaget
Fabege
Pandox
Platzer Fastigheter
Atrium Ljungberg
Cibus Nordic Real Estate
Fastighets Neobo
Switzerland
Psp Swiss Property
Swiss Prime Site
United Kingdom
Segro
Safestore Holdings
Picton Property Income
Industrials REIT
LandSec
Sirius Real Estate
Phoenix Spree Deutschland
Great Portland
Ediston Property
Londonmetric Property
Unite Group
CT Property
Workspace
Tritax Big Box REIT
Supermarket Income REIT
Hammerson
Warehouse REIT
Atrato Cap
Urban Logistics REIT
Shaftsbury
Helical
Cap & Regional
Newriver REIT
Market
value
%
2.3
2.1
1.2
1.1
0.9
0.7
0.4
0.3
0.1
0.1
0.1
9.3
4.2
2.7
6.9
8.3
4.5
3.4
3.0
3.0
2.5
2.4
2.4
2.0
1.8
1.6
1.5
1.4
0.7
0.3
0.3
0.3
0.3
0.3
0.2
0.1
0.1
0.1
40.5
£’000
21,999
19,804
11,166
10,677
8,410
6,382
3,939
2,706
1,493
1,274
742
88,592
40,606
25,547
66,153
79,223
42,509
32,628
28,318
28,199
23,664
23,137
22,973
19,440
17,115
15,219
14,262
13,390
7,033
2,909
2,827
2,700
2,573
2,494
1,709
1,408
1,205
941
385,876
Direct Property
73,957
7.8
CFD Positions (included in
current assets and liabilities)
4,662
0.5
Total Investment Positions
953,334
100.0
Notes
> Companies shown by country of listing.
>
The above positions are the physical holdings included in the investments held at fair value in the Balance Sheet. The CFD positions is the net of the profit or loss on the
CFD contracts (i.e. not the investment exposure) included in the Balance Sheet current assets and liabilities.
27
Annual Report & Accounts 2023OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information Twelve largest equity investments
1
2
3
31 March
2023
2022
31 March
2023
2022
31 March
2023
2022
Shareholding
value
% of investment
portfolio†
% of equity
owned
£79.2m £77.3m
7.3%
4.5%
0.9%
0.5%
Shareholding
value
% of investment
portfolio†
% of equity
owned
£72.5m £149.9m
6.7%
8.8%
0.6%
0.5%
Shareholding
value
% of investment
portfolio†
% of equity
owned
£59.6m £61.5m
5.5%
3.6%
1.1%
1.0%
Share price
768p
1346.0p
Share price
€17.34
€42.31
Share price
€20.85
€24.18
Segro (UK)
Segro is 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 c.£18bn (split c.62.0% in
the UK, c.38.0% in Continental Europe, with
c.56.0% urban warehouses, c.26.0% big
boxes and c.18.0% land and 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). In
2H22 UK valuations saw a sharp correction,
while EU valuations have lagged the
aggressive repricing of the UK. 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 3.7% at FY22). 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 +45.7%.
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 2022, the
company owned a portfolio of c.€95.8bn,
primarily split between Germany (c.88.9%
of value), Sweden (c.7.4%) and Austria
(c.3.7%). The portfolio has increased
dramatically and stands at 548,000 units,
following a string of acquisitions, mostly
of listed peers, such as Deutsche Wohnen,
Hembla, Victoria Park, and BUWOG.
Vonovia is involved in the whole value chain
of the residential sector, via its rental business
(c.80.1% of group EBITDA), third-party
development segment (c.6.7%), recurring
sales segment (c.4.9%), its value-add
segment (energy, multimedia, and other
services segment, c.4.6%) and its nursing
segment (c.3.0%). The German residential
sector remains heavily regulated, yet Vonovia
has continually been able to generate solid
rent growth (+3.3% in 2022), whilst also
complying with regulations and assuming a
social role, which permits them to benefit from
critical political goodwill and partnerships (as
observed by the 20,000-unit portfolio sale to
the State of Berlin in 2021). Even though asset
values have come under pressure, as seen
with all real estate asset classes, operationally
the business continues to perform strongly as
seen by FFO I growth of 14.6% p/s, driven by
operational improvements and healthy rent
growth. Moreover, market evidence points
to further upward revisions to rent growth
estimates as the supply demand imbalance in
Germany persists.
Klepierre (France)
Klépierre is a French REIT, which owns,
operates, and manages a portfolio of
European shopping centres, spanning ten
countries. At the end of 2022, the company
owned a portfolio of c.€19.8bn, with major
exposures in France (c.38.3% of value),
Italy (c.23.8%), Iberia (c.13.0%), Germany/
Netherlands (c.9.7%), and the Nordics
(c.8.7%). The company, like all shopping
centre owners, has reaped the benefits of
a return to normality as social gatherings
are permitted and travel restrictions have
been lifted demonstrated in its strong
rebound in footfall and tenant sales. While
the ongoing shift towards e-commerce
as a retail channel has continued, it has
at a slower rate, even retreating in certain
markets, with digitally native retailers
pivoting to physical by opening stores. On
a relative basis, the company continues to
benefit from its 100% focus on Continental
Europe, without any exposure to weaker
UK and US markets. Lastly, the company
benefits from the experience of the
Chairman, David Simon, also Chairman
and CEO of Simon Property Group, which
owns a c.22.3% stake in Klépierre.
In 2022, EPS growth was +18.7% YoY,
benefiting from accelerating indexation
and occupancy improvements, with
EPRA NTA broadly flat YoY. Meanwhile,
it’s financial metrics remain conservative
with a net debt to EBITDA of 7.9x and an
EPRA LTV of c.43.7%. Its average cost of
debt is low at just c.1.2%, and is expected
to remain low, as evidenced by its high
hedging ratio of c.90.0%, and weighted
average loan maturity of 6.5 years.
† Notes:
The five-year total shareholder return has
been -45.7%.
The five-year total shareholder return has
been -4.5%.
> The percentage of investment portfolio positions set out above include exposures through CFD for both the individual positions and the portfolio.
>
The five-year total shareholder returns are the returns in the local currency of the holding.
28
TR Property Investment Trust 4
5
6
31 March
2023
2022
31 March
2023
2022
31 March
2023
2022
Shareholding
value
% of investment
portfolio†
% of equity
owned
Share price
£59.3m £45.2m
5.5%
2.7%
1.3%
621p
0.8%
786p
Shareholding
value
% of investment
portfolio†
% of equity
owned
£52.4m £44.0m
4.8%
2.6%
0.8%
0.6%
Shareholding
value
% of investment
portfolio†
% of equity
owned
Share price
€95.55
€114.3
Share price
£42.5m £60.4m
3.9%
3.6%
2.1%
950p
2.1%
1340p
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, rate growth and
opening new developments) and through
acquisitions. The self-storage market also
performed extremely strongly during the
COVID-19 pandemic and has repeatedly
shown its resilient credentials during wider
economic turbulence.
The five-year total shareholder return has
been +119.6%.
Land Securities (UK)
Landsec is one of the UK’s largest REITs,
with a portfolio valued at c.£11bn. The
company’s assets are a mix of offices
(c.51.0%), retail assets (c.36.0% split
between shopping centres and outlets)
and other uses (c.13.0% such as leisure
assets, retail parks and hotels); c.61.0%
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 as at September
2022, net debt to EBITDA of 8.7x and LTV
at September 2022 of 31% (and lower
since that date following disposals of
large office assets including 1 New Street
Square). 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 -17.0%.
† Notes:
Gecina (France)
Gecina is the largest French REIT
and is one of the largest real estate
companies in Continental Europe by
market capitalisation. At the end of 2022,
its portfolio was valued at c.€20.1bn,
comprising of offices (c.80.0% of value),
residential (c.18.0%), and student
accommodation (c.2.0%).
Gecina develops, manages, and owns
a diversified portfolio, which is heavily
skewed toward the Paris region (c.97.0%),
and has been selling non-core assets
outside of Paris in recent years. In 2022,
Gecina was a primary beneficiary of the
much-debated return to the office trend,
helped by its centrally located and high-
quality portfolio. As a result, Gecina saw
solid rent increases driven by index-linked
rents, positive reversion and a material
increase in occupancy levels YoY which
all helped to drive 7.4% EPS growth YoY.
Asset values during FY22 were broadly
flat (-0.6% including value creation from
pipeline), as widening yields were offset
with improving rental markets and
stronger indexation, and highlights the
high quality of the portfolio.
The company is one of a handful of
European real estate companies with an
A rating from Moody’s and S&P, given its
conservative financial profile, operating
with an EPRA LTV of c.36.8%. The average
cost of debt is low at c.1.2%, alongside a
high hedging ratio of c.90.0%, and a long
weighted average loan maturity at 7.5
years.
The five-year total shareholder return has
been -15.4%.
> The percentage of investment portfolio positions set out above include exposures through CFD for both the individual positions and the portfolio.
>
The five-year total shareholder returns are the returns in the local currency of the holding.
29
Annual Report & Accounts 2023OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information Twelve largest equity investments
continued
7
8
9
31 March
2023
2022
31 March
2023
2022
31 March
2023
2022
Shareholding
value
% of investment
portfolio†
% of equity
owned
£40.6m £44.6m
3.7%
2.6%
1.0%
1.0%
Share price
CHF104.0 CHF121.5
Shareholding
value
% of investment
portfolio†
% of equity
owned
Share price
£37.3m £35.9m
3.4%
2.1%
9.9%
69p
6.7%
98p
Shareholding
value
% of investment
portfolio†
% of equity
owned
Share price
£34.5m £53.3m
3.2%
3.1%
9.8%
118p
9.2%
198p
PSP Swiss Property (Switzerland)
PSP Swiss Property is one of Switzerland’s
leading real estate companies, owning
a diversified portfolio of high quality
real estate assets in Switzerland. At the
end of 2022, its portfolio was valued at
CHF9.4bn, comprising of offices (c.64.0%),
retail (c.16.0%), food (c.6.0%), and
other (c.14.0%). The portfolio is skewed
towards Switzerland’s key economic
centers, including Zurich (c.57.0%, Geneva
(c.14.0%), Basel (c.8.0%), and other major
cities at c 21.0%.
Underlying property markets in
Switzerland appear to be holding up well.
Transactional evidence is light, but from
the few transactions taking place it seems
that property values for prime assets are
broadly stable. Similarly, demand for office
space in economic centers such as Zurich
and Geneva is expected to remain strong.
As a result, PSP made further progress
during the year on its vacancy reduction,
lowering vacancy from 3.8% to 3.0% at
Dec 23, and saw like-for-like rents grow by
+2.2%; all this led to EPRA EPS growth of
+4.1%. Moreover, EPRA NTA still grew 3%
over the year on modest revaluation gains
and retained earnings. LTV remained low
at 32.6%; amongst the lowest levels for
European property companies while its
current cost of debt is fixed for 4.1 years.
The five-year total shareholder return has
been +31.4%.
Picton (UK)
Picton is a diversified UK REIT with a
weighting towards UK industrial. The
£850m portfolio, as at September 2022,
was c.58.0% industrial, c.32.0% offices
(of which c.22.0% London and the South
East) and c.10.0% retail (of which c.7.0%
retail park). Along with a high quality asset
portfolio, where rental growth and capital
value performance have repeatedly beaten
relevant benchmarks, the company is
run conservatively, taking very limited
development risk as well as maintaining
a very strong balance sheet. For example,
the company’s LTV as at December
2022 was c.26.0%, with long-dated debt
maturity (c.10 years) and very limited
near term refinancing requirements. In
addition, we believe the portfolio boasts
a number of valuable asset management
opportunities, including both vacancy
reduction in heavily under-rented space,
and the potential for residential conversion
in certain assets which could provide
lucrative upside versus current valuations.
The five-year total shareholder return has
been -0.4%.
Industrials REIT (UK)
Industrials REIT 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 £660m portfolio is now c.95% MLI
(as at September 2022). Over a number
of years the UK MLI asset class has seen
strong capital value growth, driven by
both yield compression and ongoing ERV
growth (in the 12 months to December
2022 Industrials REIT has seen LfL ERV
growth of +10.5%), with rents coming from
a low base (average passing rent in the
portfolio was £5.94 at December 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 +29.0%, and the company
was recently bid for by Blackstone at a
premium of +42.0% to the closing price
before the offer was made.
The total shareholder return since listing
(15/06/18) has been +29.0%.
† Notes:
> The percentage of investment portfolio positions set out above include exposures through CFD for both the individual positions and the portfolio.
>
The five-year total shareholder returns are the returns in the local currency of the holding.
30
TR Property Investment Trust 10
11
12
31 March
2023
2022
31 March
2023
2022
31 March
2023
2022
Shareholding
value
% of investment
portfolio†
% of equity
owned
£26.9m £47.8m
2.5%
2.8%
0.8%
1.1%
Shareholding
value
% of investment
portfolio†
% of equity
owned
£26.8m £51.9m
2.5%
3.1%
15.7%
14.7%
Share price
€8.06
€10.59
Share price
186p
382p
Shareholding
value
% of investment
portfolio†
% of equity
owned
Share price
£25.6m £27.4m
2.4%
1.6%
0.5%
0.5%
CHF76.05 CHF91.25
Merlin Properties (Spain)
Merlin Properties is a Spanish diversified
REIT with a c.€11.3bn portfolio. The
majority of the company’s assets are
offices (c.56.4%), where the company
focusses its exposure on major cities,
primarily Madrid and Barcelona.
Additionally, the company owns shopping
centres (c.18.9%), data centres/logistics
(c.12.4%), with the residual c.12.4% of
assets in land and other uses.
As a result of inflation and continued
tenant demand in the Spanish market, the
business continued to perform well, with
average like-for-like rent growth of 7.3% and
year end occupancy of 95.1% (a 60bps YoY
improvement). Even though property values
are not insulated from wider market trends
(asset values declined -1.5% YoY) yields
have already significantly widened by 44bps
and are therefore likely to provide more
protection going forward. During 2022,
Merlin completed the sale of its net lease
portfolio, comprised of 659 bank branches
let to BBVA, for c.€2.0bn at a 17% premium
to its book value (the BBVA portfolio
represented c.15% of the total portfolio).
As a result of this transaction, the company
managed to significantly reduce its EPRA
LTV by 800bps to c.35.8% by financial year
end. This gives the company significant
flexibility going forward as it evaluates
its development pipeline in combination
outlook for property values. Moreover, its
cost of debt remains low, at an average of
c.2.0%, with a hedge ratio of c.99.6%, and
a weighted average loan maturity remains
long at 4.9 years.
The five-year total shareholder return has
been-15.4%.
Phoenix Spree (UK)
Phoenix Spree Deutschland is a UK listed
investment company that owns residential
units, exclusively in Berlin, Germany. The
company is predominantly invested in
so-called ‘altbau’ properties (typically built
between 1900-1940) which offer features
that remain highly desired by prospective
tenants and buyers. At the end of 2022,
the company’s portfolio was valued at
c.€776m. The company aims to maximize
shareholder returns by converting
rental units into condominiums and sell
these in the open market at significantly
higher values.
During 2023, the company continued
to benefit from a structural supply and
demand imbalance in Germany and Berlin
specifically, which led to healthy rent
growth of +3.9%, with new lettings signed
6.6% ahead of the prior year. Furthermore,
increased mortgage costs will likely mean
that many prospective buyers will rent
for longer as mortgages have become
more expensive. This will likely lead to
further upward pressure to market rents.
Nonetheless, property values reduced by
-3.1% over the year as a result of increased
interest rates, which led to a decline in the
EPRA NTA of -9.7%, even as average sales
prices were still materially (+22.4%) ahead
of trailing book values. Whilst transaction
volumes have significantly declined as
a result of interest rate increases, it is
expected that investment volumes should
pick up again once interest rates have
stabilized.
The five-year total shareholder return has
been -40.5%.
Swiss Prime Site (Switzerland)
Swiss Prime Site is one of the largest
real estate companies in Switzerland,
with a diversified portfolio of real estate
assets, coupled with a leading real estate
investment (indirect) business. It owns
a diversified real estate portfolio, which
was valued at CHF13.1bn, comprising of
offices (c.44.0% of value), retail (c.26.0%),
logistics (9.0%), hotels (c.7.0%), with the
residual c.14.0% of assets in land and
other uses.
Despite a slowdown in transactions,
underlying property markets in
Switzerland appear to be holding up well,
as the few transactions that did take
place appeared broadly supportive of
existing asset values. Moreover, tenant
demand remains healthy. During 2022
and the early start of 2023 SPS has made
significant efforts to simplify its corporate
structure (the sale of Wincasa, a real
estate services company) and exit the
retail business (Jelmoli). Meanwhile, the
underlying business continues to perform
well, with like-for-like rent growth of +1.9%
and further vacancy reduction (-30bps
to 4.3%) whilst EPRA NTA increased
modestly with +1.7% on the back of stable
property values. The reported LTV reduced
by 130bps over the year to 38.9% and cost
of debt was kept low at 0.9%.
The five-year total shareholder return has
been +5.9%.
† Notes:
> The percentage of investment portfolio positions set out above include exposures through CFD for both the individual positions and the portfolio
> The five-year total shareholder returns are the returns in the local currency of the holding..
31
Annual Report & Accounts 2023OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information Investment properties
Spread of direct portfolio by capital value (%)
as at 31 March 2023
Retail
Industrial
West End of London
Inner London*
South West
Total
50.0
1.7
–
51.7
*Inner London defined as inside the North and South Circular.
–
37.6
10.7
48.3
Total
50.0
39.3
10.7
100.0
Lease lengths within the direct property portfolio
as at 31 March 2023
Contracted rent
as at 31 March 2023
4%
0 to 5 years
5 to 10 years
10 to 15 years
15 to 20 years
20+ years
40%
Gross rental
income
43%
13%
Year 1
Year 2-5
Year 5+
£2.9m
£9.9m
£14.15m
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.
32
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 three tenants and
sits on a 4.5-acre site. Gloucester
Business Park is located to the east of
Junction 11A of the M5 and one mile to
the east of Gloucester City Centre. The
property also has easy access to the
A417 providing good links to the M4 via
junction 15.
TR Property Investment Trust
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 2023 had 109 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 Columbia Threadneedle
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 49 to 51.
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 Columbia Threadneedle Investment Business
Limited.
A summary of the terms of the Investment
Management Agreement are set out on
pages 58 and 59.
33
Annual Report & Accounts 2023OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information 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 – 60%
45 – 75%
0 – 20%
0 – 5%
0 – 5%
0 – 5%
The asset allocation guideline upper limit for UK
listed equities has increased from 50% to 60%. The
requirement for the weighting to UK commercial
property has not changed, however the number of
companies holding real estate located in Europe
but with a UK listing has increased, therefore the
asset allocation guideline has been changed to
accommodate this.
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 2023 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.
34
TR Property Investment Trust 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
NAV Total Return* (Annualised)
Benchmark Total Return (Annualised)
1 year
5 years
-35.5%
-34.0%
-1.8%
-4.9%
* The NAV Total Return is calculated by assuming dividends paid by the
Company are reinvested in the assets of the Company on the relevant ex-
dividend date. The benchmark total return assumes dividends are re-invested
on the relevant ex-dividend dates.
Although this KPI has not been met in the current year, it
has over 5 years. The NAV Total Return has exceeded the
benchmark for the previous 12 years.
Delivering a reliable dividend which is growing over the longer term
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.
Outcome
Compound Annual Dividend Growth*
Compound Annual RPI
1 year
5 years
6.9%
13.5%
4.9%
5.7%
* 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.
The exceptional inflation figure for the year to 31 March
2023 means the Dividend Annual Growth Rate has fallen
behind RPI on both a one and a five year basis. However
a growing dividend has been delivered in the current and
previous 12 years, despite a fall in earnings through the
COVID pandemic. Over the longer term, the dividend growth
rate has comfortably exceeded RPI on an annualised basis
(10 years: 8.3% vs 4.0% and 20 years: 10.6% vs 3.6%).
The discount or premium to Net Asset Value at which the Company’s shares trade
Outcome
Average discount*
1 year
5 years
-5.8%
-4.7%
Total number of shares repurchased
–
–
* Average daily discount throughout the period of share price to NAV with
income. Source: Bloomberg.
The discount has seen wide fluctuations through the year
as market sentiment towards the sector has changed. The
average discount over 1 year is wider than we have seen for
a while however, over 5 years is at a similar level to the prior
year level of -4.6% and to the ten year average of -4.9%.
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.
35
Annual Report & Accounts 2023OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information Key Performance Indicators
continued
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.
Board monitoring
The Board monitors the Company’s Ongoing
Charges, in comparison to a range of other
investment trust companies of similar size, both
property sector specialists and other sector
specialists. The broker provides a list of companies
it believes is a reasonable comparison. Note there is
no other Investment Trust specialising in property
related equities.
Expenses are budgeted for each financial year and
the Board reviews reports on actual and forecast
expenses during the year.
Investment Trust Status
KPI
The Company must continue 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
0.73%
0.64%
0.67%
0.62%
The Company’s Ongoing Charges are competitive when
compared to the peer group.
Costs over the year have not increased significantly; the
increase in the ongoing charges percentage is as a result
of the fall in NAV over the year.
Outcome
The Directors believe that the conditions and ongoing
requirements have been met in respect of the year to
31 March 2023 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.
36
TR Property Investment Trust Principal and emerging risks
In delivering long-term returns to shareholders, the Board must also identify and monitor the
risks that have been taken in order to achieve those returns. It has included below details of
the principal and emerging risks facing the Company and the appropriate measures taken in
order to mitigate those risks as far as practicable.
The ongoing conflict in Ukraine has impacted energy and commodity supplies creating
inflationary pressures and prompting central banks to raise interest rates in response.
Interest rates have risen more quickly and to higher levels than was initially anticipated. This
has brought challenges not seen for many years and particularly impacted the property
sector.
The legacy of COVID-19 has seen ongoing changes and challenges in the workplace in terms
of resourcing and changes in working practices.
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 Columbia
Threadneedle savings schemes and the Company
participates in the active marketing of those 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 those.
The Management Engagement Committee reviews the
Manager’s performance annually. The Board has the
powers to change the Manager if deemed appropriate.
37
Annual Report & Accounts 2023OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information 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.
Principal and emerging risks
continued
Risk identified
Market risk
Both share prices and exchange rates may move rapidly and
can 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. They 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.
Rising interest rates have an impact on both capital values
and distributions of property companies. Higher interest rates
depress capital values as investors demand a margin over an
increased risk-free rate of return.
Although the UK has now exited the European Union, the
structure of its relationship with Continental Europe continues
to evolve and there could be an impact on occupation across
each sector.
The COVID-19 global pandemic has changed the way we live
and work and 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 at elevated 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 2023, 66.4% of the Company’s exposure was to
currencies other than sterling.
38
TR Property Investment Trust Risk identified
Board monitoring and mitigation
The Board receives and considers regular income
forecasts.
Income forecast sensitivity to changes in FX rates is also
monitored.
The Company has substantial revenue reserves which are
drawn upon when required.
The Board continues to monitor the impact of interest
rates, Brexit and COVID-19 and the long-term implications
for income generation.
The Company is unable to maintain dividend growth
Lower earnings in the underlying portfolio putting pressure
on the Company’s ability to grow the dividend could result
from a number of factors:
• Although most companies negatively impacted by
COVID-19 returned to paying dividends during the year,
with many at pre-covid levels, rising interest rates have
posed a new threat. The effect on dividends has (in
general) not been felt through the financial year that we
are reporting on but the increased debt costs will have an
impact on earnings and hence distributions in future;
• prolonged vacancies in the direct property portfolio and
lease or rental renegotiations as a result of longer-term
changes following COVID-19;
• strengthening of sterling reducing the value of overseas
dividend receipts in sterling terms. The Company saw
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 UK’s
decision to leave the EU (‘Brexit’). 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;
• changes in the timing of dividend receipts from investee
companies;
• legacy impact of COVID-19 on working practices and
resulting changes in workspace demand; and
• negative outlook leading to a reduction in gearing levels in
order to protect capital has an adverse effect on earnings.
Accounting and operational risks
Disruption or failure of systems and processes
underpinning the services provided by third parties and the
risk that those suppliers provide a sub- standard service.
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 its reasonable
control.
39
Annual Report & Accounts 2023OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information Principal and emerging risks
continued
Risk identified
Board monitoring and mitigation
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.
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 Half Year and Annual
Reports.
Inappropriate use of gearing
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.
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.
The Board receives regular regulatory updates from
the Manager, Company Secretary, legal advisers and
the Auditor. The Board considers those 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.
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 out in the Board’s 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.
Other 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.
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.
40
TR Property Investment Trust 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 three
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 37 to 40 and the Company’s ability to continue
in operation and to 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 three 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 equity portfolio, 50% could be
liquidated within five trading days and 71% within
10 trading days.
• On a Group basis, current assets exceed current
• The Company is able to take advantage of its
closed-end investment trust company structure
to hold a proportion of its portfolio in less liquid,
direct property and the less liquid securities of
smaller companies with a view to long-term
outperformance.
• At the Balance Sheet date the Company had
£120 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 result of this is that of our own debt, 32% has
fixed interest rates (assuming all loans are fully
drawn). The flexible structure allows debt levels to
be rapidly increased and reduced as needed.
• The impact of COVID-19 on the UK and European
commercial property markets continued to
diminish 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.
• The invasion of Ukraine in February 2022 has
created further market volatility and uncertainty.
However the portfolio remains highly liquid.
• The core part of the direct property portfolio is
defensively positioned, with 40% of the income
secured to a major supermarket for over 10 years
and benefits from fixed uplifts. The balance of the
portfolio is focused on the industrial sector where
the supply and demand dynamics remain positive
from an occupational standpoint.
liabilities at the Balance Sheet Date.
• The expenses of the Company are largely
• 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.
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
86% 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.
41
Annual Report & Accounts 2023OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information
Long-term viability
continued
• Index linked income will benefit from the increase
in interest rates.
• Global interest rate increases have adversely
affected the property sector and the resulting
increase in the cost of debt will ultimately have an
impact on earnings.
• Some companies' fixed debt for the medium term
so, for these companies, the impact of current
rates will not be felt for a while.
• 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 investible sector
of international stock markets and investors will
continue to wish to have exposure to that sector.
• Closed-end 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 it 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 three years to 31 March 2026.
By order of the Board
David Watson
Chairman
1 June 2023
42
TR Property Investment Trust
Governance
43
Annual Report & Accounts 2023OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information Directors
David Watson
Chairman
Appointed:
April 2012
Kate Bolsover
Senior Independent Director
Tim Gillbanks
Chairman of the Audit Committee
Appointed:
October 2019
Appointed:
January 2018
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 was Chairman of
Aegon Asset Management UK plc until
September 2022. David 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.
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:
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.
Other appointments:
David is currently a Director of the
Prudential Assurance Company, where
he Chairs the Audit Committee.
44
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.
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:
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.
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.
TR Property Investment Trust Sarah-Jane Curtis
Non-Executive Director
Andrew Vaughan
Non-Executive Director
Busola Sodeinde
Non-Executive Director
Appointed:
January 2020
Appointed:
August 2022
Appointed:
January 2023
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.
Experience:
Andrew joined Redevco UK in 2000 as
Managing Director and was appointed CEO
in 2011. He began his career at Friends
Provident where he was a fund manager.
Andrew spent three years at Moorfield Group
as an Investment Specialist before joining
Redevco. He has a BSc in Urban Estate
Surveying.
Experience:
Busola is a Chartered Management
Accountant who has spent most of her
executive career in Financial Services. Until
2019 she was a Managing Director/Chief
Financial Officer at State Street Global
Markets EMEA, prior to which she was
Finance Director to the Corporate Finance
team of Deutsche Bank Capital Markets.
Busola is the founder of a digital publishing
firm focused on literacy and is also a
supporter of women-led ventures.
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.
Skills and contribution to the Board:
Andrew brings deep experience as a pan-
European direct property investor.
Skills and contribution to the Board:
Busola has considerable experience in
the financial services sector and from her
non-executive career has gained expertise
in audit and risk. She also has experience
in digital (social) media and consumer
engagement.
Other appointments:
Sarah-Jane is currently Property
Director of Bicester Motion as well as a
consultant to Value Retail PLC.
Other appointments:
Andrew is Chief Executive Office of
Redevco B.V.
Other appointments:
Busola is a non-executive director of
Hargreave Hale AIM VCT PLC, The
Ombudsman Services, a trustee of the
Church Commissioners for England, where
she sits on the Audit & Risk Committee, and
a Trustee of The Scouts Association.
45
Annual Report & Accounts 2023OverviewStrategic 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.
46
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
2023. 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 42.
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 2023 the net assets of the Company
amounted to £968 million (2022: £1,563 million), on a per
share basis 305.13p (2022: 492.43p) per share.
Revenue earnings per share for the year amounted to
17.22p (2022: 13.69p) and the Directors recommend the
payment of a final dividend of 9.85p (2022: 9.20p) per
share bringing the total dividend for the year to 15.50p
(2022: 14.50p). In arriving at their dividend proposal, the
Board also reviewed the income forecast for the year to
March 2024.
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 35 and 36.
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 2023 the Company had 317,350,980 (2022:
317,350,980) Ordinary shares in issue.
At the AGM in 2022 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 2023 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 2023 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 58. 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 2023
amount to 0.6% (2022: 2.0%) of Group Equity Shareholders’
Funds. No performance fee was earned in the year ended
31 March 2023 (2022: £24,489,000).
Basis of accounting and IFRS
The Group and Company financial statements for the
year ended 31 March 2023 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 it is consistent
with UK-adopted International accounting standards.
The accounting policies are set out in note 1 to the
Financial Statements on pages 80 to 83.
47
Annual Report & Accounts 2023OverviewStrategic 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 37 to 40.
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,
48
the Audit Committee does not consider it necessary for
the Company to establish its own internal audit function.
Instead, the Audit Committee relies on internal control
reports received from its principal service providers to
satisfy itself as to the controls in place.
The Board has established a process for identifying,
evaluating and managing any major risks faced by the
Group. It undertakes an annual review of the Group’s
system of risk management and internal control in line
with relevant 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 Columbia Threadneedle
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 Thursday
20 July 2023 at 2.30pm. The Notice of AGM is set out on
pages 110 to 114 and explanatory notes follow on pages
115 and 116.
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 57.
TR Property Investment Trust 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 2023.
Significant Voting Rights
As at 31 March 2023, the following shareholders had notified
that they held over 3% of the voting rights in the Company on
a non- discretionary basis:
Shareholder
Brewin Dolphin Ltd
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*
11.0%
8.4%
4.9%
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 2023 the Company has been informed that
Integrafin Holdings plc hold 4.0% of the voting rights in the
Company.
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 the Company’s website.
Corporate Governance
Full details are given in the Corporate Governance Report
on pages 49 to 55. The Corporate Governance Report
forms part of this Directors’ Report.
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.
49
Annual Report & Accounts 2023OverviewStrategic 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.
Application of the AIC Code’s Principles
In applying the principles 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 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 2023:
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 19. The Chairman has served on the Board for
more than nine years. In accordance with the AIC Code,
the Board nonetheless considers that he is independent.
He will stand down at the forthcoming AGM.
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.
Composition and Independence of the Board
The Board currently consists of six 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 their ability to act independently.
The Board’s policy on tenure is that continuity and
experience add significantly to the strength of the Board,
although it 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 three women. Diversity is taken into account as
part of the recruitment, appointment and succession
planning process. 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.
In accordance with Listing Rule 9.8.6R (9), (10)
and (11) the Board has provided the following
information in relation to its diversity:
Board Gender as at 31 March 2023(1)
Number
of Board
members
Percentage
of the
Board
Number
of senior
positions
on the
Board
Men
Women
3
3
50%
50%(3)
2(2)
1(4)
(1) The Company does not disclose the number of Directors
in executive management as this is not applicable for an
investment trust company.
(2) The three senior positions are: Chairman of the Board, Senior
Independent Director and Chairman of the Audit Committee.
Note: the position of the Chairman of the Audit Committee
is not currently defined as a senior position under the Listing
Rules, however the Board believes that, for an investment trust
company, it should be regarded as such as it is broadly equivalent
to the Chief Financial Officer of a trading company.
(3) This meets the Listing Rules target of 40%.
(4) This meets the Listing Rules target of 1.
50
TR Property Investment Trust Board Ethnic Background as at 31 March 2023 (1)
Number
of Board
members
Percentage
of the
Board
Number
of senior
positions
on the
Board
White British
or other White
(including minority-
white groups)
Mixed/Multiple
Ethnic Groups
5
1
83%
17%
3(2)
–
(1) The Company does not disclose the number of Directors
in executive management as this is not applicable for an
investment trust company.
(2) The three senior positions are: Chairman of the Board, Senior
Independent Director and Chairman of the Audit Committee.
Note: the position of the Chairman of the Audit Committee
is not currently defined as a senior position under the Listing
Rules, however the Board believes that, for an investment trust
company, it should be regarded as such as it is broadly equivalent
to the Chief Financial Officer of a trading company.
The information included in the above tables has
been obtained through questionnaires completed by
the individual Directors.
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.
Directors
Simon Marrison retired from the Board at the
conclusion of the 2022 AGM. Andrew Vaughan
was appointed a Director on 1 August 2022 and
Busola Sodeinde joined the Board on 24 January
2023. The Directors’ biographies are set out
on pages 44 and 45. All Directors will stand for
re-election by shareholders at the forthcoming
AGM in accordance with the Code, with the exception
of David Watson, who will retire from the Board at
the conclusion of the meeting. Kate Bolsover will
succeed him as Chairman and Tim Gillbanks will
become Senior Independent Director.
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:
Board
Audit
MEC
Nomination
Attended
Eligible
Attended
Eligible
Attended
Eligible
Attended
Eligible
David Watson
Tim Gillbanks
Simon Marrison1
Kate Bolsover
Sarah-Jane Curtis
Andrew Vaughan2
Busola Sodeinde3
1 Retired from the Board on 26 July 2022.
2 Appointed to the Board on 1 August 2022.
3 Appointed to the Board on 24 January 2023.
6
6
2
6
6
4
2
6
6
2
6
6
4
2
2
2
1
2
2
1
0
2
2
1
2
2
1
0
1
1
0
1
1
1
1
1
1
0
1
1
1
1
1
1
0
1
1
1
1
In addition to formal Board and Committee meetings, the Directors also attend a number of ad hoc meetings which
are convened as and when necessary.
1
1
0
1
1
1
1
51
Annual Report & Accounts 2023OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information Corporate Governance report
continued
The Board
The Board is responsible for the effective stewardship
of the Company’s affairs. Certain strategic issues
are monitored by the Board at meetings against a
framework which has been agreed with the Manager.
Additional meetings may be arranged as required. The
Board has a formal schedule of matters specifically
reserved for its decision, which are categorised under
various headings, including strategy, management,
structure, capital, financial reporting, internal controls,
gearing, asset allocation, share price discount, contracts,
investment policy, finance, risk, investment restrictions,
performance, corporate governance and Board
membership and appointments.
In order to enable them to discharge their responsibilities,
all Directors have full and timely access to relevant
information. At each meeting, the Board reviews the
Company’s investment performance and considers
financial analyses and other reports of an operational
nature. The Board monitors compliance with the
Company’s objectives and is responsible for setting asset
allocation and investment and gearing limits within which
the Portfolio Manager has discretion to act and thus
supervises the management of the investment portfolio,
which is contractually delegated to the Portfolio Manager.
The Board has responsibility for the approval of
investments in unquoted investments and any
investments in funds managed or advised by the
Portfolio Manager. It has also adopted a procedure
for Directors, in the furtherance of their duties, to take
independent professional advice at the expense of the
Company.
Conflicts of interest
In line with the Companies Act 2006, the Board has the
power to authorise any potential conflicts of interest
that may arise and impose such limits or conditions
as it thinks fit. A register of potential conflicts is
maintained and is reviewed at every Board meeting
to ensure all details are kept up-to-date. Appropriate
authorisation will be sought prior to the appointment of
any new Director or if any new conflicts arise.
Relations with shareholders
Shareholder relations are given high priority by the
Board, the AIFM and the Portfolio Manager. The prime
medium by which the Company communicates with
shareholders is through the 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.
52
This information is also available on the Company’s
website, www.trproperty.com, together with a
monthly factsheet and Manager commentary.
The Annual Report and Accounts and Notice of the
AGM are issued to shareholders so as to provide at least
twenty working days’ notice of the AGM, in accordance
with corporate governance best practice. 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 118.
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.
On 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. The Directors also
have access to the advice and services of the
Company Secretary and, when deemed necessary,
they 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.
TR Property Investment Trust 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
Stakeholder Group and why
they are important
Board engagement
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.
Shareholders
Shareholder support is
essential to the existence
of the Company and
delivery of the 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. The Manager gives a presentation at the
AGM on the Company’s performance and the future outlook. Shareholders have the
opportunity to meet the Directors and Manager and to address questions to them directly.
The Company values any feedback and questions it receives from shareholders ahead of
and during the AGM and takes action or makes changes if and when 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 Company’s financial position.
This is supplemented by daily publication of the NAV on the London 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.
53
Annual Report & Accounts 2023OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information
Corporate Governance report
continued
Stakeholder Group and why
they are important
Board engagement
External Service Providers, particularly the Company Secretary, the Administrator, the Registrar and the Depository and
the Broker
A range of advisers
enables the Company
to function and ensure
that it meets its relevant
obligations as an
investment trust company
and a constituent of the
FTSE 250.
The Board maintains regular contact with its key external providers and receives regular
reporting from them through Board and committee meetings, as well as outside of the
regular meeting cycle. Their advice, as well as their needs and views, are routinely taken into
account. The Management Engagement Committee formally assesses their performance,
fees and continuing appointment at least annually to ensure that the key service providers
continue to function at an acceptable level and are appropriately remunerated to deliver
the expected level of service. The Audit Committee reviews and evaluates the control
environments in place at each service provider as appropriate.
The Board needs to demonstrate to lenders that it is a well-managed business, capable of
delivering long-term returns consistently.
The Board regularly considers how it and the Company meet the 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
2023 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.
54
Dividends
Subject to shareholder approval of the proposed final
dividend, the Company will pay a total dividend of 15.50p for
the financial year, representing an increase of 6.9% on the
previous year. Income rose sharply as companies resumed
paying dividends and, as a result, this year’s dividend is
covered by earnings. Initial forecasts for the financial year
to 31 March 2024 indicate that revenue may fall again as a
number of companies have suspended dividends. The Board
recognises the importance of dividends to shareholders and,
subject to careful review of the Company’s revenue forecasts
and reserves together with the investment outlook, it remains
prepared to use revenue reserves to support the dividends
paid to shareholders over periods of income shortfall or
volatility for identified reasons.
TR Property Investment Trust 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.
Culture and business conduct
The Board believes that having a good corporate
culture, particularly in its engagement with the Manager,
shareholders and other key stakeholders, aids delivery of
its long-term strategy. In line with this purpose, the Board
promotes a culture of openness, debate and integrity through
ongoing engagement with the Manager and with its other
service providers. 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 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 (for more information see the
Board evaluation section on page 56).
The Board seeks to appoint the best possible service
providers and evaluates their service on a regular basis as
described on page 58. The Board considers the culture of the
Manager and other service providers, including their policies,
practices and behaviour, through regular reporting from
those 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 allow it, to the extent permitted by the
Companies Acts, to indemnify the Directors against any
liability.
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 44
and 45. 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,
Columbia Threadneedle Investment
Business Limited,
Company Secretary
1 June 2023
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Annual Report & Accounts 2023OverviewStrategic 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 to the Board 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. It last met in
March 2023.
Activity during the year
The Committee discussed succession planning of
the Board, its tenure and diversity policies. It 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. The Committee appointed a search
consultant and, following interviews with a number of
suitable candidates, it recommended the appointment of
Busola Sodeinde to the Board.
Board evaluation
During the year the Board engaged Tim Stephenson
of Stephenson & Co, an independent company which
specialises in investment trust board evaluations, to
facilitate an independent evaluation of the effectiveness
of the Board, its committees and the performance of
each Director. In addition to the Directors, the most
senior members of the Investment Management teams
were interviewed. Mr Stephenson’s report was discussed
by the Committee.
The evaluation was considered by the Committee to be
constructive in terms of analysing Board composition and
providing recommendations on Board succession planning.
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.
In light of the external performance evaluation, the Board
confirms that the performance of each Director continues
to be effective and demonstrates their commitment to
their role. Therefore all Directors, with the exception of
David Watson, will offer themselves for re-election at the
forthcoming AGM. Further information on each Director’s
skills, experience and their contribution to the Board are
outlined in the biographies on pages 44 and 45.
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 during
the year ending 31 March 2026. 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
allows a different approach to tenure in relation to investment
companies, reflecting how they differ to operating
companies in not having 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 two to three years so as
regularly to bring the stimulus 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 2012, I will stand down
from the Board at the conclusion of the forthcoming
AGM. Kate Bolsover will succeed me as Chairman.
Tim Gillbanks will succeed Kate as Senior Independent
Director. Busola Sodeinde was appointed a Director on
24 January 2023. An independent third party agency,
Nurole Limited, was engaged for the recruitment process
which resulted in Busola’s appointment. Nurole have no
other connection with the Company.
56
TR Property Investment Trust
Directors’ training
On appointment, new Directors are 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
1 June 2023
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Annual Report & Accounts 2023OverviewStrategic 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 Management
Agreement;
• Annually review the contracts and performance 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 functions (which include the
safeguarding of assets), the day to day accounting,
company secretarial, 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 63 to 65.
The MEC meets at least annually, towards the end of
the financial year and last met in March 2023.
Activity during the year
At the meeting held in March 2023, 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
ending 31 March 2024, being in the best interests of
58
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, Columbia Threadneedle acting
as Company Secretary, both firms of corporate brokers,
Panmure Gordon and Stifel, 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 (now Columbia Threadneedle
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
£3,895,000 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 2024 and the fixed
element of the fee will increase to £4,090,000, whilst
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 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 well
advanced 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 Columbia Threadneedle Investment Business
Limited. The fees for these services are charged
directly to the Company and are disclosed within other
administrative expenses disclosed in notes to the
accounts.
David Watson
Chairman of the Management
Engagement Committee
1 June 2023
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.
‘Adjusted Net Assets’ means the Net Asset Value
after (i) excluding any increases or decreases in Net
Asset Value attributable to the issue or repurchase of
any Ordinary Shares; (ii) adding back the aggregate
amount of any dividends paid or distributions made
in respect of any Ordinary Shares; and (iii) excluding
the amount of any Performance Fee accrued for
the period.
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. The -1.5% underperformance of
the benchmark in the current year has been offset
against the brought forward outperformance
as described above. As a result of this, the carry
forward of outperformance at 31 March 2023 is 0.4%
(2022: 1.9%).
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Annual Report & Accounts 2023OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information Report of the Audit Committee
Audit committee
Chairman: Tim Gillbanks
Key responsibilities
• Review the internal financial and non-financial
This has included consideration of the impact of the
COVID-19 pandemic, Russia’s invasion of Ukraine,
inflationary and interest rate increases across a range of
risk categories,
controls;
• 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
Columbia Threadneedle and BNP Paribas;
contents of the draft Half year and Annual Reports;
• Whether the Company should have its own internal
• The ISAE/AAF reports or their equivalent from BMO/
• Review accounting policies and significant financial
audit function;
reporting judgements;
• Monitor, together with the Manager, the Company’s
compliance with financial reporting, maintenance of
Investment Trust status and regulatory requirements;
and
• Consider the impact of providing non-audit services on
the external Auditor’s independence and objectivity.
Representatives of the Manager’s internal audit and
compliance departments may attend committee
meetings at the Committee Chairman’s request.
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 Board recognises the requirement for at least one
Committee member to have recent and relevant financial
experience and for the Audit Committee as a whole to
have competence relevant to the sector. The Committee
Chairman, Mr Watson and Ms Sodeinde are qualified
accountants with extensive and recent experience in the
Financial Services Industry. The other members of the
Committee have a combination of property, financial,
investment and business experience through senior
positions held throughout their careers.
Activity during the year
During the year the Committee met twice with all
members at each meeting and considered the following:
• The external Auditor’s planning memorandum setting
out the scope of the annual audit and proposed key
areas of focus;
• The reports from the Auditor concerning its audit
of the Financial Statements of the Company and
Consideration of Significant issues in relation to the
Financial Statements;
• The appropriateness of, and any changes to, the
accounting policies of the Company, including the
reasonableness of any judgements required by such
policies;
• The 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 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, they are
fair, balanced and understandable and the information
presented will enable shareholders to assess the
Company’s position, performance, business model
and strategy;
• The performance of the external auditor, to approve
their audit fees and consider the assessment of
independence;
• The review and subsequent proposal to the Board of
• Consideration of the Risk Map: any changes to
the interim and final dividends; and
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 reviewal of the Committee’s terms of reference,
ensuring they remain appropriate and compliant with
the 2018 UK Corporate Governance Code.
60
TR Property Investment Trust
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 the 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 confirm that they 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 continue to
adopt the Going Concern basis of accounting.
The long-term viability of the Company was also
assessed as set out on pages 41 and 42.
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 48.
The Audit Committee received and considered reports
on Internal Controls from the key service providers. No
areas of concern were highlighted.
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 41 and 42. 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 those risks on an ongoing basis.
Those risks are also highlighted in the Committee’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 2022 which did not
reveal any significant exceptions. The quarterly control
report to the Board from BNP Paribas covering the period
up to 31 March 2023 disclosed no significant issues to
report. In addition, on each business day, the Manager
estimates the NAV using an alternative pricing source 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.
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.
• Valuation of Direct Property Investments (Group and
Parent Company) – the physical property portfolio is
valued every six months by professional independent
valuers.
Elevated levels of inflation and interest rates and the
Russian invasion of Ukraine were also considered and
the risks associated with those events reflected in the
risk map.
The legacy impact of COVID-19 on economies around
the world and operational changes made by our service
providers in response to changing workplace practices
were considered and the risk map adjusted accordingly.
Based on the processes and controls in place within
Columbia Threadneedle Investments 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.
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.’
61
Annual Report & Accounts 2023OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information 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.
Full details of the Auditor’s fees are provided in note
6 to the accounts on page 85. The fees for non-
audit services for the year to 31 March 2023 were nil
(2022: nil).
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 2023 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
1 June 2023
Report of the Audit Committee
continued
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 2023 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 review during
2021 to ensure that shareholders were receiving
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. This is Mr
Merchant’s second year as the Company’s Audit
Partner.
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
those 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 2023 were
£97,000 (2022: £82,000), which were approved by
the Audit Committee.
62
TR Property Investment Trust Directors’ Remuneration Report
The Board comprises 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
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.
Any 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 2022 AGM,
99.8% of shareholders’ votes cast were in favour of the
resolution approving the Directors’ Remuneration Report,
with 0.2% against, showing very 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 2023 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 2023, to the following levels: Chairman
£73,000; Audit Committee Chairman £43,000; Senior
Independent Director £43,000; and other Directors
£37,000.
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 2024. In accordance with the regulations,
an ordinary resolution to approve the Directors’
remuneration policy will be put to shareholders at the
forthcoming AGM on 20 July 2023, as required every
three years.
The Directors are paid 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.
63
Annual Report & Accounts 2023OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information
Directors’ Remuneration report
continued
Fixed Fees
Additional Fees
Expenses
Other
Remuneration Type
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 are set at a
competitive level to reflect
experience and time
commitment.
The Directors are entitled
to be paid all reasonable
expenses properly incurred
by them attending meetings
with shareholders or other
Directors or otherwise in
connection with the discharge
of their duties as Directors.
Board members are not
eligible for bonuses, pension
benefits, share options,
long-term incentive schemed
or other non-cash benefits or
taxable expenses.
The aggregate limit for
the fees for the Board
as a whole is £300,000
per annum which, in
accordance with the
Articles of Association,
is divided between the
Directors as they deem
appropriate.
Fees are set to reflect
the role of each Board
member and the time
commitment required
to carry out their duties
and are reviewed with
reference to the fees paid
to Directors of similar
investment companies.
Annual remuneration report
For the year ended 31 March 2023, Directors’ fees were paid at the annual rates of Chairman: £72,000 (2022: £70,000)
and all other Directors: £36,000 (2022: £36,000). An additional £6,000 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
Simon Marrison(1)
Tim Gillbanks
Kate Bolsover(2)
Sarah-Jane Curtis
Andrew Vaughan(3)
Busola Sodeinde(4)
Total
31 March 2023
£
31 March 2022
£
72,000
14,000
42,000
40,069
36,000
24,000
6,831
234,900
70,000
40,000
40,000
35,000
35,000
-
-
220,000
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) resigned from the Board on 26 July 2022
(2) appointed Senior Independent Director on 26 July 2022
(3) appointed to the Board on 1 August 2022
(4) appointed to the Board on 24 January 2023
64
TR Property Investment Trust Company performance
The graph below compares, for the ten years ended
31 March 2023, 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.
Relative Importance of spend on pay
Dividends paid
Directors’ fees
2023
£’000
2022
£’000
Change
47,127
45,381
228
220
3.8%
3.6%
Five year change comparison
Over the last five years, Directors’ pay has increased as set
out in the table below:
Ordinary Share Class Performance: Total Return
over 10 years (rebased)
2023
£’000
2018
£’000
Change
over
5 years
Annualised
Change
4000
3500
3000
2500
2000
1500
1000
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
Mar-19
Mar-20
Mar-21 Mar-22
Mar-23
TR Property Share Price Total Return
Benchmark Total Return
Share Price Total Return assuming investment of £1,000 on 31 March
2013 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 2013. (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 2023
or as at date of
appointment
31 March 2022
41,864
2,360
10,009
-
-
11,071
36,407
2,360
5,237
-
n/a
n/a
David Watson
Kate Bolsover
Sarah-Jane Curtis
Tim Gillbanks
Busola Sodeinde
Andrew Vaughan
Since 31 March 2023 to the date of this report, there have
been no changes to the Directors’ interests in the shares of
the Company.
Chairman
Audit Committee
Chairman
Senior
Independent
Director
Director
72
42
42
36
70
38
38
33
2.9%
0.6%
10.5%
2.0%
10.5%
9.1%
2.0%
1.8%
Annual percentage change in Directors Fees
The table below sets out the annual percentage change in
fees for each director who served in the year under review.
% change
from 2022
to 2023
(audited)
%
% change
from 2021
to 2022
(audited)
%
% change
from 2020
to 2021
(audited)
%
+2.9
-65.0(5)
+5.0
+14.5 (6)
+2.9
n/a(7)
n/a(8)
+15.8(1)
+4.1(2)
0.0
0.0
0.0
n/a
n/a
+51.2(1)
+9.7(2)
0.0
+100.0(3)
+449.3(4)
n/a
n/a
Director
David Watson
Simon Marrison
Tim Gillbanks
Kate Bolsover
Sarah-Jane Curtis
Andrew Vaughan
Busola Sodeinde
(1) Appointed as Chairman with effect from 28 July 2020, increase reflects
the initial part year and subsequent full year in the role.
(2) Appointed as Senior Independent Director with effect from 28 July 2020,
increase reflects the initial part year and subsequent full year in the role.
(3) Appointed as a non-executive Director on 1 October 2019, increase
reflects the first full year with the Company.
(4) Appointed as a non-executive Director on 28 January 2020, increase
reflects the first full year with the Company.
(5) Retired 26 July 2022.
(6) Appointed as Senior Independent Director with effect from 26 July 2022,
increase reflects the change in role during the year.
(7) Appointed as a non-executive Director on 1 August 2022.
(8) Appointed as a non-executive Director on 24 January 2023.
For and on behalf of the Board
David Watson
Chairman of the Management Engagement Committee
1 June 2023
65
Annual Report & Accounts 2023OverviewStrategic 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 and the Group and Parent Company 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 keeping adequate
accounting records that are sufficient to show and
explain the Parent Company’s transactions and disclose
with reasonable accuracy at any time the financial
position of the Parent Company and enable them to
ensure that 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.
66
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.
In accordance with Disclosure Guidance and
Transparency Rule 4.1.14R, the financial statements
will form 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.
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.
The Directors consider that 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
1 June 2023
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 2023 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 2023 and of the Group’s return
for the year then ended;
• the Group financial statements have been properly
prepared in accordance with UK-adopted international
accounting standards;
• the parent Company financial statements have been
properly prepared in accordance with UK-adopted
international accounting standards and as applied in
accordance with the provisions of the Companies Act
2006; and
• the financial statements have been prepared in
accordance with the requirements of the Companies
Act 2006.
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 seven financial years ended
31 March 2023. 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
Key audit matters vs 2022
Recurring risks
£10.5m (2022: £16.8m)
1% (2022: 1%) of Total Assets
vs 2022
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 2022), 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 understand better the process by which we arrived at our audit 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.
67
Annual Report & Accounts 2023OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information Independent auditor’s report
continued
02 Key audit matters: our assessment of risks of material misstatement continued
The risk
Our response
Valuation of direct
property investments
(Group and Parent)
(£74.0 million;
2022: £96.3million)
Refer to pages 60 to
62 (Audit Committee
Report), pages 81 and 82
(accounting policy), note 10
on pages 89 to 92 (financial
disclosures).
Subjective valuation:
7.0% (2022: 5.7%) of the Group’s,
and 6.8% (2022: 5.6%) 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 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 financial 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. Using our own property valuation
specialist, we critically assessed 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 (2022: balanced). We
have considered the associated disclosures to
be proportionate.
68
TR Property Investment Trust Carrying amount of
listed investments
(Group and Parent)
(£872.1 million;
2022: £1,456.8 million)
Refer to pages 60 to 62
(Audit Committee Report),
page 82 (accounting policy)
and note 10 on pages 89 to
92 (financial disclosures).
The risk
Our response
Low risk, high value:
The portfolio of listed level 1
investments makes up 83.0% (2022:
86.4%) of the Group’s, and 80.2% (2022:
84.6%) 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 (2022: 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 £10.5m (2022: £16.8m), determined with
reference to a benchmark of total assets, of which it
represents 1.0% (2021: 1.0%).
We agreed to report to the Audit Committee any
corrected or uncorrected identified misstatements
exceeding £0.53m (2022: £0.84m) for the Group and
exceeding £0.5m (2022: £0.8m) for the Parent Company,
in addition to other identified misstatements that
warranted reporting on qualitative thresholds.
Materiality for the parent Company financial statements
as a whole was set at £9.97m (2022: £16.0m), 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% (2022: 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% (2022: 75%) of materiality
for the financial statements as a whole, which equates
to £7.85m (2022: £12.6m) for the Group and £7.45m
(2022: £12m) 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.
The audit team performed the audit of the Group as a
single aggregated set of financial information rather
than scoping in individual components. 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. The scope of the audit work performed
was fully substantive as we did not rely upon the Group’s
internal controls over financial reporting.
Total Assets
£1,051m (2022: £1,686m)
Group Materiality
£10.5m (2022: £16.8m)
£10.5m
Whole financial statements
materiality (2022: £16.8m)
£7.85m
Whole financial statements
performance materiality
(2022: £12.6m)
£9.97m
Parent Company Materiality
(2022: £16.0m)
£0.5m
Misstatements reported
to the audit committee
(2022: £0.8m)
69
Total Assets
Annual Report & Accounts 2023OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information
Independent auditor’s report
continued
04 The impact of climate change on our audit
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
83.0% 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 the 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 or Company’s
financial resources or ability to continue operations over
the going concern period. The risks that we considered
most likely to adversely affect the Group or Company’s
available financial resources and its ability to operate
over this period were:
• The impact of a significant reduction in the valuation
of investments and the implications for the Group or
Company’s debt covenants;
• The liquidity of the investment portfolio and its ability
to meet the liabilities of the Group as and when they
fall due; and
• The operational resilience of key service organisations.
We considered whether these risks could plausibly affect
the liquidity 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 or Company’s
current and projected cash and liquid investment
position (and the results of their reverse stress testing).
We considered whether the going concern disclosure
in note 1 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 on the use of the
going concern basis of accounting with no material
uncertainties that may cast significant doubt over
the Group and 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 61 is materially consistent with the financial
statements and our audit knowledge.
However, as we cannot predict all future events or
conditions and as subsequent events may result in
outcomes that are inconsistent with judgements that
were reasonable at the time they were made, the above
conclusions are not a guarantee that the Group or the
Company will continue in operation.
70
TR Property Investment Trust 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
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. We communicated identified laws and
regulations throughout our team and remained alert to
any indications of non-compliance throughout the audit.
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.
• Reading Board and Audit Committee minutes.
The potential effect of these laws and regulations on the
financial statements varies considerably.
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 communicated identified fraud risk
throughout the audit team and remained alert to any
indications of fraud throughout the audit. 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.
Firstly, the Group 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
71
Annual Report & Accounts 2023OverviewStrategic 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.
72
Directors’ remuneration report
In our opinion the part of the Directors’ Remuneration
Report to be audited has been properly prepared in
accordance with the Companies Act 2006.
Disclosures of emerging and principal risks and
longer-term viability
We are required to perform procedures to identify
whether there is a material inconsistency between
the Directors’ disclosures in respect of emerging and
principal risks and the viability statement, and the
financial statements and our audit knowledge.
Based on those procedures, we have nothing material to
add or draw attention to in relation to:
• the Directors’ confirmation within the Long-term
Viability statement on page 41 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 and emerging 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 page 41 and 42 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 and
Company’s longer-term viability.
TR Property Investment Trust 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 the 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 by
the parent Company, 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.
09 Respective Responsibilities
Directors’ responsibilities
As explained more fully in their statement set out
on page 66, 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.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance
about whether the financial statements as a whole are
free from material misstatement, whether due to fraud
or error, and to issue our opinion in an auditor’s report.
Reasonable assurance is a high level of assurance,
but does not guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if,
individually or in aggregate, they could reasonably be
expected to influence the economic decisions of users
taken on the basis of the financial statements.
A fuller description of our responsibilities is
provided on the FRC’s website at www.frc.org.uk/
auditorsresponsibilities.
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.
73
Annual Report & Accounts 2023OverviewStrategic 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 and 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
1 June 2023
74
TR Property Investment Trust Financial
statements
75
Annual Report & Accounts 2023OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information Group statement of comprehensive income
for the year ended 31 March 2023
Year ended 31 March 2023
Year ended 31 March 2022
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
(Losses)/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
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
Total
£’000
44,170
5
2,773
1,103
52,077
255
3,513
946
-
12
-
-
52,077
44,170
267
3,513
946
5
2,773
1,103
-
-
-
-
2
4
3
3
10
-
(549,430)
(549,430)
-
-
(2,780)
(2,780)
2,016
2,016
-
-
-
249,038
249,038
1,136
1,136
637
637
10
9,462
(45,556)
(36,094)
66,253
(595,738)
(529,485)
5,701
53,752
16,361
22,062
267,172
320,924
5
3
6
7
8
9
(1,560)
(4,680)
(6,240)
(1,663)
(29,477)
(31,140)
(1,660)
(1,163)
(4,383)
-
(542)
(5,222)
(1,660)
(1,705)
(9,605)
61,870
(600,960)
(539,090)
(1,146)
(3,438)
(4,584)
60,724
(604,398)
(543,674)
(6,087)
2,495
(3,592)
54,637
(601,903)
(547,266)
(1,435)
(1,621)
(4,719)
49,033
(629)
48,404
(4,967)
43,437
-
(608)
(1,435)
(2,229)
(30,085)
(34,804)
237,087
286,120
(1,886)
(2,515)
235,201
283,605
3,049
(1,918)
238,250
281,687
17.22p
(189.67)p
(172.45)p
13.69p
75.07p
88.76p
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 and loss for the year.
All income is attributable to the shareholders of the parent company.
The notes from pages 80 to 104 form part of these Financial Statements.
76
TR Property Investment Trust Group and Company statement of changes in equity
Group
For the year ended 31 March 2023
Notes
Share
Capital
£'000
Share
Premium
Account
£'000
Capital
Redemption
Reserve
£'000
Retained
Earnings
£'000
Total
£'000
At 31 March 2022
Total comprehensive income
Dividends paid
At 31 March 2023
Company
79,338
43,162
43,971
1,396,268
1,562,739
17
-
-
-
-
-
-
(547,266)
(547,266)
(47,127)
(47,127)
79,338
43,162
43,971
801,875
968,346
For the year ended 31 March 2023
Notes
Share
Capital
£'000
Share
Premium
Account
£'000
Capital
Redemption
Reserve
£'000
Retained
Earnings
£'000
Total
£'000
At 31 March 2022
Total comprehensive income
Dividends paid
At 31 March 2023
Group
79,338
43,162
43,971
1,396,268
1,562,739
17
-
-
-
-
-
-
(547,266)
(547,266)
(47,127)
(47,127)
79,338
43,162
43,971
801,875
968,346
For the year ended 31 March 2022
Notes
Share
Capital
£’000
Share
Premium
Account
£’000
Capital
Redemption
Reserve
£’000
Retained
Earnings
£’000
Total
£’000
At 31 March 2021
Total comprehensive income
Dividends paid
At 31 March 2022
Company
79,338
43,162
43,971
1,159,962
1,326,433
17
-
-
-
-
-
-
281,687
(45,381)
281,687
(45,381)
79,338
43,162
43,971
1,396,268
1,562,739
For the year ended 31 March 2022
Notes
Share
Capital
£’000
Share
Premium
Account
£’000
Capital
Redemption
Reserve
£’000
Retained
Earnings
£’000
Total
£’000
At 31 March 2021
Total comprehensive income
Dividends paid
At 31 March 2022
79,338
43,162
43,971
1,159,962
1,326,433
17
-
-
-
-
-
-
281,687
(45,381)
281,687
(45,381)
79,338
43,162
43,971
1,396,268
1,562,739
The notes from pages 80 to 104 form part of these Financial Statements.
77
Annual Report & Accounts 2023OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information Group and company balance sheets
as at 31 March 2023
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
Current liabilities
Net current assets
Total assets plus net current
assets/(liabilities)
Non-current liabilities
Net assets
Capital and reserves
Called up share capital
Share premium account
Capital redemption reserve
Retained earnings
Equity shareholders’ funds
Net Asset Value per:
Ordinary share
Notes
Group
2023
£'000
Company
2023
£'000
Group
2022
£’000
Company
2022
£’000
10
10
10
12
12
13
13
14
15
15
16
948,672
-
-
948,672
903
949,575
65,287
36,071
101,358
(23,654)
77,704
948,672
36,292
-
984,964
903
985,867
65,293
36,069
101,362
(59,950)
41,412
1,027,279
1,027,279
(58,933)
968,346
(58,933)
968,346
79,338
43,162
43,971
801,875
968,346
79,338
43,162
43,971
801,875
968,346
1,506,436
1,506,436
-
48,980
1,555,416
903
36,297
48,980
1,591,713
903
1,556,319
1,592,616
97,673
32,109
129,782
(66,109)
63,673
1,619,992
(57,253)
1,562,739
79,338
43,162
43,971
1,396,268
1,562,739
97,208
32,107
129,315
(101,939)
27,376
1,619,992
(57,253)
1,562,739
79,338
43,162
43,971
1,396,268
1,562,739
19
305.13p
305.13p
492.43p
492.43p
These financial statements were approved by the directors of TR Property Investment Trust plc (Company No:84492) and
authorised for issue on 1 June 2023.
D Watson
Director
The notes from pages 80 to 104 form part of these Financial Statements.
78
TR Property Investment Trust Group and Company cash flow statements
for the year ended 31 March 2023
Group
2023
£'000
Company
2023
£'000
Group
2022
£’000
Company
2022
£’000
Reconciliation of profit from operations
before tax to net cash outflow from
operating activities
(Loss)/profit from operations before tax
(543,674)
(543,674)
Finance costs
4,584
4,584
283,605
2,515
283,605
2,515
594,986
594,990
(265,399)
(258,387)
(336)
(336)
(977)
(977)
(6,325)
448,587
(6,325)
448,587
(427,509)
(427,509)
(10,839)
544,370
(430,830)
(10,839)
544,370
(430,831)
(978)
(978)
8
8
Losses/(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
Sale of investments
Purchase of investments
(Increase)/decrease in prepayments and
accrued income
Decrease/(increase) in sales settlement
debtor
Increase in purchase settlement creditor
Decrease in other debtors
30,399
3,172
1,419
30,399
3,172
1,413
(Decrease)/increase in other creditors
(22,265)
(21,797)
Net cashflow from operating activities
before interest and taxation
Interest paid
Taxation paid
Net cashflow from operating activities
Financing activities
Equity dividends paid
Repayment of loans
Net cashflow from financing activities
Increase 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
82,060
(4,584)
(3,403)
74,073
(47,127)
(25,000)
(72,127)
1,946
32,109
2,016
36,071
82,526
(4,584)
(3,869)
74,073
(47,127)
(25,000)
(72,127)
1,946
32,107
2,016
36,069
The notes from pages 80 to 104 form part of these Financial Statements.
(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
(32,871)
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
79
Annual Report & Accounts 2023OverviewStrategic 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 2023 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, revenues received and market liquidity as the global economy continues to suffer disruption due to inflationary
pressures, the war in Ukraine and the after-effects of the COVID-19 pandemic.
In light of the testing carried out, the liquidity of the level 1 assets held by the Company and the significant net asset value,
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
2023. 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.
80
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 2023.
81
Annual Report & Accounts 2023OverviewStrategic 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 2023, 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 contracts for difference ('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.
82
TR Property Investment Trust
01 Accounting policies continued
Derivatives continued
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.
There were no amendments to International Financial Reporting Standards or Interpretations that had an effect during the period..
Early adoption of standards and interpretations
The standards issued before the reporting date that become effective after 31 March 2023 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.
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.
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.
IAS 1 Amendments - Non-current Liabilities with Covenants (effective 1 January 2024). The amendments require disclose
of information when there is a right to defer settlement of a liability for at least twelve months.
83
Annual Report & Accounts 2023OverviewStrategic 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
2023
£'000
3,084
30,891
6,325
11,777
52,077
2023
£'000
3,513
946
(1,660)
2,799
2022
£’000
3,101
21,349
10,693
9,027
44,170
2022
£’000
2,773
1,103
(1,435)
2,441
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:
2023
£'000
2,900
9,900
14,150
26,950
2023
£'000
255
-
12
267
2022
£’000
2,800
10,250
17,500
30,550
2022
£’000
-
5
-
5
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
Income received to capital
84
TR Property Investment Trust
05 Management and performance fees
Management fee
Performance fee
2023
Revenue
£'000
2023
Capital
£'000
2023
Total
£'000
2022
Revenue
£’000
1,560
4,680
6,240
1,663
-
-
-
-
1,560
4,680
6,240
1,663
2022
Capital
£’000
4,988
24,489
29,477
2022
Total
£’000
6,651
24,489
31,140
A summary of the terms of the management agreement is given in the Report of the Directors on page 47.
Under the terms of this agreement the manager is not entitled to a performance fee for the year to 31 March 2023.
06 Other administrative expenses
Directors’ fees (Directors’ Remuneration Report on pages 63 to 65)
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
2023
£'000
228
97
1
90
187
532
28
1,163
542
1,705
2022
£’000
220
82
21
77
199
869
153
1,621
608
2,229
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 £721,000 (2022: £807,000).
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.
85
Annual Report & Accounts 2023OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information 2023
£'000
3,189
837
558
4,584
(3,438)
1,146
2022
£’000
1,162
814
539
2,515
(1,886)
629
2022
Total
£’000
-
2,135
2,135
-
2,135
(217)
1,918
2022
Capital
£’000
(2,832)
-
(2,832)
-
(2,832)
(217)
(3,049)
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
Amount allocated to Capital
Amount allocated to Revenue
08 Taxation
a) Analysis of charge in the year
UK corporation tax at 19%
(2022: 19%)
Overseas taxation
Over provision in respect of prior
years
Deferred taxation
2023
Revenue
£'000
2023
Capital
£'000
2023
Total
£'000
2022
Revenue
£’000
4,221
2,148
(3,521)
1,026
6,369
(2,495)
(282)
6,087
-
-
(2,495)
-
700
3,174
3,874
(282)
3,592
-
2,832
2,135
4,967
-
4,967
-
Current tax charge for the year
6,087
(2,495)
3,592
4,967
86
TR Property Investment Trust
08 Taxation continued
b) Factors affecting total tax charge for the year
The tax assessed for the year is lower (2022: lower) than the standard rate of corporation tax in the UK for a large
company of 19% (2022: 19%).
The difference is explained below:
Net profit/(loss) on ordinary
activities before taxation
Corporation tax charge at 19%
(2022:19%)
Effects of:
Non taxable losses/(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 provision in respect of prior
years
Disallowable expenses
Deferred tax not provided
2023
Revenue
£'000
2023
Capital
£'000
2023
Total
£'000
2022
Revenue
£’000
2022
Capital
£’000
2022
Total
£’000
60,724
(604,398)
(543,674)
48,404
235,201
283,605
11,538
(114,836)
(103,298)
9,197
44,688
53,885
-
-
-
-
(586)
(6,791)
2,148
-
(282)
131
(71)
104,392
104,392
145
145
(1,878)
(1,878)
8,656
-
-
1,026
-
-
-
-
8,656
(586)
(6,791)
3,174
-
(282)
131
(71)
3,592
6,087
(2,495)
-
-
-
-
(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
c) Provision for deferred taxation
The amounts for deferred taxation provided at 25% (2022: 25%) comprise:
Group
Unutilised losses carried forward
Shown as:
Deferred tax asset
Company
2023
Revenue
£'000
2023
Capital
£'000
2023
Total
£'000
2022
Revenue
£’000
-
-
(903)
(903)
(903)
(903)
-
-
2023
Revenue
£'000
2023
Capital
£'000
2023
Total
£'000
2022
Revenue
£’000
Unutilised losses carried forward
Shown as:
Deferred tax asset
-
-
(903)
(903)
(903)
(903)
-
-
2022
Capital
£’000
(903)
2022
Total
£’000
(903)
(903)
(903)
2022
Capital
£’000
(903)
2022
Total
£’000
(903)
(903)
(903)
87
Annual Report & Accounts 2023OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information
Notes to the financial statements
continued
08 Taxation continued
c) Provision for deferred taxation continued
The movement in provision in the year is as follows:
Group
2023
Revenue
£'000
2023
Capital
£'000
2023
Total
£'000
2022
Revenue
£’000
Provision at the start of the year
Unutilised losses carried forward
Provision at the end of the year
-
-
-
(903)
(903)
-
-
(903)
(903)
-
-
-
Company
Provision at the start of the year
Unutilised losses carried forward
Provision at the end of the year
2023
Revenue
£'000
-
-
-
2023
Capital
£'000
(903)
-
2023
Total
£'000
(903)
-
(903)
(903)
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)
The Group has not recognised deferred tax assets of £5,601,017 (2022: £8,007,769) 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 company 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 Earnings/(loss) per Ordinary 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 2023
£'000
54,637
(601,903)
(547,266)
Year ended
31 March 2022
£’000
43,437
238,250
281,687
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 share
pence
17.22
(189.67)
(172.45)
pence
13.69
75.07
88.76
The Group has no securities in issue that could dilute the return per share. Therefore the basic and diluted return per share
are the same.
88
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
2023
£’000
383,303
2,573
488,839
73,957
-
948,672
-
948,672
Company
2023
£’000
383,303
2,573
488,839
73,957
-
Group
2022
£’000
516,076
2,341
940,744
47,275
48,980
Company
2022
£’000
516,076
2,341
940,744
47,275
48,980
948,672
1,555,416
1,555,416
36,292
984,964
-
1,555,416
36,297
1,591,713
Investments held for sale: mixed use property, the Colonnades, London, W2, was under offer at 31 March 2022 with a
sale expected to complete by the end of June 2022. Ultimately, the residential element of the Colonnades was sold and a
decision was made to retain the commercial element for the foreseeable future. There are no investments held for sale as
at 31 March 2023.
b) Business segment reporting
Listed investments
Unlisted investments
Contracts for difference
Valuation
31 March
2022
£’000
Net
additions/
(disposals)
£’000
Net
appreciation/
(depreciation)
£’000
Valuation
31 March
2023
£’000
Gross
revenue
31 March
2023
£’000
Gross
revenue
31 March
2022
£’000
1,456,820
(52,591)
(532,087)
872,142
51,450
43,775
2,341
7,657
-
232
42,561
(45,556)
2,573
4,662
627
9,462
61,539
4,459
65,998
395
5,701
49,871
3,876
53,747
Total investments segment
1,466,818
(10,030)
(577,411)
879,377
Direct property segment
96,255
(4,723)
(17,575)
73,957
1,563,073
(14,753)
(594,986)
953,334
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 £1,660,000 (2022: £1,435,000) and deducting these costs from the direct
property gross revenue above would result in net income of £2,799,000 (2022: £2,441,000) for the direct property
reporting segment.
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Annual Report & Accounts 2023OverviewStrategic 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
2022
£’000
Net
additions/
(disposals)
£’000
Net
appreciation/
(depreciation)
£’000
Valuation
31 March
2023
£’000
Gross
revenue
31 March
2023
£’000
Gross
revenue
31 March
2022
£’000
UK listed equities and convertibles
516,076
46,391
(179,164)
383,303
15,941
11,731
UK unlisted equities
UK direct property¹
2,341
96,255
-
232
(4,723)
(17,575)
2,573
73,957
Continental European listed equities
940,744
(98,982)
(352,923)
488,839
1,555,416
(57,314)
(549,430)
948,672
UK contracts for difference²
European contracts for difference²
1,627
6,030
31,268
11,293
(33,831)
(11,725)
(936)
5,598
395
4,459
35,741
56,536
3,425
6,037
395
3,876
32,044
48,046
1,616
4,085
1,563,073
(14,753)
(594,986)
953,334
65,998
53,747
Included in the above figures are purchase costs of £981,000 (2022: £489,000) and sales costs of £238,000 (2022:
£259,000).
These comprise mainly stamp duty and commission.
The Company received £512,155,000 (2022: £544,092,000) from investments, including direct property, sold in the
year. The book cost of these investments when they were purchased was £412,279,000 (2022: £356,438,000). 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 £480,000 (2022: £366,000) 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 6 companies (2022: 8 companies) in which it invests.
None of these investments is considered significant in the context of these financial statements. See note 21 on pages 103
and 104 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).
90
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10 Investments held at fair value continued
e) Fair value of financial assets and financial liabilities continued
The table below sets out fair value measurements using IFRS 13 fair value hierarchy.
Financial assets/(liabilities) at fair value through profit or loss
At 31 March 2023
Equity investments
Investment properties
Contracts for difference
Foreign exchange forward contracts
At 31 March 2022
Equity investments
Investment properties
Contracts for difference
Foreign exchange forward contracts
Level 1
£'000
861,611
-
-
-
861,611
Level 1
£’000
1,456,820
-
-
-
1,456,820
Level 2
£'000
10,531
-
4,662
(386)
14,807
Level 2
£’000
-
-
7,657
2,736
10,393
Level 3
£'000
2,573
73,957
-
-
76,530
Level 3
£’000
2,341
96,255
-
-
Total
£'000
874,715
73,957
4,662
(386)
952,948
Total
£’000
1,459,161
96,255
7,657
2,736
98,596
1,565,809
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 2023 was £36,292,000 (2022: £36,297,000).
These have been categorised as level 3 in both years. The movement in the year of £5,000 (2022: £7,015,000) is
the change in fair value in the year. The total financial assets at fair value for the Company at 31 March 2023 was
£984,964,000 (2022: £1,591,713,000).
Reconciliation of movements in financial assets categorised as level 3
At 31 March 2023
31 March
2022
£’000
Purchases
£’000
Appreciation /
(Depreciation)
£’000
Sales
£’000
31 March
2023
£’000
Unlisted equity investments
2,341
-
-
232
2,573
Investment properties
– Mixed use
– Office & Industrial
48,187
48,068
96,255
98,596
387
93
480
480
(5,203)
-
(5,203)
(5,203)
(6,746)
(10,829)
(17,575)
(17,343)
36,625
37,332
73,957
76,530
All appreciation/(depreciation) as stated above relates to movements in fair value of unlisted equity investments and
investment properties held at 31 March 2023.
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.
91
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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: £7.5 - £65 per sq ft (2022: £6.5- £65)
• Capitalisation rates: 3.0% - 6.0% (2022: 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
2023 arising from
Increase in rental value 5.0%
Decrease in rental value 5.0%
Increase in Yield 0.5%
Decrease in Yield 0.5%
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%
Retail
£’000
289
(289)
(3,538)
4,343
Retail
£’000
306
(294)
(3,865)
4,841
Industrial
£’000
1,712
(1,712)
(3,466)
4,261
Office &
Industrial
£’000
2,266
(2,266)
(6,343)
8,711
Other
£’000
-
-
-
-
Other
£’000
145
(1)
(832)
1,101
Total
£’000
2,001
(2,001)
(7,004)
8,604
Total
£’000
2,717
(2,561)
(11,040)
14,653
No impairment losses have been recognised as at 31 March 2023.
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 Objective set out
on page 33. 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 pages 37 to 40 and have been applied
throughout the year.
92
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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
2023
£'000
948,672
130,906
2022
£’000
1,555,416
144,642
Concentration of exposure to price risks
As set out in the Investment Policies on page 34, 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.
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
2023
Increase
in fair value
£'000
2023
Decrease
in fair value
£'000
2022
Increase
in fair value
£’000
2022
Decrease
in fair value
£’000
(71)
142,826
71
(142,826)
(115)
234,176
115
(234,176)
142,755
(142,755)
234,061
(234,061)
44.98p
(44.98)p
73.75p
(73.75)p
11.2 Currency risk
A proportion of the Group's portfolio is invested in overseas securities and their sterling value can be significantly affected
by movements in foreign exchange rates.
Management of the risk
The Board receives a report at each Board meeting on the proportion of the investment portfolio held in sterling,
Euros or other currencies. The Group may sometimes hedge foreign currency movements outside the Eurozone by
funding investments in overseas securities with unsecured loans denominated in the same currency or through
forward currency contracts.
Cash deposits are held in sterling and/or Euro denominated accounts.
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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
2023
34.0%
42.0%
14.0%
10.0%
2022
34.0%
42.0%
16.0%
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:
2023
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
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
Sterling
£'000
10,534
8,226
(10,000)
(10,573)
(118,592)
(120,405)
459,832
903
(15,000)
325,330
Sterling
£’000
53,912
20,341
(35,000)
(25,642)
(88,280)
(74,669)
614,672
903
(15,000)
525,906
Euro
£'000
51,105
20,620
-
(1,221)
52,283
122,787
330,586
-
(43,933)
409,440
Euro
£’000
27,758
3,247
-
(111)
(10,996)
19,898
680,755
-
(42,253)
658,400
Swedish
Krona
£'000
2,811
4,299
-
(1,474)
39,628
45,264
88,592
-
-
Other
£'000
837
2,926
-
-
26,295
30,058
69,662
-
-
133,856
99,720
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
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% (2022: 15%)
• sterling/Swedish Krona +/- 15% (2022: 15%)
• sterling/other +/- 15% (2022: 15%)
94
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11 Financial instruments continued
Foreign currency sensitivity continued
If sterling had strengthened against the currencies shown, this would have had the following effect:
Statement of Comprehensive
Income – profit after tax
Revenue return
Capital return
Change to the profit after tax for
the year/shareholders’ funds
Change to total earnings per share
Year ended March 2023
Year ended March 2022
Euro
£'000
Swedish
Krona
£'000
Other
£'000
Euro
£’000
Swedish
Krona
£’000
Other
£’000
(4,080)
(354)
(370)
(3,215)
(399)
(252)
(53,496)
(17,442)
(12,993)
(72,110)
(33,256)
(16,053)
(57,576)
(17,796)
(13,363)
(75,325)
(33,655)
(16,305)
2023
(27.96)p
2022
(39.48)p
If sterling had weakened against the currencies shown, this would have the following effect:
Year ended March 2023
Year ended March 2022
Euro
£'000
Swedish
Krona
£'000
Other
£'000
Euro
£’000
Swedish
Krona
£’000
5,392
72,392
446
475
4,419
475
23,608
17,586
136,656
45,017
Other
£’000
314
4,771
77,784
24,054
18,061
141,075
45,492
5,085
2023
37.78p
2022
60.39p
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 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. The unused facilities total
£120,000,000 (2022: £95,000,000).
95
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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 £81,170,000 (2022: £77,242,000)
The Group's exposure to fixed interest rates on liabilities is £58,933,000 (2022: £57,253,000)
The Group's exposure to floating interest rates on liabilities is £10,000,000 (2022: £35,000,000)
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 (2022: 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 (2022: 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 share
2023
2%
Increase
£'000
(198)
(0.06)p
2023
2%
Decrease
£'000
198
0.06p
2022
2%
Increase
£’000
(243)
(0.08)p
2022
2%
Decrease
£’000
243
0.08p
This level of change is not representative of the year as a whole, since the exposure changes throughout the year.
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 2023, 8% (2022: 6%)
of the Group's investment portfolio was held in direct property investments.
At 31 March 2023, 92% (2022: 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.
96
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11 Financial instruments continued
Debt and Financing maturity profile
At 31 March 2023
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 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
Within
1 year
£'000
Within
1-2 years
£'000
Within
2-3 years
£'000
Within
3-4 years
£'000
Within
4-5 years
£'000
More than
5 years
£'000
10,000
-
-
-
-
43,933
-
-
-
-
-
15,000
Total
£’000
10,000
58,933
1,382
1,382
1,241
539
539
1,585
6,668
8,536
2,953
141
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8,536
2,953
141
23,012
1,382
45,174
539
539
16,585
87,231
Within
1 year
£’000
35,000
-
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
-
-
-
-
-
42,253
-
-
-
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
* A £60m multicurrency facility with RBS was renewed for one year in February 2023. £10m (2022: £35m) was drawn on this facility at the balance sheet date.
* A £30m one year facility with ING Luxembourg was renewed in July 2022. £nil (2022: £nil) was drawn on this facility at the balance sheet date.
* A £40m facility with ICBC was renewed in November 2022. £nil (2022: £nil) was drawn on this facility at the balance sheet date.
Management of the risk
The Manager sets guidelines for the maximum exposure of the portfolio to unquoted and direct property investments. These are set
out in the Investment Policies on page 34. 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 new opportunities for the provision of debt are explored 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 £56,326,000 (2022: £50,101,000).
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.
97
Annual Report & Accounts 2023OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information
Notes to the financial statements
continued
11 Financial instruments continued
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:
Debtors
Cash and cash equivalents
2023
Balance
Sheet
£'000
65,287
36,071
101,358
2023
Maximum
exposure
£'000
65,287
36,071
101,358
2022
Balance
Sheet
£’000
97,673
32,109
129,782
2022
Maximum
exposure
£’000
97,673
32,109
129,782
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 2023 (31 March 2022: no impairment).
Offsetting disclosures
In order to define its contractual rights better 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 2023 and 2022, the Group’s derivative assets and liabilities (by type and counterparty) were as follows:
Year ended 2023
Year ended 2022
Net amounts
of financial
assets/
(liabilities)
presented in
the Balance
Sheet
£'000
4,662
4,662
(386)
(386)
Cash collateral
pledged
£'000
65,117
65,117
-
-
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
-
-
CFD positions:
Goldman Sachs
FX forward contracts:
HSBC
98
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 £2,573,000 (2022: Atrato,
£2,341,000).
In the Parent Company accounts there are investments of £36,336,000 (2022: £36,297,000) 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 loss of £594,986,000 (2022: £265,399,000 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 2023 consisted of called up share capital, share premium, capital redemption
and revenue reserves totalling £968,346,000 (2022: £1,562,739,000). 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
2023
£'000
2,739
-
3,857
6,146
5,598
45,099
1,848
65,287
Company
2023
£'000
2,739
-
3,857
6,146
5,598
45,099
1,854
65,293
Group
2022
£’000
33,138
2,736
3,344
5,168
7,657
45,133
497
97,673
Company
2022
£’000
33,138
2,736
2,879
5,168
7,657
45,133
497
97,208
903
903
903
903
99
Annual Report & Accounts 2023OverviewStrategic 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
2023
£'000
10,000
8,536
-
936
702
2,953
386
141
23,654
43,933
15,000
58,933
Company
2023
£'000
10,000
8,536
36,336
936
700
2,925
386
131
59,950
43,933
15,000
58,933
Group
2022
£’000
35,000
5,364
-
-
-
25,523
-
222
66,109
42,253
15,000
57,253
Company
2022
£’000
35,000
5,364
35,869
-
-
25,523
-
183
101,939
42,253
15,000
57,253
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 £43,979,000 (2022: £42,340,000) and the 3.59% GBP Loan Notes was
£14,338,000 (2022: £14,879,000) at 31 March 2023.
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 (2022:
£130,000,000) at 31 March 2023. At 31 March 2023 £10,000,000 was drawn on these facilities (2022: £35,000,000).
The maturity of these facilities is shown in notes 11.3 and 11.4.
100
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 2022
57,253
35,000
92,253
Cash flows:
Repayment of bank loans
Non cash-flows:
Movement on foreign exchange
Closing liabilities from financing activities at 31 March 2023
14 Called up share capital
-
(25,000)
(25,000)
1,680
58,933
-
10,000
1,680
68,933
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 2022
At 31 March 2023
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 49.
During the year, the Company made no market purchases for cancellation of Ordinary shares of 25p each (2022: none).
Since 31 March 2023 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 (losses) / gains
Realised capital reserves
Total capital reserves
Revenue reserve
Total retained earnings
Group
2023
£'000
(99,771)
828,859
729,088
72,787
801,875
Company
2023
£'000
(81,449)
802,597
721,148
80,727
801,875
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
The realised capital reserves are distributable by way of a dividend to shareholders or utilised for the repurchase of share
capital, net of any unrealised losses on investments held. The revenue reserve represents accumulated revenue profits
from which annual dividends are paid.
101
Annual Report & Accounts 2023OverviewStrategic 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 2022 of 9.20p
(2021: 9.00p) per share
Interim dividend for the year ended 31 March 2023 of 5.65p
(2022: 5.30p) per share
Amounts not recognised as distributions to equity holders
in the year:
Proposed final dividend for the year ended 31 March 2023 of 9.85p
(2022: 9.20p) per share
Year ended
31 March 2023
£'000
Year ended
31 March 2022
£’000
29,196
17,931
47,127
28,562
16,819
45,381
31,259
29,196
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 2023 of 5.65p
(2022: 5.30p) per share
Proposed final dividend for the year ended 31 March 2023
of 9.85p (2022: 9.20p) per share
Year ended
31 March 2023
£'000
Year ended
31 March 2022
£'000
17,931
31,259
49,190
16,819
29,196
46,015
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 loss after taxation of the Company dealt with in the accounts of the Group was
£547,266,000 (2022: £281,687,000 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 £968,346,000 (2022:
£1,562,739,000) and on 317,350,980 (2022: 317,350,980) Ordinary shares in issue at the year end.
20 Commitments and contingent liabilities
At 31 March 2023 the Group had capital commitments of £30,000 (2022: £74,000) but no contingent liabilities (2022: nil).
102
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 Seventeen) Limited
Trust Union Properties (Number Eighteen) Limited
Trust Union Properties (Bayswater) Limited
Trust Union Properties (Cardiff) Limited
Trust Union Properties (Theale) Limited
Trust Union Properties (Number Twenty-Two) Limited
Trust Union Properties (Number Twenty-Three) Limited
Skillion Finance Limited
Trust Union Finance (1991) Plc
FGH Developments Limited
FGH Developments (Aberdeen) Limited
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
2415846
2416015
2415843
2416017
2415839
2416018
2415836
2416019
2415833
2416021
2415830
2416022
2415818
2416024
2416026
2416027
2415768
2416030
2415772
2416031
2415765
2416036
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
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
103
Annual Report & Accounts 2023OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information
Notes to the financial statements
continued
21 Subsidiaries continued
The Company has provided a guarantee for each of these subsidiaries in order for them to take the exemption from the
requirement of an audit, in line with the requirements of S.479A of the Companies Act 2006.
All the subsidiaries are fully owned and all the holdings are ordinary shares.
All companies have the registered office of Exchange House, Primrose Street, London, EC2A 2NY with the exception of
FGH Developments (Aberdeen) Limited which is registered to 50 Lothian Road, Festival Square, Edinburgh EH3 9BY.
22 Related party transactions disclosures
Balances and transactions between the Company and its subsidiaries, which are related parties, have been eliminated on
consolidation. The balances are interest free, unsecured and repayable on demand.
Amounts due by the Company to subsidiaries per note 13
The Colonnades Limited
TR Property Finance Limited
New England Properties Limited
2023
£’000
23,101
13,255
(20)
36,336
2022
£’000
22,619
13,270
(20)
35,869
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 pages 63 and 65.
Directors’ transactions
Directors' transactions in the Company's shares 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 65.
23 Subsequent events
There are no events that have occurred subsequent to the financial year end to report.
104
TR Property Investment Trust
Glossary
and AIFMD
disclosure
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105
Annual Report & Accounts 2023OverviewStrategic 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
2023
NAV/share price per share at
31 March 2022 (pence)
NAV/share price per share at
31 March 2023 (pence)
Change in year
NAV
Share
Price
492.43
456.5
305.13
279.0
(38.0%)
(38.9%)
Impact of dividends reinvested
2.5%
2.6%
Total Return for the year
(35.5%)
(36.3%)
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
NAV
Share
Price
417.97
392.50
492.43
456.50
17.8%
16.3%
3.6%
3.6%
21.4%
19.9%
Ongoing Charges
The Ongoing Charges ratio has been calculated in
accordance with the guidance issued by the AIC as the
total of investment management fees and administrative
expenses expressed as a percentage of the average
Net Asset Values throughout the year. The definition of
administrative expenses does include property related
expenses, the Ongoing Charges calculation is shown
inclusive and exclusive of these expenses to allow
comparison of the direct administrative and management
charges with the majority of Investment Trusts which do
not hold any direct property investments.
Year to
31 March
2023
Management
Fee (note 5)
Other
Administrative
expenses
(note 6)
Property
Costs
Less: Non
recurring
expenses
Average Net
Assets
Ongoing
Charge 2023
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
Including
Performance
Fees
£’000
Excluding
Performance
Fees
£’000
Excluding
Performance
Fees & Direct
Property Costs
£'000
6,240
6,240
6,240
1,705
1,705
1,705
714
714
8,659
8,659
7,945
1,184,462
1,184,462
1,184,462
0.73%
0.73%
0.67%
Including
Performance
Fees
£’000
Including
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%
106
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.
An average premium or discount is calculated by taking
the sum of each daily premium and discount for the
period under review, divided by the number of days in the
given period.
The net gearing has been calculated as follows:
Loan notes
Loans
Group
2023
£’000
Group
2022
£’000
58,933
57,253
10,000
35,000
CFD positions (notional exposure)
130,906
144,642
Less: Cash
Less: Cash collateral (included within
‘Other debtors’ in Note 12)
Equity shareholders’ funds
Net gearing
(36,071)
(32,109)
(45,099)
(45,133)
118,669
159,653
968,346 1,562,739
12.3%
10.2%
The Ongoing Charges ratio provided in the Company’s
Key Information Document is calculated in line with
the PRIIPs regulations which is different to the AIC
methodology above.
Key Performance Indicators
The Board assesses the performance of the Manager
in meeting the Company’s objective against a number
of Key Performance Indicators, which are considered to
be Alternative Performance Measures. Details of these
calculations are set out above.
Compound Annual Dividend Growth
This is calculated by taking the final dividend(a) in the time
series, divided by the initial dividend(b) in the period, raised
to the power of 1 divided by the number of years(c) in the
series.
5 year period:
a c
b
15.50p 5
12.20p
=
4.9%
Premium/(Discount)
The amount by which the market price of a share of an
investment trust company is higher or lower than the Net
Asset Value per share expressed as a percentage of the
NAV per share. If the share price is lower than the NAV per
share, the shares are trading at a discount and if the share
price is higher than the NAV per share the shares are
trading at a premium.
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
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.
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
Company’s KPIs are discussed on pages 35 and 36.
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 per share
Share price per share
(a)
(b)
2023
pence
305.13
2022
pence
492.43
279.00
456.50
Net Asset Value (NAV) per share
The value of total assets less liabilities (including
borrowings) divided by the number of shares in issue.
Premium or (Discount) (c= (b-a)/a (c)
(8.6%)
(7.3%)
107
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Annual Report & Accounts 2023OverviewStrategic 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, Columbia Threadneedle 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 Columbia Threadneedle website or from Columbia
Threadneedle 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 2023:
Leverage exposure
Maximum permitted limit
Actual
Gross
method
Commitment
method
200%
138%
200%
130%
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.
108
TR Property Investment Trust Notice of AGM
109
Annual Report & Accounts 2023OverviewStrategic 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 Thursday 20 July 2023 at 2.30 pm
for the purpose of transacting the following business:
To consider and, if thought fit, pass the following
Resolutions, of which Resolutions 1 to 12 will be
proposed as Ordinary Resolutions and Resolutions 13
and 14 shall be proposed as Special Resolutions:
1
To receive the Report of the Directors and the
Audited Accounts for the year ended 31 March 2023.
2
To approve the Directors’ Remuneration Policy.
3
To approve the Directors’ Remuneration Report
(excluding the Directors’ Remuneration Policy) for
the year ended 31 March 2023.
4
To declare a final dividend of 9.85p per Ordinary
share.
5
To re-elect Kate Bolsover as a Director.
6 To re-elect Sarah-Jane Curtis as a Director.
7 To re-elect Tim Gillbanks as a Director.
8 To re-elect Busola Sodeinde as a Director.
9 To re-elect Andrew Vaughan as a Director.
10 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.
11 To authorise the Directors to determine the
remuneration of the Auditor.
110
Special business
Ordinary resolution
12 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 conclusion of the
Annual General Meeting of the Company in 2024
(or, if earlier, at the close of business on 19 October
2024), 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
13 THAT, in substitution for all such existing authorities
and subject to the passing of Resolution 12 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 12 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;
and so that the Board may impose any limits or
restrictions and make any arrangements which it
considers necessary or appropriate to deal with
treasury shares, fractional entitlements, record
dates, legal, regulatory or practical problems in, or
under the laws of, any territory or any other matter;
and
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 2024 (or, if earlier, at the close
of business on 19 October 2024), 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
Columbia Threadneedle
Investment Business Limited
Company Secretary
12 June 2023
Registered Office:
Company registered in England and Wales.
Company number: 84492
13 Woodstock Street
London W1C 2AG
Resolution 12 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 12
above, save that the Company shall be entitled to
make offers or agreements before 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.
14 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
30 May 2023, 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
111
Annual Report & Accounts 2023OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information
Notice of Annual General Meeting
continued
Notes
Shareholders intending to attend the AGM are asked to
register their intention as soon as practicable by email
to the following dedicated address:
trpitagm@columbiathreadneedle.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 Tuesday 18 July 2023. Questions
may be sent to the following email address: trpitagm@
columbiathreadneedle.com. 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 submit their
proxy vote in advance of the meeting and to appoint
the Chairman of the meeting as their proxy, rather than
any other named person who may not be permitted to
attend the AGM in the event of restrictions or limits on
attendance. A proxy need not be a shareholder of the
Company. To appoint more than one proxy, the proxy
form should be photocopied and the name of the proxy
to be appointed indicated on each proxy form together
with the number of shares that such proxy is appointed
in respect of. Completion and submission of a proxy
instruction will not preclude a member from attending
and voting in person at the AGM (subject to any
restrictions on physical attendance).
To be valid any proxy form or other instrument
appointing a proxy must be returned by post, by courier
or by hand to the Company’s Registrars, Computershare
Investor Services PLC, The Pavilions, Bridgwater Road,
Bristol BS99 6ZY, or alternatively, by going to www.
eproxyappointment. com and following the instructions
provided. All proxies must be appointed by no later than
48 hours before the time of the AGM. In the case of
joint holders, where more than one of the joint holders
purports to appoint a proxy, only the appointment
submitted by the most senior holder will be accepted.
Seniority is determined by the order in which the names
of the joint holders appear in the Company's Register 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
112
person must have his or her name entered on the
Company’s Register of Members by 2.30 pm on 18
July 2023 (or 6.00 pm on the date two days before
any adjourned meeting). Changes to entries on
the Register of Members after this time shall be
disregarded in determining the rights of any person to
attend or vote at the meeting.
Voting will be conducted on a poll at the meeting. On
a poll vote every shareholder will through their proxy
have one vote for every Ordinary share of which he or
she is the holder.
Shareholders should note that it is possible that,
pursuant to requests made by shareholders of the
Company under Section 527 of the Act, 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.
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.
3
4
5
TR Property Investment Trust
6
CREST members who wish to appoint a proxy
or proxies through the CREST electronic proxy
appointment service may do so for the AGM to
be held on 20 July 2023 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.
8
9
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.
Unacceptable behaviour on the part of any shareholder
attending the AGM will not be tolerated and the
Chairman has the right to deal with such behaviour as
appropriate.
Under section 338 and section 338A of the Act,
members meeting the threshold requirements in those
sections have the right to require the Company (i) to
give, to members of the Company entitled to receive
notice of the meeting, notice of a resolution which
may properly be moved and is intended to be moved
at the meeting and/or (ii) to include in the business to
be dealt with at the meeting any matter (other than a
proposed resolution) which may be properly included in
the business. A resolution may properly be moved or a
matter may properly be included in the business unless
(a) (in the case of a resolution only) it would, if passed,
be ineffective (whether by reason of inconsistency
with any enactment or the company’s constitution or
otherwise), (b) it is defamatory of any person, or (c) it
is frivolous or vexatious. Such a request may be in
hard copy form or in electronic form, must identify the
resolution of which notice is to be given or the matter
to be included in the business, must be authorised by
the person or persons making it, must be received by
the company not later than six clear weeks before the
meeting, and (in the case of a matter to be included
in the business only) must be accompanied by a
statement setting out the grounds for the request.
10 As at 30 May 2023 (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 and no ordinary shares were held in treasury.
Therefore, the total number of voting rights in the
Company at 30 May 2023 was 317,350,980.
11 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.
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
12 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.
113
Annual Report & Accounts 2023OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information
Notice of Annual General Meeting
continued
13 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.
114
TR Property Investment Trust Explanation of Notice of Annual General Meeting
Resolutions 1, 2, 3 and 4: Accounts,
Directors’ remuneration policy, Directors’
remuneration report and dividend
These are the resolutions which deal with the
presentation of the audited accounts, the approval
of the Directors’ Remuneration Policy, the approval
of the Directors’ Remuneration Report and the
declaration of the final dividend.
The vote to approve the Remuneration Policy must
be put to shareholders every three years. 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 2023 of 9.85p per Ordinary share.
If approved at the AGM, the Company will pay the
dividend on 1 August 2023 to those shareholders on
the Company’s Register of Members at the close
of business on 30 June 2023.
Resolutions 5 to 9: Re-election of
Directors
These resolutions deal with the re-election of Kate
Bolsover, Sarah-Jane Curtis, Tim Gillbanks, Busola
Sodeinde and Andrew Vaughan. 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, with the
exception of David Watson who will retire at the
conclusion of the AGM.
A performance evaluation has been completed and
the 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
44 and 45, 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 10 and 11: Auditor
These deal with the reappointment of the Auditor,
KPMG LLP, and the authorisation for the Directors to
determine their remuneration.
Resolution 12: Allotment of share capital
The 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 30 May 2023, being the latest
practical date prior to publication of this Notice of
the meeting). As at 30 May 2023 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 the
conclusion of the Annual General Meeting of the
Company to be held in 2024 and close of business
on 19 October 2024.
Resolution 13: 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 30 May 2023, the latest practicable date prior
to publication of this Notice. If the powers sought
by Resolution 13 are used in relation to a non-pre-
emptive offer, the Directors confirm their intention
to follow the shareholder protections in paragraph 1
of Part 2B of the Pre-emption Group’s Statement of
Principles published in November 2022.
This authority will expire at the earlier of the
conclusion of the Annual General Meeting of the
Company to be held in 2024 and close of business
on 19 October 2024.
115
Annual Report & Accounts 2023OverviewStrategic 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 30 May 2023, the latest practicable date prior to
publication this Notice. The authority will last until
the conclusion of the Annual General Meeting of the
Company to be held in 2024 or, if earlier, at the close
of business on 19 October 2024.
Recommendation
The 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 14: Authority to make market
purchases of the Company’s Ordinary
shares
At the AGM held in 2022, a special resolution was
passed which gave the Directors authority, until the
conclusion of the AGM in 2023, to make market
purchases of the Company’s own issued shares up to
a maximum of 14.99% of the issued share capital.
The Board is proposing that they should be given
renewed authority to purchase the Company’s
Ordinary shares in the market. It 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. The 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.
116
TR Property Investment Trust
Shareholder
information
117
Annual Report & Accounts 2023OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information Directors and other information
Directors
D Watson (Chairman)
K Bolsover
S-J Curtis
T Gillbanks
B Sodeinde
A Vaughan
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
Columbia Threadneedle Investment
Business Limited
Exchange House
Primrose Street
London EC2A 2NY
Please contact Jonathan Latter for
Company Secretarial and administrative
matters
Portfolio Manager
Thames River Capital LLP, authorised
and regulated by the Financial Conduct
Authority
13 Woodstock Street
London W1C 2AG
Telephone: 020 3530 6375
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
Registrar
Computershare Investor Services PLC
The Pavilions, Bridgwater Road
Bristol BS99 6ZZ
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
118
TR Property Investment Trust
General Shareholder information
Benchmark
Details of the benchmark are given in the Strategic
Report on page 22 of this Annual 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 the European Economic Area (‘EEA’)
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.
120
TR Property Investment Trust Investing in TR Property Investment Trust plc
Market purchases
The Company’s shares 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.investorcentre.co.uk.
The Company 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 the Company.
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 the Company, 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 the Company and
other investment trusts a free 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.
The Company is also on the interactive super 60 rated list.
Columbia Threadneedle Management Limited (‘CT’)
Columbia Threadneedle offer a number of savings
plans for adults and children, from general investment
accounts to a range of investment ISAs and a Child
Trust Fund. Each product gives you the ability to
invest in a range of investment trust companies. For
more information see inside the back cover. Columbia
Threadneedle can be contacted on 0800 136 420, or visit
ctinvest.co.uk.
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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Annual Report & Accounts 2023OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information Investing in TR Property Investment Trust plc
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.
122
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 Columbia Threadneedle Investments.
CT Individual Savings Account
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.
CT Junior Individual Savings Account (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 Columbia Threadneedle.
CT Lifetime Individual Savings Account (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.
CT 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 Columbia
Threadneedle.
CT 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.
CT 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.
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
Columbia Threadneedle 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.
How to invest
To open a new Columbia Threadneedle Investments plan, apply
online at ctinvest.co.uk
Online applications are not available if you are transferring
an existing plan with another provider to Columbia Threadneedle
Investments, or if you are applying for a new plan in more than one
name but paper applications are available at ctinvest.co.uk/
documents or by contacting Columbia Threadneedle Investments.
New customers
Call:
Email:
Existing plan holders
Call:
Email:
By post:
0345 600 3030** (9.00am – 5.00pm, weekdays)
investor.enquiries@columbiathreadneedle.com
Columbia Threadneedle Management Limited, PO Box
11114 Chelmsford CM99 2DG
0800 136 420** (8.30am – 5.30pm, weekdays)
invest@columbiathreadneedle.com
You can also invest in the Company 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
investor.enquiries@columbiathreadneedle.com
* The CTF and JISA accounts are opened 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.
To find out more, visit ctinvest.co.uk
0345 600 3030, 9.00am – 5.00pm, weekdays, calls may be recorded or monitored for training and quality purposes.
© 2023 Columbia Threadneedle Investments. Columbia Threadneedle Investments is the global brand name
of the Columbia and Threadneedle group of companies. Financial promotions are issued for marketing and
information purposes by Columbia Threadneedle Management Limited, authorised and regulated in the UK by
the Financial Conduct Authority. 195600 (06/22) UK
123
Annual Report & Accounts 2023OverviewStrategic reportGovernanceFinancial statementsGlossary and AIFMD disclosureNotice of AGMShareholder information Design by Aspectus
This report has been printed on Revive 100 Silk.
Made from FSC® Recycled certified post-consumer
waste pulp. Manufactured in accordance with
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CBP019216
Financial statements
76
Group Statement of Comprehensive
Income
Group and Company Statement of
Changes in Equity
Group and Company Balance Sheets
Group and Company Cash Flow
Statements
Notes to the Financial Statements
77
78
79
80
Glossary and AIFMD disclosure
106 Glossary and AIFM disclosure
Notice of AGM
110 Notice of Annual General Meeting
115 Explanation of Notice of Annual
General Meeting
Shareholder information
118 Directors and other information
119 General Shareholder information
121 Investing
That there will be limitations on what can be achieved but wanting to see a positive direction of travel.
Overview
1 Company Summary
2
3 Historical Performance
Financial Highlights and Performance
Strategic report
4 Chairman’s Statement
7 Manager’s Report
16 Responsible investment
26 Portfolio
27
28
32
33
33 Business Model
34 Strategy and investment policies
35 Key Performance Indicators
37
Principal and emerging risks
41 Long-term viability
Investment Portfolio by country
Twelve largest equity investments
Investment properties
Investment objective and benchmark
Governance
44 Directors
46 Managers
47 Report of the Directors
50 Corporate Governance Report
56 Report of the Nomination Committee
58
Report of the Management
Engagement Committee
Report of the Audit Committee
60
63 Directors’ Remuneration Report
66
Statement of Directors’
Responsibilities in Relation to the
Group Financial Statements
Independent Auditor’s Report to
the Members of TR Property
Investment Trust plc
67
TR Property investment
Trust PLC is managed by
TR PROPERTY INVESTMENT TRUST PLC
Annual Report
31-03-2023