IPI Invesco Pty

liquidity. An increased appetite for risk, and yield, is forcing investors to 
consider portfolios. This presents an opportunity to conduct a realisation of 
the portfolio albeit that prevailing valuations may not be realisable. 
 
Rory Morrison 
 
Invesco Asset Management Limited 
 
27 November 2014 
 
. 
 
BUSINESS REVIEW 
 
Invesco Property Income Trust Limited is a Jersey domiciled property investment 
company and its investment objective is set out below. The strategy the Board 
follows to achieve that objective is to set investment policy and limits, and 
to monitor how they are applied. These are also set out below and have been 
approved by shareholders. 
 
The business model the Company has adopted to achieve its objective has been to 
contract investment management and administration to appropriate external 
service providers, who are subject to oversight by the Board. The Company's 
main supplier of services is Invesco Asset Management Limited (the `Investment 
Manager') which provides investment portfolio and management services. Further 
details of the external service providers are contained in the Report of the 
Directors on page 21. 
 
Investment Objective and Policy 
 
The Company's Investment Objective and Policy, set out below, have been 
designed to set out clearly the investment objective of the Company and provide 
shareholders with information on the policies that the Company follows in order 
to try to achieve its objective. These relate to asset allocation, risk 
diversification and gearing, including maximum exposures. The objective and 
policy were revised in 2011 to reflect a realisation programme, rather than an 
indefinite life as was the case previously, and further revised (and approved 
by shareholders) in 2013. 
 
Investment Objective 
 
The Company holds a diversified portfolio of European commercial properties. 
The investment objective of the Company has been to repay its bank borrowings 
and other liabilities and, if it is able to meet these obligations, to provide 
a return for shareholders. The Directors no longer expect to be able to meet 
the Group's liabilities in full and so do not expect there to be any surplus 
for shareholders. 
 
Investment Policy 
 
The Company has pursued its investment objective by seeking to optimise value 
from the Group's current portfolio, comprising a diversified portfolio of 
investment properties located in the UK and continental Europe. It is expected 
that the principal source of funds from which to repay borrowings and meet 
other liabilities will be the net proceeds from disposals of assets in the 
Group's property portfolio. It is likely that all of the property investments 
will need to be sold to meet the Company's obligations to its lenders and other 
creditors and that not all such obligations will be met in full. 
 
The Directors do not expect that: 
 
* any new investments will be made (other than cash or near cash equivalent 
securities); 
 
* any net new borrowings will be drawn down; or 
 
* any dividends will be paid. 
 
Performance 
 
Key Performance Indicators 
 
The Board reviews performance by reference to a number of Key Performance 
Indicators which include the following: 
 
* Asset Performance 
 
* Income generation 
 
* Ongoing Charges Ratio 
 
Asset Performance 
 
In the circumstances faced by the Company the key metric for asset performance 
has been the LTV ratio. LTV has been greater than 100% at each quarter end 
during the period. 
 
Income Generation 
 
The Board has also monitored closely the Group's cash revenues against the 
interest cover covenants in the loan facility. The Group has remained cash flow 
positive and compliant with the covenants. 
 
Ongoing Charges Ratio 
 
The expenses of the Company are reviewed by the Board at every Board meeting. 
It is the aim of the Board to minimise charges. The ongoing charges ratio 
provides a guide to the effect on performance of the costs of the Company. The 
ratio of charges to gross assets for the year was 1.6% (2013: 1.5%). The 
increase in the ratio masks a small reduction in expenses payable and is due to 
the fall in gross assets as assets were sold in the year. 
 
Financial Position 
 
Assets and Liabilities 
 
At the year end, the Group had a total net liabilities position of GBP37.7 
million (2013: total net liabilities of GBP35.0 million) equal to -24.6p per 
share (2013: -22.9p). The assets comprised a portfolio of European property in 
the office and industrial sectors and the liabilities included bank borrowings 
totalling GBP150.8 million (2013: GBP191.3 million). 
 
At the year end, liabilities included an amount of GBP7.98 million representing 
the mark to market value of currency swaps. With the agreement of the lending 
bank the swaps were closed out on 17 April 2014, crystallising a liability of GBP 
7.76 million. This was settled from a new drawdown on the Group's borrowing 
facility. 
 
Share Valuations and Net Asset Value (`NAV') 
 
On 31 March 2014, the mid-market share price, the NAV and the adjusted NAV (see 
glossary on page 65) per ordinary share were 0.25p, -24.6p and -19.5p (2013: 
0.6p, -22.9p and -11.5p) respectively. The NAVs per ordinary share are 
calculated on 153 million shares in issue at the year end and net liabilities 
attributable to ordinary shareholders of GBP37,671,000 (2013: GBP34,988,000). The 
listing of the Company's shares was suspended on 28 July 2014 and there is no 
longer any market price. 
 
Revenue and Dividends 
 
The financial results for the year are shown in the Consolidated Statement of 
Comprehensive Income on page 32. No dividends have been paid during the year 
under review (2013: GBPnil), and no further dividends are expected to be paid. 
 
Borrowing 
 
The Group's borrowing facility in place at the year end fell due for repayment 
on 28 September 2014. The Directors did not expect to be able to meet the 
repayment obligation and, with their advisers, had been engaged in discussions 
with the lending banks for some time over how to address the position. The 
conclusion to these discussions, announced in July 2014 and with the support 
and consent of the lending bank, was for the Company's remaining properties to 
be marketed in a structured sales process, aiming to achieve a sale of all 
assets before the end of 2014. To facilitate this, the repayment date of the 
facility has now been extended to 31 December 2014. Other terms of the facility 
remain largely unaltered, including covenants. The Group is in breach of the 
Loan to Value covenant, but in the circumstances this will not act to inhibit 
implementation of the sales process. It is not expected that the net sales 
proceeds will be sufficient to meet all amounts due to lenders and the lending 
banks have agreed that amounts still outstanding following the process will be 
treated as no longer owing, allowing the group companies to be wound up 
solvently. 
 
The Group also has borrowings due to Invesco Limited (`Invesco'), the parent 
company of the Investment Manager. The Invesco facility is subordinated to the 
bank facility and no amounts are permitted to be paid to Invesco until the 
lending bank has been paid in full. Invesco has consented to the sales process 
and will also waive any amounts due to it that cannot be paid at completion of 
the sales process. 
 
Hedging 
 
Hedging policy is under the control of the Board. Cashflow hedging was used to 
limit the extent of earnings exposure to fluctuations in interest rates. The 
terms of the Group's borrowing facility require the Group generally to hedge 
its interest rate exposure but during the year the Lender consented to waivers 
of this requirement in view of the disposal and debt repayment programme under 
way. 
 
The Group's interest rate exposure remains partially hedged through the use of 
a basket of interest rate swaps. As at 31 March 2014, interest on 97% of 
sterling borrowings and 33% of euro borrowings was payable at fixed rates of 
interest. The rate payable amounted to a weighted average of 2.9% (2013: 4.5%) 
per annum, including the margin. The euro interest rate hedges were cancelled 
in April 2014 with the currency swaps as described below and have not been 
replaced. The remaining sterling interest rate hedges expired on 28 September 
2014 and have not been replaced. 
 
The Group hedged against fluctuations in the euro for the net investment in 
European assets, by hedging against future movements in the euro/sterling 
exchange rate for the amount of the investment in euro denominated assets less 
borrowings in euros. As a result of falling asset values in Europe the Group's 
exposure to the Euro is overhedged. At the year end these particular hedges 
were ineffective and they were cancelled at a cost of GBP7.8 million in April 
2014. The currency exposure is now unhedged. 
 
Current and Future Developments 
 
As described in the Chairman's statement the Board and the Investment Manager 
are engaged in a process to dispose of all the remaining property assets. The 
objective is to have completed the sale before the end of 2014, following which 
the Directors expect to begin the process of winding up the group companies. In 
the event that the sales process is not successful alternative outcomes will be 
discussed with the lending banks but in no circumstances is it expected that 
shareholders will receive any return. 
 
Principal Risks and Uncertainties 
 
The principal risk factors relating to the Company can be divided into various 
areas: 
 
Investment Policy 
 
The Board has established guidelines to ensure that the Investment Policy 
approved by shareholders is pursued by the Investment Manager. 
 
There is no guarantee that the Investment Policy adopted by the Company will 
provide the returns sought by the Company. There can be no guarantee, 
therefore, that the Company will achieve its investment objective and, as set 
out under Current and Future Developments above it currently appears unlikely 
that the Company will be able to. 
 
Ordinary Shares and Dividends 
 
The market value of an ordinary share is affected by its NAV, but also reflects 

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