TIDMIPI
Invesco Property Income Trust limited
Annual Financial Report announcement
for the year ended 31 March 2015
CHAIRMAN'S STATEMENT
At the time of publication of the last annual report, we were hopeful of
achieving a sale of the whole portfolio. With a certain inevitability, this
exercise took longer than expected but contracts were exchanged on 19 June 2015
for the sale of all the property assets to a single purchaser. The disposal is
now complete. As previously indicated the Directors are now taking steps
towards the winding-up of the Company and its subsidiaries. There will be no
return to shareholders.
Portfolio sale
The disposal process began in the summer of 2014 and was conducted through an
agent with the full support and involvement of the lending bank. Seven offers
were received, which the Directors viewed positively as it provided comfort
that the market had been properly tested and that the terms offered represented
the true value of the portfolio. Sadly all the offers were below the level of
the most recent independent valuation.
On two successive occasions we pursued negotiations with a preferred party only
for the offeror to pull out, which caused some delay to the process.
Fortunately we were able to move forward quickly with a third bidder to
exchange and completion.
The aggregate consideration was less than the amount outstanding to the lending
banks and consequently all the consideration has been paid to the lending
banks, less an amount retained to meet the expected winding up costs, and there
will be no return to shareholders.
Annual accounts - going concern
For the greater part of the year ended 31 March 2015 the Board and investment
manager have been involved in discussions and negotiations to sell all of the
group's remaining property assets with the intention, if the disposal proved
successful, of winding up the group companies. As noted above the sales process
has now completed.
In the circumstances the Directors have concluded that the group should not be
treated as a going concern and the financial statements have not been prepared
on that basis.
Future of the Company
Following completion of the portfolio disposal, which included the sale of some
group companies in France and Luxembourg, the focus of activity has been on
settling inter-company balances within the group and simplifying the corporate
structure in preparation for a formal, solvent winding up. A circular
containing a notice convening a General Meeting to receive this Annual
Financial Report and to appoint liquidators is enclosed with this document.
Richard Barnes
Chairman
17 November 2015
BUSINESS REVIEW
Invesco Property Income Trust Limited is a Jersey domiciled property investment
company and the investment objective and policy followed during the year are
set out below.
Since the year end the Company has succeeded in disposing of all its property
assets and net proceeds have been paid to its lending bank.
Investment Objective and Policy
The Company's Investment Objective and Policy, set out below, were designed to
set out clearly the investment objective of the Company and provide
shareholders with information on the policies that the Company followed in
order to try to achieve its objective. The net proceeds of the portfolio sale
completed after the year end were not sufficient to meet all the bank
borrowings and there is therefore no surplus attributable to shareholders.
Investment Objective Followed During the Year
The Company held a diversified portfolio of European commercial properties. The
investment objective of the Company was 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 Followed During the Year
The Company 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 was expected that the
principal source of funds from which to repay borrowings and meet other
liabilities would be the net proceeds from disposals of assets in the Group's
property portfolio. It was expected that all of the property investments would
need to be sold to meet the Company's obligations to its lenders and other
creditors and that such obligations would not be met in full.
The Directors did not expect that:
* any new investments would be made (other than cash or near cash
equivalent securities);
* any net new borrowings would be drawn down; or
* any dividends would be paid.
Performance
Key Performance Indicators
The key concern for the Directors during the year has been to maintain
solvency. Therefore, income and the group's cash position were carefully
monitored as well as seeking appropriate assurances from creditors.
Financial Position
Assets and Liabilities
At the year end, the Group had a total net liabilities position of GBP55.0million
(2014: total net liabilities of GBP37.7 million) equal to -35.9p per share (2014:
-24.6p). The assets comprised a portfolio of European property in the office
and industrial sectors and the liabilities included bank borrowings totalling GBP
122.2 million (2014: GBP150.8 million).
Share Valuations and Net Asset Value ('NAV')
The listing of the Company's shares was suspended on 28 July 2014 and there is
no longer any market price. On 31 March 2015, the NAV and the adjusted NAV per
ordinary share were, -35.9p and -35.6p (2014: -24.6p and -19.5p) 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 GBP
54,960,000 (2014: GBP37,674,000).
Revenue and Dividends
The financial results for the year are shown in the Consolidated Statement of
Comprehensive Income on page 23. No dividends have been paid during the year
under review (2014: GBPnil), and no further dividends will be paid.
Borrowing
The Group's borrowing facility in place at the beginning of the year 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. To facilitate this,
the repayment date of the facility was extended. As expected, the net sales
proceeds were not sufficient to meet all amounts due to lenders and the lending
banks have agreed that amounts still outstanding following the disposal 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 consented to the sales process and
also agreed to waive the amounts due to it following completion of the sales
process.
Hedging
Hedging policy has been 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 required 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 was partially hedged in the year through the
use of a basket of interest rate swaps. All such swaps expired on 28 September
2014 and were not replaced.
The Group hedged against fluctuations in the euro for the net investment in
European assets made in 2006 and 2007. These hedges were ineffective at 31
March 2014 and they were cancelled at a cost of GBP7.8 million at their maturity
date in April 2014. The currency exposure was unhedged thereafter.
Current and Future Developments
As described in the Chairman's statement the Board and the Investment Manager
have completed the disposal of all the remaining property assets. The Directors
are now engaged in the process of winding up the group companies.
Principal Risks and Uncertainties
The Directors and Investment Manager have been seeking to dispose of assets and
repay borrowings since 2011. During the year under review the timescale, focus
and approach to asset disposals changed from a progressive, but selective,
asset-by-asset process to one of seeking purchasers for the entire portfolio in
a single transaction, or multiple but simultaneous deals. This has now been
completed since the year end.
The principal risks and uncertainties relating to the Company can be summarised
under two different categories: those faced prior to completion of the asset
disposal; and those applying thereafter.
Risks and uncertainties applicable prior to asset disposal
While the group retained ownership of assets being marketed or prepared for
marketing, the Company and shareholders were exposed to a number of risks and
uncertainties, including:
* Insolvency risk: at no time during the period was the Company in
compliance with covenants in the loan agreement. Accordingly the lending bank
could at any time have exercised its right to demand repayment of loans
outstanding, which the Company could not have met and it would have been
immediately insolvent;
* Borrowing risk: the value of borrowings exceeded the value of the
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Company's assets throughout the period, meaning the Company could not have met
any repayment demand. The Company was also dependent on its rental income to
meet the interest payments due on borrowings. A fall in rental income due to
tenant default, failure to retain tenants or renegotiated leases could have
left the Company unable to meet the cost of servicing borrowings;
* Risk of unsuccessful marketing of the property assets and therefore
failure to meet the investment objective;
* Market movement in asset valuations: valuations from independent valuers
could be subject to changes in asset-specific factors such as lease terms and
tenant default as well as to broader market and economic fluctuations affecting
property prices. Valuations ascribed by potential purchasers were also subject
to the same variable influences and may well differ, perhaps materially, from
professional valuations; and
* Interest rate and currency risks: with substantial borrowings in both
Euro and sterling, much of which subject to floating interest rates, and assets
also denominated in both currencies, the group was exposed to variations in
interest rates and to foreign exchange rate risks.
Risks and uncertainties applicable following completion of the portfolio sale
Following the sale of the properties and a number of subsidiaries, the group's
structure and business is considerably simplified and the balance sheet much
smaller. Accordingly the number of risks and uncertainties faced by the group
is significantly reduced. Furthermore, it is now confirmed that there is no
prospect of any return to shareholders and therefore the remaining risks can
have no detrimental financial effect on shareholders.
The remaining risks can be summarised briefly as follows:
* Insolvency risk: the actual costs of winding up the Company and its
subsidiaries may exceed the amount retained for this purpose and the company
runs the risk of insolvency as it no longer has any source of revenue;
* Regulatory risk: the Company remains subject to various laws and
regulations as it is regulated by the Jersey Financial Services Commission and
remains listed on the UKLA's Official List, albeit that that listing is
suspended. Serious breaches of regulations may impede or delay the orderly
winding up of the Company; and
* Reliance on third parties: the Company has no employees and the directors
are appointed on a non-executive basis. The Company is therefore reliant on
third party service providers for executive functions. Failure of such
providers to perform their obligations may impede or delay the orderly winding
up of the Company.
Board Diversity
The Company's policy on diversity is set out on page 9 of the Annual Financial
Report. The Board comprises five non-executive directors all of whom are male.
Summary biographical details of the Directors are set out on page 6 of the
Annual Financial Report. The Company has no employees.
This Strategic Report was approved by the Board on 17 November 2015
R&H Fund Services (Jersey) Limited
Company Secretary
DIRECTORS' RESPONSIBILITIES STATEMENT
in respect of the preparation of the annual financial report
The Directors are responsible for preparing the financial statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law the Directors have elected to prepare group
financial statements in accordance with International Financial Reporting
Standards ('IFRS') as adopted by the European Union. The financial statements
are required by law to give a true and fair view of the state of affairs of the
Group and of the profit or loss of the Group for that period.
International Accounting Standard 1 requires that financial statements present
fairly for each financial period the Group's financial position, financial
performance and cash flows. This requires the faithful representation of the
effects of transactions, other events and conditions in accordance with the
definitions and recognition criteria for assets, liabilities, income and
expenses set out in the International Accounting Standards Board's 'Framework
for the preparation and presentation of financial statements'. In virtually all
circumstances, a fair presentation will be achieved by compliance with all
applicable IFRS. However, directors are also required to:
* properly select and apply accounting policies;
* present information, including accounting policies, in a manner that
provides relevant, reliable, comparable information;
* provide additional disclosures when compliance with the specific
requirements in IFRS are insufficient to enable users to understand the impact
of particular transactions, other events and conditions on the entity's
financial position and financial performance; and
* make an assessment of the Company's ability to continue as a going
concern.
The Directors, to the best of their knowledge, state that:
* the financial statements, prepared in accordance with IFRS as adopted by
the European Union, give a true and fair view of the assets, liabilities,
financial position and results of the Group;
* this annual report includes a fair review of the development and
performance of the business and the position of the Group together with a
description of the principal risks and uncertainties that it faces; and
* they consider that this annual financial report, taken as a whole, is
fair, balanced and understandable and provides the information necessary for
shareholders to assess the Group's performance, business model and strategy.
The Directors are responsible for keeping proper accounting records that
disclose with reasonable accuracy at any time the financial position of the
Group and enable them to ensure that the financial statements comply with the
Companies (Jersey) Law 1991. They are also responsible for safeguarding the
assets of the Group, and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
Signed on behalf of the Board of Directors
Richard Barnes
Chairman
17 November 2015
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 March 2015
2015 2014
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income
Rental income 9,183 - 9,183 14,934 - 14,934
Service charge income 2,345 - 2,345 3,779 - 3,779
Interest receivable and
other income 102 - 102 16 - 16
Realised gains on swaps - 9,452 9,452 - - -
Unrealised gain on swaps - - - - 333 333
Losses on investment
properties
Unrealised loss on
revaluation of properties - (24,590) (24,590) - (9,914) (9,914)
Lease incentive - (37) (37) - (187) (187)
Realised loss on
disposal of properties - (1,147) (1,147) - (280) (280)
Total income 11,630 (16,322) (4,692) 18,729 (10,048) 8,681
Expenses
Management fees (891) (121) (1,012) (903) (124) (1,027)
Property expenses (4,743) - (4,743) (7,381) - (7,381)
Professional fees (1,676) - (1,676) (1,719) - (1,719)
Total expenses (7,310) (121) (7,431) (10,003) (124) (10,127)
Profit/(loss) before finance
costs and tax 4,320 (16,443) (12,123) 8,726 (10,172) (1,446)
Finance costs (3,829) (522) (4,351) (7,653) (1,044) (8,697)
Profit/(loss) before tax 491 (16,965) (16,474) 1,073 (11,216) (10,143)
Tax (charge)/credit (1,821) 5,493 3,672 (602) 2,889 2,287
Profit/(loss) for the year
attributable to equity
shareholders (1,330) (11,472) (12,802) 471 (8,327) (7,856)
Other comprehensive
income/(expenses)
Items that will not be
reclassified
subsequently to profit or loss
Exchange differences on
translating foreign operations (4,483) (1,306)
Items that may be reclassified
subsequently to profit or loss
Unrealised gain on
revaluation of cross
currency swaps - 1,807
Unrealised gain on
revaluation of interest
rate swaps - 4,670
- 6,477
Total comprehensive expenses (17,285) (2,685)
Loss per ordinary share
- basic and diluted (8.4)p (5.1)p
The total column of this statement represents the Group's consolidated
statement of comprehensive income. The supplementary revenue and capital
columns are presented for information in accordance with the Statement of
Recommended Practice issued by the Association of Investment Companies. All
items in the above statement derive from continuing operations. No operations
were acquired or discontinued in the year.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
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for the year ended 31 march 2015
STATED
CAPITAL OTHER TRANSLATION CAPITAL REVENUE
RESERVE RESERVE RESERVE RESERVE RESERVE TOTAL
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 31 March 2013 101,368 (4,670) 1,766 (199,874) 66,422 (34,988)
(Loss)/profit for the year - - - (8,327) 471 (7,856)
Other comprehensive income:
Exchange differences on
translating foreign - - (1,306) - - (1,306)
operations
Unrealised gain on
revaluation
of cross currency swaps - - 1,807 - - 1,807
Unrealised gain on
revaluation
of interest rate swaps - 4,670 - - - 4,670
Balance at 31 March 2014 101,368 - 2,267 (208,202) 66,893 (37,674)
Loss for the year - - - (11,472) (1,330) (12,802)
Other comprehensive income:
Exchange differences on
translating foreign - - (4,484) - - (4,484)
operations
Balance at 31 March 2015 101,368 - (2,217) (219,674) 65,563 (54,960)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 31 March 2015
2015 2014
GBP'000 GBP'000
Non-current assets
Investment properties - 108,221
- 108,221
Current assets
Trade and other receivables 2,103 3,187
Cash and cash equivalents 7,453 24,190
9,556 27,377
Assets classified as held for sale 81,222 19,156
Total assets 90,778 154,754
Current liabilities
Trade and other payables (9,476) (13,001)
Taxation (196) (3,753)
Interest rate swap liabilities - (1,474)
Currency rate swap liabilities - (7,979)
Obligations under finance lease (472) (461)
Bank loan (122,222) (150,777)
(132,366) (177,445)
Total assets less current liabilities (41,588) (22,691)
Non-current liabilities
Other payables (1,141) (1,420)
Obligations under finance leases (11,961) (7,154)
Deferred taxation (270) (6,409)
(13,372) (14,983)
Net liabilities (54,960) (37,674)
Capital and reserves
Stated capital 101,368 101,368
Translation reserve (2,217) 2,267
Capital reserves (219,674) (208,202)
Revenue reserves 65,563 66,893
Issued capital and reserves (54,960) (37,674)
Net asset value per ordinary share (35.9)p (24.6)p
Approved by the Board of Directors on 17 November 2015.
Richard Barnes
Chairman
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 March 2015
2015 2014
GBP'000 GBP'000
Operating activities
Rent and service charges received 11,807 19,790
Bank interest received 2 3
Proceeds on swap disposal (7,978) -
Bank loan interest paid (5,449) (8,357)
Operating expense payments (10,262) (10,921)
Tax paid (6,022) (134)
Net cash from operating activities (17,902) 381
Investing activities
Capital expenditures and incentives (257) (1,080)
Sale of investment properties 18,755 53,164
Net cash from investing activities 18,498 52,084
Financing activities
Loan facility fee (120) (324)
Repayment of loan (17,183) (39,172)
Net cash used in financing activities (17,303) (39,496)
(Decrease)/increase in cash and cash equivalents (16,707) 12,969
Cash and cash equivalents at beginning of year 24,190 11,198
Effect of foreign exchange changes (30) 23
Cash and cash equivalents at end of year 7,453 24,190
NOTES TO THE FINANCIAL STATEMENTS
1. Accounting policies
A summary of the principal accounting policies, all of which have been applied
consistently throughout this and the previous year, is set out below.
(a) Going Concern
It was announced on 28 July 2014 that the Company would seek purchasers for all
the Group's remaining property assets and contracts were exchanged on 19 June
2015 for the sale of those assets. The Directors are implementing plans for the
orderly and solvent winding up of the Company and its subsidiaries. Given the
effective termination of the Company's business, the Directors do not consider
it appropriate to treat the Company as a going concern and the accounts have
been prepared on a basis other than that of a going concern. The financial
statements do not include any provision for the future costs of winding up the
group companies except to the extent that they were committed at the end of the
reporting period.
(b) Basis of Accounting
The financial statements of the Group have been prepared in accordance with
International Financial Reporting Standards ('IFRS') as adopted for use in the
European Union, which comprise standards and interpretations approved by the
International Accounting Standards Board ('IASB'), and International Accounting
Standards and Standing Interpretations Committee interpretations approved by
the International Accounting Standards Committee ('IASC') that remain in
effect, and were subsequently endorsed by the European Union.
The financial statements have been prepared on a basis other than that of a
going concern. Where presentational guidance set out in the Statement of
Recommended Practice ('SORP') for investment trusts issued by the Association
of Investment Companies ('AIC') in January 2009 is consistent with the
requirements of IFRS, the Directors have sought to prepare the financial
statements on a basis compliant with the recommendations of the SORP.
2. Interest receivable and other income
YEAR YEAR
ENDED ENDED
31 MARCH 31 MARCH
2015 2014
GBP'000 GBP'000
Interest receivable 2 3
Other income 100 13
102 16
3. Profit/(loss) before finance costs and tax
Profit/(loss) before finance costs and tax is stated after charging:
YEAR ENDED YEAR ENDED
31 MARCH 2015 31 MARCH 2014
REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Directors' fees 134 - 134 123 - 123
Fees payable to the Company's
Auditor for the audit of
the financial statements
- Current period 127 - 127 92 - 92
Fees payable to the Company's
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