Invesco Prop Inc Annual Financial Report

 
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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