Invista European Real Estate Trust Full Year -8-

At 30 September 2014 the Group had access to a EUR220.0 million credit facility from Blackstone Real Estate Debt Strategies ("BREDS") and Bank of America Merrill Lynch International Limited (BAML) of which the Group had an unpaid principal balance of EUR217.9 million. The Company's gross Loan to Value ("LTV") as at that date was 77.3%.

The Group seeks to avoid significant exposure to unforeseen upward interest rate movements, with all third party debt currently hedged by means of interest rate cap agreements.

Accounting, legal and regulatory

The Group has processes in place to ensure that the administrators maintain accurate accounting records and that sufficient evidence to support the accounts is available to the auditors upon request. The Administrator also operates established accounting systems that address issues of control and completeness. Procedures are in place to ensure that the quarterly NAV and Gross Asset Value are calculated properly by the Administrator, and the Group's property assets are valued quarterly by an independent specialist property valuation firm which is provided with regular updates on portfolio activity by the Investment Manager.

The Administrator monitors legal requirements in Luxembourg to ensure that adequate procedures and reminders are in place to meet the Group's legal requirements and obligations. The Investment Manager undertakes appropriate legal, tax and structuring due diligence with the assistance of external advisers when transacting and managing the Company's assets. All contracts entered into by the Group are reviewed by the Company's legal and the Group's other advisers. Processes are in place to ensure that the Group complies with the conditions applicable to property investment companies set out in the Listing Rules and the Circulars issued by the Luxembourg financial supervisory authority, the CSSF.

The Administrator attends all Board meetings to be aware of all announcements that need to be made and the Group's advisers are aware of their obligations to advise the Administrator, and where relevant the Board, of any events which require notification be made to the Board.

Finally, the Board is satisfied that the Investment Manager and Administrator have adequate procedures in place to ensure continued compliance with regulatory requirements of the UK Financial Conduct Authority and the CSSF.

Citco REIF Services (Luxembourg) S.A. ("Citco") has entered into an Administration Agreement with the Company which may be terminated by either party giving to the other not less than 120 days notice in writing. The Administrator is entitled to an annual fee equal to EUR1.1 million pa.

Management

The Board has appointed Internos Global Investors Limited ("Internos") in replacement of Invista Real Estate Investment Management Limited ("Invista") to execute the investment objective and policy set out above pursuant to an investment advisory agreement dated 22 September 2011 (the "Internos IAA").

The appointment of Internos was approved by (i) the CSSF as the Company's regulator (in relation to Internos acting as manager and promoter of the Company); and (ii) Bank of Scotland in its capacity as former facility agent in connection with the credit facility provided by it to the Company at that time. The Company announced on 15 December 2011 that Internos has taken on the role of investment manager with effect from 15 December 2011 and that the proposed change of the Company investment objective and policy to implement a structured realisation of its portfolio of assets was subject to regulatory approval. The Company concluded discussions with the CSSF on this point and it may now pursue a structured realisation of its assets in line with the resolution approved by the Company's shareholders at the EGM on 14 October 2011, as an investment strategy under the Company's original investment policy.

The Internos IAA (including the transitional arrangements thereunder), may be terminated by either the Company or Internos on 6 months written notice. The Internos IAA may also be terminated immediately by the Company in certain circumstances, such as in the case of the departure of certain key persons of Internos or for regulatory reasons.

Management fees

From 15 December 2011, when Internos took on the management of the Company's assets from Invista, the Company agreed to pay Internos pursuant to the Internos IAA a management fee of 1.25% per annum on the Net Asset Value attributable to the Company's ordinary shareholders, subject to a minimum of EUR1.0 million per annum. Assuming an unchanged level of NAV, this was approximately EUR1.6 million per annum lower than the management fee payable under the Invista IMA, representing a reduction of 47%.

In addition, the Company will pay Internos a realisation fee equal to 12.5% of the amount by which cash returned to ordinary shareholders exceeds EUR82.8 million (the "Notional Market Cap" as defined in the Internos IAA), compounded thereafter at 10% per annum.

Significant contracts

Apart from the Internos IAA and Administration Agreements, other significant contracts are with the following parties:

   --      Citco Bank Nederland N.V. - Luxembourg Branch (Citco Bank) as Custodian Bank 

-- Citco REIF Services (Luxembourg) S.A. (Citco) as Central Administrator & Company Secretary & The Registrar & Transfer Agent

   --      Capita IRG Trustees Limited as Depository Agent 
   --      Internos Global Investors Ltd. ("Internos") for accounting services 
   --      KPMG Luxembourg, Société coopérative, for auditing and tax advisory services 

Other Significant contracts which have been entered into by the Company are listed in Part XII, Section 8 of the Prospectus.

Creditor payment policy

It is the Group's policy to ensure settlement of supplier invoices in accordance with stated terms.

Donations

The Company made no political or charitable donations during the year

Directors

The Directors of the Company (who together with their beneficial interests in the voting rights of the Company's ordinary share capital as at 30 September 2014) are listed below:

 
 Director                           30 Sep 14    30 Sep            30 Sep 13    30 Sep 
                                                     14                             13 
                             Number of shares         %     Number of shares         % 
 Tom Chandos (Chairman)      261,000 ordinary    0.1004     261,000 ordinary    0.1004 
                           shares, and 10,200                    shares, and 
                            preference shares    0.0350    10,200 preference    0.0350 
                                                                  shares and 
                                                             10,200 warrants    0.0350 
 Michael Chidiac                            -         -                    -         - 
 Robert DeNormandie                         -         -                    -         - 
 William Scott                              -         -                    -         - 
 
 
 

Directors are elected and may be removed with or without cause or replaced by the shareholders in accordance with the rules set out in articles 13 and 26 of the Articles.

Directors' Remuneration

The appointment dates and gross remuneration of the Directors (not including expenses) during the current and previous financial year was as follows:

 
 Director                       Date of appointment   30 September   30 September 
                                                              2014           2013 
                                                               EUR            EUR 
 Tom Chandos (Chairman)            17 November 2006         52,000         52,000 
 John Frederiksen (resigned 
  23 April 2013)                   17 November 2006              -         18,449 
 Michael Chidiac                   17 November 2006         35,000         35,000 
 Robert DeNormandie                   26 April 2007         40,000         40,000 
                                       28 September 
 William Scott                                 2012         30,000         30,000 
                                                           157,000        175,449 
 
 

The Directors do not have service contracts with the Company. The terms of appointment provide that a Director shall retire at every Annual General Meeting.

The Directors receive a base fee of EUR30,000 per annum, and the Chairman receives EUR52,000 per annum. The Chairman of the Audit Committee receives an additional fee of EUR5,000 per annum, reflecting his additional responsibilities and workload. All Luxembourg based Directors also receive an additional EUR5,000 per annum in recognition of their additional work.

The Directors are not eligible for bonuses, pension benefits, share options or other incentives or benefits.

Compensation in case of resignation, removal from office or takeover bid.

The Company has not entered into any agreements with the Directors providing for compensation if they resign or are removed from office without valid reason or if their appointments cease because of a takeover bid.

Disclosure of information to auditors

As far as each of the Directors is aware, there is no relevant audit information of which has not been disclosed to the Company's external auditors and each of the Directors has taken all of the steps that they each ought to have taken to be aware of relevant audit information and to establish that the Company's auditors are aware of that information.