Final Results

RNS Number : 7391F

TR Property Investment Trust PLC

29 May 2013

 



This announcement and the information contained herein is not for publication, distribution or release in, or into, directly or indirectly, the United States, Canada, Australia or Japan.

TR PROPERTY INVESTMENT TRUST PLC

Unaudited preliminary results for the year ended 31 March 2013

29 May 2013

The financial highlights presented below represent the Ordinary shares only and do not include the financial results of the Sigma share class up to the date of conversion.

ORDINARY SHARES Financial Highlights	Year ended 31 March 2013	Year ended 31 March 2012	% Change
Revenue
Total Revenue (£'000)	27,908	26,339	+6.0
Net revenue profit after tax (£'000)	18,497	18,114	+2.1
Revenue earnings per share	6.74p	7.07p	-4.7
Net dividend per share1	7.00p	6.60p	+6.1
	At 31 March 2013	At 31 March 2012	% Change
Balance Sheet
Net asset value per share	215.25p	183.62p	+17.2
Shareholders' funds (£'000)	684,219	470,472	+45.4
Shares in issue at the end of the period (m)	317.9	256.2	+24.1
Net debt2	9.6%	10.9%

Performance	Year ended 31 March 2013	Year ended 31 March 2012
Assets and Benchmark
Benchmark performance (total return)	+17.8%	-8.9%
NAV total return	+21.5%	-8.5%
IPD Monthly index total return*	+2.5%	+6.6%
Total return from direct property	+7.4%	+12.0%
	Year ended 31 March 2013	Year ended 31 March 2012	% Change
Balance Sheet
Share price	186.30p	154.50p	+20.6
Share price total return	+25.8%	-9.5%
Market capitalisation	£592m	£396m	+49.5
	Year ended 31 March 2013	Year ended 31 March 2012
Ongoing Charges 3
Excluding Performance fee	0.93%	1.08%
Including Performance fee	1.41%	1.08%
Excluding Performance fee and Direct Property costs	0.86%	0.99%

* IPD monthly, one year cumulative

1. Net dividends per shares are the dividends in respect of the financial year ended 31 March 2013. An interim dividend of 2.65p was paid in January 2013 and a final dividend of 4.35p will be paid in August 2013.

2. Net debt is the total value of loans (including notional exposure on CFDs) and debentures less cash as a proportion of Net Asset Value.

3. Ongoing charges calculated in accordance with the AIC methodology

Chairman's Statement

Introduction - Valedictory remarks

This report marks the end of my 9 years as Chairman of your Board of Directors. I succeeded Alastair Ross Goobey in 2004. He was an inspiration in this field. In Alastair's farewell statement, he was able to point to a strong ten year performance where the share price had risen from 40p in 1994 to 95p in 2004. The dividend had increased from 0.9p per share to 2.5p. Just as importantly, the Managers had significantly outperformed their benchmark index.

This 'historic' reference is to emphasise the long term nature of property investment. I believe this is just as important in equities as in physical property.

Between 2004 and 2013 the share price advanced from 95p to 186p. Dividends have grown from 2.5p to 7.0p.  However within both periods there was significant volatility. In the first the share price dropped in three out of the ten years, in the second it fell four times. The latter years saw a bigger boom with our shares reaching over 230p each; an entry into and a retreat from the Sigma small company share class; and a massive crash in 2007.

In the past 20 years the dividend has been increased 19 times and held level only once - in 2010. The compound average dividend growth has been 13% per annum in the last 10 years, establishing a new level of income which has so far more than met inflation. Shareholders have rightly looked for income more keenly in recent years.  The view that long term investors should enjoy a progressive income as well as outperformance on their asset value is a matter which the Board and our fund management team have at the top of their agenda.

These results have been achieved by fund management teams of outstanding quality. Chris Turner was not only an exceptionally gifted manager but also recognised the imperative of developing a very strong successor. Marcus Phayre-Mudge has invested in greater international and analytical expertise than ever before.  He has an inclusive style both with his team and with external stakeholders, paying great attention to shareholder communication - basically spreading the message that the Trust is one of the best ways to invest in property in a profitable and flexible way.

Last year

Turning to the specifics of the past year I am tempted to refer shareholders to my statement in last year's Annual Report - volatile equity markets and the impact of macro events. Markets have reacted bravely to the promises of unlimited support for the Eurozone laggards, probably encouraged more by what is improving in North America and continued growth in Asia.

Within this scenario, our property world is best described as steady with hot and cold spots. Your fund management team have taken account of the macro picture and then set about bottom up analysis of companies considering the quality of their assets and management to make investment decisions. Performance has been significantly positive, and well ahead of a demanding benchmark index, to earn a performance fee for the first time in four years. It is worth noting that the team has consistently beaten the benchmark index over that period but not by enough to meet the performance fee hurdle rate.

Benchmark

As at the end of March 2013, Unibail was the largest position in the benchmark index and had reached 16.8% of all constituents of the index. The Board felt that this level of concentration ran contrary to the stated investment policy of a diversified portfolio. The Board resolved to amend the benchmark index against which the manager is measured from the FTSE EPRA/NAREIT Developed Europe Net Total Return Index (in GBP) to the FTSE EPRA/NAREIT Developed Europe Capped Net Total Return Index (in GBP) with effect from 1 April 2013. The constituents of the benchmark index do not change, however individual stock positions are limited to 10%. Unibail is the only stock which had a weighting in the previous benchmark index larger than 10%.

Expense Allocation

The Board has reviewed the allocation of expenses between Revenue and Capital. Expenses are allocated between the revenue and capital accounts in line with the Board's long-term expectations of the source of returns. The Board examined the past, both long and shorter term, and it was clear that the capital account was more influential in generating returns in recent years. The Board do not expect this to change in the medium term. Also, having looked at allocations across the Investment Trust sector generally, the current higher allocation to revenue is greater than is the norm for Investment Trusts focused on a Total Return objective.

For the year to March 2014, 75% of management fees will be allocated to the capital account (2013: 33.33%) and 25% will be allocated to the income account (2013: 66.67%).  Likewise, 75% of the finance costs will be allocated to capital with 25% to revenue (2013: 50%/50%).

The revised allocation of expenses described above will have a positive impact on reported earnings going forward.

Sigma Conversion in December 2012

The Board took the decision to recommend the conversion of Sigma shares into Ordinary shares. This was approved by shareholders and implemented in December 2012. Consultation with investors had confirmed that the size of Sigma was no longer on their preferred risk profile. Ironically the overall company performance of Sigma's invested companies was better than the market. I would like to thank all shareholders who helped make this transaction happen. The benefits of a clear statement of purpose and structure have already been appreciated by investors.

NAV and Share Price Performance

The NAV total return for the year was 21.5% versus the benchmark total return of 17.8%, an outperformance of 3.7%. The share price total return was 25.8%.

More detail and commentary on performance is set out in the Manager's Report below.

Revenue Results

The stated revenue earnings figure for the year of 6.74p is ahead of guidance set out in the interim report. However, because of the way this figure is calculated, using the weighted average number of shares in issue throughout the year, and due to the fact that earnings from the portfolio are skewed towards the beginning of the year, this figure is lower than the amount available for the dividend.  A more detailed explanation is provided in the Manager's Report.

Dividend

The Board is proposing a final dividend of 4.35p which compares with the prior year final dividend of 4.20p. When taken with the interim dividend already paid of 2.65p, this is a full year dividend of 7.00p, an increase of 6.1% over the 6.60p paid last year.

Revenue Outlook

As set out above, the revised allocation of management fees and finance costs will provide a new base for earnings.

Uncertainties surrounding the timing of dividend receipts around the year end, currency fluctuations and the impact of the income mix on the tax charge remain.

Our Manager's current expectation is that earnings for the year ending March 2014 will be in the region of 7.50p per share, on the basis that the factors mentioned above do not fluctuate widely.

Net Debt and Gearing

Gearing remained modest throughout the year, fluctuating between 9% and 11%. The debt facilities previously allocated between the Ordinary and Sigma share classes are now all for the benefit of the Ordinary share class.  The one year facility with RBS was renewed in January 2013 for a further year and the ING facility was renewed for a further two year term in early May 2013. The policy of retaining a mix of short and medium term debt remains in place. Investing through Contracts for Difference ("CFD's") also offers further opportunities for competitively priced gearing and will be brought into the mix when appropriate.

Currencies

Sterling strengthened against the Euro by around 7% from March 2012 to its peak in July, which was not what we wanted through the main part of our Euro dividend season.  It then went on to weaken by almost 11% before settling close to the opening position at the end of March 2013.

Scandinavian currencies followed a similar pattern, although their weakness in early March this year coincided more helpfully with their local dividend season.

As in previous years the fund has not hedged the income account but has continued to hedge the capital currency exposure in line with the benchmark index.

Discount and Share Repurchases

The share price discount to net asset value (capital only) started the period at 14.3% and fluctuated between 12.0% and 15.0% for most of the period.  It widened on the back of arbitrage trades following the announcement of the corporate action at the end of September reaching a low of 16.4% at the end of November but ended the period at just under 12.0%. The Board continues to pay close attention to the discount to net asset value.

Following the remerger of the two share classes in December I am pleased to report an increase in the liquidity of the Ordinary shares.

A number of initiatives are being followed to improve shareholder communication and make the shares as accessible as possible to a wide range of investors.

We have increased the number of ways of investing in our shares. TR Property Investment Trust plc is now offered as part of the F&C savings plans, and our Registrars, Computershare, offer dealing options for certificated holders and a DRIP option for reinvestment of dividends for holders on the main register.

Outlook

At the beginning of this statement I emphasised the importance of taking a long term view of property investment in order to be successful. In the year under review the policy of overweight holdings in  high quality assets, including introductions to new, well researched opportunities, has paid off well in both revenue and capital growth. Looking forward, these fundamentals will continue.

The Manager's Report gives a detailed view of prospects for earnings and areas of value adding opportunities. Here I would comment that the outlook is rather better than at this time last year. Naturally all the usual caveats apply, but as I write this on 28 May 2013, market sentiment is positive and there are more slightly better economic indicators than for many months (e.g.UK growth), whilst negatives are edging towards neutral (e.g. Eurozone laggards getting a grip).

As for TR Property, I do believe that there are opportunities looking forward to add further value. As already mentioned, communication of the benefits of our Trust has grown in importance. We are taking steps to improve the visibility of the Trust to potential investors and to help them appreciate that the Trust is a low cost and very liquid way of holding property in their portfolio.

Our aim is to narrow the discount between the share price and the Net Asset Value. This is a long term project but the changes being introduced through the Retail Distribution Review are a good platform to help us to level the playing field with open ended funds who have previously paid undisclosed commissions to "Independent" Financial Advisors which of course we do not.

Your Board is conscious that cost control is important to shareholders and we have worked with F&C to continue our downward pressure on costs and the Management Fee. This year's reduction will more than fund the investment in communications and we are pleased to have joined F&C's share plan, the largest in the sector. The coming year will see us take steps towards the implementation of the Alternative Investment Fund Managers Directive ("A.I.F.M.D."). This bureaucratic measure will add cost, consume time better spent on commercial matters and add no value to the real governance of your investments. As "we are all in this together" it will not detract in any way from the relative attraction of our Company to investors. In terms of global competitiveness it is another small indication that the EU has its head in the sand. Be assured that your Board is taking every possible measure to retain flexibility of operation as it is implemented and to minimise any impact on the fund management team.

Finally I would like to wish the Trust, its Managers and the Board every success for the future. The fund managers have modernised and expanded their capability in recent years and I am sure they will continue to be competitive on your behalf. At the same time the Board's composition has changed to reflect a new generation and professional focus. In particular I wish Caroline every success for the future as she takes over the Chair of a company which has given me enormous satisfaction to be part of for the past 16 years.

Peter Salsbury

Chairman

Manager's Report

Market Background and Outlook

Introduction

Taking a glance at the returns from property equities (and this Trust) for the year under review and you would be forgiven for thinking that everything was ticking along nicely. It is, of course, pleasing to report that in certain parts of the market that is indeed the case and our broadly positive views 12 months ago have been rewarded. However, I also need to report that renewed investor appetite for equities across Continental Europe and the UK remains sentiment driven, rather than in response to underlying broad economic improvement. I am in danger of serial repetition when I remind investors of the huge structural reforms which we believe still need to be undertaken across the fractured single currency union.

However we remain confident that some progress has been made, particularly with regard to central bank responses, not only in Europe but across the world. Whilst global central bank monetary policy remains 'unconventional' through quantitative easing and other liquidity mechanisms, in Europe the ECB went a step further. Mario Draghi stating in July last year '..the ECB is ready to do whatever it takes to preserve the Euro, and believe me it will be enough' has been seen as pivotal in turning sentiment. His proposal of committing the ECB to unlimited intervention in the short dated paper of distressed member countries, conditional on those particular governments conforming to dictated fiscal / austerity programmes has been heralded a success not just because it was a  groundbreaking statement of support but also because no Eurozone sovereign has taken up the offer. The longer term consequences of such offers of intervention are unknown, the short term impact was dramatic with peripheral Eurozone bond yields returning to levels last seen in late 2010. The subsequent fall in risk premia and market volatility duly benefited equity valuations. Our benchmark's volatility (measured as the 90 day historic, annualised) fell from 18.1% in March 2012 to 13% a year later.

The second half of the year particularly illustrates the market's bias of responding positively to macro forces rather than regional economic fundamentals. Our approach remains driven by a 'bottom up' investment philosophy and normally such euphoria in the face of weak fundamentals would make us duly nervous. However we believe there are grounds for optimism, particularly for listed real estate. My opening comments referred to certain parts of our investible universe as performing both well and as expected. This statement relates not just to those geographic submarkets where the economic and real estate fundamentals are enjoying positive growth, but also to those listed companies who may be exposed to temporarily 'ex-growth' conditions but are able to manufacture returns through the continuing reduction in their cost of debt and utilisation of their balance sheets.

In essence, the themes I drew on in last year's report still remain our central conviction. We maintain exposure to those markets where we see positive trends in real estate fundamentals. The dispersion of returns across sub-markets and sectors continues to be amplified through listed stocks providing us with plenty of opportunity to stock pick. However, whilst those remain consistent themes in our strategy they have been joined by a broader trend. The improvement in market sentiment coupled with the ability of many of our companies to source both debt and equity has given us greater confidence that a broader range of businesses can extract acceptable returns from their chosen markets. European commercial property continues to offer investors a steady source of income, much of it index-linked and at greater spreads over corporate bonds than a year ago. I hope the report will illustrate where we have felt comfortable broadening our focus at the stock level. You will note that your fund's overall gearing has not increased and this is consistent with our overview that sound, broad economic growth across Europe remains elusive.

Property Markets

The ongoing theme of international capital flows focused on buying prime real estate in a small number of 'city states' remains as strong, if not stronger, than 12 months ago. The dominant characteristic is that this capital is almost entirely equity (rather than debt) and appears not to deviate from the well trodden path of acquiring only prime assets. London continues to dominate shopping lists with £11.6bn of investment in 2012, triple that of Paris. Over £8bn of that was classified as 'overseas buyers'. Importantly this Central London investment was over 38% of the £30.3bn of total UK transactions. IPD reported that initial yields in London's West End and Midtown tightened by 40bps in the year to December 2012. Likewise the Central London residential market also continues to attract foreign capital at an unprecedented rate. Knight Frank reported that 49% of all prime residential property was purchased by overseas buyers in 2012. Prices rose on average by over 8.7% in the year. Paris has also enjoyed strong investor interest, again for prime assets but here vibrant domestic buyers, particularly pension funds and insurance companies, battle with international buyers. Where investors can see rental growth or at least rental stability, the income margin over corporate (and most sovereign) bonds is enough of a purchase rationale. Unlike fixed income, prime property offers a long term history of real as opposed to nominal growth. This tale of competitive bidding against a backdrop of resolutely low bond yields resonates across all those other European cities exhibiting rental stability including Stockholm, Oslo, Lyon, Hamburg, Munich, Berlin, Geneva and Zurich. In contrast in Brussels, Amsterdam, Milan and Madrid, transactions have dwindled as buyers fear falling rents and sellers have no compunction to sell at lower prices. Once again banks are not pressurising over-indebted borrowers - a recurring feature of this era of huge central bank liquidity stimulus.

A consequence of this trend of cross border global money flows into prime capital and key cities has been that domestic institutions are widening their own scope for investment. In effect they are drifting up the yield curve looking for higher returns but consequently taking more risk. In property parlance they are seeking 'core plus' as opposed to 'core'.  This is clearly an encouraging sign. We are aware of pension funds and other savings institutions who have maintained or increased their allocation to property (invariably focused on their individual domestic markets) attracted by the yield no longer offered by fixed income products. Even with tentative market evidence of a broadening of institutional demand, capital returns from UK property were still -3% in 2012 resulting in total return of 2.7%.

Offices

With real GDP growth across the Eurozone at -0.6% for 2012 and only just positive for the UK at 0.3% it is no surprise that the list of cities which had experienced net take up of office space and a decline in vacancy, noted in this report a year ago, has not expanded. London and Paris remain the dominant office exposure within the Pan European listed property company universe and therefore are worthy of a deeper examination. London continues to stand out with rental growth across all core submarkets - West End (+4.1%) and City (+2.8%) but interestingly also in the less central sub-markets of Clerkenwell, Islington, Kings Cross and the Southbank. Whilst headcount in financial services is dropping, London's broad employment base provides ample compensation outside of EC2 and Docklands. In the West End, 71% of all take up was from technology and media businesses and 86% were lettings below 50,000 sq ft. The Q1 2013 take up of 1.4m ft equalled the June 2000 quarterly figure (at the height of the tech bubble) but this is skewed by Google's pre-let at Kings Cross. The insurance sector has been buoyant with 50% pre-lettings at Land Securities' 20 Fenchurch Street (known as the Walkie-Talkie) a year ahead of completion.

Vacancy across the Greater Paris region remains constant at 7.1% and whilst the central arrondisements have experienced a slight reduction in vacancy, the suburban markets and Peri Défense (west of La Défense) have seen weakness and falling headline rents. The message remains clear - even in the core sub-markets tenants have the upper hand, landlords must work hard at lease expiry to incentivise tenants to remain in situ. Rent frees and other capital contributions are, if anything, increasing as owners endeavour to maintain headline rents (and investment value).

The Paris experience is reflected broadly across those European cities identified as stable mainly located in Scandinavia (Stockholm, Oslo, Stavanger and Gothenburg), Germany and Switzerland. The remaining key Northern European markets of Amsterdam and Brussels remain firmly in the doldrums. Dublin deserves a mention, benefiting from renewed direct foreign investment particularly from US technology related businesses and the flickerings of life in the CBD.

Retail

Retailing's internet revolution is nothing new. It has been underway since the web came into existence. What is disturbing for both landlords and retailers is the speed of changing attitudes and customer shopping habits. The accelerants are hi-speed connectivity into homes and even more importantly mobile enabled devices. The UK is at the forefront of this process. Last year we reported the 2011 figure of 17.6m 'smart phone' users, which was double 2009's number. The 2012 figure was 19.2m and the forecast for 2013 is 24m - 62% of the working population. The ability of shoppers to scan virtually any product barcode and identify the cheapest place to buy that item, on or offline, is a defining technological event as far as retailing is concerned. Clearly those with the greatest domestic internet penetration (UK and Scandinavia) are feeling it more keenly than Italy (Western Europe's lowest domestic internet user).

The retail property winners will be those locations which provide the widest range of retailers, entertainment (and food offer) and above all convenience. Tying together traditional retailing, 'click and collect', as well as returns bought online will be an increasing trend. The continued rise of the dominant regional and supra regional mall we believe is irreversible. Whilst smaller centres will not disappear, due to the density of population in Europe and the limitations on travel time, we believe that retail tenants affordability will diminish. Work by Property Research and others concluded that a national brand which required over 200 stores 10 years ago to reach 60% of the population will, in today's multichannel world need just 50 to 60. Smaller centres and high streets are bearing the brunt of this evolution. The winners will not always be the out of town centres, in fact we believe those with city centres which can achieve this level of quality and dominance will ultimately perform best, benefiting from population densities.

This evolution is reflected in investors' valuations with yields on the top centres remaining firm over the period whilst secondary and smaller centres have seen values continue to fall. Retail was the worst performing sector in the IPD UK Index in 2012, with capital growth of -4.2%.

Across Europe, this revolution in shopping trends is slower but nevertheless on its way. In the meantime the headwinds of negative real wage growth and rising unemployment in many parts of the Continent continue to dampen consumer confidence. This in turn has resulted in negative annualised non-food retail sales growth over the last three years everywhere except in Germany, Sweden and Norway.

Distribution and Industrial

We are seeing surprisingly robust occupier demand, particularly in logistics as corporates seek to drive cost savings throughout the supply chain. The winners have been modern facilities located in the industrial heartlands and logistics facilities on the main East-West routes. In the UK, West London industrials and the traditional logistics motorway corridors have seen rental growth particularly in the 'design and build' market.

The Low Countries have seen rents return to pre-crisis levels with the area benefiting from its coastal hubs and dense motorway network. Gent, Antwerp and Brussels all remain tight markets with rental growth. Germany remains a key hot spot with rents rising in all the five key markets of Hamburg, Berlin, Munich, Dusseldorf and Frankfurt. Elsewhere in the periphery the lack of demand and a slow soak up of existing space is encouraging. All these markets are expected to be above 2008 rental value levels by the end of the year. Even in Ireland, whilst Dublin industrial rents are 50% below 2008's levels they have now stabilised for the best stock. However, Spain remains the weakest market by far with vacancy of over 10m sq ft in Madrid and 6.8m sq ft in Barcelona - record levels.

Looking further east, once again it is very local market focused. In Poland, Warsaw rents are falling due to further supply but rising in Poznan, the nascent second hub, where there is less than 0.5m sq ft available (equivalent to less than two years take up) and where Segro are focusing their Polish expansion. Further north, St Petersburg has seen prime logistic rents grow 13% in the year, however in Moscow 40% of the 8m sq ft under construction will be delivered speculatively in the next 12 months. There are clearly opportunities for growth across Europe but it pays to be very focused on particular sub-markets.

Debt and Credit Markets

New banking regulation from the European Banking Authority requires European banks to maintain a Core Tier ratio of 9%. We anticipated that this would result in an acceleration in banks seeking repayment of loans coupled with reducing new exposure to real estate lending. The concern was that this deleveraging strategy by the banks would result in a widening in the 'net debt funding gap', which seeks to measure the capital shortfall required by the property sector when lenders fail to renew loans and seek repayment.

It is very encouraging to report that in their most recent analysis (end of 2012) DTZ concluded that a dramatic 45% increase in new non-bank lending and a growing diversity of funding sources will result in the funding gap actually narrowing over 2013. Also the expectation is for the gap to all but disappear by the end of 2015. This academic analysis resonates with what we are experiencing on the ground. European listed property companies, of all sizes and from all sectors have raised debt capital from a wide range of sources over the last year. In the year to March 2013, €10.6bn was raised in the public market. This ranged from Unibail's €750m 2018 convertible with a coupon of just 0.75% through to a raft of small UK companies utilising the London Stock Exchange's retail bond platform (selling debt to small private investors). For example Primary Health Properties, Unite, CLS, Workspace and St Modwen all raised unsecured debt through this source at coupons of between 5% and 6.25%.

Insurance companies have also emerged as a growing source of debt capital. Basel 3 requirements which are due to be introduced from 2013 encourage insurance companies to lend to property companies rather than to own bricks and mortar themselves. Unite, Big Yellow and Safestore have all entered into long dated lending agreements (effectively mortgages) with the likes of Aviva and L&G. We have also seen the emergence of large dedicated real estate debt and opportunity funds who have continued to soak up performing and increasingly non-performing loan portfolios from banks.

Looking forward this diversity in lending sources is a welcome shift across Europe. In the US, non-bank lending represents 40% of property debt markets and we think this has been a factor in the speed of recovery in US commercial property values. Post the recent crisis and in this era of ultra loose monetary stimulus, the slow pace of bank deleveraging has certainly hampered the pace of corrective valuations. Markets need to find realistic prices in order to adjust ownership to new long term holders. We continue to avoid subsectors of the market where we see legacy lenders likely to take time to deleverage further.

Property Shares

Pan European property shares clearly outstripped the performance of underlying physical property across Europe and the UK. Indeed they also outperformed the broader European equity market. Clearly all 'risk assets' benefited from Mr Draghi's comments in July 2012 and then from the announcement of potential and sustainable ECB intervention through the offer of unlimited sovereign bond buying which followed in September. The continuing importance of the macro background cannot be underestimated but with so many continuous months of positive performance (June 2012 through to February this year) it is easy to forget that property shares fell over 7.6% between mid March and end of May 2012 with political risk around the French and Greek elections as well as the collapse of the Dutch government dominating investor sentiment. Nevertheless, there appears to be a determination from the ECB and its new chairman which has been welcomed by the markets. The consensual view that the interest rate curves (across Europe) are destined to remain flatter for longer than expected 12 months ago, focused investors minds on one particular issue - yield.

The outperformance of property shares was, certainly in part, driven by its offer of income. Investors sought out those businesses where earnings (and dividend income) are expected to be at the very least sustainable and if possible growing. Quite correctly investors favoured those businesses growing their 'top line' (organically or through acquisitions) and / or their 'bottom line' through further falls in their marginal cost of debt. The former had exposure to submarkets with real rental growth prospects, such as London, Paris, Oslo and Stockholm and Europe's economic powerhouse - Germany. An equal weighted basket of the five UK stocks with an almost total London focus (Great Portland Estates, Derwent London, Shaftesbury, Capital & Counties and Workspace) returned 36.3% in the year whilst the German stocks returned 20.5%.

Within Germany the winners were the residential owners which promise steady earnings growth, opportunity for accretive acquisitions and who were standing at significant discounts to asset value and rebuild costs. That equally weighted basket of five stocks (excluding LEG which only floated at the end of January 2013) returned 39%. For those businesses with less prospect of near term rental growth there was still the opportunity to generate returns through improvements to their balance sheets and cost of borrowing. As explained earlier banks and borrowers remain keen to lend to well capitalised property companies.

The real laggards in the year were those both exposed to weakening property fundamentals and sub optimal balance sheets. Investors remain wary of too much leverage in an environment of weak to negative economic growth. Whilst debt capital raisings were at record low coupons for companies such as Unibail (€700m convertible at 0.75% and €2.4bn of 7 -10 year bonds at an average of 2.5%), deeply discounted equity raisings (Citycon's €200m at 30% discount to share price) were also a feature. Those exposed to Brussels offices and secondary assets across the Low Countries were particularly poor performers as rental levels continue to decline, almost unrestrained.

At the half year we reported that the volatility in property equity pricing had declined markedly and this continues to be the case with the 90 day, annualised falling to 9.6% at March 2013 versus 13.1% at the interim stage and 18.5% a year ago. Even with these figures trending down there remains plenty of dispersion of return in our universe. To illustrate the point, there are just two Austrian listed property companies in our index. Both have been poor performers over 3, 5 and 10 years however one is beginning to get its corporate structure, portfolio and balance sheet in order underpinned with a change of management. The other continues to flounder. Respective returns for the last 12 months were +19.7% and -5.9%. Comprehensive strategic redirection coupled with execution have also been rewarded by investors. Wereldhave NV announced a retrenchment to core European retail and sold its US and UK assets at the end of 2012. Whilst its total return for the period under review was a poor -1.5%, in the first quarter of 2013 the stock rose +12.3%, a huge outperformance of broader property share prices in response to the successful execution of its new strategy.

With underlying rental growth in traditional sectors of offices, retail and industrial confined to limited hotspots, there was prominent outperformance from the 'alternative' submarkets such as student housing (Unite +64.2%), residential land assembly (St Modwen +41.6%) and self storage. In this latter category, Big Yellow returned +28.7% whilst Safestore just +5.7%. Investors again shying away from the business with the far greater debt burden even though returns at the asset level have been remarkably similar.

Outlook

We expect underlying economic growth to remain muted at best across much of Europe over the next year. However, there will be earnings growth in a substantial number of our property companies through a mixture of index-linked rents, development profits and further falls in the marginal cost of debt through refinancings and access to new sources of debt capital.

Furthermore, the severe lack of new development across virtually all markets (French shopping centres the surprising exception) is a very significant underpinning for property markets. If (or when) tenant demand recovers we will quickly experience a shortage of high grade commercial space in a large number of markets. A typical development cycle has an element of speculative construction as developers seek to take advantage of depressed land prices and construction costs and time the completion of buildings into a rising economic cycle. Historically this has been funded almost entirely from the banks. Since 2008 finance for this type of development has almost entirely dried up. Lending is focused at the balance sheet level and development without significant preletting is at historically low levels. However, we are beginning to see tentative signs of renewed bank lending, and whilst the loan to value ratios remain conservative when compared to pre-crisis levels, it is an important step towards a broader asset value recovery.

Once again, we reiterate that real estate investment is not a passive activity and again it has been the best managerial teams who have displayed their capabilities in making the most effective use of their limited capital resources. Equally so, in these difficult times, the weaker businesses have failed to deliver and the dispersion of returns across markets and companies is set to continue. The only cautionary note we sound is that we are aware of the likelihood of further dividend cuts from some weaker performers but that is within an overall picture of modest earnings growth.  The ultra loose monetary policy across the globe continues to drive demand for income and we see this as a strong underpinning for real estate and real assets which offer income.

Manager's Report

Ordinary share class

Performance

The Ordinary share class total return of +21.5% was ahead of the benchmark total return of +17.8%. Pan European property shares fully participated in the broad risk asset rally from June last year which followed the confirmation of further ultra loose monetary policy coupled with implicit and explicit central bank support. Over and above these European focused measures, the US has buoyed investor confidence with steadily improving news flow particularly around the housing market which is such an integral part of the domestic growth story. Whilst the quarterly returns from our universe over the last nine months of the financial year were +4.2%, +9.2% and +4.2%, it is appropriate to remind investors that the first quarter (to June) saw a negative return. Indeed our index fell -5% between mid March and mid June as investors once again fretted about the difficulties of achieving real political and institutional resolution to the Eurozone's multiple banking and fiscal structural issues. Clearly the ECB's intervention is welcomed and bringing peripheral Eurozone country bond yields back to 'normal' levels is a vital step. Property is often described as an income stream with an equity kicker (through its link to economic activity via rental growth and indexation) and therefore falling bond yields and reducing volatility have helped the sector's performance.

The relative outperformance against the benchmark index has been driven by our focus on quality, not just at the property asset level but also balance sheets and management expertise. Even though collectively Europe is by far the slowest growing global region there are 'hot spots' of rental growth at the regional and city level which we have sought exposure to. These sub-markets are also benefiting from the continuing lack of finance for speculative property development. There has rarely been so little new commercial property construction and where it is happening it is invariably significantly pre-let. The result is that where there is employment growth and renewed economic activity this is feeding into rents faster than was envisaged a year ago.

Our focus on identifying and investing in those businesses with strong balance sheets has also paid off. Most of our companies have reported a satisfactory continuation of their traditional banking relationships but these well financed property companies have also been able to reduce their marginal cost of debt through the bond markets and other sources of debt capital described earlier.

In a year of such outsized returns the obvious missed opportunity was not to have added significantly to the gearing in your fund. Long term investors will know that over many years we have tended to use only limited on balance sheet gearing to augment returns whilst preferring to stock pick those companies we expect to perform best in particular economic conditions. The exception has been in periods of rapid fundamental economic growth but as you will read throughout this report that underpinning has yet to reappear for the majority of our markets.

Distribution of Assets

UK equities exposure rose in the period from 34.6% to 37.0% and Continental European equity exposure increased marginally from 55.1% to 55.8%. The physical property exposure reduced from 10% to 7.4%. The reduction in physical property exposure was a function not of sales (there were none) but a combination of two factors, lower absolute performance than equities and the merger of the two share classes. Sigma had no direct property assets.

Investment Activity

Over the period, turnover (purchases and sales divided by two) totalled 30% of the average total assets over the year, slightly ahead of the 29% recorded in the previous year. Volumes were ahead of the average in May, as we reduced overall equity exposure in a period of rising peripheral bond yields and again in July, August and September as we reinvested into improving sentiment. The only significant IPO in the period was that of LEG, a German housing investment business with a market cap of €1.5bn at the end of January which we invested in. Together with the merger of London & Stamford and Metric Property in early February these two events saw volumes increase again towards the year end.

As mentioned earlier we remained focused on quality businesses and rental 'hotspots'. Our overweight to Greater London was our largest single sub-regional contributor to performance. Great Portland Estates rose +40.1% and Derwent London +25.3%. Not only do these businesses offer exposure to our most preferred submarkets but they are manufacturers of return through asset repositioning as opposed to static ownership of assets. Workspace (+49.7%) and CLS (+42.7%) were our top performing London-centric smaller companies. CLS is not in our benchmark index as it is over 75% controlled by one family, we are happy to be one of a handful of institutional investors who have built up long term positions alongside them. It is a classic investment trust stock, whilst it has little free float and therefore proves difficult to hold for open-ended funds it has shown returns of 143% over 5 years and 286% over 10 years far outstripping the benchmark return. With little rental growth in traditional UK commercial property, outside of a handful of submarkets, we chose to increase our exposure to those stocks focused on 'alternative' asset classes particularly student housing, self storage and residential land. It is interesting to note that the best performers in these areas had either a declared strategy of focusing on London or were already there. Unite's (+64.2%) development programme is London-centric and it will have over 50% of its assets in the capital by 2016. Big Yellow (+28.7%) has 74% of its self storage revenue derived from stores inside the M25 whilst St Modwen (+41.6%), our preferred land play, announced it had won control of the redevelopment of New Covent Garden Market in Vauxhall, a 10 year residential project. An error was to underestimate the apparent insatiable desire by overseas investors and occupiers, particularly Asian, for London residential new build. We sold our holding in Capital & Counties, partial owner of the Earls Court redevelopment site following receipt of planning permission, feeling that it was better to 'travel than to arrive'. The scheme covers 70 acres and the development programme is expected to run from 2015 to beyond 2025. On occasion our detailed 'bottom up' value driven analysis can fail to fully capture broader (and ongoing) investor exuberance.

The majority of our UK larger company exposure is through positions in British Land, Land Securities and Hammerson. The best performer and our largest relative position was Hammerson which sold its City of London office portfolio to Brookfield (a US REIT) in the summer. Its strong share price performance (+20.2%) reflected not only investors satisfaction with this renewed retail focus but also the impending repositioning of its French portfolio which includes the development of Marseilles' new city centre shopping centre, Terrasse du Port.

Germany continues to be a growing area of focus with the country weight increasing from 9.7% to 12.9% of net assets over the year. Europe's economic powerhouse offers real estate investors a backdrop of falling unemployment and real wage growth hence our preferred residential and retail subsector exposure. Again we sought out quality companies with appropriate debt structures and whilst our preferred stocks GSW (+25.7%) and TAG (+30.1%) exceeded the wider benchmark return it was the super leveraged businesses Gagfah (+50.9%) and Patrizia (+59.8%) which had the stunning performance. Investors clearly became comfortable with the much higher risk inherent in those business models. With less than 1% of the German housing market owned by listed property companies, international investors keen to get access to this sub market drove equity prices consistently higher in 2012. The IPO of LEG in late January 2013 led to some investor indigestion in the sector and share prices have cooled since then with LEG failing to return to within 5% of its IPO price. Fundamentals remain positive and we continue to anticipate modest but robust earnings growth.

Unibail was once again the best performing French stock over the year, returning 26.5%, It also holds that title amongst the 10 French companies in our benchmark index over 3, 5, 10 and 20 year periods. It is the Trust's largest holding and has been an overweight position throughout the year. The reduction in the size of the position at the year end reflected the Board's decision to move to the capped version of the benchmark index, as highlighted in the Chairman's Statement. Even after this adjustment it remains an overweight and the largest position in the portfolio.

Sweden's stable economy and resilient housing market has provided an attractive economic backdrop. Once again we focused on well run businesses with portfolios focused on the key cities of Stockholm, Gothenburg and Malmo. Our positioning remains very company specific as individual stock performance varied hugely over the period. For example, Kungsleden is a highly indebted business which is under investigation by the Swedish tax authorities for utilising complex offshore structures for transactions in order to avoid tax. The stock almost halved in value between February and November 2012 but a change in management and a positive result for a competitor who utilised similar structures has aided the rehabilitation of the stock which has climbed 40% since late November.

Norway offers an even stronger economic backdrop and the underlying property fundamentals are also healthy in both Oslo and Stavanger however our only exposure, Norwegian Property, which has office portfolios in both cities has not delivered the promised performance. Suffering from a history of over leverage it even raised 10% new equity at a deep discount to support its capital expenditure programme. Management credibility has deteriorated and we reduced our modest position during the year.

Switzerland was our largest country underweight in the period. Swiss property stocks have been accorded a 'safe haven' status by investors and its property shares have consistently underperformed their broader European competitors when markets are rising. As importantly, our bottom up stock analysis reveals low returns on capital employed even with the lowest cost of domestic debt in the pan European property sector. Residential values continue to climb but the listed stocks collectively have little exposure to that sector.

Gearing, Debt and Debentures

The overall net debt position in the fund was substantially unchanged. We also analyse the 'see-through' gearing of the portfolio, where we add the assets and the debt of the companies in which we invest to the on-balance sheet assets and debt of the fund. The 'see-through' gearing was 50.1% whilst the benchmark index figure was 48.0%. Whilst the fund has on balance sheet debt, the unleveraged physical property assets which comprise 7.4% of assets offsets a substantial part of this.

Revenue

As mentioned in the Chairman's Statement, the revenue earnings of 6.74p are not a fair representation of the earnings for the year. Earnings are calculated based on the weighted average number of shares in issue throughout the year. The Sigma shares re-designated as Ordinary shares were therefore brought into account from 17 December.  The earnings profile of the portfolio is not even throughout the year, earnings are skewed towards the first half, the Sigma shares had accrued earnings as part of the conversion, however these accrued earnings cannot be recognised as part of the overall earnings for the Ordinary share class. Therefore the "new" Ordinary shares only have the earnings attached since the conversion date, thus lowering the overall stated earnings.

Therefore, although the proposed overall dividend of 7.00p per share compared with stated earnings of 6.74p per share may appear to be an over-distribution, shareholders should be reassured that this is not the case. In the Group revenue column of the Group Statement of Comprehensive Income below, the earnings are shown on an overall basis. Total revenue earnings are £22.4m.  The total anticipated dividend payment based on the number of shares in issue at the year end, together with the two interim payments of the Sigma and Ordinary share classes already made amount to £21.9m, an overall payout ratio of 97.8%.

The Ordinary share class tax charge at 11.2% is higher than in the previous year (10.1%), due to the withholding tax on a higher level of overseas income. The tax rate will continue to vary depending upon the mix of the source of revenue.

As highlighted in the Chairman's Statement, a review of the cost allocations between the revenue and capital accounts has led to a change. In line with the Board's longer term expectations of the relative returns from the revenue and capital accounts, the proportion of management fees allocated to the capital account has increased.  Going forward, management fees and finance costs will be allocated 75% to the capital account and 25% to the revenue account (current allocations are management fees one third to the capital account and two thirds to the revenue account with finance costs allocated half to each account). Although this results in a lower cost charge to the revenue account, there is a partial offset due to the tax charge on the increased level of net revenue. Although the actual tax paid will not increase, there is a cross charge of tax between the two accounts where costs borne by the capital account are used to offset income expenses. The overall impact on the revenue account is positive, and the indicated earnings should be taken as a new base for the continuation of a progressive dividend policy.

As mentioned in previous reports, withholding tax reclaims have been submitted as challenges are made in the European Courts.  Progress is slow and no refunds have been received to date.  Revised tax returns have also been submitted on the basis that current UK tax treatment of foreign dividends may be applicable to earlier periods. Although as yet firm progress has been made, we have reserved our position on this by submitting a claim to the High Court. There is no certainty as to the outcome so, as in prior years, no benefit has been recognised in the financial statements.

Revenue Outlook

Although we are confident of strong underlying earnings from the companies in which we invest, the timing and methods by which the companies make their distributions and the way in which these distributions are taxed, and currency movements, all have a bearing on our overall result.

On a conservative basis, not accounting for wide fluctuations from the current position in the factors mentioned above, and taking account of the revised expense allocations, we anticipate earnings in the region of 7.50p for the year to March 2014.

Direct Physical Property

The physical property portfolio produced a positive total return of 7.4% for the 12 months comprising a capital return of 1.8% and an income return of 5.6%.  This compares to a total return of the IPD Monthly Index of 2.5% made up of a capital return of -4.0% and an income return of 6.8%.  The relative outperformance was driven by asset management at Wandsworth and residential lease extensions at the Colonnades, Bayswater.

Teva continue to expand into Field House, Harlow following completion of our rolling refurbishment of the air-conditioning.  They now occupy 82% of the building and have an obligation to take the remaining space in due course.  The building remains fully let.  At the Colonnades we have let the remaining small retail unit on a short lease ahead of our potential large scale refurbishment in 2016.  Above the commercial element of the Colonnades there are 242 flats all on long leases with between 40 and 60 years to expiry.  Over the past 7 years we have extended 77 leases (32%) of which 10 were completed in the last 12 months.  Total premiums received since 2005 have been £4.3m.  At the year end we had terms agreed on a further 17 leases which if they proceed to completion will add a further £1.4m to receipts.

In December we agreed with NACRO, who occupy two suites at Park Place, Vauxhall, that they will remain in their large unit and surrender their small suite, having previously planned to vacate the building completely.  We have refurbished the small suite to a high standard and are marketing the space to occupiers.  ETV Media, who occupied 7,500 sq ft at Park Place, have been placed into administration. The space has been fully refurbished and we are seeking rents 25% ahead of the previous passing rent.

The top performing asset in the year was our industrial estate in Wandsworth.  We extended four leases with Absolute Taste securing them until September 2016.  All the leases deliberately expire in or before September 2016 as we are appraising the medium term redevelopment of the site.  There is a small retail unit at the front of the estate and we concluded a partial surrender of the existing lease with a simultaneous grant of a new lease to Costa Coffee on a 10 year term. 

Chairman's retirement

On behalf of the whole management team I would like to sincerely thank Peter for the huge contribution and support he has given over a great many years. Taking over the Chair in 2004, he has steered the Trust through the subsequent market turbulence and wild swings in sentiment towards the asset class and he leaves us in an improving environment. He supported the launch of Sigma back in 2007 but also understood the changing market dynamics and championed the successful remerger of the two share classes in December 2012. His open management style ensured a consistency of approach much appreciated by all at Thames River Capital.

I joined the management team of TR Property in 1997, the same year as Peter became a non executive director and on a more personal note, I would like to extend my sincere gratitude for all the guidance I have had throughout my career as a fund manager. He has been instrumental in the evolution of the Trust's management team and an excellent guardian of shareholders' interests.

Caroline has been an invaluable non-executive since 2002 and I look forward to continuing to work with her as Chairman from July.

Marcus Phayre-Mudge

Fund Manager

Statement of directors' responsibilities in relation to the Group financial statements

The directors are responsible for preparing the Report and Accounts in accordance with applicable United Kingdom law and those International Financial Reporting Standards as adopted by the European Union.

Under Company Law the directors must not approve the Group and Company financial statements unless they are satisfied that they present fairly the financial position, financial performance and cash flows of the Group and Company for that period. In preparing the Group financial statements the directors are required to:

o select suitable accounting policies in accordance with IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors and then apply them consistently;

o present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

o provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Group and Company's financial position and financial performance;

o state that the Group and Company has complied with IFRSs, subject to any material departures disclosed and explained in the financial statements; and

o make judgements and estimates that are reasonable and prudent.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to ensure that the Group and Company financial statements comply with the Companies Act 2006 and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Ordinary Share Class Statement of Comprehensive Income (unaudited)

for the year ended 31 March 2013

	Year ended 31 March 2013			Year ended 31 March 2012
	Revenue Return	Capital Return	Total	Revenue Return	Capital Return	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Investment income
Investment income	22,267	-	22,267	21,749	-	21,749
Other operating income	172	-	172	32	-	32
Gross rental income	3,505	-	3,505	3,257	-	3,257
Service charge income	1,759	-	1,759	1,249	-	1,249
Gains/(losses) on investments held at  fair value	-	88,265	88,265	-	(61,383)	(61,383)
Net movement on foreign exchange	-	368	368	-	(22)	(22)
Net returns on contracts for difference	205	1,805	2,010	52	202	254
	______	______	______	______	______	______
Total income/(loss)	27,908	90,438	118,346	26,339	(61,203)	(34,864)
	______	______	______	______	______	______
Expenses
Management and performance  fees	(2,653)	(4,449)	(7,102)	(2,493)	(1,246)	(3,739)
Repayment of prior years' VAT	-	-	-	117	58	175
Direct property expenses, rent  payable and service charge costs	(2,191)	-	(2,191)	(1,795)	-	(1,795)
Other administrative expenses	(906)	13	(893)	(720)	-	(720)
	______	______	______	______	______	______
Total operating expenses	(5,750)	(4,436)	(10,186)	(4,891)	(1,188)	(6,079)
	______	______	______	______	______	______
Operating profit/(loss)	22,158	86,002	108,160	21,448	(62,391)	(40,943)
Finance costs	(1,334)	(1,334)	(2,668)	(1,293)	(1,293)	(2,586)
	______	______	______	______	______	______
Profit/(loss) from operations before tax	20,824	84,668	105,492	20,155	(63,684)	(43,529)
Taxation	(2,327)	625	(1,702)	(2,041)	1,070	(971)
	______	______	______	______	______	______
Total comprehensive income/(loss)	18,497	85,293	103,790	18,114	(62,614)	(44,500)
	______	______	______	______	______	______
Earnings/(loss) per Ordinary share	6.74p	31.10p	37.84p	7.07p	(24.44)p	(17.37)p
	______	______	______	______	______	______

Ordinary Share Class Balance Sheet (unaudited)

as at 31 March 2013

	2013	2012
	£'000	£'000
Non-current assets
Investments held at fair value	739,486	516,241
	______	______
	739,486	516,241
Current assets
Debtors	6,673	6,414
Cash and cash equivalents	13,666	2,944
	______	______
	20,339	9,358
Current liabilities	(57,883)	(39,937)
	______	______
Net current liabilities	(37,544)	(30,579)
	______	______
Total assets less current liabilities	701,942	485,662
Non-current liabilities	(17,723)	(15,190)
	______	______
Net assets	684,219	470,472
	______	______
Net asset value per Ordinary share	215.25p	183.62p

Group Statement of Comprehensive Income

For the year ended 31 March 2013

	Year ended 31 March 2013			Year ended 31 March 2012
	Revenue Return	Capital Return	Total	Revenue Return	Capital Return	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Investment income
Investment income (note 2)	27,332	-	27,332	26,364	-	26,364
Other operating income	186	-	186	51	-	51
Gross rental income	3,505	-	3,505	3,257	-	3,257
Service charge income	1,759	-	1,759	1,249	-	1,249
Gains/(losses) on investments held at fair value	-	98,734	98,734	-	(83,856)	(83,856)
Net movement on foreign exchange	-	372	372	-	827	827
Net returns on contracts for difference	206	1,851	2,057	52	230	282
	_________	_________	_________	_________	_________	_________
Total income/(loss)	32,988	100,957	133,945	30,973	(82,799)	(51,826)
	_________	_________	_________	_________	_________	_________
Expenses
Management and performance fees	(3,127)	(4,686)	(7,813)	(3,197)	(1,598)	(4,795)
Repayment of prior years' VAT	-	-	-	144	72	216
Direct property expenses, rent payable  and service charge costs	(2,191)	-	(2,191)	(1,795)	-	(1,795)
Other administrative expenses	(1,094)	(513)	(1,607)	(875)	-	(875)
	_________	_________	_________	_________	_________	_________
Total operating expenses	(6,412)	(5,199)	(11,611)	(5,723)	(1,526)	(7,249)
	_________	_________	_________	_________	_________	_________
Operating profit/(loss)	26,576	95,758	122,334	25,250	(84,325)	(59,075)
Finance costs	(1,517)	(1,517)	(3,034)	(1,592)	(1,592)	(3,184)
	_________	_________	_________	_________	_________	_________
Profit/(loss) from operations before tax	25,059	94,241	119,300	23,658	(85,917)	(62,259)
Taxation	(2,707)	625	(2,082)	(2,302)	1,070	(1,232)
	_________	_________	_________	_________	_________	_________
Total comprehensive income/(loss)	22,352	94,866	117,218	21,356	(84,847)	(63,491)
	_________	_________	_________	_________	_________	_________
Earnings/(loss) per Ordinary share (note 3a)	6.74p	31.10p	37.84p	7.07p	(24.44)p	(17.37)p
Earnings/(loss) per Sigma share (note 3b)	3.11p	7.72p	10.83p	2.60p	(17.83)p	(15.23)p

The Total column of this statement represents the Group's Statement of Comprehensive Income, prepared in accordance with IFRS.  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.

All income is attributable to the shareholders of the parent company. There are no minority interests.

Group and Company Statement of Changes in Equity

	Share Capital*				Retained Earnings*
	Ordinary	Sigma	Share Premium Account	Capital Redemption Reserve	Ordinary	Sigma	Total
for the year ended 31 March 2013	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 31 March 2012	64,056	15,559	43,162	43,694	333,613	88,161	588,245
Net profit for the period	-	-	-	-	103,790	13,428	117,218
Shares repurchased	(83)	(63)	-	146	-	(341)	(341)
Dividends paid	-	-	-	-	(17,551)	(3,352)	(20,903)
Re-designation of Sigma shares (A)	15,496	(15,496)	-	-	97,896	(97,896)	-
	________	________	________	________	________	_______	________
At 31 March 2013	79,469	-	43,162	43,840	517,748	-	684,219
	________	________	________	_________	________	_______	________
	Share Capital*				Retained Earnings*
	Ordinary	Sigma	Share Premium Account	Capital Redemption Reserve	Ordinary	Sigma	Total
for the year ended 31 March 2012	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 31 March 2011	64,056	15,615	43,162	43,638	393,743	110,229	670,443
Net profit for the period	-	-	-	-	(44,500)	(18,991)	(63,491)
Shares repurchased	-	(56)	-	56	-	(333)	(333)
Dividends paid	-	-	-	-	(15,630)	(2,744)	(18,374)
	________	________	________	________	________	_______	________
At 31 March 2012	64,056	15,559	43,162	43,694	333,613	88,161	588,245

* The Ordinary/Sigma split is for information only and has not been audited.

(A) On 14 December 2012 the shareholders of both share classes voted to convert Sigma shares into Ordinary shares.

Group and Company Balance Sheets

as at 31 March 2013

	Group 2013 £'000	Company 2013 £'000	Group 2012 £'000	Company 2012 £'000
Non-current assets
Investments held at fair value	739,486	716,986	639,742	617,992
Investments in subsidiaries	-	49,916	-	48,202
	_________	_________	_________	_________
	739,486	766,902	639,742	666,194
Current assets
Debtors	6,673	6,618	7,158	7,076
Cash and cash equivalents	13,666	13,024	4,389	4,128
	_________	_________	_________	_________
	20,339	19,642	11,547	11,204
Current liabilities	(57,883)	(102,544)	(45,005)	(89,018)
	_________	_________	_________	_________
Net current liabilities	(37,544)	(82,902)	(33,458)	(77,814)
Total assets less current liabilities	701,942	684,000	606,284	588,380
Deferred taxation asset	-	219	-	-
Non-current liabilities	(17,723)	-	(18,039)	(135)
	_________	_________	_________	_________
Net assets	684,219	684,219	588,245	588,245
	_________	_________	_________	_________
Capital and reserves
Called up share capital	79,469	79,469	79,615	79,615
Share premium account	43,162	43,162	43,162	43,162
Capital redemption reserve	43,840	43,840	43,694	43,694
Retained earnings	517,748	517,748	421,774	421,774
	_________	_________	_________	_________
Equity shareholders' funds	684,219	684,219	588,245	588,245
	_________	_________	_________	_________
Net Asset Value per :
Ordinary share (Note 4(a))	215.25p	215.25p	183.62p	183.62p
Sigma share (Note 4(b))	-	-	94.62p	94.62p

Group and Company Cash Flow Statements

as at 31 March 2013

	Group 2013	Company  2013	Group 2012	Company  2012
	£'000	£'000	£'000	£'000
Reconciliation of operating revenue to net cash inflow from operating activities
Profit/(loss) from operations before tax	119,300	119,262	(62,259)	(61,901)
Financing activities	3,034	3,116	3,184	3,628
(Gains)/losses on investments and derivatives held at fair value through profit or loss	(100,585)	(101,260)	83,856	82,504
Foreign exchange movements	(372)	(372)	(827)	(827)
(Increase)/decrease in accrued income	(715)	(752)	453	431
Net sales/(purchases) of investments	2,995	2,706	(2,106)	(3,173)
Decrease in sales settlement debtor	1,146	1,146	1,905	1,905
Increase/(decrease) in purchase settlement creditor	8,134	8,134	(4,142)	(4,142)
Decrease/ (increase)  in other debtors	280	290	(426)	(577)
Increase/(decrease) in other creditors	2,542	3,190	(66)	2,219
Scrip dividends included in investment income	(2,140)	(2,140)	-	-
	_________	_________	_________	_________
Net cash inflow from operating activities before interest and taxation	33,619	33,320	19,572	20,067
Interest paid	(3,034)	(3,116)	(3,184)	(3,628)
Taxation paid	(2,352)	(2,352)	(1,679)	(1,679)
	_________	_________	_________	_________
Net cash inflow from operating activities	28,233	27,852	14,709	14,760
Financing activities
Equity dividends paid	(20,903)	(20,903)	(18,374)	(18,374)
Repurchase of shares	(341)	(341)	(333)	(333)
Drawdown of loans	1,916	1,916	3,372	3,372
	_________	_________	_________	_________
Net cash used in financing activities	(19,328)	(19,328)	(15,335)	(15,335)
	_________	_________	_________	_________
Increase/(decrease) in cash	8,905	8,524	(626)	(575)
Cash and cash equivalents at start of the year	4,389	4,128	4,188	3,876
Foreign exchange movements	372	372	827	827
	_________	_________	_________	_________
Cash and cash equivalents at end of the year	13,666	13,024	4,389	4,128
	_________	_________	_________	_________

Notes to the Financial Statements

1	Accounting Policies
	The financial statements for the year ended 31 March 2013 have been prepared on a going concern basis in accordance with International Financial Reporting Standards (IFRS), which comprise standards and interpretations approved by the International Accounting Standards Board (IASB), together with interpretations of the International Accounting Standards and Standing Interpretations Committee approved by the International Accounting Standards Committee (IASC) that remain in effect, to the extent that they have been adopted by the European Union and as regards the Company financial statements, as applied in accordance with the provisions of the Companies Act 2006.
	The Group and Company financial statements are expressed in Sterling, which is the functional 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.
2	Investment income
			2013	2012
			£'000	£'000
	Dividends from UK listed investments		1,998	1,900
	Dividends from overseas listed investments		17,754	18,416
	Scrip dividends from overseas listed investments		2,140	-
	Interest from listed investments		67	55
	Property income distributions		5,373	5,993
			_________	_________
			27,332	26,364
			_________	_________
3	Earnings/(loss) per share
a	Earnings/(loss) per Ordinary share
	The earnings per Ordinary share can be analysed between revenue and capital, as below.
			Year ended 31 March 2013 £'000	Year ended 31 March 2012 £'000
	Net revenue profit		18,497	18,114
	Net capital profit/(loss)		85,293	(62,614)
			_________	_________
	Net total profit/(loss)		103,790	(44,500)
			_________	_________
	Weighted average number of Ordinary shares in issue during the year		274,298,027	256,225,000
			_________	_________
			pence	pence
	Revenue earnings per share		6.74	7.07
	Capital earnings/(loss) per share		31.10	(24.44)
			_________	_________
	Earnings/(loss) per Ordinary share		37.84	(17.37)
			_________	_________
b	Earnings/(loss) per Sigma share
	The earnings per Sigma share can be analysed between revenue and capital, as below.
		Period ended		Year ended
		12 December 2012 £'000		31 March 2012 £'000
	Net revenue profit	3,855		3,242
	Net capital profit/(loss)	9,573		(22,233)
		_________		_________
	Net total profit/(loss)	13,428		(18,991)
		_________		_________
	Weighted average number of Sigma shares in issue during the year	123,972,000		124,697,820
		_________		_________
		pence		pence
	Revenue earnings per share	3.11		2.60
	Capital earnings/(loss) per share	7.72		(17.83)
		_________		_________
	Earnings/(loss) per Sigma share	10.83		(15.23)
		_________		_________
4	Net asset value per Ordinary share
	Net asset value per Ordinary share is based on net assets attributable to Ordinary shares of £684,219,000 (2012: £470,472,000) and on 317,875,980 (2012: 256,225,000) Ordinary shares in issue at the year end.  The net assets and the number of shares for the current year include the assets transferred and the shares issued on the conversion of the Sigma shares as Ordinary shares.

5	Share capital changes
	Sigma Shares Conversion Following the resolution to convert Sigma shares into Ordinary shares on 14 December 2012, 123,972,000 Sigma shares were converted into 61,650,980 Ordinary shares, resulting in a total of 317,875,980 Ordinary shares in issue. Ordinary shares During the year, the Company made no market purchases for cancellation. Since 31 March 2013, the Company has made market purchases of 275,000 ordinary shares for cancellation. Sigma shares Between 1 April 2012 and 12 December 2012 the Company made market purchases of 500,000 Sigma shares for cancellation.
6	Status of preliminary announcement
	The financial information set out in this preliminary announcement does not constitute the Company's statutory accounts for the years ended 31 March 2013 or 2012. The statutory accounts for the year ended 31 March 2013 have not been delivered to the Registrar of Companies, nor have the auditors yet reported on them. The statutory accounts for the year ended 31 March 2013 will be finalised on the basis of the information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting.
7 8	Dividends Ordinary shares Subject to shareholders approval at the AGM, a final dividend of 4.35p per share will be paid on 6 August 2013 to shareholders on the register on 28 June 2013. The shares will be quoted ex-dividend from 26 June 2013. An interim dividend of 2.65p per share was paid on 8 January 2013. The total dividend in respect of the year is therefore 7.00p per Ordinary share. Annual Report and AGM The Annual Report will be posted to shareholders in June 2013 and will be available thereafter from the Company Secretary at the Registered Office, 11 Hanover Street, London, W1S 1QY. The Annual General Meeting of the Company will be held at The Royal Automobile Club, 89/91 Pall Mall, London, SW1Y 5HS on 23 July 2013 at 12 noon.

This announcement and the information contained herein is not for publication, distribution or release in, or into, directly or indirectly, the United States, Canada, Australia or Japan and does not constitute, or form part of, an offer of securities for sale in or into the United States, Canada, Australia or Japan.

The securities referred to in this announcement have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act") and may not be offered or sold in the United States unless they are registered under the Securities Act or pursuant to an available exemption therefrom.  The Company does not intend to register any portion of securities in the United States or to conduct a public offering of the securities in the United States.  The Company will not be registered under the U.S. Investment Company Act of 1940, as amended, and investors will not be entitled to the benefits of that Act.

This announcement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the securities referred to herein in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration, exemption from registration or qualification under the securities law of any such jurisdiction. 

The contents of this announcement include statements that are, or may be deemed to be "forward looking statements".  These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "anticipates", "expects", "intends", "may", "will" or "should".  They include the statements regarding the target aggregate dividend.  By their nature, forward looking statements involve risks and uncertainties and readers are cautioned that any such forward-looking statements are not guarantees of future performance.  The Company's actual results and performance may differ materially from the impression created by the forward-looking statements. The Company undertakes no obligation to publicly update or revise forward-looking statements, except as may be required by applicable law and regulation (including the Listing Rules).  No statement in this announcement is intended to be a profit forecast.

For further information please contact:

Marcus Phayre-Mudge

Fund Manager

TR Property Investment Trust plc

Telephone: [phone]

 

END

 

 

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