Annual Financial Report

RNS Number : 5368O

Value and Indexed Prop Inc Tst PLC

10 June 2022

 

VALUE AND INDEXED PROPERTY INCOME TRUST PLC

ANNUAL FINANCIAL REPORT

FOR THE YEAR ENDED 31 MARCH 2022

Chairman's Statement

You will see from the Manager's Report that VIP has been successful in continuing with its plan, that I wrote about last year, to establish a portfolio of properties on long leases with inflation linked rent reviews. This has involved greater investment activity than usual, but the re-arrangement of our portfolio has now broadly been completed. Since VIP's year end, we have borrowed an additional £8 million from an existing lender. The net decrease in cash is due to the purchase of additional properties, in line with the Company's investment policy.

Many of the Company's index-linked leases provide for maximum and minimum increases at future rent review, often described as 'caps and collars'. The details of these are shown in Note 9 to the Financial Statements. The Financial Statements have been prepared under IFRS (International Financial Reporting Standards) and IFRS 16 requires that these minimum rent increases, which may arise only many years in the future, are averaged over the whole life of the lease. As detailed in Note 10 to the Financial Statements, an increase in amounts due from brokers this year has arisen due to the sale of an investment in the quoted portfolio which straddled the year end and the cash was received in full two days later.

The Board is recommending a final dividend of 3.6p per share making total dividends of 12.6p per share for the year to 31 March 2022, compared to 12.3p per share in the previous year, an increase of 2.4%. Subject to Shareholder approval at the Annual General Meeting (AGM), the final dividend will be paid on 29 July 2022 to Shareholders on the register on 1 July 2022. The ex-dividend date is 30 June 2022. It will be the 35^th year of dividend increases following the reconstruction of the Company. In the short term this will require some use of our capital reserves. In the medium term, however, the Board will aim to ensure that the dividend is paid from rents and dividends received (after interest costs and management expenses) and that the indexed leases permit future increases in line with inflation.

Net Asset Value total return (with debt at par) and Share Price total return are considered by the Board to be Alternative Performance Measures (APMs) as explained further in the Business Review in the Annual Report and defined in the Glossary in the Annual Report. Over the year, the Net Asset Value total return (with debt at par) was 15.6% (2021: 12.3%) and the Share Price total return was 15.8% (2021: 39.3%). This compares with the FTSE All-Share Index total return of 13.0% (2021: 26.7%). The total return from the property portfolio was 20.2% (2021: 2.3%) (the MSCI UK Quarterly Property Index total returns were 19.6% (2021: 0.9%)) and from the equity portfolio was 24.1% (2021: 26.6%). From 1 April 2021, our performance comparator was changed from the FTSE All-Share Index to the MSCI UK Quarterly Property Index to reflect the change in our investment policy.

As provided in the Circular issued to Shareholders in December 2020, there will be an opportunity in the future for Shareholders who wish to sell their shares to do so at Net Asset Value less costs. The Board's intention is to table a proposal at the AGM to be held in 2026.

As noted in previous statements, the difference between the fair value and the nominal value of our Debenture Stock and our secured loans is reducing over the life of the Debenture, which would be repaid at its nominal (par) value. The figures are set out in Note 17 to the Financial Statements. We announced on 24 May 2022 that we intend to repay this Debenture early to reduce interest costs and provide greater flexibility in the management of our portfolio.

This years' AGM will be held in the offices of Shepherd & Wedderburn LLP, 1 Exchange Crescent, Conference Square, Edinburgh, EH3 8UL on Friday, 8 July 2022 at 12.30pm. The Notice of Annual General Meeting can be found in the Annual Report. The Board encourages Shareholders to vote using the Proxy Form, which can be submitted to Computershare, the Company's Registrar. Proxy Forms should be completed and returned in accordance with the instructions thereon and the latest time for the receipt of Proxy Forms is 12.30pm on Wednesday, 6 July 2022. Proxy votes can also be submitted by CREST or online using the Registrar's Share Portal Service at www.investorcentre.co.uk/eproxy.

I announced last year that I intended to retire during the course of 2022 and, accordingly, I shall be retiring after the AGM and John Kay will become Chairman. Over the years, I have appreciated greatly the support of my colleagues on the Board, and also the professionalism and attention to detail of our Managers and Secretaries.

The outlook for markets is dominated at present by the major uncertainties of inflation and Ukraine. However, property with long term, inflation-related leases offers good value in these circumstances.

James Ferguson

Chairman

10 June 2022

Summary of Portfolio

	31 March 2022		31 March 2021
	£m	%	£m	%
UK Property	155.8	83.0	81.1	46.2
UK Equities	26.9	14.3	28.6	16.3
Cash	5.2	2.7	66.0	37.5
	187.9	100.0	175.7	100.0

Property Manager's Report

Property Portfolio

The Market

The MSCI UK Quarterly Property Index, the most representative measure of the performance of institutional investment property portfolios, showed a total return of 16.3% over 2021, with capital growth of 11.5%. Estimated rental values were up overall by 1.8%, with retail 3% down on average, offices and alternatives virtually level and industrial property up 9%. Differential movements in capital values were more dramatic, with industrial property up by no less than 31%, retail and alternative sector properties up on average by 3%-4% and offices flat. For 2021 as a whole, total returns, taking capital and income together, for industrial/warehouse property averaged 36%, with retail and alternatives averaging 8%-10% and offices only 5%. 2021 was the first year since 2009 when retail property in the UK outperformed offices. There will be many more as the office sector remains locked in long term structural decline.

Total returns will be lower but still satisfactory over 2022 as a whole. They may be around 12% overall, with returns for industrials, retail and the alternative sectors all in the early teens but offices only around 5% with capital values flat, rents under pressure and voids through the roof. Property's real returns will be far lower, with the RPI already up 9% year on year. It will stay higher for longer than the Bank of England or the market expects. Stagflation is here to stay for at least as long as the war in Ukraine drags on.

UK Commercial Property - Average Annual % Growth Rates to March 2022

3 Months		6 Months	1 Year	3 Years	5 Years	10 Years
Capital Values	+14.8	+17.9	+14.9	+1.9	+2.2	+3.3
Rental Values	+4.6	+4.6	+3.1	-0.3	+0.3	+1.2
Total Returns	+18.8	+22.2	+19.6	+6.4	+6.7	+8.3

Source: MSCI UK Quarterly Property Index - Annualised

These returns to the end of March are higher than the calendar year figures quoted above because capital value growth accelerated through 2021 after a dull first quarter.

Comparative Investment Yields - End December (Except end March 2022)

		March 2022	2021	2020	2019	2017	2011	2008	2006
Property (Equivalent Yield)		5.0	5.1	5.8	5.6	5.6	6.9	8.3	5.4
Long Gilts:	Conventional	1.6	1.0	0.2	1.0	1.4	2.5	3.7	4.6
	Index Linked	-2.2	-2.6	-2.6	-2.0	-1.8	-0.2	0.8	1.1
UK Equities		3.1	3.1	3.4	4.1	3.6	3.5	4.5	2.9
RPI (Annual Rate) *		9.0	7.1	0.9	2.2	4.1	4.8	0.9	4.4
Yield Gaps:	Property less Conventional Gilts	3.4	4.1	5.6	4.6	4.2	4.4	4.6	0.8
	less Index Linked Gilts	7.2	7.7	8.4	7.6	7.4	7.1	7.5	4.4
	less Equities	1.9	2.0	2.4	1.5	2.0	3.4	3.8	2.5

Source: MSCI UK Quarterly Property Index and ONS for the RPI (*to December except March 2022)

Property transaction volumes and market liquidity improved markedly through 2021 with an estimated total turnover of £65 billion, higher than in 2019 pre-pandemic and above the long term averages. This trend has continued so far in 2022. Industrial property volumes were strongest but activity increased in previously quiet sectors, especially leisure, hotels and retail, with relentless demand for retail warehouses and supermarkets supplemented recently by buyers of in town retail at high yields. Prime, especially long-let offices were active but the market for older secondary offices is getting worse, with some now virtually unlettable and unsaleable where they do not meet environmental standards. There is a growing "brown discount" for properties in all sectors with non-compliant Energy Performance Certificates (EPCs).

Property void rates rose from 8.2% at the start of the pandemic in March 2020 to a peak of 10.2% in June 2021 and remain high at around 10%. As the table below shows, industrial and retail void rates have fallen markedly from their COVID peaks, but office voids shot up from 13.1% in March 2020 to 19.4% now, well above the previous record high of 14.8% for office voids in 2013.

During the COVID crisis, the Government, under political and tenant pressure, repeatedly suspended landlords' traditional tools for enforcing rent collection - eviction orders, use of Commercial Rent Arrears Recovery (CRAR) bailiffs and statutory demands for winding up. They have also introduced a fiendishly complicated legal arbitration procedure for rent arrears run up during COVID. This will be a bonanza for lawyers and no real help for landlords and tenants who should have done a deal long ago.

Apart from that, landlords are able again to use their normal strong powers to enforce prompt payment of rent from commercial property tenants, including the use of bailiffs where necessary. With all properties throughout the UK now able to open again and trade normally, there is no longer any excuse for strong tenants not to pay their rent promptly and in full; rent collection rates should, therefore, now be back to normal on all professionally managed institutional property portfolios.

Property Prospects by Sector

Warehouse/Industrials - an Overheated Market - Yields have Fallen Far Enough

Warehouse and industrial property delivered most of commercial property's total capital growth in 2021 for the right reasons, with voracious demand, mainly from food and online retailers, driving up rents right across the UK for both "big box" warehouses near motorways and smaller units on estates nearer city centres. Valuation yields were forced down to reflect improving rental growth prospects, and the outlook for rental growth remains good, vacancy rates for both "big box" units and traditional industrial estates are very low (and now negligible in parts of the South East, Midlands and East Anglia). Driven by the explosion of online retailing, 2021 saw the second highest ever take up of logistics "big boxes" at 34.1 million square feet, only slightly below the exceptional performance in 2020 at 35.8 million square feet and 71% above 2019. 2022 will be slower.

Over £18 billion was invested across the industrial/warehouse sector in 2021, nearly double the 2020 transaction volume and over 60% above the previous highest annual level recorded in 2017. But the industrial property investment market is now running white hot, too hot in our view, with yields bid down to unsustainably low levels by panic buyers, who are having to make wholly unrealistic rental growth projections to justify the prices they are paying. Sellers are hard to find. Rapidly rising interest rates and other economic pressures have started to cool this overheated market. The latest UK figures showed online non-food retail sales down to 39% of the total, against 63% a year ago. Amazon recorded its first quarterly loss since 2015 at the end of April, the share price fell 16% instantly and has fallen 26% to date. The share prices of the larger property REITS focusing on large warehouses followed suit with Segro -25% and Tritax Big Box -22%.

Rapidly rising costs and supply chain problems, together with a weakening economy and consumer confidence, are already putting pressure on the strong occupiers and may affect some weaker occupiers more acutely this year, although industrial property values will still be supported by the conversion of older and lower value sites to residential and other alternative uses, especially in southern England. Well-located industrial and warehouse property in all sizes from logistics "big boxes" on motorway junctions to "last mile" urban sheds and estates of smaller units should still outperform offices and probably the property market as a whole for the rest of the year. But risks are rising and selling opportunities should be taken where valuation yields have fallen too far to generate satisfactory long-term returns.

Offices - Locked in Long Term Relative Decline - the Way we Work has Changed for Good

Offices have taken over the performance wooden spoon from retail for the first time in twelve years and may hold it for the foreseeable future. Investors' long overdue focus on ESG is hitting office values harder than on most other sectors, because so many older office buildings, in London in particular, simply cannot be updated to suitable standards at realistic cost. Occasional headline-grabbing investment or letting deals for the very best space are just a sign of a flight from quantity to quality, with tenants usually downsizing at the same time, giving owners of their old space a hospital pass. There is still some demand for high quality city centre offices, but for more limited space for meeting, training and prestige purposes.

Mid and back-office work is now being done far more from home, or partly at low cost non-city centre locations. Unnecessary offices are one cost that businesses can now cut, with break clauses exercised in most cases and tenants demanding considerable capital expenditure from landlords to renew leases, even in part. Functional obsolescence and depreciation will, therefore, need to be factored more specifically into most office valuations, keeping capital values under continuing downward pressure to reflect lower effective net rents and greater re-letting risk, as valuers start to reflect this risk properly.

The public sector, the largest UK office tenant, has clearly now adopted a long-term hybrid working model, and would have serious HR and legal problems and additional trade union pressure if it tried to force any employee back to the office full-time, despite the Minister for Government Efficiency publicly applying pressure. Many UK companies are also downsizing, going hybrid, closing their head office altogether and taking temporary space nearby instead. Those employers such as some American investment banks or law firms requiring full office attendance will, therefore, find staff recruitment and retention ever more difficult in a climate where talented employees feel more able to negotiate the way they work, irrespective of age or sex.

Retail - Bouncing Back, Led by Retail Warehouses and Supermarkets

The COVID pandemic hit the high street hard where it had already been hurting for many years: first, by getting many more older shoppers, in particular, used to the range and convenience of non-food shopping in particular, online; and second, by making people switch from public transport or parking in congested city-centres to easier and safer car-borne shopping out of town. Retail warehouse rents are rising again, especially where well-run operators like B&Q, B&M and Home Bargains trade alongside the leading supermarkets, and capital values are growing rapidly - some institutional investors missed the market in industrial property, want no more offices, and have money which they are struggling to invest.

On the high street, the steepest falls in property values happened in "prime" central London and other prime highly valued cities and towns which are now unaffordable for both multiple and individual retailers. Unfair business rates had already crippled urban high streets in less prosperous parts of the UK, and the Government's latest partial attempt at rates reform will be too little, too late for many locations. Prosperous suburbs and market towns with affordable rents and an attractive mix of convenience and independent traders have proved more resilient during the crisis and are generally recovering better than bigger centres. Transaction volumes are rising again for high street shops and shopping centres, and as rental values have been reset at affordable and sustainable levels, there are now growing signs of capital growth from the retail bargain basement.

Supermarkets and convenience stores (including petrol filling stations), have done well during COVID, often with increases of 20%-30% in their turnover, part of which they are able to retain with more people working on average nearer home. Online food sales' market share has slipped back from 16% to 11% now with Sainsbury's reporting online sales down from 21% to 15% of their total. Aldi, Lidl, and their older-established grocery competitors are fighting fiercely for stores under 15,000 - 20,000 sq. ft. The leading supermarkets are also much better at combining physical and online shopping than most non-food retailers.

Non-Traditional Alternatives - Index-Linked Leases to Strong Survivors are Key

Property in the "Alternatives" sector - i.e. everything except office, industrial or retail - has been growing rapidly in importance for institutional investors in recent years and now accounts for one-sixth of the MSCI UK Quarterly Property Index. It covers a wide range of property types and tenants, often with long, index-linked leases. With the RPI now rising at an annual rate of 9% and the CPI at 7%, these index-linked leases hold the key to sustained outperformance so long as the individual property rents are well covered by operating profits and paid by strong multiple tenants.

COVID with its ever-changing lockdowns posed a once in a lifetime challenge to alternative sector operators and investors. Tenants with strong long-term business models and short-term crisis management, working with investors who knew how and when to give help and improve leases, came through the COVID challenge stronger than ever before, with their weaker multiple competitors, and many private operators, savagely squeezed or forced out of business altogether. Alternative investments are, therefore, outperforming most property sectors again, and probably even industrials over 2022, but with strong survivor bias and variations within and between different sub-sectors, as outlined below.

Alternatives - Leisure and Hotels - Strong Tenants Trading Stronger than ever Outside City Centres

Well-let pubs have proved far safer investments than restaurants, where many private-equity backed multiple chains were already drowning in debt pre-COVID. The leading pubcos, like Greene King and Wetherspoons, as well as most traditional regional brewers, have strong balance sheets with plenty of freehold assets and borrowing capacity. Profitable, spacious pubs with outside space, have been trading exceptionally well and above pre-pandemic levels over the past year, apart from central London. Pubs of this type in suburban, smaller town and rural locations will stay short and long-term winners whilst consumer spending on food and drink remains at current levels.

Hotel values are also well off the bottom. Modern hotels in prosperous smaller towns and rural areas, serving British holidaymakers, workers and businesses, have been performing really strongly over the past year, proving resilient even during the latest COVID surge. They will continue to outperform large city centre and airport hotels dependent on international business and travel. Zoom, Teams and ESG have slashed expensive corporate frequent flying. Covenant strength will remain crucial for hotels' investment value - for example, a Premier Inn is valued well above a similar Travelodge, because long-term investors hate CVAs (Company "Voluntary" Arrangements). Caravan parks should also trade very strongly for many years to come.

Health and Fitness clubs have been rebuilding their memberships but will be suffering from the squeeze on real incomes. The leading brands on large out of town sites, with good car parking and customers often able to work from home, offer the best long-term investments.

The two main ten pin bowling companies, who dominate the market, are going from strength to strength and offer a sensibly priced family treat which cannot be replicated online. But bingo halls and cinemas face a tougher future as lockdowns drove away many of their older customers and the operators are vulnerable to online competition.

Alternatives - Student Housing and Care Homes - Covenant Strength Key

Direct-let investments on long leases to well-established universities should continue to perform well but indirect student housing investments with nomination agreements or third-party providers, depending more on the local residential letting market, are less clear beneficiaries of yield hardening for safe, long-let property.

COVID has hit care homes hard. Costs and vacancy rates are rising because of more deaths, slower admissions and severe Brexit and vaccination-related staff shortages, while some private-equity backed care home providers need more equity and lower rents. High quality homes with self-funded residents will continue to outperform those dependent on squeezed local authority budgets. The rise in National Insurance contributions has raised staff costs for care homes, and the Government's reforms to social care funding will not deliver meaningful extra cash for another three to four years. Medical centres and private hospitals will stay in demand as the NHS faces years of non-COVID catch up and outsourcing more profitable work.

25 years ago Gordon Brown gave the Bank of England Monetary Policy Committee the power to set interest rates to meet a stated inflation target. As the chart above shows, until recently, their record has been good. Even including the current inflation tsunami, annual UK CPI growth over the past quarter of a century has averaged exactly 2% (with the RPI at 2.8%). Official interest rates have averaged 2.6%, compared with 10.4% over the previous 25 years and 8.4% for the RPI (CPI figures are not available). But success, as so often in business and government, has bred complacency and groupthink, reinforced by similar flawed inflation models in other Western Central Banks. Massive Quantitative Easing was the only possible response to the 2008/9 banking crash, which hit the UK hardest of all the main Western economies, but the Bank persisted with the policy far longer and stronger than was necessary or prudent, leaving Britain in our present agonizing double bind of unsustainably low interest rates and high inflation. The Bank really has no alternative now to raising interest rates rapidly to stop inflation expectations taking a real hold, as they did in eerily similar circumstances in the early 1970's after the first oil price shock. Inflation has also rocketed in the US to 8.3% (a new 40 year high) and 7.4% in the Eurozone.

The March consumer price figures (CPI + 7.0% and RPI + 9.0% year on year) clearly show inflation heading higher over the next few months, probably into double figures for the CPI and 12% for the RPI Inflation may still be around the current rates at the year end. The latest Producer Price Indices show output prices up by 11.5% year on year and input prices up by 19.2%.

So Britain is now suffering stagflation, with average real incomes likely to fall by at least 2% and maybe up to 3% over 2022 as a result of increases in tax and National Insurance combined with average earnings and benefits lagging far behind price rises. UK domestic consumer spending was the main engine of UK economic recovery in 2021, with exceptionally high pandemic savings being spent by better off households, and employees gradually returning to work. That will not be repeated in 2022, and forecasts, like the OBR's in March, for UK GDP to grow by 3.8% this year now look far too high. A technical recession may well be looming later this year on a quarter by quarter basis. Q1 2022 may be only just up, with Q2, Q3, Q4 all down. Although GDP figures are often subject to major subsequent revisions. Any progress later in 2023 will be critically dependent on progress towards peace in Ukraine and easing disruption to international trade, not least with China, and supply shortages around the world. There is still a danger of renewed outbreaks of COVID, especially in less developed countries where vaccination rates are very low. Food and energy shortages, serious as they feel in richer countries like the UK, could actually kill millions especially in Africa, if the war in Ukraine and disruption of world trade drag on.

Conclusion - Index-Linked Income Still Seriously Undervalued

UK commercial property values stabilised in late 2020 and have since been rising rapidly. Industrials have been by far the star performers, but their yield re-rating must be over as prices are clearly overheating especially at the prime end of the market. Offices' relative performance is going from bad to worse. Retail values started to recover early in 2021, as gains for retail warehouses, supermarkets and convenience stores offset slowing rates of decline in shopping centres and high street shops, which have now finally bottomed out. The alternative sectors have also bounced back strongly with pubs, hotels, bowling and caravan parks booming, especially outside London. Healthcare and nursing home investments will stay in demand despite their staffing problems. 2022 may see a similar pattern of relative property performance, despite current short term interest rate rises, and possibly sharp increases in current unsustainably low long term bond yields, with alternatives, retail and industrials leading the way and offices bringing up the rear.

The COVID crisis has taught UK property investors a stark lesson: stay on the right side of structural change, avoid offices, and stick wherever you can to properties let to strong tenants at affordable rents on long, preferably index-linked, leases. Safe, long-term indexed income will be even more highly prized as inflation rises faster for longer than myopic markets and complacent central bankers expect. Wars are always inflationary, and however long the hot war lasts in Ukraine, the West is clearly now in an economic cold war with Russia and its allies, with sanctions and shortages biting for years to come.

Secure, index-linked, UK property offers massive yield margins over index-linked gilts, and a comfortable yield cushion still over conventional bonds. It is still seriously undervalued.

Portfolio Summary

VIP specialises in UK commercial properties with long, strong, index-related income streams to deliver above average long term real returns.

PORTFOLIO SUMMARY	31 March 2022	30 September 2021	31 March 2021
Portfolio Value:	£155,478,000*	£110,050,000	£80,550,000
Contracted Income:	£8,339,944	£6,336,645	£5,151,786
Contracted income as a % of Portfolio Value:	5.4%	5.8%	6.4%
Total Number of Properties:	43	39	31
Total Number of Tenants (the Portfolio is 100% let):	43	40	32
Contracted Indexed Rent:	95.8%	92.4%	90.6%
Weighted Average Unexpired Lease Term (if all tenants exercise break options):	12.8 years	13.8 years	15.1 years
Annual Total Return March to March:	20.2% (MSCI:19.6%)	-	2.3% (MSCI: 0.9%)

*Savills Valuation - NB: This figure does not include £6m committed to complete the Alnwick Hotel Development. The fair valuation given by Savills excludes prepaid or accrued operating lease income arising from the spreading of lease incentives or minimum lease payments and for adjustments to recognise finance lease liabilities for one leasehold property, both in accordance with IFRS 16. For further information see Note 9 to the Financial Statements.

Performance and Independent Revaluation

Savills' independent valuation at 31 March 2022 on the direct commercial property portfolio increased to £155,478,000 with a running yield of 5.4% (from 5.7% as at end-December 2021). This is up from the half-yearly valuation at 30 September 2021 of £110,050,000, the increase driven by both net acquisitions and valuation uplift.

VIP's property portfolio produced a total return on all 43 properties of 20.2% over the past year to March, against 19.6% for the MSCI UK Quarterly Property Index, the main benchmark for commercial property performance. Properties held throughout had a total return of 23.5%, the difference reflecting the acquisition costs on 14 properties bought during the year.

VIP's property portfolio total returns on All Assets of 20.2% over the past year and 8.8% over the past six months were driven by a valuation uplift of 8.5% on the 38 properties held over the six months (leisure 16.1%, industrials 12.4%, supermarkets 8.1%, other 7.1%, hotels 5.4%, pubs 4.1% and roadside 2.0%).

The longer term returns on the property portfolio have been between 10% and 12% a year over 3, 5, 10 and 20 years and 35 years and are above the MSCI averages over all these periods. The real returns above the Retail Price Index from VIP's property portfolio were 10% last year and between 5% and 9% a year over all cumulative periods from 3 to 35 years since the inception of OLIM Property's management.

Contracted rental income rose by 6% on held properties. The average lot size is £3,600,000, ranging from £1,150,000 to £13,000,000.

Properties

All 43 properties are let and 100% occupied on full repairing and insuring leases (tenants are responsible for repair, maintenance and outgoings), plus there is an agreement for lease in place at Alnwick where a Premier Inn hotel (80 bedrooms plus hotel) is currently under construction with completion due summer 2022. All 43 tenancies have upwards only rent increases and a weighted average unexpired length of 12.8 years (19.8 years if the break options are not exercised). All the properties valued at 31 March 2022 are freehold with the exception of two which are long leasehold with 109 and 83 years to run (Doncaster and Fareham).

Purchases to 31 March 2022

Fourteen new properties were purchased over the year for £63,430,000 in total including costs, at an average net initial yield of 5.3% (plus there will be an additional £6,000,000 to be paid on practical completion during late summer of 2022 of the Premier Inn Hotel at Alnwick, which is currently under construction); their average weighted unexpired lease length at 31 March 2022 is 10.4 years (if the break options are exercised). The newly purchased freehold properties consist of two hotels (one under construction), six industrials, three petrol filling stations with convenience stores and three supermarkets. Seven of the properties have RPI-linked rent increases, four have CPI-linked rent increases and three with fixed increases.

Purchases and Sales since March 2019

Year March to March	Purchases	No. of properties	Sales	No. of properties
2019/2020	£10,800,000	5	£9,200,000	5
2020/2021	£17,600,000	7	£4,750,000	2
2021/2022	£63,430,000	14	£3,260,000	2
Total	£91,830,000	26	£17,210,000	9

Purchase Pipeline

Further properties with long, strong, index-linked income are under active investigation.

Sales to 31 March 2022

The sale of two short-let overrented properties completed during the year: a petrol filling station in Southampton and a pub in Thornton Cleveleys for a combined £3.3m, 4.9% above valuation and at a net sale yield of 8.8%.

Sales since 31 March 2022

Since the year end, two properties have completed: a Buzz Bingo in Bradford and a Co-op store in Barton upon Humber for a combined £3.3m in total (39.5% above valuation) at a net sale yield of 6.2%.

Rent Reviews

The portfolio now has 96% of contracted income (42 out of 43 tenancies) with index-linked or fixed rent increases. Only one property, the industrial at Fareham, has three yearly open market upwards only reviews (the December 2021 sweep up clause has since been agreed with a 4% uplift and is to be documented imminently).

Nineteen rent reviews completed over the course of the year (twelve with annual rent increases and seven with five yearly review patterns), sixteen RPI-linked rent increases and three with fixed rental increases: 7 pubs, 5 supermarkets, 2 petrol filling stations, 1 bingo hall, 1 bowling alley, 1 library, a driving test centre and the caravan park giving a combined 6.9% uplift on their passing rents.

Rent Collection

100% of all contracted rents due were collected in the year to 31 March 2022 and landlords' rights to enforce rent collection are now back to normal.

The portfolio remains well-spread with a focus on index-linked rent reviews and the sectors of the UK commercial property market which benefit from structural change-industrials (33%), supermarkets (27%) and alternatives (40% mainly leisure, pubs and hotels). We do not invest in offices. VIP'S safe, long let indexed portfolio should prove resilient. It has outperformed through previous turbulent times as shown by the Property Record Table in the Annual Report, delivering long term above average real returns (benchmark MSCI UK Quarterly Property Index).

Louise Cleary & Matthew Oakeshott

OLIM Property Limited

10 June 2022

Equity Manager's Report

UK Equities

Market Background

The UK stock market gave a good absolute return over VIP's financial year, with the FTSE All-Share Index delivering a total return of 13.0%, against 19.6% for UK property. For most of the year progress was steady, driven by improving sentiment as lockdown restrictions were eased progressively. However, share prices dropped sharply in February and early March 2022 after the Russian invasion of Ukraine. They then recovered to end the quarter only marginally down.

Property shares were strong over the year to end March 2022, with the FTSE All Share Real Estate Investment Trusts ("REITs") Index generating a total return of 22.5%. REIT NAV performance was strong, benefiting from the post-pandemic recovery in commercial property values and, in particular, from the strength in industrial property sector valuations.

Performance

VIP's equity portfolio performed well ahead of the wider stock market, reflecting the better performance of property stocks as a whole. The portfolio recorded a total return of 24.1%, which also outperformed the FTSE All Share REITs Index. The portfolio benefited from its high exposure to its new investments in industrial property, and from the strong performances of its two Food Retailers, Wm Morrison Supermarkets and Tesco. The former was the subject of competing private equity takeover bids and was eventually taken private at 287p per share, generating a profit of over £1.5m for VIP. Tesco's share price was aided by strong trading and this holding was also subsequently disposed of at a significant profit.

Portfolio

The last twelve months saw sales of equities of £36.2m and purchases of £30.5m giving total transactions of £66.7m, with net sales of £5.7m. During the year we completed the sale of the portfolio's legacy holdings, switching into property-backed securities. The new portfolio focused on the industrial sector with three specialist industrial REITs, Tritax Big Box REIT, Urban Logistics REIT and Warehouse REIT, and a large holding in BMO Real Estate Investments, which mainly invests in industrial property and retail warehouses. A new holding in Tesco was established and an increased investment in Wm Morrison Supermarkets was made, both at small premiums to their respective asset values, in order to gain exposure to the resilient food retail property sector. As noted above, both of these investments were realised before the year end at a significant profit. New holdings were also made in PRS REIT and Residential Secure Income REIT, which both have exposure to attractive RPI-linked leases, and in Real Estate Credit Investments, which advances loans secured on property. An initial holding in Civitas Social Housing was sold after corporate governance issues came to light. At the end of March 2022, the equity portfolio had 7 remaining investments valued at £26.9m.

Since the year end, the portfolio's three specialist industrial property holdings, Tritax Big Box REIT, Urban Logistics REIT and Warehouse REIT, have been sold for a good profit and at a premium to their most recent NAVs. The proceeds have been partly re-invested in BMO Real Estate Investments at a discount of 25%.

Patrick Harrington

OLIM Property Limited

10 June 2022

Business Review

This Business Review is intended to provide an overview of the strategy and business model of the Company as well as the key measures used by the Directors in overseeing its management. The Company is an investment trust company that invests in accordance with the investment objective and investment policy outlined in this Business Review.

Value and Income Trust PLC changed its name on 22 January 2021 to Value and Indexed Property Income Trust PLC (VIP or the Company). VIP's Ordinary Shares are listed on the Premium segment of the Official List and traded on the main market of the London Stock Exchange. The Company is registered as a public limited company in Scotland under company number SC050366. VIP is an investment company within the meaning of Section 833 of the Companies Act 2006. The Company has one class of share. VIP is a member of the Association of Investment Companies (AIC).

The Group

Value and Indexed Property Income Services Limited (VIS), a wholly owned subsidiary of the Company, is authorised by the Financial Conduct Authority to act as the Company's Alternative Investment Fund Manager (AIFM).

Capital Structure

As at 31 March 2022, and as at the date of this Annual Report, VIP's share capital consisted of 43,557,464 Ordinary Shares of 10p nominal value in issue and 1,992,511 Ordinary Shares of 10p each held in Treasury. Each Ordinary Share in issue entitles the holder to one vote on a show of hands and, on a poll, to one vote for every share held.

Share Dealing

Shares in VIP can be purchased and sold in the market through a stockbroker, or indirectly through a lawyer, accountant or other professional adviser. Further information on how to invest in VIP is detailed in the Annual Report.

Recommendation of Non-Mainstream Investment  Products

VIP currently conducts its affairs so that the shares issued by it can be recommended by independent financial advisers to ordinary retail investors in accordance with the rules of the Financial Conduct Authority (FCA) in relation to non-mainstream investment products and intends to do so for the foreseeable future. VIP's shares are excluded from the FCA's restrictions which apply to non-mainstream investment products because they are shares in an investment trust company and the returns to investors are based on investments in directly held property and publicly quoted securities.

Highlights of the Year

· Net Asset Value total return (with debt at par)* of 15.6% (2021: 12.3%) over one year and 2.7% (2021: -8.5%) over three years.

· Share Price total return* of 15.8% (2021: 39.3%) over one year and 13.3% (2021: -3.3%) over three years.

· FTSE All-Share Index total return of 13.0% (2021: 26.7%) over one year and 16.8% (2021: 9.9%) over three years.

· MSCI Quarterly Property Index total return of 19.6% over one year.

· Dividends for year up 2.4% - increased for the 35th consecutive year.

Financial Record

	31 Mar 2022	31 Mar 2021
NAV (valuing debt at par) (p)	314.3	271.1
NAV (valuing debt at market) (p)*	305.0	256.6
Ordinary share price (p)	239.0	218.0
Discount of share price to NAV (valuing debt at market) (%)	21.6	15.0
Dividend per share (p)	12.6	12.3
Total assets less current liabilities (£m)	196.5	177.6

* This is an Alternative Performance Measure (APM) which has been explained in the Glossary in the Annual Report.

Investment Objective and Investment Policy

Investment Objective

The Company invests mainly in directly held UK commercial property to deliver secure, long-term, index-linked income and partly in property-backed UK securities. The Company aims to achieve long-term, real growth in dividends and capital value without undue risk.

Investment Policy

The Company's policy is to invest in directly held UK commercial property, property-backed securities listed on the London Stock Exchange and cash or near cash securities. The Company will not invest in overseas property or securities or in unquoted companies. UK directly held commercial property will usually account for at least 80 per cent. of the total portfolio but it may fall below that level if relative market levels and investment value, or a desired increase in cash or near cash securities, make it appropriate.

The UK commercial property portfolio

The Company will target secure income and capital returns linked to inflation, mainly through its diversified portfolio of UK property assets, let or pre-let to a broad range of strong tenants on long leases with rental growth subject to index-linked or fixed increases. The Company has not set any geographical limits, except that it may invest in all four nations of the United Kingdom. It has also set no structural limits and expects the portfolio to be focused on (but not limited to), the industrial/ warehouse, supermarket, roadside and leisure sectors (including for example, caravan parks, pubs, hotels, garden and bowling centres) income strips and ground rents. Offices and high street retail properties would not be priority sectors for investment. In order to manage risk in the portfolio, at the time of purchase, no single property asset will exceed in value 25 per cent. Of the Company's gross asset value and no single tenant (except UK Government and public sector) will account for more than 30 per cent. Of the Company's total rental income.

The UK quoted securities portfolio

In order to limit the risk to the Company's overall total portfolio of assets that are derived from any particular securities investment, no individual shareholding will account for more than 10 per cent. of the gross assets of the Company at the time of purchase. The Company will not use derivatives. The Company is permitted to invest cash held for working capital purposes and awaiting investment in cash deposits, gilts and money market funds.

No material changes may be made to the Company's investment policy described above without the prior approval of Shareholders by the passing of an Ordinary Resolution.

Borrowing policy

The Company has a longstanding policy of funding most of the increases in its property portfolio through the judicious use of borrowings. Gearing will normally be within a range of 25 per cent. and 50 per cent. of the total portfolio. The Company will not raise new borrowings if total net borrowings would then represent more than 50 per cent. of the total assets.

Until 2015, all borrowings had been long-term debentures to provide secure long-term funding, and avoiding the risks associated with short-term funding of having to sell illiquid assets at a low point in markets if loans had to be repaid. Detail of the Company's current borrowings, comprising two fixed term secured loan facilities and the 9.375% Debenture Stock 2026, can be found in Notes 12 and 24 to the Financial Statements. As announced on 24 May 2022, the Company has voluntarily decided to redeem the 2026 Debenture Stock early on 28 June 2022. The redemption price will be determined in accordance with the conditions set out in the Trust Deed and will be communicated to holders of the 2026 Debenture Stock shortly before the redemption date.

Performance, Results and Dividend

As at 31 March 2022, the Net Asset Value (NAV) total return (with debt at par) over one year was 15.6% and the Share Price total return over one year was 15.8%. This compares to the FTSE All-Share Index total return over one year of 13.0% and the MSCI UK Quarterly Property Index total return of 19.6%. Total assets less current liabilities were £196.5 million. A review of the performance of the property and equity portfolios is detailed in the Chairman's Statement in the Annual Report and in the Property and Equity Manager's Reports in the Annual Report.

For the year to 31 March 2022, quarterly dividends of 3.0p per share were each paid on 29 October 2021, 28 January 2022 and 29 April 2022. The Directors have declared that a final dividend of 3.6p per Ordinary Share (2021: 3.6p), if approved by Shareholders at the 2022 AGM, is paid on 29 July 2022 to Shareholders on the register on 1 July 2022. The ex-dividend date is 30 June 2022. This represents an annual increase in dividends of 2.4% as compared with the 9.0% and 7.0% annual increases in the Retail Price and Consumer Price Indices, respectively, as at the end of March 2022.

Principal and Emerging Risks and Uncertainties

The Board has an ongoing process for identifying, evaluating and monitoring the principal and emerging risks and uncertainties facing the Group and the Parent Company. The risk register forms a key part of the Group and the Parent Company's risk management framework used to carry out a robust assessment of the risks, including a significant focus on the controls in place to mitigate them. The principal and emerging risks and uncertainties which affect the Group's and the Company's business are:

Market Risk

The fair value of, or future cash flows from, a financial instrument held by the Group may fluctuate because of changes in market prices. This market risk comprises three elements - price risk, interest rate risk and currency risk.

Price Risk

Changes in market prices (other than those arising from interest rate or currency risk) may affect the value of the Group's investments.

For equities, asset allocation and stock selection, as set out in the Investment Policy in the Annual Report, both act to reduce market risk.

OLIM Property Limited (OLIM Property) is the Investment Manager responsible for the management of the Company's property and equities portfolios.

VIS delegates its portfolio management responsibilities to OLIM Property, which, as well as managing the property portfolio, actively monitors market prices throughout the year and reports to VIS and to the Board, which meet regularly in order to review investment strategy. The equity investments held by the Group are listed on the London Stock Exchange. All investment properties held by the Group are commercial properties located in the UK with long-term, index-linked income streams.

Interest Rate Risk

Interest rate movements may affect:

· the fair value of the investments in property;

· the level of income receivable on cash deposits; and

· the fair value of borrowings.

The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment and borrowing decisions.

The Board imposes borrowing limits to ensure that gearing levels are appropriate to market conditions and reviews these on a regular basis. Current borrowings comprise a debenture stock and two secured term loans, with four and eleven year terms remaining, providing secure long-term funding. It is the Board's policy to maintain a gearing level, measured on the most stringent basis of calculation after netting off cash equivalents, of between 25% and 50%.

Currency Risk

A small proportion of the Group's investment portfolio is invested in securities whose fair value and dividend stream are affected by movements in foreign exchange rates. It is not the Company's policy to hedge this risk.

Liquidity Risk

This is the risk that the Group will encounter difficulty in meeting obligations associated with its financial liabilities.

The Group's assets comprise readily realisable securities which can be sold to meet commitments, if required, and investment properties which, by their nature, are less readily realisable. The maturity of the Company's existing borrowings is set out in the interest rate risk profile section of Note 21 to the Financial Statements.

Credit Risk

This is the failure of a counterparty to a transaction to discharge its obligations under that transaction that could result in the Group suffering a loss.

The risk is not significant and is managed as follows:

· investment transactions are carried out on behalf of VIP by an outsourced dealing agent. Settlement of these transactions is executed by a large investment bank whose credit standing is reviewed periodically by OLIM Property (which reports to VIS).

· the risk of counterparty exposure due to failed trades causing a loss to the Group is mitigated by the review of failed trade reports on a daily basis. In addition, a stock reconciliation to third party administrators' records is performed on a daily basis to ensure that discrepancies are picked up on a timely basis. VIS carries out periodic reviews of the Depositary's operations and reports its findings to the Company. This review also includes checks on the maintenance and security of investments held.

·     cash is held only with reputable banks with high quality external credit ratings which are monitored on a regular basis.

Property Risk

The Group's commercial property portfolio is subject to both market and specific property risk. Since the UK commercial property market has been markedly cyclical for many years, it is prudent to expect that to continue.

The price and availability of credit, real economic growth and the constraints on the development of new property are the main influences on the property investment market.

Against that background, the specific risks to the income from the portfolio are tenants being unable to pay their rents and other charges or leaving their properties at the end of their leases. All leases are on full repairing and insuring terms, with upward only rent reviews and the average unexpired lease length is 20 years (2021: 17 years) and 13 years if break options are exercised. Details of the tenant and geographical spread of the portfolio are set out on in the Annual Report. The long-term record of performance through the varying property cycles since 1987 is set out in the Annual Report. OLIM Property is responsible for property investment management, with surveyors, solicitors and managing agents acting on the portfolio under OLIM Property's supervision.

Political Risk

The EU (Future Relationship) Act 2020 came into effect on 1 January 2021 and the full political, economic and legal consequences of the UK leaving the European Union (EU) are not yet known. It is possible that investments in the UK may be more difficult to value and assess for suitability of risk, harder to buy or sell and may be subject to greater or more frequent rises and falls in value. In the longer term, there is likely to be a period of uncertainty as the UK seeks to negotiate its ongoing relationship with the EU and other global trade partners. The UK's laws and regulations, including those relating to investment companies, may in future, diverge from those of the EU. This may lead to changes in the operation of the Company or the rights of investors in the territories in which the shares of the Company may be promoted and sold.

The Board reviews regularly the political situation, together with any associated changes to the economic, regulatory and legislative environment, to ensure that any risks arising are mitigated as effectively as possible.

An explanation of certain economic and financial risks and how they are managed is contained in Note 21 to the Financial Statements.

Climate Change and Social Responsibility Risk

The Board recognises that climate change is an important emerging risk that all companies should take into consideration within their strategic planning. As referred to elsewhere in the Strategic Report and in the Statement of Corporate Governance in the Annual Report, the Company has little direct impact on environmental issues. As an investment trust company, the Company has no direct employee or environmental responsibilities. The Board is aware that the Manager continues to take into account environmental, social and governance matters when considering investments.

Economic Risk

The valuation of the Company's investments may be affected by underlying economic conditions, such as fluctuating interest rates, rising inflation, increased fuel and energy costs, and the availability of bank finance, all of which can be impacted during times of geopolitical uncertainty and volatile markets, including during the coronavirus pandemic and the situation in Ukraine. The Board monitors the economic and market environment closely, and the situation in Ukraine, and believes that the diverse well-spread, long let indexed portfolio should prove resilient.

Other Key Risks

Additional risks and uncertainties include:

· Discount volatility: The Company's shares may trade at a price which represents a discount to its underlying net asset value.

· Regulatory risk: The Directors strive to maintain a good understanding of the changing regulatory agenda and consider emerging issues so that appropriate changes can be implemented and developed in good time. The Group operates in a complex regulatory environment and, therefore, faces a number of regulatory risks. A breach of Section 1158 of the Corporation Tax Act 2010 would result in the Company being subject to capital gains tax on portfolio investments. Breaches of other regulations, including but not limited to, the Companies Act 2006, the FCA Listing Rules, the FCA Disclosure, Guidance and Transparency Rules, the Market Abuse Regulation, the Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation, the Second Markets in Financial Instruments Directive (MiFID II) and the General Data Protection Regulation (GDPR), could lead to a number of detrimental outcomes and reputational damage.

The Company is also required to comply with tax legislation under the Foreign Account Tax Compliance Act and the Common Reporting Standard. The Company has appointed its registrar, Computershare, to act on its behalf to report annually to HM Revenue & Customs (HMRC).

The Company's privacy policy is available to view on the Company's web pages hosted by the Investment Manager at https://www.olimproperty.co.uk/value-and-indexed-property-income-trust.html. 

Breaches of controls by service providers to the Company could also lead to reputational damage or loss. The Audit and Management Engagement Committee monitors compliance with regulations by reviewing internal control reports from the Administrator and from the Investment Manager.

Alternative Investment Fund Managers Directive

The Alternative Investment Fund Managers Directive (AIFMD) introduced an authorisation and supervisory regime for all managers of authorised investment funds in the EU.

In accordance with the requirements of the AIFMD, the Company appointed VIS as its Alternative Investment Fund Manager (AIFM) and BNP Paribas Securities Services as its Depositary. VIS's status as AIFM remains unchanged following the UK's departure from the EU. The Board has controls in place in the form of regular reporting from the AIFM and the Depositary to ensure that both are meeting their regulatory responsibilities in relation to the Company.

Key Performance Indicators

At each Board Meeting, the Directors consider a number of performance measures to assess the Company's success in achieving its objectives and which also enable Shareholders and prospective investors to gain an understanding of its business.

A historical record of these performance measures, with comparatives, together with the Alternative Performance Measures (APMs) are shown in the Highlights of the Year and Financial Record section of the Business Review. Definitions of the APMs can be found in the Glossary in the Annual Report.

Following the change in investment policy to invest predominantly in property, the Directors have carried out a review of the key performance indicators to determine the performance of the Company. The Directors have identified the following as key performance indicators:

· Net asset value and share price total returns relative to the MSCI UK Quarterly Property Index and FTSE All-Share Index (total returns); and

· Dividend growth relative to consumer price inflation.

The Manager's Reports report on how the Company performed during the year under review against these indices.

The net asset value (NAV) total return is considered to be an appropriate long-term measure of Shareholder value as it includes the current NAV per share and the sum of dividends paid to date.

The share price total return relative to the FTSE All-Share Index (total return) is the theoretical return including reinvesting each dividend in additional shares in the Company at the current mid-market price on the day that the shares go ex-dividend.

The medium term dividend policy is for increases at least in line with inflation.

The Board reviews the Company's rental and investment income and operational expenses on a quarterly basis, as the Directors consider that both of these elements are important components in the generation of Shareholder returns. Further information can be found in Notes 2 and 4 to the Financial Statements in the Annual Report.

In addition, the Directors will consider economic, regulatory and political trends and factors that may impact on the Company's future development and performance.

Share Buy-backs

No Ordinary Shares were bought back in the year to 31 March 2022 (2021: 1,992,511 Ordinary Shares bought back). As at 31 March 2022, and as at the date of this Annual Report, 1,992,511 Ordinary Shares of 10p each are held in Treasury. Further information can be found in Note 14 to the Financial Statements.

At the forthcoming AGM, the Board will seek the necessary Shareholder authority to continue to conduct share buy-backs.

Statement of Compliance with Investment Policy

The Company is adhering to its stated investment policy and managing the risks arising from it. This can be seen in various tables and charts throughout this Annual Report, and from the information provided in the Chairman's Statement and in the Manager's Property and Equity Reports in the Annual Report.

The Board's Section 172 Duty and Stakeholder Engagement

The Directors recognise the importance of an effective Board and its ability to discuss, review and make decisions to promote the long-term success of the Company and protect the interests of its key stakeholders. As required by Provision 5 of The AIC Code of Corporate Governance (the AIC Code) (and in line with The UK Corporate Governance Code (the Code)), the Board has discussed the Directors' duty under Section 172 of the Companies Act and how the interests of key stakeholders have been considered in the Board discussions and decision making during the year. This has been summarised in the table below:

Stakeholder	Form of Engagement	Influence on Board decision making
Shareholders	AGM - Shareholders are encouraged to attend the AGM and are provided with the opportunity to ask questions and engage with the Directors and the Manager. Shareholders are also encouraged to exercise their right to vote on the resolutions proposed at the AGM (please refer to the Chairman's Statement in the Annual Report). Shareholder documents - The Company reports formally to Shareholders by publishing Annual and Interim Reports, normally in June and November each year. Significant matters or reporting obligations are disseminated to Shareholders by way of announcement to the London Stock Exchange. The Company Secretary acts as a key point of contact for the Board and all communications received from Shareholders are circulated to the Board. Other Shareholder events include investor and wealth manager lunches and roadshows organised by the Company's Broker at which the Manager is invited to present.	Dividend declarations - The Board recognises the importance of dividends to Shareholders and takes this into consideration when making decisions to pay quarterly and propose final dividends for each year. Further details regarding dividends for the year under review can be found in the Chairman's Statement in the Annual Report. Share buy-back policy - the Directors recognise the importance to Shareholders of the Company maintaining a buy-back policy and considered this when establishing the current programme. Further details can be found in this Business Review in the Annual Report and in the Directors' Report in the Annual Report. Shareholder communication and feedback from the Broker feeds directly into the Board's annual strategy review, the asset allocation considerations and the Manager's guidance on desirable investment characteristics.
Investee companies and assets	Quarterly Board Meetings - The Manager reports to the Board on the Company's investment portfolio and the Directors challenge the Manager where they feel it is appropriate.	The Manager worked closely with all tenants during the COVID-19 pandemic, and, as a result,100% of all contracted rents due were collected in the year to 31 March 2022. The Directors are aware that the exercise of voting rights is key to promoting good corporate governance and, through the Manager, ensures that the listed companies are encouraged to adopt best practice corporate governance. The Board has delegated the responsibility for monitoring the listed companies to the Manager and has given it discretion to vote in respect of the Company's holdings in the equity portfolio, in a way that reflects the concerns and key governance matters discussed by the Board.
Manager	Quarterly Board Meetings - The Manager attends every Board Meeting and presents a detailed portfolio analysis and reports on key issues such as performance of the property and equities portfolios.	The Directors and the Manager are cognisant of the Company's investment policy and the strategy agreed by the Board, which the Manager has been tasked with implementing, which has resulted in a reduction in the number of equity investments and an increase in the number of properties held in the portfolio. The Board engages constructively with the Manager to ensure investments are consistent with the agreed strategy and investment policy.
Registrar	Review meetings and control reports.	The Directors review the performance of all third party service providers; this includes ensuring compliance with GDPR.
Depositary and Custodian	Regular statements and control reports received, with all holdings and balances reconciled.	The Directors review the performance of all third party providers, including oversight of securing the Company's assets.
Advisers	The Company relies on the expert audit, accounting and legal advice received from its Auditor, Administrator and Legal Advisers.	The Directors review the performance of all third party service providers.

There were no key decisions made in the year to 31 March 2022 that require to be disclosed.

Employee, Environmental and Human Rights Policy

As an investment trust company, the Company has no direct employee or environmental responsibilities, nor is it responsible for the emission of greenhouse gases. Its principal responsibility to Shareholders is to ensure that the investment portfolio is properly managed and invested. The Company has no employees and, accordingly, has no requirement to report separately on employment matters.

Management of the investment portfolio is undertaken by the Investment Manager through members of its portfolio management team. In light of the nature of the Company's business, there are no relevant human rights issues and, therefore, the Company does not have a human rights policy.

Independent Auditor

The Company's Independent Auditor is required to report if there are any material inconsistencies between the content of the Strategic Report and the Financial Statements. The Independent Auditor's Report can be found in the Annual Report.

Future Strategy

The Board and the Investment Manager intend to maintain the strategic policies set out above for the year ending 31 March 2023 as it is believed that these are in the best interests of Shareholders.

The Company's Viability Statement is included in the Annual Report.

Approval

This Business Review, and the Strategic Report as a whole, was approved by the Board of Directors and signed on its behalf by:

James Ferguson

Chairman

10 June 2022

Going Concern

The Group and the Parent Company's business activities, together with the factors likely to affect their future development and performance, are set out in the Directors' Report, and the financial position of the Group and of the Parent Company is described in the Chairman's Statement within the Strategic Report. In addition, Note 21 to the Financial Statements includes: the policies and processes for managing the financial risks; details of the financial instruments; and the exposures to market price risk, interest rate risk, liquidity risk, credit risk and price risk sensitivity. The Directors believe that the Group and the Parent Company are well placed to manage their business risks.

Following a detailed review, the Directors have a reasonable expectation that the Group and the Parent Company have adequate financial resources to enable them to continue in operational existence for the foreseeable future, being at least 12 months from approval of the Financial Statements, and accordingly, they have continued to adopt the going concern basis (as set out in Note 1(b) to the Financial Statements) when preparing the Annual Report and Financial Statements.

Statement of Directors' Responsibilities

The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with UK adopted international accounting standards and applicable laws and regulations.

Company law requires the Directors to prepare Financial Statements for each financial year. Under that law, the Directors are required to prepare the Group Financial Statements, and have elected to prepare the Company Financial Statements, in accordance with UK adopted international accounting standards. Under company law, the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss for the Group and Company for that period.

In preparing these Financial Statements, the Directors are required to:

· select suitable accounting policies and then apply them consistently;

· make judgements and accounting estimates that are reasonable and prudent;

· state whether they have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006, subject to any material departures disclosed and explained in the Financial Statements;

· state whether they have been prepared in accordance with UK adopted international accounting standards, subject to any material departures disclosed and explained in the Financial Statements;

· prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business; and

· prepare a Directors' Report, a Strategic Report and Directors' Remuneration Report which comply with the requirements of the Companies Act 2006.

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

The Directors are responsible for ensuring that the Annual Report and Financial Statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for Shareholders to assess the Group's position and performance, business model and strategy.

The Directors are responsible for ensuring the Annual Report and Financial Statements are made available on a website. Financial Statements are published on the Company's web pages hosted by the Investment Manager in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company's web pages is the responsibility of the Directors. The Directors' responsibility also extends to the ongoing integrity of the Financial Statements contained therein.

Directors' Responsibility Statement

Each Director confirms, to the best of his or her knowledge, that:

· the Financial Statements have been prepared in accordance with the applicable set of accounting standards and Article 4 of the IAS Regulation and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group and Company; and that

· the Annual Report includes a fair review of the development and performance of the business and the financial position of the Group and Company, together with a description of the principal risks and uncertainties that they face.

The Directors confirm that the Annual Report and Financial Statements taken as a whole is fair, balanced and understandable and provides the information necessary for Shareholders to assess the Group's position

and performance, business model and strategy.

For and on behalf of the Board of

Value and Indexed Property Income Trust PLC

James Ferguson

Chairman

10 June 2022

Group Statement of Comprehensive Income

For the year ended 31 March

			Year ended				Year ended
			31 March 2022				31 March 2021
			Revenue	Capital	Total		Revenue	Capital	Total
			'000	'000	'000		'000	'000	'000
INCOME		Note
Rental income		2	5,647	-	5,647		5,359	-	5,359
Investment income		2	1,682	-	1,682		3,414	-	3,414
Other income		2	-	-	-		159	-	159
			7,329	-	7,329		8,932	-	8,932
Gains on investments
Realised gains on held-at-fair-value investments and investment properties		9	-	10,440	10,440		-	8,588	8,588
Unrealised gains on held-at-fair-value investments and investment properties		9	-	8,797	8,797		-	1,185	1,185
TOTAL INCOME			7,329	19,237	26,566		8,932	9,773	18,705
EXPENSES
Investment management fees		3	(1,088)	(2)	(1,090)		(301)	(702)	(1,003)
Other operating expenses		4	(870)	-	(870)		(771)	-	(771)
Finance costs		5	(3,177)	-	(3,177)		(5,084)	-	(5,084)
Total expenses			(5,135)	(2)	(5,137)		(6,156)	(702)	(6,858)
Profit before taxation			2,194	19,235	21,429		2,776	9,071	11,847
Taxation		6	(321)	3,154	2,833		(359)	1,132	773
Profit attributable to equity Shareholders of parent company			1,873	22,389	24,262		2,417	10,203	12,620
Earnings per Ordinary Share (pence)		7	4.30	51.40	55.70		5.35	22.56	27.91

The total column of this statement represents the Statement of Comprehensive Income of the Group, 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.

The Group does not have any other comprehensive income and so the total profit, as disclosed above, is the same as the Group's total comprehensive income. All income is attributable to the equity holders of Value and Indexed Property Income Trust PLC, the parent company. There are no minority interests.

The Notes form part of these Financial Statements.

The Board is proposing a final dividend of 3.60p per share, making a total dividend of 12.60p per share for the year ended 31 March 2022 (2021: 12.30p per share) which, if approved by Shareholders, will be payable on 29 July 2022 (see Note 8).

Company Statement of Comprehensive Income

for the year ended 31 March

			Year ended				Year ended
			31 March 2022				31 March 2021
			Revenue	Capital	Total		Revenue	Capital	Total
			'000	'000	'000		'000	'000	'000
INCOME		Note
Rental income		2	5,647	-	5,647		5,359	-	5,359
Investment income		2	1,682	-	1,682		3,414	-	3,414
Other income		2	-	-	-		159	-	159
			7,329	-	7,329		8,932	-	8,932
GAINS AND LOSSES ON INVESTMENTS
Realised gains on held-at-fair-value investments and investment properties		9	-	10,440	10,440		-	8,588	8,588
Unrealised gains on held-at-fair-value investments and investment properties		9	-	8,797	8,797		-	1,781	1,781
TOTAL INCOME			7,329	19,237	26,566		8,932	10,369	19,301
EXPENSES
Investment management fees		3	(1,088)	(2)	(1,090)		(301)	(702)	(1,003)
Other operating expenses		4	(870)	-	(870)		(771)	-	(771)
Finance costs		5	(3,177)	-	(3,177)		(5,050)	-	(5,050)
Total expenses			(5,135)	(2)	(5,137)		(6,122)	(702)	(6,824)
Profit before taxation			2,194	19,235	21,429		2,810	9,667	12,477
Taxation		6	(321)	3,154	2,833		(359)	1,132	773
Profit attributable to equity Shareholders of parent company			1,873	22,389	24,262		2,451	10,799	13,250
Earnings per Ordinary Share (pence)		7	4.30	51.40	55.70		5.42	23.88	29.30

The total column of this statement represents the Statement of Comprehensive Income of the Company 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.

The Company does not have any other comprehensive income and so the total profit, as disclosed above, is the same as the Company's total comprehensive income.

The Notes form part of these Financial Statements.

Group Statement of Financial Position

As at 31 March

				As at				As at
				31 March 2022				31 March 2021
			Note	£'000	£'000			£'000	£'000
ASSETS
Non current assets
Investment properties			9		155,838				81,132
Investments held at fair value through profit or loss			9		26,871				28,581
					182,709				109,713
Deferred tax asset			6		4,091				1,258
Receivables			10		2,238				2,017
					189,038				112,988
Current assets
Cash and cash equivalents				5,153			65,965
Receivables			10	4,709			972
					9,862				66,937
TOTAL ASSETS					198,900				179,925
Current liabilities
Payables			11	(2,423)			(2,318)
					(2,423)				(2,318)
TOTAL ASSETS LESS CURRENT LIABILITIES					196,477				177,607
Non-current liabilities
Payables			12	(2,854)			(2,862)
Borrowings			12	(56,723)			(56,662)
					(59,577)				(59,524)
NET ASSETS					136,900				118,083
EQUITY ATTRIBUTABLE TO EQUITY SHAREHOLDERS
Called up share capital			14		4,555				4,555
Share premium			15		18,446				18,446
Retained earnings			16		113,899				95,082
TOTAL EQUITY					136,900				118,083
NET ASSET VALUE PER ORDINARY SHARE (PENCE)			17		314.30				271.10

These Financial Statements were approved by the Board on 10 June 2022 and were signed on its behalf by:-

James Ferguson,

Chairman

The Notes form part of these Financial Statements.

Company Statement of Financial Position

As at 31 March

					As at			As at
					31 March 2022			31 March 2021
			Note		£'000	£'000		£'000	£'000
ASSETS
Non current assets
Investment properties			9			155,838			81,132
Investments held at fair value through profit or loss			9			27,071			28,781
						182,909			109,913
Deferred tax asset			6			4,091			1,258
Receivables			10			2,238			2,017
						189,238			113,188
Current assets
Cash and cash equivalents					4,953			65,765
Receivables			10		4,709			972
						9,662			66,737
TOTAL ASSETS						198,900			179,925
Current liabilities
Payables			11		(2,423)			(2,318)
						(2,423)			(2,318)
TOTAL ASSETS LESS CURRENT LIABILITIES						196,477			177,607
Non-current liabilities
Payables			12		(2,854)			(2,862)
Borrowings			12		(56,723)			(56,662)
						(59,577)			(59,524)
NET ASSETS						136,900			118,083
EQUITY ATTRIBUTABLE TO EQUITY SHAREHOLDERS
Called up share capital			14			4,555			4,555
Share premium			15			18,446			18,446
Retained earnings			16			113,899			95,082
TOTAL EQUITY						136,900			118,083
NET ASSET VALUE PER ORDINARY SHARE (PENCE)			17			314.30			271.10

These Financial Statements were approved by the Board on 10 June 2022 and were signed on its behalf by:-

James Ferguson,

Chairman

The Notes form part of these Financial Statements.

Group Statement of Cashflows

For the year ended 31 March

			2022			2021
		Note	£'000	£'000		£'000	£'000
Cash flows from operating activities
	Rental income received			5,970			5,218
	Dividend income received			1,835			3,486
	Interest (paid)/received			(1)			244
	Operating expenses paid			(1,914)			(1,673)
NET CASH INFLOW FROM OPERATING ACTIVITIES		18		5,890			7,275
Cash flows from investing activities
	Purchase of investments held at fair value through profit or loss		(30,132)			(4,500)
	Purchase of investment properties		(63,412)			(17,553)
	Sale of investments held at fair value through profit or loss		32,042			79,584
	Sale of investment properties		3,445			4,725
NET CASH (OUTFLOW)/INFLOW FROM INVESTING ACTIVITIES				(58,057)			62,256
Cash flow from financing activities
	Repayment of debenture stock		-			(15,000)
	Fees paid on new loan		-			(4)
	Interest paid on loans		(3,113)			(4,938)
	Finance cost of leases		(78)			(191)
	Payments of lease liabilities		(9)			(17)
	Dividends paid	8	(5,445)			(5,512)
	Buyback of Ordinary Shares for Treasury	14	-			(4,332)
NET CASH OUTFLOW FROM FINANCING ACTIVITIES				(8,645)			(29,994)
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS				(60,812)			39,537
Cash and cash equivalents at 1 April 2021				65,965			26,428
CASH AND CASH EQUIVALENTS AT 31 MARCH 2022				5,153			65,965

The Notes form part of these Financial Statements.

Company Statement of Cashflows

For the year ended 31 March

				2022					2021
		Note		£'000		£'000			£'000		£'000
Cash flows from operating activities
	Rental income received					5,970					5,218
	Dividend income received					1,835					3,486
	Interest (paid)/received					(1)					244
	Operating expenses paid					(1,914)					(1,673)
NET CASH INFLOW FROM OPERATING ACTIVITIES		18			5,890					7,275
Cash flows from investing activities
	Purchase of investments held at fair value through profit or loss			(30,132)					(4,500)
	Purchase of investment properties			(63,412)					(17,553)
	Sale of investments held at fair value through profit or loss			32,042					79,584
	Sale of investment properties			3,445					4,725
NET CASH (OUTFLOW)/INFLOW FROM INVESTING ACTIVITIES					(58,057)					62,256
Cash flow from financing activities
	Repayment of debenture stock			-					(15,000)
	Fees paid on new loan			-					(4)
	Interest paid on loans			(3,113)					(4,938)
	Finance cost of leases			(78)					(157)
	Payments of lease liabilities			(9)					(51)
	Dividends paid	8		(5,445)					(5,512)
	Buyback of Ordinary Shares for Treasury	14		-					(4,332)
NET CASH OUTFLOW FROM FINANCING ACTIVITIES					(8,645)					(29,994)
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS					(60,812)					39,537
Cash and cash equivalents at 1 April 2021					65,765					26,228
CASH AND CASH EQUIVALENTS AT 31 MARCH 2022					4,953					65,765

The Notes form part of these Financial Statements.

Statement of Changes in Equity

For the year ended 31 March

Group		Year ended 31 March 2022
		Share	Share	Retained	Total
		capital	premium	earnings
	Note	£'000	£'000	£'000	£'000
Net assets at 31 March 2021		4,555	18,446	95,082	118,083
Profit for the year		-	-	24,262	24,262
Dividends paid	8	-	-	(5,445)	(5,445)
Net assets at 31 March 2022		4,555	18,446	113,899	136,900
Company		Year ended 31 March 2022
		Share	Share	Retained	Total
		capital	premium	earnings
		£'000	£'000	£'000	£'000
Net assets at 31 March 2021		4,555	18,446	95,082	118,083
Profit for the year		-	-	24,262	24,262
Dividends paid	8	-	-	(5,445)	(5,445)
Net assets at 31 March 2022		4,555	18,446	113,899	136,900
Group		Year ended 31 March 2021
		Share	Share	Retained	Total
		capital	premium	earnings
	Note	£'000	£'000	£'000	£'000
Net assets at 31 March 2020		4,555	18,446	92,306	115,307
Profit for the year		-	-	12,620	12,620
Dividends paid	8	-	-	(5,512)	(5,512)
Buyback of Ordinary Shares for Treasury	14	-	-	(4,332)	(4,332)
Net assets at 31 March 2021		4,555	18,446	95,082	118,083
Company		Year ended 31 March 2021
		Share	Share	Retained	Total
		capital	premium	earnings
		£'000	£'000	£'000	£'000
Net assets at 31 March 2020		4,555	18,446	91,676	114,677
Profit for the year		-	-	13,250	13,250
Dividends paid	8	-	-	(5,512)	(5,512)
Buyback of Ordinary Shares for Treasury	14	-	-	(4,332)	(4,332)
Net assets at 31 March 2021		4,555	18,446	95,082	118,083

The Notes form part of these Financial Statements.

Notes to the Financial Statements

1  Accounting policies

The Financial Statements have been prepared in accordance with UK adopted international accounting standards.

The functional and presentational currency of the Group and Company is pounds sterling because that is the currency of the primary economic environment in which the Group and Company operate. The Financial Statements and the accompanying Notes are presented in pounds sterling and rounded to the nearest thousand pounds except where otherwise indicated.

(a)  Basis of preparation

The Financial Statements have been prepared on a going concern basis as disclosed in the Annual Report and on the historical cost basis, except for the revaluation of equities, investment properties and investment in subsidiaries, all of which are valued at fair value through profit and loss. The principal accounting policies adopted are set out below. Where presentational guidance set out in the Statement of Recommended Practice Financial Statements of Investment Trust Companies and Venture Capital Trusts (the SORP) issued by the Association of Investment Companies (AIC) in April 2021 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, except for the allocation of finance costs to revenue as explained in Note 1(f).

The Board has considered the requirements of IFRS 8, 'Operating Segments'. The Board is charged with setting the Group's investment strategy. The Board has delegated the day to day implementation of this strategy to the Investment Manager but the Board retains responsibility to ensure that adequate resources of the Group are directed in accordance with its decisions. The Board is of the view that the Group is engaged in a single segment of business, being investments in quoted UK equities and UK commercial properties. The view that the Group is engaged in a single segment of business is based on the fact that one of the key financial indicators received and reviewed by the Board is the total return from the investment portfolio taken as a whole. A review of the investment portfolio is included in the reports from the Investment Manager in the Annual Report.

(b)  Going concern

The Group's business activities, together with the factors likely to affect its future development and performance, are set out in the Strategic Report in the Annual Report. The financial position of the Group as at 31 March 2022 is shown in the Statement of Financial Position in the Annual Report. The cash flows of the Group for the year ended 31 March 2022 are set out in the Annual Report. The Group had fixed debt totalling £56,723,000 as at 31 March 2022, as set out in Notes 11 and 12; none of the borrowings is repayable before March 2026. Note 21 sets out the Group's risk management policies and procedures, including those covering market price risk, liquidity risk and credit risk. As at 31 March 2022, the Group's total assets less current liabilities exceeded its total non current liabilities by a factor of over two. The assets of the Group consist mainly of securities and investment properties that are held in accordance with the Group's investment policy, as set out in the Annual Report. Most of these securities are readily realisable, even in volatile markets. The Directors, who have reviewed carefully the Group's forecasts for the coming year and having taken into account the liquidity of the Group's investment portfolio and the Group's financial position in respect of cash flows, borrowing facilities, the intention to repay the debenture early, and investment commitments (of which there is none of significance), are not aware of any material uncertainties that may cast significant doubt upon the Group's ability to continue as a going concern. Accordingly, the Directors believe that it is appropriate to continue to adopt the going concern basis in preparing the Financial Statements.

(c)  Basis of consolidation

The consolidated Financial Statements incorporate the Financial Statements of the Company and the entity controlled by the Company (its subsidiary). An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has ability to affect those returns through its power over the investee. The Company consolidates the investee that it controls. All intra-group transactions, balances, income and expenses are eliminated on consolidation. The investment in the subsidiary is recognised at fair value in the Financial Statements of the Company. This is considered to be the net asset value of the Shareholders' funds, as shown in its Statement of Financial Position.

Value and Indexed Property Income Services Limited is a private limited company incorporated in Scotland under company number SC467598. It is a wholly owned subsidiary of the Company and has been appointed to act as Alternative Investment Fund Manager of the Company.

(d)  Presentation of Statement of Comprehensive Income

In order to reflect better the activities of an investment trust company and in accordance with guidance issued by the AIC, supplementary information which analyses the Statement of Comprehensive Income between items of a revenue and capital nature has been presented alongside the Statement of Comprehensive Income. In accordance with the Company's Articles, net realised capital returns may be distributed by way of dividend.

Additionally, the net revenue is the measure that the Directors believe to be appropriate in assessing the Company's compliance with certain requirements set out in sections 1158-1160 of the Corporation Tax Act 2010.

(e)  Income

Dividend income from investments is recognised as revenue for the period on an ex-dividend basis. Where no ex-dividend date is available, dividends receivable on or before the period end are treated as revenue for the period.

Where the Group has elected to receive dividend income in the form of additional shares rather than cash, the amount of cash dividend foregone is recognised as income. Any excess in the value of shares received over the amount of cash dividend foregone is recognised as a gain in the income statement.

Interest receivable from cash and short term deposits and interest payable is accrued to the end of the period.

Rental receivable and lease incentives, where material, from investment properties under operating leases are recognised in the Statement of Comprehensive Income over the term of the lease on a straight line basis. Other income is recognised on an accruals basis.

(f)  Expenses and Finance Costs

All expenses and finance costs are accounted for on an accruals basis. Expenses are presented as capital where a connection with the maintenance or enhancement of the value of investments can be demonstrated. In this respect and in accordance with the SORP, the investment management fees have been allocated 30% to revenue and 70% to capital for the year ended 31 March 2022 to reflect the Board's expectations of long-term investment returns.

It is normal practice, and in accordance with the SORP, for investment trust companies to allocate finance costs to capital on the same basis as the investment management fee allocation. However, as the Company has a significant exposure to property, and property companies allocate finance costs to revenue to match rental income, the Directors consider that, contrary to the SORP, it is inappropriate to allocate finance costs to capital.

(g)  Receivables and Payables

Receivables do not carry any interest and are stated at their nominal value, as reduced by any impairment calculated using an expected credit loss model. Payables are not interest bearing and are stated at their nominal value.

(h)  Taxation

The Company's liability for current tax is calculated using tax rates that have been enacted or substantially enacted by the date of the Statement of Financial Position.

Deferred tax is recognised in respect of all temporary differences that have originated but not reversed at the date of the Statement of Financial Position, where transactions or events that result in an obligation to pay more tax in the future or the right to pay less tax in the future have occurred at the date of the Statement of Financial Position.

This is subject to deferred tax assets only being recognised if it is considered more probable than not that there will be suitable profits from which the future reversal of the temporary differences can be deducted.

Due to the Company's status as an investment trust company, and the intention to continue to meet the conditions required to maintain approval for the foreseeable future, the Company has not provided deferred tax on any capital gains and losses arising on the revaluation or disposal of investments.

(i)  Dividends payable

Interim dividends are recognised as a liability in the period in which they are paid as no further approval is required in respect of such dividends. Final dividends are recognised as a liability only after they have been approved by Shareholders in general meeting.

(j)  Investments

Equity investments

All equity investments are classified on the basis of their contractual cashflow characteristics and the Group's business model for managing its assets. The business model, which is the determining feature, is such that the portfolio of equity investments is managed, and performance is evaluated, on the basis of fair value. Consequently, all equity investments are measured at fair value through profit or loss.

For listed investments, fair value through profit or loss is deemed to be bid market prices or closing prices for SETS stocks sourced from the London Stock Exchange. SETS is the London Stock Exchange electronic trading service covering most of the market including all FTSE 100 constituents and most liquid FTSE 250 constituents along with some other securities. Gains and losses arising from changes in fair value are included in net profit or loss for the period as a capital item in the Statement of Comprehensive Income and are ultimately recognised in the retained earnings.

Investment property

Investment properties are initially recognised at cost, being the fair value of consideration given, including transaction costs associated with the investment property. Any subsequent capital expenditure incurred in improving investment properties is capitalised in the period incurred and is included within the book cost of the property.

After initial recognition, investment properties are measured at fair value. Gains and losses arising from changes in fair value are included in net profit or loss for the period as a capital item in the Statement of Comprehensive Income and are ultimately recognised in the retained earnings.

As disclosed in Note 21, the Group leases out all of its properties on operating leases. An operating lease is a lease that does not transfer substantially all the risks and rewards incidental to ownership of an underlying asset. A property held under an operating lease is classified and accounted for as an investment property where the Group holds it to earn rental, capital appreciation or both. A property held under an operating lease is classified and accounted for as an investment property where the Group holds it to earn rental, capital appreciation or both. Any such property leased under an operating lease is carried at fair value. Fair value is established by half-yearly professional valuation on an open market basis by Savills (UK) Limited, Chartered Surveyors and Valuers, and in accordance with the RICS Valuation - Global Standards January 2020 (the 'RICS Red Book'). The determination of fair value by Savills is supported by market evidence, excluding prepaid or accrued operating lease income arising from the spreading of lease incentives or minimum lease payments because it has been recognised as a separate liability or asset. The fair value of investment property held by a lessee as a right-of-use asset reflects expected cash flows (including variable lease payments that are expected to become payable). Accordingly, if a valuation obtained for a property is net of all payments expected to be made, it will be necessary to add back any recognised lease liability, to arrive at the carrying amount of the investment property using the fair value model. These valuations are disclosed in Note 9.

The Company accounts for its investment in its subsidiary at fair value. All fair value adjustments in relation to the subsidiary are eliminated on consolidation.

(k)  Cash and cash equivalents

Cash and cash equivalents comprises deposits held with banks that are repayable on demand.

(l)  Non - current liabilities

All new loans and borrowings are initially measured at cost, being the fair value of the consideration received, less issue costs where applicable. Thereafter, all interest-bearing loans and borrowings are subsequently measured at amortised cost. Amortised cost is calculated by taking into account any discount or premium on settlement. The costs of arranging any interest-bearing loans are capitalised and amortised over the life of the loan. When the term of a loan is modified, the amortisation of costs is adjusted in line.

(m)  Leases

The Group leases properties that meet the definition of investment property. These right-of-use assets are presented as part of Investments Properties in the Statement of Financial Position and held at fair-value. All properties are leased out under operating leases and rental income is recognised on a straight line basis over the expected term of the relevant lease. Many leases have fixed or minimum rental uplifts and rental income is recognised on a straight line basis over the expected term of the lease.

(n)  Critical accounting judgements and key estimates

The preparation of the Financial Statements requires the Directors to make judgements, estimates and assumptions that may affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. The critical accounting area involving a higher degree of judgement or complexity comprises the determination of fair value of the investment properties. The Group engages independent professional qualified valuers to perform the valuation. Information about the valuation techniques and inputs used in determining fair value as at 31 March 2022 is disclosed in Note 9.

(o)  Adoption of new and revised Accounting Standards

The following new and revised Standards and Interpretations became effective during the year and had no material impact on the amounts reported in these Financial Statements but may impact accounting for future transactions and arrangements.

Standards

IFRS 16 Amendments - Covid 19-Related Rent Concessions (effective 1 June 2020)

IAS 39, IFRS 4, 7, 9 and 16 Amendments - Interest Benchmark Reform Phase 2 (effective 1 January 2021)

IFRS 16 Amendments - Covid-19 Related Rent Concessions beyond 30 June 2021 (effective 1 April 2021)

At the date of authorisation of these Financial Statements, the following Standards and interpretations, which have not been applied to these Financial Statements, were in issue but were not yet effective.

Standards

IAS 1 Amendments - Classification of Liabilities as Current or Non-Current (effective 1 January 2023)

IAS 1 Amendments - Disclosure of Accounting Policies (effective 1 January 2023)

IAS 8 Amendments - Definition of Accounting Estimates (effective 1 January 2023)

IAS 12 Amendments - Deferred Tax related to Assets and Liabilities arising from a Single Transaction (effective 1 January 2023)

The Directors do not expect the adoption of these Standards and interpretations (or any other Standards and interpretations which are in issue but not effective) will have a material impact on the Financial Statements of the Group in future periods.

2	Income	2022				2021
		Group		Company		Group		Company
		£000		£000		£000		£000
Investment income
Dividends from listed investments in UK		1,682		1,682		3,414		3,414
Other operating income
Rental income		5,647		5,647		5,359		5,359
Interest receivable on short term deposits		-		-		159		159
Total income		7,329		7,329		8,932		8,932

			2022				2021
3	Investment management fee	Revenue	Capital	Total		Revenue	Capital	Total
		£000	£000	£000		£000	£000	£000
Group and Company
Investment management fee		1,088	2	1,090		301	702	1,003

A summary of the terms of the management agreement is given in the Directors' Report in the Annual Report.

In November 2020, OLIM gave notice of its intention to wind up its operations in early 2021. As a result, the investment management agreement with OLIM ceased with effect from 28 February 2021 and responsibility for the management of the equity portfolio moved to OLIM Property Limited.

From 1st April 2021 the management fee has been allocated 100% to revenue (previously 30% to revenue, 70% to capital). 

OLIM Property Limited received an investment management fee of £1,090,000 (2021 - £479,000), the basis of calculation of which is given in the Annual Report.

OLIM Limited received an investment management fee of £nil (2021 - £524,000).

4  Other operating expenses		2022				2021
		Group		Company		Group		Company
		£000		£000		£000		£000
Fee payable to the Company's auditor for the audit of the Company's accounts		55		55		63		63
- audit of the Subsidiary's accounts		2		2		2		2
Directors' fees		105		105		107		107
NIC on Directors' fees		3		3		7		7
Fees for company secretarial services		222		222		230		230
Direct property costs		(2)		(2)		(80)		(80)
Other expenses		485		485		442		442
		870		870		771		771

Directors' fees comprise the Chairman's fees of £30,000 (2021 - £30,000), the Audit and Management Engagement Committee Chairman's fees of £24,500 (2021 - £24,500) and fees of £22,000 (2021 - £22,000) per annum paid to each other Director.

Additional information on Directors' fees is given in the Directors' Remuneration Report in the Annual Report. 

5  Finance costs	2022				2021
	Group		Company		Group		Company
	£000		£000		£000		£000
Interest payable on:
11% First Mortgage Debenture Stock 2021	-		-		1,650		1,650
9.375% Debenture Stock 2026	1,875		1,875		1,875		1,875
Less amortisation of issue premium	(24)		(24)		(24)		(24)
Bank loan interest payable	1,181		1,181		1,307		1,307
Amortisation of loan expenses	67		67		85		85
Finance costs attributable to lease liabilities	78		78		191		157
	3,177		3,177		5,084		5,050

6	Taxation		2022				2021
		Revenue	Capital	Total		Revenue	Capital	Total
		£000	£000	£000		£000	£000	£000
a)	Analysis of the tax credit/(charge) for the year:
	Group
	Current tax	(321)	321	-		(359)	359	-
	Deferred tax	-	2,833	2,833		-	773	773
		(321)	3,154	2,833		(359)	1,132	773
	Factors affecting the total tax credit/(charge) for year:
	Profit before tax			21,429				11,847
	Tax charge thereon at 19% (2021 - 19%)			4,072				2,251
	Effects of:
	Non taxable dividends			(320)				(649)
	Gains on investments not taxable			(3,655)				(1,857)
	Movement in deferred tax not recognised			(2,930)				(518)
				(2,833)				(773)
			2022				2021
		Revenue	Capital	Total		Revenue	Capital	Total
		£000	£000	£000		£000	£000	£000
	Company
	Current tax	(321)	321	-		(359)	359	-
	Deferred tax	-	2,833	2,833		-	773	773
		(321)	3,154	2,833		(359)	1,132	773
	Factors affecting the total tax credit/(charge) for year:
	Profit before tax			21,429				12,477
	Tax charge thereon at 19% (2021 - 19%)			4,072				2,371
	Effects of:
	Non taxable dividends			(320)				(649)
	Gains on investments not taxable			(3,655)				(1,970)
	Movement in deferred tax not recognised			(2,930)				(525)
				(2,833)				(773)
b)	Factors affecting future tax charges
	Unutilised tax losses			23,192				25,617
	Potential tax benefit at 19%			635				4,867
	Potential tax benefit at 25%			4,963				-
				5,598				4,867
	Recognised as a deferred tax non-current asset			4,091				1,258
	Not recognised as a deferred tax asset			1,507				3,609
				5,598				4,867

The Company and Group have deferred tax assets of £5,774,000 (2021 - £4,867,000) at 31 March 2022 relating to total accumulated unrelieved tax losses carried forward of £23,192,000 (2021 - £25,617,000). The Company and Group have recognised deferred tax assets of £4,091,000 (2021 - £1,258,000), based on forecast profits for the next five years but have not recognised deferred tax assets of £1,507,000 (2021 - £3,609,000) arising as a result of losses carried forward. These losses do not have an expiry date but it is considered too uncertain that the Group will generate profits against which these losses would be available to offset and, on that basis, the deferred tax asset in respect of these losses has not been recognised.

7  Return per Ordinary Share	2022				2021
	Group		Company		Group		Company
	£000		£000		£000		£000
The return per Ordinary Share is based on the following figures:
Revenue return	1,873		1,873		2,417		2,451
Capital return	22,389		22,389		10,203		10,799
Weighted average number of Ordinary Shares in issue	43,557,464		43,557,464		45,216,413		45,216,413
Return per share - revenue	4.30p		4.30p		5.35p		5.42p
Return per share - capital	51.40p		51.40p		22.56p		23.88p
Total return per share	55.70p		55.70p		27.91p		29.30p

8  Dividends	2022		2021
	£000		£000
Dividends on Ordinary Shares:
Third quarterly dividend of 2.90p per share (2021- 2.90p) paid 30 April 2021	1,263		1,321
Final dividend of 3.60p per share (2021 - 3.40p) paid 30 July 2021	1,568		1,549
First quarterly dividend of 3.00p per share (2021- 2.90p) paid 29 October 2021	1,307		1,321
Second quarterly dividend of 3.00p per share (2021- 2.90p) paid 28 January 2022	1,307		1,321
Dividends paid in the period	5,445		5,512
The third interim dividend of 3.00p (2021 - 2.90p), paid on 29 April 2022, has not been included as a liability in these Financial Statements. The final dividend of 3.60p (2021 - 3.60p), being paid on 29 July 2022, has not been included as a liability in these Financial Statements. Set out below is the total dividend paid and proposed in respect of the financial year, which is the basis upon which the requirements of Sections 1158 - 1159 of the Corporation Tax Act 2010 are considered. The current year's revenue available for distribution by way of dividend is £1,874,000 (2021 - £2,451,000).
	2022		2021
	£000		£000
First quarterly dividend of 3.00p per share (2021- 2.90p) paid 29 October 2021	1,307		1,321
Second quarterly dividend of 3.00p per share (2021- 2.90p) paid 28 January 2022	1,307		1,321
Third quarterly dividend of 3.00p per share (2021 - 2.90p) payable 29 April 2022	1,307		1,263
Final quarterly dividend of 3.60p per share (2021 - 3.60p) payable 29 July 2022	1,568		1,568
	5,489		5,473

The final dividend is based on the latest share capital of 43,557,464 ordinary shares excluding those held in Treasury.

9  Investments		Investment
		properties	Equities	Total
		£'000	£'000	£'000
Group
Cost at 31 March 2021		70,589	18,766	89,355
Unrealised appreciation		10,543	9,815	20,358
Valuation at 31 March 2021		81,132	28,581	109,713
Purchases		63,418	30,456	93,874
Sales proceeds		(3,298)	(36,235)	(39,533)
Realised gains on sales		(767)	11,207	10,440
Movement in unrealised appreciation in year		15,353	(7,138)	8,215
Valuation at 31 March 2022		155,838	26,871	182,709
	Investment	Investment in
	properties	Subsidiary	Equities	Total
	£'000	£'000	£'000	£'000
Company
Cost at 31 March 2021	70,589	200	18,766	89,555
Unrealised appreciation	10,543	-	9,815	20,358
Valuation at 31 March 2021	81,132	200	28,581	109,913
Purchases	63,418	-	30,456	93,874
Sales proceeds	(3,298)	-	(36,235)	(39,533)
Realised gains on sales	(767)	-	11,207	10,440
Movement in unrealised appreciation in year	15,353	-	(7,138)	8,215
Valuation at 31 March 2022	155,838	200	26,871	182,909

The fair value valuation given by Savills plc excludes prepaid or accrued operating lease income arising from the spreading of lease incentives or minimum lease payments and for adjustments to recognise finance lease liabilities for one leasehold property, both in accordance with IFRS 16. The valuation has, therefore, been increased.

	2022 £'000		2021 £'000
Savills plc valuation	155,478		80,550
Operating lease assets	(2,502)		(2,289)
Finance lease liabilities	2,862		2,871
Valuation of Investment Properties	155,838		81,132
Increase in fair value	360		582

The fair value valuation given by Savills plc includes £3,278,000 relating to the properties at Barton-upon-Humber and Bradford where contracts have been exchanged for sale in May 2022.

The movement in unrealised appreciation in the year disclosed in the Company's Statement of Comprehensive Income includes amortisation of £nil (2021 - £630,000) relating to the transfer of the 11% Debenture Stock 2021 from Audax Properties Limited to the Company in 2014.

Transaction costs

During the year expenses were incurred in acquiring and disposing of investments classified as fair value through profit or loss. These have been expensed through capital and are included within gains and losses on investments in the Statement of Comprehensive Income. The total costs were as follows:-

		2022		2021
		£'000		£'000
Purchases		95		27
Sales		32		75
		127		102

The fair values of the investment properties were independently valued by professional valuers from Savills (UK) Limited, acting in the capacity of External Valuers as defined in the RICS Red Book (but not for the avoidance of doubt as an External Valuers of the portfolio as defined by the Alternative Investment Fund Managers Regulations 2013). The valuations were prepared on the basis of Fair Value as required by the IFRS (International Financial Reporting Standards). In addition, the valuations have also been prepared in accordance with RICS Valuation - Professional Standards VPS 3.5 Fair Value and VPS 4.1 Valuations for Inclusion in Financial Statements. The definition of Fair Value is set out in IFRS 13 and is adopted by the International Accounting Standards Board as follows: "The price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date" The RICS Red Book directs us to consider that Fair Value is consistent with the concept of Market Value, the definition of which is set out in Valuation Practice Statement 4 1.2 of the Red Book, as follows: "The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm's length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion." The valuations have been arrived at predominantly by reference to market evidence for comparable property (Level 3 of the Fair Value Hierarchy). As part of Savills' standard process, the valuations were carried out by specialist valuers, which were peer reviewed and reviewed again prior to the valuation date. During the review process, the various characteristics of each property were taken into consideration.

Property portfolio	Fair value - Group £'000		Inputs
		Key unobservable input	Range	Blended Yield
Industrial	52,174	Net Equivalent Yield	3.00% - 5.25%	4.50%
Supermarkets	42,584	Net Equivalent Yield	4.00% - 6.50%	5.00%
Pubs	20,456	Net Equivalent Yield	4.50% - 8.50%	6.50%
Other	13,285	Net Equivalent Yield	4.75% - 8.00%	5.50%
Roadside	10,802	Net Equivalent Yield	5.25% - 5.50%	5.50%
Leisure	7,751	Net Equivalent Yield	6.50% - 7.50%	7.50%
Hotels	7,386	Net Equivalent Yield	4.85%	4.85%
	154,438*

*The aggregate excludes the Premier Inn Alnwick, valued at £1,400,000 as this is a development property.

A 50 bps increase in the equivalent yield applied would have increased the net assets attributable to the Group and Company's Shareholders and the total gain for the year by £17,012,000. A 50 bps decrease in the equivalent yield applied would have decreased the net assets attributable to the Group and Company's Shareholders and the total gain for the year by £13,428,000. A 5% decrease in the rental value applied would have decreased the net assets attributable to the Group and Company's Shareholders and the total gain for the year by £3,998,000. A 5% increase in the rental value applied would have increased the net assets attributable to the Group and Company's Shareholders and the total profit for the year by £4,652,000.

Investment in subsidiary

Name	Country of incorporation	Date of acquisition	% Ownership	Principal activity
Value and Indexed Property Income Services Limited (formerly Value and Income Services Limited)	UK	16 January 2014	100	AIFM

10  Receivables	2022				2021
	Group		Company		Group		Company
	£000		£000		£000		£000
Amounts falling due within one year:
Dividends receivable	98		98		251		251
Prepayments and accrued income	418		418		721		721
Amounts due from brokers	4,193		4,193		-		-
	4,709		4,709		972		972
Amounts falling due after more than one year:
Rental	2,238		2,238		2,017		2,017
	6,947		6,947		2,989		2,989

Many of the Company's leases provide for minimum and maximum increases of rental at future rent reviews. Minimum increases have been averaged over the life of the lease, generating amounts receivable which require to be recognised as an asset.

11 Payables	2022				2021
	Group		Company		Group		Company
	£000		£000		£000		£000
Amounts due to OLIM Property Limited	103		103		84		84
Accruals and other creditors	1,676		1,676		1,653		1,653
Value Added Tax payable	312		312		572		572
Amounts due to brokers	324		324		-		-
Lease liability	8		8		9		9
	2,423		2,423		2,318		2,318

The amount due to OLIM Property Limited comprises the monthly management fee for March 2022, subsequently paid in April 2022.

12  Non-current liabilities	2022				2021
	Group		Company		Group		Company
	£000		£000		£000		£000
Bank loans	37,000		37,000		37,000		37,000
Balance of costs incurred	(473)		(473)		(536)		(536)
Costs incurred in the year	-		-		(22)		(22)
Add : Debit to income for the year	85		85		85		85
	36,612		36,612		36,527		36,527
9.375% Debenture Stock 2026	20,000		20,000		20,000		20,000
Add:  Balance of premium less issue expenses	135		135		159		159
Less: Credit to income for the year	(24)		(24)		(24)		(24)
	20,111		20,111		20,135		20,135
Total Borrowings	56,723		56,723		56,662		56,662
Lease liability payable in more than one year
- within 2 - 5 years	28		28		37		37
- over 5 years	2,826		2,826		2,825		2,825
Total payables	2,854		2,854		2,862		2,862
	59,577		59,577		59,524		59,524

The Company has a £15,000,000 fixed term secured loan facility for a period of up to ten years to 31 March 2026 (2021 - £15,000,000). At 31 March 2022, £11,893,750 was drawn down at a rate of 4.344% and £3,106,250 was drawn down at a rate of 3.60%. The terms of the loan facility contain financial covenants that require the Company to ensure that:-

-  in respect of each 3 month period ending on 31 March and 30 September (the Half Year dates), net rental income shall be at least 200 per cent of interest costs;

-  in respect of each 12 month period beginning immediately after 31 March and 30 September, net rental income shall be at least 200 per cent of interest costs; and

-  at all times, the loan shall not exceed 60 per cent of the value of the properties that have been charged.

On 28 November 2019, the Company entered into a £22,000,000 fixed term secured loan facility for a period of up to seven years to 30 November 2026. On 3 March 2021, this facility was extended until 31 March 2031. At 31 March 2022, £20,900,000 was drawn down at a fixed rate of 3.28099% and £1,100,000 was drawn down at a variable rate of 2.55550% (being LIBOR for the period equal in length to the interest period of the loan plus a margin of 2.35%). The terms of the loan facility contain financial covenants that require the Company to ensure that:-

-  the total debt ratio does not at any time exceed 50 per cent;

-  projected interest cover is not less than 200 per cent at all times; and

-  the Loan to Value shall not exceed 68% of the value of the properties that have been charged.

The 9.375% Debenture Stock 2026 issued by VIP is repayable at par on 30 November 2026 and is secured by a floating charge over the property and assets of the Company.

The Trust Deed of the 9.375% Debenture Stock contains restrictions and events of default. The restrictions require that the aggregate group borrowings, £57 million, must not at any time exceed the total group capital and reserves (equivalent to net assets of £136.9 million as at 31 March 2022).

The fair values of the loan and the debentures are disclosed in Note 21 and the net asset value per share, calculated with the borrowings at fair value, is disclosed in Note 17.

13  Deferred tax

Under IAS 12, provision must be made for any potential tax liability on revaluation surpluses. As an investment trust, the Company does not incur capital gains tax and no provision for deferred tax is, therefore, required in this respect.

As disclosed in Note 6, a deferred tax asset has been recognised to reflect the estimated value of tax losses carried forward which are likely to be capable of offset against future profits.

14  Share capital	2022		2021
	£000		£000
Authorised:
56,000,000 Ordinary Shares of 10p each (2021 - 56,000,000)	5,600		5,600
Called up, issued and fully paid:
43,557,464 Ordinary Shares of 10p each (2021 - 43,557,464)	4,356		4,356
Treasury shares:
1,992,511 Ordinary Shares of 10p each (2021 - 1,992,511)	199		199
	4,555		4,555

The ordinary share capital on the Statement of Financial Position relates to the number of Ordinary Shares in issue and in Treasury. Only when shares are cancelled, either from Treasury or directly, is a transfer made to the Capital Redemption Reserve.

During the prior year, the Company repurchased 1,992,511 Ordinary Shares at a cost of £4,332,281 including expenses - All of these shares were placed in Treasury.

15  Share premium	2022				2021
	Group		Company		Group		Company
	£000		£000		£000		£000
Opening balance	18,446		18,446		18,446		18,446

16  Retained earnings	2022				2021
	Group		Company		Group		Company
	£000		£000		£000		£000
Opening balance at 31 March 2021	95,082		95,082		92,306		91,676
Profit for the year	24,262		24,262		12,620		13,250
Dividends paid (see Note 8)	(5,445)		(5,445)		(5,512)		(5,512)
Buyback of Ordinary Shares for Treasury (see Note 14)	-		-		(4,332)		(4,332)
Closing balance at 31 March 2022	113,899		113,899		95,082		95,082

The table below shows the movement in retained earnings analysed between revenue and capital items.

		2022				2021
	Revenue	Capital		Total		Revenue	Capital		Total
	£000	£000		£000		£000	£000		£000
Group
Opening balance at 31 March 2021	96	94,986		95,082		3,191	89,115		92,306
Profit for the year	1,873	22,389		24,262		2,417	10,203		12,620
Dividends paid (see Note 8)	(5,445)	-		(5,445)		(5,512)	-		(5,512)
Buyback of Ordinary Shares for Treasury (see Note 14)	-	-		-		-	(4,332)		(4,332)
Closing balance at 31 March 2022	(3,476)	117,375		113,899		96	94,986		95,082
Company
Opening balance at 31 March 2021	(991)	96,073		95,082		2,070	89,606		91,676
Profit for the year	1,873	22,389		24,262		2,451	10,799		13,250
Dividends paid (see Note 8)	(5,445)	-		(5,445)		(5,512)	-		(5,512)
Buyback of Ordinary Shares for Treasury (see Note 14)	-	-		-		-	(4,332)		(4,332)
Closing balance at 31 March 2022	(4,563)	118,462		113,899		(991)	96,073		95,082

Of the Company's Retained Earnings of £113,899,000, £85,326,000 is considered to be distributable.

17  Net asset value per equity share

The net asset values per Ordinary Share are based on the Group's net assets attributable of £136,900,000 (2021 - £118,083,000) and on the Company's net assets attributable of £136,900,000 (2021 - £118,083,000) and on 43,557,464 (2021 - 43,557,464) Ordinary Shares in issue at the year end, excluding shares held in Treasury.

The net asset value per Ordinary Share, based on the net assets of the Group and the Company adjusted for borrowings at fair value (see Note 21) of £132,836,000 (2021 - £111,755,000) is 304.97p (2021 - 256.57p).

	2022			2021
	Group	Company		Group	Company
Net assets at 31 March 2022	136,900	136,900		118,083	118,083
Fair value adjustments	(4,064)	(4,064)		(6,328)	(6,328)
Net assets with borrowings at fair value	132,836	132,836		111,755	111,755
Number of shares in issue	43,557,464	43,557,464		43,557,464	43,557,464
Net asset value per share	314.30p	314.30p		271.10p	271.10p
Net asset value per share with borrowings at fair value	304.97p	304.97p		256.57p	256.57p

18  Reconciliation of income from operations before tax to net cash inflow from operating activities	2022				2021
	Group £000		Company £000		Group £000		Company £000
Income from operations before tax	26,566		26,566		18,705		19,301
Gains on investments	(19,237)		(19,237)		(9,773)		(10,369)
Investment management fee	(1,090)		(1,090)		(1,003)		(1,003)
Other operating expenses	(870)		(870)		(771)		(771)
Decrease/(increase) in receivables	303		303		(274)		(274)
Increase in other payables	218		218		391		391
Net cash from operating activities	5,890		5,890		7,275		7,275

19  Reconciliation of current and non-current liabilities arising from financing activities	2022				2021
	Group		Company		Group		Company
	£000		£000		£000		£000
Cash movements
Payment of rental (for leasing)	88		88		209		209
Repayment of debenture	-		-		15,000		15,000
Loan costs	32		32		22		22
Non-cash movements
Finance costs (for leasing)	(78)		(78)		1,179		2,407
Changes in fair value	(33)		(33)		-		630
Amortisation of loan premium and expenses and fair value adjustment	(61)		(61)		(61)		(61)
Change in debt in the year	(52)		(52)		16,349		18,207
Opening debt at 31 March 2021	(59,533)		(59,533)		(75,882)		(77,740)
Closing debt at 31 March 2022	(59,585)		(59,585)		(59,533)		(59,533)

20  Relationship with the Investment Manager and Related Parties

Value and Indexed Property Income Services Limited is a wholly owned subsidiary of Value and Indexed Property Income Trust PLC and all costs and expenses are borne by Value and Indexed Property Income Trust PLC. Value and Indexed Property Income Services Limited has not traded during the year.

Matthew Oakeshott is a director of OLIM Property Limited which has an agreement with the Group to provide investment management services, the terms of which are outlined in the Annual Report and in Note 3.

21  Financial instruments and investment property risks

Risk management

The Group's and the Company's financial instruments and investment property comprise securities, property and other investments, cash balances, loans and debtors and creditors that arise directly from its operations; for example, in respect of sales and purchases awaiting settlement or debtors for accrued income.

The Manager has dedicated investment management processes which ensures that the Investment Policy set out in the Annual Report is achieved. For equities, stock selection procedures are in place based on active portfolio management and the identification of stocks. The portfolio is reviewed on a periodic basis by a senior investment manager and by OLIM Property's Investment Committee.

Additionally, the Manager's Compliance Officer continually monitor the Group's investment and borrowing powers and report to their respective Managers.

The main risks that the Group faces from its financial instruments are:

(i)  market risk (comprising price risk, interest rate risk and currency risk)

(ii)  liquidity risk

(iii)  credit risk

The Board regularly reviews and agrees policies for managing each of these risks. The Manager's policies for managing these risks are summarised below and have been applied throughout the year.

(i)  Market risk

The fair value of, or future cash flows from, a financial instrument held by the Group may fluctuate because of changes in market prices. This market risk comprises three elements - price risk, interest rate risk and currency risk.

Price risk

Price risks (i.e. changes in market prices other than those arising from interest rate or currency risk) may affect the value of the Group's investments.

It is the Board's policy to hold an appropriate spread of investments in the portfolio in order to reduce the risk arising from factors specific to a particular sector. For equities, asset allocation and stock selection, as set out in the Investment Policy in the Annual Report, both act to reduce market risk. The Manager actively monitors market prices throughout the year and reports to the Board, which meets regularly in order to review investment strategy. The investments held by the Company are listed on the London Stock Exchange.

All investment properties held by the Group are commercial properties located in the UK with long, strong income streams.

Price risk sensitivity

If market prices at the date of the Statement of Financial Position had been 10% higher or lower, while all other variables remained constant, the return attributable to ordinary shareholders for the year ended 31 March 2022 would have increased/decreased by £18,271,000 (2021 - increase/decrease of £10,971,000) and equity reserves would have increased/ decreased by the same amount.

Interest rate risk

Interest rate movements may affect:

-  the fair value of the investments in property; and

-  the level of income receivable on cash deposits

The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment and borrowing decisions.

The Board imposes borrowing limits to ensure gearing levels are appropriate to market conditions and reviews these on a regular basis. Borrowings comprise debenture stock and five and ten year bank loans, providing secure long term funding. It is the Board's policy to maintain a gearing level, measured on the most stringent basis of calculation after netting off cash equivalents, of between 25% and 50%. Details of borrowings at 31 March 2022 are shown in Notes 11 and 12.

Interest risk profile

The interest rate risk profile of the portfolio of financial assets and liabilities at the statement of financial position date was as follows:

At 31 March 2022	Weighted average period for which rate is fixed Years	Weighted average interest rate  %	Fixed rate £'000	Floating rate  £'000
Assets
Sterling	-	-	-	5,153
Total assets	-	-	-	5,153
At 31 March 2022
Liabilities
Sterling	6.17	5.64	57,000	-
Total liabilities	6.17	5.64	57,000	-
At 31 March 2021
Assets
Sterling	-	-	-	65,965
Total assets	-	-	-	65,965
At 31 March 2021
Liabilities
Sterling	7.17	5.64	57,000	-
Total liabilities	7.17	5.64	57,000	-

The weighted average interest rate on borrowings is based on the interest rate payable, weighted by the total value of the loans. The maturity dates of the Group's loans are shown in Notes 11 and 12.  

The floating rate assets consist of cash deposits on call, earning interest at prevailing market rates. The Group's equity and property portfolios and short term receivables and payables are non interest bearing and have been excluded from the above tables. All financial liabilities are measured at amortised cost.

Interest rate sensitivity

The sensitivity analyses below have been determined based on the exposure to interest rates at the statement of financial position date and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period in the case of instruments that have floating rates.

If interest rates had been 100 basis points higher or lower and all other variables were held constant, the Group's:

-  profit for the year ended 31 March 2022 would increase/decrease by £31,000 (2021 - increase / decrease by £47,000). This is mainly attributable to the Group's exposure to interest rates on its floating rate cash balances.

 -   the Group holds no financial instruments that will have an equity reserve impact.

In the opinion of the Directors, the above sensitivity analyses are not representative of the year as a whole, since the level of exposure changes frequently as part of the interest rate risk management process used to meet the Group's objectives.

Currency risk

A small proportion of the Group's investment portfolio is invested in securities whose fair value and dividend stream are affected by movements in foreign exchange rates. It is not the Group's policy to hedge this risk.

Currency sensitivity

There is no sensitivity analysis included as the Group has no outstanding foreign currency denominated monetary items. Where the Group's equity investments (which are non-monetary items) are affected, they have been included within the other price risk sensitivity analysis so as to show the overall level of exposure.

(ii)  Liquidity risk

This is the risk that the Group will encounter difficulty in meeting obligations associated with its financial liabilities.

The Group's assets comprise of readily realisable securities which can be sold to meet commitments if required and investment properties which, by their nature, are less readily realisable. The maturity of the Group's existing borrowings is set out in the interest risk profile section of this note.

The table below details the Group's remaining contractual maturity for its financial liabilities, based on the undiscounted cash outflows, including both interest and principal cash flows, and on the earliest date upon which the Group can be required to make payment.

As at 31 March 2022	Carrying value	Expected cashflows	Due within 3 months	Due between 3 months and 1 year	Due after 1 year
	£'000	£'000	£'000	£'000	£'000
Borrowings	57,850	75,519	1,261	1,955	72,303
Leases	2,895	7,265	22	65	7,178
Other payables	356	356	356	-	-
Total	61,101	83,140	1,639	2,020	79,481
As at 31 March 2021
Borrowings	57,853	78,738	1,268	1,951	75,519
Leases	2,871	7,351	22	65	7,264
Other payables	527	527	527	-	-
Total	61,251	86,616	1,817	2,016	82,783

(iii)  Credit risk

This is the failure of a counterparty to a transaction to discharge its obligations under that transaction that could result in the Group suffering a loss.

The risk is not significant and is managed as follows:

-   investment transactions are carried out on behalf of VIP by an outsourced dealing agent. Settlement of these transactions is executed by a large investment bank whose credit standing is reviewed periodically by OLIM Property (which reports to VIS).

-   the risk of counterparty exposure due to failed trades causing a loss to the Group is mitigated by the review of failed trade reports on a daily basis. In addition, a stock reconciliation to third party administrators' records is performed on a daily basis to ensure that discrepancies are picked up on a timely basis.

-   cash is held only with reputable banks with high quality external credit ratings which are monitored on a regular basis.

Credit risk exposure

In summary, compared to the amounts on the Group Statement of Financial Position, the maximum exposure to credit risk during the year to 31 March was as follows:

	2022			2021
Current assets	Statement of Financial Position £'000		Maximum exposure £'000		Statement of Financial Position £'000		Maximum exposure £'000
Cash and cash equivalents	5,153		58,689		65,965		83,209
Other receivables	4,709		5,186		597		7,733
	9,862		63,875		66,562		90,942

(iv)  Property risk

The Group's commercial property portfolio is subject to both market and specific property risk. Since the UK commercial property market has been markedly cyclical for many years, it is prudent to expect that to continue. The price and availability of credit, real economic growth and the constraints on the development of new property are the main influences on the property investment market.

Against that background, the specific risks to the income from the portfolio are tenants being unable to pay their rents and other charges, or leaving their properties at the end of their leases. All leases are on full repairing and insuring terms, with upward only rent reviews and the average unexpired lease length is 20 years (2021 - 17 years). Details of the tenant and geographical spread of the portfolio are set out in the Annual Report. The long term record of performance through the varying property cycles since 1987 is set out in the Annual Report. OLIM Property is responsible for property investment management, with surveyors, solicitors and managing agents acting on the portfolio under OLIM Property's supervision.

The Group leases out its investment property to its tenants under operating leases. At 31 March 2022, the future minimum lease receipts under non-cancellable leases are as follows:-

	2022 £000		2021 £000
Due within 1 year	8,159		5,152
Due between 2 and 5 years	32,525		20,362
Due after more than 5 years	78,686		63,155
	119,370		88,669

This amount comprises the total contracted rent receivable as at 31 March 2022.

None of the Group's financial assets is past due or impaired.

Fair values of financial assets and financial liabilities

All assets and liabilities of the Group other than receivables and payables and the borrowings are included in the Statement of Financial Position at fair value.

(i)  Fair value hierarchy disclosures

All assets and liabilities of the Group other than receivables and payables and the borrowings are included in the Statement of Financial Position at fair value.

The table below sets out fair value measurements using the IFRS 13 Fair Value hierarchy:-

At 31 March 2022	Level 1 £000		Level 2 £000		Level 3 £000		Total £000
Equity investments	26,871		-		-		26,871
Investment properties	-		-		155,838		155,838
	26,871		-		155,838		182,709
At 31 March 2021
Equity investments	28,581		-		-		28,581
Investment properties	-		-		81,132		81,132
	28,581		-		81,132		109,713

Company and Group numbers per the above fair value disclosures are the same except for the investment of £200,000 made by the Company in its subsidiary, which was the subject of an inter-group transfer in 2014.

Fair value categorisation within the hierarchy has been determined on the basis of the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety as follows:-

Level 1 - inputs are unadjusted quoted prices in an active market for identical assets

Level 2 - inputs, not being quoted prices, are observable, either directly (i.e. as prices) or indirectly (i.e. derived from prices)

Level 3 - inputs are not observable

There were no transfers between Levels during the year.

(ii)  Borrowings

The fair value of borrowings has been calculated at £61,064,000 as at 31 March 2022 (2021 - £62,652,000) compared to a Statement of Financial Position value in the Financial Statements of £56,723,000 (2021 - £56,662,000) per Notes 11 and 12.

The fair value of the debenture is determined by comparison with the fair value of an equivalent gilt edged security, discounted to reflect the differing levels of credit worthiness of the borrowers. The fair values of the loans are determined by a discounted cash flow calculation based on the appropriate inter-bank rate plus the margin per the loan agreement. These instruments are, therefore, considered to be Level 2 as defined above. There were no transfers between Levels during the year.

All other assets and liabilities of the Group are included in the Statement of Financial Position at fair value.

		Fair value			Statement of Financial Position Value
		2022	2021		2022	2021
		£000	£000		£000	£000
9.375% Debenture Stock 2026		23,592	25,517		20,111	20,135
		23,592	25,517		20,111	20,135
Bank loans		37,472	37,135		36,612	36,527
		61,064	62,652		56,723	56,662

22  Capital management policies and procedures

The Group's capital management objectives are:

-  to ensure that the Group will be able to continue as a going concern; and

-  to maximise the return to its equity shareholders in the form of long term real growth in dividends and capital value without undue risk through the optimisation of the debt and equity balance.

The capital of the Group consists of equity, comprising issued capital, reserves, borrowings and retained earnings.

The Board monitors and reviews the broad structure of the Group's capital. This review includes:

-  the planned level of gearing which takes into account the Managers' views on the market and the extent to which revenue in excess of that which requires to be distributed should be retained.

The Group's objectives, policies and processes for managing capital are unchanged from the preceding accounting period.

Details of the Group's gearing and financial covenants are disclosed in Notes 11 and 12.

23  Commitments

At the Statement of Financial Position date, the Company had entered into capital expenditure commitments on a land asset within the property portfolio. This undertaking is dependent on a number of outcomes and independent valuations.

Property    £000

Alnwick - Land at Willowburn Trading Estate, Willowburn Avenue  6,000

24  Events after the Statement of Financial Position Date

The Company announced on 9 May 2022 an increase of £8 million on an existing loan at a net effective interest rate of 3.65% and an extension in its maturity to 31 March 2033 from 31 March 2031.

The Company announced on 24 May 2022 that its 2026 Debenture Stock will be redeemed early on 28 June 2022, under and in terms of the trust deed constituting the 2026 Debenture Stock (the Trust Deed). The redemption price for the 2026 Debenture Stock will be determined in accordance with the terms of the Trust Deed and will be communicated to holders of the 2026 Debenture Stock shortly before the redemption date.

The Board is recommending the payment of a final dividend of 3.6p per Ordinary Share (2021: 3.6p) and, subject to receiving Shareholder approval at the 2022 AGM, will be paid on 29 July 2022 to all Shareholders on the register on 1 July 2022.

There are no significant subsequent events for the Group or the Company though purchases and sales of property in the normal course of business which completed after the year end are disclosed in the Annual Report.

Additional Information

In accordance with section 435 of the Companies Act 2006, the Directors advise that the financial information set out in this announcement does not constitute the Group's statutory Financial Statements for the period ended 31 March 2022 but is derived from these Financial Statements. The statutory Financial Statements for the year ended 31 March 2021 have been delivered to the Registrar of Companies and contained an audit report which was unqualified and did not constitute statements under S498(2) or S498(3) of the Companies Act 2006.

The Financial Statements for the period ended 31 March 2022 have been prepared in accordance with UK adopted international accounting standards. The Financial Statements for the period ended 31 March 2022 will be forwarded to the Registrar of Companies following the Company's Annual General Meeting. The Auditors have reported on these Financial Statements; their reports were unqualified and did not contain statements under Section 498(2) or (3) of the Companies Act 2006.

The Group and Company Statement of Financial Position at 31 March 2022 and the Group and Company Statement of Comprehensive Income, Statement of Changes in Equity and Statement of Cash Flows for the year then ended have been extracted from the Group's Financial Statements. Those Financial Statements have not yet been delivered to the Registrar.

The 2022 Annual Report and Financial Statements will be posted to Shareholders shortly and will contain the Notice of the Annual General Meeting of the Company to be held on Friday, 8 July 2022 at 12.30pm at the offices of Shepherd and Wedderburn LLP, 1 Exchange Crescent, Conference Square, Edinburgh EH3 8UL.

For Value and Indexed Property Income Trust PLC

Maven Capital Partners UK LLP

Company Secretary

10 June 2022

 

END

 

 

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