Report and Financial Statements For the year ended 5 April 2011
REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 5 APRIL 2011 CONTENTS PAGE Officers and Professional Advisers 1 Report of the Trust Manager 2-3 Statement of Trust Manager s Responsibilities 4 Independent Auditors' Report 5 Statement of Total Return 6 Statement of change in Unit holders Net Assets 7 Aggregated Balance Sheet 8 Notes to the Financial Statements 9-11
OFFICERS AND PROFESSIONAL ADVISERS Trustee Capita Trust Company Limited 40 Dukes Place London EC3A 7NH Trust Manager Alpha Real Property Investment Advisers LLP (from 25 February 2011) 7-9 Swallow Street London W1B 4 DE Close Investments Limited (until 25 February 2011) 10 Crown Place London EC2A 4FT Company Property Investment Portfolio PLC IOMA House Hope Street Douglas Isle of Man IM1 1AP Sponsor Alpha Real Property Investment Advisers LLP (from 25 February 2011) 7-9 Swallow Street London W1B 4 DE Close Investments Limited (until 25 February 2011) 10 Crown Place London EC2A 4FT Auditors & Taxation Advisers Mazars LLP The Pinnacle 160 Midsummer Boulevard Milton Keynes MK9 1FF Page 1
REPORT OF THE TRUST MANAGER The Trust Manager presents the annual report and the audited financial statements of the PIP Exempt Trust ( the Trust )for the year ended 5 April 2011. PRINCIPAL ACTIVITY The Trust acts as a feeder fund to Property Investment Portfolio PLC (the Company or PIP ). The Company invests in a range of specialist funds providing investors with a diversified exposure to UK and European property markets through property funds, all of which are or were formerly, sponsored, managed or advised by Close Investments Limited. CHANGE OF TRUST MANAGER AND SPONSOR The Alpha Real Capital LLP group (the Alpha Group ) completed the acquisition of the property fund management business of Close Brothers Group plc on 25 February 2011 and as of that date Alpha Real Property Investment Advisers LLP ( Alpha ) replaced Close Investments Limited ( Close ) as sponsor and trust manager for the Trust and as investment adviser to PIP. SUSPENSION OF DEALING IN UNITS The Directors of the Company resolved to suspend dealing in the shares of the Company on 22 January 2008. As a result the Trustee of the Trust resolved to suspend dealing in the units of the Trust with effect from 22 January 2008. Dealing in the shares of the Company and the units of the Trust remains suspended. The Trust has recognised its investment in the Company at its net asset value at the year end. (Growth Portfolio: 0.3305 per income share and 0.3745 per accumulation share; Distribution Portfolio: 0.3199 per income share and 0.3914 per accumulation share). The total return before distributions for the year was a gain of 692,445 (2010: a deficit 3,128,745). During the year the Trust paid distributions from capital for the year of 277,609 (2010: 511,384). POST BALANCE SHEET EVENTS Extraordinary General Meeting ( EGM ) of PIP and Reverse Auction Tender Offer On 14 October 2011 the Company held an adjourned EGM for shareholders to vote on the resolution ( the Consent Resolution ) to vary the Articles of Association of the Company to enable the Reverse Auction Tender Offer to proceed. The Reverse Auction Tender Offer has been proposed by the Board of PIP as an opportunity for those shareholders wishing to tender their investment in the Company at a discount to the prevailing Net Asset Value ( NAV ) per share as at 30 June 2011 (subject to a minimum discount level of 25%). A maximum amount of 1.5 million had been set aside from the Company s cash reserves for the Reverse Auction Tender Offer. The Consent Resolution was passed by almost 97% of shareholders voting, with shareholder turnout of over 27%. With the successful passing of the Consent Resolution the Company has accepted tenders for a total of 5.51 million shares, representing a NAV at 30 June 2011 of 1.91 million. As the total tenders submitted by shareholders of 1.44 million are within the maximum amount of cash set aside by the Company, the tender strike discount has been triggered at a discount of 25%. The Trust submitted tenders to PIP corresponding to a total of 1.68 million units, all of which were accepted. The NAV of the units tendered at the year end was 0.58 million. As a result the Trust has paid out tenders for 0.44 million to 35 registered unitholders. Following the successful Reverse Auction Tender Offer we have seen an improvement in the performance of the Trust since its low point at 30 September 2009. The NAV of the Growth and Distribution Portfolios has increased by 23.2% and 22.9% respectively over the two years to 30 September 2011 (taking into account the benefit of capital distributions during the period). While continuing shareholders in the Company and hence the Trust have benefited from those shareholders who have tendered their shares and units at a discount to NAV, the Board of PIP confirms that the Company shall remain suspended for dealing for the foreseeable future. As a result the Trust remains suspended for dealing. However following the success of the recent Reverse Auction Tender Offer the Board of PIP may offer a similar liquidity option at a point of time in the future, should it be considered to be in the interests of shareholders. Page 2
REPORT OF THE TRUST MANAGER (continued) STATEMENT OF DISCLOSURE OF INFORMATION TO AUDITORS The Trust Manager has taken all necessary steps to make itself aware of any relevant information and to establish that the auditors are aware of that information. As far as the Trust Manager is aware, there is no relevant audit information of which the Trust s auditors are unaware. AUDITORS Mazars LLP have signified their willingness to continue in office as auditors of the Trust. APPROVAL This report was approved by the Trust Manager, Alpha Real Property Investment Advisers LLP and signed on its behalf: Anthony Buckley Alpha Real Property Investment Advisers LLP Date: 15 December 2011 Page 3
STATEMENT OF TRUST MANAGER S RESPONSIBILITIES The Trust Manager is required to prepare the financial statements in accordance with the Trust Deed for each financial year which give a true and fair view of the Trust s state of affairs and its surplus or deficit for that year. In preparing those financial statements, the Trust Manager is required to; select suitable accounting policies and then apply them consistently; make judgments and accounting estimates that are reasonable and prudent; prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Trust will continue in business The Trust Manager is responsible for keeping adequate accounting records, which at any time disclose with reasonable accuracy the financial position of the Trust and enable the Trust Manager to ensure the financial statements comply with the Trust Deeds, applicable law and United Kingdom Accounting Standards. The Trust Manager is also responsible for safeguarding the assets of the Trust and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Page 4
INDEPENDENT AUDITORS REPORT TO THE UNIT HOLDERS OF THE PIP EXEMPT TRUST We have audited the financial statements of The PIP Exempt Trust for the year ended 5 April 2011 which comprise the Statement of Total Return, the Statement of Change in Unit Holders Net Assets, the Aggregated Balance Sheet and the related notes. The financial reporting framework that has been applied in their preparation is set out in the Trust Deed clause 5.6, applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). Respective responsibilities of Trust Manager and auditor As explained more fully in the Statement of Trust Manager s Responsibilities set out on page 4, the Trust Manager is responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board s (APB s) Ethical Standards for Auditors. This report is made solely to the unitholders of the Trust as a body in accordance with the Trust Deed. Our audit work has been undertaken so that we might state to the Trust s unitholders those matters we are required to state to them in an auditor s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Trust and the Trust s unitholders as a body for our audit work, for this report, or for the opinions we have formed. Scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the APB's web-site at www.frc.org.uk/apb/scope/private.cfm. Opinion on the financial statements In our opinion the financial statements: give a true and fair view of the state of the Trust s affairs as at 5 April 2011 and of its Total Return for the year then ended; have been properly prepared in accordance with the Trust Deed and United Kingdom Generally Accepted Accounting Practice; and have been prepared in accordance with the requirements of the Companies Act 2006. The information given in the Report of the Trust Manager is consistent with the financial statements Gregory Hall (Senior Statutory Auditor) for and on behalf of Mazars LLP Mazars LLP (Chartered Accountants and Statutory Auditor ) The Pinnacle 160 Midsummer Boulevard Milton Keynes MK9 1FF Date: 15 December 2011 Page 5
STATEMENT OF TOTAL RETURN FOR THE YEAR ENDED 5 APRIL 2011 Note Year ended Year ended Distribution Growth 5 April 2011 5 April 2010 Total Total Net gains on investments during the year 5 310,637 380,136 690,773 (3,128,818) Net income for the year: Investment income (dividends) Dividends - income - - - - Dividends - accumulation - - - - Interest receivable 958 1,133 2,091 91 Expenses : Interest charges - - - - Legal and professional fees - - - - Bank and other charges - - - - Net income before taxation for the year 958 1,133 2,091 91 Taxation 2 (342) (77) (419) (18) Net income after taxation for the year 616 1,056 1,672 73 Total return before distributions 311,253 381,192 692,445 (3,128,745) Distributions for the year - - - - Change on net assets attributable to unit holders 311,253 381,192 692,445 (3,128,745) All operations are classified as continuing. There are no recognised gains or losses other than as shown in the Statement of Total Return above. The notes on pages 9 to 11 form part of these financial statements. Page 6
STATEMENT OF CHANGE IN UNIT HOLDERS NET ASSETS FOR THE YEAR ENDED 5 APRIL 2011 Note Year ended Year ended Distribution Growth 5 April 2011 5 April 2010 Total Total Net assets brought forward 2,892,226 3,576,152 6,468,378 10,108,507 Amount on creation of units: Income units - - - - Accumulation units - - - - Less : amounts paid on cancellation of units Income units - - - - Accumulation units - - - - Total movement in respect of units - - - - Change in net assets attributable to unit holders 311,253 381,192 692,445 (3,128,745) Distribution from capital (125,862) (151,747) (277,609) (511,384) Retained distribution on accumulation units - - - - Net assets at the end of the year 3,077,617 3,805,597 6,883,214 6,468,378 Page 7
AGGREGATED BALANCE SHEET (Distribution and Growth) AS AT 5 APRIL 2011 Note 5 April 2011 5 April 2010 Assets Fixed assets Investment in the Company 5 6,868,145 6,454,450 Cash at bank 15,487 13,946 Total current assets 15,487 13,946 Total assets 6,883,632 6,468,396 Liabilities Creditors: amounts falling due within one year 6 (418) (18) Total liabilities (418) (18) Total net assets attributable to unit holders 6,883,214 6,468,378 The financial statements were approved by the Trust Manager on 15 December 2011 and signed on its behalf by: Anthony Buckley Alpha Real Property Investment Advisers LLP The notes on pages 9 to 11 form part of these financial statements. Page 8
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 5 APRIL 2011 1. Operations The Trust was created on 31 March 2003 and was formed principally to participate in the UK and European property markets, both in commercial and residential property through the Company. The aim of the Company is to provide a high level of return by investing in commercial and residential properties. The Trust has no employees. 2. Accounting Policies (a) Basis of Preparation The financial statements for the year ended 5 April 2011 have been prepared under the historical cost convention, as modified by the revaluation of investments, and in accordance with clause 5.6 of the Trust Deed and applicable United Kingdom Accounting Standards. (b) Going concern These financial statements have been prepared on a going concern basis. The Trust Manager has reviewed the current financial position and performance of the Trust and based on a period of 12 months from the date of audit opinion consider that the going concern assumption is appropriate. (c) Investments Investments are stated at the dealing price of the Company determined in the Isle of Man at close of business at the year end. Gains and losses on disposal are taken through the Statement of Total Return. (d) Taxation The Trust is an unauthorised unit trust within the meaning of the United Kingdom Finance Act 1996. Income arising in the Trust, after deducting allowable expenses, will be subject to basic rate tax for the fiscal year in which the income arises (20% for the tax year ended 5 April 2011). Unit holders, being exempt from tax will, however be entitled to reclaim any tax paid in such circumstances. The Trust is also required to file an annual income tax return. (e) Income recognition All dividends during the year from the Company to the extent they are declared ex-dividend by 5 April. Interest on bank deposits is accounted for on an accruals basis.. (f) Cash flow statement No cash flow statement has been presented with these financial statements as this is not required within the Trust Deed. 3. Trustee s Fee The trustee s remuneration is payable by the Trust Manager. 4. Auditors Remuneration The auditors remuneration is payable by the Trust Manager. Page 9
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 5 APRIL 2011 5. Investments Investment in the Fund: Distribution Growth Total Valuation: At 5 April 2010 2,879,951 3,574,499 6,454,450 Capital distribution received (125,367) (151,711) (277,078) Net gains on investments during the year 310,637 380,136 690,773 At 5 April 2011 3,065,221 3,802,924 6,868,145 The Trust holds redeemable preference shares in the Company. The Company is an open ended investment company registered in the Isle of Man. The investment at 5 April 2011 comprises income shares to the value of 1,811,006 (Growth 290,643 and Distribution 1,520,363) and accumulation shares to the value of 5,057,139 (Growth 3,512,282 and Distribution 1,544,857). The above investment has been accounted for as a trade investment within the financial statements as the Trust does not have a significant influence on the operating and financial policies of the Company. The Trust Manager has valued the investment based upon the net asset value per share of the Company at the balance sheet date. 6. Creditors amounts falling due within one year 5 April 2011 5 April 2010 Taxation 418 18 418 18 Page 10
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 5 APRIL 2011 7. Post balance sheet events On 14 October 2011 at PIP s adjourned Extraordinary General Meeting shareholders approved the Consent Resolution to alter the Articles of Association of the Company to enable the Reverse Auction Tender Offer to proceed. The Consent Resolution was approved by almost 97% of shareholders voting. With the successful passing of the Consent Resolution the Trust submitted tenders to PIP corresponding to a total of 1.67 million units, representing a NAV at 30 June 2011 of 0.59 million, all of which were accepted. The NAV of these units at the year end was 0.58 million. The total value of tenders submitted within PIP totalled 1.44 million. As the total tenders submitted within PIP were within the maximum amount of cash set aside by PIP of 1.5 million, the tender strike discount has been triggered at a discount of 25%. The Trust has consequently paid out tenders for 0.44 million to 35 registered unitholders. As a result the Trust cancelled the following units in October 2011: Unit class Growth Portfolio Income units 301,931 Growth Portfolio Accumulation units 502,684 Distribution Portfolio Income units 686,993 Distribution Portfolio Accumulation units 184,984 Total units 1,676,592 Page 11