Company Announcements

TR PROPERTY INVESTMENT TRUST PLC

LONDON STOCK EXCHANGE ANNOUNCEMENT

Unaudited preliminary results for the year ended 31 March 2022

LEI: 549300BPGCCN3ETPQD32

Information disclosed in accordance with Disclosure Guidance and Transparency Rule 4.1

TR Property Investment Trust plc, announces its full year results for the year ended 31 March 2022 (unaudited)

Chairman David Watson commented

"In a year dominated by volatility and powerful global macroeconomic and political themes, I'm pleased to report a year of healthy performance. Our NAV total return for the year was 21.4% against a benchmark of 12.2%."

Manager Marcus Phayre-Mudge commented

 "Although the economic outlook remains unsettled, property assets, particularly where the income is index-linked, should remain relatively attractive despite rising interest costs."

1.      Net debt is the total value of loan notes, loans (including notional exposure to CFDs) less cash as a proportion of net asset value.

2.      Dividends per share are the dividends in respect of the financial year ended 31 March 2022. An interim dividend of 5.30p was paid on 14 January 2022. A final dividend of 9.20p (2021: 9.00p) will be paid on 2 August 2022 to shareholders on the register on 24 June 2022. The shares will be quoted ex-dividend on 23 June 2022.

3.      The NAV Total Return for the year is calculated by reinvesting the dividends in the assets of the Company from the relevant ex-dividend date. Dividends are deemed to be reinvested on the ex-dividend date as this is the protocol used by the Company's benchmark and other indices.

4.      The Share Price Total Return is calculated by reinvesting the dividends in the shares of the Company from the relevant ex-dividend date.

5.      Ongoing Charges are calculated in accordance with the AIC methodology. The Ongoing Charges ratios provided in the Company's Key Information Document are calculated in line with the PRIIPs regulation which is different to the AIC methodology.

6.      Considered to be an Alternative Performance Measure

Chairman's statement

Introduction

The year was again dominated by powerful global macro- economic and political themes, propelling the market in the first half and depressing it in the second. Spring 2021 saw broadly-based market optimism through the continuation of broad post vaccine recovery across all economies, aided by the sustained dovish response from central banks. As inflationary pressures built towards the second half, particularly due to supply chain disruption and increasingly tight labour markets, investors began to build in expectation of increases in base rates and consequently, credit spreads and expectations of global growth moderated or evaporated. The central investment theme became inflationary concerns, with the key questions being its degree of permanence and the various key central banks' responses. Towards the end of the financial year, risk was elevated further by the tragic events and unfolding humanitarian disaster in Ukraine. For global equity markets the cold-hearted financial repercussions are manifold; evidenced through the price of energy and the supply and price of a range of hard and soft commodities which were mined, refined or grown in abundance in Ukraine. The longer-term impact of Russian aggression on commodity prices and global trade and energy flows are only now starting to be understood.

It may therefore seem somewhat surprising that against that back drop I am able to report a year of healthy performance for the Company. Our net asset value total return was +21.4%, well ahead of the benchmark return of +12.2%. The share price total return at +19.9% was slightly behind the underlying asset growth, as the discount between the share price and the NAV widened just before the year end.

At the half year, I highlighted that our Manager continued to focus on the most sustainable income and that he had further tilted the portfolio towards index-linked income. This continued to be the case in the second half and helped drive relative performance. Real estate has good inflation protecting attributes, not least that the vast majority of our income is, to varying degrees, explicitly linked to national inflation indices. Inevitably, it is not just public market investors who have realised the attraction of steady real income growth. Private equity investment into real estate continues to be elevated and there has been much merger and acquisition activity which is detailed later in the Manager's report. The consequences for the Company are twofold. In the short term, we have made sizeable gains from our stakes in those companies which have been taken private or merged. Secondly, investors have responded, recognising that if listed property companies share prices are left to drift well below asset value then the private market will swoop in. This remains a critical and valuable underpin.

Revenue results and dividend

Earnings for the year were 13.69p per share, 12% higher than the previous year (12.25p) but still almost 6% behind pre COVID-19 levels.

As anticipated in the Half Year Report, earnings for the second half were lower than in the previous year. This was partly because of one-off items in the second half of the year to March 2021 which did not recur and partly because of the significant changes in dividend timetables seen through the year but which largely impacted the second half. Many companies moved to more frequent and smaller distributions, which reduced income in comparison to the prior year due simply to timing. More details are set out in the Manager's Report.

These factors mask a positive underlying trend and, as described above, our Manager has focused the portfolio on sources of sustainable income. The Board is therefore pleased to announce an increase in the final dividend to 9.20p (2021: 9.00p) bringing the full year dividend to 14.50p, an increase of just over 2%. This will require a small contribution from the Company's revenue reserve. We highlighted in the last Annual Report that we expected that this would be the case and that the Board was happy to employ some of the revenue reserve, providing a return to pre COVID-19 income levels could be expected in the medium term.

Revenue outlook

Our Manager is feeling comfortable about the Company's revenue outlook. Dividends announced for the first quarter are showing increases on the prior year. Many of our investee companies have medium term debt arrangements secured when interest rates were at historic lows and so will not immediately feel the impact of higher interest rates. Further ahead, this will become more of an issue if higher rates persist. Our own income tax rate will also increase for the 2022/23 financial year. As always, the Board will keep an eye to the longer term, but having built up the revenue reserve over many years, we feel it is appropriate to maintain dividend levels where we can easily do so provided a longer term fall in income is not expected. After the final dividend set out above, the revenue reserve will still be 11.37p per share.

Net Debt and Currencies

The opening gearing position was 16.5% and closed at 10.2%. It fluctuated over the year between these levels as the gearing was actively managed. Our debt portfolio gives us considerable flexibility to increase and decrease gearing levels quickly and this has proved beneficial yet again.

Sterling has traded in a narrow range against the Euro throughout the year and it closed only fractionally stronger at the end of the year. Therefore currencies have not been a significant factor in this year's results.

Discount and Share Repurchases

From the starting point of 6.1% the discount, for the most part, gradually narrowed in the period up to the beginning of 2022 and then traded at a small premium through January. With the invasion of Ukraine and a general worsening of sentiment, the shares moved back to a discount, its widest at 9.9% and closing the year at 7.4%. The discount average for the year was 3.4%. This meant that the share price return was slightly behind the NAV return.

No share buy-backs or issues were made during the year.

Awards

The Company was the winner of in the Specialist Equities category of the Citywire Investment Trust Awards for the second year running. It has also been awarded ratings with a number of platforms and publications and these are included in the shareholder information section later in this report.

Outlook

The era of cheap money is coming to an end. Inflation is surging and central banks are reversing their balance sheet expansion that has defined the period following the Global Financial Crisis. Consequently, bond markets are volatile and real (as opposed to nominal) yields on duration debt are getting even more negative. Inflation protected income is becoming harder to find so index-linked property income should remain attractive. However, rising interest costs are clearly a headwind for any leveraged asset class.

Our strategy remains the same, identifying asset classes and sub-markets where demand outstrips supply and where rents are capable of rising. Build cost inflation and the regulatory/social pressure to build more sustainably (higher upfront cost, but lower long-term maintenance and running costs)

has squeezed development margins. Our Manager expects a subdued development cycle in many markets and a reduction in risk of oversupply must be a positive in the medium term. We continue to seek more exposure to asset classes where rebuild costs are well above the current prescribed asset values. Equity market volatility is providing us with some of these opportunities in the listed space and we hope to enlarge our physical property portfolio based on the same investment thesis.

David Watson

Chairman

31 May 2022

Manager's Report

Performance

The Net Asset Value total return for the year to the end of March 2022 was +21.4%, ahead of the benchmark total return of +12.2%.

The Spring and Summer of 2021 saw a benign backdrop of continuing monetary policy largesse from central banks coupled with an improving outlook for all economies and this bode well for many parts of the real estate landscape. Share prices across our universe responded accordingly and our NAV grew by 14% from April to August. Post the summer holidays investors increasingly fretted over the themes of a global slowdown (breakdown in supply chains, COVID-19 impacted manufacturing capabilities in Asia) coupled with rising wage and energy costs. All of which heightened the risk of stagflation. Share price volatility increased hugely and we experienced 20% swings in the value of the benchmark between the beginning of September and the end of November. Such large swings in sentiment reflected the changes in expectation of central banks' behaviour. In simple terms - would they turn hawkish (and at what pace) to help control these renewed inflationary pressures. The last phase of the financial year (December to March) was marked by a steady decline in real estate equity prices as the expectation of multiple rate rises by the US Federal Reserve and the Bank of England alongside more hawkish rhetoric from the European Central Bank was priced in. The last month of the financial year was, of course, overshadowed by the terrible events in Ukraine immediately adding to energy and other raw material inflation expectations.

What I have summarised here is the performance of pan-European real estate equities over the 12 months to the end of March rather than underlying property values. Share prices are volatile and react quickly to macro driven sentiment. Underlying real estate values tend to adjust when the price of capital changes, as opposed to the expectation of future price changes. They are also anchored much more locally being dependent on the expectation of local rental growth or contraction. Spreads have widened and debt costs are increasing but they remain historically low and crucially, at the moment, debt is still readily available. As I warned in last year's Annual Report, if equity markets allow listed companies to trade on large discounts to their implicit asset value then private vehicles (who can operate with higher leverage and hence a lower cost of capital) will take them private. This has been a key theme this year and the Company's performance has benefited from a number of transactions. Expectations of capital growth amongst private owners (be it institutional or retail investors) is much more important to underlying pricing than the gyrations of publicly listed share prices. It is encouraging to see transaction volumes and private market optimism normalise in many of our sub-markets and this is examined in more detail later in the report.

The portfolio positioning had been heavily adjusted in the immediate 'post vaccine' period (Q4 2020, Q1

2021) essentially closing the underweight to European shopping centres and renewing exposure to office markets with shorter commute times (i.e. a focus on the smaller cities, not London and Paris). The year under review saw that process extended, with the portfolio further concentrating on capturing the impact of three key trends. Those sectors likely to experience the greatest rental growth in a recovering economic environment such as logistics, industrial, self-storage and prime office development continue to be heavily represented in the portfolio. Secondly, security of income is crucial. Private rented residential property continues to enjoy virtually full occupancy, particularly in Germany and Sweden where rents remain heavily regulated (and at sub-market levels). The final theme was inflation protection and seeking to own explicitly index-linked, high quality income across a broad range of sectors. This latter theme overlaps with the residential focus given the highly defensive nature of the earnings.

All of these themes were drivers of relative outperformance alongside the positive impact of numerous merger and acquisition ('M&A') situations over the year (that activity will be detailed later in the report). However, it is important to clarify that the listed German residential names have - with one exception - performed relatively poorly this year. The sector saw the largest piece of M&A activity with the cash takeover of Deutsche Wohnen by Vonovia and this was extensively reviewed in the Half Year Report. We have remained loyal to our central view that Berlin residential property values will continue to outperform the rest of Germany with a continued supply/demand imbalance. Phoenix Spree Deutschland (total return +18%) was the performance outlier over the year and ensured that our German residential portfolio contributed positively to our relative outperformance of the benchmark.

Offices

The vast majority of office workers have now returned to the office, at least part of the time. The longer term consequences of the dramatic increase in remote working since 2020 are still evolving. However, we are increasingly confident of a number of key features which either pre-existed or have emerged. The first is all around optionality. Most office workers to a greater or lesser extent can work remotely. This optionality means that the office environment must become more attractive and/or more efficient than the alternative for workers. This need for a better quality workplace coincides with businesses becoming increasingly focused on their environmental footprint. At the same time government regulation across the developed world is driving energy efficiency improvements. The net result will be an increase in demand (and the rent achieved) for 'green' buildings, in the right locations offering state of the art amenities. There is already a clear polarisation in favour of CBD (central business districts) over decentralised or suburban markets. Central Paris saw take up of +49% year on year, a drop in immediate supply of 17% over 2020 with vacancy at 3% driving rents up, whilst the Western Crescent and La Defense saw rents fall and incentives increase. London experienced a very similar picture with the West End, Midtown and the City seeing Q4 2021 take up of 3.8m sq ft, a 7 year quarterly high. The total take up for 2021 was 10m sq ft, 65% ahead of 2020. Docklands and other suburban markets did not experience this level of improving statistics. Investors remain bullish, Knight Frank ('KF') reported a fourfold increase in Q1, 2022 on the corresponding quarter of 2021 with £5.8bn of transactions (versus £1.2bn).

Savills produced a detailed research note in March 2022, predicting reductions in office space demand across all European cities to varying degrees. We have sympathy with the overall expectation but the crucial point is the other side of the equation. If this demand is very focused on quality, where is that supply coming from? If we look at the UK's six regional markets (to avoid only discussing London) we see all six cities as having less than two years' supply. Cost inflation and the inability to tie down risk pricing with contractors results in reduced speculative construction which will exacerbate the problem.

KF's M25 report for Q4 2021 highlights technology, media and telecom (TMT) and Life Science tenant demand but generally subdued take up levels versus pre-pandemic levels. Oxford and Cambridge continue to experience strong rental growth but Reading, Uxbridge and St Albans saw little, given greater supply of new buildings. The traditional occupiers of these strong satellite towns are in the throes of assessing their office needs. One would have expected the investment market to also reflect this 'pause for thought' but this has not been the case. According to KF, South East office volumes reached £4bn in 2021, a record for the region and 45% ahead of the long term average. International buyers dominated but they generally have a longer investment horizon than local buyers. The build cost inflation we are now seeing may well prove that buying high quality existing assets was a very sensible strategy.

Retail

Negative sentiment towards this sector had begun to soften as the post pandemic retail environment experienced the predicted recovery in sales and footfall. Across Europe, consumers had rebuilt savings (or reduced debt) over the last two years and the re-opening statistics didn't disappoint the optimists. However, looking forward the investment community is trying to establish the likely sales volumes post this initial re-opening surge. All the major firms of valuers are reporting stability in yields over the last few quarters across both shopping centres and high streets at both prime and secondary assets. This may well appear optimistic as it is based on low volumes but the number of deals is increasing and we are confident of much higher transaction volumes in 2022 than 2021.

The one area of real valuation recovery has been retail warehousing. The last year has seen an extraordinarily competitive landscape in this sub-sector with yields compressing over 1% at the prime end and even more amongst secondary assets. What is understandable is that where tenant demand/affordability has been proven then investors are happy to own. As retailing evolves into a seamless 'clicks and bricks' omnichannel experience, retail parks are a key part of the value chain for the retailers. If the retailer can offer a fast and efficient 'click and collect' service which the customer is happy to use, then the sales margins from selling online improve materially. It is the 'last mile' delivery which is so cost inefficient.

The outlook for large, regional shopping centres remains uncertain. The vast majority are too big for their market in an omnichannel world. Owners are seeking to demolish part or repurpose to non-traditional uses, in many cases trying to redefine themselves as a community hub as opposed to just a covered retailing arena. The strategy feels correct but the costs of conversion and the inability of new users to pay anything like the previous rents will lead to subdued returns. However, there has been some price discovery with high profile examples such as Hammerson's sale of Silverburn in Glasgow and a wide range of smaller transactions across Europe from Eurocommercial, Klepierre and Unibail providing evidence that buyers believe that rents are stabilising.

Industrial and Logistics

2021 was yet another record year in terms of take up, capital value growth and, all importantly, further shrinkage in the amount of vacancy. The UK market saw take up exceed 50 million sq ft and vacancy is now below 3% across the whole range of 'big box' unit sizes. Like for like rental growth for Segro's portfolio was in excess of 5% and this has driven yields nationwide 75-100 bps leading to huge capital growth. Yet urban logistics has been even hotter, with investors focused on the supply inelasticity of infill markets. Greater London prime industrial transactional evidence now regularly sees equivalent yields (i.e. based off market rents which are higher than passing rents) of less than 3%. This price inflation has been fuelled by evidence of another year

of rental growth exceeding 10%. Segro reported rental growth averaging 13.1% in its UK portfolio during 2021. Savills estimate that inner London rents have moved 25% in the last year alone.

UK industrial transaction volumes reached £16.7bn in 2021, 113% growth on 2020 and 152% growth on the five year average. Given such an acceleration we must closely watch the fundamentals, there may well be capital seeking deployment without due consideration. However, for now, the demand/supply imbalance at the occupier level is driving rental growth. The entire UK industrial market recorded a drop in available space to 18.1million sq ft, a contraction of one third over the year. No wonder rents are rising.

On the Continent, we have also seen market rental growth outstrip annual indexation. This is set to continue even with the printing of record high annualised inflation of 5.1%. Segro are the only fully pan-European listed player and they reported 4.1% like for like rental growth across Continental Europe for 2021. We remain confident that in many key markets this level of growth will be exceeded in 2022. Across Continental Europe, online sales penetration now averages 15-18%, still a long way behind the UK at c.28%. Shortening supply chains and reshoring has driven demand in cheaper markets such as Poland. Savills European Logistics Survey 2021 showed that 46% of all occupiers canvassed expected to increase their warehouse requirements over the next year.

Availability continues to shrink, with vacancy down from 5.1% to 3.5%, with record low levels in Dublin (1.1%), the Netherlands (3.3%), Czech Republic (1.7%) and take up levels well ahead of decade averages with Madrid (+9), Poland (+13%) and the Netherlands (+10%). For the best space, rents are responding very rapidly and we expect average rental growth to exceed 5% across the Continent. However in early May this year (post the year end) Amazon announced a dramatic pause in its expansion programme. Whilst we believe that these comments were focused on their domestic US market, it has caused reverberations across all logistics/ecommerce real estate markets. Major owners and developers such as Segro and Tritax point to full orderbooks and strong transactional evidence, forward looking equity markets took fright. Share prices of these two names are down - 22% and 17% respectively, calendar year to date.

Residential

This sector remains a strong store of value. In the short term capital values should be impacted by rising interest rate expectations. For PRS (private rental sector) this uncertainty (along with the broader geo-political backdrop) has probably encouraged would be buyers to remain renters in the near term. Occupancy rates remain at record levels across both open-market rental markets (UK, Finland) and regulated rental markets (Germany and Sweden). In the latter group of companies, we expect below market rents to assist in maintaining affordability even as energy costs rise and consumption is squeezed. Rent is not a bill which can be reduced, particularly when it is already below market. We are not predicting greater vacancy (the structural issues of demand/supply disequilibrium are still there) but we are mindful of the potential for slower rental growth.

This cost of energy crisis will accelerate the need to improve the energy efficiency of all residential stock. This is particularly an issue in Germany where so much of the housing stock owned by the listed companies requires upgrading, coupled with the need to find alternatives to Russian gas (the major domestic energy source). The cost of these improvements will ultimately be split between the state, the landlord and the tenant. The outstanding question is in what proportions. There is certainly no 'one size fits all' solution but if the bulk of this energy efficiency expenditure is subsidised by the state and the landlord can, in addition, gain a return on their share of the investment via higher rents (and reduced energy bills), this doesn't have to be a bear investment case for this sector.

Although these potential headwinds are well flagged, underlying house (and apartment) prices continue to rise driven by affordability. Mortgage rates, whilst rising, are still very low by historical standards and wage inflation is feeding through, which drives affordability. Major cities such as Berlin and Stockholm where there is very little new supply continue to see values rising at c.1% per month. According to JLL, there was an 11.6% year on year increase in Berlin condominium prices.

Alternatives

The record occupancy increases and rate growth in self storage recorded through the pandemic will undoubtably slow. However we are confident that growth will continue, fuelled by the structural drivers of commercial usage (last mile, business to consumer, supply chain resilience) and increasing awareness of the product from residential customers. The Self Storage Association UK reported further occupancy growth across all its members. This remains a highly fragmented sector with over 1,900 separate sites and only 30% are operated by 'large' operators (defined as those with 10 or more stores). The marketing advantage for the largest operators (the listed companies) is very valuable, ensuring that almost all potential customers searching via the internet (the vast majority) will see an offer from one or more of the largest operators.

Healthcare property had a tougher year. Those focused on primary healthcare have the benefit of rental underpin (directly or indirectly) from the state however, in the case of the UK, rental growth risks being at sub-inflation levels due to its deferred reference point (historic build cost).

In Continental Europe, the exposure of poor care and financial irregularities at Orpea, a large listed nursing home operator has highlighted (amongst many things) the meagre margins which these businesses are run off. A state investigation is underway by the French authorities and we maintain very minimal exposure

to this underlying operator. The vast majority of our Continental European healthcare exposure is in the Netherlands and Belgium rather than France.

Purpose built student accommodation (PBSA) has fared better as students clearly want the campus experience and value for money. The structural fundamentals remain sound; the combination of the growing numbers of students (post the recent demographic dip) coupled with the desire to live in better quality accommodation than previous student generations. According to UCAS, 30% of first year students live in PBSA and this has increased from 22% five years ago. An encouraging growth rate. Another 40% start their university life in halls of residence but that percentage has remained static over the same period, reflecting the lack of capacity or capability for universities to add to their own residential real estate portfolios. Cushman Wakefield have identified 681,000 student accommodation beds across the UK with a net increase of just 21,000 over 2020/21. Q1 2022 data has also revealed a marked slowdown in planning applications for new PBSA units. Importantly, quality is a key priority with prices up by 17% since 2019/20 for those with en suite bathrooms.

We continue to hold Unite (UK) and Xior (Belgium, Spain) and note the recent takeover of American Campus Communities, an $8bn market cap US student accommodation REIT by Blackstone. Yet another privatisation.

Debt and Equity Markets

Debt markets continued to be supportive for real estate companies throughout the year under review, with central banks continuing to provide support through quantitative easing and bond purchases as well as maintaining very low rates. The start of 2022 brought a change in investor attitude with a marked shift in expectation of more hawkish behaviour from central banks, led by the US Federal Reserve. Reviewing listed European real estate debt issuance, we may well look back on the €20.9bn raised in 2021 (alongside the €23bn in 2017) as record years unlikely to be seen again as the cycle of rising rates evolves during 2022 and beyond. German residential businesses were again busy customers of the bond market with Vonovia's cheapest deal raising €1,250m at 0.25% for a 7 year bond; whilst they also raised 30 year money (€750m) at 1.625%. LEG, their smaller competitor, managed 0.875% for 12 years raising €500m.

Equity markets were also very busy with the 'deal sheet' highlight being the record breaking €8bn rights issue by Vonovia, required to fund the acquisition of Deutsche Wohnen. Logistics businesses were once again avid raisers of capital, given their premium rated paper. Tritax Bigbox raised £350m, Eurobox £215m, VGP €300m and Aberdeen European Logistics £45m. Elsewhere equity raisings were focused on stocks with strong underlying income with LXI raising twice in the year (totalling £225m) alongside fellow index linked income play Supermarket Income Reit raising £200m. The latter name has already come back to the market shortly after the year end. Healthcare falls into this secure income camp with the UK's Target Healthcare (£125m) and Assura (£182m) seizing the moment alongside Belgium listed Aedifica (€285m).

Whilst considerable primary issuance added to the size of the listed real estate sector, this capital inflow was dwarfed by the record breaking amount of M&A activity which in the majority of cases led to privatisation and shrinkage in the sector's market capitalisation.

Investment Activity - property shares

Turnover (purchases and sales divided by two) totalled £549m equating to 36% of the average net assets over the year. This is, coincidentally, the same as last year's equivalent figure (36%) which itself was slightly ahead of the year to March 2020 (32%). It has therefore now been three years of elevated portfolio rotation due to

a combination of market volatility, sector rotation and, importantly, M&A activity.

Last year, this section of the report highlighted several moves by private equity ('PE') into the listed space with PE firms such as Brookfield buying into British Land and KKR into Great Portland Estates (now called GPE). Starwood had taken RDI (market cap £325m) private in February 2021and this turned out to be a precursor to the elevated levels of activity seen thereafter.

In June, Blackstone was required to increase its initial bid for St Modwen Properties, paying a 21% premium to the net asset value of 463p. Once again, private equity was able to look beyond the immediate development pipeline and value the high quality land bank more aggressively than public markets. In the same month, ABG (alongside Blackstone again) announced the acquisition of GCP Student Living (market cap £960m). Blackstone and ABG were also co-investors in several UK and European student funds.

Brookfield, another giant private equity firm struck 3 times in the year. Firstly in November in Germany, they acquired 91% of Alstria (market cap €3bn), the only pure German only office investor. In Belgium in February this year, they announced an agreed bid for Befimmo, an unloved owner of primarily Brussels offices. As if that was not enough, just before our year end they announced the agreed take private of Hibernia, Dublin's only listed office developer. In each of these deals, Brookfield paid substantial premiums (+20%) to the undisturbed share price but still acquired at close to or even below net asset value. Offices remain out of favour with stock market investors and therefore these businesses were - in the eyes of private equity - undervalued in the public domain. The Company held both Alstria and Hibernia. In the case of the latter, our holding was 4% of the issued capital. The transaction is bittersweet: whilst we saw a significant valuation gain we have lost a well managed company with strong technical expertise in developing prime office space. Not easy to replace.

Corporate activity between listed companies was also much in evidence. In November, Landsec acquired U+I (previously called Development Securities) for £170m, at an eyewatering 70% premium to the undisturbed share price. This small urban regeneration stock's performance had been lacklustre as investors worried about its balance sheet and inability to fund its long dated development pipeline. For Landsec, this was a precursor to announcing a strategic initiative in regional regeneration with the acquisition of 75% of MediaCity in Manchester (£426m).

CTP, the newly listed Eastern European logistics developer agreed to buy Deutsche Industrie, a small listed German property company owning secondary industrial assets and development land across Germany. Whilst the acquisition currency was shares in CTP, the price reflected a 48% premium to the undisturbed price. At the time we felt this transaction was a positive read across to our other German holdings, Sirius and VIB Vermoegen. A couple of months later, DIC, a listed manager of property funds, surprised the market with a partial tender for 51% of VIB Vermoegen at €51 per share. This well run Bavarian logistics owner /developer is listed on a local exchange and not the main market. DIC were therefore able to acquire over 10% before announcing their intentions and they quickly reached 25% of the share capital (ahead of the tender).

At this point I chose to sell our holding (3% of the Company's net assets) at a 'block premium' of €54 per share. I was fearful that DIC's control would result in the loss of the highly regarded management team and this has come to pass with CEO and CFO departing. However, we have been handsomely rewarded through the corporate activity. The share price at the beginning of the financial year was just under €30 per share. This company has been a key component of our logistics exposure over more than a decade.

In Sweden, SBB the highly acquisitive social infrastructure company, announced control of a small residential business, Amasten. We had recently completed our own research on this business and we had begun to build a holding. The bid price was a 20% premium to where we were buying shares a month earlier.

Finally, in March we saw the final act in the Mckay Securities saga. Longstanding shareholders will have been aware of our view that this well run owner of South East office and industrial property was being materially undervalued by the equity market.

Essentially the company was too small and the shares too illiquid for today's stock market. This company is absolutely not alone in this regard, there are many companies which are just too small and need to join forces with fellow minnows. The key with this business was the high quality of the portfolio. We were pleased to read that Rothschild had undertaken a competitive sales process which culminated in an agreed bid from Workspace, a listed owner of flexible office space in London. Owning 9% of the issued capital we were invited to provide an irrevocable undertaking (subject to no higher offer) which we provided. The bid was two thirds cash (209p) and one third shares and reflected a premium of 30% to the undisturbed price. We will open a holding in Workspace in May on completion of the transaction.

Investment Activity - direct property portfolio

The physical property portfolio produced a total return for the 12 months of 18.1% made up of a capital return of 15.4% and an income return of 2.7%. This can be compared to the return from the MSCI All property index which produced a total return of 23.9% made up of a capital return of 18.0% and an income return of 5.0%.

The core driver of returns was rental growth at the two industrial properties in Wandsworth and Gloucester. At Gloucester, we let the largest unit at a new headline rent on the estate following a short marketing period to an online health food business. This will allow us to move rents forward with other lease events on the estate scheduled for 2022 and 2023. In Wandsworth we completed a number of new lettings including a letting to the online leisure fashion brand Sweaty Betty. They plan to use the premises as a photographic studio for their online offering. We are delighted to add them to the tenant line-up and this not only reflects the diversity of tenants on the estate but also exemplifies the versatility of uses in a standard steel portal industrial building.

At the Colonnades our restaurant operator, Happy Lamb Hot Pot, completed their fit out and opened for trading as soon as COVID-19 restrictions were lifted in May 2021. They have become a successful and vibrant addition to the local area. We are currently exploring opportunities to sell this asset.

Revenue and Revenue Outlook

Revenue earnings for the current year have increased by almost 12% over the prior year.

The increase in earnings was attributable to the first half. At the half year stage we announced earnings some 34% ahead of the prior year. It was flagged at the time that this increase would not be repeated in the second half.

The comparison of the first half (April to September 2021) was being made against April to September 2020, which had suffered an extreme fall in income. As a reaction to the COVID-19 pandemic many companies suspended dividends and, in some cases even cancelling ones which had already been announced. Distributions were very cautious against such an uncertain backdrop. In the current year, the vaccination programme was well underway and confidence began to return in the first half.

Comparing second half earnings year to year in isolation, they fell by around 27%, although this is not a fair comparison. Just before March 2021 we finally received a tax refund as a result of a long running reclaim. This enhanced the earnings for the year to March 2021 so a more realistic comparison of the second half of the year shows a fall of around 12% rather than the 27% highlighted above . The explanation for this 5% fall is explained largely by the fact that many companies changed their dividend schedules, not only in timing but also the frequency, annual payers moved to paying half yearly, half-yearly to quarterly etc. so the amounts being paid in each distribution were proportionately lower. The new payment schedules will have been established for the forthcoming year so we don't expect this to have an ongoing impact.

The overall trend for earnings is positive, the majority of companies have resumed distributions although there are some exceptions, mainly in the retail sector where we are significantly underweight.

Whilst the year to 31 March 2022 earnings result is still some 6% behind pre COVID-19 levels, we do expect some further recovery in the year to March 2023. There are some new clouds on the horizon though, the era of cheap money is over, inflation is reaching levels not seen for many years and a cost of living crisis looms for a number of well documented reasons. However, many of our companies secured debt at historically low levels and will enjoy the benefit of this for a while. Changing market outlook and sentiment is likely to lead to lower gearing levels from time to time and that in turn reduces income levels.

As previously documented, providing the Board is comfortable with longer term income prospects, it is prepared to supplement distributions from the revenue reserve to cover shorter term fluctuations.

Gearing and Debt

The Chairman has already commented on gearing levels and highlighted the benefits of our flexible borrowing structure.

This flexibility has been crucial in such a volatile year. Our gearing oscillated in a 10 - 16% range as we responded to the dramatic changes in market sentiment through the year. Over the year we utilised both our revolving loan facilities and our CFD capability in addition to our longer-term debt. Although the shorter-term debt is linked to market rates and therefore the cost will increase, the flexibility this affords in adjusting gearing levels is more of an advantage than the lower cost of fixed term debt. We aim to achieve a balance between pricing and flexibility which is why our debt is sourced from a number of providers.

Outlook

As recently as this January, central bankers across the world were indicating that they believed that inflationary pressures were transitory. The rise in energy costs seen in Q4, 2021 were then supercharged by events in Ukraine in February and March. Supply chain disruption, particularly around Chinese shutdowns and post COVID-19 workforce shortages, have compounded these pressures. The result has been a period of sustained inflation, Euroland CPI reached 7.5% in April, its sixth consecutive new monthly high. The UK's March figure was 7%. We now expect these elevated figures to continue into 2023 and for the central banks to be forced to react quickly with interest rate rises. The unanswered question is whether raising mortgage costs, which will cool consumer demand and house price growth, will do much to assist in reducing the supply driven pressures. Build cost inflation is equally strong and we expect much potential development to be mothballed as the required return on capital employed evaporates. However, this drop in potential supply will form an underpin for rental growth where demand is stable or growing. Our strategy remains twin-tracked. We will continue to own long and strong income which offers genuine index-linked income whilst simultaneously maintaining exposure to markets where we see tenant demand remaining robust even in the face of an economic slowdown. Renewed focus on balance sheet strength, debt structures and flexibility will help us ensure that we steer the Company carefully through the terrain of rising rates.

Writing this outlook in the middle of May, pan-European real estate equities have already collectively corrected 14% from the start of the new financial year (1st April). This fall is greater than the FTSE 100, 250 or the EuroStoxx 600. The most leveraged businesses have, predictably, been hit hardest but previously highly rated businesses with strong growth prospects have also been hit hard and we expect to find value amongst those with the most secure balance sheets. Much of our world offers solid earnings from real assets; buildings which are often crucial to a company's operation or a basic necessity for domestic users.

Marcus Phayre-Mudge

Fund Manager

31 May 2022

Principal  and  emerging  risks  and  uncertainties

In delivering long-term returns to shareholders, the Board must also identify and monitor the risks that have been taken in order to achieve that return. The Board has included below details of the principal and emerging risks and uncertainties facing the Company and the appropriate measures taken in order to mitigate these risks as far as practicable. The ongoing impact of COVID-19 on economies around the world has been recovering throughout this financial year however the invasion of Ukraine by Russia in February had a significant effect on global markets and market uncertainty remains. In addition rising inflation and interest rates bring challenges not seen for many years.

Share price performs poorly in comparison to the underlying NAV

Risk Identified

The shares of the Company are listed on the London Stock Exchange and the share price is determined by supply and demand. The shares may trade at a discount or premium to the Company's underlying NAV and this discount or premium may fluctuate over time.

Board monitoring and mitigation

The Board monitors the level of discount or premium at which the shares are trading over the short and longer-term.

The Board encourages engagement with the shareholders. The Board receives reports at each meeting on the activity of the Company's brokers, PR agent and meetings and events attended by the Fund Manager. The Company's shares are available through the BMO share schemes and the Company participates in the active marketing of these schemes. The shares are also widely available on open architecture platforms and can be held directly through the Company's registrar.

The Board takes the powers to issue and to buy back shares at each AGM.

Poor investment performance of the portfolio relative to the benchmark

Risk Identified

The Company's portfolio is actively managed. In addition to investment securities the Company also invests in commercial property and accordingly, the portfolio may not follow or outperform the return of the benchmark.

Board monitoring and mitigation

The Manager's objective is to outperform the benchmark. The Board regularly reviews the Company's long- term strategy and investment guidelines and the Manager's relative positions against these.

The Management Engagement Committee reviews the Manager's performance annually. The Board has the powers to change the Manager if deemed appropriate.

Market risk

Risk Identified

Both share prices and exchange rates may move rapidly and adversely impact the value of the Company's portfolio. Although the portfolio is diversified across a number of geographical regions, the investment mandate is focused on a single sector and therefore the portfolio will be sensitive towards the property sector, as well as global equity markets more generally.

Property companies are subject to many factors which can adversely affect their investment performance, these include the general economic and financial environment in which their tenants operate, interest rates, availability of investment and development finance and regulations issued by governments and authorities.

Although we have now exited the European Union, the structure of our relationship with Continental Europe continues to evolve and there could be an impact on occupation across each sector.

The COVID-19 global pandemic continued for much of the financial year. It has changed the way we live and work, uncertainties remain regarding the impact on economies and property markets around the world both in the short and longer term.

The invasion of Ukraine by Russia in February 2022 created further market volatility and uncertainty which remains.

Inflation and interest rates are rising globally to levels not seen in over 10 years.

Any strengthening or weakening of sterling will have a direct impact as a proportion of our Balance Sheet is held in non-GBP denominated currencies. The currency exposure is maintained in line with the benchmark and will change over time. As at 31 March 2022, 66% of the Company's exposure was to currencies other than sterling.

Board monitoring and mitigation

The Board receives and considers a regular report from the Manager detailing asset allocation, investment decisions, currency exposures, gearing levels and rationale in relation to the prevailing market conditions.

The report considers the impact of a range of current issues and sets out the Manager's response in positioning the portfolio and the ongoing implications for the property market, valuations overall and by each sector.

The Company is unable to maintain dividend growth

Lower earnings in the underlying portfolio putting pressure on the Company's ability to grow the dividend could result from a number of factors:

•     lower earnings and distributions in investee companies. Companies in some property sectors continue to be negatively impacted by the COVID-19 pandemic although most have returned to paying dividends, some are at a lower level than previously and a few are continuing to withhold dividends;

•     prolonged vacancies in the direct property portfolio and lease or rental renegotiations as a result of longer term changes anticipated following COVID-19;

•     strengthening of sterling reducing the value of overseas dividend receipts in sterling terms. The Company did see a material increase in the level of earnings in the years leading up to the COVID-19 pandemic. A significant factor in this was the weakening of sterling following the Brexit decision. Although this has now passed, the value of sterling may continue to fluctuate in the near or medium term as the longer term implications of Brexit and COVID-19 and the impact on the UK and European economies become clearer. The invasion of Ukraine by Russia has also increased market uncertainty. The longer term implications will differ across the European economies. This could lead to currency volatility. Strengthening of sterling would lead to a fall in earnings;

•     adverse changes in the tax treatment of dividends or other income received by the Company; and changes in the timing of dividend receipts from investee companies.

•     impact of higher interest rates on distributions from investee companies.

•     negative outlook leading to a reduction in gearing levels in order to protect capital has an adverse effect on earnings.

Board monitoring and mitigation

•     The Board receives and considers regular income forecasts.

•     Income forecast sensitivity to changes in FX rates is also monitored.

•     The Company has substantial revenue reserves which are drawn upon when required.

•     The Board continues to monitor the impact of Brexit and COVID-19 and the long term implications for income generation.

Accounting and operational risks

Risk Identified

Disruption or failure of systems and processes underpinning the services provided by third parties and the risk that these suppliers provide a sub-standard service.

The impact of the COVID-19 pandemic and the longer term changes in working practices at the administrator and other service providers.

Board monitoring and mitigation

Third party service providers produce periodic reports to the Board on their control environments and business continuation provisions on a regular basis.

The Management Engagement Committee considers the performance of each of the service providers on a regular basis and considers their ongoing appointment and terms and conditions.

The Custodian and Depositary are responsible for the safeguarding of assets. In the event of a loss of assets the Depositary must return assets of an identical type or corresponding value unless it is able to demonstrate that the loss was the result of an event beyond their reasonable control.

Monitoring the quality and timeliness of service as service providers adopt widespread home working following the COVID-19 pandemic and consideration of the durability of the arrangements. Many organisations have now incorporated home working into their operational structure as a permanent feature.

Financial risks

Risk Identified

The Company's investment activities expose it to a variety of financial risks which include counterparty credit risk, liquidity risk and the valuation of financial instruments.

Board monitoring and mitigation

Details of these risks together with the policies for managing them are found in the Notes to the Financial Statements in the full Annual Report and Accounts.

Loss of Investment Trust Status

Risk Identified

The Company has been accepted by HM Revenue & Customs as an investment trust company, subject to continuing to meet the relevant eligibility conditions. As such the Company is exempt from capital gains tax on the profits realised from the sale of investments.

Any breach of the relevant eligibility conditions could lead to the Company losing investment trust status and being subject to corporation tax on capital gains realised within the Company's portfolio.

Board monitoring and mitigation

The Investment Manager monitors the investment portfolio, income and proposed dividend levels to ensure that the provisions of CTA 2010 are not breached. The results are reported to the Board at each meeting.

The income forecasts are reviewed by the Company's tax advisor through the year who also reports to the Board on the year-end tax position and on CTA 2010 compliance.

Legal, regulatory and reporting risks

Risk Identified

Failure to comply with the London Stock Exchange Listing Rules and Disclosure Guidance and Transparency Rules; failure to meet the requirements of the Alternative Investment Fund Managers Regulations, the provisions of the Companies Act 2006 and other UK, European and overseas legislation affecting UK companies.

Failure to meet the required accounting standards or make appropriate disclosures in the Interim and Annual Reports

Board monitoring and mitigation

The Board receives regular regulatory updates from the Manager, Company Secretary, legal advisors and the Auditors. The Board considers these reports and recommendations and takes action accordingly.

The Board receives an annual report and update from the Depositary.

Internal checklists and review procedures are in place at service providers.

Inappropriate use of gearing

Risk Identified

Gearing, either through the use of bank debt or derivatives may be utilised from time to time. Whilst the use of gearing is intended to enhance the NAV total return, it will have the opposite effect when the return of the Company's investment portfolio is negative or where the cost of debt is higher than the return from the portfolio.

Board monitoring and mitigation

The Board receives regular reports from the Manager on the levels of gearing in the portfolio. These are considered against the gearing limits set in the Investment Guidelines and also in the context of current market conditions and sentiment. The cost of debt is monitored and a balance sought between term, cost and flexibility.

Personnel changes at Investment Manager

Loss of portfolio manager or other key staff.

Board monitoring and mitigation

The Chairman conducts regular meetings with the Fund Management team.

The fee basis protects the core infrastructure and depth and quality of resources. The fee structure incentivises outperformance and is fundamental in the ability to retain key staff.

Statement of Directors' Responsibilities in relation to the Group Financial statements

The Directors are responsible for preparing the Annual Report, the Strategic Report, the Directors' Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare Group and Parent Company financial statements for each financial year. Directors are required to prepare the Group financial statements in accordance with

UK-adopted International Accounting Standards, in conformity with the requirements of the Companies Act 2006 and applicable law and have elected to prepare the Parent Company financial statements on the same basis. In addition, the Group financial statements are required under the UK Disclosure Guidance and Transparency Rules to be prepared 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 Parent Company and of the Group's profit or loss for that period. In preparing each of the Group and Parent Company financial statements, the Directors are required to:

•     select suitable accounting policies and apply them consistently;

•     make judgements and estimates that are reasonable, relevant and reliable;

•     state whether the Group and Parent Company have been prepared in accordance with UK-adopted International Accounting Standards and in conformity with the requirements of the Companies Act 2006;

•     assess the Group and Parent Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and

•     use the going concern basis of accounting unless they either intend to liquidate the Group or the Parent Company or to cease operations or have no realistic alternative but to do so.

The Directors are responsible for maintaining adequate accounting records that are sufficient to show and explain the Parent Company's transactions and disclose with reasonable accuracy at any time the financial position of the Parent Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to

safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

By order of the Board

David Watson

Chairman

31 May 2022

Group statement of comprehensive income

for the year ended 31 March 2022

The Total column of this statement represents the Group's Statement of Comprehensive Income, prepared in accordance with UK-adopted International Accounting Standards. 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 income or expense that is not included in the above statement therefore "Total comprehensive income" is also the profit for the year.

All income is attributable to the shareholders of the parent company.

Group and Company statement of changes in equity

Group

Company

Group

Share Capital

Group and Company balance sheets

as at 31 March 2022

Notes

1    Accounting policies

3    Earnings/(loss) per Ordinary share

4   Net Asset Value Per Ordinary Share

Net asset value per Ordinary share is based on the net assets attributable to Ordinary shares of £1,562,739,000 (2021: £1,326,433,000) and on 317,350,980 (2021: 317,350,980) Ordinary shares in issue at the year end.

5.  Dividends

An interim dividend of 5.30p was paid in January 2022. A final dividend of 9.20p (2021: 9.00p) will be paid on 2 August 2022 to shareholders on the register on 24 June 2022. The shares will be quoted ex-dividend on 23 June 2022.

6.  Status of preliminary announcement

By order of the Board

BMO Investment Business Limited

Company Secretary,

31 May 2022

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

ENDS

A copy of the Annual Report and Accounts will be submitted to the National Storage Mechanism and will shortly be available for inspection at data.fca.org.uk/#/nsm/nationalstoragemechanism

The Annual Report and Accounts will also be available shortly on the Company's website at www.trproperty.com where up to date information on the Company, including daily NAV and share prices, factsheets and portfolio information can also be found.