Invista Real Estate Investment Management Holdings … · Annual Report and Accounts 2011 Invista...

Invista Real Estate Investment Management Holdings plcAnnual Report and Accounts 2011For the year ended 31 December 2011

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Invista manages commercial property assets in the UK, Europe and Asia, with a total of £749 million of assets under management as at 31 December 2011. Invista also has a number of co-investments in funds to which Invista companies also provide investment management services.

Invista’s current principal real estate investments comprise joint venture interests in the Invista Real Estate Opportunity Fund and the Invista Real Estate International Fund. Each fund is closed ended in nature with a five year duration that expires in each case on February 2013 and May 2013, respectively. Each of these funds may be extended at the discretion of the investment manager for up to two further one-year periods. The Opportunity Fund has a pan-European remit and currently has seven investments in various locations: six in the UK, with one in Switzerland. The International Fund is focused on Asia and its principal investment is a 50% interest in Big Orange Self Storage, which, in turn, owns six self storage assets across Hong Kong and Singapore. The investment manager to each of these funds is Invista Real Estate Investment Management Limited.

01 2011 Statistics

02 Executive Chairman’s Statement

04 Business and Finance Review

14 Board of Directors

16 Remuneration Report

25 Corporate Governance Report

30 Risk Environment

33 Directors’ Report

34 Statement of Directors’ Responsibilities

35 Independent Auditors’ Report

36 Consolidated Income Statement

37 Consolidated Statement of Comprehensive Income

38 Consolidated Balance Sheet

39 Consolidated Statement of Changes in Equity

40 Consolidated Cash Flow Statement

41 Company Income Statement

42 Company Statement of Comprehensive Income

43 Company Balance Sheet

44 Company Statement of Changes in Equity

45 Company Cash Flow Statement

46 Notes to the Financial Statements

83 Corporate Information

Invista Real Estate Investment Management Holdings plc Annual Report and Accounts 2011 01

2011 Statistics

£22.6mRevenue

£2.3mProfit

before tax

18.0p

Capital returned to shareholders

£48 million, being

per ordinary share

Change 2011 2010 %

Revenue £22.6m £27.9m (19)Profit before taxation £2.3m £14.9m (85)Earnings/(loss) per share 0.2p (5.6)p n/aDistributions and dividends per share 18.0p 0.7p Up 17.3pClosing assets under management (“AUM”) £749m £5,237m (86)

Invista Real Estate Investment Management Holdings plc Annual Report and Accounts 2011

Executive Chairman’s Statement

02

Douglas FerransExecutive Chairman

In 2011 Invista embarked in earnest on the value realisation strategy communicated to shareholders towards the end of 2010. The Company made significant advances in pursuit of that goal, with a first tranche £48 million of capital paid to shareholders in June 2011.

The business has been the subject of radical change as assets under management reduced from £5.2 billion at the beginning of the year to some £0.2 billion as at March 2012. While Invista has made progress in realising value from the Company’s assets, there is more to be done, particularly given that Invista’s two largest assets by value and complexity remain on the balance sheet.

The Company continues to execute its strategy against the backdrop of extremely testing market conditions for commercial property and real estate markets. For the year 2011 Invista has reported a net profit after taxation of £0.5 million compared with a loss of £14.8 million in 2010. The principle reason for this outcome was that in 2011 the Company did not suffer the level of asset value write-downs that it endured in 2010. The Board believes the 2011 profit is satisfactory, taking into account the significant changes and downsizing of the business that occurred during the period.

Invista has now transferred substantially all of its investment management mandates to third parties. During 2011 the Company successfully disposed of a number of peripheral assets. However, there remain further significant challenges as the Company continues to explore the best way to realise appropriate value from the two unlisted funds in which it owns significant stakes and continues to manage: the Invista Real Estate International Fund and the Invista Real Estate Opportunity Fund. Invista has capital commitments outstanding in respect of these two investments that amount to £23 million.

The Company’s investment management capabilities have been scaled down to the level of resources required to manage the remaining funds. There remains the clear possibility that the market environment for the execution of asset sales does not maximise the Company’s ability to realise value for shareholders. Accordingly, it remains a realistic option that the Company will continue to trade for the foreseeable future, albeit on a significantly reduced scale of operations.

Strategy

The Board remains firmly committed to the strategy outlined previously: an orderly realisation of value from Invista’s assets and the return of that value to shareholders. In addition, we seek a successful resolution of the outstanding legal dispute we have with our 55% shareholder and previous client, Lloyds Banking Group, our aim being, as far as possible, to do so in a manner that overall achieves the best financial outcome for all shareholders.

It remains the case, as stated in the Company’s announcement of 7 December 2010 and as repeated at the interim results, that ongoing discussions with third parties in relation to the realisation of value from specific assets could realise value at a discount to net asset value and that cash proceeds ultimately returned to shareholders may be at a discount to the Company’s net asset value.

Core to our strategy is the return of this realised value to shareholders and a first tranche was returned to shareholders in June 2011. It is the Board’s goal that further capital will be returned to shareholders during the course of 2012, dependent on successful asset sales.

Board

In January 2011 Duncan Owen, previously Chief Executive Officer, resigned from the Board and at that time I was appointed Executive Chairman. Otherwise the Board composition remained unchanged throughout 2011.

In March 2012 Philip Gadsden, previously Deputy Chief Executive Officer, resigned from the Board. Philip is acting as a consultant to the Company and remains a member of Invista’s Investment Committees.

Colleagues

2011 was a year of considerable upheaval and change for our employees, many of whom have now left the business. I would like to record my gratitude for their professionalism, patience, understanding and effort through what has been an extremely challenging environment for us all in the Company.

Douglas Ferrans Executive Chairman



Business and Finance Review

Summary and 2011 outcomesKey financial statistics 2011 2010

Assets under management (“AUM”) £749m £5,237mRevenue £22.6m £27.9mProfit before taxation £2.3m £14.9mNet profit/(loss) for the year £0.5m £(14.8)m

Overview

Revenue in 2011 fell by 19% to £22.6 million primarily as a consequence of the significant downsizing of the business that took place during the year. By year end AUM had fallen by 86% to £749 million. Resultant profit before tax was £2.3 million (2010: £14.9 million).

Invista recorded a net profit after taxation for the year, including the results of discontinued activities, of £0.5 million (2010: loss £14.8 million). The 2010 result was heavily impacted by the £29.1 million write-down of the investment in Invista Castle in that year’s accounts: the impact of investments was far less significant to the overall financial outcome for 2011.

Principal 2011 events

The operations of the business were impacted by a number of significant investment management mandates being transferred to third parties during the year. A number of asset sales were completed and £48 million was returned to shareholders.

• In May 2011 the HBOS Funds were transferred to a new manager. The AUM transferred represented approximately half of Invista’s AUM at that time.

• In September 2011 investment management mandates in respect of the St James’s Place property funds transferred to a new manager.

• In October 2011 the notice period previously served by Northern Trust Fiduciary Services (Guernsey) Limited and Arnold Limited relating to a residential fund expired and the fund duly transferred to a new manager.

• In December 2011 the mandates in respect of Invista European Real Estate Trust Sicaf and Celsius European Holdings S.à.r.l. both transferred to a new manager.

• During the year Invista sold its shareholdings in: the HI Tricomm Group (owner of the Invista Castle residential portfolio); Invista Foundation Property Trust Limited; IPD Group Limited; and Celsius European Holdings S.à.r.l.

• £48 million was returned to shareholders on 29 June 2011 by way of a return of capital, amounting to 18.0 pence per Invista share.

• Invista ended the year with cash balances of £35.0 million, excluding £3.5 million of cash being held in escrow relating to the sale of the Invista Castle residential portfolio.

Post year end

• Investment management mandates in respect of Invista Foundation Property Trust Limited and The Equitable Life Assurance Society were transferred to a new manager in January 2012, leaving Invista with proforma assets under management as at 31 December 2011 of £184 million.

Objectives for the future

The overall objective for Invista remains to continue to seek to realise value from Invista’s remaining assets in an orderly fashion and to return further capital to shareholders, whilst recognising that this will be dependent on successful asset sales.

Guy EastaughChief Financial Officer

Douglas FerransExecutive Chairman


Investment management activities

Overview of funds and assets under management

AUM by fund as at 31 December 2011 is set out below: As at As at 31 Dec 11 31 Dec 10 Assets under management £m £m

HBOS FundsClerical Medical With-Profits Property Fund – 774Clerical Medical Managed Property Fund – 693Clerical Medical Unit Linked Fund – 307Halifax Life Property Fund – 207Halifax Managed Income Fund – 164Clerical Medical Non-Sterling Fund – 188Clerical Medical Managed Income Fund – 3HMIFC UK Property Fund – 230Total HBOS Funds – 2,566

Separate AccountsThe Equitable Life Assurance Society 193 375St James’s Place APUT – 161St James’s Place UK Property Fund – 615Total Separate Accounts 193 1,151

Collective Investor FundsInvista Foundation Property Trust 372 379Invista Property Portfolio Fund 6 26Invista European Real Estate Trust – 474Residential (including Invista Castle) – 378Invista Real Estate Opportunity Fund LP 56 56Invista Canmoor 44 48Celsius – 81Invista Real Estate International Fund LP 50 50BOSS Partnership I LP 28 28Total Collective Investor Funds 556 1,520

Total AUM 749 5,237

Fund flows across all assets under management are summarised below: AUM AUM as at Fund as at 31 Dec 10 flows 31 Dec 11 £m £m £m

HBOS Funds 2,566 (2,566) –Separate Accounts 1,151 (958) 193Collective Investor Funds 1,520 (964) 556Total 5,237 (4,488) 749



Revenue for the period is set out below:

Year ended Year ended 31 Dec 11 31 Dec 10 Change Revenue £m £m %

HBOS Funds 6.6 11.1 (41)Separate Accounts 3.3 4.8 (31)Collective Investor Funds 12.7 12.0 6Total 22.6 27.9 (19) Included within 2011 revenue above of £22.6 million are termination fees of £3.8 million relating to a number of early termination arrangements entered into during the year in respect of a number of the aforementioned investment mandates transferring to new managers. Of the £3.8 million, £3.1 million relates to the early termination and transfer of the HBOS Funds that took place in May 2011.

HBOS Funds

Management of the HBOS Funds ceased in May 2011 when the mandates were transferred to a new manager.

Invista continues to accrue for the receipt of £0.5 million which remains outstanding from Lloyds Banking Group in respect of the transfer of the HBOS Funds. This amount, included in revenue of £6.6 million from the HBOS Funds in 2011 shown above, remains the subject of a formal legal dispute between the parties as previously announced by Invista in November 2011.

Separate Accounts

Invista no longer manages any Separate Account business, with all assets previously under management as at 31 December 2010 having since been transferred to new managers during 2011 or in January 2012.

Collective Investor Funds

As at 31 December 2011 Invista managed Collective Investor Funds with a total value of £556 million. Excluding the Invista Foundation Property Trust, which transferred to a new manager in January 2012, funds under this heading comprise:

Proforma 31 Dec 11 Fund £m

Invista Real Estate Opportunity Fund LP 56Invista Real Estate International Fund LP 50Invista Canmoor 44BOSS Partnership 1 LP 28Invista Property Portfolio Fund 6Total 184 Amounts noted above in respect of Invista Real Estate Opportunity Fund LP and Invista Real Estate International Fund LP represent in each case the total aggregate equity commitments of Invista together with the other Limited Partners in each partnership.

The figure of £28 million noted above in respect of BOSS Partnership 1 LP represents the total capital commitment of Invista Real Estate International Fund’s joint venture partner in the BOSS Partnership.

06


Cash and other investing activities

Cash

As at 31 December 2011 Invista held consolidated cash balances of £35.0 million. Capital commitments outstanding to Invista Real Estate International Fund LP (“IREIF”) and Invista Real Estate Opportunity Fund LP (“IREOF”) totalled £23.2 million, in aggregate, as at 31 December 2011.

Other investing activities

Invista’s principal remaining balance sheet investments comprise joint venture interests in IREIF and IREOF.

Invista Real Estate International FundIREIF’s objective is to provide investors with a geared exposure to the Asia Pacific real estate market and targets investments with both direct and indirect real estate exposure. The fund did not make any new investments in 2011.

Invista holds a 50% interest in IREIF. IREIF’s sole investment is, in turn, a 50% interest in BOSS Partnership 1 LP (“BOSS”). BOSS’s investment portfolio comprises the following six self storage facilities as at 31 December 2011, which are all owned by BOSS on a long leasehold basis:

Date Valuation Debt Implied NAV Implied LTV* Facility Location opened £m £m £m %

Kwai Chung Hong Kong Oct 2007 17.5 6.4 11.1 37Sha Tin Hong Kong Oct 2007 28.2 10.6 17.6 38Sub-total 45.7 17.0 28.7 37Woodlands Singapore Nov 2007 12.7 3.1 9.6 24Bukit Batok Singapore Dec 2007 6.5 2.5 4.0 38Hougang Singapore Mar 2010 6.7 1.5 5.2 22Tampines Singapore Dec 2010 8.1 3.0 5.1 37Total 79.7 27.1 52.6 34* Loan-to-value ratio.

Valuations represent those carried out as at 31 December 2011 by a suitably qualified firm of chartered surveyors in accordance with the Royal Institute of Chartered Surveyors Valuation Standards (the “Red Book”).

BOSS had other net assets of £21 million as at 31 December 2011, principally comprising undrawn capital commitments.IREIF, in addition to its 50% interest in BOSS, had net trade and other receivables of £2 million as at 31 December 2011.

The combined debt facility of £17.0 million in respect of Kwai Chung and Sha Tin matures on 30 April 2012. BOSS is presently in advanced discussions with regard to the refinancing of this facility. Invista currently expects that BOSS will secure a refinancing arrangement on acceptable terms or otherwise repay the debt from other resources. Other than the Hong Kong debt facility, none of the other debt facilities has a debt maturity date due to occur during 2012.

In May 2008 Invista committed to provide £25 million in equity to IREIF which may be drawn down by IREIF over the life of the fund. IREIF has a five year duration which expires in May 2013. The fund may be extended at the discretion of the investment manager (Invista Real Estate Investment Management Limited) for up to two further one year periods. To date Invista has invested £14.8 million in IREIF, leaving a commitment of £10.2 million still outstanding.

Invista has been investigating the potential sale of its interests in IREIF to third parties but, to date, no definitive agreements have been entered into.


Invista Real Estate Opportunity FundIREOF’s objective is to achieve superior returns for investors through the realisation of gains from real estate backed opportunistic investments in the UK and Continental Europe. The fund did not make any new investments in 2011.

Invista holds a 45% interest in IREOF. IREOF, in turn, holds a diverse property portfolio comprising seven majority or wholly owned freehold assets:

Owned Valuation Debt Implied NAV Implied LTV*Name Location Acquired Sector % £m £m £m %

Etoy Switzerland Mar 2008 Industrial 100 8.2 3.5 4.7 43Witney UK Apr 2008 Agricultural/ 100 5.3 2.0 3.3 38 residentialWoolwich UK Apr 2008 Industrial 94 5.3 4.7 0.6 89Aladdin UK Jan 2010 Industrial 85 5.3 2.9 2.0 55Romford UK Jan 2010 Industrial 85 4.3 2.1 1.9 49Edinburgh UK Jul 2010 Residential 100 4.6 – 4.6 –Epsom UK Sep 2010 Industrial 100 2.9 – 2.9 –Total 35.9 15.2 20.0 42* Loan-to-value ratio.

Valuations represent those carried out as at 31 December 2011 by a suitably qualified firm of chartered surveyors in accordance with the Royal Institute of Chartered Surveyors Valuation Standards (the “Red Book”) or equivalent.

IREOF had other net assets of £0.8 million as at 31 December 2011, principally comprising cash.

The debt facility in respect of the Woolwich property was subject to a covenant breach during the year. Post the year end a partial disposal took place at the site reducing the outstanding debt to £1.7 million and the implied LTV to 74%, from 89%. Discussions are taking place with the lender as to the strategy for repayment of the remaining £1.7 million debt balance which remains secured on the Woolwich property.

Other than the Woolwich debt facility, which has become repayable as a consequence of the covenant breach, none of the debt facilities has a debt maturity date due to occur during 2012.

IREOF has a five year duration which expires in February 2013. The fund may be extended at the discretion of the investment manager (Invista Real Estate Investment Management Limited) for up to two further one year periods.

In October 2007 Invista committed to provide £25 million in equity to IREOF which was available to be drawn down by IREOF during the fund’s defined investment period. IREOF’s investment period now having expired, the fund may only call on further equity drawdowns from the Limited Partners in respect of assets already owned or expenses and other running costs of the fund. To date Invista has invested £12.1 million in IREOF, leaving a potential total commitment of £12.9 million still outstanding. The investment manager estimates though that the maximum that IREOF would seek to drawdown in future from the Limited Partners in respect of IREOF existing investments and fund running costs would be £13 million: Invista’s share of this sum being £6 million.

Invista has been investigating the potential sale of its interests in IREOF to third parties but, to date, no definitive agreements have been entered into.


08


Other assets

Invista sold its remaining shares in Invista Foundation Property Trust Limited (“IFPT”) in January 2011 for £1.2 million, realising a profit on sale of £0.7 million.

In February 2011 Invista sold its entire interest in the Invista Castle residential portfolio to Grainger plc for a cash consideration of £18.5 million. The transaction yielded net cash proceeds of £7.7 million for Invista after the repayment of outstanding debt secured on the portfolio.

In September 2011 Invista announced that it had sold its 50% joint venture interest in Celsius European Holdings S.à.r.l. for a nominal cash consideration. Invista subsequently ceased to be investment manager to the Celsius portfolio on 14 December 2011. Invista had held its 50% equity interest in Celsius European Holdings S.à.r.l. at £nil as at 31 December 2010.

In October 2011 Invista sold its 5% interest in IPD Group Limited (“IPD”) for £1.3 million, realising a loss on investment of £0.5 million.

Profit and loss account

Invista recorded an overall net profit for the year of £0.5 million (2010: loss £14.8 million). The discontinued operation represents the activities of the HI Tricomm Holdings Group, owner of the Invista Castle residential portfolio, which was sold in February 2011.

2011 2010 £m £m

Management fees 16.4 25.0Other fee income 5.3 2.1BOSS operating companies 0.9 0.8Revenue 22.6 27.9

Administrative expenses (20.2) (18.9)Share of joint venture losses (0.4) –Net valuation profits on investments 0.2 6.3

Operating profit 2.2 15.3

Net finance income/(expense) 0.1 (0.4)

Profit before taxation 2.3 14.9

Taxation (1.6) (3.2)

Profit from continuing operations 0.7 11.7

Loss from discontinued operation (0.2) (26.5)

Profit/(loss) after taxation 0.5 (14.8)

Earnings/(loss) per share 0.2p (5.6)pDividend per share – 0.7p

10 Invista Real Estate Investment Management Holdings plc Annual Report and Accounts 2011


Revenue

Management fees fell by 34% in 2011 to £16.4 million from £25.0 million in the previous year as the business downsized significantly, ending the year with 86% fewer assets under management by value than those held at the start of the year.

Other fee income of £5.3 million includes £3.8 million (2010: £nil) of early termination fees in respect of investment management mandates transferring during the year.

Administrative expenses

Administrative expenses rose by £1.3 million, or 7%, to £20.2 million. Administrative expenses have been significantly impacted by the high level of consultant, adviser and other related activity in relation to the asset disposal programme and the termination and transfer of fund mandates.

In total Invista incurred reorganisation costs in relation to its value realisation strategy of £6.4 million during the year, representing 32% of total administrative expenses.

2011 2010 Administrative expenses £m £m

Salary and related 8.5 11.0Reorganisation costs 6.4 –Accommodation 1.1 0.7BOSS operating companies 0.9 0.8Other administrative expenses 3.3 6.4Total 20.2 18.9 Accommodation costs in 2010 are stated net of a credit of £0.9 million relating to the release of rent free provisions in respect of the move during that year of the UK office from the 4th Floor to the 6th Floor of Exchequer Court.

Reorganisation costs of £6.4 million comprised the following:

2011 Reorganisation costs £m

Consultants 1.5Lease surrender and other related costs 1.4Legal advice 1.3Redundancies 1.1Financial advisers 0.9Taxation advice 0.1Other 0.1Total 6.4 The £1.4 million of lease surrender and other related costs were incurred in connection with Invista’s move in May 2011 from Exchequer Court in London EC3 to more flexible and cost efficient accommodation at 107 Cheapside, London EC2.

As at 31 December 2011 Invista’s headcount totalled 33 full time equivalents (31 December 2010: 89). As at 31 March 2012 this number had reduced further due to fund transfers taking place during January 2012 and stood at 12 full time equivalents. As at 31 December 2011 a further 29 employees managed the operations of BOSS in Hong Kong and Singapore. The costs associated with the BOSS employees are included within the BOSS operating companies’ expenses of £0.9 million.


Joint venture losses

Share of (losses)/profits from jointly controlled entities comprises Invista’s share of the results arising from its interests in IREIF and IREOF.

2011 2010 Share of joint venture (losses)/profits £m £m

Invista Real Estate International Fund LP 0.6 0.5Invista Real Estate Opportunity Fund LP (1.0) (0.5)Total (0.4) – In 2011 combined joint venture losses amounted to £0.4 million (2010: £nil). The year on year impact of revaluation of underlying investment properties amounted to a £1.1 million gain within IREIF and a £0.3 million loss within IREOF.

Net valuation profits on investments

Net valuation profits on investments were £0.2 million (2010: £6.3 million) and comprised the net impact of the sales of shares held in IFPT and IPD.

2011 2010 Net valuation profits/(losses) on investments £m £m

Loss on sale of IPD shares (0.5) –Profit on sale of IFPT shares 0.7 0.9Profit on Global Property Securities Fund – 4.2Profit on sale of IERET shares – 1.2Total 0.2 6.3

Net finance income/(expense)

The Group had net finance income during the year of £0.1 million (2010: expense £0.4 million). In 2010 continuing operations incurred net finance expense as income on deposits was more than offset by interest payable on a £13.6 million loan which remained outstanding during 2010. This loan was repaid in full in February 2011 from the proceeds of sale of the Invista Castle residential portfolio.

Taxation

The Group’s tax charge in 2011 was adversely impacted by a number of items of disallowable expenditure. A reconciliation of Invista’s 2011 corporation tax charge to the 2011 average rate of 26.5% is set out in note 9 to the accounts.

Loss from discontinued operation

A loss of £0.2 million after the impact of taxation (2010: £26.5 million) was incurred in relation to the Group’s residential property ownership activities which were disposed of during the year.



Litigation

The Group is involved in a legal dispute with certain subsidiaries of Lloyds Banking Group, its majority shareholder, in connection with amounts that Invista maintains are owing under the early termination agreement entered into between the parties in March 2011. In response to Invista issuing legal proceedings in November 2011, certain subsidiaries of Lloyds Banking Group issued a counter-claim in January 2012.

The Board considers that no provision is required to be made in these accounts in respect of the counter-claim.

Balance sheet

Invista’s net asset value at 31 December 2011 was £65 million, and comprises the following principal components:

31 Dec 2011 31 Dec 2010 Asset £m £m

Cash balances 35.0 77.4IREIF 19.5 18.5IREOF 9.3 10.2Cash held in escrow 3.5 –Investment in IPD – 1.8Invista Castle Limited – 6.9Shares held in IFPT – 1.2Current tax liabilities (1.5) (2.8)Other net liabilities (0.8) (0.9)

Consolidated net assets 65.0 112.3 Invista returned £48 million of cash to its shareholders in June 2011 by way of a capital repayment amounting to 18.0 pence per ordinary share.

An amount of £3.5 million has been retained in escrow to cover potential warranty claims in relation to the sale of the Invista Castle residential portfolio. The term of the escrow arrangement expires in August 2012.

Invista has no balance sheet debt or undrawn debt facilities in place.


Corporate and social responsibility

Invista’s principal objective is to deliver outstanding service for its clients. Invista is committed to achieving this objective in a manner which is consistent with the FSA’s Treating Customers Fairly initiative. Invista also recognises its broader responsibilities as a manager of assets that impact the environment and seeks through constructive dialogue with relevant stakeholders, and through a programme of continuous improvement, to ensure that assets managed by Invista have a positive and sustainable impact on the environment and on key social and economic factors.

To this end, Invista has in place appropriate policies and procedures approved by the Board to ensure a consistent, fair and transparent standard that governs the manner in which Invista treats its customers, employees and shareholders.

Douglas Ferrans Executive Chairman

Guy Eastaugh Chief Financial Officer


Olivia DicksonSenior Independent DirectorChair, Audit Committee

Olivia Dickson was previously a Managing Director at JP Morgan where she held a number of senior roles including Head of Private Client Brokerage and Head of European Derivatives Brokerage. More recently she has served as a Senior Adviser to the Financial Services Authority. Olivia is a Non-Executive Director of Investec plc and Canada Life Limited, a Trustee Director and Chair of the Risk and Assurance Committee of the Mineworkers’ Pension Scheme, and a member of the Financial Reporting Council’s Board for Actuarial Standards, the Financial Services Authority’s Regulatory Decisions Committee and the Pensions Regulator’s Determinations Panel. Olivia was appointed to the Board on 14 June 2006.

Board of Directors

Guy EastaughChief Financial Officer

Guy Eastaugh joined Invista in May 2007 in his current role. A Chartered Accountant, Guy began his career at PricewaterhouseCoopers, qualifying in 1987. Guy subsequently spent six years in investment banking before moving into industry in 1995. He worked at Enron Europe Limited before joining Hanson plc as Head of Corporate Development in 1999. Prior to joining Invista Guy was Head of Corporate Finance and Corporate Director – Strategy at GKN plc, a company he had been with since 2003. Guy was appointed to the Board on 1 May 2007.

Douglas FerransExecutive ChairmanChairman, Executive Committee, Remuneration Committee and Nominations Committee

Douglas Ferrans was appointed to the Board on 14 June 2006 and became Chairman in April 2009. He was appointed Executive Chairman on 20 January 2011. Douglas started his career at Scottish Amicable in 1977, gaining experience in many different business areas before becoming Chief Executive of Scottish Amicable Investment Managers Limited in 1995. He was Marketing Director at Britannic Asset Management Limited from October 1997 to May 2001. In June 2001 Douglas became the Chief Executive of Insight Investment and later became Chairman before his departure from Insight in December 2008. Douglas is a Fellow of the Faculty of Actuaries and is also Chairman of the Investment Management Association.


Steve ColsellNon-Executive Director

Steve Colsell joined HBOS plc in August 2006 as Finance Director of the Insurance and Investment Division. In January 2009, following the acquisition of HBOS by Lloyds, he became Finance Director, Strategy, Wealth and International for Lloyds Banking Group plc. Steve started his career at Allied Dunbar in 1985, working in various actuarial roles before becoming Head of Treasury for Zurich Financial Services in 1998. He later held a number of senior finance positions for Zurich before joining Kensington Group plc as Finance Director in 2004. Steve is the Lloyds Bank nominated member of the St. James’s Place Boards. Steve is a Fellow of the Institute of Actuaries. He was appointed to the Board on 1 April 2009.

Douglas GardnerIndependent Non-Executive Director

Douglas Gardner was previously at Tarmac plc, carrying out the role of Chief Executive of the Property Division until 1983. He then moved to Brixton Estate plc serving as Managing Director until 1993, when he became Chairman and Chief Executive. Since retiring from Brixton in 2000, Douglas has focused almost exclusively on the real estate fund management industry. He is a Non-Executive Director of the Invesco Property Income Trust Limited. Douglas is a Fellow of the Royal Institution of Chartered Surveyors. He was appointed to the Board on 1 January 2010.


Remuneration Report

Role and membership of the Remuneration Committee

Full details of the Remuneration Committee’s role and membership of the Committee are set out in the Corporate Governance Report on pages 25 to 29. The Committee meets at least twice a year. In 2011 the Committee met formally four times.

No Executive Director plays any part in the determination of his or her own remuneration or contractual terms.

The Committee’s Terms of Reference are publicly available on Invista’s website or on request from the Company’s registered office.

Compliance and corporate governance

Whilst the UK Corporate Governance Code and the Regulations1 do not strictly apply to AIM companies, the Board has given full consideration to the provisions of the UK Corporate Governance Code and the Regulations1 in preparing this report and in designing performance-related incentive plans for senior employees, and has implemented such provisions where appropriate for a company of the size and nature of Invista.

For full details of Invista’s approach to corporate governance see the Corporate Governance Report on pages 25 to 29.

1 The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008.

During 2011 Invista also became subject to the requirements of the FSA’s Remuneration Code. The Company considers that the remuneration policy reflects the Code appropriately in line with the proportionate approach to implementation adopted by the FSA.

Advisers to the Remuneration Committee

During 2011 the Remuneration Committee sought independent external advice on remuneration matters from Deloitte LLP.

Deloitte LLP also provided international taxation advice to the Company.

External appointments

In 2011 none of the Executive Directors carried out a Non-Executive Director role for which they personally received a fee.

Remuneration policy overview

The normal operation of the existing incentive schemes was suspended in 2010 following the announcement made to the market in October 2010. The focus of the Company continues to be the orderly realisation of value from assets and the return of that value to shareholders. As a consequence, the scale of the Company’s business has and continues to be significantly reduced and the remuneration arrangements reflect that.

The Company’s stated remuneration policy has been to reinforce Invista’s key corporate goals, provide appropriate incentives linked to performance, and provide sufficiently competitive total remuneration whilst ensuring that the linkage between performance and total remuneration was maintained.

The Remuneration Committee reviews on an annual basis whether the remuneration policy remains appropriate for the relevant financial year. Factors taken into account by the Remuneration Committee include the following:

• market conditions;

• the recruitment market in the Company’s sector;

• market practice;

• views of institutional shareholders and their representative bodies; and

• promotion of effective risk management.

Given the Company’s current position the balance between the above factors has understandably shifted with the most focus being given to ensuring that remuneration arrangements facilitate a smooth and orderly scaling down of Invista’s business.

An overview of the policy for Executive Directors for 2012 is as follows:

• Salaries are unchanged from 2011.

• There will be no cash bonus paid in respect of 2011 performance and consequently no bonus deferral.

• No awards were granted under the Company’s share plans during 2011. There is no intention to grant further awards under the Company’s share plans in future years.

The remuneration for Douglas Ferrans, in his role as Executive Chairman, is unchanged from 2011.


Remuneration policy for Executive Directors (excluding the Executive Chairman)

Service contractsExecutive Directors have contracts which can be terminated by the Company by giving not less than 12 months notice or by the Executive Director giving not less than six months notice. The Company may make a payment in lieu of notice equal to the Executive Director’s annual salary.

In the event that an Executive Director’s employment terminates by reason of a change of control, the Company must pay the Executive Director a sum equivalent to the discretionary bonus he would otherwise have earned in his notice period.

RemunerationThe elements of total remuneration for Executive Directors are as follows:

i) SalariesNo base salary increases have been made to Executive Directors for 2012.

ii) Benefits in kindBenefits consist of private medical insurance, limited-term income protection, life assurance cover up to six times basic salary and a company car cash allowance scheme.

iii) PensionsInvista makes contributions at proportional rates of basic salary to a Stakeholder Pension scheme. The employer contribution to the pension scheme ranges from 4% to 20% of the employee’s basic salary, depending on the seniority of the employee and the extent of matching contribution of the employee. The maximum contribution Invista will make to the pension is 20%.

iv) Annual discretionary cash bonusThe Committee determined that there would be no discretionary cash bonus for the Executive Directors in respect of 2011 performance.

Therefore no Annual Incentive Plan (“AIP”) shares are being awarded to any Executive Director. AIP shares comprise deferred shares which are released three years from the date of grant.

v) Long-term share plans No share incentive awards will be granted in 2012. Given the Company’s current objectives, the Committee does not intend to grant further awards under the Company’s long-term share plans.

The details set out below regarding the long-term incentives relate to legacy awards and are as disclosed to shareholders in previous years.

2008 Long-Term Incentive Plan (“LTIP”)The LTIP has three levels of participation:

• Base Award

• Enhanced Award

• Standard Award

The overall annual limit of awards under all levels of the LTIP is 400% of individual salary.

No Base Awards, Enhanced Awards, or Standard Awards were made in 2011, and no awards will be made in 2012.

Performance conditionsAwards are released depending on the Company meeting targets for return on capital employed (“ROCE”) which is calculated as follows:

Net profit (after tax)

Net assets (including both cash and debt)*

* Calculated by averaging the opening, half-year and closing balance.

The performance condition is as follows:

Average ROCE p.a. over 3-year % of Award performance period released

<7.5% 0%7.5% 20%8% 30%9% 40%10% 50%11% 60%12% 70%13% 80%14% 90%15% 100%

These targets have remained unchanged from when the plan was introduced in April 2008.


Remuneration Report

For awards granted under the LTIP in March 2009 the three-year performance period ended on 31 December 2011. Based on the performance over the period, the ROCE threshold hurdle was not met and therefore the outstanding awards made under this grant cycle lapsed in full.

Change of control scale-back conditionThe rules of the LTIP provide that on a change of control event awards would normally vest, but that in exceptional circumstances the Committee may apply the performance condition.

For the award made in March 2010 the Committee was mindful of appropriate vesting in the event of a change of control and, therefore, the award was made subject to a scale-back condition if this should arise.

In the event of a change of control the share award will operate as a notional share option so that participants are only entitled to any share price growth achieved since the date of the award. A notional option multiple would be applied to the share award and the notional gains calculated.

The table below illustrates the resultant vesting of the original share award which would apply for various share price growth scenarios. In order for the awards to vest in full the share price would have to double from the date of award.

Share price growth Vesting of original at change of control share award

10% 18%20% 33%30% 46%40% 57%50% 67%75% 86%100% 100%

The Committee considered that this additional scaleback condition provides a balance between preventing windfall gains while incentivising for value creation for shareholders on a corporate event.

2009 Deferred Matching Plan (“DMP”)The 2009 Deferred Matching Plan was adopted by the Company in February 2009 to facilitate arrangements when the acquisition of HBOS plc by Lloyds TSB Group plc triggered vesting of a number of Invista’s share schemes as a result of a change of control.

The DMP expires five years following its adoption. It is not intended that any further awards will be made under the DMP.

In accordance with the terms of the plan, the remaining outstanding DMP awards vested in March 2011. Participants were unable to exercise these awards at this date due to the Company being in a prohibited period for the purposes of share dealing. Following the capital return received by all shareholders in June 2011, payments equivalent to this capital return were made to participants. Such payments were only made in respect of fully vested but unexercised awards. Consistent with the treatment of shareholders, these payments were made at a rate of 18.0 pence per share.

Change of control provisions in existing share plans The treatment of outstanding share plan awards upon a change of control event is as follows:

• Awards under the Annual Incentive Plan would vest in full.

• For the 2010 LTIP award a scale-back condition would also apply as detailed above.

Remuneration policy for Non-Executive Directors and the Executive Chairman

Service contractsThe Non-Executive Directors are covered by contracts extending for a period of three years from their appointment or reappointment. Appointments can be terminated by one month’s notice from either party, and appointments are contingent on re-election by shareholders at forthcoming AGMs. The Executive Chairman’s contract was originally entered into on a Non-Executive basis. The contract was subsequently varied to reflect his appointment to Executive Chairman on 20 January 2011 with the key terms remaining unchanged.


When the Board is satisfied that it is in the interests of the Company and its shareholders, a Non-Executive Director may be asked to serve a further three-year term. Non-Executive Directors are typically expected to serve two three-year terms, although the board may invite a Non-Executive Director to serve for an additional period.

The table below shows the date of appointment/reappointment, term and year of election/re-election for each of the Non-Executive Directors and the Executive Chairman:

Year of Date of election/ original Date of Term re-election appointment reappointment (years) at AGM

Douglas Ferrans 14 June 2006 14 June 2009 3 2011Olivia Dickson 14 June 2006 14 June 2009 3 2009Steve Colsell 1 April 2009 n/a 3 2009Douglas Gardner 1 January 2010 n/a 3 2010

RemunerationThe fees of the Non-Executive Directors and the Executive Chairman have been agreed by the Board to reflect the time commitment and levels of responsibility expected of them. Fee rates were set at the current levels in June 2009 following external advice on levels of directors’ pay.

The table below shows the fees paid to each of the Non-Executive Directors and the Executive Chairman during 2011:

Annual fee (£)

Douglas Ferrans 100,000Olivia Dickson 50,000Steve Colsell –Douglas Gardner 50,000

The fees for the Executive Chairman and the Non-Executive Directors are subject to annual review by the Board. No Director votes in relation to the agreement of their own fees.

The remuneration for Douglas Ferrans, following his appointment to Executive Chairman from 20 January 2011, was unchanged.

Non-Executive Directors’ fees are paid monthly in arrears. Non-Executive Directors do not participate in the Company’s annual cash bonus scheme, other incentive schemes, or the Company’s pension arrangements.


Remuneration Report

Employee share ownership schemes

The Company believes that share ownership by employees throughout the Company enhances alignment with shareholders’ interests and forms a key element of the Company’s commitment to creating a competitive, flexible and performance oriented reward structure.

The Share Incentive Plan (“SIP”)In previous years all employees have been able to acquire shares through the Company’s “all-employee” HMRC approved share incentive plans – Sharekicker and Free Shares. In 2011 no awards were made under either scheme.

Under the Sharekicker scheme employees elected to use part of their gross annual salary to acquire shares (partnership shares) and providing these shares are retained in trust for three years they will be matched by two additional shares (matching shares) from the Company for each share held/purchased by the employee. The last award under this plan was made in March 2010.

Below is a summary of share awards still outstanding under the Sharekicker scheme:

Shares still to vest Award Shares added Forfeited/released Vested allocated to employees effective from At 31 Dec 10 in year in year in year at 31 Dec 11 Partnership Matching Partnership Matching Partnership Matching Partnership Matching Partnership Matching shares shares shares shares shares shares shares shares shares shares

Apr 2008 78,686 157,372 – – (2,272) (4,544) (76,414) (152,828) – –Mar 2009 97,128 194,256 – – (44,754) (89,508) – – 52,374 104,748Mar 2010 64,371 128,742 – – (45,207) (90,414) – – 19,164 38,328

A second approved plan under the Share Incentive Plan, the Free Shares Plan, awarded employees free shares on an annual basis equivalent to 5% of salary, up to a limit of £3,000. At the end of three years shares are transferable to employees. No awards have been made under this plan since 2008 and the outstanding awards under this scheme all vested during 2011.

Below is a summary of movements in the share awards under the Free Shares Plan during 2011:

Shares still Shares Forfeited/ allocated to Award added released Vested in employees at effective from At 31 Dec 10 in year in year year 31 Dec 11

Aug 2008 332,098 – (84,314) (247,784) –

Directors’ remuneration for the year ended 31 December 2011

Total Directors’ remuneration for the year ended 31 December 2011 is shown below: Year ended Year ended 31 Dec 11 31 Dec 10 Aggregate emoluments £000s £000s

Fees to Non-Executive Directors and Executive Chairman 200 200Emoluments to Executive Directors 692 834Company contributions Stakeholder Pension Scheme 80 139Total 972 1,173 Duncan Owen resigned as Chief Executive and Board Director of Invista Real Estate Investment Management Holdings plc on 20 January 2011 and therefore only his remuneration up until that date in 2011 is included in the table above.


The following table, which has been prepared in accordance with regulatory requirements, sets out the elements of Directors’ aggregate emoluments for the year ended 31 December 2011:

Capital Company Annual distribution Total year Total year Fee/basic Taxable pension cash adjustment for ended ended£000s salary benefits contributions incentive subsisting awards1 31 Dec 11 31 Dec 10

Executive ChairmanDouglas Ferrans 100 – – – – 100 100

Executive Directors Duncan Owen 2 17 1 3 – – 21 392Philip Gadsden 252 13 41 – 170 476 306Guy Eastaugh 225 14 36 – – 275 275

Non-Executive Directors Olivia Dickson 50 – – – – 50 50Douglas Gardner 50 – – – – 50 50Total 694 28 80 – 170 972 1,1731 This payment represents 18.0 pence per share paid on the vested share awards in the Deferred Matching Plan which were unexercised at the time of the capital return

in June 2011. Further details on the adjustment are set out on page 18.2 Duncan Owen resigned as Chief Executive and Board Director of Invista Real Estate Investment Management Holdings plc on 20 January 2011. He remained in employment

for the remainder of 2011 as a Director of Invista Real Estate Investment Management Limited on the same terms and conditions. Mr Owen’s salary, benefits and pension for 2011 was £392,000 (2010: £392,000). In addition, consistent with other participants, a capital distribution adjustment payment of £212,000 was made in June 2011 relating to vested but unexercised awards in the Deferred Matching Plan (see note 1 above). No further payments were made during 2011.

Options held by the Directors in Invista’s various share-based incentive schemes are as follows:

Deferred Matching Plan

Award Options Options Date effective held at Granted Lapsed Vested in held at shares Exercise from 31 Dec 10 in year in year year1 31 Dec 11 received price

Philip Gadsden Mar 09 942,611 – – (942,611) – Mar 11 NilDuncan Owen Mar 09 1,178,263 – – (1,178,263) – Mar 11 Nil1 The DMP awards which vested in March 2011 had not been exercised as at 31 December 2011 due to the Company being in a prohibited period for the purposes

of share dealing since the vesting date.

Long-Term Incentive Plan Award Options Options effective held at Granted Lapsed in Vested held at Exercise from 31 Dec 10 in year year1 in year 31 Dec11 price

Philip Gadsden Mar 09 1,185,882 – (1,185,882) – – Nil Mar 10 988,235 – – – 988,235 NilTotal 2,174,117 – (1,185,882) – 988,235 Guy Eastaugh Mar 09 794,118 – (794,118) – – Nil Mar 10 661,765 – – – 661,765 NilTotal 1,455,883 – (794,118) – 661,765 Duncan Owen Mar 09 1,482,353 – (1,482,353) – – Nil Mar 10 1,235,294 – – – 1,235,294 NilTotal 2,717,647 – (1,482,353) – 1,235,294

1 Following the year end awards made in March 2009 lapsed as the ROCE performance condition attached to these awards was not achieved.


Remuneration Report

Annual Incentive Plan Deferred Award Award Options Options effective held at Granted Lapsed in Vested held at Exercise from1 31 Dec 10 in year year in year 31 Dec11 price

Philip Gadsden Mar 09 592,941 – – – 592,941 NilGuy Eastaugh Mar 09 397,059 – – – 397,059 NilDuncan Owen Mar 09 741,176 – – – 741,176 Nil1 Awards made in March 2009 are the deferred share element of the annual bonus awarded in respect of performance for the financial year ending 31 December 2008.

AIP deferred shares are released three years from the date of grant.

Sharekicker At 31 Dec 10 Shares added in year Vested in year At 31 Dec 11 Award effective Partnership Matching Partnership Matching Partnership Matching Partnership Matching from shares shares shares shares shares shares shares shares

Philip Gadsden Apr 08 2,272 4,544 – – (2,272) (4,544) – – Mar 09 3,571 7,142 – – – – 3,571 7,142Total 5,843 11,686 – – (2,272) (4,544) 3,571 7,142Guy Eastaugh Apr 08 2,272 4,544 – – (2,272) (4,544) – – Mar 09 3,571 7,142 – – – – 3,571 7,142Total 5,843 11,686 – – (2,272) (4,544) 3,571 7,142Duncan Owen Apr 08 2,272 4,544 – – (2,272) (4,544) – – Mar 09 3,571 7,142 – – – – 3,571 7,142 Mar 10 3,125 6,250 – – – – 3,125 6,250Total 8,968 17,936 – – (2,272) (4,544) 6,696 13,392

Free Shares Plan Award effective Shares Vested from At 31 Dec 10 added in year in year At 31 Dec 11

Philip Gadsden Aug 08 6,741 – (6,741) –Guy Eastaugh Aug 08 6,741 – (6,741) –Duncan Owen Aug 08 6,741 – (6,741) –

Directors’ share interests

InvistaThe interests of those who were Directors of the Company at 31 December 2011 in the shares of the Company are as follows:

Ordinary shares Ordinary shares of £0.0001 each of £0.0001 each at 31 Dec 11 at 31 Dec 10

Philip Gadsden 1,538,694 1,534,150Guy Eastaugh 456,532 451,988Olivia Dickson 45,555 45,555 The register of Directors’ share interests, which is open to inspection, contains full details of Directors’ interests.


Lloyds Banking Group plcThe interests of those who were Directors of the Company at 31 December 2011 in the share capital of Lloyds Banking Group plc are as follows:

Lloyds Banking Lloyds Banking Group plc Group plc ordinary shares of ordinary shares of 25 pence each 25 pence each at 31 Dec 11 at 31 Dec 10

Philip Gadsden 12,224 12,224Olivia Dickson 190 190Douglas Ferrans 653,437 653,437Steve Colsell 111,538 52,411Douglas Gardner 7,506 7,506

Details of share options outstanding as at 31 December 2011 for Directors under Lloyds Banking Group share plans are set out below:

Date from Options Exercise which Option Share Options held Granted in Exercised in held at price exercisable/ expiry Director plan at 31 Dec 10 period period 31 Dec 11 £ releasable date

Philip Gadsden HBOS plc 2,598 – – 2,598 11.692 Mar 07 – 16 Mar 14 All Employee Mar 14

Share Option PlanSteve Colsell Lloyds Banking 595,226 – (595,226) – Nil 19 Jan 11 19 Jan 14 Group 2009 Share Option Plan Lloyds Banking 1,833,162 – – 1,833,162 n/a 1 Jan 12 n/a Group 2009 Long-Term Incentive Plan Lloyds Banking 594,330 – – 594,330 n/a 1 Jan 13 n/a Group 2010 Long-Term Incentive Plan Lloyds Banking – 396,599 – 396,599 n/a 1 Jan 14 n/a Group 2011 Long-Term Incentive Plan

In addition Steve Colsell has 216,218 Lloyds Banking Group shares from deferred prior year bonuses which will be released at a future date.

Remuneration Report

Statutory performance graph

The graph below, prepared in accordance with the Companies Act 2006 and the regulations there under, shows a comparison of Invista’s total shareholder return against the FTSE All-Share Index since inception to 31 December 2011. Invista considers this to be an appropriate comparative index, given the broad nature of the index and the companies within it.

The total shareholder return for Invista includes the return of capital of 18.0 pence per ordinary share paid in June 2011.

The share price at 31 December 2011 was 9.48 pence.

Total shareholder return

£

Invista Real Estate Investment Management Holdings plc FTSE All Share Index

Source: Thomson Datastream

0

20

40

60

80

100

120

140

160

18/0

9/06

29/1

2/06

30/0

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31/0

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31/1

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30/0

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31/1

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29/0

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30/1

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31/0

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31/1

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8/10

This graph shows the value of £100 invested in Invista Real Estate Investment Management Holdings plc since Admission to AIM compared with the value of £100 invested in the FTSE All-Share Index from the same date.

This report was approved by the Board of Directors and signed on its behalf by

Douglas Ferrans Chairman, Remuneration Committee 19 April 2012



Corporate Governance Report

Introduction

This report is in two parts. The first explains the approach Invista has taken to applying the principles and provisions set out in the UK Corporate Governance Code (the “Code”) throughout the year. The second part contains a statement of compliance with the Code’s provisions. Where Invista is not in full compliance with a particular provision an explanation has been provided.

It should be noted that whilst the Code does not strictly apply to AIM listed companies it is the Board’s intention for Invista to be in compliance with the Code’s provisions, unless the Board is of the opinion that it would be disproportionate or inappropriate to be so.

The Board

The Board comprises the Executive Chairman, three Non-Executive Directors and one Executive Director.

The Board considers two of the Non-Executive Directors, Olivia Dickson and Douglas Gardner, to be independent for the purpose of the Code. The Executive Chairman, Douglas Ferrans, has during the last five years, been an employee of a Company within the Lloyds Banking Group and is not, therefore, considered independent for the purpose of the Code. Steve Colsell represents the interests of a significant shareholder, the Lloyds Banking Group, and hence is also not considered independent under the Code. Olivia Dickson performs the role of Senior Independent Director.

The Board considers that collectively it has a sufficiently broad range of skill sets and experience. These are shown in the Directors’ biographical details on pages 14 to 15. The terms and conditions of appointment of the Executive Chairman and Non-Executive Directors are available on request and will be available for inspection at the Annual General Meeting.

All the Directors will submit themselves for re-election by shareholders at intervals of no more than three years. Douglas Ferrans (as Executive Chairman) has agreed to submit himself for re-election on an annual basis.

Board procedures

The Board has a formal terms of reference which is made available on the Company’s website and reviewed on at least an annual basis. The primary responsibilities reserved to the Board include the approval of business strategy, annual budgets, Annual Report and Accounts and half yearly financial statements, trading statements, dividends,

delegated authorities, significant capital projects, significant balance sheet investments and disposals, corporate risk policies and governance procedures.

Comprehensive Board papers comprising an agenda, standing reports and other papers are sent to the Directors in advance of each meeting. During 2011 a key agenda item has been the execution of the Company’s value realisation strategy. The Company’s advisers have commonly been in attendance for these discussions. Other subjects covered include current trading, operational issues, risk and compliance, governance, and financial matters. The Board also receives recommendations from its various Board Committees.

During the year seven formal Board Meetings were held at which all the Directors were present with the exception of Steve Colsell who was absent on five occasions. In addition a number of informal Board conference calls were held, primarily to consider specific issues arising with regard to the Company’s value realisation programme.

Board Committees

There are currently four standing Committees of the Board to which the Board has delegated specific responsibilities. The membership of these Committees and a summary of their main responsibilities and activities during 2011 are set out below.

The terms of references for the Committees are made available on the Company’s website and are reviewed at least annually.

It should be noted that the Independent Committee, which as reported last year was established following the emergence of a number of conflicts that arose in relation to the execution of the Company’s value realisation strategy, was stood down during the year having completed its work.

Audit Committee

The Audit Committee is chaired by Olivia Dickson and also comprises Douglas Ferrans and Douglas Gardner. The Board considers that collectively the Committee has sufficient recent and relevant financial experience.

Steve Colsell has the right to attend meetings in a non-voting capacity and the Chief Financial Officer and the Chief Risk Officer & Company Secretary are normally in attendance at meetings. The external auditors of Invista attend meetings on a regular basis and have unrestricted access to the Committee and its Chair.



During 2011 the Committee met four times, at which all members were present.

The purpose of the Audit Committee is to monitor the integrity of the financial statements and the financial reporting process and to assist the Board in discharging its corporate governance and risk management responsibilities. Ultimate responsibility for these matters however resides with the Board.

During the year the work of the Audit Committee included the following:

Financial matters• reviewed reports from management and the external

auditors relating to the Annual Report and Accounts of the Company, as well as the half-yearly financial statements, related disclosures and the financial reporting process;

• reviewed and approved the external auditors’ remuneration and terms of engagement;

• received standing reports from the Chief Financial Officer and papers covering specific financial matters such as currency risk and liquidity risk, including cash flow projections;

• reviewed various reports relating to the specific risks of the value realisation strategy and the changing risk profile of the business; and

• reviewed the results of the scenario testing of Invista’s 2011 business plan (covered in more detail under the financial reporting and going concern section on page 28).

Non-financial matters• reviewed the key risks of the Group (including the

separate risk maps and underlying risk registers for the value realisation programme and business as usual activities);

• received standing reports, including regulatory updates from the Chief Risk Officer & Company Secretary;

• assessed the effectiveness and independence of the external auditors;

• reviewed the internal control and risk management arrangements for the Group, recommending for Board approval the restructuring of the risk and internal audit functions under the overall responsibility of the Chief Risk Officer & Company Secretary;

• reviewed the annual risk management and internal audit plan;

• reviewed specific risk reports from Invista senior management covering such items as contractual risk and Invista’s Asian Division; and

• reviewed and recommended for Board approval Invista’s anti-bribery and corruption policy.

The Committee also met in private session separately with the external auditor and the Chief Risk Officer & Company Secretary without the Executive Directors present.

The external auditors will be asked to attend the Company’s Annual General Meeting and will be available to answer questions from shareholders about the conduct of the audit and the preparation and content of the Independent Auditors’ Report.

Remuneration Committee

The Remuneration Committee is chaired by Douglas Ferrans and also comprises Olivia Dickson and Douglas Gardner.

Steve Colsell has the right to attend meetings in a non-voting capacity and the Chief Financial Officer, the Head of Human Resources and the Chief Risk Officer & Company Secretary may be requested to attend meetings. The Committee’s external remuneration consultant (Deloitte LLP) may also be invited to attend meetings as the Committee considers appropriate.

The Remuneration Committee is responsible for reviewing and making recommendations to the Board on all material elements of remuneration policy, as set out in the Remuneration Report on pages 16 to 24 and to determine the specific remuneration arrangements of the Executive Directors and senior management.

During 2011 the Remuneration Committee met formally on four occasions at which all members were present. In addition, a number of matters requiring Committee approval were actioned by written resolution.

Nominations Committee

The Nominations Committee is chaired by Douglas Ferrans and also comprises Olivia Dickson and Douglas Gardner. Steve Colsell has the right to attend meetings in a non-voting capacity.


The Nominations Committee is responsible for considering the size, composition and balance of the Board, retirement and appointment of additional and replacement Directors and making appropriate recommendations to the Board. During 2011 the Nominations Committee met twice with all members being present.

Executive Committee

The Executive Committee is chaired by Douglas Ferrans and also comprises the Chief Financial Officer. The Head of Finance, the Head of Human Resources and the Chief Risk Officer & Company Secretary are also normally in attendance.

The key responsibilities of the Executive Committee include the following:

• implementing the Company’s value realisation strategy and annual business plan of the Company as agreed by the Board;

• regularly reviewing financial and business performance against plan;

• managing the day-to-day operations of the business and outsourced activities; and

• ensuring that at all times the Company operates within the context of the risk management framework and systems of controls established by the Board.

Professional development

New Directors appointed to the Board receive a full, formal and tailored induction which includes briefings on their legal and regulatory responsibilities as a Director of a listed company and as FSA approved persons, and briefings from relevant members of senior management in order to equip them with a detailed understanding of the activities of the Group.

In relation to ongoing training there is a standing Board meeting agenda item covering Directors’ training requests. The Directors are regularly updated on their duties and responsibilities and have access to the advice of the Chief Risk Officer & Company Secretary and to independent professional advice where needed in furtherance of their duties.

Relations with shareholders

The Company places great importance on its relations with shareholders and aims to keep them informed through regular communications.

During 2011 the Executive Chairman has maintained close relationships with Invista’s main institutional shareholders and has provided feedback to the rest of the Board on their views, particularly with regard to the implementation of the Company’s value realisation strategy. The Directors receive copies of all research and major press coverage concerning the Company.

Annual and Interim Reports are widely distributed to other parties who may have an interest in the Group and these documents are also made available on the Company’s website.

All shareholders are encouraged to attend the Annual General Meeting at which they have an opportunity to ask questions. The Annual General Meeting is attended by all the Directors who are available to answer questions. The Senior Independent Director is available to shareholders if they have concerns which have failed to be resolved through the usual communication channels. The Company continues to offer major shareholders the opportunity to meet any or all of the Directors, including the Executive Chairman and Senior Independent Director.

The Group will continue its policy of announcing the number of proxy votes cast on resolutions at the Annual General Meeting and any other general meetings.

Relationship with Lloyds Banking Group

Invista entered into a Relationship Agreement with Lloyds Banking Group (formerly HBOS plc) in order to regulate the relationship between the two companies following Invista’s admission to AIM on 22 September 2006.

The principal purpose of the Relationship Agreement is to ensure that Invista can operate independently of Lloyds Banking Group and provide that the relationship will be conducted on an arm’s length basis. Under the agreement, Lloyds Banking Group has the right to appoint a Director to the Board of the Company. Steve Colsell has been so appointed.



Invista previously managed funds on behalf of a number of Lloyds Banking Group Companies. Following the serving of notice of termination from these Companies, (details of which were reported in the 2010 Annual Report and Accounts) an early termination agreement was entered into between the parties on 17 March 2011 and the funds were subsequently transferred to a new manager (Scottish Widows) in May 2011. As referred to in the Business and Finance Review, an amount of £0.5 million due to Invista under the early termination agreement, is the subject of a formal legal dispute between the parties. In response to Invista issuing legal proceedings in November 2011, Lloyds Banking Group issued a counter-claim in January 2012. Invista lodged a formal response to the counter-claim on 5 April 2012.

Financial reporting and going concern

The Directors have acknowledged their responsibilities in the Statement of Directors’ Responsibilities in relation to the financial statements for the year ended 31 December 2011 on page 34.

The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out in the Business and Finance Review on pages 4 to 13. The financial position of the Group, its cash flows and liquidity position are described in the financial statements and accompanying notes. In particular, note 21 summarises the Group’s policies and processes for managing its capital, financial risk, details of its financial instruments and hedging activities and its exposures to liquidity and credit risks. The Board has also reviewed Invista’s business plan covering a range of different downside scenarios, sensitivities and assumptions.

The Group has a financial position underpinned by significant cash balances. Consequently, after a thorough examination of the Company’s financial position, the Directors are satisfied that the Company has and will maintain sufficient financial resources to enable it to continue operating in the foreseeable future whilst meeting all its commitments.

The Directors believe that although the Company is pursuing, and will continue to pursue, a strategy of realising value for shareholders, it is not a seller at any price. Shareholder value remains the key driver and accordingly the Directors consider that at the date of signing these accounts it remains a realistic option that the Company will continue to trade for the foreseeable future, albeit on a significantly reduced scale of operations.

The Annual Report and Accounts have therefore been prepared on a “going concern basis”.

Risk management and internal control

The Directors are responsible for Invista’s system of internal control and for reviewing its effectiveness. This includes a responsibility for financial, operational and compliance controls in managing the risks inherent in the business. The Audit Committee, along with the appropriately staffed and qualified Risk and Finance Teams, support the Directors in the discharge of these responsibilities.

In accordance with the Turnbull Guidance on Internal Control, the Directors and senior managers of Invista are committed to maintaining a strong control culture within all business areas and for evaluating and managing the significant risks faced by Invista.

Specifically, a risk management framework has been developed, whereby the key risks facing the business are continually assessed and monitored. Regular reporting to the Audit Committee on the management of these risks is undertaken, including the reporting of net risks (i.e. after controls are considered) against the Company’s risk appetite. Where the net risk exceeds the relevant risk appetite an action plan is put in place to reduce the risk to an acceptable level if possible. The Risk Team undertakes independent compliance and internal audit monitoring of the key risks facing the business, including any emerging risks.

Any significant developments impacting the Invista business are subject to a rigorous risk assessment including the impact upon the Company’s existing risk profile with additional controls being embedded into Invista’s processes and management systems where this is deemed appropriate and feasible. A risk map and underlying risk register is maintained in relation to the Company’s value realisation programme which take account of the specific risks facing the Company in this regard. A separate risk map and register for business as usual activities is also maintained. These documents are subject to regular scrutiny by the Audit Committee and Board.

The Executive team has clearly defined responsibilities and accountabilities for managing risk which are subject to frequent review to ensure that they remain aligned with business developments and any new or emerging risks.


Adherence to regulatory and professional codes of conduct is required at all times and the Board actively promotes a culture of quality and integrity.

When control issues of significance occur, the Audit Committee receives full and detailed reports from management and the Risk Team as appropriate, including proposals for amending and strengthening the processes concerned. Where appropriate, such cases will be taken forward to the Board by the Chair of the Audit Committee for noting and discussion.

In establishing the system of internal control, the Directors have regard to materiality of relevant risk, the likelihood of a risk occurring and the cost of mitigating risk. It is therefore designed to manage, rather than eliminate risk and as such can provide only reasonable and not absolute assurance against the risk of material misstatement or loss.

At its May 2011 meeting the Audit Committee carried out a critical assessment of the current internal control and risk management framework. The review included the nature and scope of the ongoing challenge and monitoring processes, including the effectiveness of the Risk Team, and the potential impact on these processes as a result of the value realisation programme. The key outcome from the review, following recommendation by the Audit Committee and approval by the Board, was the merging of the separately operating risk and internal audit functions under the overall responsibility of the Chief Risk Officer & Company Secretary.

Non-audit services

In order to ensure objectivity and independence, a policy on non-audit services was previously introduced following review by the Audit Committee and approval by the Board. Any proposed non-audit services by the auditor can only be undertaken if permissible under the policy.

2012 Annual General Meeting

At the meeting the Directors will be available to answer shareholder questions on the activities of the Board and its Committees.

A notice of the meeting, which includes details of the business to be conducted and proxy voting form, will be sent to shareholders.

Statement of Compliance with the UK Corporate Governance Code

The Board considers that it is in compliance with the UK Corporate Governance Code save for the following areas:

Section A.3.1 of the Code states that on appointment the Chairman should meet the independence criteria set out in the Code. Upon his appointment as Chairman and subsequently Executive Chairman, Douglas Ferrans did not meet these criteria due to his former connection with the Lloyds Banking Group. The Board considers that Douglas Ferrans is the most appropriate Executive Chairman given his considerable knowledge and experience of the fund management industry and the Company.

Section B6 of the Code states that the Board should undertake a formal and rigorous annual evaluation of its own performance and those of its Committees and individual Directors. In light of the Company’s current circumstances and the Board’s close focus during the year on the execution of the Company’s value realisation strategy it was decided not to undertake an annual performance evaluation for 2011.

Section C.3.1 of the Code states that the Board should satisfy itself that at least one member of the Audit Committee has significant relevant and current financial experience. Whilst it is arguable whether any individual Committee member has significant financial experience, the Board considers that collectively the Committee has sufficient recent and relevant financial experience. Section C.3.1 also states that Audit Committee members should all be independent Non-Executive Directors. As stated above, Douglas Ferrans, a member of the Committee, is not deemed to be independent due to his former connection with the Lloyds Banking Group. However, the Board considers that Douglas Ferrans is an appropriate Committee member due to the knowledge and experience he brings to the role.

Section D.2.1 of the Code states that the Company Chairman may be a member of, but not the Chairman, of the Remuneration Committee. Douglas Ferrans has been appointed as Chairman of the Remuneration Committee which the Board deems to be appropriate at the present time having considered the respective knowledge, expertise and time commitments of Committee members. As reported last year, following the announcement of the Company’s value realisation strategy, it was agreed by the Board that Douglas Ferrans would continue in his role as Chairman of this Committee in order to maintain continuity and to facilitate the oversight of remuneration decisions relating to the strategy.


Risk Environment

Invista operates in a highly regulated environment. The UK’s Financial Services Authority (“FSA”) is the primary regulator of Invista.

Invista has two regulated subsidiaries:

• Invista Real Estate Investment Management Limited; and

• Invista Real Estate Investment Management (CI) Limited.

Invista Real Estate Investment Management Limited provides investment management services to clients’ property funds. It is authorised and regulated by the FSA. Invista Real Estate Investment Management (CI) Limited is authorised and regulated by the Guernsey Financial Services Commission (“GFSC”) and performs GFSC controlled investment activities in Guernsey in relation to the provision of investment management services to certain offshore clients.

Risks and uncertainties

An overview of Invista’s risk management processes is provided in the risk management and internal control section of the Corporate Governance report.

Details of the principal risks and uncertainties arising from the implementation of Invista’s value realisation strategy and its business as usual activities are outlined below.

These risks will continue to be subject to regular scrutiny by the Audit Committee and Board during the course of 2012 with the Company’s risk maps and underlying risk registers being kept up to date to reflect existing and emerging risks.

Litigation risk

This includes the risk of potential client, employee, shareholder and other party claims and the failure to properly deal with any claims arising.

External legal advice will continue to be taken as appropriate to reduce the likelihood of Invista’s actions causing future claims and litigation.

Any actual and potential claims are promptly reported to the Directors who ensure that expert legal support is obtained. The Directors closely oversee the progression of such claims until they are satisfactorily resolved.

The Directors have ensured that appropriate corporate insurance cover has been taken out and regularly review corporate insurance arrangements. As with all insurances

however, there is a risk that claims against insurance policies are ultimately not successful.

Shareholder risk

Any changes in the long-term intentions of Invista’s major shareholders or any deterioration in the relationships with them could lead to uncertainty and disruption.

The Company seeks to manage this risk through its close and continuous communication with major shareholders. The Executive Chairman meets regularly with major shareholders in order to keep them informed of key strategic and operational developments and more recently to obtain their views with regard to the disposal of assets and return of shareholder monies.

Any issues or specific feedback arising are promptly communicated to the rest of the Board and actioned where appropriate.

As referred to in the Corporate Governance Report the Group is involved in a legal dispute with its majority shareholder Lloyds Banking Group. This could potentially weaken the overall shareholder relationship. To help mitigate this risk, Invista is maintaining an ongoing dialogue with Lloyds corporate centre.

Market conditions

The current unstable conditions in world financial markets, including real estate markets, could lead to a marked deterioration in Invista’s remaining assets under management and balance sheet investments. This could adversely impact the effectiveness of the value realisation programme resulting in a worse financial outcome for shareholders.

Whilst market conditions are outside of Invista’s control, alternative strategies, such as continuing to manage certain assets for the foreseeable future, for example on an outsourced basis, are being kept under regular review by the Board (taking independent advice as appropriate from the Company’s advisers) in order to ensure that the best financial outcome for shareholders is achieved.

The current unstable debt market conditions could adversely impact the Company’s ability to obtain debt finance on favourable commercial terms or at all. This is of particular relevance to Invista’s interests in the Invista Real Estate International Fund LP and the Invista Real Estate Opportunity Fund LP.


Both funds have a number of investments in leveraged entities with debt facilities secured on investment properties in a range of locations. The maturity profile of the debt in these funds ranges from 2012 to 2015. Whilst the current expectation is that discussions with potential lenders in respect of forthcoming refinancing events will secure refinancing commitments on acceptable commercial terms, in each case alternative options, including the sale of the asset concerned, are being, or would be, explored.

Balance sheet including execution risk

There is a risk that the values of Invista’s balance sheet investments, namely the interests in the Invista Real Estate International Fund LP and the Invista Real Estate Opportunity Fund LP, may suffer further falls and that Invista will incur impairment charges and other losses as a result. There is also a risk that balance sheet valuations may not be realised in practice. These risks could be amplified during the value realisation programme as Invista could be seen by the market as a “forced seller”.

The Board monitors the performance and risks of Invista’s balance sheet assets and continually reviews the strategy for eventual exit of these investments.

Financial (cost overrun) risk

Any further delays in the value realisation programme (which are likely to be as a consequence of the above two risks) could result in significant cost overruns, particularly with regard to adviser costs which could adversely impact the eventual repayments to shareholders.

This risk is reduced but not eliminated (due to factors outside of Invista’s control – see the above two risks) by having an established budgetary control and expenditure approval process in place. Actual costs against budget are closely scrutinised by management and the Board. Reductions in staff and adviser costs will be made as soon as the Board considers it prudent to do so.

People risk, including staff retention

There is a risk that the uncertainty arising from the Company’s value realisation strategy, could result in low staff morale, the departure of key staff, poor staff performance/output and an increase in operational losses and fraud.

The Remuneration Committee, on behalf of the Board, is responsible for determining remuneration policy, ensuring that it remains competitive and supports an effective risk

management framework. The Committee has implemented appropriate retention arrangements to ensure the retention of key individuals.

All staff are required to have individual performance objectives in place against which actual performance is monitored by line managers. Cover arrangements and succession planning are kept continually under review by Invista’s senior management.

Invista’s independent Risk Team carries out a regular programme of monitoring reviews across all areas of Invista’s business.

Invista has an anti-financial crime policy in place which has been reviewed by the Audit Committee and approved by the Board. The policy includes details of Invista’s fraud prevention measures. There is also a separate Board approved anti-bribery and corruption policy in place.

Client risk

As the Group continues to be scaled down there is a risk that Invista may be unable to honour its obligations to remaining clients, for example as a result of control breakdowns, breaches of client mandates or loss of business continuity.

All fund transitions are subject to a controlled project management process with appropriate project infrastructure, disciplines and escalation points.

Invista has documented procedures in place across all areas of its business with monitoring checks in place to provide an “early-warning” system to identify any control breakdowns. The procedures detail the relevant control processes which include authorisation checks, supervisory reviews, access controls and segregation of duties.

Compliance against client mandates is overseen by the relevant Investment Committee and independent Risk Team and there is a documented process in place for the reporting of breaches. All processes and procedures are subject to risk based compliance monitoring.

In relation to client credit risk, i.e. the risk of clients defaulting on their contractual obligations, Invista has credit control procedures in force to monitor and chase outstanding payments. Where amounts remain outstanding, the Company will consider, as appropriate, the legal and other measures available to it to secure payment.


Risk Environment

Regulatory, legal and taxation risk

The risk of failing to fulfil regulatory obligations and/or non-compliance with legal requirements, including UK and international taxation law.

Invista has an in-house Risk Team, led by the Chief Risk Officer & Company Secretary, which is experienced in monitoring compliance against regulatory requirements. The Chief Risk Officer & Company Secretary reports formally to the Executive Chairman and has full access to the Chair of the Audit Committee and other Directors. The Chief Risk Officer & Company Secretary attends meetings of the Board and tables a risk report thereto.

Invista uses external legal advisers and obtains specialist UK taxation advice from Lloyds Banking Group’s tax team and from Deloitte LLP and KPMG in relation to international taxation matters.

Conflicts of interest

The risk that potential conflicts of interest may not be identified or be properly managed.

Invista has a detailed conflicts of interest policy in place, the primary purpose of which is to ensure that all clients and other stakeholders such as tenants are treated fairly. The policy is regularly reviewed and updated accordingly. The Directors have had extensive input into the policy and the Risk Team is responsible for monitoring compliance against the policy and for reporting the results of monitoring to the Audit Committee and the Board.

In relation to Invista’s value realisation programme, a process has been established to monitor the potential conflicts of interest arising. In particular, certain Directors and staff may be conflicted if they are involved in the sale and/or purchase of Invista’s assets. In these instances mitigating actions will be taken to manage specific conflicts or to eliminate them altogether e.g. during the year one Director was excluded from the membership of an Independent Committee established to oversee the sale of a particular asset.

Property specific risk

There are a number of risks which are generic to property as an asset class and remain relevant to Invista’s remaining funds under management. These include the following:

• tenancy risk – tenant failure or default and excessive void rates;

• covenant risk – the breach of covenants set out in finance and loan agreements leading to the potential recall of debt; and

• insurance risk – the failure to insure a property properly.

Specific fund managers are responsible for actively managing each individual property with a view to increasing rental yields. A business plan is produced for each property which is reviewed on an annual basis by the relevant Investment Committee. The Committees also monitor void rates with corrective action being taken if they appear to be excessive.

It is the responsibility of each individual fund manager to ensure that the covenants in force on their fund(s) are strictly followed. This is overseen by the relevant Investment Committee and independent Risk Team.


Directors’ Report

The Directors present their Report and the audited consolidated financial statements for the year ended 31 December 2011.

Principal activities

The Group manages commercial property across the UK, Europe and Asia. It also has a number of co-investments in funds to which Invista companies also provide investment management services. The subsidiary, associated and joint venture undertakings principally affecting the profits or net assets of the Group in the year are listed in notes 14 and 15 accompanying the financial statements.

Business review

A review of the business of the Group, including a list of the principal risks and uncertainties facing the Group, is set out in the Business and Finance Review and Risk Environment on pages 4 to 13 and 30 to 32, respectively.The Business and Finance Review also includes details of present activities and future business developments.

Dividends

No interim dividend for 2011 was paid (2010: 0.7 pence per ordinary share and 0.875 pence per preferred ordinary share amounting to £1,840,125).

The Board has not proposed any dividend payment in respect of 2011 (2010: £nil final dividend).

Return of capital

A return of capital to shareholders amounting to 18.0 pence per ordinary share was paid on 29 June 2011.

Directors

The Directors of the Company serving during the year were as follows:

Douglas Ferrans (Chairman) – appointed Executive Chairman 20 January 2011 Duncan Owen (Chief Executive) – resigned 20 January 2011 Philip Gadsden (Deputy Chief Executive) – resigned 1 March 2012 Guy Eastaugh (Chief Financial Officer) Olivia Dickson (Senior Independent Director) Douglas Gardner (Non-Executive Director) Steve Colsell (Non-Executive Director)

Supplier payment policy

It is the Group’s policy that payments made to suppliers are made in accordance with those terms and conditions agreed between the Group and its suppliers.

The Group had average trade creditors outstanding for the year ended 31 December 2011 representing 5 days of purchases.

Charitable and political contributions

The Group made a charitable donation of £100 during the year (2010: £nil). It is the Group’s policy not to make donations to political parties.

Employees

Applications for employment by disabled persons are always fully considered, bearing in mind the aptitudes of the applicant concerned. In the event of members of staff becoming disabled every effort is made to ensure that their employment with the Group continues and that appropriate training is arranged. It is the policy of the Group that the training, career development and promotion of disabled persons should, as far as possible, be identical to that of other employees.

International Financial Reporting Standards

The financial statements are prepared in accordance with International Financial Reporting Standards as adopted by the European Union.

Availability of audit information

The Directors who held office at the date of approval of this Directors’ Report confirm that, so far as they each are aware, there is no relevant audit information of which the Group’s auditors are unaware, and each Director has taken all the steps that they ought to have taken as a Director to make themselves aware of any relevant audit information and to establish that the Group’s auditors are aware of that information.

Auditors

KPMG Audit Plc have expressed their willingness to continue in office as auditors and a resolution to reappoint them will be proposed at the forthcoming Annual General Meeting.

By order of the Board

Mark Lawson Company Secretary 19 April 2012


Statement of Directors’ Responsibilitiesin respect of the Annual Report and the financial statements

The Directors are responsible for preparing the Annual Report and 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. As required by the AIM Rules of the London Stock Exchange they are required to prepare the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU and applicable law and have elected to prepare the Parent Company financial statements on the same basis.

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 their 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 then apply them consistently;

• make judgements and estimates that are reasonable and prudent;

• state whether they have been prepared in accordance with IFRSs as adopted by the EU; and

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the Parent Company will continue in business.

The Directors are responsible for keeping 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 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.

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.


We have audited the financial statements of Invista Real Estate Investment Management Holdings plc for the year ended 31 December 2011 set out on pages 36 to 82. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the EU and, as regards the Parent Company financial statements, as applied in accordance with the provisions of the Companies Act 2006.

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditors’ 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 Company and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of Directors and auditors

As explained more fully in the Directors’ Responsibilities Statement set out on page 34, the Directors are 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.

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 financial statements

In our opinion:

• the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 December 2011 and of the Group’s profit for the year then ended;

• the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the EU;

• the Parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the EU and as applied in accordance with the provisions of the Companies Act 2006; and

• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

Opinion on other matter prescribed by the Companies Act 2006

In our opinion the information given in the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

• adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or

• the Parent Company financial statements are not in agreement with the accounting records and returns; or

• certain disclosures of Directors’ remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

Shaun Kirby (Senior Statutory Auditor) for and on behalf of KPMG Audit Plc Statutory Auditor Chartered Accountants 15 Canada Square London E14 5GL

19 April 2012

Independent Auditors’ Reportto the members of Invista Real Estate Investment Management Holdings plc (Registered Number 05788425)


2011 2010 Note £000 £000

Revenue 3 22,606 27,869

Administrative expenses 4 (20,216) (18,908)

Share of (losses)/profits of jointly controlled entities 14 (380) 36

Net valuation profits on investments 7 225 6,329

Operating profit 6 2,235 15,326

Net finance income/(expense) 8 74 (391)

Profit before tax 2,309 14,935

Income tax expense 9 (1,592) (3,232)

Profit from continuing operations 717 11,703

Discontinued operationLoss from discontinued operation (net of income tax) 10 (185) (26,476)

Profit/(loss) for the year attributable to equity holders of the Parent Company 532 (14,773)

Earnings per shareBasic earnings/(loss) per share 11 0.20p (5.64)pDiluted earnings/(loss) per share 11 0.20p (5.64)p

Continuing operationsBasic earnings per share 11 0.27p 4.47pDiluted earnings per share 11 0.26p 4.32p

The notes on pages 46 to 82 form part of these financial statements.

Consolidated Income Statementfor the year ended 31 December 2011


2011 2010 Note £000 £000

Profit/(loss) for the year 532 (14,773)

Other comprehensive income:Net change in fair value of available for sale investments – (34)Net change in fair value of available for sale investments reclassified to profit or loss (687) (4,234)Deferred tax on net change in fair value of available for sale investments – 334Movement on swaps – (3,289)Deferred tax on movement in swaps – 801Movement on joint venture swaps 14 137 (31)Deferred tax on movement in joint venture swaps (78) (5)Foreign currency translation differences in respect of investments held by joint ventures 14 141 1,233Foreign currency translation differences for foreign operations 4 20Other comprehensive loss for the year, net of tax (483) (5,205)

Total comprehensive income/(loss) for the year attributable to equity holders of the Parent Company 49 (19,978)


Consolidated Statement of Comprehensive Incomefor the year ended 31 December 2011


2011 2010 Note £000 £000

Non-current assetsProperty, plant and equipment 13 22 380Investments in jointly controlled entities 14 28,793 28,785Investments 15 – 3,018Deferred tax assets 16 498 1,074Total non-current assets 29,313 33,257

Current assetsTrade and other receivables 17 5,924 3,549Cash and cash equivalents 35,037 77,396Assets classified as held for sale 18 – 103,932Total current assets 40,961 184,877Total assets 70,274 218,134

Current liabilitiesInterest bearing loans and borrowings 19 – 13,641Derivatives used for hedging – 296Trade and other payables 20 3,731 6,061Current tax liabilities 1,473 2,788Liabilities classified as held for sale 18 – 82,782Total current liabilities 5,204 105,568

Non-current liabilitiesOther payables 20 34 295Total non-current liabilities 34 295Total liabilities 5,238 105,863

Net assets 65,036 112,271

EquityShare capital 26 76 76Share premium account 27 – 108,768Capital contribution reserve 27 – 1,782Hedge reserve 27 (189) (8,066)Retained earnings 65,149 9,711Total shareholders’ equity 65,036 112,271


The financial statements were approved by the Board of Directors on 19 April 2012 and signed on its behalf by:


Consolidated Balance Sheetat 31 December 2011


Capital Share Share contribution Hedge Retained capital premium reserve reserve earnings Total Note £000 £000 £000 £000 £000 £000

Balance at 1 January 2010 76 108,768 1,782 (5,542) 34,021 139,105Loss for the year – – – – (14,773) (14,773)Net change in fair value of available

for sale investments – – – – (34) (34)Net change in fair value of available

for sale investments reclassified to profit or loss – – – – (4,234) (4,234)

Deferred tax on net change in fair value of available for sale investments – – – – 334 334

Movement on swaps – – – (3,289) – (3,289)Deferred tax on movement in swaps – – – 801 – 801Movement on joint venture swaps 14 – – – (31) – (31)Deferred tax on movement in joint

venture swaps – – – (5) – (5)Foreign currency translation differences

in respect of investments held by joint ventures 14 – – – – 1,233 1,233

Foreign currency translation differences for foreign operations – – – – 20 20

Total comprehensive loss – – – (2,524) (17,454) (19,978)Dividends paid – – – – (6,049) (6,049)EBT share purchases – – – – (927) (927)Employee share expense – – – – 225 225Tax on employee share expense – – – – (105) (105)Balance at 31 December 2010 76 108,768 1,782 (8,066) 9,711 112,271

Profit for the year – – – – 532 532Net change in fair value of available for sale

investments reclassified to profit or loss – – – – (687) (687)Movement on joint venture swaps 14 – – – 137 – 137Deferred tax on movement in joint

venture swaps – – – (78) – (78)Foreign currency translation differences

in respect of investments held by joint ventures 14 – – – – 141 141

Foreign currency translation differences for foreign operations – – – – 4 4

Total comprehensive income/(loss) – – 59 (10) 49Employee share expense – – – – 87 87EBT loan repayment – – – – 267 267Transfer Castle hedge reserve

following sale – – – 7,818 (7,818) –Cancellation of share premium account 27 – (108,768) – – 108,768 –Capital distribution 27 – – – – (47,638) (47,638)Transfer capital contribution reserve

following impairment to IPD investment 27 – – (472) – 472 –Transfer capital contribution reserve

following sale of IPD investment 27 – – (1,310) – 1,310 –Balance at 31 December 2011 76 – – (189) 65,149 65,036


Consolidated Statement of Changes in Equityfor the year ended 31 December 2011


Total Total 2011 2010 Note £000 £000

Profit/(loss) for the year 532 (14,773)Adjustments for: Tax 1,657 3,854 Investment income (412) (955) Finance expense 704 5,715 Employee share awards 87 225 Depreciation/amortisation 358 991 Net loss/(gain) on sale of investments 204 (6,329) Share of losses/(profits) of jointly controlled entities 380 (36) Change in fair value of investment properties – 29,100 Change in fair value of other investments (22) 5Changes in working capital: Decrease/(increase) in trade and other receivables 2,598 (491) (Decrease)/increase in trade and other payables (3,383) 754Cash flows from operating activities 2,703 18,060Income taxes paid (4,156) (6,427)Net cash from operating activities (1,453) 11,633

Cash flows from investing activitiesInvestment income 412 955Acquisition of property, plant and equipment – (316)Acquisition of investments in joint ventures (110) (4,311)Disposal of discontinued operation, net of cash disposed 10 8,804 –Acquisition of other investments – (6,536)Disposal of other investments 2,718 24,827Net cash flows from investing activities 11,824 14,619

Cash flows from financing activitiesDividends paid – (6,049)Capital distribution (47,638) –EBT share purchases – (927)EBT loan repayment 267 –Repayments of loans (13,638) (1,296)Interest paid (445) (5,523)Net cash flows from financing activities (61,454) (13,795)

Net (decrease)/increase in cash and cash equivalents (51,083) 12,457Opening cash and cash equivalents 86,120 73,663Cash and cash equivalents at 31 December 35,037 86,120

Cash and cash equivalents continuing operations 35,037 77,396Cash and cash equivalents discontinued operation 10 – 8,724Cash and cash equivalents at 31 December 35,037 86,120


Consolidated Cash Flow Statementfor the year ended 31 December 2011


The Company is taking advantage of the exemption in s408 of the Companies Act 2006 not to present its individual income statement and related notes that form a part of these approved financial statements.

The Company made a profit of £5,876,000 for the year ended 31 December 2011 (2010: loss of £32,941,000).

Company Income Statement


2011 2010 £000 £000

Profit/(loss) for the year 5,876 (32,941)

Other comprehensive income:Net change in fair value of available for sale investments – (39)Net change in fair value of available for sale investments reclassified to profit or loss (676) (2,155)Deferred tax on net change in fair value of available for sale investments – 335Other comprehensive loss for the year, net of tax (676) (1,859)

Total comprehensive income/(loss) for the year 5,200 (34,800)


Company Statement of Comprehensive Incomefor the year ended 31 December 2011


2011 2010 Note £000 £000

Non-current assetsInvestments 15 9,333 14,564Total non-current assets 9,333 14,564

Current assetsTrade and other receivables 17 27,981 32,039Current tax asset 210 –Cash and cash equivalents 20,832 60,224Total current assets 49,023 92,263Total assets 58,356 106,827

Current liabilitiesTrade and other payables 20 735 7,122Total current liabilities 735 7,122

Net assets 57,621 99,705

EquityShare capital 26 76 76Share premium account 27 – 108,768Capital contribution reserve 27 – 1,782Other reserve 27 – 1,452Retained earnings 57,545 (12,373)Total shareholders’ equity 57,621 99,705

Registered Number 05788425


The financial statements were approved by the Board of Directors on 19 April 2012 and signed on its behalf by:


Company Balance Sheetat 31 December 2011


Capital Share Share contribution Other Retained capital premium reserve reserve earnings Total Note £000 £000 £000 £000 £000 £000

Balance at 1 January 2010 76 108,768 1,782 13,036 17,594 141,256Loss for the year – – – – (32,941) (32,941)Net change in fair value of available

for sale investments – – – – (39) (39)Net change in fair value of available

for sale investments reclassified to profit or loss – – – – (2,155) (2,155)

Deferred tax on net change in fair value of available for sale investments – – – – 335 335

Total comprehensive loss – – – – (34,800) (34,800)Dividends paid – – – – (6,049) (6,049)EBT share purchases – – – – (927) (927)Share award to employees

of the subsidiary – – – 225 – 225Tax on share awards to employees

of the subsidiary – – – (105) 105 –Release of employee share reserve

to retained earnings (11,704) 11,704 –Balance at 31 December 2010 76 108,768 1,782 1,452 (12,373) 99,705

Profit for the year – – – – 5,876 5,876Net change in fair value of available

for sale investments reclassified to profit or loss – – – – (676) (676)

Total comprehensive income – – – – 5,200 5,200Cancellation of share premium account 27 – (108,768) – – 108,768 –Transfer capital contribution reserve

following impairment to IPD investment 27 – – (472) – 472 –Transfer capital contribution reserve

following sale of IPD investment 27 – – (1,310) – 1,310 –Capital distribution 27 – – – – (47,638) (47,638)EBT loan repayment – – – – 267 267Share award to employees of the subsidiary – – – 87 – 87Release of employee share reserve

to retained earnings (1,539) 1,539 –Balance at 31 December 2011 76 – – – 57,545 57,621


Company Statement of Changes in Equityfor the year ended 31 December 2011


2011 2010 £000 £000

Profit/(loss) for the year 5,876 (32,941)Adjustments for: Tax (240) (308) Investment income (299) (545) Dividends received from subsidiaries (10,855) (7,400) Net gain on sale of investments (586) (2,133) Impairment loss on investments 2,873 11,763 Impairment loss on other receivables 607 30,329Changes in working capital: (Increase)/decrease in trade and other receivables (2,558) 7 (Decrease)/increase in trade and other payables (5,119) 5,612Cash flows from operating activities (10,301) 4,384Income taxes paid 31 (712)Net cash from operating activities (10,270) 3,672

Cash flows from investing activitiesInvestment income 299 545Dividends received from subsidiaries 10,855 7,400Acquisition of other investments (110) (4,310)Disposal of other investments 2,586 5,557Capital repayment – 8,000Repayment of investments 4,619 –Net cash flows from investing activities 18,249 17,192

Cash flows from financing activitiesCapital distribution (47,638) –Dividends paid – (6,049)EBT share purchases – (927)EBT loan repayment 267 –Net cash flows from financing activities (47,371) (6,976)

Net (decrease)/increase in cash and cash equivalents (39,392) 13,888Opening cash and cash equivalents 60,224 46,336Cash and cash equivalents at 31 December 20,832 60,224

Company Cash Flow Statementfor the year ended 31 December 2011


1. Basis of preparation

Both the Parent Company financial statements and the Group financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards (‘IFRS’) and interpretations issued by the International Financial Reporting Interpretations Committee (‘IFRIC’) as adopted by the EU (‘Adopted IFRS’) that are effective at 31 December 2011 and comply with article 4 of the EU IAS regulation.

The Group has a financial position underpinned by significant cash balances. Consequently, after a thorough examination of the Company’s financial position, the Directors are satisfied that the Company has and will maintain sufficient financial resources to enable it to continue operating in the foreseeable future whilst meeting all its commitments. The Directors believe that although the Company is pursuing, and will continue to pursue, a strategy of realising value for shareholders, it is not a seller at any price. Shareholder value remains the key driver and accordingly the Directors consider that at the date of signing these accounts it remains a realistic option that the Company will continue to trade for the foreseeable future, albeit on a significantly reduced scale of operations.

It is for this reason that the Directors believe the going concern basis of accounting under IAS 1 is the appropriate basis for this set of financial statements.

The application of the following IFRS pronouncements which all became effective in 2011 has had no material impact on these financial statements:

• Amendment to IAS 32 Financial Instruments: Presentation – Classification of Rights Issues. Requires rights issues denominated in a currency other than the functional currency of the issuer to be classified as equity regardless of the currency in which the exercise price is denominated.

• IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments. Clarifies that when an entity renegotiates the terms of its debt with the result that the liability is extinguished by the debtor issuing its own equity instruments to the creditor, a gain or loss is recognised in the income statement representing the difference between the carrying value of the financial liability and the fair value of the equity instruments issued; the fair value of the financial liability is used to measure the gain or loss where the fair value of the equity instruments cannot be reliably measured.

• Improvements to IFRSs (issued May 2010). Amends IFRS 7 Financial Instruments: Disclosure to require further disclosures in respect of collateral held by the Group as security for financial assets and sets out minor amendments to IFRSs as part of the annual improvements process.

• Amendment to IFRIC 14 Prepayments of a Minimum Funding Requirement. Applies when an entity is subject to minimum funding requirements and makes an early payment of contributions to cover those requirements and permits such an entity to treat the benefit of such an early payment as an asset.

• Amendments to IAS 24 Related Party Disclosures. Simplifies the definition of a related party and provides a partial exemption from the disclosure requirements for government related entities.

There are no new standards, amendments to standards or interpretations that have been adopted by the EU as at 31 December 2011 but are not yet effective for the year ended 31 December 2011 which would be expected to have a material effect on the financial statements of the Group.

The financial statements are presented in sterling, rounded to the nearest thousand. They are prepared on the historical cost basis, except for valuation of certain financial instruments, investments and investment properties.

The preparation of financial statements in conformity with Adopted IFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Key judgements management have taken relate to valuation, in most instances, of share awards, properties and swaps. The Group uses external professional valuations to assist in this judgement. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Notes to the Financial Statements


2. Significant accounting policies

a) Basis of consolidationThe consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 December each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Accounting for business combinations involving companies under common control are excluded from the requirements of IFRS 3 “Business Combinations”. The Group on its formation accounted for the assets and liabilities acquired from the HBOS plc Group at their book values. Where assets were transferred for £nil consideration a capital contribution reserve was established.

b) Revenue recognitionRevenue is measured at fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts, VAT and other sales related taxes.

Management and administration fees are recognised in the income statement as they are earned.

Performance fees are recognised when the performance period has ended and the performance calculation can be performed with reasonable certainty.

Transaction fees are accounted for once the relevant investment transaction has been completed.

Termination fees are accounted for once the relevant transfer has been completed.

Rental income from investment properties is accounted for on a straight line basis over the term of ongoing leases and is shown gross of any UK income tax .

Bank interest is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.

Dividend income from investments is recognised when the shareholders’ rights to receive payment have been established.

c) Foreign currenciesTransactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Gains and losses arising on retranslation are included in net profit or loss for the period. Unrealised foreign exchange gains or losses arising on the revaluation of available for sale assets to fair value are recognised directly in equity, unless the assets have been impaired in which case they are recognised in the income statement.

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated to the Group’s presentational currency at foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign operations are translated at an average rate for the year where this rate approximates to the foreign exchange rates ruling at the dates of the transactions. Exchange differences arising from this translation of foreign operations are taken directly to the translation reserve. They are released into the income statement upon disposal.

d) Investment propertiesInvestment property is land and buildings held to earn rental income together with the potential for capital growth. Investment properties are initially recognised on unconditional exchange of contracts at cost, being the fair value of the consideration given, including transaction costs associated with the investment property. After initial recognition, investment properties are measured at fair value, with unrealised gains and losses recognised in the income statement. Realised gains and losses on the disposal of properties are recognised in the income statement. Fair value is based on the market valuation of the properties at the balance sheet date. At 31 December 2011 the Group’s only interests in investment properties are those it holds through its share of joint ventures.


2. Significant accounting policies continued

e) Property, plant and equipment

Owned assetsItems of property, plant and equipment are stated at cost less accumulated depreciation (see below) and impairment losses.

Plant and equipment is assessed for impairment where there is an indication of impairment. Where impairment exists, the carrying amount of the asset is reduced to its recoverable amount and the impairment loss recognised in the income statement. The depreciation charge for the asset is then adjusted to reflect the asset’s revised carrying amount.

Where parts of an item of plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

DepreciationThe cost of equipment, including fixtures and fittings and computer hardware, less estimated residual value, is written off in equal instalments over expected lives of the assets as follows:

Computer equipment 3 years

Motor vehicles 4 years

Fixtures and fittings 5 years

The cost of leasehold improvements/lease premiums are written off in equal instalments over the lesser of the remaining life of the lease or eight years.

f) Investments in equity instrumentsInvestments in equity instruments are classified as available for sale and are held at fair value except to the extent that their fair value cannot be reliably measured, in which case they are measured at cost less any provision for impairment. Unrealised gains and losses are recognised in equity unless a loss is considered an impairment, in which case it is recognised in the income statement. Realised gains and losses in equity instruments are included in the income statement for the period. When an investment is derecognised, the gain or loss accumulated in equity is reclassified to profit or loss. At 31 December 2011 the Group had disposed of all of its investments in equity instruments.

g) Derivative financial instrumentsThe Group and its joint ventures use derivative financial instruments to hedge their exposure to cash flow, interest rate and foreign exchange fluctuation risks arising from operational, financing and investment activities.

The derivative hedging instruments are initially recognised at fair value and attributable transaction costs are recognised in the income statement when incurred. Subsequent to initial recognition, derivative financial instruments are measured and stated at fair value.

Changes in the fair value of derivative hedging instruments designated as cash flow hedges are recognised directly in equity to the extent that the hedge is effective. To the extent that the hedge is ineffective, changes in fair value are recognised in the income statement.

If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, then hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognised in equity remains there until the forecast transaction occurs. When the hedged item is a non-financial asset, the amount recognised in equity is transferred to the carrying amount of the asset when it is recognised. In other cases the amount recognised in equity is transferred to the income statement in the same period that the hedged item affects the income statement. At 31 December 2011 the Group’s only derivative financial instruments are those it holds through its share of joint ventures.

h) Investment in subsidiary undertakingsIn the Company’s financial statements investments in subsidiaries are stated at cost less any provision for impairment.




i) Investment in joint venturesJoint ventures are entities over which the Company, and entities controlled by the Company (its subsidiaries), have joint control under a contractual arrangement with other parties.

Attributable shares of the results of joint ventures are included in the consolidated financial statements using the equity method of accounting. The share of any losses is restricted to a level that reflects an obligation to fund such losses.

Underlying investment properties of the joint ventures are measured at fair value, with unrealised gains and losses recognised in the income statement.

j) Non-current assets held for saleNon-current assets, or disposal groups comprising assets and liabilities, that are expected to be recovered primarily through sale or distribution rather than through continuing use, are classified as held for sale or distribution. Immediately before classification as held for sale or distribution, the assets, or components of a disposal group, are re-measured in accordance with the Group’s accounting policies. Thereafter, generally, the assets, or disposal group, are measured at the lower of their carrying amount and fair value less cost to sell. Any impairment loss on a disposal group first is allocated to goodwill, and then to remaining assets and liabilities on a pro rata basis, except that no loss is allocated to financial assets, deferred tax assets or investment property, which continue to be measured in accordance with the Group’s accounting policies. Impairment losses on initial classification as held for sale or distribution and subsequent gains or losses on re-measurement are recognised in the income statement. Gains are not recognised in excess of any cumulative impairment loss. Intangible assets and property, plant and equipment once classified as held for sale or distribution are not amortised or depreciated. In addition, equity accounting of equity-accounted investees ceases once classified as held for sale or distribution.

k) Trade and other receivablesTrade and other receivables are stated at their face value as reduced by appropriate allowances for estimated irrecoverable amounts.

l) Impairment The carrying amounts of the Group’s non-financial assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated.

An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the income statement.

m) Cash and cash equivalentsCash and cash equivalents comprise cash at bank and in hand, and short-term bank deposits held by the Group with an original maturity of three months or less. Cash is held for the purpose of meeting short-term commitments as well as for meeting future investment needs.

n) Interest bearing loans and borrowingsAll loans and borrowings are initially recognised at the fair value of the consideration received less attributable transaction costs. Subsequent to initial recognition these transaction costs are amortised to the income statement using the effective interest method. At 31 December 2011 the Group’s only interest bearing loans and borrowings are those it holds through its share of joint ventures.

o) ProvisionsA provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

p) Trade and other payablesTrade and other payables are stated at their face value.



q) TaxationThe tax expense represents the sum of the current tax payable and deferred tax.

The current tax payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates at the balance sheet date.

r) Retirement benefit costsPayments to defined contribution retirement benefit schemes are charged as an expense as they fall due.

s) Share-based payments The Group has applied the requirements of IFRS 2 Share-based Payments. The Group issues equity-settled share-based payments to certain employees of its subsidiaries. These are measured at fair value at the date of grant and expensed on a straight line basis over the vesting period and, if applicable, performance period based on the Group’s estimate of shares that will eventually vest.

In accordance with IFRS 2 the Company recognises the benefit of share-based payment arrangements granted by the Company to employees of its subsidiary as an increase to the carrying value of its investment in the subsidiary. The effect of this on equity is recognised in a separate other reserve.

t) Ordinary and preferred ordinary sharesOrdinary shares and preferred ordinary shares are classed as equity. External costs directly attributable to the issue of new shares are shown in equity as a deduction from the share premium account.

u) Discontinued operationsA discontinued operation is a component of the Group’s business that represents a separate major line of business or geographical area of operations that has been disposed of or is held for sale or distribution, or is a subsidiary acquired exclusively with a view to resale. Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale, if earlier. When an operation is classified as a discontinued operation, the comparative income statement is re-presented as if the operation had been discontinued from the start of the comparative period.

v) Operating leasesOperating lease payments are recognised as an expense in the income statement on a straight line basis over the lease term.

3. Revenue

Continuing Continuing Discontinued Discontinued operations operations operation operation Total Total 2011 2010 2011 2010 2011 2010 £000 £000 £000 £000 £000 £000 Note 10 10

Investment management fees 16,448 24,949 – – 16,448 24,949Termination fees 3,802 – – – 3,802 –Transaction fees 690 492 – – 690 492Administration fees and other income 1,666 2,428 – – 1,666 2,428Fee income 22,606 27,869 – – 22,606 27,869

Gross rental income – – 838 8,766 838 8,766Property operating expenses – – (86) (882) (86) (882)Net rental and related income – – 752 7,884 752 7,884

Revenue 22,606 27,869 752 7,884 23,358 35,753



4. Administrative expenses


Employee costsWages and salaries 8,587 9,421 – – 8,587 9,421Share-based payments 87 225 – – 87 225Social security costs 647 937 – – 647 937Other pension costs 588 700 – – 588 700Total (including Directors) 9,909 11,283 – – 9,909 11,283

Occupancy costs 1,149 706 – – 1,149 706Other administrative costs 9,158 6,919 3 32 9,161 6,951Total administrative expenses 20,216 18,908 3 32 20,219 18,940

Administrative expenses have been significantly impacted by the high level of consultant, adviser and other related activity in relation to the asset disposal programme and the termination and transfer of fund mandates.

In total Invista incurred reorganisation costs in relation to its value realisation strategy of £6.4 million during the year. These can be broken down into £1.1 million of redundancy costs and £5.3 million of other reorganisation costs.

Included within the £5.3 million other reorganisation costs are £1.4 million of lease surrender and other related costs incurred in connection with Invista’s move in May 2011 from the office at Exchequer Court to the office at 107 Cheapside. See note 6 for further details.

The average number of persons employed by the Group (including Directors) during the year was 94 (2010: 117), of which 25 (2010: 41) were investment professionals. At 31 December 2011 headcount for the Group was 62 (2010: 119).

Included in the Group total, the Big Orange Self Storage operating companies had an average of 29 (2010: 26) employees during the year and 29 employees at 31 December 2011 based in Singapore and Hong Kong involved in self storage property management. Of the total administrative expenses £0.9 million relates to the running costs of the Big Orange Self Storage operating companies (2010: £0.8 million).

The Company had no employees during the year (2010: nil).

5. Remuneration of Directors

Aggregate Directors’ remunerationThe total amounts for Directors’ remuneration were as follows:

2011 2010 £000 £000

Emoluments 692 834Company contributions to pension schemes 80 139Total 772 973

Highest paid Director 2011 2010 £000 £000

Emoluments 435 329Company contributions to pension schemes 41 63Total 476 392


5. Remuneration of Directors continued

The full £41,000 of the company contributions to pension schemes for the highest paid Director was paid during 2011 and none was accrued as at 31 December 2011. 2011 2010 No. of Directors No. of Directors

Retirement benefits are accruing to the following number of Directors under defined contribution schemes 2 3

6. Operating profit

Operating profit has been arrived at after charging: Continuing Continuing Discontinued Discontinued operations operations operation operation Total Total 2011 2010 2011 2010 2011 2010 Note £000 £000 £000 £000 £000 £000

Depreciation of property, plant and equipment 13 358 991 – – 358 991

Operating lease rentals 894 33 – – 894 33

Auditors’ remuneration for: Statutory audit of Group 60 60 – – 60 60 Statutory audit of subsidiaries 33 75 – 15 33 90 Other services pursuant to legislation 18 17 – – 18 17 Audit-related regulatory reporting 4 3 – – 4 3 Further assurance services – 1 – – – 1 Tax advisory services 84 20 – – 84 20

Operating lease rentals relate to the Group’s office premises in London, Paris and Hong Kong. The lease costs have been spread evenly over the lease terms.

Until 22 March 2010 the Group occupied leasehold premises in London on the 4th Floor Exchequer Court, 33 St Mary Axe, London, EC3A 8AA under a ten year lease which began in July 2007 and was due to expire in 2017. A rent free period applied until 25 November 2008, the benefit of which was initially spread over the lease term.

On 22 March 2010 the Group surrendered the lease for the 4th Floor at Exchequer Court and entered into a new lease on the 6th Floor at the same address. As a result of this an accelerated release to the income statement of the remaining provision for the 4th Floor rent free period was spread over the period from 21 December 2009 to 22 March 2010 reducing the operating lease rental cost shown above for 2010. However, the effect of this on operating profit in 2010 was offset by an accelerated depreciation charge spread over the same period relating to the write off of fixed assets in respect of the 4th Floor Exchequer Court.

The lease for the 6th Floor Exchequer Court was originally due to expire in July 2017. On 8 March 2011 the Group entered into an agreement for the surrender of the 6th Floor lease and the surrender was completed on 31 May 2011 with the payment of a lease surrender cost of £1,155,000. This cost is in addition to the £894,000 operating lease rentals figure for 2011 shown above which reflects the regular monthly office lease costs for the year.

From 16 May 2011 the Group moved to new offices at 107 Cheapside, London, EC2V 6DN under a more flexible agreement. As at 31 December 2011 there were two leases in place: one expiring on 31 March 2012 and the other expiring on 31 May 2012. These have since been extended to 30 June 2012.

Rental of the Group’s office in France at 21, rue des Pyramides – 75001 Paris was under a nine year lease which began in January 2008 and which was due to expire in 2017. On 17 January 2012 the Group signed a termination deed in respect of this lease with an effective date of 31 December 2011.

The Group’s office in Hong Kong at Unit 820, 8/F, Two Exchange Square, 8 Connaught Place, Central, Hong Kong was under a 19 month lease which began in July 2009 and was due to expire in January 2011. This lease was extended at the end of 2010 for a further six months until July 2011 and was then further extended until January 2012. With effect from 1 February 2012 the Hong Kong office moved to Unit 832 at the same address on a three month lease which expires on 30 April 2012.

Note 22 provides details of future lease payment commitments.



7. Net valuation profits/(losses) on investments


Revaluation of investment properties – – – (29,100) – (29,100)

Loss on sale of discontinued operation – – (429) – (429) –

Impairment of investment in IPD 15 (472) – – – (472) –Total impairment of investments (472) – – – (472) –

Profit realised on sale of IFPT shares 15 684 939 – – 684 939Profit realised on sale of investment in IPPF 15 13 – – – 13 –Profit realised on sale of IERET shares – 1,194 – – – 1,194Net realised profit on sale of investments in

Invista Global Property Securities Fund LP – 4,196 – – – 4,196Net realised profit on available for sale investments 697 6,329 – – 697 6,329

Net valuation profits/(losses) on investments 225 6,329 (429) (29,100) (204) (22,771)

8. Net finance income/(expense)


Interest income on bank deposits 375 339 – – 375 339Interest income on available for sale investments – 29 – – – 29Total interest income 375 368 – – 375 368

Dividend income on available for sale investments 37 587 – – 37 587

Net change in fair value of ineffective cash flow hedge – – – (6) – (6)

Net foreign exchange loss (96) (231) – – (96) (231)

Loan with other related company written off 22 – – – 22 –

Finance expense (264) (1,115) (440) (4,600) (704) (5,715)

Net finance income/(expense) 74 (391) (440) (4,606) (366) (4,997)

On 4 February 2011 the Group completed the sale of 100% of the share capital of HI Tricomm Holdings Limited and its subsidiaries. The finance expense reported as discontinued represents the finance expense up to the point of sale attributable to the loan balances held within the group of companies that were sold.

The finance expense classified as continuing operations relates to interest paid on the bank loan held within Invista Castle Limited which was repaid on 4 February 2011 from the proceeds of the sale of HI Tricomm Holdings Limited by Invista Castle Limited. See note 19 for further information.

The amount shown as loan with other related company written off relates to a loan previously taken out by Invista European Celsius Holdings S.à.r.l. in October 2008 for t19,000 at a fixed interest rate of 7.7% from one of the Celsius joint venture companies Mondeville AP1 S.à.r.l. On 14 September 2011 Invista was released and discharged from this loan as part of the sale of its joint venture investment in Celsius European Holdings S.à.r.l. The amount detailed above represents the value of the loan plus accrued interest.


9. Income tax expense

a) Analysis of tax expense 2011 2010 Note £000 £000

Current tax:Corporation tax charge for the year at an average rate of 26.5% (2010: 28%) 1,508 3,410Adjustments in respect of prior years (269) (646)Deferred tax:Deferred tax charge 370 844Deferred tax change in tax rate 48 –Adjustments in respect of prior years – 246Total income tax expense 1,657 3,854

Income tax expense from continuing operations 1,592 3,232Income tax from discontinued operation 10 65 622Total income tax expense 1,657 3,854

b) Reconciliation of effective tax rateThe standard corporation tax rate in the UK changed from 28% to 26% on 1 April 2011, resulting in an average corporation tax rate for 2011 of 26.5%.

The tax assessed for the year is higher than the average standard rate of corporation tax in the UK of 26.5% (2010: 28%). The differences are explained below:

2011 2010 £000 £000

Profit/(loss) before taxation 2,189 (10,919)

Profit/(loss) multiplied by the average standard rate of corporation tax in the UK of 26.5% (2010: 28%) 580 (3,057)Tax effect of share of results of joint ventures (92) (10)Non-deductible expenses and income 1,489 818Corporation tax rate change 48 –Effect of different tax rates of subsidiaries operating in other jurisdictions (100) (167)Non-utilisation of tax losses – 315Utilisation of capital losses – (1,792)Effect of revaluations of investments – 8,150Other 1 (3)Adjustments in respect of prior years (269) (400)Income tax expense 1,657 3,854

The 2012 Budget on 21 March 2012 announced that the UK corporation tax rate will reduce to 22% by 2014. A reduction in the rate from 26% to 25% (effective from 1 April 2012) was substantively enacted on 5 July 2011, and a further reduction to 24% (effective from 1 April 2012) was substantively enacted on 26 March 2012. This will reduce the Group’s future current tax charge accordingly and further reduce the deferred tax asset at 31 December 2011 which was calculated based on the rate of 25% substantively enacted at the balance sheet date. It has not yet been possible to quantify the full anticipated effect of the announced further 2% rate reduction, although this will further reduce the Group’s future current tax charge and reduce the Group’s deferred tax asset accordingly.

The current effective rate of taxation has been impacted in the year to 31 December 2011 by the level of disallowable expenses associated with the reorganisation of the business. In particular £1.4 million of lease surrender and other related costs were incurred in connection with Invista’s move to new premises in May 2011 which are not deductible for tax purposes.

£nil losses are being carried forward for which no deferred tax asset has been recognised (2010: loss of £1.1 million).

Tax arrangements put in place at the time of IPO in September 2006 in respect of HBOS plc (now Lloyds Banking Group plc) are detailed in full in the Admission document.



10. Discontinued operation

On 4 February 2011 the Group completed the sale of 100% of the share capital of HI Tricomm Holdings Limited and its subsidiaries and thus the sale of its entire interest in the portfolio of residential properties held by that group of companies.

As at 31 December 2010 the Group’s investment in HI Tricomm Holdings Limited was classified as held for sale as a marketing process to sell the asset was well underway at that time (see note 18 for further details).

2011 2010 Note £000 £000

Results of discontinued operation

Revenue 3 752 7,884Administrative expenses 4 (3) (32)Net valuation loss on investment 7 – (29,100)Operating profit/(loss) 749 (21,248)

Finance expense 8 (440) (4,606)

Profit/(loss) before tax 309 (25,854)

Income tax expense 9 (65) (622)

Profit/(loss) for the year 244 (26,476)

Loss on sale of discontinued operation 7 (429) –

Loss for the year (185) (26,476) Basic loss per share 11 (0.07)p (10.11)pDiluted loss per share 11 (0.07)p (10.11)p

Cashflows from/(used in) discontinued operationOpening cash and cash equivalents 8,724 8,440Net cash used in operating activities (2,856) 6,062Net cash from financing activities (462) (5,778)Cash and cash equivalents disposed of (5,406) –Net cash from discontinued operation – 8,724

Cashflows from disposal of discontinued operationConsideration received net of costs 17,710 –Cash and cash equivalents disposed of (5,406) –Cash transferred to escrow 17 (3,500) –Net cash inflow 8,804 –


11. Earnings per share

Basic and diluted earnings per ordinary share are based upon the Group profit attributable to ordinary shareholders of £532,000 (2010: loss of £14,773,000).

Profit/(loss) attributable to ordinary shareholders Continuing Discontinued Continuing Discontinued operations operation Total operations operation Total 2011 2011 2011 2010 2010 2010 £000 £000 £000 £000 £000 £000

Profit/(loss) for the year 717 (185) 532 11,703 (26,476) (14,773)

Number of shares 2011 2010

Weighted average number of ordinary shares for the purposes of basic earnings per share 262,580,637 261,758,071Effect of dilutive potential ordinary shares:Share options 8,176,050 8,845,442Weighted average number of ordinary shares for the purposes of diluted earnings per share 270,756,687 270,603,513

The weighted average number of ordinary shares for the purposes of basic earnings per share includes 50,000 preferred ordinary shares as detailed in note 26.

12. Segmental information

The Group’s current operating segments, based on the Group’s management and reporting structure, are the Investment Management and Other Investing Activities business segments. Given the changes to the business during the course of 2011 with respect to the transfer of investment management mandates to new fund managers and disposal of balance sheet assets, it is now considered that the Group has two additional reporting segments in respect of business activities in Asia, being that of “Investment Management Asia” and “Other Investing Activities Asia”. These have now been separately disclosed. Comparatives for 2010 have been restated as necessary to reflect this. The Directors do not consider there to be any further material geographical segments other than those detailed.

On 4 February 2011 the Group completed the sale of 100% of the share capital of HI Tricomm Holdings Limited and thus the sale of its entire interest in the portfolio of residential properties held by that company. Previously this part of the business had formed part of the Residential Property segment. This discontinued segment has been separately disclosed. In the balance sheet at 31 December 2010 the Group’s investment in HI Tricomm Holdings Limited was classified as held for sale as a marketing process to sell the asset was well underway at that time. Following the sale of the entire interest in the portfolio of residential properties and repayment of loans by Invista Castle the continuing operating segment of Residential Property is no longer applicable and therefore has been removed from the continuing 2011 reported results.



12. Segmental information continued

The results analysed by the business segments, both continuing and discontinued, are shown below:

UK and Europe Asia Elimination Residential Other Other of Total Investment Property Investing Investment Investing Group discontinued continuing Year to 31 December 2011 Management (discontinued) Activities Management Activities total operation operations £000 £000 £000 £000 £000 £000 £000 £000 Note 10

Revenue 20,684 752 – 1,037 885 23,358 (752) 22,606Administrative expenses (16,019) (3) (2,224) (1,039) (934) (20,219) 3 (20,216)Share of (losses)/profits of

jointly controlled entities – – (1,040) – 660 (380) – (380)Net valuation profits/(losses)

on investments – (429) 225 – – (204) 429 225

Operating profit/(loss) 4,665 320 (3,039) (2) 611 2,555 (320) 2,235

Finance income 36 – 326 – (24) 338 – 338Finance expense – (440) (264) – – (704) 440 (264)

Net finance income/(expense) 36 (440) 62 – (24) (366) 440 74

Profit/(loss) before tax 4,701 (120) (2,977) (2) 587 2,189 120 2,309

Income tax (expense)/credit (2,309) (65) 450 – 267 (1,657) 65 (1,592)

Profit/(loss) after tax 2,392 (185) (2,527) (2) 854 532 185 717

UK and Europe Asia Other Other At 31 December 2011 Investment Investing Investment Investing Group Management Activities Management Activities total £000 £000 £000 £000 £000

Depreciation 316 – 4 38 358Total assets 16,077 33,828 116 20,253 70,274Total liabilities 3,896 367 250 725 5,238Investments – non-current assets 498 9,335 – 19,480 29,313Interest bearing loans and borrowings – – – – –


12. Segmental information continued

UK and Europe Asia Elimination Residential Other Other of Total Investment Property Investing Investment Investing Group discontinued continuing Year to 31 December 2010 Management (discontinued) Activities Management Activities total operation operations (restated) £000 £000 £000 £000 £000 £000 £000 £000 Note 10

Revenue 26,123 7,884 – 933 813 35,753 (7,884) 27,869Administrative expenses (15,401) (32) (1,378) (1,321) (808) (18,940) 32 (18,908)Share of profits/(losses) of

jointly controlled entities – – (451) – 487 36 – 36Net valuation profits/(losses)

on investments – (29,100) 6,329 – – (22,771) 29,100 6,329

Operating profit/(loss) 10,722 (21,248) 4,500 (388) 492 (5,922) 21,248 15,326

Finance income 8 (6) 716 – – 718 6 724Finance expense – (4,600) (1,115) – – (5,715) 4,600 (1,115)

Net finance (expense)/income 8 (4,606) (399) – – (4,997) 4,606 (391)

Profit/(loss) before tax 10,730 (25,854) 4,101 (388) 492 (10,919) 25,854 14,935

Income tax (expense)/credit (3,512) (622) 189 – 91 (3,854) 622 (3,232)

Profit/(loss) after tax 7,218 (26,476) 4,290 (388) 583 (14,773) 26,476 11,703

UK and Europe Asia Residential Elimination Property Other Other of Total Investment (discontinued/ Investing Investment Investing Group discontinued/ continuing Management held for sale) Activities Management Activities total held for sale operations At 31 December 2010 (restated) £000 £000 £000 £000 £000 £000 £000 £000 Note 18

Depreciation 940 – – 5 46 991 – 991Total assets 20,365 103,932 74,680 123 19,034 218,134 (103,932) 114,202Total liabilities 7,207 82,782 14,798 167 909 105,863 (82,782) 23,081Investments – non-current assets 1,235 – 13,424 4 18,594 33,257 – 33,257Interest bearing loans and borrowings – 67,544 13,641 – – 81,185 (67,544) 13,641

13. Property, plant and equipment

Group Leasehold Fixtures & Computer Motor improvements fittings equipment vehicles Total £000 £000 £000 £000 £000

CostAt 1 January 2010 589 1,048 626 4 2,267Additions 108 182 95 2 387Disposals (525) (894) (401) (5) (1,825)At 31 December 2010 172 336 320 1 829Additions – 2 – – 2Disposals (172) (232) (320) (1) (725)At 31 December 2011 – 106 – – 106



13. Property, plant and equipment continued

Group Leasehold Fixtures & Computer Motor improvements fittings equipment vehicles Total £000 £000 £000 £000 £000

Accumulated depreciationAt 1 January 2010 225 549 506 – 1,280Charge for the year 361 501 128 1 991Disposals (525) (895) (401) (1) (1,822)At 31 December 2010 61 155 233 – 449Charge for the year 112 160 86 – 358Disposals (173) (231) (319) – (723)At 31 December 2011 – 84 – – 84

Carrying valueAt 31 December 2011 – 22 – – 22At 31 December 2010 111 181 87 1 380

CompanyThere was no property, plant and equipment held by the Company as at 31 December 2011 (2010: £nil).

14. Investments in jointly controlled entities

The following table sets out the Group’s carrying value in each of its joint ventures as at 31 December 2011:

Invista Real Estate Invista Real Estate International Fund Opportunity Fund Limited Limited Partnership Partnership Total £000 £000 £000

Cost and carrying amountAt 1 January 2010 17,110 6,126 23,236 Additions – investments – 4,311 4,311Foreign exchange movement 978 255 1,233Share of profits/(losses) 487 (451) 36Joint venture hedge movements (39) 8 (31)Balance at 31 December 2010 18,536 10,249 28,785Additions – investments 110 – 110Foreign exchange movement 139 2 141Share of (losses)/profits 660 (1,040) (380)Joint venture hedge movements 13 124 137Balance at 31 December 2011 19,458 9,335 28,793

Invista Real Estate International Fund Limited PartnershipInvista acquired a 50% interest in and joint control of Invista Real Estate International Fund Limited Partnership (“IREIF”) on 8 May 2008. IREIF’s sole investment is in turn a 50% interest in BOSS Partnership 1 LP (“BOSS”). BOSS’s investment portfolio comprises six self storage facilities in Hong Kong and Singapore which are all owned by BOSS on a long leasehold basis. The fund is leveraged.

The maturity profile of the debt within BOSS ranges from 2012 to 2015. One significant debt facility totalling £17 million has a maturity date of 30 April 2012. BOSS is presently in advanced discussions with regard to the refinancing of this facility. Invista currently expects that BOSS will secure a refinancing arrangement on acceptable terms.

IREIF has a five year duration which expires in May 2013. The fund may be extended at the discretion of the investment manager (Invista Real Estate Investment Management Limited) for up to two further one year periods.

In May 2008 Invista committed to provide a total of £25 million in equity to IREIF. During 2011 Invista invested a further £110,000 in the joint venture (2010: £nil). The total invested to date is £14,760,000, leaving a potential total commitment of £10,240,000 still outstanding.


14. Investments in jointly controlled entities continued

Invista Real Estate Opportunity Fund Limited PartnershipInvista holds a 45% interest in Invista Real Estate Opportunity Fund Limited Partnership (“IREOF”). IREOF, in turn, holds a diverse property portfolio comprising seven majority or wholly owned assets in the UK and Continental Europe. IREOF is leveraged.

The debt facility in respect of one of IREOF’s properties, Woolwich, was subject to a covenant breach during the year. Post the year end a partial disposal took place at the site reducing the outstanding debt to £1.7 million and the implied loan-to-value ratio (“LTV”) to 74% from 89%. Discussions are taking place with the lender as to the strategy for repayment of the remaining £1.7 million debt balance which remains secured on the Woolwich property.

Other than the Woolwich debt facility, which has become repayable as a consequence of the covenant breach, none of the debt facilities has a debt maturity date due to occur during 2012.

IREOF has a five year duration which expires in February 2013. The fund may be extended at the discretion of the investment manager (Invista Real Estate Investment Management Limited) for up to two further one year periods.

In October 2007 Invista committed to provide £25 million in equity to the fund which was available to be drawn down during the fund’s defined investment period. The investment period now having expired IREOF may only call on further equity draw downs from the Limited Partners in respect of assets already owned or expenses and other running costs of the fund.

To date Invista has invested £12,060,000, leaving a potential total commitment of £12,940,000 still outstanding. During 2011 no further investment was made into the fund (2010: £4,311,000).

Cave Pearls S.à.r.l. and Ramsay Finance S.à.r.l. Invista’s share in these joint venture companies was sold on 21 January 2011 to Celsius European Holdings S.à.r.l. for a nominal purchase consideration of t1 per investment.

The carrying value of the investments in these entities was written down to £nil at 31 December 2009.

Celsius European Holdings S.à.r.l. Invista acquired a 50% interest in and joint control of Celsius European Holdings S.à.r.l. (incorporated in Luxembourg) in 2007.

At 31 December 2010 the Group held its investment at £nil as the Directors considered that the value of the underlying investment portfolio and other assets continued to not exceed the face value of the debt.

On 14 September 2011 Invista sold its 50% interest in the joint venture for a nominal purchase consideration of t4 to a subsidiary of Kaupthing Bank hf who are the debt provider to Celsius. Invista also received a payment of t250,000 to vary the then current investment management agreement to manage the underlying Celsius assets. Invista subsequently ceased to be investment manager to the Celsius portfolio on 14 December 2011.

The following tables illustrate summarised financial information relating to the carrying value of the Group’s investment in its joint ventures as at 31 December 2011 and at 31 December 2010: Invista Invista Real Estate Real Estate International Opportunity Fund Limited Fund Limited Partnership Partnership Total £000 £000 £000

Share of joint venture balance sheet at 31 December 2011Non-current assets 18,634 15,234 33,868Current assets 891 1,168 2,059Share of gross assets 19,525 16,402 35,927Current liabilities (67) (2,676) (2,743)Non-current liabilities – (4,391) (4,391)Share of gross liabilities (67) (7,067) (7,134)

Share of net assets/carrying value of investments in joint ventures 19,458 9,335 28,793

Revenue (net rental income) – 429 429Administrative expenses (414) (601) (1,015)



14. Investments in jointly controlled entities continued

Invista Invista Real Estate Real Estate International Opportunity Fund Limited Fund Limited Partnership Partnership Total £000 £000 £000

Share of joint venture balance sheet at 31 December 2010Non-current assets 17,410 16,057 33,467Current assets 1,190 2,436 3,626Share of gross assets 18,600 18,493 37,093Current liabilities (64) (713) (777)Non-current liabilities – (7,531) (7,531)Share of gross liabilities (64) (8,244) (8,308)

Share of net assets/carrying value of investments in joint ventures 18,536 10,249 28,785

Revenue (net rental income) – 401 401Administrative expenses (480) (563) (1,043)

15. Investments

Group Group Company Company 2011 2010 2011 2010 £000 £000 £000 £000

Available for sale – 3,018 – 2,987Subsidiary undertakings – – 9,333 11,577Balance at 31 December – 3,018 9,333 14,564

Available for sale Group Company Carrying amount £000 £000

At 1 January 2010 19,486 8,769Additions 6,515 –Disposals (22,949) (5,743)Net change in fair value of available for sale investments (34) (39)Balance at 31 December 2010 3,018 2,987Impairments (472) (472)Disposals (2,546) (2,515)Balance at 31 December 2011 – –

During 2011 the Group disposed of 100% of its remaining available for sale investments as follows:

IPD Group LimitedThe Group sold its investment of 5% of the ordinary shares in IPD Group Limited (“IPD”), a company registered in England and Wales. The carrying value of the investment at 31 December 2010 was £1,782,000 but an impairment of £472,000 taking the carrying value to £1,310,000 was booked in June 2011 to reflect the Board’s expectation of the value of the investment at that time. The shares were subsequently sold in October 2011 net of expenses of sale for £1,310,000.

The shares in IPD were originally transferred to Invista from Insight Investment Management Limited in the period ended 31 December 2006 for £nil consideration and the difference between the book value of £1,782,000 and the consideration of £nil was credited to reserves as a capital contribution. In June 2011 a transfer was made equal to the impairment value of £472,000 from the capital contribution reserve to retained earnings and on sale in October 2011 a further transfer of £1,310,000 was made from the capital contribution reserve to retained earnings taking the balance in the capital contribution reserve to zero.


15. Investments continued

Invista Foundation Property Trust LimitedIn 2010 the Group sold 4,173,467 shares of its total holding of 7,283,807 Invista Foundation Property Trust Limited (“IFPT”) shares for £1,649,000 realising a gain on sale in the year ending 31 December 2010 of £939,000. At 31 December 2010 this left the Group with a holding of 3,110,340 shares in IFPT with a fair value of £1,205,000.

In January 2011 the Group sold its remaining IFPT shares for £1,213,000 realising a gain on sale in the year of £684,000 after recognising previously unrealised gains in reserves.

Invista Property Portfolio Limited Liability PartnershipThe Group had a £50,000 capital investment in Invista Property Portfolio Limited Liability Partnership (which relates to the Invista Property Portfolio Fund, a Guernsey domiciled fund) and at 31 December 2010 the fair value of this investment based on the returns to members of the fund was £31,000.

In November 2011 the Group sold its investment for £33,000 realising a gain on sale in the year of £13,000 after recognising previously unrealised gains in reserves.

CompanySubsidiary undertakingsThe amounts included in respect of subsidiary undertakings in the accounts of the Company are as follows:

2011 2010 £000 £000

Shares in group undertakingsBalance at 1 January 11,577 23,115Additions – –*Disposals (–*) –Impairments (2,331) (11,763)Share awards to employees of a subsidiary 87 225Balance at 31 December 9,333 11,577

* Less than £1,000.

The disposal in the year to 31 December 2011 relates to Invista Real Estate Singapore Pte Ltd which, being no longer required by the Group, was taken off the register in Singapore on 8 March 2011.



15. Investments continued

The Company wholly owned the ordinary share capital in the following subsidiary undertakings as at 31 December 2011:

Subsidiary undertakings Country of incorporation Principal activity

Invista Real Estate Investment Management Limited UK Property investment managementInvista Real Estate Investment Management (CI) Limited Guernsey Property investment managementInvista Property Management Limited UK Property investment managementInvista Industrial (General Partner) Limited UK General partner of limited partnershipInvista Industrial (Nominee) Limited UK Nominee companyInvista Residential Property Trust Limited UK Holding companyInvista Castle Limited UK Holding companyInvista European Celsius Holdings S.à.r.l. Luxembourg Holding companyInvista Real Estate Opportunity Fund General Partner Limited UK General partner of limited partnershipInvista Real Estate Opportunity Fund Investing Partner Limited UK Investing partner of limited partnershipInvista Real Estate International Fund General Partner Limited UK General partner of limited partnershipInvista Real Estate International Fund Investing Partner Limited UK Investing partner of limited partnershipInvista Global Property Securities Fund General Partner Limited UK General partner of limited partnershipInvista Global Property Securities Fund Investing Partner Limited UK Investing partner of limited partnershipStorage Partners Asia (Cayman) Limited Cayman Islands Holding companyBig Orange Self Storage Holdings (Cayman) Limited Cayman Islands Holding companyBig Orange Self Storage Hong Kong Limited Hong Kong Self storage property managementBig Orange Self Storage Singapore Pte. Limited Singapore Self storage property managementInvista SSA Partnership GP1 Limited Cayman Islands General partner of limited partnership Invista Real Estate Limited UK Property investment management

The companies shown above that were put into members’ voluntary liquidation during the year to 31 December 2011 were:

• Invista Global Property Securities Fund General Partner Limited

• Invista Global Property Securities Fund Investing Partner Limited

• Invista Real Estate Limited

The Invista Global Property Securities Fund Limited Partnership terminated upon the commencement of the liquidation of Invista Global Property Securities Fund General Partner Limited.

The following companies were sold during the year to 31 December 2011:

Subsidiary undertakings Country of incorporation Principal activity

HI Tricomm Holdings Limited UK Holding companyInfrastructure Investors Defence Housing (Bristol) Limited UK Property investmentTricomm Housing (Holdings) Limited UK Holding companyTricomm Housing Limited UK Property facilities management company

See note 10 for further details.


18. Assets and liabilities held for sale

At 31 December 2010 the Group’s investment in HI Tricomm Holdings Limited and its subsidiary companies was presented as a disposal group held for sale given that a sales process was well advanced at the year end. At 31 December 2010 the disposal group comprised assets of £103.9 million less liabilities of £82.8 million.

On 4 February 2011 the Group completed the sale of 100% of the share capital of HI Tricomm Holdings Limited. See note 10 for more details.

No assets or liabilities were classified as held for sale at 31 December 2011.

2011 2010 £000 £000

Assets classified as held for saleInvestment properties – 92,400Deferred tax assets – 1,174Trade and other receivables – 1,634Cash and cash equivalents – 8,724Balance at 31 December – 103,932

2011 2010 £000 £000

Liabilities classified as held for saleInterest-bearing loans and borrowings – 67,544Derivatives used for hedging – 11,651Trade and other payables – 1,298Current tax liabilities – 2,289Balance at 31 December – 82,782

19. Interest bearing loans and borrowings

Group Group 2011 2010 £000 £000

Bank loan – 13,638Amount loaned from other related company – 18 – 13,656Less: arrangement costs – (15)Balance at 31 December – 13,641

The bank loan at 31 December 2010 was an interest bearing loan held within Invista Castle Limited. This loan was repaid on 4 February 2011 from the proceeds of the sale of HI Tricomm Holdings Limited by Invista Castle Limited.

The amount loaned from other related company shown above was a loan taken out by Invista European Celsius Holdings S.à.r.l. in October 2008 for t19,000 at a fixed interest rate of 7.7% pa from one of the Celsius joint venture companies Mondeville AP1 S.à.r.l. On 14 September 2011 Invista was released and discharged from this loan as part of the sale of its joint venture investment in Celsius European Holdings S.à.r.l. See notes 8 and 14.

The Company had no loans and borrowings at 31 December 2011 (2010: £nil).


20. Trade and other payables


Current liabilitiesTrade payables 4 173 2 54Amounts owed to Lloyds Banking Group undertakings 92 210 – –Amounts owed to Invista Group undertakings – – 78 6,491Other taxation and social security 413 736 – –Other payables 649 811 67 13Accruals and deferred income 2,573 4,131 588 564Balance at 31 December 3,731 6,061 735 7,122

Non-current liabilitiesOther payables 34 295 – –Balance at 31 December 34 295 – –

Non-current liabilities for the Group relate to a provision for National Insurance payable on share scheme awards.

21. Financial instruments

Financial risk managementThe management of Invista’s financial risks are documented within the financial risk management framework. The document and underlying policies are the responsibility of the Chief Financial Officer and are periodically reviewed by the Audit Committee and approved by the Board.

At each Audit Committee meeting a financial risk and controls report is presented which gives an update on the key financial risks defined in the financial risk management framework. In addition, Invista’s Risk Team is responsible for carrying out independent monitoring reviews of the Company’s financial process risks.

With regard to its use of financial instruments Invista has exposure to the risks set out below:

a) Credit riskCredit risk is the risk of financial loss to Invista if another party to a financial instrument fails to discharge its obligations and arises principally from Invista’s receivables related to investment management fees.

Trade and other receivables Invista’s exposure to credit risk is influenced mainly by the individual characteristics of each client or fund. Invista has ended the year with most of the investment management mandates having transferred to third parties. At 31 December 2011 Invista managed assets totalling £749 million. In January 2012 two further clients transferred to a new manager leaving £184 million of assets under management. Credit risk therefore now only relates to a small number of remaining clients.

Invista has credit control procedures in place including:

All new clients/funds are subject to a documented “Client Take On” process which includes, where appropriate, “credit” and “know your customer” checks.

Aged debt reports are produced directly from the accounting system. A fully documented credit control process exists whereby outstanding debts are pursued on a regular basis, with a formal escalation procedure in place. It is Invista’s policy to establish appropriate allowances for estimated irrecoverable amounts of trade receivables.

Where amounts remain outstanding Invista will consider, as appropriate, the legal measures available to it to secure payment.

Cash and cash equivalentsCash balances are invested in short-term deposits with approved banks as documented in the Group’s Investment Policy as amended from time to time.



21. Financial instruments continued

Exposure to credit riskThe carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:

Group Group Company Company 2011 2010 2011 2010 Carrying amount £000 £000 £000 £000

Available for sale investments – 3,018 – 2,987Trade receivables 708 857 – –Amounts owed by Invista Group undertakings – – 27,702 31,809Accrued income 1,134 1,231 – –Other receivables 274 503 262 229Cash and cash equivalents 35,037 77,396 20,832 60,224

Included within assets classified as held for sale:Trade receivables – 858 – –Accrued income – 738 – –Other receivables – 7 – –Cash and cash equivalents – 8,724 – –Total exposure to credit risk 37,153 93,332 48,796 95,249

The largest balance within the trade receivables carrying amount at 31 December 2011 was £166,000 relating to facilities management fees for 2010 owed by one of the Big Orange Self Storage facilities in Hong Kong (part of the investment portfolio of the BOSS Partnership 1 LP Fund) to Big Orange Self Storage Hong Kong Limited.

The largest balance within the trade receivables carrying amount at 31 December 2010 was £314,000 relating to investment management fees for the months of October and November 2010 in respect of one of the Company’s clients.

The largest balance within the assets classified as held for sale trade receivables carrying amount at 31 December 2010 was £852,000 rental income due for the month of November 2010 in respect of the Group’s previously owned portfolio of residential assets.

The ageing of trade receivables for the Group at the reporting date was:

Continuing Held for sale 2011 2010 2010 £000 £000 £000

0-30 days (not past due) 374 856 85231-60 days – 1 –61-90 days – – –91-120 days – – –More than 120 days 334 – 6Total 708 857 858

No other financial assets were past due.

All trade receivables relate to clients that have a good track record with the Group.



The movement in the allowance for impairment in respect of trade receivables during the year was as follows:

2011 2010 £000 £000

Balance at 1 January 12 12Transfer on disposal of discontinued operation (12) –Balance at 31 December – 12

b) Liquidity riskLiquidity risk is the risk that Invista will not be able to meet its financial obligations as they fall due. Invista’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to Invista’s reputation.

Invista maintains sufficient surplus liquid resources to meet the FSA’s and GFSC’s liquid capital tests. The FSA regulatory capital is monitored on a continuous basis and reported monthly to the Executive Committee and quarterly to the Audit Committee and the FSA. The GFSC’s regulatory capital is monitored on a continuous basis and reported as part of the monthly management accounts for Invista Real Estate Investment Management (CI) Limited and quarterly to the Board.

Invista currently has no committed overdraft facilities.

The following are the contractual maturities of financial liabilities including estimated interest payments:

Non-derivative financial liabilities Carrying Contractual amount cash flows* Up to 1 mth 1- 3 mths 4-12 mths Over 12 mths £000 £000 £000 £000 £000 £000

Group31 December 2011Trade & other payables 3,765 (3,765) (1,095) (2,013) (623) (34)

31 December 2010Trade & other payables 6,356 (6,356) (968) (4,994) (99) (295)Bank loans 13,623 (13,730) – – (13,730) –Other loans 18 (18) – – (18) –

Included within liabilities classified as held for sale: Trade & other payables 1,298 (1,298) (89) (1,209) – –Bank loans 67,544 (92,245) – – (2,356) (89,889)

Company31 December 2011Trade & other payables 735 (735) (80) (655) – –

31 December 2010 Trade & other payables 7,122 (7,122) (6,545) (577) – –* Contractual cash flows include debt repayments and interest on loans and borrowings.




On 4 February 2011 the bank loan noted above was repaid from the proceeds of sale of 100% of the share capital of HI Tricomm Holdings Limited. The bank loan shown under liabilities classified for sale as at 31 December 2010 was transferred as part of the sale.

Interest on loans and borrowings was calculated using the six month Libor rate as at 31 December 2010.

Invista was released and discharged from the ‘other’ loan on 14 September 2011 as part of the sale of its joint venture holding in Celsius European Holdings S.à.r.l.

Derivative financial liabilities Carrying Contractual amount cash flows Up to 1 mth 1- 3 mths 4-12 mths Over 12 mths £000 £000 £000 £000 £000 £000

Group31 December 2011 – – – – – –

31 December 2010Interest rate swaps used for hedging 296 (252) – – (252) –

Included within liabilities classified as held for sale: Interest rate swaps used for hedging 11,651 (43,792) – – (2,891) (40,901)

The carrying values of interest rate swaps as at 31 December 2010 detailed above related to two swaps taken out to minimise exposure to the variability in cash flows payable on outstanding loan balances held within the Invista Castle group of companies from interest rate fluctuations.

The contractual cash flows were calculated as the difference between the hedging instrument fixed rate and the six month Libor rate as at 31 December 2010.

On 4 February 2011 the first interest rate swap noted above was broken and repaid out of the proceeds of sale of 100% of the share capital of HI Tricomm Holdings Limited. The interest rate swap noted under liabilities classified as held for sale was transferred as part of the sale. No interest rate swaps were therefore held at 31 December 2011

The Company had no derivative financial liabilities at 31 December 2011 (2010: £nil).

c) Market riskMarket risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect Invista’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters while optimising the return.

i) Currency riskInvista is exposed to currency risk, where fluctuating exchange rates may give rise to a loss, on revenue, expenditure and borrowings and investments that are denominated in a currency other than sterling (GBP), its functional currency.

Following the transfer of client mandates to new fund managers during 2011 and the withdrawal of operations from Invista’s Paris branch at the end of 2011, Invista no longer has any material exposure to either revenue or expenditure in euros.

Since the establishment of the Hong Kong office in July 2009 and the acquisition in December 2009 of the BOSS operating group of companies (Big Orange Self Storage Holdings (Cayman) Limited and its subsidiaries) Invista has also had transactions denominated in US dollars (USD), Hong Kong dollars (HKD) and Singapore dollars (SGD).

In addition, Invista’s investments in joint ventures which are denominated in currencies other than GBP or which invest in underlying assets in currencies other than GBP, such as the investments made by the Invista Real Estate Opportunity Fund Limited Partnership or the Invista Real Estate International Fund Limited Partnership, are exposed to currency risk.



Joint venturesWithin the Invista Real Estate Opportunity Fund Limited Partnership there is some exposure to currency risk as a result of underlying investments in Swiss francs (CHF) although this is in part mitigated by funding liabilities also being in CHF.

The Invista Real Estate International Fund Limited Partnership operates internationally and is exposed to foreign exchange risk arising from various currency exposures. Foreign exchange risk arises from recognised monetary assets and liabilities. It is the fund’s policy to only enter into currency hedging transactions where the fund’s management are of the opinion that the currency exposure is material and that the terms of such hedging would be economically efficient for the fund.

Exposure to currency riskInvista’s exposure to foreign currency risk at the reporting date was as follows:


Property, plant and equipment 22 58 – –Trade receivables/accrued income 480 239 – –Cash and cash equivalents 588 1,026 – –Trade payables/accruals 865 1,231 1 26

Included within the carrying value at 31 December 2011 of Invista’s investment in the Invista Real Estate Opportunity Fund Limited Partnership joint venture is Invista’s share of investments in properties made in CHF to the value of £3,643,000 (2010: £3,761,000) and loan balances held in CHF of £1,575,000 (2010: £1,613,000).

The carrying value at 31 December 2011 of Invista’s investment in the Invista Real Estate International Fund Limited Partnership joint venture includes Invista’s share of IREIF’s investment in BOSS Partnership 1 LP and as a result comprises underlying assets of £6,194,000 (2010: £5,172,000) held in USD, £7,243,000 (2010: £6,548,000) held in HKD and £6,001,000 (2010: £5,891,000) held in SGD.

The following exchange rates applied during the year on the currencies in which Invista had its greatest foreign currency exposure:

Reporting Reporting date rate date rate Average Average (Lloyds Banking (Lloyds Banking rate rate Group spot rate) Group spot rate) 2011 2010 2011 2010

Euro/GBP 1.150 1.167 1.19461 1.16037CHF/GBP 1.417 1.598 1.45276 1.45273USD/GBP 1.609 1.542 1.54545 1.55291HKD/GBP 12.518 11.980 12.0036 12.0711SGD/GBP 2.016 2.094 2.00842 1.99126




Sensitivity analysis for currency riskA 10% strengthening of sterling against the following currencies at the reporting date would have increased/(decreased) equity and profit or loss for the Group by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant.

Effect in ‘£000 Equity Profit or (loss)

31 December 2011Euro (9) (378)CHF (189) –USD (563) (17)HKD (676) 71SGD (519) –

31 December 2010Euro (36) (419)CHF (196) –USD (467) (7)HKD (584) 72SGD (522) 3

A 10% weakening of sterling against the above currencies at the reporting date would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant.

ii) Interest rate riskAt the reporting date the profile of Invista’s interest-bearing financial instruments was:

Group Group Company Company 2011 2010 2011 2010 Carrying amount £000 £000 £000 £000

Fixed rate instruments – assets/(liabilities)Other receivables 17 – – –Cash held in escrow 3,504 – – –Other loans – (18) – –Total 3,521 (18) – –

Variable rate instruments – assets/(liabilities)Cash and cash equivalents 35,037 77,396 20,832 60,224Bank loans – (13,623) – –Included within liabilities classified as held for sale:Cash and cash equivalents – 8,724 – –Bank loans – (67,544) – –Total 35,037 4,953 20,832 60,224

Fixed rate instruments shown as other receivables in 2011 are time deposits held by the Big Orange Self Storage operating companies with banks in Hong Kong and Singapore with maturities of six months and three months respectively.

Cash held in escrow represents the cash balance held to cover potential warranty claims arising from the sale of the Group’s investment in HI Tricomm Holdings Limited and its subsidiary companies. For further details see note 17.



As previously noted the bank loan shown at 31 December 2010 was repaid on 4 February 2011 from the proceeds of sale of 100% of the share capital of HI Tricomm Holdings Limited. The bank loan shown under liabilities classified for sale as at 31 December 2010 was transferred as part of the sale.

Invista was released and discharged from the ‘other’ loan on 14 September 2011 as part of the sale of its joint venture holding in Celsius European Holdings S.à.r.l.

Interest rate movements on bank loans and also on loans within the joint venture companies during 2010 and 2011 were hedged by interest rate swaps

Joint ventures and other investments entered into can be highly leveraged. Investment vehicles are structured to mitigate interest rate risk to the providers of finance (debt and equity) and this is achieved by interest rate swaps being put in place within the joint ventures.

Sensitivity analysis for interest rate riskA change of 100 basis points in interest rates over a 12 month period on the variable rate financial instruments held at the reporting date, excluding bank loans, would have increased/decreased equity and profit or loss by the amounts shown below. This analysis assumes that all other variables remain constant. The analysis is performed on the same basis for 2010. The variable rate bank loans are excluded from this sensitivity analysis as they are fully hedged by interest rate swaps.

Effect on Effect on Effect on Effect on profit or loss equity profit or loss equity Group Group Company Company £000 100bps change 100bps change 100bps change 100bps change

31 December 2011 +/- 350 – +/- 208 –31 December 2010 +/- 861 – +/- 602 –

iii) Market price risk Invista was subject to market price risk during 2011 on its available for sale quoted equity securities held in the Invista Foundation Property Trust Limited (“IFPT”) until their sale in January 2011.

Invista’s investment in Invista Property Portfolio Limited Liability Partnership was not a market listed stock and so was not impacted by market share price movements in the period it was held until its sale in November 2011.

Therefore at 31 December 2011, as a result of the disposal of all of its available for sale investments, the Group is no longer subject to market price risk.

d) Capital managementThe Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence.

Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements, other than the FSA and GFSC liquid capital tests as previously mentioned in part b) of this note. During the year ended 31 December 2011 Invista Real Estate Investment Management Limited and Invista Real Estate Investment Management (CI) Limited were in full compliance with regulatory requirements.




e) Fair valuesThe fair values of financial assets and liabilities, together with the carrying amounts shown in the balance sheet, are as follows:

Group Carrying amount Fair value Carrying amount Fair value 2011 2011 2010 2010 Financial assets/(liabilities) £000 £000 £000 £000

Investments – available for sale – – 3,018 3,018Trade & other receivables* 5,620 5,620 2,590 2,590Cash and cash equivalents 35,037 35,037 77,396 77,396Loans and borrowings – – (13,641) (13,641)Trade and other payables (3,765) (3,765) (6,356) (6,356)Derivatives used for hedging – – (296) (296)

Included within assets/(liabilities) classified as held for sale:Trade & other receivables* – – 1,603 1,603Cash and cash equivalents – – 8,724 8,724Loans and borrowings – – (67,544) (67,544)Trade and other payables – – (1,298) (1,298)Derivatives used for hedging – – (11,651) (11,651)* Receivables totals shown above exclude prepayments.

Company Carrying amount Fair value Carrying amount Fair value 2011 2011 2010 2010 Financial assets/(liabilities) £000 £000 £000 £000

Investments – available for sale – – 2,987 2,987Loans & receivables* 27,964 27,964 32,038 32,038Cash and cash equivalents 20,832 20,832 60,224 60,224Trade and other payables (735) (735) (7,122) (7,122)* Receivables totals shown above exclude prepayments.

Estimation of fair valuesThe major methods and assumptions used in estimating the fair values of financial assets and liabilities are as follows:

Investments – available for saleInvestments in equity instruments are held at market value as a measure of fair value. The investment in IPD Group Limited was held at cost less any provision for impairment as its fair value could not be reliably measured. At 31 December 2011 the Group had no investments in available for sale assets.

Cash and cash equivalentsThese comprise cash held by the Group and short-term bank deposits with an original maturity of three months or less. The carrying amount of these assets approximates their fair value.

Trade and other receivable/payablesReceivables/payables are mainly balances with a remaining life of less than one year and therefore the fair value is considered to be materially equal to their carrying value.



Loans and borrowingsBorrowings are initially recognised at the fair value of the consideration received less attributable transaction costs. Subsequent to initial recognition these transaction costs are amortised to the income statement using the effective interest method. At 31 December 2011 the Group’s only loans and borrowings are those it holds through its share of joint ventures.

Derivatives used for hedgingThe derivative hedging instruments are initially recognised at fair value and attributable transaction costs are recognised in the income statement when incurred. Subsequent to initial recognition derivative financial instruments are marked to external market valuations. At 31 December 2011 the Group’s only derivatives used for hedging are those it holds through its share of joint ventures.

Fair value of financial instruments carried at fair valueAt 31 December 2011 neither the Group nor the Company had any remaining financial assets and liabilities carried at fair value.

The table below provides an analysis of the financial assets and liabilities of the Group that were carried at fair value in the consolidated balance sheet at 31 December 2010, grouped into levels 1 to 3 based on the degree to which the fair value is observable.

The fair value hierarchy levels are as follows:

• Level 1 – quoted prices (unadjusted) in active markets for identical assets and liabilities;

• Level 2 – inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (ie as prices) or indirectly (ie derived from prices); and

• Level 3 – inputs for the assets or liability that are not based on observable market data (unobservable inputs).

Group Level 1 Level 2 Level 3/Other* Total £000 £000 £000 £000

At 31 December 2010Available for sale investments 1,205 31 1,782 3,018Derivatives used for hedging – 296 – 296

Included within liabilities classified as held for sale:Derivatives used for hedging – 11,651 – 11,651

Company Level 1 Level 2 Level 3/Other* Total £000 £000 £000 £000

At 31 December 2010Available for sale investments 1,205 – 1,782 2,987* Level 3/Other includes the investment of the Group and the Company in shares in IPD Group Limited. See note 15 for details.



22. Operating leases

Future minimum rental costs payable under non-cancellable operating leases at the reporting date were as follows:

2011 2010 £000 £000

Not later than one year 62 805After one year but not more than five years – 2,947After five years – 1,075Total 62 4,827

The operating leases as at 31 December 2011 were for the Group’s current office premises at 107 Cheapside, London, EC2V 6DN under two leases, one expiring on 31 March 2012 and the other expiring on 31 May 2012; and the Group’s office in Hong Kong at Unit 820, 8/F, Two Exchange Square, 8 Connaught Place, Central, Hong Kong under a 19 month lease which began in July 2009 and was extended at the end of 2010 for a further six months until July 2011 and was then further extended until January 2012.

The leases at 107 Cheapside have subsequently been extended to 30 June 2012, the additional costs of which are not included in the table above.

With effect from 1 February 2012 the Hong Kong office moved to Unit 832 at the same address on a three month lease which expires on 30 April 2012, the costs of which are also not included in the table above.

The operating lease costs payable at 31 December 2010 above included the Group’s former leasehold office premises at 6th Floor Exchequer Court, 33 St Mary Axe, London, EC3A 8AA under a lease which was due to run for the remaining period of the original lease taken out on 4th Floor Exchequer Court expiring in 2017. On 8 March 2011 the Group entered into an agreement for the surrender of the 6th Floor lease and the surrender was completed on 31 May 2011. The costs payable at 31 December 2010 also included the lease for the Group’s office in France at 21, rue des Pyramides – 75001 Paris under a nine year lease expiring in 2017. On 17 January 2012 the Group signed a termination deed in respect of this lease with an effective date of 31 December 2011.

The Group leased out its investment property classified within assets held for sale as at 31 December 2010 (see note 18) under a single lease agreement subject to a project agreement. The investment property was sold as part of the Group’s sale of its investment in HI Tricomm Holdings Limited and its subsidiaries on 4 February 2011.

23. Retirement benefit schemes

The Group operates defined contribution retirement benefit schemes for all qualifying employees. Pension costs for the schemes amounted to £588,000 for the year ended 31 December 2011 (2010: £700,000).

All death-in-service and benefits for incapacity arising during employment are wholly insured. No post retirement benefits other than pensions are made available to employees.

24. Share-based payments

During the year ended 31 December 2011 the Group had the following share-based payment arrangements in place which are equity settled:

• Annual Incentive Plan – awards granted as deferred shares to be released three years from the date of grant. Awards made in the form of nil cost options.

• Long-Term Incentive Plan – awards granted based on multiples of salary up to a maximum of 400% and released depending on the Group meeting targets for return on capital employed (ROCE). Awards made in the form of nil cost options.

• Deferred Matching Plan – Following the acquisition of HBOS plc by Lloyds Banking Group which triggered a change of control for Invista a number of Invista’s share schemes vested early on 25 February 2009. The Senior Executives were each invited to waive their rights to the vesting of their shares on that date in return for one matching share for every two shares waived and the replacement of the original scheme awards with an award under the 2009 Deferred Matching Plan. The matching shares together with the replacement awards were to be received on the original vesting date subject only to continued employment. On 24 February 2010 the Executive Directors waived their rights to receive all subsisting matching shares awarded to them. Awards made in the form of nil cost options.


24. Share-based payments continued

No share-based payment awards were granted during 2011. The table below summarises the share-based payment awards granted in prior years for schemes which are yet to vest:

Number of Award Date of grant options granted Contractual life Vesting conditions

Annual Incentive Plan – Deferred Shares 5 March 2010 1,196,078 3 years 3 years serviceLong-Term Incentive Plan 5 March 2010 2,885,294 3 years 3 years service and subject to achievement of performance conditionsAnnual Incentive Plan – Deferred Shares 26 March 2009 2,718,529 3 years 3 years service

The table below summarises the share-based payment award schemes that vested in 2011:

Number of Vesting options Exercise Award date vesting price

Deferred Matching Plan – relating to Long-Term Incentive Plan 2008 17 March 2011 2,603,963 NilDeferred Matching Plan – relating to Performance Share Plan 2008 17 March 2011 2,120,874* Nil* Number of options vesting was the total of replacement awards and matching shares. For those options relating to the Performance Share Plan 2008 the total vesting

excluded 1,060,438 matching shares for which the Executive Directors waived their rights on 24 February 2010.

Participants in the Deferred Matching Plan whose awards vested in March 2011 were not able to exercise their awards during 2011 due to the Company being in a prohibited period for the purposes of share dealing for the remainder of the year.

The 3,462,353 options granted under the Long-Term Incentive Plan award for the Executive Directors on 26 March 2009 lapsed on 31 December 2011 as the performance conditions attached to the awards based on ROCE targets for the three year performance period ended 31 December 2011 were not met.

In addition to the above schemes the Group operates the following HMRC approved all employee share-based payment arrangements:

• Sharekicker Plan – provides employees with the opportunity to purchase shares with a proportion of their gross annual bonus. For every share purchased two matching shares are awarded after three years. No awards were made under this scheme in 2011.

• Free Shares Plan – free shares of 5% of salary, up to a limit of £3,000, are awarded to each employee each year the plan operates and are transferable to employees after three years. No awards have been made under this plan since 2008.

The table below summarises the share-based payment awards granted in prior years for the HMRC approved plans which are yet to vest:

Number of Award Date of grant options granted Contractual life Vesting conditions

Sharekicker Plan 2010 31 March 2010 141,242* 3 years 3 years serviceSharekicker Plan 2009 26 March 2009 222,824* 3 years 3 years service* This is the number of matching shares purchased.




The table below summarises the share-based payment awards under the HMRC approved plans that vested in 2011:

Number of Vesting options Exercise Award date vesting price

Sharekicker Plan 2008 2 April 2011 152,828* NilFree Shares Plan 2008 6 August 2011 247,784 Nil

* This is the number of matching shares vesting.

Financial assumptions underlying the calculation of fair valueThe expense has been based on the fair value of the instruments granted, as calculated using appropriate derivative pricing models.

For the share plans, apart from Sharekicker and Free Shares, as the awards are not subject to any market based performance conditions, and any dividends payable during the vesting period are payable on vesting, the fair value of each award is equal to the face value. For Sharekicker and Free Shares, as dividends payable during the vesting period are payable in cash, the fair value of each award is 100% of the face value less the expected value of the dividends.

Share scheme Fair value £

Annual Incentive Plan 2010 – Deferred Shares 0.51Long-Term Incentive Plan 2010 0.51Sharekicker Plan 2010 0.48Annual Incentive Plan 2009 – Deferred Shares 0.425Sharekicker Plan 2009 0.42

Movements in optionsThe table below shows the total number of options outstanding at the year end:

Number of Number of options options 2011 2010

Outstanding at 1 January 15,193,089 18,374,178Granted during the year – 4,222,614Vested during the year (5,420,917) –Vested and exercised during the year (640,860) (2,995,979)Forfeited during the year (28,532) (2,607,724)Expired during the year (3,462,353) (1,800,000)Outstanding at 31 December 5,640,427 15,193,089Exercisable at 31 December – –

The total above for options vesting during the year includes the awards under the Deferred Matching Plan which vested in March 2011 but were not exercised during 2011 due to the Company being in a prohibited period for the purposes of share dealing.

The options that expired in 2011 related to the 2009 Long-Term Incentive Plan award as the attached performance conditions have not been met.

The weighted average share price at the date of exercise for share options exercised in 2011 was £0.46 (2010: £0.45).

The options outstanding at 31 December 2011 are all nil cost options and have a weighted average contractual life of 0.8 years (2010: 1.2 years).



Charge to income statementThe total charge to the income statement in respect of the share-based payment awards made during the year ended 31 December 2011 is £87,000 (2010: £225,000).

The 2011 charge includes a credit resulting from the write back of costs previously charged for the 2009 Long-Term Incentive Plan for the Executives which lapsed as the attached performance conditions were not met.

The 2010 charge included a credit resulting from the waiving of the Executive Directors’ matching shares under the Deferred Matching Plan and the write back of costs previously charged for the 2008 Long-Term Incentive Plan for the Executives which lapsed as the attached performance conditions were not met.

For the year ended 31 December 2011 no provision has been made for the grant of any further share awards related to 2011.

25. Related parties

Ultimate parent undertakingThe Group’s ultimate parent company is Lloyds Banking Group plc, a limited liability company incorporated and domiciled in Scotland, which is also the parent undertaking of the largest group of undertakings for which group accounts are drawn up and of which the Company is a member. Copies of the group accounts for Lloyds Banking Group plc may be obtained from Group Secretariat, Lloyds Banking Group plc, 25 Gresham Street, London, EC2V 7HN.

Transactions with key management personnelIn addition to their salaries, the Group also provides non-cash benefits to Executive Directors and other Senior Managers (together “the Senior Executives”) and contributes to a post-employment defined contribution plan on their behalf. Senior Executives also participate in the Group’s share option schemes – see note 24.

Key management personnel* compensation comprised:

2011 2010 £000 £000

Short-term employee benefits 3,049 2,853Post-employment benefits 258 284Termination payments 400 217Share-based payments 19 953Total 3,726 4,307

* Senior Executives and Non-Executive Directors.

In March 2011 the remaining share awards under the Deferred Matching Plan vested but the participants, who were all Senior Executives, were unable to exercise these awards at this date due to the Company being in a prohibited period for the purposes of share dealing. Following the capital return received by all shareholders in June 2011, payments equivalent to the capital return at 18.0 pence per share were made to plan participants. These payments totalled £850,000 and are included in the short-term employee benefits total for 2011 shown above.

The Directors of the Company controlled 0.8% of the voting shares of the Company as at 31 December 2011 (2010: 1.3%).

Other related party transactionsTransactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and therefore are not disclosed in the Group financial statements but are included in the Company financial statements.



25. Related parties continued

Transactions between the Group and its joint venture companies are disclosed separately below.

Balances with related parties at 31 December 2011 were as follows: Group Group Company Company 2011 2010 2011 2010 Note £000 £000 £000 £000

Receivables* Lloyds Banking Group undertakings (a) 546 462 – 3Invista Group undertakings (b) – – 27,702 31,809Invista joint venture companies (c) 705 379 – –

Payables**Lloyds Banking Group undertakings (d) 92 211 – –Invista Group undertakings (e) – – 78 6,491Invista joint venture companies (f) 688 36 – –* Receivables include trade receivables and accrued income with related parties.** Payables include accruals for amounts due to related parties.

a) The Group’s receivables balance with Lloyds Banking Group undertakings represents trade receivables and accruals related to investment management fees and in 2011 termination fees due on various Lloyds Banking Group funds.

b) The Company’s receivables balance with Invista Group undertakings includes amounts loaned to the respective entities to fund investments in the Group’s subsidiary and joint venture investments.

c) The Group’s receivables balance with its joint venture companies represents investment management fees due from Celsius European Holdings S.à.r.l, the Invista Real Estate Opportunity Fund Limited Partnership, and the Invista Real Estate International Fund Limited Partnership. The balance due from the Invista Real Estate International Fund Limited Partnership also encompasses facilities management and base management fees due to the Big Orange Self Storage operating companies from the Big Orange Self Storage facilities within the investment portfolio of BOSS Partnership 1 LP. The balance also includes £149,000 for VAT repayable by the Invista Real Estate Opportunity Fund Limited Partnership, and the Invista Real Estate International Fund Limited Partnership.

d) The Group’s payables balance with Lloyds Banking Group undertakings at 31 December 2011 represents the amount owed for the provision of taxation services for 2011 by the Lloyds Banking Group tax team.

e) The Company’s payables balance with Invista Group undertakings at 31 December 2010 included £4,952,000 representing the cash received by the Company from the disposal of available for sale investments in the Invista Global Property Securities Fund Limited Partnership which equated to an advance distribution of profits from the Limited Partnership. A distribution of profits was made to the Company in 2011 by means of a dividend from Invista Global Property Securities Fund Investing Partner Limited. The Company’s payables balance with Invista Group undertakings at 31 December 2011 represents its remaining balance with Invista Global Property Securities Fund Investing Partner Limited to be settled on liquidation of this subsidiary.

f) The Group’s payables balance at 31 December 2011 with its joint venture companies represents cash advances made to the Big Orange Self Storage operating companies from the Big Orange Self Storage facilities within BOSS Partnership 1 LP.

The balance of remaining intra group receivables and payables relates to outstanding amounts of expenses that have been incurred by one entity but are rechargeable to another entity.

On 14 September 2011 Invista sold its 50% interest in the its joint venture company Celsius European Holding`s S.à.r.l. for a nominal purchase consideration of t4 to a subsidiary of Kaupthing Bank hf. See note 14.

In addition to the balances shown above at 31 December 2010 the Group owed £7,000 to its partner in the Celsius joint venture for consultancy fees. No such balance remained outstanding at 31 December 2011.

From October 2008 the Group had a loan for t19,000 from one of the Celsius joint venture companies Mondeville AP1 S.à.r.l. Invista was released and discharged from this loan on 14 September 2011 as part of the sale of its joint venture investment in Celsius. See note 19.


25. Related parties continued

During the year the Group received the following income from related parties for the provision of investment management services:

Group Group 2011 2010 £000 £000

Lloyds Banking Group undertakings 8,843 13,372Invista joint venture companies 3,578 2,399

Revenue from Lloyds Banking Group undertakings comprises revenues from the HBOS Funds which were transferred to a new manager in May 2011, and revenues from the St James’s Place funds which were transferred to a new manager in September 2011.

Following receipt on 12 October 2010 of one year’s notice of termination from Lloyds Banking Group on the investment management agreements for the HBOS Funds, an early termination agreement was reached and in accordance with that agreement Invista received £2.6 million termination fees in the first half of 2011 with a further £0.5 million accrued as at 31 December 2011 for fees which remain outstanding from certain subsidiaries of Lloyds Banking Group. The remaining £0.5 million is the subject of a formal legal dispute between the parties. On 20 January 2012, in response to Invista’s claim, certain subsidiaries of Lloyds Banking Group served a counter-claim. This counter-claim has not been fully quantified but is estimated by Lloyds Banking Group to be at least £4.2 million. See note 29 for further details.

No bad debt provisions in respect of related parties were made during 2011 (2010: nil).

In 2011 income of t7,100 (2010: t10,000) was received by the Group from the Celsius joint venture company Celsius European Holdings S.à.r.l. relating to a directorship of that company being held by one of the Group’s Senior Executives until Invista sold its interest in the joint venture on 14 September 2011.

During the year ended 31 December 2011 the Group paid £92,000 (2010: £102,000) to Lloyds Banking Group for the provision of taxation services.

Invista’s corporate insurances remain under the Lloyds Banking Group programme, with the exception of crime and professional indemnity insurance which was moved to an external insurer with effect from 1 July 2011.

The Invista Real Estate Opportunity Fund Limited Partnership took out a five year interest bearing loan with Bank of Scotland for £2,000,000 to fund the acquisition of one of its properties in April 2008. Alongside the loan an interest rate swap was taken out with Bank of Scotland Treasury to hedge the interest payments on the loan.

During 2011 one of the Group subsidiary companies, Invista Property Management Limited, had a guarantee of t30,000 issued in its favour by the Bank of Scotland in order that it met with the conditions of the Company’s licence to operate in France.

The Company received no income from related parties (2010: £nil).

The Company incurred no costs from related parties (2010: £nil).

During the year a share-based payment was made to employees of a fellow subsidiary company, Invista Real Estate Investment Management Limited, in return for services rendered by its employees.

Agreements put in place at the time of IPO in September 2006 in respect of related parties are detailed in full in the Admission document.



28. Dividends

The following dividends have been charged direct to retained earnings during the year:

2011 2010 £ £

Ordinary dividends2009 final dividend paid of 1.6 pence per ordinary share – 4,208,3122010 interim dividend paid of 0.7 pence per ordinary share – 1,839,687

Preferred ordinary dividends2009 final dividend paid of 2.0 pence per preferred ordinary share – 1,0002010 interim dividend paid of 0.875 pence per preferred ordinary share – 438Total – 6,049,437

No final dividend was paid for 2010.

No interim dividend was paid for 2011 and no dividend payment for 2011 has been proposed.

A capital payment of 18.0 pence per ordinary share was paid on 29 June 2011. See note 27 for further details.

29. Contingent liabilities

On 23 November 2011 Invista announced that legal proceedings had been commenced against certain subsidiaries of Lloyds Banking Group plc (Invista’s ultimate parent company) in respect of an early termination agreement. On 20 January 2012, in response to Ordinary dividendsInvis3f 18.0 penoac 20 January 2012, in reel0inary shar0ivi0Deso29Jtp1 ant l� u-CnS0 Jan 9ot00S3 20aaT1_1 1 Tf1.25Ppd5SDoiso 7o00090009>>> BDC ( )Tj34.016 0dto85-qn123e8o .act.>o4 34o 32 uT201c> aa


Notes

This publication was printed on Challenger Offset, made from FSC certified pulp.

It was produced to ISO 14001 Environmental Management System standards and 95% of the waste created during the process was recycled. The materials used included vegetable oil based inks, elemental chlorine free pulp and fibre from FSC (Forest Steward Council) managed forests.

The FSC managed forests have been independently inspected and comply with internationally agreed environmental, social and economic standards.

Invista Real Estate Investment Management Holdings plc. Registered in England and Wales. Registered number: 05788425. Registered office: 107 Cheapside, London, EC2V 6DN.

Invista Real Estate Investment Management Limited. Registered in England and Wales. Registered number: 04459443. Registered office: 107 Cheapside, London, EC2V 6DN. Authorised and regulated by the Financial Services Authority.

Invista Real Estate Investment Management (CI) Limited. Registered office: 3rd Floor, NatWest House, Le Truchot, St Peter Port, Guernsey, Channel Islands GY1 1WD. Registered number: 45340. Licensed and regulated by the Guernsey Financial Services Commission.

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Accounts 2011

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