SLI.L Regulatory News (SLI)

STANDARD LIFE INVESTMENTS PROPERTY INCOME TRUST

ANNUAL FINANCIAL REPORT IN RESPECT OF THE YEAR ENDED 31 DECEMBER 2013

Financial Highlights

· Net Asset Value total return of 25.2% for the year ended 31 December 2013

· Share price increased by 20.2% over the year to 70.0p

· Dividend yield of 6.5% based on year end share price of 70.0p

· 4 properties purchased for £22.6m excluding costs and 2 properties sold for £15.7m

· Share capital increased 11.0% over the year at an average premium to Net Asset Value of 4.9%

1 Calculated under International Financial Reporting Standards.

2 EPRA NAV represents the value of an entity's equity on a long-term basis. Some items, such as fair value of derivatives, are therefore excluded.

3 Calculated as bank borrowings less all cash as a percentage of the open market value of the property portfolio as at 31 December 2013.

4 Dividends paid during the 12 months to 31 December 2013.

5 The net income receivable for the year expressed as a percentage of the capital employed. Quarterly figures are compounded over the year to give the annual rate.

6 source: IPD quarterly version of the monthly index funds (excludes cash).

7 The sum of capital growth and net income for the year expressed as a percentage of capital employed excluding cash.

* The European Public Real Estate Association (EPRA) is a common interest group, which aims to promote, develop and represent the European public real estate sector

Strategic Report: Chairman's Statement

The Company's Annual Report for 2013 is in a new format. It reflects the expectations of the Financial Reporting Council ('FRC') and we have also taken note of recommendations made by numerous other bodies. Report writing is indeed now an industry in itself, I hope to the benefit of shareholders rather than those who are making it their occupation.

Generally, 2013 was a good year for the Company. The dividend per share was maintained, the net asset value per share ('NAV') increased and the share price rose significantly. The NAV total return to shareholders over the year was 25.2%. Overall, performance over the year was ahead of the most commonly accepted benchmarks. While this is satisfying, there is more to do if we are to meet our targets for the future.

The Property Portfolio

The Investment Manager's report provides detailed information on the portfolio. At the end of the year, it was valued at £176.4m (this is the open market value unadjusted for lease incentives or finance lease obligations). Additionally, there was a positive cash balance of £12.3m, giving total assets of £191.6m (2012: £176.0m). The fund's NAV at year end was 65.5p per share (2012: 57.7p), an uplift of 13.5% over the period. The table below sets out the components of the movement in the NAV.

The net income return on capital invested at year end was 7.7% and there were no material arrears of rent. On average, 99% of rents were received within 21 days of the relevant quarter end date and, following the completion of the agreement for lease at Staines in March 2014 and the letting of the fourth floor at Cheltenham, void levels as at mid March were only 1.6%. The IPD average void rate is reported as being 7.6%.

The most significant sale during the year was the disposal of our mixed use office and industrial development in Aberdeen, which realised a gain of 29% over book cost. The proceeds enabled us to acquire a large office building close to the M25 in Rickmansworth and three retail warehouses let to Matalan, Argos and Homebase. Important asset management agreements were reached in respect of our holdings at Witham, Mansfield and Monck Street London.

Shares and Share Price

At the year end, there were 154,994,237 shares in issue, an increase of 11.0% over the year. Our plans for the size of the Company are set out in the Strategic Overview.

The share price on 31 December 2013 was 70.0p, an uplift of 20.2% over the 12 month period, and representing a premium of 6.9% over NAV.

Earnings and Dividends

During the year the Company paid four quarterly dividends of 1.133p per share each, totalling 4.532p per share (2012: 4.532p per share) and representing a yield of 6.5% on the share price at the year end.

Loan to Value ratio

At 31 December 2013, the LTV ratio was 40.9%, which is within the range of 35-45% determined by the Board. Our loan agreement with RBS sets an upper limit of 65% until December 2016, reducing to 60% for the two remaining years.

The Board and Corporate Governance

Following David Moore's retirement, Huw Evans was elected as a director. His experience in the financial services sector is of particular value to the Company.

I will be retiring as Chairman and Director of the Company at the 2014 AGM and I am delighted that the Board has agreed that Dick Barfield will succeed me as Chairman.

I am pleased to report that Robert Peto will be appointed as a Director immediately following the AGM on 28 May 2014. Robert has a wealth of experience in UK commercial real estate and is currently chairman of DTZ Investment Management Limited.

Conversion to UK REIT

In my statement last year, I reported that the Board was considering the tax efficiency of the Company's present structure. The review has now been completed and it concluded that it would be in the best interests of the vast majority of shareholders if the Company was to convert to a UK based REIT.

Steps are therefore being taken to address the requirements of possible conversion and, once concluded, the Board will send details of the scheme to all shareholders as a prelude to an EGM that will probably take place in the autumn of 2014. If the proposals receive consent, conversion could take place by 31 December 2014.

Outlook

The improved business climate in the UK has given new impetus to the property market. There is strong demand from investors for well let and well positioned property, creating a significant uplift in prices. The occupational market has been slower to respond, with few tenants prepared to commit to new leases with a term certain of more than 5 years. So far, we have seen little evidence of rental values increasing.

My expectations for the future have to be tempered by the uncertainty of the outcome of the General Election expected in 2015. Even so, I believe that real estate will remain a favoured asset class and that we will see continuing demand for good secondary holdings. It is the occupational market that is and will remain the more fragile, and we will need to be alert to keep our good tenants and to fill voids by lettings to companies that have a positive long term future.

The Board is confident that the Company has a portfolio that is generally in line with current requirements and that good management and asset management will produce further growth.

Paul Orchard-Lisle CBE

Chairman

16 April 2014

Strategic Report: Strategic Overview

Objective

The objective of the Company is to provide shareholders with an attractive level of income together with the prospect of income and capital growth.

Investment Policy and Business Model

The Board intends to achieve the investment objective by investing in a diversified portfolio of UK commercial properties. The majority of the portfolio will be invested in direct holdings within the three main commercial property sectors of retail, office and industrial although the Company may also invest in other commercial property such as hotels, nursing homes and student housing. Investment in property development and investment in co-investment vehicles, where there is more than one investor, is permitted up to a maximum of 10% of the property portfolio.

In order to manage risk, without compromising flexibility, the Board applies the following restrictions to the property portfolio, in normal market conditions:

· No property will be greater by value than 15% of total assets.

· No tenant (excluding the Government) will be responsible for more than 20% of the Company's rent roll.

· Gearing, calculated as borrowings as a percentage of gross assets, will not exceed 65%. The Board's current intention is that the Company's loan to value ratio (calculated as borrowings less all cash as a proportion of the property portfolio valuation) will be between 35% and 45%.

As part of its strategy, the Board has contractually delegated the management of the property portfolio, and other services, to Standard Life Investments (Corporate Funds) Limited (the 'Investment Manager').

Strategy

During the year, the Board reassessed its strategy, with the help of its Investment Manager and other advisers.

The overall intention is to continue to distribute an attractive income return alongside growth in the NAV and deliver a good overall total return.

At the property level, it is intended that the Company remains primarily invested in the commercial sector, while keeping a watching brief on other classes such as student accommodation and care homes. The Company is principally invested in office and industrial property and intends to remain so. There are seen to be some opportunities in the retail market, primarily out-of-town. In all sectors, poor secondary and tertiary locations are regarded as high risk and will be avoided, as indeed will the low yielding office sector.

The Board's preference is to buy into good but not necessarily prime locations, where it perceives there will be good continuing tenant demand, and to seek out properties where the asset management skills of the Investment Manager can be used to beneficial effect. The Board will continue to have very careful regard to tenant profiles.

While the financial size of the Company has increased significantly over the year, it remains below the level that some investors find attractive. The Board intends therefore to seek out opportunities for further growth in the Company provided that it is in the long term interests of existing shareholders.

As noted in the Chairman's Statement, the Board has concluded that there would be significant advantages for the Company by converting into a UK REIT and will be consulting shareholders accordingly.

The European Alternative Investment Fund Managers Directive (AIFMD) has a final implementation date of 22 July 2014 and the Board has decided to appoint its Investment Manager, Standard Life Investments (Corporate Funds) Limited, as AIFM, to undertake the necessary regulatory returns, initial authorisations and registrations. The Company will also be appointing a depositary under the new regime.

Retail Distribution

On 1 January 2014, the FCA introduced rules relating to the restrictions on the retail distribution of unregulated collective investment schemes and close substitutes (non-mainstream investment products). UK investment trusts are excluded from these restrictions.

Having taken legal advice, and on the basis that the Board conducts the affairs of the Company as if it would be an investment trust if it was resident in the UK, the Board believes that the Company's shares are excluded securities under the new rules and, as a result, the FCA's restrictions on retail distribution do not apply.

The Board

The Board currently consists of a non-executive Chairman and four non-executive Directors, with a range of property, investment, commercial and professional experience. As well as selecting Directors who can contribute fully to the progression of the Company's performance, there is a requirement to maintain the correct balance of onshore and offshore membership of the Board. There is also a commitment to achieve the proper levels of diversity in all respects. At 31 December 2013, the Board consisted of two female and three male Directors. The Company does not have any employees.

Key Performance Indicators

The Board meets quarterly and at each meeting reviews performance against a number of key measures:

Property income and total return against the Investment Property Databank Balanced Monthly Funds Index ('the Index')

The Index provides a benchmark for the performance of the Company's property portfolio and enables the Board to assess how the portfolio is performing relative to the market. A comparison is made of the Company's property returns against the Index over a variety of time periods (quarter, annual, three years and five years).

Property voids

Property voids are unlet properties. The Board reviews the level of property voids within the Company's portfolio on a quarterly basis and compares the level to the market average, as measured by the Investment Property Databank. The Board seeks to ensure that proper priority is being given by the Investment Manager to replacing the Company's income.

Rent collection dates

The Board assesses rent collection by reviewing the percentage of rents collected within 21 days of each quarter end.

Net asset value total return

The net asset value total return reflects both the net asset value growth of the Company and also the dividends paid to shareholders. The Board regards this as the best overall measure of value delivered to shareholders. The Board assesses the net asset value total return of the Company over various time periods (quarter, annual, three years, five years) and compares the Company's returns to those of its peer group of listed, closed-ended property investment companies.

Premium or discount of the share price to net asset value

The Board closely monitors the premium or discount of the share price to the net asset value and believes that a key driver to the level of the premium or discount is the Company's long term investment performance. However, there can be short term volatility in the premium or discount and the Board takes powers at each AGM to enable it to issue or buy back shares with a view to limiting this volatility.

Dividend per share and dividend yield

A key objective of the Company is to provide an attractive, sustainable level of income to shareholders and the Board reviews, at each Board meeting, the level of dividend per share and the dividend yield, in conjunction with detailed financial forecasts, to ensure that this objective is being met and is sustainable.

The Board considers the performance measures both over various time periods and against similar funds.

A record of these measures are disclosed in the financial highlights, in the Chairman's Statement section of the Strategic Report and in the Investment Manager's Report.

Principal Risks and Uncertainties

The Company's assets consist of direct investments in UK commercial property. Its principal risks are therefore related to the commercial property market in general, but also the particular circumstances of the properties in which it is invested, and their tenants. The Board and Investment Manager seek to mitigate these risks through a strong initial due diligence process, continual review of the portfolio and active asset management initiatives. All of the properties in the portfolio are insured, providing protection against risks to the properties and also protection in case of injury to third parties in relation to the properties.

The Board has also identified a number of other specific risks that are reviewed at each Board meeting. These are as follows:

· The Company and its objectives become unattractive to investors. This is mitigated through regular contact with shareholders, a regular review of share price performance and the level of the discount or premium at which the shares trade to net asset value and regular meetings with the Company's broker to discuss these points and address any issues that arise.

· Poor selection of new properties for investment. A comprehensive and documented initial due diligence process, which will filter out properties that do not fit required criteria, is carried out by the Investment Manager prior to making a recommendation to the Board in relation to a proposed property purchase. This is followed by detailed review and challenge by the Board prior to a decision being made to proceed with a purchase. This process is designed to mitigate the risk of poor property selection.

· Tenant failure or inability to let property. Due diligence work on potential tenants is undertaken before entering into new lease arrangements. In addition, tenants are kept under constant review through regular contact and various reports both from the managing agents and the Investment Manager's own reporting process. Contingency plans are put in place at units that have tenants that are believed to be in financial trouble. The Company subscribes to the Investment Property Databank Iris Report which updates the credit and risk ranking of the tenants and income stream, and compares it to the rest of the UK real estate market.

· Loss on financial instruments. The Company has entered into a number of interest rate swap arrangements, in order to fix the interest rate on the bank borrowings. These swap instruments are valued on a quarterly basis by the counterparty bank. The Investment Manager checks the valuation of the swap instruments internally to ensure they are accurate. In addition, the credit rating of the bank that the swaps are taken out with is assessed regularly.

Other risks faced by the Company include the following:

· Strategic - incorrect strategy, including sector and property allocation and use of gearing, could all lead to poor returns for shareholders.

· Tax efficiency - the structure of the Company or changes to legislation could result in the Company no longer being a tax efficient investment vehicle for shareholders.

· Regulatory - breach of regulatory rules could lead to the suspension of the Company's Stock Exchange Listing, financial penalties or a qualified audit report.

· Financial - inadequate controls by the Investment Manager or third party service providers could lead to misappropriation of assets. Inappropriate accounting policies or failure to comply with accounting standards could lead to misreporting or breaches of regulations.

· Operational - failure of the Investment Manager's accounting systems or disruption to the Investment Manager's business, or that of third party service providers, could lead to an inability to provide accurate reporting and monitoring, leading to loss of shareholder confidence.

· Economic - inflation or deflation, economic recessions and movements in interest rates could affect property valuations and also bank borrowings.

The Board seeks to mitigate and manage these risks through continual review, policy setting and enforcement of contractual obligations. It also regularly monitors the investment environment and the management of the Company's property portfolio, levels of gearing and the overall structure of the Company.

Social, Community and Employee Responsibilities

The Company has no direct social, community or employee responsibilities. The Company has no employees and accordingly no requirement to report separately in this area as the management of the portfolio has been delegated to the Investment Manager. In light of the nature of the Company's business there are no relevant human rights issues and there is thus no requirement for a human rights policy. The Board does, however, closely monitor its suppliers to ensure that proper provision is in place.

Environmental Policy

The Investment Manager acquires and manages properties on behalf of the Company. It is recognised that these activities have both direct and indirect environmental impacts.

The Board has endorsed the Investment Manager's own environmental policy which is to work in partnership with contractors, suppliers, tenants and consultants to minimise those impacts, seeking continuous improvements in environmental performance and conducting regular reviews.

The Investment Manager's policy focuses on energy conservation, mitigating greenhouse gas ('GHG') emissions, maximising waste recycling and water conservation.

As an investment company, the Company's own direct environmental impact is minimal and GHG emissions are therefore negligible. Information on the GHG emissions in relation to the Company's real estate portfolio is disclosed in the Standard Life Investments annual Sustainable Real Estate Investment report, a copy of which can be obtained on request from the Investment Manager. The Company was awarded Green Star status from the Global Real Estate Sustainability Benchmark for 2013.

Bank Debt

In January 2012 the Company entered into a new debt facility with RBS. The original facility of £84m was due to expire in December 2013. The new facility, for the same amount, is for a term of 7 years expiring in December 2018, at a margin of 1.75% over 3 month Libor (the margin can vary depending on the LTV).

The Company has entered into interest rate swaps in order to fix the interest rate on the bank borrowings. During the year, the Company had three interest rate swaps in place. The first, for £72m, matured in December 2013. The Company now has two swaps, for a total of £84m, entered into in January 2012, expiring in December 2018 with a liability of £0.1m at the year end.

Following the expiry of the £72m swap in December 2013, the effective cost of debt has dropped to 3.8% per annum, saving the Company £2m per annum.

Approved by the Board on 16 April 2014

Paul Orchard-Lisle

Chairman

Investment Manager's Report

UK Real Estate Market

The recovery playing out in UK real estate gathered momentum over the final quarter with the IPD quarterly version of the monthly index funds (which is considered to be a benchmark for the Group) recording a total return of 9.9% p.a. in the twelve months to end December. The asset class is beginning to reap the benefits of the improving economic conditions; business confidence is picking up and occupiers are increasingly relocating for expansion reasons rather than simply because they have come to the end of their lease. Capital growth is improving due to increased allocations to real estate and also investors' expectations of the more favourable rental environment. Capital values rose by 4.3% p.a. in the twelve months to end December. Rents are improving modestly at a broad level and these are expected to pick up further into the recovery cycle. Rents rose by 0.9% p.a. in the twelve months to end December.

Despite some volatility over the year, the performance of the FTSE EPRA/NAREIT UK* listed sector was positive over this period and bodes well for the direct sector as the listed sector's performance is generally a strong lead indicator for the performance of the direct sector. The listed sector rose by 23.8% in the twelve months to end December. Performance was ahead of the FTSE All Share which rose by 20.8% over the same timeframe.

\* The FTSE EPRA/NAREIT UK Index is a subset of the FTSE EPRA/NAREIT Developed Index and is designed to track the performance of real estate companies and REITS listed on the London Stock Exchange. By making the index constituents free-float adjusted, liquidity, size and revenue screened, the series is suitable for use as the basis for investment products, such as derivatives and Exchange Traded Funds.

Investment Outlook

In the favourable environment of improving confidence and reducing void rates, investors are allocating more capital to the sector and consequently, given the increased weight of capital, risk appetite is increasing. In terms of outlook, we expect reasonable positive total returns for investors on a three year hold period. The sector remains attractive from a fundamental point of view, i.e. improving economic drivers and a constrained pipeline of future new developments. Rising interest rates are an emerging risk although there is a reasonable buffer in pricing to compensate if the market prices in a further acceleration of rate rises. The retail sector continues to face a series of headwinds that may hold back recovery in weaker locations but the prospects for retail towards the South East and Central London are expected to improve as economic recovery gains more traction. Ensuring the quality and sustainability of income remains a key investment decision making criterion. Investors remain cautious towards poorer quality secondary and tertiary stock and it is these types of assets that continue to be most vulnerable to softness in pricing because of the relatively high levels of availability, the weaker prospects for economic growth in most secondary centres and the increasing supply of these assets from banks as they work through their problem loan books. However, opportunities are arising in the transactions market for reasonable quality secondary buildings where these assets can be repositioned as prime. We continue to expect asset management initiatives and locational choices to be the defining characteristics contributing to income returns in 2014. We also expect income to be the main component of returns over this period as capital values will, we believe, only appreciate modestly. Prime/good quality secondary assets and selective poorer quality secondary assets in stronger locations are likely to provide the best opportunities in the improving economic environment we anticipate in 2014.

Investment Management Strategy

The investment strategy we follow is aligned with the Company Objective of providing an attractive income return with prospects for capital and income growth. We aim to achieve this by taking an active approach to asset management (working with tenants to extend leases and minimise voids), capturing profit (selling when the property has delivered a return to us that we believe has been maximised and the proceeds can be reinvested into more attractive opportunities) and identifying new investments (generally at yields of 8% plus that are accretive to the revenue account and where we think there will be greater investment demand in the medium term).

Purchases

The purchase philosophy for the Company is to invest in assets that offer an attractive income return, and have good medium / long term prospects. We like to invest in assets that will require asset management, or that we believe will become more attractive to investors in the medium term.

During the course of 2013 four properties were purchased:

We completed the purchase of an office in Maple Cross, Rickmansworth in Q3 for £9.85m (excluding costs), a yield of 11.1%. The property, which is located close to junction 17 of the M25 motorway, is let to Trebor Bassett for a further 9 years at a rent of £1,156,900 pa.

In Q4 we completed the purchase of three retail warehouse investments from Morrison Supermarkets. Two units are let to Matalan, and one property is let to Argos and Homebase. The combined purchase price of £12.7m (excluding costs) reflected a yield of 8%.

At the year end we had agreed terms to buy an industrial investment of two logistics units for £3.6m, a yield of 10.6% and this was purchased at the end of March 2014. The purchase was not contractually agreed at 31 December 2013.

Sales

Over the course of 2013 two properties were sold:

In Q2 we sold a vacant old retail warehouse to an owner occupier. The sale price of £0.9m was at valuation and the carrying value of the property as at 31 December 2012 was £0.9m.

In Q3 we completed the sale of a mixed office and industrial investment in Aberdeen for £14.77m which had a carrying value of £14.25m as at 31 December 2012. The development of the property was funded by the Company in 2010 and the sale proceeds were 29% ahead of the book cost at the completion date of the development. Although the property was let to a good tenant on a long lease we believed it was sensible to capture the profit and recycle the funds, as the property would have become quite over rented at the forthcoming fixed increase review.

Asset management

The focus of our asset management is to protect income and enhance values. We have a policy of meeting with tenants to understand their needs and seek an early renewal of leases or removal of break clauses.

The average weighted unexpired term to the earliest of break or lease expiry is 5.2 years. The IPD average lease length for all leases is 10.2 years, but if leases over 35 years are excluded (they are rare and mainly ground rents) then the average is 7.3 years. The latest research from Strutt and Parker / IPD suggested that the average length of new leases granted in 2012 was 4.9 years. We now live in an environment where tenants are used to having lease flexibility with breaks or only five year commitments, and although an improved economic environment and low supply might improve the chance of obtaining longer leases the impact of new accounting rules and a more global market (used to shorter leases) means commercial real estate investors and valuers are going to have to get used to shorter leases.

The Company has just under 53% of its lease income expiring in the next 5 years. 2014 and 2016 were the two main years, but following asset management initiatives the distribution is now fairly even over the next 4 years. For example 2014 had 19 lease events and we had already dealt with 7 of those before the start of the year. Of the remaining twelve we have terms agreed or advanced negotiations on seven, and from current discussions expect to renew leases on at least 10 of the 12 properties.

Examples of the main asset management initiatives during 2013 are:

Witham - we regeared the lease on an industrial unit. The original lease was due to expire in 2016, and the property was over rented with a weak covenant. We reduced the rent but got annual fixed increases for the next ten years, and obtained a parent company guarantee.

Mansfield - We took a lease surrender and simultaneously granted a new lease to the sub-tenant for 7 years at the same rent. The original lease was due to expire in 2014. We also let another unit on the same estate.

Wymondham - We let the largest void in the fund to Poundstretcher. We had previously agreed terms with a supermarket operator on a 'subject to planning' basis. However, due to changes in planning case law we undertook a letting to a non-food operator whilst maintaining some optionality for the future if we can gain the correct planning consent. After the reporting period a court appeal on a similar planning case went against the company, and the prospect of getting a food consent is now very remote.

Aberdeen - Several small industrial units were let, so that the estate was fully let for most of the year. Terms were also agreed to renew leases on all of the units with expiries in 2013.

Monck Street, London- We extended the lease on a ground floor office and increased the rent, setting new market evidence for the remaining units.

Bourne House Staines - During the year we commenced a full refurbishment of the property, and agreed terms to let it on a good covenant for a term of 10 years with a break in year 7. The agreement for lease on this letting was completed in March 2014, after the reporting period.

Portfolio Valuation

The Company's investments were valued on a quarterly basis throughout 2013 by Jones Lang La Salle.

At the year end the Company's real estate portfolio was valued at £176.4m excluding adjustments for lease incentives and finance lease obligations, with cash holdings of £12.3m. This compares to £161.6m and £13.5m at the end of December 2012. The Company has allocated £3.0m to the cost of refurbishing Staines, and £3.6m to the purchase of Cullen Square Livingston.

At the year end the Company's real estate portfolio had a net initial yield of 7.6% and an equivalent yield of 7.7%.

Performance

The Company seeks to provide an attractive income return with some capital and income growth through investing in UK commercial real estate.

At an underlying asset level the Company's portfolio has continued to deliver strong underlying performance compared to the IPD index, which is considered the main measure of UK direct real estate returns.

Although the income return is important, we also remain committed to providing an attractive total return and the Company has achieved top quartile performance against the IPD quarterly index over one, three and five years.

The Company has a ranking of the weighted risk score on the 18.5 percentile according to the IPD Iris report on income security, which reflects the good quality of tenants the Company has. Over 99% of rent due was collected within 21 days of each quarter of 2013.

The property level returns provide a comparison of performance to the wider market, but do not represent the overall performance of the Company. The Net Asset Value total return is a better measure, and is one the Board focuses on. For the 12 months to end December 2013 the Company maintained its strong performance with a NAV total return of 25.2% against a sector average of 15.3%. (Source Winterflood Securities)

Source: Winterflood Securities

Jason Baggaley

Fund Manager

Statement of Directors' Responsibilities

The Directors are responsible for preparing the Annual Report and the Group financial statements for each year which give a true and fair view, in accordance with the applicable Guernsey law and those International Financial Reporting Standards ("IFRSs") as adopted by the European Union.

The Directors are required to prepare Group financial statements for each financial year which give a true and fair view of the state of affairs of the Group and of the financial performance and cash flows of the Group for that period. In preparing those Financial Statements, the Directors are required to:

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

· make judgement and estimates that are reasonable and prudent;

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

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

· state that the Group has complied with IFRSs as adopted by the European Union, subject to any material departures disclosed and explained in the Group financial statements; and

· prepare the Group Financial Statements on a going concern basis unless it is inappropriate to presume that the Group will continue in business.

The Directors confirm that they have complied with the above requirements in preparing the Financial Statements.

The Directors are responsible for keeping adequate accounting records, that are sufficient to show and explain the Group's transactions and disclose with reasonable accuracy at any time, the financial position of the Group and to enable them to ensure that the Financial Statements comply with The Companies (Guernsey) Law, 2008. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud, error and non compliance with law and regulations.

The maintenance and integrity of the Company's website is the responsibility of the Directors; the work carried out by the auditors does not involve considerations of these matters and, accordingly, the auditors accept no responsibility for any change that may have occurred to the Financial Statements since they were initially presented on the website. Legislation in Guernsey governing the preparation and dissemination of the financial statements may differ from legislation in other jurisdictions.

Responsibility Statement of the Directors' in respect of the Consolidated Annual Report

Statement under the Disclosure and Transparency Rules

The Directors each confirm to the best of their knowledge that:

· the Consolidated Financial Statements, prepared in accordance with IFRSs as adopted by European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group; and

· the management report, which is incorporated into the Strategic Report, Directors' Report and Investment Manager's Report, includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that they face.

Statement under the UK Corporate Governance Code

The Directors each confirm to the best of their knowledge that:

· the Annual Report and Financial Statements taken as a whole are fair, balanced and understandable and provide the information necessary to assess the Group's performance, business model and strategy.

Approved by the Board on 16 April 2014.

Paul Orchard-Lisle Sally-Ann Farnon

Chairman Director

All enquiries to:

The Company Secretary

Northern Trust International Fund Administration Services (Guernsey) Limited

Trafalgar Court

Les Banques

St Peter Port

Guernsey

GY1 3Ql

Tel: 01481 745001

Fax: 01481 745051

Gordon Humphries

Standard Life Investments Limited

Tel: 0131 245 2735

Jason Baggaley

Standard Life Investments Limited

Tel: 0131 245 2833

AUDITED FINANCIAL STATEMENTS

Consolidated Statement of Comprehensive Income

for the year ended 31 December 2013

All items in the above Consolidated Statement of Comprehensive Income derive from continuing operations.

Consolidated Balance Sheet

as at 31 December 2013

Approved by the Board of Directors on 16 April 2014.

Consolidated Statement of Changes in Equity

for the year ended 31 December 2013

Consolidated Statement of Changes in Equity

for the year ended 31 December 2012

Consolidated Cash Flow Statement

for the year ended 31 December 2013

Standard Life Investments Property Income Trust Limited

Notes to the Consolidated Financial Statements

for the year ended 31 December 2013

1. GENERAL INFORMATION

Standard Life Investments Property Income Trust Limited ("the Company") and its subsidiary (together the "Group") carries on the business of property investment through a portfolio of freehold and leasehold investment properties located in the United Kingdom. The Company is a limited liability company incorporated and domiciled in Guernsey, Channel Islands. The Company has its listing on the London Stock Exchange.

The address of the registered office is Trafalgar Court, Les Banques, St Peter Port, Guernsey.

These audited Consolidated Financial Statements were approved for issue by the Board of Directors on 16 April 2014.

2. ACCOUNTING POLICIES

2.1 Basis of preparation

The audited Consolidated Financial Statements of the Group have been prepared in accordance with and comply with International Financial Reporting Standards as adopted by the European Union ("IFRS"), and all applicable requirements of The Companies (Guernsey) Law, 2008. The audited Consolidated Financial Statements of the Group have been prepared under the historical cost convention as modified by the measurement of investment property and derivative financial instruments at fair value. The consolidated financial statements are presented in pound sterling and all values are not rounded except when otherwise indicated.

Changes in accounting policy and disclosure

New standards, interpretations and amendments to existing standards which have been published and are mandatory for the Group's annual reporting periods beginning on or after 1 January 2014, are detailed below and have not been adopted early:

- IFRS 10 Consolidated Financial Statements

- IFRS 11 Joint Arrangements

- IFRS 12 Disclosure of Interests in Other Entities

- IAS 27 Separate Financial Statements

- IAS 28 Investments in Associates and Joint Ventures

- IAS 39 Financial Instruments : Recognition and Measurement - Novation of Derivatives and Continuation of Hedge Accounting (Amendments)

- Amendment to IAS 32 Financial Instruments: Presentation

- Amendment to IAS 36 Impairment of Assets

- Amendments to IFRS 10, IFRS 12 and IAS 27: Investment Entities

The standards mentioned above are not expected to have a significant impact on the reported financial position or performance of the Group.

The accounting policies adopted are consistent with those of the previous financial year, except for the following new and amended IFRS and IFRIC interpretations as of 1 January 2013. There have been other new and amended standards issued or have come into effect from 1 January 2013. However, they do not impact the annual consolidated financial statements of the Group and hence not discussed.

IFRS 13 Fair Value Measurement

IFRS 13 establishes a single source of guidance for all fair value measurements. IFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted. The Group has considered the specific requirements relating to highest and best use, valuation premise, and principal (or most advantageous) market. The methods, assumptions, processes and procedures for determining fair value were revisited and adjusted where applicable. The assessment of fair value under IFRS 13 has not materially changed the fair values recognised or disclosed.

IFRS 13 mainly impacts the disclosures of the Group. It requires specific disclosures about fair value measurements and disclosures of fair values, some of which replace existing disclosure requirements in other standards, including IFRS 7 Financial Instruments: Disclosures.

The disclosure requirements of IFRS 13 apply prospectively and need not be provided for comparative periods before initial application. Consequently, comparatives of these disclosures have not been provided.

Amendment to IFRS 7 Financial Instruments: Disclosures

The amendment to IFRS 7 requires additional disclosures for financial assets and liabilities which are offset in the financial statements or are subject to enforceable master netting agreements or similar arrangements . The additional disclosures are presented in note 8 - Trade and other receivables.

IAS 1 Presentation of Items of Other Comprehensive Income - Amendments to IAS 1

The amendments to IAS 1 became effective 1 July 2012. The amendments introduce a grouping of items presented in other comprehensive income (OCI). Items that will be reclassified ('recycled') to profit or loss at a future point in time (e.g., net loss or gain on available-for-sale financial assets) have to be presented separately from items that will not be reclassified (e.g., revaluation reserve). The amendment affected presentation only and had no impact on the Group's financial position or performance.

Amendment to IAS 12 Income Taxes: Deferred Tax

IAS 12 requires an explanation of the relationship between tax expense (income) and accounting profit in either or both of the following forms:

- A numerical reconciliation between tax expense (income) and the product of accounting profit multiplied by the applicable tax rate(s), also disclosing the basis on which the applicable tax rate(s) is (are) computed.

- A numerical reconciliation between the average effective tax rate and the applicable tax rate, also disclosing the basis on which the applicable tax rate is computed.

The additional disclosures are presented in note 6 - Taxation.

2.2 Significant accounting judgements, estimates and assumptions

The preparation of the Group's financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future periods. The most significant estimates and judgements are set out below.

Fair value of investment properties

Investment property is stated at fair value as at the Balance Sheet date. Gains or losses arising from changes in fair values are included in the Consolidated Statement of Comprehensive Income in the year in which they arise. The fair value of investment properties is determined by independent real estate valuation experts using recognised valuation techniques. The fair values are determined based on recent real estate transactions with similar characteristics and locations to those of the Group's assets.

The determination of the fair value of investment properties requires the use of valuation models which use a number of judgements and assumptions. The first model used was the income capitalisation method.

Under the income capitalisation method, a property's fair value is estimated based on the normalised net operating income generated by the property, which is divided by the capitalisation rate (discounted by the investor's rate of return). Under the income capitalisation method, over (above market rent) and under-rent situations are separately capitalised (discounted).

The other method used in determining the fair value of investment property is the development appraisal method.

Under the development appraisal method, estimates of capital outlays and construction cost, development costs, and anticipated sales income are estimated to arrive at a series of net cash flows that are then discounted over the projected development and marketing periods. Specific development risks such as planning, zoning, licences, and building permits are separately valued.

Fair value of financial instruments

When the fair value of financial assets and financial liabilities recorded in the Consolidated Balance Sheet cannot be derived from active markets, they are determined using a variety of valuation techniques that include the use of mathematical models. The input to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair value. The judgements include considerations of liquidity and model inputs such as credit risk (both own and counterparty's), correlation and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments. The models are calibrated regularly and tested for validity using prices from any observable current market transactions in the same instrument (without modification or repackaging) or based on any available observable market data.

The valuation of interest rate swaps used in the Balance Sheet is provided by The Royal Bank of Scotland. These values are validated by comparison to internally generated valuations prepared using the fair value principles outlined above.

Deferred Tax Asset

The Group has recognised a deferred tax asset as detailed in Note 6. The Directors exercise judgement in estimating the amount of the tax losses that will be available for utilisation against future taxable profits and the most important estimate is the expected date of REIT conversion which, based on conditions at the Balance Sheet date, was estimated to be 30 June 2014.

2.3 Summary of significant accounting policies

A Basis of consolidation

The audited consolidated financial statements comprise the financial statements of Standard Life Investments Property Income Trust Limited and its only material wholly owned subsidiary undertaking, Standard Life Investments Property Holdings Limited, a company with limited liability incorporated and domiciled in Guernsey, Channel Islands.

Subsidiaries are entities over which the Group has the power to govern the financial and operating polices generally evidenced by a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group and they are de-consolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains and losses on transactions between Group companies are eliminated on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

B Functional and presentation currency

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ("the functional currency"). The consolidated financial statements are presented in pounds sterling, which is also the Company's functional currency.

C Revenue recognition

Revenue is recognised as follows;

i) Bank interest

Bank interest income is recognised on an accruals basis.

ii) Rental income

Rental income from operating leases is net of sales taxes and VAT recognised on a straight line basis over the lease term. The initial direct costs incurred in negotiating and arranging an operating lease are recognised as an expense over the lease term on the same basis as the lease income. The cost of any lease incentives provided are recognised over the lease term, on a straight line basis as a reduction of rental income. The resulting asset is reflected as a receivable in the Consolidated Balance Sheet. The valuation of investment properties is reduced by the total of the unamortised lease incentive balances. Any remaining lease incentive balances in respect of properties disposed of are included in the calculation of the profit or loss arising at disposal.

Contingent rents, being those payments that are not fixed at the inception of the lease, for example increases arising on rent reviews, are recorded as income in periods when they are earned. Rent reviews which remain outstanding at the year end are recognised as income, based on estimates, when it is reasonable to assume that they will be received.

Surrender premiums received by the Group following the break of a lease are recognised as income to the extent that there are no obligations directly related to that surrender.

iii) Property disposals

Where revenue is obtained by the sale of properties, it is recognised when the significant risks and returns have been transferred to the buyer. This will normally take place on exchange of contracts unless there are significant conditions attached. For conditional exchanges, sales are recognised when these conditions are satisfied.

D Expenditure

All expenses are accounted for on an accruals basis. The investment management and administration fees, finance (including interest on the bank facility and the finance cost of the redeemable preference shares) and all other expenses are charged through the Consolidated Statement of Comprehensive Income as and when incurred. The Group had no properties during the year that did not earn any income during the 12 months to 31 December 2013.

E Taxation

i) Taxes

The Group is subject to income in the United Kingdom and is exempt from capital gains tax. Significant judgement is required to determine the total provision for current and deferred taxes.

The Group recognises liabilities for current taxes based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income and deferred tax provisions in the period in which the determination is made. Deferred tax assets and liabilities are recognised on a net basis to the extent they relate to the same fiscal unity and fall due in approximately the same period.

ii) Current income tax

Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date. Current income tax relating to items recognised directly in equity is recognised in equity and not in the income statement. Positions taken in tax returns with respect to situations in which applicable tax regulations are subject to interpretation are reviewed periodically and provisions are established where appropriate.

iii) Deferred income tax

Deferred income tax is provided using the liability method on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, with the following exceptions:

▸Where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination that, at the time of the transaction, affects neither accounting nor taxable profit or loss.

▸In respect of taxable temporary differences associated with investments in subsidiaries where the timing of the reversal of the temporary differences can be controlled by the parent, and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available against which deductible temporary differences, carried forward tax credits or tax losses can be utilised.

The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities. In determining the expected manner of realisation of an investment property measured at fair value a rebuttable presumption exists that its carrying amount will be recovered through sale. For more details on the judgements used to determine the deferred tax asset please see note 6.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Deferred income tax relating to items recognised directly in equity is recognised in equity and not in profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

F Investment property

Investment property comprises completed property and property under construction or re-development that is held to earn rentals or for capital appreciation or both. Property held under a lease is classified as investment property when the definition of an investment property is met.

Investment property is measured initially at cost including transaction costs. Transaction costs include transfer taxes, professional fees for legal services and initial leasing commissions to bring the property to the condition necessary for it to be capable of operating. The carrying amount also includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met.

Subsequent to initial recognition, investment property is stated at fair value. Fair value is based upon the market valuation of the properties as provided by the independent valuers as described in note 2.2. Gains or losses arising from changes in the fair values are included in the income statement in the year in which they arise. For the purposes of these financial statements, in order to avoid double counting, the assessed fair value is:

i) Reduced by the carrying amount of any accrued income resulting from the spreading of lease incentives and/or minimum lease payments.

ii) Increased by the carrying amount of any liability to the superior leaseholder or freeholder that has been recognised in the Balance Sheet as a finance lease obligation.

Acquisitions of investment properties are considered to have taken place on exchange of contracts unless there are significant conditions attached. For conditional exchanges acquisitions are recognised when these conditions are satisfied.

Investment property is derecognised when it has been disposed of or permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of investment property are recognised in the income statement in the year of retirement or disposal.

Gains or losses on the disposal of investment property are determined as the difference between net disposal proceeds and the carrying value of the asset in the previous full period financial statements.

G Trade and other receivables

Trade receivables are recognised and carried at the lower of their original invoiced value and recoverable amount. Where the time value of money is material, receivables are carried at amortised cost. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the asset is reduced through use of an allowance account, and the amount of the loss is recognised in the Consolidated Statement of Comprehensive Income. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited in the Consolidated Statement of Comprehensive Income.

H Cash and cash equivalents

Cash and cash equivalents are defined as cash in hand, demand deposits, and other short-term highly liquid investments readily convertible within three months or less to known amounts of cash and subject to insignificant risk of changes in value.

I Borrowings and interest expense

All loans and borrowings are initially recognised at the fair value of the consideration received, less issue costs where applicable. After initial recognition, all interest-bearing loans and borrowings are subsequently measured at amortised cost. Amortised cost is calculated by taking into account any discount or premium on settlement. Borrowing costs are recognised within finance costs in the Consolidated Statement of Comprehensive Income as incurred.

J Accounting for derivative financial instruments and hedging activities

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedging transactions. The Group also documents its assessment both at hedge inception and on an ongoing basis of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognised in other comprehensive income in the Consolidated Statement of Comprehensive Income. The gains or losses relating to the ineffective portion are recognised in operating profit in the Consolidated Statement of Comprehensive Income.

Amounts taken to equity are transferred to profit or loss when the hedged transaction affects profit or loss, such as when the hedged financial income or financial expenses is recognised.

When a derivative is held as an economic hedge for a period beyond 12 months after the end of the reporting period, the derivative is classified as non-current consistent with the classification of the underlying item. A derivative instrument that is a designated and effective hedged instrument is classified consistent with the classification of the underlying hedged item.

K Service charge

The Company has appointed a managing agent to deal with the service charge at the investment properties and the Company is acting as an agent for the service charge and not a principal. The table in note 20 is a summary of the service charge during the year. It shows the amount the service charge has cost the tenants for the 12 months to 31 December 2013, the amount the tenants have been billed based on the service charge budget and the amount the Group has paid in relation to void units over the year. The table also shows the balancing service charge that is due back to the tenants as at the Balance Sheet date.

L Other financial liabilities

Trade and other payables are recognised and carried at invoiced value as they are considered to have payment terms of 30 days or less and are not interest bearing. The balance of trade and other payables are considered to meet the definition of an accrual and have been expensed through the income statement or Balance Sheet depending on classification. VAT payable at the Balance Sheet date will be settled within 31 days of the Balance Sheet date with HMRC and deferred rental income is rent that has been billed to tenants but relates the period after the Balance Sheet date. Rent deposits recognised in note 10 are those that are due within one year as a result of upcoming tenant expiries.

3 FINANCIAL RISK MANAGEMENT

The Group's principal financial liabilities, other than derivatives, are loans and borrowings. The main purpose of the Group's loans and borrowings is to finance the acquisition and development of the Group's property portfolio. The Group has rent and other receivables, trade and other payables and cash and short-term deposits that arise directly from its operations.

The Group is exposed to market risk (including interest rate risk and real estate risk), credit risk, capital risk and liquidity risk. The Group is not exposed to currency risk or price risk. The Group is engaged in a single segment of business, being property investment in one geographical area, the United Kingdom. Therefore the Group only engages in one form of currency being pound sterling. The Group currently invests in direct non-listed property and is therefore not exposed to price risk.

The Board of Directors reviews and agrees policies for managing each of these risks which are summarised below.

Market risk

Market risk is the risk that the fair values of financial instruments will fluctuate because of changes in market prices. The financial instruments held by the Group that are affected by market risk are principally the derivative financial instruments.

i) Interest Rate risk

As described below the Group invests cash balances with RBS and Citibank. These balances expose the Group to cash flow interest rate risk as the Group's income and operating cash flows will be affected by movements in the market rate of interest. There is considered to be no fair value interest rate risk in regard to these balances.

The bank borrowings as described in note 11 also expose the Group to cash flow interest rate risk. The Group's policy is to manage its cash flow interest rate risk using interest rate swaps, in which the Group has agreed to exchange the difference between fixed and floating interest amounts based on a notional principal amount (see note 12). The Group has floating rate borrowings of £72,000,000 and £12,432,692, all of which has been fixed via interest rate swaps.

The bank borrowings are carried at amortised cost and the Group considers this to be a close approximation to fair value. The fair value of the bank borrowings is affected by changes in the market interest rate. The fair value of the interest rate swaps is exposed to changes in the market interest rate as their fair value is calculated as the present value of the estimated future cash flows under the agreements. The accounting policy for recognising the fair value movements in the interest rate swaps is described in note 2.3.

Trade and other receivables and trade and other payables are interest free and have settlement dates within one year and therefore are not considered to present a fair value interest rate risk.

The following tables set out the carrying amount of the Group's financial instruments excluding the amortisation of borrowing costs as outlined in note 5. Bank borrowings have been fixed due to interest rate swaps and are detailed further in note 12:

Year ended 31 December 2013

Year ended 31 December 2012

The disclosed amount for interest rate swaps in the above table are the estimated net undiscounted cash flows.

The Group's liquidity position is regularly monitored by management and is reviewed quarterly by the Board of Directors.

Capital risk

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, increase or decrease borrowings or sell assets to reduce debt.

The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings less cash and cash equivalents. Total capital is calculated as equity, as shown in the Consolidated Balance Sheet, plus net debt.

The gearing ratios at 31 December 2013 and at 31 December 2012 were as follows:

Gearing, calculated as borrowings as a percentage of gross assets, will not exceed 65%. The Board's current intention is that the Company's loan to value ratio (calculated as borrowings less all cash as a proportion of the property portfolio valuation) will be between 35% and 45%.

Fair values

Set out below is a comparison by class of the carrying amounts and fair value of the Group's financial instruments that are carried in the financial statements.

Carrying Amount Fair Value

The fair value of the financial assets and liabilities are included at an estimate of the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair value:

- Cash and cash equivalents, trade and other receivables are the same as fair value due to the short-term maturities of these instruments.

- The fair value of bank borrowings is estimated by discounting future cash flows using rates currently available for debt on similar terms and remaining maturities. The fair value approximates their carrying values gross of unamortised transaction costs. This is considered as being valued at level 2 of the fair value hierarchy and has not changed level since 31 December 2012.

- The fair value of the interest rate swap contract is estimated by discounting expected future cash flows using current market interest rates and yield curve over the remaining term of the instrument. This is considered as being valued at level 2 of the fair value hierarchy and has not changed level since 31 December 2012. The definition of the valuation techniques are explained in the significant accounting judgements, estimates and assumptions in note 2.2.

The following table shows an analysis of the fair values of financial instruments recognised in the Balance Sheet by the level of the fair value hierarchy*:

*Explanation of the fair value hierarchy:

Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities.

Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.

Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

4 FEES

Investment management fees

On 19 December 2003 Standard Life Investments (Corporate Funds) Limited ("the Investment Manager") was appointed as Investment Manager to manage the property assets of the Group.

Under the terms of the Investment Management Agreement the Investment Manager is entitled to receive a fee at the annual rate of 0.85% of the total assets, payable quarterly in arrears except where cash balances exceed 10% of total assets. The fee applicable to the amount of cash exceeding 10% of total assets is altered to be 0.20% per annum, payable quarterly in arrears. The Investment Manager has also agreed to reduce its charge to 0.75% of the total assets of the Group until such time as the net asset value per share returns to the launch level of 97p. This is applicable from the quarter ending 31 December 2008 onwards and does not affect the reduced fee of 0.20% on cash holdings above 10% of total assets. The total fees charged for the year ended 31 December 2013 amounted to £1,327,746 (2012: £1,305,792). The amount due and payable at the year end amounted to £347,343 excluding VAT (2012: £321,685 excluding VAT).

Administration, secretarial and registrar fees

On 19 December 2003 Northern Trust International Fund Administration Services (Guernsey) Limited ("Northern Trust") was appointed administrator, secretary and registrar to the Group. Northern Trust is entitled to an annual fee, payable quarterly in arrears, of £65,000. Northern Trust is also entitled to reimbursement of reasonable out of pocket expenses. Total fees and expenses charged for the year ended 31 December 2013 amounted to £80,899 (2012: £75,510). The amount due and payable at the year end amounted to £nil (2012: £16,250 excluding VAT).

Valuer's fee

On 4 December 2007, Jones Lang LaSalle ("the Valuer"), independent international real estate consultants, was appointed as valuer in respect of the assets comprising the property portfolio. The Valuer is entitled to an annual fee of 0.017% of the average portfolio value calculated over the preceding quarter and a start up fee of 0.0225% (with a minimum fee of £2,500) of the value of each property added to the portfolio. The total valuation fees charged for the year ended 31 December 2013 amounted to £30,260 (2012: £30,503) of which minimum fees of £2,500 (2012: £7,500) were incurred due to adding new properties to the portfolio. The amount due and payable at the year end amounted to £7,071 excluding VAT (2012: £7,129 excluding VAT).

Auditor's fee

At the year end date Ernst & Young LLP continued as independent auditor of the Group. The auditor's fees for the year ended 31 December 2013 amounted to £45,800 (2012: £41,440) and relate to audit services provided for the 2013 financial year. Ernst & Young LLP also provided non-audit services in respect of advice relating to the potential consequences of REIT conversion. Fees incurred up to the Balance Sheet date amounted to £6,000 (2012: £nil).

5 FINANCE INCOME AND COSTS

6 TAXATION

Current income tax

The major components of income tax expense for the years ended 31 December are:

A reconciliation between the tax credit and the product of accounting profit multiplied by the applicable tax rate for the year ended 31 December 2013 and 2012 is, as follows:

The Group has available deferred tax assets of £2,954,557 (2012: £3,174,161) due to tax losses which arose in Guernsey that are available for offset against future taxable profits of the Company in which the losses arose. A deferred tax asset of £587,315 (2012: £Nil) has been recognised in respect of these losses. The remaining £2,367,242 of deferred tax assets have not been recognised as the Company expects to convert from a Guernsey Investment Company to a Real Estate Investment Trust (REIT) in 2014 and as a result these tax losses would not be utilised. As a REIT, any future profit generated by the Company would not be taxable in the Company.

The Company and its subsidiary have obtained exempt company status in Guernsey so that they are exempt from Guernsey taxation on income arising outside Guernsey and bank interest receivable in Guernsey. The Board intend to conduct the Group's affairs such that the Company and its subsidiary continue to remain eligible for exemption.

7 INVESTMENT PROPERTIES

Country UK UK UK Total Total

Class Industrial Office Retail 2013 2012

*Lease incentives are split between non current of £3,269,593 and current of £265,445 (note 8).

Valuation gains and losses from investment properties are recognised in profit and loss for the period and are attributable to changes in unrealised gains or losses relating to investment property (completed and under construction) held at the end of the reporting period.

The fair value of completed investment property, except two properties described below, is determined using the income capitalisation method. In the case of the two properties valued using alternative techniques the valuer has used the development appraisal approach as this is the technique most suited to valuing both assets and the details on the specific valuation technique is detailed in the definition below. Neither of these properties are considered to be development properties. The property in Swindon is still generating income for the Group but has development potential in the future, the Group therefore continue to categorize this as an investment property. The property in Staines is undergoing a refurbishment that will be completed by approximately June 2014 and has an agreement for a lease in place. The Group still consider this to be an investment property. Both properties are therefore not shown separately as properties under construction and have been included as investment property in the table above.

The income capitalisation method is based on capitalising the net income stream at an appropriate yield. In establishing the net income stream the valuer has reflected the current rent (the gross rent) payable to lease expiry, at which point the valuer has assumed that each unit will be re-let at their opinion of ERV. The valuer has made allowances for voids and rent free periods where appropriate, as well as deducting non recoverable costs where applicable. The appropriate yield is selected on the basis of the location of the building, its quality, tenant credit quality and lease terms amongst other factors.

Two properties are valued using alternative methods:

The industrial estate in Swindon and the office building in Staines Upon Thames have been valued using the development appraisal method. In the case of the development appraisal method, estimates of capital outlays and construction cost, development costs, and anticipated sales income are estimated to arrive at a series of net cash flows. Specific development risks such as planning, zoning, licences, and building permits are separately valued. Allowances for developers profit and finance costs during construction and marketing periods are also reflected.

One property has changed valuation technique during the year. As at 31 December 2012 the industrial estate in Swindon was valued using the income capitalisation approach. The change in valuation technique was due to the possibility that there could be future development potential and capital expenditure on the property during the coming year. For this reason it was felt the development appraisal technique was more appropriate for this property.

The valuations were performed by Jones Lang Lasalle, an accredited independent valuer with a recognised and relevant professional qualification and recent experience of the location and category of the investment property being valued. The valuation model in accordance with Royal Institute of Chartered Surveyors ('RICS') requirements on disclosure for Regulated Purpose Valuations has been applied (RICS Valuation - Professional Standards, March 2012 published by the Royal Institution of Chartered Surveyors). These valuation models are consistent with the principles in IFRS 13.

The Company appoints a suitable valuer (such appointment is reviewed on a periodic basis) to undertake a valuation of all the direct real estate investments on a quarterly basis. The valuation is undertaken in accordance with the then current RICS guidelines and requirements as mentioned above.

The Investment Manager meets with the valuer on a quarterly basis to ensure the valuer is aware of all relevant information for the valuation and any change in the investment over the quarter. The Investment Manager then reviews and discusses the draft valuations with the valuer to ensure correct factual assumptions are made. The Valuer reports a final valuation that is then reported to the Board.

The management group that determines the Company's valuation policies and procedures for property valuations is the Property Valuation Committee. The Committee reviews the quarterly property valuation report produced by the Valuer (or such other person as may from time to time provide such property valuation services to the Company) before its submission to the Board, focussing in particular on:

· significant adjustments from the previous property valuation report

· reviewing the individual valuations of each property

· compliance with applicable standards and guidelines including those issued by RICS and the UKLA Listing Rules

· reviewing the findings and any recommendations or statements made by the Valuer

· considering any further matters relating to the valuation of the properties

The Chairman of the Committee makes a brief report of the findings and recommendations of the Committee to the Board after each Committee meeting. The minutes of the Committee meetings are circulated to the Board. The Chairman submits an annual report to the Board summarising the Committee's activities during the year and the related significant results and findings.

All investment property is classified as Level 3 in the fair value hierarchy. There were no movements between levels during the year.

There are currently no restrictions on the realisability of investment property or the remittance of income and proceeds of disposal.

The table below outlines the valuation techniques used to derive Level 3 fair values for each class of investment property:

- The fair value measurements at the end of the reporting period.

- The level of the fair value hierarchy (e.g. Level 3) within which the fair value measurements are categorised in their entirety.

- A description of the valuation techniques applied.

- Fair value measurements, quantitative information about the significant unobservable inputs used in the fair value measurement.

- The inputs used in the fair value measurement, including the ranges of rent charged to different units within the same building.

Country & Class Fair value Valuation technique Key unobservable Range (weighted average)

Descriptions and definitions

The table above includes the following descriptions and definitions relating to valuation techniques and key unobservable inputs made in determining the fair values:

Estimated rental value (ERV)

The rent at which space could be let in the market conditions prevailing at the date of valuation.

Equivalent yield

The equivalent yield is defined as the internal rate of return of the cash flow from the property, assuming a rise to ERV at the next review, but with no further rental growth.

Initial yield

Initial yield is the annualised rents of a property expressed as a percentage of the property value.

Reversionary yield

Reversionary yield is the anticipated yield to which the initial yield will rise (or fall) once the rent reaches the ERV.

The table below shows the ERV per annum, area per square foot, average ERV per square foot, initial yield and reversionary yield as at the Balance Sheet date.

The table below presents the sensitivity of the valuation to changes in the most significant assumptions underlying the valuation of completed investment property.

Below is a list of how the interrelationships in the sensitivity analysis above can be explained.

In both cases outlined in the sensitivity table the estimated Fair Value would increase (decrease) if:

· The ERV is higher (lower)

· Void periods were shorter (longer)

· The occupancy rate was higher (lower)

· Rent free periods were shorter (longer)

· The capitalisation rates were lower (higher)

8 TRADE AND OTHER RECEIVABLES

Reconciliation for changes in the provision for impairment of trade receivables:

The estimated fair values of receivables are the discounted amount of the estimated future cash flows expected to be received and approximate their carrying amounts.

The trade receivables above relate to rental income receivable from tenants of the investment properties. When a new lease is agreed with a tenant the Investment Manager performs various money laundering checks and makes a financial assessment to determine the tenant's ability to fulfil its obligations under the lease agreement for the foreseeable future. The majority of tenants are invoiced for rental income quarterly in advance and are issued with invoices at least 21 days before the relevant quarter starts. Invoices become due on the first day of the quarter and are considered past due if payment is not received by this date. Other receivables are considered past due when the given terms of credit expire.

Amounts are considered impaired when it becomes unlikely that the full value of a receivable will be recovered. Movement in the balance considered to be impaired has been included in other direct property costs in the Consolidated Statement of Comprehensive Income. As of 31 December 2013, trade receivables of £114,622 (2012: £34,917) were considered impaired and provided for.

The ageing of these receivables is as follows:

As of 31 December 2013, trade receivables of £410,679 (2012: £381,917) were less than 3 months past due but

considered not impaired.

9 CASH AND CASH EQUIVALENTS

Cash held at banks earns interest at floating rates based on daily bank deposit rates. Deposits are made for varying periods of between one day and three months, depending on the immediate cash requirements of the Group, and earn interest at the applicable short-term deposit rates.

10 TRADE AND OTHER PAYABLES

Trade payables are non-interest bearing and are normally settled on 30-day terms.

11 BANK BORROWINGS

On 20 January 2012 the Company completed the drawdown of £84,432,692 loan with The Royal Bank of

Scotland plc ("RBS") and simultaneously repaid the old loan facility. The new facility is repayable on 16

December 2018. Interest is payable at a rate equal to the aggregate of 3 month Libor, a margin of 1.65% (below

40% LTV) or 1.75% (40% to 60% LTV inclusive) or 1.95% (above 60% LTV).

Under the terms of the loan facility there are certain events which would entitle RBS to terminate the loan facility

and demand repayment of all sums due. Included in these events of default is the financial undertaking relating

to the loan to value percentage. The loan agreement notes that the loan to value percentage is calculated as the

loan amount less the amount of any sterling cash deposited within the security of RBS divided by the gross

secured property value, and that this percentage should not exceed 65% for the first five years and then 60%

from the fifth anniversary to maturity.

Other loan covenants that the Group is obliged to meet include the following:

During the period the Group did not breach any of its loan covenants, nor did it default on any other of its obligations under its loan agreement.

The loan facility is secured by fixed and floating charges over the assets of the Company and its wholly owned subsidiary, Standard Life Investments Property Holdings Limited.

12 INTEREST RATE SWAPS

The Company had two interest rate swap agreements with RBS which ended on 29 December 2013. The first swap agreement was entered into on 29 December 2003. Under this first swap the Company agreed to receive a floating interest rate linked to 3 month Libor and pay a fixed interest rate of 5.115%. The second swap agreement was entered into on 19 December 2008. Under this second swap the Company agreed to pay a floating interest rate linked to 3 month Libor and receive a floating interest rate linked to 1 month Libor plus a margin of 0.1%. Both agreements are for a notional principal amount of £72,000,000. These swap agreements together qualify as a fully effective cash flow hedge and fair value changes are shown in Other Comprehensive Income in the Consolidated Statement of Comprehensive Income. The £72,000,000 loan and the interest rate swaps have the same critical terms and so the hedge is fully effective. The effective interest rate of the combined swap agreements is 5.015% (2012: 5.015%).

On 20 January 2012 the Company completed an interest rate swap of a notional amount of £12,432,692 with RBS. This interest rate swap has a maturity of 16 December 2018. Under the swap the Company has agreed to receive a floating interest rate linked to 3 month Libor and pay a fixed interest rate of 1.77125%.

On 20 January 2012 the Company completed an interest rate swap of a notional amount of £72,000,000 with RBS which replaces the interest rate swap entered into on 29 December 2003. This interest rate swap effective date is 29 December 2013 and has a maturity date of 16 December 2018. Under the swap the Company has agreed to receive a floating interest rate linked to 3 month Libor and pay a fixed interest rate of 2.0515%.

The individual swap assets and liabilities are listed below:

13 LEASE ANALYSIS

Lease length

The Group has entered into leases on its property portfolio. This property portfolio as at 31 December 2013 had

an average lease expiry of 5 years and 4 months. Leases include clauses to enable periodic upward revision of

the rental charge according to prevailing market conditions. Some leases contain options to break before the end

of the lease term.

Future minimum rentals receivable under non-cancellable operating leases as at 31 December are as follows:

The largest single tenant at the year end accounts for 8.6% (2012: 10.24%) of the current annual passing rent.

14 SHARE CAPITAL

Under the Company's Articles of Incorporation, the Company may issue an unlimited number of ordinary shares

of 1 pence each. As at 31 December 2013 there were 154,994,237 ordinary shares of 1p each in issue. All

ordinary shares rank equally for dividends and distributions and carry one vote each. There are no restrictions

concerning the transfer of ordinary shares in the Company, no special rights with regard to control attached to

the ordinary shares, no agreements between holders of ordinary shares regarding their transfer known to the

Company and no agreement which the Company is party to that affects its control following a takeover bid.

Transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of these financial statements are detailed in note 24.

15 RESERVES

Retained earnings

This is a distributable reserve and represents the cumulative revenue earnings of the Group less dividends declared as payable to the Company's shareholders.

Capital reserves

This reserve represents realised gains and losses on disposed investment properties and unrealised valuation gains and losses on investment properties and cash flow hedges since the Company's launch.

Other distributable reserves

This reserve represents the share premium raised on launch of the Company which was subsequently converted to a distributable reserve by special resolution dated 4 December 2003. This balance has been reduced by the allocation of preference share finance costs.

The detailed movement of the above reserves for the years to 31 December 2013 and 31 December 2012 can be found in the Statement of Changes in Equity.

16 EARNINGS PER SHARE NET OF TAX

Basic earnings per share amounts are calculated by dividing profit for the year net of tax attributable to ordinary equity holders by the weighted average number of ordinary shares outstanding during the year. As there are no dilutive instruments outstanding, basic and diluted earings per share are identical.

The following reflects the income and share data used in the basic and diluted earnings

per share computations:

EPRA (as defined in the Financial Highlights) publishes guidelines for calculating adjusted earnings that represent earnings from the core operational activities. Therefore, it excludes the effect of movements in the fair value of, and results from sales of, investment property together with the effect of movements in the fair value of financial instruments.

17 DIVIDENDS

On 21 February 2014 a dividend of £1,756,085, 1.133p per ordinary share (2012: £1,582,028, 1.133p per ordinary share) in respect of the quarter to 31 December 2013 was paid.

18 RECONCILIATION OF CONSOLIDATED NET ASSET VALUE TO

PUBLISHED NET ASSET VALUE

The net asset value attributable to ordinary shares is published quarterly and is based on the most recent valuation of the investment properties and calculated on a basis which adjusts the underlying reported IFRS numbers. The adjustment made is to include a provision for payment of a dividend in respect of the quarter then ended.

The EPRA publishes guidelines for calculating adjusted NAV. EPRA NAV represents the fair value of an entity's equity on a long-term basis. Items that EPRA considers will have no impact on the long term, such as fair value of derivatives, are therefore excluded.