Annual Financial Report

AUDAX PROPERTIES PLC

ANNUAL FINANCIAL REPORT

FOR THE YEAR ENDED 31 MARCH 2013

Directors' Report

The Directors have pleasure in submitting their Annual Report and the Financial Statements for the year ended 31 March 2013.

Business Review

The Directors have prepared this Business Review in accordance with the requirements of Section 417 of the Companies Act 2006. A review of the Company's activities is given in the Results and Dividend section.

The Directors have identified the principal risks and uncertainties which affect its business and these are detailed in Note 15 to the Financial Statements along with the Directors' policy for managing the principal risks and uncertainties. Additional risks include:

Regulatory risk: The Company operates in a complex regulatory environment and faces a number of regulatory risks. In respect of the parent company Value and Income Trust PLC, breaches of regulations, such as Sections 1158-1159 of the Corporation Taxes Act 2010, the UKLA Listing Rules and the Companies Act 2006, could lead to a number of detrimental outcomes and reputational damage. In addition, breaches of controls by service providers to the Company and its parent company, could also lead to reputational damage or loss. The Audit and Management Engagement Committee of the parent company monitors compliance with regulations by reviewing internal control reports from the Administrator, and from the Investment Managers, OLIM Limited ("OLIM") and OLIM Property Limited ("OLIM Property").

The Directors have identified the Company's net assets at each year end and operating profit or loss for the year as the two key performance indicators for determining the progress of the Company and the relevant figures may be found in the Results and Dividend section below.

Results and Dividend

The properties in which the Company has invested have continued to show a satisfactory total return in present market conditions. The results for the year and future prospects are also deemed to be satisfactory. Additional information may be found in the Annual Report of the parent company.

No interim dividend has been declared and paid in the year ended 31 March 2013 (2012:2,300 pence per Ordinary share). The Directors do not recommend the payment of a final dividend (2012: nil).

Principal Activity and Status

The business of the Company is that of a property investment company within the United Kingdom and the Directors do not envisage any change in this activity in the foreseeable future. The Company is registered as a public limited company in England and Wales under company number 2027379. The Company is a wholly-owned subsidiary of Value and Income Trust PLC ("the parent company").

The "close company" provisions do not apply to the Company.

The Company makes no political donations or expenditures, or donations for charitable purposes and has no employees.

Capital Structure

As at 31 March 2013 and 1 April 2012, the Company had 50,000 £1 Ordinary shares in issue, 50p partly paid, each with one voting right resulting in voting rights of 50,000. As at 1 April 2012 and 31 March 2013 and the date of this Report, Value and Income Trust PLC held 49,999 of the Ordinary shares and Matthew Oakeshott held 1 Ordinary share. Each Ordinary shareholder is entitled to one vote on a show of hands and, on a poll, to one vote for every share held.

The Company also had debenture stock borrowings of £15m which are secured over specific assets of the Company and the parent company and which rank for repayment ahead of any capital return to shareholders.

Directors

The Board consists of a Chairman, James Ferguson, and four Directors. David Back resigned as a Director at the conclusion of the Annual General Meeting on 13 July 2012. John Kay is the Senior Independent Director. Biographies of the current Directors are shown below.

JAMES FERGUSON

(Chairman - Independent Director)

James Ferguson was appointed a director in 1986 and Chairman in 1994. He joined Stewart Ivory in 1970, became Chairman in 1989 and retired in July 2000. He is Chairman of Scottish Oriental Smaller Companies Trust PLC, The North American Income Trust PLC (formerly Edinburgh US Tracker Trust PLC), Northern 3 VCT PLC and The Monks Investment Trust PLC. He is also a director of The Independent Investment Trust PLC. He is a former Deputy Chairman of the Association of Investment Companies. James is Chairman of Value and Income Trust PLC.

JOHN KAY

(Independent Director - Senior Independent Director)

John Kay, appointed a director in 1994, is an economist specialising in the application of economics to business issues. He has been chairman of London Economics, a director of several other companies, has held chairs at the London Business School and Oxford University and is currently a visiting Professor of Economics at the London School of Economics. He is a director of The Law Debenture Corporation PLC and Scottish Mortgage Investment Trust PLC. He is a Director of Value and Income Trust PLC.

ANGELA LASCELLES

(Managing Director OLIM Limited - Non Independent Director)

Angela Lascelles has been professionally engaged in investment business since graduating in philosophy from London University. She spent four years in stockbroking before becoming a fund manager, first of an investment trust, then at the Associated British Foods Pension Fund and at Courtaulds Pension Fund from 1979 until 1986. She has been a director of OLIM since 1986. She was re-appointed as a director on 15 January 2009. She is a Director of Value and Income Trust PLC.

MATTHEW OAKESHOTT

(Chairman OLIM Property Limited - Non Independent Director)

Matthew Oakeshott, after studying economics at Oxford University and a period as special adviser to Mr Roy Jenkins as Home Secretary, joined S.G. Warburg & Co Ltd in 1976 and became a director of Warburg Investment Management Ltd in 1978. He was Investment Manager of Courtaulds Pension Fund from 1981 to 1985. He was a director of OLIM from 1986 to April 2012 and is now Chairman of OLIM Property Limited which is controlled by Matthew Oakeshott through his investment in Seagrove Investments Limited. Matthew Oakeshott is a Life Peer. He was appointed a director on 1 April 2007. He is a Director of Value and Income Trust PLC.

DAVID SMITH

(Independent Director)

David Smith, appointed a director on 10 July 2009, retired from the legal firm Shepherd & Wedderburn in 2008 where he was a partner for 34 years, specialising in commercial property. He is a Director of Value and Income Trust PLC.

Policy on tenure and Directors' independence

The Directors take the view, in line with the AIC Code on Corporate Governance, that independence is not compromised by length of service on the Board and that experience can add significantly to the Board's strength. With the exception of Angela Lascelles and Matthew Oakeshott, all Directors who served during the year are considered by the Board to be independent of the investment managers, OLIM and OLIM Property, and free of any material relationship with OLIM or OLIM Property. Angela Lascelles, as a director of OLIM, and Matthew Oakeshott, as a director of OLIM Property, are not considered to be independent under the UKLA Listing Rules and accordingly submit themselves annually for re-election at the Annual General Meeting of the parent company.

The Directors do not retire by rotation as the Company is a wholly-owned subsidiary and the Board of the parent company has decided that all of its Directors will retire at every third AGM of the parent Company and, where their services are in excess of nine years, will offer themselves for re-election at each AGM of the parent company. The Board of the parent company undertakes an annual evaluation of the Board with a focus on the reasons why any director, as assessed by the other Directors, is considered to be independent notwithstanding the fact that the Director may have served for more than nine years from the date of their first election. A Director appointed during the year is required, under the Company's Articles of Association, to retire and seek re-election at the next Annual General Meeting.

There is an agreed procedure for Directors to take independent professional advice if necessary and at the Company's expense. This is in addition to the access which every Director has to the advice and services of the Company Secretary, Maven Capital Partners UK LLP, which is responsible to the Directors for ensuring that Board procedures are followed and that applicable rules and regulations are complied with.

Directors' share interests

The Directors at 31 March 2013 and 1 April 2012 had no interests in the share capital and debentures of the Company with the exception of Matthew Oakeshott who held one ordinary share at 31 March 2013 and 1 April 2012. These interests were unchanged at the date of this Report. No Director has a service contract with the Company.

Conflicts of Interest

The Board has a procedure in place to deal with a situation where a Director has a conflict of interest, as required by the regime introduced by the Companies Act 2006. As part of this process, the Directors prepare a list of other positions held and all other conflict situations that may need to be authorised either in relation to the Director concerned or his/her connected persons. The Board considers each Director's situation and decides whether to approve any conflict, taking into consideration what is in the best interests of the Company and whether the Director's ability to act in accordance with his or her wider duties is affected. Each Director is required to notify the Company Secretary of any potential or actual conflict situations that will need authorising by the Board. Authorisations given by the Board will be reviewed at each Board meeting.

The Directors' interests in contractual arrangements are as shown in Note 14 to the Financial Statements. No other contracts or arrangements subsisted in which any of the Directors was materially interested.

Directors' and Officers' Liability Insurance

The parent company purchases and maintains liability insurance covering the Directors and officers of the Company.

Investment Management

Up to 5 April 2012, investment management of the Company's assets and responsibility for the Company's operations was delegated to OLIM. With effect from 5 April 2012, responsibility for providing property investment management services to the Company was transferred from OLIM to OLIM Property.

Under two separate investment management agreements entered into by the parent Company Value and Income Trust PLC, both of which may be terminated by either party on giving one year's notice, OLIM and OLIM Property receive an investment management fee of 2/3 of 1% of VIT and its subsidiaries total assets, which is allocated 2/3 to OLIM and 1/3 to OLIM Property.

During the year ended 31 March 2013 the Company paid management fees of £346,221 (excluding VAT) to the investment managers. Of this, OLIM received a management fee, excluding VAT of £231,807 and OLIM Property received a management fee, excluding VAT of £114,414.

An additional fee is payable to the Company Secretary and Administrator for company secretarial and administrative services (see Note 2).

The Directors of the Company (excepting Matthew Oakeshott and Angela Lascelles) review the terms and conditions of the appointment of OLIM and OLIM Property on a regular basis. Following the most recent review, the Directors are satisfied that the continuing appointment of OLIM and OLIM Property as investment managers, on the current terms, is in the best interests of shareholders as a whole as the Company benefits from the expertise of the specialised team of investment professionals employed by each of OLIM and OLIM Property. In the event of termination on less than the agreed notice period, compensation is payable in lieu of the unexpired notice period.

Corporate Governance

The Company is committed to high standards of corporate governance and the Directors are accordingly accountable to the Company's shareholders.

The Directors have considered the principles and recommendations of the AIC Code of Corporate Governance ('AIC Code'), by reference to the AIC Corporate Governance Guide for Investment Companies ('AIC Guide'). The AIC Code, as explained by the AIC Guide, addresses all the principles set out in the Main Principles of the UK Corporate Governance Code ('UK Code'), as well as setting out additional principles and recommendations on issues that are of specific relevance to the Company. The AIC Code and AIC Guide are available from the AIC's website at www.theaic.co.uk. The UK Code is available from the Financial Reporting Council's website at www.frc.org.uk.

The Directors consider that reporting against the principles and recommendations of the AIC Code, and by reference to the AIC Guide (which incorporates the UK Code), would provide better information to shareholders. The Company has complied with the recommendations of the AIC Code and the main provisions of UK Code to the extent that the Company is a wholly-owned subsidiary of its parent company.

The UK Code includes provisions relating to:

·; the role of the Chief Executive;

·; Executive Directors' remuneration; and

·; the need for an internal audit function

For the reasons set out in the AIC Guide, and in the UK Code, the Directors consider that these provisions are not relevant to the position of the Company, being an externally managed investment company. The Company has therefore not reported further in respect of these provisions.

Matthew Oakeshott and Angela Lascelles do not receive any remuneration directly from the Company or the parent company. The amount of £14,000 (2012 - £12,000) was paid in the year to OLIM for the provision of the services of Angela Lascelles as a director of the Company and its parent Company. The amount of £14,000 was paid to OLIM Property (2012 - £12,000 was paid to OLIM) in the year for the provision of the services of Matthew Oakeshott as a director of the Company and its parent company. These amounts were included in the fees paid to OLIM and OLIM property in the year in respect of investment management services.

The Board sets the Company's objectives and ensures that its obligations to its Shareholders are met. The Board has formally adopted a Schedule of Matters Reserved which are required to be brought to it for decision thus ensuring that it maintains full and effective control over appropriate strategic, financial, operational and compliance issues. The requirement for Board approval on these matters is communicated directly to the senior staff of OLIM and OLIM Property.

The Schedule of Matters Reserved includes:

- the maintenance of clear investment objectives and risk management policies;

- the monitoring of the business activities of the Company including investment performance and revenue budgets;

- Companies Act requirements such as the approval of the periodic financial statements and approval and recommendation of any dividends;

- major changes relating to the Company's structure, including share buybacks and share issues;

- succession planning including Board appointments and removals and the related terms;

- appointment and removal of the Managers and the terms and conditions of the investment management agreements relating thereto;

- terms of reference and membership of Board Committees; and

- Stock Exchange/UK Listing Authority/Financial Services Authority matters, including responsibility for approval of all circulars, listing particulars and approval of all releases concerning matters decided by the Board.

The Board performs the role of Nomination Committee, chaired by James Ferguson. The Nomination Committee comprises the whole Board. This is considered appropriate given the Board's small size and composition. The terms of reference of the Nomination Committee are available from the Company Secretary on request. The Nomination Committee is responsible for considering appointments to the Board; possible new Directors are identified against the requirements of the Company's business and the need to have a balanced Board. Every Director is entitled to receive appropriate training as deemed necessary. The Board has conducted appraisals of the Chairman, the other Directors and the Board as a whole which include completion of a questionnaire covering the operation of the Board and separate discussion between the Chairman and each member of the Board. The Senior Independent Director meets with the Chairman to discuss the Chairman's evaluation by the other members of the Board.

The Board normally meets at least four times each year and more frequently when business needs require. The Table below shows the number of Board meetings attended by each director against the total number of meetings that each Director was entitled to attend (Matthew Oakeshott and Angela Lascelles are not members of the Audit and Management Engagement Committee).

Table - Board and Committee meetings - Director eligibility and attendance.

* David Back retired as a director at the conclusion of the Annual General Meeting on 13 July 2012.

Internal Controls

The Directors are ultimately responsible for the Company's system of internal controls and risk management and for reviewing its effectiveness. Following publication by the Financial Reporting Council of 'Internal Control: Revised Guidance for Directors on the Combined Code' (the 'FRC Guidance'), the Directors confirm that there is an ongoing process for identifying, evaluating and managing the significant risks faced by the Company. This process has been in place for the year under review and up to the date of approval of this Annual Report and Financial Statements and is regularly reviewed by the Board and accords with the FRC Guidance.

The Directors have reviewed the effectiveness of the system of internal controls. In particular, the Directors have reviewed and updated the process for identifying and evaluating the significant risks affecting the Company and policies by which these risks are managed. The significant risks faced by the Company are as follows:

·; financial;

·; operational; and

·; compliance.

Further information regarding the risks attaching to the Company's financial instruments may be found in Note 15 to the Financial Statements.

The key components designed to provide effective internal control are outlined below:

·; forecasts and management accounts are prepared which allow the Directors to assess the Company's activities and review its performance; the emphasis is on obtaining the relevant degree of assurance and not merely reporting by exception;

·; OLIM and OLIM Property regularly report to the Directors on the investment portfolio;

·; the compliance departments of OLIM and OLIM Property keep their operations under review;

·; written agreements are in place which specifically define the roles and responsibilities of OLIM, OLIM Property and Maven Capital Partners UK LLP; and

·; at its meeting in May 2013, the Audit and Management Engagement Committee of the parent company carried out an annual assessment of internal controls for the year ended 31 March 2013 by considering documentation from OLIM, OLIM Property, Aberdeen Asset Management PLC (Company Secretary until 1 February 2013) and Maven Capital Partners UK LLP (Company Secretary from 1 February 2013), and taking account of events since 31 March 2013.

Internal control systems are designed to meet the Company's particular needs and the risks to which it is exposed. Accordingly, the internal control systems are designed to manage rather than eliminate the risk of failure to achieve business objectives and by their nature can only provide reasonable and not absolute assurance against misstatement and loss.

Accountability and Audit

The Directors have appointed an Audit and Management Engagement Committee which comprises the Independent Directors and is chaired by James Ferguson. While the Directors note that this is not in compliance with the AIC Code, the Directors consider that it remains appropriate for James Ferguson to continue to chair the Committee, due to its small size and composition.

Audit matters are reviewed by the Audit and Management Engagement Committee within clearly defined written terms of reference (copies of which are available from the Company Secretary on request).

A summary of the Committee's main duties is shown below:

- to monitor the integrity of the interim management statements, half-yearly and annual financial statements of the Company by reviewing and challenging where necessary, the actions and judgements of the Managers;

- to review and monitor the effectiveness of the Company's internal controls and risk management systems;

- to review an annual statement from the Managers detailing the arrangements in place whereby the Managers staff may, in confidence, escalate concerns about possible improprieties in matters of financial reporting or other matters;

- review the Managers' procedures for detecting fraud and the Managers' systems and controls for the prevention of bribery;

- to consider annually whether there is a need for the Company to have its own internal audit function;

- to meet with the Independent Auditor to review their proposed audit programme and their findings;

- to make recommendations in relation to the appointment of the Independent Auditor and to approve their remuneration and terms of engagement;

- to monitor and review annually the Auditor's independence, objectivity, effectiveness, resources and qualification. At its May 2013 meeting the Committee confirmed its view that the Independent Auditor remained independent and objective; and

- to develop and implement a policy on the engagement of the Independent Auditor for non-audit services. During the period under review, fees of £825, excluding VAT, (2012 - £800), excluding VAT), were paid to the Independent Auditor in respect of non-audit services - it is the policy of the Board to review and pre-approve any non-audit services in light of the Independent Auditor's obligation to remain independent.

Matters related to management engagement include the review of the performance of the Managers, their remuneration and compliance with the terms of the investment management agreements.

Going Concern

In compliance with the UKLA's Listing Rules and with reference to the Financial Reporting Council's guidance on Going Concern and Liquidity Risk issued in October 2009, the Directors can report that, based on the Company's valuations of assets and liabilities, budgets and financial projections, they have satisfied themselves that the business is a going concern. The Directors believe that the Company has adequate resources to continue in operational existence for the foreseeable future and for at least twelve months from the date of the approval of this Report.

Creditor Payment Policy

It is the policy of the Company to settle all investment transactions in accordance with the terms and conditions of the relevant market in which it operates. All other expenses are paid on a timely basis in the ordinary course of business. In certain circumstances, settlement terms are agreed prior to business taking place.

Independent Auditor

A resolution to re-appoint Chiene + Tait, Chartered Accountants, as Independent Auditor of the Company will be proposed at the Annual General Meeting.

The Directors confirm that as far as they are aware, as at the date of this Report, there is no relevant audit information of which the Company's Independent Auditor is unaware and that each Director has taken all the steps they could reasonably be expected to have taken as a Director in order to make themselves aware of any relevant audit information and to establish that the Company's Independent Auditor is aware of that information.

Relations with Shareholders

The Directors and the Managers consider it important to maintain good relations with shareholders and welcome their views. The Managers, Company Secretary and Registrar are available to answer shareholder queries throughout the year and contact details may be found on page 1. The notice of the Annual General Meeting, which is included within the Annual Report, is normally sent out at least 20 working days in advance of the meeting.

Additional Information

Where not provided elsewhere in the Directors' Report, the following provides the additional information required to be disclosed by The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008.

There are no restrictions on the transfer of Ordinary shares or Debenture loan stock in the Company other than certain restrictions which may from time to time be imposed by law (for example, insider trading law). The Company is not aware of any agreements between shareholders that may result in a transfer of securities and/or voting rights.

The rules governing the appointment of Directors are set out in the Statement of Corporate Governance in the Annual Report of the parent company. The Company's Articles of Association may only be amended by a special resolution at a general meeting of shareholders.

The Company is not aware of any significant agreements to which it is a party that take effect, alter or terminate upon a change of control of the Company following a takeover.

Other than the investment management agreements between the Managers and the parent company, the Company is not aware of any contractual or other agreements which are essential to its business which could reasonably be expected to be disclosed in the Directors' Report.

By order of the Board

Maven Capital Partners UK LLP

Company Secretary

24 May 2013

STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND THE FINANCIAL STATEMENTS

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

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with International Financial Reporting Standards as adopted by the European Union.

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 Company and of the profit or loss of the Company for that period. In preparing these financial statements, International Accounting Standard 1 requires that Directors:

• properly select and consistently apply accounting policies;

• 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 are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance;

• make an assessment of the Company's ability to continue as a going concern; and

• make judgements and estimates that are reasonable and prudent.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006.

They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Responsibility Statement

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

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

• the Directors' Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that they face.

For and on behalf of the Board of Audax Properties PLC

James Ferguson

Chairman

24 May 2013

STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 MARCH 2013

All items in the above statement derive from continuing operations.

The accompanying notes are an integral part of the financial statements.

STATEMENT OF FINANCIAL POSITION

AS AT 31 MARCH 2013

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 MARCH 2013

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 MARCH 2013

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 MARCH 2013