Interim Results

ISIS Property Trust 2 Limited 21 February 2005 To: RNS Date: 21 February 2005 From: ISIS Property Trust 2 Limited Interim Results in respect of the period from 10 May 2004 to 31 December 2004 This announcement of the interim results for the period from 10 May 2004 to 31 December 2004 replaces the announcement issued on 17 February 2005. The revised announcement contains a change to the net asset value per share reported under International Financial Reporting Standards but not the net asset value as reported under UK GAAP nor the Financial Highlights as reported in the original results announcement. Financial Highlights • Share price increased by 9.8% • Net asset value per share increased by 15.3% • Dividends of 2.24 pence per share paid to date and another 1.6875 pence per share to be paid on 29 March 2005 This is the first set of results to be issued by the Company since its launch on 1 June 2004. The Company's investment objective is 'to provide ordinary shareholders with an attractive level of income together with the potential for capital and income growth from investing in a diversified UK commercial property portfolio.' The paragraphs below set out how progress has been made in respect of each part of this objective. Dividends The Company's first interim dividend of 2.24p per Ordinary Share was paid on 24 December 2004 and the Board has declared a second interim dividend, of 1.6875p per Ordinary Share, which will be paid on 29 March 2005 to shareholders on the register on 11 March 2005. As stated in the prospectus, the Company expects to make further dividend payments in respect of its first full accounting period to 30 June 2005, of 1.6875p per Ordinary Share, during each of June and September 2005. The total expected dividends in respect of this period, of 7.3025p per Ordinary Share, are equivalent to an annual gross dividend yield of 6.75 per cent on the issue price of 100p per share. Capital The Company's net asset value (capital only) per share as at 31 December 2004 was 110.7p. This represents an increase of 15.3 per cent compared to the net asset value per share of 96.0p on 1 June 2004. The total return for the period, reflecting both capital growth and dividends payable, was 19.2 per cent. This compares favourably with returns from the IPD All Property and FTSE All-Share indices of 11.8 per cent and 11.6 per cent respectively. The Company's share price increased to 109.8p during the period, representing an increase of 9.8 per cent from the launch price of 100p per share. The share price total return for the period was 14.7%. Property Market Overview The 19 per cent full year out-turn for all property total returns in 2004 was the highest seen for ten years and reflected continued strong investor demand. This strength was maintained in the final quarter of 2004, with returns of 5 per cent. The year saw a return to rental growth after two years of decline, helped by stabilisation in the office market as the year progressed. 2004 was an atypical year with capital growth exceeding income return. Yields fell across all sectors due to the weight of money entering the market. The retail sector continues to out-perform but the office sector has staged a sharp recovery and the sector gap has narrowed. Portfolio Within the context of a strong investment market the portfolio experienced an above average increase in capital values during the period. The portfolio valuation increased from £176.695 million at launch on 1 June 2004 to £192.595 million as at 31 December 2004, an un-geared uplift of 9.0 per cent. This compares to a reported index growth figure of 7.8 per cent (IPD UK monthly Index). The level of investment activity within the UK commercial property market has undoubtedly created an extremely competitive transactional environment with the resultant impact on yields and pricing. In addition, there has been some portfolio specific activity which improved returns. The largest single impact was seen at 48/49 St James Street, London SW1. An uplift of £1.85 million (18.5 per cent) reflected, not only the improved market appetite for West End offices, but also improved rents. This was witnessed by the reletting of the 6th floor at £50.00 per sq. ft. (Estimated Rental Value on 1 June 2004 was £42.50 per sq.ft). At 30/40 The Parade, Leamington Spa, three completed lease renewals and one agreed rent review were, in part, responsible for the valuation uplift of £1.31 million (14.0 per cent). In total, six rent reviews and nine lease renewals were agreed during the period with a total annualised increase in rents achieved of £96,190. The largest uplift was recorded at Genesis House, Milton Keynes where the rent increased from £460,000 per annum to £505,000 per annum, an increase of 9.8 per cent. In summary, the portfolio continues to provide a sound base from which to deliver income and capital growth. No sales or purchases have been undertaken to date. The overall void level for the portfolio currently stands at 0.1 per cent. Gearing At the time of the launch the Company drew down a bank facility of £70,662,000 which represented 40.0 per cent of the initial portfolio valuation. At the same time the Company entered into an interest rate swap transaction under which it fixed the interest rate payable on the full amount of the loan, such that the rate of interest which the Company will pay is fixed at 6.355 per cent per annum until 31 May 2007 and 6.265 per cent from 1 June 2007 until 31 May 2014. As a result of the strong growth in the value of the portfolio during the period, the level of gearing as at 31 December 2004 had decreased to 36.4 per cent. Outlook Prospects remain positive over the next 12 months. The Managers' estimate for all property total returns is between 7 per cent and 9 per cent with the possibility of further yield compression. Rental growth is expected to remain at or around 2004 levels. All enquiries to: The Company Secretary Guernsey International Fund Managers Limited Trafalgar Court Les Banques St Peter Port Guernsey GY1 3QL Tel: 01481 745001 Fax: 01481 745051 ISIS Property Trust 2 Limited Consolidated Income Statement (unaudited) for the period from incorporation on 10 May 2004 to 31 December 2004 Revenue Capital Total £'000 £'000 £'000 Unrealised gain on revaluation of investment properties - 15,785 15,785 Revenue Rental income 7,148 - 7,148 --------- --------- -------- Total income 7,148 15,785 22,933 --------- --------- -------- Expenditure Set-up costs (1,528) - (1,528) Investment management fee (914) - (914) Administrative fee (35) - (35) Valuers' and other professional fees (107) - (107) Directors' fees (43) - (43) Other expenses (198) - (198) --------- --------- -------- Total expenditure (2,825) 15,785 (2,825) --------- --------- -------- Net operating profit before finance costs 4,323 15,785 20,108 Finance costs Interest receivable 114 - 114 Interest payable (2,613) - (2,613) --------- --------- -------- (2,499) - (2,499) --------- --------- -------- Net operating profit from ordinary activities before taxation 1,824 15,875 17,609 Taxation on profit on ordinary activities - - - --------- --------- -------- Net operating profit on ordinary activities after taxation 1,824 15,785 17,609 --------- --------- -------- --------- --------- -------- Net profit for the period 1,824 15,785 17,609 --------- --------- -------- Earnings per share 15.9p ISIS Property Trust 2 Limited Consolidated Balance Sheet at 31 December 2004 (unaudited) £'000 Investment properties 192,595 ----------- Current assets Trade and other receivables 1,261 Cash and cash equivalents 4,729 ----------- 5,990 ----------- Current liabilities Trade and other payables (4,988) Non-current liabilities Interest bearing bank loan (70,566) Interest rate swap (4,284) ----------- Total liabilities (79,838) ----------- NET ASSETS 118,747 =========== Represented by: Share capital 1,105 Special distributable reserve 106,792 Capital reserves 11,501 Revenue reserves (651) ----------- EQUITY SHAREHOLDERS' FUNDS 118,747 =========== Net asset value per Ordinary Share 107.5p ISIS Property Trust 2 Limited Consolidated Statement of Changes in Equity (unaudited) for the period from incorporation on 10 May 2004 to 31 December 2004 £'000 Net profit for the period 17,609 ----------- Issue of ordinary share capital, net of issue costs 107,897 Dividends paid (2,475) ----------- 105,422 ----------- Unrealised loss on revaluation of interest rate swap (4,284) ----------- Net assets as at 31 December 2004 118,747 =========== ISIS Property Trust 2 Limited Consolidated Statement of Cash Flows (unaudited) for the period from incorporation on 10 May 2004 to 31 December 2004 £'000 Cash flows from operating activities Rent and service charges received 8,555 Bank interest received 96 Bank loan interest paid (1,713) Investment management fees paid (534) Operating expense payments (1,237) ----------- Net cash inflow from operating activities 5,167 ----------- Cash flows from investing activities Purchases of property (176,695) ----------- Net cash outflow from investing activities (176,695) ----------- Cash flows from financing activities Proceeds of issue of Ordinary Shares 110,500 Issue costs (2,430) Draw down of bank loan 70,662 Dividends paid (2,475) ----------- Net cash inflow from financing activities 176,257 Net increase in cash and cash equivalents 4,729 Opening cash and cash equivalents - ----------- Closing cash and cash equivalents 4,729 =========== ISIS Property Trust 2 Limited Notes to the interim accounts for the period from incorporation on 10 May 2004 to 31 December 2004 1. The unaudited interim results have been prepared on the basis of International Financial Reporting Standards and the accounting policies which will be set out in the statutory accounts of the Group for the period ending 30 June 2005. 2. Earnings per Ordinary Share are based on 110,500,030 shares, being the weighted average number of shares in issue during the period. 3. Earnings for the period from 10 May 2004 to 31 December 2004 should not be taken as a guide to the results for the period to 30 June 2005. 4. A second interim dividend of 1.6875p per share, equivalent to £1,865,000 will be paid on 29 March 2005 to shareholders on the Register on 11 March 2005. The ex-dividend date will be 9 March 2005. 5. Reconciliation of consolidated net asset value to published net asset value: 31 December 31 December 2004 2004 £'000 (p) Consolidated net asset value per accounts 118,747 107.5 Adjustments:* Revenue after taxation (1,824) (1.6) Dividends paid 2,475 2.2 Unrealised loss on revaluation of interest rate swap 4,284 3.9 Costs allocated to capital as permitted by SORP (1,407) (1.3) ---------- ---------- Published net asset value 122,275 110.7 ========== ========== * The published NAV is calculated on a capital basis under UK Generally Accepted Accounting Principles ('UK GAAP') and practice for investment trust companies. In order to reconcile this to the published accounts it is necessary to add back all revenue reserves and account for the effect of International Financial Reporting Standards versus UK GAAP. Costs allocated to capital comprise management fees and bank loan interest payable, charged 60 per cent to revenue and 40 per cent to capital in recognition of the long term expected returns of the group, as permitted by the UK Statement of Recommended Practice 'Financial Statements of Investment Trust Companies' published in January 2003. 6. On 10 December 2004, the Royal Court of Guernsey confirmed the reduction of capital by way of a cancellation of the Company's share premium account. The amount cancelled, being £106,792,000, has been credited as a distributable reserve established in the Company's books of account and shall be available as distributable profits to be used for all purposes permitted under Guernsey law, including the buyback of shares and the payment of dividends. 7. The Group results consolidate those of IPT 2 Property Holdings Limited, a wholly owned subsidiary which invests in properties. This information is provided by RNS The company news service from the London Stock Exchange

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