Interim Results

ISIS Property Trust 2 Limited
08 March 2007


To:               RNS

Date:             8 March 2007

From:             ISIS Property Trust 2 Limited


Interim results in respect of the period ended 31 December 2006


   • Net asset value per share increased by 6.8 per cent

   • Dividend yield of 4.9 per cent


The Chairman, Quentin Spicer, stated:

'The six months to 31 December 2006 saw further strong performance for the
commercial property sector, with total returns according to the Investment
Property Databank ('IPD') Monthly Index of 7.7 per cent. The Company's net asset
value total return for the period was 9.3 per cent and the net asset value per
share as at 31 December 2006 was 151.9 pence.


The shares have historically traded at a premium to net asset value. However,
this trend changed during the second half of 2006, subsequent to the
announcement of two interest rate increases. The share price fell by 0.5 pence
during the period and the shares were trading at a 6.5 per cent discount as at
31 December 2006.


Property Market and Portfolio


There was an increased level of activity within the portfolio during the period,
with three properties being sold. The largest sale was 99/101 Long Acre, London
WC2 which was sold for £17.5million, reflecting a net initial yield of 3.6 per
cent. The property valuation at 30 June 2006 was £16.4 million and the original
purchase price at launch was £10.8 million.


The property at Genesis House, Milton Keynes was sold for £8.1 million
reflecting a yield of 5.85 per cent. The valuation as at 30 June 2006 was £6.8
million and the purchase price was £6.0 million in June 2004. The Company also
sold 114 Princes Street, Edinburgh for £985,000 reflecting a yield of 4.1 per
cent, compared with its valuation at 30 June 2006 of £950,000 and a purchase
price of £710,000.


Apart from the sales, further significant increases in value were recorded on a
number of properties. A significant contribution came from the property at Units
1-8 Lakeside Road, Colnbrook which increased in value by 10.3 per cent to £15.5
million, as a result of the refurbishment and re-letting of units. Also of
particular note was 48/9 St James Street, London WC2 which increased in value by
10.5 per cent to £18.4 million, as a result of an increase in ERV ('Estimated
Rental Value')and an inward yield shift from continued occupational and investor
demand for West End office property. Clifton Moor Gate, York increased in value
by 4.9 per cent to £10.7 million, as a result of yield movement from increasing
investor demand in the motor showroom sector.


Across the portfolio, void rates remain extremely low at 0.3 per cent, compared
with the IPD average of 7.4 per cent. During the period, six rent reviews were
completed providing an uplift of £45,875 per annum, or 6.4 per cent.


The receipts from the sales of property in the first half of the financial year
are expected to be reinvested in the short to medium term, with a view to
rebalancing the portfolio. It is the intention of the Managers to seek further
investment in the out of town retail and office sectors.


Dividends


A first interim dividend of 1.73 pence per share was paid on 22 December 2006. A
second interim dividend of 1.73 pence per share will be paid on 30 March 2007 to
shareholders on the register on 16 March 2007. As explained in my 2006 annual
results statement, this new rate of dividend represents an increase of 2.5 per
cent on the rate set at launch and it is intended that, in the absence of
unforeseen circumstances, future quarterly dividends will be maintained at this
level.


Borrowings


The use of borrowings has continued to be an effective strategy in a market of
increasing property values, providing enhanced returns to shareholders. The
gearing level as at 31 December 2006 was 29.4 per cent, which compared to 30.9
per cent as at 30 June 2006 and 40.0 per cent at launch on 1 June 2004.


On 10 January 2007 the Company repaid in full its existing debt facility of
£70.7m with The Royal Bank of Scotland plc ('RBS') and entered into a new £75m
facility with Lloyds TSB Scotland plc ('LTSB'). The term of this facility is
until January 2017. The margin under the new debt facility is 50 basis points
over LIBOR for the first three years and 45 basis points over LIBOR for the
remaining period. The other terms of the facility are substantially identical to
the terms of the previous facility with RBS. The Company has initially drawn
down £60m under the new facility.


At the same time, the Company terminated the interest rate swap with RBS and
entered into a new interest rate swap transaction with LTSB. Under this
agreement, the interest on the amount initially drawn down under the new
facility has been fixed at an aggregate interest rate (including margin) of
5.655 per cent per annum for the first three years and 5.605 per cent per annum
thereafter. This compares to a fixed rate of interest of 6.265 per cent under
the previous facility.


Outlook

It has been another successful six months for the Company and further positive
returns are expected during the remainder of the financial year, although at
more modest levels than previously witnessed.


Future returns are expected to be driven by income growth, rather than the
capital returns experienced to date. The Company has realised capital gains on
some properties and the Board believes it is well placed to take advantage of
any new investment opportunities that come to the market.


Enquiries to:

The Company Secretary

Northern Trust International Fund Administration Services (Guernsey) Limited

Trafalgar Court

Les Banques

St Peter Port

Guernsey GY1 3QL

Tel: [phone]

Fax: [phone]


I McBryde, S Macrae

F&C Investment Business Limited

Tel: [phone]

Fax: [phone]


ISIS Property Trust 2 Limited


                         Consolidated Income Statement
                     for the six months to 31 December 2006


Notes                      Six months to 31     Six months to 31    Year to 30
                              December 2006        December 2005     June 2006
                                (unaudited)          (unaudited)     (audited)
                                      £'000                £'000         £'000

Revenue

Rental income                         6,106                6,201        12,547

Gains on investment
properties 7                         11,173               16,769        31,158
                                  -----------          -----------   -----------
Total income                         17,279               22,970        43,705
                                  -----------          -----------   -----------

Expenditure

Investment management fee           (1,024)                (898)       (1,883)

Direct operating
expenses of let rental
property                              (240)                (237)         (466)

Administrative fee                     (32)                 (31)          (62)

Valuation and other professional
fees                                   (78)                 (70)         (157)

Directors' expenses                    (52)                 (33)          (66)

Other expenses                         (94)                (113)         (162)
                                  -----------          -----------   -----------
Total expenditure                   (1,520)              (1,382)       (2,796)
                                  -----------          -----------   -----------
Net operating profit before
finance costs                        15,759               21,588        40,909
                                  -----------          -----------   -----------

Net finance costs

Interest revenue receivable             187                   64           201

Finance costs                        (2,265)              (2,270)       (4,508)
                                  -----------          -----------   -----------
                                     (2,078)              (2,206)       (4,307)
                                  -----------          -----------   -----------

Net profit from ordinary activities before
taxation                             13,681               19,382        36,602

Taxation on profit on                     
ordinary activities                       -                    -             -
                                  -----------          -----------   -----------
Net profit for the period            13,681               19,382        36,602
                                  ===========          ===========   ===========

Earnings per share 2                  12.4p                17.5p         33.1p


                         ISIS Property Trust 2 Limited


               Consolidated Balance Sheet as at 31 December 2006

 
                                31 December        31 December         30 June
                                       2006               2005            2006
                                (unaudited)        (unaudited)       (audited)
                                      £'000              £'000           £'000
Non-current assets

Investment properties               212,471            214,065         227,293
                                  -----------        -----------     -----------

Current assets
Trade and other receivables           3,306              1,046           2,939
Cash and cash equivalents            28,822              7,578           5,051
                                  -----------        -----------     -----------
                                     32,128              8,624           7,990
                                  -----------        -----------     -----------
Total assets                        244,599            222,689         235,283
                                  -----------        -----------     -----------

Non-current liabilities

Interest-bearing bank loan          (70,725)           (71,330)        (71,330)
Interest rate swap liability         (1,807)            (5,741)         (2,652)
                                  -----------        -----------     -----------
                                    (72,532)           (77,071)        (73,982)

Current liabilities

Trade and other payables             (4,181)            (5,062)         (4,165)
                                  -----------        -----------     -----------
Total liabilities                   (76,713)           (82,133)        (78,147)
                                  -----------        -----------     -----------

                                  -----------        -----------     -----------
Net assets                          167,886            140,556         157,136
                                  ===========        ===========     ===========

Represented by:

Share capital                         1,105              1,105           1,105
Special distributable reserve       102,020            104,186         103,288
Capital reserve                      66,568             41,006          55,395
Other reserve                        (1,807)            (5,741)         (2,652)
                                  -----------        -----------     -----------
Equity shareholders' funds          167,886            140,556         157,136
                                  ===========        ===========     ===========

Net asset value per share 6          151.9p             127.2p          142.2p


                         ISIS Property Trust 2 Limited

                  Consolidated Statement of Changes in Equity
                     for the six months to 31 December 2006


Notes                       31 December 2006   31 December 2005   30 June 2006
                                 (unaudited)        (unaudited)      (audited)
                                       £'000              £'000          £'000

Opening net assets                   157,136            124,478        124,478

Net profit for the period             13,681             19,382         36,602

Dividends paid 4                     (3,776)            (3,730)        (7,459)
Unrealised gain on
revaluation of interest
rate swap                                845                426          3,515
                                  ------------        -----------    -----------
Closing net assets                   167,886            140,556        157,136
                                  ============        ===========    ===========


                         ISIS Property Trust 2 Limited


                      Consolidated Statement of Cash Flows
                     for the six months to 31 December 2006


                           Six months to 31     Six months to 31    Year to 30
                              December 2006        December 2005     June 2006
                                (unaudited)          (unaudited)     (audited)
                                      £'000                £'000         £'000

Cash flows from
operating activities

Net operating profit for the
period before
finance costs                        15,759               21,588        40,909

Adjustments for:

Gains on investment
properties                          (11,173)             (16,769)      (31,158)

(Increase) /decrease in
operating trade and
other receivables                      (367)                 258        (1,635)

                                    ---------            ---------     ---------
Increase / (decrease) in
operating trade and
other payables                           87                  565          (326)

                                    ---------            ---------     ---------
                                      4,306                5,642         7,790
                                    ---------            ---------     ---------

Interest received                       187                   64           201

Bank loan
interest paid                        (2,611)              (1,959)       (3,927)
Interest rate swap
arrangement                            (330)                (293)         (569)
                                    ---------            ---------     ---------
                                     (2,754)              (2,188)       (4,295)
                                    ---------            ---------     ---------
Net cash inflow from
operating activities                   1,552                3,454         3,495
                                    ---------            ---------     ---------

Cash flows from investing activities

Capital expenditure                    (615)              (1,246)          (85)
Sale of investment
properties                            26,610                5,000         5,000
                                    ---------            ---------     ---------
Net cash inflow from
investing activities                  25,995                3,754         4,915
                                    ---------            ---------     ---------

Cash flows from financing activities
Dividends paid                       (3,776)              (3,730)       (7,459)
                                    ---------            ---------     ---------
Net cash outflow from
financing activities                 (3,776)              (3,730)       (7,459)
                                    ---------            ---------     ---------
Net increase in cash and
cash equivalents                      23,771                3,478           951
Opening cash and cash
equivalents                           5,051                4,100         4,100
                                    ---------            ---------     ---------
Closing cash and cash
equivalents                          28,822                7,578         5,051
                                    =========            =========     =========


                         ISIS Property Trust 2 Limited


                 Notes to the Consolidated Financial Statements
                     for the six months to 31 December 2006


 1. The unaudited interim results have been prepared in accordance with the
    accounting policies that the directors anticipate will be complied with in
    the annual financial statements for the year to 30 June 2007.


 2. Earnings per Ordinary Share are based on 110,500,000 shares, being the
    weighted average number of shares in issue during the period (31 December
    2005 - 110,500,000 and 30 June 2006 - 110,500,000).


 3. Earnings for the six months to 31 December 2006 should not be taken as a
    guide to the results for the year to 30 June 2007.


 4. Dividends paid during the period comprise a fourth interim dividend for the
    year ended 30 June 2006 of 1.6875p per share paid on 29 September 2006, and
    a first interim dividend for the year ended 30 June 2007 of 1.73p per share
    paid on 22 December 2006.


A second interim dividend for the year ended 30 June 2007, of 1.73p per share,
will be paid on 30 March 2007 to shareholders on the register at close of
business on 16 March 2007.


 5. No Director has any interest in any transactions which are or were unusual in
    their nature or significant to the Group. F&C Asset Management plc received
    fees for its services as Investment Managers. The total charge to the Income
    Statement during the period was £1,024,000 of which £520,000 remained
    payable at the period end.


The Directors of the Company received fees for their services totalling £52,500,
of which £26,000 remained payable at the period end.


 6. The net asset value per ordinary share is based on net assets of £167,886,000
    (31 December 2005 - £140,556,000 and 30 June 2006 - £157,136,000) and
    110,500,000 ordinary shares (31 December 2005 - 110,500,000 and 30 June 2006
    - 110,500,000), being the number of shares in issue at the period end.


 7. Gains on investments disposed in period

                                            Six month period to 31 December 2006
                                                                       £ million

Original cost of investment properties sold                                 17.8
Market value of investment properties sold as at 30 June 2006               24.2
Sale proceeds                                                               26.6
Gain on disposal calculated with reference to

                               - original cost                               8.8
                               - 30 June 2006 valuation                      2.4


 8. The Group results consolidate those of IPT2 Property Holdings Limited, a
    wholly owned subsidiary which invests in properties.


9.      The Interim Report will be posted to shareholders during March 2007.


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