Final Results - Replacement

RNS Number : 9801M

TR Property Investment Trust PLC

02 June 2010

 



The following amendments have been made to the 'Final Results'' announcement released on 2 June 2010 at 07:00 under RNS No 9037M.

1.     Manager's Report - Ordinary Share Class - Revenue Forecast - 'net revenue to increase by about 3% to 5.35p per share'

2.     Manager's Report - Sigma Share Class - Revenue Expectations -- 'revenue earnings will be in the order of 2.3p per Sigma share.'

All other details remain unchanged. The full amended text is shown below.

This announcement and the information contained herein is not for publication, distribution or release in, or into, directly or indirectly, the United States, Canada, Australia or Japan.

TR PROPERTY INVESTMENT TRUST PLC

Unaudited preliminary results for the year ended 31 March 2010

 

2 June 2010

ORDINARY SHARES Financial Highlights and Performance	Year ended 31 March 2010	Year ended 31 March 2009	% Change
Revenue
Revenue earnings per share	5.18p	6.49p	-20.2
Net dividend per share	5.75p	5.75p	-
	At 31 March 2010	At 31 March 2009	% Change
Balance Sheet
Net asset value per share	185.22p	126.07p	+46.9
Share price	159.40p	106.00p	+50.4
Net (debt)/cash	(8%)	15%
Shareholders' funds (£'000)	475,500	323,666	+46.9
Shares in issue at end of period (m)	256.7	256.7	-
Performance	Year ended	Year ended
	31 March	31 March
	2010	2009
Benchmark performance (total return)	+60.6%	-48.6%
NAV total return	+52.6%	-40.5%
Share price total return	+60.5%	-41.2%

SIGMA SHARES Financial Highlights and Performance	Year ended 31 March 2010	Year ended 31 March 2009	% Change
Revenue
Revenue earnings per share	3.06p	2.91p	+5.2
Net dividend per share	2.00p	2.00p	-
	At 31 March 2010	At 31 March 2009	% Change
Balance Sheet
Net asset value per share	98.12p	61.34p	+60.0
Share price	70.50p	39.00p	+80.8
Net (debt)/cash	(11%)	17%
Shareholders' funds (£'000)	122,577	76,623	+60.0
Shares in issue at end of period (m)	124.9	124.9	-
Performance	Year ended 31 March 2010	Year ended 31 March 2009
Benchmark performance (total return)	+70.0%	-48.6%
NAV total return	+64.1%	-42.3%
Share price total return	+90.0%	-56.2%

Chairman's Statement

Introduction

In my interim report I noted that, between March and September 2009, UK and European property share prices had risen with record speed. Since September, prices have broadly moved sideways waiting for gradually improving fundamentals of the direct market to catch up with share ratings. Over the year both share classes underperformed the benchmark in terms of NAV total return performance chiefly due to investing their cash holdings with greater circumspection than was subsequently justified. At the share price total return level the Ordinary share class performance was in line with benchmark and the Sigma performance well ahead of its benchmark, thanks to a decline in the discount to NAV at which the shares have traded. Each manager's report goes into greater detail regarding relative performance last year. Since September both share classes have been fully invested and utilising a modest level of borrowed money.

While noting the underperformance, I think it fair to draw shareholders' attention to the historical performance table which shows the record of the managers over an extended period continues to be excellent.

Chris Turner has decided to retire in July 2011 following the Annual General Meeting. He has been Senior Fund Manager since 1995. He will continue in his current role as Senior Fund Manager with day to day responsibility for the Ordinary Share Class until 31 March 2011.

Chris has recommended that Marcus Phayre-Mudge takes over as Fund Manager for the Ordinary Share Class from 1 April 2011 and be appointed as Senior Fund Manager when he retires in July 2011. He has also proposed that James Wilkinson becomes Fund Manager for the Sigma Share Class from 1 April 2011.

These recommendations have been endorsed by the management of Thames River Capital and the Board has no hesitation in giving their approval.

On behalf of the Board, I thank Chris and the management of Thames River Capital for their part in planning a smooth transition. In particular I pay tribute to Chris for recruiting and developing the talent in Marcus, James and their colleagues over many years. They have become an exceptionally strong Property Fund Management Team by any standards.

NAV and Share Price Performance

The details of the absolute and relative returns are set out at the start of each share class report and are commented on by the fund managers. In summary the Ordinary share class NAV total return of 52.6% was 8.0% behind its benchmark total return of 60.6%, while the Sigma share class NAV total return of 64.1% was 5.9% behind its benchmark return of 70.0%.

Revenue Results

As anticipated, the Trust's group net revenue declined as a result of lower dividend income and the absence of large VAT and backdated interest payments. The decline was, however less than anticipated at the interim stage because a number of UK quoted companies chose to pay second interim dividends before the end of March in place of final dividends in the second quarter of 2010. In the event these payments added some £1.3m to Group income, raising the Ordinary share revenue per share by some 0.4p per share to 5.18p. The Sigma share class also benefited and actually showed an increase in revenue per share over the year. Further details of the revenue results are noted in the managers' reports.

Dividends

As announced in my statement in the last Annual Report, the Board had agreed that, subject to unforeseen circumstances, it intended to use some of the Trust's substantial revenue reserves to recommend to shareholders that the dividends in the year to end March 2010 will not be less than the dividends paid for the year ended March 2009. This we have done, though the final dividends, due in August, have been brought forward and distributed as second interim payments made on 1 April 2010.

Ordinary Shares

The Board maintained the interim dividend at 2.30p per share and has declared and paid a second interim dividend of 3.45p which together equal the 5.75p per share paid for the year ended March 2009.

Sigma Shares

The Board maintained the interim dividend at 0.90p per share and has declared and paid a second interim dividend of 1.10p which together equal the 2.00p per share paid for the year ended March 2009.

Revenue Outlook

Details of the revenue outlook for both share classes are noted in the managers' reports. In summary our managers are advising the Board that, subject to unforeseen circumstances, they expect that net revenue per share for the Ordinary share class will be in the order of 5.35p per share - an increase of around 3% relative to the year to March 2010, and that the Sigma share class is expected to have net revenue of 2.30p, a decline of 25% relative to last year.

Net Debt, Gearing and Currencies

During the financial year ended March 2009 both share classes had substantial cash holdings, and this cash contributed significantly to the relative outperformance in that year. At March 2009 the Ordinary share class held net cash of £49.6m or 14.4% of gross assets and Sigma had £13m of net cash or 14.9% of gross assets.  This cash was reinvested gradually over the six months to September 2009, too gradually to prevent relative NAV total return underperformance in that six month period. At the end of September 2009, the Trust was in modest net debt. A £50m variable rate multi-currency borrowing facility was renewed in November 2009. At March 2010, the Trust was utilising almost all this facility in addition to the outstanding £15m Debenture repayable in 2016. The gearing ratios were 7.5% for the Ordinary share class and 10.8% for Sigma.

As in previous years the portfolios' exposure to foreign currencies was not hedged either at the asset or income level. Over the year Sterling appreciated against the Euro but depreciated against the Swiss Franc and the Swedish Krona.

Discount and Share Repurchases

The Ordinary share price discount to capital only net asset value averaged 9.8% over the year with a range of 4.0% to 15.4%. The Sigma share discount to capital only net asset value averaged 23.6% over the year with a range of 13.8% to 36.2%. No shares were repurchased in either share class.

Share Issuance

 

For some years the Board has not included the customary motion at the AGM seeking shareholders consent to issue shares. During the last financial year the Ordinary shares traded at a very low discount to NAV and the Board has been advised that reinstating the motion would be a sensible measure. I can assure shareholders that the Board will not issue any shares unless they are trading at a premium to NAV and that furthermore, the Board considers that issuance will be to the benefit of all shareholders.  The Board has no present intention to introduce the use of Treasury shares.

Sigma Share Class Benchmark

 

When the Sigma share class was launched in 2007 it had the same benchmark as the Ordinary share class. Last year the Board decided that it was more appropriate for it to use that benchmark minus those shares capitalised at over £1 billion with the constituents adjusted quarterly. However strong market conditions coupled with increased volatility and a capped index resulted in an unduly large number of stocks rotating in and out of the Sigma benchmark on a quarterly basis. From 1 April 2010, the Board have introduced new measures to reduce the constituent volatility whilst maintaining the stretching performance target required to attain a performance fee. A more detailed explanation is contained in the manager's statement. 

Board and Management

The Board has noted the announcement by F&C Asset Management regarding the acquisition of Thames River Capital. The Board is assured that the team managing the Trust will be unchanged and looks forward to continuing to work with the team as part of the enlarged group. 

Outlook

Late April and early May have brought sharp reminders that markets are still willing to respond violently when faced with political or economic uncertainty. Despite the gradual return of relative normality in the economies and high streets across Europe, severe structural problems remain. The Euro currency is being pressure tested, while in both the UK and across Europe we have to factor into property demand the outlook for higher taxation and lower government spending. The prospect of rising interest rates, which preoccupied our thoughts earlier in the year, seems to have taken a backstage position for the moment, but at some stage it will return.

Demand for property as an investment has re-emerged strongly, both in the residential and commercial markets, most particularly from retail investors. A substantial part of this is down to the search for income, but, despite the assurances of many economists, there is a widespread view that the problem of the public debt mountains will eventually lead to higher inflation and that real estate, held either directly or indirectly, will prove a better medium term investment than conventional bonds.  

As noted, both the Ordinary and Sigma share class have returned to a lightly geared position. However both portfolios continue to be dominated by holdings in companies which the managers consider have both below average risk in terms of their balance sheets and also which offer decent relative liquidity. Like an Icelandic volcano, the global economy keeps reminding us that it is not settled, but somehow the alarm created by these later eruptions are never as frightening or disruptive as that first explosion.

My thanks to Chris Turner

Chris Turner has transformed the company since he took over as Senior Fund Manager in May 1995. The share price was 34p and the Net Assets were £162m

Financial performance has been outstanding. Average annualised growth figures include a Share Price total return of +15.1%; NAV total returns of + 14.8%; and Dividends + 12.8%.  These compare with increases of +9.1% for the EPRA Benchmark; +7.4% for the FTSE 100 index, and +  2.7% for the Retail Price Index.

Under his leadership investment has been focussed on those Companies judged to have superior management, high quality assets and good prospects for growth.

The policy of managing directly owned commercial property is a source of market credibility and develops expertise in the team. Both Marcus and James were responsible for this area in their early years under Chris.

He has backed his judgement with significant investment decisions, consistently maintaining positions well away from the benchmark ratios. He led the fund from a UK base to becoming Pan European; he supported the launch of Sigma and was instrumental in joining forces with Thames River Capital.

He has grown a very strong reputation with shareholders putting in much effort to ensure that they are appropriately informed. This has expanded the retail base to over 70% in respect of the Ordinary shares. His views are highly respected by company managers throughout the property industry.

However I believe that the building of a strong team with the ability to analyse companies and economic trends then to have the courage to make significant decisions which benefit shareholders will be his most important legacy.

Comprehensive details on Marcus and James will be set out in the Management section of the Annual Report and have been reproduced at the end of the Managers' Reports for reference in this Preliminary Statement.

Peter Salsbury

Chairman

1 June 2010

MANAGERS' REPORT

Ordinary Share Class & Sigma Share Class

Chris Turner and Marcus Phayre-Mudge

Market Background and Outlook

Cliché or not, we have to say that, for property shares and for the direct property market, March 2009 to March 2010 has clearly been a year of two very distinct and contrasting halves. In the first six months, property share prices flew forwards with record speed and volatility. At the interim stage we reported this extraordinary turnaround in sentiment which saw the Pan European real estate sector rise by an average of 47% over the six month period.  Since September volatility has moderated and the sector has traded in a very narrow range ending with a modest gain of 3.9%. The annual price appreciation for the sector of +53.0% was slightly ahead of that for the All Share Index of +46.7% and the Stoxx 600 Index in Euros of +49.4%.

In the direct property market the pattern has been exactly the same, with a time lag. Values continued to fall in the UK until July 2009, and in Europe until December 2009. Having turned, UK values surged forward at unprecedented pace rising by 12.8% between August 2009 and March 2010 and are only now settling down to a normal, much more sluggish, pace. In Europe, six months behind the UK, which now seems to be the pattern in the direct market, values are also now moving forward - though much more gradually, having much less lost ground to make up.

Of course all is not sweetness and light. Macro events continue to haunt the global and the European economies. Nevertheless on the four key problems facing UK and European commercial property markets - economic growth, unemployment, interest rates and leverage within the industry - investors  are less hazy about the scale of the problems and have, or think they have, some greater notion about the possible course and timescale for the solutions.  That is a positive which we think definitely puts markets on a sounder footing than they were even six months ago.

Property Investment Markets

After an average value decline of 44% from their March 2007 peak, the UK commercial property capital values reached their nadir in July 2009, some two months after the huge rally in the corporate bond market. Judicious buying of top quality income streams had already been happening for some months, motivated primarily by yield, and, for overseas investors, also by the decline in Sterling. What completed the turn of the market was the drying up of distressed selling by property companies and open-ended property funds. Once values were clearly moving upwards again, buying interest turned into a virtual frenzy and this, in turn, further reduced selling activity. Over the autumn, initial yields for the most sought after income streams (typically well let Central London property and supermarkets nationwide) dropped by 200 basis points and some values rose by 25%. Unable to secure the best stock, many buyers moved up the risk curve to acquire shorter leases or properties let to medium-risk tenants. This imbalance between buyers and sellers continued through the last quarter of 2009 and the first quarter of 2010.

By the end of this March average commercial property values had appreciated by 13% in 8 months. Today the market is better balanced and buying interest, whilst still strong for the right product, appears more judicious and selective. Central and inner London property is in high demand from both domestic and overseas buyers. The London economy seems to have suffered more sharply than the rest of the UK early in the recession, and appears now to be recovering faster without  a high reliance on public sector employment. Buyers are still cautious of offices outside London unless there is a long lease in place to a quality covenant. Investor demand for shopping centres, which was extremely poor in 2009, has revived, and yields have declined even for secondary centres. Out of London, the sharpest appreciation in values has come in the retail warehouse market where the covenant and rental value worries which concerned investors a year ago seem to have evaporated. Prime UK industrial yields have fallen by 150 basis points to under 7%, but to be classified as prime a shed must have a lease with over 10 years to run to a good covenant. Elsewhere in this market, high vacancy rates are often a considerable barrier to value growth.

In a similar pattern to the UK, investment activity in Continental Europe has gathered pace reflecting the growing optimism of the investors that the nadir in values has passed.  The record shows that, on average, Continental values fell far less fast than UK values in the 2007-2009 period - 20% to 25% rather than 40% to 45%. There is therefore less ground to be made up, and, as such, the pace of value growth has been more modest than that seen in the UK. Nevertheless top quality buildings, especially in Northern Europe's major cities are now commanding multiple bids and often selling at or above asking price. Southern and Eastern Europe are slacker, but even in Spain, there is renewed investment activity.

In terms of the outlook for commercial property values, the mood of the industry is generally that the recent surge in pricing will moderate and come to a halt over the summer. Derivative market pricing for the IPD annual index futures suggests UK average capital growth will be around 4% in 2010. The IPD monthly index has already recorded average capital value growth of 4.5% in the January to April 2010 period, so the implication is that the rest of 2010 will show a 0.5% decline. Futures pricing also implies a 2% annual capital value decline in both 2011 and 2012. In Europe, the German IPD all property futures market pricing has a very similar profile to the UK index, pointing to a 3% decline in capital values in 2010 and 2011. The IPD French office futures market indicates stable values for the next three years.

Whilst we do not wish to decry the underlying logic of these forecasts, three points need to be made. Firstly, derivative market pricing has been a less than perfect guide to the future over the past eighteen months. This time last year, UK pricing implied a 24% average value decline in 2009 (outcome -5.6%) and a decline of 6% in 2010 (outcome +4.5% so far). So recent pricing has tended to be ruled by pessimists (or banks laying off their liabilities).  Secondly, these numbers are for indices of average commercial property. There is now some market pricing available for futures in individual sub-sectors of the UK market and these numbers show the expected variations in forecast returns. The Central London office market and the UK retail warehouse sectors are expected to show continued value growth in 2010 and 2011, while capital values are expected to decline for South East offices and industrial property across the UK.  Thirdly, as yield contraction slows, so the prime mover of a property's valuation is now reverting to the length of the lease and the level of the rent passing relative to rental values. Whatever its location, an over-let property with an approaching lease expiry and a tenant no longer in occupation is a depreciating asset. Meanwhile, an empty building for which a tenant is found for a decent certain lease term and rent will see a sharp, maybe up to 25%, uplift in value.

Rental Values

With the exception of the best (Grade A) office buildings in capital cities and units in the very choicest retail pitches, fragile is the best description of tenant demand across the whole of the UK and Europe.  In the UK, published rental indices record a decline of 10.8% in average rental values since March 2008, of which 5.9% occurred in the twelve months to March 2010.  These statistics are based on headline rental values rather than net effective figures and therefore miss the impact of rent-free periods and other landlords' incentives which are in very widespread use. If these are taken into account the true decline in average rental values may be closer to 20%. Today, the speed of decline has slowed in most locations. In a minority of locations rents have found a base and rent-free periods are declining. Occupier enquiries are rising, but as yet, rental growth is only being evidenced in the core Central London office and retail markets.

In the market for business space (as opposed to retail space) most tenant demand is the result of rationalisation or consolidation. Businesses are taking the opportunity of lease expiries to move into higher quality space without increasing their rental outgoings - trading up rather than down.  Agents are reporting higher turnover at the gross level in almost all areas but net absorption remains neutral to negative, and so vacancy rates remain high despite increased activity.  However the almost total absence of new construction starts means the supply of Grade A space is shrinking and thus the vacancy problem is moving down the quality ladder. This is forcing landlords of older or outmoded space into proper and costly refurbishment before they can hope to find an occupier. At the very bottom of the quality ladder, demolition, spurred on in the UK, by the inequitable empty rates levy, may be the most practical solution. This action does, at least, reduce the vacancy rate.

Green issues appear to be a factor of increasing importance in the office sector. The operating efficiency of buildings is of increasing concern to potential occupiers, as is the availability of public transport. That shiny, twenty year old, out of town office complex surrounded by a full car park, alongside a motorway clogged every rush hour and miles from the shops, no longer seems very user friendly. Towns such as Bracknell, once the epicentre of the dot.com boom, have seen office rental values decline by 50% from the high twenties per square foot to the low teens. It is hard to see office property in such locations ever returning to its former value in real terms.  

As noted, the Central London office market is the brightest area of the leasing market at present. Contrary to expectations, the financial industry labour force has started to grow again, and hopefully nothing in the new government's proposals for the banking industry will put a halt to this trend. A series of major lettings in the City has reduced Grade A availability. Incentives have declined markedly and there has been an increase in real underlying rental values and a fall in overall vacancy rates. The same is true of the West End.  In both locations, the supply of new space over the next two years will be paltry, so that some tenants may now fear that a lack of effective action today may prevent their finding appropriate space when their current leases expire.

Retail demand is also improving, but from a very low base. Most Pan European suburban high streets now have an unprecedented number of to let boards.  In malls and major shopping centres, owners have to work very hard to avoid the dead frontages that shoppers shun. The result has been a huge increase in temporary lettings often at discounted rents up to 30% below previous levels. It appears that tenant failures, administrations and voluntary arrangements are in decline and that incentives have levelled off. The one bright spot in the retail market has been Central London where rental values have continued to grow throughout the last two years.

Across the UK and Europe, industrial and storage letting markets are what agents describe as "challenging". In the UK, vacancy has climbed over 15% and visitors to any shed estate will often find three in ten of the units unoccupied. Any letting is a good letting and rental values remain under pressure. Tenants are using choice to gain shorter leases with more frequent options to break.

Looking ahead, the outlook for business tenant demand is probably best assessed by mixing together the outlook for changes in GDP with the outlook for employment growth. Across Europe, GDP is rising anaemically while employment growth is at best static. If, as expected, Governments are now forced by markets to trim their budget deficits, employment growth may be non-existent for some considerable time. The utilisation of commercial floorspace varies from industry to industry. The service sector is a big user, the construction sector is not. The front line services in the public sector - police, hospitals, schools - use little commercially rented space, but these are the services least likely to be cut.  Office markets in regional centres with high levels of public sector employment may be best avoided by investors for the time being.

In the retail sector the resilience of consumer expenditure has been remarkable. Shopping has become a European sport, with some consumers' finances looking little better than those of the average premier league football team. The problem is to foresee what, if any, will be the impact on retail sales and margins, over the next two years, from higher taxation, or falling job security or rising mortgage rates, or a combination of all three.

Debt and Credit Markets

We commented twelve months ago, and at the interim stage, that the pile of outstanding bank and Commercial Mortgage Backed Securities debt against commercial property showed little change. We noted that maturing loans were being rolled despite very obvious breaches in the original loan terms - a policy now somewhat cruelly tagged "pretend and extend"- and that very little distressed property had come to market. Today the situation has changed - modestly in terms of the numbers and to a greater extent in terms of the markets' knowledge of the problems. In numbers terms the rally in both pricing and enthusiasm for commercial real estate has created a queue of cash rich funds and companies wanting to help the banks shift problem assets. Meanwhile the extent of the debt problem both in the UK and across Europe has been so extensively researched by agents and commentators, and aired in the press, that few investors buying today will not be fully aware of the implications.

New bank lending for fresh commercial property purchases is still expensive by historic standards, but the supply of funds has increased modestly over the last six months and margins are creeping downwards, especially in Europe. In Switzerland we have seen a five year fixed rate loan of CHF250m taken at an all in cost of 2.5%, in a market where running yields of 4.5% can be had from prime real estate. 

Property Shares

As noted in our introduction, property share prices soared by 47% in the first half of our financial year and then traded sideways over the second half. In the first half the diversity of performance was very wide, but it was mainly gearing related rather than stock specific - broadly the faster they fell in 2008, the faster they rose in mid 2009. For investors who, like us, had fled to safety in the year to March 2009, it was necessary to make large scale switches into smaller higher risk businesses to outperform. Amongst the benchmark constituents, spectacular gains were seen in prices of the shares of companies considered closest to receivership.

Over the whole year the performance of the UK property shares (+55%) and Continental real estate stocks (+57%) was virtually identical in local currency terms. The shares of the big companies tended to underperform either because they had cut their gearing with dilutive rights issues, or because they had relatively low gearing to start with. At the country level, Greece and Belgium performed worst with +25% total returns, Switzerland (+42%) and Germany (+35%) were below par, UK, France, Netherlands and Italy all had total returns just ahead of the benchmark while Austria and Finland gained over 100% and the only serious listed Norway property share returned 233%.

The huge increase in share prices primarily reflected a narrowing of discounts to NAV from a 30% - 70% range down to a nil - 20% range. In the UK, price changes also reflected some very positive NAV valuations at December 2009 and March 2010. On the Continent values continued to decline until the first quarter of 2010, but shares are anticipating a return to NAV growth in 2010.  

Rights issues and other capital raisings were commonplace last summer but much less frequent in the second half. The quoted sector has now almost completely refinanced itself and a few companies are even now in the embarrassing position of having to hold, on deposit, cash raised in an issue which was intended to be invested at the bottom of the market and which cannot be yet used to repay term debt. Takeover bids have been very scarce and there have been no outright bankruptcies - which is astonishing and a tribute to both the kindness of bankers and the appetite of investors for refinancing businesses.

Recent final results have been broadly in line with forecasts. In the UK the dilutive effect of the large rights issues last spring has been seen in dividends which have been adjusted downwards by most of the companies involved. On the Continent, rights issues were much better judged in terms of time and pricing and widespread dilution was avoided. Due to this and to the use of some variable rate debt by most non-UK property companies, we have seen 5% to 10% earnings growth outside the UK, and dividend increases to match.

Several larger companies have moved their strategy towards greater specialisation. Corio, the largest Dutch REIT is now selling off all its office and industrial property to concentrate solely on retail property.  In the UK, Liberty International, already a retail specialist, has split the business into two quoted companies - a pure shopping centre investment business and a Central London retail and exhibition business. We applaud these moves. We think that specialist companies are likely to outperform over the cycle as they allow management to concentrate their skills on one specific area of the market rather than attempt to spread their abilities over different use classes.  We think that diversification of risk is usually better handled by the equity investor than by the managements of property companies. The argument is similar to that which raged in the Investment Trust sector thirty years ago and which eventually resulted in the majority of Trusts becoming specialists in an industry or region (including this Trust).  It is notable that all the new entrants to the quoted market over the last year were specialist businesses in terms of geography or property type.

Outlook

According to a recent survey, the real estate sector is the most under-owned sector of the stock market by UK generalist fund managers, and the second most under-owned by their Continental counterparts. Perversely we find this rather encouraging, and it allows us toimagine what might happen to stock prices if the sector suddenly regained any popularity amongst professional investors. In fact the asset class has recently been popular with retail investors as the surge of capital into UK property funds this spring has proved. This divergence in outlook might be due to the difference in opinion about the outlook for inflation. The professionals, by and large, accept that inflation will not be a problem, so long as capacity utilisation remains as low as it is today. They are as concerned about potential deflation. Retail investors see the UK RPI at over 5% and worry about protecting their income against the possibility of resurgent inflation. They are aware that national deficits can be shrunk by austerity that is severe enough to bring rioters onto the streets or at least the removal of a Government at the next election. They can also remember that the real value of debt can be eroded by turning a blind eye to controlling inflation.

As the foregoing comments allude, the outlook for commercial real estate over the next two years is not all sweetness and light. The sectors immediate prospects are bound up with the outlook for economic growth, employment and interest rates. The recent sovereign debt crisis in Europe has highlighted problems that were known but broadly ignored until recently.  If this crisis forces more Governments to concentrate on reducing deficits at the expense of fostering growth, then further recovery will be postponed. One side effect of such action would probably ensure that interest rates stay lower for longer and this ought to be beneficial for property investment demand. At least the decline in the Euro is likely to give a boost to exporters within the Euro area.

It does seem as though we may be coming to the end of the first phase of the property market recovery - a phase in which equity investment using bottom up  stock selection seemed almost pointless in the face of the gale-force winds of macro economics over which we have very little foresight or control. We have to look forward to a period of quieter markets, unaffected by global noise, in which we can use our stock selection skills to pick the companies which will give us consistently above average returns whatever the strength of the underlying economy may be at the time.

Manager's Report

Ordinary Share Class

Performance

Facts first - over the financial year ending in March 2010 the Ordinary Share Class NAV total return of +52.6% compared to a benchmark total return of +60.6% - an underperformance gap of 8.0%. The share price total return at +60.5% was only a whisker below the benchmark thanks to the discount to NAV narrowing over the year. My errors that led to this NAV underperformance are very irritating to my pride, particularly as this has been the first year in the last decade that the NAV total return has not outperformed. In my defence, I would like to note that taken over the two years March 2008 to March 2010, the NAV total return has been -9.2% while the benchmark total return has been -17.4%. 

All the NAV underperformance occurred in the first six months to September 2009. In that period I was badly wrong footed by the speed and totality of the change in sentiment. Having outperformed by being cautious and by holding up to 20% of the share capital in cash through the previous year, I found it impossible to believe the right approach was not to reinvest this cash gradually to avoid being caught in another false dawn. Like the rest of the stock market, property shares took off into orbit, rising 50% in five months, leaving unfit old codgers like myself panting in their wake. Two other personal traits were of no help either. Firstly, I am, by nature, a rather slow investor, taking pride in having a low investment turnover, but this was a period when I should have been extremely active. Secondly, retail investors are a majority of the shareholders of the Trust and "would I buy this for my mother" is an investment test I use from time to time. After the dire uncertainties of 2008, the desire to ensure capital preservation made it harder than usual to buy into the high risk companies whose shares outperformed so strongly in the rally.

Since September, the Ordinary share class has been fully invested and has been using a modest amount of borrowed money. The NAV total return in the second half has been +4.3% compared with the benchmark's total return of +4.9%. So relative performance has stabilized but the underperformance of the first half has not been re-captured. Our direct property portfolio made a positive absolute contribution to returns in the half and has come through the last two years extremely well relative to the IPD index thanks to the hard work by my colleagues.

Income is important. The Board took the excellent decision to maintain the Ordinary share dividend at 5.75p per share last year utilising a small portion of our revenue reserves. The revenue per share declined for a number of reasons outlined below, but, the outcome was better than my forecast. It would not be difficult to reinvest the portfolio to increase the revenue per share quite markedly, but there is a natural trade off between income and capital growth, and, incidentally, the Trust is taxed on income while capital gains within the Trust are tax-free.  The Trust has a total return policy and the dividend growth over the last ten years would not have been achieved without avoiding some of the stocks in the sector with the highest dividend yields.

Investment Activity

My long term practice has been to keep the annual portfolio turnover below 25% of average total assets. As already noted this was a mistake in 2009. Purchases and sales added together and divided by two (the turnover) was just under £90m or just under 23% of average total assets of £395m.

The Ordinary share class started the year with net cash of just under £50m. I reinvested this into the market fairly evenly over the first six months of the financial year, and by the end of September 2009, the share class had modest net debt.  From September the share class has been utilizing between half and three quarters of its £52m total facilities. In March 2009, beside the cash drag, the Ordinary share class was also invested in safer stocks with below average gearing so the see-through leverage of the portfolio was 33% compared with the benchmark's leverage of 48%. Purchases over the summer therefore were biased towards rebuilding higher see-through leverage and by the end of September this had reached 47% compared with 49% for the benchmark. Since September, the portfolio see-through leverage has been matching or slightly exceeding the benchmark figure.

Despite the recovery in sentiment, I did not feel confident enough to make substantial investments in illiquid shares, but preferred to keep the bulk of our funds in reasonably tradable securities. Only one of our holdings in the top twenty equities represents more than 1.1% of the issued equity of the business, and that exception is Big Yellow where the holding which was once 15% of the equity, is now down to 1.9%.

Despite their volatility, the impact of currency fluctuations on the capital and revenue returns, taken over the whole year, was relatively small. We took no special action to hedge the currency, though it should be noted that all borrowings are currently in Sterling. We made no use of index derivatives nor have we bought any shares on "contracts for difference". We did not lend any stock.

Distribution of Assets

The investment portfolio of the Ordinary share class rose by £235m from £278m to £513m. The biggest percentage changes are to the direct property portfolio which, because it appreciated only slightly over the year, shrunk from 17.4% of investments to 9.9%, and to the European quoted section which rose from 50.9% to 57.0%. UK quoted property shares rose modestly from 31.7% to 33.1%.

Within Europe, my biggest net investments were into Sweden and Switzerland, both of which are outside the Eurozone and have relatively debt free Governments. I expect their economies to show good relative resilience over the coming year. Within the UK we have favoured shares which give us exposure to London business space and underweighted stocks with high retail exposure and those with provincial portfolios. On the Continent we somewhat reversed the selection and preferred shares with exposure to shopping malls against the office and industrial sector save for companies invested in offices located in the Paris area.   

Largest Equity Investments

The top ten holdings had a value of £245m and accounted for 48% of the total portfolio. The list will continue to be very familiar to regular readers. The only new entrants, bar Segro, are stocks which were previously in the 11 to 20 list and all the departures out of the top ten are still in the top 20.  The French company, Unibail, continues to dominate the list. It is the largest quoted real estate business in Pan-Europe with a portfolio of 80 major shopping centres located mainly in France but including centres in Sweden, Central Europe, Spain and the Netherlands. Most of these centres are the type of trophy assets that are rarely, if ever, offered for sale. The total assets of Unibail are equal to those of Land Securities and British Land together and our £80m holding represents only 0.7% of the issued capital. I like the asset class and the quality of the individual properties and have a high regard for the management. Over an extended period the shares have substantially outperformed the Sector. 

We have holdings in all of the big five UK REITS, and, three of them (Land Securities, Segro and Hammerson) outperformed the benchmark in total return terms in our last financial year. However on a five year total return basis, the picture is different. By this measure the UK REITs stand out as poor investments relative to their major Continental counterparts. In part this reflects the sharper fall in UK property values, but it also reflects the impact of the dilution from the rights issues which the boards and advisors imposed on shareholders 15 months ago. Those UK companies which avoided rights issues, such as Derwent London or Big Yellow, or timed them with greater wisdom, such as Great Portland, still sport positive five year numbers.

Revenue and Revenue Outlook

Post tax revenue per Ordinary share fell 20.4% to £13.3m and net revenue per share declined by 20.2% to 5.18p. The actual decline in core income dividend and net rental income was just under 16% from £22.7m to £19.5m. There were a number of one-off features to the revenue both last year and the year before which make it difficult to draw other precise comparisons. Special VAT re-payments (with backdated interest) occurred in both years, but were more significant in the year to March 2009. However, last year we had the benefit of £0.83m of underwriting income versus none in the previous year. Dividend timing differences also played their usual part. Unibail, whose dividends are the largest single source of income for the Ordinary share class, reverted from quarterly to annual payments in 2009, thus delaying £2m of income from the last financial year into the current one, but in the opposite direction we received in March and early April some £1m of UK dividend income that we had expected in May and June 2010 as a number of companies switched to second interims in place of final dividends. In 2008, we had substantial income from cash on deposit and in 2009/10 this cash earned almost nothing.  The rental income decline partly reflects the sale of the Woking building in September 2008, and partly the modest loss of income and increased outgoings from space vacated by tenants during 2009. In previous years the service charge income and outgoings have been shown net of recoveries from tenants. This year, to comply with the accounting standard, they are shown gross on both the income and expense lines. The net result remains the same.

At the expenses level, the management fee charged to revenue was 9.2% higher than the prior year following a 47% increase in shareholders' funds. The fee is charged under the new fee arrangements agreed in March 2009. Finance costs fell by 32% reflecting the repayment of the 8.125% Debenture last year and the current trend in interest rates.

The taxation rate is 22% versus 25% for the last financial year. As  noted at the interim stage, the key factor in the lower tax charge is the change regarding taxation of overseas dividends. UK law changed such that all overseas dividend receipts are non taxable from 1 July 2009. It may be possible that this treatment of overseas dividends may also be applied for earlier periods and there are also a number of cases in the European Courts which have challenged the practice of applying withholding taxes. These matters are still at various stages of either appeal or implementation by the individual tax authorities across Europe. If the appeals are unsuccessful and the rulings are incorporated into each jurisdiction's tax law, then this will reduce the ongoing tax charge further. However, at this point, the outcome is not certain and the tax charges in the accounts have been prepared on the basis of the current legislation.

Revenue Forecast

Last year my forecasts thankfully proved too pessimistic. This year, with over half our dividend income already received or declared, I expect our net revenue per share to increase by about 3% to 5.35p per share. As ever, this forecast is made barring unforeseen circumstances and is based on current exchange rates. I commented earlier that a number of our UK investments, which normally pay us their final dividend in May or June, switched to March this year. My forecast assumes that, in 2011, these companies revert to their former timing, so that the income contribution from these companies will be higher in 2011-2012.

Gearing, Debt and Debentures

At the start of the year the Ordinary share class had gross cash of £61.8m. Adjusting for the share of the Debenture debt of £12.2m, net cash was £49.6m which was equivalent to 14.4% of gross assets. The cash was spent over the period, mainly in the first three months, and at the end of June net cash was down to £16m. At the end of September gross cash was down to £4.5m and, after deducting the debenture debt, the share class had net borrowings of £7.7m equivalent to 1.6% of gross assets. In November we renewed our one year revolving credit facility for £50m of which the Ordinary class has £40m. At the end of the financial year we had £47m of debt made up of £12m from the Debenture and £35m from the bank facility. The cash of £9.8m shown in the balance sheet was mostly swallowed up in paying the second interim dividend of £8.9m the day after the year end.

Direct Property Portfolio

The physical property portfolio produced a total return of 13.1% for the year to 31 March 2010, comprising an income return of 7.7% and capital growth of 5.4%. The portfolio underperformed the Investment Property Databank Monthly index which produced a total return of 16.3%, comprised of an income return of 8.1% and a capital return of 7.6%. 

There were no sales or purchases during the year and the team continued to concentrate on asset management of the existing portfolio.  At the Colonnades we suffered two bankruptcies in the first half of the year affecting some 18% of the income from the building. The 7,200 sq ft of office space has been subdivided and half has been relet as has the small café with only a minimal void.  The residential lease extensions continued, producing over £250,000 premium income taken as capital receipts over the year.

At our industrial estate in Wandsworth we let one of the two small vacant workshop and storage units at £12.50 per sq ft and have placed the other under offer. As reported at the half year, we agreed a new lease with the tenant of our Milton Keynes office building, Exel Europe Limited (DHL).

The vacancy rate on the portfolio at the end of the year was 2.8% and this will fall to 2% following the completion of the lease at Wandsworth.  In contrast the void rate in the IPD Monthly Index finished the year at 10.8%. We have three further leases expiring in 2010 in the portfolio, all at the Colonnades. Discussions are in hand for the renewal of all three tenants. The current rents passing on these leases represent just below 5% of the portfolio's rent roll. 

Chris Turner

Fund Manager

Ordinary share class

1 June 2010

Manager's Report

Sigma Share Class

Introduction

I reported at the interim stage that small cap real estate stocks had outperformed their larger competitors in the six months to September 2009. This outperformance not only continued but widened further in the second half of the year. FTSE EPRA/NAREIT Small Cap Europe Total Return Index rose +70.1% in the year to March 2010 whilst the FTSE EPRA/NAREIT Europe Index (which includes all those stocks with a market capitalisation of over £1bn) rose +60.1%. This differential is consistent with the broad trend of smaller companies outperforming larger stocks in the initial upward correction following such a serious bear market. Indeed initial upward correction is a mild euphemism for what was a very dramatic reversal of investor sentiment towards all equities particularly those viewed as direct beneficiaries of the easing of debt availability and the monetary stimuli put in place by central banks.

Sigma's benchmark index rose 68.2% between 9 March 2009 (the low point) and 19 October as the correction in real estate equity pricing was reinforced by the underlying asset value movement. The IPD's Monthly Index turned positive in July and has delivered capital growth of 13.1% between then and the end of March. However, the index value on 19 October was only exceeded again on the last three days of the financial year. From mid October to the year end the sector oscillated in a sub 10% trading range as sentiment ebbed and flowed. For the bulls the strongest value reinforcement was the lack of forced selling by creditors - banks have not flooded the market with indebted property. Investors need income and as detailed in the Revenue section dividend cuts were fewer than expected as earnings were enhanced by lower short term rates and thus reduced interest bills. The sector continued to offer attractive dividend yields and exposure to real assets. However, set against these positive drivers, the market continued (quite rightly in our view) to fret about the lack of broad tenant demand for space. The exception to this has been a small group of submarkets including the Central London office and retail markets. With GDP growth nascent or absent across Europe there is little justification for anticipating rental growth in the near term.

Another feature of the market worthy of note has been currency volatility. Sigma's non Sterling asset exposure is not hedged although the benchmark is denominated in Sterling. The manager therefore needs to monitor closely the see-through currency exposure of the portfolio versus the benchmark's currency exposure. The central theme over most of the year was the volatility of Sterling versus all European currencies.

Performance

In the year to March 2010, the Sigma share class total return NAV rose +64.1% and this compares with a total return from the FTSE EPRA/NAREIT Small Cap Europe Index of +70.0%. On a price only (as opposed to total return) basis Sigma's NAV rose by +56.4% whilst the benchmark (price only) rose +61.05%. The narrower gap between the two sets of figures reflects the impact of reinvested dividends. With over 40% of the sector's income received in the first quarter of the year the assumed reinvestment of these dividends helped generate significant additional returns. Over the two years from March 2008 to March 2010 the NAV total return has been -5.3% while the benchmark total return has been -12.6%.

Sigma still had net cash throughout the first quarter and this was a drag on performance. My stock selection has always focused on the sustainability of asset values and earnings as well as seeking to evaluate the value of individual company management's strategic contribution. As a consequence the portfolio did not own positions in a number of the higher risk businesses and it was these highly leveraged companies which enjoyed dramatic outperformance in the first half of the year as risk appetite surged. The initial rally from early March to May was followed by a short, sharp pullback (-6% ) in June. Indeed fundamentals in the underlying real estate markets had shown very few signs of improvement at this stage. In fact it was to be macroeconomic data which drove all markets higher from early July. Underowned by generalist investors and seen as a geared play on recovery, real estate equities surged forward with record breaking returns in Q2 (July -September) of +37.0%.

As outlined in the Introduction, the second half of the year was very different, marked by higher volatility in a tight trading range. The introduction of leverage in September was clearly beneficial (as the sector rose +12.5% in the second half of the year) but the vast majority of the year's gains were in the first half. The introduction of leverage into the portfolio was triggered by the improvement in the fundamental demand for real estate as an asset class. Indeed the leverage remains mild at 12%. My reticence to increase it further is based on the concern that the demand for the asset class is chiefly from investors and not yet from tenants - it is the latter who drive rental growth and ultimately value growth.

Investment Activity

Purchases exceeded sales in a year in which the early months were dominated by the investment of net cash followed by the fund moving to a geared position early in the second half. The level of activity (both purchases and sales) was also greater than in previous years due to the constituent volatility in the benchmark. As outlined in the Chairman's Statement, the benchmark's quarterly review of constituents based on a fixed market capitalisation limit of £1bn resulted in a significantly higher amount of turnover as stocks departed or entered the benchmark in a period of rapidly increasing and volatile share prices. The Chairman has already commented on the improvements that the Board have made to reduce the volatility of the constituent movements and I echo the Board's view that this will lead to reduced stock turnover whilst continuing to allow investors' to measure the manager's performance appropriately. An explanation of the amendments is detailed further in the report.

Investment turnover (sales and purchases divided by two) was £95.4m which equates to 90.8% of the average gross assets (over the year) of £105.0m. This is expected to return to the long run average of 50% following the alterations to the benchmark index review procedure. There was plenty of opportunity to invest fresh capital into the real estate equity sector in the period. The UK companies' rescue rights issues which dominated the market in February and March 2009 continued in April with Segro and Liberty raisings. Other UK stocks which followed later in the year with rights issues were St. Modwen, Wichford, Capital & Regional and Workspace. Rescue rights issues were not a purely Anglo Saxon phenomenon and Continental European stocks which required fresh equity included Sponda (Finland), Norwegian Properties (Norway) and Deutsche Wohnen (Germany). As values in underlying property markets stabilised over the summer months, a number of companies raised equity to invest opportunistically. In the UK this included Great Portland Estates, Shaftesbury, Big Yellow Group, Primary Health, Hansteen, Development Securities and London & Stamford. Such opportunistic raisings were less prevalent in Continental Europe and generally restricted to 10% share placings (Vastned Retail, Eurocommercial and Corio). Rights issues were undertaken by Warehouses de Pauw and Befimmo. If all of those were not enough to keep us busy, the UK market also saw two IPOs of externally managed vehicles intending to seek out distressed opportunities.

The apparent significant reduction in the exposure to France (from 27.2% to 11.2%) and the Netherlands (16.4% down to 11.5%) and the respective increase in Scandanavia (Sweden from 7.5% to 15.7% and Finland 0.6% to 5.6%) is not as extreme as it first appears. The significant adjustments in the benchmark constituents over the period resulted in a dramatic change in the geographic exposure. In fact the relative overweight exposure to France and the Netherlands is as large as it was a year ago whilst the fund has reduced its underweight to Scandinavia over the period.

Reviewing the monthly transaction reports illustrates my response to opportunities in the market. I was a net buyer of equities in April and May (with purchases exceeding sales 1.8:1). June and July were evenly balanced but mid August through to October was the period of greatest activity (purchases of £50.2m and sales of £40.7m) as the fund took on gearing. This period was marked by great volatility and the snapshot monthly statistics often do not provide a clear picture. For example the month of October was virtually flat (-0.3%) but intra month movements +6.7% to -8.2% indicates the level of volatility. The timing of transactions was of the greatest importance. 

Largest Equity Investments

Given the activity described above it is useful to compare the top 20 holdings with the situation back in March 2009. The portfolio was then in the final stages of the transition to entirely small cap stocks and the top 20 positions included 4 large cap stocks. Over the following nine months a further four of those listed, Segro, Derwent London, Silic and Wereldhave became large cap stocks.

As we have outlined earlier the most dramatic movements in share prices in the first half of the year were those businesses with the greatest leverage as investors sought additional risk exposure. My investment strategy is focused on quality businesses with sound management and portfolios of assets which I believe will make market beating returns over the medium term. The top 20 positions does not contain any businesses with a significant development focus. I believe that development will remain subdued for some time to come as tenants hold back from commitments and banks remain unwilling to fund speculatively. The market which remains the exception to prove the rule is Central London where an international finance community and a lack of new supply is forcing rents upwards. For this reason, Great Portland Estates is now our second largest position.

Alongside Castellum there are now five other significant Scandanavian positions. This reflects our positive macro view on these Northern European economies. Most property companies in this region tend to operate with a combination of greater than average leverage and higher proportion of floating rate debt. Over the last twelve months this has helped the region outperform the broader market. Within those six stocks the sector focus has remained city centre office markets (Fabege, Hufvudstaden and Norwegian Properties) as well as retail (Citycon).

The expected lack of rental growth in the short term in the traditional commercial property sectors has drawn me to other markets and this is clearly visible in the top 20 positions. The exposure to residential has increased considerably (from 5.2% to 22.6% on a see through basis) with Conwert (Austria / Germany) and Grainger (UK) in our top 10 positions. Other significant positions include Unite (student housing), Big Yellow (self storage) and Foncière des Murs (budget hotels predominantly leased to Accor).

I mentioned earlier that there have been a number of 'opportunistic' vehicles which raised capital and expected to acquire assets from distressed sellers. Sigma has significant exposure to just one company with this business model, Hansteen. In the last 12 months it has acquired a €330m portfolio of German industrial properties and an £80m portfolio of UK assets from creditor banks keen to recover some of their capital.     

Distribution of Assets

The UK exposure has remained static in absolute terms but relative to the benchmark it is now a considerable overweight position. This reorientation was undertaken in the second half of the year and is heavily concentrated in the Greater London and South East markets. Geographically, France is the other significant overweight. The French assets are also heavily concentrated in the Ile de France and through high quality shopping centres.

At the sector level, I have maintained the overweight exposure to retail particularly in France and Scandanavia. Residential exposure has increased substantially but with a strong country concentration, Sweden, the UK and Austria.

Last year I commented that I had gravitated to higher office exposure in Paris and Brussels. I have maintained the former and dramatically reduced the latter. The defensive qualities of the Brussels office market with a high level of sovereign related tenants is not appropriate as the cycle evolves. Although offering security of income, the Brussels market is also entering a period of over supply and, at best, static rents.

The Central European exposure was reduced heavily in 2008 and remains limited today.

 Revenue

In the interim report I stated that I expected our revenue to be in the region of 2.0p per Sigma share. This estimate reflected several factors including our anticipation of further dividend cuts as companies sought to preserve cash in their business. The expectation of the continuation of low base rates also minimised the return from any cash in the portfolio.

In fact our estimates proved too pessimistic with earnings totaling 3.06p. The core reason behind the improvement in earnings was better than expected dividend receipts from our underlying holdings. Cashflows, particularly on the Continent were aided by high levels of floating rate debt which led to reduced interest bills coupled with fewer tenant delinquencies. The result was that the majority of businesses (which had not already announced the temporary suspension of dividends) either paid the same as last year or actually increased the amount (versus the previous year). Allied to this were a number of additional factors which require explanation.

As the outlook for European commercial property and property equities improved so did investors' appetite for risk. From late September last year Sigma began to utilise its RBS loan facility and by mid Autumn the fund had 10% gearing. This debt had an average cost of 2.3% which is below the dividend yield on the portfolio (3.9%) and is therefore earnings accretive. Our income forecasts are always prudent and there is no assumption that debt will be drawn.

The second factor is the shape of the portfolio. As noted earlier, one of our key concerns for the sector remains the general lack of rental growth opportunities across Europe. A consequence of this view is that the portfolio remains focused on businesses with standing (income producing) portfolios as opposed to developer or other lower yielding and opportunistic business models. As noted last year, the overweight to Continental European stocks has once again been positive from an income perspective. The strengthening of the Euro resulted in a greater than expected Sterling value for our Euro denominated dividend receipts. Importantly, a number of UK property companies chose to pay a second interim dividend (in lieu of a final dividend) ahead of the new tax year and the change in personal income tax thresholds. This had the effect of pulling income from 2010/11 back into 2009/10. In Sigma's case the list of companies included Hansteen, 3.4% of net assets. Overall this amounted to around 0.20p per share of post tax income.

Also bolstering our income was the successful VAT reclaim on management fees (and interest) and underwriting fees. These non-recurring items added just under 0.50p per share to income.

As anticipated at the interim stage, the tax charge for the year is considerably lower than in 2009. The key factor in this is that from 1 July 2009, UK law changed such that all overseas dividend receipts are non taxable from this date.  Because a higher proportion of Sigma's income is derived from overseas dividends than the Ordinary share class, this has had a greater impact on the tax charge for Sigma.

It may be possible that this treatment of overseas dividends may also be applied for earlier periods and there are also a number of cases in the European Courts which have challenged the practice of applying withholding taxes. These matters are at various stages of either appeal or implementation by the individual tax authorities across Europe. If the appeals are unsuccessful and the rulings are incorporated into each jurisdiction's tax law, then this will reduce the ongoing tax charge further. However, at this point, the outcome is not certain and the tax charges in the accounts have been prepared on the basis of the current legislation.

Revenue Expectations

A number of the contributing factors to the year's earnings noted above are unlikely to reoccur and this is the rationale behind the cautious payout ratio in the year to March 2010. The payment of second interims (pulling income from 2010/11 back into 2009/10 will have a negative impact on our forecasts. Currencies could also swing the other way and at the time of going to press the volatility has increased markedly. My current advice to the Board is that revenue earnings will be in the order of 2.3p per Sigma share.

Since Sigma's inception the payout ratio has been cautious as the portfolio underwent transition to an entirely small cap portfolio. Looking forward it is expected that the payout ratio will increase.

My view is that base rates are set to remain low throughout 2010 and that this will continue to enhance the earnings of those businesses with floating rate debt. However, we remain reluctant to factor in rental growth and many payouts are expected to remain static rather than grow. Some index linked rents (particularly where tied to the cost of construction) have already begun to fall. There also remains a swathe of Continental European property which enjoyed strong annual rental uplifts in better economic conditions and where the indexation was greater than open market rental value movements. This has resulted in some over rented leases which will revert to market levels over time.

I continue to remind shareholders that Sigma has a total return objective. If the economic outlook was to show signs of improvement and the fund rotated into a larger number of non or low income producing development cycle plays then the earnings forecast could alter.

Cash, Gearing and Debentures

Changes in the net cash position of the share class was, as expected for such a dramatic performance period, acute. At the end of March 2009, Sigma had net cash of £8m (11.2% of NAV). This figure is post any adjustment for debenture debt, the cost of the final dividend and any outstanding rights issue commitments. As noted at the half year, the Trust had renewed its £50m loan facility with the Royal Bank of Scotland of which £10m was Sigma's share. Sigma began to draw on this facility in September and by December this was fully drawn. Coupled with Sigma's share of the debenture (£2.85m) by the end of March 2010 the gearing was 10.8% of total assets.

Alongside the gearing figure on the balance sheet we also calculate the 'see-through loan to value' (which adds the proportionate debt of all our equity investments to our own balance sheet net debt). This figure is 58.5% (34.6% last March) and reflects not only the drawdown of the RBS facility but also the portfolio's rotation entirely into smaller companies. Back in March 2009 the portfolio still contained 25% large cap stocks which were generally less leveraged than their smaller competitors (particularly the UK stocks after the wave of rescue rights issues). The equivalent figure for the benchmark is 53.8%. Sigma's see-through positions are then enhanced by its own on balance sheet gearing. I remain vigilant that this increased see-through leverage may result in greater volatility in both asset values and share prices.

Sigma Share Class Benchmark

The Chairman has reported that the Board have introduced new measures to reduce the constituent volatility in the small cap benchmark. In the year to March 2010, the quarterly index adjustments based on a fixed constituent market cap of £1bn resulted in 52% of the benchmark rotating. The Board wished to maintain its current constituent limit of £1bn to ensure that the benchmark remains aligned to the share class's objective of investing in smaller companies but with the following additional features:

(1) the market cap is adjusted annually in line with the movement in the benchmark over the period (ie a 10% capital gain in the index in the year to March 2011 would result in the market cap hurdle rising to £1.1bn.)

(2) The constituents list is reviewed annually rather than quarterly

(3) Only companies which have a market cap 20% ahead of the market cap hurdle will be excluded and only those with a market cap 20% below the hurdle will fall into the index (the 'smoothing band' approach).

Marcus Phayre-Mudge

Fund Manager

Sigma share class

1 June 2010

Managers' CVs

Marcus Phayre-Mudge

Marcus is currently fund manager of the Sigma share class and deputy fund manager of the Ordinary share class. He joined Chris at Henderson Global Investors in January 1997, initially managing the direct property portfolio within TR Property Investment Trust and latterly focusing on real estate equities, managing a number of UK and Pan European real estate equity funds in addition to activities in the Trust. Marcus moved with Chris to Thames River Capital in October 2004 where he is also fund manager of Thames River Property Growth & Income Fund Limited.

Prior to joining Henderson, Marcus was an investment surveyor at Knight Frank (1990) and was made an Associate Partner in the fund management division (1995). He qualified as a Chartered Surveyor in 1992 and has a BSc (Hons) in Land Management from Reading University.   

James Wilkinson

James joined the TRPIT team at Henderson in October 2002 taking responsibility for the direct property investments. He was also a portfolio manager and member of the Property Securities team at Henderson.  

James moved with Chris and Marcus to Thames River Capital in October 2004 gradually increasing his involvement in the equities component of the Trust. James was appointed deputy fund manager of the Thames River Property Growth & Income Fund in 2007 and is currently the lead fund manager for the Thames River Real Estate Securities Fund. 

Prior to joining Henderson he was Associate Partner at Healey & Baker Investment Managers where he spent six years. James qualified as a Chartered Surveyor in 1998. He has a BA (Hons) in Philosophy from University of East Anglia and an MA in Property Valuation and Law from City University Business School.

Statement of directors' responsibilities in relation to the Group financial statements

The directors are responsible for preparing the Annual Report and the Group financial statements in accordance with applicable United Kingdom law and those International Financial Reporting Standards as adopted by the European Union.

Under Company Law the directors must not approve the Group financial statements unless they are satisfied that they present fairly the financial position, financial performance and cash flows of the Group for that period. In preparing the Group financial statements the directors are required to:

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

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

o provide additional disclosures when compliance with the specific requirements in IFRSs 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;

o state that the Group has complied with IFRSs, subject to any material departures disclosed and explained in the financial statements; and

o 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 Group's transactions and disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that the Group financial statements comply with the Companies Act 2006 and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Historical Performance for years ended 31 March

	2000	2001	2002	2003	2004	2005(D) (Restated)	2006(D)	2007(D)	2008(D)	2009(D)	2010(D)
Gross revenue (A)
(£'000)	12,693	13,307	13,751	16,676	16,247	-	-	-	-	-	-
Total income (B)
(£'000)	-	-	-	-	-	19,741	23,143	26,226	32,160	32,073	27,782
Total assets less current liabilities
(£'m)	305.8	382.7	382.7	344.3	440.9	544.7	813.6	1,017.0	725.3	418.6	616.6
Shareholders' funds (£'m)
Total	266	343	342	304	401	505	771	973	707	400	598
Ordinary shares	266	343	342	304	401	505	771	973	568	324	476
Sigma shares	-	-	-	-	-	-	-	-	139	76	123
Net revenue
(pence per share)
Earnings - Ords	1.41	1.58	1.86	2.30	2.51	2.85	3.44	4.09	5.79	6.49	5.18
Earnings - Sigma	-	-	-	-	-	-	-	-	0.85	2.91	3.06
Dividends - Ords	1.32	1.40	1.65	2.05	2.50	2.85	3.40	4.10	5.60	5.75	5.75
Dividends - Sigma	-	-	-	-	-	-	-	-	1.95**	2.00	2.00
NAV per share (pence)
Ords	56.5*	73.2*	78.1*	73.0	113.1	145.7	224.1	290.8	219.6	126.1	185.2
Sigma	-	-	-	-	-	-	-	-	108.6	61.3	98.1
Share price (pence)
Ords	45.25	58.25	64.75	59.00	95.00	128.50	209.50	256.50	188.25	106.00	159.40
Sigma	-	-	-	-	-	-	-	-	92.00	39.00	70.50
Indices of growth
Per Ordinary share
Share price	100	129	143	130	210	284	463	567	416	234	352
Net Asset Value	100	129	138	129	200	258	397	514	389	223	327
Dividend Net	100	106	125	155	189	216	258	303	424	436	436
RPI	100	102	104	107	110	113	116	121	126	125	131
Benchmark (C)	100	125	127	116	164	204	292	363	271	132	202
Per Sigma share
(2007=launch date)
Share Price	-	-	-	-	-	-	-	100	87	37	66
Net Asset Value	-	-	-	-	-	-	-	100	88	50	80
Dividend Net	-	-	-	-	-	-	-	-	100	103	103
RPI	-	-	-	-	-	-	-	100	103	103	107
Benchmark (E)	-	-	-	-	-	-	-	100	88	43	70

(A)            Gross revenue - is as set out in the Statement of Total Return prepared under UK GAAP.

(B)            Total income - is as set out in the Group Income Statement prepared in accordance with IFRS.

(C)            A composite index comprising the FTSE Real Estate Index up to the end of September 2001, the S&P/Citigroup European Property Index thereafter up to March 2007 and FTSE EPRA/NAREIT Europe Index thereafter. Source: Thames River Capital.

(D)            Figures for 2006 onwards have been prepared in accordance with IFRS. Figures for 2005 have been restated in accordance with IFRS. All previous figures were prepared under UK GAAP.

(E)            The benchmark for the Sigma share class was FTSE EPRA/NAREIT Europe Index up to 31 March 2009 and FTSE EPRA/NAREIT Europe Index in Sterling, adjusted to exclude those stocks with a market capitalisation exceeding £1bn thereafter.

*fully diluted for warrant conversion.

**Includes a special dividend of 1.10p.

Ordinary Share Class Income Statement

for the year ended 31 March 2010

	Year ended 31 March 2010			Year ended 31 March 2009
	Revenue Return	Capital Return	Total	Revenue Return	Capital Return	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Investment income
Investment income	15,696	-	15,696	18,447	-	18,447
Other operating income	1,502	-	1,502	2,722	-	2,722
Gross rental income	3,655	-	3,655	4,240	-	4,240
Service charge income	1,506	-	1,506	926	-	926
Gains/(losses) on investments held at  fair value	-	154,504	154,504	-	(246,226)	(246,226)
	______	______	______	______	______	_____
Total income	22,359	154,504	176,863	26,335	(246,226)	(219,891)
	______	______	______	______	______	_____
Expenses
Management and performance  fees	(2,288)	(1,144)	(3,432)	(2,095)	(4,288)	(6,383)
Repayment of prior years' VAT	443	292	735	1,386	3,439	4,825
Direct property expenses, rent  payable and service charge costs	(1,792)	-	(1,792)	(1,176)	-	(1,176)
Other expenses	(696)	-	(696)	(664)	-	(664)
	______	______	______	______	______	______
Total operating expenses	(4,333)	(852)	(5,185)	(2,549)	(849)	(3,398)
	_____	______	______	______	______	______
Operating profit/(loss)	18,026	153,652	171,678	23,786	(247,075)	(223,289)
Finance costs	(937)	(937)	(1,874)	(1,372)	(1,372)	(2,744)
	______	______	______	______	______	______
Net profit/(loss) before tax	17,089	152,715	169,804	22,414	(248,447)	(226,033)
Taxation	(3,797)	589	(3,208)	(5,715)	4,903	(812)
	______	______	______	______	______	______
Net profit/(loss)	13,292	153,304	166,596	16,699	(243,544)	(226,845)
	______	______	______	______	______	_____
Earnings/(loss) per Ordinary share	5.18p	59.71p	64.89p	6.49p	(94.71)p	(88.22)p
	______	______	______	______	______	______

Ordinary Share Class Balance Sheet

as at 31 March 2010

	2010	2009
	£'000	£'000
Non-current assets
Investments held at fair value	512,665	278,150
	______	______
Current assets
Debtors	9,286	3,940
Cash and cash equivalents	9,863	61,776
	______	______
	19,149	65,716
Current liabilities	(40,615)	(4,766)
	______	______
Net current (liabilities)/assets	(21,466)	60,950
	______	______
Total assets less current liabilities	491,199	339,100
Non-current liabilities	(15,699)	(15,434)
	______	______
Net assets	475,500	323,666
	______	______
Net asset value per Ordinary share	185.22p	126.07p

Sigma Share Class Income Statement

For the year ended 31 March 2010

	Year ended 31 March 2010			Year ended 31 March 2009
	Revenue Return	Capital Return	Total	Revenue Return	Capital Return	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Investment income
Investment income	4,940	-	4,940	4,902	-	4,902
Other operating income	483	-	483	836	-	836
Gains/(losses) on investments held at fair value	-	44,260	44,260	-	(62,769)	(62,769)
	______	______	______	______	______	______
Total income	5,423	44,260	49,683	5,738	(62,769)	(57,031)
	______	______	______	______	______	______
Expenses
Management and performance fees	(626)	(313)	(939)	(807)	(836)	(1,643)
Repayment of prior years' VAT	104	68	172	325	807	1,132
Other expenses	(162)	-	(162)	(139)	-	(139)
	______	______	______	______	______	______
Total operating expenses	(684)	(245)	(929)	(621)	(29)	(650)
	______	______	______	______	______	______
Operating profit/(loss)	4,739	44,015	48,754	5,117	(62,798)	(57,681)
Finance costs	(206)	(206)	(412)	(331)	(331)	(662)
	______	______	______	______	______	______
Profit/(loss) from operations before tax	4,533	43,809	48,342	4,786	(63,129)	(58,343)
Taxation	(707)	817	110	(1,109)	768	(341)
	______	______	______	______	______	______
Net profit/(loss)	3,826	44,626	48,452	3,677	(62,361)	(58,684)
	______	______	______	______	______	______
Earnings/(loss) per Sigma share	3.06p	35.73p	38.79p	2.91p	(49.35)p	(46.44)p

 Sigma Share Class Balance Sheet

as at 31 March 2010

		2010	2009
		£'000	£'000
Non-current assets
Investments held at fair value		133,557	65,755
		______	______
Current assets
Debtors		4,674	5,964
Cash and cash equivalents		1,582	15,792
		______	______
		6,256	21,756
Current liabilities		(14,387)	(8,039)
		______	______
Net current (liabilities)/assets		(8,131)	13,717
		______	______
Total assets less current liabilities		125,426	79,472
Non-current liabilities		(2,849)	(2,849)
		______	______
Net assets		122,577	76,623
		______	______
Net asset value per Sigma share		98.12p	61.34p

GROUP INCOME STATEMENT

For the year ended 31 March 2010

	Year ended 31 March 2010			Year ended 31 March 2009
	Revenue Return	Capital Return	Total	Revenue Return	Capital Return	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Investment income
Investment income (note 2)	20,636	-	20,636	23,349	-	23,349
Other operating income	1,985	-	1,985	3,558	-	3,558
Gross rental income	3,655	-	3,655	4,240	-	4,240
Service charge income	1,506	-	1,506	926	-	926
Gains/(losses) on investments held at fair value	-	198,764	198,764	-	(308,995)	(308,995)
	_________	_________	_________	_________	_________	_________
Total income	27,782	198,764	226,546	32,073	(308,995)	(276,922)
	_________	_________	_________	_________	_________	_________
Expenses
Management and performance fees	(2,914)	(1,457)	(4,371)	(2,902)	(5,124)	(8,026)
Repayment of prior years' VAT	547	360	907	1,711	4,246	5,957
Direct property expenses, rent payable  and service charge costs	(1,792)	-	(1,792)	(1,176)	-	(1,176)
Other expenses	(858)	-	(858)	(803)	-	(803)
	_________	_________	_________	_________	_________	_________
Total operating expenses	(5,017)	(1,097)	(6,114)	(3,170)	(878)	(4,048)
	_________	_________	_________	_________	_________	_________
Operating profit/(loss)	22,765	197,667	220,432	28,903	(309,873)	(280,970)
Finance costs	(1,143)	(1,143)	(2,286)	(1,703)	(1,703)	(3,406)
	_________	_________	_________	_________	_________	_________
Profit/(loss) from operations before tax	21,622	196,524	218,146	27,200	(311,576)	(284,376)
Taxation	(4,504)	1,406	(3,098)	(6,824)	5,671	(1,153)
	_________	_________	_________	_________	_________	_________
Net profit/(loss)	17,118	197,930	215,048	20,376	(305,905)	(285,529)
	_________	_________	_________	_________	_________	_________
Earnings/(loss) per Ordinary share (note 3a)	5.18p	59.71p	64.89p	6.49p	(94.71)p	(88.22)p
Earnings/(loss) per Sigma share (note 3b)	3.06p	35.73p	38.79p	2.91p	(49.35)p	(46.44)p

The total column of this statement represents the Group's Income Statement, prepared in accordance with IFRS.  The Revenue Return and Capital Return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies. All items in the above statement derive from continuing operations.

All income is attributable to the shareholders of the parent company. There are no minority interests.

GROUP AND COMPANY STATEMENT OF CHANGES IN EQUITY

	Share Capital				Retained Earnings
	Ordinary	Sigma	Share Premium Account	Capital Redemption Reserve	Ordinary	Sigma	Total
for the year ended 31 March 2010	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 31 March 2009	64,181	15,615	43,162	43,513	186,807	47,011	400,289
Net gain for the period	-	-	-	-	166,596	48,452	215,048
Ordinary dividends paid	-	-	-	-	(14,762)	(2,498)	(17,260)
	________	________	________	________	________	_______	________
At 31 March 2010	64,181	15,615	43,162	43,513	338,641	92,965	598,077
	________	________	________	_________	________	_______	________
	Share Capital				Retained Earnings
	Ordinary	Sigma	Share Premium Account	Capital Redemption Reserve	Ordinary	Sigma	Total
for the year ended 31 March 2009	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 31 March 2008	64,650	15,960	43,162	42,699	431,040	109,098	706,609
Net loss for the period	-	-	-	-	(226,845)	(58,684)	(285,529)
Ordinary shares repurchased	(469)	-	-	469	(2,992)	-	(2,992)
Sigma shares repurchased	-	(345)	-	345	-	(1,450)	(1,450)
Ordinary dividends paid	-	-	-	-	(14,396)	(1,953)	(16,349)
	________	________	________	_________	________	_______	________
At 31 March 2009	64,181	15,615	43,162	43,513	186,807	47,011	400,289
	________	________	________	_________	________	_______	________

GROUP AND COMPANY BALANCE SHEETS

as at 31 March 2010

	Group 2010 £'000	Company 2010 £'000	Group 2009 £'000	Company 2009 £'000
Non-current assets
Investments held at fair value	646,222	626,622	343,905	324,930
Investments in subsidiaries	-	53,745	-	55,133
	_________	_________	_________	_________
	646,222	680,367	343,905	380,063
Current assets
Debtors	10,325	9,644	5,970	5,123
Cash and cash equivalents	11,445	11,402	77,568	77,517
	_________	_________	_________	_________
	21,770	21,046	83,538	82,640
Current liabilities	(51,366)	(103,179)	(8,871)	(62,414)
	_________	_________	_________	_________
Net current (liabilities)/assets	(29,596)	(82,133)	74,667	20,226
Total assets less current liabilities	616,626	598,234	418,572	400,289
Non-current liabilities	(18,549)	(157)	(18,283)	-
	_________	_________	_________	_________
Net assets	598,077	598,077	400,289	400,289
	_________	_________	_________	_________
Capital and reserves
Called up share capital	79,796	79,796	79,796	79,796
Share premium account	43,162	43,162	43,162	43,162
Capital redemption reserve	43,513	43,513	43,513	43,513
Retained earnings	431,606	431,606	233,818	233,818
	_________	_________	_________	_________
Equity shareholders' funds	598,077	598,077	400,289	400,289
	_________	_________	_________	_________
Net asset value per :
Ordinary share	185.22p	185.22p	126.07p	126.07p
Sigma share	98.12p	98.12p	61.34p	61.34p

GROUP AND COMPANY CASH FLOW STATEMENTS

as at 31 March 2010

	Group 2010	Company  2010	Group 2009	Company  2009
	£'000	£'000	£'000	£'000
Reconciliation of operating revenue to net cash (outflow)/ inflow from operating activities
Net profit/(loss) before tax	218,146	218,207	(284,376)	(283,740)
Financing activities	2,286	2,650	3,406	3,465
(Gains)/losses on investments held at fair value through profit or loss	(198,764)	(196,618)	308,995	307,976
(Increase)/decrease in accrued income	(306)	(566)	(41)	194
(Increase)/decrease in other debtors	(3,250)	(3,156)	1,869	(11,788)
(Decrease)/increase in creditors	(4,116)	(5,853)	2,113	(9,278)
Net (purchases)/sales of investments	(97,357)	(97,653)	34,514	34,094
(Increase)/decrease in sales settlement debtor	(775)	(775)	607	607
Decrease in purchase settlement creditor	(274)	(274)	(173)	(173)
Scrip dividends included in investment income	(2,937)	(2,937)	-	-
	_________	_________	_________	_________
Net cash (outflow)/inflow from operating activities before interest and taxation	(87,347)	(86,975)	66,914	41,357
Interest paid	(2,286)	(2,650)	(4,085)	(3,465)
Taxation paid	(1,323)	(1,323)	(1,691)	(1,691)
	_________	_________	_________	_________
Net cash (outflow)/inflow from operating activities	(90,956)	(90,948)	61,138	36,201
Financing activities
Equity dividends paid	(17,260)	(17,260)	(16,349)	(16,349)
Purchase of Ordinary and Sigma shares	-	-	(4,442)	(4,442)
Repayment of debentures	-	-	(25,000)	-
Drawdown of loans	45,250	45,250	-	-
	_________	_________	________	_________
Net cash used in financing	27,990	27,990	(45,791)	(20,791)
	_________	_________	_________	_________
(Decrease)/increase in cash	(62,966)	(62,958)	15,347	15,410
Cash and cash equivalents at start of the year	77,568	77,517	51,881	51,767
Exchange movements	(3,157)	(3,157)	10,340	10,340
	_________	_________	_________	_________
Cash and cash equivalents at end of the year	11,445	11,402	77,568	77,517
	_________	_________	_________	_________

Notes to the Financial Statements

1	Accounting Policies
	The financial statements for the year ended 31 March 2010 have been prepared in accordance with International Financial Reporting Standards (IFRS), which comprise standards and interpretations approved by the International Accounting Standards Board (IASB), together with interpretations of the International Accounting Standards and Standing Interpretations Committee approved by the International Accounting Standards Committee (IASC) that remain in effect, to the extent that they have been adopted by the European Union.
	The Group and Company financial statements are expressed in Sterling, which is their functional and presentational currency. Sterling is the functional currency because it is the currency of the primary economic environment in which the Group operates. Values are rounded to the nearest thousand pounds (£'000) except where otherwise indicated.
2	Investment income
		2010	2009
		£'000	£'000
	Dividends from UK listed investments	1,933	3,092
	Dividends from overseas listed investments	11,007	13,703
	Scrip dividends from overseas listed investments	2,937	-
	Interest from listed investments	428	113
	Property income distributions	4,331	6,441
		_________	_________
		20,636	23,349
		_________	_________
3	Earnings /(loss) per share
a	Earnings/(loss) per Ordinary share
	The earnings/(loss) per Ordinary share can be analysed between revenue and capital, as below.
		Year ended 31 March 2010 £'000	Year ended 31 March 2009 £'000
	Net revenue profit	13,292	16,699
	Net capital gain/(loss)	153,304	(243,544)
		_________	_________
	Net total earnings/(loss)	166,596	(226,845)
		_________	_________
	Weighted average number of shares in issue during the year	256,725,000	257,124,930
		_________	_________
		pence	pence
	Revenue earnings per share	5.18	6.49
	Capital gain/(loss) per share	59.71	(94.71)
		_________	_________
	Earnings/(loss) per Ordinary share	64.89	(88.22)
		_________	_________
b	Earnings/(loss) per Sigma share
	The earnings/(loss) per Sigma share can be analysed between revenue and capital, as below.
		Year ended	Year ended
		31 March 2010 £'000	31 March 2009 £'000
	Net revenue profit	3,826	3,677
	Net capital gain/(loss)	44,626	(62,361)
		_________	_________
	Net total earnings/(loss)	48,452	(58,684)
		_________	_________
	Weighted average number of shares in issue during the period	124,922,000	126,373,055
		_________	_________
		pence	pence
	Revenue earnings per share	3.06	2.91
	Capital gain/(loss) per share	35.73	(49.35)
		_________	_________
	Earnings/(loss) per Sigma share	38.79	(46.44)
		_________	_________
4a	Net asset value per Ordinary share
	Net asset value per Ordinary share is based on net assets attributable to Ordinary shares of £475,500,000 (2009: £323,666,000) and on 256,725,000 (2009: 256,725,000) Ordinary shares in issue at the year end.
b	Net asset value per Sigma share
	Net asset value per Sigma share is based on the net assets attributable to Sigma shares of £122,577,000 (2009: £76,623,000) and on 124,922,000 (2009: 124,922,000) Sigma shares in issue at the year end.

5	Share capital changes
	Ordinary shares During the year, the Company made no market purchases for cancellation. Sigma shares During the year, the Company made no market purchases for cancellation.
6	Status of preliminary announcement
	The financial information set out in this preliminary announcement does not constitute the Company's statutory accounts for the years ended 31 March 2010 or 2009. The statutory accounts for the year ended 31 March 2010 have not been delivered to the Registrar of Companies, nor have the auditors yet reported on them. The statutory accounts for the year ended 31 March 2010 will be finalised on the basis of the information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting.
7 8	Dividends Ordinary shares An interim dividend of 2.30p (2009: 2.30p) per Ordinary share was paid on 12 January 2010 to shareholders on the register on 11 December 2009. A second interim dividend of 3.45p per Ordinary share was paid on 1 April 2010 to shareholders on the register on 12 March 2010. This second interim dividend has replaced the final dividend that would normally be paid in August 2010. The total dividend in respect of the year is, therefore, 5.75p per share. Sigma shares An interim dividend of 0.90p (2009: 0.90p) per Sigma share was paid on 12 January 2010 to shareholders on the register on 11 December 2009. A second interim dividend of 1.10p per Sigma share was paid on 1 April 2010 to shareholders on the register on 12 March 2010. This second interim dividend has replaced the final dividend that would normally be paid in August 2010. The total dividend in respect of the year is, therefore, 2.00p per share. Annual Report and AGM The Annual Report will be posted to shareholders in June 2010 and will be available thereafter from the secretary at the Registered Office, 51 Berkeley Square, London W1J 5BB. The Annual General Meeting of the Company will be held at The Royal Automobile Club, 89/91 Pall Mall, London, SW1Y 5HS on Tuesday 27 July 2010 at 12 noon.

This announcement and the information contained herein is not for publication, distribution or release in, or into, directly or indirectly, the United States, Canada, Australia or Japan and does not constitute, or form part of, an offer of securities for sale in or into the United States, Canada, Australia or Japan.

The securities referred to in this announcement have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act") and may not be offered or sold in the United States unless they are registered under the Securities Act or pursuant to an available exemption therefrom.  The Company does not intend to register any portion of securities in the United States or to conduct a public offering of the securities in the United States.  The Company will not be registered under the U.S. Investment Company Act of 1940, as amended, and investors will not be entitled to the benefits of that Act.

This announcement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the securities referred to herein in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration, exemption from registration or qualification under the securities law of any such jurisdiction. 

The contents of this announcement include statements that are, or may be deemed to be "forward looking statements".  These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "anticipates", "expects", "intends", "may", "will" or "should".  They include the statements regarding the target aggregate dividend.  By their nature, forward looking statements involve risks and uncertainties and readers are cautioned that any such forward-looking statements are not guarantees of future performance.  The Company's actual results and performance may differ materially from the impression created by the forward-looking statements. The Company undertakes no obligation to publicly update or revise forward-looking statements, except as may be required by applicable law and regulation (including the Listing Rules).  No statement in this announcement is intended to be a profit forecast.

For further information please contact:

Chris Turner

Fund Manager - Ordinary share class

TR Property Investment Trust plc

Telephone: [phone]

Marcus Phayre-Mudge

Fund Manager - Sigma share class

TR Property Investment Trust plc

Telephone: [phone]

 

END

 

 

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