Half Yearly Report

RNS Number : 7293W

TR Property Investment Trust PLC

24 November 2010

 



This announcement and the information contained herein is not for publication, distribution or release in, or into, directly or indirectly, the United States, Canada, Australia or Japan.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

Financial Report for the half year ended 30 September 2010

24 November 2010

ORDINARY SHARES Financial Highlights and Performance	Half year ended 30 September 2010 (Unaudited)	Half year ended 30 September 2009 (Unaudited)	% Change
Revenue
Revenue earnings per share	5.52p	3.60p	+53.3
Net interim dividend per share	2.30p	2.30p	0.0
	As at 30 September 2010 (Unaudited)	As at    31 March 2010 (Audited)	% Change
Balance Sheet
Net asset value per share	189.34p	185.22p	+2.2
Share price	161.70p	159.40p	+1.4
Net debt	6%	8%
Shareholders' funds (£'000)	486,087	475,500	+2.2
Shares in issue at end of period (m)	256.7	256.7
Performance	Half year ended	Year ended
	30 September	31 March
	2010	2010
Benchmark performance (total return)	+4.4%	+60.6%
NAV total return	+4.2%	+52.6%
Share price total return	+1.4%	+60.5%

SIGMA SHARES Financial Highlights and Performance	Half year ended 30 September 2010 (Unaudited)	Half year ended 30 September 2009  (Unaudited)	% Change
Revenue
Revenue earnings per share	1.13p	1.76p	-35.8
Net interim dividend per share	0.90p	0.90p	0.0
	As at 30 September 2010 (Unaudited)	As at 31 March 2010 (Audited)	% Change
Balance Sheet
Net asset value per share	100.04p	98.12p	+2.0
Share price	74.50p	70.50p	+5.7
Net debt	6%	11%
Shareholders' funds (£'000)	124,969	122,577	+2.0
Shares in issue at end of period (m)	124.9	124.9
Performance	Half year ended 30 September 2010	Year ended 31 March 2010
Benchmark performance (total return)	+5.6%	+70.0%
NAV total return	+3.1%	+64.1%
Share price total return	+5.7%	+90.0%

Dividends

Ordinary Shares

An interim dividend of 2.30p (2009: 2.30p) per Ordinary share has been declared payable on 11 January 2011 to shareholders on the register on 10 December 2010. The shares will be quoted ex-dividend on 8 December 2010.

Sigma Shares

An interim dividend of 0.90p (2009: 0.90p) per Sigma share has been declared payable on 11 January 2011 to shareholders on the register on 10 December 2010. The shares will be quoted ex-dividend on 8 December 2010.

Chairman's Statement

Introduction

Pan European property shares made forward progress over the six months to the end of September 2010 with an average total return in Sterling of 4.43% in the period. In context, this fairly modest figure was nevertheless better than the total returns from the All Share Index (0.58%) and the Stoxx 600 in Sterling (-1.86%).

It was not all plain sailing. From the start of April to the end of June, property share prices fell sharply thanks to a combination of sovereign debt concerns in the Eurozone, fears of a double dip in Western economies and worries over the austerity budget in the UK. Since the end of June pricing has recovered smartly. The impact of the extra fiscal laxity being applied to ease this bunch of crises seems to have shifted investor sentiment. The chances of interest rates remaining lower for longer have increased as have the fears that inflation may re-emerge as a problem. The recovery therefore has been driven by investors hunting assets with decent current income and some potential for inflation protection, both of which property and property shares can offer.

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 commented on by the Fund managers. In summary the Ordinary share class showed an NAV total return of +4.2% and a share price total return of 1.4% while its benchmark total return was 4.4%. For the Sigma share class the NAV total return was 3.1%, the share price total return was 5.7% while its benchmark total return was 5.6%.

Revenue Results

The revenue results for the half year are not quite as anticipated. In particular the Ordinary share class earnings, at 5.52p, have been boosted by an estimated taxation charge that is lower than our managers projected. Revenue earnings are some 53% ahead of last year's interim level, and indeed ahead of the revenue earnings for the whole of year to March 2010. A detailed explanation of the reasons for this exceptional variance is provided in Chris Turner's Manager's Report. Meanwhile, as expected, the Sigma share class earnings at 1.13p are lower than the same period last year. Full explanations of each of these revenue results are provided in the share class managers' reports.

Ordinary Shares Dividend

The Board is maintaining the interim dividend at 2.30p per share. The Board will consider the potential to raise the final payment at the year end when it has a clearer view both of this year's final taxation position and also of the net revenue outlook for the next financial year.

Sigma Shares Dividend

The Board is maintaining the interim dividend at 0.90p per share.

Revenue Outlook

Ordinary Shares

Based on our managers' income forecasts for the timing and quantum of dividends to be received up to the end of March 2011, and using current exchange rates, a stable portfolio and subject to the usual caveats, they expect net revenue per share for the full year to be around 6.60p per share. This represents an increase of 27% over per share revenue last year. Using the same criteria but adjusting the tax charge back up to 12%, the net revenue per share in 2011-2012 is currently expected to fall back to around 6.20p per share.

Sigma Shares

In the annual report our managers advised the Board that they expected that revenue per share for the Sigma share class for the year to March 2011 would be in the order of 2.30p per share.  This has been revised to 2.10p which is still ahead of the 2.0p full year dividend paid last year. The weakening Euro in the first half of the year has resulted in slightly lower than expected earnings in Sterling terms.

Net Debt and Currencies

Throughout the half year both share classes have continued to be run with modest gearing. The Ordinary share class started the half year with £41m of net debt and finished the period with £29m. The comparable figures for the Sigma share class were £13m and £6m. Since the end of September, the Trust has received credit committee approval for the renewal of its one year variable multi-currency borrowing facility with the Royal Bank of Scotland. The costs of this loan, in terms of spread and non-utilisation fees have been reduced from last year's level though the costs remain much greater than in the years prior to 2009. Your Board continues to explore ways of providing the Trust with flexible and realistic access to modest levels of longer term debt in a manner which recognises the excellent covenants that we offer.

As in previous years the portfolios' exposure to foreign currencies was not hedged at either the asset or income level. Over the half-year Sterling appreciated against the Euro by some 3%, but depreciated against the Swiss Franc and the Swedish Krona by a similar amount.

 

Discount and Share Repurchases

The Ordinary share discount to capital only net asset value averaged 9.3% over the half year with a range of 2.1% to 14.6%. The Sigma share discount to capital only net asset value averaged 23.9% over the half year with a range of 19.2% to 27.8%. No shares were repurchased in either share class in the period.

Board and Management

I noted in the last annual report that F&C had reached agreement to acquire Thames River in May. I can now report that this transaction was completed in September and that there have not been, and are not expected to be, any changes to the Trust's management personnel and arrangements as a result of the transaction. 

Peter Wolton, who joined the board as a non-executive director in 2005, has indicated that he wishes to retire due to pressure of other commitments. We are sorry to lose him and very grateful for the effort and advice he has given to the Trust over the last five years.

Outlook

The outlook for Western economies and for inflation remains unclear. On the economic front there have been encouraging signs this summer that the northern European economies, led by Germany, have now stabilised to a point where steady growth can be resumed. However much of the periphery of the Eurozone is still very fragile. In the UK recent economic data has been better than expected but we still have to face the full impact of the austerity spending plans and higher personal taxation.

The argument as to whether or not insidious inflation is likely to re-emerge as a feature of Western economies rages on. That the recent rise in the price of gold has occurred at the same time that long bond yields have continued to fall, points to how deeply contrary viewpoints are held. In the UK the inflation rate has been stubbornly above expectations for some time. Meanwhile interest rates remain at extremely low levels and the point at which they may start to rise appears to be receding rather than approaching.

Property markets have come through the summer slightly better than expected. Fear that the banks would wreck the investment market by dumping large quantities of unwanted assets has not proved correct. Tenant demand is still scarce in most areas, but is picking up in the biggest cities, though average rental values continue to decline modestly. Public company balance sheets are in pretty decent order and rental yields on high quality property offer a viable margin over borrowing costs for businesses without high cost legacy debt.

It is the hunt for income and the fear of inflation that has recently sustained pricing in the property share market and I expect this trend to continue for the moment.

 

Peter Salsbury

Chairman

24 November 2010

Directors' Responsibility Statement

The Directors acknowledge responsibility for the interim results and approve this Half-Yearly Financial Report.

The Directors of TR Property Investment Trust plc confirm that to the best of their knowledge:

(a)       the Half-Yearly Financial Statements have been prepared in accordance with IAS34 as adopted by the European Union and give a true and fair view of the assets, liabilities, financial position and profit for the period of the Company as required by the Disclosure and Transparency Rules ('DTR') 4.2.4R;

(b)       the Chairman's Statement together with the following Managers' Reports includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

(c)       the report includes a fair review of the information required by DTR 4.2.8R.

Approved by the Board on 24 November 2010 and signed on its behalf by Peter Salsbury, Chairman

Managers' Statement

Chris Turner and Marcus Phayre-Mudge

Ordinary share class & Sigma share class

Market Background and Outlook

Introduction

European commercial property investment demand has been better than forecast over the summer, thanks to low interest rates and the fear of inflation. However demand is still very polarised, being robust for well located and well let assets in core Europe and in the UK, and feeble for poorly let or vacant property - particularly when located in areas with obvious ongoing economic problems. Fears that the market would be flooded by banks offloading liquidated stock have not materialized. While tenant demand has improved overall this is as a result of being much improved in a minority of locations. It is still low to non-existent in some places.

Property shares followed the general equity market trends over the summer. They fell persistently through to the end of June and then fully recovered by the end of September. These movements were driven by the macro events in both the UK and Europe - austerity packages, sovereign debt concerns, and the fear up to the end of June of an economic double dip. Then relief as these problems appeared to fade and measures put in place to rectify these threats were seen as ensuring that interest rates are likely to stay lower for longer.

There were no ghastly surprises in the sector. For the most part reported numbers were not far from expectations. Individual share price performances were more influenced by national location than by stock specific events. Stocks with high dividend yields outperformed as investors searched for income and this helped the small cap benchmark used by Sigma to outperform the main EPRA benchmark despite the reluctance of many institutions to consider investing in smaller potentially illiquid equities. Throughout the summer brokers reported that generalist institutional investor interest in real estate stocks remained very modest. Generally it has been private investors who have increased their weightings in the Sector as both specialist global property share funds and  open ended direct property funds have reported net inflows being maintained.

Property Investment Markets

UK

As expected the rate of UK commercial property average capital growth has slowed markedly. The initial bounce took values up by 13% in the August 2009-March 2010 period, whereas the six months to end September has seen only a 2.4% increase as judged by the IPD monthly index. This is, however, just an average. Digging into subsectors shows that City and West End office properties have risen in value by around 7% since March while the increase for  all UK retail has been 2.5% and for industrial values less than 1%. We guess that if properties inside the M25 were excluded from the index, capital values in the rest of the UK probably fell in the period.

Indeed UK investment demand is currently very London centric. Here the commercial market is dominated by public and private buyers from all parts of the globe, but especially Asia. Pricing appeared to lull over the early summer, but once the election was out of the way, well located and well let buildings have again been selling rapidly. Outside London the picture is rather different, and, with the exception of the top retail locations, demand is mostly domestic and risk averse.

Last autumn's surge in investment demand was all about the scramble for income, so the yield compression was rapid. This summer's domestic buying has been more judicious and selective particularly for business space in the regions.  Where there is uncertainty about whether and at what rental level a property can be re-let when the lease expires, buyers may be hard to find even at a low double-digit initial yield. Thus rental values or the lack of them are again coming to play a larger part in value movements.

The greater buoyancy of the UK investment property market is reflected in the IPD All Property total return swaps market. In May we noted that swap pricing indicated average UK capital value growth of 4% for calendar 2010. Today that figure is close to growth of 6%. Swap pricing continues to suggest that there will be a modest (3%) decline in capital values in both 2011 and 2012.

Europe

Across the Channel property values have generally stabilised but have yet to make significant upwards progress. They fell far less sharply than in the UK in the 2007-2009 period and therefore did not see the same bounce through Q4 2009 and Q1 2010. In the core European countries good retail centres have definitely improved in value with the few offerings attracting multiples bids. In some city centre locations, notably Paris and Stockholm, office pricing has risen, whereas in other centres with higher vacancy, such as Frankfurt, Brussels and Amsterdam, underlying yields have made little or no progress. With most Continental leases for five year terms and subject to annual inflation indexing, business space lease renewals have often been to lower passing rents. In the peripheral economies where extreme austerity measures are coming into place the property investment market conditions are difficult and sometimes non-existent.

Rental Values

Offices

Office demand has been generally weak with a few shining exceptions. We noted in the Annual Report that Central London had seen an increase in demand for new buildings and that both headline and net effective rents had started to rise. This trend has continued and vacancy rates have declined -  the West End is now below 6%. However net absorption is probably modest. Several factors are helping the market. The period 2010 to 2014 sees the end of a lot of 25 year leases on space taken immediately post "big bang". Occupiers with such leases are choosing new high quality space of which there is a diminishing supply as little speculative development has been started since 2008. Older office buildings, particularly in the West End, are, where suitable, being converted to residential. Finally job growth has been present in financial services and other London based industries - though not Central Government!

Away from London, net effective city centre office rental values have started to rise again in Paris, Stockholm, Warsaw, Oslo and Geneva. In peripheral Europe, in cities such as Madrid, Barcelona and Dublin effective rents are still falling. Elsewhere in city centres rental values are reported to be stable  though the very high vacancy in centres such as Amsterdam, Brussels and Frankfurt suggests that "stable" is unlikely to mean that average rental values are about to rise. In suburban and regional locations demand is generally weak, particularly for business park space. Hefty incentives are often required to lure the occasional occupier who has the luxury of a multitude of buildings or suites from which to choose.  In some locations there would now seem to be more office space than the local working population may ever again require.

Retail

Across the UK retail sales volumes have continued to grow but by less than the rate of inflation. Tenant demand appears to have improved modestly over the summer but is still very far from being vibrant. However there are pockets of strength notably in locations concentrating on luxury items or in areas dominated by higher income earners. So while district and sub regional centres across the country have vacant units and flagging rental values, Central London retail rental values have risen smartly, particularly in places such as Covent Garden and Bond Street. Next year will see the impact of another increase in VAT as well as the impact of public sector budget and benefit cuts so that regional retail property demand seems unlikely to recover much ground over the next eighteen months.

In Europe similar comments apply with national tilts. Lease incentives remained necessary to improve occupancy rates in most locations, and the best performance seems to be from the largest malls in the major cities, but even here, like for like annual rental growth is generally only in the 1% to 2% range. Consumer confidence has improved in the core countries but still remains extremely weak in the peripheral economies where fiscal tightening is fiercest.

Storage and Industrial

This is a tough market for landlords right across Europe.  There are some early signs that the contraction of demand is drawing to a close, but vacancy rates are high (over 15% in the UK) and this suggests that a return to rental growth is still some distance away. Good quality well located sheds have seen an improvement in take-up over the summer as occupiers trade up to higher quality premises often taking advantage of their pricing power to obtain very flexible lease packages. Letting older, poorly located property seems destined to remain a battle for an extended period.

Debt and Credit Markets.

As we have noted in previous reports there is a vast amount of debt, estimated at over £1,000 billion, owed by private commercial property owners across Europe, mostly to banks. It is not known how much of this debt is in actual default (5%?) or how much would be in default if loan covenants were strictly enforced (20%?). In Ireland the newly established bad bank, NAMA, already holds some €75 billion of assets.  The banks have been taking a long term view of the situation. To a large extent they have no other option. Stock is slowly coming to the market, particularly in the UK, but not at a pace that is disturbing the mainstream investment markets. Certainly the widely expressed fear that banks would knock the stuffing out of investment values by dumping unwanted assets has not proved to be the case. Many of the non-performing loans are secured against stagnant pools of assets that cannot be refinanced. As time moves on the problem is becoming one for the banks and not one for the property market, save that, with their loan books overloaded with historic risk the banks have less appetite than usual for fresh lending. Indeed the range of banks open to fresh real estate lending has not grown much in the last six months, and the Basel 3 agreement may not help in this respect in 2011.

Property Shares

UK

UK property shares declined by 14% in Q2 2010 and then regained almost all their losses in Q3 to finish down 3.50% for the half year (total return -1.43%).  Thus their performance pattern was much aligned to that of the All Share Index. With Central London proving to be the best sector for investment and tenant demand, the London specialist stocks, Derwent London, Shaftesbury and Great Portland all featured amongst the best performers. Stocks underperforming included the residential property specialists, Grainger and Unite and also those with above average exposure to regional business space, SEGRO, St Modwen, Max Property and Helical Bar. Reflecting investors' search for income stocks offering high dividend yields, especially the Guernsey based offshore REITs, almost all outperformed whatever their portfolio spread or dividend cover. SEGRO aside, the largest UK stocks, Land Securities, British Land, Hammerson and Capital Shopping all performed broadly in line. Risk was out of demand and stocks with high leverage and no yield such as Quintain and Songbird underperformed.

In Sterling terms the European property shares outperformed their UK equivalents both on a price only basis (+3.3%) and on a total return basis (+6.25%). At their nadir in Q2 they were down 22% in Sterling terms (and 18.8% in Euro terms) but their recovery in Q3 was sharper and stronger.

Europe

The general pattern of performance was similar to that in the UK but the country overlay was also very important. High income did well, high risk and no income did poorly. Retail specialists outperformed office focused investment companies. By country, the core European states plus Sweden and Switzerland did well while the periphery languished. Swedish stocks (+24.5% in Sterling, +20.8% in Krona) performed best despite their higher than average gearing. The Swedish economy showed signs of early sustainable recovery, interest rates remain low and the country is not a candidate for fresh austerity measures. German and Austrian generally outperformed as did French property companies. Greek property shares tumbled by an average of 25% and the lone Spanish stock, which entered the EPRA Index in June, fell by 9.1% in Q3.

The spectacular gains shown by heavily leveraged companies in the year to March 2010 were not repeated. Indeed these stocks almost all underperformed. For instance, the three Swiss property stocks with acceptable leverage all outperformed, thanks partly to currency strength, but the fourth and most highly geared dropped sharply. Emphasising the attraction of immediate income almost every stock with a forward dividend yield of over 5% outperformed. There was very little corporate activity. One small merger occurred in Austria. There were no hostile takeover bids, save an abortive attempt for Minerva in the UK. A large German new issue concentrated on Berlin housing failed to float. Issuance was therefore all at the secondary level with several substantial accelerated placements in Europe made to fund new property purchases or to repay debt.

Debt Profiles

The overall level of leverage across Pan European property shares, at just under 50%, changed little over the summer. German and Austrians led with average 60% leverage followed by the Swedish, Finnish, Belgian and Italian stocks around 55%. The UK and Dutch stocks were on the overall average, while the French stocks averaged 35% leveraged, due primarily to the below average gearing of Unibail Rodamco. Fresh longer term bond issuance was scarce. Unibail raised 5 year fixed money at 3.375% while both the largest Swiss stocks paid 1.875%. There was no bond issuance in the UK and here as elsewhere companies tended to use variable bank debt and then swap it into fixed rates. Where the UK differs is in the average length of debt. The average maturity profile for Pan European property companies is about 4 years. Land Securities and British Land both have maturity profiles of over 10 years, most of it at fixed rates. This will be marvellous in a rising inflationary environment, but gives the companies no benefit from refinancing if bond rates stay near their present levels for the next five years.

Swaps

Most quoted property companies now have substantial portfolios of interest rate swaps almost all of which are out of the money and which would cost substantial sums to repay ahead of time. The negative value of these are excluded from the most commonly used definition of NAV, are generally downplayed by managements and ignored by analysts. Nevertheless they have an impact on the current value of a business in control of finance costs. When, as now, rental income streams are under pressure, those companies with short term or variable rate debt can see their interest outgoings declining as fast or faster than their rental income. Most of the large UK companies are not in this position. In the more extreme instances the negative value of swaps can amount to 20% of the shareholders' funds.

Outlook

In an environment of modest growth, low inflation and normalized interest rates, property and property companies would have little immediate attraction at current price levels - relative to most other equity sectors that is. Other sectors would have the early prospect of sustainable earnings growth. The earnings growth in the real estate sector which comes from rising rental values would be at least two or three years away. Development gains from projects started today would not come through for several years and in the mean time borrowing costs would be far higher than today's pushing up outgoings. In equity markets property is, as they say, a late cycle play.

However the current economic environment is not normal. UK inflation does not feel under control and yet the economy is not in a position to stomach a sharp rise in base rates. In Europe the interest rate needed to protect the fragile peripheral economies is really now too low for those core economies which are showing sustainable growth. If interest rates have to stay low for longer out of political necessity and if Governments continue to pump money into their economies, then the investors' hunt for reasonably safe income with inflation protection is very likely to continue to push some commercial property values higher, sending yields down to their pre 2007 lows.

Nevertheless we need to proceed with caution. There is a lot of risk out there still in secondary portfolios with high leverage. Our current approach is to stay with modest gearing and concentrate the investments in corporates with prime portfolios in those locations where investor and tenant demand is strongest. It does not feel yet to be time to switch from the strongest performers into the weakest.

Manager's Report

Ordinary Share Class

Performance and Background

The Ordinary share class total return at 4.2% was 0.2% behind the benchmark total return of 4.4% for the six month period. This irritating underperformance occurred despite the lower than expected tax charge, which resulted in higher than anticipated revenue earnings.

All told it has been a noisy period in stock markets. Throughout the summer stock pricing has been dominated by sharp, short-term, changes of global economic sentiment and, nearer to home, by Eurozone sovereign debt concerns.  Property shares have flowed up and down with these shifts in sentiment, rarely finding a life of their own. For investors trying to stock pick with an eye to more than the next two months, this macro driven correlation in stock movements has been tedious.

Fundamentals have improved in my view. Though Western economies remain very fragile I think that the fear of a general relapse has faded somewhat, to be replaced by a sense that we will muddle through. There are some extraordinary distortions to the usual pattern of equity valuations as a result of the level of bond and interest rates. The spread between dividend yields and bond yields is at historic highs in both the property sector as well as the general equity market. 

Investment Activity

With this background, I have stuck generally to the high quality names through the summer. Investment turnover, at around 6% of total assets, has been well below my average and activity has been limited mainly to light pruning and modest re-weightings. I failed to spot the selling opportunity in early April and nor did I take proper advantage of the buying opportunity at the end of June.

Within the UK I have continued to favour shares which give us exposure to London and underweighted stocks with high retail exposure and those with provincial business space portfolios. Thus after Liberty International was split into two companies - Capital Shopping Centres and Capital and Counties - in May, I sold much of the holding in the former and reinvested in the latter, which has the all-London portfolio that includes both the Covent Garden Estate and the Earls Court complex. Elsewhere in the UK I have taken the view that the mortgage finance will continue to be scarce through 2011. As a result I have reduced the holding in Big Yellow. This has been a great investment and it remains a first class business, but the strength of demand for their self storage space is related to the volume of housing turnover.

Within Europe, I maintained the overweights in Sweden and France, created an overweight in Norway and closed some of the underweight in Germany. I have not made any investments in Iberia, Ireland and our Greek holdings are worth less than 0.1% of the fund. On the Continent I have continued to prefer shares with exposure to shopping malls against the office and industrial sector - save for companies invested in offices located in Central Paris and CBD Stockholm.

On balance, I was a net dis-investor from small (sub £200m market cap) companies. Partly this is the residue of the aversion to illiquidity borne of 2008, and partly a reflection that, in the early stages of a market recovery, it will tend to be the medium and larger companies that have decent access to finance and can do quick deals.

Despite their volatility, the impact of currency fluctuations on the capital and revenue returns, taken over the half year, was relatively small. We took no special action to hedge the currency, though we switched some of our bank borrowings into Euros for part of the period, and held much of our cash in Swiss francs.

Distribution of Assets

Reflecting the low level of equity market turnover, the distribution of the Ordinary Share Class portfolio has shown little change over the last six months. Continental Securities rose from 57% to 60%, UK equities declined from 33% to 32%, and UK directly held property declined from 10% to 8% (as a result of the sale of the Cambridge property).

Largest Equity Investments

As usual the top twenty investments - and their combined size relative to the total portfolio - have remained pretty constant over the half year. Unibail remains by far the largest single holding. The shares outperformed in the period with a total return of 15.2% and over the summer the company became one of the 50 largest quoted businesses in Europe. As the holding represents just under one sixth of the entire portfolio it is worth noting that Unibail is Europe's largest quoted property company by both market cap and gross assets.  Its €22 billion portfolio is located  in France (62%), the Netherlands (11%), Scandinavia (8%), Spain (9%), Austria (5%) and Eastern Europe (5%). The asset focus rests on very large dominant shopping centres in the main European cities especially Paris, Stockholm and Warsaw and Vienna and that these centres generate high sales density and footfall and have lower structural vacancy than those of its peer group. In October 2010 the company distributed a capital return of €20 per share but even after this event it still has below average leverage and maintains a consistent track record of earnings and dividend growth. In terms of liquidity the holding of just over 600,000 shares represents under 2 days' average trading turnover in the shares. The running dividend yield is a very useful 5.4%.

Land Securities and British Land, the two biggest UK REITs, together represent 11% of total assets, which is roughly a benchmark average weighting. Neither companies' board or management covered themselves with glory in 2008 and 2009, but both shares are now recovering some poise. They offer us exposure to Central London offices which we like and some reasonable high grade UK retail space, which we can tolerate. Neither have any meaningful exposure to UK regional offices and industrial space in which we prefer to be underweight. Both offer fairly attractive stable dividend yields. Both shares slightly underperformed the Sector over the summer with  total returns in the half year of -3.6% and -0.6% respectively. Over the summer  I reduced the size of the holding in SEGRO, the UK REIT which specializes in owning storage and industrial property in the UK and Europe. In retrospect I should have been more brutal with the holding as the stock produced a total return of -13% in the half year.

Elsewhere the portfolio benefited from strong total returns from Castellum (+23%), Eurocommercial (+14%), Gecina(+13%), Derwent London, Swiss Prime Site and Prime Swiss Property (all +12%). The only major holdings to underperform, aside from those already mentioned, were Hammerson(+12%), Klépierre(+2%), Icade (+3%) and Big Yellow (-3%). 

Revenue and Revenue Outlook.

In comparison to the six month period ended 30 September 2009 total revenue rose by £3.6m or 25% to £17.8m. There were lots of smaller changes, but by far the biggest component of the change was the dividend from Unibail, which due to timing differences totalled some £4.2m in the half year compared to £1.1m in the equivalent period in 2009. Finance charges rose reflecting higher borrowings and management charges were also higher. Net profit before tax rose 24% to £15.08m. The estimated tax charge has dropped significantly from 24% to 6% of pretax revenue.

This change in the tax charge is worthy of a more detailed explanation. An amendment to legislation in the UK in July 2009 resulted in most overseas dividends no longer being taxable in the UK. However, in most Continental European countries, tax is still withheld locally on dividend payments, so there is still an underlying tax cost to the Trust. The tax charge for the Trust will always be variable depending upon the mix of income sources. Under current legislation we would expect the normal average revenue tax charge to be around 12% for the Ordinary share class.

In the current year a further factor has come into play. A number of European property companies have unexpectedly distributed their dividends from capital reserves. In most instances these have been treated by the Trust as income as they represent the usual periodic distribution of earnings from regular property investment activity (i.e. rental income) and not a return of capital or distribution of capital profits. However, because these dividends have been paid from capital reserves, withholding tax has not been applied so the dividends have been received gross. As these dividends are no longer taxable in the UK, no further tax has been payable. As a substantial number of dividends have been paid in this way, we expect the impact to be a materially lower tax charge in the current year.

It is difficult to predict whether this trend will continue into the next financial year. As asset values recover and unrealised losses which have been accounted for through the revenue accounts reverse, it is expected that companies will resume paying their dividends from revenue reserves and withholding tax will be applied, increasing the Trust's overall tax charge back to around the 12% level.

As referred to in the last Annual Report, there is also the prospect of challenging withholding taxes on dividends from European countries and also applying the current UK tax treatment of foreign dividends to earlier periods. There is still no certainty on the outcome of these points, however we will continue to monitor the situation and submit any claims where appropriate. Revised tax returns have been submitted for earlier periods on the basis of the case currently being heard by the EU Courts in relation to applying the current UK tax treatment of foreign dividends to these periods, however at this stage the outcome of these proceedings is uncertain and accordingly no benefit has been recognised in the financial statements.

Based on our forecasts for the timing and quantum of dividends to be received up to the end of March 2011, using current exchange rates, a stable portfolio and with the usual caveats, I expect net revenue per share for the full year to be around 6.6p per share, an increase of over 27% on per share revenue last year. Using the same criteria but adjusting the tax charge up to 12%, the net revenue per share in 2011-2012 could fall back to around 6.2p per share.

Gearing, Debt and Debentures

At the start of the half year we had £47m of debt made up of £12m from the Debenture and £35m from the bank facility. The cash of £9.9m shown in the balance sheet was mostly swallowed up in paying the second interim dividend of £8.9m the day after the half year started. Over the summer net debt was in the £30 to £40m range though at the half year end the figure had dropped to £29.1m. The portfolio's see-through leverage (which adds the proportionate debt of all our equity investments to our on balance sheet net cash or net debt) started the half year at 47% and remained close to that level through the period, ending at 47.9%. This is very close to the equivalent figure for the EPRA benchmark which stood at 47.5% at the end of September. 

Direct Property Portfolio        

The physical property portfolio produced a positive total return for the 6 months to September of 4.8%, comprising a capital return of 2.1% and an income return of 2.7%.  The portfolio underperformed the IPD Monthly Index, which returned 5.9% made up of a capital return of 2.4% and an income return of 3.5%. This underperformance was driven by the lack of exposure to central London offices and retail warehousing as well as a reduction in our income return as a result of the rent free period granted as an incentive to DHL to sign a longer lease in Milton Keynes.

In June we completed the sale of our office building on Cambridge Science Park for £6.7 million, 3% above the March 2010 valuation.  The property was over-rented and held on a long lease from Trinity College Cambridge with a geared headrent of 15%. The sale was in line with the Trust's strategy of reducing exposure to regional offices and had little prospect for future asset management.

During September we took the surrender of the National Car Parks lease at the Colonnades for a reverse premium. The car park has suffered years of underinvestment which resulted in a reduction in usage as the parking environment deteriorated and concerns with the security increased.   We will invest part of the reverse premium in upgrading the fabric of the car park and have appointed a management company to carry out the day to day management.  The surrender will result in a short term reduction in income from the car park, however, we are confident that we can improve the parking environment and increase revenue.  In January the removal of the western extension to the congestion charging zone should have a major positive effect.  We hope that improvements to the car park will also have a positive valuation effect on all the other parts of the Colonnades.

Chris Turner

Fund Manager

Ordinary Share Class

24 November 2010

Manager's Report

Sigma Share Class

Introduction

Sigma's performance is measured against a small cap index, the FTSE EPRA/NAREIT Small Cap Europe Index, since April 1^st 2009. In the financial year to 31^st March 2010 this index outperformed the FTSE EPRA/NAREIT Europe Index, which includes all those stocks with a market capitalisation of over £1bn by almost 10 percentage points (+70% v. +60.6%). I commented at the time that this differential was consistent with the broad trend of smaller companies outperforming larger companies in the initial upward correction following such a serious bear market as the one witnessed between early 2007 and March 2009. This outperformance by smaller property companies has continued into the first half of this financial year with the FTSE EPRA/NAREIT Small Cap Europe Index rising +5.6% whilst the FTSE EPRA/NAREIT Europe Index rose +4.4%. Smaller property companies also outperformed the FTSE Smaller Companies Index which rose +4.9% whilst the All Share total return was -0.5% in the period.

Performance

Over the period, the Sigma share NAV total return was +3.1% with the total return from the index as noted above of +5.6%. On a price only (as opposed to total return) basis Sigma's NAV rose by +2.0% whilst the benchmark (price only) rose +3.5 %. The larger underperformance on a total return basis reflects the impact of reinvested dividends. This differential is widest in the first half of the year as over 50% of our revenue is received in the period and reflects the fact that I was underweight some of the highest yielding stocks in the period. Our universe includes a significant number of Guernsey listed, externally managed companies investing principally in diversified but static portfolios of UK property. They distribute all of and in many cases over 100% of their net revenue, hence they are high yielding. However we consider that this level of distribution is unsustainable in the long run as these businesses will be unable to refresh and invigorate their portfolios due to the lack of retained earnings.

Over the whole period returns were modest but far from steady. The first quarter was dominated by the crisis enveloping the Euro and the Eurozone. Across Europe, the tension within the single currency overlaying a broad range of national fiscal positions came to the fore. Real estate and by extension real estate equities as a leveraged asset class reacted poorly to investors expectations of reduced lending capabilities and austerity packages. Between 31 March and the low point in the period (late May) the benchmark fell over 17%. Such was the severity of the correction that the index fell 9% between 12 and 25 May. Sentiment was dominated by these overarching macro driven concerns and all European equities were impacted. The increased volatility and heightened correlation of individual stock returns were reminiscent of late 2008. This contraction in the dispersion of returns in our universe meant that stock selection was temporarily redundant; it was just a question of total exposure. Sigma had maintained leverage close to 10% since the autumn of 2009 and this had benefited the asset value in the recovering market conditions from February through to mid April. However, even the large number of low beta micro cap stocks, which had in previous corrections proved to have less market sensitivity, did not perform well in May and June. Looking back this leverage should have been reduced faster and further. The majority of these micro cap holdings are in Euro denominated stocks and the impact on the Euro in this two month period was dramatic (it weakened 6.2 % against Sterling in May and June). It should be reiterated, that many of these smaller companies are long term positions held alongside co-owning management teams whom we believe will deliver far better than average returns in the forthcoming property cycle. Borrowings are currently drawn in both Sterling and Euros to ensure that the see-through currency exposure of the fund matches that of the benchmark's currency exposure.

The second quarter of the financial year saw a steady recovery in real estate equity prices. As the summer progressed and the Euro crisis abated (temporarily in our view), investors' interest returned to focus on the likelihood and consequences of weak economic growth across Europe. Consensus continues to be that short rates will be 'lower for longer'. The record wide disparity between real estate yields and bond yields continues to attract investors, particularly private retail investors who are seeking more income than the negative real returns on their bank savings. Both the benchmark and Sigma's total returns in the second quarter were identical at +23.5%.

Investment Activity

Investment turnover (sales and purchases divided by two) was £20.5m which equates to 16.6% of average shareholders' funds over the period. This was a considerable reduction from the same period last year when turnover was 49%. This reduction in activity reflects not only the welcomed stability in the benchmark's constituents but more importantly the relatively small movements in the net debt position in the period. The periods of particularly high investment turnover in 2009 also reflected the movement from a net cash position of over 25% in late 2008 to drawing fully on our share (£10m) of the group's £50m RBS facility by December 2009. Over the first half of this financial year, the fund's gearing oscillated between 5.8% and 10.6%. The stability (and existence) of this mild gearing reflected my view that although over short periods the market would be buffeted by macro driven sentiment, there were a large number of listed property companies which we felt were positioned not only to withstand further economic headwinds but also seize opportunities. For many of these companies, being listed has been a godsend. They have had access to capital markets for balance restructuring which many of their privately held competitors have not, as well as for some the raising of opportunistic equity. The rigour of public market disclosure has forced them to confront and resolve legacy debt issues rather than huddle with their creditors hoping it will all get better. Over the six months under review, I reduced gearing in July, selling into the euphoric bounce across all European markets following the creation of the European Financial Stability Facility. This facility provided access to ECB funds and paved the way for agreement on both a strategy in the event of a Eurozone sovereign default and a promise by those nation states closest to collapse that they would commence deficit reduction programmes. By late summer, it was apparent that investors' attention, continued to be driven by macro events becoming increasingly focused on the impact of QE and the driving down of bond yields (and hence the price of debt and the theoretical risk-free rate). This is positive for a leveraged asset class with an inflation proof income stream and as the European summer holiday period ended stock markets rose and in particular real estate. The benchmark climbed 14.3% in September, finally bringing the asset value back into positive territory for the half year.

Distribution of Assets

The most noteworthy changes to the distribution of our assets has been the increase in Swedish stocks (from 15.7% at March to 21%), Dutch (from 11.6% to 13.9%) and German (from 4.7% to 6.7%). In the case of Sweden and Germany the increase in exposure was driven by our renewed confidence in their respective economies. Sweden (along with its smaller neighbour Norway) have produced GDP growth this year which is the envy of the rest of Europe. Both the Riksbank and the Norges Bank have put up base rates (albeit modestly and from low bases) but nevertheless the positive message about their economies is clear. Germany has benefited from the weakening in the Euro, reinforcing their competitiveness in international markets. They do not have a residential price bubble and given the large rented share of the market, falling house prices would have a markedly reduced impact on consumer confidence when compared with the UK. In fact Deutsche Wohnen (the largest listed Germany home owner) is now our 15^th largest investment. The focus on Dutch stocks reflects our expectation that owning real estate stocks for their high and stable dividend will remain a key driver for investors. Collectively, the Dutch companies in our universe have a dividend yield of 5.7%, only exceeded by the Belgian companies at 7.0%. So why not own more Belgian businesses? The answer neatly illustrates our decision making process. There may well be an overarching characteristic - in this case yield - but the individual stock acquisition decision will be ultimately driven by 'bottom up' company analysis. In the case of Belgium the two largest companies (Cofinimmo and Befimmo) account for 75% of the country exposure. The Brussels office market remains central to the performance of both companies, even though Cofinimmo is attempting to diversify into France. We believe that particular submarket will continue to experience a long period of negative rental growth as a consequence of over development and a shrinking euro bureaucrat tenant base.

UK equity exposure has also slightly reduced (34.3% to 29.6%) over the last six months. This is a consequence of further repositioning of our UK sector focus. There has been increased exposure to the Central London office and retail markets through our core holdings in Great Portland Estates and Shaftesbury but also a new investment in Capital and Counties. Whilst we remain confident that the Greater London conurbation will outperform, we are less confident about the residential market outside London and the holding in Grainger has been reduced by one third. Unite, the specialist student accommodation developer, a significant position in previous years has been sold on concerns that the increase in tuition fees will negatively impact on the student accommodation budgets.

Revenue

Although the earnings at the half year are considerably lower than the same period last year, I outlined in the annual report a number of likely reasons and each of these have as expected had some bearing. Consequently none of these factors is a surprise to your managers and at the full year, I advised the Board that revenue earnings would be in the region of 2.3p per Sigma share. At the half way stage the revenue earnings were 1.13p. Unlike the Ordinary share class the pace of dividend receipts is much more evenly spread across the year. In fact, our largest investment, Eurocommercial Properties, pays annually in November.

In the same period last year, the portfolio still contained a number of higher yielding large cap stocks and as the portfolio continued its rotation to entirely smaller companies the yield fell. It has always been the case that we expect Sigma to be lower yielding than the Ordinary share class, given that Sigma holds no physical property.

At the investment income level, revenue is down 22% when compared with the prior period but income from operations is down a much greater 40% and this requires further explanation. There are two important items to note, VAT and the debt charge. Firstly VAT where last year we recovered £104,000 whereas this year the figure was £14,000. The gearing in the portfolio has increased significantly and the finance charge has virtually doubled from £76,000 to £151,000. Both items were anticipated and our forecast reflected our expectations. The volatility of currencies is harder to predict and with around 85% of our revenues earned overseas this can have a considerable impact on revenue.

A positive in the period was a reduction in the tax charge from 17.3% in the prior year to 10.8%. The factors described for the Ordinary share class have had an impact but to a lesser extent.

It is difficult to predict the ongoing tax charge as this is dependent upon the income mix for the share class and also how Continental European companies classify their distributions, however, without the recurrence of the distributions from capital reserves which have had an impact in the current year, we would anticipate a tax charge of around 13%.

As referred to in the last Annual Report, there is the prospect of challenging withholding taxes on dividends from European countries and also applying the current UK tax treatment of foreign dividends to earlier periods. There is still no certainty on the outcome of these points, however we will continue to monitor the situation and submit any claims where appropriate. Revised UK tax returns have been submitted for earlier periods on the basis of the case currently being heard by the EU Courts in relation to applying the current UK tax treatment of foreign dividends to these periods, however, at this stage the outcome of these proceedings is uncertain and accordingly no benefit has been recognised in the financial statements.

Debt, Gearing and Debenture

Sigma has a £10m share of the Group facility with RBS and a £2.85m share of the remaining debenture. The total debt availability is therefore currently £12.85m. Based on an NAV at the half year of £125.00m, the facility represents a maximum external gearing of 10.3%. At the half year gearing was at 6% and over the period it has ranged between 5.8% and 10.6%. Given the intra-period performance volatility of our universe (ranging from monthly returns of -6.8% in May to +14.8% in September), the debt position has been actively managed.

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 55.5% and the equivalent figure for the benchmark is 53.7%. Sigma continues to hold a number of lower beta, small and micro cap names where we have confidence in the management to deliver over the medium and long term. However in a period of rapid share price inflation (such as we saw in September) they will struggle to keep up. The gearing goes someway to act as compensation and has aided performance in these stronger markets.

Marcus Phayre-Mudge

Fund Manager

Sigma Share Class

24 November 2010

Ordinary Share Class Statement of Comprehensive Income

for the half year ended 30 September 2010

	(Unaudited) Half year ended 30 September 2010			(Unaudited) Half year ended 30 September 2009			(Audited) Year ended 31 March 2010
	Revenue Return	Capital Return	Total	Revenue Return	Capital Return	Total	Revenue Return	Capital Return	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Income
Investment income	15,809	-	15,809	10,670	-	10,670	15,696	-	15,696
Other operating income	18	-	18	1,143	-	1,143	1,502	-	1,502
Gross rental income	1,486	-	1,486	1,881	-	1,881	3,655	-	3,655
Service charge income	470	-	470	538	-	538	1,506	-	1,506
Gains on investments held at  fair value	-	5,920	5,920	-	135,445	135,445	-	154,504	154,504
	______	______	______	______	_____	_____	______	______	______
Total income	17,783	5,920	23,703	14,232	135,445	149,677	22,359	154,504	176,863
	_______	_______	______	______	_____	_____	______	______	______
Expenses
Management and performance fees	(1,219)	(609)	(1,828)	(1,102)	(551)	(1,653)	(2,288)	(1,144)	(3,432)
Repayment of prior years' VAT	59	30	89	443	292	735	443	292	735
Direct property expenses, rent payable and service charge costs	(595)	-	(595)	(688)	-	(688)	(1,792)	-	(1,792)
Other expenses	(345)	-	(345)	(320)	-	(320)	(696)	-	(696)
	______	______	______	______	_____	_____	______	______	______
Total operating expenses	(2,100)	(579)	(2,679)	(1,667)	(259)	(1,926)	(4,333)	(852)	(5,185)
	______	______	______	______	_____	_____	______	______	______
Operating profit	15,683	5,341	21,024	12,565	135,186	147,751	18,026	153,652	171,678
Finance costs	(603)	(603)	(1,206)	(404)	(404)	(808)	(937)	(937)	(1,874)
	______	______	______	______	_____	_____	______	______	______
Net profit before tax	15,080	4,738	19,818	12,161	134,782	146,943	17,089	152,715	169,804
Taxation	(902)	528	(374)	(2,919)	559	(2,360)	(3,797)	589	(3,208)
	______	______	______	______	_____	_____	______	______	______
Net profit	14,178	5,266	19,444	9,242	135,341	144,583	13,292	153,304	166,596
	______	______	______	______	_____	_____	______	______	______
Earnings per Ordinary share (note 3a)	5.52p	2.05p	7.57p	3.60p	52.72p	56.32p	5.18p	59.71p	64.89p

Ordinary Share Class Balance Sheet

as at 30 September 2010

	30 September 2010	30 September 2009	31 March 2010
	(Unaudited)	(Unaudited)	(Audited)
	£'000	£'000	£'000
Non-current assets
Investments held at fair value	518,790	470,642	512,665
	______	______	______
Current assets
Other receivables	3,092	3,996	9,286
Cash and cash equivalents	3,480	4,487	9,863
	______	______	______
	6,572	8,483	19,149
Current liabilities	(23,591)	(4,428)	(40,614)
	______	______	______
Net current (liabilities)/assets	(17,019)	4,055	(21,465)
	______	______	______
Total assets less current liabilities	501,771	474,697	491,200
Non-current liabilities	(15,684)	(15,305)	(15,700)
	______	______	______
Net assets	486,087	459,392	475,500
	______	______	______
Net asset value per Ordinary share	189.34p	178.94p	185.22p

Sigma Share Class Statement of Comprehensive Income

for the half  year ended 30 September 2010

	(Unaudited) Half year ended 30 September 2010			(Unaudited) Half year ended 30 September 2009			(Audited) Year ended 31 March 2010
	Revenue Return	Capital Return	Total	Revenue Return	Capital Return	Total	Revenue Return	Capital Return	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Income
Investment income	2,117	-	2,117	2,708	-	2,708	4,940	-	4,940
Other operating income	13	-	13	293	-	293	483	-	483
Gains on investments held at fair value	-	2,664	2,664	-	39,325	39,325	-	44,260	44,260
	______	______	______	______	______	______	______	______	______
Total income	2,130	2,664	4,794	3,001	39,325	42,326	5,423	44,260	49,683
	______	______	______	______	______	______	______	______	______
Expenses
Management and performance fees	(337)	(169)	(506)	(296)	(148)	(444)	(626)	(313)	(939)
Repayment of prior years' VAT	14	7	21	104	68	172	104	68	172
Other expenses	(70)	-	(70)	(71)	-	(71)	(162)	-	(162)
	______	______	______	______	______	______	______	______	______
Total operating expenses	(393)	(162)	(555)	(263)	(80)	(343)	(684)	(245)	(929)
	______	______	______	______	______	______	______	______	______
Operating profit	1,737	2,502	4,239	2,738	39,245	41,983	4,739	44,015	48,754
Finance costs	(151)	(151)	(302)	(76)	(76)	(152)	(206)	(206)	(412)
	______	______	______	______	______	______	______	______	______
Net profit before tax	1,586	2,351	3,937	2,662	39,169	41,831	4,533	43,809	48,342
Taxation	(171)	-	(171)	(461)	602	141	(707)	817	110
	______	______	______	______	______	______	______	______	______
Net profit	1,415	2,351	3,766	2,201	39,771	41,972	3,826	44,626	48,452
	______	______	______	______	______	______	______	______	______
Earnings per Sigma share (note 3b)	1.13p	1.88p	3.01p	1.76p	31.84p	33.60p	3.06p	35.73p	38.79p

Sigma Share Class Balance Sheet

as at 30 September 2010

	30 September 2010	30 September 2009	31 March 2010
	(Unaudited)	(Unaudited)	(Audited)
	£'000	£'000	£'000
Non-current assets
Investments held at fair value	133,491	114,488	133,557
Current assets
Other receivables	4,795	1,067	4,674
Cash and cash equivalents	3,621	6,804	1,582
	______	______	______
	8,416	7,871	6,256
Current liabilities	(14,089)	(2,289)	(14,387)
	______	______	______
Net current (liabilities)/assets	(5,673)	5,582	(8,131)
	______	______	______
Total assets less current liabilities	127,818	120,070	125,426
Non-current liabilities	(2,849)	(2,849)	(2,849)
	______	______	______
Net assets	124,969	117,221	122,577
	______	______	______
Net asset value per Sigma share	100.04p	93.84p	98.12p

GROUP STATEMENT OF COMPREHENSIVE INCOME

for the half year ended 30 September 2010

	(Unaudited) Half year ended 30 September 2010			(Unaudited) Half year ended 30 September 2009			(Audited) Year ended 31 March 2010
	Revenue Return	Capital Return	Total	Revenue Return	Capital Return	Total	Revenue Return	Capital Return	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Income
Investment income	17,926	-	17,926	13,378	-	13,378	20,636	-	20,636
Other operating income	31	-	31	1,436	-	1,436	1,985	-	1,985
Gross rental income	1,486	-	1,486	1,881	-	1,881	3,655	-	3,655
Service charge income	470	-	470	538	-	538	1,506	-	1,506
Gains on investments held at fair value	-	8,584	8,584	-	174,770	174,770	-	198,764	198,764
	_____	_____	_____	_____	_____	_____	_____	_____	_____
Total income	19,913	8,584	28,497	17,233	174,770	192,003	27,782	198,764	226,546
	_____	_____	_____	_____	_____	_____	_____	_____	_____
Expenses
Management and performance fees (note 2)	(1,556)	(778)	(2,334)	(1,398)	(699)	(2,097)	(2,914)	(1,457)	(4,371)
Repayment of prior years' VAT	73	37	110	547	360	907	547	360	907
Direct property expenses, rent payable  and service charge costs	(595)	-	(595)	(688)	-	(688)	(1,792)	-	(1,792)
Other expenses	(415)	-	(415)	(391)	-	(391)	(858)	-	(858)
	_____	_____	_____	_____	_____	_____	_____	_____	_____
Total operating expenses	(2,493)	(741)	(3,234)	(1,930)	(339)	(2,269)	(5,017)	(1,097)	(6,114)
	_____	_____	_____	_____	_____	_____	_____	_____	_____
Operating profit	17,420	7,843	25,263	15,303	174,431	189,734	22,765	197,667	220,432
Finance costs	(754)	(754)	(1,508)	(480)	(480)	(960)	(1,143)	(1,143)	(2,286)
Income from operations before tax	16,666	7,089	23,755	14,823	173,951	188,774	21,622	196,524	218,146
Taxation	(1,073)	528	(545)	(3,380)	1,161	(2,219)	(4,504)	1,406	(3,098)
	_____	_____	_____	_____	_____	_____	_____	_____	_____
Net profit	15,593	7,617	23,210	11,443	175,112	186,555	17,118	197,930	215,048
	_____	_____	_____	_____	_____	_____	_____	_____	_____
Earnings per Ordinary share (note 3a)	5.52p	2.05p	7.57p	3.60p	52.72p	56.32p	5.18p	59.71p	64.89p
Earnings per Sigma share (note 3b)	1.13p	1.88p	3.01p	1.76p	31.84p	33.60p	3.06p	35.73p	38.79p

The total column of this statement represents the Group's Statement of Comprehensive Income, 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.

A second interim Ordinary dividend of 3.45p was paid on 1 April 2010. A second interim Sigma dividend of 1.10p was paid on 1 April 2010. These second interim dividends replaced the final dividend that would normally have been paid in August 2010. These can be found in the Group Statement of Changes in Equity for the half year ended 30 September 2010.

GROUP AND COMPANY STATEMENT OF CHANGES IN EQUITY

	Share Capital		Share Premium Account £'000	Capital Redemption Reserve £'000	Retained Earnings		Total £'000
for the half year ended 30 September 2010 (Unaudited)	Ordinary £'000	Sigma £'000			Ordinary £'000	Sigma £'000
At 31 March 2010	64,181	15,615	43,162	43,513	338,641	92,965	598,077
Total comprehensive income:
Profit for the half year	-	-	-	-	19,444	3,766	23,210
Transactions with owners, recorded directly to equity:
Ordinary dividends paid	-	-	-	-	(8,857)	(1,374)	(10,231)
At 30 September 2010	64,181	15,615	43,162	43,513	349,228	95,357	611,056
	Share Capital		Share Premium Account £'000	Capital Redemption Reserve £'000	Retained Earnings		Total £'000
for the half year ended 30 September 2009 (Unaudited)	Ordinary £'000	Sigma £'000			Ordinary £'000	Sigma £'000
At 31 March 2009	64,181	15,615	43,162	43,513	186,807	47,011	400,289
Total comprehensive income:
Profit for the half year	-	-	-	-	144,583	41,972	186,555
Transactions with owners, recorded directly to equity:
Ordinary dividends paid	-	-	-	-	(8,857)	(1,374)	(10,231)
At 30 September 2009	64,181	15,615	43,162	43,513	322,533	87,609	576,613
	Share Capital		Share Premium Account £'000	Capital Redemption Reserve £'000	Retained Earnings		Total £'000
for the year ended 31 March 2010 (Audited)	Ordinary £'000	Sigma £'000			Ordinary £'000	Sigma £'000
At 31 March 2009	64,181	15,615	43,162	43,513	186,807	47,011	400,289
Total comprehensive income:
Profit for the year	-	-	-	-	166,596	48,452	215,048
Transactions with owners, recorded directly to equity:
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

GROUP BALANCE SHEET

as at 30 September 2010

	30 September 2010 (Unaudited) £'000	30 September 2009 (Unaudited) £'000	31 March 2010 (Audited) £'000
Non-current assets
Investments held at fair value	652,281	585,130	646,222
Current assets
Other receivables	3,153	3,457	10,325
Cash and cash equivalents	7,101	11,291	11,445
	_________	_________	_________
	10,254	14,748	21,770
Current liabilities	(32,946)	(5,111)	(51,366)
	_________	_________	_________
Net current (liabilities)/assets	(22,692)	9,637	(29,596)
	_________	_________	_________
Total assets less current liabilities	629,589	594,767	616,626
Non-current liabilities	(18,533)	(18,154)	(18,549)
	_________	_________	_________
Net assets	611,056	576,613	598,077
	_________	_________	_________
Capital and reserves
Called up share capital	79,796	79,796	79,796
Share premium account	43,162	43,162	43,162
Capital redemption reserve	43,513	43,513	43,513
Retained earnings	444,585	410,142	431,606
	_________	_________	_________
Shareholders' funds	611,056	576,613	598,077
	_________	_________	_________
Net asset value per :
Ordinary share	189.34p	178.94p	185.22p
Sigma share	100.04p	93.84p	98.12p

GROUP CASH FLOW STATEMENT

For the half  year ended 30 September 2010

	Half  year ended 30 September 2010 (Unaudited)	Half year ended 30 September 2009 (Unaudited)	Year ended 31 March 2010 (Audited)
	£'000	£'000	£'000
Reconciliation of operating revenue to net cash inflow/(outflow) from operating activities
Net gain before tax	23,755	188,774	218,146
Financing activities	1,508	960	2,286
Gains on investments held at fair value through profit or loss	(8,584)	(174,770)	(198,764)
Decrease/(increase) in accrued income	2,046	826	(306)
(Increase)/decrease in other debtors	(266)	936	(3,250)
Decrease in creditors	(566)	(3,787)	(4,116)
Net sale/(purchase) of investments	3,844	(63,030)	(97,357)
Decrease/(increase) in sales settlement debtor	5,531	548	(775)
Decrease in purchase settlement creditor	(1,101)	(960)	(274)
Scrip dividends included in investment income	(2,762)	-	(2,937)
	_________	_________	_________
Net cash inflow/(outflow) from operating activities before interest and taxation	23,405	(50,503)	(87,347)
Interest paid	(1,508)	(960)	(2,286)
Taxation paid	(809)	(1,157)	(1,323)
	_________	_________	_________
Net cash inflow/(outflow) from operating activities	21,088	(52,620)	(90,956)
Financing activities
Equity dividends paid	(10,231)	(10,231)	(17,260)
Drawdown of loans	(15,485)	-	45,250
	_________	_________	_________
Net cash used in financing	(25,716)	(10,231)	27,990
	_________	_________	_________
Decrease in cash	(4,268)	(62,851)	(62,966)
Cash and cash equivalents at start of the period	11,445	77,568	77,568
Exchange movements	284	(3,426)	(3,157)
	_________	_________	_________
Cash and cash equivalents at end of the period	7,101	11,291	11,445
	_________	_________	_________

NOTES TO THE FINANCIAL STATEMENTS

1	Basis of accounting
	The financial statements have been prepared on the basis of the accounting policies shown in the annual financial statements for the year ended 31 March 2010 and in accordance with International Accounting Standard (IAS) 34 'Interim Financial Reporting'.
	The financial statements are presented in Sterling and all values are rounded to the nearest thousand pounds (£'000) except where otherwise indicated.
2	Management and performance fees
			(Unaudited) Half year ended 30 September 2010			(Unaudited) Half year ended 30 September 2009					(Audited) Year ended 31 March 2010
			Revenue Return £'000	Capital Return £'000	Total £'000	Revenue Return £'000		Capital Return £'000	Total £'000		Revenue Return £'000		Capital Return £'000	Total £'000
	Management fee		1,556	778	2,334	1,398		699	2,097		2,914		1,457	4,371
	Repayment of prior years' VAT		(73)	(37)	(110)	(547)		(360)	(907)		(547)		(360)	(907)
	Performance fee		-	-	-	-		-	-		-		-	-
			_____	____	____	____		____	___		____		____	___
			1,483	741	2,224	851		339	1,190		2,367		1,097	3,464
			_____	_____	_____	_____		_____	____		_____		_____	____
3	Earnings per share
a	Earnings per Ordinary share
	The earnings per Ordinary share can be analysed between revenue and capital, as below.
						Half year ended 30 September 2010 (Unaudited) £'000			Half year ended 30 September 2009 (Unaudited) £'000			Year ended 31 March 2010 (Audited) £'000
	Net revenue profit					14,178			9,242			13,292
	Net capital profit					5,266			135,341			153,304
						_______			_________			_________
	Net total profit					19,444			144,583			166,596
						_______			_________			_________
	Weighted average number of Ordinary shares in issue during the period					256,725,000			256,725,000			256,725,000
						pence			pence			pence
	Revenue earnings per Ordinary share					5.52			3.60			5.18
	Capital earnings per Ordinary share					2.05			52.72			59.71
						_______			_________			_________
	Earnings per Ordinary share					7.57			56.32			64.89
						_______			_________			_________
b		Earnings per Sigma Share
		The earnings per Sigma share can be analysed between revenue and capital, as below.
							Half year ended 30 September 2010 (Unaudited) £'000			Half year ended 30 September 2009 (Unaudited) £'000			Year ended 31 March 2010 (Audited) £'000
		Net revenue profit					1,415			2,201			3,826
		Net capital profit					2,351			39,771			44,626
							_______			_______			_________
		Net total profit					3,766			41,972			48,452
							_______			_______			_________
		Weighted average number of Sigma shares in issue during the period					124,922,000			124,922,000			124,922,000
							pence			pence			pence
		Revenue earnings per Sigma share					1.13			1.76			3.06
		Capital earnings per Sigma share					1.88			31.84			35.73
							_______			_______			_________
		Earnings per Sigma share					3.01			33.60			38.79
							_______			_______			________
4		Changes in share capital
		During the half year there were no changes to the share capital. At 30 September 2010 there were 256,725,000 Ordinary shares of 25p and 124,922,000 Sigma shares of 12.5p in issue.
5		Comparative information
		The financial information contained in this Half-Yearly Financial Report does not constitute statutory accounts as defined in section 435(1) of the Companies Act 2006. The financial information for the half year ended 30 September 2009 and 30 September 2010 has not been audited. The figures and financial information for the year ended 31 March 2010 are an extract from the latest published accounts and do not constitute statutory accounts for that year. Those accounts have been delivered to the Registrar of Companies and include the report of the auditors, which was unqualified and did not contain a statement under either section 498(2) or 498(3) of the Companies Act 2006.

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 Companies 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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