Half Yearly Report

RNS Number : 0299D

TR Property Investment Trust PLC

25 November 2009

 



This announcement and the information contained herein is not for publication, distribution or release in, or into, directly or indirectly, the United States, Canada, Australia or Japan.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 2009

25 November 2009

ORDINARY SHARES Financial Highlights and Performance	Half year ended 30 September 2009 (Unaudited)	Half year ended 30 September 2008 (Unaudited)	% Change
Revenue
Revenue earnings per Ordinary share	3.60p	4.13p	-12.8
Net interim dividend per Ordinary share	2.30p	2.30p	-
	As at 30 September  2009 (Unaudited)	As at    31 March 2009 (Audited)	%  Change
Balance Sheet
Net asset value per share	178.94p	126.07p	+41.9
Share price	157.00p	106.00p	+48.1
Net (debt)/cash	(2%)	15%	-
Shareholders' funds (£'000)	459,392	323,666	+41.9
Shares in issue at end of period (m)	256.7	256.7	-
Performance	Half year ended	Year ended
	30 September	31 March
	2009	2009
Benchmark performance (total return)	53.0%	-48.6%
NAV total return	45.3%	-40.5%
Share price total return	52.3%	-41.2%

SIGMA SHARES Financial Highlights and Performance	Half year ended 30 September 2009 (Unaudited)	Half year ended 30 September 2008  (Unaudited)	% Change
Revenue
Revenue earnings per Sigma share	1.76p	2.05p	-14.1
Net interim dividend per Sigma share	0.90p	0.90p	-
	As at 30 September 2009 (Unaudited)	As at  31 March  2009 (Audited)	% Change
Balance Sheet
Net asset value per share	93.84p	61.34p	+53.0
Share price	73.45p	39.00p	+88.3
Net cash	3%	17%	-
Shareholders' funds (£'000)	117,221	76,623	+53.0
Shares in issue at end of period (m)	124.9	124.9	-
Performance	Half year ended 30 September 2009	Year ended  31 March 2009
Benchmark performance (total return)	57.5%	-48.6%
NAV total return	55.3%	-42.3%
Share price total return	92.2%	-56.2%

Dividends

Ordinary Shares

An interim dividend of 2.30p (2008: 2.30p) per Ordinary share has been declared payable on 12 January 2010 to shareholders on the register on 11 December 2009. The shares will be quoted ex-dividend on 9 December 2009.

Interim Shares

An interim dividend of 0.90p (2008: 0.90p) per Sigma share has been declared payable on 12 January 2010 to shareholders on the register on 11 December 2009. The shares will be quoted ex-dividend on 9 December 2009.

Chairman's Statement

Introduction 

The six months to the end of September 2009 have seen an extraordinary improvement in global equity sentiment and a remarkable increase in the appetite for risk amongst investors. Share prices have responded with very substantial gains not least in the property share sector. What started as a relief rally in March and April, developed over the late summer into a full scale rush for income once it became clear that cash would be earning virtually no return for an extended period. In the physical property market, values continued to decline over the summer due to rental weakness, but distressed selling slowed markedly and by August it was apparent that pent up investment demand was strengthening rapidly. This led to another leap in property share prices which has pushed some stocks onto premiums to NAV in the anticipation of value growth to come in the next six months.  

Against this background, both of the Trust's share classes have seen significant increases in their share prices and net asset values. Both started the period with net cash holdings and, taking a circumspect view of the rally, reinvestment of this cash was spread over the six months. The result has been relative underperformance of the benchmark indices in the period. However, this result needs to be seen in the context of both the strong outperformance in the year to March 2009 and the Board's view that a high risk investment strategy, was not, and is not in the best long term interest of shareholders at the present time. I said in my annual report that revenue earnings in the current year would decline from last year's record level, and this is the case. As forecast, the Board is maintaining the dividend at last year's level. 

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 NAV total return of 45.3% was 7.7% behind its benchmark total return of 53.0%, while the Sigma share class NAV total return of 55.3% was 2.2% behind its benchmark return of 57.5%. 

This is the first period that Sigma's performance is measured against its new 'small caps' benchmark which has risen more sharply than the benchmark for the Ordinary share class previously used by Sigma.

Revenue Results

As anticipated, net revenue per share declined for both share classes due to a combination of lower dividend income and lower interest from cash on deposit. These reductions were somewhat offset by lower management fees, lower borrowing costs, a further repayment of VAT overpaid in prior years, and some £0.8m of underwriting fees spread across both share classes.

Compared with the same period last year, the Ordinary share class' post tax revenue fell 13.2% to £9.24m and net revenue per share declined by 12.8% to 3.60p. The Sigma share class' post tax revenue declined 15.9% to £2.2m and the net revenue per share fell 14.1% to 1.76p.

Dividends 

As announced in my statement in the last Annual Report, the Board has agreed that, subject to unforeseen circumstances, it will 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 to end March 2009. 

Ordinary Shares

The Board is maintaining the interim dividend at 2.30p per share.

Sigma Shares

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

Revenue Outlook 

Ordinary Shares

In the annual report our managers advised the Board that, subject to unforeseen circumstances, they expected that revenue per share for the Ordinary share class will be in the order of 4.7p per share - a decline of around 28% relative to revenue in the year to March 2009. Since May the share class has received unanticipated income from underwriting and VAT repayments, but a timing change in the dividend payments from its largest asset, Unibail, means that the current revenue forecast remains at 4.7p. 

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 2010 will be in the order of 1.80p per share. At the start of the year, Sigma had £13m of net cash yielding very little. Over the period the majority of this cash was invested (and the remainder shortly after the half year). On the whole this investment has been into equities yielding more than cash. This, coupled with the unanticipated income from underwriting and VAT repayments, has resulted in our Manager increasing the forecast from 1.8p per share to 2.0p.

Net Debt, Gearing and Currencies

At the start of the half year the Ordinary share class had gross cash of £61.8m. Adjusting for the debenture debt of £12.2m, net cash was £49.6m which was equivalent to 14.6% of gross assets. At the end of September gross cash was down to £4.4m and, after deducting the debenture debt, the share class had net borrowings of £7.7m equivalent to 1.6% of gross assets. 

A similar course was followed by the Sigma share class which had £12.9m of net cash at the start of the half year, equivalent to 16.4% of gross assets. At the end of September, Sigma had net cash of £4.6m equivalent to 3.8% of gross assets.

Since the end of September, the Trust has received credit committee approval for its one year £50m variable rate multi-currency borrowing facility with the Royal Bank of Scotland. The costs of this loan, in terms of spread, security and non-utilisation fees, are now much greater than in previous years, and your Board is keen to explore ways of providing the Trust with flexible and realistic access to modest levels of 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. Sterling strengthened rapidly against the Euro until mid-June and weakened equally quickly to leave the exchange rate virtually unchanged over the period.  

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 3.9% to 14.6%. The Sigma share discount to capital only net asset value averaged 23.1% over the half year with a range of 13.8% to 36.2%. From August to the end of the reporting period the discount on the Sigma shares has remained tighter than 20%.

No shares were repurchased in either share class in the period.

Outlook

Across both UK and Europe property share prices have recovered from their spring 2009 lows in spectacular fashion, and are now anticipating increases in underlying property values. The first glimpse of such value growth is now apparent in the UK, where, despite continued weak tenant demand, investors are returning to the asset class attracted by income yields no longer available in most other asset classes. Your Manager expects Continental property pricing to follow a similar, if slightly delayed, path.

The combination of massive government borrowing and low interest rates has removed fears of a further implosion of asset pricing. There is, at least in the short term, a danger of a further pricing bubble as cash rich investors seek yields from other assets, including property.

Eventually these economic life support systems will have to be switched off. We are moving into un-trodden ground and at some stage, particularly in the UK, we face the threat of higher taxation, reduced government spending, a return to normalised interest rates and the possibility of higher inflation. Such moves will alter the investment landscape. This may well precede the  capability of banks to lend in a normal professional way to the property sector. The Trust is now very lightly geared but our asset selection is still below average risk and above average liquidity. Given the outlook for the UK economy in 2010 relative to France, Germany and Scandinavia, both share class managers have chosen to place the bias of their equity assets in these latter countries.  

Managers' Statement

Ordinary share class & Sigma share class

Market Background and Outlook

As the Chairman has noted, this has been an extraordinary six months for stock markets generally and for UK and European property shares in particular. The main EPRA Index rose 47% in Sterling terms over the period - its highest ever six monthly gain and outperforming both the DJ Stoxx 600 and the UK All Share indices which rose 37.4% and 32.5% respectively. The performance was far from uniform in either timing or motivation. In April the sector rose 13% continuing a relief rally that had seen prices already rise 19% between the 10th and 31st of March. In May and June this relief rally petered and prices dropped by 6%. Arguments raged over the alphabetic shape of the recovery and whether inflation or deflation was round the corner. With hindsight two things became clearer over the midsummer period. The first was that central banks would try to keep interest rates at very low levels for an extended period well into 2010. The second was that business and consumer sentiment was improving across the globe - in defiance of a multitude of dire economics. A new rally based on hope and the search for income got under way and over July and August the Sector rose a stunning 31% led by the share prices of companies with the greatest levels of leverage, many of which more than doubled in price over the period.  

Demand for property shares, from both generalist investors returning to the Sector and from private investors hunting relatively stable income, not only created a substantial and very rapid bull market, but allowed the industry to raise significant fresh capital. Over the six months, if the rights issues in progress at the start of April are included, the total is over £8 billion. Over 70% of this capital has gone into refinancing the UK companies. 

Property Investment Markets

This dash for higher, and therefore riskier, income has had a dramatic impact on the pricing of all high yielding assets over the half year. Corporate bonds and equities led the way, but since the late summer physical property has come to the party. The obvious weakness of the rental demand and the shortage of credit have clearly been delaying factors, but there is now, in the UK, a considerable quantity of cash lined up and actively seeking investments, and, very importantly, a dearth of decent quality property for sale. Distressed selling from property companies and institutions has almost totally dried up - indeed many have turned buyers again. Very importantly the banks, as discussed in the next paragraph, are showing no present urgency in sorting out their loan books. There is virtually a frenzy in the market, as there has been in some areas for housing. Yields for the most desirable properties, which still means buildings let on long leases at sensible rents to household names, have jumped downward by as much as 200 basis points since April to below, sometimes well below, 6%. Buyers have reacted by moving up the risk curve to accept shorter leases and less secure tenants so that good secondary investments, which were totally unwanted in the Spring are now being hunted down and selling for above asking prices. 

Buyers and potential buyers in the UK property investment industry are split into two distinct camps; those who believe that today's prices represent good value relative to returns from other high yielding asset classes, and those who consider the current market to be just a mini-bubble inflated by artificially low interest rates and by the lack of freely available property stock. This latter camp generally believe that an anaemic economic recovery will mean that rental values continue to decline through 2010, eating into the long term income returns from real estate, and that the best policy is to wait until the banks and their clients are forced to de-gear and expose a lot more stock onto the market. Forward pricing in the IPD Index derivative market is siding with the cautious and indicating only 1% to 2% capital value growth for the average UK commercial property in 2010. 

On the Continent property values have generally been marked down by 10 to 15% less than in the UK, and therefore there is less evidence of a sudden rush to buy. Nevertheless the investment volumes have increased in most locations. As in the UK good quality property appears to be in rising demand, though, again, there is little available on the markets.

Rental Values 

Rental values have continued to decline across the UK and Europe though the pace is varying by property type and location. As we commented in May the widespread use of rent free periods and other incentives may be masking the true position. The IPD index in the UK suggests that rental values fell 3.4% over the half year to end September but this decline is based on headline rents not effective rents. The worst declines have come in capital city office markets - London, Paris and Madrid etc where falls of 30% or more are now documented. Encouragingly such falls have now started to stimulate demand, at least at the gross level, as occupiers take advantage of bargain rents to reorganise and improve their workspace. With no new developments started for some two years, a shortage of brand new space may be seen in 2010. Suburban and regional office markets have been very mixed and statistically have suffered less than city centres, but the truth is often that demand is so patchy that lowering asking rent will not yet hasten a letting. Industrial and storage space is also a very weak market particularly in the UK where the nationwide vacancy rate is now above 15%. The retail picture is very mixed. Demand has held up very well in Central London where tourism has given turnover a strong boost. On the Continent retail rental values appear to have been resilient, with the notable exception of Spain.  

Debt and Credit Markets.

We wrote in May that the level of debt outstanding against UK commercial property appeared to have changed very little since November 2008. The same comment applies today. Maturing loans are being rolled despite patent breaches. Very few distressed assets have come to market. This laissez faire policy is almost certainly born of necessity. Unprepared for the mess that has befallen their loan books, many banks are only now bringing skilled staff together to deal with their problems. Massive and immediate writedowns have been out of the question given the ongoing negotiations with the Government and other shareholders. Meanwhile the nascent recovery in property values, caused in part by the absence of distressed selling, is working to the banks' advantage. 

The property investment market has no feel for how long this collective impasse will last. Estimates range from six months to five years. Lloyds and RBS appear to have the biggest problems amongst the UK lenders, but the involvement of overseas banks, particularly from Eire, complicates the picture. It is not clear if proposed changes to the banks' accounting procedures for writedowns will delay or accelerate the speed at which foreclosures occur. Meanwhile there is a substantial queue of public property companies and large private investors lined up to "assist" the banks with workouts. The banks' current desire to play for time seems likely to leave many of these helpers disappointed. 

Fresh bank lending conditions to the commercial property market have improved a little, with an increase in the number of banks willing to consider loans but the number remains small and terms are very tight with margins and fees very high by pre 2007 standards. It looks likely that a return to normality in the property credit conditions will also be a very slow process.

Property Shares

Between April and September, Pan European property share prices rose by an average of 47%. The diversity of performance was again very wide - broadly the faster they fell in 2008, the faster they rose.  The exceptions, chiefly Land Securities and British Land, were those that de-geared with rights issues in the early spring, so, unwittingly, removing much of their potential upside. Every share in the EPRA benchmark produced a positive total return and there were no bankruptcies. Amongst the benchmark constituents spectacular gains were seen in prices of the shares of companies considered closest to receivership. Quintain shares easily topped the gainers rising 24 fold. Gains of over 200% came from Unite and Brixton in the UK and Prologis in the Netherlands. Ten further stocks rose by over 100%. 

Big companies underperformed. The ten largest companies in the benchmark at the end of March made up 60% of the benchmark by weight. Of these ten, only Klépierre rose by over 100%, Corio and Hammerson rose over 50%, and all the remainder underperformed with Liberty International, PSP Swiss and Wereldhave all rising by under 30% and Unibail, itself 20% of the benchmark, rising only 33%. 

This leap in share prices has not been accompanied by a surge in net asset values, earnings or dividends. The rerating of the sector has merely brought share prices closer in touch with asset values in response to the belief that capital values have stabilised and will start to grow modestly (in the UK) and are about to stabilise (on the Continent). In the UK most share prices have now moved to the last stated NAV or to a premium to that number. On the Continent discounts have narrowed sharply but are still generally available.

Corporate activity has been muted. In the only deal worth over £100m Segro acquired Brixton through an all share offer and then had a second rights issue to repay some of Brixton's debt.  

Dividend passes or re-positionings (a smarter word for "cuts") have continued to be seen particularly when accompanied by a rights issue. Revenue earnings are under pressure, more so in the UK than in the rest of Europe. Rental income growth is non-existent everywhere, save from letting void space, but most Continental companies have exposure to some variable rate short term debt and are benefiting from lower interest costs, while the vast majority of UK property company debt is fixed directly or via swaps. 

As noted in the Introduction, rights issues and other capital raisings have been commonplace, and there are now very few highly leveraged quoted companies who have not tapped the market for fresh capital. Underwriting fees have been generous and the exercise, particularly for those who raised capital before midsummer, has been hugely dilutive to those shareholders who could not participate. Since July a number of issues, including three new issues, have been made to fund the acquisition of distressed property. It is clear now that this capital may not be easy to spend sensibly in the short term. 

Volatility in share price movements has moderated but remains high by historic standards and appears to be running in line with the banking sector, not altogether surprising given the influence that banks and interest rate movements may have on the asset class over the next three years. Liquidity has improved and is reasonable in the largest forty stocks, but out in the bye-ways it is still difficult to trade reliably. 

Outlook

So many external factors are unclear. The anticipation that extremely low interest rates will be with us for an extended period have created a very powerful surge in the demand for income and thus brought about asset reflation. Econometric models suggest that asset and property prices are likely to continue to rise while interest rates remain at virtually zero, but will suffer once rates move to higher ground. Equity and bond investors are preoccupied with spotting the portents for when such a moment may occur to the extent that more good economic news becomes seen as bad for markets because it brings closer the moment when fiscal policy is tightened.

Governments and Central Banks would seem to have a very narrow line down which to progress. So far their policies appear to have worked far better than markets expected. If they start raising rates too early they risk pushing their economies back into recession and stimulating a second wave of declines in asset prices, which in turn will stall the recovery of the financial sector. Leave it too late and inflation may be back on the agenda, although the slack in the economy and the weakness in bank lending would appear to make an early return of serious inflation unlikely. 

Germany and France saw GDP growth in the third quarter and the UK should see a return to growth in the fourth quarter. The pace of economic recovery in 2010 across Europe is likely to be modest and a sustained fall in unemployment seems unlikely to occur in the next twelve months. Against this background, commercial property companies face some difficult decisions on strategy. Survival for almost all is assured but the path to higher revenue earnings and dividend growth is unclear. With fresh credit in short supply, most are currently concentrating on reducing their vacancy rates, dusting down but not starting development projects, and hoping to find bargains in the investment market in 2010. Short term this attitude is logical but in the medium and longer term the industry needs some fresh thinking. 

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 2009 and signed on its behalf by Peter Salsbury, Chairman

Manager's Report

Ordinary Share Class

Performance

Back at the start of April, if a fairy godmother had offered to me, on your behalf, a total return, in the six months to end September, of 45%, I would have grabbed it gleefully. As it has turned out, what looks like an excellent absolute result, has actually been a very poor one - relative to the benchmark's total return of 53%. What went wrong is simple - I was too conservative, wrong footed by the speed and totality of the change in sentiment. As a result I reinvested the cash holdings too slowly, and held onto safe stocks when I should have sold them all and moved up the risk curve faster and with as much capital as possible. I take some comfort from knowing that I was not alone amongst fund managers and investors in finding it difficult to re-orientate my outlook, and to buy or re-invest into companies whose shares I was so glad not to own at the end of 2008.  

The rally in stocks was extremely widespread, but was led by what would aptly have been described as junk just a few months earlier. Medium and small companies outperformed, particularly those with very high leverage, while big safe stocks underperformed. Our physical property portfolio, which made up 17% of the gross assets at March, had a great six months losing less than 1% in value. However, this was no help whatever to short term performance and with an average of 5% net cash across the half year, I mistakenly had only some 80% of the Ordinary share capital at work in the equity market, trying to keep up with the 100% invested benchmark. Thankfully, due to a narrowing of the discount to NAV, the share price total return at 52.3% was only marginally lower than the benchmark. 

Investment Activity

Regular readers will know that I have taken sneaking pride in previous years for having a relatively low level of portfolio turnover - usually keeping it below 25% per annum. From the remarks in my opening paragraph, the last six months was clearly a period when I needed to change my habits. Regretfully I did not. Though I was a net investor in each month in the half year, my pace of buying was too cautious. I was looking for a decent pause or relapse in pricing, both to provide a buying opportunity and to assess the underlying fundamentals in more depth. That relapse never came. The 18% rise in property share prices in August was particularly unexpected. I was at my desk for what is usually a quiet month with stable pricing, watching highly leveraged stocks rise up to 10% a day, while your holdings in the large stable well financed companies struggled to make any positive headway. During September I said goodbye to the remaining net cash and took the Ordinary share balance sheet into modest net debt. I bought into companies with higher leverage and this is reflected in the see-through leverage of the portfolio which rose from 33% at March to 47% at the end of September - almost in line with the benchmark average.  

Distribution of Assets

Over the six months the biggest percentage change was in the direct property which dropped from 17.4% of gross assets down to 10.3%. This was purely a move generated by the performance of the equities, as there were no sales or purchases of property in the half year. The change in balance between UK and Continental equities was also principally due to stock performance rather than portfolio realignment. The UK property equities outperformed rising 54%, while Continental stocks returned 44% in Sterling. Since the late summer my purchases have been biased towards the Continent on grounds of value, income and economic outlook. European securities were 54% of the portfolio at September compared with 51% at March. UK equities rose from 32% to 35.5% in the period. We bought two blocks of Euro denominated medium term corporate bonds, in Hammerson and Prologis European both of which performed well, and these made up 1.7% of the gross assets at the half year end. 

Outside the UK the equity investments continued to be dominated by stocks listed in Paris which made up 31.3% of gross assets, compared with 33% in March. Almost half this total is the holding in Unibail which owns property right across the Continent. 

Largest Equity Investments

The top ten holdings had a value of £238m and accounted for 49.6% of the total assets.  The list has, as usual, changed very little over the summer either in order or content, save for the return of Segro, where we took up our rights and excess underwriting stock, in their two issues this summer. Unibail continued to dominate the list. The other re-entry was Foncière des Régions which rose from 14th place as a result of a 125% share price increase. The two departures were Castellum and Great Portland, stocks in which we continue to have substantial holdings.  

Aside from Foncière des Régions, Klépierre rose by over 100%. Hammerson, Corio, Segro, and Derwent London all gave us total returns of over 50%. The underperformers were the three big stocks, particularly Unibail and British Land with total returns of below 40%.  

Revenue and Revenue Outlook.

Post tax revenue per Ordinary share fell 13.2% to £9.24m and net revenue per share declined by 12.8% to 3.60p. This was a better than expected earnings result in the context of my forecast, in May, of a 25% decline in earnings per share over the twelve months to next March. Our investment income declined by 15.4% to £10.67m as dividend cuts and passes in some of our larger holdings hurt, but overall dividend income was slightly higher than I expected. Other operating income was significantly greater than forecast. Our cash holdings earned next to nothing (as anticipated) but we had two unexpected windfalls - interest on VAT refunded of £560,000 and underwriting commissions of £466,000. The decline in gross rental income is mainly as a result of selling the Woking building in September 2008, though there was some loss of income from tenant bankruptcies as noted in the direct property comments.

The expenses line saw lower management fees but higher property management costs and other expenses. We have received another VAT repayment this time covering the 1990 to 1996 period totalling £735,000, of which £443,000 was credited to the revenue account. Borrowing costs halved as we repaid the 8.125% debenture last November so the charge in the period only relates to the 11.5% debenture. Taxation is estimated at 24% versus 25% for the last financial year. 

The key factor in the lower tax charge is the legislative changes announced in the budget regarding the taxation of overseas dividends. From 1 July 2009, UK law changed such that all overseas dividend receipts are non taxable from this date.

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 jurisdictions 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.

Against this background, I would have hoped to raise my forecast for full year earnings upward to around 5.4p per share. However the second half revenue will be hit by a major timing difference. Our largest source of income, Unibail, has been paying us dividends of about £1m per quarter. In the summer the company decided to revert to a single annual payment to occur in April. This means that the two £1m payments expected in the second half and equivalent to about 0.6p per share after tax, will not be available until April 2010. Elsewhere we still have some further lack of clarity on the timing and extent of certain dividend payments next spring, and assuming unchanged currency rates, I have retained my full year revenue per share forecast of 4.7p.

Gearing, Debt and Debentures

At the start of the half year the Ordinary share class had gross cash of £61.8m. Adjusting for the debenture debt of £12.2m, net cash was £49.6m which was equivalent to 14.6% of gross assets. The cash was spent over the period, mainly in the first three months, 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. 

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) rose from 33% to 47% over the half year as we reinvested the cash into equities. In the same period the benchmark's see through leverage has remained fairly constant at 48% to 49%, with the impact of falling property values being offset by the equity capital raisings seen in the Sector. 

Direct Property Portfolio

The direct property portfolio produced a positive total return over the period of 3.1%, made up of a fall in the capital value of -0.5% and an income return of 3.5%. The portfolio comfortably outperformed the IPD Monthly Index, which returned 0.5%, made up of a capital decline of -3.5% and an income return of 4.2%. There were no sales or purchases in the half year during which we concentrated on tenant retention and lease renewals. 

We were hit by two bankruptcies, both at the Colonnades, affecting £190,000 of income. The majority of the loss resulted from the liquidation in June of Sanastro Ltd, who occupied 7,200 sq ft of offices. The profitable portion of the business was bought as part of a pre-pack arrangement. A 5 year lease was agreed with the newco, which will take 3,600 sq ft at a rent of £17.50 per sq ft (£63,000 per annum) from the date of the liquidation. We are marketing the vacant space and are in negotiations with the liquidator regarding recovery of the debt. A small café that became vacant has been relet at a new rent of £15,000 per annum. The previous tenant was paying £22,000 per annum. The reduction in rent takes into account the increased flexibility in the new lease which has 1 month rolling landlord redevelopment breaks. 

In Milton Keynes we regeared the Exel Europe Ltd (DHL) lease prior to the break in January 2010. DHL will take a new 5 year lease with a third year tenant's break option at a rent of £450,000 per annum, a reduction of only £1 per sq ft or £35,000 per annum. We have also completed the letting of one vacant industrial unit in Wandsworth. Both these lettings have been in line with our strategy of actively managing the vacancy and extending existing leases.

Despite the insolvencies within the portfolio we have limited the vacancy rate to just 3% of the total rental income. In the same period the void levels in the IPD Monthly Index increased to 12%.

Manager's Report

Sigma Share Class

Introduction

In the Annual Report in June, I offered some explanations as to why we felt that smaller property companies had underperformed their larger competitors in the year to March 2009. For the half year just gone and set against a backdrop of record setting performance by Pan European real estate equities I am pleased to report a reversal of this phenomenon. Sigma has since 1st April, had its own 'small cap' benchmark against which investors and the Board measure the Manager's performance. This benchmark is a derivation of the one used by the Ordinary share class, it merely excludes those stocks with a market capitalisation of more than £1bn. It is adjusted quarterly, adding or removing those stocks whose market capitalisation have moved through the threshold in either direction. The FTSE EPRA/NAREIT Small Cap Europe Index returned +57.5% in the six months to 30th September whilst the FTSE EPRA / NAREIT Europe Index which includes all those stocks with a market capitalisation of over £1bn rose +53.0%. 

The outperformance of smaller companies is, we believe, partially explained by their 'under ownership' in the bear market from early 2007 to the spring of this year as investors sought safety in the more liquid names. As sentiment began to improve these stocks enjoyed stronger demand as investors arbitraged away the relative value discounts when compared with larger stocks. This almost voracious appetite for risk, as outlined earlier, saw very strong demand for those smaller businesses where equity had been reduced to a thin slice and super leveraged returns were once again on offer for those investors who believed that technical insolvency and loan delinquency would not lead to foreclosure and the evaporation of any remaining equity by superior creditors. As spring turned to summer, the central bank and government funded stimulus programmes had the effect of reflating asset values which has, for the moment, offered tremendous support to the bulls. Throughout 2008 and into early 2009, leverage was to be avoided as it was merely magnifying the effect of falling values. Quite suddenly, this has reversed. With base rates set to remain low and the banks not seeking to call in loans (even when borrowers are in breach of covenant) the most leveraged businesses offer the highest returns. For those businesses with floating rate debt, earnings (albeit short term) have been flattered. Rising share prices anticipated this asset value growth which is now coming through the asset valuations in the second half and are now reflecting these changes in fortunes. 

My stock selection has always focused on the sustainability of asset values and earnings as well as seeking to quantify the value of individual company management's strategic contribution (how well did they read the cycle?). As a consequence the portfolio did not own positions in a number of higher risk businesses in the early part of the financial year. In fact into the summer we remained concerned that the central bank intervention was forcing capital into income producing assets without altering the fundamental economic demand for the use of the underlying buildings. Property (from an earnings perspective) remains a late cycle play as rental growth responds only to tenant demand and we have seen little improvement in occupational markets. However, looking back over this period of tremendous share price growth there are clearly occasions when changes in markets require fundamental analysis to be put to one side as momentum and a wholesale shift in the attitude to risk grips investors.  

Performance

Over the period, the Sigma share NAV total return was +55.3% and this compares with a total return from the FTSE EPRA/NAREIT Small Cap Europe Index of +57.5%. On a price only (as opposed to total return) basis Sigma's NAV rose by 53.0% whilst the benchmark (price only) rose 51.7%, a modest outperformance reflecting the fact that the total return measurement includes reinvested dividends. The differential between the price only and the total return figures is widest in the first half of the year as over 80% of our revenue is received in the period. The absolute numbers are clearly pleasing but the relative performance requires further explanation. At the year end in March I still held 11% of the fund's assets in cash such was our conviction that the worst was not yet over. The investment focus was on high quality smaller companies which had the appropriate leverage together with better than average portfolios (and income) which we felt would weather the storm better than others. The low point in an equity cycle is only apparent after it has passed and the fund clearly suffered from some cash drag in the first surge of share prices between mid March and late May. Also the strongest performing equities were those with the most risk, particularly where leverage was combined with development exposure. Sigma had avoided or was significantly underweight in such businesses. Within the Investment Activity section, I will explain how we have reacted to the changing tempo in the markets as the half year progressed.

Investment Activity

This half year was an active period for the fund. Investment turnover (purchases and sales divided by two) totalled £47.7m equivalent to 49% of average shareholders' funds. The period encompassed the virtual completion of the sale of large cap stocks which were particularly focused in the UK and France, coupled with the reinvestment of the cash position. The market also presented a number of fresh investment opportunities through participation in the recapitalisations of a range of property company balance sheets. During the first quarter of the year, these recapitalisations were dominated by the deeply discounted rights issues from the largest UK companies. Sigma participated where we had positions in order not to be diluted but I took advantage of the subsequent relief rallies to sell the remaining positions in the UK majors. The exception was Segro where the 12 for 1 rights issue meant that the stock remained below the £1bn threshold even after raising £525m in early April. In June, the company successfully acquired their deeply indebted rival Brixton Estates. This required a further rights issue which took the market capitalisation back over £1bn. In last year's Interim I wrote that we had significantly sold down our position in St Modwen. At the time I commented that the business had quality management and a strong market niche but that in the short term the business model relied on selling land to residential developers. This sub-market evaporated as development finance disappeared and St Modwen raised £107m in May to ensure that it complied with its debt covenants. We participated in the rights issue and placing. Following this successful refinancing we have begun to rebuild our position. Other rescue raisings were from Workspace and Wichford neither of which are companies we previously held. In the case of the latter we participated in the deeply discounted rights issue viewing this as an attractive entry point. On the Continent, the rescue refinancings were later in the summer and fewer in number and quantum with just Sponda and Norwegian Properties in Scandinavia and Deutsche Wohnen in Germany requiring deeply discounted raisings. 

As companies began to decide that the bottom of the asset value cycle was in sight they wanted equity firepower to take advantage of pricing. For these businesses, the balance sheet restructuring continued but the rationale had evolved from 'rescue' to 'opportunistic'. Companies which raised equity included a number of our significant holdings including Great Portland and Big Yellow Group in the UK. We also added to our small existing positions in Primary Health Properties and London & Stamford Properties where again we viewed the placing prices as attractive entry points. On the Continent, we added to our positions in Warehouses De Pauw, Hansteen , Vastned Retail and Befimmo who all raised capital for acquisitions. Investor appetite has been strong enough to enable a number of IPOs in the sector. The fund has invested in one this year, Max Property, run by two highly rated property professionals both of whom have track records in listed property companies. 

The corporate bond market has exhibited many of the same characteristics as the equity market during the last two years. In May we made Sigma's first acquisition of bonds, buying European logistics investor ProLogis European Properties' 5.875% 2014 bonds at a yield of nearly 12%. We made further investments during the period. As market confidence in asset values increased during the first quarter of the current financial year bond prices made significant gains from their previous lows. They have continued to recover throughout the period. In total, bonds made up 1.7% of investments at the period end.

Distribution of Assets

At the half year, small cap stocks were 85.4% of the portfolio (excluding cash). At the year end in March, this figure had been 76.4%. Given the level of turnover in the portfolio it would be fair to have expected the portfolio to be entirely small cap. However, as outlined in my introduction, six companies in the new benchmark, (of which we had positions in five) outgrew the index in September due to growth in their market capitalisation. Adjusted for these holdings Sigma is 96.4% small cap positions. The geographical distribution between the UK and Continental Europe has hardly varied over the six month period maintaining a 35/65 split. However, within Continental Europe there have been significant adjustments at the country level. The exposure to France has dropped markedly from 27.3% of the portfolio to 12.8% although relative to the benchmark this remains a significant overweight. The exposure to Finland, Belgium and Germany have all increased markedly but in each instance this is a function of the bottom up stock selection procedure rather than a reflection of our views at a country level. At a see-through asset level, I continue to focus on exposure to retail property on the Continent (excluding Spain). I had previously reported that our exposure to this sector was principally through the core markets of France, Belgium and the Netherlands. To these countries I have now added retail exposure in Sweden, Germany and Finland as well as increased exposure to both central London and Paris office markets. The apparent continued balance between the UK and the Continent requires some clarification. I have in fact become more confident over the last six months towards a significant number of UK smaller companies whilst continuing to sell down the remaining large cap exposure as stocks such as Segro which had moved to 15-20% premiums to our expectation of their next published asset value.

Revenue

I outlined in the revenue outlook section of the Annual Report back in June, a number of factors which we expected to temper our revenue expectations through the second half of 2009 and into 2010. All of those considerations remain valid six months later. Our cautionary stance was centred on the likelihood of an increasing number of companies cutting or removing payment of dividends in order to preserve cash, particularly as they anticipated cashflow squeezes with the economic downturn leading to falling top line revenue. The good news is that these dividend adjustments have been no more savage than we had anticipated. The expectation is that the revenue for the full year will be broadly in line with our estimates. Whilst total revenue fell 24.2% when compared with the same period last year, the income from operations before tax (effectively our net income before tax) fell only 17.8%. This smaller reduction reflected the receipt of the final part of the prior years' VAT rebate (and accrued interest) which amounted to 6.4% of Sigma's net income. The VAT rebate appears as a positive under expenses in the income statement. Finance costs also fell as Sigma had no borrowings beyond its share of the one remaining debenture (£2.85m of 11.5% 2016).  

The tax charge for the current year is estimated to be 17.2%, a decrease from 23.2% for the year ended March 2009.

As noted for the Ordinary share class, the key factor in the lower tax charge is the legislative changes announced in the Budget regarding the taxation of overseas dividends. From 1 July 2009, UK law changed such that all overseas dividend receipts are non taxable from this date.  

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.

As the Chairman highlighted, whilst the reduction in the revenue top line has weighed on our expectations this has been countered by our receipt of underwriting income. This has continued, at a reduced rate, in the second half of the year but it is not anticipated that it will continue into the next financial year. 

Our expectation is that earnings for the year to March 2010 will be 2.0p per share which is an increase of 0.2p on our estimate back in May.

Debt, Gearing and Debentures

As already noted virtually all of the cash holdings were deployed in the period. Although at 30 September there was a small net cash position, Sigma utilised the Royal Bank of Scotland facility in early October, introducing gearing for the first time in the share class' history. As noted in the Chairman's Statement credit committee approval for the renewal of the loan facility has been received from RBS albeit at an increased cost. The Sigma share class' portion of this facility is £10m. The increased cost of the facility was anticipated. If this facility was fully utilised and added to Sigma's share of the outstanding debenture (£2.85m) the maximum gearing (based on gross assets at 30 September) would be 12%.

As well as looking at the gearing figure at the balance sheet level, 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 has risen significantly as the portfolio has rotated almost entirely into small cap stocks and stands at 61% versus a figure of 34.6% in March. The benchmark's equivalent figure was 56.3%, considerably higher than the benchmark used by the Ordinary share class and reflecting the generally greater leverage in smaller companies. We are comfortable with this increased see-through gearing figure as underlying asset values continue to rise.  

Ordinary Share Class Income Statement 

for the half year ended 30 September 2009

	(Unaudited) Half year ended  30 September 2009			(Unaudited) Half year ended  30 September 2008			(Audited) Year ended  31 March 2009
	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	10,670	-	10,670	12,610	-	12,610	18,447	-	18,447
Other operating income	1,143	-	1,143	1,347	-	1,347	2,722	-	2,722
Gross rental income	1,881	-	1,881	2,130	-	2,130	4,240	-	4,240
Service charge income	538	-	538	423	-	423	299	-	299
Returns/(losses) on investments held at fair value	-	135,445	135,445	-	(113,286)	(113,286)	-	(246,226)	(246,226)
	______	______	______	______	_____	_____	______	______	______
Total income	14,232	135,445	149,677	16,510	(113,286)	(96,776)	25,708	(246,226)	(220,518)
	_______	_______	______	______	_____	_____	______	______	______
Expenses
Management and performance fees	(1,102)	(551)	(1,653)	(1,133)	(2,207)	(3,340)	(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	(688)	-	(688)	(570)	-	(570)	(549)	-	(549)
Other expenses	(320)	-	(320)	(282)	-	(282)	(664)	-	(664)
	______	______	______	______	_____	_____	______	______	______
Total operating expenses	(1,667)	(259)	(1,926)	(1,985)	(2,207)	(4,192)	(1,922)	(849)	(2,771)
	______	______	______	______	_____	_____	______	______	______
Operating profit/(loss)	12,565	135,186	147,751	14,525	(115,493)	(100,968)	23,786	(247,075)	(223,289)
Finance costs	(404)	(404)	(808)	(829)	(829)	(1,658)	(1,372)	(1,372)	(2,744)
	______	______	______	______	_____	_____	______	______	______
Income from operations before tax	12,161	134,782	146,943	13,696	(116,322)	(102,626)	22,414	(248,447)	(226,033)
Taxation	(2,919)	559	(2,360)	(3,053)	2,005	(1,048)	(5,715)	4,903	(812)
	______	______	______	______	_____	_____	______	______	______
Net profit/(loss)	9,242	135,341	144,583	10,643	(114,317)	(103,674)	16,699	(243,544)	(226,845)
	______	______	______	______	_____	_____	______	______	______
Earnings/(loss) per Ordinary share (note 3a)	3.60p	52.72p	56.32p	4.13p	(44.40)p	(40.27)p	6.49p	(94.71)p	(88.22)p

Ordinary Share Class Balance Sheet

as at 30 September 2009

	30 September  2009	30 September 2008	31 March 2009
	(Unaudited)	(Unaudited)	(Audited)
	£'000	£'000	£'000
Non-current assets
Investments held at fair value	470,642	405,359	278,150
	______	______	______
Current assets
Other receivables	3,996	10,690	3,940
Cash and cash equivalents	4,487	78,261	61,776
	______	______	______
	8,483	88,951	65,716
Current liabilities	(4,428)	(25,330)	(4,766)
	______	______	______
Net current assets	4,055	63,621	60,950
	______	______	______
Total assets less current liabilities	474,697	468,980	339,100
Non-current liabilities	(15,305)	(15,941)	(15,434)
	______	______	______
Net assets	459,392	453,039	323,666
	______	______	______
Net asset value per Ordinary share	178.94p	176.28p	126.07p

Sigma Share Class Income Statement 

for the half year ended 30 September 2009

	(Unaudited) Half year ended  30 September 2009			(Unaudited) Half year ended 30 September 2008			(Audited) Year ended 31 March 2009
	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	2,708	-	2,708	3,459	-	3,459	4,902	-	4,902
Other operating income	293	-	293	498	-	498	836	-	836
Returns/(losses) on investments held at fair value	-	39,325	39,325	-	(34,204)	(34,204)	-	(62,769)	(62,769)
	______	______	______	______	______	______	______	______	______
Total income	3,001	39,325	42,326	3,957	(34,204)	(30,247)	5,738	(62,769)	(57,031)
	______	______	______	______	______	______	______	______	______
Expenses
Management and performance fees	(296)	(148)	(444)	(459)	(229)	(688)	(807)	(836)	(1,643)
Repayment of prior years' VAT	104	68	172	-	-	-	325	807	1,132
Other expenses	(71)	-	(71)	(70)	-	(70)	(139)	-	(139)
	______	______	______	______	______	______	______	______	______
Total operating expenses	(263)	(80)	(343)	(529)	(229)	(758)	(621)	(29)	(650)
	______	______	______	______	______	______	______	______	______
Operating profit/(loss)	2,738	39,245	41,983	3,428	(34,433)	(31,005)	5,117	(62,798)	(57,681)
Finance costs	(76)	(76)	(152)	(189)	(189)	(378)	(331)	(331)	(662)
	______	______	______	______	______	______	______	______	______
Income from operations before tax	2,662	39,169	41,831	3,239	(34,622)	(31,383)	4,786	(63,129)	(58,343)
Taxation	(461)	602	141	(622)	353	(269)	(1,109)	768	(341)
	______	______	______	______	______	______	______	______	______
Net profit/ (loss)	2,201	39,771	41,972	2,617	(34,269)	(31,652)	3,677	(62,361)	(58,684)
	______	______	______	______	______	______	______	______	______
Earnings/(loss) per Sigma share (note 3b)	1.76p	31.84p	33.60p	2.05p	(26.89)p	(24.84)p	2.91p	(49.35)p	(46.44)p

Sigma Share Class Balance Sheet

as at 30 September 2009

	30 September 2009	30 September 2008	31 March 2009
	(Unaudited)	(Unaudited)	(Audited)
	£'000	£'000	£'000
Non-current assets
Investments held at fair value	114,488	91,281	65,755
Current assets
Other receivables	1,067	528	5,964
Cash and cash equivalents	6,804	24,105	15,792
	______	______	______
	7,871	24,633	21,756
Current liabilities	(2,289)	(7,391)	(8,039)
	______	______	______
Net current assets	5,582	17,242	13,717
	______	______	______
Total assets less current liabilities	120,070	108,523	79,472
Non-current liabilities	(2,849)	(2,849)	(2,849)
	______	______	______
Net assets	117,221	105,674	76,623
	______	______	______
Net asset value per Sigma share	93.84p	83.29p	61.34p

GROUP INCOME STATEMENT 

for the half year ended 30 September 2009

	(Unaudited) Half year ended  30 September 2009			(Unaudited) Half year ended  30 September 2008			(Audited) Year ended  31 March 2009
	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	13,378	-	13,378	16,069	-	16,069	23,349	-	23,349
Other operating income	1,436	-	1,436	1,845	-	1,845	3,558	-	3,558
Gross rental income	1,881	-	1,881	2,130	-	2,130	4,240	-	4,240
Service charge income	538	-	538	423	-	423	299	-	299
Returns/(losses) on investments held at fair value	-	174,770	174,770	-	(147,490)	(147,490)	-	(308,995)	(308,995)
	_____	_____	_____	_____	_____	_____	_____	_____	_____
Total income	17,233	174,770	192,003	20,467	(147,490)	(127,023)	31,446	(308,995)	(277,549)
	_____	_____	_____	_____	_____	_____	_____	_____	_____
Expenses
Management and performance fees (note 2)	(1,398)	(699)	(2,097)	(1,592)	(2,436)	(4,028)	(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	(688)	-	(688)	(570)	-	(570)	(549)	-	(549)
Other expenses	(391)	-	(391)	(352)	-	(352)	(803)	-	(803)
	_____	_____	_____	_____	_____	_____	_____	_____	_____
Total operating expenses	(1,930)	(339)	(2,269)	(2,514)	(2,436)	(4,950)	(2,543)	(878)	(3,421)
	_____	_____	_____	_____	_____	_____	_____	_____	_____
Operating profit/(loss)	15,303	174,431	189,734	17,953	(149,926)	(131,973)	28,903	(309,873)	(280,970)
Finance costs	(480)	(480)	(960)	(1,018)	(1,018)	(2,036)	(1,703)	(1,703)	(3,406)
Income from operations before tax	14,823	173,951	188,774	16,935	(150,944)	(134,009)	27,200	(311,576)	(284,376)
Taxation	(3,380)	1,161	(2,219)	(3,675)	2,358	(1,317)	(6,824)	5,671	(1,153)
	_____	_____	_____	_____	_____	_____	_____	_____	_____
Net profit/(loss)	11,443	175,112	186,555	13,260	(148,586)	(135,326)	20,376	(305,905)	(285,529)
	_____	_____	_____	_____	_____	_____	_____	_____	_____
Earnings/ (loss) per Ordinary share  (note 3a)	3.60p	52.72p	56.32p	4.13p	(44.40)p	(40.27)p	6.49p	(94.71)p	(88.22)p
Earnings/ (loss) per Sigma share (note 3b)	1.76p	31.84p	33.60p	2.05p	(26.89)p	(24.84)p	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. 

The final Ordinary dividend of 3.45p in respect of the year ended 31 March 2009 was declared on 27 May 2009 and paid on 4 August 2009. The final Sigma dividend of 1.10p in respect of the year ended 31 March 2009 was declared on 27 May 2009 and paid on 4 August 2009. These can be found in the Group Statement of Changes in Equity for the half year ended 30 September 2009.

                  GROUP 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 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
Net gain for the period	-	-	-	-	144,583	41,972	186,555
Dividends paid	-	-	-	-	(8,857)	(1,374)	(8,857)
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 half year ended 30 September 2008 (Unaudited)	Ordinary £'000	Sigma £'000			Ordinary £'000	Sigma £'000
At 31 March 2008	64,650	15,960	43,162	42,699	431,040	109,098	706,609
Net loss for the period	-	-	-	-	(103,674)	(31,652)	(135,326)
Ordinary shares repurchased	(400)	-	-	400	(2,697)	-	(2,697)
Sigma shares repurchased	-	(101)	-	101	-	(555)	(555)
Dividends paid	-	-	-	-	(8,489)	(829)	(8,489)
At 30 September 2008	64,250	15,859	43,162	43,200	316,180	76,062	558,713
	Share Capital		Share Premium Account £'000	Capital Redemption Reserve £'000	Retained Earnings		Total £'000
for the year ended 31 March 2009 (Audited)	Ordinary £'000	Sigma £'000			Ordinary £'000	Sigma £'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)
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 BALANCE SHEET

as at 30 September 2009

	30 September 2009 (Unaudited) £'000	30 September 2008 (Unaudited) £'000	31 March 2009 (Audited) £'000
Non-current assets
Investments held at fair value	585,130	496,640	343,905
Current assets
Other receivables	3,457	11,218	5,970
Cash and cash equivalents	11,291	102,366	77,568
	_________	_________	_________
	14,748	113,584	83,538
Other payables	(5,111)	(32,721)	(8,871)
	_________	_________	_________
Net current assets	9,637	80,863	74,667
	_________	_________	_________
Total assets less current liabilities	594,767	577,503	418,572
Non-current liabilities	(18,154)	(18,790)	(18,283)
	_________	_________	_________
Net assets	576,613	558,713	400,289
	_________	_________	_________
Capital and reserves
Called up share capital	79,796	80,109	79,796
Share premium account	43,162	43,162	43,162
Capital redemption reserve	43,513	43,200	43,513
Retained earnings	410,142	392,242	233,818
	_________	_________	_________
Shareholders' funds	576,613	558,713	400,289
	_________	_________	_________
Net asset value per :
Ordinary share	178.94p	176.28p	126.07p
Sigma share	93.84p	83.29p	61.34p

  GROUP CASH FLOW STATEMENT

For the half year ended 30 September 2009

	Half year ended 30 September 2009 (Unaudited)	Half year ended 30 September 2008 (Unaudited)	Year  ended 31 March 2009 (Audited)
	£'000	£'000	£'000
Reconciliation of operating revenue to net cash inflow from operating activities
Net gain/(loss) before tax	188,774	(134,009)	(284,376)
Financing activities	960	2,036	3,406
(Gains)/losses on investments held at fair value through profit or loss	(174,770)	147,490	308,995
Decrease/(increase) in accrued income	826	2,598	(41)
Decrease/(increase) in other receivables	936	(491)	1,869
(Decrease)/increase in other payables	(3,787)	2,041	2,113
Net (purchase)/sale of investments	(63,030)	54,615	34,514
Decrease/(increase) in sales for settlement	548	(5,897)	607
Decrease in purchases for settlement	(960)	(1,159)	(173)
	_________	_________	_________
Net cash (outflow)/inflow from operating activities before interest and taxation	(50,503)	67,224	66,914
Interest paid	(960)	(2,036)	(4,085)
Taxation on investment income	(1,157)	(1,223)	(1,691)
	_________	_________	_________
Net cash (outflow)/inflow from operating activities	(52,620)	63,965	61,138
Financing activities
Equity dividends paid	(10,231)	(9,318)	(16,349)
Purchase of Ordinary and Sigma shares	-	(3,252)	(4,442)
Repayment of debentures	-	-	(25,000)
	_________	_________	_________
Net cash used in financing	(10,231)	(12,570)	(45,791)
	_________	_________	_________
(Decrease)/increase in cash	(62,851)	51,395	15,347
Cash and cash equivalents at start of the period	77,568	51,881	51,881
Exchange movements	(3,426)	(910)	10,340
	_________	_________	_________
Cash and cash equivalents at end of the period	11,291	102,366	77,568
	_________	_________	_________

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 2009 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 2009			(Unaudited) Half year ended  30 September 2008						(Audited) Year ended  31 March 2009
			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		1,398	699	2,097	1,592		796		2,388		2,902		1,450	4,352
	Repayment of prior years' VAT		(547)	(360)	(907)	-		-		-		(1,711)		(4,246)	(5,957)
	Performance fee		-	-	-	-		1,640		1,640		-		3,674	3,674
			_____	____	____	____		____		___		____		____	___
			851	339	1,190	1,592		2,436		4,028		1,191		878	2,069
			_____	_____	_____	_____		_____		____		_____		_____	____
3	Return/(loss) per share
a	Return/(loss) per Ordinary share
	The return per Ordinary share can be analysed between revenue and capital, as below.
						Half year ended  30 September 2009 (Unaudited) £'000			Half year ended  30 September  2008  (Unaudited) £'000				Year ended  31 March  2009 (Audited)  £'000
	Net revenue profit					9,242			10,643				16,699
	Net capital return/(loss)					135,341			(114,317)				(243,544)
						_______			_________				_________
	Net total return/(loss)					144,583			(103,674)				(226,845)
						_______			_________				_________
	Weighted average number of Ordinary shares in issue during the period					256,725,000			257,466,940				257,124,930
						pence			pence				pence
	Revenue earnings per Ordinary share					3.60			4.13				6.49
	Capital return/(loss) per Ordinary share					52.72			(44.40)				(94.71)
						_______			_________				_________
	Return/(loss) per Ordinary share					56.32			(40.27)				(88.22)
						_______			_________				_________
b		Return/(loss) per Sigma Share
		The return/(loss) per Sigma share can be analysed between revenue and capital, as below.
							Half year  ended 30 September 2009 (Unaudited) £'000				Half year ended 30 September 2008 (Unaudited) £'000			Year ended 31 March 2009 (Audited) £'000
		Net revenue profit					2,201				2,617			3,677
		Net capital return/(loss)					39,771				(34,269)			(62,361)
							_______				_______			_________
		Net total return/(loss)					41,972				(31,652)			(58,684)
							_______				_______			_________
		Weighted average number of Sigma shares in issue during the period					124,922,000				127,417,568			126,373,055
							pence				pence			pence
		Revenue earnings per Sigma share					1.76				2.05			2.91
		Capital return/(loss) per Sigma share					31.84				(26.89)			(49.35)
							_______				_______			_________
		Return/(loss) per Sigma share					33.60				(24.84)			(46.44)
							_______				_______			________
4		Changes in share capital
		During the half year there were no changes to the share capital. At 30 September 2009 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 2008 and 30 September 2009 has not been audited. The figures and financial information for the year ended 31 March 2009 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

 

 

IR ILFSTLTLSFIA