Half Yearly Financial Report

28th Aug 2009 09:30



The Advantage Property Income Trust Limited 

Half-yearly Financial Report (unaudited)

For the six months ended 30 June 2009

Guernsey Registered Number 42048

27 August 2009

The Advantage Property Income Trust Limited

"TAP" or the "Company"

Half Year Results for the six months to 30 June 2009

The Advantage Property Income Trust Limited (LSE: TAP), a company focused on investment in a diversified portfolio of income-producing commercial property in the United Kingdom and the Channel Islands, presents its half year results for the six months to 30 June 2009.

Performance Highlights

*As measured by IPD

  Financial Summary

	30 June 2009	31 December 2008	30 June 2008
Share price	17.5p	9.0p	43.0p
Net asset value per share*	37.0p	56.7p	87.6p
Earnings per share	(18.85p)	(35.43p)	(6.96p)
Dividends	0.81p	5.69p	3.25p
Portfolio value	£154,035,600	£196,270,000	£233,452,400
Gearing**	67.0%	56.9%	50.4%

Notes

Net asset value and earnings per share calculated under International Financial Reporting Standards.

* Including unrealised gains.

** Long term debt as a percentage of portfolio value. Long term debt is determined as the actual bank debt, excluding fair value adjustments arising from swaps, and excluding debt issue costs.

For further information, please visit www.tapincome.com or contact:

Christopher Carter Keall,

Valad Asset Management (UK) Ltd 020 7659 6666

Jeff Keating, James Maxwell,

Singer Capital Markets Ltd 020 3205 7500

Jeremy Carey, Gemma Bradley,

Tavistock Communications Ltd 020 7920 3150

Anson Fund Managers Ltd,

Secretary 01481 722260

CHAIRMAN'S STATEMENT

As shareholders will be aware, on 7 August 2009 the board of The Conygar Investment Company PLC ("Conygar") announced an offer to acquire the entire issued and to be issued share capital of TAP ("the Offer") not already owned by Conygar at the date of the Offer, and on 26 August 2009 Conygar announced that all conditions of the Offer for TAP have been satisfied or waived, save for the condition relating to admission of Conygar's enlarged share capital to trading on AIM, and that accordingly Conygar has declared the Offer unconditional in all respects.

Conygar also stated in its offer document dated 7 August 2009 that once the Offer becomes or is declared unconditional in all respects, it is envisaged that TAP will be managed on a day to day basis by Conygar under a new arm's length contract. A new board of directors of TAP will be appointed including Robert Ware and Peter Batchelor, who are the chief executive and finance director of Conygar,

Therefore this is expected to be my final report to shareholders as Chairman of TAP. May I take this opportunity to thank shareholders for their support. 

Review of TAP

The Company has been operating in a very challenging economic climate since June 2007 with capital values falling and occupiers under significant pressure. These factors have resulted in significant capital value falls from the peak of the market. This has had the effect of increasing the loan to value ratio of the Company's assets to the amount of outstanding debt.

In recent months, the quoted real estate market has seen reductions in the discounts to Net Asset Values (NAV) that have been prevalent and significant. For example, the discount between share price and NAV for TAP as at 24 December 2008 stood at 89%, whilst as at 19 August 2009 this had reduced to 47%.

The Company has continued its strategy and policy of repaying debt through sales of assets and maintaining income from our occupiers through early discussions on expiry and other lease events. 

At property level, the assets within the Company have continued to perform over a 12 month period in line with the market but have fallen sharper than the market in the last quarter. This has been mainly due to the stabilisation of yields for prime assets, to which the Company is not particularly exposed. 

The yields on the Company's assets are at historically high levels and this will benefit investors seeking total return over the coming months. Indeed, with demand currently outstripping supply, there is already evidence, particularly in auction rooms, of the return of yield compression for small well let assets, which bodes well for the Company as and when the market recovers. 

Against this background, I report a half year result of continued negative market valuation movement, but with valuation yields either at or approaching their peak for the cycle, the main anticipated future risk for the Company being the retention of our occupiers. The relationship of the Company with these stakeholders is key and will determine the future performance of the Company. In this light the Property Fund Adviser has continued to provide detailed reviews of the covenant of each occupier and is maintaining regular contact to pre-empt any financial difficulties.

Overall, I am satisfied that our key strategies of high income and added value have resulted in the Company outperforming the IPD universe over a 12 month period despite the recent capital falls. 

CHAIRMAN'S STATEMENT (Continued)

Total Returns	3mths	6mths	12mths
TAP	-7.1%	-12.5%	-23.7%
IPD Quarterly	-2.2%	-9.1%	-24.7%

Property activity has been concentrated on asset management and the disposal of assets that have either been forecast to under-perform over the coming years or where asset management initiatives have been completed and offer limited future performance.

The Company has completed 26 transactions during the first six months of the year, comprising eight asset disposals (£11.89 million), eight new lettings (£158,400 per annum of new income), eight lease renewals (£146,380 per annum of rent preserved) and two rent reviews (rental uplift of £35,500 per annum). 

During the first half of 2009, the Property Fund Adviser has negotiated with the administrators of two of three possible failing tenants and has successfully retained the occupation of both these tenants. This has reduced the actual tenant failure rate for the first half of 2009 from a potential 0.6% to an actual 0.2% of portfolio income. 

In addition to the above, a number of other initiatives have been successfully completed in the period under review, including:

 Results

The net asset value of the Company as at 30 June 2009 had fallen to 37.0 pence per share, a reduction from 56.7 pence per share as at 31 December 2008. Profit before tax, excluding unrealised gains/losses on investments and derivative movement, for the first half of the year totalled £2.3 million. Unrealised loss on the investment properties amounted to £27.9 million during the period and the NAV total return, defined as change in NAV plus dividends paid, was -33.3%.

The Company paid one dividend in the period of £1,159,822.

Gearing

The Company has bank debt of £103.2 million, equivalent to 67.0% (Dec 2008: 56.9%) of gross property assets.

The bank debt is made up of two facilities: one from the Bank of Scotland plc for £78.0 million, of which £67.9 million has been drawn down and one from Capmark Bank Europe plc for £35.3 million which had been fully drawn down as at 30 June 2009. On 20 July 2009, a further £3.6 million of the Capmark facility was repaid, leaving £31.7 million drawn down as at the date of this report.

CHAIRMAN'S STATEMENT (continued)

Current Economic Hedging

The interest rate on £79.1 million of debt is currently fixed at a blended rate of 5.2% (before margin) with the interest rate on the remaining £24.1 million floating. As at 30 June 2009 this meant that 76.6% of the debt was at fixed rates (31 December 2008: 70.7%).

The weighted average cost of all debt including margin for the six months was 5.8%. With a significant proportion of its debt hedged, I believe that the Company is substantially protected against a fluctuating interest rate environment.

Future prospects

As stated above, it is envisaged that TAP will be managed on a day to day basis by Conygar under a new arm's length contract. Going forward, it is therefore difficult for the Board and Property Fund Adviser to advise shareholders on the future strategy of the Company.

Finally I would like to thank all our advisers who have worked diligently and with expertise on behalf of the Board and shareholders over the last few years.

Christopher N Fish

Chairman

27 August 2009

PROPERTY FUND ADVISER'S REPORT 

Property Market 

Investment transaction volumes weakened in the second quarter of 2009 to the lowest level in a decade, due to the lack of quality stock available and the continued malaise in the lending markets. According to Property Data, the value of UK transactions was down to £3.1 billion from £4.0 billion in the first quarter of 2009. This is anticipated to be the low point for investment volumes in this market cycle, with more positive signs starting to emerge in the Central London office market. Additionally, private buyers and equity rich investors are competing on secure, income-producing, small lot sizes, keeping yields firm on sub-£5 million assets. This dynamic is also keeping the auction rooms busy, with a number of sales being agreed at prices well in excess of reserve prices. 

The performance of the UK property market in the first six months of 2009 has continued to be dominated by falling capital values The IPD all property total return for the first half of 2009 is -9.1%, driven by -12.4% capital growth and 3.5% income return. There have now been eight consecutive quarters of negative total returns as a result of falling capital growth. This has been due to, initially, outward yield shift across all sectors, and then laterally over the past six months, as a result of rental declines. This is further illustrated by global property consultancy CB Richard Ellis (CBRE) who have reported that yields at the All Property level remained unchanged at June 2009 from May 2009 at 8.4%, marking the end of two years of month on month rises. Analysing this indication of stabilisation further, prime yields appear to have peaked and have now receded by 13 basis points to 7.6% although further significant yield increases are anticipated for UK secondary and tertiary assets.

The substantial level of equity chasing limited smaller lot size stock is reflected in the yields being achieved at auction. According to IPD/ARAS figures the prime yields being achieved at auction have moved from 5.7% in the first quarter of 2009 to 5.16% in the second quarter of 2009 with secondary stock achieving 6.9%, down from 7.6% at the end of March.

All property rental growth, as measured by CBRE, fell by -8.1% in the first six months of 2009. This can be attributed to the falling occupier demand leading landlords to cut rents to either attract new tenants, or keep tenants in occupation at lease events. 

Future Prospects

The Property Market Analysis LLP (PMA) summer forecasts provide 2009 performance projections with a total return for the year now standing at -15.9%, compared to the -17.0% expected in the spring 2009 forecast. PMA's expectation of capital growth for the year is -23.3%, with an annual ERV growth rate of -13.2%. The future bounce back to positive total returns has been increased to 5.2% for 2010, followed by 10.7% in 2011. Returns are anticipated to stabilise in the three years thereafter in the mid teens. 

Stand alone retail units are expected to be the best performing sector in 2009, followed by shopping centres and south east offices. Central London offices remain far and away the worst performing sector, which carries forward into 2010, when it is forecast to be the only sector recording negative returns. As TAP is one of the only funds in its peer group with no central London exposure, one could reasonably hope for outperformance against the IPD benchmark going forward. 

PROPERTY FUND ADVISER'S REPORT (continued)

Property Activity

The Property Fund Adviser has continued to actively manage the property portfolio and has maintained its focus on the core strategy of income and income growth from a balanced portfolio. In line with the wider commercial property market, the net value of the TAP portfolio has continued to fall over the period by 15.5% on a like for like basis to £154,035,600 as at 30 June 2009. When one takes into account capital receipts from asset management and sales, the capital growth fall for the first half of the year was -15.8%  (as measured by IPD). This underperformed the market as recorded by the IPD Quarterly Index, which recorded capital growth over the period of -12.4%. Notwithstanding that, the income return generated by the Company's portfolio of 3.8% for the first half of the year outperformed the comparative IPD Quarterly universe income return of 3.5%. 

The Company made eight asset disposals during the first six months of the year which have realised proceeds of £11.9 million, a £1.0 million (7.7%) discount to the preceding quarterly valuation. The receipts were applied to the repayment of debt in line with the Company's strategy. 

The disposals comprised two retail properties, three industrial properties and three retail warehouses. In February a vacant retail shop in a secondary location was sold to a local owner occupier at 2.1% below the December 2008 valuation. This helped to reduce the void rate and cut vacant property costs. In March an industrial asset in Stoke on Trent was sold to a regional property company for a 2.7% premium to the December 2008 valuation. This asset was let to national covenant with 7.8 years unexpired lease term and all asset management initiatives had been completed. 

In May, a vacant industrial unit in Livingston was sold to an owner occupier at a 7.7% discount to the March 2009 valuation. This asset had been vacant for many years and would have required significant capital expenditure going forward. A 20 unit industrial / trade counter estate in Swindon also sold in May at a 1.4% discount to the March 2009 valuation. This estate was leasehold, and the leases were on internal repairing basis only, leading to a notable degree of non-recoverable property costs. Whilst the estate was fully let to a range of national and local multiples, many of the units were unoccupied. 

The Company made four asset disposals in June. A retail parade in Aylesbury with vacant offices above was sold 5.5% below the March 2009 valuation. The property was let to three national covenants with an average unexpired lease term of 5.1 years. It was significantly over-rented and the vacant offices would require a substantial amount of capital expenditure in order to secure a letting. Two retail warehouses let to Halfords with 11 years remaining in Dover and Huddersfield were sold to a syndicate of high net worth individuals at a 12.2% discount to the March 2009 valuation. These assets were identified for sale due to their off-pitch locations in secondary towns and their lack of added-value opportunity. A further Halfords retail warehouse was sold in Northampton to a private family trust at an 8.0% discount to the March 2009 valuation. The property was let with 7 years remaining but was subject to a restrictive planning permission. 

The income stream from the portfolio remains well diversified with 187 tenants and an average unexpired lease term of 6.2 years. The net lettable void of the portfolio as at 30 June 2009 was 8.9%. The increase in the portfolio's lettable void rate from 31 December 2008 (5.7%) can largely be attributed to the completion of the refurbishment of the 24,500 sq ft office building AdVantage Reading in March 2009, which accounts for 27.8% of the vacant space within the portfolio.  The total void when taking into account the vacancy created through the implementation of asset management initiatives, such as the refurbishment of Milton Keynes, is 135% ERV. 

PROPERTY FUND ADVISER'S REPORT (Continued)

The Company continues to monitor its occupational income and allocates each tenant an income risk profile. At the end of the period under review, 'red-rated' high risk tenants accounted for 7.9% of the portfolio rent roll. 'Amber-rated' or medium risk tenants accounted for 15.3% of the portfolio income. The majority of the portfolio consisted of 'green-rated' low risk income, which accounted for 76.9% of the portfolio income as at 30 June 2009. Should all red and amber rated tenants fail, the Company would lose £3.3 million of rental income. 

The portfolio remains broadly balanced across the main commercial sectors, although there is a slight bias towards offices, with offices (39.6%), industrial (20.9%), high street retail (18.2%), retail warehousing (16.5%), and leisure (4.8%) continuing to provide good sector diversification.

Asset Management 

A total of eight new lettings were successfully completed during the period, securing £158,400 per annum of headline rental income. The average lease length achieved was 5.5 years. Additionally, 8 lease renewals have been completed, preserving £146,380 per annum of income for the Company, and two rent reviews were completed which achieved rental uplift of £35,500 per annum. 

Added value has been achieved at Rutland Square in Bakewell, where a new 20 year lease was granted to a guarantor following the administration of the previous lessee. The rent achieved was £25,000 per annum, which was slightly ahead of ERV and a 9 month rent incentive was granted by means of a stepped rent over the first three years. 

At Ayr High Street, The Works took an assignment of the occupational lease from the administrator at £66,720 per annum. The Property Fund Adviser successfully managed to secure an additional 5 years of income by way of a reversionary lease, taking the income through to September 2017 in return for a rental incentive equivalent to 6 months' rent. 

A right of pre-emption has been entered into with an existing occupier at York House in Felixstowe allowing the tenant to take leases on any of the office accommodation as and when it is returned to the Company following lease expiries and break clauses. During the first six months of the year, Seafast Logistics have taken five suites on a five year lease at a rent of £20,000 per annum. 

WH Smith have renewed their lease of a 7,775 sq ft unit at The Brunel Centre, Bletchley for five years at a rent of £64,000 following the grant of a stepped rent equivalent to 5 months rent free. Three leases of office suites at Bletchley were also renewed during the first half of 2009, preserving £25,545 per annum of income for the Company. 

Following the rental evidence set in the latter part of 2008 at Palmers Green due to the settlement of the William Hill rent review, the Company was able to achieve a 49% uplift in the rent passing on Grabal Alok's 10,321 sq ft retail unit by agreeing the December 2007 rent review at £108,000 per annum, which was also 17% better than ERV. The asset management team continues to maximise income returns from the existing portfolio with numerous leasing deals in solicitors hands.

Future performance is also being enhanced through the refurbishment and repositioning of a number of the Company's assets including AdVantage Reading, which has delivered BREEAM "Excellent" rated, top quality accommodation to a limited supplied central Reading market. Further projects are being completed at Advantage One, Milton Keynes, Brunswick Point in Leeds and at Hortonwood, Telford, where we currently have good interest from potential occupiers and owners.

PROPERTY FUND ADVISER'S REPORT (continued)

The asset management initiatives during the period have made a positive contribution to the performance of the underlying assets. The Property Fund Adviser continues to identify and execute added value initiatives to provide income and income growth to investors.

Fund Strategy

As mentioned in the Chairman's Statement, it is envisaged that TAP will be managed on a day to day basis by Conygar under a new arm's length contract. Going forward, it is therefore difficult for the Board and Property Fund Adviser to advise shareholders on the future strategy of the Company.

INVESTMENT OBJECTIVE AND POLICY

Since Admission to the Official List of the UK Listing Authority and the Channel Islands Stock Exchange and to trading on the London and Channel Islands Stock Exchanges on 8 February 2005, the Company's investment objective has been to provide shareholders with an attractive level of income together with the potential for income and capital growth derived from investment in the Group's diversified portfolio of commercial property in the United Kingdom and the Channel Islands.

The Group's diversified portfolio comprises both freehold and long leasehold (over 60 years remaining at the time of acquisition) commercial properties in the United Kingdom and the Channel Islands.

The Group currently owns a portfolio of properties which has been designed to give balance across the main commercial property sectors. The Group will not invest in other investment companies or funds.

Any material change to the Company's investment objective and policy may only be made with shareholder approval.

GROUP STRUCTURE

Parent company:

The Advantage Property Income Trust Limited 

Subsidiaries:

TAPP Property Limited (a property holding Guernsey company)

TOPP Holdings Limited (a Guernsey company)

Subsidiaries of TAPP Property Limited:

TAPP Maidenhead Limited (a property holding Guernsey company)

Acopia Limited (a Jersey company)

Alta Rica Limited (a Jersey company)

Coleridge (Fleet GP) Limited (a UK company)

Loch (Warrington GP) Limited (a UK company)

All of the above subsidiaries are dormant except for TAPP Maidenhead Limited.

Subsidiaries of TOPP Holdings Limited:

TOPP Bletchley Limited (a property holding Guernsey company)

TOPP Property Limited (a property holding Guernsey company)

All subsidiaries are 100% owned by The Advantage Property Income Trust Limited.

Directors of the Company

Christopher N Fish 

Robert J Bould (retired 3 June 2009)

Caroline M Burton 

Charles N K Parkinson (retired 3 June 2009)

Nicholas C M Renny

No director past or present had or has a contract of employment with the Company.

COMPANY SUMMARY

Share Capital

As at 30 June 2009, the Company had an authorised share capital of £1,750,000 divided into 175,000,000 Ordinary Shares of £0.01 each, of which 142,747,300 shares are in issue.

Inter-Company Loan Agreements

The Company enters into Inter-Company Loan Agreements with its subsidiary companies when appropriate. Interest is charged on loans to TAPP Property Limited at a rate of 6.25%. Loans to other group companies are unsecured, interest free and repayable on demand.

Bank Facility and Other Financing Arrangements

As at 30 June 2009 TAPP Property Limited had a revolving facility with the Bank of Scotland of up to £78,000,000 repayable on or before 27 January 2015 secured by fixed and floating charges over the assets of the Group (the "HBOS Facility"). 

On 31 March 2009, the Group completed an amendment to the terms of the revolving bank facility with the Bank of Scotland. The amendment provided for revised margins over the 3 month London Interbank Offer Rate on the basis of a sliding scale of loan to value ratios up to a maximum of 70%. The facility was also reduced from £98.3 million to £78.0 million. 

Repayments during the period to 30 June 2009 were:-

B/f 1 January 2009 £76,493,083

29 June 2009  (£6,605,387)

30 June 2009  (£1,952,683)

£67,935,013

As at 30 June 2009 TOPP Property Limited maintained a facility with CapMark Bank Europe plc of up to £35,266,623, which had been fully drawn down. On 20 July 2009 a repayment of £3,592,250 was made.

Interest Rate Swap Agreements

TAPP Property Limited has entered into the following Interest Rate Swap Agreements with HBOS Treasury Services plc:-

Trade date 17 March 2005; Effective Date 5 May 2005 to 17 February 2015 on £22,000,000 at a fixed rate of 5.150% (plus margin).

Trade date 22 March 2005; Effective Date 5 May 2005 to 17 February 2015 on £21,800,000 at a fixed rate of 5.135% (plus margin).

Accounting policies - Basis of preparation

The accounting policies of the Group comply with IAS 34, as adopted by the European Union and applicable Guernsey law. In conforming with these standards, the financial statements include freehold and leasehold properties valued at their fair value based upon open market valuations provided by independent valuers.

PROPERTY INVESTMENTS

Property Address
INDUSTRIAL	£32,077,600
BIRMINGHAM Europa House, Tilton Road
BOURNE END Units 1,2 & 3 Wessex Road Industrial Estate, Wessex Road
BRIGHOUSE Armytage Road
CLEVEDON Units 5a, 5b, 5c, 6a & 6b, Tweed Road Industrial Estate
HEMEL HEMPSTEAD  3 Cherry Trees Lane
KETTERING Travis Perkins/Kettering Tiles, Linnell Way
LIVINGSTON 3/3A Baird Road Kirkton Campus
LIVINGSTON 1 Simpson Parkway Kirkton Campus
LIVINGSTON Development site Kirkton Campus
MANCHESTER 1 St Modwen Road, Trafford Park
MANCHESTER Europa, Second Avenue, Trafford Park
MILTON KEYNES Advantage One, Third Avenue, Bletchley
NEWBURY Parceline Distribution Depot, Hambridge Lane
NORTHAMPTON 51 Caswell Road, Brackmills
PORTSMOUTH Units A & B, Fisher Grove, Farlington
RUNCORN Units 1001/1004 Lime Court, Manor Park
SHEFFIELD Unit C, Thorncliffe Park Estate, Brookdale Road
STRATFORD UPON AVON Swan Development, Avenue Farm Industrial Estate
TELFORD Unit C, Hortonwood
INDUSTRIAL (CONTINUED)
UDDINGSTON Unit 6, Bedlay View, Tannochside Park
WITHAM 3,16 & 18 Freebournes Road
WORCESTER Unit 15b Blackpole Trading Estate
LEISURE	£7,400,000
DUNDEE Kingscourt Leisure Complex, Douglas Road
OFFICES	£61,060,000
FLEET Integration House, Ancells Business Park, Rye Close
FLEET Waterfront Business Park, Fleet Road
GUERNSEY National Westminster House, Le Truchot, St Peter Port
HEATHROW Princess House, Nobel Drive
LEEDS Brunswick Point
LIVINGSTON 1 Garbett Road, Kirkton Campus
LIVINGSTON 6 Flemming Road, Kirkton Campus
MAIDENHEAD Geoffrey House
NEWCASTLE UPON TYNE Hadrian House, Balliol Business Park
READING AdVantage Reading, Castle Street
STIRLING Laurel House, Laurel Hill Business Park
SWINDON Pagoda Park, Westmead Drive
WARRINGTON The Links, Kelvin Close
OFFICES (CONTINUED)
WELWYN GARDEN CITY Units 1/6 Silver Court, Watchmead
WHETSTONE Brook Point 1412-1420 High Road
RETAIL	£28,048,000
ABERDEEN 127 Union Street & 68/70 The Green
AYR  156&158/160 High Street
AYR 52/56 Newmarket Street
BAKEWELL Units 1-4, Rutland Square
BLETCHLEY The Brunel Centre
BRIGHTON 5-8 London Road
FELIXSTOWE York House, 96/102a Hamilton Road
HINKLEY 70-76 Castle Street
HORSHAM 7 West Street
HUYTON 32-36 Derby Road
MAIDSTONE 27 Week Street
PALMERS GREEN 290-296 Green Lanes
RUGELEY Shrewsbury Arms Shopping Mall, High Street
SOUTHAMPTON 82 Above Bar Street
SUTTON Units 1 & 2, 153 High Street
TORQUAY 46 Union Street

  

RETAIL WAREHOUSE	£25,450,000
BIRMINGHAM Trident Retail Park
COVENTRY Halfords, 36 Foleshill Road
DERBY Southgate Retail Park, Normanton Road
MITCHAM Halfords, 23 Streatham Road
NORWICH Halfords, Barker Street
NUNEATON Halfords, Newtown Road
SLOUGH Halfords, 380 Bath Road
SUTTON IN ASHFIELD Forest Retail Park, Forest Street
WINNERSH Halfords, Reading Road
WREXHAM Halfords, Mount Street
TOTAL	£154,035,600

Interim Management Report

A description of important events that have occurred during the first six months of the financial year, their impact on the performance of the Company as shown in the financial statements and a description of the principal risks and uncertainties facing the Company for the remaining six months of the financial year is given in the Property Fund Adviser's Report on pages 6 to 10 and is incorporated here by reference.

There were no material related party transactions which took place in the first six months of the financial year.

This half-yearly financial report has been reviewed by Ernst & Young LLP pursuant to the Auditing Practices Board guidance on Review of Interim Financial Information and their Interim Review Report is included in its entirety at page 19.

Going Concern

The performance of the investments held by the Company over the reporting period, the Company's financial position, its cash flows and liquidity position are set out in the financial statements. The outlook for the future and the Company's financial risk management objectives and policies, details of its financial instruments and its exposures to price risk, credit risk and interest rate risk are described in the Property Fund Adviser's Report.

The Directors have reviewed the current and projected financial position of the Group, making reasonable assumptions about future trading performance and believe that the Group has adequate financial resources and is well placed to manage its business risks successfully despite the uncertain economic conditions. The Directors are continually reviewing the banking covenants to ensure compliance and a sales programme has been put in place in order to repay debt where required to maintain loan to value ratios below the  applicable covenants. After due consideration, the directors consider that the Group has adequate resources to continue in operational existence for the foreseeable future and accordingly they continue to adopt the going concern basis in preparing the half yearly financial report.

Principal Risks and Uncertainties

The principal risks and uncertainties facing the Group are mainly related to the commercial property market and specifically the valuation of property. 

  

Interim Management Report (continued)

The value of the property portfolio is affected by the conditions prevailing in the property investment market and the general economic environment. Accordingly, the Group's net asset value can rise and fall due to external factors beyond management's control. The property portfolio is valued in compliance with international standards by external professionally qualified valuers. The global banking crisis coupled with the downturn in the UK economy have caused unusually high levels of volatility in the UK property market. It has experienced sharp falls and is far less liquid with fewer transactions being completed, most of which are considered to have been distressed sales. As a consequence, there has been a significant reduction in market evidence upon which to base valuations and therefore a significant degree of judgement has been required resulting in a greater level of uncertainty in respect of the figures reported by our 

valuers. However, the Group has a high quality diversified portfolio which will help to mitigate the impact of the current state of the property markets on the Group.

Responsibility Statement

The Board of directors jointly and severally confirm that, to the best of their knowledge:

(a) The condensed set of financial statements, prepared in accordance with IAS 34 as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and that the interim management report herein includes a fair review of the information required by DTR 4.2.7R (an indication of important events during the first six months and a description of the principal risks and uncertainties for the remaining six months of the year) and by DTR4.2.8R (a disclosure of related party transactions and charges therein) of the Disclosure and Transparency Rules.

(b) This Interim Management Report includes or incorporates by reference:

a.  an indication of important events that have occurred during the first six months of the financial year and their impact on the financial statements;

b. a description of the principal risks and uncertainties for the remaining six months of the financial year;

c. confirmation that there were no related party transactions in the first six months of the current financial year that have materially affected the financial position or the performance of the Company during that period; and

Interim Management Report (continued)

d. confirmation that there have been no changes in the related parties transactions described in the last annual report that could have a material effect on the financial position or performance of the Company in the first six months of the current financial year.

 

Christopher N Fish Nicholas C M Renny

Director Director

27 August 2009

  INDEPENDENT REVIEW REPORT TO THE ADVANTAGE PROPERTY INCOME TRUST LIMITED

Introduction 

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the 6 months ended 30 June 2009 which comprises the Condensed Group Statement of Comprehensive Income, Condensed Group Statement of Financial Position, Group Statement of Changes in Equity, Condensed Group Statement of Cash Flows and the related notes 1 to 13. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. 

This report is made solely to the Company in accordance with guidance contained in ISRE 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our work, for this report, or for the conclusions we have formed.

Directors' Responsibilities 

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority. 

As disclosed in note 1, the condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union.

Our Responsibility 

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. 

Scope of Review 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. 

Conclusion 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the 6 months ended 30 June 2009 is not prepared, in all material respects, in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority. 

Ernst & Young LLPGuernsey

27 August 2009

  INDEPENDENT REPORT ON PROFIT ESTIMATE

The Directors 27 August 2009

The Advantage Property Income Trust Limited

Anson Place Mill Court La Charroterie St Peter Port Guernsey GY1 1EJ

Dear Sirs

We report on the profit estimate comprising the Interim results of The Advantage Property Income Trust Limited (the "Company") and its subsidiaries (together the "Group") for the six months ended 30 June 2009 (the "Profit Estimate"). The Profit Estimate, and the material assumptions upon which it is based, are set out on pages 22 to 29 of the Interim Results (the "Document") issued by the Company dated 27 August 2009.

This report is required by Rule 28.3(b) of The City Code on Takeovers and Mergers (the "Code") and is given for the purpose of complying with that rule and for no other purpose. Accordingly we assume no responsibility in respect of this report to The Conygar Investment Company PLC or any person connected to, or acting in concert with, The Conygar Investment Company PLC or to any other person who is seeking or may in future seek to acquire control of the Company (an "Alternative Offeror") or to any other person connected to, or acting in concert with, an Alternative Offeror. 

Responsibilities

It is the responsibility of the directors of the Company to prepare the Profit Estimate in accordance with the requirements of the Code. In preparing the Profit Estimate the directors of the Company are responsible for correcting errors that they have identified which may have arisen in unaudited financial results used a basis for preparation of the Profit Estimate.

It is our responsibility to form an opinion as required by the Code as to the proper compilation of the Profit Estimate and to report that opinion to you.

Basis of preparation of the Profit Estimate

The Profit Estimate has been prepared on the basis stated on page 26 of the Document and comprises the unaudited interim financial results for the six months ended 30 June 2009. The Profit Estimate is required to be presented on a basis consistent with the accounting policies of the Group.

Basis of opinion

We conducted our work in accordance with Standards for Investment Reporting issued by the Auditing Practices Board in the United Kingdom. Our work included evaluating the basis on which the historical financial information included in the Profit Estimate has been prepared and considering whether the Profit Estimate has been accurately computed using that information and whether the basis of accounting used is consistent with the accounting policies of the Group.

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with reasonable assurance that the Profit Estimate has been properly compiled on the basis stated.

INDEPENDENT REPORT ON PROFIT ESTIMATE (CONTINUED)

However, the Profit Estimate has not been audited. The actual results for this period that will be reported as part of the results for the year ending 31 December 2009 may therefore be affected by revisions required to accounting estimates due to changes in circumstances, the impact of unforeseen events and the correction of errors in the interim financial results. Consequently, we can express no opinion as to whether the actual results achieved as are reported as part of the results for the year ending 31 December 2009 will correspond to those shown in the Profit Estimate and the differences may be material.

Our work has not been carried out in accordance with auditing or other standards and practices generally accepted in other jurisdictions and accordingly should not be relied upon as if it had been carried out in accordance with those standards and practices.

Opinion

In our opinion, the Profit Estimate has been properly compiled on the basis stated and the basis of accounting used is consistent with the accounting policies of the Group.

Yours faithfully

Ernst & Young LLP

Guernsey

27 August 2009

  FINANCIAL STATEMENTS

Condensed group statement of comprehensive income

For the six months ended 30 June 2009

(unaudited)

		Six months	Six months	Year to 31
		to 30 June	to 30 June	December
		2009	2008	2008
	Notes	£	£	£
Revenue
Net rental income	3	7,531,986	8,146,414	16,004,933
Other income		42,365	-	155,664
Expenditure
Property outgoings		(1,039,659)	(601,089)	(1,342,429)
Property fund adviser's fee		(563,436)	(1,014,295)	(1,706,373)
Other expenses		(501,536)	(397,764)	(875,270)
	4	(2,104,631)	(2,013,148)	(3,924,072)
Net operating profit for the period before finance costs		5,469,720	6,133,266	12,236,525
Gain/(Loss) from investments
Realised (loss)/gain on sale of investment properties		(2,565,201)	56,192	(322,019)
Movement on unrealised loss on revaluation of investment properties	10	(27,922,705)	(14,526,173)	(50,779,878)
		(30,487,906)	(14,469,981)	(51,101,897)
Finance income/(costs)
Interest receivable		17,118	207,010	370,652
Interest payable and similar charges		(3,174,184)	(3,710,864)	(7,375,256)
Fair value gain/(loss) on interest rate
swaps		1,323,545	1,941,494	(4,678,299)
		(1,833,521)	(1,562,360)	(11,682,903)
Net loss on ordinary activities
before taxation		(26,851,707)	(9,899,075)	(50,548,275)
Taxation on net loss on ordinary
activities	8	(57,288)	(38,953)	(19,977)
Net result for the period		(26,908,995)	(9,938,028)	(50,568,252)
Dividends per share	7	0.81p	3.25p	5.69p
Loss per share	9	(18.85p)	(6.96p)	(35.43p)

The accompanying notes form an integral part of this statement of comprehensive income.

FINANCIAL STATEMENTS (CONTINUED)

Condensed group statement of financial position as at 30 June 2009

(unaudited)

	Notes	As at	As at	As at
		30 June	30 June	31 December
		2009	2008	2008
		£	£	£
Non-current assets
Investment properties		151,502,626	230,124,775	193,063,084
Reverse lease premium		2,532,974	3,327,625	3,206,916
Fair value of swap instrument		-	1,758,062	-
	10	154,035,600	235,210,462	196,270,000
Current assets
Debtors		5,086,660	5,362,407	5,047,171
Cash and cash equivalents	5	5,439,824	7,302,775	2,331,331
		10,526,484	12,665,182	7,378,502
Total assets		164,562,084	247,875,644	203,648,502
Current liabilities
Financial liabilities		(6,055,229)	(6,016,251)	(6,944,634)
Income tax payable		-	(147,596)	(50,652)
		(6,055,229)	(6,163,847)	(6,995,286)
Non-current liabilities
Financial liabilities	6	(101,636,115)	(116,301,319)	(110,442,337)
Fair value of swap instrument		(3,538,186)	-	(4,861,731)
Deferred tax		(488,025)	(387,441)	(435,802)
		(105,662,326)	(116,688,760)	(115,739,870)
Net assets		52,844,529	125,023,037	80,913,346
Represented by:
Share capital		1,427,473	1,427,473	1,427,473
Share premium		68,878,048	68,878,048	68,878,048
Reserves		(17,460,992)	54,717,516	10,607,825
Shareholders' funds		52,844,529	125,023,037	80,913,346

Net Asset Value per share

37.02p

87.58p

56.68p

The accompanying notes form an integral part of this statement of financial position.

Approved by:

Christopher N Fish Nicholas C M Renny

Director Director

27 August 2009

FINANCIAL STATEMENTS (CONTINUED)

Condensed group statement of changes in equity 

For the six months ended 30 June 2009

(unaudited)

		Issued
		share	Share	Revenue	Other
		capital	premium	reserves	reserves	Total
		£	£	£	£	£
Opening at 1 January
2009		1,427,473	68,878,048	63,746,912	(53,139,087)	80,913,346
Net result for the period		-	-	1,013,710	(27,922,705)	(26,908,995)
Current year
crystallisation of
unrealised property
gain		-	-	(1,338,881)	1,338,881	-
Dividend paid		-	-	(1,159,822)	-	(1,159,822)
At 30 June 2009		1,427,473	68,878,048	62,261,919	(79,722,911)	52,844,529

For the six months ended 30 June 2008

(unaudited)

		Issued
		share	Share	Revenue	Other
		capital	premium	reserves	reserves	Total
		£	£	£	£	£
Opening at 1 January
2008		1,427,473	68,878,048	69,706,994	(412,164)	139,600,351
Net result for the period		-	-	4,588,145	(14,526,173)	(9,938,028)
Current year
crystallisation of
unrealised property
gains		-	-	1,729,352	(1,729,352)	-
Dividend paid		-	-	(4,639,286)	-	(4,639,286)
At 30 June 2008		1,427,473	68,878,048	71,385,205	(16,667,689)	125,023,037

The accompanying notes form an integral part of this statement of changes in equity.

  FINANCIAL STATEMENTS (CONTINUED)

Condensed group statement of cash flows

For the six months ended 30 June 2009

(unaudited)

						Six months	Six months	Year ended
						ended	ended	31 December
						30 June 2009	30 June 2008	2008
						£	£	£
Operating activities
Net operating profit for the period before finance
costs						5,469,720	6,133,266	12,236,525
Adjustment for:
	(Increase)/decrease in operating debtors					(31,141)	408,277	576,943
	Decrease in operating creditors					(521,440)	(499,900)	(218,481)
	Reverse premium amortisation					247,146	237,688	496,619
						5,164,285	6,279,331	13,091,606
	Taxation paid					(72,821)	(22,029)	(29,608)
Net cash inflow from operating activities						5,091,464	6,257,302	13,061,998
Investing activities
Purchase of investment properties						(370,599)	(218,082)	(2,706,861)
Proceeds from sale of investment properties						11,696,594	4,932,903	7,923,965
Proceeds from insurance claim						-	7,865,000	7,849,449
Net cash inflow from investing activities						11,325,995	12,579,821	13,066,553
Financing activities
Interest received						17,118	207,010	370,652
Interest paid						(3,218,192)	(4,018,031)	(6,968,929)
Repayment of bank loans						(8,558,070)	(8,000,000)	(13,994,627)
Dividends paid						(1,159,822)	(4,639,286)	(8,118,753)
Debt issue costs paid						(390,000)	(6,472)	(7,994)
Net cash outflow from financing activities						(13,308,966)	(16,456,779)	(28,719,651)
Net increase/(decrease) in cash and cash						3,108,493	2,380,344	(2,591,100)
equivalents
Opening cash and cash equivalents						2,331,331	4,922,431	4,922,431
Closing cash and cash equivalents						5,439,824	7,302,775	2,331,331
The accompanying notes form an integral part of this cash flow statement.

NOTES TO THE FINANCIAL STATEMENTS

1 Basis of preparation

The consolidated financial statements of The Advantage Property Income Trust Limited as at 31 December 2008 were drawn up in accordance with International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board (IASB). The half year Group financial statements as at 30 June 2009, which have been prepared in accordance with International Accounting Standard 34 (Interim Financial Reporting), have been drawn up using the same accounting methods as in the 2008 Group financial statements. All interpretations of the International Financial Reporting Interpretations Committee (IFRIC), formerly the Standing Interpretations Committee (SIC), which were mandatory as at 30 June 2009, were also applied. This includes the new standards and amendments and revisions to existing standards that have become effective for periods beginning on or after 1 January 2009, which included IAS 1 Presentation of Financial Statements and IFRS 8 Operating Segments.

2 Accounting policies

The six months' figures are unaudited and the accounting policies and methods of computation followed are as stated in the last annual financial report of the Group. 

Segmental reporting

The directors are of the opinion that the Group is engaged in a single segment of business, being that of a property investment business and substantially in one geographical area, the United Kingdom.

3 Net rental income
	Six Months	Six Months	Year to 31
	to 30 June	to 30 June	December
	2009	2008	2008
	Group	Group	Group
	£	£	£
Rental income from investment properties	7,779,132	8,390,724	16,501,552
Lease incentive charge	(247,146)	(244,310)	(496,619)
	7,531,986	8,146,414	16,004,933

4 Property outgoings and other expenses

During the period the Group incurred £1,039,659 (2008: £601,089) property outgoing costs and £501,536 (2008: £397,764) of other expenses that did not generate rental income. During the period, the Group incurred £31,602 (2008: £30,787) of audit fees and £31,760 (2008: £12,463) of non-audit fees due to the auditors. 

5 Cash and cash equivalents
	Six Months	Six Months	Year to 31
	to 30 June	to 30 June	December
	2009	2008	2008
	Group	Group	Group
	£	£	£
Cash at bank and in hand	5,439,824	5,302,775	2,331,331
Short term deposits	-	2,000,000	-
	5,439,824	7,302,775	2,331,331

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

6 Financial liabilities
	Six Months	Six Months	Year to 31
	to 30 June	to 30 June	December
	2009	2008	2008
	Group	Group	Group
	£	£	£
Bank loans	103,201,636	117,754,332	111,759,705
Debt issue costs	(1,565,521)	(1,453,013)	(1,317,368)
	101,636,115	116,301,319	110,442,337

7 Dividends
						Six Months	Six Months	Year to 31
						to 30 June	to 30 June	December
						2009	2008	2008
						Group	Group	Group
						£	£	£
Interim dividends paid						1,159,822	4,639,286	8,118,753
						1,159,822	4,639,286	8,118,753

During the period the Company paid one dividend, comprising of 0.8125 pence per each Ordinary Share. The dividend was paid in February.

8 Taxation
(a) Tax on profit on ordinary activities
		Six Months	Six Months	Year to 31
		to 30 June	to 30 June	December
		2009	2008	2008
		Group	Group	Group
Current income tax:		£	£	£
UK Income Tax		-	-	-
Adjustments in respect of prior years		-	-	(67,337)
		-	-	(67,337)
Deferred Tax:
Origination and reversal of timing differences		(9,032)	38,953	87,314
Adjustments in respect of prior years		66,320	-	-
Total deferred tax		57,288	38,953	87,314
Tax charge in the income statement		57,288	38,953	19,977

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

9 Earnings per share
						Six Months	Six Months	Year to 31
						to 30 June	to 30 June	December
						2009	2008	2008
						Group	Group	Group
						£	£	£
Loss used to calculate basic EPS						(26,908,995)	(9,938,028)	(50,568,252)
Weighted average number of shares						142,747,300	142,747,300	142,747,300

10 Investment properties
						Freehold	Long Leasehold	Total
Cost						£	£	£
At 1 January 2009						229,407,196	14,675,980	244,083,176
Additions during the period at cost						170,020	27,227	197,247
Disposals during the period at cost						(12,580,143)	(2,593,739)	(15,173,882)
At 30 June 2009						216,997,073	12,109,468	229,106,541
Revaluation
At 1 January 2009						184,845,000	11,425,000	196,270,000
Additions during the period at cost						170,020	27,227	197,247
Disposals during the period at valuation						(11,860,000)	(1,975,000)	(13,835,000)
Reverse lease premium						(208,675)	(38,471)	(247,146)
Reverse lease premium disposals						(426,796)	-	(426,796)
Revaluation movement in the period						(26,248,949)	(1,673,756)	(27,922,705)
At 30 June 2009						146,270,600	7,765,000	154,035,600

Cushman & Wakefield LLP, a firm of independent chartered surveyors, completed a valuation of the properties at the period end on an open market basis in accordance with the Practice Statements contained in the RICS Appraisal and Valuation Standards published by the Royal Institution of Chartered Surveyors ('Red Book') in May 2003. The valuation has been prepared by an appropriate valuer who conforms to the requirements as set out in the Red Book, acting in the capacity of external valuer.

11 Interest bearing loans and borrowings

Repayment of debt

During the period the Group made the following loan repayments:

29 June 2009: £6,605,387

30 June 2009: £1,952,683

Both repayments were made to a secured bank loan with the Bank of Scotland bearing an interest rate of Libor + 2.5% as at 30 June 2009.

On 20 July, £3.6 million was repaid from the facility held with Capmark.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

11 Interest bearing loans and borrowings (continued)

Facility amendment

On 31 March 2009 an amendment to the terms of the revolving bank facility with the Bank of Scotland was completed. The amendment provides for revised margins over the 3 month London Interbank Offer Rate on the basis of a sliding scale of loan to value ratios up to a maximum of 70%. The facility has also been reduced from £98.3 million to £78.0 million. 

12 Related party transactions

The Group has undertaken transactions with companies related by virtue of their shareholding in The Advantage Property Income Trust Limited. 

Valad Asset Management (UK) Limited, a subsidiary company of Valad Holdings (UK) plc, charged the Group property fund adviser's fees of £610,409 (2008: £1,062,038) in the six month period. As at 30 June 2009, Valad Asset Management (UK) Limited was owed £274,002 (2008: £522,267).

13 Post balance sheet event

On 7 August 2009 Conygar Investment Company PLC ("Conygar") announced an offer to acquire the entire issued and to be issued share capital of The Advantage Property Income Trust Limited ("the Offer") not already owned by Conygar at the date of the Offer.

On 26 August 2009 Conygar announced that all conditions of the Offer had been satisfied or waived, save for the condition relating to admission of Conygar's enlarged share capital to trading on AIM, and accordingly Conygar has declared the Offer unconditional in all respects.

DIRECTORS AND SERVICE PROVIDERS
Directors	Christopher N Fish (Chairman) Caroline M Burton Nicholas C M Renny
Property Fund Adviser	Valad Asset Management (UK) Limited 5th Floor, 1 Mount Street London England  W1K 3NB
Administrator and Secretary (and Registered Office of Company)	Anson Fund Managers Limited Anson Place Mill Court La Charroterie St Peter Port Guernsey GY1 1EJ
Lending Bankers	The Governor and Company of the Bank of Scotland  155 Bishopsgate London England EC2M 3YB
	Capmark Bank Europe Plc 31 St James' Square London England SW1Y 4JJ
Auditors	Ernst & Young LLP 14 New Street St Peter Port Guernsey GY1 4AF
Registrar, Transfer Agent and Paying Agent	Anson Registrars Limited PO Box 426 Anson Place Mill Court La Charroterie St Peter Port Guernsey GY1 3WX
Property Valuers	Cushman & Wakefield LLP 43-45 Portman Square London England W1A 3BG

The Company's Ordinary Shares are listed and traded on the London Stock Exchange and the Channel Islands Stock Exchange.

SHAREHOLDER INFORMATION

REPORT AND FINANCIAL STATEMENTS

The Annual Financial Report for the each year ended 31 December is intended to be sent to Shareholders in the following April.

The Half-Yearly Financial Report for the period ended 30 June each year is intended to be made public in the following August and sent to Shareholders in the following September.

SHARE DEALING

Shares may be dealt in directly through a stockbroker or professional adviser acting on an investor's behalf. The buying and selling of shares may be settled through CREST.

The SEDOL for Ordinary Shares is B05LNH5.

The ISIN for Ordinary Shares is GB00B05LNH59.

The Company's Registrar, Transfer Agent and Paying Agent is Anson Registrars Limited at the address given below.

The Company's UK Transfer Agent is Anson Administration (UK) Limited, 3500 Parkway, Whiteley, Fareham, Hampshire, England, PO15 7AL.

SHAREHOLDER ENQUIRIES

The Company's Registrar is Anson Registrars Limited at PO Box 426, Anson Place, Mill Court, La Charroterie, St Peter Port, Guernsey GY1 3WX. They can be contacted by telephone on 01481 711301 or by e-mail at [email protected]

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ENDIR MGGZRRRKGLZG

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Related Shares:

TAP.L