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Interim Results

17th May 2010 07:00

RNS Number : 9990L

Wichford plc

17 May 2010

Wichford P.L.C.

("Wichford" or the "Company")

UNAUDITED HALF-YEARLY FINANCIAL RESULTS

Wichford P.L.C., the property investment company, announces its unaudited half-yearly results for the six months ended 31 March 2010.

Highlights

Trading Operations Profit after tax £4.3 million (March 2009: £4.7 million)

Total profit after tax £18.0 million (March 2009: loss of £76.2 million)

Trading Operations earnings per share 0.40 pence (March 2009: 0.44 pence*)

Total earnings per share 1.69 pence (March 2009: loss of 7.17 pence*)

Declared interim dividend per share 0.32 pence (March 2009: 0.32 pence**)

Total Portfolio at Market Values £562.5 million (September 2009: £526.9 million)

Net assets £57.0 million (September 2009: £47.4 million)

Net asset value per share 5.37 pence (September 2009: 4.49 pence***)

EPRA net asset per share 8.56 pence (September 2009: 7.52 pence****)

Comparative notes have been adjusted to reflect the rights issue of shares.

* See note 9 for details of the calculation of earnings per share.

** See note 20 for details of the calculation of the dividends per share.

*** See note 10 for details of the calculation of net asset value per share.

**** See note 22 for details of the calculation of EPRA net asset value per share

Other Highlights

Occupancy levels remain above 99%

Successful period of lettings and lease extensions

Substantial progress against Rights Issue objectives

Purchase of three new properties during the first half

Further progress post period-end to secure the extension of the principal UK debt facilities

Significant progress on restructuring the VBG1 facility

Cash of £60.5 million

Revised Investment Advisers Agreement implemented, generating annualised savings of approximately £0.5 million per annum

Mark Sheardown appointed as a Non-executive Director of the Company

Philippe de Nicolay, Chairman of Wichford, commented today:

"This has been a first half of real achievement for Wichford after a very tough period. The Company has returned to profit, increased its net asset value and has made real progress with regard to its debt facilities. Through acquisitions and active management of the portfolio, Wichford has taken substantial steps towards securing its debt position and I expect further progress to be made during the rest of the year. Furthermore, we have managed our costs carefully and maintained our dividend. At the same time we have been able to recruit Mark Sheardown, whose extensive and relevant property expertise has strengthened our Board. "

Enquiries:

Wichford P.L.C.

Philippe de Nicolay 00 33 1 40 74 42 79

Wichford Property Management Ltd

Philip Cooper 020 7355 7020

Stephen Oakenfull 020 7811 0100

Citigate Dewe Rogerson 020 7638 9571

George Cazenove

Kate Lehane

Notes to editors

Wichford P.L.C. (UK Listed: WICH) is a property investment company, with a portfolio focused on investment property occupied principally by Central and State Government bodies. Approximately a quarter of the portfolio comprises public sector rented properties in France, Germany and the Netherlands.

Chairman's Statement

The first six months of the year have been an exceptionally busy period for the Company and importantly one in which the Company has seen a return to profitability. Property values in the UK found a floor in the last quarter of 2009 and increased investment activity together with a search for secure income returns resulted in some yield compression.

Wichford's UK Portfolio values increased by 4.04% during the period with the majority of the uplift from longer leases reflecting demand for longer term secure income. Wichford's Continental European property values showed a small decline in value of 0.71% in local currency terms. Underlying rental income in both the UK and Continental Europe remained highly resilient despite challenging occupier markets.

The Group produced a profit after tax of £18.0 million for the period, with Earnings from Trading Operations of £4.3m or 0.40 pence per share. Net asset value per share on an EPRA basis increased 13.8% to 8.56 pence per share.

The Group has been able to achieve a number of successful lettings and lease extensions during the period, details of which are contained in the Business Review. I am also pleased to report significant progress and success in meeting the objectives set out at the time of the Rights Issue, specifically:

·; Completing property acquisitions which should enable the extension of the principal UK debt facilities;

·; Resolution of the maturity of the VBG1 facility;

·; Enhancing the existing real estate expertise on the Board; and

·; Reducing overhead costs

Funding

Substantial progress has been made towards extending our two major UK debt facilities. In addition to those acquisitions made during the period, the Company completed the acquisition of three further properties after 31 March 2010 and has heads of terms agreed on one further acquisition. These properties, totalling £18.9 million in value, are sufficient to meet the extension criteria on both facilities, subject to them being accepted as security. An announcement on progress in this regard will be made in due course.

Negotiations have continued to progress well on VBG1 with heads of terms now agreed with the facility servicer. Implementation of the agreement is subject to a consultation period with the controlling class of noteholders of the CMBS vehicle. We anticipate that the restructuring terms will be implemented in a relatively short space of time on terms beneficial to both the Borrowers and the Lender.

Board Appointments

I would like to welcome Mark Sheardown, who joined the Board in January of this year. Mark has over 30 years of experience in property development and investment into real estate, including that occupied by government-backed entities. He will enhance the Board's direct property expertise, strengthening the Company's ability to leverage value from the existing portfolio and making a significant contribution to the Company's investment strategy.

Dividend

The Directors have resolved to pay an interim dividend of 0.32 pence per share. This reflects an increase of 3.2% on the final dividend approved at the Annual General Meeting in January 2010 and in line with the dividend policy established at the time of Rights Issue in September last year and is covered 1.25 times by current Trading Operations earnings.

Outlook

Investment markets continue to perform strongly, albeit that the recent re-pricing of capital values has taken place in the absence of any real rental growth. The covenant strength of Wichford's government tenant base will continue to play an important role in maintaining occupancy levels and stable rental income returns.

Competition for long-dated income with strong covenants remains high, particularly in the current low interest rate environment, whereas demand and the ability to fund shorter unexpired terms is much weaker resulting in a wide spread between initial yields at these two ends of the market. Despite the general improvement in property values, opportunities still exist to acquire higher yielding properties where the location and occupiers should support long term occupancy and higher values.

Completing the extension of our principal UK debt facilities remains our priority in the short term and I am pleased with progress that we have made so far. The necessary transactions to meet the extension criteria have been secured and the process of substituting these properties into the relevant facilities is underway. I look forward to reporting that this important milestone has been achieved in the coming months.

Following the completion of the £18.9 million of acquisitions agreed after 31 March 2010, the Group has approximately £25.0 million available for selective investment.

Looking ahead, we are actively developing strategies to take the Company forward in the medium to long term to ensure the Company's growth potential is supported by a robust capital structure.

Business Review

Operating Review

A strengthened investment market demand coupled with limited stock availability drove investment yields lower during the period. The UK Portfolio increased 4.04% with performance driven almost entirely from the Core Portfolio (+5.45%) as investment activity focussed on longer term secure rental income streams. This appears to be in part a reflection of the lack of credit availability for shorter dated income streams and investor caution over occupational markets. The value of the European portfolio reduced 0.71% in local currency terms, although valuations appear to be stabilising with increased investment activity and improved sentiment starting to be reflected in Wichford's European markets.

European Public Real Estate Association ("EPRA") net asset value per share increased 13.8% to 8.56 pence (September 2009: 7.52 pence) as a result of the positive portfolio revaluation. Both the EPRA and IFRS net asset value figures include the negative net asset value position on both the VBG1 and VBG2 portfolios. The negative impact on net asset value at 31 March 2010 was 1.96 pence per share.

Uncertainty over the sustainability of the property recovery and potentially weak occupier markets places added emphasis on the covenant strength of the Company's Central and State Government occupiers. Vacancy rates remained below 1% throughout the period supporting a stable rent roll. Recent acquisitions have begun to replace income from sales in the previous financial year although the full impact of these acquisitions will only be reflected in the second half of this year.

Earnings per share from Trading Operations were 0.40 pence (March 2009: 0.44 pence).

The Group's cash position has continued to provide the ability to react quickly to investment opportunities. Since 31 March 2010, a further £18.9 million of acquisitions have either completed or have heads of terms agreed. These acquisitions and further investment in the second half of the year will support revenue growth as the full impact of these acquisitions takes effect. As at 31 March 2010 the Group's cash position was £60.5 million.

Furthermore, recently completed acquisitions together with those agreed after 31 March 2010 provide sufficient long-dated income to enable the extension of the weighted average unexpired lease term ("WAULT") to above 7.5 years from October 2012 - the principal criteria for extending Wichford's two key UK debt facilities for an additional two years from October 2010 to October 2012. The extension is still subject to the completion of one further acquisition as well as the successful substitution of these properties as security into either the Delta or Gamma facilities.

Securing these acquisitions is a significant step towards extending the Delta and Gamma facilities. Despite the yields for Government backed leases in excess of 25 years being low, the amount of capital required to meet the WAULT test is substantially reduced as a result of the length of leases being acquired (see "Transactions after 31 March 2010" below) making additional funds available for investment outside of these facilities.

Acquisitions

The Company completed three acquisitions and the purchase of the land associated with the Uxbridge DSA during the period for a total cost of £26.7 million. Additionally £3.7 million was paid into escrow for the property in Uxbridge, Middlesex, as a deferred consideration subject to practical completion, which was achieved post 31 March 2010.

DSA Driving Centres, Uxbridge and Gillingham

Gillingham and Uxbridge are both let on forty year leases to the Driving Standards Agency with tenant break options in year 15 and 20 respectively. Both properties are newly developed. The total acquisition price of £9.43 million reflected a blended net initial yield of 5.92%. Both properties are subject to RPI indexation.

Crescent Centre, Bristol

Acquired from Henderson Global Investors for £14.0 million reflecting a net initial yield 7.89%. The 1970s office building is let predominantly to Government occupiers who make up 86.5% of the passing rent. The largest tenants are Her Majesty's Revenue & Customs and the Employment Tribunals.

Parliament Square, Edinburgh

Acquired for £5.55 million reflecting a net initial yield of 5.54% with a reversion to 6.43% in January 2012. The property is let to the Edinburgh City Council and occupied by the Scottish Courts Authority. It is currently being used as the District Court and forms part of the adjoining Scottish Supreme Court. Its location, forming part of the Royal Mile, is in one of Edinburgh's busiest tourist locations. The property has an unexpired lease term of 11.8 years with income subject to five yearly RPI indexation with minimum 3% p.a. uplifts.

Letting Activity

Occupational markets remain subdued but despite this and concerns over cuts to Government spending, occupancy remained above 99% in the six months ended 31 March 2010.

There were a number of successful lettings and lease extensions during the period:

Crescent Centre, Bristol

Letting activity at this recently acquired property has progressed well. A direct lease has been signed with a previous sub-tenant on 2,935 sq ft of space. Heads of terms have also been agreed with an existing tenant for an additional 1,622 sq ft as well as a five year extension to their existing lease. The vacancy on acquisition of 4.6% will be reduced to 2.8% following conclusion of these lettings.

Ward Jackson House, Hartlepool

The tenant break clause in November 2011 has been removed and replaced with a break option in March 2018 extending the unexpired lease term by 6.4 years. The extension is subject to lease incentives equivalent to 24 months rent.

Theatre Buildings, Billingham

The tenant break clause in February 2011 has been removed and replaced with a break option in March 2018 extending the unexpired lease term by 7.1 years. The extension is subject to lease incentives equivalent to 24 months rent.

Lease expiries in the second half this financial year are however anticipated to increase vacancies while letting and redevelopment options are progressed. Leases on approximately 122,400 sq ft of space across two properties (Lyon House, Harrow and St Anne's House, Croydon) accounting for £1.5 million p.a. of rental income expire in June 2010.

Portfolio

Valuations

Valuations of the UK Portfolio stabilised and improved in the six months to 31 March 2010. The like for like increase of 4.04% was driven largely by the UK Core Properties (+5.45%) as competition for secure income returns continued to place downward pressure on yields. The smaller like-for-like increase in the Active Properties of 1.01% reflects the continued lack of bank debt for investments with shorter lease terms as well as conservative valuations on certain properties where vacancies are anticipated while re-letting and other options are progressed.

Valuations of properties acquired during the period under review were encouraging. The Crescent Centre in Bristol increased 1.4% in the two months since acquisition. With a further letting and lease extension under negotiation, the opportunity for further active management driven value is achievable.

The Driving Standards Authority (DSA) test centre in Gillingham, acquired in January 2010, was valued 13.0% above the acquisition price. The most recent valuation reflects the market's appetite for inflation-linked long-dated government income in the current low interest rate environment. The newly developed property, with a 40 year lease and 15 year unexpired term, was acquired as a pre-let development. These types of investment are seen as a significant opportunity to enhance returns as part of the Company's future investment strategy.

The Continental European portfolio declined 0.71% over the period in local currency terms compared to a decline of 2.93% in the previous six months to September 2009. The relative strength of Sterling over the period resulted in values decreasing 3.28% in Sterling terms.

The table below contain both the like-for-like valuation movements as well as the changes in the total portfolio.

Open Market Value	Like-for-Like Portfolio		Like-for Like Valuation Surplus		Total Portfolio
	31 March 2010	30 Sept 2009	Surplus / (Deficit)	Surplus / (Deficit)	31 March 2010	30 Sept 2009
	£m	£m	£m	%	£m	£m
UK Core	266.9	253.1	13.8	5.45	292.6	253.1
UK Active	119.7	118.5	1.2	1.01	119.7	118.5
UK Blended	386.6	371.6	15.0	4.04	412.3	371.6
Continental Europe	150.2	155.3	(5.1)	(3.28)	150.2	155.3
Total	536.8	526.9	9.9	1.88	562.5	526.9

	€m	€m	€m	%	€m	€m
Continental Europe	168.3	169.5	(1.2)	(0.71)	168.3	169.5

Note: For the like-for-like analysis, 30 September 2009 figures have been re-allocated to Core or Active dependent on their current classification and do not include acquisitions since 30 September 2009

Portfolio Summary

As at 31 March 2010 the UK Portfolio's Core/Active split was 71:29 providing an appropriate balance of income security and active management opportunities. There are a number of asset management opportunities within the existing portfolio and further selective investment into shorter leases is continually under review where property fundamentals and tenant inertia create opportunities to create long term secure rental income streams.

With recent acquisitions focusing on long-dated income, the average lease length of the portfolio will increase providing greater long term income security and scope for acquiring higher yielding properties.

Indexation and fixed rental increases across the portfolio stood at 62.0% at 31 March 2010 and remains an important part of Wichford's strategy and protection against potential future inflationary pressures.

	Core	Active	UK Portfolio	Continental Europe Portfolio	Total
Properties	49	23	72	7	79
Total Area (sq ft 000's)	1,808	882	2,690	1,025	3,715
Open Market Value (£ 000's)	292,600	119,680	412,280	150,196	562,476
Annualised rental income (£ 000's)	22,544	11,593	34,137	12,014	46,151
Average rent (£ per sq ft)	12.47	13.14	12.69	11.73	12.42
Net initial yield (%)	7.29	9.16	7.75	7.60	7.75
Weighted average unexpired term (years)	9.28	3.64	7.29	10.15	8.03
Rental income index-linked/fixed increases (%)	66.7	20.8	48.7	100.0	62.0

Transactions after the 31 March 2010

Acquisitions

Subsequent to 31 March 2010, the Company has completed on three properties.

St George House, Leeds and DSA, Wigan

The properties are being acquired as a portfolio. St George House has long leasehold title to Leeds City Council with a 73 year unexpired term. The DSA test centre in Wigan is a newly developed driving test centre with a 24 year unexpired term to the Secretary of State for Communities & Local Government with rent reviews subject to the higher of RPI or open market review.

The purchase price of £14.3 million reflects a blended net initial yield of 4.0%.

Westwey House, Weymouth

The property is let to The Secretary of State for the Environment with an unexpired lease term of approximately 60 years and is occupied by a JobCentre Plus, the Department of Work and Pensions (DWP), Court Services, Court Advisors, Family Courts and Tribunals. The purchase price of £2.5 million reflects a net initial yield of 4.25%.

Heads of terms have been agreed on a further acquisition with an unexpired lease term of 124 years. The agreed price of £2.1 million reflects a net initial yield of 4.5%.

While the yields on these acquisitions may be considered low, the extremely long lease lengths have a material impact on the portfolio's WAULT for a relatively small capital value. Acquiring such long-dated leases has provided a capital efficient solution to meeting the WAULT test allowing surplus Rights Issue funds to be invested opportunistically outside of these debt facilities.

Letting Activity

Aqueous 2, Birmingham

The tenant break clause in November 2011 has been removed extending the unexpired term to the expiry date of August 2015. The extension is subject to lease incentives equivalent to 6.5 months rent. This was completed after the 31st of March 2010 and is not reflected in the latest valuations.

Outlook and Priorities

The immediate focus remains the resolution of near term debt maturities. There has been substantial progress toward extending the maturity date of the Delta and Gamma facilities as well as the restructuring of VBG1 - further information is provided in the Financial Review.

The programme of reducing operating costs has been successfully implemented with terms re-negotiated or contracts re-tendered on all major on-going service contracts and advisory roles. Legal costs associated with acquisitions and associated advice on debt facilities have remained high for the period as a result of increased transactional activity and securitisation requirements. However, it is expected that these costs will be reduced going forward once acquisitions and negotiations in relation to debt facilities are concluded.

Investment into the existing portfolio is expected to increase and is an important strategy to retain or attract new government occupiers into refurbished and cost effective office space in line with the Government's future estate requirements and efficiency agendas. Modernising some of Wichford's older properties presents a real opportunity to create future capital growth and income security.

Continued tight credit markets, particularly for developments, will continue to create opportunities to forward fund pre-let government developments at enhanced yields and with limited risk.

Despite the competitive pricing for secure rental income, opportunities to acquire well located properties with opportunities to create value remain, primarily through the selective conversion of shorter unexpired terms into long term secure investments.

Financial Review

Overview

Profit before tax was £18.3 million, compared to a loss of £75.7 million for the six months to 31 March 2009. Profit after tax from Trading Operations, which excludes the revaluation of investment properties, was £4.3 million (March 2009: £4.7 million).

Basic earnings per share was 1.69 pence compared to a loss of 7.17 pence for the same period last year. Earnings per share from Trading Operations was 0.40 pence per share at 31 March 2010 (March 2009: 0.44 pence).

The net assets of the Group increased to £57.0 million at 31 March 2010 (September 2009: £47.4 million) supported by a revaluation of investment properties and profits from Trading Operations and despite a fall in the fair value of the Group's derivatives by £1.4 million.

Revenue

Revenue, at £21.9 million, declined by £0.5 million or 2.3% on the same period last year, partly as a result of lower rental income following sales in the second half of the previous financial year and partly due to the adverse effect of the €/£ exchange rate. The exchange rate movement resulted in a decrease in revenue of £0.3 million.

Administrative Expenses

Administrative expenses were successfully reduced by 14.6% from £4.1 million to £3.5 million as a result of a reduction in one-off expenses. The impact of the cost reduction programme outlined at the time of the Rights Issue will only be fully reflected in subsequent financial periods. There should be a noticeable impact on these costs for the full year to September 2010 as costs are progressively reduced.

Finance Cost

The finance costs of the Group were £14.4 million in the period which is slightly higher than the previous year due partly to the increased interest costs experienced on the Hague facility. Finance income was also down £0.1 million reflecting the lower interest rate environment.

Interim dividend

The Directors have approved the payment of an interim dividend of 0.32 pence per share to be paid on 18 June 2010 to all those Shareholders on the register at the close of business on 28 May 2010.

This interim dividend is covered 1.25 times by Trading Operations profit after tax.

Net Assets

At 31 March 2010 net assets per share was 5.37 pence compared to 4.49 pence at 30 September 2009. Net assets per share on an EPRA basis, which excludes the fair value of derivatives, was 8.56 pence, up 13.8% from 7.52 pence at September 2010.

The Group's net assets have increased from £47.4 million at 30 September 2009 to £57.0 million at 31 March 2010 principally due to the profit reported for the six months which included a surplus on revaluation of investment properties of £14.2 million as well as continuing profits from Trading Operations. The fair value of the Group's derivatives declined a further £1.4 million offsetting some of these gains.

Cash

The Group's cash balance has reduced from £100.0 million at 30 September 2009 to £60.5 million at 31 March 2010 principally due to the purchase of three properties in the period.

At 31 March 2010 the Group had £11.1 million of restricted cash. Of this £5.5 million was released to cash and cash equivalents on 1 April 2010 on the successful substitution of a property into the Zeta facility. A further £4.6 million is expected to be released from restricted cash on further successful substitutions.

Financing and Capital

VBG1

As announced during the course of February and March this year, the Borrowers (non-recourse subsidiaries of the Company) entered into a Standstill Agreement following the maturity of the facility in January 2010. The Standstill Agreement extends to 18 May 2010. Since the last announcement, considerable progress has been made towards agreeing a solution which is beneficial to both the Borrower and the Lender and heads of terms has now been agreed with the Servicer.

In line with the provisions of the securitisation documentation, the Servicer has submitted the heads of terms to the representative for the controlling class of noteholders who has a maximum of 30 days to consult with the Servicer over the proposed terms. The Company remains confident that a satisfactory agreement will be reached and a further announcement will be made in due course.

Gamma and Delta

In addtition to those acquisitions made in the period, a further three properties have been acquired after 31 March 2010 as outlined in the Business Review.

Furthermore, heads of terms have been agreed on a property with an unexpired lease term of 124 years.

Subject to the facility servicer accepting these properties as security, these transactions are sufficient to increase the WAULTs of both the Delta and Gamma facilities above the required extension hurdle of 7.5 years from October 2012. The substitution process to pledge these properties to the Delta and Gamma facilities has been initiated and is expected to be completed before the September year end.

Facility	Lender	Debt (£m)	Actual ICR (%)	Minimum ICR (%)	Actual LTV (%)	Maximum LTV (%)

Delta	Windermere XI CMBS Ltd	114.6	137.9 *	125.0	97.2	n/a
Gamma	Windermere VIII CMBS Ltd	199.7	152.5	115.0	93.2	n/a
Hague	SNS Property Finance	19.6	148.7**	100.0	89.5	n/a
Halle	Windermere XIV CMBS Ltd	33.1	172.0	140.0	93.5	n/a
VBG1	Talisman 3	60.3	205.2	120.0	122.1	85.0
VBG2	Talisman 4	48.2	121.8	115.0	125.8	86.0
Zeta	Lloyds TSB Plc	46.0	275.6	140.0	59.8	65.0
		521.5

* Actual figures for the Delta ICR are lower than normal due to sales that have been made reducing the rental income to cover the interest. Once the substitution properties have been acquired these ratios will increase.

** SNS have waived the interest cover covenant, which includes notional management costs and notional amortisation of the loan amount, until October 2010. The figure shown is calculated on the same basis as the other ICR figures in the table.

The VBG facilities have on-going Loan to Value covenants which were not breached in the six months to 31 March 2010 on the valuations addressed to the loan servicer. The Company's valuations reflect Loan to Value ratios in excess of the covenants.

The facilities' maturity dates are shown in the table below.

Facility	Lender	Maturity

Delta	Windermere XI CMBS Ltd	October 2010	Option to extend to October 2012 - subject to WAULT of 7.5 years from October 2012
Gamma	Windermere VIII CMBS Ltd	October 2010	Option to extend to October 2012 - subject to WAULT of 7.5 years from October 2012
Hague	SNS Property Finance	July 2014
Halle	Windermere XIV CMBS Ltd	April 2014
VBG1	Talisman 3	January 2010	Heads of terms for restructuring agreed
VBG2	Talisman 4	April 2011
Zeta	Lloyds TSB Plc	May 2011	Extendable for two years with agreement of lender

Hedging

The Group continues to use borrowings with a floating interest rate and interest rate swaps as hedges against interest rate movements. The interest rate swaps on the VBG1 facility matured at the same time as the loans on 15 January 2010. Since then the Group has been charged a variable rate on these loans which is significantly lower than the interest rate swaps entered into in 2006. As part of the ongoing negotiations, it is expected there will be a requirement to enter into a new hedging arrangement should the facility be extended.

There remains one interest rate swap that has been identified as ineffective as measured under IAS 39 requirements and so the change in fair value since 30 September 2009 has been passed through the profit and loss account. A proportion of the previous fair value taken to reserves has been recycled through the profit and loss account. This amounts to less than £0.2 million at 31 March 2010.

The overall value of the interest rate swaps reduced by £1.4 million from 30 September 2009 to 31 March 2010 due to a decline in the underlying variable rates during the period.

Taxation

The Company has made a provision for current year's income tax of £0.1 million which is partially based on brought forward taxable losses.

A deferred tax provision of £0.2 million for the six months period to 31 March 2010 has been based on the estimated amount of the initial value of each property being recovered through use. No credit has been taken for any potential deferred tax assets.

Exchange rates

The average Euro to Sterling exchange rate for the six months to 31 March 2010 was 1.11613 (March 2009: 1.15316; September 2009: 1.14662).

The closing Euro to Sterling exchange rate as 31 March 2010 was 1.12040 (March 2009: 1.07630; September 2009: 1.09120).

GOING CONCERN

After considering the relevant factors, the Directors have a reasonable expectation that the Company has adequate resources to continue in operation for the foreseeable future. They have, therefore, adopted the Going Concern basis in preparing these financial statements.

Statement of Directors Responsibilities

Each of the directors confirms that, to the best of each person's knowledge and belief:

(a) the condensed consolidated interim financial statements comprising the condensed consolidated statement of comprehensive income, the condensed consolidated statement of financial position, the condensed consolidated statement of changes in equity, the condensed consolidated statement of cash flows and related notes have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.

(b) the interim management report includes a fair review of the information required by:

(i) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(ii) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

Ten Largest Investments

1.Justizzentrum, Halle, Germany
Freehold courts and offices built in 1997 and totalling 34,689 sq m		Current rent £2.9 million p.a. German CPI indexation.
Let to Land Sachsen-Anhalt until June 2020		Valuation: £35.4 million
2.Weiner Platz, Dresden, Germany
Freehold offices built in 2004 and totalling 17,449 sq m		Current rent £2.4 million p.a. German CPI indexation.
Let to VBG Verwaltungs-Berufsgenossenschaft until January 2024		Valuation: £32.9 million
3.Centenary Court, Bradford
Freehold 1990s built office of 9,743 sq m		Current rent £1.8 million p.a. UK RPI indexation.
Occupied by HMRC until April 2027 with a break in 2021		Valuation: £28.8 million
4.Martin Luther Strasse, Stuttgart, Germany
Freehold offices built in 2005 and totalling 12,455 sq m		Current rent £2.1 million p.a. German CPI indexation.
Let to VBG Verwaltungs-Berufsgenossenschaft until January 2025		Valuation: £27.1 million
5.Haagse Veste 1, The Hague, Netherlands
Freehold 2008 built office of 12,878 sq m		Initial rent of £1.9 million p.a. Dutch CPI indexation.
Occupied by the Royal Dutch Government for use by the International Criminal Court. Let for a term of six years from July 2008 with a tenant's option to extend for a further four years		Valuation: £21.9 million
6.Castle House, Leeds
Leasehold 1980s built office of 7,281 sq m		Current rent £1.2 million p.a. UK RPI indexation.
Let to Secretary of State for the Environment until 2023		Valuation: £21.0 million
7.Markgraffenstrasse, Berlin, Germany
Freehold 2005 built office of 2,025 sq m		Current rent £1.2 million p.a. German CPI indexation.
Let to VBG Verwaltungs-Berufsgenossenschaft until January 2022		Valuation: £16.5 million
8.Woodlands, Bedford
Freehold 1985 built office of 14,416 sq m		Current rent £1.4 million p.a. Fixed uplift at rent review.
Majority occupied by Highways Agency until August 2020		Valuation: £15.2 million
9.Crescent Centre, Bristol
Freehold 1970s office building of 8,180 sq m		Current rent £1.2 million p.a.
Majority let to HMRC until 2023 with a break in 2021		Valuation: £14.2 million
10.Unicorn House, Bromley
Freehold 1980s built office of 5,365 sq m		Current rent £1.0 million p.a.
Let to the Secretary of State for the Environment until 2010 and then to Trillium until March 2022 with a break in 2018		Valuation: £14.2 million

Auditors' Independent review report to Wichford P.L.C.

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2010 which comprises the condensed consolidated statement of comprehensive income, the condensed consolidated statement of financial position, the condensed consolidated statement of cash-flows, the condensed consolidated statement of changes in equity and the related explanatory notes. 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 the terms of our engagement letter to assist the company in meeting the requirements of the Transparency (Directive 2004/109/EC) Regulations 2007 ("the TD Regulations") and the Disclosure and Transparency Rules of the UK's Financial Services Authority ("the FSA"). Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have reached.

Directors' Responsibility

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 TD Regulations and the Disclosure and Transparency Rules of the FSA.

As disclosed in Note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the EU. The Directors are responsible for ensuring that the condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.

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. 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 report for the six months ended 31 March 2010 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU, the TD Regulations and the Disclosure and Transparency Rules of the UK FSA.

Condensed consolidated statement of comprehensive income

As at 31 March 2010

		Six months ended 31 March 2010
		Trading	Other
		Operations	Items**	Total
	Notes	£m	£m	£m
Revenue	5	21.9	–	21.9
Surplus on revaluation of investment properties	11	–	14.2	14.2
(Loss)/Profit on disposal of investment properties		–	-	-
Administrative expenses	6	(3.2)	(0.3)	(3.5)
OPERATING PROFIT		18.7	13.9	32.6
Finance income	7	0.1	–	0.1
Finance costs	7	(14.4)	-	(14.4)
PROFIT BEFORE TAX		4.4	13.9	18.3
Income tax expense	8	(0.1)	(0.2)	(0.3)
PROFIT FOR THE PERIOD Attributable to owners of the company		4.3	13.7	18.0

OTHER COMPREHENSIVE INCOME
(Loss) on cash flow hedges		–	(1.0)	(1.0)
(Loss) on foreign currency translation		–	(4.1)	(4.1)
Other comprehensive income for the period		–	(5.1)	(5.1)
total comprehensive income for the period attributable to owners of the company		4.3	8.6	12.9

Earnings per share from continuing operations
Basic/Diluted – pence	9	0.40	1.29	1.69

	Notes	Six months ended 31 March 2009			Year Ended 30 September 2009
	Notes	Trading Operations* £m	Other Items** £m	Total £m	Trading Operations* £m	Other Items** £m	Total £m
Revenue	5	22.4	–	22.4	44.8	–	44.8
Deficit on revaluation of investment properties	11	–	(79.9)	(79.9)	–	(80.7)	(80.7)
(Loss) on disposal of investment properties		–	-	-	–	(0.5)	(0.5)
Administrative expenses	6	(3.1)	(1.0)	(4.1)	(6.7)	(1.6)	(8.3)
OPERATING PROFIT/(LOSS)		19.3	(80.9)	(61.6)	38.1	(82.8)	(44.7)
Finance income	7	0.2	–	0.2	0.3	–	0.3
Finance costs	7	(14.3)	-	(14.3)	(28.9)	(0.2)	(29.1)
PROFIT/(LOSS) BEFORE TAX		5.2	(80.9)	(75.7)	9.5	(83.0)	(73.5)
Income tax expense	8	(0.5)	-	(0.5)	(0.4)	(1.5)	(1.9)
PROFIT/(LOSS) FOR THE PERIOD/YEAR ATTRIBUTABLE TO OWNERS OF THE COMPANY		4.7	(80.9)	(76.2)	9.1	(84.5)	(75.4)

OTHER COMPREHENSIVE INCOME
(Loss) on cash flow hedges		–	(39.3)	(39.3)	–	(34.3)	(34.3)
Gain/(loss) on foreign currency translation		–	1.8	1.8	–	(4.7)	(4.7)
Other comprehensive income for the period/year		–	(37.5)	(37.5)	–	(39.0)	(39.0)
total comprehensive income for the period/YEAR attributable to owners of the company		4.7	(118.4)	(113.7)	9.1	(123.5)	(114.4)

Earnings per share from continuing operations
Basic/Diluted – pence (2009 restated)	9	0.44	(7.61)	(7.17)	0.86	(7.96)	(7.10)

All activities are continuing.

*	Trading Operations:	This excludes the Other Items and reflects the trading activities of the Group.
**	Other Items:	Includes the profits and losses on the sales of investment properties and items of a non-trading nature such as valuation adjustments arising from the fair value of investment properties and derivative financial instruments.

Condensed consolidated statement of financial position

As at 31 March 2010

	Notes	31 March 2010 £m	31 March 2009 £m	30 September 2009 £m
NON-CURRENT ASSETS
Investment properties	11	551.4	541.4	516.1

CURRENT ASSETS
Trade and other receivables	12	24.7	19.7	19.0
Cash at bank	13	60.5	32.6	100.0
		85.2	52.3	119.0
TOTAL ASSETS		636.6	593.7	635.1

CURRENT LIABILITIES
Trade and other payables	14	(22.6)	(24.3)	(26.6)
Borrowings	15	(61.3)	(65.0)	(63.6)
Derivative financial liabilities	16	(33.9)	(38.0)	(32.5)
		(117.8)	(127.3)	(122.7)
NON-CURRENT LIABILITIES
Borrowings	15	(460.2)	(465.0)	(463.5)
Deferred tax liabilities	8	(1.6)	(1.2)	(1.5)
		(461.8)	(466.2)	(465.0)
TOTAL LIABILITIES		(579.6)	(593.5)	(587.7)
NET ASSETS		57.0	0.2	47.4
EQUITY
Share capital	18	22.6	13.3	22.6
Share premium		161.4	118.8	161.4
Retained earnings		(93.6)	(96.3)	(107.0)
Cash flow hedges reserve		(36.1)	(40.2)	(34.7)
Currency translation reserve		2.7	4.6	5.1
TOTAL EQUITY ATTRIBUTABLE TO THE ORDINARY EQUITY HOLDERS OF THE PARENT COMPANY		57.0	0.2	47.4
NET ASSET VALUE
Basic/Diluted – pence per share (2009 restated)	10	5.37	0.02	4.49

Condensed consolidated statement of changes in equity

for the six months ended 31 March 2010

				Cash flow	Currency
	Share	Share	Retained	hedges	translation
	capital	premium	earnings	reserve	reserve	Total
Six months ended 31 March 2010	£m	£m	£m	£m	£m	£m
At 1 October 2009	22.6	161.4	(107.0)	(34.7)	5.1	47.4
Shares issued	-	-	-	-	-	-
Share issue costs	-	-	-	-	-	-
Transfer to distributable reserves	-	-	-	-	-	-
Profit for the period	-	-	18.0	-	-	18.0
(Loss) on cash flow hedges	-	-	-	(1.0)	-	(1.0)
(Loss) on foreign currency translation	-	-	(1.3)	(0.4)	(2.4)	(4.1)
Total comprehensive income for the period	-	-	16.7	(1.4)	(2.4)	12.9
Dividends paid	-	-	(3.3)	-	-	(3.3)
At 31 March 2010	22.6	161.4	(93.6)	(36.1)	2.7	57.0

				Cash flow	Currency
	Share	Share	Retained	hedges	translation
	capital	premium	earnings	reserve	Reserve	Total
Six months ended 31 March 2009	£m	£m	£m	£m	£m	£m
At 1 October 2008	13.3	168.7	(65.2)	(0.6)	1.8	118.0
Shares issued	-	-	-	-	-	-
Share issue costs	-	0.1	-	-	-	0.1
Transfer to distributable reserves	-	(50.0)	50.0	-	-	-
(Loss) for the period	-	-	(76.2)	-	-	(76.2)
(Loss) on cash flow hedges	-	-	-	(39.3)	-	(39.3)
Gain on foreign currency translation	-	-	(0.7)	(0.3)	2.8	1.8
Total comprehensive income for the period	-	-	(76.9)	(39.6)	2.8	(113.7)
Dividends paid	-	-	(4.2)	-	-	(4.2)
At 31 March 2009	13.3	118.8	(96.3)	(40.2)	4.6	0.2

				Cash flow	Currency
	Share	Share	Retained	hedges	translation
	capital	premium	earnings	reserve	Reserve	Total
Year ended 30 September 2009	£m	£m	£m	£m	£m	£m
At 1 October 2008	13.3	168.7	(65.2)	(0.6)	1.8	118.0
Shares issued	9.3	46.5	-	-	-	55.8
Share issue costs	-	(3.8)	-	-	-	(3.8)
Transfer to distributable reserves	-	(50.0)	50.0	-	-	-
(Loss) for the year	-	-	(75.4)	-	-	(75.4)
(Loss) on cash flow hedges	-	-	-	(34.3)	-	(34.3)
(Loss) on foreign currency translation	-	-	(8.2)	0.2	3.3	(4.7)
Total comprehensive income for the year	-	-	(83.6)	(34.1)	3.3	(114.4)
Dividends paid	-	-	(8.2)	-	-	(8.2)
At 30 September 2009	22.6	161.4	(107.0)	(34.7)	5.1	47.4

The cumulative foreign exchange difference included in the Retained earnings reserve is a loss of £11.8 million (March 2009: a loss of £3.0 million: September 2009: a loss of £10.5 million). In the cash flow hedges reserve the cumulative foreign exchange difference is a loss of £0.9 million (March 2009: nil; September 2009: a loss of £0.5 million).

Condensed consolidated statement of cash flows

for the six months ended 31 March 2010

	Six months ended 31 March 2010 £m	Six months ended 31 March 2009 £m	Year ended 30 September 2009 £m
PROFIT/(LOSS) FOR THE PERIOD/YEAR	18.0	(76.2)	(75.4)
Adjust non-cash items:
- (Increase)/decrease in fair value of investment properties	(14.2)	79.9	80.7
- Loss on sale of investment properties	-	-	0.5
- Accrued rental income	(0.1)	(0.2)	(0.4)
- Rent incentives	0.3	0.6	1.1
- Finance income	(0.1)	(0.2)	(0.3)
- Finance costs	14.4	14.3	29.1
- Income tax expense	0.3	0.5	1.9
- Foreign exchange loss	(1.6)	(5.2)	(7.2)
Working capital adjustments:
- (Increase)/decrease in trade and other receivables	(2.0)	10.5	10.9
- Increase/(decrease) in trade and other payables	(2.9)	(0.5)	2.2

Finance costs paid	(14.1)	(14.4)	(29.1)
Finance costs received	0.1	0.2	0.3
Finance lease interest paid	(0.1)	(0.1)	(0.1)
Taxation paid	(0.7)	–	(0.1)
CASH FLOWS (USED IN)/FROM OPERATING ACTIVITIES	(2.7)	9.2	14.1
INVESTING ACTIVITIES
Purchase of investment properties	(26.7)	(1.8)	(1.8)
Uncompleted purchases of investment properties	(3.7)	-	-
Sale of investment properties	-	-	15.3
CASH FLOW (USED IN)/FROM INVESTING ACTIVITIES	(30.4)	(1.8)	13.5
FINANCING ACTIVITIES
Ordinary Shares issued (net of expenses)	-	-	52.0
(Decrease)/increase in bank debt and finance leases	(3.1)	14.3	13.5
Equity dividends paid	(3.3)	(4.2)	(8.2)
CASH FLOWS (USED IN)/FROM FINANCING ACTIVITIES	(6.4)	10.1	57.3
(DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS	(39.5)	17.5	84.9
Cash and cash equivalents at beginning of period/year	100.0	15.1	15.1
CASH AND CASH EQUIVALENTS AT PERIOD/YEAR	60.5	32.6	100.0

Notes to the financial statements

1. Basis of preparation

The unaudited condensed consolidated half-yearly financial statements of the Company for the six months ended 31 March 2010 comprises the Company and its subsidiaries (together referred to as the “Group”). They are presented in pounds sterling which represents the functional currency of the Company and a number of key subsidiaries. The report is prepared on the historical cost basis except for the following assets and liabilities which are stated at fair value: derivative financial instruments and investment properties.

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Actual results may differ materially from these estimates. In preparing these half-yearly financial statements, the significant judgements made by management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the Consolidated Financial Statements as at and for the year ended 30 September 2009, except as noted in Note 2.

These condensed consolidated financial statements have been prepared on a going concern basis as the Directors consider this the most appropriate basis. A summary of the Directors consideration in this regard can be found in the Going Concern section in Note 3.

The financial information included in the half-yearly financial statements are unaudited and does not constitute statutory accounts as defined in the Companies (Isle of Man) Acts 1931-2004.

The consolidated financial statements of the Group as at and for the year ended 30 September 2009 are available upon request from the Company’s Registered Office at Top Floor, 14 Athol Street, Douglas, Isle of Man IM1 1JA or at www.wichford.com.

Statement of Compliance

These condensed consolidated half-yearly financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by EU. Both interim figures for the six months ended 31 March 2010 and the comparative amounts for the six months ended 31 March 2009 are unaudited but have been reviewed by the Auditors. The summary financial statements for the year ended 30 September 2009, as presented in the interim financial statements, represent an abbreviated version of the Group’s full accounts for that year, on which independent auditors issued an unqualified audit report. The financial information presented herein does not amount to statutory financial statements.

The condensed consolidated interim financial statements were approved by the Board of Directors on 14 May 2010.

2. Significant accounting policies

Except as described below, the accounting policies applied by the Group in these condensed interim financial statements are the same as those applied by the Group in its audited financial statements as at and for the year ended 30 September 2009.

The following new standards and amendments to standards are mandatory for the Group for the first time for the financial year beginning 1 October 2009.

(i) Determination and presentation of operating segments

As of 1 October 2009 the Group determines and presents operating segments based on the information that internally is provided to the Board of Directors. This change in accounting policy is due to the adoption of IFRS 8 Operating Segments. Previously operating segments were determined and presented in accordance with IAS 14 Segment Reporting. The new accounting policy in respect of segment operating disclosures is presented as follows:

Comparative segment information has been re-presented in conformity with the transitional requirements of IFRS 8. Since the change in accounting policy only impacts presentation and disclosure aspects, there is no impact on earnings per share.

An operating segment is a component of the Group that engages in business activities from which it may earn

revenues and incur expenses, including revenues and expenses that relate to the transactions with any of the Group’s other components. An operating segment’s operating results are reviewed regularly by the Chief Operating Decision Maker (defined to be the Board of Directors) to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.

(ii) Presentation of financial statements

The Group applies revised IAS 1 Presentation of Financial Statements (2007), which became effective for the years beginning on or after 1 January 2009. As a result the Group presents a new primary statement called the consolidated statement of changes in equity all owner changes in equity whereas all non owner changes in equity are presented in the new consolidated statement of comprehensive income. This presentation has been applied in the condensed interim financial statements as of and for the six months period ended on 31 March 2010.

Comparative information has been re-presented so that it is in conformity with the revised standard. Since the change in accounting policy only impacts presentation aspects, there is no impact on earnings per share.

3. Significant accounting judgments, estimates and assumptions

Investment property valuation

The Group uses the valuation performed by its independent valuers in determining the fair value of its investment properties. The valuation is based upon assumptions including estimated rental values, future rental income, anticipated maintenance costs, future development costs and appropriate discount rates. The valuers also make reference to market evidence of transaction prices for similar properties.

Financial instruments

The Group uses the valuation provided by its bankers or third party firms specialising in such derivative financial instruments as the fair value of its cash flow hedges. The valuation is based upon assumptions including market prices and estimated cash flows. The Group tests the effectiveness of these instruments half-yearly and the estimated ineffective portion is passed through profit and loss rather than taken to reserves.

Tax risk

The Group is exposed to the risk of changes to tax legislation in the various countries in which the Group operates. It is also exposed to different interpretations of tax regulations between the tax authorities and the Group. This can lead to discussions with the relevant tax authorities going back some time and may result in tax being paid that was in excess of the Group’s estimate.

To the extent possible the Group will endeavour to reach a long-term agreement on the parameters used to calculate the tax charge with the tax authorities in order to minimise this exposure.

Going concern

These financial statements have been prepared on a going concern basis as the Directors consider this the most appropriate basis.

The principal issues the Directors considered in their enquiries concerned the maturity of the VBG1 facility in January 2010 and the required increase in the weighted average unexpired lease term (“WAULT”) for each of the Delta and Gamma facilities so that the extension of these facilities will be granted to October 2012 from October 2010.

With regard to the VBG1 facility the Directors have agreed heads of terms for an extension of this facility, until 15 January 2012, subsequent to 31 March 2010 and are confident that all terms and conditions will be adhered to.

There has been signficant progress in purchasing suitable properties and agreeing terms on others that will increase the WAULT of each of the Delta and Gamma facilities. The Company is working with its advisers and the facility servicer to bring these additional acquisitions to completion as soon as possible. The Company is confident that these facilities will be extended to October 2012 and thus regard them as long-term liabilities. The WAULT will be tested by the loan servicer prior to 12 October 2010 but had not been so tested by 31 March 2010.

4. Operating segments

The business activity of the Group is property investment in the UK and Continental Europe which the Board considers to be the only business segment as presented previously in the Annual Report. However the Board manages the Group by looking at the Continental European operations separate from the rest of the Group and so there are two reportable segments.

The following summary describes the operations in each of the Group’s reportable segments:

UK – Includes all UK properties together with all associated legal entities.

Continental Europe – includes all non-UK properties together with all associated legal entities.

Six months ended 31 March 2010	UK £m	Continental European £m	Total £m
External revenue	15.9	5.9	21.8
Inter-segment revenue	-	-	-
Reportable segment profit/(loss) before income tax	10.1	(1.8)	8.3
Reportable segment assets	351.6	201.3	552.9

Acquisition of investment properties	26.7	-	26.7
Profit/(loss) on disposals of investment properties	-	-	-

Six months ended 31 March 2009	UK £m	Continental European £m	Total £m
External revenue	16.2	6.2	22.4
Inter-segment revenue	-	-	-
Reportable segment loss before income tax	(59.5)	(27.2)	(86.7)
Reportable segment assets	427.4	205.3	632.7

Acquisition of investment properties	-	1.8	1.8
Profit/(loss) on disposals of investment properties	-	-	-

Year ended 30 September 2009	UK £m	Continental European £m	Total £m
External revenue	32.4	12.4	44.8
Inter-segment revenue	-	-	-
Reportable segment loss before income tax	(56.8)	(37.5)	(94.3)
Reportable segment assets	417.9	201.3	619.2

Acquisition of investment properties	-	1.8	1.8
(Loss) on disposals of investment properties	(0.5)	-	(0.5)

Reconciliation of reportable segment profit/(loss)	Six months ended 31 March 2010 £m	Six months ended 31 March 2009 £m	Year ended 30 September 2009 £m
Total profit/(loss) for reportable segments	8.3	(86.7)	(94.3)
Other profit/(loss)	-	-	-
	8.3	(86.7)	(94.3)
Elimination of inter-segment profits	-	-	-
Unallocated amounts	10.0	11.0	20.8

Consolidated profit/(loss) before income tax	18.3	(75.7)	(73.5)

Reportable segment assets and profit/(loss) for reportable segments are presented based on internal funding allocations. The differences to the condensed consolidated statement of comprehensive income and the condensed consolidated statement of financial position are due to corporate activities.

5. Revenue

	Six months ended 31 March 2010 £m	Six months ended 31 March 2009 £m	Year ended 30 September 2009 £m
Rental income	21.9	22.4	44.8
	21.9	22.4	44.8
Finance income (note 7)	0.1	0.2	0.3
	22.0	22.6	45.1

6. Administrative expenses

A summary of the items included in administrative expenses is shown below.

	Six months ended 31 March 2010 £m	Six months ended 31 March 2009 £m	Year ended 30 September 2009 £m
TRADING OPERATIONS
Administrative expenses	3.2	3.1	6.7

OTHER ITEMS
Windermere swaps and associated advice	-	0.4	0.6
Restructuring costs of German investments	-	0.6	1.0
Expenses of substitutions	0.3	-	-
Total Administrative Expenses in Other Items	0.3	1.0	1.6
TOTAL ADMINISTRATIVE EXPENSES	3.5	4.1	8.3

7. Finance income and costs

	Six months ended 31 March 2010 £m	Six months ended 31 March 2009 £m	Year ended 30 September 2009 £m
Finance INCOME
Interest receivable	0.1	0.2	0.3
Total finance income	0.1	0.2	0.3
Finance costs
Interest expense	14.3	14.2	28.8
Finance lease interest	0.1	0.1	0.2
Ineffectiveness on Cash Flow Hedges	0.2	-	0.2
Fair value movement on trading derivatives	(0.2)	-	(0.1)
Total finance costs	14.4	14.3	29.1

8. Income tax expense

(a) Tax on profit from ordinary activities

	Six months ended 31 March 2010 £m	Six months ended 31 March 2009 £m	Year ended 30 September 2009 £m
Profit/(loss) before tax	18.3	(75.7)	(73.5)
Current income tax
Adjustments in respect of previous years	-	-	0.8
Income tax in respect of current period/year	0.1	-	0.3
Total current income tax	0.1	-	1.1
Deferred tax
Origination and reversal of temporary differences	0.2	0.5	0.8
Income tax expense reported in the statement of comprehensive income	0.3	0.5	1.9

The Company has made a provision for tax on profits of its UK properties owned mainly through non UK resident companies of £0.1million for the period to 31 March 2010. This provision results from the recognition that these periods are still subject to agreement with HMRC.

(b) Deferred tax

Deferred tax included in the Condensed Statement of Financial Position is as follows:

	31 March 2010 £m	31 March 2009 £m	30 September 2009 £m
Deferred tax liability
Temporary differences on investment property	1.6	1.2	1.5
Deferred tax liability	1.6	1.2	1.5

The deferred tax included in the Condensed Consolidated Statement of Comprehensive Income is as follows:

	Six months ended 31 March 2010 £m	Six months ended 31 March 2009 £m	Year ended 30 September 2009 £m
Temporary differences on investment property	0.2	0.5	0.8
Deferred income tax expense	0.2	0.5	0.8

The deferred tax provision reflects the likely tax charge in future periods based on the current expectation of how long each property will be owned. The calculation of this provision is based on separate calculations for recovering the initial investment through its use and on sale.

The Company does not recognise any deferred tax assets where the probability of their crystallisation is regarded as low.

As the Group’s properties are principally in the UK and owned by companies registered in the Isle of Man, the Company regards the UK’s income tax rate of 20% (March 2009: 20%; September 2009: 20%), as payable under the UK’s Non Resident Landlord Scheme, to be most relevant tax rate for the reconciliation of the theoretical tax charge on accounting profits to the tax charge for the year shown in the Condensed Consolidated Statement of Comprehensive Income.

This reconciliation is shown below.

	Six months ended 31 March 2010 £m	Six months ended 31 March 2009 £m	Year ended 30 September 2009 £m
Profit/(loss) before tax	18.3	(75.7)	(73.5)

Profit/(loss) before tax multiplied by standard rate of UK income tax (20%) (March 2009: 20%; September 2009: 20%)	3.7	(15.1)	(14.7)

Effect of:
- income not subject to UK income tax	(4.2)	(0.9)	(5.1)
- exempt part of property revaluation of investment properties	(2.8)	16.0	16.2
-set off against losses brought forward	-	-	-
- losses carried forward	3.4	-	3.9
- deferred tax provision	0.2	0.5	0.8
- adjustment in respect of prior years	-	-	0.8
Total tax charge for the period/year	0.3	0.5	1.9

9. Earnings per share

Basic earnings per share for the year ended 31 March 2010 is based on the profit attributable to equity shareholders of £18.0million (March 2009: loss of £76.2 million: September 2009: loss of £75.4 million) and a weighted average number of Ordinary Shares outstanding during the period ended 31 March 2010 of 1,062,095,584 (March 2009: 1,062,095,584; September 2009: 1,062,095,584). The number of shares for the prior periods have been amended to the current period as a result of the rights issue made in September 2009 as detailed in Notes 17(e) and 18.

Diluted earnings per share are the same as basic earnings per share. The potential number of shares that may be issued under the performance fee arrangements with the Investment Adviser was nil at 31 March 2010 as the value of this incentive scheme was nil.

The table below shows the figures on a comparable basis and shows the figures for 31 March 2009 and 30 September 2009 on the same basis as that used for the figures for 31 March 2010. Therefore the weighted number of shares for all periods is the same.

	Six months ended 31 March 2010 £m	Six months ended 31 March 2009 £m	Year ended 30 September 2009 £m
Profit from Trading Operations	4.3	4.7	9.1
Profit/(loss) from Other Items	13.7	(80.9)	(84.5)
Profit/(loss) attributable to equity shareholders	18.0	(76.2)	(75.4)
Weighted average number of Ordinary Shares (000s)	1,062,096	1,062,096	1,062,096
Earnings per share – pence
Profit from Trading Operations per share	0.40	0.44	0.86
Profit/(loss) from Other Items per share	1.29	(7.61)	(7.96)
Basic profit/(loss) per share	1.69	(7.17)	(7.10)

The table below shows the figures reported at 31 March 2009 and 30 September 2009 as the comparative to the current year figures.

	Six months ended 31 March 2010 £m	Six months ended 31 March 2009 £m	Year ended 30 September 2009 £m
Profit from Trading Operations	4.3	4.7	9.1
Profit/(loss) from Other Items	13.7	(80.9)	(84.5)
Profit/(loss) attributable to equity shareholders	18.0	(76.2)	(75.4)
Weighted average number of Ordinary Shares (000s)	1,062,096	132,762	147,792
Earnings per share – pence
Profit from Trading Operations per share	0.40	3.54	6.15
Profit/(loss) from Other Items per share	1.29	(60.91)	(57.14)
Basic profit/(loss) per share	1.69	(57.37)	(50.99)

For EPRA basis total earnings per share figure refer to note 22.

10. Net assets per share

Net assets per share is calculated by dividing the net assets at 31 March 2010 attributable to the equity holders of the parent of £57.0 million (March 2009: £0.2 million: September 2009: £47.4 million) by the number of Ordinary Shares as at 31 March 2010 of 1,062,095,584 (March 2009: 1,062,095,584; September 2009: 1,062,095,584). The number of shares for the comparative period has been amended to the current period as a result of the rights issue made in September 2009 as detailed in Notes 17(e) and 18.

The table below shows the figures on a comparable basis and shows the figures for 31 March 2009 and 30 September 2009 on the same basis as that used for the figures for 31 March 2010. Therefore the number of Ordinary Shares used in both years is the same.

	31 March 2010	31 March 2009	30 September 2009
Net assets attributable to equity holders of the parent (£m)	57.0	0.2	47.4
Number of Ordinary Shares (000s)	1,062,096	1,062,096	1,062,096
Net assets per share (pence)	5.37	0.02	4.49

The table below shows the figures reported at 31 March 2009 and 30 September 2009 as the comparative to the current year figures.

	31 March 2010	31 March 2009	30 September 2009
Net assets attributable to equity holders of the parent (£m)	57.0	0.2	47.4
Number of Ordinary Shares (000s)	1,062,096	132,762	1,062,096
Net assets per share (pence)	5.37	0.15	4.49

For EPRA basis net asset value figures refer to note 22.

11. Investment properties

		Freehold
	Freehold/	and long	Long
	Feuhold	leasehold	leasehold	Total
Six months ended 31 March 2010	£m	£m	£m	£m
At 30 September 2009	414.1	18.6	83.4	516.1
Foreign exchange differences	(5.6)	-	-	(5.6)
Purchases during the period	26.7	-	-	26.7
Disposals during the period	-	-	-	-
Valuation gains	11.0	0.3	2.9	14.2
At 31 March 2010	446.2	18.9	86.3	551.4

		Freehold
	Freehold/	and long	Long
	Feuhold	leasehold	leasehold	Total
Six months ended 31 March 2009	£m	£m	£m	£m
At 30 September 2008	468.5	22.4	96.1	587.0
Foreign exchange differences	25.7	-	-	25.7
Purchases during the period	1.8	-	-	1.8
Disposals during the period	-	-	-	-
Valuation losses	(57.5)	(3.4)	(12.2)	(73.1)
At 31 March 2009	438.5	19.0	83.9	541.4

		Freehold
	Freehold/	and long	Long
	Feuhold	leasehold	leasehold	Total
Year ended 30 September 2009	£m	£m	£m	£m
At 30 September 2008	468.5	22.4	96.1	587.0
Foreign exchange differences	23.3	-	-	23.3
Purchases during the year	1.8	-	-	1.8
Disposals during the year	(13.4)	-	(1.9)	(15.3)
Valuation losses	(66.1)	(3.8)	(10.8)	(80.7)
At 30 September 2009	414.1	18.6	83.4	516.1

At 31 March 2010 the Group owned 79 properties throughout the UK, France, Germany and the Netherlands.

While the Group did not purchased any additional properties during the year to 30 September 2009 it made provision for the future potential purchase of the remaining shares in connection with its investments in Germany. This amounted to £1.8 million.

All the Group’s investment properties were externally valued as at 31 March 2010, 31 March 2009 and 30 September 2009 on the basis of open market value by professionally qualified valuers in accordance with the Appraisal and Valuation Standards of the Royal Institution of Chartered Surveyors (“RICS”). The Group’s valuer is BNP Paribas Real Estate Advisory and Property Management UK Limited in the UK and DTZ Eurexi for Continental Europe.

The value of each of the properties has been assessed in accordance with the relevant parts of the Red Book. In particular, the Market Value has been assessed in accordance with PS 3.2. Under these provisions, the term “Market Value” means “the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arms-length transaction after proper marketing wherein the parties have each acted knowledgeably, prudently and without compulsion”.

In undertaking the valuations on the basis of Market Value, the valuers have applied the interpretative commentary which has been settled by the International Valuation Standards Committee and which is included in PS 3.2. The RICS considers that the application of the Market Value definition provides the same result as Open Market Value, a basis of value supported by previous editions of the Red Book.

The valuation does not include any adjustments to reflect any liability to taxation that may arise on disposal, nor for any costs associated with disposals incurred by the owner. No allowance has been made to reflect any liability to repay any government or other grants, or taxation allowance that may arise on disposals. Deductions have been made to reflect purchasers’ acquisition costs. These have been applied according to value on a sliding scale, representative of the typical costs that would be incurred in the market.

A reconciliation of investment property valuations to the Condensed Consolidated Statement of Financial Position carrying value of property is shown below:

	31 March 2010 £m	31 March 2009 £m	30 September 2009 £m
Investment property at Market Value as determined by external valuers	562.5	552.1	526.9
Adjustments for items presented separately on the Condensed Consolidated Statement of Financial Position:
- Add minimum payment under head leases separately included as a payable	2.0	2.0	2.0
- Less accrued incentives separately included as a receivable	(11.5)	(11.5)	(11.4)
- Less accrued rental income separately included as a receivable	(1.8)	(1.4)	(1.6)
- Add accrued rental income separately included as a payable	0.2	0.2	0.2
Condensed Consolidated Statement of Financial Position carrying value of investment property	551.4	541.4	516.1

12. Trade and other receivables

	31 March 2010 £m	31 March 2009 £m	30 September 2009 £m
Trade receivables	3.0	1.5	0.9
VAT recoverable	0.3	0.2	0.3
Accrued rental incentives	11.5	11.5	11.4
Accrued rental income	1.8	1.4	1.6
Other prepayments	7.3	4.5	4.0
Service charge	0.8	0.6	0.8
	24.7	19.7	19.0

Trade receivables are non-interest bearing and generally have a 14-day term. Due to their short maturities, the fair value of trade and other receivables approximates to their book value.

As at 31 March 2010 nil trade receivables were impaired (March 2009: nil: September 2009: nil). As at 31 March 2010, there was £0.5 million of trade receivables were overdue but not impaired (March 2009: nil; September 2009: nil).

Within the other prepayment total of £7.3 million for 31 March 2010 there is £3.7 million for uncompleted purchases of investment properties.

13. Cash at bank

	31 March 2010 £m	31 March 2009 £m	30 September 2009 £m
Cash and cash equivalents	49.4	30.1	80.6
Restricted cash	11.1	2.5	19.4
Cash at bank	60.5	32.6	100.0

Of the £11.1 million of restricted cash at 31 March 2010 £5.5 million was released to cash and cash equivalents on 1 April 2010 on the successful substitution of a property into the Zeta facility. This leaves £4.6 million in restricted cash which will be released upon the substitution of properties into the UK facilities as part of the programme to increase the WAULT.

Cash at bank earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods dependent on the immediate cash requirements of the Group. The book value of cash and cash equivalents approximates their fair value.

14. Trade and other payables

	31 March 2010 £m	31 March 2009 £m	2009 £m
Rents received in advance	5.5	8.1	7.4
VAT payable	1.4	1.1	1.9
Other payables and accruals	14.7	14.3	16.3
Accrued rental income	0.2	0.2	0.2
Service charge	0.8	0.6	0.8
	22.6	24.3	26.6

Trade and other payables are non-interest bearing and it is the Group’s policy to pay within the stated terms which typically vary from 30-45 days. Due to their short maturities, the fair value of trade payables approximates to their book value.

15. Borrowings

	31 March 2010 £m	31 March 2009 £m	30 September 2009 £m
current
Bank loans	61.3	65.0	63.6
Non-current
Bank loans	460.2	467.1	465.3
Less: deferred finance costs	(2.0)	(4.1)	(3.8)
Finance leases	2.0	2.0	2.0
	460.2	465.0	463.5

a) Bank Loans

At 31 March 2010, the bank borrowings of £521.5 million (March 2009: £532.1 million; September 2009: £528.9 million) are secured by fixed and floating charges over the assets and income streams of the Group. It comprised of seven separate borrowing facilities each secured on a number of discrete assets with no common assets.

These facilities are summarised as below:

Facility	Lender	31 March 2010 £m	31 March 2009 £m	30 September 2009 £m
Delta	Windermere XI CMBS Ltd	114.6	114.6	114.6
Gamma	Windermere VIII CMBS Ltd	199.7	199.7	199.7
Hague	SNS Property Finance	19.6	20.4	20.2
Halle	Windermere XIV CMBS Ltd	33.1	34.5	34.0
VBG1	Talisman 3	60.3	65.0	63.6
VBG2	Talisman 4	48.2	51.9	50.8
Zeta	Lloyds TSB	46.0	46.0	46.0
		521.5	532.1	528.9

The Gamma and Delta facilities are non-amortising and have repayment dates in October 2010 with extended repayment dates in October 2012 subject to the fulfilment of a test over the WAULT of the secured assets in October 2010; both have been put into securitisation conduits by the lender. The Gamma facility was originally entered into by the Group in March 2005 and in early 2006 the lender approached the Company to split the facility into two and so the Delta facility was created in July 2006.

The Hague facility, which was entered into by the Group in July 2008, was non-reducing and has a final repayment date in July 2014. Subsequent to the 30 September 2009 the Group has agreed that for the period from November 2009 to October 2010 this facility will become a reducing loan whereby 0.50% of the initial outstanding balance will be repaid over that period in equal monthly amounts. This was imposed together with a liquidity surcharge and an increased margin. These changes will be reviewed at October 2010. As a result of the imposition of the liquidity surcharge and increased margin a waiver of this test has been granted until October 2010.

This facility contains a cross-default provision that enables SNS Property Finance to demand repayment of the facility if there is an event of default under any other Group facility. SNS Property Finance’s recourse is limited to the Hague property and its rental income. Notwithstanding the terms of this cross default provision, in the event that such a default occurred under any of the other Group facilities, the Company has been advised that it would be difficult for SNS Property Finance to demand repayment of the Hague facility pursuant to this cross default provision in the absence of either a payment default under the Hague facility or Den Haag’s actual or threatened insolvency.

The Halle facility is non-reducing and has a repayment date in April 2014. The facility was already in place when the Group acquired the property on which it is secured in September 2007 and it was re-stated in October 2007 to increase the amount borrowed from €31.9 million to €37.1 million. This facility was originally entered into in February 2007.

The VBG facilities are reducing dependent upon expected rent rises with final repayment dates in January 2010 for VBG1 and April 2011 for VBG2. However, on acquisition, part of the purchase price was paid into escrow accounts such that all expected reductions of these bank loans would be funded by the escrow accounts. These facilities have been put into securitisation conduits by the lender. The Group consolidated these facilities from the acquisition of the properties on which they are secured, in June 2007. The original date that these facilities were entered into by entities that are now part of the Group was December 2005 for VBG1 and April 2006 for VBG2. The VBG1 facility matured on 15 January 2010 but has not been repaid. The Company is in ongoing negotiations to restructure this facility. Heads of terms have been agreed with the loan servicer after 31 March 2010.

The VBG facilities have on-going Loan to Value covenants which were not breached in the six months to 31 March 2010 on the valuations addressed to the loan servicer. The Company’s valuations reflect Loan to Value ratios in excess of the covenants.

The Zeta facility, which was entered into be the Group in May 2008, is non-reducing and has a final repayment date in May 2011.

The Delta, Gamma and Halle facilities provide for the payment of interest at a fixed rate. However, the respective borrowing subsidiaries have given indemnities to the lenders in respect of interest rate swaps entered into to create those fixed rates. As such these facilities have been treated as floating rate facilities with interest rate swaps. As such all of the facilities are regarded as subject to the interest rate swaps of either ones with a group entity as a counter-party or where the facility agreement requires such instruments to be in place and have been taken out by the lender as detailed in note 16. The derivatives for the Delta, Gamma and Halle facilities do not have a Group company as counter-party but the Company recognises that it benefits from them and so has decided to recognise them separately. On these facilities the Group is charged a fixed interest rate equal to the strike rate for these derivatives.

b) Finance Leases

Obligations under finance leases at the reporting dates are analysed as follows:

	31 March 2010 £m	31 March 2009 £m	30 September 2009 £m
Gross finance lease liabilities repayable:
In one year or less	0.1	0.1	0.1
In more than one year, but not more than five years	0.5	0.5	0.5
In more than five years	9.6	9.8	9.6
	10.2	10.4	10.2
Less: finance charges allocated to future periods	(8.2)	(8.4)	(8.2)
Present value of minimum lease payments	2.0	2.0	2.0

	31 March 2010 £m	31 March 2009 £m	30 September 2009 £m
Present value of finance lease liabilities repayable:
In one year or less	-	-	–
In more than one year, but not more than five years	0.1	0.1	0.1
In more than five years	1.9	1.9	1.9
Present value of minimum lease payments	2.0	2.0	2.0

The present values of minimum lease payments have been calculated by using the market cost of external borrowings available to the Group at the inception of the lease.

16. Derivative financial instruments

The Group enters into interest rate swaps and forward currency contracts. The purpose is to manage the interest rate and currency risks arising from the Group’s operations and its sources of finance.

The interest rate swaps employed by the Group to convert the Group’s borrowings to fixed interest ones fall into two categories, as explained in a) i) and ii) below.

It is the Group’s policy that no trading in derivatives shall be undertaken.

a) Interest rate swap agreements

In accordance with the terms of the borrowing arrangements, the Group has entered into interest swap agreements.

The interest rate swaps are used to manage the interest rate profile of financial liabilities. The Group has employed interest rate swaps to eliminate future exposure to interest rate fluctuations as well as being charged fixed rate interest on those facilities described as having lender level interest rate swaps as described below.

The notional value of both borrower and lender level interest rate swaps at 31 March 2010 was £461.2million (March 2009: £510.6 million; September 2009: £529.4 million) and the blended fixed rate achieved by these interest rate swaps, excluding credit spread, was 4.44% (March 2009: 4.49%; September 2009: 4.25%).

The principal reason for the reduction in the notional value from 30 September 2009 has been the maturity of the interest rate swap on the VBG1 facility which matured on 15 January 2010. This facility is now being charged a variable rate of three months Euribor, which is significantly less that the interest rate swap that has matured.

These interest rate swaps can be segregated into two types: Lender level and Borrower level. These are detailed below.

i) Lender level interest rate swap agreements

Lender level interest rate swaps agreements are those from which the Group benefits but which do not have any Group entity as a counter-party, instead the lender is the counter-party with a commercial banking entity providing the interest rate swap. These arise where the Group’s loan agreements call for interest rate swaps to be taken out to allow a fixed interest charge to be made to the borrowing subsidiaries with the borrowers giving indemnities to the lenders in respect to these interest rate swaps.

The interest rate swaps for the Delta, Gamma and Halle facilities, from which the Group benefits by both eliminating any interest rate fluctuations in the market over the course of the facilities and also from any benefit (or cost) of closing these instruments out, are lender level interest rate swaps. They are between the CMBS vehicles (the lenders) and commercial banking counter-parties.

The Company recognises these embedded derivatives separately as, while the Group is charged interest at a fixed rate on these facilities, the terms of the facilities mean the Group receives their benefit or pays their burdens.

The original interest rate swaps for these facilities were entered into directly by the Group and novated to or were taken out with a Lehman Brothers company. From the novation to the Lehmans Brothers company a fixed interest rate became payable, equivalent to that under the swaps, but the facility agreements also meant that any gains or losses on closing these instruments were for the Group to bear. Since, by this means the Group has the economic interest in the original swaps, it has recognised them in its accounts.

Following the Lehman Brothers company, that was the counter-party to the CMBS vehicles, going into administration in 2008 its ability to fulfil its obligations under these interest rate swaps was uncertain. The Group continued to receive the benefit of these interest rate swaps as the agent for the securitisation vehicles continued to charge interest according to the profiles of these interest rate swaps while the trustees to the securitisation vehicles considered how best to replace them.

During 2009 the trustees arranged for the original interest rate swaps to be cancelled and new interest rate swaps to be taken out as replacement for the Delta, Gamma and Halle facilities. This was achieved at no additional cost to the Group and the Group now have a constant fixed interest rate profile to the extended maturity date of these facilities in October 2012 for the Delta and Gamma facilities and April 2014 for the Halle facility. The cash-flow over the life of these new interest rate swaps is not materially different to the cash-flow of the original swaps.

As a result of the use of interest rate swaps, the fixed rate profile of the Group’s lender level interest rate swaps was:

Facility	Effective Date	Maturity Date	Swap Rate	31 March 2010 £m	31 March 2009 £m	30 September 2009 £m

Delta	21/07/06	15/10/2012	4.95%	114.6	114.6	114.6
Gamma	23/05/05	20/10/2012	4.77%	199.7	199.7	199.7
Halle	28/09/07	22/04/2014	4.19%	33.1	34.5	34.0

Total				347.4	348.8	348.3

The fair values of the interest rate swaps for these three facilities were:

Facility	31 March 2010 £m	31 March 2009 £m	30 September 2009 £m

Delta	(9.5)	(10.3)	(8.4)
Gamma	(15.6)	(16.6)	(13.7)
Halle	(2.9)	(2.9)	(2.6)

Total	(28.0)	(29.8)	(24.7)

ii) Borrower level interest rate swap agreements

Borrower level interest rate swap agreements are those that have a Group company as the counter-party to the commercial bank providing the interest rate swap.

The Group has taken out such interest rate swaps in respect of its Hague, VBG1, VBG2 and Zeta facilities. The interest rate swap in respect of the VBG1 facility matured on 15 January 2010 and has not been replaced due to the negotiation of the future of this facility. The variable rate being charged since 15 January 2010 has been considerably lower than the interest rate swap.

As a result of the use of interest rate swaps, the fixed rate profile of the Group’s borrower level interest rate swaps was:

Facility	Effective Date	Maturity Date	Swap Rate	31 March 2010 £m	31 March 2009 £m	30 September 2009 £m

Hague	01/08/2008	01/08/2014	4.88%	19.6	18.7	20.2
VBG1	29/06/2007	15/01/2010	3.15%	-	43.8	42.9
VBG1	29/06/2007	15/01/2010	3.22%	-	21.3	20.9
VBG2	29/06/2007	15/04/2011	3.93%	48.2	52.0	51.1
Zeta	08/05/2008	09/05/2011	5.30%	17.0	17.0	17.0
Zeta	21/07/2008	09/05/2011	5.79%	9.0	9.0	9.0
Zeta	24/07/2009	09/05/2011	2.15%	20.0	-	20.0

Total				113.8	161.8	181.1

The fair values of these interest rate swaps were:

Facility	31 March 2010 £m	31 March 2009 £m	30 September 2009 £m
Hague	(2.5)	(2.5)	(2.4)
VBG1	-	(1.0)	(0.8)
VBG2	(1.6)	(2.5)	(2.4)
Zeta	(1.8)	(2.2)	(2.2)
	(5.9)	(8.2)	(7.8)

iii) Summary of fair value of interest rate swaps

Below is a summary of the interest rate swaps detailed above.

	31 March 2010 £m	31 March 2009 £m	30 September 2009 £m

Fair value of lender level interest rate swaps	(28.0)	(29.8)	(24.7)
Fair value of borrower level interest rate swaps	(5.9)	(8.2)	(7.8)
Fair value of the Group’s derivative arrangements	(33.9)	(38.0)	(32.5)

Hedge accounting

The swap agreements are designated as cash flow hedges against interest rate fluctuations. The loss of £1.0 million on the fair value of the interest rate swaps (March 2009: loss of £39.3 million; September 2009: loss of £34.3 million) in the six months to 31 March 2010 is reported in the reserves as the Group has applied hedge accounting to their swap agreements. The cash flow hedges have been assessed, with one exception, as highly effective.

For the agreement that has been deemed ineffective, the fair value of this derivative has been recognised through the profit and loss account from that date. The fair value movement of this swap in the income statement is a gain of £0.2 million in the six months to 31 March 2010 (March 2009: nil; September 2009: gain of £0.1 million). This fair value of the interest rate swap is reported through profit or loss within finance costs which is detailed in Note 7.

b) Forward Exchange agreements

The Group has entered into short-term foreign exchange sale and purchase contracts for the purpose of mitigating the Group’s exposure to foreign exchange rate movements on its equity investment in foreign property acquisitions. The Group chooses not to designate these contracts as hedging instruments and therefore they are carried at fair value through the profit and loss within the finance costs which is detailed in Note 7.

17. Financial risk management objectives and policies

The Group’s principal financial instruments, other than derivatives (note 16), comprise bank loans, finance lease liabilities and cash. The main purpose of these financial instruments is to finance the Group’s operations. The Group has various other financial assets and liabilities such as trade receivables and trade payables that arise directly from its operations.

The main risks arising from the Group’s financial instruments are interest rate risk, exchange rate risk, credit risk and liquidity risk. The Board of Directors reviews and agrees policies for managing each of these risks that are summarised below.

The financial risks and the ways in which the Group manages them are listed as follows:

(a) Interest rate risk

The Group finances its operations through equity, retained profits and bank borrowings. The Delta, Gamma and Halle facilities are charged fixed interest rates created by the lender level interest rate swap arrangements detailed in Note 16 above with all other of the Group’s bank borrowings being charged at variable interest rates.

The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s long-term debt obligations with floating interest rates. The Group uses interest rate derivatives to mitigate its exposure to interest rate fluctuations. At the period end, as a result of the use of interest rate swaps, the majority of the Group’s borrowings were at fixed interest rates.

The interest rate swap for the VBG1 facility matured on 15 January 2010 and has not been replaced pending the conclusion of negotiations to restructure this facility. The Group has agreed heads of terms for an extension of this facility and is working towards a successful conclusion. The result was that the Group was exposed to fluctuations in the variable rate on this facility which were at an historically low level.

	31 March 2010 £m	31 March 2009 £m	30 September 2009 £m
Fixed rate bank borrowings weighted average interest rate	4.85%	5.36%	5.34%
Weighted average period for which rate is fixed in years	2.7 years	3.5 years	3.0 years

The Group’s profit before tax therefore has little exposure to interest rate fluctuations until the repayment dates of the loans for which the interest rate swaps have been arranged. If the Delta and Gamma loans are not extended beyond October 2010 to October 2012 then the Group has an interest rate exposure on the interest rate swaps already acquired for these facilities for that two-year period. However the Company expects to achieve this extension.

(b) Exchange rate risk

As the Group owns properties in Continental Europe, there is the additional risk of movements in €/£ exchange rates. The Group minimises the exposure to foreign currency exchange rate movements by matching, as much as possible, the investment properties and associated loans in the same currency.

The following table demonstrates the sensitivity to a possible change in the €/£ exchange rate, with all variables held constant, of the Group’s profit before tax (due to changes in value of revenue and interest streams) and the Group’s equity (due to changes in the value of investment properties and associated loans).

		Effect on
	Increase/decrease	profit	Effect on
	in €/£ exchange rate	before tax	equity
		£m	£m
31 March 2010	+5%	(0.7)	(4.7)
	-5%	0.7	4.7
31 March 2009	+5%	(1.3)	(2.6)
	-5%	1.3	2.6
30 September 2009	+5%	(3.9)	(2.3)
	-5%	3.9	2.3

The €/£ exchange rate as at 31 March 2010 was 1.12040 (March 2009: 1.07630; September 2009: 1.09120). The average rate for the period was 1.11613 (March 2009: 1.15316; September 2009: 1.14662).

The Group trades only with recognised, creditworthy third parties. It is the Group’s policy that all tenants who wish to trade on credit terms are subject to credit verification procedures. In addition, the Group further manages the credit risks by employing specialist property managers to monitor its properties. The Group’s tenants are mainly government entities. The result is that the Group’s exposure to bad debt is not significant as the tenants are mainly government related. The maximum exposure is the carrying amount as disclosed in Notes 11 and 12.

With respect to credit risk arising from the other financial assets of the Group, which comprise cash and cash equivalents, the Group’s exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments.

(d) Liquidity risk

The Group monitors its risk to a shortage of funds through the use of both short-term and long-term cash flow forecasts. The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts and bank loans.

The tables below summarise the maturity profile of the Group’s borrowings at 31 March 2010 based on contractual undiscounted cash-flows.

		Finance
		lease
	Bank loans	liabilities
At 31 March 2010	£m	£m
In one year or less	61.3	0.1
In more than one year, but not more than two years	93.2	0.1
In more than two years, but not more than three years	314.3	0.1
In more than three years, but not more than four years	52.7	0.1
In more than four years, but not more than five years	-	0.1
In more than five years	-	9.7
	521.5	10.2

		Finance
		lease
	Bank loans	liabilities
At 31 March 2009	£m	£m
In one year or less	65.0	0.1
In more than one year, but not more than two years	51.9	0.1
In more than two years, but not more than three years	46.0	0.1
In more than three years, but not more than four years	314.3	0.1
In more than four years, but not more than five years	54.9	0.1
In more than five years	-	9.9
	532.1	10.4

		Finance
		lease
	Bank loans	liabilities
At 30 September 2009	£m	£m
In one year or less	63.6	0.1
In more than one year, but not more than two years	96.8	0.1
In more than two years, but not more than three years	-	0.1
In more than three years, but not more than four years	314.3	0.1
In more than four years, but not more than five years	54.2	0.1
In more than five years	-	9.7
	528.9	10.2

The above tables assume that the Delta and Gamma facilities run to their extended repayment dates in October 2012 rather than their repayment dates in October 2010. The above tables do not reflect the agreed heads of terms to extend the VBG1 facility.

(e) Capital Management

The Company’s Articles of Association set out the borrowing powers of the Company. This defines a maximum amount that could be borrowed to be five times the issued share capital and the capital and revenue reserves of the Company. This gives a maximum borrowing power at 31 March 2010 of £1,795.0 million (March 2009: £1,459.0 million; September 2009: £1,773.5 million). The Company expects to remain within this maximum for the foreseeable future.

In addition, the Group is principally managed by reference to its overall loan to value ratio and expects to maintain this ratio between 60% and a maximum of 85%.

As a mechanism for managing the exposure to foreign currency exchange rate movements, the Group expects to borrow additional funds in the functional currency relevant to the acquisition it funds.

In September 2009 the Company raised £52.0 million net of expenses by way of a rights issue. The principal reasons for this was to provide the liquidity to increase the Group’s options in relation to the maturity of the VBG1 facility and to extend the WAULT on the Delta and Gamma facilities in order to secure the medium term funding position of the Group.

18. Authorised and issued share capital

On 28 August 2009 Shareholders approved, and the Company implemented, a share re-organisation whereby each Ordinary Share of 10 pence was split into one Ordinary Share of 1 penny and one Deferred Share of 9 pence.

The Shareholders, at the same meeting, approved an increase in the Authorised Share Capital of the Company to £26,110,000 by the creation of additional Ordinary Shares.

These steps were taken to allow a rights issue to be made that was also approved at the General Meeting on 28 August 2009 and resulted in the issuance of 929,333,636 new Ordinary Shares on 25 September 2009. These new Ordinary Shares did not rank for the interim dividend paid on 28 September 2009 of 3 pence per share but do for all subsequent dividends.

	31 March 2010	31 March 2009	30 September 2009
AUTHORISED
Ordinary Shares of 10 pence each
– number	-	180,000,000	-
– £m	-	18.0	-

Ordinary Shares of 1 penny each
– number	3,805,142,468	-	1,416,142,468
– £m	38.0	-	14.2

Deferred Shares of 9 pence each
– number	132,761,948	-	132,761,948
– £m	12.0	-	12.0

ISSUED, CALLED UP AND FULLY PAID
Ordinary Shares of 10 pence each
– number	-	132,761,948	-
– £m	-	13.3	-

Ordinary Shares of 1 penny each
– number	1,062,095,584	-	1,062,095,584
– £m	10.6	-	10.6

Deferred Shares of 9 pence each
– number	132,761,948	-	132,761,948
– £m	12.0	-	12.0

Holders of the Ordinary Shares are entitled to receive dividends and other distributions and to attend and vote at any general meeting.

The Company made a rights issue of Ordinary Shares on 25 September 2009 whereby the shares issued at that time did not rank for any interim dividend related to the financial period ended 31 March 2009 but rank pari passu with the remaining Ordinary Shares for dividends for the financial periods beginning on or after 1 April 2009.

The holders of Deferred Shares are not entitled to receive dividends or other distributions nor to receive notice of or attend or vote at any general meeting of the Company. Further the holders of Deferred Shares are not entitled on a return of capital (whether in a winding-up or otherwise) to the repayment of the amount paid up on the Deferred Shares until after payment of the capital paid up on the new Ordinary Shares issued under the rights issue together with payment of £1.0 million on each of such new Ordinary Shares. The Deferred Shares are not capable of transfer at any time other than with the consent of the Directors of the Company.

At the Annual General Meeting in January 2010 the Shareholders voted to increase the Authorised Share Capital of the Company to £50.0 million by the creation of an additional 2,389,000,000 Ordinary Shares of 1 pence each. This is reflected in the table above.

The Shareholders also voted for the cancellation of the Deferred Shares, subject to the approval of the Court in the Isle of Man, while not reducing the Authorised Share Capital of the Company. Thus, this cancellation, would lead to the creation of an additional 1,194,857,532 Ordinary Shares of 1 pence each. As the Court’s approval was not given until after 31 March 2010, the cancellation of the Deferred Shares and the creation of these new Ordinary Shares are not reflected in the table above.

Number	31 March 2010	31 March 2009	30 September 2009
Ordinary Shares of 10 pence each
– ranking for dividends for the current period/year	-	132,761,948	-
– not ranking for interim dividend for the previous period/year	-	-	-
Ordinary Shares of 1 penny each
– ranking for dividends for the current period/year	1,062,095,584	-	132,761,948
– not ranking for interim dividend for the previous period/year	-	-	929,333,636
	1,062,095,584	132,761,948	1,062,095,584

£m	31 March 2010	31 March 2009	30 September 2009
Ordinary Shares of 10 pence each
– ranking for dividends for the current period/year	-	13.3	-
– not ranking for interim dividend for the current period/year	-	-	-
Ordinary Shares of 1 penny each
– ranking for dividends for the current period/year	10.6	-	1.3
– not ranking for interim dividend for the current period/year	-	-	9.3
	10.6	13.3	10.6

19. Equity

In March 2009 the Company received approval from the High Court in the Isle of Man to its request to transfer £50.0 million from Share Premium to distributable reserves.

In September 2009 the Company, prior to the Rights Issue, converted its Ordinary Shares of 10 pence per share into Ordinary Shares of 1 penny per share and Deferred Shares of 9 pence per share before issuing 929,333,636 new Ordinary Shares of 1 penny each. This resulted in an increase of equity of £52.0 million, net of expenses.

The Shareholders voted to cancel the Deferred Shares at nil consideration at the Annual General Meeting in January 2010. This was subject to approval by the Court in the Isle of Man. Such approval was granted on 15 April 2010 and registered with the Isle of Man Companies Registry on 19 April 2010.

20. Dividends

Ordinary dividends paid	31 March 2010 £m	31 March 2009 £m	30 September 2009 £m
Final dividend for 2008 – 3.15 pence per Ordinary Share of 10 pence	-	4.2	4.2
Interim dividend for 2009 – 3.00 pence per Ordinary Share of 10 pence	-	-	4.0
Final dividend for 2009 – 0.31 pence per Ordinary Share of 1 penny	3.3	-	-
	3.3	4.2	8.2

The final dividend for 2009, which was paid in the period, was approved by the Shareholders at the Annual General Meeting and was paid on 1 March 2010 to Shareholders on the register at the close of business on 5 February 2010.

The Directors have resolved to pay an interim dividend for the period being reported of 0.32 pence per share (amounting to £3.4 million). This interim dividend will be paid on 18 June 2010 to Shareholders on the register at the close of business on 28 May 2010.

21. Capital commitments

As at 31 March 2010, the Group had a commitment to complete on the purchase of a property in Uxbridge, Middlesex, on which contracts had been exchanged, and the land element completed, but the building and occupational lease had not been completed by the vendor (March 2009: nil; September 2009: nil). This commitment was for £3.7 million.

22. Performance measures

The European Public Real Estate Association (“EPRA”) issued Best Practices Policy Recommendations in November 2006 which gives guidelines for performance measures. These include earnings per share and net asset value definitions which are different from those under IFRS. The Company considers these measures as appropriate for comparisons over time.

These definitions are used in the tables below.

EARNINGS PER SHARE

The table below shows the figures on a comparable basis and shows the figures for 31 March 2009 and 30 September 2009 on the same basis as that used for the figures for 31 March 2010. Therefore, the weighted number of shares for all periods is the same.

	Six months ended 31 March 2010	Six months ended 31 March 2009	Year ended 30 September 2009

Profit/(loss) attributable to equity shareholders –statement of comprehensive income (£m)	18.0	(76.2)	(75.4)
Adjustments:
- (Surplus)/deficit on revaluation of investment properties (£m)	(14.2)	79.9	80.7
- Loss on sale of investment properties (£m)	-	-	0.5
- Fair value of derivatives (£m)	-	-	0.2
EPRA basis earnings (£m)	3.8	3.7	6.0

Weighted average number of Ordinary Shares (000’s)	1,062,096	1,062,096	1,062,096

EPRA basis Earnings Per Share (pence)	0.36	0.35	0.56

The table below shows the figures reported at 31March 2009 and 30 September 2009 as the comparative to the current year figures.

	Six months ended 31 March 2010	Six months ended 31 March 2009	Year ended 30 September 2009

Profit/(loss) attributable to equity shareholders –statement of comprehensive income (£m)	18.0	(76.2)	(75.4)
Adjustments:
- (Surplus)/deficit on revaluation of investment properties (£m)	(14.2)	79.9	80.7
- Loss on sale of investment properties (£m)	-	-	0.5
- Fair value of derivatives (£m)	-	-	0.2
EPRA basis earnings (£m)	3.8	3.7	6.0

Weighted average number of Ordinary Shares (000’s)	1,062,096	132,762	147,792

EPRA basis Earnings Per Share (pence)	0.36	2.79	4.06

NET ASSET VALUE

The table below shows the figures on a comparable basis and shows the figures for 31 March 2009 and 30 September 2009 on the same basis as that used for the figures for 31 March 2010. For comparative purposes, the number of Ordinary Shares used in all periods is the same.

	31 March 2010	31 March 2009	30 September 2009

Net assets attributable to equity holders of the parent – Condensed Consolidated Statement of Financial Position (£m)	57.0	0.2	47.4
Adjustments:
- Fair value of derivatives (£m)	33.9	38.0	32.5
EPRA basis net assets (£m)	90.9	38.2	79.9
Number of Ordinary Shares (000’s)	1,062,096	1,062,096	1,062,096
EPRA basis Net assets per share (pence)	8.56	3.60	7.52

The table below shows the figures reported at 31 March 2009 and 30 September 2009 as the comparative to the current year figures.

	31 March 2010	31 March 2009	30 September 2009

Net assets attributable to equity holders of the parent – Condensed Consolidated Statement of Financial Position (£m)	57.0	0.2	47.4
Adjustments:
- Fair value of derivatives (£m)	33.9	38.0	32.5
EPRA basis net assets (£m)	90.9	38.2	79.9
Number of Ordinary Shares (000’s)	1,062,096	132,762	1,062,096
EPRA basis Net assets per share (pence)	8.56	28.77	7.52

23. Related Party transactions

Corovest has effective control of WPML, the Investment Adviser, and Corovest is the Property Adviser to Ciref Plc, the Company’s largest shareholder holding 21.00% of the issued Ordinary Shares of the Company. Mr Cesman, as a director of Ciref Plc, served as a Director of the Company.

The Investment Adviser’s fees and any performance fee was payable to WPML and this, together with Mr Cesman’s remuneration for being a Director of the Company, amount to the whole of the related party transactions. These are summarised below:

	Six months ended 31 March 2010 £m	Six months ended 31 March 2009 £m	Year ended 30 September 2009 £m
Investment Advisor’s fees
– for advisory services	1.5	1.8	3.5
– for accrued performance fees	-	-	-
Director’s fees	-	-	-

Total for related parties	1.5	1.8	3.5

24. Subsequent events

The Directors have decided to pay an interim dividend for the period being reported of 0.32 pence per Ordinary Share (amounting to £3.4 million). This interim dividend will be paid on 18 June 2010 to all those Shareholders on the register at the close of business on 28 May 2010.

On 15 April 2010 the Court in the Isle of Man approved the cancellation of the Deferred Shares in the Company and this was registered with the Isle of Man Companies Registry on 19 April 2010. The nominal value of these shares (£12.0 million) has subsequently been transferred to distributable reserves. The Company now only has Ordinary Shares in issue.

As a consequence of the Deferred Shares being cancelled and the Shareholders’ vote to increase the Authorised Share Capital of the Company, an additional 1,194,857,532 Ordinary Shares of 1 pence each have been created.

Glossary of terms

Active Portfolio	Portfolio of UK properties which have lease terms of less than seven years to expiry or a possible lease break date at the tenant’s option
CMBS	Commercial Mortgage-Backed Securitisation
Combined Code	The Combined Code on Corproate Governance issued by the Financial Reporting Council in June 2006
Continental Europe Portfolio	Portfolio of properties in Europe but not in the UK
Corovest	Corovest Fund Managers (UK) Limited
Core Portfolio	Portfolio of UK properties which have lease terms in excess of seven years to expiry or a possible lease break date at the tenant’s option
Gearing	The Group’s net debt as a percentage of net assets
ICR	Interest Cover Ratio
Index linked	Where a government publishd index is used as the mechanism to determine increases in rent from the tenant. An example of such an index is the United Kingdom Consumer Price Index.
Investment Adviser	WPML
IPD	Investment Property Databank, an independent orgainsiation that issues real estate performance indices
LTV	Loan to Value
Main Market	Main Market of the London Stock Exchange plc
Management Company	WPML
Net Initial Yield	The percentage of the current annual rents to the valuation of the properties after including a potential purchaser’s estimated acquisiiton costs
Other Items	Includes the profits and losses on the sales of investment properties and items of a non-trading, non-cash nature such as valuation adjustments arising from the fair valuing of investment properties and derivative financial instruments.
Trading Operations	This excludes the Other Items and reflects the trading activities of the Group
WAULT	Weighted Average Unexpired Lease Term. This is the average of all remaining period of the leases to tenants for properties within the relevant portfolio taken to the next break date or end of lease whichever is the sooner; the outstanding lengths of these leases are weighted on the annual rent of each lease.
WPML	Wichford Property Management Limited, wholly owned by Corovest

This information is provided by RNS

The company news service from the London Stock Exchange

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