11th Sep 2007 17:30
Standard Life Invs Property Inc Tst11 September 2007 Standard Life Investment Property Income Trust Limited Interim Report and Unaudited Financial Statements For the six months ended 30 June 2007 Objective To provide shareholders with an attractive level of income together with theprospect of income and capital growth from investing in a diversified UKcommercial property portfolio. Financial Summary +-----------------------------------+---------------+-------------------+------------+| |30 June 2007 |31 December 2006 |% Change |+-----------------------------------+---------------+-------------------+------------+|Price per share |118.8p |125.3p |-5.2% |+-----------------------------------+---------------+-------------------+------------+|Value of property portfolio* |£241.3m |£239.4m |0.8% |+-----------------------------------+---------------+-------------------+------------+|Gearing** |41.6% |42.0% |n/a |+-----------------------------------+---------------+-------------------+------------+|IFRS Net Asset Value per share*** |138.8p |134.4p |3.5% |+-----------------------------------+---------------+-------------------+------------+|Published IFRS Net Asset Value per |137.2p |132.7p |3.4% ||share**** | | | |+-----------------------------------+---------------+-------------------+------------+ * Valued on an open market basis in accordance with the RICS Appraisal andValuation Standards. ** Gearing: (Bank borrowings plus redeemable preference shares less cash)/(Market value of properties). *** Calculated under International Financial Reporting Standards. The IFRS NetAsset Value per share for 31 December 2006 has been re-stated following thechange in accounting policy for deferred tax. **** Calculated under International Financial Reporting Standards and adjustedto include an accrued dividend in respect of the last quarter. Chairman's Statement "I would like to thank shareholders for their support at the recent AGM in June2007. As a result the Company's investment remit has been broadened, giving theInvestment Manager greater flexibility to improve total return prospects for newpurchases and the portfolio overall. Following the AGM the Company now also hasthe ability to hold shares bought back in treasury. As anticipated in the last annual report, the slow down in UK commercialproperty returns that started in the fourth quarter of last year has continuedin the first half of 2007. The net asset value over the six months ended 30 June2007 increased by 3.4% and the Company's dividends paid increased by 4% to 3.38pper share. The primary objective of the Company is to provide an attractive level ofincome. I am pleased to report that in respect of the 6 months ended 30 June2007, the Company's income return from its property portfolio was 3.0% comparedwith an income return for the IPD All Quarterly Funds of 2.4%. The UK commercial property market as measured by the IPD Monthly Index produceda total return of 4.4% over the first half of 2007. The office sector continuedto produce the strongest returns delivering 6.9% whilst the industrial andretail sectors produced returns of 4.2% and 2.9% respectively. Following the sale of a portfolio of six properties for £41.5m, the Company hasrepaid £9.85m of debt under the revolving credit facility, so that the Company'sgearing just after the interim period stood at 30%. The Company intends toutilise the remaining funds to maximise shareholder returns, and is monitoringopportunities for further acquitisions. Along with the new REIT sector and the other offshore property trusts, therating of the Company's ordinary shares widened over the six month period withthe discount to net asset value widening from 5.6% at the start of the period to13.4% at 30 June 2007. The general de-rating of the real estate equity sectorhas particularly affected the newly launched REITS as well as the offshoreproperty companies investing in the UK and follows the rises in interest ratesand lower returns forecast from UK commercial property. The Investment Manager's forecast is for single digit returns for 2007 andfuture returns will increasingly be driven more by rental growth and assetmanagement as capital growth continues to ease, and in some areas declines. Thatsaid, the Company's property portfolio is well placed to continue to produceattractive and steady absolute investment returns to its shareholders. David MooreChairman of the Board 11 September 2007 All Enquiries to: The Company SecretaryNorthern Trust International Fund Administration Services (Guernsey) LtdTrafalgar CourtLes BanquesSt Peter PortGuernseyTel: 01481 745529 Richard EnglandGordon HumphriesJason BaggaleyStandard Life InvestmentsTel: 0131 225 2345 Investment Manager's Report UK Property Market Total returns from the UK direct property market continue to moderate towardslevels that are closer to their long term average. Annual returns from IPD'sMonthly Index to the end of June were running at 12.4% p.a. Yield compressioneased over the quarter and capital growth for UK direct property slowed to astill very respectable 7.1% p.a. from the recent highs in the middle of lastyear. Rental growth continues to trends upwards and was 3.9% p.a. to the end ofJune. The economic fundamentals underpinning the commercial property market remainintact, i.e. robust economic growth, strong financial and business servicesoutput and employment, significant business investment and healthy employmentlevels. Similarly, survey data suggests that institutions are intent onincreasing their allocation to commercial property and are yet to reach theirtarget levels. Despite the strong fundamentals, real estate equities haveunderperformed over the period with total returns of -18.7% since the peak inearly January 2007 and heightened volatility in the sector. The increasedvolatility looks to be mainly a result of changes in equity investor sentiment. As a consequence of the recent fiscal tightening, debt backed buyers remainunder pressure and bond yields and 5 year swap rates tightened over the quarterby 50 basis points and 58 basis points respectively to 5.5% p.a. and 6.2% p.a.In this environment, debt backed buyers are increasingly retreating from themarket and consequently secondary assets pricing has therefore moved out overthe quarter reflecting this retreat. Portfolio Valuation The investment portfolio is valued quarterly by DTZ Debenham Tie Leung. At theend of June 2007 the portfolio's value was £241.3m. This shows an increase invalue of £1.9m over the reporting period, during which no purchases were made. The increase in capital value was driven by Central London and in particular therefurbishment and re-letting of an office in Clerkenwell. The constant inwardyield shift across all sectors seen in 2005 and 2006 has come to an end, andcapital values remained broadly static in the first half of 2007. The primary aim of the Trust remains to provide an attractive level of income,and the investments in the portfolio have been selected for their incomecharacteristics foremost. The portfolio has an average unexpired lease term of8.9 years as at the end of June 2007, and for the 12 months to 30 June providedan income return of 6.3% (compared to the IPD universe income return of 4.5%). Investment Activity Since its launch in December 2003, the Company has achieved its aim of beingfully invested in a diversified portfolio providing a high income return. Theportfolio now consists of 34 properties with over 100 tenants spread across theUK. In 2007 the focus has changed slightly, with a desire to reduce gearing andensure capital protection as the UK commercial property market moves through acycle to one of lower total returns. During the second half of the period weexchanged on the sale of a portfolio of six properties for £41.5m. The salecompleted in early July, just after the reporting period. Funds from the saleare being used to reduce borrowing (£9.85m of debt will be repaid under therevolving credit facility with no penalty) and we intend to invest the remainingmonies into good quality investments that have strong reversionary potential andoffer an attractive income return. Asset Management The property portfolio has continued to have very low voids as we seek tomaximise the income. As at the end of June the void level stood at just under 1%of the portfolio's Estimated Rental Value following lettings at the Courtyards,St Albans and 7 Back Hill, London. The letting of 7 Back Hill in particular wasbeneficial to the Company as it followed a surrender from the old tenant andrefurbishment of the accommodation at a time of strong tenant demand. We hadexpected a 12 month void following refurbishment and a new rent of £27.50 per sqft, however the property was let on completion of the works at £35 per sq ftwith only 6 months incentive. Following the purchase of a multi-let industrial estate in Aberdeen in December2006 we have refurbished 2 vacant units (which are subject to a rent guaranteefrom the vendor) and have extended the lease on 3 units with terms agreed on therenewal of 3 other leases, all above ERV. Gearing The gearing level at 30 June 2007 stood at 41.6% of the market value ofinvestment properties. Investment Outlook We anticipate total returns from commercial property will continue to moderatefurther in the short term particularly as fiscal tightening increases. In thisenvironment, our expectation is that the office sector will continue to provideinvestors with the vest returns. Investors will focus on good quality assetswhere rental income can be maximised. We forecast that returns will be singledigit this year and will increasingly be driven more by rental growth as capitalgrowth continues to ease. In an increasingly challenging retail environmentgoing forward, fundamentally strong centres with asset management opportunities,particularly the better prime and super prime assets will continue to maintaintheir current pricing. Shopping centre vacancy rates continue to compare veryfavourably with other sectors. We anticipate that prime and super prime willcontinue to outperform secondary assets as investors continue to embark on a"flight to quality" as returns from UK direct property continue to ease." Property Investments as at 30 June 2007 +--------------------------------------+------------------+---------------+|Name (Sector) |Town | Capital Value || | | (£) |+--------------------------------------+------------------+---------------+|Wellington House (Standard Office) |London |20-22m |+--------------------------------------+------------------+---------------+|Clough Road (Retail Warehouse) |Hull |16-18m |+--------------------------------------+------------------+---------------+|Hollywood Green (Leisure) |London |16-18m |+--------------------------------------+------------------+---------------+|Whitebear Yard (Standard Office) |London |10-12m |+--------------------------------------+------------------+---------------+|2-4 Bucknall Street (Standard Office) |London |10-12m |+--------------------------------------+------------------+---------------+|Drakes Way (Standard Industrial) |Swindon |8-10m |+--------------------------------------+------------------+---------------+|Solution Hall (Standard Office) |Welwyn Garden City|8-10m |+--------------------------------------+------------------+---------------+|Wellesley House (Standard Office) |Harlow |8-10m |+--------------------------------------+------------------+---------------+|The Axys (Office Park) |Nantgarw |8-10m |+--------------------------------------+------------------+---------------+|Chancellors Place (Standard Office) |Chelmsford |8-10m |+--------------------------------------+------------------+---------------+|Century Plaza (High Street Retail) |Edgware |8-10m |+--------------------------------------+------------------+---------------+|Ocean Trade Centre (Industrial Park) |Aberdeen |8-10m |+--------------------------------------+------------------+---------------+|Bathgate Retail Park (Retail |Bathgate |8-10m ||Warehouses) | | |+--------------------------------------+------------------+---------------+|Interfleet House (Office Park) |Derby |6-8m |+--------------------------------------+------------------+---------------+|Foxhills Industrial Park (Distribution|Scunthorpe |6-8m ||Warehouse) | | |+--------------------------------------+------------------+---------------+|The Courtyard (Office Park) |St Albans |4-6m |+--------------------------------------+------------------+---------------+|Farah Unit, Crittal Road (Standard |Witham |4-6m ||Industrial) | | |+--------------------------------------+------------------+---------------+|Phase II, Telelink (Office Park) |Swansea |4-6m |+--------------------------------------+------------------+---------------+|Pity Hey Place (Distribution |Skelmersdale |4-6m ||Warehouse) | | |+--------------------------------------+------------------+---------------+|Turin Court (Standard Office) |Manchester |4-6m |+--------------------------------------+------------------+---------------+|Windsor Court & Crown Farm (Standard |Mansfield |4-6m ||Industrial) | | |+--------------------------------------+------------------+---------------+|Esporta (Leisure) |Chislehurst |4-6m |+--------------------------------------+------------------+---------------+|Viscount Way (Office Park) |Swindon |4-6m |+--------------------------------------+------------------+---------------+|31/32 Queen Square (Standard Office) |Bristol |4-6m |+--------------------------------------+------------------+---------------+|De Ville Court (Standard Office) |Weybridge |4-6m |+--------------------------------------+------------------+---------------+|Coal Road (Standard Industrial) |Leeds |4-6m |+--------------------------------------+------------------+---------------+|Wardley Industrial Estate (Retail |Manchester |2-4m ||Warehouses) | | |+--------------------------------------+------------------+---------------+|Halfords (Retail Warehouses) |Paisley |2-4m |+--------------------------------------+------------------+---------------+|Gemini Court (Distribution Warehouse) |Port Talbot |2-4m |+--------------------------------------+------------------+---------------+|Eurolink Normanton (Industrial Park) |Leeds |2-4m |+--------------------------------------+------------------+---------------+|Easter Park (Distribution Warehouse) |Bolton |2-4m |+--------------------------------------+------------------+---------------+|Lister House (Standard Office) |Leeds |2-4m |+--------------------------------------+------------------+---------------+|Unit 14 Interlink Park (Distribution |Bardon |2-4m ||Warehouse) | | |+--------------------------------------+------------------+---------------+|Portrack Lane (Distribution Warehouse)|Stockton on Tees |1-2m |+--------------------------------------+------------------+---------------+ Standard Life Investments Property Income Trust Limited Unaudited Consolidated Income Statement for the period ended 30 June 2007 Restated 01-Jan-07 01-Jan-06 to to 30-Jun-07 30-Jun-06 Note £ £IncomeUnrealised gain arising on adjustment to fair 1,772,856 11,048,950value of investment propertiesRental income 7,635,900 7,125,791 Total income and fair value gains 9,408,756 18,174,741 ExpenditureInvestment management fees 3 (1,023,772) (917,033)Head lease (142,484) (140,346)paymentsValuation fees (42,500) (39,681)Other direct property costs (188,889) (129,382)Directors' fees and (41,992) (41,166)subsistenceOther administration (149,870) (115,880)expenses (1,589,507) (1,383,488) Operating profit 7,819,249 16,791,253 Finance costs - netInterest payable (2,964,522) (2,601,463)Interest 80,932 210,415receivable (2,883,589) (2,391,047) Profit for the period before 4,935,660 14,400,206taxTaxation 4 - - Profit for the 4,935,660 14,400,206period Earnings per share for the periodattributable to the equity holders ofthe company Basic and diluted 4.75 pence 14.4 pence (restated) All items in the above income statement derive from continuing operations Standard Life Investments Property Income Trust Limited Unaudited Consolidated Balance Sheet as at 30 June 2007 Restated 30-Jun-07 31-Dec-06 Note £ £ASSETSNon-current assetsFreehold investment 5 204,265,662 195,915,863propertiesLeasehold investment 5 41,110,750 47,984,258propertiesInterest rate swap 3,715,809 501,862 249,092,221 244,401,983 Current assetsTrade and other 2,935,396 3,734,872receivablesCash and cash equivalents 5,082,435 5,214,503 8,017,831 8,949,375 Total assets 257,110,052 253,351,358 EQUITYEquity capital and reserves attributableto company's equity holdersShare capital 1,040,000 1,040,000Share premium 5,217,022 5,217,022Retained earnings 6 2,611,320 2,748,875Capital reserves 40,948,582 35,961,779Other distributable 94,586,418 94,801,259reservesTotal equity 144,403,342 139,768,935 LiabilitiesNon-current liabilitiesBank borrowings 84,432,692 84,432,692Redeemable preference 7,376,206 7,161,365sharesLeasehold obligations 4,077,302 4,544,339 95,886,200 96,138,396 Current liabilitiesTrade and other payables 6,687,062 7,310,579Bank borrowings 9,850,000 9,850,000Leasehold obligations 283,448 283,448 16,820,510 17,444,027 Total liabilities 112,706,710 113,582,423 Total equity and 257,110,052 253,351,358liabilities Approved by the board of directors on 11September 2007 John Hallam David MooreDirector Director Standard Life Investments Property Income Trust Limited Unaudited Consolidated Statement of Changes in Equity for the period ended 30June 2006 Share Share Retained Capital Other Total capital premium earnings reserves distributable equity reserves Note £ £ £ £ £ Opening balance 1 1,000,000 - (2,334,373) 19,734,918 95,206,619 113,607,164January 2006 Movement on revaluationof interest rate swap - - - 2,841,598 - 2,841,598Profit for the period - - 11,974,950 - - 11,974,950Transfer between - - 202,680 - (202,680) -reserves *Unrealised gain onadjustment tofair value of - - (11,048,950) 11,048,950 - -investment propertiesDividends - - (3,250,000) - - (3,250,000) Balance at 30 June 2006as previously reported 1,000,000 - (4,455,693) 33,625,466 95,003,939 125,173,712 Prior year adjustment :Taxation - - 6,871,553 - - 6,871,553 Balance at 30 June 2006 as 1,000,000 - 2,415,860 33,625,466 95,003,939 32,045,265restated Standard Life Investments Property Income Trust Limited Unaudited Consolidated Statement of Changes in Equity for the period ended 30June 2007 Share Share Retained Capital Other Total capital premium earnings reserves distributable equity reserves Note £ £ £ £ £ Opening balance 1 1,040,000 5,217,022 (4,146,647) 35,961,779 94,801,259 132,873,413January 2007 aspreviously reported Prior year adjustment:Taxation - - 6,895,522 - - 6,895,522 Opening balance 1 1,040,000 5,217,022 2,748,875 35,961,779 94,801,259 139,768,935January 2007 as restatedMovement on revaluationof interest rate - - - 3,213,947 - 3,213,947swapProfit for the - - 4,935,660 - - 4,935,660periodTransfer between - - 214,841 - (214,841) -reserves *Unrealised gain onadjustment tofair value of 5 - - (1,772,856) 1,772,856 - -investment propertiesDividends 7 - - (3,515,200) - - (3,515,200) Balance at 30 June 1,040,000 5,217,022 2,611,320 40,948,582 94,586,418 144,403,3422007 * this is a transfer to move preference share finance costs from the retainedearnings reserve to the other distributable reserves. Standard Life Investments Property Income Trust Limited Unaudited Consolidated Cash Flow Statement for the period ended 30 June 2007 01-Jan-07 01-Jan-06 to to 30-Jun-07 30-Jun-06 Note £ £ Cash flows from operating activitiesCash generated from operations 8 6,222,353 5,648,465Interest paid (2,749,681) (2,398,783)Net cash generated from operating 3,472,672 3,249,682activities Cash flows from investing activitiesCapital expenditure 5 (170,472) (4,715,920)Interest received 80,932 210,415Net cash used in investing activities (89,540) (4,505,505) Cash flows from financing activitiesDividends paid 7 (3,515,200) (3,250,000) Net decrease in cash and cash (132,068) (4,505,823)equivalents in the period Cash and cash equivalents at beginning 5,214,503 13,711,633of period Cash and cash equivalents at end of 5,082,435 9,205,810period Standard Life Investments Property Income Trust Limited Notes to the Consolidated Financial Statements for the period ended 30 June 2007 1. GENERAL INFORMATION Standard Life Investments Property Income Trust Limited ("the Company") and itssubsidiaries (together the "Group") carry on the business of property investmentthrough a portfolio of freehold and leasehold investment properties located inthe United Kingdom. The Company is a limited liability company incorporated anddomiciled in Guernsey, Channel Islands. The Company has its primary listing onthe Channel Islands Stock Exchange with a secondary listing on the London StockExchange. These unaudited consolidated financial statements have been approvedfor issue by the Board of Directors on 11 September 2007. The address of the registered office is Trafalgar Court, Les Banques, St PeterPort, Guernsey. The audited consolidated financial statements of the Company forthe year ending 31 December 2006 are available on request from this registeredaddress. 2. ACCOUNTING POLICIES Basis of preparation The unaudited consolidated financial statements of the Group have been preparedin accordance with IAS 34 on Interim Financial Reporting, and all applicablerequirements of Guernsey Company Law. They do not contain all the informationrequired for full annual statements and should be read in conjunction with theaudited consolidated financial statements of the Company for the year ending 31December 2006. Except as noted below, the same accounting policies and methodsof computation are followed in these interim financial statements as comparedwith the audited consolidated financial statements prepared for the year ending31 December 2006. Implementation of IFRS 7 International Financial Reporting Standard (''IFRS'') 7, Financial Instruments:Disclosures, and the complementary Amendment to IAS 1, Presentation of FinancialStatements - Capital Disclosures, will be adopted in the full audited year endfinancial statements. IFRS 7 introduces new disclosures to improve theinformation about financial instruments. It requires the disclosure ofqualitative and quantitative information about exposure to risks from financialinstruments including specified minimum disclosure about credit risk, liquidityrisk and market risk including sensitivity to market risk. The amendment to IAS1 introduced disclosures about the level of an entity's capital and how itmanages capital. This standard does not have any impact on the classificationand valuation of the Group's financial instruments. Standards and interpretations not yet effective The following standards and interpretations have been evaluated and have beenassessed as not being relevant or not having a significant effect on the Group. - IAS 23 Capitalisation of borrowing costs - IFRS 8 Operating Segments - IFRIC 7 - 12 Deferred Tax The audited consolidated financial statements for the year ending 31 December2006 provided for deferred income tax in full, using the liability method, ontemporary differences arising between the tax bases of assets and liabilitiesand their carrying amounts in the financial statements. The estimate of deferredtaxation assumed that all of the temporary difference was recoverable throughuse of the asset which was considered an appropriate accounting policy at thetime of preparing the financial statements. In light of the evolving interpretation of IAS 12 it is now considered moreappropriate to apply a 'blended' approach when estimating the amount of deferredincome tax arising from the temporary difference between the tax bases of theassets and liabilities and their carrying amounts in the financial statements.This blended approach involves assessing the expected manner of recovery of thistemporary difference. The depreciable amount of the temporary difference istreated as recoverable through use of the asset and the residual value elementof the temporary difference is treated as recoverable through disposal of theasset. Recovery through use of the asset implies the appropriate tax rate is theincome tax rate applicable to the Group's schedule A business whereas recoverythrough disposal of the asset implies the appropriate tax rate is the capitalgains tax rate applicable to the Group. This approach is considered to provide abetter estimate of the Group's deferred tax position. Deferred income tax is determined using tax rates (and laws) that have beenenacted or substantially enacted by the balance sheet date and are expected toapply when the related deferred income tax asset is realised or the deferredincome tax liability is settled. 3 RELATED PARTY DISCLOSURES Parties are considered to be related if one party has the ability to control theother party or exercise significant influence over the other party in makingfinancial or operational decisions. Redeemable preference shares On 29 December 2003 the Company issued 6,000,000 25p redeemable zero dividendpreference shares for £6,000,000 to The Standard Life Assurance Company. On 10July 2006 these shares were transferred to Standard Life Assurance Limited.These shares have a nominal value of £1,500,000 and are redeemable by theCompany at a price of £1.7908. These shares do not carry any voting rights. Ordinary share capital Standard Life Investment Funds Limited has held 21,769,609 of the issuedordinary shares throughout the period on behalf of its Unit Linked PropertyFunds (December 2006: 21,769,609). This equates to 20.9% (December 2006: 20.9%)of the ordinary share capital, however, Standard Life Investment Funds Limitedis not considered to exercise control of the Group. Those parties related to theInvestment Manager waived their rights to commission on the initial purchase ofthese shares in order to maintain the fairness of the transaction to allparties. Cash held on deposit with related parties As at 30 June 2007, £634,439 (December 2006: £617,974) was held on deposit withStandard Life Investments Global Liquidity Funds plc. This deposit was investedin AAA bonds and an interest accrued on this deposit daily. The interest earnedon this deposit during the period was £16,465 (period ended June 2006: £128,047)representing an average rate of 5.3% (period ended June 2006: 4.5%). Standard Life plc is the ultimate controlling party of the Investment Manager,Standard Life Investments (Corporate Funds) Limited. Standard Life InvestmentsGlobal Liquidity Funds plc is an entity that is also managed within the StandardLife plc group. Directors The Directors each hold the following number of Ordinary Shares in the Company: 30 Jun 07 31 Dec 06David Moore 15,000 15,000Richard Barfield 15,000 15,000John Hallam 15,000 15,000Shelagh Mason 15,000 15,000Paul Orchard-Lisle 25,000 25,000 No Director has any interest in any transactions which are or were unusual intheir nature or conditions or significant to the business of the Group and whichwere effected by any member of the Group since its date of incorporation. Totalfees relating to the directors in the period under review were £41,992 (periodended 30 June 2006: £41,166), being £40,000 (period ended 30 June 2006: £40,000)in respect of emoluments and £1,992 (period ended 30 June 2006: £1,166) inrespect of subsistence. Investment Manager On 19 December 2003 Standard Life Investments (Corporate Funds) Limited ("theInvestment Manager") was appointed as investment manager to manage the propertyassets of the Group. Under the terms of the Investment Management Agreement theInvestment Manager is entitled to receive a fee at the annual rate of 0.85% ofthe total assets (less any amounts drawn down under the facility agreement butnot yet invested in property assets), payable quarterly in arrears. Total feescharged for the period ended 30 June 2007 amounted to £1,023,772 (period ended30 June 2006: £917,033). The amount due and payable at period end amounted to£512,816 (period ended 30 June 2006: £463,388). 4 TAXATION Deferred tax 30-Jun-07 30-Jun-06 £ £ Unrealised gain to be recovered through 2,122,156 1,616,520use of assetUtilised Schedule A loss (2,122,156) (1,616,520)Taxable unrealised gain after utilised - -schedule A losses At the balance sheet date provision has been made for deferred income on alltemporary differences between the tax bases of assets and liabilities and theircarrying amounts for financial reporting purposes, in accordance with theaccounting policy detailed above at note 2. 5 FREEHOLD AND LEASEHOLD INVESTMENT PROPERTIES 30-Jun-07 30-Jun-07 30-Jun-07 Freehold Leasehold Total £ £ £ Market value as at 31 196,165,000 43,190,000 239,355,000December 2006Capital expenditure 170,472 - 170,472Unrealised gain / loss arising on 2,077,078 (304,222) 1,772,856adjustment to fair value of investmentpropertiesMovement in adjustment for 22,449 4,223 26,672lease incentivesMarket value at 30 June 2007 198,434,999 42,890,001 241,325,000 Adjustment for lease (22,449) (4,223) (309,338)incentivesDiscounted present value of minimum - 4,360,750 4,360,750lease paymentsFair value at 30 June 2007 198,412,550 47,246,528 245,376,412 31-Dec-06 31-Dec-06 31-Dec-06 Freehold Leasehold Total £ £ £ Market value as at 31 168,285,000 34,020,000 202,305,000December 2005Capital expenditure 18,152,720 6,004,293 24,157,013Unrealised gain arising on adjustment to 9,568,910 3,132,178 12,701,088fair value of investment propertiesMovement in lease incentive 158,370 33,529 191,899debtorMarket value at 31 December 196,165,000 43,190,000 239,355,0002006 Adjustment for lease (249,137) (33,529) (282,666)incentivesDiscounted present value of minimum - 4,827,787 4,827,787lease paymentsFair value at 31 December 195,915,863 47,984,258 243,900,1212006 Investment properties were revalued at the period end by DTZ Debenham Tie LeungLimited, Chartered Surveyors on the basis of the market value for existing use.The market values of leasehold investment properties have been adjusted toreflect the discounted present value of minimum lease payments to reflect theirfair value in accordance with IFRS. The market value for existing use providedby DTZ Debenham Tie Leung Limited at the period end was £241,325,000 (December2006: £239,355,000). 6 RETAINED EARNINGS 30-Jun-07 31-Dec-06 £ £ Opening balance as at 1 January as (4,146,647) (2,334,373)previously reportedPrior period adjustment in relation to 6,895,522 4,446,297deferred taxationOpening balance as at 1 January as 2,748,875 2,111,924restated Profit for the period / year 4,935,660 19,630,279Transfer between reserves 214,841 405,360Unrealised gain arising on adjustment tofair value ofinvestment properties transferred to (1,772,856) (12,701,088)capital reserveRealised gain on disposal of investment property - -transferred to capital reserveDividends paid (3,515,200) (6,697,600)Closing balance 2,611,320 2,748,875 This is a distributablereserve. 7 DIVIDENDS The interim dividends paid to date in 2007 are as follows (period ended 30 June2006: £3,250,000): £1,757,600 (1.69p per ordinary share) paid in February relating to the quarter ending 31 December 2006 £1,757,600 (1.69p per ordinary share) paid in May relating to the quarter ending 31 March 2007 £3,515,200 A further interim dividend of 1.690p per share in respect of the quarter to 30June 2007was approved in August 2007. These consolidated financial statements donot reflect this dividend, however, the published net asset value does. 8 CASH GENERATED FROM OPERATIONS 01-Jan-07 01-Jan-06 to to 30-Jun-07 30-Jun-06 £ £ Profit for the period 4,935,660 14,400,206 Movement in debtors 799,476 (131,264)Movement in creditors (623,517) 37,425Interest payable 2,964,522 2,601,463Interest receivable (80,932) (210,415)Unrealised gain arising on adjustment to fair value (1,772,856) (11,048,950)of investment propertiesMovement in deferred tax - 2,425,256provisionCash generated from 6,222,353 8,073,721operations 9 SEGMENTAL REPORTING The group is organised into four main business segments determined in accordancewith the type of investment property: Retail - Mainly shops and retail warehouse parks Office - Mainly in large cities Industrial - distribution warehouses and industrial units Other - Leisure centres and Cinema complex's Segmental analysis by business segment 01-Jan-07 to 30-Jun-07 Retail Office Industrial Other Total £ £ £ £ £ Rental income 1,190,855 3,796,710 1,956,511 691,824 7,635,900Unrealised gain arising onadjustmentto fair value of investment 1,050,000 1,186,080 (483,224) 20,000 1,772,856propertiesProperty related (53,906) (283,330) (34,137) (2,500) (373,873)expenditureSegment result 2,186,949 4,699,460 1,439,150 709,324 9,034,883 Non-property related (1,215,634)expenditureOperating profit 7,819,249Finance costs - net (2,883,589)Profit for the year before 4,935,660taxation There were no transactions between the business segments. Property related expenditure relates to head lease payments, valuation fees andother direct property costs. 01 Jan 06 to 30 Jun 06 Retail Office Industrial Other Total £ £ £ £ £ Rental income 2,105,489 2,225,013 2,145,877 649,412 7,125,791Unrealised gain arising onadjustmentto fair value of investment 1,940,000 6,191,242 2,137,708 780,000 11,048,950propertiesProperty related (27,399) (216,255) (54,796) (10,959) (309,409)expenditureSegment result 4,018,090 8,200,000 4,228,789 1,418,453 17,865,332 Non-property related (1,074,079)expenditureOperating profit 16,791,253Finance costs - net (2,391,047)Profit for the period 14,400,206before taxation There were no transactions between the business segments. Property related expenditure relates to head lease payments, valuation fees andother direct property costs. 10 EVENTS AFTER THE BALANCE SHEET DATE A portfolio sale of six properties was completed on 30 July 2007. The sale valueof the properties was £41,500,000 which is equal to the value at which theseproperties were included in the 30 June 2007 independent valuation referred toat note 5 above. The properties sold were: Wellesley House, HarlowSolution Hall, Welwyn Garden CityThe Axys, NantgarwThe Courtyard, St AlbansViscount Way, SwindonGemini Court, Port Talbot This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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