TR Property Inv. - Interim Results

RNS Number:1559I

TR Property Investment Trust PLC

21 November 2007

21 November 2007

TR PROPERTY INVESTMENT TRUST PLC

Unaudited interim results for the half year ended 30 September 2007

HIGHLIGHTS

* Launch of second share class - Sigma

* Strong Ordinary Share revenue growth of 38.7%

* Modest outperformance of the Benchmark for Ordinary Shares

* Dividend per share increase of 35.3% for Ordinary Shares

DIVIDEND

Ordinary Shares

An interim dividend of 2.30p (2006: 1.70p) per Ordinary share has been declared

payable on 9 January 2008 to shareholders on the register on 7 December 2007.

The shares will be quoted ex-dividend on 5 December 2007.

Sigma Shares

An interim dividend of 0.20p per Sigma share has been declared payable on 9

January 2008 to shareholders on the register on 7 December 2007. The shares will

be quoted ex-dividend on 5 December 2007.

TR PROPERTY INVESTMENT TRUST PLC

Unaudited interim results for the half year ended 30 September 2007

Ordinary Shares - Financial Highlights

Half year ended Half year ended

30 September 30 September

2007 (Unaudited) 2006 %

Revenue (Unaudited) Change

Total revenue income (#'000) 20,030 16,536 +21.1

Income from operations before tax (#'000) 15,193 11,611 +30.9

Revenue earnings per ordinary share 3.94p 2.84p +38.7

Net interim dividend per share 2.30p 1.70p +35.3

IFRS loss (earnings) per ordinary share# (55.67)p 17.12p -425.2

# Under IFRS capital returns are included in 'earnings'

At At

30 September 31 March

2007 2007 %

Balance Sheet (Unaudited) (Audited) Change

Investments held at fair value (#'000) 642,063 1,082,398 -40.7

Shareholders' funds (#'000) 613,706 972,944 -36.9

Shares in issue at end of period (m) 262.5 334.6 -21.5

Gearing 3% 9%

Net asset value per share 233.79p 290.78p -19.6

Note: At 24 July 19.0% of the Ordinary share

capital (and corresponding assets and

liabilities) converted to Sigma shares.

Performance

Half year ended Half year ended

30 September 30 September

Assets and Benchmark 2007 2006

Benchmark performance (price only) -20.7% +4.7%

NAV change -19.6% +6.8%

Benchmark performance (total return) -19.1% +6.6%

NAV total return -18.8% +7.8%

IPD Monthly Index total return* +1.1% +9.0%

Total return from direct property +1.9% +10.7%

Half year ended Year ended

30 September 31 March %

Share Price 2007 2007 Change

Share price 203.0p 256.5p -20.9

Share price total return -20.0% +24.4%

Market capitalisation #533m #858m -37.9

Sources: Thames River Capital/*IPD monthly,

six months cumulative

TR PROPERTY INVESTMENT TRUST PLC

Unaudited interim results for the half year ended 30 September 2007

Sigma Shares - Financial Highlights

Period ended

30 September

2007 (Unaudited)

Revenue

Total revenue income (#'000) 456

Income from operations before tax (#'000) 96

Revenue earnings per Sigma share 0.06p

Net interim dividend per share 0.20p

Net special dividend per share 1.10p

(Loss)/earnings per Sigma share# (8.69)p

A special dividend of 1.10p per share was paid on 12 October 2007 to Sigma Shareholders on the register at 5

October 2007. The special dividend arose as a result of accrued earnings of 1.67p per share included in the

Calculation Date NAV for the Conversion of Ordinary shares into Sigma share on creation off the Sigma share

class. The special dividend was a non-recurring payment.

# Under IFRS capital returns are included in 'earnings'

At At Inception

30 September 24 July

2007 2007 %

Balance Sheet (Unaudited) (Unaudited) Change

Investments held at fair value (#'000) 138,694 165,804 -16.4

Shareholders' funds (#'000) 150,466 161,914 -7.1

Shares in issue at end of period (m) 131.8 131.8 -

Gearing 0% 3.2%

Net asset value per share 114.17p 122.85p -7.1

Performance

Period ended

30 September

Assets and Benchmark 2007

Benchmark performance (price only) -5.9%

NAV change -7.1%

Benchmark performance (total return) -5.6%

NAV total return -7.1%

Period ended

30 September

Share Price 2007

Share price 104.3p

Share price total return -1.9%

Market capitalisation #137m

Source: Thames River Capital

TR PROPERTY INVESTMENT TRUST PLC

Unaudited interim results for the half year ended 30 September 2007

Chairman's Statement

Introduction

The six month period to the end of September 2007 has been one of increasing

uncertainty in global debt and equity markets. Commercial and residential

property assets have been the particular recipients of adverse investor

sentiment caused by fears of rising investment yields and higher borrowing

costs. Against this background Pan European property shares fell by over 20% in

the six months anticipating that a sharp fall in property values will occur in

2008. As a dedicated investor in property shares the Trust could never be immune

from such a decline. In the event the Ordinary share portfolio modestly

outperformed its benchmark and, on a brighter note, revenue per share is sharply

higher and the Board is able to make a substantial increase in the interim

dividend.

The major event of the period for the Trust has been the creation of the Sigma

share class. Shareholders were circulated in June with details of the proposals,

and these were approved at the EGM on 24 July. I am pleased to report that just

under 19% of the equity elected to convert and together with #10m of new capital

raised, Sigma began life with net assets of #162m. Marcus Phayre-Mudge who has

been the deputy manager of the Trust for over five years and has worked with

Chris Turner since 1997, is managing this share class. The report & accounts now

contain the usual group financial statements together with separate income

statements and balance sheets for each share class. There is a separate

Manager's report for each share class.

Asset and Share Price Performance

Ordinary Shares

Over the six month period the net asset value (NAV) per share calculated under

IFRS declined by 19.6% from 290.8p to 233.8p while the share price fell by 20.9%

from 256.5p to 203.0p. In the same period, the benchmark index declined by

20.7%. The total returns for the Ordinary share class were -18.8% for the NAV,

-20.0% for the share price and -19.1% for the benchmark, an out-performance of

0.3%.

Sigma Shares

Over the short period from their introduction to the end of September, the net

asset value declined by 7.1% from 122.85p to 114.17p while the share price fell

by 1.9% from 106.25p to 104.25p. In the same period the benchmark index declined

by 5.9%. The total returns for the Sigma share class were -6.5% for the NAV,

-1.9% for the share price and -5.6% for the benchmark, an under performance of

0.9% which occurred during the first week after the creation of the new share

class. The position has since improved and at the time of writing Sigma is

progressively ahead of its benchmark.

Revenue Results and Dividends

Ordinary Shares

The Ordinary share revenue return has risen sharply in the period. In my

statement in the last annual report I commented that our managers were advising

the Board that increase in revenue per share in the current year would be in the

order of 20% to 30%. In this interim period the revenue per ordinary share was

3.94p, a 38.7% increase on the 2.84p earned in the first half of last year.

Income benefited from a good level of dividend growth from our shareholdings

both in the UK and on the Continent, two special dividends from our Swedish

shareholdings and from higher rental income from our direct property portfolio.

Finance costs declined due to lower borrowings and share repurchases meant that

the higher income was divided by fewer shares. The Board has pleasure in raising

the interim Ordinary share dividend by 35.3% from 1.70p per share to 2.30p per

share. The dividend will be paid on 9 January 2008 to ordinary shareholders on

the register on 7 December 2007.

TR PROPERTY INVESTMENT TRUST PLC

Unaudited interim results for the half year ended 30 September 2007

Chairman's Statement continued

Sigma Shares

The Sigma shares inherited 1.67p per share of revenue accrued by the converting

shares up to the date of the Sigma class creation in July 2007, and part of this

revenue was paid in a special dividend of 1.10p per share to Sigma shareholders

on 12 October 2007. In its short period of independence since July the Sigma

share class has earned 0.06p per share. Our managers' forecasts for the Sigma

share class revenue in the remaining six months of the financial year are for

earnings in the order of 0.4p to 0.5p per share and on this basis the Board is

paying an interim dividend per Sigma share of 0.2p per share. The dividend will

be paid on 9 January 2008 to ordinary shareholders on the register on 7 December

2007.

Portfolio Distribution

The distribution of the portfolio shows only modest change since the end of

March. Further details are given in the managers' reports.

Gearing and Currencies

Borrowings have been reduced further over the period. At the end of March the

Trust's net debt was #98m (gearing of 9.2%), comprising #40m in debentures and

#58m in short term bank debt. The debentures were split between the Ordinary and

Sigma share classes in July (#32m to the Ordinary and #8m to Sigma). At the end

of September the Ordinary share portfolio had repaid all the bank debt and held

#11m in cash giving net debt of #21m (gearing of 3.5%). At the same date the

Sigma share class held cash of #20m giving net cash of #12m. In the absence of

unforeseen circumstances, gearing levels are expected to remain between 0% and

10% for the remainder of the financial year. All of our debt continues to be

denominated in Sterling and our portfolio exposure to foreign currency assets

and overseas income is unhedged. In the six month period, March to September,

the Euro rose against the Sterling by 2.7% increasing the value of our

Continental assets and Euro income.

Discount and Share Repurchases

The average discount over the period was 12.2% for the Ordinary shares and 11.5%

for the Sigma share class. These figures compare with an average discount of

9.9% in the period from September 2006 to March 2007. During the half year the

Trust repurchased 10.217m Ordinary shares for cancellation at a total cost of

#23.36m (228.7p per shares). Sales of assets were made to cover these

repurchases which added some #3.48m to shareholders funds.

VAT on Management Fees

Fund management fees (including performance fees) charged by third party fund

managers to Investment Trust Companies have been treated as subject to VAT since

1990. Similar fees charged to Unit Trusts and OEICs are exempt from VAT. A

group of Investment Trust Companies took a case to the VAT Tribunal claiming

that Investment Trust Companies should be exempt from VAT, the case eventually

ended up in the European Court of Justice ('ECJ').

In June of this year the ECJ delivered its judgement and supported the view that

management fees charged to Investment Trusts should be exempt. Earlier this

month HM Revenue & Customs confirmed that it has withdrawn from defending the

appeal of this case and that UK law will be amended to include Investment Trusts

within the scope of VAT exemption.

VAT will therefore not apply to any future management fee invoices. In addition

the investment trust is able to reclaim some of the VAT paid over to managers in

the past and we are in discussion with Thames River Capital and Henderson on

this matter.

TR PROPERTY INVESTMENT TRUST PLC

Unaudited interim results for the half year ended 30 September 2007

Chairman's Statement continued

Board Appointments

I am delighted to report the appointment of Paul Spencer to the Board with

effect from August 1 2007. Paul is the Chairman of National Savings & Investment

(a Government funded agency), Managed Pension Funds Ltd and Sovereign Reversions

plc. He also sits on the Boards of WPP Group plc (where he chairs the Audit

Committee), Nipponkoa Insurance Company (Europe) Ltd, and Resolution plc.

Market Outlook

The Trust now has minimal on balance sheet gearing and the portfolios'

see-through gearing has been sharply reduced to below that of the benchmark. Our

equity portfolio is dominated by holdings in large liquid stocks with an

emphasis on those with below average gearing, fixed rate long term debt and high

quality tenants and leases. We have no derivative positions or exposure to debt

instruments and our direct property portfolio is virtually fully leased.

The turmoil in credit markets has created a heightened level of uncertainty for

all asset pricing. If the turmoil develops into a full blown credit squeeze it

may yet threaten world economic activity. In these uneasy circumstances the

managers are concentrating on risk avoidance and on holding assets with secure

cash flows and dividend profiles and husbanding resources against the future

prospects of recovery and growth.

My view is that the problem is about financial companies expecting Central banks

to bale them out when their lack of confidence in each other causes illiquidity

in each other's credit positions. Meanwhile the operational world carries on

quite well - including property, retail and manufacturing. Chris Turner

addresses this issue of market fundamentals at the end of his statement.

Peter Salsbury

Chairman

TR PROPERTY INVESTMENT TRUST PLC

Unaudited interim results for the half year ended 30 September 2007

Ordinary Shares - Manager's Report

Introduction

Re-reading my previous manager's statement in the 2007 Annual Report is not a

happy experience in the light of subsequent events. Though I was somewhat

cautious, I was, with hindsight, seriously over-confident in believing that

property shares and the commercial property investment markets were likely to

have a soft landing after such an extended bull market. As early as mid-April

the threat of rising interest rates was causing persistent daily price share

price weakness in the Sector and, almost without respite, these conditions

lasted throughout the entire half-year. The credit crisis in August and

September only added to the weakness, resulting in an eventual decline of over

20% in share prices. These credit problems, which I did not foresee, have added

a new layer of uncertainty in asset pricing. The crisis may have put an end to

base rate rises, but debt has become harder and more expensive to borrow and

this liquidity squeeze could now threaten to infect the wider economy.

I have taken action on the Ordinary share portfolio to virtually eliminate

gearing. All our bank debt has been repaid and we are holding cash against our

debenture debt. Many of our share sales have been of stocks with higher levels

of gearing so that our see-through gearing is, for the first time in my

stewardship of the Trust, below the equivalent benchmark gearing level. We have

reduced or sold entirely many of our shareholdings with significant exposure to

speculative development and further reduced the portfolio exposure to

residential and retail property. We have been conscious to retain liquidity in

the portfolio. We have bought very little since May except the Trust's own

shares, and these share repurchases have been made with the proceeds of specific

asset sales and not with borrowed money. Since September we have completed the

sale of our property at Slough for #18.5m - ahead of the March 2007 valuation.

Meanwhile the remainder of our direct property portfolio is 99% occupied by a

diverse range of tenants.

Performance

Over the half year period the net asset value total return was -18.8% and this

figure compares with a total return from the EPRA benchmark of -19.1%. The

benchmark was changed at the start of the period from the S&P/Citigroup European

Property Index. That index showed a total return of -20.7% over the six months.

The EPRA benchmark total returns were -22.5% for the UK and -16.3% for Europe ex

UK, so our UK overweight hurt our performance. It hardly requires mentioning

that performance would have improved if I had taken action earlier to eliminate

gearing. As it is, the modest outperformance is due almost entirely to the

benefit of share buybacks and the returns from our direct property portfolio.

Share price falls were relatively uniform across the UK and Europe and were

often exacerbated by the high redemption levels in open ended funds. The best

performer in our top ten investments was Liberty International (-8%) and the

worst was Segro, formally Slough Estates (why must companies choose silly

names?) which fell 35%. Our best performances came from cash takeover bids for

Keops and Norgani, Nanette, a Polish housebuilder which rose 25% and Kardan the

Eastern European financial and property stock which rose 6%. Our worst performer

overall was Capital and Regional which fell 52% over the half year, though part

of the holding was sold before the major price decline.

TR PROPERTY INVESTMENT TRUST PLC

Unaudited interim results for the half year ended 30 September 2007

Ordinary Shares - Manager's Report continued

Property Investment Market Background

As the summer progressed strong UK inflation numbers led to actual and

anticipated base rates increases. Leveraged buyers withdrew from the market as

did some overseas investors and transaction volumes declined. By July it was

clear that the market has stalled. Meanwhile the credit crisis spread its

effects from the US into the UK, and by August it became clear that commercial

property prices were starting to fall. Since July market activity has been at a

very low level so that valuers have little immediate evidence on which to rely.

Over the third quarter, the valuation based IPD Index of all UK commercial

property capital values fell by 2%, but there is a consensus among market

participants that this figure understates the fall and that the true average

value decline may be closer to 10%, taking the IPD initial yield from 4.6% to

5.1% and the equivalent yield from 5.1% to 5.6% In the context of the heightened

economic uncertainty this is a logical decline. However the market is not dead

as our recent sale of the Slough property proves.

On the Continent, there has been greater value growth so far in 2007, due in

part to high levels of activity from leveraged buyers. With loan criteria now

tightening, deals are being pulled. There has been a 25 basis point outward

yield shift in prime office yields in Germany and similar moves are likely to be

seen shortly in other Continental investment markets.

The question is what happens next? Inactivity in the market is confusing the

pundits, but we are missing two normal of the normal ingredients for a full

blown property bear market - sky high interest rates and over development.

Consensus forecasts and IPD Index derivative pricing suggest a 10% to 12% value

decline in the next twelve months. UK property share pricing is generally

discounting all this and more and points to portfolio value declines of closer

to 20% over the next twelve months. Much will eventually demand on the state of

tenant demand in 2008, which in turn will depend on the state of the economy and

housing markets.

Tenant Demand

In the UK the best tenant demand remains for offices. UK average office rental

growth continues to run at around 8% per annum, more in Central London and less

in the provinces. The West End has been the outstanding performer with rental

growth close to 25% in the last twelve months. The City has also done well, but

here there is now concern that the credit crisis will lead to a decline in

demand in 2008. In contrast to offices, UK retail and industrial rental growth

is crawling along at between 1% and 2% per annum. On the Continent the picture

is broadly similar with offices again leading with average growth of about 5%

per annum and retail and industrial rental values growing at around 3% to 4% per

annum.

Property Share Background

European property shares had a dismal summer. At the end of March UK stocks were

on an average premium to asset value of 4% and Continental stocks had an average

premium of 30%. Over the six months stated net asset values have risen by around

1% in the UK and 6% on the Continent. UK property shares have fallen 24% in the

period and Continental shares are down by 18%, with the result that, at the end

of September, average UK discounts to asset value were around 22% and average

premiums on the Continent were 6%. At the end of September the average historic

dividend yields were 2.45% for the UK and 3.22% for the Continental stocks.

TR PROPERTY INVESTMENT TRUST PLC

Unaudited interim results for the half year ended 30 September 2007

Ordinary Shares - Manager's Report continued

Share prices declined steadily over the period with the benchmark index falling

in five of the six monthly periods. There were very few earnings shocks, in fact

results in the period were generally at or above expectations. The persistent

driver of price declines was the fear of future property value declines. REIT

status was no defense. Large scale redemptions in open ended property securities

funds made them forced sellers and the declines became almost self feeding.

Shorting was also well in evidence. A few companies made share buybacks into

Treasury but these were generally desultory and of no real consequence. Some

smaller stocks, notably many of those issued on AIM over 2005 and 2006, have

virtually ceased to be marketable. The Trust's exposure to these stocks is

mercifully very light (around 1% of the gross assets). We are watching this area

however in the hope of finding some major bargains if sellers decide that they

are prepared to take any price to offload the shares. In the larger stocks

liquidity has been generally good.

Currently the market is in that mood where almost all news is bad news. If a

company produces a better than expected valuation result then it must have dozy

valuers. Property share prices are Share prices declined steadily over the

period with the benchmark index falling in five of the six monthly periods.

There were very few earnings shocks, in fact results in the period were

generally at or above expectations. The persistent driver of price declines was

the fear of future property value declines. REIT status was no defense. Large

scale redemptions in open ended property securities funds made them forced

sellers and the declines became almost self feeding. Shorting was also well in

evidence. A few companies made share buybacks into Treasury but these were

generally desultory and of no real consequence. Some smaller stocks, notably

many of those issued on AIM over 2005 and 2006, have virtually ceased to be

marketable. The Trust's exposure to these stocks is mercifully very light

(around 1% of the gross assets). We are watching this area however in the hope

of finding some major bargains if sellers decide that they are prepared to take

any price to offload the shares. In the larger stocks liquidity has been

generally good.

Currently the market is in that mood where almost all news is bad news. If a

company produces a better than expected valuation result then it must have dozy

valuers. Property share prices are clearly discounting substantial NAV declines

over the coming months, but that is no guarantee that the stocks will not react

downwards again when the NAV declines are announced. Meanwhile we welcome the

decision by the board of our largest investment, Land Securities, to explore a

three-way split of the business and we think that this move will enhance the

company's long term returns.

Investment Distribution and Activity

We were more active than usual in the period, though the actual turnover figures

are not fully comparable due to the effects of the creation of the Sigma share

class in July. Buybacks formed almost half of our purchase activity and direct

property much of the remainder. The major change in the spread of investments

has been the increase in the direct property from 6.9% in March to 14.8% in

September. We bought two buildings (Harlow and Milton Keynes), the equities

declined by 22% and the properties by 1% over the period and lastly the Sigma

share class took 21% of our equity portfolio but none of the properties. As a

result of this we saw a reduction in the UK quoted shares from 55% to 47.5%

while our Continental holdings remained at around the 38% level. For reference

the UK component of the EPRA benchmark is 43%.

TR PROPERTY INVESTMENT TRUST PLC

Unaudited interim results for the half year ended 30 September 2007

Ordinary Shares - Manager's Report continued

Revenue

The one bright area in our results has been the sharp increase in our revenue

per share. The arrival of the UK REIT regime has pushed the major UK companies

into dividend increases of between 15% and 90%. On the Continent dividend growth

has been strong in France as result of sharp increases in the French cost of

construction index to which rents are generally indexed. We had two special

dividends from Sweden which have been taken as income. Rental income also grew

thanks to letting and purchases. On the cost side lower debt levels reduced our

finance charges and other expenses declined. Though the notional tax charge rose

slightly in percentage terms, share buybacks meant that the increased income was

shared by fewer shares. I provided guidance in March that our revenue per share

would grow by 20% to 30% in the current year. The growth in the first half has

been 35%. One variable which is outside our control is the timing of dividends

in the March and April period, but on the assumption that the timing of payments

is similar to last year my guidance for the full year is now for revenue growth

per share of 25% to 35% for the full year.

Debt, Gearing and Debentures

Reflecting the worsening market conditions, I reduced the Trust borrowings

sharply from April 2007 onwards, with effect that the Ordinary share class net

debt fell from #90m at the end of March 2007 to #21m at the end of September. At

the end of March our debt consisted of #40m in two debentures with coupons of

8.125% and 11.5% repayable in 2008 and 2016 respectively and #50m of short term

variable rate bank debt. All this bank debt has been repaid and some #8m of the

debentures have been allocated to the Sigma share class. Against this remaining

#32m of debenture debt we held #11m of cash at the end of September. As a result

of these changes to our debt, and despite the fall in the asset value, on

balance sheet gearing has fallen from 9% at March to 3% at the end of September.

Since September we have completed the sale of our Slough office building for

#18.5m and we are now holding cash equal to our debenture debt. As in previous

reports I would draw shareholders' attention to the fact that our debenture debt

had a market value higher than its nominal value. If we were to repay the

debenture debt today, the cost to the Trust would be in the order of #45.5m

compared with the face value of #40m. The difference represents a negative value

of some 2.1p per Ordinary share, which is not deducted from the balance sheet

asset value. This figure represents only 0.9% of the asset value per share.

The amount of money borrowed by the Trust and invested in shares or property is

one measure of our gearing, the other is the extent of the debt owed by the

companies in which we hold shares. This figure - the Trust's 'see-through

leverage' which adds the proportionate net debt of all our equity investments to

our on balance-sheet debt - was 36.5% of our gross see-through assets at the end

of September. This figure compares with 39.4% for our Benchmark at the same

date, and a figure of 42.5% for our portfolio at March 2007. This is the first

time this decade that the Trust's see-through gearing has been less than that of

the benchmark, a fact which reflects not only the on balance sheet debt

reductions, but also the deliberate sale of shares with above average leverage.

Direct Property Portfolio

The direct property portfolio was the best performing area of the portfolio over

the six months, producing an un-geared total return of 1.91% for the period,

ahead of the Investment Property Databank Monthly Index return of 1.1%. The

Trust's return was made up of income return of 2.2% and a negative capital

return of 0.29% compared to IPD's 2.4% income return and negative capital return

of 1.3%.

TR PROPERTY INVESTMENT TRUST PLC

Unaudited interim results for the half year ended 30 September 2007

Ordinary Shares - Manager's Report continued

In April we paid #13.2m including costs for Field House in Harlow, Essex which

occupies a large site which may be suitable for long term redevelopment. The

building is let until 2012 at a low rent. In May we bought a modern freehold

office building in Milton Keynes' central business district for an all-in cost

of #6.85 million. The current rent of #420,000 per annum is under review as

part of ongoing lease renewal negotiations with the tenant, Exel Europe Ltd.

Elsewhere, activity was focused on letting the last remaining space at Thames

Central, the Trust's 62,000 sq ft office building in Slough. This was achieved

during the summer. Since the half year we have completed the sale of the

building for #18.5 million, a sum equal to the July and September 2007

valuations, ahead of the March 2007 valuation and significantly ahead of the

original purchase price of #11 million (including acquisition costs), which the

Trust paid in June 2005. The exit income yield is 5.5%

At the half-year (prior to the sale of Thames Central) the direct portfolio made

up 14.8% of the gross assets of the Ordinary share class. Excluding Thames

Central, the direct portfolio comprised 11.6%. Shareholders may be aware that

the Trust has often been prepared to buy vacant property or to hold buildings

let on very short leases. Given the current uncertain outlook, I am happy to

report that, at the end of September, the portfolio vacancy rate was down to

only 1%.

Unquoted Investments

The Trust currently has no unquoted investments

Outlook

Significant movements in property share values tend to presage similar movements

in underlying property values. So the savage decline in seen in property share

prices since March is based on the assumption that there will be a very sharp

fall in property values over the next twelve to eighteen months. Transaction

turnover has already dropped by 75% and yields have started to rise, but only

modestly. Lacking a central market place, property valuers are reluctant to make

large scale write-downs purely on the basis of opinion.

So we have to wait, and while we wait we are increasingly vulnerable to alarm

and despondency. As investors, we feel akin to the residents of a City

threatened by a hurricane. We know that there is a storm out there offshore, and

the media is getting increasingly excited about all the dreadful damage that

could occur. They may be right but dire predictions are good copy, and storms

sometimes moderate or veer off in another direction. We batten down the hatches

and, if we can, leave town, only to sneak back after the storm has passed to see

that well protected property is still there and damage is generally less than

predicted.

The two really dreadful property share markets in my lifetime have been 1973-75

and 1989-92. Both came against the background of sky high interest rates, large

scale overdevelopment and a sharp rise in unemployment which drove down rental

values. We do not have overdevelopment today, no-one is forecasts sky high

interest rates or a doubling of unemployment. So the fall in property values is

a pricing issue.

So what are property share prices discounting? This is easier to ask than to

answer. We have to start from what we think 'normal' pricing should be within a

REIT regime. Let's assume around a 5% discount. If the discount is currently 35%

then, simplistically, the share price is assuming a 30% decline in the NAV.

Adjusting for leverage that will mean a 15% to 25% decline in the value of the

properties. Now the current average initial yield on the UK IPD property Index

is 4.71% and the equivalent yield (which takes account of full rental values) is

5.67%. Two years ago these figures

TR PROPERTY INVESTMENT TRUST PLC

Unaudited interim results for the half year ended 30 September 2007

Ordinary Shares - Manager's Report continued

were 5.35% and 6.23% and, if the pricing stabilised at these levels then,

allowing for a little rental growth, it would need a decline of roughly 10% in

property values from current levels. But if we take yields back to their highest

level this decade, at the end of 2001, they were 7.19% initial and 8.53%

equivalent. To get back to these yields property values would need to fall by

around 33%. If we look the other way round, and use the average property value

decline of 20% implied by share prices, then the required yields are 5.7% and

6.8%. We can only guess at what yield levels transaction volumes will return to

normal levels, but yields of 5.7% and 6.8% look sensible. Events, such as the

recent credit crisis, can change our guesswork, bringing tighter financing and

the prospect of some forced selling. A very sharp fall in residential pricing

would be another negative should it occur.

For the moment uncertainty prevails and markets don't like it. All news is taken

as bad news. What we can say is that, short of Armageddon, we have seen the

worst of the share price falls in the well run well financed property companies.

I think that the point of maximum pessimism is still to be reached. An event may

mark that point, but what event I cannot tell. That event could conceivably

occur anytime now or it may still be twelve months away.

So we wait with our hatches battened down - staying in town as an investor

dedicated to property - trying not to be too brave or too pessimistic. We will

search for opportunities in others' distress and look forward to the day when we

can report a return to decent growth.

Chris Turner

Fund Manager

TR PROPERTY INVESTMENT TRUST PLC

Unaudited interim results for the half year ended 30 September 2007

Sigma Shares - Manager's Report

Introduction

The Chairman's statement comments on the creation of the Sigma share class and

the results of the EGM and the conversion offer and placing.

The Sigma share class was created for dedicated investment in smaller sized

property companies across Europe. As it was largely created through the

conversion of Ordinary shares, Sigma's initial portfolio comprised a pro rata

share of the listed equities within the Ordinary share class portfolio (but

excluding the direct property investments) together with #9.96 million of cash

raised in the Placing. Sigma also took a pro rata share of all the debt (which

included both floating rate short term debt and the debentures) totalling

#10.26m. The initial net assets were #161.9million.

Investment Activity & Distribution of Assets

On the day of conversion, the portfolio comprised over 64% large capitalization

stocks (defined as those with a market cap of over #1bn). As set out in the

prospectus, the Sigma portfolio will be repositioned over time, however, against

the backdrop of difficult market conditions, the pace of reinvestment has been

slower than originally anticipated. Larger cap stocks have suffered from a

liquidity 'discount', whereby in falling markets, the more liquid stocks tend to

be hit harder and faster, consequently, the pace of sale and reinvestment has

been deliberately cautious.

At the end of September, large cap stocks accounted for 57% of the portfolio and

cash for reinvestment (after netting off the debenture debt) stood at 6%.

As a result, at the end of September there is still a strong resemblance to the

Ordinary share portfolio, this reflects the youthfulness of Sigma's portfolio

evolution; 9 weeks is not long! Given the downward trend of the market over the

period, sales (#22.4m) have dominated purchases (#6.7m). We are comfortable

holding cash and seeking out opportunities as they appear.

As stated earlier, caution has been the watchword and purchases have been spread

between adding to existing 'inherited' holdings and investing in a number of new

companies. In the former category are St.Modwen and Shaftesbury (in the UK),

Eurocommercial and Kardan (Netherlands listings) and Kungsleden (Sweden) which

are all long term significant holdings in the Ordinary portfolio top 40.

Although these businesses operate in very different markets, a common theme is

the strength and continuity of longstanding management.

The next group are companies which we have, over a period of time investigated,

liked and subsequently made initial modest investments within the Ordinary

portfolio. However, prior to the creation of Sigma, it had been difficult to

build significant positions in these stocks, relative to the size of the

portfolio. This was a significant driver in the rationale for the creation of

the smaller Sigma class, which will enable more meaningful positions to be

constructed. This group includes Local Shopping REIT and CLS (UK), Fonciere

Paris France, Zueblin France and Fonciere des Murs (France), Plaza Centres

(listed in the Netherlands), Wallenstam Byggnads (Sweden), Alstria and Hahn

(Germany), and Sponda (Finland). Following further investment these stocks are

now important components of the Sigma portfolio.

The third and final group is new companies not previously held by the Trust. So

far these have been relatively modest investments and were principally into two

companies, a German office refurbishment business, IFM and a family run

logistics developer in France, Argan.

TR PROPERTY INVESTMENT TRUST PLC

Unaudited interim results for the half year ended 30 September 2007

Sigma Shares - Manager's Report continued

The sales have been primarily, but not exclusively, from large caps. Two of the

three non European stocks, one in India and one in Japan have been sold. In

addition, the portfolio is increasingly defensively positioned with the

reduction in exposure to the most leveraged companies.

Gearing

At launch, Sigma acquired a pro rata proportion not only of the equity

portfolio, but also the debt. This included a share of the two debentures

(repayable in 2008 and 2016). Given current market conditions, the strategy is

to have no leverage. The short term floating rate debt was repaid almost

immediately on the creation of the new share class and cash is held against the

debentures, neutralizing the capital effect of the debentures. Sigma therefore

effectively has no gearing.

Sigma's see-through debt as a proportion of see-through asset exposure was 39.0%

at the end of September, in line with the benchmark figure of 39.4%.

Outlook

Chris has commented in his report on our market outlook. The immediate effect of

our view has been a change in the pace of the repositioning of the portfolio

towards smaller cap stocks. We will continue to take this cautious approach. My

primary concern is to protect value for shareholders, and I remain reluctant to

switch shareholders funds from the large cap stocks, which due to their

liquidity have borne the brunt of selling pressure and (particularly in the UK)

are standing at significant discounts to their underlying asset values, into the

less liquid smaller cap stocks standing at lower discount levels. This

differential will narrow at some point, until then we ask shareholders to share

our patience.

On a brighter note, these conditions are revealing opportunities for the long

term investor. We are very pleased with the acquisitions we have made so far and

look forward to reporting on many more in due course.

Marcus Phayre-Mudge

Fund Manager

TR PROPERTY INVESTMENT TRUST PLC

Unaudited interim results for the half year ended 30 September 2007

Ordinary Shares - Income Statement

for the half year ended 30 September 2007

Half year ended 30 September Half year ended 30 September Year ended 31 March

2007 2006 2007

(Unaudited) (Unaudited ) (Audited)

Revenue Capital Revenue Capital Revenue Capital

Return Return Total Return Return Total Return Return Total

#'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000

Investment income

Investment income 16,702 - 16,702 14,313 - 14,313 21,264 - 21,264

Other operating 260 - 260 40 - 40 66 - 66

income

Gross rental 1,973 - 1,973 1,454 - 1,454 3,201 - 3,201

income

Service charge 1,095 - 1,095 729 - 729 1,695 - 1,695

income

(Losses)/ gains

on investments

held at

fair value - (184,337) (184,337) - 50,925 50,925 - 236,669 236,669

---------- --------- ---------- ----------- --------- ---------- ---------- --------- ----------

Total income 20,030 (184,337) (164,307) 16,536 50,925 67,461 26,226 236,669 262,895

---------- --------- ---------- ----------- --------- ---------- ---------- --------- ----------

Expenses

Management and

performance

fees 1,818 1,125 2,943 1,630 815 2,445 3,602 9,050 12,652

Direct property

expenses, rent

payable and

service

charge costs 1,457 - 1,457 1,147 - 1,147 2,327 - 2,327

Other expenses 178 - 178 356 - 356 561 - 561

---------- --------- ---------- ---------- --------- ---------- ---------- --------- ----------

Total operating 3,453 1,125 4,578 3,133 815 3,948 6,490 9,050 15,540

expenses

---------- --------- ---------- ---------- --------- ---------- ---------- --------- ----------

Operating profit/ 16,577 (185,462) (168,885) 13,403 50,110 63,513 19,736 227,619 247,355

(loss)

Finance costs 1,384 1,384 2,768 1,792 1,792 3,584 3,669 3,669 7,338

-------- --------- --------- --------- ---------- ---------- --------- ---------- ----------

Income from 15,193 (186,846) (171,653) 11,611 48,318 59,929 16,067 223,950 240,017

operations before

tax

Taxation (2,469) 940 (1,529) (1,850) 782 (1,068) (2,013) (206) (2,219)

-------- --------- -------- -------- -------- -------- -------- -------- --------

Net profit/(loss) 12,724 (185,906) (173,182) 9,761 49,100 58,861 14,054 223,744 237,798

before

reorganisation

Transfer to Sigma (2,203) 26,806 24,603 - - - - - -

shares

===== ===== ===== ===== ====== ====== ===== ====== ======

Net profit/(loss) 10,521 (159,100) (148,579) 9,761 49,100 58,861 14,054 223,744 237,798

===== ===== ===== ===== ====== ====== ===== ====== ======

Earnings per

Ordinary share

(note 2) 3.94p (59.61)p (55.67)p 2.84p 14.28p 17.12p 4.09p 65.16p 69.25p

The total column of this statement represents the Income Statement, prepared in

accordance with IFRS. The revenue return and capital return columns are

supplementary to this and are prepared under guidance published by the

Association of Investment Companies. All items in the above statement derive

from continuing operations.

All income is attributable to the Ordinary shareholders of the parent company.

There are no minority interests.

TR PROPERTY INVESTMENT TRUST PLC

Unaudited interim results for the half year ended 30 September 2007

Ordinary Shares - Balance Sheet

as at 30 September 2007

30 September 30 September 31 March

2007 2006 2007

(Unaudited) (Unaudited) (Audited)

#'000 #'000 #'000

Non-current assets

Investments held at fair value 642,063 905,218 1,082,398

Current assets

Debtors 13,546 3,524 4,239

Cash and cash equivalents 11,022 64 535

--------- --------- ----------

24,568 3,588 4,774

Current liabilities (16,069) (42,160) (70,156)

---------- ---------- ----------

Net current assets/(liabilities) 8,499 (38,572) (65,382)

Total assets less current liabilities 650,562 866,646 1,017,016

Non-current liabilities (36,856) (43,725) (44,072)

---------- ---------- ----------

Net assets 613,706 822,921 972,944

====== ====== ======

Capital and reserves

Ordinary called up share capital 65,625 85,962 83,650

Share premium account 30,023 37,063 37,063

Capital redemption reserve 41,209 36,343 38,655

Retained earnings 476,849 663,553 813,576

---------- ----------- -----------

Equity shareholders' funds 613,857 822,921 972,944

====== ====== ======

Net asset value per Ordinary share 233.79p 239.33p 290.78p

TR PROPERTY INVESTMENT TRUST PLC

Unaudited interim results for the half year ended 30 September 2007

Sigma Shares - Income Statement

Period from inception to 30 September 2007

Period from inception to 30 September

2007

(Unaudited)

Revenue Capital Total

#'000 #'000 #'000

Investment income

Investment income 324 - 324

Interest receivable

and similar

income 132 - 132

Losses on investments

held at

fair value - (11,337) (11,337)

----------- --------- ----------

Total income 456 (11,337) (10,881)

----------- --------- ----------

Expenses

Management and

performance

fees 268 134 402

Other expenses 21 - 21

---------- --------- ----------

Total operating 289 134 423

expenses

---------- --------- ----------

Operating profit/ 167 (11,471) (11,304)

(loss)

Finance costs 71 71 142

---------- ---------- ----------

Income from operations

before tax 96 (11,542) (11,446)

Taxation (16) 14 (2)

--------- ---------- ----------

Net profit 80 (11,528) (11,448)

===== ====== ======

Earnings/loss per

Sigma

Share (note 2) 0.06p (8.75)p (8.69)p

The total column of this statement represents the Income Statement, prepared in

accordance with IFRS. The revenue return and capital return columns are

supplementary to this and are prepared under guidance published by the

Association of Investment Companies. All items in the above statement derive

from continuing operations.

All income is attributable to the Sigma shareholders of the parent company.

There are no minority interests.

TR PROPERTY INVESTMENT TRUST PLC

Unaudited interim results for the half year ended 30 September 2007

Sigma Shares - Balance Sheet

Period from inception to 30 September 2007

At inception

30 September 2007 24 July 2007

(Unaudited) (Unaudited)

#'000 #'000

Non-current assets

Investments held at fair value 138,694 165,809

Current assets

Debtors 999 -

Cash and cash equivalents 20,651 7,127

--------- ----------

21,650 7,127

Current liabilities 2,284 3,428

---------- ----------

Net current liabilities 19,366 3,699

Total assets less current liabilities 158,060 169,508

Non-current liabilities (7,594) (7,594)

---------- ----------

Net assets 150,466 161,914

====== ======

Capital and reserves

Called up share capital 16,474 16,474

Share premium account 13,142 13,142

Retained earnings 120,850 132,298

----------- -----------

Equity shareholders' funds 150,466 161,914

====== ======

Net asset value per Sigma share 114.17p 122.85p

TR PROPERTY INVESTMENT TRUST PLC

Unaudited interim results for the half year ended 30 September 2007

Group Income Statement

for the half year ended 30 September 2007

Half year ended 30 September Half year ended 30 September Year ended 31 March

2007 2006 2007

(Unaudited) (Unaudited) (Audited)

Revenue Capital Total Revenue Capital Total Revenue Capital Total

#'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000 #'000

Investment income

Investment income 17,026 - 17,026 14,313 - 14,313 21,264 - 21,264

Other operating 392 - 392 40 - 40 66 - 66

income

Gross rental 1,973 - 1,973 1,454 - 1,454 3,201 - 3,201

income

Service charge 1,095 - 1,095 729 - 729 1,695 - 1,695

income

(Losses)/gains on

investments

Held at fair value - (195,674) (195,674) - 50,925 50,925 - 236,669 236,669

---------- --------- ---------- ---------- -------- ---------- ---------- --------- ----------

Total income 20,486 (195,674) (175,188) 16,536 50,925 67,461 26,226 236,669 262,895

---------- --------- ---------- ---------- -------- ---------- ---------- --------- ----------

Expenses

Management and

performance

Fees 2,086 1,259 3,345 1,630 815 2,445 3,602 9,050 12,652

Direct property

expenses, rent

payable and

service

charge costs 1,457 - 1,457 1,147 - 1,147 2,327 - 2,327

Other expenses 199 - 199 356 - 356 561 - 561

---------- --------- ---------- ---------- --------- ---------- ---------- --------- ----------

Total operating 3,742 1,259 5,001 3,133 815 3,948 6,490 9,050 15,540

expenses

---------- --------- ---------- ---------- --------- ---------- ---------- --------- ----------

Operating profit/ 16,744 (196,933) (180,189) 13,403 50,110 63,513 19,736 227,619 247,355

(loss)

Finance costs 1,455 1,455 2,910 1,792 1,792 3,584 3,669 3,669 7,338

---------- ---------- ---------- -------- -------- ---------- --------- -------- --------

Income from

operations

before tax 15,289 (198,388) (183,099) 11,611 48,318 59,929 16,067 223,950 240,017

Taxation (2,485) 954 (1,531) (1,850) 782 (1,068) (2,013) (206) (2,219)

-------- --------- --------- --------- ---------- ---------- --------- ---------- ----------

Net profit/(loss) 12,804 (197,434) (184,630) 9,761 49,100 58,861 14,054 223,744 237,798

===== ===== ===== ===== ====== ====== ===== ====== ======

Earnings/(loss)

per ordinary

Share (note 2) 3.94p (59.61)p (55.67)p 2.84p 14.28p 17.12p 4.09p 65.16p 69.25p

Earnings per Sigma

share

(note 2) 0.06p (8.75)p (8.69)p N/A N/A N/A N/A N/A N/A