VALUE AND INDEXED PROPERTY INCOME TRUST PLC

Unaudited Half-Yearly Report

For the Six Months Ended 30 September 2023

Summary

Value and Indexed Property Income Trust PLC (VIP - previously Value and Income Trust PLC) is an investment trust company listed on the London Stock Exchange. It invests directly in UK commercial property to deliver long, strong, index-related income. Its performance benchmark is the MSCI UK Quarterly Property Index, the main benchmark for commercial property performance. OLIM Property Limited is the Investment Manager.

VIP's property portfolio delivered a total return of -1.8% over the six months to end September against -0.5% for the MSCI UK Quarterly Property Index. Over the past 5 years the VIP property return was 4.0% p.a. (Index 1.1% p.a.) and over 10 years it was 7.7% p.a. (Index 5.9% p.a.).

VIP's dividend per share has risen every year since 1986 when OLIM's management began. It has risen by 963% against the Retail Price Index rise of 276%. The medium term dividend policy is for increases at least in line with inflation, underpinned by VIP's index-related property income. A first interim dividend of 3.2p per share was paid on 27 October 2023. The second interim dividend of 3.2p per share will be paid on 26 January 2024 to Shareholders on the register on 29 December 2023, with an ex-dividend date of 28 December 2023. It is intended that a third interim dividend of 3.2p per share will be paid on 26 April 2024 to all Shareholders on the register on 2 April 2024, with an ex-dividend date of 28 March 2024. The targeted total dividend for the full year is 13.2p (+2.3%).

* Savills valuation

Over the six months to end September, four overrented properties (two pubs, a convenience store and a petrol filling station) were sold for £8.1 million, 2.9% above their valuation. Since the end of September VIP have reinvested part of the proceeds in an RPI-linked Virgin Active health and fitness club at Brentwood in Essex. Several other acquisitions are under active negotiation to reinvest the remaining proceeds, with higher yields and better growth prospects. Rent reviews were completed on five properties, and 100% of rent due was collected.

The portfolio is fully let, with no voids (MSCI UK Quarterly Property Index void rate: 8.5%). VIP has no exposure to offices, high street retail or shopping centres. The top six tenants have sixteen leases: Marks & Spencer, HM Government and Local Authorities, Ten Entertainment Group, Premier Inn, Sainsbury's and Parkdean Resorts, representing 65% of the contracted income.

*96.5% of VIP's borrowings are at a fixed rate, with 3.5% variable.

Over the six months to 30 September 2023, VIP's share price fell by 6.6%, while the Net Asset Value per share, valuing debt at par, fell by 7.7%. 230,000 shares were bought back for £0.45 million. VIP's independent property revaluation declined by 5.0% over the period, giving a total return of -1.8% against -0.5% for the MSCI UK Quarterly Property Index. The portfolio outperformed on the income front and underperformed on capital.

ENQUIRIES:

Matthew Oakeshott

OLIM Property Limited

Email: matthew.oakeshott@olimproperty.co.uk

Tel: 020 7846 3252

Louise Cleary

OLIM Property Limited

Email: louise.cleary@olimproperty.co.uk

Tel:  020 7846 3252

Website: https://www.olimproperty.co.uk/value-and-indexed-property-income-trust.html

Manager's Report

Portfolio summary

VIP invests directly in UK commercial properties to deliver long, strong, index-related income.

The portfolio comprises 35 properties across 7 well diversified sub-sectors, all let on 38 full repairing and insuring leases Weighted Average Unexpired Lease Term - WAULT - 11.9 years to the tenants' option to break) to 20 different tenant covenants across England, Scotland and Wales. All are freehold except two which are long leasehold with 108 and 82 years to run (Doncaster and Fareham).

Performance and independent revaluation

Savills' independent valuation as at end September 2023 totalled £135.45 million on 35 properties against £150.50 million on 39 properties at 31 March 2023. This reflects a net initial yield of 6.1% (31 March 2023: 5.8%) after deducting notional purchase costs. The average lot size is £3.9 million.

The valuation reflects a 5.0% like-for-like reduction in capital value of the 35 properties held over the six months. Three properties rose in value over the six months, all pubs where the rents rose by a third; five were unchanged - four small convenience stores and the recently acquired bowling investment at Coventry. The rest fell in value due to the impact of rising interest rates across the property investment market and economic and political turbulence.

The property portfolio has been upgraded further over the six month period with the sale of four overrented properties - two pubs, a convenience store and a petrol filling station for a gross total of £8.1 million (+2.9% on March 2023 valuation) and an average net sale yield of 7.1%.

No properties were purchased over the six months to end September. In November, the acquisition of a freehold purpose built health and fitness club on a 6.8 acre site with over 190 car parking spaces in Brentwood, Essex completed for a total of £6.4 million at a net initial yield of 7.6%, rising to 8.4% in July 2024. It is let to Virgin Active Limited until July 2036 (WAULT just under 13 years) with annual RPI-linked rent increases with a minimum 1% pa and maximum 4% pa. Several other acquisitions are under active negotiation to reinvest the remaining proceeds of the four sales, in properties with longer leases and stronger long term growth prospects at a higher initial yield.

The property portfolio total return on all assets, taking capital and income together and deducting all costs was -1.8% over the six months, against -0.5% for the MSCI UK Quarterly Property Index. VIP's portfolio outperformed on the income front but underperformed on capital.

Responsible impact based ESG management and EPCs

OLIM Property has always taken a cautious and responsible approach to managing VIP's property portfolio, with environmental impact, social responsibility and governance (ESG) taken fully into account in selecting high quality properties with suitable tenants for acquisition, long term management and disposal. Occupier relationships are crucial. We engage with our tenants to understand and establish sustainable rental levels and grow future income streams, working closely with them to address value add energy performance targets. All VIP's properties are regularly reviewed, Energy Performance Certificates (EPCs) and ESG improvements implemented wherever possible, and properties sold where performance may be negatively impacted by ESG factors. 97% of the portfolio now has EPC ratings A to C (31 March 2023: 96%). We continue to work with our tenants to upgrade properties and improve energy efficiency.

Indexed rent reviews

Contracted income from the 35 properties is £8.795 million per annum as at 30 September 2023 where 95.9% (37 out of 38 tenancies) have index-linked or fixed increases. 69.3% of the rental income is linked to RPI, 11.5% linked to CPI and 15.2% with fixed increases. Seven tenancies (26.1%) have annual rent reviews and thirty (69.8%) have five yearly reviews. Only one property, the industrial at Fareham, has three yearly open market upwards only reviews (4.1%).

Annual rent increases were completed at five properties over the six months, with an average uplift of +3.8% on their passing rents (three with RPI-linked increases and two with fixed uplifts), which contributed to a 0.8% increase on income on all held properties. Three rent reviews due in January 2024 have been settled early with their passing rents rising by 33.1% (in line with RPI) over the five years from January 2019. Including five further rent reviews due before 31 March 2024, current contracted rental income on the portfolio should increase by around £350,000 (4.0%) on all held properties over the 12 months.

Market Report

Winter has arrived early this year in the UK commercial property market. There was a short-lived stabilisation in values in the spring when 10 year gilt yields traded below 3.5%. But property valuation yields have been rising again, and capital values falling since April. Property values have now fallen by almost a quarter on average on the MSCI UK Quarterly Property Index from their peak last summer after property yields were pushed down to 40 year lows. QE (Quantitative Easing) had been going on too far, for too long, in the United Kingdom as in most Western economies, forcing interest rates unsustainably low and capital values, especially of low yielding assets, unsustainably high.

The Bank of England had dropped its guard and lost its focus on its key target: to keep consumer price inflation at 2%. It has remained well behind the curve of what was necessary to rebuild international and local investors' confidence, as it raised base rate repeatedly from 0.1% to 5.25% since December 2021. This meant that UK gilt yields have had to shoot up to take the strain; and it will ultimately be necessary to raise short-term interest rates further to get inflation down even to hailing distance of 2%.

The dire state of the UK public finances, the costly over-issuance of index-linked gilts, and the dangerously short (under 4 years average) maturity of the UK gilt market makes us effectively a forced seller to foreigners of vast quantities of gilts every year for the foreseeable future. So no Chancellor of the Exchequer or Governor of the Bank of England can now afford to take risks with inflation. Consumer price inflation is still rising at over 6% on an annual basis, with average earnings up by over 8%, although both rates of increase are now slowing at last.

Bond and currency markets stabilised in the spring after the economic and interest rate chaos of the Truss-Kwarteng administration last autumn. But gilt yields have since broken through their panic peaks of a year ago, being pushed up to 4.7% in mid-October by stubbornly high wage and consumer price inflation and rising oil prices following Hamas' attack on Israel and the growing crisis in the Middle East. Turnover in commercial property is exceptionally thin, well down on 2023 already, languishing around the worst levels of 2009 in the Global Financial Crisis and 2020 at the start of COVID.

The collapse in office capital values has gathered pace, falling by 11% over the first nine months of 2023, with retail down 3%, alternatives down 4% and industrials 1% ahead according to the MSCI UK Quarterly Property Index. But valuers are further behind this thin and falling market than usual. Rental values are generally flat in the office, retail and alternatives sectors but are still rising gently in the industrial sector. Rental growth has been slowing across all sectors recently.

Retail and industrial property void rates are now back down to their pre-COVID levels, as shown in the Vacancy Rates table in the Interim Report, office void rates have shot up from 13% pre-COVID to 22% now, well above the previous record high of 15% for office voids in 2013. This has dragged the average void rate for all property back up to its previous 2009 peak near 11%. Retail void rates have stabilised around 6% and retail tenants are now generally benefitting from lower business rates bills from April, although many shoppers are still strapped for cash. Industrial void rates, although still below their long-term averages, have risen from 5% two years ago to 7% today and higher business rates bills and tenancy failures in this sector will accentuate that trend.

The main pain from voids will be in the office sector for many years to come. Most office owners cannot cope with the long-term structural shift to hybrid working, with two-fifths of UK adults now working from home at least one day a week, against an eighth pre-pandemic. Commuters into London and other large cities are now less visible on Mondays and an endangered species on Fridays. Even where prestige occupiers are taking expensive new space, they are invariably downsizing, usually by at least half, as with HSBC at Canary Wharf. Most older office buildings simply cannot be upgraded to meet the requirements of potential occupiers (or achieve the necessary Energy Performance Certificate ratings) at reasonable, or often any cost. The office oversupply problem is even more serious than that facing retail property 10-15 years ago, and valuers are only just starting to get to grips with it.

Property valuers marked capital values down much further and faster in the second half of 2022 than in previous property market downturns, despite low deal volumes. For some reason, they are proving more reluctant to move valuations down again now on "sentiment" as they call it, rather than evidence of actual deals completed, although values are clearly again under downward pressure. Both rental values and rent collection may also come under pressure in 2024, especially in the office and industrial sectors as weaker tenants struggle and leases expire.

The key to outperformance by property portfolios on both the income and total return fronts in this harsh economic climate, with interest rates and inflation both staying stubbornly high, will be reducing risk and sticking to strong tenants, paying affordable, preferably index-linked, rents on long leases for sustainable buildings in prosperous locations. Above all, that means avoiding office investments for the foreseeable future.

Property prospects by sector

Warehouse / Industrials - Values sliding on low/negligible volumes

Market momentum continued to decline this quarter. Volumes remain extremely low with only £4.66 billion traded so far in 2023 compared to £9.84 billion for the same period for 2022 (53% down). Only £1.46 billion was sold during the last quarter and Q4 has so far been extremely quiet. 2023 will have the lowest trading volumes since 2009.

There are few genuine buyers and even those few have become increasingly selective. One or two big Pension Funds are looking for perfection - the very rare absolutely prime, ESG excellent, high calibre buildings in the best locations with undoubted covenants. But even in the rest of the market - now more than ever - building quality and ESG credentials are topping the wish list. Developers who helped fuel the 3% yields of last year have all but vanished, along with those never to be repeated yields. Some North American Private Equity money is now back looking at industrial property but, given the high costs of financing, their bids are well below what vendors want and after many weeks in due diligence, they often wait until the eleventh hour to chip the price and renegotiate the agreed deal. Sellers have no choice but to accept this behaviour if they need funds quickly.

Occupational activity in the industrial market is more subdued and now back to pre-pandemic levels after the "mega deal" furore of recent years, which was fuelled by online retailing. Total take-up of units in the UK of over 50,000 sq ft stood at 19.2 million sq ft for the first half of 2023 which is down 28% on activity in the same period in 2022 and 33% below the five-year half-yearly average. Q3 figures, once published, will show further decline as the wider economic turmoil reduces occupier appetite and ability to pay rent. Like investors, occupiers have developed much more discerning attitudes towards quality, ESG credentials and energy efficiency and demand has slowed significantly - as an example, Grade A space accounted for 73% of take-up in the first half of 2023. Rental growth forecasts will continue to be revised. Rents grew by over 13% in 2022 and forecasts have been gradually scaled back over the year from 7% for 2023 to sub 4% for the year.

Offices - An emasculated sector, weakening further

Structural change, lack of occupational demand and refinancing, redemption and ESG pressures all continue to hammer the office market with buyers scarce and hyper cautious. Only the very best assets attract some interest, although heavy discounts and double-digit yields are now available for the "rest". Turnover for the UK office market to date now stands at £2.0 billion, 53% below the five yearly average.

The occupational story is equally grim. The vacancy rate for offices in the MSCI monthly index has risen further to 22.0% from 15.2% in January 2021, the height of Covid, an increase of 45%. Like investors, occupiers are only looking for quality and this is difficult to find. 62% of London's office stock is now at least 30 years old with a similar level across the rest of the UK. With office to residential conversions no longer cost effective and prohibitive refurbishment costs, these buildings may well remain empty once vacated and will be so for a substantial period of time.

The most pertinent example of the state of the occupational office market is the recent surrender premium paid by Meta, (ex Facebook) to their landlord, British Land, in order to vacate their refurbished, BREEAM outstanding, EPC excellent, revolutionary low carbon, eight storey office building near Regents Park, London, 1 Triton Square. Having leased the 300,000 sq ft of space in 2021 on a 20 year lease, they never occupied and attempted to sublet the space for over two years without success. Earlier this month, in desperation, the tenant paid the owner, £149m to exit the building - a payment equal to around seven years' worth of rent.

Prices need to fall further for offices to accommodate the need for significant refurbishment and redevelopment. The bottom of the office market is not in sight and empty offices will be a blot on the landscape, in and out of town, as retail once was.

Retail - Valuers not yet reflecting weaker sentiment

According to the GfK Consumer Confidence Barometer, UK consumer confidence fell sharply in October 2023 back to the level in April underlining the cost of living crisis with many consumers not having enough money to make ends meet. In addition, concerns over the cost of gas, electricity and fuel, mortgage rates and rents, a slowing jobs market and uncertainty due to the conflict in the Middle East are contributing to consumer worries. This sentiment will be of concern to retailers in the run up to Christmas and is confirmed in the latest ONS Retail Sales statistics where overall retail sales volumes fell by -0.9% in September.

Non-food sales volumes fell by -1.9%. Unseasonably warm weather reduced sales of autumn-weather clothing (September was the joint warmest September on record) in addition to the impact of continuing increases in the cost of living. Despite this, several strong brands are actively taking high street space including Greggs, B&M, Savers, Gails Bakery, Mint Velvet and Oliver Bonas.

Wilko went into administration in August, the largest retail failure since Woolworths in 2008. They closed 52 shops in September, with rival B&M agreeing to take 51, but most of their other 300 stores lie empty. Boots announced in June that a series of 300 closures would take place as part of a consolidation programme. M&S are to close a further 20 stores as part of its turnaround plan but are expanding M&S Simply Food out of town. Argos have closed 100 stores, moving to concessions inside owner Sainsbury's stores. Hundreds of Lloyds Pharmacies have closed or been sold. Shopping habits generally have changed, with more frequent but lower spending shopping trips.

The retail warehouse occupational market is generally more active but discretionary spending is still under pressure, as households continue to delay big-ticket and non-essential purchases.

Food store sales volumes growth remained positive at +0.2% but growth is slowing in comparison to a rise of +1.4% in August. Annual grocery price inflation is still very high, but for the first time since last year, the prices of some staple foods are now dropping month to month. Tesco's market share is 27.4% followed by Sainsbury's 14.8% and Asda 13.7%. In 2010 the "big four" accounted for over 75% of market share - today this figure is just under 65% with Morrisons market share having fallen to 8.6% - to the benefit of the two main discount retailers Aldi and Lidl which account for 9.9% and 7.6% respectively - the former having overtaken Morrisons over the last 12 months. This increase in the discount retailers' market share is due to consumers taking advantage of cheaper products in the current economic climate.

Aldi opened its 1,000th British store in Woking in September. Today £1 in every £10 spent on groceries is at Aldi and the retailer has plans to open another 500 shops. Lidl has 960 stores and opened its largest warehouse yet in Luton costing £300m. M&S returned after four years to the FTSE 100 in September and is now the third fastest growing food retailer (mainly at Waitrose's expense) after Aldi and Lidl.

During 2023, monthly retail rental value growth has largely been consistent, with the MSCI UK Quarterly Property Index recording growth of +0.8% over the nine months to September, the lowest of the three main property sectors and in comparison to +2.7% for all property.

Retail investment transaction volumes are down by around 80% over the year to date. There is a little activity in small lot sizes, but the bigger end of the market is desperately quiet.

A glut of supermarket stock is now on the market at unrealistic pricing (around 29 assets quoting around £540m). There is no investment market for the larger, often over-rented stores and weaker tenants except at much higher yields. John Lewis are trying to raise £150m from the sale and leaseback of 12 well located Waitrose supermarkets with 20-year inflation linked leases. The uncertainty in the market should present some interesting retail investment opportunities with higher yields offering better protection against current debt costs.

Alternatives - The trend of "flight to quality" gains momentum

Property in the "Alternatives" sector - i.e. everything except offices, retail and industrial/warehouse property - accounts for 23% of the MSCI UK Quarterly Property Index. Volatile, often disappointing returns in the traditional office, retail and industrial sectors have led investors to search for higher returns and lower risk to diversify their portfolios over the past decade. Properties in this sector often offer strong defensive characteristics such as long, index-linked leases and a wide range of property types and tenants. Capital values are, however, now under pressure from rising bond yields in this sector like others. Private property companies and individual investors are still active in the sector, but generally for sub £5 million lot sizes. Funds that were buying the larger lot sizes are now selling, with redemption pressures on the increase.

In some cases, index-linked rents have risen too high and the additional burden of increasing operating costs is clearly hitting tenants who were already struggling post pandemic. This is particularly true of the leisure sector and there are warning signs from independent operators and those backed by private equity. But robust tenants who run a well-managed business are thriving like Shepherd Neame, Britain's oldest brewer, and owner and operator of 296 pubs in Kent and the Southeast. Its recent results showed record revenues and an increase in underlying profits with consumer demand strong, but increased costs across the business, such as the national living wage rising 40% over the past 5 years.

Recovery of confidence in London pubs and restaurants continues as visitor numbers top pre-pandemic levels and office workers return to the capital (except on Mondays and Fridays). Good quality pubs in the country with outside space have generally been trading well, with inevitable weather-related fluctuations. Consumers remain eager to eat and drink out despite the pressure on disposable incomes, but they are increasingly selective about where they spend their money. Well financed operators who keep investing and upgrading their properties, like Greene King, Wetherspoons and Youngs are gaining market share but stretched private equity-backed chains like Stonegate are suffering where they let standards slide.

Cinemas benefitted briefly from the double bubble of 'Barbie' and 'Oppenheimer' but are still seriously structurally challenged by rising costs and competition from streaming. The fourth largest UK player, Empire Cinemas, has just gone into administration - they will not be the last.

Bowling remains one of the only affordable family outings and both main operators (Ten Entertainment Group & Hollywood Bowl) are reporting strong trading figures. Ten Entertainment does not expect to raise pricing in the near term (pricing having been frozen since 2019) with increase in footfall apparently more than sufficient to offset mid-single digit % inflation.

Modern budget hotels and caravan parks in rural areas and tourist hot spots are well placed to benefit from the more cost-conscious consumer who are reconsidering holidays abroad amid a cost-of-living crisis. City centre hotels are also benefiting from returning tourists. Whitbread, the parent company of Premier Inn, recently reported that pre-tax profits have risen by almost a third in the past 6 months with London bookings rising by nearly a quarter year-on-year. Premier Inn remain a much more secure investment than Travelodge or other weaker operators, but capital values are under pressure from rising yields as pension funds focus on selling rather than buying.

Capital values for Health and Fitness clubs have been falling, particularly those in city centres affected by the decline in commuting.

Care homes are still struggling. Staff shortages and insufficient public sector funding remain a cause for concern with no short-term solution in sight. Only the strongest operators in both sectors are likely to attract investment, particularly where value is underpinned by the future residential development potential of sites they occupy.

Established Garden Centre operators have continued to invest in their sites expanding their offer by focusing on better restaurants, soft play areas for children, toys, books, pet food, clothes etc, with concession partnerships now being more carefully considered with the consumer in mind. Operators occupy large sites and so investments in affluent locations are in demand, particularly as they are infrequently offered to the market.

Student numbers are rising and investments on long leases to well-established universities have been in great demand. But capital values of student housing, as of other residential investment types, are declining as investment competition had driven prices up too far. However, many universities are facing a critical shortage of student housing with new local supply limited and likely to remain so with construction costs rising, so values should now be near the bottom in strong locations.

The economy

The UK economy is still stagnating, after a slightly stronger recovery from COVID than the Central Statistical Office first reported. The main Eurozone economies are flat or weakening. Russia is at war, China has serious problems in the property sector and most of the developing world is growing well behind their long term averages.

US economic growth is still running at 2%-3% a year, with the Treasury bond market under considerable strain. This is hard to explain on the normal market metrics of investors' concern about rising inflation or short term interest rates. It may just be a symptom of a wider malaise among international bond investors, worried about a vast overhang of debt worldwide, partly from Central Banks turning from buyers to sellers of their bond holdings built up during Quantitative Easing, (The Bank of England, for example, now holds £750 billion of the £2.5 trillion of UK national debt. Our annual debt interest bill averaged 2% of national income between 2000 and 2020, rose to 4.4% in 2022-23 and will still settle at over 3% a year, costing the country more than any other public service except the NHS). Investors may also be concerned about geopolitical instability in the Middle East and Ukraine, and the possible return of President Trump next year. As the 10-year government bond yield chart, displayed in the Interim Report shows, the 40 year long bull market in bonds is well and truly over and yields have clearly turned upwards for the foreseeable future.

UK consumer price inflation, despite last month's rise in petrol prices, will clearly fall back down soon through 5% on an annual basis. But keeping it in a 3%-5% range will be very hard, with wages rising at over 6% a year and productivity growth negligible. 2% is, therefore, now clearly an unrealistic and unachievable target number for inflation for the UK, and for many Central Banks in the developed world. Underlying inflation in the USA, UK and Eurozone did average around 2% with relatively minor fluctuations between the early 2000's and COVID in 2020 but is now well above that level, and squeezing inflation back down to 2% in the Western economies will be a long, hard slog. The Bank of England has been slow since the pandemic to raise their forecasts for inflation for one year ahead - but at least they have raised them. Their forecasts for two years ahead have, however, stuck firmly in cloud cuckoo land around 2% p.a., falling to 1% from 2023!

The Bank of England's Monetary Policy Committee should be restructured to make it genuinely independent, with more outside economists and professional investors who really understand how the UK economy works and fewer Bank insiders and, especially, retired Treasury officials reinforcing conventional groupthink. The end of ultra-low interest rates has inevitably been a stressful and uneven process, but it is ultimately helpful for the economy. Too much cheap money has inflated asset bubbles, encouraged speculative frenzies ranging from over-hyped technology stocks to crypto currencies, diverted too much capital into financial engineering by private equity, pushed up UK house prices unaffordably and unsustainably and kept too many zombie companies alive for too long. Bankruptcies are now clearly rising.

Investment in the UK has suffered not only from constantly chopping and changing Government policy over the past decade, but also from the effects of perverse and over prescriptive regulation of pension funds for far longer. 30 years ago, UK pension funds typically held over half their assets in UK equities and property, with nearly a quarter in bonds and a quarter overseas. Then strict new accounting rules post the Maxwell scandal forced them into artificial annual valuations of notional surpluses and deficits depending on short-term fluctuations in bond yields and based on highly hypothetical assumptions about how and when pension funds might be wound up. As bond yields were forced down almost to zero after the Great Financial Crash in 2008, so called pension fund deficits ballooned, companies had to make large and unforeseeable contributions to their pension funds, and the pension fund investment climate changed from calm, balanced long-term analysis to extreme short-term myopic risk aversion. Funds were forced to invest ever more heavily in bonds guaranteeing rotten long term negative real returns. This highly artificial process of "derisking" pension funds culminated in the actually extremely risky debacle of LDI (Liability Driven Investment) in 2022. This has predictably produced much hand-wringing and no action from the Bank of England and the other relevant regulators.

Radical reform and simplification of pension regulation is urgently needed, to enable UK pension funds to go back to prudent long-term investment policies based on common sense, not artificial rules, with substantial investment again in their natural homes, UK equities, property and infrastructure which provide high yields and positive prospective long term real returns, instead of dangerous costly debt-driven private equity funds and "structured products". Reform of savings taxation for private investors would also help stimulate investment, especially in UK mid and small cap companies quoted on The London Stock Exchange, and rebuild the City of London's competitive position in raising capital for growing companies post Brexit. British ISA and personal pension fund tax breaks, worth many billions a year, could be redirected to focus on UK shares and investments - it makes no economic sense for UK taxpayers' money to subsidise British investors buying shares in Amazon, Chinese property, Singapore small company equities or Saudi Aramco.

The UK housing market, with prices and rents both significantly higher than in our main Western competitor countries, remains a real hindrance to productivity and growth. The ongoing mortgage crisis proves yet again that it is both a source of financial instability and a barrier to geographic and social mobility. Only 210,000 homes were completed in the year to April 2023, against 330,000 in 1972 and about 400,000 in 1962, and this year will be even worse. Private sector completions have shown little change, but social housebuilding by local authorities and housing associations has collapsed. Changes to stamp duty, interest deductibility and tenure for private landlords in recent years have also led to an exodus of small landlords and explosive upward pressure on rents.

Only 30% of households now have mortgages, against 40% in the late 1980s, but there are more renters (9.2 million against 7.4 million mortgage holders) who are also often now facing unaffordable housing costs, especially as private landlords sell up. The last two occasions that mortgages were this unaffordable were in 1989 and 2007. Real house prices then fell by 20% each time, and they are well on their way there in this downturn. The obvious sustainable solution to the UK housing crisis is to rebuild the long lost genuinely affordable social housebuilding programme, along with radical reform of the planning system to stop the so called major "housebuilders" being really land speculators with little building businesses on the side.

The international economic outlook and business confidence are flat at best, but three big question marks remain over economic forecasts until end-2024. On the upside, if the war in Ukraine were to end in an effective Russian defeat, inflation and interest rates would move lower worldwide. But that becomes less likely, the more the West turns its foreign policy focus and resources to the intractable crisis in Israel and Palestine. On the downside, world bond markets are showing serious signs of strain. A non-bank credit crunch may have already started in the USA and UK as the private equity bubble bursts. Most significant of all, global warming is here and now, with 2022 the world's hottest year and June and part of October 2023 easily England's hottest on record.

Conclusion - UK commercial property now attractive at real deal prices, not historic valuations

Valuers are further behind the real market than usual in UK commercial property, because genuine cash buyers are few and far between. But at average yields, now really around 7%, UK non-office property now offers a realistic yield premium over UK equities and conventional long-dated gilts, despite short term UK interest rates having to stay at or above current levels for some time until inflation falls much nearer the Bank of England's target.

Rising bond yields and lower liquidity are never good for property prices, commercial or residential, but property has always been a cyclical market and always will be. The key to long term outperformance in any market, but especially property where so many players overdose on debt, is to buy from the frightened and sell to the greedy. The real bargain is lower down the risk curve. Safe, non-office property let at sustainable rents on long, index-linked leases to strong tenants in prosperous parts of the UK, typically available at initial yields of 5%-6%, now offers both very good absolute investment value and an outstandingly high 4 point margin over long dated UK index-linked gilts, now trading at only 1% real.

Matthew Oakeshott & Louise Cleary

OLIM Property Limited

15 November 2023

Interim Board Report

Management and administration of VIP

Value and Indexed Property Income Services Limited (VIS), a wholly owned subsidiary of the Company, is the Company's Alternative Investment Fund Manager (AIFM). As AIFM, VIS has responsibility for the overall portfolio management and risk management of the assets of the Company. VIS has delegated its portfolio management responsibilities for the property portfolio to OLIM Property Limited (OLIMP) (the Investment Manager). The delegation by VIS of its portfolio management responsibilities is in accordance with the delegation requirements of the Alternative Investment Fund Managers Directive (AIFMD). The Investment Manager remains subject to the supervision and direction of VIS. The Investment Manager is responsible to VIS and ultimately to the Company in regard to the management of the investment of the assets of the Company in accordance with the Company's investment objective and policy. VIS has a risk committee which reviews the effectiveness of the Company's internal controls and risk management systems and procedures and identifies, measures, manages and monitors the risks identified as affecting the Company's business.

BNP Paribas Trust Corporation UK Limited is the Company's Depositary and oversees the Company's custody and cash arrangements.

Principal and Emerging Risks and Uncertainties

The Board carries out a regular review and robust assessment of the principal and emerging risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity. These principal and emerging risks and uncertainties are set out in full in the Strategic Report within the 2023 Annual Report, and remain applicable to the rest of the financial year.

Climate Change and Social Responsibility Risk

The Board recognises that climate change is an important emerging risk that all companies should take into consideration within their strategic planning, but as an investment trust company, the Company has no direct employee or environmental responsibilities. The Board encourages the Manager to take environmental, social and governance matters fully into account, as set out in the 2023 Interim Report.

Statement of Directors' Responsibilities

The Directors confirm that to the best of their knowledge:

?   the condensed set of Financial Statements within the Half-Yearly Financial Report has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting'; and

?   the Interim Report includes a true and fair review of the information required by 4.2.7R and 4.2.8R of the FCA's Disclosure, Guidance and Transparency Rules.

For and on behalf of the Board of Value and Indexed Property Income Trust PLC

John Kay

Chairman

15 November 2023

Group Statement of Comprehensive Income

The total column of this statement represents the Statement of Comprehensive Income of the Group, prepared in accordance with IFRS. The revenue return and capital return columns are supplementary to this and are prepared under guidance issued by the Association of Investment Companies. All items in the above statement derive from continuing operations.

All income is attributable to the equity holders of Value and Indexed Property Income Trust PLC, the parent company. There are no minority interests.

The Board has declared a first quarterly dividend of 3.20p per share (2023 - 3.00p) which was paid on 27 October 2023 to all Shareholders on the register on 29 September 2023 (ex-dividend date of 28 September 2023). A second quarterly dividend of 3.20p per share (2023 - 3.10p) will be paid on 26 January 2024 to those Shareholders on the register on 29 December 2023 with and ex-dividend date of 28 December 2023. It is intended that a third quarterly dividend of 3.20p (2023 - 3.20p) will be paid on 26 April 2024 to those Shareholders on the register on 2 April 2024. The ex-dividend date will be 28 March 2024.

The Notes form part of these Financial Statements.

Group Statement of Financial Position

These Financial Statements were approved by the Board on 15 November 2023 and were signed on its behalf by:

John Kay

Chairman

The Notes form part of these Financial Statements.

Group Statement of Changes in Equity

The Notes form part of these Financial Statements.

Group Statement of Cashflows

The Notes form part of these Financial Statements.

Notes to the Financial Statements

1. Accounting policies

The Financial Statements have been prepared in accordance with UK adopted international accounting standards.

The functional and presentational currency of the Group is pounds sterling because that is the currency of the primary economic environment in which the Group operates. The Financial Statements and the accompanying notes are presented in pounds sterling and rounded to the nearest thousand pounds except where otherwise indicated.

(a)  Basis of preparation

The Financial Statements have been prepared on a going concern basis and on the historical cost basis, except for the revaluation of investment properties and investment in subsidiaries, both of which are valued at fair value through profit and loss. Where presentational guidance set out in the Statement of Recommended Practice Financial Statements of Investment Trust Companies and Venture Capital Trusts (the SORP) issued by the Association of Investment Companies (AIC) in July 2022 is consistent with the requirements of IFRSs, the Directors have sought to prepare the Financial Statements on a basis compliant with the recommendations of the SORP.

The Board has considered the requirements of IFRS 8, 'Operating Segments'. The Board is charged with setting the Group's investment strategy. The Board has delegated the day to day implementation of this strategy to the Investment Manager but the Board retains responsibility to ensure that adequate resources of the Group are directed in accordance with its decisions. The Board is of the view that the Group is engaged in a single segment of business, being investments in UK commercial properties. The view that the Group is engaged in a single segment of business is based on the fact that one of the key financial indicators received and reviewed by the Board is the total return from the investment portfolio taken as a whole. A review of the investment portfolio is included in the Investment Manager's Report in the Interim Report.

All expenses and finance costs are accounted for on an accruals basis. Expenses are presented as capital where a connection with the maintenance or enhancement of the value of investments can be demonstrated. In this respect and in accordance with the SORP, the investment management fees are allocated 100% to income, in line with the general practice of property companies.

The Group's Financial Statements have been prepared using the same accounting policies as those applied for the Financial Statements for the year ended 31 March 2023 which received an unqualified audit report.

(b) Going concern

The Group's business activities, together with the factors likely to affect its future development and performance, are set out in the Interim Report. The financial position of the Group as at 30 September 2023 is shown in the Statement of Financial Position. The cash flows of the Group for the half year to 30 September 2023, which are not untypical, are set out in the Group Statement of Cashflows in the Interim Report. The Group had fixed debt totalling £49,036,225 as at 30 September 2023; none of the borrowings is repayable before 2026. As at 30 September 2023, the Group's total assets less current liabilities exceeded its total non current liabilities by a factor of over 2.8.

The assets of the Group consist mainly of investment properties that are held in accordance with the Group's investment policy, as set out in the Interim Report. The Directors, who have reviewed carefully the Group's forecasts for the coming year and having taken into account the liquidity of the Group's investment portfolio and the Group's financial position in respect of cash flows, borrowing facilities and investment commitments (of which there is none of significance), are not aware of any material uncertainties that may cast significant doubt upon the Group's ability to continue as a going concern. Accordingly, the Directors believe that it is appropriate to continue to adopt the going concern basis in preparing the Group's Financial Statements.

(c) Basis of consolidation

The consolidated Financial Statements incorporate the Financial Statements of the Company and the entity controlled by the Company (its subsidiary). An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has ability to affect those returns through its power over the investee. The Company consolidates the investee that it controls. All intra-group transactions, balances, income and expenses are eliminated on consolidation. The investment in the subsidiary is recognised at fair value in the Financial Statements of the Company. This is considered to be the net asset value of the Shareholders' funds, as shown in its Statement of Financial Position.

Value and Indexed Property Income Services Limited is a private limited company incorporated in Scotland under company number SC467598. It is a wholly owned subsidiary of the Company and has been appointed to act as the Alternative Investment Fund Manager of the Company.

(d) Presentation of Statement of Comprehensive Income

In order to reflect better the activities of an investment trust company and in accordance with guidance issued by the AIC, supplementary information which analyses the Statement of Comprehensive Income between items of a revenue and capital nature has been presented alongside the Statement of Comprehensive Income. In accordance with the Company's Articles, net capital returns may be distributed by way of dividend.

(e) Dividends payable

Interim dividends are recognised as a liability in the period in which they are paid as no further approval is required in respect of such dividends. Final dividends are recognised as a liability only after they have been approved by Shareholders in general meeting.

(f) Investments

Investment properties

Investment properties are initially recognised at cost, being the fair value of consideration given, including transaction costs associated with the investment property. Any subsequent capital expenditure incurred in improving investment properties is capitalised in the period incurred and included within the book cost of the property.

After initial recognition, investment properties are measured at fair value. Gains and losses arising from changes in fair value are included in net profit or loss for the period as a capital item in the Statement of Comprehensive Income and are ultimately recognised in retained earnings.

The Group leases out all of its properties on operating leases. A property held under an operating lease is classified and accounted for as an investment property where the Group holds it to earn rental, capital appreciation or both. Any such property leased under an operating lease is carried at fair value. Fair value is established by half-yearly professional valuation on an open market basis by Savills (UK) Limited, Chartered Surveyors and Valuers, and in accordance with the RICS Valuation - Global Standards January 2020 (the 'RICS Red Book'). The determination of fair value by Savills is supported by market evidence.

Leases

The Group leases properties that meet the definition of investment property. These right-of-use assets are presented as part of Investment Properties in the Statement of Financial Position and held at fair value.

2. Income

3. Return per Ordinary Share

4. Dividends paid

* First and second quarterly dividends for the year to 31 March 2024 have been declared with pay dates falling after 30 September 2023. These have not been included as liabilities in these Financial Statements. See Note 5.

5. Interim dividend

A first quarterly dividend of 3.20p per Ordinary Share was paid on 27 October 2023 to Shareholders registered on 29 September 2023, with an ex dividend date of 28 September 2023 (2022 - 3.00p). A second quarterly dividend of 3.20p per share will be paid on 26 January 2024 to Shareholders registered on 29 December 2023, with an ex dividend date of 28 December 2023 (2022 - 3.10p).

It is intended that a third quarterly dividend of 3.20p (2023 - 3.20p) will be paid on 26 April 2024 to those Shareholders on the register on 2 April 2024, with an ex-dividend date of 28 March 2024.

6. Retained earnings

The table below shows the movement in retained earnings analysed between revenue and capital items.

7. Transaction costs

During the period, expenses were incurred in acquiring and disposing of investments classified as fair value through profit or loss. These have been expensed through capital and are included within gains and losses on investments in the Statement of Comprehensive Income.

The total costs are as follows:-

8. Fair value hierarchy disclosures

The table below sets out fair value measurements using the IFRS 13 Fair Value hierarchy:

Fair value categorisation within the hierarchy has been determined on the basis of the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety as follows:-

Level 1 - inputs are unadjusted quoted prices in an active market for identical assets

Level 2 - inputs, not being quoted prices, are observable, either directly (i.e., as prices) or indirectly (i.e., derived from prices)

Level 3 - inputs are not observable

The fair value of the loans is determined by a discounted cash flow calculation based on the appropriate inter-bank rate plus the margin per the loan agreement. These instruments are, therefore, considered to be Level 2 as defined above. There were no transfers between Levels during the period. All other assets and liabilities of the Group are included in the Balance Sheet at fair value.

9. Relationship with the Investment Manager and other Related Parties

Matthew Oakeshott is a Director of OLIM Property Limited which has an agreement with the Group to provide investment management services.

OLIM Property Limited receive an investment management fee of 0.60% of the capital assets that it manages.

OLIM Property Limited received an investment management fee of £440,343 (half year to 30 September 2022: £515,000 and year to 31 March 2023: £990,000). At the period end, the balance owed by the Group to OLIM Property Limited was £64,154 (31 March 2023: £52,747) comprising management fees for the month of September 2023, subsequently paid in October 2023.

Value and Indexed Property Income Services Limited is a wholly owned subsidiary of the Value and Indexed Property Income Trust PLC and all costs and expenses are borne by Value and Indexed Property Income Trust PLC. Value and Indexed Property Income Services Limited has not traded during the period.

10. Half Yearly Report

The financial information contained in this Half Yearly Financial Report does not constitute statutory accounts as defined in sections 434 - 436 of the Companies Act 2006. The financial information for the six months ended 30 September 2023 and 30 September 2022 has not been audited.

The information for the year ended 31 March 2023 has been extracted and abridged from the latest published audited financial statements and do not constitute the statutory accounts for that year. Those Financial Statements have been filed with the Registrar of Companies and included the Report of the Independent Auditor, which contained no qualification or statement under section 498 of the Companies Act 2006.

This Half-Yearly Report was approved by the Board on 15 November 2023.

Other information

A full copy of the 2023 Interim Report and Financial Statements will be printed and issued to Shareholders. In due course, a copy will be available on the Company's website at:

https://www.olimproperty.co.uk/value-and-indexed-property-income-trust.html.

The 2023 Interim Report and Financial Statements will be submitted to the National Storage Mechanism and will be available for inspection at:

https://www.fca.org.uk/markets/primary-markets/regulatory-disclosures/national-storage-mechanism.

Neither the content of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

By order of the Board

Maven Capital Partners UK LLP

Company Secretary

0141 306 7400

15 November 2023