Market Capitalisation £560.75M

Picton Property Income Limited entered the UK REIT regime on 1 October 2018 and became a commercial company. As such Picton is outside the scope of AIFMD and is not required to produce a Key Information Document (KID) under PRIIPs.

RNS Number:9343R
ING UK Real Estate Income Trust Ltd
09 April 2008

                    ING UK Real Estate Income Trust Limited

                                31 DECEMBER 2007

The financial information set out in this announcement does not constitute the
Company's statutory accounts for the year ended 31 December 2007.

The financial information for the year ended 31 December 2007 is derived from
the financial statements delivered to the UK Listing Authority and The Channel
Islands Stock Exchange. The Auditors reported on those accounts, their report
was unqualified and did not contain a statement under section 65(3) of The
Companies (Guernsey) Law, 1994.

Facts and Figures

ING UK Real Estate Income Trust Limited is a closed-ended, Guernsey registered
investment company, launched on the London and Channel Islands' Stock Exchanges
on the 25 October 2005. With approximately 800 investors, the Company, together
with several subsidiaries including a Guernsey unit trust and four Jersey unit
trusts which beneficially hold title to the properties, comprise "the Group".


The Group aims to provide shareholders with an attractive level of income
together with the potential for capital growth. It can invest both directly and
indirectly in an investment portfolio comprising UK, Isle of Man and Channel
Islands properties. The Group's focus is on five principal commercial property
sectors: office, retail, retail warehouse, industrial and leisure. Maximum
borrowings are limited to 65% of gross assets. The investment portfolio is
managed by ING Real Estate Investment Management (UK) Limited.


>            Income profit for the year, prior to payment of dividends
and excluding revaluation, of £18.5 million, compared to a prorated income
profit of £17.9 million for the year to 31 December 2006.

>            Dividends totalling £20.7 million paid in the year, equivalent to
6.25 pence per ordinary share.

>        Gain of £4.1 million arising from sale of assets.

>            Total expense ratio of 1.11% (calculated as total expenses as a
proportion of the average property assets).

>  Reduction in total cost of debt to 5.16% (31 December 2006: 5.18%). Since the
year end and following disposals, the loan balance of £307.0 million has been
reduced to £282.2 million and total debt cost reduced to 5.09%.

> 1,098,700 shares repurchased for cancellation during the year, enhancing


>                 Outperformance of the underlying property portfolio at income
level, generating an income return of 5.7% compared with the IPD Annual Index of

>            Outperformance of underlying property portfolio generating a total
return of -0.8% compared to the IPD Annual Index of -3.4%.

>            Dividend cover of 89% was achieved reflecting active management in
the year.

>            Exchanged contracts on six disposals over the year, at an average
premium of 8.8% over preceding valuation.

>            Outperformance principally driven through sales programme and
exposure to office sector.

Facts and Figures (continued)

                                          Year ended 31    15 month period to 31
                                          Dec 2007         Dec 2006
Net asset value                           £369.5 million   £418.3 million
Net asset value per share                 112 pence        126 pence
Dividends paid                            £20.7 million    £17.8 million
Net income for the year/period            £18.5 million    £22.4 million
Pre-tax (loss)/profit (including          £(27.8) million  £106.6 million
unrealised (losses)/gains)
(Loss)/earnings per share                 (8.2) pence      34.4 pence
(Loss)/gain on interest rate swaps        £(3.1) million   £8.7 million
(Loss)/gain on revaluation of portfolio   £(46.7) million  £70.4 million
Gearing*                                  45.4%                 44.6%
Share price                               69.5 pence       118 pence
Net asset value
total return                             (6.8)%                33.8%
Shareholder total
return                                   (35.8)%                25.4%

* Calculated as debt as a proportion of gross assets less current liabilities

Chairman's Statement

I am pleased to present the Annual Report for ING UK Real Estate Income Trust
Limited for the 12 months from 1 January 2007 to 31 December 2007, during which
time conditions within the UK commercial property market changed dramatically.

Despite rising interest rates, the first six months were to be characterised by
increasing asset values and continued investor demand. The later months have
been in sharp contrast, with reduced investor activity and significantly tighter
availability of bank lending, which has led to a 'buyers' market' with reducing
capital values, despite a reduction in financing rates.

In 2006, we highlighted that growth in the market driven by yield compression
would not last and that income would become a primary driver of performance.
Although the correction in the underlying asset class has been significantly
sharper than commentators had predicted, this change in sentiment has primarily
been driven by capital market conditions, rather than the underlying
occupational market which provided positive rental growth throughout the year.

Against this backdrop, I am pleased to report that your Company, as an income
focused vehicle, has met its objectives and continued to pay a dividend
equivalent to 6.25 pence per share. The ungeared performance of the portfolio
outperformed the IPD Annual Index on both an Income and Total Return basis.

The Investment Manager continues to extract value from the portfolio and
acquired only £2.6 million of assets in 2007. It sold or exchanged contracts on
approximately £39 million of sales, not only ahead of the original cost on
acquisition, but also over 8% on average ahead of their preceding valuation.

Set against the repricing of the commercial property market, there have been
considerable successes within the property portfolio and through active
management at the end of the year the dividend cover of the Group was 89%, with
the remaining £2.2 million distributed to investors from retained earnings.

Your Board has been active in addressing issues within the underlying market
and, as such, during the year and also following the year end, the Group reduced
the overall level and cost of its borrowings.

In addition, over the year there has been an increasingly wide divergence
between the asset valuation and the share price, as the volatility and forward
looking nature of the share price became disconnected with the more stable asset
class.  This led your Company to seek to repurchase over one million shares for
cancellation during the final quarter of 2007, which enhanced both income and
Net Asset Value per share.

The Board has been pleased with the way the Investment Manager has managed the
portfolio during these difficult market conditions, but remains acutely aware of
the need to maintain all activity cognisant with the prevailing conditions and
ensure that no opportunity is missed to optimise investor returns.

One particular aspect that both the Board and Investment Manager are aware of is
the importance of maintaining a competitive total expense ratio, which for the
year to 31 December 2007 was 1.11%.

At the same time the Board is acutely aware of the volatility of current
conditions and will ensure that the investment strategy is continually monitored
and adapted to meet any unexpected and significant changes in market sentiment.

The portfolio remains well balanced, offers an attractive income yield of just
over 6 per cent with reversionary potential, a 95% occupancy rate and a secure
income stream with an average lease length in excess of 8.5 years.

Whilst economic concerns still exist, the effect of declining interest rates and
a rising income return from commercial property is bringing investors and
liquidity back to the sector. Whilst capital values of commercial real estate
continue to be volatile, the income and stability of this income stream is one
of the defensive attributes of the sector and we believe the Group is well
structured in current market conditions to continue to meet its objective of
delivering a strong income return.

Given the structure of the portfolio and the Investment Manager's performance to
date, the Board is confident that the Investment Manager will continue to take
action and address the challenging market conditions to best position the
Company to achieve its objectives during 2008.

Nicholas Thompson

Chairman of the Board

8 April 2008

Economic and Property Market Review

Economic Overview

2007 was an unsettling year for the UK economy. Whilst GDP growth continued to
advance, rising at a robust pace of 2.8% per annum up to the end of the year,
there was also a marked deterioration in financial conditions that began in the
summer. The UK was not immune from the US sub-prime mortgage crisis and
institutions also suffered significant sub-prime-related losses.

The result of the losses was a notable reduction in the willingness of banks to
lend to each other and, consequently, the spread between the 3-month LIBOR and
the base rate widened significantly, reducing the amount of liquidity available
in the financial system. Moreover, despite the strength of the underlying
economy, the credit crunch has impacted on investor sentiment across all asset
classes. The risk premium to invest will almost certainly have risen across the
asset classes. An exception was gilts, where yields fell as investors sought a
degree of security in uncertain times. The credit tightening will eventually
ease, probably later on in 2008, and although base rates are now reducing, it is
difficult to envisage debt in the future being as freely available as it has
been over the last four to five years.

Adding to the concerns brought about by the seizing up of the financial system,
UK economic growth is also expected to slow in 2008. Current economic growth has
been partly underpinned by the resilience of household consumption. However,
previous interest rate rises are beginning to take effect with household
expenditure and retail sales growth now starting to ease.

RPI inflation was 4.1% per annum in February 2008, up from 4.0% in December
2007. Upside risks include food and oil prices and their effects on both
producers and manufactured goods prices. The outlook for a weak 2008 prompted
the Bank of England to cut rates by 25 basis points in December to 5.50% and
again in early February 2008 to a current 5.25%. This was influenced by the
ongoing credit crunch and fears of it spilling over to the real economy.

Property Performance

According to the IPD Annual Index, the average ungeared UK property total return
was -3.4% over the year to December 2007. This overall figure masks significant
variation in monthly performance. On a month-on-month basis, total returns were
mild but positive for the first half of the year. However, thereafter total
returns started to decline as the market began to experience reduced investor
demand and weakening capital values, and the credit crunch began to impact on
investor sentiment.

The worst monthly performance was recorded in December 2007 and total returns
actually improved over the following month. It is, however, too soon to tell
whether this slight deceleration in the decline marks a more general improvement
in the market.

In terms of the main three-sector hierarchy, the Office sector saw the best
relative return of -0.7% per annum, followed by -3.3% per annum for Industrials
and -7.1% per annum for Retail.

The underperformance of the retail sector was chiefly driven by the significant
declines in total returns in the retail warehouse sub-sector, reflecting
proportionally greater outward yield movement from their lower yield level,
whilst the more defensive shopping centre segment fared relatively better.

The sub-sectors that fared relatively better overall, however, were mainly
focussed on London and the South East, such as West End and Mid-town offices,
primarily driven through strong rental growth, South East Industrial and Rest of
South East offices.

Capital growth detracted from returns to a significant extent in 2007, with the
income return acting as a buffer against the impact of the outward yield

The decrease in liquidity was demonstrated by the reduction in UK property
investment turnover levels in the closing months of 2007, down from an average
of around £15 billion quarter-on-quarter over the last few years to around £7
billion in the last quarter of 2007. This means that the normal volume of deal
evidence has not been available for year end valuations and therefore we expect
that the outward yield movement that was seen in the market in late 2007 will
continue to filter through into the IPD index this year as a result of valuation

However, given the relative "speed" of the yield movement to date, it is
unlikely that this will be a drawn out process as was the case in the early
1990s, but the pace of yield increase is instead expected to slow. It is also
unlikely that the full extent of yield movement that has been registered in the
transactions market has yet to be reflected in the IPD index, due to the
valuation process, which tends to "smooth" the highest and lowest performance
points out of the index.

Looking further into the performance drivers, unsurprisingly given the buoyant
conditions in the wider economy over the last few years, IPD rental growth
continued at a robust 4.1% per annum. This was largely powered by central London
office stock seeing rental value growth of around 10 to 15% over the last 12
months. However, because of previous capital growth, income returns still
marginally fell from 4.9% per annum to 4.6% per annum over the same 12 month

The strong rental value growth that was recorded in the central London office
market was also seen elsewhere in the country, with Rest of South East offices
(excluding central London) also seeing buoyant growth of 4.1% per annum. Another
strong performer was South East standard retail, which achieved rental value
growth of 2.8% in 2007. The industrial sector, however, continued to see
relatively low rises in rental levels but, more positively, maintained the
highest income return of 6.9% per annum.

As a result of this deterioration in investor sentiment and outward movement in
yields, the property market underperformed both equities and bonds on an annual
basis to December, with the other main asset classes recording total returns of
4.6% and 2.9% respectively. For the UK, on a one, three year and five year basis
equities outperformed both bonds and property. Property shows a much stronger
performance over ten years, outperforming both asset classes, with an annualised
return of 11.5%.

Portfolio Review


The investment strategy is aimed at providing an attractive level of income,
together with the potential for capital growth, from directly or indirectly
investing in a diversified portfolio of property located in the UK, Isle of Man
or Channel Islands.

It is intended that the Group will hold a diversified portfolio of properties.
The Group's strategy includes investment in the five principal sectors; namely
office, retail, retail warehouse, industrial and leisure. The Group may also
invest in other property funds.

The Investment Manager has a strategy of targeting assets with good fundamental
characteristics, maintaining a diverse spread of occupational tenants and above
average income yields for the property sector, with opportunities to enhance
value through active management.

This is achieved by taking an overweight position in sub sectors which provide a
higher level of income return relative to the IPD Annual Index, whilst at the
same time providing opportunities for capital growth. The Group has an
overweight position in the office and industrial sectors and a lower weighting
towards the retail sector. In particular the Group has a below average exposure
to lower yielding sub sectors such as retail warehousing and central London

Particular emphasis is placed on providing a stable and secure cash flow, added
to which active management initiatives are pursued that can enhance income or
capital value.

Where assets do not meet the strategy of providing strong income return
characteristics or offer the prospects for capital enhancement, and where active
management initiatives have been completed, then, where appropriate, monies will
be recycled to opportunities that provide greater performance potential.

With a number of disposals completed throughout 2007 and early in 2008, the
Investment Manager has sought to enhance the income bias and at the same time
reduce the number of non-core assets within the portfolio. Proceeds were
primarily used to reduce the overall level and cost of debt and it is expected
that this will continue into 2008, with a view to repaying all non-securitised
borrowings by the end of this year.

Portfolio Performance

For the year ending 31 December 2007, at an ungeared level, the underlying
portfolio outperformed the IPD Annual Index on both an Income and Total Return

The Group's property portfolio produced a total loss of -0.8% which compares
favourably with the IPD Annual Index of -3.4%.  The portfolio has now
outperformed this Index since inception.

The Income Return from the portfolio was 5.7% for 2007, significantly ahead of
the IPD Annual Index at 4.6%, for the second consecutive year.

In 2007, as in 2006, the portfolio outperformed on an income return basis due to
the portfolio structure providing a relatively high initial yield, further
combined with active management initiatives that enhanced income throughout the

Net Asset Value

The marked and sudden movement in capital values in the second half of 2007
impacted overall performance, and, together with the impact of gearing, reduced
the overall Net Asset Value of the Group.

For the year to December 2007, the NAV Total Return was -6.8%. NAV Total Return
is calculated as the percentage increase or decrease in net asset value
generated over the year assuming the dividend is reinvested.

Since launch in October 2005, the NAV Total Return has been 10.3% on an
annualised basis.

Review of 2007

The repricing of commercial real estate during 2007 came much sooner and was
more severe than we had predicted. Whilst the occupier market remained robust
throughout the year, this was in marked contrast to the investment market in
which values corrected sharply in the latter half of the year.

Set against this correction, there was significant activity on the underlying
portfolio and real progress was made in enhancing the quality of the portfolio
and income generated. In the latter half of 2007 active management was as much
focussed on maintaining value as opposed to creating it.

The sales programme which continued throughout the year, with selective
disposals across all sectors, resulted in proceeds that were used to degear the
portfolio, whilst at the same time reducing the overall exposure to the retail
sector in particular.

Whilst it was the Investment Manager's intention to reduce borrowing further
over the course of the year, the speed of the correction in the underlying
market and significantly lower transaction volumes in the fourth quarter
resulted in some disposal transactions becoming abortive in the latter part of
the year as purchasers withdrew from transactions, unable to obtain finance or
approval to proceed.

With a portfolio as diverse as this, there are likely to be many asset
management led initiatives that provide performance on a cumulative basis rather
than one off transactions. We have however highlighted below examples across all
sectors that contributed to performance. What is particularly pleasing is the
completion of a number of business plans, many of which were first prepared at
the launch.

The Investment Manager's focus continues to be on active management to retain
existing tenants, minimise void periods and capitalise on situations where the
landlord and tenant can work together to create value. Particular emphasis has
been on providing additional income and thereby enhancing the dividend cover
which this year was close to 90%.

At the year end the portfolio consisted of 58 assets, diversified across both
sector and geographically, providing an income stream secured against over 300
separate tenancies. The running yield on the portfolio was 6.01% and
reversionary yield 6.63%, before purchaser's costs.

A brief sector by sector summary follows;


The Group has an overweight position towards the office sector, which performed
well during 2007.

In particular, central London assets, such as Boundary House, London, EC3 which
was acquired in 2006 at a low rent of £18 per sq ft., saw significant
performance as leases were restructured and income grew, with over 20% rental
growth achieved during 2007.

At Angel Gate Office Village, London, N1 the scheme reached over 95% occupancy
for the first time since acquisition and rental levels achieved showed over 25%
rental growth during 2007.

At City Link House, Croydon we were able to regear a lease over four floors to
The Royal Bank of Scotland plc on a 15 year term enhancing both rental income
and capital value.


Performance in the retail sector was more muted, coming principally from the
disposals made in 2007. The sale of Belfast in particular is detailed below.

A strong rent review settlement at one of the retail warehouse assets, Angouleme
Way Retail Park, Bury, has enhanced the rental income from the park, and also
provided good quality evidence for future settlements, with estimated rental
growth of over 16% in 2007.

In addition, the Group's two principal supermarket investments performed well on
the back of rental and capital growth.


The industrial sector continues to be important for its relatively high income
return and one small strategic acquisition was made in this sector as detailed

At Easter Court, Warrington, the estate became fully income producing following
three lettings during the course of 2007. The income has increased 47% since the
end of 2006.

The disposal of the industrial unit at Garsington Road, Oxford, detailed below,
highlights the recycling of capital, in particular of smaller assets, where
there is limited capital upside and the income return does not meet the Group's

Acquisitions and Disposals

In the year to 31 December 2007 the Group acquired one asset and exchanged
contracts or disposed of six assets for a consideration of over £39 million, on
average 8.8% above their preceding valuation.

The acquisition was of a vacant industrial unit, adjacent to the Group's largest
holding, a south east industrial estate, in Harlow, Essex. This was a strategic
acquisition for £2.6 million, which consolidated the holding. Having refurbished
and re-let the unit to FedEx UK Limited following acquisition, this provided new
rental value evidence for the rest of the estate.

The disposals were part of a planned programme of phased disposals which started
in 2006, principally to reduce the number of smaller assets within the portfolio
and also to sell assets which did not contribute on an income return basis and
where the business plans had been implemented.

The principal sales were as follows:

Trafford Park, Manchester - The Group completed the sale of two detached retail
warehouse units for £5.8 million on 13 April 2007, following completion of rent
reviews undertaken the preceding year. The sale was £255,000 ahead of the
preceding quarter's valuation.

Scottish Provident Building, Belfast - The Group completed the sale of this
Grade II Listed building, located in central Belfast for £21.0 million on 20
December 2007. Detailed analysis had been undertaken in respect of a
refurbishment of the predominately vacant upper parts and a decision was made to
sell the asset rather than employ significant capital to facilitate a
refurbishment programme. The sale reflected a net initial yield of 3.75% and was
£2.2 million ahead of the preceding valuation.

40 Garsington Road, Oxford - The Group exchanged contracts on the sale of a
vacant industrial unit in Oxford, following the tenant activating their break
clause in November 2007. The outgoing tenant paid the Group a penalty of
£132,000 , equivalent to six months' rental, to terminate the lease. The sale,
which completed just after the year end, was at £4.85 million, £510,000 ahead of
the previous valuation.

Whilst in current market conditions it is more difficult to achieve disposals,
where appropriate these will continue where value can be achieved through the
disposal process and when it is in line with the strategy of enhancing income
and total return prospects.


The occupancy rate on the portfolio remains strong and at December stood at 95%,
ahead of the IPD Annual Index of 92.8%.

The Investment Manager has taken advantage of the low vacancy rate and has
undertaken surrenders of occupational leases where value can be generated
through this process.

As at 31 December 2007, approximately 50% of the void is attributable to two
assets, which are detailed below:-

3 The Boulevard, Watford - This refurbished office building totals 43,259 sq ft
and provides Grade A headquarters open plan accommodation. The Watford area has
been over-supplied for a number of years although the availability of stock in
this market has reduced. The Manager continues to market the property on
flexible terms and unfortunately a transaction to lease the entire building
became abortive in December this year. We are actively remarketing it and are
exploring reconfiguring access arrangements and flexible leasing options.

Unit G2, River Way Industrial Estate, Harlow - This industrial unit, comprising
33,500 sq ft was vacated in 2007 and was subsequently refurbished. An agreement
for lease has just been signed, which will secure a new ten year lease with a
break option after five years, setting further positive evidence for the estate
and increasing the rental income by over £209,000 per annum.


The Group's borrowings were reduced during 2007 as part of a strategy to reduce
the overall level of debt. Whilst debt repayment costs were fixed, changes to
the marked to market value of the swap had a negative impact on the Balance
Sheet at the year end. The debt is held in two separate tranches, the majority
of which is securitised. Proceeds from sales have been used to reduce borrowings
in the more expensive tranche. At 31 December 2007 the weighted average cost of
debt was 5.16%, excluding loan arrangement costs.

The Group has borrowed a total of £225 million of AAA rated loan notes on the
debt market, with interest payable on the initial £200 million at 4.795% and the
further £25 million at 5.3804%, both fixed by way of interest rate swaps. These
loan notes are repayable on 31 January 2013.

The Group also has a loan with JP Morgan with a balance of £82 million at 31
December 2007. Interest is payable on this loan at 6.0%, also fixed by way of a
swap. This loan is repayable on 4 December 2009.

During the year loan repayments of £6.5 million were made. Following the year
end and after completion of the disposals undertaken in the fourth quarter, the
Group reduced its non-securitised borrowings by a further £24.8 million. Current
borrowings now stand at £282.2 million and the weighted average cost of debt has
reduced to 5.09%.


With economic growth entering a slower period over the next 12 to 18 months, the
principal implication for commercial property is softer occupational demand.
Supply-side issues are also a factor to consider, but we believe that in most
cases the importance of new supply is exaggerated. Some pockets of new supply
will have local impacts, particularly in retail, where new shopping centres and
retail parks can alter the dynamic between retail locations within the
catchment, but these locations have a minimal impact on rents at a national
level. Even in City offices, where an above average amount of new supply is set
for delivery in 2008 and 2009, the impact on rents should be minor, providing
financial sector redundancies do not escalate dramatically. Consequently, while
we do expect rental growth on the average UK property portfolio to decelerate,
we would not expect a decline in rental levels in the absence of a prolonged
economic recession.

On the capital market front, credit markets are unlikely to immediately ease.
That means property market liquidity will remain lower than normal over the
remainder of the year. Despite a 10 to 15% fall in capital values in 2007, we
expect the IPD index to show further falls in capital values, concentrated in
the first half of 2008. A key reason for this is that we believe that UK
property is already approaching long-term 'fair value' (an initial yield of
around 5.25 to 5.5%), but values are likely to undershoot through the bottom of
the cycle, as they overshot at the top. The difference between the current views
on yields in the transactions market and those yields being quoted by IPD will
also come more into play this year, with the index expected to continue to
"catch up" with the underlying market.

At a sector level, industrials are expected to outperform over a one, three and
five year time horizon, with both the South East and Rest of UK sub-markets
forecast to see relatively healthy returns. The office sector is expected to see
the lowest total returns over all three periods. However, it must be noted that
this relative underperformance will largely be the result of the central London
sub-markets. Indeed, offices elsewhere in the UK are expected to see a somewhat
stronger performance and are in fact forecast to move in line with the
all-property average over the three periods.

Income returns are expected to form the greatest proportion of total returns and
are forecast to average 5.9% per annum over the five years to 2012, slightly
stronger than the 5.7% per annum that has been recorded over the period 2002 to

2008 sees the introduction of two elements of legislation that will affect the
real estate sector, namely The Rating (Empty Properties) Act 2007 and the Energy
Performance of Buildings Regulations 2007. The former, which came into effect on
1 April, increases the rates liability of vacant accommodation and in particular
the industrial sector which until now has benefited from full business rates
relief for vacant properties.

At present, the portfolio benefits from a relatively low vacancy rate, so the
impact of the legislation will be less than the market in general. We have
employed consultants to review the rates liabilities on all vacant or soon to be
vacant assets to ensure that appeals can be lodged and costs mitigated where

In respect of the introduction of Energy Performance Certificates, these were
introduced (on a phased basis) from 6 April and are required on all sales and
lettings of commercial real estate, dependent upon the size of the building. We
have employed consultants to prepare these to ensure that no letting or sale
campaign is prejudiced by the introduction of this legislation.

Furthermore, in respect of properties that are in direct control of the
landlord, either being multi-let or vacant, we are in the process of
establishing a policy to ensure that the environmental impact of these assets is
improved in the short and medium term, through the introduction and monitoring
of energy saving measures. The income bias on the portfolio, along with office
exposure and lower weighting in the retail sector, led to outperformance in

With slower economic and rental growth envisaged for 2008, the portfolio's
defensive quality of a high income return and low exposure to primarily growth
dependant sectors, will we believe enable it to continue to outperform.

We will continue our successful sales programme with a view to further reducing
borrowings where we are able to make disposals at opportunistically attractive
levels, selling assets where we have completed business plans and where they do
not add to the income bias of the portfolio.

With the diversity of assets and tenancies within the portfolio we are confident
that the asset management team will continue to deliver outperformance and
create additional opportunities that will enhance value and income from the
underlying portfolio.

Michael Morris

ING Real Estate Investment Management (UK) Limited

8 April 2008

Financial Statements

Consolidated Income
For the year ended 31
December 2007
                                                     Year ended 31    15 Sept
                                                     Dec 2007         2005
                                                                      31 Dec
                            Note Income     Capital             Total      Total
                                   £000       £000             £000       £000

Rental income                    40,902          -           40,902     39,329
Service charges recharged
to                                3,999          -            3,999      6,074
Other operating income            2,795          -            2,795      4,661
Total operating income           47,696          -           47,696     50,064

Gains and losses on
Realised gains arising on
disposal of investment
properties                            -      4,085            4,085      4,572
Unrealised (losses)/gains
revaluation of investment             -    (46,775)         (46,775)    70,421
Total gains and losses on
investments                           -    (42,690)         (42,690)    74,993

Property operating               (2,935)         -           (2,935)    (2,572)
Service charge costs             (3,999)         -           (3,999)    (6,074)
Management expenses              (6,496)         -           (6,496)    (5,977)
Other operating expenses         (1,669)         -           (1,669)    (1,607)
Total operating expenses        (15,099)         -          (15,099)   (16,230)

(Loss)/profit before
finance                          32,597    (42,690)         (10,093)   108,827
costs and tax

Finance costs
Interest receivable               1,914          -            1,914      1,617
Interest payable                (16,470)         -          (16,470)   (12,549)
Unrealised (losses)/gains
revaluation of interest               -     (3,079)          (3,079)     8,727
Total finance costs             (14,556)    (3,079)         (17,635)    (2,205)

(Loss)/profit before tax         18,041    (45,769)         (27,728)   106,622
Tax                                 460          -              460       (460)

(Loss)/profit for the
year/period                      18,501    (45,769)         (27,268)   106,162

(Loss)/earnings per share
Basic and diluted          3                                   (8.2)p     34.4p

The total column of this statement represents the Group's Consolidated Income
Statement, prepared in accordance with International Financial Reporting
Standards. The supplementary income return and capital return columns are both
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 equity holders of the parent company. There
are no minority interests.

Consolidated Statement of Changes in Equity
For the year ended 31 December 2007
                    Share     Share Premium Distributable Retained       Total
                    Capital   Account       Reserve       Earnings
                       £000          £000          £000        £000       £000

Balance as at 15          -             -             -           -          -
September 2005
Net profit for
the period                -             -             -     106,162    106,162
Dividends paid            -             -             -     (17,835)   (17,835)
Issue of
shares                    -       337,198             -           -    337,918
Issue costs               -        (7,199)            -           -     (7,199)
Transfer to
reserve                   -      (298,610)      298,610           -          -
Balance as at
31 December
2006                      -        31,389       298,610      88,327    418,326

Net loss for
the year                  -             -             -     (27,268)   (27,268)
Dividends paid            -             -             -     (20,707)   (20,707)
Repurchase of
shares                    -             -          (834)          -       (834)

Balance as at
31 December
2007                      -        31,389       297,776      40,352    369,517

Consolidated Balance Sheet
As at 31 December 2007
                                                       2007              2006
                                     Note              £000              £000

Non-current assets
Investment properties                   5           633,206           702,167
Total non-current assets                            633,206           702,167

Current assets
Accounts receivable                                   6,018             7,437
Cash and cash equivalents                            51,150            37,873
Total current assets                                 57,168            45,310

Total assets                                        690,374           747,477

Current liabilities
Accounts payable and accruals                       (17,496)          (24,428)
Total current liabilities                           (17,496)          (24,428)

Non-current liabilities
Loans and borrowings                    6          (303,361)         (304,723)
Total non-current liabilities                      (303,361)         (304,723)

Total liabilities                                  (320,857)         (329,151)

Net assets                                          369,517           418,326

Ordinary share capital                  8                 -                 -
Share premium account                   9            31,389            31,389
Distributable reserve                   9           297,776           298,610
Retained earnings                                    40,352            88,327

Total equity                                        369,517           418,326

Net asset value per share                              1.12              1.26

These Consolidated Financial Statements were approved by the Board of Directors
on 8 April 2008 and signed on its behalf by:

Robert Sinclair Tjeerd Borstlap

Director Director

Consolidated Cash Flow
For the year ended 31
December 2007

                              Year ended 31 Dec  Period from 15 Sept 2005 to 31
                              2007               Dec 2006
                                          £000                            £000

before tax                             (27,728)                        106,622

Adjusted for
receivable                              (1,914)                         (1,617)
payable                                 16,470                          12,549
Realised and
gains and
losses on
investments                             45,712                         (83,720)
of finance
costs                                      544                             331
Cashflows from
profit before
changes                                 33,084                          34,165

/(increase) in
trade and
receivables                              1,419                          (4,930)
ease in trade
and other
payables                                (7,188)                         23,968

Net cash flows
from operating
activities                              27,315                          53,203

Cash flows from investing
Purchase of
properties                              (5,913)                       (652,930)
Disposal of
properties                              34,343                          25,756
received                                 1,847                           1,617
Net cash flows
from investing
activities                              30,277                        (625,557)

Cash flows from financing
Equity raised                                -                         337,198
Repurchase of
shares                                    (834)                              -
Proceeds from
long term
borrowings                                   -                         738,000
Repayment of
long term
borrowings                              (6,469)                       (424,550)
Issue costs of
borrowing &
equity raising                               -                         (10,037)
Interest paid
on loans                               (16,305)                        (12,549)
Dividends paid                         (20,707)                        (17,835)
Net cash flows
from financing
activities                             (44,315)                        610,227

Net increase
in cash and
equivalents                             13,277                          37,873

Cash and cash
equivalents at
beginning of
year/period                             37,873                               -

Cash and cash
equivalents at
end of
year/period                             51,150                          37,873

Notes to the Consolidated Financial Statements

for the year ended 31 December 2007

1.   Significant accounting polices

The preliminary statement is prepared on the basis of the accounting policies
disclosed in the prior year financial statements.

Whilst the financial information included in this preliminary statement has been
computed in accordance with International Financial Reporting Standards (IFRS),
this announcement does not itself contain sufficient information to comply with
IFRS. The Group's full financial statements that comply with IFRS were approved
by the Directors on 8 April 2008.

2.   Dividends
                         Year ended 31 Dec 2007       Period ended 31 Dec 2006
                                          £000                            £000
Declared and paid                       20,707                          17,835

The interim dividend of 1.5625 pence per ordinary share in respect of the period
ended 31 December 2007 has not been recognised as a liability in accordance with
IFRS as it was declared after the year end. A dividend of £5,163,000 was paid on
29 February 2008.

3.   Earnings per share

Basic earnings per share is calculated by dividing the net (loss)/profit for the
year attributable to ordinary shareholders of the Company by the weighted
average number of ordinary shares in issue during the year.

The following reflects the income and share data used in the basic and diluted
earnings per share calculations:

                           Year ended 31 Dec 2007    Period ended 31 Dec 2006

Net (loss)/profit
attributable to ordinary
shareholders of the
Company from continuing
operations (£000)                          (27,268)                    106,162

Weighted average number of
ordinary shares for basic
and diluted earnings per
share                                  331,350,393                 308,366,051

4.   Investments

The Company had the following principal subsidiaries and sub-subsidiaries at 31
December 2007 and as at 31 December 2006.

Name                                  Place of              Ownership proportion
ING UK Real Estate (Property)
Limited                               Guernsey                             100%
ING (UK) REIT (SPV) Limited           Guernsey                             100%
ING (UK) Listed Real Estate           Guernsey                             100%
ING UK Real Estate (Property)
No.2 Limited                          Guernsey                             100%
Limited                               Guernsey                             100%
Merbrook Business Property
Unit Trust                            Jersey                               100%
Merbrook Prime Retail Property
Unit Trust                            Jersey                               100%
Merbrook Bristol Property Unit
Trust                                 Jersey                               100%
Merbrook Swindon Property Unit
Trust                                 Jersey                               100%
ING (UK) Listed Real Estate Issuer    England & Wales                        -

5.   Investment properties
                                                               2007       2006
                                                               £000       £000
Opening valuation                                           702,167          -
Additions                                                     5,913    652,930
Disposals                                                   (34,343)   (25,756)
                                                            673,737    627,174
Gains and losses on investments held at fair value through
profit and loss:
Gains on disposals                                            4,085      4,572
(Deficit)/surplus on revaluation                            (46,775)    70,421
Closing valuation                                           631,047    702,167
Valuations of assets held under finance leases                2,159          -
Total investment properties                                 633,206    702,167

Historic cost                                               611,384    631,746

The investment properties were valued by King Sturge LLP, Chartered Surveyors,
as at 25 December 2007, on the basis of Market Value in accordance with the
Appraisal and Valuation Manual of the Royal Institution of Chartered Surveyors.

The Group's borrowings are secured by a first ranking fixed charge over the
investment properties held.

Rental Income and property expenses arise from the properties shown above.

6. Loans and borrowings
                           Maturity                       2007            2006
                                                          £000            £000
Floating rate notes        31 January 2013             225,000         225,000
Bank loan                  4 December 2009              81,981          88,450
Interest rate swaps                                     (5,648)         (8,727)
Obligations under finance leases                         2,028               -
                                                       303,361         304,723

On 20 December 2005 the Group issued £200 million of AAA rated seven year loan
notes to the debt market. The interest payable on these notes is fixed at 4.795%
by means of an interest rate swap. On 6 July 2006 a further £25 million of loan
notes were issued on the same terms, with the interest payable fixed at 5.3804%
by means of a further swap. The loan notes are secured over the investment
properties held by the GPUT, and are repayable on 31 January 2013. The loan
notes were issued by ING (UK) Listed Real Estate Issuer PLC, a Special Purpose
Entity that is consolidated under the principles of SIC 12, see Note 10.

On 4 December 2006 the Group entered into a 3 year term loan with J P Morgan for
£93 million. The full amount was drawn down on that date, with £4,550,000 repaid
on 11 December 2006, following the disposal of an investment property.
Subsequent disposals have lead to further repayments of the loan. Interest on
the loan is fixed at 5.20% by a further interest rate swap, plus a margin
payment of between 60 and 80 basis points depending on the loan to value ratio
at the time. This is currently 80 basis points. The loan is repayable in full on
4 December 2009, and is secured over the units held in the JPUTs and the
investment properties held by those JPUTs, with the exception of Merbrook
Swindon Property Unit Trust.

The interest rate swaps mature on the same dates as the associated borrowings.

The weighted average interest rate paid on the Group's borrowings for the year
was 5.1645% (31 December 2006: 5.1817%).

The fair value of the loans may be lower than the book value given that, at the
present time, lenders are less willing to provide financing for the type of
assets held by the Group at the interest annually paid by the Group. However, it
is not practical or possible to measure the fair value of the loan due to the
current market conditions.

The loan agreement for the floating rate notes states that for the securitised
pool of assets the Loan to Value ratio should not exceed 50% and the Interest
Cover Ratio should be a minimum of 1.50. The additional JP Morgan loan agreement
determines that for the assets falling under this agreement the Loan to Value
ratio should not exceed 78% and the minimum Interest Cover Ratio should be a
minimum of 1.10. The Group has not breached any of the loan covenants either in
the current year or in the previous accounting periods.

7.  Contingencies and capital commitments

The Group has entered into contracts at Longcross Court, Cardiff and Heron
Industrial Estate, Reading with commitments outstanding at 31 December 2007 of
approximately £1.0m, (31 December 2006 : £nil). There are no other contractual
obligations to purchase, construct or develop investment property or for
repairs, maintenance or enhancements as at 31 December 2007.

8.   Ordinary Share Capital
                                                                2007      2006
Authorised:                                                     £000      £000

Unlimited number of ordinary shares of no par value                -         -

Issued and fully paid:

330,401,300 ordinary shares of no par value                        -         -
(31 December 2006: 331,500,000)

The Directors have authority to buy back up to 14.99% of the Company's ordinary
shares in issue subject to the annual renewal of the authority from
shareholders. Any buy back of ordinary shares will be made subject to Guernsey
law, and the making and timing of any buy backs will be at the absolute
discretion of the Board.

During November 2007 the Company repurchased 1,098,700 ordinary shares for
cancellation at an average price of 75.76 pence per share, leaving ordinary
shares in issue of 330,401,300. Under Guernsey law, a capital redemption reserve
is created for the redemption of these ordinary shares. As the nominal value of
these shares is £nil the amount to be transferred to this reserve is £nil.

9.  Share Premium and distributable reserve
                                                Share          Distributable
                                                Premium        Reserve
                                                        £000              £000
Opening balance at 15 Sept 2005                            -                 -
Premium arising on issue of equity shares            305,000                 -
Expenses of issue of equity shares                    (6,390)                -
Transfer                                            (298,610)          298,610
Further issue of equity shares                        32,198                 -
Expenses of issue of equity shares                      (809)                -
Balance at 31 Dec 2006                                31,389           298,610

Repurchase of ordinary shares                              -              (834)

Balance at 31 Dec 2007                                31,389           297,776

By way of a special resolution dated 30 September 2005, the amount standing to
the credit of the share premium account was cancelled and transferred to a
distributable reserve. Royal Court approval was obtained on 17 October 2005.
Distributable reserves may be used for the purpose of paying dividends or buying
back shares.

For further information:

The Company Secretary

Northern Trust International Fund Administration Services (Guernsey) Limited

Trafalgar Court

Les Banques

St Peter Port



Tel: 01481 745439

Fax: 01481 745085

ING Real Estate Investment Management (UK) Limited

Helen Stott, 020 7767 5648

Financial Dynamics

Dido Laurimore/Laurence Jones, 020 7831 3113

                      This information is provided by RNS
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