Annual Report 2006 - Tamar European Industrial Fund
Annual Report 2006 - Tamar European Industrial Fund
Annual Report 2006 - Tamar European Industrial Fund
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Notes to the Accounts<br />
2. Fees<br />
Group<br />
(a) Investment management fees 504<br />
Under the terms of the Investment Management Agreement, Kenmore Financial Services Limited (the Investment<br />
Manager) is entitled to a base fee equal to 0.75 per cent per annum of the aggregate value of the real estate assets of<br />
the Group, until such time that 90 per cent of the fund is committed or invested and thereafter equal to 0.90 per cent per<br />
annum of the aggregate value of the real estate assets of the Group. The base fee rate will reduce to 0.85 per cent per<br />
annum to the extent that such assets exceed £550 million and to 0.75 per cent per annum to the extent that such assets<br />
exceed £700 million.<br />
The base fee is payable quarterly in arrear and, in respect of each calendar quarter, will be calculated by reference to<br />
the time weighted average of the aggregate value of the real estate assets of the Group for the relevant quarter.<br />
Performance fee<br />
In addition, the Investment Manager is entitled to a performance fee in respect of each performance period if the<br />
growth in net asset value (excluding deferred tax on unrealised capital gains or losses in the Property Portfolio plus<br />
dividend returns, at the end of that performance period) exceeds 10 per cent per annum and, further, if the Company<br />
has met its stated dividend policy during such performance period.<br />
The performance fee rate is set at 20 per cent of such outperformance. The trigger for a performance fee payment for<br />
each period is subject to a ‘‘high water mark’’ which is reset every 3 years, such that the 10 per cent hurdle applies to<br />
the previous highest financial period end NAV within each consecutive 3 year period.<br />
50 per cent of the performance fee, if payable in respect of any performance period, will be paid in cash. An amount<br />
equal to the remaining 50 per cent in ordinary shares in the Company will be set aside and paid to the Investment<br />
Manager if the Company has met its stated dividend policy for a period of 2 years commencing at the end of the<br />
performance period in respect of which the performance fee provisionally accrued.<br />
The issue price of any shares to be issued to the Investment Manager shall be the higher of the average market price<br />
of the shares over 20 Business Days prior to the end of the financial period in respect of which the performance fee<br />
was earned and the published NAV (calculated excluding any deferred tax on capital gains) as at the end of such<br />
performance period.<br />
The first performance period shall be the period from Admission to 31 December 2007 and, thereafter, the performance<br />
period shall be each 12 month period ending on 31 December. No fee has been accrued in the period to 31 December<br />
<strong>2006</strong>. At each interim reporting date the Board will consider the need to make an accrual for any fee due under the<br />
Investment Management Agreement taking into account performance to date and their view of the outlook for the<br />
balance of each performance period.<br />
Termination<br />
The Investment Management Agreement may be terminated by either the Company or the Investment Manager on not<br />
less than twelve months’ notice in writing but so as not to expire prior to 25 September 2010. Pursuant to the terms of<br />
the Investment Management Agreement, the Company and the Investment Manager agree to review the terms of such<br />
agreement on the fourth anniversary of the Investment Management Agreement.<br />
(b) Valuers’ fees<br />
The valuers, Savills SA, have agreed to provide valuation services in respect of the property portfolio.<br />
24<br />
£’000<br />
Notes to the Accounts<br />
3. Other expenses<br />
Company Group<br />
£’000 £’000<br />
Direct operating expenses of let rental property - 1,446<br />
Investment management fees (see note 2(a)) - 504<br />
Provision for bad debts - 235<br />
Valuation and other professional fees 30 427<br />
Directors’ fees 42 42<br />
Auditors remuneration for:<br />
- audit 38 92<br />
- other services to the Group - -<br />
Other 60 255<br />
In addition to the above, the auditors received £31,000 for services provided in connection with the launch<br />
of the Company. This expense is set against the proceeds from the share issue.<br />
170 3,001<br />
4. Finance costs Company Group<br />
£’000 £’000<br />
Interest on borrowings - 1,962<br />
Unrealised gains on interest rate swaps - (1,092)<br />
Other interest 720 (108)<br />
720 762<br />
5. Taxation Company Group<br />
£’000 £’000<br />
Current income tax charge - 221<br />
Deferred income tax relating to origination and reversal of temporary differences (see note 10) - 2,583<br />
Total tax charge - 2,804<br />
A reconciliation of the income tax charge applicable to the results from ordinary activities at the statutory income tax<br />
rate to the charge for the period is as follows:<br />
Company Group<br />
£’000 £’000<br />
Net profit from ordinary activities before taxation 1,139 7,701<br />
Income tax at following - 2,460<br />
applicable tax rates 0% 31.94%<br />
Effects of:<br />
Capital gains on revaluation of investment properties not taxable - (2,532)<br />
Tax exempt income - (56)<br />
Non-deductible expenses - 12<br />
Losses not utilised - 100<br />
Other timing differences - 237<br />
Total tax charge - 221<br />
25