Annual Report 2006 - Tamar European Industrial Fund

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