Annual Report 2006 - Tamar European Industrial Fund

Performance Summary
Returns (from launch on 25 September 2006) 31 December 2006
Growth in adjusted net asset value per share 9.0%
Ordinary Share price 12.75%
FTSE All-Share Index 9.1%
Capital Values Launch
31 December 25 September
2006 2006 % Change
Total assets less current liabilities (£000’s) 314,994 276,204 +13.3
Adjusted net asset value 104.1p 95.5p +9.0
Ordinary Share price 112.75p 100.00p +12.8
FTSE All-Share Index 3,221.42 2,969.82 +8.5
Premium to adjusted net asset value per share 8.3% 4.7% -
Gearing ‡ 54.3% 51.2% -
Earnings and Dividends (from incorporation to 31 December 2006) †
Earnings per Ordinary Share 3.5p
Dividends announced per Ordinary Share 1.5p
Highs/Lows (since launch on 25 September 2006) Highs Lows
Ordinary Share price 112.75p 100.00p
Premium (to adjusted net asset value per share at launch) 18.1% 4.7%
‡ Gearing: Secured bank loans (after interest rate swaps) ÷ total assets (less current liabilities).
† Including dividends announced but not paid in respect of the period to 31 December 2006.
Source: Datastream.
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Chairman’s Statement
It gives me great pleasure to report the first results of the Kenmore European Industrial Fund (the “Fund” / “Company”)
for the period from incorporation to 31 December 2006.
The Fund was launched in September 2006 with a successful fund raising of £140 million. Shortly after Admission
to the London Stock Exchange on 25 September 2006, it acquired a seed portfolio of 70 properties costing £212.7
million, subsequently augmented by further acquisitions in the reporting period. The Fund’s investment objective is to
provide investors with an attractive level of income together with the potential for capital growth. The Fund will focus
on industrial assets in western and northern Europe excluding the UK, primarily in France, Germany, Benelux, and
Scandinavia.
Results
On Admission, the prospectus suggested that the adjusted net assets of the Fund would be 95.5 pence excluding
deferred tax on unrealised investment gains. On the same basis I am delighted to report that net assets per share
excluding deferred tax have increased to 104.1 pence, a rise of 9.0%. The value of the portfolio acquired on Admission
has increased 3.4% with each country showing gains measured against the Fund’s acquisition cost.
The table below shows the movement in adjusted net asset value per share:
NAV per Share (Pence)
Admission, excluding deferred tax 95.5
Uplift from valuation gains 5.6
Expensing of acquisition costs (0.9)
Uplift from balance of retained profits 1.2
Improvement in mark to market of debt 0.8
Deferred tax charge for the period 1.9
As at 31 December 2006, excluding deferred tax 104.1
Including (both recognised and unrecognised) deferred tax, NAV per share is 82.4 pence which compares to the
pro-forma figure on Admission of 78.0 pence.
Profits before tax in the period from incorporation to 31 December 2006 were £7.7 million.
The share price has performed well in the period under review. The shares were admitted to trading at 100 pence
and have traded at a premium consistently since then. We believe that investor demand has been stimulated by the
prospects of an attractive dividend and potential capital growth and the level of liquidity has been encouraging. The
Company also joined the FTSE small cap index in October 2006.
Portfolio
In addition to the portfolio acquired shortly after Admission, the Company acquired 10 assets at a cost of £65 million
(excluding acquisition costs) in the period to 31 December 2006. As at the balance sheet date, the Company held
properties at a market value of £288 million, representing approximately 70% of the total expected portfolio size.
Since 31 December, the Company has continued to build the portfolio and, as at 27 February, has acquired a further 4
properties costing £10.5 million. There is a further pipeline of 10 acquisitions totalling £61.1 million which the Board has
approved for purchase which, if completed as expected, will result in the Fund being approximately 90% invested.
Information on the portfolio and the pipeline of assets is contained in the Investment Manager’s Review.
Gearing
At an Extraordinary General Meeting of the Company on 18 October 2006, members approved a change to the Articles
to remove the restriction that, at time of Admission, the maximum permitted borrowings of the Company should be no
greater than 65% of gross assets. The maximum permitted borrowing of the Company is now 75% of gross assets.
The aim of the Board, as stated in the prospectus, is to keep borrowings at approximately 70% of gross assets when
fully invested. During this period, with the acquisition of the portfolio the level of gearing may fall below this level.
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