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