Fund information

Monthly updates

Ordinary Shares

The last month of 2017 has turned out to be very positive for pan European real estate equities with the benchmark (in GBP) rising by 4.98% fuelled particularly by the very strong performance in the UK where stocks collectively rose 8.2%. The UK had seriously underperformed its Continental counterparts prior to December as investors worried about the pace and outcome of the first phase of the Brexit negotiations, the slowing pace of economic growth and the weakening London economy (particularly falling house prices and slowing job creation. The strong performance in December was broad based reflected the relief that the Brexit negotiations were moving onto the next level (trade) but also that the gloomiest predictions of office leasing take up have proved unfounded with a swathe of deals announced across many sub-markets in the capital. This led to monthly rallies in excess of 11% in both Derwent London and Great Portland. However the strong performance came from 2017’s serial underperforming sector - retail - with the announcement of an agreed all paper merger between Intu and Hammerson with the combined entity’s board controlled by Hammerson and their management as CEO and CFO. Based on the Hammerson share price the deal reflects a 37% discount to Intu’s June 2017 NAV (we also expect the December valuation to fall). Intu’s share price rose 28.7% in the month.

Much like buses, M&A in the sector comes along in quick succession. A week later Unibail announced the acquisition of Westfield in a 65% paper, 35% cash transaction creating a €61bn portfolio of US and European assets. The implied cap rate for the Westfield assets is 4.3% and whilst the deal will be only modestly accretive and requires €3bn of sales by Unibail we believe it is strategically intelligent. Retail landlords are bulking up to help withstand the ongoing challenges of multi-channel retailing.

The final transaction was the announcement of Vovonia’s agreed cash bid for Buwog, the Austrian listed owner/developer who has over half its portfolio in Germany. Funded by debt, the market appears quite sanguine about the increased LTV at which Vonovia will trade and we are pleased as Buwog (+19% in the month) was an overweight position in the fund. Vonovia are clearly the sector consolidator having chalked up 3 transactions of over €1bn each in the last 4 years. At €29.05 per share the price reflects a 23% premium to the last NAV but financed by €3.7bn of cheap debt the acquisition will be earnings accretive.

The Trust’s NAV rose +5.46% in the month outperforming the benchmark by 49 bps with gains driven not only by our overweight to Buwog but strong performance from a number of overweight UK names including Great Portland, CLS, Land Securities and Segro. We also completed the sale of our two smallest properties to different parties. Our industrial building in Plymouth at £4.29m, slightly ahead of valuation and Beacon House, Wimbledon at £5.8m, 10% ahead of valuation.

The fund’s 12 month performance saw the NAV grow by 23.18% whilst the benchmark rose 17.04%. The share price total return was +37.29% reflecting a tightening in the discount to the NAV at which the shares trade.

The last month of 2017 has turned out to be very positive for pan European real estate equities with the benchmark (in GBP) rising by 4.98% fuelled particularly by the very strong performance in the UK where stocks collectively rose...

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Pan European property equities in GBP rose a modest 1.1% in November with the UK a weak performer (-0.1%) again (the UK returned -0.2% in October). The strongest performance came from Germany, Italy and Norway. The latter has only a single stock, Entra which performed well following its Q3 results which pointed to ongoing strength in the Oslo office market as well as a more positive outlook for the Norwegian economy as the oil price continues to rise. Italian stocks performed well again (after 3.5% growth in October) as IGD and Beni Stabili continued to benefit from the expectation that listed property companies would be eligible for the Italian equivalent of ISAs (PIRs). IGD rose 8.5% in the month.

Germany was the strongest performer as all (bar one) of its commercial and residential companies rose in value in the month. The strongest performers were the smaller companies such as DIC Asset (+6.9%) and Hamborner (5.9%) but Vovonia, the largest residential name rose 4.7%. With concerns over the ability of Ms Merkel to form a new coalition came renewed risk aversion and the yield on the benchmark 10yr Bund dropped in the month. Given the ongoing correlation between the residential companies pricing and the Bund yield this move downwards was helpful.

The Trust’s NAV rose 1.35% in November, a little ahead of the benchmark. This was assisted by our position in Axiare (+14%) which rose following an agreed bid from Colonial (-2.8%) where we had a zero holding ahead of the announcement. Given that the cash offer of €18.50 per share will not be paid until the end of Q1 2018 we have liquidated our overweight in Axiare and closed the underweight in Colonial. Self storage in the UK was a strong performer with excellent interim results from Big Yellow (+7.2%) which has reduced the underperformance this year versus Safestore (+4.5% in November). The Trust holds both names.

UK retail was again a poor performer with Intu (-9%) the weakest stock in the benchmark in November. Whilst we have no holding in Intu or Hammerson (-0.9%), our positions in Capital & Regional (-6.4%) and New River Retail (-4.8%) suffered even with strong interim results from New River Retail including a success move from secured to unsecured financing and a drop in their cost of debt to less than 3% following investment of the new capital. Our focus remains on the convenience and community-led retail exposure rather than prime retail which we believe is overvalued given how little rental growth is forecast. Our European retail exposure fared better with Mercialys (+5.4%) and Eurocommercial (+5.3%) going ex div in the month.

The Trust published its Interim results (for the six months to 30th September) on 23rd November and the Board announced the interim dividend of 4.65p (13% ahead of last year’s interim dividend). The results include a comprehensive update on the portfolio, positioning and outlook and is available at www.trproperty.com.

Pan European property equities in GBP rose a modest 1.1% in November with the UK a weak performer (-0.1%) again (the UK returned -0.2% in October). The strongest performance came from Germany, Italy and Norway. The latter has only a...

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Pan European property equities in GBP rose just 0.6% in October with Continental Europe in EUR rising 1.4% whilst the UK languished with a small negative total return of -0.2%. The Catalonian situation dominated the news headlines and led to a rollercoaster ride for Spanish equities and property stocks (as a pure domestic play) were certainly not immune. They were all down in the month as expected with a range of -1.6% (Merlin) to -6.9% (Axiare). The Trust’s largest Spanish holding is Hispania (-2.9%) which focuses on owning tourist hotels and should, in theory, withstand any domestic economic weakness as the majority of customers are non-domestic. However the company announced the deferral of the sale of its office portfolio citing investor concerns ahead of the election on 21st December.

The strongest performance came from the Italian companies, all of whom benefited from the press speculation that listed real estate is likely to qualify for inclusion in the Italian equivalent of ISAs. Beni Stabili was +3.5% in the month bringing its performance YTD to a staggering 46% as investors have continued to focus on recovery in the Milan office market.

The Trust’s NAV rose 1.24% in October, exceeding the benchmark by 65bps and performance was aided by our ongoing underweight position towards UK retail with Intu (-4.3%) and Hammerson (-2.4%) amongst the worst performers. The other side of the UK retail coin – logistics and distribution – did well with London Metric (+6.1%) and Tritax Bigbox (+4.6%), the former is a 2% holding in the fund. Our European logistics exposure was also boosted in October as we participated in the overnight placing of new shares in Argan, the French logistics developer and investor. They have acquired 2 more distribution buildings for €40m, financed through the issuance of new shares to the vendor who immediately placed them in the market at €36 per share, a 4% discount to the undisturbed price. The Trust was allocated 14% of the 1.2m shares on offer and the stock ended the month at €39 per share and the holding is nearly 2% of NAV.

The ECB announced, the well flagged, reduction in bond buying with purchases dropping from €60bn to €30bn from January 2018. Draghi’s comments were perceived as remaining dovish and bond yields fell which helped rate sensitive stocks such as the German residential sector outperform with a collective increase of 2.8%.

Irish stocks were weak (-1.2%) as the authorities announced a 4% increase in stamp duty (from 2% to 6%).

The Interim results for the half to 30th September, including the interim dividend announcement, will be made on 23rd November.

Pan European property equities in GBP rose just 0.6% in October with Continental Europe in EUR rising 1.4% whilst the UK languished with a small negative total return of -0.2%. The Catalonian situation dominated the news headlines and led to...

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Pan European property equities had a disappointing month (-3.5%) when viewed in GBP. Once again currency was a driver and European stocks ex UK when viewed in EUR returned +0.2%, modest but at least positive. After so many months of steady weakening, GBP found a floor against EUR and rallied +4.5% in the month.

At the country level, the UK property names did not follow the currency and collectively fell -1.4%. However within the group there was much dispersion. The ongoing weakness amongst retail focused names persisted with Intu (-7.3%) and Hammerson (-2.4%). There has been little investment activity in prime UK shopping centres this year and the rumoured pricing on the sale of Intu’s half of Chapelfield in Norwich and a small stake (7%) in Bluewater has confirmed yield expansion (price falls) in the asset class. The other side of the retail coin, logistics, continues to the ‘asset class de jour’ and Hansteen (+5.9%) rose on the expectation of a return of capital through a tender offer at a premium following the sale of its European assets. Empiric Student Property fell 10% on a profit warning with its interim results. The student accommodation sector is in good health but has an operational focus which requires specialist skills and the issues at ESP are company specific. The fund holds only Unite (+15.4% YTD).

The weakness in retail focused names was Europe wide with Germany’s Deutsche Euroshop down -4.4%, Wereldhave (-3.0%) and Unibail (-3.6%). Not a single retail focused Continental European company has produced a positive return year to date, the negative market view is wholesale.

Strong performance came from Ireland with solid growth from Green REIT and Hibernia. Yields are compressing in the Dublin office market as investors now expect the heightened speculative supply to be absorbed faster than previously expected. Stocks with exposure to other major European cities also continue to perform with Paris focused Gecina (+4.8%) and Fonciere des Regions (+5.8%). Sweden was a strong performer as the Riksbank continues to maintain a dovish approach and the real estate businesses all offered positive expectations on rental growth amidst the sustainability of the Swedish economy.

The Trust’s NAV fell -3.07% in the month slightly less than the benchmark at -3.43%. The 30th September marks the interim of the financial year and the Trust’s NAV rose +10.4% whilst the benchmark rose +8.1%. The share price return has been even stronger at 17.6% as the discount tightened considerably.

The interim valuation of the physical property portfolio resulted in a modest net gain of £2.2m as we saw rental growth particularly in our industrial/logistics assets. The sale of the office building in Wimbledon is proceeding as we had hoped and we expect the process to be finalised in early November.

Pan European property equities had a disappointing month (-3.5%) when viewed in GBP. Once again currency was a driver and European stocks ex UK when viewed in EUR returned +0.2%, modest but at least positive. After so many months of...

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Pan European property equities were broadly flat over the month (+0.4%) when measured in EUR. In GBP the return was 3.6% such was the continuing weakness of GBP against all other currencies. From the end of April to the end of August, GBP/EUR dropped over 8.6% with August reporting 2.8%. The weakness of GBP reflected a further degrading in expectation and sentiment towards the UK economy - particularly when compared with the strong performance across both Western and Southern European nations. The UK property names – heavily domestic in exposure – was the only regional group to have a negative total return in the month. The Trust’s NAV rose 4.11%, 56bps ahead of the benchmark whilst the share price rose 4.4%. The worst performers in the UK were Capital & Counties (-5.7%), Tritax (-4.6%) and Helical Bar (-3.8%). The fund is underweight all three stocks. Our underweight to Switzerland (-1.1% in CHF) also contributed to relative performance.

German residential had a strong month with the Berlin names, ADO (+7.3%) and Deutsche Wohnen (+6.6%). The former aided by potential takeover activity in its Israeli listed parent company. However all the residential stocks performed strongly with the newest arrival to the index, Phoenix Spree returning 5%. The 10 year Bund fell from 54bps to 36 bps over the month and whilst we think that investors should not view these stocks as bond proxies, there is still a strong correlation.  Given the increasing expectation of the reappointment of Merkel and thus political stability in Europe’s largest economy combined with little new news at Davos from Draghi has encouraged the market to believe that the ECB will remain dovish. We have begun to take profits in some of these positions.

French stocks had a weaker month, particularly the retail names with Klepierre and Mercialys the worst performers year to date. The negative structural theme of the impact of eCommerce continues to dominate regardless of the delivery of strong stock specific returns. We believe a large amount of the potential downside is now priced into many of these names.

The Spanish economy continues to improve and the summer saw record growth in tourist spend. Collectively the Spanish real estate names have returned 21.6% YTD , the strongest national return alongside Italy. However August saw a pause in performance with the market awaiting results in early September from Merlin the largest listed owner of Madrid offices.

Within the property portfolio we continue to progress a number of asset management opportunities. This month we completed the rent review for our industrial building in Plymouth increasing the rent by 14% from £298,000 p.a. to £341,000 p.a.  This is a great result as we have exceeded both the valuers’ and our own expectations by 6%.  This concludes the asset management programme for this property and it will be marketed for sale in the coming months.

Pan European property equities were broadly flat over the month (+0.4%) when measured in EUR. In GBP the return was 3.6% such was the continuing weakness of GBP against all other currencies. From the end of April to the end...

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Pan European property equities were flat (-0.3% in Euros) broadly in line with general equities (-0.4% for the EuroStoxx 600). A stronger Euro helped the Trust's GBP benchmark to return 1.47% whilst the Trust's net asset value rose 1.77%. The share price rose an encouraging 3.32% narrowing the discount to sub 8%.

The European strengthening economic recovery has become broad-based across countries and sectors; nevertheless this is yet to translate into stronger inflation. As expected, the ECB made no changes to policy interest rates and forward guidance in the July meeting and German 10-year bunds were up a modest 8bp in the month as a result.

Against this backdrop the reporting season acted as the main share price catalyst. The top performing region was Southern Europe with Spanish stocks +4.3% and Italian names +6.9%, which benefited from accelerating growth both on capital values (yield compression) and rents.

Hispania, a 3.6% holding in the Trust and 3% overweight generated +21bp of relative performance after the Spanish hotel landlord released consensus-beating numbers, in particular the 15% NAV progression over H1 17.

The sector performance was dragged down particularly by French and Dutch stocks with the retail names being the poorest performers, namely Unibail-Rodamco (-1.9%), Klepierre (-4.2%), Wereldhave (-2.9%) and Eurocommercial (-2.3%).

Whilst the UK sector was positive overall (+1.6%) helped by income and industrial-focused names, the retail majors were under pressure. Intu's H1 results, showing LFL net rent guidance reduced to 0% for 2017, were taken poorly prompting a -8.2% subsequent share price reaction.

The valuation disconnect between London-exposed property equities and the London property investment market was unambiguously demonstrated with the sale of 20 Fenchurch St by Land Securities.

The building aka Walkie Talkie was sold to Hong Kong LKK for £1.3bn, a net initial yield of 3.4%, in the UK’s largest ever office transaction. This strong pricing was 13% above Land Sec’s March 17 book value whilst the shares are trading on a -28% discount to NAV and -22% discount to unlevered asset base.This disposal of this mature asset at record pricing and the resultant £475m capital return to shareholders makes sense. Nevertheless the share price response was fairly muted. Brexit uncertainty remains and catalysts for re-rating may be limited to a large scale debt restructuring in an effort to accelerate recurring earnings growth by reducing the above-average cost of debt.

The Trust participated in the IPO of Supermarket Income REIT, which raised £100m and aims to pay an inflation-linked dividend yield in excess of 5%. The company is under exclusivity or advanced discussions for 5 assets, all let to major supermarket operators on long-dated inflation-linked leases.

Pan European property equities were flat (-0.3% in Euros) broadly in line with general equities (-0.4% for the EuroStoxx 600). A stronger Euro helped the Trust's GBP benchmark to return 1.47% whilst the Trust's net asset value rose 1.77%. The...

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After the strong returns in April and May, June saw a pause and then a drift downwards in most sectors of the pan European real estate world. The Trust’s benchmark fell -1.11% and the net asset value (NAV) fall was in line at -1.15%. June 30th marked the end of the first quarter of the financial year and the strength of April and May is reflected in the overall Q1 numbers with the NAV rising 7.51% and the benchmark +6.48%. The strongest performance was from the share price which returned 10.2% and reflects a further narrowing of the NAV discount to around 9%.

The UK has been an underperformer in the first quarter. Real estate equities are one of the few pure domestic plays on the London stock market. The calling of the snap election and more importantly the result has clearly unsettled investors increasing the (political) risk premium. It is of little surprise that the poorest UK performers in the month were all London-centric names, Helical Bar (-8.4%), Capital & Counties (-6.9%), Great Portland (-4.9%) and Land Securities (-4.2%) whilst the top performers were high yielding, diversified names with little London exposure, Redefine (+7%), F&C UK REIT (+3.6%), and Custodian (+2.8%). The fund has continued to increase its non-London exposure as well as sourcing further income streams with inflation protection qualities. After the investment in PRS REIT last month, we expect to find further opportunities in the coming weeks. In terms of corporate actions, New River Retail announced a £230m raise at 335p (a 5% discount) to fund further acquisitions and development and Assura raised £98.4m. Although the raise was at a discount to the previous close, the price reflected a 15% premium to the asset value, such is the demand for government backed, index-linked income.

The strongest performing market was Finland (+14.3%) where Sponda announced an agreed bid from Blackstone at an 18% premium to the undisturbed price. The Trust had a holding in line with the benchmark. As an underperforming business which has looked cheap for some time, the privatisation reflects the private equity buyer’s ability to leverage the purchase.

The sector weakened towards the end of the month following a speech by the President of the European Central Bank which was interpreted as a signal indicating that the markets should anticipate the end of the central bank’s asset buying programme. The mini taper tantrum which followed was quickly quashed with clarifying comments from the bank. However real estate stocks continued to weaken into the month end and beyond with the most liquid European names being amongst the weakest performers. The two largest shopping centre names fell sharply with Unibail down -3.9% and Klepierre falling -3.5%. Sentiment towards the Paris office market were boosted by M&A activity. Gecina announced the purchase of Eurosic (Paris office portfolio) from its institutional owners. The result will be €15bn Paris portfolio, twice the size of its nearest rival. The transaction will be financed through a €1.5bn bond issue and a €1bn rights issue.

The final dividend of 6.4p, (full year 10.5p) went ex on 22nd June and will be paid on 1st August. The AGM will be held at the Grosvenor House Hotel, London W1 on 25th July at 2pm.

After the strong returns in April and May, June saw a pause and then a drift downwards in most sectors of the pan European real estate world. The Trust’s benchmark fell -1.11% and the net asset value (NAV) fall was...

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A really strong month for pan European equities and property was no exception with the benchmark index rising 5.6% and the net asset value (NAV) slightly exceeding that with a return of 5.7%. The combination of a reduction in political risk following Macron’s victory was coupled with the "hard data" evidence of growth acceleration in Europe, in terms of earnings per share growth. This has finally begun to permeate through to the corporate sector which registered the best earnings season in almost seven years. This in turn prompted a reversal of the €100bn equity outflows seen in 2016.

Germany (+7.9%) and Sweden (+7.1%) were the top performing countries with returns dominated by their respective residential businesses. In Germany, this was particularly the case for the Berlin focused companies. The so-called Mietspiegel (rent reference index) for Berlin was announced during the month and came in stronger than anticipated at 9.4% versus the 5-6% that was widely expected. While the precise impact on future rental growth for our companies under coverage remains uncertain for now, the higher than anticipated adjustment should positively impact the number. The prospect of higher rental growth acted as a catalyst for both ADO Properties and Deutsche Wohnen, with both stocks outperforming the EPRA index by 9.5% and 6.0% respectively. The fund is overweight ADO but has an underweight position in Deutsche Wohnen. In Sweden, the charge was led by D Carnegie (+16%) the residential owner / developer which is now controlled by Blackstone and where the free float is small. Our largest overweight position is in Balder (+10.1%) which has recovered strongly from a poor performance in Q1 and continues to drive value from both its Swedish and Finnish residential assets.

In France, we participated in the €124m clean-up trade placing in the housebuilder Kaufmann & Broad. The shares from a private equity legacy shareholder were placed at a discount and returned over 7% in the month. We remain positive about residential pricing across much of Europe although the tremendous growth in prices in some large cities are causing concern.

In the German office segment TLG Immobilien made a takeover offer for WCM, an owner of mediocre quality office and retail assets with no specific geographical focus. During its presentation, TLG acknowledged the deal was around 5% NAV dilutive and funds from operation (FFO) neutral despite a significant increase in leverage. This is a disappointing transaction and appears to be a case of ‘growth for growth’s sake’ and results in a dilution of TLG’s Berlin office exposure which was a key plank to our investment rationale. We have therefore reduced the position to a neutral holding.

In the UK, we had FY17 results from the two majors, Land Securities and British Land. Both failed to inspire investors with Land Securities remaining bearish with record low gearing, whilst British Land is expected to experience a drop in earnings as it has reduced leverage through sales and will also see a drop in income at its Broadgate estate as it prepares vacant buildings for refurbishment. The stocks fell – 3.2% and -3.4% respectively in the month. The only positive performer amongst the seven largest companies in the UK was Segro (+3.6%) which continues to benefit from investor demand for logistics exposure. It was also expected to join the FTSE100 which was duly announced on June 1st.

May saw the first IPO of a REIT specialising in the family housing niche of the private rented sector. PRS REIT (market cap £266m) saw its shares rise 6% at launch and the fund participated given our aim to increase exposure to this growing sub-sector.

A really strong month for pan European equities and property was no exception with the benchmark index rising 5.6% and the net asset value (NAV) slightly exceeding that with a return of 5.7%. The combination of a reduction in political...

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A strong month for pan European equities and property was no exception with the benchmark index rising 2.0%. The fund’s net asset value rose 2.9% as a number of significant positions performed better than the market. The share price rose 5.6% and the discount to net asset value tightened further and is now less than 10%.

The macro news was dominated by the result of the first round of the French Presidential election and there was a significant relief rally with the result. The Europe ex UK component of the index, in EUR, rose 2.4%. At the country level, the French stocks collectively rose 2.9%. Whilst this news ‘lifted all boats’ the sector and stock specific news was also crucial in helping investors to rediscover some of their enthusiasm for the sector. The month saw a flurry of results from Sweden, French office and retail names. Swedish companies returned 4.3% (in SEK) buoyed by the news that the proposal for a change in the treatment for deferred and transfer taxes was deemed not ready for discussion by Parliament. It may reappear in the Autumn but that news coupled with strong Q1 figures from virtually all Swedish names helped propel prices upwards. Stockholm’s office market data was again strong putting it firmly at the top of the European capital city performance table. Fabege (an overweight position) returned 7.1% in the month. Paris continues to experience positive momentum on both office take up and, in certain key sub-markets, sustained rental growth and this was reflected in results from both Gecina (+2.6%) and Fonciere des Regions (+4.6%) . Icade (+5.2%) showed a marked slowdown in the pace of rental decline in its poorer quality peripheral assets. French retail stocks also published with Unibail (+2.9%) and Mercialys (+2.3%) both showing improving retail sales with the latter reporting a healthy 3.3% like for like rental growth.

The top regional performer was the UK (+4.8% in GBP) where stocks responded to the positive political news that the a snap General Election would take place on June 8th with the market expecting a significant increase in the Conservative majority which will bolster Theresa May’s position in the Brexit negotiations. At the property level, the MSCI/IPD index published its six consecutive month of positive capital growth with very strong data from the industrial/ logistics sector (+2.4% capital growth in Q1). Central London offices saw further rental growth declines but overseas capital continues to seek prime assets with high profile deals ensuring little chance of valuers’ pushing yields upwards for prime assets. Those companies with London exposure enjoyed a strong month with pure players such as Great Portland (+6.2%) and Derwent London (+4.7%) benefiting as well as the diversified large caps, Land Securities (+4.4%) and British Land (+8.8%) with c.50% London exposure recording healthy returns. Our largest overweight with London exposure is CLS Holdings who announced the sale of their Vauxhall development site at a 40% premium to the December valuation. The stock rose 9.6%. Our other strong performer was the South East office and industrial small cap, Mckay Securities which rose 11.4% in April. Both names made material contributions to our monthly relative performance.

The full year results and final dividend announcement will be made on 25th May. 

A strong month for pan European equities and property was no exception with the benchmark index rising 2.0%. The fund’s net asset value rose 2.9% as a number of significant positions performed better than the market. The share price rose...

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Pan European real estate equities enjoyed another positive month, albeit not on the scale of February’s 4% move with the benchmark rising just 0.3%. However the Trust’s performance was considerably stronger with the NAV rising 1.07% and the share price pushing up 3.4%. The decent performance in the fourth quarter of the financial year – both relative and absolute – resulted in the Financial Year 2017 net asset value (total return) reaching 8.0%, 153bps ahead of the benchmark (post costs). Given the rollercoaster of global events in the last 12 months we are encouraged by the resilience of returns.

The results season drew to a close mid month and as I commented last month we have seen strong earnings performance across most of our companies. However macro influences continue to dominate. Property is a local business and many of our companies are seen as a pure domestic or pan European play. Hence the tone of the European political landscape is quickly reflected in prices of these locally focused stocks. Following the Dutch elections and the swing in the polls towards Macron in France we saw outperformance of both Dutch and French companies in the month. Unibail and Klepierre – the largest retail landlords – were both up 4%. Alongside the improving political sentiment we saw good employment and economic data which pushed bond yields higher on inflation expectations. This depressed German residential names, which still have a strong correlation with bond pricing, they collectively fell -1.7%.

The strongest European performance came from Hispania (+9.8%), which focuses on Spanish hotel investment and management. This externally managed business announced that it would liquidate over the next three years and whilst the share price performed strongly in late February it has continued to do so in March. Spain is enjoying the highest GDP growth rate in the Eurozone and we remain confident that Southern Europe will continue to benefit from tourists reluctant to travel to Turkey, Egypt or North Africa.

The Swedish stocks collectively fell -3.2% (in SEK) over the month as investors continued to worry about the impending announcement by the tax authorities of a white paper proposing changes to the capital gains tax and stamp duty regime for commercial property. Whilst it was published on 30th March, the proposals do require parliamentary approval and therefore may well be amended or diluted, but it remains a negative for liquidity at the very least.

The physical property portfolio was independently valued at 31st March and this resulted in a modest uplift of £0.6m in value. Following the successful opening of Waitrose at The Colonnades in Bayswater, our largest asset, we now await a further amendment to planning before proceeding with the remaining retail and restaurant lettings. We also note encouraging signs of rental growth, particularly in our light industrial and distribution assets and that sector continues to be our acquisition focus. We have also increased our equity exposure to this sector in both the UK and Europe and companies with exposure have been very strong so far in 2017 with Argan (16.6%) and VIB Vermoegen (8.9%). In the UK, London Metric raised £95m in a 10% placing at less than a 2% discount to the undisturbed price. We participated in the raising as the strategy continues to focus on logistics and away from retail.

Pan European real estate equities enjoyed another positive month, albeit not on the scale of February’s 4% move with the benchmark rising just 0.3%. However the Trust’s performance was considerably stronger with the NAV rising 1.07% and the share price...

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Pan European real estate equities, along with broader equities enjoyed a positive month after the weakness of January. The Trust’s NAV rose 4.07%, a little ahead of the benchmark at 3.93%. Encouragingly, the share price rose 6.2% closing the discount to NAV from 14% to 12%.

Normally the results season provides plenty of opportunity for share prices and investors to focus on the ‘bottom up’ detailed data reported by companies, the vast majority of whom have December year ends. However, this year has been overshadowed by non-company specific news flow particularly from France but also the US. There is now a growing consensus that the Fed will lift rates again as early as March and investors remain focused on the expectation of an ongoing reflationary environment in the US aided by the new administration’s (as yet undefined) fiscal policies. Closer to home, we were fully aware that the elections across Europe would cause sentiment to ebb and flow. However the French Presidential race is looking very different to expectations given the issues surrounding Fillon and this has heightened the price of risk with French bonds at their widest margin to German bonds for many years. Not surprisingly French property shares were amongst the weakest performers (+0.3%). The winners were Germany (+6.8%), the UK (6.4%), Italy (10.4%) and Norway (6.7%) – the latter two on the back of just one stock respectively.

22 companies have now reported and the clear message is that earnings per share have grown, on average 7% and that this is set to continue, albeit moderating in most cases. Net asset values also grew, on average by 9%, but we expect that rate of growth to reduce significantly and that includes slight yield expansion in the UK (London offices and retail). However, in many core European cities there is evidence of yield stability or even tightening as evidenced by recent transactions in Paris, Berlin, Milan and Barcelona. However, parts of the occupational landscape are not as strong as investors might hope for and markets which may experience weakness include Paris offices where demand needs to maintain its momentum given renewed supply, French retail (more supply and Madrid offices where improving demand must be sustained to have an impact on the large office availability particularly in peripheral sub-markets.

Berlin residential continues to see headline growth with Deutsche Wohnen beating market estimates but then raising €850m of new equity. Hispania, our preferred Spanish hotel play, announced that it will liquidate over the next 3 years although it has extended its investment period until December 2017 to capture its acquisition pipeline.

In the UK, every company which reported has beaten consensus numbers and share prices rallied following each set of results, only to slip back once the initial exuberance has worn off. Generalist investors are not focused on the sector but given the sound fundamentals, therein lies the opportunity. Amongst the fund’s smallest companies, 4 of them accounting for over 6% of assets have enjoyed a strong start to the year with McKay (+16.8%), and CLS (12.3%) in the UK and Terreis (+8.4% ) and Argan (+9.6%) in France having their respective moments in the sun.

Pan European real estate equities, along with broader equities enjoyed a positive month after the weakness of January. The Trust’s NAV rose 4.07%, a little ahead of the benchmark at 3.93%. Encouragingly, the share price rose 6.2% closing the discount...

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The New Year has opened with a correction in pan European property equity prices following a strong finish in December. The benchmark, FTSE EPRA / NAREIT Europe Index (in GBP) fell 2.7% in the month with the UK (-4.3%) and France (-6.6% in EUR) the poorest performers. Given that both these markets are collective regional overweights in the portfolio it was encouraging to see the fund’s asset value fall less than 2% resulting in 68bps of relative outperformance in the month. This was a reminder of how stock specific performance can be with our four largest off benchmark positions, which are all either UK or French companies, all contributing to performance. McKay Securities rose +11.5% making up its drastic underperformance in 2016, whilst CLS Holdings (+4.5%) issued a reverse profits warning, stating that their results in March would be well ahead of expectations. In France, Argan, the logistics developer announced record figures and the stock rose +4.4% whilst our owner of core Paris offices, Terreis, rose +8.1% on strong full year numbers which reflected the yield compression from strong investor demand for CBD Paris offices.

Sentiment towards the sector continues to be lacklustre as generalist investors remain believers in the sunny uplands of the US driven reflation environment and see real estate as a bond proxy. However closer to home we see investors still prepared to buy sustainable income plays especially if there is the likelihood of inflation protection through indexation or rental growth. In the UK, industrial and logistic continue to see rental growth whilst the expectation of falling rents in London remains high. Little surprise that the top performers fitted these criteria with Picton (+5.6% in the month and +17.4% in 12 months), Segro (+0.8%) whilst Derwent London (-11%), Great Portland (-7.3%) and Capital & Counties (-8.5%) were at the bottom of the table.

As mentioned, French stocks were particularly weak with Fonciere des Regions surprising the market with a 10% accelerated book build at a 4.7% discount to the previous price. This deleveraging has of course been viewed cautiously and the stock is down a further 2% to the month end. Gecina announced the removal of its well regarded CEO replaced by one of its non executive directors linked to a large shareholder. The stock fell 9.2% in the month reflecting these corporate governance concerns.

Spain was a relative bright spot recording +0.8% return with Hispania (+1.8%) the best performer. This hotel owner and manager is the fund’s largest Spanish position as we believe in the structural shift to ‘safecationing’ in Western Europe. We are also confident that employment growth will translate into steady rental growth in Madrid and Barcelona in late 2017 and beyond and maintain our office exposure in those markets.

The reporting season gets underway from the beginning of February and we remain confident that many of our companies will illustrate steady, if subdued rental and earnings growth. The key will be the sustainability of that growth in the medium term which we believe will see investors re-engaging with the asset class as bonds continue to undeliver in an inflationary environment.

The New Year has opened with a correction in pan European property equity prices following a strong finish in December. The benchmark, FTSE EPRA / NAREIT Europe Index (in GBP) fell 2.7% in the month with the UK (-4.3%) and...

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Pan European real estate equities (in GBP) rose 5.6% in December almost recovering the 6.3% loss in November. These dramatic price movements over a short period are driven by macro concerns / expectations as opposed to property fundamentals. The weakness in property shares which started after the summer and accelerated through October and November, dramatically reversed in December. Whilst real estate has been viewed by many as a bond proxy, there may be a sneaking realisation that although bond yields are rising they remain not only low by any historic standards but also that the ECB intends to remain accommodative (albeit with monthly buybacks dropping to €60bn per month). With ‘reflation’ on many observers’ lips, we highlight that property remains a pro-cyclical asset class and the consensus expectations in earnings and dividend growth into 2017 and beyond is testament to this.

However, we cannot avoid the observation that the correlation between bond pricing and real estate equity pricing remains elevated with the 10 yr Bund falling 8bps (from 0.3% to 0.22%) and German residential names rising between 3 and 5% in the month. We note that they have collectively fallen in value in every calendar month since August as bond yields rose.

The Italian referendum result appeared priced in with Beni Stabili up 8.6% in the month. This was clearly a strong correction but well behind the broader Italian index,(MIB) rose +13.5%. Our exposure to Italy is through Fonciere des Regions (FdR), the French listed mini-conglomerate which owns 50% of Beni Stabili. FdR rose 11.9% in December.

The Spanish property companies continued to perform well, particularly Merlin (+8.6%) who post the month end announced the divestment of their hotel portfolio to Fonciere des Murs, a subsidiary of FdR. Further positive employment data encourages us to remain overweight Spanish real estate however our focus is through Hispania (mainly hotels).

Sweden was a poorer (relative) performer with an increasing concern that the Riksbank cannot remain as accommodative as they have been given the rate of economic growth. Finnish stocks performed well, possibly due to the expectation of improving economic conditions in Russia given the likely stabilisation in the oil price following the latest OPEC agreement.

In the UK, we saw strong recovery in all London-centric names. Even after double digit positive performance in the month, Derwent London and Great Portland still rank as very poor performers in 2016 returning -23.3% and -18.1% respectively.

The Trust’s NAV rose 5.7% in December slightly ahead of the benchmark but the share price rose just 4.3% resulting in the discount widening to 12.5%.

Pan European real estate equities (in GBP) rose 5.6% in December almost recovering the 6.3% loss in November. These dramatic price movements over a short period are driven by macro concerns / expectations as opposed to property fundamentals. The weakness...

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Pan European real estate equities (in GBP) fell a dramatic -6.3% with the Trust’s NAV falling an additional 56bps at -6.8%. The only sliver of a lining on this particularly dismal cloud was the share price performance which fell half as much at -3.4% resulting in the discount tightening to -12% (from -15% a month ago).

Market sentiment has moved dramatically since the summer from deflationary fears and concerns over “QE infinity” / negative interest rate policies to reflation hopes. Trump’s US presidential victory has only exacerbated this frantic sector rotation momentum with his election seen as a pro-cyclical, fiscal easing signal leading to further yield increases in global bond markets.

As a previous QE winner our sector underperformed general equities by -10% over the last 3 months (EPRA Dev. Europe, TR Euros) following 2 ½ years of stark outperformance. The overall stock market leadership shifting to cyclicals away from defensives has been being unequivocal. However, within the European listed real estate space, sub-sector and stock performance dispersions have, in our view, been much more disorderly than expected.

For instance the most “cyclical” property sub-sectors (self-storage, hotels) have not outperformed whilst the traditional non-cyclical defensive sectors such as Swiss and Belgian diversified have outperformed. Switzerland was the only country in positive territory (+0.9%) in the month. In addition large liquid stocks as well as previously strong performers have been hit hard which has been detrimental to the fund’s performance.

The fund’s gearing includes the physical portfolio (9.5% of assets) and therefore the gearing to equities is modest (4%) but it does reflect our belief in the fundamental stability of the asset class and this has been borne out by the modest movement in underlying values since the end of June with IPD All Property capital values down -3.7% in the 4 months to the end of October.

The UK (in GBP) fell just -0.7% whilst the Eurozone (in EUR) was down -4.1%. However the recovery in GBP resulted in a dramatic monthly return of -8.6% for the Continental European companies collectively when measured in GBP. The German residential businesses continued to weaken in the face of rising bond yields, however investors favoured those sub-markets with the best rental growth prospects. The two Berlin focused names Deutsche Wohnen fell just 2.2% and ADO Properties -3.6%. Whilst we hold ADO we also hold LEG which fell -6.9% in the month.

The Trust reported its Interim results (to end of September) on 25th together with the interim dividend of 4.1p, an increase of 30% on the same period last year. The full report is available on www.trproperty.co.uk.

Pan European real estate equities (in GBP) fell a dramatic -6.3% with the Trust’s NAV falling an additional 56bps at -6.8%. The only sliver of a lining on this particularly dismal cloud was the share price performance which fell half...

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Pan European real estate equities, as measured by the Trust’s benchmark fell -3.3% in the month with the Trust’s NAV down -3.9% generating 54bps of underperformance. The benchmark is denominated in GBP and therefore the fall in the market was cushioned by the further weakness in GBP versus all European currencies. Europe ex UK in EUR fell a substantial -6.3% in the month but just -2.7% when measured in GBP. Investors continued to rotate away from defensive, income plays towards cyclicals driven by the expectation of higher inflation (following rises in commodity and oil prices) coupled with the central bank rhetoric that further QE and monetary easing was now less likely. Bond yields rose and sub-markets such as German residential stocks which have become highly correlated to the 10 year Bund fell nearly 7% as the yield on the 10 year moved from -0.11% to +0.15%. The fund moved down close to a neutral position in German / Austrian residential in September and given our strong belief in the underlying fundamentals we would expect to move back overweight on further price weakness.

No markets were immune to the selloff but it has followed the traditional pattern of Belgium (-2.8%) and Switzerland (-3.6% in CHF but +0.5% in GBP) falling the least. The Trust remains underweight both markets due to our concerns about the prospects for rental growth in Brussels and Zurich.

Spain was the strongest regional performer, buoyed partially by hopes of political stabilisation and then at the corporate level by the surprise announcement that Colonial had acquired a 15% stake in Axiare, a small listed property company at a premium to the last published asset value. Axiare was the best performer in the month rising 10% whilst Colonial fell 0.6%. These price moves tallied with our views on this transaction.

Unite, the student housing REIT, was the UK’s weakest performer down -11.8% on concerns that ‘hard Brexit’ will reduce the number of overseas (particularly EU students). We remain confident in the market fundamentals and the company’s ability to use its scale to drive up margins and extract gains from its development pipeline.

In our physical portfolio, we completed the letting of two units in Gloucester to Infusion GB Limited who are already tenants on the estate. The two units came vacant at the end of July, we completed the dilapidation works and Infusion have taken new 10 year leases at a 16% premium to the previous passing rent. The rent achieved is in excess of both the valuers’ estimate of rental value and the level assumed at purchase in July 2015.

The share price weakened 5.2% in October, slightly more than the fall in the NAV and this led to a widening in the share price discount to net asset value to over 15%. The Trust bought 150,000 shares at a average discount of 15.8%. These shares were then cancelled.

Pan European real estate equities, as measured by the Trust’s benchmark fell -3.3% in the month with the Trust’s NAV down -3.9% generating 54bps of underperformance. The benchmark is denominated in GBP and therefore the fall in the market was...

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Pan European real estate equities fell -0.71% in the month with the Trust’s NAV down -0.37% generating 35bps of outperformance. The September NAV includes the six monthly independent valuation of the physical portfolio. This was the inaugural valuation by Knight Frank LLP who have replaced Deloitte LLP as the Trust’s independent valuer. The property portfolio suffered a net fall of £1.5m, this is a 1.4% fall in the value of the property portfolio, adjusted for capital expenditure incurred in the period. The modest correction reflects the exposure of the fund to London industrial (Wandsworth) and retail (The Colonnades in Bayswater) which remain popular sub-sectors amongst investors.

Continental European property companies collectively fell -2.0% in EUR, however the continuing weakness in GBP mitigated this correction with the performance in GBP just -0.27%. The FX exposure of the Trust is maintained in line with the benchmark, broadly 30% GBP, 70% EUR and other European currencies. This currency exposure has been a major shock absorber and since 24th June the NAV has risen 12.5%, significantly aided by the depreciation of GBP. However the share price to net asset value discount has stubbornly remained in the region of 13-15%.

Central banks in Europe, UK, Japan and US kept their policy rates unchanged. However concerns around central bank withdrawal, in particular outside of the US, have emerged and prompted a sell-off in yield equities, including real estate stocks (FTSE/EPRA Developed Europe TR down -2.4% in Euros) but the full extent will depend on the pace of further yield increase and tapering fears.

As we wrote in July 2016 we take no comfort in collapsing interest rates as it also manifests signs of increased central bank policy ineffectiveness. Furthermore the risks surrounding the “QE Infinity” trap are significant. Arguably the CSPP bond purchase program (Corporate QE) which started in June has further cemented the markets dependence on central bank action and complicate even more normalisation exit strategy. We still consider pan-European property shares to be one of the least “toxic” yielding asset classes trading on a 4.9% cash recurring earnings yield and a progressive 3.6% dividend yield.

In September numerous Pan-European property companies took the opportunity to grow while trading at premiums to NAV and capital is available. SEGRO announced a £340m capital increase, ADO €200m, Balder SEK690m, Befimmo €127m, Hamborner €166m and Tritax announced £150m. In addition we saw large shareholders taking advantage of strong share performance to place their stakes: the Norwegian state placed €270m, i.e 33% of their stake in the Norwegian office company ENTRA and Oaktree sold their remaining holding in German office landlord Alstria.

Pan European real estate equities fell -0.71% in the month with the Trust’s NAV down -0.37% generating 35bps of outperformance. The September NAV includes the six monthly independent valuation of the physical portfolio. This was the inaugural valuation by Knight...

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After the dramatic performance of the sector in July (+7.4%) which was a combination of pricing recovery (post the Brexit selloff) and continued strengthening of EUR (which pushed up performance of the GBP denominated benchmark), August was a much calmer affair. It felt like the market took a collective holiday from the volatility and noise of the immediate aftermath of the Referendum. The index rose 1.1% in August and the NAV was just ahead at 1.19%. Encouragingly the share price rose 5.4% in the month narrowing the discount a little.

UK property stocks rose 1.5% continuing the sustained recovery seen since mid July. Europe was more mixed with stock specific moves driving national performance. Finnish property companies were very strong led by the month’s top performer Sponda (+14.2%) rallying on a combination of half year results beating expectations and recapturing some of the relative underperformance versus the Swedish companies. Swedish commercial and residential businesses all reported further yield compression and healthy rental markets in their first half results. Combined with the super accommodative Riksbank policies these stocks have seen dramatic performance up +11.3% in the quarter. Norway’s performance has been even stronger at 14.1% in the quarter driven by an expectation of an improving economy as the oil price returned to the $45-50 per barrel range.

For once Austrian residential businesses eclipsed their much larger German neighbours. Buwog rose +7.5% as the new, highly respected CEO reported on the success of work in progress and strategy. The stock is the Trust’s 4th largest overweight position. Conwert, another stock in the midst of a turnaround strategy rose +7%. Post the month end, Vonovia announced an all stock bid for Conwert. German residential remains a significant position for the fund, with our Berlin small cap, ADO Properties rallying 8% whilst LEG, owning assets across the wider North Rhine Westphalia region fell -2.5%.

Post the holiday season we expect to see a flurry of investment transactions which will deliver much needed post Brexit price discovery. Our view is that whilst rental growth expectations (particularly in London offices) will have been dialled back, the significant drop in bond yields post the Referendum merely exacerbates the hunt for yield. It is therefore of little surprise that recent anecdotal evidence around the highest yielding asset class – industrial/distribution – reflect very little price depreciation since June. Equity market participants also remain positive towards these sectors with Tritax Bigbox and Segro exceeding or very close to all time highs. The latter completed a 9.9% accelerated cash raise on 1st September at 435p, which was where the shares traded in mid June.

After the dramatic performance of the sector in July (+7.4%) which was a combination of pricing recovery (post the Brexit selloff) and continued strengthening of EUR (which pushed up performance of the GBP denominated benchmark), August was a much calmer...

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Quantitative easing (QE) and low bond yields have provided significant tailwinds to the real estate equity sector. However, a game-changer was the implementation of the European Central Bank (ECB) Corporate Sector Purchase Programme (CSPP). The growth of negative yielding corporate debt has been dramatic post the announcement of CSPP with an estimated €445bn of negative-yield euro investment grade corporate bonds (total universe including sub-12 month tenor) according to Merrill Lynch data. The magnitude of buying pressure from the ECB (€8.5bn monthly including negative bond yields) exerts an unprecedented hunt for yield, particularly benefiting European property shares which provide a long-dated dependable income stream at a significant pick-up versus other available yield propositions.

The Trust's benchmark rose a substantial 7.45% in the month, reflecting not only the underlying performance of pan European property equities but also the continuing strengthening of the Euro against sterling. We remind investors that the Trust's assets and the benchmark are priced in Sterling, and therefore non-Sterling currency appreciation benefits the overall valuation (and vice versa). However regardless of the underlying asset positioning, the FX position is always in line with the benchmark which ensures that any alpha generation is not generated by currency positioning. The fund's NAV rose 7.73%, 28bps ahead of the benchmark. However the share price rose only 5.7% leading to a slight widening in the discount.

We take no comfort in collapsing interest rates as it also manifests signs of increased central bank policy ineffectiveness. Furthermore the risks surrounding the “QE Infinity” trap are significant. Nevertheless we consider pan-European property shares to be one of the least “toxic” yielding asset classes trading on a 4.9% cash recurring earnings yield and a progressive 3.6% dividend yield.

Another incremental catalyst could come on 31 August when both MSCI and S&P will carve out Real Estate as a separate GIS sector (first addition since inception in 1999). This is likely to draw further focus on the REIT sector which has been amongst the top performing asset class over the years, whilst a stand-alone reporting will make underweight positions more apparent.

In the UK, after the initial pain of the Brexit vote, (sterling hitting a 31 year low and AAA rating stripped out) the prompt appointment of Theresa May as prime minister limited the political uncertainty and calmed markets. UK REITs bounced strongly since their lows reached, following the EU referendum result and the open-ended property fund redemption crisis. UK property companies reported solid, albeit backward-looking, set of interim results and reassurance in terms of letting and transaction activity since Brexit and their shares have been helped by 10-year gilt yields halving from their 1.4% level seen at the end of May.

Gearing in the fund increased slightly over the month. We added further to our German/Austrian residential exposure through our participation in the Buwog secondary placing.

Quantitative easing (QE) and low bond yields have provided significant tailwinds to the real estate equity sector. However, a game-changer was the implementation of the European Central Bank (ECB) Corporate Sector Purchase Programme (CSPP). The growth of negative yielding corporate...

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Pan European property equities as measured by the benchmark, FTSE EPRA NAREIT Developed Europe Net TR in sterling rose +2.0% in the month. This was quite an astonishing performance in the light of the UK market’s predictably severe response to the decision to leave the European Union - which whilst binary - produced an unexpected result. From May 31st to June 23rd the benchmark rose +1.7% only to fall -5.4% in the two days post the referendum result followed by a +6.1% recovery in the final three days of the month. After banks, other financials and house builders, real estate was the next most affected subsector. Whilst we had continued to reduce UK exposure in the weeks running up to the referendum, the fund was fully invested (the limited gearing being offset by our physical property exposure) and this coupled with a modest overweight to London, on a see through basis, resulted in relative performance in the month of -0.35%. Whilst we expected 20%+ corrections in the event of a Leave vote in high quality London development names (Great Portland, Derwent London ), we were surprised at the severity of the response to the house builders (we own just one - Telford Homes which fell -17.3% in the month). This severe reaction extended to any stock with links to any part of the residential market, however modest, with land bank play St Modwen (-17.8%) and the owner of the Earls Court residential site, Capital & Counties (-13.2%). The self-storage operator, Safestore, however, rose +5.7% in the month. The fund has a holding in St Modwen and Safestore but not in Capital & Counties.

Continental European companies also shuddered in response to the surprising news but to a far smaller extent. Predictably those stocks exposed to the stronger economies performed best with Germany (+4.7%) dominated by large residential businesses and Sweden (+0.5%). The preferred safe haven of Switzerland +1.7% in Swiss francs (CHF) also did well even though the strengthening Swiss franc will make real economic growth going forward even harder.

The overriding factor in the last week of the month was the currency movements. Sterling fell -7.9% from €1.30 to €1.19. The fund’s foreign exchange strategy has been consistent for many years. All currency exposures are in line with the benchmark’s currency positioning regardless of the underlying stock exposure. This means that when European currencies are strengthening against sterling the asset value rises (but not the manager’s relative performance). The movement versus the Swiss franc was even stronger at -9.7%. Only 30.3% of the Trust’s net exposure is to sterling and the currency movement enabled the asset value to rise by 1.65% in the month. However, the share price has not kept pace with the asset value and at the month end the shares traded at a discount of 18%, a level only experienced in the period from June 2008 to March 2009.

Looking forward, we are in a period of heightened volatility as the political turmoil reverberates through the UK and across to Europe. The spread of potential economic outcomes as a consequence of this decision-making vacuum is as wide as it’s ever been. Rebuilding and reigniting business and consumer confidence will be critical in determining whether a recession is the outcome of this dangerously blunt tool of democracy. However the silver lining – for real estate at least – is that certain key fundamentals remain solid. The sector offers elevated levels of income (relative to fixed income), corporate balance sheets are not stretched and in many cases have significant firepower if opportunities arise and encouragingly there are very few markets which can be described as significantly overbuilt. Central London prime residential new build is an exception and the fund has minimal exposure to that market.

The Trust went ‘ex’ the final dividend of 5.2p on 23rd June. It is paid on 2nd August. Based on the 282p (30/6/16) price, the dividend yield is 3%. The dividend has been increased in 22 of the last 23 years (it was held flat in the year to March 2010) and the 10 year compound annual growth rate is 9.4%.

Pan European property equities as measured by the benchmark, FTSE EPRA NAREIT Developed Europe Net TR in sterling rose +2.0% in the month. This was quite an astonishing performance in the light of the UK market’s predictably severe response to...

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The Trust’s NAV rose 1.49% in the month outperforming the benchmark which rose 0.97%. Encouragingly the share price rose 1.75% resulting in a slight tightening in the discount to the NAV (including accrued income) of 10%. The Trust reported its full year results on 23rd and the Board announced a full year dividend of 8.35p, an increase of 8.4% on the previous year, reflecting the growth in underlying income from property companies across the UK and Continental Europe. The Chairman also commented on the revenue outlook remaining positive with interest costs remaining low and earnings stability highlighted as an ongoing key quality of the asset class.

Sterling strengthened against the Euro by 2% in the month as various polls predicted an improvement in the odds of remaining in the EU. This provided a tailwind to UK stocks coupled with the usual large number of May results announcements (for those with March year ends) which were either inline or exceeded market expectations. Land Securities (a large overweight for the fund) rose 3% in the month following a greater than expected increase in the final dividend. Investors also appreciate its record low leverage in these uncertain times. Other names which responded strongly in the month included Segro (+4.8%) on further demand for distribution and industrial assets, Grainger (+9.7%) on good results and clarification of strategy and Workspace (+3.9%) which looked oversold YTD on the risks to SME demand for space in the face of slowing economic conditions. Interestingly the self storage stocks Big Yellow (+3.5%) and Safestore (+3.2%) responded to good results from the former but also investor demand for stocks with a growth story and perceived secure earnings streams.

The strengthening GBP also dampened returns from Continental stocks which collectively rose nearly 3% when viewed in EUR. There was renewed emphasis on income stability across the Eurozone with outperformance from German and Austrian residential businesses, Belgium stocks and the higher quality Dutch listed businesses such as Eurocommercial (+3.6%). The two Italian companies – Beni Stabili and IGD both went ex dividend well in the month recovering more than their respective 3.7% and 5.0% dividend yields. Italian sovereign bonds also rallied in the month following announcements of progress of reform in the banking sector.

Swedish and Norwegian stocks were up +4% (in local currency) reflecting the ongoing loose monetary policy from their respective central banks even though, particularly in Sweden, economic growth is currently at 4% annualised. The buoyant economic conditions are feeding into rental growth particularly in Stockholm and Gothenburg and Q1 results across those companies with exposure to these markets was strong.

The Trust’s NAV rose 1.49% in the month outperforming the benchmark which rose 0.97%. Encouragingly the share price rose 1.75% resulting in a slight tightening in the discount to the NAV (including accrued income) of 10%. The Trust reported its...

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The Trust’s NAV fell -1.22% whilst the benchmark fell -1.29%. Encouragingly the share price dropped -0.2% resulting in a slight tightening of the discount to NAV. It was a better month for UK stocks which collectively rose 2%. The referendum continues to dominate investors’ thoughts and the shifting of bookmaker’s odds in favour of Remain which overlapped with Obama’s call for unity in Europe helped the London-centric names in particular. Derwent London and Great Portland were both up 4.2% with Workspace a very strong 6.6%. Our overweights in these names helped performance but the strong rebound in Capital & Counties (+7.2%) which owns the Earls Court development site was a detractor from our relative performance as we don’t own the stock given our concerns over London high value residential. The healthcare names were again strong performers with Primary Health Properties +5.9% even after an oversized raising of £150m at 100p. We participated but with some reservation over the speed of appropriate acquisitions given the size of the raise. Assura, which owns and develops polyclinics and GP surgeries let to NHS backed tenants also rose a dramatic 6.7%. The market remains risk adverse

The German residential names were quite weak in April. ADO, our preferred Berlin focused small cap, raised €100m to finance portfolio expansion and we participated in the raise. The stock fell -4.6% in the month whilst the largest apartment business, Vonovia fell -7.1%. This sub sector has had a high correlation with the Bund, which rose 20bps in April and goes someway to explaining the market response.

The earnings season also got underway in earnest with Gecina (Paris offices) reflecting yield compression and capital value growth whilst Icade’s results were a mix with improvement particularly in residential development but write downs (which were expected) in business parks. Mercialys, the owner of sub-regional shopping centres had another year of solid growth. In the Nordics, Fabege also revealed greater capital growth than expected and we added to our holding. Castellum’s figures were dominated by the earlier announcement of the purchase of Norrporten and the capital raise due after the EGM (20th May). Entra, Norway’s largest office company also showed strong results. The stock has, unsurprisingly, rallied alongside the improving oil price.

The Trust’s full year results and final dividend will be announced on 25th May.

The Trust’s NAV fell -1.22% whilst the benchmark fell -1.29%. Encouragingly the share price dropped -0.2% resulting in a slight tightening of the discount to NAV. It was a better month for UK stocks which collectively rose 2%. The referendum...

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The rebound in prices of pan European property equities which commenced in mid February, evolved into a strong rally in March with the benchmark climbing 7.7%. The index (in GBP) was last at this level in June 2007.

Once again, Continental Europe outperformed the UK as the expectation of more unorthodox monetary easing was effectively confirmed by the ECB. Europe ex UK (in GBP) returned 8.9% in March bringing the YTD (Q1 2016) to 11.4%. What is noteworthy is how little response there was from broader European equities through March with the EuroStoxx600 Net TR Index up just 1.4% in the month. Investors are less convinced that central banks can engineer the growth required to drive an inflationary response. In the case of property where the average lease contract is multi-year, the benefit from falling debt costs coupled with stable top line revenue continues to look attractive, at least on a relative basis. Another surprise has been the strength of EUR (or ongoing weakness in GBP). When viewed in EUR the returns from Continental Europe are a more modest 7.1% in the month and just 3.6% YTD.

The negative sentiment towards the UK extends beyond the currency with the UK property stocks still collectively down -7.1% YTD, even after a robust 5.4% rise in March. Fears over the June referendum remain centre stage and the universal inability to measure the impact leads to the deferral of investment decision making. The UK commercial property market has recorded significantly lower quarterly transaction volumes than last year. Whilst the top performing UK companies in Q1 were the higher yielding names with no development risk such as Tritax Bigbox and the medical focused businesses; March saw strong performance from the largest stocks led by a 10% gain in Land Securities (the fund’s largest UK overweight position).

The strongest gains in Europe were the largest companies, particularly the German residential names with Vonovia (+10.1%), Deutsche Wohnen (+12.1%) and LEG (+9.5%). The Paris office names also did well with Gecina (+8.3%) and Fonciere des Regions (9.9%). Elsewhere in Europe, income remains a focus and the ex-growth high yielding names such as Befimmo (+9.7%) and NSI (+7.6%) also performed well.

Performance in March benefited from the semi-annual revaluation of the physical property portfolio (9% of assets) which rose a net £6.6m in the second half. The valuation gains were primarily a result of our asset management initiatives at the Colonnades in Bayswater (where all 5 of the new retail / restaurant units are let or under offer) and our light industrial estate in Wandsworth where a new rental level of £20 per ft has been set.

The Trust’s full year performance (to the end of March) saw the NAV (with income) return +8.2% versus a benchmark total return of 5.4%, resulting in outperformance, post fees, of 285bps.

The rebound in prices of pan European property equities which commenced in mid February, evolved into a strong rally in March with the benchmark climbing 7.7%. The index (in GBP) was last at this level in June 2007. Once again,...

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The turbulence experienced in January continued into February. The general negative sentiment over prospects for global growth and slowing earnings across broad equities met some positive resistance from real estate names particularly on the Continent. We are deep into the results season and whilst no chief executive was wildly optimistic the numbers generally spoke for themselves. The essential message was that earnings were sustainable (and growing in some quarters), the lack of development provided comfort that a supply shock was not around the corner and central banks’ desire to help would lead to further debt cost reduction (where that is feasible). In fact further yield compression is anticipated in those markets with rental growth such as Paris and Stockholm. Continental European property stocks were only down -0.3% in the month.

However, it was the UK names – particularly the large caps and London-centric names who saw further aggressive selling pressure. Investors expect yield expansion (50bps is priced in) and worry about renewed supply (we don’t) as well as the uncertainty around Brexit. Well managed mid caps such as Derwent London and Great Portland are now trading at NAV having fallen 17% YTD with Land Securities and British Land at close to 30% discount to FY16 asset values. UK property names fell over 7% in February and Capital & Counties (the owner of the Earls Court residential site) was down 12.6% as investors anticipate a 10-15% price correction in high end residential values. Whilst the Trust owns no shares in Capital and Counties the NAV still fell -1.44% which was 41 bps lower than the benchmark.

Scandinavia proved to be the best performing region with Swedish property companies climbing 3.5% in the month partly on the back of an unanticipated rate cut by the Riksbank pushing negative rates from -0.35% to -0.5% as it seeks to maintain a weak Krona and generate bank lending. Whilst Norway grapples with the effects of the lower oil price, Entra the 50% state controlled property company produced great results and the stock rose 8.8% on the day and has now returned 4.9% YTD, the top performer in Europe so far in 2016. The lack of new supply in its key CBD markets enabled it to both retain tenants and move rents upwards.

Whilst UK stocks were the worst performers it is worth noting that two high yielding companies successfully raised capital in February, Tritax Big Box (£200m) and Redefine (£160m). This reflects the polarised demand with investors searching for high sustainable dividend income whilst happy to avoid stocks more dependent on the development cycle and economic growth. Given the headline weakness in UK stocks it may surprise investors that the benchmark fell just -1% in the month. It is worth reminding investors that the fund’s FX positioning matches that of the benchmark regardless of the underlying positioning. This is achieved using forward contracts to bring exposures in line. The underlying currency exposure of the benchmark is currently 33.7% GBP and 52.9% EUR whilst the fund NAV is denominated in GBP. Hence the 3.4% appreciation of EUR versus GBP in February was a benefit to the net asset value.

The turbulence experienced in January continued into February. The general negative sentiment over prospects for global growth and slowing earnings across broad equities met some positive resistance from real estate names particularly on the Continent. We are deep into the...

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Remarking that the opening month of 2016 was turbulent would be an understatement. The Euro Stoxx 600 (Net EUR) fell nearly 12% (to 20th) and then recovered to close down -6.4%. Pan European property shares were not immune but fared a little better with EPRA Europe ex UK (in EUR) down -3.0%. The UK was the underperformer falling -5.8% (in GBP) led by the Central London focused midcaps and the largest names (who were also caught up in FTSE100 index selling).

The ECB President hinted at more monetary stimulus from the central bank and the Bank of Japan adopted negative interest rates. Carney at the Bank of England also alluded to lower for longer and the subsequent MPC minutes saw a unanimous vote to hold rates.

The pan European benchmark (which is in GBP) fell just -1.95% as the currency exposure is just 35% GBP and the remainder is European currencies of which EUR accounts for 51%. The fund continues to align its currency exposure to that of the benchmark. The weakening of GBP versus EUR by 8% since the end of November has clearly been beneficial.

Whilst property is not immune from the threat of global slowdown, it remains a domestically focused income stream which in many instances is highly resilient and we expect the group to be one of the few equity sub-markets to see consistent EPS growth in 2016 across the vast majority of companies.

The fund’s NAV fell-2.25%, underperforming the benchmark by 30bps. This underperformance was driven by our overweight to the UK and in particular the London focused stocks. Whilst we had reduced the overall size of our holdings in businesses such as Great Portland, Derwent London and Workspace in Q4 2015 we continue to believe in their core strategies of manufacturing internal growth through development and regeneration of their portfolios. However we have also favoured those businesses which have reduced their financial gearing in the expectation of more volatile market conditions. Land Securities is a good example.

Our underweight to Swiss stocks (which outperformed rising 1.2% in CHF) was also a headwind. Swiss stocks traditionally outperform when markets suffer negative sentiment but we consider local economic conditions to have been weakened by the renewed strength in the currency following removal of the peg.

Following completion of the extension and refurbishment at our largest property asset, the Colonnades in Bayswater we have continued to make progress on the lettings of the 5 retail / restaurant units. Agreements for lease have been signed on 2 of the restaurant units with two further units are under offer and in legals. The property portfolio will be revalued at the year end in March.

Remarking that the opening month of 2016 was turbulent would be an understatement. The Euro Stoxx 600 (Net EUR) fell nearly 12% (to 20 th ) and then recovered to close down -6.4%. Pan European property shares were not immune...

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Pan European property shares held up well as the year ended, with the Trust’s benchmark returning 1.4% in GBP terms in December. However the weakening of GBP versus EUR (a theme throughout the month) resulted in a negative return of -3.4% when viewed in EUR terms. December’s performance is always subject to the lighter volumes (and hence greater volatility) associated with the holiday season and so it makes sense to review the whole year alongside the month. Property equities had another good year, particularly when viewed against the broader market. The benchmark rose 12.2% when viewed in GBP and a tremendous 18.1% in EUR (due to EUR weakness earlier in the year). This compares to -2.5% for the All Share (in GBP) and +8.8% from the Euro Stoxx 600 (in EUR). Property equities have continued to benefit from the loose monetary stance of the ECB and further falls in the cost of capital engineered by more QE (in the Eurozone). Allied to this, and in the face of clear global growth uncertainties, the attraction of steady recurring earnings which are locally focused against a positive backdrop of little new supply of commercial space in most markets continues to be attractive.

The regional star performers of 2015 were Sweden (+24.5% in SEK) and Spain (+23.8%). The Riksbank remain determined to keep overnight rates negative and maintain pressure on their currency even whilst house prices reach all time highs. Local banks have also been accommodative with lending to property businesses on ever tightening margins. Spain was the focus of capital raisings in 2014 and again in 2015 and this deployment of capital in competition with private equity and leveraged buyers has driven down yields faster than we expected.

The three top performers in the year were two Swedish businesses Balder (+89.3%) which benefited from the floatation of a subsidiary, Collector as well as residential price growth and Pandox which has risen 41% since IPO in June together with Merlin in Spain (+44%). The fund participated in the IPO of Pandox and has held an overweight position in Balder for several years. Whilst we participated in the various rights issues in Merlin we have been underweight this business as we continue to worry about the pace of rental growth following such a sharp fall in yields.

The fund’s NAV rose 1.15% in the month underperforming the benchmark by 25bps. Whilst the fund’s financial year end is March the calendar year performance saw the NAV grow by 16.9%, 473 bps ahead of the benchmark.

January has opened considerably weaker across all markets and property equities have been no exception. However it is worthy of note that our benchmark is broadly flat YTD (8th Jan) whilst the All Share has fallen -4.9% and the Euro Stoxx 600 is down -6.2%.

Pan European property shares held up well as the year ended, with the Trust’s benchmark returning 1.4% in GBP terms in December. However the weakening of GBP versus EUR (a theme throughout the month) resulted in a negative return of...

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Pan European property shares fell -3.1% (in GBP) in November underperforming the broader European equity markets. The month was dominated by the interim result announcements from a number of UK companies with March year ends. Land Securities’ results undershot market expectations by a very small margin (1-2%) but the stock was punished falling over 8%. British Land’s results were more inline but the stock still corrected -4.1%. The rate of capital growth (particularly in London) is clearly moderating but it remains positive with rental growth rates remaining robust. Consequently earnings growth looks sustainable and this is particularly the case where companies such as Land Securities, Great Portland and Derwent London have material development programmes as well as exposure to subsectors with rental growth. Even with our large position in Lands (and its –ve contribution to the month’s return) the NAV movement outperformed the benchmark by 57bps falling -2.5%.

The UK large caps pulled down the country performance to -3.3% (in GBP) whilst Europe ex UK (in EUR) fell just -1.2%. Germany (+0.9%) and Sweden (+0.2%) were only positive performers amongst the larger markets. In both cases it was the residential stocks which performed well. In Germany, LEG (our largest German overweight) rose 3.4% as it upped its 2015 guidance. It also completed a €306m capital raise to fund the purchase of a large portfolio (from Vonovia). The Trust participated in the raising at €68 per share. Other strong performers were the smaller residential names – Grand City (+7.4%) and ADO (+5.4%). In Sweden, Balder (+6.8%) reported great numbers following the performance post-flotation of Collector, a strategic investment. Klovern (+11.3%) was the top performer as investors continued to happily buy the Swedish high leverage story backed by a dovish Riksbank who remain committed to weakening their currency.

The Swiss stocks outperformed the rest of Europe with the largest two names PSP Swiss (-0.8%) and SPS (+1.8%) reflecting the move to what is generally viewed as a safe haven when sentiment weakens. We remain underweight the Swiss names on property market fundamentals and our view that the economy will continue to struggle with its strong currency.

The Trust announced its interim results on 25th November and the Board increased the interim dividend to 3.15p, a 6.8% increase on last year’s interim. The property portfolio (9% of assets) was also revalued as at 30th September and on a like-for-like basis (excluding the one purchase in the period) rose by 8.4%. The full statement on the first half’s performance can be found in the Interim 2015 Report together with the Chairman and manager’s outlook for the second half.

The Trust also announced with the interim results agreement on the replacement of our long term debt financing. The 11.5% 25 year debenture due for repayment in February 2016 will be replaced with a £15m 15 year loan note carrying a coupon of 3.59% and a €50m 10 year loan note with a coupon of 1.92%. The total servicing cost of these two loans will be less than the current debenture.

Pan European property shares fell -3.1% (in GBP) in November underperforming the broader European equity markets. The month was dominated by the interim result announcements from a number of UK companies with March year ends. Land Securities’ results undershot market...

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Pan European property shares had their strongest monthly return so far this year rising +7.9% (in euros) and 4.7% (in sterling). The broader equity market (Stoxx index in TR) saw its best monthly performance since July 2009 at +8.1%. Stocks rallied strongly in the second half of the month after the European Central Bank (ECB) hinted it could expand its stimulus at their next meeting on 3rd December. The euro weakened sharply resulting in the poorer performance of the sector in sterling terms.

Due to the frail economic recovery in Europe but also mounting concerns over the Chinese slowdown, market expectations for rate lift-offs keep getting postponed. In the UK whilst the first rate hike was expected in 7 months time back in August, by October this has moved out to 12 months to Q4 2016. In the eurozone this figure is now 38 months away. In Sweden the Riksbank recently pushed back the first hike guidance by 6 months to Q1 2017 citing “substantial uncertainty linked to the global economy”.

The ultra-low or negative corporate and sovereign bond yield environment for an extended period continues to exert an unprecedented hunt for yield. Evidently this has been positive for property shares which have outperformed the broader European equity market by 11.4% year to date.

The Trust’s NAV rose 4.46% underperforming the benchmark by 21bps in the month. This was primarily due to the relative underperformance of the UK (+4.4%), our largest country overweight versus strong returns in local currency from the largest eurozone countries France (+7.9%), Germany (+5.8%) and the Netherlands (+10.2%). The most leveraged companies in the European property sector are to be found in Sweden. The Riksbank’s dovish commentary, pushing back the commencement of a rate rising cycle, saw share prices respond accordingly rising +10.1%. Residential and Stockholm focused businesses continue to be the strongest performers but the standout performance this month came from Pandox, the recently listed hotel owner /operator which rose 14.7% in the month and is up 32% from its June IPO.

The portfolio continues to have gearing of close to 15% but I remind investors that our physical portfolio is now 9% of assets and that element of the portfolio has no separate debt attached to it. We remain focused on markets and stocks where we see rental growth or are confident that tenant demand will lead to rents appreciating in the near term.

The interim results will be published on 25th November together with the announcement of the Interim dividend. The share price has underperformed the recent strength in the underlying portfolio and at the end of October should at close to 7% discount to the net asset value (including income).

All fund returns are quoted in sterling using net performance.

Pan European property shares had their strongest monthly return so far this year rising +7.9% (in euros) and 4.7% (in sterling). The broader equity market (Stoxx index in TR) saw its best monthly performance since July 2009 at +8.1%. Stocks...

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Following the dramatic sell off in equity markets in late August, September was expected to be choppy as investors across the globe awaited the Federal Reserve’s decision on whether to commence a rate rising cycle in the US. Citing the slowdown in China and emerging market volatility as part of the rationale for holding off raising rates, this seemed to spook rather than calm markets resulting in more volatility. Once again, higher yielding companies with secure domestic Developed Market earnings streams proved resilient. The fund’s benchmark, FTSE EPRA/NAREIT Developed Europe Net TR Index (in sterling) rose a satisfactory +1.4% in the month although the volatility meant that it bounced around in a 5% trading range all month. An ongoing feature of returns from the sector has been the outperformance of broader European equities (which have themselves outperformed emerging markets). The EuroStoxx 600 (Net Total Return in euros) fell -4.1% whilst the FTSE All Share Index also fell -2.9% in the month.

Within the sector the most significant corporate news was the announcement of an agreed all paper offer for LEG, Germany’s 3rd largest listed residential landlord by Deutsche Wohnen (the 2nd largest). The deal looks good for LEG shareholders but less so for Deutsche Wohnen and the communication of the deal rationale from its management has been stunningly poor. Whilst the LEG stock rose 10.4% in the month it has subsequently fallen in early October suggesting that there is a risk that not enough Deutsche Wohnen shareholders will vote in favour of the deal. ADO Properties, which had performed poorly since its IPO two months ago rose over 11% post the LEG/ Deutsche Wohnen news as investors expect medium term consolidation to continue in the sector regardless of whether this deal goes through. Elsewhere in Europe residential stocks performed well particularly in Sweden with both Balder (+7%) and Wallenstam (+6.7%) significantly outperforming the rest of their Swedish competitors with the Swedish companies managing just +1.6% (in Swedish krona).

In the UK, Quintain which is being taken private in an agreed cash bid from Lonestar at 131p found itself facing dissent from a 13% activist shareholder and subsequently increased the offer to 141p to the benefit of all holders, ourselves included.

Switzerland, a traditional safe have in turbulent times proved to be anything but safe with the two largest names PSP Swiss and Swiss Prime Site down – 4.3% and -6.1% respectively as investors continue to worry that the economy is moribund and rental values in both Geneva and Zurich continue to drift downwards.

Spain was a stock picking market this month with Merlin up + 3% as investors enjoyed the greater liquidity and size following the 2 for 3 capital raise to fund the Testa acquisition. Meanwhile both Hispania (-7.9%) and Lar Espana (-6.0%) suffered.

The fund’s property assets are externally revalued twice a year and the September interim valuation saw a like for like increase of £6.5m (7.6% increase) to £91.775m. The physical portfolio is now 9% of net assets. This revaluation helped the net asset value rise 2.34% in the month resulting in 94 bps of relative outperformance in September.

Following the dramatic sell off in equity markets in late August, September was expected to be choppy as investors across the globe awaited the Federal Reserve’s decision on whether to commence a rate rising cycle in the US. Citing the...

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Given the dramatic events in global stock markets during the second half of August it is pleasing to report that our benchmark fell just - 0.6% over the month. The benchmark is sterling denominated and with over 50% of our exposure in non-sterling assets, the strengthening of the euro late in the month helped performance. In euro terms the benchmark fell -3.4%. As a reminder, the fund’s currency exposure is always aligned with the benchmark exposure regardless of the underlying stock positioning and this ensures that relative performance is not impacted by currency movements. Whether viewed in sterling or euros, real estate equities were remarkably resilient when compared with broader European equities with the FTSE100 down -6.7% and EuroStoxx600 down -8.2%.  Why? We think the sector continues to offer domestic focused income with many markets exhibiting sound fundamentals for rental growth coupled with sustainable earnings aided by lower debt costs. Short term rates in the eurozone are not rising and quantitative easing (QE) may get extended. In the UK where rental growth is now apparent across most office and industrial sector nationwide (but with retail the structural weakling) rates may rise but it is going to be modest.

Across Europe, Germany and Austria were the strongest performers, +1.9% and +2.7% with performance dominated by the residential stocks and in particular Deutsche Wohnen (+4.1%) and Deutsche Annington (+2.8%). In the case of the latter it is partly technical buying in anticipation of Deutsche Annington (now renamed Vonovia) entering the DAX in mid-September. We also feel that investors appreciate the resilience of the income stream from these large residential landlords who also continue to drive rental growth of 2- 2.5% per annum. In the UK, the top performers were the healthcare companies such as Primary Health Property (+0.9%) and higher yielding, quarterly dividend payers such as Tritax (+0.5%). Amongst the larger names Great Portland (-0.5%) and Derwent London (- 0.7%) the Central London specialists performed well following upbeat H1 reports.

With the H1 reporting season now complete (for those with Dec year ends), the broad message was both a mixture of further yield compression (particularly on the Continent) and rental growth (focused in the UK but not in the larger retail names). Businesses such as TLG (diversified German assets) which benefited from both yield compression and enhanced earnings (from lower debt costs) were well rewarded (+3.7% in the month).

The fund’s NAV fell -0.48% narrowly outperforming the benchmark, which was pleasing given that we remain positive (at the fundamental level) and therefore the Trust had some limited gearing (around 7% when adjusted for the direct property exposure) throughout this turbulent time.

Given the dramatic events in global stock markets during the second half of August it is pleasing to report that our benchmark fell just - 0.6% over the month. The benchmark is sterling denominated and with over 50% of our...

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European shares responded strongly to the deferral of a decision on the future of Greece within the single currency and real estate shares were no exception – particularly given that they are one of the best ways to achieve domestic European exposure. Following the -5.8% pullback in the previous month, the 30th June proved to be the lowpoint and the benchmark rose 6.8% in July and has added a further 2% so far in August (to 7th). The recovery has resulted in the sector almost returning to where it started the financial year (March 31st). Whilst market sentiment has gyrated with a Q1 intra-quarterly movement of 12% we have also seen a large number of corporate actions as well as new highs in the underlying commercial property investment markets. In other words, there is plenty of investor interest and positive data points in the underlying asset class – property is a popular asset class.

Whilst June saw a rash of capital raisings, July was quieter but not silent. Merlin, the Spanish investment vehicle announced the phased acquisition of Testa for EUR 1.8bn and will complete a 2 for 3 discounted rights issue in August, increasing its market cap by 60%. Citycon completed its EUR 600m rights issue to buy Sektor Gruppen, a Norwegian shopping centre owner and manager. This deal looks expensive but that is masked by the cheap debt available to acquire it. The fund participated in the IPO of ADO Properties a small residential business focused solely on Berlin, our favoured German market.

At the country level returns were remarkably consistent with returns between 6 and 8%, the exceptions were Greece (closed) and Norway (-2%). The latter is dominated by two stocks Norwegian Properties and Entra which remains 50% government owned but we expect that position to be placed in Q4 leading to a stock overhang ahead of the news.

The surprise event of the month was the announcement that LoneStar was making an agreed offer for Quintain at 131p. Whilst this was 22% premium to the prior share price, it is only 6% ahead of the NAV. The share price is currently 133p reflecting the market’s belief that other bids may now materialise. Given that the business is a development play on Wembley residential a cash bid reflects the amount of capital seeking exposure to the sector.

The fund’s NAV rose +7.23% leading to 46 bps of relative outperformance in the month. However, the share price did not keep up with the rally rising 3.1% in the month.

European shares responded strongly to the deferral of a decision on the future of Greece within the single currency and real estate shares were no exception – particularly given that they are one of the best ways to achieve domestic...

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Real estate equity markets across Europe were weak in June with the benchmark falling -5.8%, its single weakest month since August 2013. No coincidence that the primary driver of the market sell off back in that summer was an earlier Greek crisis. However the blame for the market weakness cannot be laid entirely at Athens’ door. The beginning of the month saw the German 10 yr Bund yield rise from 0.5% to almost 1% in a matter of days. This was a continuation of the theme of rising yields (albeit from a very low base) which has been evident since late April as investors sense that deflation is unlikely given the weakness of the Euro and the drop in oil prices helping household budgets and hence consumer confidence. German residential businesses have enjoyed a high correlation with their domestic bond market and this drove German property share prices upwards (+35%) between October 2014 and March 2015. However this correlation resulted in a strong correction through May and June which coincided with Deutsche Annington announcing both a major portfolio acquisition and a capital raise of €2.2bn (in effect a thinly veiled degearing exercise). The stock fell 12.2% in the month and is down 22.8% since the end of February.

Amidst a tempestuous month for property shares, the sector had its highest number of significant corporate actions in any one month period. There were additional capital raisings from New River, Intervest, Wereldhave, Hamborner, Aedifica, LEG and Citycon as well the IPO of Pandox in Sweden and the announcement of a cash offer for Deutsche Office from Alstria. In Sweden, Pandox saw 50% of the B shares listed providing a partial exit for the private family office who delisted the company in 2004. The A shares (and control) remains with them. The fund participated in the IPO (at SEK 106 per share). The effective merger of Deutsche Office and Alstria will create the largest listed office business in Germany but also result in an increased exposure to Frankfurt (the weakest market amongst the big 6 cities).

The UK property companies outperformed their Continental European counterparts in the month as the Greek situation continues to shine a light on the complexities within the Eurozone monetary union. The fund remains overweight the UK versus Continental Europe.

Pan European property shares have now corrected -8.9% since 31st March (the fund’s year end). However, market fundamentals (particularly the lack of new supply of office, industrial and logistics) in many of our preferred submarkets remain robust and we see this correction as a potential buying opportunity – subject to some form of agreement between the European political elite and the people of Greece.

The fund’s relative performance in June was a modest +12bps and the share price went ex the final dividend of 4.75p on 25th June, payable on 4th August. The AGM will be held on 21st July at the RAC, Pall Mall at 12 noon.

Real estate equity markets across Europe were weak in June with the benchmark falling -5.8%, its single weakest month since August 2013. No coincidence that the primary driver of the market sell off back in that summer was an earlier...

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May saw further share price volatility and weakness across Continental Europe which started in mid-April. The fund’s benchmark index fell -2.1% with Europe ex UK falling -5.5% in sterling and -4.1% in euro. The UK had a much stronger month rising +2.7% on the back of the general election outcome and strong year end data from a number of property companies. As I wrote last month eurozone sovereign bonds have experienced renewed volatility as investors attempt to second guess the buying pressure from the European Central Bank (ECB) – the price setter. With yields so low (10 yr Bund yields got down to 0.05% in March) the impact of small movements in yields leads to dramatic capital value change. This volatility spilled over into weak sentiment towards leveraged assets such as real estate stocks. It is important to note that there has been no such weakness in the underlying asset class and we expect further yield compression in most submarkets if base rates remain this low into 2016 and potentially beyond.

The fund remains significantly overweight the UK and it was this geographical position which drove relative outperformance. The NAV fell -1.2% resulting in +87bps of relative outperformance in the month. The UK’s two largest property companies, Land Securities and British Land both reported full year results (to March 2015) with Land Securities’ figures significantly ahead of consensus driven by the delivery of development gains from its London assets as well as unexpectedly strong valuation gains from its retail assets. The retail portfolio has been restructured with highly profitable sales (eg. Livingstone, Bristol and Sunderland) and property swaps (Exeter for more exposure in Glasgow). Our holding is the fund’s largest single position.

On the Continent, the worst hit region was Scandinavia. In Sweden, the highly leveraged commercial property owners such as Hemfosa (-9.6%), Klovern (-10.3%) and even Wihlborgs (-11.3%) were hit hard as investors sought to reduce exposure to leverage. The two largest Finnish names were no better with Sponda (-8.6%) and Citycon (-8.9%). The latter announced a rights issue to fund a large (€1.5bn) acquisition of a Norwegian shopping centre owner / manager. We see this as an expensive transaction fuelled by cheap debt. In our core European markets of France and Germany we saw weakness across the sector with the German residential names predictably weak given their strong correlation with Bund pricing.The Fund announced its full year results on 27th May and the directors declared a final dividend of 4.75p bringing the full year to 7.7p, an increase of 3.4%. The preliminary statement is available on the fund’s website (www.trproperty.co.uk) and hard copies of the Annual Report will be available at the end of the month.

May saw further share price volatility and weakness across Continental Europe which started in mid-April. The fund’s benchmark index fell -2.1% with Europe ex UK falling -5.5% in sterling and -4.1% in euro. The UK had a much stronger month...

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Pan European property equities fell -1.2% as measured by the benchmark, FTSE EPRA/NAREIT Developed Europe TR Net in sterling terms. The weakness was focused in the eurozone with those stocks collectively falling -2.5% whilst the UK returned +0.2%.  The drivers of this weaker sentiment continues to be macro based rather than concerns about the underlying property markets – which in most cases are showing varying degrees of improvement. Rather ironically it appears that the weakness in share prices may have been driven by an expectation of an improvement in eurozone economic data points. The speed of the decline in the euro has certainly helped European exports and will ultimately import inflation as well. All of this helps the ECB towards its fight to avoid deflation. With deflation seen as less likely, yields on sovereign bonds have risen. With bond yields so low, small increases in yield move values significantly. The 10 year Bund yield moves from 0.1% to 0.5% contributed to the -3% decline in German property company prices as that sector is dominated by residential businesses which have had a very high correlation to Bunds over the last year. They are large, liquid stocks offering a pure domestic German focus with a highly granular tenant base paying affordable rents – the income whilst not AAA is very high quality. These businesses have benefited hugely from lowering their cost of debt as bond yields have tumbled.

The Greek situation also rumbles on in the background. Whilst its share of European GDP is very modest, the melodrama continues to remind investors of the deep flaws within the European Union’s structure and the difficulty of a single currency and base rate overlaying multiple sovereign fiscal bodies. Greek property names fell -5.8%. At the same time, there are clear signs of self-help and the Spanish economy appears to be making clear headway. International investors have been active buyers of commercial and leisure assets, driving yields down and prices up. Spanish property stocks rose +3.5% in April with Merlin Properties raising €617m in a discounted rights issue to expand its portfolio by over €1bn.

The UK underperformed Continental Europe during the first quarter as the ECB’s QE programme drove bond yields even lower. However, April saw the UK stocks end the month where they began, even in the face of election uncertainties. One significant outperformer was Unite Group (+4%) this specialist in student accommodation has been a long term favourite. We participated in the 10% overnight placing which raised an additional £115m for expansion.

The net asset value 0.99% in the month, resulting in +23bps of relative performance in the month. The full year results and the final dividend will be published on 27th May.

Pan European property equities fell -1.2% as measured by the benchmark, FTSE EPRA/NAREIT Developed Europe TR Net in sterling terms. The weakness was focused in the eurozone with those stocks collectively falling -2.5% whilst the UK returned +0.2%. The drivers...

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A modest fall of -0.5% for the FTSE EPRA/NAREIT Developed Europe TR Net (GBP) benchmark in the month belies a more active intra-month movement with the sector falling 5.3% to 10th, only to recover all losses and then settle back to a modest negative return for the month. With the full year 2014 reporting season predominantly completed by the first week of the month, the drivers of the sell-off were once again macro focused.

The euro weakened further in the first 10 days (2.6% v GBP) only to stage a full recovery and finish the month where it started, Continental European property companies followed a similar pattern of performance as investors focused on improving economic data from core eurozone countries. A combination of QE, a weakened currency and signs of improving consumer sentiment were enough to drive eurozone stocks upwards in the second half of the month. The Euro Stoxx 600 TR Net (EUR) index rose +1.7% in March. Amongst the property stocks, the French names were the best performers rising +4.4% and now 16.8% YTD (second only to Italy YTD +21.3%). Whilst the DAX rose almost 5% (responding to the expected export growth fuelled by a weakened currency) the domestic focused German property names (dominated by the residential businesses) fell -4.6%, led by Deutsche Annington (-8.9%). In the case of DA, investors have become increasingly concerned that whilst this large business (it now has 230,000 flats following the merger with Gagfah) offers liquid exposure to German residential property the synergies and further refinancing benefits were more than priced in.

Sweden, the star performer in February, suffered a severe bout of profit taking with the listed property companies collectively falling -11% in 9 consecutive negative days. This was followed by a sharp recovery resulting in the group’s monthly performance of -3.7% (in SEK). The Swedish names still remain a strong performer YTD +18.1%. The dramatic price movements in February and March reflect the fact that the real estate companies are a large part of the Swedish mid and small cap indices (21% of OMX Small /Mid) and are popular amongst active private local investors who appear to experience herd like sentiment surges.

Switzerland, another strong performer YTD, suffered in March as investors focused on the underlying weakness in demand for office space particularly in the Zurich market. PSP Swiss (-7.4%) also suffered from falling foul of negative interest rates which meant that it might have to pay its banks on part of its derivative book where in normal conditions it would have expected to receive a payment – a perverse but legal consequence of the extreme monetary environment we live in.

The Trust’s year end is March 31st and the NAV at the month end included the six monthly valuation of the physical portfolio (c7%) of assets. On a like for like basis and excluding capital expenditure, the increase in valuation was a modest £4.3m. The year-end valuation, which includes the acquisition of the Wimbledon office building in November 2014, was £75.95m. This valuation gain helped the NAV rise +0.29% in the month, outperforming the benchmark which fell -0.48 by 77 bps.

For the financial year to 31st March, the NAV increased by +28.15% whilst the benchmark rose +23.34% resulting in 481bps of relative outperformance net of all fees. The share price total return was +31.5%.

A modest fall of -0.5% for the FTSE EPRA/NAREIT Developed Europe TR Net (GBP) benchmark in the month belies a more active intra-month movement with the sector falling 5.3% to 10th, only to recover all losses and then settle back...

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Markets continue to be dominated by macro events. Whilst January saw the unexpected removal of the EUR/CHF cap by the Swiss national bank coupled with the ECB’s stronger than expected open-ended promise on QE, February saw Sweden’s Riksbank cut its repo rate to -0.10%. Central banks remain doggedly determined that such super loose monetary policy will stimulate lending or at the very least make sure their respective currencies don’t attract unwanted buyers (and resultant strengthening). Once again property stocks enjoyed a positive month with the benchmark, FTSE EPRA/NAREIT Developed Europe TR Net (GBP) climbing 2%. However when viewed in local currencies the returns were even stronger. The Eurozone constituents in EUR rose 5.1% whilst the Swedish stocks rose an astonishing 12.5% in SEK. Swedish property companies are amongst the most levered in our universe (average LTVs are over 50%) and also the first to report FY2014 numbers. The anticipation of further yield compression on such leveraged balance sheets has resulted in these stocks standing at an average 52% premium to asset value.

Swiss property companies also had a very strong month. With the central bank now charging 75bps for the pleasure of looking after your CHF it is no surprise that (relatively) stable and high yielding dividend income streams such as those from the largest property companies, PSP and Swiss Prime have proved popular, the stocks rose +4.3% and 8.7% respectively.

The announcement of significant QE by the ECB helped drive expectation of asset value growth and share prices, it had the opposite effect on EUR which weakened against GBP by 3.3%. This of course reduced these Continental share price gains when viewed in GBP. Year to date EUR has weakened by over 7% against GBP. This is clearly a helpful by product of massive QE within the Eurozone making their exports more competitive whilst importing some inflation. We maintain our overweight to Germany which we see as a net beneficiary. The Swedish currency also weakened by 1.7% in the month but the YTD movement has been virtually flat. Shareholders are reminded that the Trust’s FX policy is to maintain exposures in line with the benchmark weightings.

The weakest performance was from the UK stocks which reflected various factors including some uninspiring results from the two largest retail property specialists, Hammerson (-1.9%) and Intu (-3.2%). Whilst the former at least showed robust performance from its fastest growing investment area (premium designer outlets) whereas the latter produced like-for-like rental growth of -3.2% coupled with the highest leverage amongst the UK large caps. Relative performance of the fund in the month was aided by the two best performers in the UK, St Modwen (+16%) and Unite (+12.3%). Unite produced solid results, an increase in the dividend and a positive outlook driven by its development programme and robust demand for the asset class by both tenants and investors.

The top performing German name was Deutsche Annington (11.9%) which announced a 94% acceptance rate for its acquisition of Gagfah. The acquisition was split between cash and new shares in DA. The combined business will own over 350,000 apartments and have a market cap in excess of €23bn.

The fund’s NAV rose 2.4% in the month. The benchmark rose 2.0% leading to 40bps of relative outperformance.

Markets continue to be dominated by macro events. Whilst January saw the unexpected removal of the EUR/CHF cap by the Swiss national bank coupled with the ECB’s stronger than expected open-ended promise on QE, February saw Sweden’s Riksbank cut its...

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The New Year started very strongly for pan European property shares with the benchmark, FTSE EPRA/NAREIT Developed Europe TR Net (GBP) climbing 9.6% and the Trust’s NAV slightly higher at +9.8%. Broader European equities as measured by Eurostoxx 600 rose 7.3%. Market sentiment and performance was entirely dominated by macro events, the widely anticipated QE from the ECB preceded by the completely unexpected removal of the EUR/CHF currency cap by the Swiss National Bank and the introduction of a negative 75bps rate on deposits held at the SNB. Alongside the obvious consequence of the Swiss Franc’s immediate appreciation we also saw heavy buying of Swiss property stocks as they offer sustainable dividend yields of over 3.5%. Swiss stocks rose 9% in local currency and 22% in GBP. The Trust maintains currency weightings in line with the benchmark. This ensures that the relative performance of the manager does not include artificial benefit or losses from currency movements. Swiss stocks (and Swiss Franc) exposure is 6% of the benchmark.

The immediate impact of the ECB announcement has been very positive for property stocks particularly those with the highest leverage (where further falls in the cost of debt is anticipated) and those with high and relatively secure earnings and dividends. The Eurozone stocks rose 14.2% (in EUR) and 10.5% (in GBP), outstripping the UK +7.7%. European stock performance was dominated by the region’s largest property company Unibail Rodamco which rose 17.5%. With a market cap of EUR 24bn it is nearly double the size of the second largest , Land Securities (EUR 13bn) and therefore acts as a bellwether for global interest in the relatively small (in the global context) world of pan European property stocks. Unibail published its full year results at the end of the month and whilst a disposal programme (of its smaller centres) will lead to a falling EPS next year, the dividend will be maintained and management forecast a 5 year CAGR of 6-8% from 2016. The stock stands at a 50% premium to its NAV and reflects the investor appetite for perceived high and growing earnings when income is increasingly scarce. The stock is the Trust’s largest individual position although we moved to a neutral weight (versus the benchmark) at the end of January.

The other group of strong performers were smaller stocks with higher leverage. A number of these we do not hold as we consider their underlying property markets to remain weak with limited tenant demand. However investors see yield compression (and asset value increases) as a consequence of QE reducing the cost of debt. In Germany, DIC and Deutsche Office rose 25% and 21% respectively, whilst Citycon in Finland (+16.5%) and CA Immo in Austria all fitted the bill of laggards in 2014 who have enjoyed the rising tide lifting all boats.

The December year end results season has now begun and we expect upbeat messages from our companies as regards investment demand for their income producing assets. What is of greater importance is identifying those businesses in a position to capture tenant demand and we continue to expect that to be stronger in the UK than Continental Europe.

The New Year started very strongly for pan European property shares with the benchmark, FTSE EPRA/NAREIT Developed Europe TR Net (GBP) climbing 9.6% and the Trust’s NAV slightly higher at +9.8%. Broader European equities as measured by Eurostoxx 600 rose...

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A volatile end to what has been a strong year for European property equities. The month was another tale of two halves with the benchmark falling -3.7% to the 15th halfway mark, only to rebound strongly +4.2% in the second half. With low volumes over the holiday period the year ended on a slightly weaker note and the month’s total return was -0.73%. More importantly the sector outperformed the broader Stoxx 600 Index not only in December (the broader index suffered a - 6.8% intra month peak – trough) but also over the year. The Stoxx 600 returned just 7.8% versus 16.6% for the real estate sector as measured by the fund’s benchmark. Broad European equities experienced greater volatility with 7 intra-month market corrections greater than 4%. We expect 2015 to be challenging in terms of further sharp drawdowns and rebounds in sentiment. Investors appear fixated with the hope that QE will buy time and support asset reflation. However we believe that QE cannot be a substitute for the overdue structural reforms in an anaemic growth environment in Europe. Income yielding real assets such as property will benefit from further reduction in both the price of risk and the lack of attractive alternatives in the skinny income returns from fixed income assets. We continue to seek out those pockets of real rental growth created by the lack of new development across Europe.

The fund’s total return in December was -0.23% resulting in relative outperformance of 50bps in the month. Our performance was aided by the overweight to Germany (+4.2%) the strongest performing country in the month. Deutsche Annington launched a take-over bid on Gagfah. The combined entity will be the largest German residential landlord with 350,000 flats valued at €21bn. The fund had overweight positions in both Annington (+8.6%) and Gagfah (+19.3%). The other strong performer in Germany was TLG. This company owns a mixed portfolio primarily focused on retail units let to discount food retailers. The stock has risen 25% since its IPO in October 2014. The fund sold its position (bought at IPO) in the month. Swedish property stocks also performed well (+6.1% in local currency) as investors predicted yield compression would be a consequence of the Riksbank’s latest cut in the base rate. These businesses are amongst the most leveraged in our universe and modest underlying valuation movements are magnified in net asset values. In the Netherlands, Wereldhave completed its 8 for 13 deeply discounted rights issue raising €550m to pay for the six French shopping centres acquired from Unibail. The stock was +3.9% in December and returned +21% in the year as it continues its transformation into a retail focused property company.

The Trust went ‘ex’ the interim dividend of 2.95p (an increase of 3.4% on the previous year) on 4th December. It was paid on 6th January. Over calendar 2014, the benchmark return was +16.9% and the fund’s total return was +23.4%. The share price total return (assuming dividend reinvestment) was 29.3%.

A volatile end to what has been a strong year for European property equities. The month was another tale of two halves with the benchmark falling -3.7% to the 15 th halfway mark, only to rebound strongly +4.2% in the...

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European real estate equity markets continued their collective climb upwards during November. The dramatic recovery in prices which started in mid-October continued almost unabated during the month with the fund’s benchmark, FTSE EPRA / NAREIT Developed Europe TR Net (in GBP) rising 5.4% in November. The fund returned 6.0% in the month outperforming the benchmark by 56bps. The sector has now risen over 14% from its recent low point of 15th October, more than making up the ground lost in the 10% sell off between mid-September and mid-October. Property equities have continued to outperform broader European equities in this recent period of heightened volatility. Investors are anticipating further ECB stimulus in Q1 2015. The most optimistic were hoping for significant QE even sooner (December) but that has not come to pass with Draghi maintaining his watching brief on economic data into the New Year. European property companies continue to reduce their cost of debt with refinancing and access to bond markets. Banks are happy to lend to well-financed property companies – plus ca change!

 

In the UK we saw interim results from the two largest companies, Land Securities and British Land amongst others. These two bellwethers of the sector beat consensus NAVs and illustrated the strength of the underlying investment demand with sales significantly exceeding March valuations. The Swedish names rose 6.3% (in SEK) responding to the Riksbank base rate cut (from 0.5% to 0%). Collectively the Swedish companies have the highest LTVs in the region with the most levered Klovern and Hemfosa rising 12% and 13.1% respectively. Both companies announced the issuance of preference shares (which their lenders treat as equity) enabling them to grow faster. In Germany, the residential names were solid performers with Deutsche Annington the outstanding stock (+12.2%) as its free-float weight in the various indices increased significantly following a EUR 450m capital raise and stock placings by cornerstone private equity investors earlier in the year. Shortly after the month end, Deutsche Annington announced an agreed part cash /part paper takeover of Gagfah (more detail in next month’s commentary). Finland was once again the laggard with renewed concerns over the impact of economic weakness in Russia, its largest trading partner. The Finnish stocks have returned 0.5% YTD versus 17.8% for the sector.

The Trust announced its Interim results on 26th November. The interim dividend rose to 2.95p, a 3.5% increase on the previous year. The shares went ‘ex’ on 4th December and the dividend is payable on 6th January. The full results are on the website (www.trproperty.co.uk) and include the usual in depth manager’s statement and outlook alongside the Chairman’s comments.

European real estate equity markets continued their collective climb upwards during November. The dramatic recovery in prices which started in mid-October continued almost unabated during the month with the fund’s benchmark, FTSE EPRA / NAREIT Developed Europe TR Net (in...

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Equity markets across the globe performed a dramatic dive in values to the middle of the month followed by an equally dramatic recovery. Real estate equities which had already been weakening midway through September fell further to mid October and then staged an even stronger recovery than the broader market. The fund’s pan European benchmark, FTSE EPRA / NAREIT Developed Europe TR Net (in GBP) rose 7.9% from 15th October resulting in a total return of +3.2% for the month.

The UK names had a particularly strong rally in the second half of the month +9.7% and the UK component of the benchmark is now at a level last seen in May 2008. Investors appear to be appreciating that rental growth has spread well beyond Central London and that the lack of new construction is set to drive rents as the economy accelerates. The IPD Monthly Index had 0.8% rental growth in Q3 (dragged down by retail at only 0.3%). With the average initial yield on UK commercial property running at 5.6% the sector looks attractive to income investors who also see the prospect of additional capital gain as rental growth comes through. Post the recovery in share prices in the second half of the month the sector is trading at a modest 3% premium to our estimate of FY2014 NAVs.

On the Continent, the Nordics were the strongest performers. In Sweden (+4.0% in SEK) investors anticipated the Riksbank cutting the base rate. In the end the central bank exceeded expectation and cut the rate from 0.5% to zero. They have also successfully devalued the currency (boosting export competitiveness) with SEK having weakened against GBP by 11.1% YTD. In Norway the long awaited IPO of Entra, a large office portfolio of mainly government let property got off to a flying start with the stock up 14.6% by the month end. The Norwegian Government will have another chance to sell more shares (at a better price) as they still own 49.6%. The longer term prognosis for the Norwegian economy does suffer as the price of oil falls. The North Sea remains the most expensive enviroment from which to extract crude.

The rally in Eurozone property stocks, whilst more modest than the UK, was still substantial at 8.8% but reflected a different set of positive drivers. Here the weakening in economic data and confirmation that growth rates in core Western Europe are anemic has increased the expectation of further unorthodox monetary stimulus from the ECB. Leveraged assets would benefit from further reductions in the risk free rate.

The Trust’s interim results and dividend will be announced on 26th November.

Equity markets across the globe performed a dramatic dive in values to the middle of the month followed by an equally dramatic recovery. Real estate equities which had already been weakening midway through September fell further to mid October and...

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Equity markets across the globe weakened in September and pan European property equities were no exception. The Trust’s benchmark, FTSE EPRA / NAREIT Developed Europe TR Net (in GBP) fell -3.8%, whilst the Income NAV fell a little less at -3.1%. The share price ended the month -5.1%. September marks the interim valuation point (March year-end) and the NAV in the first half rose 4.49% whilst the benchmark returned 2.58%. Property equities underperformed the Euro STOXX 600 which rose 0.42%.

The anticipation of the next development within the ECB’s evolving stimulus package continues to dominate market behaviour. Investors were disheartened by the initial lack of take up by the banks of the offer of further cheap loans. The hope is now for more aggressive asset purchases, although of course, the question of which nation’s assets are acceptable collateral highlights one of the Eurozone’s more fundamental flaws.

Purchase of Greek bonds will have conditionality – the deficit reduction programme must continue. With no firm balance sheet expansion target figures given by the ECB, investors remain in a state of uncertainty as to how to quantify this latest response.

Coupled with further poor manufacturing and purchase pricing data which points to more deflationary pressures, the short term market reaction was as expected.

Amongst the larger Eurozone nations France was the poorest performer, -7.1%, reflecting continued weak economic data and negativity towards consumer facing businesses (particularly retail) Mercialys fell -8.4%. Fonciere des Regions suffered from its Italian subsidiary, Beni Stabili (-6.6%) announcing a deeply discounted rights issue. Finland was weak again, -9.0%, with the impact of sanctions in Russia weighing on its major trading partner and neighbour.

The UK fell -2.8%, whilst this was less than the broader index when measured in GBP, the Eurozone matched that return when viewed in local currency. It was the weakness of EUR which drove 1/3 of the weaker performance as the fund and its benchmark are measured in GBP. Within the UK, the weakest names were residential (Grainger -10.6%) followed by Hammerson (-5.6%) which announced a 9.9% overnight raising to fund additional investment in Leicester and its outlet mall JV.

The fund’s direct property portfolio is valued at the interim and full year. The like for like valuation growth was 5% in H1. With the completion of the sale of Vauxhall (£14.47m) and the acquisitions of Plymouth (£3.43) and Bristol (£4.82m) the property portfolio is currently valued at £69.9m (8% of net assets).

Equity markets across the globe weakened in September and pan European property equities were no exception. The Trust’s benchmark, FTSE EPRA / NAREIT Developed Europe TR Net (in GBP) fell -3.8%, whilst the Income NAV fell a little less at...

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Once again the peak holiday month in Europe proved to be busier than expected. Whilst reduced volumes of trading can create more volatility, particularly in our smaller companies we saw plenty of activity across our universe. The sector rose a healthy +2.8% in the month but that belies a dramatic intra month movement of -2.2% in the first week followed by a sustained +5.2% rally into the month end. The Trust’s NAV with income exceeded the benchmark by a whisker at +2.9% whilst the share price rose a robust +4.7%.

Once again sentiment was driven by the expectation of further intervention and stimulus from the ECB. This anticipation was further fuelled by Draghi’s comments at Jackson Hole, and followed early in September with a rate cut (the main refinancing rate was cut from 0.15% to 0.05%) and an announcement of both bond buying and ultra cheap 4 year loans which are likely to boost the ECB’s balance sheet to over €1trillion. The ECB remains the only major central bank not to embark on full scale QE.

Back at the company level, the end of July and early August sees a flurry of (June) interim results. From the UK the message was one of asset values continue to rise slightly ahead of expectation with the 4.1% yield on Land Securities’ purchase of a share in Bluewater being reflected in the consensus beating valuation of Intu’s portfolio. The UK rose 3.1% in the month with Unite, the student accommodation specialist the top performer (+7%) on a combination of strong results and confirmation that it would accelerate a normalised dividend. Investors do like to see cash flow from their property stocks.

With the expectation of further monetary easing in the Eurozone and 10yr Bunds driven below 1% German property stock strength was to be expected. Our strategy continues to focus on markets with strong fundamentals as opposed to mere beneficiaries of (temporarily) cheaper debt and our overweight in German companies – particularly residential (nationwide) and industrial (southern focus) helped performance in August with Germany the top performing European country rising 5.6%.

The Trust also added to its direct property portfolio in the month completing the purchase of a 53,000 ft logistics unit at the junction of the M4/M5 motorways. The unit is let to Yodel until 2019 at a rent of £325,000. The book cost of £4.76m, reflects a net initial yield of 6.7%.

Once again the peak holiday month in Europe proved to be busier than expected. Whilst reduced volumes of trading can create more volatility, particularly in our smaller companies we saw plenty of activity across our universe. The sector rose a...

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Pan European property stocks fell a modest -0.7% in July. The intra month movement was less dramatic than in June with a peak/trough spread of just 2.6%. The Trust’s NAV fell just -0.1%, resulting in 52bps of relative outperformance. Our overweight position in the UK was beneficial as UK stocks rose +1.6% over the month. June’s best performers were July’s weakest with France (-5.1%) and the Netherlands (-4.5%) falling as broad market sentiment turned from seeking increased real asset exposure (on the back of falling bond yields) to concerns that weaker production and sales data confirmed that the Eurozone continues to flirt with deflation.

Additional geopolitical unrest in Ukraine and sanctions against Russia threatens to aggravate the fragile economic environment even within the strongest performer – Germany. Renewed poor economic data from the peripheral nations contributed to weakness in the Italian (-11.8%) and Spanish (-6.5%) names. The Trust had invested in the €1.3bn IPO of Merlin, a Spanish (partial) cashbox which aims to create a €2.5bn portfolio through acquisitions. Given the 5% gain in the first week of trading, the position was sold. Since then the stock has fallen to 8% below its issue price allowing us to add once again to the holding. This was the last major IPO of H1 2014 and a number of subsequent potential issues (particularly in the UK) have been postponed or cancelled.

Whilst this sounds disappointing, it is good to see that markets are keeping irrational exuberance in check particularly when looking at new management teams. Existing listed companies have been more successful in tap issues with raisings in the last quarter from Picton Property, Schroder REIT and Capital & Regional. The latter raised £33m to enable it to buy out Aviva’s interest in the Mall Fund. Investor demand for commercial property remains strong and by way of illustration, Max Property received an all cash offer from Blackstone for its entire £760m portfolio at 14% premium to the June 2014 valuation. The Trust has a £20m position (2.4% of NAV) and we will receive proceeds at the end of August.

The other major corporate news is the recommended all paper takeover of Corio by Klepierre. The valuation pricing parity (1.14 Klepierre shares for each Corio share) reflects both a bid premium for the weaker lower valued Corio but also the expectation of potential synergies (€60m estimate) in combining their Continental European shopping centre portfolios. Corio rose 10% on the day of the announcement whilst Klepierre fell slightly reflecting the nervousness from Klepierre shareholders of the scale of the turnaround required in much of the undermanaged Corio portfolio.

Pan European property stocks fell a modest -0.7% in July. The intra month movement was less dramatic than in June with a peak/trough spread of just 2.6%. The Trust’s NAV fell just -0.1%, resulting in 52bps of relative outperformance. Our...

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Pan European property stocks fell -0.86% in June, pulling back the calendar YTD return to +10.2%. The Trust’s NAV fell -0.69%, resulting in a modest 16bps of relative outperformance. The steady upward climb of real estate stocks since the beginning of the year was interrupted with a sharp 5% correction mid month, followed by a dramatic recovery. The culprit was primarily the UK stocks which collectively had a mid month correction of -7.3% and completed the month down -2.6%, whilst the remainder of Europe rose 0.5%. Within the UK particular underperformers were those small and mid cap stocks with housing / residential land exposure following Governor Carney’s Mansion House speech where he commented that market expectations of potential rate rises were too far in the future (mid 2015).

St Modwen, one of our largest overweight positions had a peak to trough intra month move of -14.9%. We added to the position on this weakness just ahead of its H1 results at the end of June. Their results beat market expectations and the stock has since risen 14% from its low (24/6). A good example of company fundamentals restoring confidence with investors even in the face of mixed messages on broader interest rate policy.

France and the Netherlands were the strongest performers amongst the Eurozone countries as investors bought the most liquid property names in a continued acceleration of exposure to European income stocks. Whilst top line growth looks weak across many of these Continental companies, the ability to continue to reduce their cost of debt allied with the market’s enthusiasm for even looser monetary policy from the ECB drove positive investor sentiment. Bond markets remain very accommodating and Unibail raised €500m 7yr convertible with a zero coupon – yes investors will receive no income and the strike price was 37.5% ahead of the share price. Earnings are clearly enhanced.

Equity capital markets remain active with the €1.3bn IPO of Merlin, another Spanish (partial) cashbox with the aim of creating a €2.5bn portfolio through acquisitions. The initial seed portfolio is 880 banking properties let to BBVA across Spain.

Disappointingly, Liberty Living, a student housing IPO was pulled due to lack of appetite at the price range. This vehicle would have acquired the Brandeaux Student Fund and provided an exit to investors who currently find their investment gated (a ban on redemptions). Another reminder of the risks associated with illiquid assets in an open-ended structure. The Trust’s shares went ‘ex’ the final dividend of 4.6p on 25th June. Payment date is 5th August.

Pan European property stocks fell -0.86% in June, pulling back the calendar YTD return to +10.2%. The Trust’s NAV fell -0.69%, resulting in a modest 16bps of relative outperformance. The steady upward climb of real estate stocks since the beginning...

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European real estate stocks enjoyed another positive month with the Trust’s benchmark, FTSE EPRA/NAREIT Developed Europe Capped Net Total Return (in GBP) rising 3.0% bringing the year to date figure to 11.2%. Once again property shares outperformed the broader European equity market which has returned YTD 7.6% (EuroStoxx 600 Index in EUR).

The Eurozone property companies again outperformed the UK names rising 6.1% (in EUR) versus 3.0% for the UK. For the first time since 2009, the Eurozone has outperformed the UK over a 6 month period when viewed in local currency. At the time of writing (5th June) the ECB announced a package of measures designed to boost the credit transfer mechanism through further loosened monetary policy with some key interbank rates set negative rates and other incentives for banks to lend more to the private sector.

The outperformance of Eurozone stocks over the last couple of month had been increasingly driven by the expectation of the ECB’s plan of action. Mr Draghi did not disappoint. Whilst there was no large scale asset purchasing programme (‘QE’), there was confirmation that the ultra low base rate would be extended further into the future (‘ lower for longer’). It is no surprise that a leveraged asset class such as property has continued to benefit from these historic central bank policy moves.Sovereign bond yields have continued to fall across the Eurozone with record lows in the core countries of Germany and France as well as dramatic improvement in the peripheral nations. The combination of lowering the risk free rate and the anticipation of cheaper borrowing is driving property equity values upwards. However occupational market fundamentals require real growth (and greater employment and /or spending power) and there remains precious little of that outside of Germany.

Where fundamentals do continue to improve in the UK, particularly office and industrial rents in the South East. The lack of new development over the last 5 years is leading to a shortage of choice for businesses with larger requirements. In the logistics space we continue to see more ‘build to suit’ as tenants can’t find existing space. House prices across the UK, Germany and Sweden continue to rise and in the UK some lenders are endeavouring to cool demand by imposing stronger loan limits based on borrowers earnings.The UK’s largest property companies, Land Securities and British Land both reported March full year results this month.Whilst both sets of results were broadly in line with market expectations there is now a growing difference in their respective balance sheet strategies. Land Securities is likely to reduce leverage through sales, even with a significant amount of capital expenditure in its ongoing year development pipeline whilst British Land not only raised capital in 2013 but has maintained higher leverage through acquisitions.The Trust also reported its March full year results with a 12month NAV increase of 22.4% and announced a final dividend of 4.6p to be paid in August. This brings the full year dividend to 7.45p.

European real estate stocks enjoyed another positive month with the Trust’s benchmark, FTSE EPRA/NAREIT Developed Europe Capped Net Total Return (in GBP) rising 3.0% bringing the year to date figure to 11.2%. Once again property shares outperformed the broader European...

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European real estate stocks enjoyed a positive month with the Trust’s benchmark, FTSE EPRA/NAREIT Developed Europe Capped Net Total Return (in GBP) rising 2.3%. Not only did property shares outperform the broader European market, as measured by the Stoxx 600 (+1.6%) but also for the second month in a row Eurozone property shares (+3.0%) outperformed the UK (+1.8%). This is clearly a short data series to be commenting on but it is important given the huge outperformance of the UK over Continental Europe in the previous two years. Peripheral Eurozone sovereign bonds are rapidly heading back to pre-crisis lows and the margins over Bunds are already testing the record books. Why? It appears that investors are increasingly confident that the ECB will introduce some form of unorthodox additional monetary stimulus (negative overnight rates, QE) to help combat the growing risk of deflation. For leveraged risk assets such as property this is seen as positive and helps counter concerns that average indexation across the Eurozone (on which rents are based) is likely to fall to c.1% over the next year. This low indexation figure is compounded by the strength of EUR which reduces import costs.

France was the strongest regional performer (+4.5%) and reflects the fact that it contains the largest number of stocks with the greatest liquidity. Investors want fast exposure to Eurozone property stocks and the French names are the most liquid group alongside Unibail (now a Dutch listed company) which rose +3.2% in the month. The other regional top performers were Austria and Finland, both +6.0% as investors were calmed by Putin’s slightly less aggressive stance towards Ukraine. Again, markets have been responding to short term macro drivers.

At the stock level, performance in April is often skewed by stocks going ex dividend. Most Continental property companies pay a single annual dividend rather than splitting it into two or even quarterly payments (as the largest UK REITs do). Investors requiring income will hold the stocks until the dividend date but there is often price weakness post the ex dates. For example, Corio’s total return was +8.1% but the dividend return alone was +6.4%.

The Sweden property companies (in SEK) rose +3.7% but just +1.9% in GBP. The expectation remains that the Riksbank may well cut rates from 0.75% to 0.5% during the summer as all central banks compete to keep their currencies as weak as possible. Swedish property companies have strongly outperformed as they tend to have greater leverage than their Eurozone cousins and April was no exception. They also benefit from 4 out of 10 names delivering dividends in the month. We participated in the IPO of a small Stockholm focused residential refurbishment specialist. D Carnegie raised SEK 600m (£55m) at 39 SEK per share. The share price ended the month at SEK 47.9 per share. The issue was heavily oversubscribed and the fund owns 1% of the company.

The NAV for the Trust rose +2.27% virtually in line with the benchmark whilst the share price only rose +0.65%. Within the direct property portfolio, contracts were exchanged for the sale of the office building in Vauxhall. The price agreed was in excess of the March 2014 independent valuation and completion will be in late May. At the Colonnades, the agreement for lease for their new store has been signed with Waitrose.

On 28th May the Board will announce the preliminary results for the full year to 31st March as well as declare the final dividend which is payable in August.

European real estate stocks enjoyed a positive month with the Trust’s benchmark, FTSE EPRA/NAREIT Developed Europe Capped Net Total Return (in GBP) rising 2.3%. Not only did property shares outperform the broader European market, as measured by the Stoxx 600...

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European real estate stocks suffered their first collective negative month of 2014, with the Trust’s benchmark, FTSE EPRA/NAREIT Developed Europe Capped Net Total Return (in GBP) falling -2%. This was greater than broader European equities which fell -0.7% as measured by the Stoxx 600 Index. The pullback was driven by the UK stocks which until this month had enjoyed outperformance of their ‘Continental cousins’, a situation which had persisted throughout 2013 and into the new year. Even after the fall of -3.5% in March, the UK property stocks had returned +6.6% YTD still ahead of the remainder of Europe (ex UK) which was +4.2%.

The Trust’s NAV was virtually flat in the month, falling just-0.1% and outperforming the benchmark by 189bps. The majority of this performance (+160 bps) was from the revaluation of the property assets. The direct assets account for just under 8% of the net assets and are independently valued in September and March. The valuation increase of £14.8m was largely driven by valuation increases at The Colonnades, W2 (following the granting of planning permission to extend the supermarket and create new retail units) and Vauxhall, SW8 (now under offer for sale to a residential developer). However we also added relative performance in the equity portfolio through our nil holdings in Capital & Counties (-7% in the month) and Intu (-13.1%). Intu’s performance reflected their announcement of a deeply discounted rights issue (raising £488m at a 53% discount to the December 2013 NAV), they have agreed to buy 2 shopping centres in the West Midlands and a retail park in Northern Ireland from Westfield for £868m.

Equity investors were clearly spooked by Russia’s involvement in the Ukraine and the subsequent annexation of the Crimea. The Stoxx 600 dropped -4.5% in the first two weeks of March only to recover almost all of that loss in the last two weeks as investors reflected on the damage to Russia’s economy from the perceived land grab. Finnish property stocks with assets in Russia and the Baltic States performed poorly with Sponda (-8.1%) and Technopolis (-7.1%).

Beyond the issues surrounding the eastern edges of Europe, the remainder of it continues to benefit from investor appetite for exposure just as other parts of the globe look less attractive with US equities looking expensive and many emerging markets looking vulnerable to a Chinese slowdown and rising US Treasury yields. Sovereign bond yields in peripheral Europe continue to fall with IGD, an Italian shopping centre owner +13.8% and Eurobank Properties in Greece +13.7% the top performers in the month. The appetite for assets in these perceived recovering economies remains undiminished and we have seen three ‘cashbox’ IPOs from Grupo Lar, Hispania and Kennedy Wilson Europe in the last 2 months with the first two focused on Spain and the latter on Ireland, the UK and Spain. We expect more, and early in April, Green REIT announced a further €400m raise to invest in Ireland.

European real estate stocks suffered their first collective negative month of 2014, with the Trust’s benchmark, FTSE EPRA/NAREIT Developed Europe Capped Net Total Return (in GBP) falling -2%. This was greater than broader European equities which fell -0.7% as measured...

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European real estate stocks had a tremendous month. The fund’s benchmark, FTSE EPRA/NAREIT Developed Europe Capped Net Total Return in GBP returned +6.83% whilst the fund’s NAV rose + 8.0%. The sector is now up +7.3% for the year so far and ahead of the broader European equity market as measured by the Stoxx 600 which is +3.3% (total return in EUR). The currency exposure of the fund should be noted with just 41% denominated in GBP. EUR strengthened by nearly 0.5% against GBP in the month.

The nervousness of late January was replaced by renewed optimism towards Europe as investors continued to retreat from emerging market exposure. For the first time in many months, the UK (+6.5%) underperformed the remainder of Europe (+7.1%). We believe that European property shares have benefited from (1) investors seeking developed markets exposure – property is predominantly domestic (2) continued expectation that the ECB will seek to fight the fear of deflation with ultra loose monetary policy but that this will not result in QE and (3) the ongoing need for income. On top of these broad factors there has been a sustained improvement in sentiment towards peripheral European markets. The tightening in sovereign bond yields in Spain, Portugal, Italy and Ireland has been reflected in risk asset values cross the region. Italy was the top performing country in the benchmark, rising +17% in the month. Sweden was the next highest performer rising +9.4% as investors focused on economic growth in the broad Scandinavian region coupled with the Riksbank’s commitment to continued monetary easing. Residential property prices continue to improve across the UK, Germany and Sweden as governments continue to try to bolster consumer confidence.

As stocks now trade at premiums to asset values in many quarters, it is no surprise that there have an increasing number of capital raisings for existing businesses as well as IPOs. In the UK, Mckay Securities successfully doubled their market cap, raising £86.7m gross at 189p per share. We were already investors in Mckay and welcome this capital increase, the fund participated and now owns 6.5% of the company (based on the month end price of 210p). Kennedy Wilson, the US investment manager raised £1bn for a listed fund which has started life with only 20% of the cash invested. The stock rose to a 10% premium on the first day of listing, such was demand even for what is primarily a cash shell. The vehicle intends to buy property in the UK, Ireland and Spain. We expect considerable further issuance of both primary and secondary equity and just after the month end, Deutsche Annington placed €500m in a combination of existing shares from their private equity owner, Terra Firma and new shares. There will undoubtedly be more to come.

European real estate stocks had a tremendous month. The fund’s benchmark, FTSE EPRA/NAREIT Developed Europe Capped Net Total Return in GBP returned +6.83% whilst the fund’s NAV rose + 8.0%. The sector is now up +7.3% for the year so...

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European real estate stocks rose modestly in the month. The fund’s benchmark, FTSE EPRA/NAREIT Developed Europe Capped Net Total Return in GBP returned +0.74% whilst the NAV rose + 0.55%. The New Year started positively for equities as investor optimism about a broad economic recovery, driven from the US continued to take root alongside steadily improving sentiment about Europe. Markets appeared undeterred by fears of deflationary forces and continued to drive peripheral Eurozone sovereign bond yields lower. The feel good factor which had been driven by the Fed comments in mid December had resulted in developed world equities rising by 3.5% (S&P 500) and 4.7% (FTSE All Share) between 16th Dec and 16th January. However the increasing concerns (and performance) of many emerging markets has once again spread across the developing world and all equity markets have given up their New Year gains by the end of the month. In fact US and German treasury yields have tightened again (with 10yr Treasury yields down 50bps this year) such is the nervousness of investors. It is therefore interesting (and to an extent encouraging) to note the performance of both European and US real estate stocks against this backdrop. During January the All Share fell -3.1% whilst UK property stocks rose +3.7%. In the US, the pattern was repeated with the S&P 500 falling -3.5% and US Reits rose +3.5%. We think the reasons are a combination of investors preferring developed market exposure (property shares are invariably locally focused) and the natural support to earnings of static or further falls in the cost of debt. Draghi has made it clear that rates are not set to rise in Europe and Carney confirmed at Davos that he does not view the employment rate as a sure fire rate trigger in the UK.

The top performers in the month were the peripheral Eurozone stocks in Italy (+10.9%) and Greece (+10.8% but just one stock) and amongst the larger countries it was the UK (+3.7%) and Sweden (+5.3% in SEK) who were the top performers. In the case of the UK and Sweden this outperformance is a continuation of the relative gains made in 2013. Investors quite rightly continue to focus on markets experiencing both rental growth and where debt availability is encouraging buyers to capitalise on the spread between the cost of borrowing and income yields. We have not bought back into peripheral Eurozone property stocks which we believe will benefit later in the credit cycle than some are suggesting. Whilst debt availability may improve there remains a huge amount of bad debt attached to property in Italy, Spain, Greece and Central & Eastern Europe where the credit transmission now enjoyed in many parts of Western Europe has yet to manifest itself.

Within our physical property portfolio we have now submitted our planning application for the retail extension and refurbishment at The Colonnades in Bayswater, London W2.

European real estate stocks rose modestly in the month. The fund’s benchmark, FTSE EPRA/NAREIT Developed Europe Capped Net Total Return in GBP returned +0.74% whilst the NAV rose + 0.55%. The New Year started positively for equities as investor optimism...

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Real estates equities in December followed the broader equity market pattern through the month. Essentially spending the first two weeks fretting about the likelihood of the Fed finally announcing tapering (after the deferral in October) and then the second half of the month rebounding as the announcement was entirely sensible – a reduction in the size of the monthly bond purchases but reassurance that further strength in the world’s largest economy would be required for tapering to accelerate. For our world of European property equities, the sector (in GBP) had fallen -2.6% by 17th December and then recovered virtually the same amount to end the month +0.2%. The Trust’s NAV rose +0.6% leading to 43 bps of relative outperformance.

Looking at the calendar year end numbers, the major theme for the year was the stunning outperformance of the UK (+23.8 % return in GBP) over Continental Europe (+4.1% in EUR). Within Continental Europe, Sweden stood out with a total return of +19.4% (when viewed in local currency) as the Riksbank continued to take a dovish approach cutting rates and allowing domestic house prices to continue to inflate strongly particularly in the larger urban areas.

The peripheral European nations also experienced strong performance as sovereign debt costs continued to fall with Italy returning +13.3%. For core Western Europe, the weakness in performance in the year was a function of either fundamental or technical issues. In the case of the Netherlands (+6.1%) and France (+5.5%) underlying weak economic growth and poor consumer confidence continued to hold back rental growth. However, Germany (-2.5%) was an entirely technical situation. Whilst real estate and economic fundamentals remain sound in Europe’s economic powerhouse, the listed property sector suffered from a large number of stock overhangs. The sector is dominated by several residential investment companies whose private equity owners have partially listed over the last 3 years. The market has anticipated further multiple placings of various stakes and this has weighed on share prices.

At the country level, the fund remains overweight the UK, Germany, Sweden and France. The French country call may surprise some investors but the focus is on Unibail (with shopping centres across 8 countries) together with a number of small, specialist companies with clearly defined strategic goals in particular sub-markets such as super prime Paris and logistics.

Physical property accounts for 7.5% of the net assets and our largest property, the Colonnades in Bayswater accounts for almost half of that value. We recently submitted our detailed planning application for an extension of 13,000 sq ft encompassing a doubling of the size of the existing Waitrose store.

Real estates equities in December followed the broader equity market pattern through the month. Essentially spending the first two weeks fretting about the likelihood of the Fed finally announcing tapering (after the deferral in October) and then the second half...

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European real estate stocks pulled back slightly in the month, in line with broader pan European equities. The Fund’s benchmark, FTSE EPRA/NAREIT Developed Europe Capped Net Total Return in GBP fell -1.74% whilst the NAV fell less at -0.96%, leading to relative performance of 78bps. The share price fell -2.4% in the month. There was little differential between the performance of the UK and Continental Europe in the month and the YTD performance gap between the two remains at, an astonishing 1300bps (21.8% v 8.6%). Pan European property stocks have now pulled back 5% from the October recovery point and 6.1% from the 2013 peak in mid May. However US Reits have fallen over 16% from their May highs and are down 8% from the more recent October recovery. We think that US stocks are being (overly) penalised for the continuing expectation of near term tighter monetary policy. Europe is in a very different position and whilst all risk assets ultimately price off the risk free rate (US long dated Treasuries generally) and are therefore exposed if Treasury yields rise – the impact is much more muted this side of the Atlantic. The ECB has cut inflation forecasts for the Eurozone and ultra loose monetary policy remains in place.

At the stock level, CA Immo, the Austrian developer/investor rose 9.4% in the month as investors responded to the partial sale of Tower 185 in Frankfurt. There are only two Austrian companies and the gulf in performance YTD could not be starker. CA Immo has returned 20.8% whilst Conwert (which the fund does not hold) has fallen -2.8% YTD. In Germany, Deutsche Wohnen rose 6.7% in the month as the acquisition of GSW went unconditional. The GSW shares have now converted into Wohnen stock but remain a separate class of share until after 28th May (when the original Wohnen shares receive the final dividend).

The worst performers in the month were Nieuwe Steen (-16.9%), the Dutch owner of mainly secondary offices and DIC Asset (-12.5%) in Germany. Both carried out what were effectively deeply discounted capital raisings (in order to de-gear their balance sheets) but veiled behind more complex corporate activity. The fund doesn’t hold Nieuwe Steen and has a de minimis holding in DIC.

We are also pleased to report that the Trust has won an award – the Investment Week Awards 2013, Investment Trust of the Year – Property. The judging panel commented on both performance and the successful re-merger of the two share classes as contributing factors. The Trust went ‘ex’ its interim dividend of 2.85p on 4th December.

European real estate stocks pulled back slightly in the month, in line with broader pan European equities. The Fund’s benchmark, FTSE EPRA/NAREIT Developed Europe Capped Net Total Return in GBP fell -1.74% whilst the NAV fell less at -0.96%, leading...

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Real estate stocks enjoyed a strong October with the (FTSE EPRA/NAREIT Developed Europe Capped Net Total Returnin GBP) rising +5.4% in the month. Once again performance was dominated by the UK (+6.6% in GBP) whilst the rest of Europe rose +3.4% (in EUR). On a global view, Europe was the strongest performing region with the US returning +4.5% (in USD). Concerns over the possibility of near term (earlier than Q2 2014) reduction in QE by the Fed have now diminished and 10 year US Treasury yields have moved back down towards 2.6% (from over 3%). The result has been a return of risk appetite for leveraged assets. The month also witnessed a renewed demand for European equities and the Euro (which gained 2% against GBP and USD intra month) particularly Southern Europe. IGD and Beni Stabili both returned more than 10% in the month and the fund sold stock into this buying interest. The only Greek stock in the index, Eurobank rose +21%. It is now up 84% YTD and that huge increase brings its 3 year performance just back into positive territory.

Our concern is that investors are getting ahead of themselves in believing that all parts of Europe can grow their way out of their deficits. The region is still suffering from a huge range of issues including rising unemployment (Spain and Italy) and falling house prices (where state intervention is on its way – the Netherlands). The weakening inflation numbers towards the end of the month (<1% pa) served as a strong reminder of the difficulties.

The Trust’s NAV rose 6.0% in the month, outperforming the benchmark by 60bps. Performance versus the benchmark was particularly driven by the long positions in the UK and our underweight in Switzerland. The Swiss companies(-0.9%) have continued to suffer as rental growth remains negative in the Zurich office markets and investors do not feel the need for the traditional safe haven of Swiss Franc backed assets. In the UK, stocks associated with the residential market (both directly and indirectly) did well. St Modwen (+15.9%) combines a residential land bank with a high yielding industrial portfolio whilst Safestore (+10.6%) is one of the two leading self storage operators and will benefit from rising turnover in the housing market. Grainger (+11.3%) is the only pure owner of standing residential stock.

In Scandinavia, the Swedish stocks collectively had a strong month rising +6.4% as investors priced in no move in the Riksbank base rate. It was the industrial players, Castellum (+8.5%), Wihlborgs (+8.5%) and Kungsladen (+11%) which performed the strongest. In Norway, we were once again disappointed by the management of NPRO and the stock slid -4.2% on numbers, bringing the YTD to -8%, the worst performer in the index year to date.

Real estate stocks enjoyed a strong October with the (FTSE EPRA/NAREIT Developed Europe Capped Net Total Returnin GBP) rising +5.4% in the month. Once again performance was dominated by the UK (+6.6% in GBP) whilst the rest of Europe rose...

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Real estate stocks enjoyed a more upbeat month after the torrid performance in August with the benchmark index (FTSE EPRA/NAREIT Developed Europe Net Total Return in GBP) rising +2.7% in the month. Unlike August when it underperformed broader European equities; September saw the sector keep up with the Euro Stoxx 600 Index rising 2.5% (when measured in GBP) and +4.5% when measured in EUR. Currencies clearly made a difference and GBP has now strengthened +4.6% versus EUR since the end of July (including 2% in August). The month was always set to be dominated by the keenly awaited Federal Reserve’s announcement on 18th September. The announcement that the monetary stimulus (in the form of €85bn of bonds being bought each month) would remain in place versus an expectation of ‘tapering’ took markets by surprise. US Treasury yields dropped back from their recent highs of 3% and asset pricing around the globe improved as a consequence.

Our view – this is merely a delay in the inevitable and we continue to focus on companies with sound balance sheets and where CFOs have been moving away from an over reliance on floating rate debt. As longer term interest costs begin to rise we need to ensure that we are exposed to businesses with portfolios that are experiencing rental growth or close to it. From here it is the anticipation of that growth which will drive investment values. The UK continues to report strong PMI figures and that has driven the anticipation of tenant demand and rental growth.

The UK stocks rose +3.8% in the month, with the strongest performers including Hansteen (+10.2%) following the acquisition of the Ashtenne Industrial Fund from the administrators of Warner Estates and LondonMetric (+11.2%) who reported a string of acquisitions which will help support the high dividend. Income remains a strong rationale for owning the sector and the high yielding Dutch names responded to the renewed realisation that income would continue to be hard to access rising 5.2% collectively. The Austrian names rose +6.8% following CA Immo’s announcement that it had sold 2/3rds of its flagship project, Tower 185 in Frankfurt.

The fund’s NAV rose +2.5%, underperforming the benchmark by 23 bps. We suffered from underweight positions in Capital & Counties (+5.5%) and Segro (+8.0%) – both were reduced positions on valuation grounds. The share price rose +2.9% on a slight narrowing of the discount.

Real estate stocks enjoyed a more upbeat month after the torrid performance in August with the benchmark index (FTSE EPRA/NAREIT Developed Europe Net Total Return in GBP) rising +2.7% in the month. Unlike August when it underperformed broader European equities;...

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Real estate equities across the globe had a torrid August on both an absolute and relative basis. Interestingly, European property companies were amongst the better performers (compared to the US and Asian stocks) but were still down -5.6% (as measured by the Trust’s benchmark – FTSE EPRA / NAREIT Developed Europe TR Index in GBP). Investors continued to fret about the impact of rising long term rates across the globe sucked up by the rising momentum in US Treasuries. Our view is that European central bankers will do their utmost to keep short rates as low as possible for as long as feasible. Whilst PMI data (in the UK in particular) is improving across manufacturing and services, it is the employment data which the BoE is focused on (as its preferred definition of spare capacity) and we await more conclusive evidence that this is improving at a pace which will bring forward our expected timing of short rates hikes.

The fund’s NAV fell -5.0% in the month, 60 bps less than the benchmark. This relative outperformance was driven by our overweight positions in Germany and our positioning in the UK. However our gearing (at 13%) clearly did not help – but it should be noted that our physical assets (c.8% of NAV) are ungeared and therefore our ‘see-through’ gearing is broadly in line with the benchmark’s. Performance was therefore driven by our bottom up positioning and here we were helped by having no holding in Capital & Counties (-11.8%) and Intu (-9.1%). Investors remain concerned about the lack of real (as opposed to nominal) wage growth in the UK and whilst the warm weather helped recent retail sales we believe that retailers continue to face structural headwinds. Industrial owners were in vogue with Hansteen’s (+4.5%) performance aided by their announcement that they have taken control of the Ashtenne Industrial Fund (previously owner/managed by Warner). Ashtenne was the Hansteen management team’s previous vehicle (sold to Warner in 2006) - ‘what goes around comes around’. Swiss property stocks which had failed to outperform the pan European property equity market in the initial ‘tapering talk’ sell off (mid May to late June) did so in August falling just -0.7% (in local currency), reinstating their previous safe haven status.

A significant new position in the month was the acquisition of £5m of New River Retail CULS (Convertible Unsecured Loan Stock) December 2015. The strike price is 259p and the share price was 242p. The yield to redemption is 4.7% (in the event that conversion does not happen before that date). We are attracted by the underpinning income and at 103p (per 100p) the premium was modest affording a high level of capital protection whilst retaining the opportunity to participate in the equity growth story in due course.

Real estate equities across the globe had a torrid August on both an absolute and relative basis. Interestingly, European property companies were amongst the better performers (compared to the US and Asian stocks) but were still down -5.6% (as measured...

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European equity markets continued their bounce from the June low (24th) virtually uninterrupted throughout July. Property stocks were no exception and as a leveraged asset class they were destined to perform well when markets were calmed by further protestations from central bankers that short-term rates were not scheduled to rise until there was firm evidence of improvement in economic fundamentals. Those signs have begun to appear in UK data and coupled with the government’s (possibly ill considered) stimuli to the housing market UK stocks saw strong outperformance. The Fund’s NAV rose 7.44% whilst the benchmark rose +6.62%.

The top five performers were all UK smaller companies, particularly industrial and residential backed businesses, gaining between 16% (Hansteen) and 20.3% (Grainger) in the month. St. Modwen – principally a mixture of industrial property and residential land, rose 17%. The best performer amongst the large caps was Segro (+11.3%), the only industrial large cap. Performance was driven by the improvement in GDP forecasts. This has already fed through in both the services and manufacturing segments of the PMIs.

Elsewhere in Europe it was a mixed month for property stocks. In local currencies France was the strongest performer (+6.8%) with Klepierre and Gecina both +13.5% on the back of good half-year numbers and the promise of further internal improvement. The Netherlands was amongst the weakest (+2.6%) as investors’ concerns regarding consumer numbers and falling house prices found little comfort in domestic data. The same concerns could be felt in Italy where the political situation continues to add risk to a shrinking economy. The German residential names were relatively weak in the month but here it was stock specific rather than more fundamental economic issues. Sentiment was driven down by a combination of the reduced size of the Deutsche Annington IPO coupled with the stock overhangs in Gagfah and LEG where lock-ups from previous private equity holders and their banks weighed heavily.

The Fund’s relative outperformance in the month was driven by the broad overweight to the UK and in particular to smaller companies coupled with our participation the Green REIT IPO and the primary issuance in New River Retail.Green REIT is the first Irish REIT and raised €310 million to invest principally in Dublin. The issue was heavily oversubscribed and the stock rose to a 15% premium to the issue price. New River raised £67 million for acquisitions at 205p (currently 243p). The combined investment was £8m.

European equity markets continued their bounce from the June low (24th) virtually uninterrupted throughout July. Property stocks were no exception and as a leveraged asset class they were destined to perform well when markets were calmed by further protestations from...

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The weakness across virtually all equity markets in June was a continuation of the feared (or imagined?) consequences of possible monetary tightening by the Fed. It is interesting to note that the S&P 500 was down only -3.7% from its recent peak of 21st May as investors back the expectation of a US recovery alongside the monetary tightening. However the potential impact of tightening yields within a far weaker European context has been viewed much more negatively. The FTSE 100 fell -9.3% since the recent peak (21st May) and -5.6% in the month, whilst the fund’s benchmark, FTSE EPRA/NAREIT Developed Europe Capped Index Total Return (in GBP) fell -5.9% in the month slightly underperforming the broader market. Real estate stocks have become increasingly popular over the last two years partially because of their perceived ‘bond like’ characteristics offering steady income which is significantly higher than that offered by BBB corporate bonds. We maintain the view that in addition to this yield differential there is the opportunity for rental growth (in a number of sub-markets across Europe) together with the possibility of property development gains (from certain portfolios) which adds to the attractiveness of the asset class today. This sell off from 21st May to the end of June reached -10.6% for our benchmark and now provides us with an investment opportunity.

Looking back over the month Continental Europe underperformed the UK with the former down -6.9% and the UK falling -4.3%. Geographically the major losers were Austria (-9.3%), France (-10.2%) and Italy (-10.2%). It is worthy of note that the Italian property companies are up 14% year to date even after this correction. They are an example of stocks which have been a beneficiary of the tightening in peripheral European bond yields which came to an abrupt halt in mid May.

The NAV fell -6.0% slightly underperforming the benchmark(-5.9%). Relative performance was aided by our overweights in French offices together with our underweight to UK large caps, Swiss and Belgian stocks. The surprise was Switzerland which traditionally outperforms when the Eurozone weakens – but not this month. Our performance suffered from the overweight to UK smaller companies,(particularly St Modwen and Max Property) and our European shopping centres exposure (which has been steadily falling).

The Trust’s AGM will be held at 12 noon on 23rd July at the Royal Automobile Club, London SW1. All shareholders are welcome.

The weakness across virtually all equity markets in June was a continuation of the feared (or imagined?) consequences of possible monetary tightening by the Fed. It is interesting to note that the S&P 500 was down only -3.7% from its...

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The reflationary trade which followed the Bank of Japan’s surprise announcements in April continued into May, providing further support to asset classes such as real estate which offer income yields comfortably ahead of fixed income/ bond yields, which are (in the main) inflation linked through annual indexation. The benchmark, FTSE EPRA/NAREIT Developed Europe Capped Index Total Return (in GBP) rose a staggering 7.8% from 1 May to 20 May, which brought the financial year-to-date (31 March to 20 May) to 13.7%. Too fast, too furious? From 21 May to the end of the month the index fell 5% as investors moved on from events in Tokyo to signs of real economic improvement in the US and began factoring in the impact of possible monetary tightening by the Fed.

Markets were led, firstly upwards in a continuous movement and then downwards in an equally straight line by macro events. What is happening on the ground in terms of European real estate values and underlying economic conditions appeared to matter little in these strongly momentum driven markets. Whilst the Fund outperformed the benchmark during the month by 70bps – it began to underperform in the last few days of the month as investors sold the best performers of the previous quarter – principally the London centric names and Unibail, Europe’s largest property company which stands on a significant premium valuation to the other pan-European shopping centre companies. Unibail was amongst the weakest performers(-2%) in the month.

Germany remains popular with investors with strong performance from the largest residential owner, Deutsche Wohnen which rose 9.5% in the month. The strongest performance was from Prime Office, a small owner of office property which has failed to deliver since its IPO and is now being courted by a large private equity shareholder, Oaktree. The stock rose 32% in the month. The Italian companies also performed well (+5.1% for Beni Stabili) which was surprising given the backdrop of rising sovereign bond yields. However, the stock still trades at a 40%+ discount to its NAV and we maintain our overweight position.

In the UK, those businesses with residential development exposure performed well as house price data and the UK government’s policy stimulus in this area fed through into pricing. Capital &Counties (site at Earls Court) rose 6.6%, Quintain (sites as at Wembley & Greeenwich) 15.8%, St Modwen (large land bank across the UK) 7.7% and the only pure residential investor Grainger rose 13.6%.

The Trust announced its preliminary results for the year to March 2013 on 24 May and a final dividend of 4.35p, bringing the total to 7.0p, a 6.1% increase on the previous year. The revenue outlook in the Chairman’s Statement highlighted our expectation that earnings would exceed 7.5p in the year to March 2014.

The reflationary trade which followed the Bank of Japan’s surprise announcements in April continued into May, providing further support to asset classes such as real estate which offer income yields comfortably ahead of fixed income/ bond yields, which are (in...

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Whilst March was the first negative month since May 2012, April made up that small loss and more, putting the trend firmly back in an upward direction. The benchmark, FTSE EPRA/NAREIT Developed Europe Capped Index Total Return (in GBP) rose 5.5% bringing the year-to-date total return to 10%. The fund outperformed modestly in the month. Most asset classes benefited from the Bank of Japan (BOJ) reflationary trade. Italian sovereign 10-year yields were down 85bp to 3.25%, not far off their all-time lows in 2005. European BBB corporate bond yields hit record lows of 2.7%. Property shares seen as secure, relatively high income opportunities clearly benefited and this fed through into demand. Real estate equity funds have recorded 10 straight weeks (to 25 April 13) of positive inflows ($0.7bn).The BOJ reflationary trade also appears to have generated strong correlation between the strength of GBP/Yen and the UK REIT sector in April.

London remained the flavour of the month. Amongst the strongest performers was the flexible London office space provider Workspace up 9.3%, bringing its total year-to-date return to 25.5%. The stock also benefits from exposure to residential conversion opportunities within its portfolio. The fund remains overweight all of the London stocks except Capital & Counties, which was also a strong performer in the month (+13.1%) despite announcing that it has agreed to pay 5.5% of the residual land value of the entire Earls Court development to Network Rail in return for the use of airspace over the West London line which cuts across the site. Our other top performers in the UK were the self storage businesses where we own both Big Yellow (+13.7%) and Safestore (+15.6%). The Swiss property companies, often viewed as safe havens tend to perform poorly in strong markets and collectively they fell 1% in the month by far the weakest geographic region. The two largest European retail focused companies – Unibail and Klepierre performed surprisingly well (+9.3% and +10% respectively) but investors were clearly focused on the attractive forthcoming dividends.

A large number of stocks go ‘ex’ either annual or interim dividends in the month and this accounts for 1.3% of the total return in the period. It is interesting to note that in these momentum markets many of these stocks have made upmost and in some cases more than their dividend in the last few weeks.

Whilst the share price return year-to-date has been 13.6%,the discount to NAV remains in the range 13-16% and we made our first buyback for over three years acquiring, for cancellation 175,000 shares at a 16.1% discount.

Whilst March was the first negative month since May 2012, April made up that small loss and more, putting the trend firmly back in an upward direction. The benchmark, FTSE EPRA/NAREIT Developed Europe Capped Index Total Return (in GBP) rose...

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Pan-European property shares had their first negative month since May 2012. The benchmark, FTSE EPRA/NAREIT Developed Europe Index Total Return (in GBP) fell 1.4% pulling back the Q1 2013 total return to +4.3%. The one year total return to the end of March stands at +17.8%.Whilst 2012 saw property shares as a group outstrip broader European equity markets, Q1 2013 has seen a reversal of this trend. We believe this is, at least partially, self inflicted by the sector particularly in the UK. Four UK companies raised capital in Q1 with Intu (£280m) and British Land (£493m) being by far the largest. None of them are trading above the price at which they raised equity and in fact the placing prices averaged 6% below the previous closing prices. Investors are clearly only prepared to allow capital to be raised if provided with a suitable discount and a strong rationale and even then are still prone to suffering a degree of indigestion.

The only Continental company to raise equity capital was Cofinimmo, which placed 0.9m treasury shares at €87.5 per share, 5.1% below the previous closing price.

The results season concluded with a rush of reporting in the last two weeks of the month.Company numbers have broadly been in line with expectations with modest earnings and dividend growth principally due to indexation (on Continental stocks) and further reductions in the cost of debt. The Central London focused businesses announced both asset value and rental growth for both the preceding period but also importantly forecasting into the new financial period. There was further tapping of bond markets with Fonciere des Regions completing a €180m 7-year bond with 330bps coupon. This follows their inaugural bond issue in October 2012.

At the stock level, there was an increased volatility in prices which is quite common around results. Unite, the student housing owner rose 10.6%, rebounding after some negative press commentary around student visa applications and backed up by good results. In Germany, Gagfah(+13.5%) and Patrizia (+11.2%) both bucked the trend of weakening pricing in the remaining German residential names (averaging a fall of 1.0%). Gagfah announced a significant reduction in their cost of debt following a comprehensive refinancing.

The Trust’s financial year end is March and the full year NAV total return was +21.3% versus a benchmark return of +17.8% leading to 350bps of relative outperformance. The share price total return was +25.8%. Full year results will be published on 29th May accompanying the final dividend announcement. On 26 March, the Chairman of the Trust, Peter Salsbury announced his retirement from the Board. He will be succeeded by the Senior non-Executive Director, Caroline Burton.

Pan-European property shares had their first negative month since May 2012. The benchmark, FTSE EPRA/NAREIT Developed Europe Index Total Return (in GBP) fell 1.4% pulling back the Q1 2013 total return to +4.3%. The one year total return to the...

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Pan European property shares continued their positive run through February with the benchmark index (FTSE EPRA/NAREIT Developed Europe Index Total Return in GBP) rising 2.5%, bringing the year-to-date figure to 5.8%. The Fund’s NAV rose 3.0% in February and is up 6.4% since the beginning of the year, 60bps ahead of the index.The share price has risen 7.5% in that two month period.

There is an important currency caveat which must be highlighted. The benchmark and the NAV of the Fund have benefited significantly from the weakening of the base currency (GBP) against the other European currencies, principally EUR which is 47% of the index. In EUR terms, the index has actually fallen 0.4% since the beginning of the year. Whilst GBP has been falling against EUR since the mid summer, the decline accelerated in 2013 with a devaluation of 5.7% over the last two months. The Fund’s overweight exposure to UK property companies remains heavily weighted to London. We believe that this (temporary) weakness in GBP is attracting investment in both residential and commercial property. It is certainly helping tourism and other local GDP generators. We continue to avoid investment outside of the South East of the UK. This tight focus on investable regions is a strong theme across the portfolio. German residential property remains favoured long-term, but share prices have stalled. The €1.5bn IPO of LEG Immobilien at the end of January has, we feel, created some indigestion amongst investors.Whilst the metrics for these businesses remain valid, returns are likely to be ‘single digit’ unless they continue to expand.

The reporting season is well underway and, in the main, results confirmed our views of the underlying property markets across Europe. The Dutch and Belgium office markets were as weak as expected with Nieuwe Steen, Befimmo and Cofinimmo all reporting pressure on rental values and declines in rental income (on a like for like basis). Corio, which invests in retail property across Europe, highlighted the key areas of weakness, particularly Spain, Southern Italy and Turkey. London-based companies such as Derwent London, and Capital & Counties produced great figures – exceeding even the most bullish expectations. St Modwen saw its share price move to a premium to asset value and promptly raised equity (10% placing) for its 2015 redevelopment of New Covent Garden Market in Vauxhall. Capital raisings by Citycon and Intu (previously called Capital Shopping Centres) ostensibly to fund acquisitions (Kista in Sweden and Midsummer Shopping Centre in Milton Keynes respectively) were both viewed as defensive moves to help strengthen the balance sheets.

Pan European property shares continued their positive run through February with the benchmark index (FTSE EPRA/NAREIT Developed Europe Index Total Return in GBP) rising 2.5%, bringing the year-to-date figure to 5.8%. The Fund’s NAV rose 3.0% in February and is...

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Pan-European property shares started the year positively with the index rising 3.18% (FTSE EPRA/NAREIT Developed Europe Index Total Return in GBP) however the sector underperformed the broader market where the FTSE All-Share Index rose 6.37%. Markets were dominated by the strength of EUR versus some other European currencies with EUR/GBP strengthening by 5.3% and EUR/CHF 2.3% in the month. The Fund’s index when viewed in EUR actually fell 2.25% such was the impact of currency and the weakness of Eurozone property shares which fell 1.4% in local currency.

This weakness in Continental European property stocks was in contrast to the broader EuroStoxx600 Index which rose 2.8% in January. Investors appear more positive about Europe’s prospects and the property equity sector’s outperformance in 2012 has seen some rotation away into perceived higher growth stocks. With equity prices standing close to asset value (and at premiums in a number of the better quality stocks) it is understandable that some view the sector’s valuation as full. However, our view is that when viewed alongside the tightening incorporate bond yields (BBB+) over the last six months, the dividend yield on the EPRA index(and the Fund) of over 4% remains attractive. The question is one of sustainability of income and whether there are (unlike bonds) underlying portfolios beneath these listed companies which will show capital growth in the near term. We think the answer is yes – if you pick carefully.

January’s top performing countries in local currency were Italy (+11.8%), Greece (+10.4%)and Sweden (+3.5%). Both Italian and Greek equities responded to the tightening in yields and the cost of their respective sovereign debt.Sweden was one of the poorest performers in 2012 and we believe an element of the new year’s performance so far has been rotation into those underperformers. The Riksbank cut rates three times in 2012 and this is feeding through into cheaper interest bills for our Swedish investments.

The Fund’s NAV rose 3.3% outperforming the index modestly. The strong performance in the first two weeks by a broad range of the weaker businesses in the sector was not beneficial for our positioning. However, we stick to our ‘quality’theme for both assets and balance sheets. The long awaited €1.5bn market cap IPO of LEG, a German residential investor took place on 31 January at €44 per share – the middle of the range. The results season is well underway and whilst there have been few surprises (a good thing), it is also encouraging to see a highly rated stock (and one of our largest relative overweights)Great Portland Estates perform well following its Q3 results presentation.

Pan-European property shares started the year positively with the index rising 3.18% (FTSE EPRA/NAREIT Developed Europe Index Total Return in GBP) however the sector underperformed the broader market where the FTSE All-Share Index rose 6.37%. Markets were dominated by the...

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Pan-European property shares had another positive month, the benchmark index rose+1.07% bringing the year-to-date figure to 23.92%. The NAV total return for the Trust over the last 12 months was 28.91% and the shareprice total return was 30.4%.

European property shares have outperformed the broader European equity markets with the EuroStoxx600 returning 18.2% and the FTSE All-Share 12.3% in 2012. Investors have warmed to the relatively secure, high and stable earnings available from good quality listed property companies. Where there is also evidence of rental growth (such as German residential) or strong international investor demand (Central London) returns have been excellent for companies exposed to such markets. Germany’s residential companies averaged over 50% return in 2012. The Fund’s largest London focused overweight position, Great Portland Estates rose 51.4% in the year. The weakest performance came from those businesses with issues overbalance sheet structure. Quite simply either too much debt or too expensive debt (they have swapped or hedged at interest rates way above current rates). We have seen a number of dividend cuts but in the same vein we also see steady, albeit modest, earnings growth from a range of companies able to continue taking advantage of historically low interest rates. The Fund’s largest geographical underweight is to Switzerland. Swiss stocks have performed well in risk-off periods. Markets responded strongly to Draghi’s post summer commitment to “doing whatever it takes” and consequently Swiss stocks relative performance was poor. The total return from the two largest Swiss property companies was 13.9% and 14.7% for the year.

At the EGM, shareholders overwhelmingly voted for the merger of the two shares classes.Following the conversion of Sigma shares into Ordinary shares (ratio of 0.4973 Ordinary for each Sigma share) there are now 317.875m shares in issue and the total net assets with income of the Trust is £655m.

The Trust’s interim dividend was declared on 22 November at 2.65p for the Ordinary share class,and 1.05p for the Sigma share class, a 10%increase on that paid in the previous year. The stocks went ex on 5 December and the payment date is 8 January. Holders of Sigma shares will receive their interim dividend. The final dividend will be announced at the end of May and paid in July. The current dividend yield is 4%.

Pan-European property shares had another positive month, the benchmark index rose+1.07% bringing the year-to-date figure to 23.92%. The NAV total return for the Trust over the last 12 months was 28.91% and the shareprice total return was 30.4%. European property...

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Pan-European property shares had another positive month, the benchmark index, FTSE EPRA/NAREIT Developed Europe TR Net Index (in GBP) rose 2.4% bringing the year-to-date figure to 22.6%. However, it was certainly a tale of two halves with the index falling 4.2% in the first two weeks of the month only to rise 6.9% in the remaining fortnight. With the US presidential election out of the way, investors focused their concerns on the ‘fiscal cliff’ and the risk of bipartisan gridlock amongst lawmakers in Congress. However, subsequent economic data from both the US and China relieved some concerns and markets climbed once again.

Within the property sector, it was the Eurozone countries which outperformed the UK, Switzerland, Sweden and Norway. Austrian stocks rose 9.1% with both CA Immo and Conwert posting impressive gains. Germany rose 3.5% and French stocks were up 3.8%. The UK was a relative underperformer (+1.4%) in the month but remains an outperforming geographical region this year. At the stock level, St Modwen rose 8.2% on an upbeat trading statement and Helical Bar 16.2% on its interim results and positive news on its London centric development portfolio. The Swedish stocks remained lacklustre – partially on the continued fears around the tax issues (covered last month) but also the announcement of further layoffs in a number of industries. Swiss stocks performed poorly as expected in a rising market where they are seen as defensive plays. However they continue to trade at premiums to NAV and SPS took the opportunity to raise 10% new equity in a rights issue at the CHF 64 NAV versus a closing price of CHF 74. This stock remains a significant underweight in the fund and the resulting price weakness helped relative performance.

The interim dividend announced on 22nd November was 2.65p, a 10% increase on last year. The ex date is 5 December.

On 26 September, the Board of TRPIT announced a proposal to convert Sigma shares into Ordinary shares, creating a larger, more liquid Investment Trust with a single share class. The offer reflects a discount to Sigma’s net asset value after costs and the Board recommends that holders of both share classes vote in favour at the EGM (December 14th) or by proxy. The Circular and proxy forms were circulated with the Interim results. Any investor requiring more information should contact their TRC sales contact or the Trust’s management team directly.

Pan-European property shares had another positive month, the benchmark index, FTSE EPRA/NAREIT Developed Europe TR Net Index (in GBP) rose 2.4% bringing the year-to-date figure to 22.6%. However, it was certainly a tale of two halves with the index falling...

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Pan-European property shares rose strongly with the benchmark, FTSE EPRA/NAREIT Developed Europe TR Net Index (in GBP) up 5.5%. Financial stocks, including property performed well compared to the broader European equity market. The commitment to unfettered bond buying by the ECB – for those who asked – appears to have calmed those most bearish on the Eurozone. From a macro perspective it appeared that the market spent the month focused on the economic consequences of the alternative US presidential election outcomes.

At the country level, France was the strongest performer +9.7%, powered by Unibail, Europe’s largest listed property company which rose 12.1%. It continued to tap the bond market announcing a €500m 5-year bond at a fixed coupon of 1.625%, a record low for the group. Italian property stocks collectively rose 7.5%, these companies have developed a high correlation with the performance of Italian sovereign debt. Their performance has been dictated by investor sentiment towards the Eurozone generally rather than anything to do with local property markets – hence their strong performance in the period. As if mirroring the ‘risk-on’ response by the market, Swiss stocks rose just 0.3%.They continue to have ‘safe haven’ status, particularly amongst domestic investors but to fundamental investors (such as ourselves) they remain expensive. Sweden was notably weak, primarily driven by one stock, Kungsladen which announced the suspension of dividends in the light of further negative tax rulings. The Swedish tax authorities continue to investigate whether tax avoidance techniques used in earlier decades amounted to evasion.

The NAV rose 5.8% delivering 25bps of outperformance. This was fuelled by our overweight to French and Italian stocks and underweight to Switzerland. Our significant overweight to the UK did not help particularly, collectively rising +3.9%. However, within the group we saw strong performance from one London midcap Workspace (+13.7%), as well as our ‘alternatives’ student housing, Unite (+7.4%) and self storage with Big Yellow (8.9%).

In September, the TRPIT Board announced a proposal to convert Sigma shares into Ordinary shares, to create a larger, more liquid Trust. The offer reflects a discount to Sigma’s net asset value after costs and the Board recommends that holders of both share classes vote in favour at the EGM (14 December). The Circular and proxy forms will be circulated on 22 November.

Pan-European property shares rose strongly with the benchmark, FTSE EPRA/NAREIT Developed Europe TR Net Index (in GBP) up 5.5%. Financial stocks, including property performed well compared to the broader European equity market. The commitment to unfettered bond buying by the...

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Whilst pan European property shares fell modestly over the month (-0.2%) it was (in GBP terms) a game of two halves. From the beginning of the month to the mid point (14th) the sector and the broader equity market rose strongly on the back of the ECB’s announcement of the offer of unlimited (but conditional) bond buying – the so called Outright Monetary Transactions – to any Eurozone sovereign which requests it. Alongside the improvement in equity markets, EUR also strengthened 2.1% against GBP in those first two weeks as investors took comfort from this commitment by the central bank. However, whilst this strategy is to be welcomed it doesn’t solve the core issue of whether debtor nations within the single currency will continue imposing the austerity requirements and whether the creditor nations will accept larger write downs. The second half of the month saw concerns remerge coupled with global markets also rolling off their September 14th highs. The US electioneering is also well underway and concerns around the impact of the ‘fiscal cliff’ and a political impasse also began to weigh on markets.

At the country level, it was the peripheral nations which outperformed with the Italian property companies up +10.2%. The Fund holds both Beni Stabili and IGD. Norway’s single stock, Norwegian Property, also performed well rising +4.5% whilst the remainder of Europe saw modest movement of -1% to +1.7%. Once again it was the macro considerations which drove the market. At the individual company level we saw further evidence of successful capital raising both equity (Capital & Counties) and debt (convertibles from British Land and Capital Shopping Centres). Interestingly smaller companies were also able to tap the retail bond market with Workspace raising £57m and CLS £75m such is the demand for income.

The interim property revaluation produced an uplift of £0.47m at the month end. The six month NAV with income increase was therefore 4.9% and the share class outperformed its benchmark in the first half by 160bps.

On 26th September, the Board of TRPIT announced a proposal to convert Sigma shares into Ordinary shares. This will create a larger, more liquid Investment Trust with a single share class. The offer reflects a discount to Sigma’s net asset value after costs and the Board recommends that holders of both share classes vote in favour at the EGM which will be held in December. Any investor requiring more information please contact their TRC sales contact or the Trust’s management team directly.

Whilst pan European property shares fell modestly over the month (-0.2%) it was (in GBP terms) a game of two halves. From the beginning of the month to the mid point (14th) the sector and the broader equity market rose...

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Pan-European property shares rose modestly over what is traditionally the quietest month of the year. However, the shape of the month’s performance was more telling. The first week saw the continuation of the positive reaction (from 23 July) of investors to comments from Mario Draghi that the ECB would take steps to help peripheral sovereign bond markets. There then followed the lull in news through the rest of the month with share prices deflating on inactivity resulting in a total return of +0.44%. The Fund’s NAV rose +0.77% in the month and the share price rose 1.9%. Performance was driven by our overweights in the UK and France. These two countries, along with Norway (just one stock) were the only parts of Europe to register a positive return in the month.

As if to prove that markets remain driven by macro based sentiment, the announcement by the ECB on 6 September of their ‘unlimited’ bond buying (for those sovereigns willing to sign up to the attached conditions) ignited markets which had been drifting downwards for the previous three weeks. Our view is that such commitment by the central bank is clearly a positive, the real test will be whether there is the political will to subscribe to the required fiscal budgeting.

We remain focused on companies with high quality assets and appropriate gearing. Listed property companies, particularly the better resourced, continue to enjoy access to capital markets. British Land raised £400m of 2017 convertible bonds at a rate of 1.5%. The conversion premium was 31%. A great deal for the company and reflects their long duration income streams on quality assets. The marginal cost of debt continues to fall as property companies lock into lower rates.

Central London remains a rarity in European real estate, showing good rental growth across all subsectors. Derwent London’s results produced 2.8% rental growth in the first half and values rose 3.3%. Outstanding performances also came from Unite, the student housing specialist (+15.5%), St Modwen (+11.9%) and Quintain (+10.5%) all overweight positions in the Fund. Our underweight to the Swiss stocks, on valuation grounds, also helped with SPS falling -3.9% in the month. If the ECB’s strategy bears fruit we would expect to see these overpriced ‘defensive’ stocks weaken further.

Pan-European property shares rose modestly over what is traditionally the quietest month of the year. However, the shape of the month’s performance was more telling. The first week saw the continuation of the positive reaction (from 23 July) of investors...

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Pan-European property shares rose 4% in the month and the Total Return of the Ordinary share class NAV was 4.4%. Markets rose sharply at the end of June following the EU summit’s decision to allow the injection of aid directly into stricken banks from next year and to create a single banking supervisor for Eurozone banks.

Subsequently, share prices largely moved sideways until Mario Draghi began what appeared to be a concerted effort by politicians and central bankers to persuade markets that the ECB would (with the blessing of national governments) take steps to shore up peripheral sovereign bond markets following the 2 August rates meeting. Share prices reacted positively to these comments, adding nearly 4% from the 23 July to the month end. With dominated by the impact of comments from Europe’s central bankers and politicans it is not surprising that the UK (+5.3%) and Sweden (+8.9% in SEK) outperformed. With the markets taking Draghi comments positively at the beginning and end of the month, it was Switzerland (-0.5%), the traditional defensive play which underperformed. The Fund’s performance was driven by the overweight to UK stocks, particularly London, as well as Unibail, our largest holding which rose 7.8%. Towards the end of the month our Italian stocks performed strongly in reaction to potential ECB support.

We remain sceptical that the ECB is currently in a position to take decisive action. It strikes us that all roads lead to Berlin. Germany has not yet ratified the ESM and remains concerned about plans that appear to mutualise national debts.

Whilst the ECB can use the securities markets programme (SMP) to buy bonds, it is unlikely to do so in size without support from the Bundesbank. Similarly, it will look for a nod from Berlin before it purchases bonds issued by the EFSF, another source of potential support for sovereign bond markets.

Meanwhile, listed property companies continue to punch above their weight in terms of performance relative to the wider market and the physical property market. They are attracting good support from lenders relative to the wider corporate world and non-listed property companies. Stock selection remains critical and we have had a number of reminders on the importance of management trust and credibility. Management is an important factor in our bottom-up screening process and we are confident that backing the right teams will generate superior returns over time.

The Ordinary share class went ‘ex’ its 4.2p final dividend on 4 July. Based on the month end share price of 156.9p, the current dividend yield is 4.2%.

Pan-European property shares rose 4% in the month and the Total Return of the Ordinary share class NAV was 4.4%. Markets rose sharply at the end of June following the EU summit’s decision to allow the injection of aid directly...

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The share class benchmark, the FTSE EPRA/NAREIT Europe Net TR Index (in GBP) rose 4.63% in June. Whilst the sector see-sawed in a 4% trading range, it leapt 4.4% in the last three days on the back of the EU summit. The announcement that the EFSF and ESM can recapitalise banks directly rather than through their respective sovereigns is a step towards breaking the toxic link between busted banks and their deeply indebted sovereigns. Importantly for debt market investors these, capital injections will not enjoy seniority over other bondholders. Whilst these and other measures announced after the summit are an important step in the right direction, they are not the solution and still require ratification from 17 nations.

However, it is clearly positive and for our sector, intricately tied to banks and other lenders, it is important. Interestingly, European property shares have outperformed general European Equities (as measured by Euro Stoxx 600) by 742bps year–to-date.

We firmly believe investors are beginning to appreciate the robustness of earnings, the quality of assets and the strengthened balance sheets of UK and European property companies.

French, UK and Italian stocks were the best performers in June with the latter responding to the news around the summit. The French stocks were led higher by Unibail (8.6%) which announced an agreement to acquire an effective 46% in MFI, Germany’s 2nd largest shopping centre owner / manager with an owned portfolio of €1.5bn. We think this is an interesting off-market transaction which offers an existing platform in the one European market in which they were under represented. Unibail remains our largest investment (14.9% of NAV). Tour Eiffel, a small office owner/ developer is worthy of a mention. The stock rose 16% on the back of a successful sale of non-core medical centre assets followed by a successful refinancing of a €120m credit line. Another example of a listed property company concluding a debt restructuring - which market detractors claim is the sector’s largest issue.

Within the portfolio our long positions in the UK, France and Italy aided performance whilst our underweight to Switzerland also helped as all four listed Swiss stocks underperformed the index.

Both share classes will go ‘ex div’ on 4th July and pay on 1st August. Together with the interim dividend the Ordinary share class will have paid 6.60p for the yearto-March 2012. A dividend yield of over 4.5%.

The AGM will be held at the RAC on 24th July at 12 noon.

The share class benchmark, the FTSE EPRA/NAREIT Europe Net TR Index (in GBP) rose 4.63% in June. Whilst the sector see-sawed in a 4% trading range, it leapt 4.4% in the last three days on the back of the EU...

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Performance in May was almost identical to April with the FTSE EPRA/NAREIT Europe Index Total Return (in GBP) falling -2.45%. As with April the index fell in the first half of the month, only to recover slightly in the second half. Real estate share prices have now returned to their end of January levels but are still up +4% year to date. Whilst the multi-layered and interwoven issues affecting the entire Eurozone continue to dominate market sentiment, property shares have continued to outperform the broader equity market with Stoxx Europe 600 down -6.8%in the month and down -2% year to date. We believe that the quality of income and the high dividend yield offered by the sector continues to attract investors. In all this turmoil the opportunity to buy exposure to high quality physical assets in core markets is driving demand. The fund continues to increase its exposure to key cities and regions including London, Paris, Germany and Scandanavia. German property shares were the only national group to have a positive return in May and the residential stocks were particularly strong with GSW +12.2%, Deutsche Wohnen +12.6% and Gagfah +7.3%.

Whilst investors continue to worry about property companies' ability to refinance loans it is encouraging to report that a number of businesses continue to diversify their sources of debt. Great Portland announced that it raised $200m in a US private placement and Unite raised £121m in a 10yr deal with L&G borrowing at 5% at 60% loan to value. This is another example of an insurance group participating in commercial property lending - we are confident that they will continue to compete with traditional bank finance in certain subsectors of the commercial property market. Primary Health Properties raised 10% of their equity in an overnight placing to institutions at 305p raising £19m. The fund participated and the price was at a 6% discount to the previous closing price.

Whilst German property companies performed, the peripheral eurozone continued to suffer with Italian stocks falling -19.3% and Greek (just one stock) -38.2%. Year to date, Spanish property shares are down -49.7% whilst Norway is +12.3% and Sweden+1.2% (in local currency). There continues to be huge regional performance disparency which is not unexpected and the portfolio is positioned accordingly.

Preliminary annual results were published on 23rd May including the announcement of the final dividend of 4.2p, a 10% increase on the previous year. Combined with the interim of 2.4p, the trailing dividend yield at the end of May was 4.5%.

Performance in May was almost identical to April with the FTSE EPRA/NAREIT Europe Index Total Return (in GBP) falling -2.45%. As with April the index fell in the first half of the month, only to recover slightly in the second...

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April was the first negative month of 2012 for real estate equities (and the European equity market in general). The FTSE EPRA/NAREIT Europe Index Total Return (in GBP) fell 2.47% in the month. Real estate shares fell over 7% between mid March and the last week of April, recovering into the end of the month. We have entered another 'risk-off' period as the markets fretted about the French presidential election, the Greek general election and the fall of the current Dutch government. Economic data was of little comfort in the period with the UK in particular delivering a -0.3% quarterly GDP figure. Whilst the total return for the sector was -2.5%, the capital fall was 3.75% such were the weight of dividends paid in the month. We would highlight that the dividend yield in the sector is over 5% and our investee companies generally remain confident of the sustainability of this income. Not unexpectedly, it was the Eurozone which bore the brunt of the sell-off with the Eurozone subset of our index falling 5.7%. Putting this into a wider equity context the Euro Stoxx 50 dropped -6.9% in the month.

The Fund has 35% exposure to UK equities and 11% to UK physical property. Over 80% of the physical property is in London, which is our preferred geographical exposure in the UK. The UK property stocks produced a positive, albeit modest return of 0.4% in the month. Particular outperformers included Shaftesbury (+3.9%) which owns prime retail assets across Soho and Covent Garden.

Net debt in the share class was reduced by £2.7m as sales exceeded purchases and some of our revolving facilities were paid back. Our preferred German residential play, GSW, issued shares via a rights issue and we participated. The company will use the proceeds to bid for another significant Berlin focused portfolio.

Big Yellow, the self storage operator announced that it had entered into a new £100m 15-yr loan with Aviva. The deal is underwritten with first charge over 15 properties valued at £260m. The stock rose 4.4% in the month. We expect to see more insurance companies lending to the real estate sector rather than buying property directly as a direct consequence of the Solvency 2 regulations. It is very encouraging to see this form of lending to a non-traditional property use such as self storage. The Trust owns both Big Yellow and Safestore and we are positive on the sector. The Trust's annual results will be released on 23 May and will include the announcement of the final dividend following the Board meeting on 22nd.

April was the first negative month of 2012 for real estate equities (and the European equity market in general). The FTSE EPRA/NAREIT Europe Index Total Return (in GBP) fell 2.47% in the month. Real estate shares fell over 7% between...

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March was another positive month for listed real estate company share prices with the EPRA Europe Index (TR, in GBP) +4.06% in the month. Investors warmed not only to broadly positive news flow from property companies reporting full year results, but also from a more optimistic response from Europe's political leaders and central bankers culminating in a further strengthening of the fiscal bailout system to €700bn. However, the severity of the structural reforms required across the eurozone are underestimated at one's peril. Spain remains in a difficult place announcing further austerity cuts of €27bn in the 2012 budget. Further falls in house prices and rising unemployment figures (particular in the 18-34 yrs) points to further quarters in recession. Whilst the Fund has no direct exposure to Spanish property companies, a large number of property companies have pan-European portfolios particularly in the retail space. We monitor all our country exposures very carefully and minimising that particular country exposure is vital. On the other hand, Italy saw returns of 11% and 12% respectively from Beni Stabili and IGD as the cost of Italian sovereign debt tumbled from 7% to 5%. We maintain our long position in Italy.

The Ordinary share class NAV with income increased by 5.1% in March and brings the financial year-end figure to -8.5%. This compares to 4.1% for the benchmark in the month and -8.9% for the year, slight outperformance in both cases. The gearing remains at 9.1% but the property assets are 11.5% of the net assets. The property portfolio rose in value by 2.1% in the six month revaluation at the end of March and thus contributed to the 1% outperformance in the month.

At the country level, alongside Italy, Germany was the other strong performer (+9.5%) as investors became more comfortable with the eurozone's issues and bought both the most likely beneficiary and the most bombed out parts of our universe. Traditional safe havens such as Belgium and Switzerland underperformed. We however continue to have concerns about over optimism particularly towards the European consumer. The Fund positioning remains focused on high quality companies with strong balance sheets. We continue to expect buying opportunities from the deleveraging cycle for those businesses with firepower. Unibail's raising of €750m through a 7 year bond at a yield of 3% (105 bps spread) in mid March is illustrative of the attractive cost of capital for those who can access it.

March was another positive month for listed real estate company share prices with the EPRA Europe Index (TR, in GBP) +4.06% in the month. Investors warmed not only to broadly positive news flow from property companies reporting full year results,...

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February was another positive month for listed real estate company share prices. The year-end reporting season got into full swing, with most companies reporting positive growth in net asset values, earnings and dividends. There has been little evidence to support sell-side analyst forecasts of negative capital growth for 2012.We remain confident in our own forecasts for low positive capital growth across the sector, albeit showing wide dispersion between sectors and countries.

The Ordinary share class NAV with income increased by 1.76% in February, giving a total of 6.54% for the calendar year to date. This compares to 1.53% for the index in the month and 5.56% for the first two months of the year. The outperformance by the Fund reflects our positioning in high quality companies exposed to those sub-markets which we believe will perform best in a low growth environment. Gearing at 10.6% reflects the 11.8% exposure of net assets to physical property (of which 78% is exposed to London assets).

Consequently, the exposure to equities is broadly ungeared. Our slightly positive view of certain key underlying real estate markets continues to be tempered by expectations of further volatility in both equity and bond markets.
The Eurozone continues to be the main source of volatility. The second ECB three year Long Term Refinancing Operation injected a further €530 billion of liquidity into the financial system albeit part of this was offset by lower take up in shorter refinancing operations earlier in the month. Whether there is a causal link or not, Italian 10-year bond yields have fallen to around 5% for the first time since last summer, putting a spring in the step of Eurozone politicians. The performance of Beni Stabili, Italy's only listed REIT has been highly correlated and the stock has recovered 46% from its mid-December low point. The Fund has a long position in this company.

However, at the same time a number of peripheral Eurozone countries including Greece and, more worryingly, Spain continue to miss their deficit targets, pointing to the major structural changes that need to take place within Europe over the long term if further crises are to be averted. The Fund continues to have no direct stock holdings in Spanish real estate companies.

Within the direct property portfolio, we continue to progress lease negotiations at our office building in Harlow with an existing tenant.

February was another positive month for listed real estate company share prices. The year-end reporting season got into full swing, with most companies reporting positive growth in net asset values, earnings and dividends. There has been little evidence to support...

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Pan-European real estate equities rose 3.85% in the month. This is a modest total figure compared with the performance from the intra-month low point on 9 January to the end of January which was +8.6%. The wider European financials sector rose even more, 13.3% from 9 January whilst the broader equity market responded more modestly to this renewed 'risk-on' phase with EuroStoxx 600 rising 'just' 3.4%. The performance laggards of Q4, 2011 principally the share prices of the Continental financial institutions responded to the consensus view that the long-term refinancing operation programme providing effectively unlimited three-year liquidity by the ECB was a significant positive for the Eurozone banking system. Real estate, as a levered asset class predictably benefitted. Our view is that such liquidity is most welcome but it is only that - liquidity - and not the solution to the problems of bank and sovereign solvency.

The Fund reduced exposure slightly in the month, raising 1.5% of NAV through sales in the last few days. The Fund had relative outperformance in the month with the NAV with Income rising 4.7% exceeding the index which rose 3.8%. The relative overweight positions to the UK (which rose 5.4%), Italy (+7.6%) and Norway (+15.2%) helped, whilst our underweights to Austria (-7.5%) and Switzerland (-0.6%) also aided performance. In the UK, the Central London focused stocks performed well with Great Portland +11.5%, Shaftesbury +8.4% and Derwent London +7.2% whilst the large caps with London exposure, Land Securities +6.1% and British Land +7.1% also performed well.

The sales made reflected the strong performance of a number of stocks particularly our largest position, Unibail. The company announced good results on 1stFebruary but the share price had been driven to €150 per share and the year end NAV was reported at €137.5. The business is very well run, owns excellent assets and the share price performed comfortably ahead of its peer group in 2011. The Fund now has a market neutral position and the stock remains our largest absolute position.

Whilst the accommodative practices of the ECB are most welcome, we continue to see polarisation in physical property markets with a wide disparity of returns across sub-markets. GDP forecasts have begun to improve particularly in the core Continental European countries as well as in the UK and our focus remains on well financed businesses operating in the major centres - both commercial and retail in these countries.

Pan-European real estate equities rose 3.85% in the month. This is a modest total figure compared with the performance from the intra-month low point on 9 January to the end of January which was +8.6%. The wider European financials sector...

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Pan-European real estate equities fell by -3.08% in the month. Whilst clearly not a good figure, it was all looking significantly worse half way through the month. The index sold off daily from the beginning of December until 14th recording -9.3% month to date. This was a new year to date low and an index value last seen in August 2010.
For a levered asset class, the likelihood of further reductions in lending capability amongst eurozone banks is a significant risk. The Fund continues to focus on businesses with limited leverage and where any near term refinancing is manageable. Several of our largest positions have also successfully tapped bond markets and made private placements, thus securing additional lines of credit and this is to be applauded.

Much like November, the latter part of the month saw a partial reversal of the sell-off with gains of 6.8%, in the second half of the month. Of course, the holiday period resulted in lower than average volumes and three 'up' days into the year end. The subsequent weakness in January would imply an element of window dressing into the year end.
Individual stock price movements continue to be driven by macro sentiment. The largest Italian listed company, Beni Stabli is a case in point with its share price rising +11.1% in the month, but still down over 40% for the year. The narrowing of the spread in Italian sovereign bonds in late December clearly helped. The company owns a high quality portfolio primarily focused on Milan and Northern Italy with over a third of its income from Telecom Italia. We have been buying on weakness with the shares at less than a third of asset value.

In France, the need to raise equity amongst financial institutions continues to weigh heavily on those property companies with dominant institutional owners such as Klepierre (BNP 50%) and Silic (44% Groupama). In the latter case, Groupama announced that it will back an all share merger with Icade to create France's largest owner of office property. However, the exchange ratio offers no premium to Silic's minority shareholders. It merely appears to be a function of Groupama's precarious financial position.

The Fund continues to have an overweight position in the UK through both equities and physical property. Elsewhere, our largest overweight positions are in Germany, France and the Nordics. The French exposure is dominated by Unibail, which was the top performing country stock down 2.6% in the year, versus -8.4% for the French stocks collectively.

Pan-European real estate equities fell by -3.08% in the month. Whilst clearly not a good figure, it was all looking significantly worse half way through the month. The index sold off daily from the beginning of December until 14th recording...

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Pan-European real estate equities fell by 5.2% in the month. On the face of it - not a good month. However, this figure reflected a remarkable change in investor sentiment in the last week of the month. From 1- 25 November, real estate equities were down nearly 14%, only to stage a 9% recovery in the last five days of the month. November was the mirror image of October (which saw 3 weeks of 'risk-on' with a 13% rally, followed by a correction in the last five days). Markets remain sentiment driven, overshadowed by the next 'noise' on the eurozone political landscape. After the mild euphoria in the run up to the summit on 27 October, November saw investors focus on the lengthy timetable that any political solution by the 17 member states would require. Markets danced to a faster beat and the crisis in Italy pushed 2-yr sovereign debt yields to over 7% - an unsustainable level. Whilst Greece is peripheral, Italy is not. As we enter December, there appears to be renewed political momentum and coordination of response between Germany and France - the decision makers. Our strategy remains bottom-up with the focus on positioning the Fund for an enhanced period of economic slowdown across Europe - our best case scenario. All is not doom and gloom, however, equity repricing has resulted in the sector offering earnings yields of 6.75% with dividend yields of 5.5%, all covered and rising. Discounts to current NAV are now in excess of 15%.

Unsurprisingly, the Italian stocks, Beni Stabili and IGD were both hit hard, falling 28% and 26.8% respectively. Such is their volatility they recovered 14% and 10% in the first week of December. In a 'risk-off' period, once again the Swiss (-3%) and Belgium (-0.4%) companies outperformed, falling far less than the broader property equity market. Whilst the Fund is underweight both Switzerland and Belgium, it is overweight the UK stocks on grounds of both valuation and currency. The UK stocks outperformed falling -2.2%. The weakest performer of the large caps was Segro which fell 7.6%, mainly on the expectation that a change in strategy would result in a large scale sales programme. Grainger was the top performer (+30%) announcing that it completed its refinancing (£0.9bn). Whilst good news, the increased interest bill will lead to reduced earnings.

In Germany, Deutsche Wohnen completed a 1 for 4 rights issue at €9.1 per share; we took up our rights and remain overweight German residential property through Deutsche Wohnen, GSW and TAG. The Fund was a small net seller over the month. The largest purchase was the rights issue take-up.

Pan-European real estate equities fell by 5.2% in the month. On the face of it - not a good month. However, this figure reflected a remarkable change in investor sentiment in the last week of the month. From 1- 25...

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Yet another month driven by macro forces. At least for these four weeks it was back to 'risk-on'. Markets took heart from the concerted effort by Europe's political leadership to at least agree on firm policy actions surrounding further bailout of Greece, strengthening and expanding the EFSF and potentially forcing recapitalisations of some banks. The emphasis is on 'agree policy actions'. None of the suggestions have been put in place as yet, many of them require ratification from all 17 member states. The structure of the monetary union does not allow rapid decision making and the summit on 27 October was therefore seen as a critical opportunity. In the week leading up to the summit, the Euro Stoxx 600 Index was up 7% as investors hoped for firm action. It fell 5.6% in the following 3 days. Response to macro events still dominates and this is difficult territory for our fundamental bottom up approach.

Real estate stocks slightly underperformed the broad market rising +6.3% (versus 7% for the EuroStoxx Index and 7.8% for the FTSE All-Share Index). The Ordinary share class NAV rose 7.1% outperforming the index by 80 bps. At the country level, the Fund's overweight positions in UK, France, Germany and Sweden were all beneficial whilst the significant underweight to Switzerland also aided relative performance. The pattern of Swiss stocks underperforming in a rising market remained intact in October with the five Swiss companies in the index falling -1.2% in local currency terms as investors bought back into euro denominated stocks that had sold off in August and September. At the stock level, the Fund's performance was aided by overweight positions in a number of companies which rebounded well. Beni Stabili (+ 10.3%) Italy's largest listed property company, recovered strongly. It had lost 43% of its value in Q3 as bears focused on Italy's deficit. In Germany GSW (+10.8%) and DIC Asset (+15.5%) also helped performance. Whilst we believe DIC has too much leverage, we are confident that the office markets in Hamburg, Frankfurt and Munich will continue to benefit from being in the strongest regions within Europe's strongest economy. In the UK, those with London based portfolios did well, Workspace (+11.8%), Great Portland (+9.5%), Shaftesbury (+8.2%) and Derwent London (+17.9%) as investors focused again on sub-markets with rental growth. The Fund has an overweight position in all these stocks. With our underweight positions in Belgium (high yielding stocks) and Switzerland, the portfolio has reduced exposure to the most defensive names in the sector.

Interim results and notification of the interim dividend will be announced by the Board on 23 November.

Yet another month driven by macro forces. At least for these four weeks it was back to 'risk-on'. Markets took heart from the concerted effort by Europe's political leadership to at least agree on firm policy actions surrounding further bailout...

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Looking at last month's factsheet, the use of the word 'torrid' to describe the -7.2% decline in pan-European share prices was premature. I can therefore merely add the preface 'very' to describe this month's -10.4% fall in the Fund's benchmark index, FTSE EPRA / NAREIT Europe Index (total return, GBP). Unlike August which experienced a strong rally in the last week of the month, September was a series of negative responses to virtually every piece of news flow and data. Investors progressed from 'risk-off' to real fear. Even gold proved not to be a safe haven in the month. Last month, I wrote about the 'safe haven' aspects / overvaluation of Swiss property companies and the market continued to ignore the fundamentals of that particular commercial property sub-market. Swiss property companies returned +1.7% in local currency in the month and our underweight to those companies was the primary cause of the relative underperformance within our equity portfolio.

Quite rightly, investors continue to question whether European politicians (voted in by their local electorates) can be brave enough to look beyond local politics to the bigger issues of potential fiscal unity (or at least a collective responsibility within the single currency area). None of these issues are new. What has compounded matters this month has been the steady round of GDP forecast reductions. The expectation of zero growth or worse is becoming the consensus. Whilst pan-European property equities have outperformed so far this year (EPRA has returned 4.5% more than Stoxx 600 year-to-date), the sector has underperformed since the end of July.

However, as fear increases so does correlation and we believe that a significant number of high quality companies are becoming undervalued. Asset values remain a long way from their peaks of the first quarter of 2007 (even in markets such as central London which have recovered significantly), whilst the majority of companies have loan-to-value figures in the comfortable mid 40% ranges. Earnings are benefiting from the twin boosts of indexation (on the Continent) coupled with ultra-low short-term rates. Development risk is either non existent or modest. As prices fall, earnings yields push up to 7% and dividend yields approach 6%. There are great selective buying opportunities.

The property portfolio within the Ordinary share class is independently revalued at the half year. The gain was £1.1m (2.5% increase) and valuation improvements reflected not only our Central London focus (78% of the portfolio) but also the successful asset management work of re-letting our building in Harlow. Whilst gearing in the share class is currently 12%, the physical assets account for 12.5% of the net assets.

Looking at last month's factsheet, the use of the word 'torrid' to describe the -7.2% decline in pan-European share prices was premature. I can therefore merely add the preface 'very' to describe this month's -10.4% fall in the Fund's benchmark...

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A torrid month for equities globally and pan-European real estate shares were no exception with the Fund's benchmark falling 7.2% (total return, GBP). In rapid 'risk-off' periods and heightened volatility, correlation across asset classes increases. Whilst I wrote last month that the longstanding (strong) correlation with the broader financials group had broken earlier in the year, the relationship did reassert itself in August, but not as robustly as in previous years. The BBG European Financials Index was down 15% over the month, significantly underperforming real estate shares.
We believe this is important. The underlying assets in the sector are leveraged but this is not a repeat of 2007/8 for three critical reasons (1) asset pricing is still 15-30% below the peaks of Spring '07 (2) balance sheet rebuilding / fresh equity has resulted in Loan-to-Value averaging around 40% - much more stable and (3) earnings are robust with companies able to take advantage of very low short term rates. In fact - a number of businesses we invest in have announced that they are swapping out floating rate debt for fixed as the terms are too good to miss.

Whilst the Fund had external gearing of 8% at the end of July, it also had 10% of its assets in unleveraged physical property. This meant we entered the month effectively with no external leverage against the equity portfolio. The relative underperformance was a result of our bottom-up fundamental approach, which highlighted the relative overvaluation of both Swiss and Belgium property companies. In the former, we were well aware of the 'safe haven' credentials of Swiss companies but earnings yields of sub 4% and vacancy rates of 10% in the Zurich office markets were not attractive. It is worth noting that the Fund does not take currency risk (versus the benchmark) and whilst we held underweight positions in the stocks, we held benchmark equivalent currency exposure (in cash or forwards). The Swiss companies (in CHF) fell just 0.4% in the month. Now standing at double-digit premiums to asset value (versus a sector average discount of - 15%) we believe that such relative outperformance will not be repeated and maintain our position.

Earlier in the year, the Fund made a tactical decision to increase its physical property exposure and this month it acquired an office building in Vauxhall, investing £8.25m. The property is multi-let and yields 6.75% net. We intend to carry out a number of asset management initiatives in the next 12 months.

As I said at the AGM (late July) we expect these bouts of volatility to continue and the Fund will maintain its strategy of seeking exposure to quality assets and management in markets where we see the correct rental growth dynamics.

A torrid month for equities globally and pan-European real estate shares were no exception with the Fund's benchmark falling 7.2% (total return, GBP). In rapid 'risk-off' periods and heightened volatility, correlation across asset classes increases. Whilst I wrote last month...

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Writing the monthly commentary in the second week of August, the data feels very historic. For the record the NAV (with income) fell 4.8% and the benchmark fell 4.9% giving slight relative outperformance. The same benchmark denominated in EUR rather than GBP fell 'only' 1.9% as EUR weakened by 3% versus GBP over the month. Looking back, the resurgence of Eurozone sovereign debt issues began to boil up again during July but sentiment briefly improved following the decision to expand the European Financial Stability Fund (EFSF) as well as a new support package for Greece. However this improvement in outlook was short lived and as the month ended the risk of contagion to Italy and beyond was becoming a central theme. Investors voted with their feet and the price movements (and intra day volatility) of early August have been dramatic.

Whilst real estate equities fell in July, the falls were modest when viewed in local currency. Whilst early August has seen significant weakness, the sector has outperformed the broader marker on a relative basis.

Often viewed as an adjunct to the Financials group its performance versus BBG European Financials index is impressive. Between 1st July and 12th August that index is down 19.9% whilst EPRA (in EUR) is down 11.3%. Investors may well consider that the vast majority of listed property companies have balance sheets and access to debt far improved from the dark days of 2008. The recapitalizations and restructuring of 2009 have resulted in an average LTV of only 41%. Earnings are highly visible and relatively secure (with lease lengths of 7 years on average). Forecast earnings yields for 2001 are 6.5% whilst dividend yields are in excess of 5%.

Within the fund the overweight to the UK was beneficial as it fell 2.9% outperformed only by Norway and Switzerland. The other large components of the index, France and the Netherlands fell 3.8% and 6.1% when viewed in EUR (but -6.7% and -8.9% in GBP).

Whilst the fund had gearing of 8.5% by the month end, it also held 9% of its assets in physical property, hence it had no geared exposure to its underlying equity portfolio. The fund has made its first property acquisition since 2006, buying a multi-let office building in Vauxhall for £7.83m with a net initial yield of 6.75%. This increased the exposure of the fund to physical property from 8% to 9.2%.

The final dividend of 3.7p is payable on 2nd August.

Writing the monthly commentary in the second week of August, the data feels very historic. For the record the NAV (with income) fell 4.8% and the benchmark fell 4.9% giving slight relative outperformance. The same benchmark denominated in EUR rather...

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Whilst the NAV (with income) of the share class rose +1.33% in the month, all the gains were made in the last week with the index rising 4.6% between 24th and 30th June after a dismal previous three weeks. Once again, the villain of the piece was eurozone sovereign debt concerns. Whilst Greece is once again at the epicentre, it is not the core of the issue. The central concern for markets is the contagion resulting from the losses incurred by other eurozone banks if Greece was to default. For a leveraged asset class such as real estate, the ability of banks to lend is critical and any impairment is an issue. A characteristic of such 'risk off' periods is that the stock performance in our universe becomes very top down driven and the spread of regional / country performance widens. Not surprisingly, the UK, France, Germany, Switzerland and Norway were the regional outperformers. The UK was the top performer (in local currency terms) powered by strong performance from the London focused and large cap stocks. The relief felt (post the Greek double vote) translated into a 6% rally in the UK stocks. This helped performance for the Fund.

All the Swedish stocks suffered very poor performance early in the month falling over 7.5% before recovering slightly to end the month down 'only' -4.3% (in SEK). This performance was in line with broader Swedish equities, and reflected the concerns of a global slowdown on an export driven country. Rising base rates (the highest in Europe) will also limit earnings growth on businesses with high levels of floating rate debt.

Whilst the Fund was a slight net disinvestor in the first half of the month, we did participate in a small German office investment company IPO, Prime, in the second half of the month investing £1.5m. Initially mispriced (at a range of €7-9 per share), it was withdrawn and reoffered at €6.2 per share. At a 30% discount to NAV the issue price is an attractive entry point into offices in Germany's four largest cities.

Gearing remains modest at 5.5% and the shares go 'ex div' (of 3.7p) on 6th July, payable on 2nd August.

Whilst the NAV (with income) of the share class rose +1.33% in the month, all the gains were made in the last week with the index rising 4.6% between 24th and 30th June after a dismal previous three weeks. Once...

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The share class total return for May was +2.2% versus the index, FTSE EPRA/NAREIT Developed Europe Index (TR in GBP) of +1.9%. When viewed at the capital level, the monthly return was +1.6%, such was the weight of dividend 'ex' dates (23 companies in the month) and the total return figure includes these. This steady return from the sector brings the quarter-todate to +6.1% and year-to-date to +12.8%, significantly outperforming the FTSE All-Share and Euro Stoxx 600, both up less than 2% YTD. In fact, broader equity markets had a weak month and investors sought out not only gilts but also perceived 'safe' stocks. Real estate equities offer exposure to a real asset class (as inflation fears persist), prudent leverage and the prospect of recurring earnings (with Continental income streams index-linked). With share prices close to current NAVs this is an attractive proposition.

May is always a busy month. This year we had 25 companies reporting full year (March year ends are common in the real estate sector) or first half 2011 figures. The UK outperformed Continental Europe for the third month in a row bringing the quarterly returns to +8.8% (UK) and +5.1% (CE). Results were generally in line or slightly ahead of consensus. However, Land Securities produced stunning results, driven primarily by improved valuations of their London assets - both standing investments and developments. This helped propel the performance of other stocks with a London focus and continued the outperformance of real estate shares compared to the wider market.

Looking forward, the Fund's gearing is modest at 6% and even the effect of this is dampened by virtue of our 7% of assets in unencumbered physical property. With the holiday season approaching we feel now is not the time make a significant directional call. But rather to continue focusing on our bottom-up approach and seeking out the dispersion of returns we believe these market conditions will continue to reveal. The abrupt flattening of the yield curve and the expectation of further slowing in global growth will, in the short term, help leveraged assets such as real estate. The Ordinary class share price rose 7.4% in May further reducing the discount between the share price and the NAV.
Following the publication of the preliminary results on 25 May, the Board declared a final dividend of 3.70p (FY 6.0p). The shares will go 'ex' on 6 July with the dividend payable on 2 August.

The share class total return for May was +2.2% versus the index, FTSE EPRA/NAREIT Developed Europe Index (TR in GBP) of +1.9%. When viewed at the capital level, the monthly return was +1.6%, such was the weight of dividend 'ex'...

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Pan-European real estate equities (in GBP) rose +4.1% in April, another strong month bringing the total return YTD to +10.7%. The dividend payment season is now underway (the vast majority of our Continental stocks pay annual dividends between late March and early June) and contributed 1% to performance in April. We also saw further weakness of GBP against EUR, CHF and SEK. The immediate consequence is to boost returns in GBP. Whilst we do not hedge the Fund's non-GBP position we endeavour to match the relevant exposure of the benchmark, ensuring relative performance is not a function of currency fluctuations. When measured in EUR terms the index's total return was 'only' +6.6% - such has been the weakness of GBP. It is this currency weakness which has been a driver of performance of those UK stocks with significant London exposure. Foreign buyers are driving London's prime commercial and residential markets. Large cap, Land Securities and British Land were up 7% and 8.7% respectively, whilst specialists Derwent London and Great Portland were up over 9%. The latter is the Fund's largest overweight position. Collectively, the UK stocks rose +5.8%, the top performing country (in local terms).

On the Continent, the strongest performers were Norway (+4.4% in NOK) and the Netherlands (+3.6%). We remain overweight in Norwegian Properties, the only Norwegian property company in the index and focused on offices in Oslo and Stavanger. The Netherlands saw a takeover offer for Prologis European Properties by APG and Goodman. Prologis US, the majority shareholder, countered and then increased their bid to €6.2 (a premium of 24%). APG have now sold their stake to Prologis. Whilst arguing they wished to improve corporate governance in the business it is encouraging that such a large pension fund was prepared to invest €600m in the pan-European logistics market.

Gearing increased from 7% to 8% and invested €5.3m in the IPO of GSW, a Berlin residential investment company.The price was €19 per share and the stock was €21.70 by the month end, with a market cap of €885m. The Fund participated in a placing from Primary Health Properties, a small UK healthcare property investor raising £16m for acquisitions. Such placings enable the Fund to participate in a meaningful way in what is a difficult stock to add to.

Pan-European real estate equities (in GBP) rose +4.1% in April, another strong month bringing the total return YTD to +10.7%. The dividend payment season is now underway (the vast majority of our Continental stocks pay annual dividends between late March...

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European property shares outperformed general markets in March. The absence of any sector specific impact from events in Japan and the near Middle East helped support prices. Pricing was also assisted by the strong indication that the EBC gave in early March that it would raise Eurozone base rate in April. There is good evidence that, while real estate shares are interest rate sensitive, they perform well at the start of a new cycle of rising interest rates. Continental property shares rose 1.3% in Euro terms and 5.4% in Sterling terms. UK property shares, by contrast, declined by 1.9%, leaving the benchmark in Sterling 2.84% higher on the month. The Ordinary NAV per share rose 3.33%, and the share price increased 6.43% as the discount to NAV narrowed.

Leading UK shares fell back by 2% to 4% over the month as investors fretted over the outlook for retail rents in the wake of a string of negative consumer news stories. The Budget included further verbal support for the expansion of the REIT sector. It also contained an intriguing comment that the Chancellor abhorred planning delays and wanted to explore the possibility of amending the use classes order to speed up the conversion of office space to residential use. The four UK property companies who might benefit most from such a change, Capital and Counties, Workspace, St Modwen and CLS were all strong outperformers over the month.

During March the share class was, on balance, a modest net seller for around £1m, leaving year end net debt at a little under £40m. Purchases included additions to the holdings in Alstria, the German office investor and in Unibail Rodamco. New holdings were opened in Wihlborgs and IGD. Sales included reductions in the holdings of Hammerson and Capital Shopping Centres. The revaluation of the directly held properties at 31 March 2011 showed an increase in value of £1m - a 2.3% like for like increase. The Trust's final results for the year end 31 March are due to be released on Wednesday 25 May.

As announced last May, Chris Turner handed over the role of lead manager of the Ordinary share class to Marcus Phayre-Mudge on 1 April ahead of his imminent retirement. At the same time, Marcus has passed on his role as lead manager of the Sigma share class to James Wilkinson.

European property shares outperformed general markets in March. The absence of any sector specific impact from events in Japan and the near Middle East helped support prices. Pricing was also assisted by the strong indication that the EBC gave in...

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