Fund information

April 2011

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.


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