
Ordinary Shares

Price (p)	149.40
Published NAV	171.60
Yield	3.89
Discount	-13.84

Prices correct as of close 2010-09-09. Last Published NAV is as at the previous business day. Source: Trustnet

Sigma Shares

Price (p)	66.90
Published NAV	88.60
Yield	2.99
Discount	-25.20

Prices correct as of close 2010-09-09. Last Published NAV is as at the previous business day. Source: Trustnet

For Sigma Shares

September 2009
After the record month of August (index +21.5%), the FTSE EPRA/NAREIT Europe Small Cap Index (in GBP) rose +5.2% in September. This is still a significant monthly move, if dwarfed by the previous figure. The index has risen +36.2% in the third quarter of this year alone. This is a quarterly record and reflects the continued strengthening of sentiment towards real estate and real estate equities. Looking back over the quarter, investors’ appetite for well let physical property has changed beyond recognition. Transactional evidence is indicating 100bps tightening in yields for prime assets and anecdotally we hear that buyers are moving up the risk spectrum (considering shorter leases, older buildings). This improvement in underlying values has yet to translate into published asset values (it is such a recent phenomenon) but share prices have anticipated it. Given that the UK stocks suffered the greatest ‘mark-to market’ downward movement it is no surprise that the UK share prices have anticipated the fastest upward correction. Our concerns rest with earnings. In the UK, rents continue to fall and demand for space is at best fragile. In France (the second largest country exposure in the benchmark) the ICC (the rent index primarily used in industrial and office property) fell 4% year on year. However in the immediate future we expect investors to continue to focus on the improvement in capital values driven by adjustments in risk appetite. Leverage and (in some instances) development opportunities are once again seen as positives. Following such a strong period, companies continue to tap the market with a mixture of rights issues and placings. This month in the real estate small cap space we had Unite (student accommodation), Wichford (government let property), Primary Health (GP surgeries), Deutsche Wohnen (German residential) and Songbird (Canary Wharf estate). Sigma participated in each instance as well as providing sub-underwriting in certain cases for which it received fees. Demand for these issues was robust and our underwriting commitment was not called upon. Over the last six months, the cash position in the fund has consistently reduced and for the first time in Sigma’s history (launch was July 2007) the fund is now fully invested and by the end of the first week of October was geared albeit modestly (2%). The Small Cap benchmark had its quarterly adjustment on 22nd September. Six companies left the index having become ‘large caps’ (ie with a market value of over £1bn). This was anticipated but also means that Sigma (temporarily) has an increased exposure to larger companies (albeit bought when they were smaller ones!) Sigma’s capital only NAV rose 6.4% in the month whilst the benchmark (capital only) rose 5.2% leading to 120bps of outperformance. The discount to NAV has drifted out to 19.8% from 18.7% over the month which meant that the share price did not reflect all the underlying gain in the month rising 4.9% to 73.45p.