December 2012

By | 16th January 2013

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%.

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