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Close Property invests in Fareham

Close Property Investment

Fareham Innovation Fund

Type: Unit trust.

Aim: Income by investing in a commercial property.

Minimum investment: Lump sum £10,000.

Investment split: 100 per cent Fareham Innovation Centre.

Yield: 11 per cent.

Isa link: No.

Pep transfers: No.

Charges: Initial 7.25 per cent, annual 1.25 per cent.

Commission: Initial 3 per cent.

Tel: 020 7426 6216.

Suitability to market 7.3

Investment strategy 7.6

Past performance 5.3

Company&#39s reputation 7.6

Charges 6.3

Commission 6.3

Product literature 8.6

Close Property Investment, an offshoot of Close Brothers, has
introduced the Fareham innovation fund, a unit trust that will invest in
building and running a business centre near the town of Fareham in
Hampshire.

Looking at how the fund fits into the market Laymond says: “This is
an alternative to more conventional investment products and
therefore fits well as part of a spectrum of products.”

Divers says: “As an unregulated scheme it cannot be marketed to the
general public across the UK, so it is a very specialised investment
area. Most IFAs will not use it, even if they knew how to. It is however,
a collective investment and though an exempt unit trust has been
established it is not a liquid asset like those we most often use.”

Briggs says: “There is a dearth of commercial property unit trusts at
the moment, so any addition is welcome.”

Asked to identify the type of client that it is most suitable for Divers
says: “This would be for high-net-worth investors as a part of a
longer-term Sipp or a SSAS portfolio. Property is more defensive than
equities and higher yielding than bonds, so it adds security and
diversification. There must be many managing directors and
entrepreneurs who this will appeal to. It would suit the pop stars and
footballers pension funds.”

Briggs says: “Investments can only be accepted from exempt
persons, such as Sipps and SSAS.”

Laymond says: “This is suitable for those with existing portfolios who
are now seeking a broader base or cornerstone of commercial
property investments. This is also suitable for Sipps and SASS, as
they are more likely to have surplus cash available for investment.”

The panel differ about the marketing opportunities that the plan
provides. Briggs says: “Marketing opportunities are very limited as
this is restricted to SIPP and SASS investors. As there is no specific
or defined exit route (four to five years is anticipated) it will only be
suitable for those who are some way off retirement, say with 10 years
or more to go.”

Divers agrees. He says: “There are very few advantages for the
average IFA, probably none for the bank assurers. There are some
for the private portfolio managers, but not a lot really as it is only
raising a total of £1.6m.”

However, Laymond says: “After the September 11 disaster this
provides excellent opportunities, as many investors are turning to
cash funds and old-style investments, plus property has always been
secure.”

Singling out the strong points of the unit trust Divers says: “The
strongest point is that Close Brothers is doing it. Each partnership
share is in chunks of £10,000, a useful size to do business in.”

Laymond says: “The development land is being acquired at a 30 per
cent discount to the open market value. There is also a rental yield of
9 per cent and a 50 per cent share of the profits of running the
innovation centre.”

Briggs says: “Commercial property is a useful asset class to include
in a portfolio.”

Turning to the drawbacks of the fund Laymond says: “The downside
risk is that the innovation centre might not succeed and the fact that it
could take longer then anticipated to achieve full occupancy. As with
many investments of this nature it must be viewed as medium to long
term and may be difficult to cash in if funds are needed prematurely.”

Briggs says: “The investment is limited to Sipps and SASS, there is
no defined exit route, there is a high initial charge and it has limited
access until November 14, 2001.”

Divers says: “This is not generally available to the wider public, who
might enjoy a property investment that is not run of the mill.”

Analysing the investment strategy Briggs says: “In essence the
strategy is sound, but I would have some concerns on the timing of
the launch. Even ignoring the effects of September 11 on world
markets, it is arguable that the UK commercial property market has
reached the top of its current cycle.”

Divers says: “The investment strategy is very focussed, even
blinkered, in both type and location. It is very specific, very specialist
and within that framework one assumes that Close Brothers has
done its homework and established a need.”

Laymond says: “This offers an opportunity to achieve higher returns
than normally available through a conventional commercial property
investment without forfeiting its asset backing.”

Judging the reputation of Close Property Investment Divers says: “It is
a well-known and well-established company.”

Laymond thinks that the company has an excellent reputation, and
Briggs says: “Close has an excellent reputation and is renowned for
its innovative products, such as the techmark tracker and the
protected escalator funds.”

Addressing the company&#39s investment past performance record
Laymond thinks that this is more than satisfactory.
Divers says: “This is difficult to judge. The company does not operate
in the wider field of unit and investment trust sand life fund business.
It produces more VCTs and last year the AIM VCT did well but
otherwise published figures elsewhere did not inspire.”

Briggs says: “Close&#39s main speciality is its range of escalator funds,
the performance of which is not comparable to the fund under
review.”

Judging if the charges are fair and reasonable Briggs says: “There is
a high initial charge, but then again this is not a common or garden
investment.”

Divers says: “The charges very probably are fair and reasonable for
this type of investment – it is not like they are New Star, raising £250m
which could be around for 30 years.”

Laymond says: “In view of the level of activity needed, whilst
somewhat high the charges reflect the fact that you get what you pay
for. In this case there is more activity so the charges are acceptable.”

Looking at the product literature Divers says: “It has got that Close
Brothers quality feel to it. It is very glossy with high quality paper, good
quality printing and a nice layout. Everything that today&#39s serious
investor and professional IFA would think of as expected.”

Laymond thinks that it is concise and to the point and Briggs thinks
that it is excellent, being clear, concise and very business-like.

Summing up, Laymond says: “You can rely on Close Brothers to
continually deliver outstanding investment opportunities and this is
another one not to be missed, particularly by Sipp and SASS funds.”

Divers says: “This is not your typical IFA stuff. Few IFAs are
knowledgeable or educated enough to use it. That said, there are
some IFAs out there doing the business.”

Barry Laymond, Senior practitioner, Barry Laymond Financial
Services, Robert Briggs, Principal, Robert A Briggs ACII, David Divers,
Principal, Sandringham Investments.

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Friday, November 2, 2001.Type: Capital guaranteed bond.Aim: Growth by investing in futures and hedge funds.Minimum investment: $20,000, Euros 20,000.Place of registration: Bermuda.Investment split: 100 per cent in futures and hedge funds.Guarantee: Capital returned in full at end of term regardless ofperformance of underlying investments.Isa link: No.Charges: Annual 3 per cent.Commission: Subject to negotiation.Contact: www.manmultistrategy3.com.

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