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Julian Gibbs

A projected income of 7.25 per cent tax-free with some prospects of capital growth is highly attractive in today&#39s markets. The new Close Brothers high-income properties fund aims to achieve this.

Chip invests in a diversified portfolio of secondary properties, freeholds and long leaseholds with a wide spread of tenants. This should provide a more secure income prospect and lower risk than a City of London-weighted portfolio.

Chip&#39s initial property portfolio will comprise £32.6m of commercial assets spread widely over the Midlands, North and South of England, with a diverse tenant base. It currently has 182 different tenants which will generate rental income of over £3m, yielding 9.3 per cent gross or an estimated 10.4 per cent when fully let.

It is expected that Chip will close at £50m, at which time the company will borrow a further £50m, giving a sensible gearing of 50 per cent at a fixed rate of interest. It will then acquire more freeholds and long leaseholds of a similar type to take the total portfolio to over £90m.

The management is highly experienced and has an excellent past record. With Chip available as an Isa or Pep transfer, the income will be tax-free and it can also be invested through Sipps, SSASs and Furbs.

According to the Investment Property Databank, the commercial property sector has shown returns of more than 10 per cent a year over all periods from five to 21 years. Forecast returns are between 10 and 12 per cent a year for 2003/06.

In today&#39s stockmarket conditions, I believe this is an excellent investment for both conservative and realistic investors.


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