CHAIRMAN'S STATEMENT (continued)

At the Oakcroft Business centre in Chessington, as previously reported, two of the three units were vacated by the tenant on the expiry of the leases at the end of our last financial year following the disposal of a part of the tenant's business. We negotiated a satisfactory cash settlement with them regarding dilapidations and then carried out an extensive refurbishment funded by the settlement monies received. The works were completed by our contractors on programme and within budget at the end of September.

I am delighted to report that shortly after the refurbishment was finished, we successfully completed the letting of the two vacant units to the existing tenant of the third unit at the Business Centre for new five-year leases on each unit, subject to a single tenant break (with compensation payable to us if exercised), as well as the extension of the lease of their present unit. We will receive increased rents over those previously paid and the leases will all be held by the property holding subsidiary of the large French defence and electronics company which acquired the present tenant some years ago. Hence, we have secured occupation of all three units, at higher rents and with an enhanced tenant covenant. The financial benefit of the new terms will begin to flow through in the present year.

I reported on the detail of the acquisition at Liphook at the half-year and that we had let one of the three vacant units. Whilst there has been some interest, the other two units remained vacant at the year-end. Indeed, they are the only vacancies in the portfolio at the time of writing.

Shortly before the year-end we completed the sale of two of our four retail units in Colchester to a single owner-occupier purchaser for £370,000.

I am pleased to report that contracts to purchase four adjoining trade counter and industrial units in Lichfield have recently been exchanged, with completion in the near future. The acquisition price of £1.95 million will be funded from our own cash resources together with a new additional facility of £1.34 million from our bankers. Further details will be provided with the interim results in November and in our accounts for the year, in due course.

Portfolio Valuation

As at 25 March 2016, our Independent Valuers, BNP Paribas Real Estate, have undertaken the annual revaluation of the company's portfolio at £25,230,000 representing, as already mentioned, a revaluation surplus of £946,000. The Board considers this to be an excellent outcome reflecting the improved lease profile and enhanced covenants within the portfolio.

Following the revaluation and the sale at Colchester, as at the year-end, the industrial sector within the portfolio accounted for 64% by value, with the retail and office elements comprising 20% and 16% respectively.

Borrowings and Gearing

Total borrowings at the year-end were just under £10 million (2015 - £7.6 million) and net gearing at the year-end was 54.2% compared to 45.7% last year. The increased borrowings reflect the drawdown under our existing facility used to purchase the Beaver Industrial Estate at Liphook.

We continue to benefit from interest rates remaining at an historic low level and for a much longer period than most experts have predicted. Whilst the position may change, and could always change quite quickly, it still seems that experts consider that any increases in rates are still some way off and will be in relatively small steps. Moreover, it remains the case that rates are currently not forecast in the medium term to return to the levels prevailing in the pre-financial crisis period.

Costs

Our property costs in this year were higher than in the prior year as we invested in some improvements jointly with tenants, which are generally reflected in better lease terms and increased rents. These costs remain under strict control, as do our administrative costs, which were also somewhat higher due to the professional valuation and legal fees resulting from transactions during the year.

Dividend

In the light of the satisfactory results for the year, the Board is recommending a total dividend for the year of 13.2p per share (2015 - 12.3p). An increased interim dividend of 5.0p per share (2015 - 4.5p) was paid in December 2015. Accordingly, subject to approval of Shareholders at the Annual General Meeting, a final dividend of 8.2p per share (2015 - 7.8p) will be paid on 22nd July 2016 to Shareholders on the register on 24th June 2016.

The increase in dividends this year should not be taken as any indication of further increases in the current year as this will depend on performance during the year, including our ability to maintain high levels of occupancy as well as to find suitable additions to the portfolio.