Kenmore European Industrial Fund ('Company'/ 'Fund')

Interim Management Statement

and Announcement of Net Asset Value

This interim management statement ('IMS') relates to the period from 1 January 2008 to 31 March 2008, and contains information that covers this period, and up to the date of the publication of this interim management statement, unless otherwise specified.

Giles Weaver, Chairman, commented:

'Underlying European property market fundamentals have held up well in the first quarter of 2008.  The planned geographic spread of the portfolio and strong income profile of the underlying assets has also benefited the Fund.  Leasing activity has remained strong and voids continue to be reduced, which add to the defensive characteristics of the asset base.  I am also pleased to report that payment of the dividend in April fulfilled the policy outlined at the Company's IPO.

'The Fund has not been immune to the malaise affecting global markets and our industry and the value of our property portfolio has declined by 1.78% in the quarter.  However, over the same period, the Euro (the currency in which the majority of the Fund's assets are held) has strengthened by 6.9% against Sterling, which is used for reporting purposes.  The net impact of both these and the trading surplus was a 0.3% increase over the quarter in the net assets per share, after adding back deferred tax.

'In my statement accompanying the recent annual report, I noted that the Fund was well placed to meet the challenging conditions expected in 2008 with strong underlying performance and a stable income profile.  This has been borne out in the first quarter and the Board expects this to continue into the remainder of the year.'

Net Asset Value

The Company's Net Asset Value ('NAV') at 31 March 2008, adjusted to add back deferred tax, was 121.9 pence per share. This represents an increase of 0.3% over the equivalent NAV at 31 December 2007, and an uplift of 27.6% since admission on 25 September 2006.

The table below sets out the movement in the adjusted NAV in the quarter:

Including dividends paid to date, the growth in NAV equates to a total return of 32.4% on the NAV on admission. Incorporating deferred tax, whether recognised on the balance sheet or not, NAV at 31 March 2008 was 81.9 pence per share.

Material Events and Transactions

During the period, the Company acquired one property in Simmern, Germany for a gross purchase price of €14.8 million (£11.7 million) and sold two properties in Norway for NOK 118.7 million (£11.6 million).  This brings the total number of assets held in the Fund's portfolio as at 31 March 2008 to 109.

The annual results were announced on 10 March 2008 together with the announcement of an interim dividend of 3.00p per Ordinary share were announced on 10 March 2008 to shareholders on the register on 11 April 2008. This was paid on 25 April 2008.

Market Review

The first quarter saw the underlying real value of the property portfolio (excluding the impact of acquisitions, disposals and exchange rate movements) fall by 1.78% to €568.5 million (£449.9 million).  However, occupancy at 31 March 2008 rose by 0.39% to 87.81% due to 94,398 sqm of leasing in the quarter (representing 7.96% of the Fund's gross income). A further 7,224 sqm was signed but will not take effect until the Fund's second quarter results.  The current portfolio yield is 7.71%, which has strengthened by 20 basis points, as result of the successful leasing activity undertaken during the quarter.

Global economic issues continue to impact the European property market, although as yet this has had a more severe effect on the UK market than the wider European continent. In the first quarter of 2008, secondary investment yields in continental Europe have pushed out by an average of 25 basis points and are generally expected to widen further, while prime yields will come under less pressure despite the movement already witnessed during the past six to eight months.  A lack of property financing has resulted in fewer investment transactions occurring in the first quarter 2008 - most of those being transactions from the fourth quarter 2007 that held over to 2008. Current market sentiment is that 2008 will result in reduced property transaction activity, seeing single asset and small portfolios of less than £15 million being transacted with the lack of credit availability, coupled with higher financing costs, squeezing out the likelihood of larger portfolio transactions for the foreseeable future.

In terms of the Fund, ongoing robust leasing performance should continue to improve the overall running yield as well as further improve occupancy levels.  This strong leasing performance and tenant retention is expected to continue through 2008 although there remain concerns that the economic downturn in the credit markets could ultimately lead to a slowing in market leasing.

As at 31 March 2008, the fund had debts levels representing gearing of 60%, based on gross assets. This remains significantly below the 70% gearing level set out in the Company's IPO prospectus. Furthermore, the Company had interest rate swaps in place for 93% of its drawn debt, at a weighted average rate of 4.10% for a weighted average period of 2.9 years.

Portfolio Summary

Geographical Analysis

The geographic spread of the Fund's portfolio at 31 March 2008 is:

Other Information

Further information can be found on the Company's website www.kenmoreeifund.com, or by contacting:

Rob Brook, Kenmore Financial Services Limited

Tel: +44 (0)20 7629 4480

Stephanie Highett/Dido Laurimore/Olivia Goodall, Financial Dynamics

Tel: +44 (0)20 7831 3113

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