New Star International Property Fund suspends dealing

As market conditions and investor sentiment continue to deteriorate, there has been an increase in the level of redemptions from the New Star International Property Fund, mainly from a few institutional clients.

This has had an impact on the fund's liquidity. New Star, with the agreement of the fund's depositary, Royal Bank of Scotland, have, therefore, reluctantly decided to suspend dealing in the fund until further notice.

This suspension of dealing is designed to restore sufficient liquidity to the fund for it to meet redemptions once it re-opens for dealing. New Star intends to minimise the period of suspension. We are, however, mindful that fair value for all investors needs to be achieved when disposing of assets given the weak market environment. We cannot, therefore, estimate how long the suspension may last at this stage but we will continue to communicate with our investors and their advisers throughout the process.

The New Star International Property Fund has performed relatively well amidst the turmoil of the past year. Through its diversified real estate portfolio, the fund has to a significant degree protected investor value. Since launch on 4 June 2007, the fund has fallen 9.2% compared to a 39.9% decline for the FTSE All-Share Total Return Index and a 34.4% decline for the MSCI World Total Return Index in sterling terms. At yesterday's valuation point, the fund's gross income yield is 4.2%. The fund's net income will continue to be paid during the suspension period.

Stuart Webster, New Star's head of global property, says: "It is with great reluctance that New Star has temporarily suspended dealing in the New Star International Property Fund. The fund has demonstrated that a portfolio such as this has valuable diversification benefits in difficult times. The fund's focus on diverse asset quality has the potential to deliver strong long-term returns to investors."