158551 SEPUT Annual Report 2012 Cover_158551 SEPUT Annual Report 2012 Cover 25/06/2012 14:12 Page 2
31 March 2012
Schroder Exempt Property Unit Trust
ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS
31 March 2012
Schroders Exempt Property Unit Trust
31 Gresham Street, London EC2V 7QA
www.schroders.com/seput www.schroderproperty.com
Schroder Exempt
Property Unit Trust
Annual Report and Audited
Financial Statements
158551 SEPUT Annual Report 2012 Cover_158551 SEPUT Annual Report 2012 Cover 25/06/2012 14:12 Page 3
Schroder Exempt Property Unit Trust (“SEPUT” or the “Trust”) was
established in 1971 as an open ended property unit trust under UK law.
The investment objective of the Trust is to achieve a blend of income and
capital growth for investors through investment in UK property. Risk is
diversified by the Trust holding a mixed portfolio of retail, office, industrial
and other property throughout the UK. The Trust may also hold land and
undertake developments as well as use moderate levels of gearing from
time to time.
Front cover: Mermaid Quay, Cardiff
Investment Objective and Policy
The Trust seeks to provide a return of 0.5% per annum (net of fees) above
its benchmark (Investment Property Databank UK Pooled Property Fund
Indices – All Balanced Funds Median) over rolling three year periods.
The Trust may be suitable for UK tax exempt pension funds and charities
who wish to hold a direct property portfolio without the commitment of
considerable trustee oversight and management expertise. The property
in the Trust is professionally and actively managed by chartered surveyors
employed by the Property Manager, Schroder Property Investment
Management Limited.
The Manager welcomes the opportunity to meet unitholders, potential
unitholders and their advisers to explain more fully the strategy and
progress of the Trust. Please see Manager Contacts on page 39.
Schroder Exempt Property Unit Trust
Schroder Property Investment Management Limited
31 Gresham Street
London EC2V 7QA
Tel: +44 (0)20 7658 6000
Further information can be found on the website
www.schroders.com/seput
www.schroders.com/seput
www.schroders.com/seput
Contents
REPORTS
02
05
06
09
10
11
13
14
15
FINANCIAL STATEMENTS
17
18
19
20
21
34
35
38
Trust Analysis
Chairman’s Statement
Manager’s Statement
Rent Reviews, Lettings and Lease Renewals
Purchases and Sales
Portfolio Details
Responsibilities of the Manager,
Trustee and Supervisory Board
Independent Valuer’s Report
Independent Auditor’s Report
Statement of Net Assets
Income and Expenditure Account
Statement of Total Recognised Gains and Losses
Cash Flow Statement
Notes to the Financial Statements
Supervisory Board and Key Service Providers
Additional Unitholder Information
General Information
01
Trust Analysis
Size and Net Asset Value per Unit
During the year the Net Asset Value (NAV) of the Trust increased by £12.1 million, to £1,248.2
million at 31 March 2012 from £1,236.1 million at 31 March 2011. The Trust’s NAV per unit was
£32.69 at 31 March 2012, compared to £32.01 at 31 March 2011, an increase of 2.1%.
Active Management
Over the twelve months to 31 March 2012, 13 rent reviews were settled at an average of 15.6%
above the old passing rent, and 9.4% above estimated rental value. 40 new lettings were
completed over the last twelve months, contracting an additional £5.9 million of income.
Total Returns
Performance % to 31 March 2012
6.4
5.5
5.7
1 year (% per annum)
8.3
7.5
7.3
2 years (% per annum)
8.4
9.5
8.8
3 years (% per annum)
-5.2
-2.7
-3.6
5 years (% per annum)
4.4
5.8
5.4
10 years (% per annum)
-35
-30
-25
-20
-15
-10
-5
0
5
10
15
20
25
30
35
25
30
35
Twelve month performance % to 31 March 2012
6.4
5.5
5.7
2012
10.2
8.9
9.1
2011
8.7
13.2
11.7
2010
2009
–30.4
–26.2
–27.1
–13.9
–11.5
–11.1
2008
-35
Trust
-30
-25
-20
-15
Benchmark*
-10
-5
0
5
10
15
20
IPD UK Pooled Property Fund Indices
- All Balanced Funds Index Weighted Average
Source: Investment Property Databank (IPD) UK Pooled Property Fund Indices. Performance is calculated on a Net Asset
Value (NAV) to NAV price basis plus income distributions accrued for the relevant periods, compounded monthly, net of fees
and based on an unrounded NAV per unit.
* Benchmark shown is the IPD UK Pooled Property Fund Indices – All Balanced Funds Index Median. The Trust benchmark
has changed over time and a composite for 10 years is available upon request.
The Weighted Average is shown for illustration purposes and is used for detailed analysis of the Trust’s property portfolio as
the Median does not provide appropriate detail.
02
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2012
Portfolio by Sector
At 31 March 2012
Overweight/underweight relative to benchmark*
Absolute Segment
SEPUT
-1.7%
-5.2%
-4.0%
0.6%
3.4%
7.6%
1.1%
8.7%
-5.5%
-2.2%
-2.7%
-8
-6
-4
-2
0
2
4
Underweight
6
Overweight
8
10
Benchmark*
Standard Retail – South East
6.6
8.3
Standard Retail – Rest of UK
3.8
9.0
Shopping Centres
1.9
5.9
Retail Warehouses
19.2
18.6
Offices – Central London
16.0
12.6
Offices – South East
16.5
8.9
Offices – Rest of UK
5.9
4.8
Industrial –South East
16.7
8.0
Industrial – Rest of UK
1.2
6.7
Other
8.2
10.4
Cash
4.0
6.7
12
Source: IPD and Schroders, 31 March 2012
* Positions relative to IPD UK Pooled Property Fund Indices – All Balanced Funds Weighted Average. The weighted average has been used as this level of information is not available in the median.
Relative positions are measured on a GAV (Gross Asset Value) basis. Data may be subject to rounding.
Portfolio Profile
At 31 March
2012
Gearing (% NAV)*
At 31 March
2011
6.1%
6.9%
7.4 years
7.6 years
Void rate***
7.6%
6.7%
Benchmark – void rate***
7.8%
8.0%
£1,248.2m
£1,236.1m
Average unexpired lease length**
Size of Trust (NAV)
NAV per unit
Gross annual distribution
Distribution yield****
£32.69
£32.01
£1.340935
£1.326611
4.1%
4.1%
Source: Schroders 31 March 2012
*
NAV: net asset value.
** To first break or expiry, whichever is sooner.
*** Expressed as a % of open market rental value.
**** Total distributions paid per unit over last 12 months, divided by latest NAV per unit.
03
Trust Analysis (continued)
Top Ten Holdings
31 March 2012
Holdings
Bracknell
London W4, Building 8, Chiswick Park
York, Monks Cross
Crayford, Acorn Industrial Estate
London NW10, Matrix, Park Royal
Cardiff, Mermaid Quay
Reading, Davidson House
Manchester, Fujitsu, Central Park
London WC2, Parker Tower
London W14, Kensington Village
Sector
% NAV*
Retail and Office
Offices
Retail Warehouse
Industrial
Industrial
Other: Leisure
Offices
Office
Offices
Offices
5.5
4.4
4.1
3.8
3.6
3.6
3.4
3.3
3.2
3.1
£m Contracted Rent*
% Contracted Rent*
2.7
2.6
2.5
2.3
1.9
1.9
1.4
1.4
1.3
1.2
3.5
3.4
3.2
2.9
2.5
2.4
1.8
1.8
1.6
1.6
Source: Schroders, 31 March 2012
* NAV: net asset value
Top Ten Tenants
31 March 2012
Tenant
Fujitsu Services Limited
Lloyds TSB Bank Plc
QVC Ltd
British Telecommunications PLC
Exel Ltd
Regus (UK) Limited
Pendragon PLC
B&Q Plc
Sungard Availability Services (UK) Ltd
Universal Music Operations Limited
Source: Schroders, 31 March 2012
* The rental amount to be paid as defined by the lease.
04
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2012
Chairman’s Statement
Overview
The Trust has been significantly repositioned
over the last three years from the market lows
in 2009. The majority of the portfolio is now
invested in good quality direct real estate which
appeals to today’s occupiers. This repositioning
has been done in a challenging environment
where concerns over sovereign debt in the
eurozone and limited economic growth
continue to weigh heavily on investment
markets.
Against that background, the Trust has
outperformed the benchmark over the one and
two year periods to 31 March 2012 as can be
seen on the tables on page 2 and it has
consistently performed in line or ahead of the
benchmark for the last eight quarters. In the
current economic climate the quality of the
portfolio and the security of the income stream
are essential to continue delivering relative
outperformance and are central to the Trust’s
investment strategy. The repositioning of the
portfolio puts the Trust in a much stronger
position to withstand any further deterioration in
the UK economy.
Net Asset Value and
Performance
I am pleased to report that over the 12 months
to 31 March 2012, the Net Asset Value (“NAV”)
of the Trust increased by £12.1 million to
£1,248.2 million. The NAV per unit increased
during the same 12 month period from £32.01
to £32.69, a rise of 2.1%.
The Trust outperformed its benchmark over the
year to 31 March 2012 generating total returns
of 6.4% versus the benchmark at 5.5%. This is
the second year the Trust has outperformed its
benchmark, although it remains behind over the
three year period.
Units in Issue and
Secondary Market
As at 31 March 2012 the Trust had a total of
38,185,964 units in issue, a decrease of 1.1%
(431,574) over the 12 months. During the
period under review 528,340 units were
redeemed, predominantly between April to
June 2011, while new unit subscriptions
amounted to 96,766 units and were mainly
issued from January to March 2012.
On the secondary market units valued at £50.7
million were traded between investors over the
12 month period. This represents 4.2% of the
units in issue at the end of the period under
review.
Investment and
Borrowing Guidelines
The Supervisory Board is responsible for
ensuring that the Manager operates within the
agreed investment and borrowing guidelines.
The guidelines have been set in order to
protect the interests of unitholders and are
reviewed on a regular basis. The guidelines
were monitored and I am pleased to report that
they were maintained to the Board’s
satisfaction during the period under review.
The Manager would be pleased to provide
details of the guidelines to unitholders on
request.
Gearing
In 2009 the Manager articulated a strategy of
repositioning the portfolio which included
reducing the level of gearing. As at 31 March
2009 gearing in the Trust stood at 20.6% NAV,
but this has now been reduced to 6.1% NAV
and is entirely held within the indirect
investments.
Conversion to a
Property Authorised
Investment Fund
For over 40 years SEPUT has provided UK
pension funds and charities with access to a
diversified portfolio of UK property. In the
coming months unitholders will be asked to
consider the conversion of SEPUT from an
unauthorised unit trust into a Property
Authorised Investment Fund (“PAIF”). A PAIF is
a new type of property fund which was
introduced by the UK government in 2008.
PAIFs are authorised by the FSA, unlike
SEPUT, and importantly are tax efficient for UK
pension funds, charities and other investors.
Although PAIFs can be available to both retail
and institutional investors, SEPUT will remain
only available to professional investors.
The conversion of SEPUT to a PAIF is a major
project, the cost of which Schroders will fund.
The Financial Services Authority has given
approval in principle for the conversion, and the
Supervisory Board has also endorsed it. The
conversion will now be up to unitholders to
decide and this will take place at an
Extraordinary General Meeting (“EGM”) where
unitholders will be asked to vote on the
proposal. This is expected to take place on 16
July 2012. Subject to approval, SEPUT would
then convert into a new fund called Schroder
UK Property Fund.
As a regulated fund, the governance
arrangements will differ from those for SEPUT,
and there will be no provision for the
Supervisory Board. However, the converted
fund will continue to be managed by the same
team at Schroders using the same investment
strategy SEPUT has adopted over the past
three years which has delivered the recent
outperformance.
Governance
The Supervisory Board is satisfied that the
Trust has been managed in accordance with
the Trust Deed and agreed guidelines and with
due regard to sound governance practice.
Andrew Sykes resigned from the Supervisory
Board in October 2011 due to the appointment
of Schroders as the Investment Manager of a
real estate investment trust which Mr Sykes
chairs.
Due to the anticipated conversion of SEPUT to
a PAIF in July 2012, it will not be necessary to
hold the SEPUT Annual General Meeting
(“AGM”). Therefore this will probably be my last
annual report to unitholders as Chairman of the
Supervisory Board and I would like to thank my
fellow Board members for their contribution to
the good governance of the fund.
Should the Trust not convert to a PAIF,
unitholders will be alerted and the usual SEPUT
AGM will be called at a later date.
Outlook
The Supervisory Board remains supportive of
the management team and the strategy for the
Trust. We are pleased that we have overseen
the repositioning strategy of the Trust
articulated in 2009. This is now complete and
the majority of SEPUT is invested in good
quality direct real estate which is better placed
to withstand any further market turbulence.
While challenges remain in the UK market, the
investment team are well placed to take
advantage of opportunities both within the
existing portfolio and in the wider property
market. They will continue to be cautious in
their approach, ensuring the portfolio is focused
on secure and good quality income producing
assets for the benefit of the Trust’s unitholders.
James A. Scott
Chairman
Schroder Exempt
Property Unit Trust
Supervisory Board
25 June 2012
05
Manager’s Statement
Performance
Over the one and two year periods to 31 March
2012, the Trust outperformed its benchmark.
Over the three year period to 31 March 2012 it
remains behind the benchmark, but its relative
performance has materially improved since this
time a year ago.
The main contributors to performance relative
to the benchmark over the past 12 months
were as follows:
–
–
–
–
–
Asset allocation. The overweight position
to central London offices at the expense of
other sectors has been an important driver.
This includes the indirect investment in
West End of London Property Unit Trust
1
(WELPUT ), which has produced above
benchmark returns.
Acquisitions that have benefited from
uplifts in valuation. This includes the
purchase and development of the pre-let
Building 8 in Chiswick Park. The
development was completed on schedule
and the tenant, QVC Ltd, is now in
occupation. It is let on a 21 year lease with
fixed uplifts and has performed well in
excess of expectations. Rents in Chiswick
Park have continued to grow since we
acquired the property, which may enhance
future performance.
Active asset management strategies
that have helped improve rents and in turn
valuations. An example of this strategy in
action is the floor by floor refurbishment of
the multi let office building in Kensington
Village, West London. Estimated rental
values have grown from around £27.50 to
£33.00 per square foot over the 12 month
period under review.
Profitable sales of non core assets. In
Q4 2012, the Moorgate EC2 and Mark
Lane EC3 office development sites in the
City of London were sold at a premium to
their prior valuation. This benefited
performance, as well as reducing risk in the
portfolio.
Not surprisingly, land and potential
regeneration schemes such as Bracknell
town centre and Croydon have
underperformed the rest of the portfolio.
However, the recent opening of Waitrose in
Bracknell and other similar plans with
retailers are expected to improve total
returns into the market recovery.
–
Despite significantly reducing exposure to
indirect retail warehouses in the past three
years, the high level of gearing and low
distribution yields which have been a
feature of these funds has also detracted
from relative performance. SEPUT will seek
to further reduce its exposure to these
holdings, but only when opportune to do
so.
Strategy
The following considerations have been taken
into account when forming our short to
medium term strategy:
–
The polarisation in values of prime and
secondary property continues to be a
feature of the market. With a number of
investors focusing on the very narrow
prime end of the market, we believe
opportunities may exist in some good
secondary properties. These properties
typically offer good property fundamentals
in a good location, where growth can still
be achieved by improving the quality of the
income stream or the asset itself. The
difference between prime and good
secondary, therefore tends to be the length
of lease. Prime yields may actually present
more risk and may be more vulnerable to
any increase in long dated gilt yields,
particularly where investors compromise on
the quality of the bricks and mortar.
–
Given the weak growth prospects, we
continue to take a defensive stance and
favour those parts of the market where
rents are affordable and which offer a
higher income return. Long let properties to
supermarkets are available at typical yields
of 4.5%, but niche properties such as
select car showrooms, healthcare and
leisure, where rents are often also indexed
to inflation, may offer better value.
UK Property Market
Review and Outlook
The past year has proven challenging for the
high street and this became evident in late
2011 and early 2012 with established retailers
like GAME and Peacocks going into
administration. Their failures are symptomatic of
some of the difficulties facing the high street.
The former lost market share to the internet
while the latter was undermined by high debt
financing costs. These issues were highlighted
in the government sponsored review carried
out by Mary Portas in December 2011.
Profitable retailers, too, are reviewing their
property strategy and many, such as Arcadia
Group and Mothercare, are seeking to reduce
their high street presence as they move to a
multi-channel (i.e. shops and internet)
approach. Elsewhere, the City office market
started to cool from mid-2011 onwards, with
large occupiers choosing to wait and see rather
than commit to space. Most provincial office
markets remain subdued although there have
been some pockets of growth that have defied
the wider malaise. These include media and
technology clusters such as Cambridge, Soho
W1 and Old Street N1 in London, all of which
have benefited from the growth of the IT and
creative sectors.
The property investment market is dominated
by two overriding themes. The first is the
continued importance of foreign capital which is
particularly evident in the Central London office
market where cross border flows accounted for
62% of all transactions in London in 2011
(source: Real Capital Analytics). Another
persistent feature of the investment market is
the widening of the yield gap between prime
and secondary property as the majority of
investors focus on prime properties with long
income streams. Whilst the number of banks
actively lending to commercial property has not
completely dried up, terms remain prohibitive
on all but the best stock and in the short term
this may exacerbate the prime/secondary
divide. More encouragingly we are seeing the
emergence of some insurance companies as
providers of debt as an alternative to banks.
To continue to deliver performance, some key
objectives over the next 12 months include:
–
Income – ensure SEPUT has a diversified,
secure and good quality income stream.
With income expected to be the main
driver of property returns over the coming
years, this will be important for providing
consistent returns from year to year.
–
Stock selection – we will continue to
target acquisitions where we believe the
property offers a good location and the
right specification for modern occupiers,
where growth can still be achieved either
from a fixed or RPI-linked rental profile, or
by improving the quality of the income
stream, or the asset itself can be improved.
–
Active asset management – in a weak
market environment it is essential to keep
void rates low and execute initiatives to
protect and enhance cashflows. The
manager continues to work closely with
tenants to achieve this and the Trust’s
vacancy rate remains below the
benchmark.
1 Schroder’s in house fund
06
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2012
Portfolio activity
During the period under review a number of
direct properties have been acquired with the
purpose of securing high yielding longer income
streams. The Trust has also sought to reduce
specific stock and development risk by
selectively reducing exposure to development
sites.
Purchases
Reading, Davidson House, Forbury
Square
A prime, 125,600 sq ft office building centrally
located in Reading was acquired for £42.9
million producing £2.9 million of contracted rent
from eight tenants equating to a 6.45% net
initial yield. The property benefits from a
weighted average lease term, including breaks,
of almost seven years. Its largest tenant Regus,
who occupy almost 40% of the space, pay a
rent significantly below the estimated market
rent for the location. This provides a potential
upside should Regus vacate the property.
However, given the mutual break in their lease
is not until 2018, this is likely to be a longer
term driver of value if re-let at higher rents. In
the meantime, the income return from this core
property is very attractive.
Motor Retail Investment Limited
Partnership
The Motor Retail Investment Limited
Partnership was acquired in a joint venture with
Schroder Property’s Multi-manager team.
Initially it comprises 12 car showrooms across
the UK. SEPUT has committed £25 million to
the Partnership of which £17.5 million was
used for this acquisition. The portfolio has a net
initial yield of over 7% and benefits from 19
years unexpired lease term let to Pendragon.
The majority of leases are linked to capped
annual RPI uplifts.
While a non-traditional retail asset, it has a high
initial yield with a long income stream, in line
with the Trust’s strategy. In analysing the
opportunity a specialist advisor was appointed.
Considerable due diligence was undertaken
with Schroders’ in-house equities team on the
car manufacturers’ operating models and on
Pendragon. This helped us to assess both the
different manufacturers’ needs for the individual
showrooms and the franchisee’s covenant
strength.
Schroder Emerging Retail Property Unit
Trust (SERPUT)
We completed the purchase of SERPUT which
effectively brings 10 high street shopping
parades with an initial yield of around 7.0%
under SEPUT’s control. The portfolio targets
convenience retail locations across the UK with
expanding demographics and proved to be a
defensive exposure to the struggling retail
sector over the last 12 months.
Colchester, Turner Rise Retail Park
A modern, well configured retail park in
Colchester was acquired from a distressed
fund for £16.5 million. It comprises eight fully let
units adjacent to an Asda supermarket (not
included in the acquisition). It has 12 years
weighted average unexpired lease term to next
break. The rents are around £11.50 per sq ft
which are relatively modest compared to
historic levels in Colchester. Several new
lettings took place immediately prior to
completion of the purchase, to strong and
popular retailers such as Home Bargains. It is
felt that the prospects for future rental growth
are good, in addition to the yield of over 8%
from the income that is already contracted. The
sale price was conditional on a quick
completion and SEPUT’s investment team
were able to capitalise on their ability to
execute the transaction in a matter of days.
Croydon, Dingwall Road Car Park
A multi storey car park adjacent to the Ruskin
Square development was acquired for £3.5
million. Acquiring this car park facilitates a more
cost efficient way of providing parking to the
proposed Croydon Gateway development
scheme. In the meantime, the car park is let to
NCP until 2015 and provides a steady income
stream. The location will be strengthened once
the new passenger bridge link to the revamped
East Croydon station is opened in 2013.
London N1, Shepherdess Walk
Two adjoining office buildings totalling 85,000
sq ft were acquired from the same distressed
vendor as Turner Rise Retail Park, Colchester.
The purchase price was £18.5 million which
reflects a 9.5% net initial yield. The property
offers an attractive income return and is located
in the emerging technology hub near Old Street
in London, colloquially known as Silicon
Roundabout.
The offices are let to two tenants with an
average unexpired lease term of 3.25 years.
While this is shorter then we would typically
seek, the strategy for this property is to seek
income security either by refurbishing and reletting the space or renewing existing leases.
The purchase price allows for a significant
refurbishment of the building (to meet modern
standards and the Trust’s requirements for
energy efficiency and low carbon emissions)
without the need to assume growth beyond
current rental levels which are less than £30 per
sq ft for a refurbished building.
Kingston Upon Thames, Clarence Street
A freehold parade of five shops was acquired in
the affluent London suburb of Kingston upon
Thames for £4.1 million (8.0% net initial yield). It
is fully let at rental levels which are slightly
below market, with a weighted 7.8 years
unexpired lease term to the next break.
The location is popular with retailers thanks to
its close proximity to the station generating
passing trade. The acquisition complements
our investment strategy by targeting
convenience retail locations throughout the UK.
Unit Trust Swap
2
Hercules Unit Trust and Henderson UK
Retail Warehouse Fund
In 2011 the Trust swapped approximately
£11.8 million of units in Hercules Unit Trust for
units in the Henderson UK Retail Warehouse
Fund effectively at a like for like unit price. The
swap reduces stock specific risk and both of
these indirect retail warehouse holdings are
now similar sizes (2.4% and 2.6% NAV,
respectively). While both funds have similar
property fundamentals, Henderson has a higher
distribution yield of 3.7% compared to 2.6%
from the Hercules Unit Trust. This yield
advantage has contributed to its
outperformance.
Unit trusts – divestments
Gresham Property Partners, L.P.
Following the winding up of the fund after its
remaining assets were sold in 2009, a final
distribution of £1.4 million was paid to SEPUT.
Hercules Unit Trust Convertible Bond
The £9.5 million investment in Hercules Unit
Trust (HUT) Convertible Bond was redeemed at
par. SEPUT chose not to exercise the option to
convert the holding into HUT units.
Sales
Cardiff, Cardiff Bay Retail Park
In July 2011, a retail park which the Trust
owned since 1998 in a joint venture with
Equitable Life was sold for £54.5 million (6.25%
net initial yield on the purchase price). SEPUT’s
interest represented £27.25 million. The sale
price reflected a premium to its prior valuation
and allowed SEPUT to crystallise the property’s
anticipated future performance.
London, Moorgate EC2 and Mark Lane
EC3
Moorgate and Mark Lane, two speculative
office development sites in the City of London,
2 Schroder’s in house fund
07
Manager’s Statement (continued)
were sold for £28.6 million and £19.5 million,
respectively. Both disposal prices were ahead
of their prior valuations. The disposals reduce
SEPUT’s exposure to non income producing
land sites from 7.4% to 3.5% of net asset value
and SEPUT no longer has any development
sites in the City of London. This is in line with
the Trust’s strategy to reduce non income
producing assets.
The Fund is now well positioned to meet the
needs of its investors seeking to gain the
benefits of a £1.2 billion property portfolio. If
unitholders resolve to convert SEPUT to a
Property Authorised Investment Fund (PAIF),
new types of professional investors will also be
able to invest in the Fund for the first time
providing the Trust with a more diverse investor
base.
Change of Trustee
As part of a group restructure, RBS Group Plc
has decided to move its trustee and depositary
services from RBS Plc to the National
Westminster Bank Plc. Both entities sit within
the RBS Group Plc. Notwithstanding the
change of operating entity, SEPUT should not
experience any difference in the services
previously offered and the team, structure and
reporting lines will remain the same.
I D Mason
Fund Manager
25 June 2012
The effective date of the change of trustee to
NatWest Plc was 31 March 2012 and was
effected by the trustee, manager and
Supervisory Board entering into a supplemental
Retirement and Appointment of Trustee Deed.
Summary
As evidenced by its recent outperformance
over the one and two year periods, we believe
the Trust is on track to achieve its target
outperformance over the three year period.
Given the weak market prospects, we continue
to take a defensive stance and favour those
parts of the market where rents are affordable
and which offer a high income return such as
the recent acquisition of Shepherdess Walk in
London. Our preferred sectors include South
East offices and industrials and niche property
types such as car showrooms, healthcare and
leisure where rents are often indexed to
inflation. We also favour convenience retail in
affluent areas, where rents are at levels which
retailers can more readily afford. Given SEPUT
has cash in excess of £50 million, it is in a good
position to continue to take advantage of
opportunities in the property investment
market.
08
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2012
Rent Reviews, Lettings and
Lease Renewals
During the year ended 31 March 2012
Rent Reviews
In the directly held portfolio 13 rent reviews were settled over the year, adding an additional £237,873 to rental income per annum. This reflects an uplift
of 15.6% on the old rent and was 9.4% above the estimated rental value (ERV) defined as being the Trust’s valuer’s opinion as to the open market rent
which, on the date of valuation, could be reasonably expected to be obtained on a new letting or rent review of the property (Source: Schroders,
31 March 2012).
Notable rent reviews
Property
Tenant
York, Monks Cross
AG Clothing Ltd
Cardiff, Mermaid Quay
Nando’s Chickenland Ltd
Cardiff, Mermaid Quay
SA Brain & Co Ltd
Old Rent
(per annum)
New Rent
(per annum)
ERV
(per annum)
141,146
167,632
159,200
61,000
75,000
68,100
223,560
290,000
226,300
Source: Schroders, 31 March 2012
New Lettings
In the directly held portfolio 40 new lettings were completed adding £5.9 million per annum to the rent roll (Source: Schroders, 31 March 2012).
Notable new lettings
Old Rent
(per annum)
New Rent
(per annum)
ERV
(per annum)
Matalan Retail Ltd
n/a
640,134
640,134
Universal Music Operations Ltd
n/a
439,925
471,900
Sika Ltd
n/a
101,535
67,700
Property
Tenant
Frimley, Albany Park
London W14, Kensington Village
Dunstable, Arenson Centre
Source: Schroders, 31 March 2012
Lease Renewals
In the directly held portfolio 18 leases were renewed totalling £1.0 million per annum, approximately 9.4% above estimated rental values (Source:
Schroders, 31 March 2012).
09
Purchases and Sales
During the year ended 31 March 2012
Purchases
Name
Sector
Type
Transaction Lot size
Reading, Davidson House
Rest of UK Office
Direct
Over £25m
Motor Retail Investment Limited Partnership
Standard JV Retail
Direct
Between £10m and £25m
Henderson UK Retail Warehouse Fund (Unit Trust Swap)
Retail Warehouse
Indirect
Between £10m and £25m
Colchester, Turner Rise
Retail Warehouse
Direct
Between £10m and £25m
London N1, Shepherdess Walk
Central London Office
Direct
Between £10m and £25m
Croydon, Gateway Car Park
Other
Direct
Under £5m
Schroder Emerging Retail Property Unit Trust (SERPUT) (Completed Purchase)
Standard Retail
Direct
Under £5m
Kingston Upon Thames, 167/181 Clarence Street
Standard Retail
Direct
Under £5m
Total Acquisition Price
£96.8 million
Sales
Name
Sector
Type
Transaction Lot size
Cardiff, Cardiff Bay Retail Park
Retail Warehouse
JV
Over £25m
London EC2, Moorgate
Central London Office
Direct
Over £25m
Hercules Unit Trust (Unit Trust Swap)
Retail Warehouse
Indirect
Between £10m and £25m
London EC3, Mark Lane
Central London Office
Direct
Between £10m and £25m
Hercules Unit Trust Convertible Bond
Retail Warehouse
Indirect
Under £10m
Gresham Property Partners L.P.
Industrial
Indirect
Under £5m
Total Sale Price
Source: Schroders, 31 March 2012
10
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2012
£127.3 million
Portfolio Details
At 31 March 2012
Portfolio Holdings
Name
Lot size
Type
Exeter – 232-240 High Street
Between £10m and £25m
Direct
Loughton – 202-226 High Road
Between £10m and £25m
Direct
Southsea – 2-42 Palmerston Road
Between £10m and £25m
Direct
Bristol – Maggs House
Between £5m and £10m
Direct
Dunfermline – Duloch Park District Centre
Between £5m and £10m
Direct
Shipley – 20-40 Market Square
Between £5m and £10m
Direct
Stanmore – Buckingham House, The Broadway
Between £5m and £10m
Direct
Woodley – 81-107 Crockhamwell Road
Between £5m and £10m
Direct
Birmingham – 42-60 High Street, Harborne
Under £5m
Direct
Enfield – 30-38 London Road
Under £5m
Direct
Standard Retail
Kingston Upon Thames – 167/181 Clarence Street
Under £5m
Direct
London SW14 – 270-282 Upper Richmond Road, East Sheen
Under £5m
Direct
Retail Warehouse
Henderson UK Retail Warehouse Fund (HRWF)
Over £25m
Indirect
Norwich – Hall Road Retail Park
Over £25m
Direct
The Hercules Unit Trust (HUT)
Over £25m
Indirect
York – Monks Cross
Over £25m
JV
Colchester – Hythe Riverside Park
Between £10m and £25m
Direct
Colchester – Turner Rise
Between £10m and £25m
Direct
Ipswich – Interchange Retail Park
Between £10m and £25m
Direct
Over £25m
JV
Over £25m
Direct
Retail and Office
Bracknell
Central London Offices
London SE1 – Palace House
London W14 – Kensington Village
Over £25m
Direct
London WC2 – Parker Tower
Over £25m
Direct
West End of London Property Unit Trust (WELPUT)
Over £25m
Indirect
London EC1 – 4-7 Chiswell Street
Between £10m and £25m
Direct
London EC2 – 11/12 Appold Street
Between £10m and £25m
Direct
London EC3 – Lombard Street
Between £10m and £25m
Direct
London N1 – Shepherdess Walk
Between £10m and £25m
Direct
London W1 – 81-82 Dean Street
Between £10m and £25m
Direct
Austral House Unit Trust (AHUT)
Under £5m
Indirect
Basinghall Street Unit Trust (BSUT)
Under £5m
Indirect
City of London Office Unit Trust (CLOUT)
Under £5m
Indirect
11
Portfolio Details (continued)
Name
Lot size
Type
Cardiff – St William House
Over £25m
Direct
Croydon – Gateway Site
Over £25m
Direct
London W4 – Building 8, Chiswick Park
Over £25m
Direct
Manchester – Fujitsu, Central Park
Over £25m
Direct
Reading – Davidson House
Over £25m
Direct
Rest of UK Offices
Bracknell – Bracknell Beeches
Between £10m and £25m
Direct
Croydon – AMP House
Between £10m and £25m
Direct
Reading – New Century Place
Between £5m and £10m
Direct
Slough – Capital Point, 33 Bath Road
Between £5m and £10m
Direct
Cranford – Europa House, Bath Road
Under £5m
Direct
Crayford – Acorn Industrial Estate
Over £25m
Direct
Hackbridge – Felnex Trading Estate
Over £25m
Direct
London E16 – Electra, Canning Town
Over £25m
Direct
London NW10, Matrix, Park Royal
Over £25m
Direct
Dunstable – Chiltern Park
Between £10m and £25m
Direct
Frimley – Albany Park
Between £10m and £25m
Direct
London UB6 – Greenford
Between £10m and £25m
Direct
Woking – Woking Business Park
Between £10m and £25m
Direct
Industrial
Birmingham – Deykin Avenue
Between £5m and £10m
Direct
Dunstable – Arenson Centre
Between £5m and £10m
Direct
Welwyn Garden City – Quadrant Park
Between £5m and £10m
Direct
Cannock – Walkmill Lane, land site
Under £5m
Direct
Direct
Livingston – Limefields, 2nd land site
Under £5m
Livingston – Limefields, land site
Under £5m
Direct
London UB6 – Greenford, land site
Under £5m
Direct
Sutton – Kimpton Industrial Estate
Under £5m
JV
York – Alexandra Court, James Street
Under £5m
Direct
Cardiff – Mermaid Quay
Over £25m
Direct
London E14 – West India Quay
Over £25m
JV
Motor Retail LP
Between £10m and £25m
JV
UNITE UK Student Accommodation Fund
Between £10m and £25m
Indirect
Hartlepool – Jacksons Landing, land site
Under £5m
Direct
Other
12
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2012
Responsibilities of the Manager,
Trustee and Supervisory Board
Manager’s and Trustee’s Supervisory Board’s
Responsibilities for the
Responsibilities
Financial Statements
for the Financial
The Trust Deed requires the Manager to prepare
Statements
Financial Statements for each financial year
detailing the state of affairs of the Trust as at
the end of the financial year and its income or
loss for the financial year. The Manager is
responsible for keeping proper accounting
records and, along with the Property Manager,
for taking reasonable steps to safeguard the
assets of the Trust and to prevent and detect
fraud and other irregularities. The Trustee is
required to hold the underlying property of the
Trust for the unitholders and is responsible for
the safe custody of that property and any
documentation relating to it.
The Supervisory Board is responsible for
approving, on the Audit Committee’s
recommendation, the Financial Statements
prepared for each financial year and half year,
including the content and the accounting
policies adopted, and for reporting any
corporate governance issues relating to the
Trust or other matters in connection with the
Financial Statements.
The Manager confirms that suitable accounting
policies and appropriate accounting standards
have been used and applied consistently and
reasonable and prudent judgements and
estimates have been made in the preparation
of the Financial Statements. The Manager
intends to liquidate the Trust and transfer all
assets and liabilities into a newly formed
authorised Open Ended Investment Company
(OEIC), Schroder UK Property Fund. Therefore
the Manager does not consider the Trust to be
a going concern.
13
Independent Valuer’s Report
To the Unitholders of Schroder Exempt Property Unit Trust
As independent valuer for the Trust, we have
valued properties held by the Trust at 31 March
2012 in accordance with The Royal Institution
of Chartered Surveyors and International
Valuation Standards (RICS). The Manager has
been provided with a full valuation certificate
and report. The properties have been valued
on the basis of Market Value as defined by the
RICS Valuation Standards subject to existing
leases.
Details of the nature and extent of the
properties, the tenure and tenancies, permitted
uses, town planning consents and related
matters, have been supplied by the Property
Manager, Schroder Property Investment
Management Limited (SPrIM). The majority
of the properties form the subject of detailed
reports from ourselves. We have seen copies
of all the leases but we have not examined the
title documents and we have therefore
assumed that the Trust’s interests are not
subject to any onerous restrictions, to the
payment of any unusual outgoings or to any
charges, easements or rights of way, other
than those to which we have referred in our
reports. We rely upon the Property Manager
to keep us advised of any changes that may
occur in the investments. We are not instructed
to carry out structural surveys nor test any
of the service installations. Our valuations
therefore have regard only to the general
condition of the properties evident from
our inspections. We have assumed that no
materials have been used in the buildings
which are deleterious, hazardous or likely to
cause structural defects. We are not
instructed to carry out investigations into
pollution hazards which might affect the
properties and our valuations assume
the properties are not adversely affected
by any form of pollution.
14
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2012
In our opinion the aggregate of the market
values of the 41 properties owned by the Trust
at 31 March 2012 is £745.1 million. This figure
represents the aggregate of the values
attributable to the individual properties and
should not be regarded as a valuation of the
portfolio as a whole in the context of a sale
as a single lot.
In the case of the properties in the course of
development, our valuations reflect the stage
reached in construction and the costs already
incurred at the date of valuation. We have had
regard to the contractual liabilities of the parties
involved in the developments and any cost
estimates which have been prepared by
professional advisers.
No allowance is made in our valuations for the
costs of realisation, any liability for tax which
might arise on the event of disposal or for any
mortgage or similar financial encumbrance over
the property. Our valuations exclude VAT.
BNP Paribas Real Estate
31 March 2012
Independent Auditor’s Report
To the Unitholders of Schroder Exempt Property Unit Trust
We have audited the financial statements of the
Schroder Exempt Property Unit Trust (“the
Trust”) for the year ended 31 March 2012 which
comprise the Unit Trust Statement of Net
Assets, the Income and Expenditure Account,
the Statement of Total Recognised Gains and
Losses, the Cash Flow Statement and the
related notes. The financial reporting framework
that has been applied in their preparation is
applicable law and United Kingdom Accounting
Standards (United Kingdom Generally Accepted
Accounting Practice).
Respective
responsibilities of the
Manager, Trustees
and Auditors
As explained more fully in the Manager’s
Responsibilities Statement, the Manager is
responsible for the preparation of the financial
statements and for being satisfied that they give
a true and fair view.
Our responsibility is to audit and express an
opinion on the financial statements in
accordance with applicable law and
International Standards on Auditing (UK and
Ireland). Those standards require us to comply
with the Auditing Practices Board’s Ethical
Standards for Auditors.
This report, including the opinion, has been
prepared for and only for the unitholders of the
Trust as a body in accordance with the Trust
Deed and for no other purpose. We do not, in
giving this opinion, accept or assume
responsibility for any other purpose or to any
other person to whom this report is shown or
into whose hands it may come save where
expressly agreed by our prior consent in writing.
Scope of the audit of
Basis of preparation
modifying our opinion, we draw
the financial statements Without
attention to note 1 to the financial statements
An audit involves obtaining evidence about the
amounts and disclosures in the financial
statements sufficient to give reasonable
assurance that the financial statements are free
from material misstatement, whether caused by
fraud or error. This includes an assessment of:
whether the accounting policies are appropriate
to the Trust’s circumstances and have been
consistently applied and adequately disclosed;
the reasonableness of significant accounting
estimates made by the Manager; and the overall
presentation of the financial statements. In
addition, we read all the financial and nonfinancial information in the annual report to
identify material inconsistencies with the audited
financial statements. If we become aware of any
apparent material misstatements or
inconsistencies we consider the implications for
our report.
which discloses the basis of preparation and
explains that the Manager intends to liquidate
the Trust and transfer all assets and liabilities
into a newly formed authorised Open Ended
Investment Company (OEIC) as stated in note 1
of the accounts.
PricewaterhouseCoopers LLP
Chartered Accountants
London
25 June 2012
Opinion
In our opinion the financial statements:
•
give a true and fair view of the financial
position of the Trust as at 31 March 2012
and of the net income, the total recognised
gains, and cash flows for the year then
ended; and
•
have been properly prepared in accordance
with United Kingdom Generally Accepted
Accounting Practice and the Trust Deed.
15
Financial Statements
31 MARCH 2012
16
17
18
19
20
21
Statement of Net Assets
Income and Expenditure Account
Statement of Total Recognised Gains and Losses
Cash Flow Statement
Notes to the Financial Statements
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2012
Statement of Net Assets
At 31 March
Notes
2012
£’000
2011
£’000
2(a)
2(b)
3
4
–
–
–
–
602,328
39,800
9,462
457,801
–
1,109,391
722,054
11,680
462,718
36,299
52,878
1,285,629
–
–
–
23,995
133,655
157,650
1,285,629
1,267,041
6
27,607
6,395
3,403
37,405
19,861
6,920
4,134
30,915
8
1,248,224
1,236,126
£32.69
£32.01
Fixed assets
Investment Property
Development property
Investment in subordinated convertible notes
Property related Investments
Total fixed assets
Current assets
Investment Property
Development property
Property related investments
Debtors
Cash at bank and on deposit
Total current assets
2(a)
2(b)
4
5
14
Total assets
Current liabilities
Creditors
Taxation
Distributions payable
Total current liabilities
Net assets attributable to unitholders
Net asset value per unit
The Financial Statements on pages 17 to 33 were approved by the Manager, Schroder Property
Investment Management Limited, and the Supervisory Board on 25 June 2012 and signed on their behalf by:
W A Hill, Director
On behalf of the Manager
J A Scott, Chairman
On behalf of the Supervisory Board
The notes on pages 21 to 33 form part of these Financial Statements. The Independent Valuer’s
Report is shown on page 14. The Independent Auditor’s Report is shown on page 15.
17
Income and Expenditure Account
For the year ended 31 March
2012
£’000
2011
£’000
39,362
50
5,685
10,778
38,392
82
5,641
9,241
Net rental income
34,319
34,874
Income from property related investments
19,156
20,901
794
946
436
–
803
143
436
660
54,705
57,381
Notes
Rents receivable
Other income
Service charge income
Less: property expenses
1(f)
1(f)
9
Income from subordinated convertible notes
Interest receivable on bank deposits
Less: finance costs: interest payable
1(i)
Net interest income
Net income before tax
Less: income tax
11
Net income after tax
Less: Management expenses
Supervisory Board remuneration
Trustee fee
Management fees
Valuation fee
Audit fee
Printing and stationery
Legal and professional fees and other charges
16
16
Total management expenses
Net income available for distribution
Finance costs: distributions
Retained deficit for the year
There is no difference between the net income available for distribution as stated above and its
historical cost equivalent. All items dealt with in arriving at the net income available for distribution
relate to continuing operations.
The notes on pages 21 to 33 form part of these Financial Statements. The Independent Valuer’s
Report is shown on page 14. The Independent Auditor’s Report is shown on page 15.
18
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2012
10(a)
10,941
11,476
43,764
45,905
118
203
6,780
220
109
10
333
127
197
6,331
216
90
12
271
7,773
7,244
35,991
(39,381)
38,661
(41,479)
(3,390)
(2,818)
Statement of Total Recognised
Gains and Losses
For the year ended 31 March
Notes
2012
£’000
2011
£’000
12
12
12
2,545
4,358
–
9,305
32,063
(410)
12
12
12
24,939
(4,004)
999
18,853
5,538
2,563
Capital surplus for the year
Net income available for distribution
28,837
35,982
67,912
38,661
Total recognised gains
64,819
106,573
Realised profit/(loss) on:
Investment property sold
Property related investments sold
Property equities
Movement in revaluation reserve for retained:
Investment property
Sites in the course of development
Property related investments
The notes on pages 21 to 33 form part of these Financial Statements. The Independent Valuer’s
Report is shown on page 14. The Independent Auditor’s Report is shown on page 15.
19
Cash Flow Statement
For the year ended 31 March
Net cash inflow from operating activities
Notes
2012
£’000
2011
£’000
13
41,938
44,212
Returns on investment and servicing of finance
Interest received
Interest paid
Distributions paid
417
–
(40,102)
–––––––
Tax paid
786
(143)
(39,998)
–––––––
(39,685)
(39,355)
(10,083)
(10,835)
Capital expenditure and financial investment
Sale of investment property:
Freehold
27,250
40,429
Purchase of investment property:
Freehold
(86,447)
(34,312)
–
(6,985)
(48,105)
48,203
(40,936)
123,541
–
6,071
9,462
–
(9,961)
–––––––
(18,747)
–––––––
Purchase of development property:
Freehold
Property related investments:
Purchases
Sales
Property equities:
Sales
Subordinated convertible notes:
Redeemed
Other capital expenditure
(59,598)
–––––––
(67,428)
Cash (outflow)/inflow before financing
Financing
Issue of units
Units redeemed
(Decrease)/Increase in cash
8
8
3,312
(16,661)
–––––––
14
The notes on pages 21 to 33 form part of these Financial Statements. The Independent Valuer’s
Report is shown on page 14. The Independent Auditor’s Report is shown on page 15.
20
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2012
69,061
–––––––
63,083
19,657
(431)
–––––––
(13,349)
–––––––
(80,777)
–––––––
19,226
–––––––
82,309
–––––––
Notes to the Financial Statements
1. Accounting policies
The Financial Statements have been prepared in
accordance with the historical cost convention,
as modified by the revaluation of property assets
and property related investments, as explained
in notes 1(a) and 1(c) below, and in accordance
with applicable United Kingdom Accounting
Standards and the Trust Deed. In accordance
with Financial Reporting Standard (FRS) 18, the
Trust’s accounting policies are reviewed annually
to confirm that they remain appropriate and are
in accordance with the requirements of
Accounting Standards, Urgent Issues Task
Force (UITF) abstracts and the Trust Deed.
The Manager intends to liquidate the Trust and
transfer all assets and liabilities into a newly
formed authorised Open Ended Investment
Company (OEIC), called Schroder UK Property
Fund. Therefore the Manager, in agreement with
the Supervisory Board, does not consider the
Trust to be a going concern. In preparing the
financial statements the Manager has
considered whether adjustments to balances are
necessary in order to reflect this intention. In
accordance with The Unitholder Proposal
document for Schroder UK Property Fund, the
assets and liabilities of the Trust will be
transferred at net book value to Schroder UK
Property Fund and any costs incurred will be
borne by The Manager, therefore the carrying
values in the financial statements at 31 March
2012 are unchanged and as they would be if the
entity were a going concern. The Manager
intends to seek unitholder approval for the
conversion of the Trust at an EGM on 16 July
2012.
The principal accounting policies adopted in
these Financial Statements, which have been
applied consistently, are:
(a) Properties owned by the Trust, including
investments in properties owned through
partnerships and trusts for land, are
independently valued on a market value basis
having regard to whether they are let or unlet
at the date of valuation. Development properties
in the course of development are independently
valued having regard to the stage reached in
the construction and taking account of any
agreed letting and of any contractual liabilities to
advance further monies. Where legal completion
of a purchase is not fully executed at the date of
the Statement of Net Assets, but takes place
subsequently, or in the case of development
properties purchased for development where no
work has yet taken place, the property is shown
at cost unless, in the opinion of the Manager,
there may be a material difference between cost
and valuation on completion.
(b) Acquisitions and disposals of investment
properties, property related investments and
property equities are recognised where, by the
end of the accounting period, there is a legally
binding, unconditional and irrevocable contract.
Investments in property equities are recognised
on a trade date basis.
(c) Property related investments are valued
at the net asset value as provided by the
relevant managers, in accordance with
industry practice.
(d) Unrealised surpluses less unrealised deficits
on valuation of property fixed assets, property
related investments and property equities are
credited directly to the revaluation reserve in
accordance with SSAP 19. Realised profits, less
realised losses, determined by reference to
carrying value at the commencement of the
accounting period, are credited to the realised
profit/loss on sale reserve and disclosed in the
Statement of Total Recognised Gains and
Losses. Realised prior period revaluations are
taken to the realised profit/loss on sale reserve,
as a reserve transfer.
(e) In accordance with SSAP 19 no
depreciation or amortisation is provided in
respect of freehold properties or leasehold
properties which have unexpired lease terms
in excess of 20 years.
(f) Rental income and other income are
recognised in the Income and Expenditure
Account on an accruals basis. Rental income
includes the Manager’s best estimates for
unsettled rent reviews. Provisions are made
where, in the opinion of the Manager, amounts
are deemed likely to be irrecoverable. Income
from property related investments comprises
distributions receivable gross of any related
tax withheld and is accounted for on a
receivable basis.
(i) Interest receivable and payable are
accounted for on an accruals basis.
(j) Where the Trust makes advances to
developers by reference to the stage of
completion reached on developments, interest
on these advances is rolled up during the period
of development and is paid to the Trust on
completion. This interest is credited to the
Income and Expenditure Account during the
period of the development.
(k) Fees are recognised on an accruals
basis and are charged in full to the Income
and Expenditure Account. The Manager has
allocated 50% of the management fees to
income and the remaining 50% to capital for the
calculation of distributable income.
(l) Income tax is provided for on income taxable
in the period at the basic rate of income
tax. Deferred tax is accounted for on an
undiscounted basis at expected tax rates on
all timing differences. A deferred tax asset is
only recognised where it is more likely than
not that the asset will be recoverable in the
foreseeable future out of suitable taxable
income from which the reversal of timing
differences can be deducted.
(m) Profits or losses that arise on disposal of
units in any property related investments or
equities are calculated on a First In, First
Out basis (FIFO).
(n) Investments in Subordinated Convertible
Notes are held at cost until their conversion.
(g) Benefits to lessees in the form of rent free
periods and other incentives are treated as a
reduction in the overall return on the leases and,
in accordance with UITF 28, ‘Operating Lease
Incentives’, are recognised on a straight line
basis over the shorter of the lease term or the
period up to the initial rental review date. The
valuation of investment property is reduced by
all lease incentives.
(h) In accordance with FRS 25, income
distributions are classified as finance costs
and are accounted for on an accruals basis.
21
Notes to the Financial Statements (continued)
2. Directly held property
The investment and development properties as at 31 March 2012 have been treated as current assets on the statement of net assets due to the
liquidation of the Trust and the transfer of these properties to a newly authorised Open Ended Investment Company (OEIC) as referenced within
Accounting Policies, note 1. It is no longer appropriate to hold these as fixed assets on account of the liquidation of the Trust.
Freehold
£’000
Leasehold
£’000
Total
£’000
(a) Investment property
Valuation at 1 April 2011
Additions to existing properties at cost
Cost of properties purchased
Cost of properties transferred
Value of properties sold
Movement in revaluation reserve
493,374
7,440
86,447
27,466
(25,500)
17,475
108,954
8
–
–
–
6,390
602,328
7,448
86,447
27,466
(25,500)
23,865
Valuation at 31 March 2012
606,702
115,352
722,054
(b) Development property
Valuation at 1 April 2011
Additions at cost
Cost of properties transferred
Movement in revaluation reserve
39,800
3,350
(27,466)
(4,004)
–
–
–
–
39,800
3,350
(27,466)
(4,004)
Valuation at 31 March 2012
11,680
–
11,680
Total valuation of investment and development property
618,382
115,352
733,734
Reconciliation to market valuation
Market valuation at 31 March 2012
Unamortised tenant incentives
628,880
(10,498)
116,175
(823)
745,055
(11,321)
Valuation at 31 March 2012
618,382
115,352
733,734
31 March 2012
£’000
31 March 2011
£’000
–
56,000
25,500
50,250
56,000
75,750
The following investments are included within the valuation of investment properties:
(c) Investments in trusts for land
Valuation at
(i) 50.0% interest in a trust investing in Cardiff Bay Retail Park
(ii) 25.0% interest (31 March 2010: 33%) in a trust investing in properties in York, Monks Cross
22
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2012
3. Investment in subordinated convertible notes
Valuation at
1 April 2011
£’000
Cost of
investments sold
£’000
Valuation at
31 March 2012
£’000
Percentage
holding at
31 March 2012
%
9,462
(9,462)
–
–
Hercules Unit Trust
The Trust acquired £9.5 million of Subordinated Convertible Notes on 15 December 2009
from the Hercules Unit Trust (HUT) at a fixed coupon of 10%. The Subordinated Convertible
Notes were redeemed by the issuer in January 2012 at face value of £9.5 million.
4. Property related investments
(a) Basis of valuation
The total value of property related investments at 31 March 2012 stood at £462.7 million
(31 March 2011: £457.8 million).
Properties held directly or indirectly within property related investments are independently valued
on a market value basis as follows:
Valued by:
(i)
(ii)
(iii)
(iv)
Bracknell Property Unit Trust*
Croydon Gateway Property Unit Trust*
City of London Office Unit Trust*
Capital Point Slough Unit Trust*
(BPUT)
(CGPUT)
(CLOUT)
(CPSUT)
BNP Paribas Real Estate
BNP Paribas Real Estate
BNP Paribas Real Estate
BNP Paribas Real Estate
(v)
(vi)
(vii)
(viii)
City Property Unit Trust*
Hackbridge Unit Trust*
Henderson UK Retail Warehouse Fund†
Hercules Unit Trust*
(CPUT)
(HackUT)
(HRWF)
(HUT)
BNP Paribas Real Estate
BNP Paribas Real Estate
CB Richard Ellis Limited
CB Richard Ellis Limited
(ix)
(x)
(xi)
(xii)
Lombard Street Unit Trust*
Motor Retail Limited Partnership
Parker Tower Unit Trust*
Schroder Emerging Retail Property Unit Trust*
(LSUT)
(MRLP)
(PTUT)
(SERPUT)
BNP Paribas Real Estate
Knight Frank
BNP Paribas Real Estate
Allsop LLP
(xiii)
(xiv)
(xv)
(xvi)
Teesland iDG Sutton Unit Trust
UNITE UK Student Accommodation Fund
West End of London Property Unit Trust*
West India Quay Unit Trust
(TiDGSUT)
(UNITE)
(WELPUT)
(WIQUT)
BNP Paribas Real Estate
CB Richard Ellis Limited
CB Richard Ellis Limited
Jones Lang LaSalle Limited
(xvii)
Bracknell Eagle House Limited
(BEH)
BNP Paribas Real Estate
* Schroder managed property funds.
23
Notes to the Financial Statements (continued)
4. Property related investments (continued)
(b) Movements during the year
The Trust owned the following interests in property related investments:
Percentage
holding at
31 March 2012
%
49.6
97.7
26.8
100.0
Valuation at
1 April 2011
£’000
59,158
42,678
534
9,303
Additions
at cost
£’000
11,032
6,150
–
–
Cost of
investments
sold
£’000
–
–
–
–
Movement in
revaluation
reserve for
investments
sold
£’000
–
–
–
–
CPUT
Gresham
HackUT
HRWF
HUT
96.1
0.0
100.0
5.1
3.2
40,198
1,385
30,835
20,522
43,553
4,444
–
188
11,902
(174)
(81,670)
(870)
–
–
(8,829)
39,075
(515)
–
–
(3,218)
517
–
(246)
561
(773)
2,564
–
30,777
32,985
30,559
LSUT
MRLP
PTUT
SERPUT
100.0
50.0
100.0
100.0
18,635
–
40,746
72,132
–
25,000
805
210
–
–
–
–
–
–
–
–
583
(444)
(1,218)
1,215
19,218
24,556
40,333
73,557
TiDGSUT
UNITE
WELPUT
WIQUT
50.0
2.7
6.0
50.0
3,169
14,384
32,312
26,400
100
–
40
–
–
–
–
–
–
–
–
–
(185)
778
3,082
1,600
3,084
15,162
35,434
28,000
AHUT
BSUT
BEH
26.8
26.8
50.0
294
132
1,431
457,801
–
–
248
59,945
–
–
–
(91,369)
–
–
–
35,342
–
22
(142)
999
294
154
1,537
462,718
BPUT
CGPUT
CLOUT
CPSUT
The realisable value of the Trust’s holding in property related investments may differ from the net
asset value as provided by the relevant managers.
At 31 March 2012, the Trust’s holding in each of HackUT, LSUT, PTUT and SERPUT stood at
100.0% and the Trust’s holdings in CGPUT and CPUT at 31 March 2012 stood at 97.7% and
96.1% respectively. Despite these holdings being in excess of 50.0%, the Trust does not have
control as the relevant trust instruments state that unitholders cannot remove the Manager within the
first term and five years of the date of appointment respectively, unless the Manager’s removal
clause is extended by unitholder resolution. Therefore, as significant control cannot be exercised,
these investments are not consolidated.
The Trust’s holding in CPSUT at 31 March 2012 stood at 100.0%. There would be no material
difference to the net asset value of the Trust if this investment, which is controlled by the Trust, had
been consolidated at that date.
The Trust owns two shares in Hackbridge Limited representing 100.0% of the shares in issue.
Hackbridge Limited is a Jersey registered limited company incorporated on 1 May 2005. Hackbridge
Limited holds the remaining 1.0% interests in CPSUT, HackUT, LSUT, PTUT and SERPUT.
24
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2012
Movement in
revaluation
reserve for
retained
investments
£’000
(1,645)
(2,727)
6
15
Valuation at
31 March 2012
£’000
68,545
46,101
540
9,318
4. Property related investments (continued)
(c) Summary of financial information at 31 March 2012
The information detailed below contains information as provided by the relevant managers at 31 March 2012.
Debt
£’000
Other assets/
(liabilities)
£’000
Net asset
value
£’000
Adjustment to
fair value
debt*
£’000
135,295
46,000
725
9,500
–
–
–
–
2,804
1,167
1,291
(182)
138,099
47,167
2,016
9,318
–
–
–
–
96.1
–
100.0
5.1
3.2
–
–
30,700
1,067,825
1,461,189
–
–
–
(459,496)
(555,000)
2,667
–
77
39,310
59,326
2,667
–
30,777
647,639
965,515
–
–
–
(36,571)
(8,000)
LSUT
MRLP
PTUT
SERPUT
100.0
50.0
100.0
100.0
17,800
38,050
40,275
68,520
–
–
–
–
1,418
11,061
58
5,037
19,218
49,111
40,333
73,557
–
–
–
–
TiDGSUT
UNITE**
WELPUT
WIQUT
50.0
2.7
6.0
50.0
10,950
1,273,000
871,556
56,000
(5,026)
(612,000)
(270,000)
–
244
(99,100)
(7,883)
–
6,168
561,900
593,673
56,000
–
(37,900)
(14,714)
–
AHUT
BSUT
BEH
26.8
26.8
50.0
–
–
–
–
–
–
1,112
576
3,072
1,112
576
3,072
–
–
–
5,127,385
(1,901,522)
22,055
3,247,918
(97,185)
518,567
(76,099)
20,250
462,718
(4,017)
Trust’s holding at
31 March 2012
%
Property
value
£’000
BPUT
CGPUT
CLOUT
CPSUT
49.6
97.7
26.8
100.0
CPUT
Gresham
HackUT
HRWF**
HUT
Total of Trust’s share
*
A number of the property related investments shown above have entered into interest rate swaps
in order to hedge their interest rate exposure. Revaluation to fair value of the remaining swap
agreements at 31 March 2012 would give rise to a combined total deficit of £4.0 million
(31 March 2011: deficit £3.3 million). Neither the property related investments nor the Trust
account for the deficit arising from these fair value adjustments.
** The information for HRWF and UNITE is at 29 February 2012 and 31 December 2011
respectively.
25
Notes to the Financial Statements (continued)
5. Debtors
31 March 2012
£’000
31 March 2011
£’000
Rents receivable
Distributions due from property related investments
Tenant deposits
UITF 28 accrued rents receivable
UITF 28 unamortised tenant incentives
VAT recoverable
Other debtors and prepayments
10,341
4,997
4,702
3,086
8,235
358
4,580
6,910
3,932
5,279
1,400
342
1,207
4,925
Total debtors
36,299
23,995
31 March 2012
£’000
31 March 2011
£’000
7,441
8,318
48
4,702
5,054
2,044
5,831
5,167
20
5,279
2,282
1,282
27,607
19,861
Notes
31 March 2012
£’000
31 March 2011
£’000
8
12
12
12
12
12
890,960
(59,258)
301,153
141,856
(1,933)
(24,554)
904,309
(105,938)
288,012
172,840
(1,933)
(21,164)
1,248,224
1,236,126
No. of
Units
Value
£’000
Opening balance at 1 April 2011
Units issued during the year
Units redeemed during the year
38,617,538
96,766
(528,340)
904,309
3,312
(16,661)
Closing balance at 31 March 2012
38,185,964
890,960
6. Creditors
Rents received in advance
Provision for doubtful debts
Trade creditors
Tenant deposits
Other creditors and accruals
Amounts due on properties
Total creditors
7. Net assets attributable to unitholders
Net assets attributable to unitholders are represented as follows:
Amounts paid to Trustee for investment
Revaluation reserve
Realised net profit on sale of investment property
Realised net profit on sale of property related investments
Realised net loss on sale of property equities
Deficit on Income and Expenditure Account
Total net assets attributable to unitholders
Under FRS 25 the above amounts are deemed to be repayable to unitholders and are therefore
presented as liabilities of the Trust.
8. Amounts paid to Trustee for investment
26
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2012
9. Property expenses
For the year ended
31 March 2012
£’000
31 March 2011
£’000
Service charge expenses
Letting fees
Rates
Rent review fees
Amortised tenant incentives
Other
6,143
402
961
139
810
2,323
6,163
336
775
91
152
1,724
Total property expenses
10,778
9,241
10. Finance costs: distributions
(a) Total distributions
Monthly distributions were payable in respect of the following periods:
Net income before tax
Income tax
Net income after tax
Total management expenses
Net amount distributable
Gross return to unitholders
after recovery of income tax
Net income before tax
Income tax
Net income after tax
Total management expenses
Net amount distributable
Gross return to unitholders
after recovery of income tax
April 2011
£’000
4,591
(918)
3,673
(353)
3,320
May 2011
£’000
4,536
(907)
3,629
(320)
3,309
June 2011
£’000
4,587
(917)
3,670
(319)
3,351
July 2011
£’000
4,648
(930)
3,718
(481)
3,237
August 2011
£’000
4,506
(901)
3,605
(334)
3,271
September 2011
£’000
4,598
(920)
3,678
(437)
3,241
4,238
4,216
4,268
4,167
4,172
4,161
October 2011
£’000
4,529
(906)
3,623
(341)
3,282
November 2011
£’000
4,424
(885)
3,539
(339)
3,200
December 2011
£’000
4,633
(927)
3,706
(424)
3,282
January 2012
£’000
4,482
(896)
3,586
(353)
3,233
February 2012
£’000
4,444
(889)
3,555
(303)
3,252
March 2012
£’000
4,727
(945)
3,782
(379)
3,403
4,188
4,085
4,209
4,129
4,141
4,348
For the year ended
Notes
Net income before tax (excluding undistributed UITF 28 adjustment)
Income tax
Net income after tax
Total management expenses
Net amount distributable
Gross return to unitholders after recovery of income tax
13(a)(i)
12(b)
31 March 2012
£’000
54,705
(10,941)
43,764
(4,383)
39,381
50,322
31 March 2011
£’000
57,381
(11,476)
45,905
(4,426)
41,479
52,955
The balance of amounts accrued under UITF 28 for the year ended 31 March 2012 was a deficit of
£11,321,000 (31 March 2011: deficit of £1,742,000). 80.0% of the overall rents accrued under UITF
28 and the taxation provision thereon are recognised in the Income and Expenditure Account for the
year and distributed to unitholders.
27
Notes to the Financial Statements (continued)
10. Finance costs: distributions (continued)
(b) Distributions per unit
Net income before tax
Income tax
Net income after tax
Total management expenses
Net amount distributable
Gross return to unitholders
after recovery of income tax
Net income before tax
Income tax
Net income after tax
Total management expenses
Net amount distributable
Gross return to unitholders
after recovery of income tax
April 2011
pence
11.9920
(2.3984)
9.5936
(0.9220)
8.6716
May 2011
pence
11.8468
(2.3694)
9.4774
(0.8360)
8.6414
June 2011
pence
11.9788
(2.3958)
9.5830
(0.8320)
8.7510
July 2011
pence
12.1901
(2.4380)
9.7521
(1.2620)
8.4901
August 2011
pence
11.8178
(2.3636)
9.4542
(0.8750)
8.5792
September 2011
pence
12.0571
(2.4114)
9.6457
(1.1460)
8.4997
11.0700
11.0108
11.1468
10.9281
10.9428
10.9111
October 2011
pence
11.8891
(2.3778)
9.5113
(0.8950)
8.6163
November 2011
pence
11.6141
(2.3228)
9.2913
(0.8900)
8.4013
December 2011
pence
12.1590
(2.4318)
9.7272
(1.1130)
8.6142
January 2012
pence
11.7575
(2.3515)
9.4060
(0.9270)
8.4790
February 2012
pence
11.6460
(2.3292)
9.3168
(0.7930)
8.5238
March 2012
pence
12.3801
(2.4760)
9.9041
(0.9930)
8.9111
10.9941
10.7241
11.0460
10.8305
10.8530
11.3871
31 March 2012
pence
143.3284
(28.6657)
114.6627
(11.4840)
103.1787
131.8444
31 March 2011
pence
148.5975
(29.7195)
118.8780
(11.4480)
107.4300
137.1495
31 March 2012
£’000
–
31 March 2011
£’000
143
For the year ended
Net income before tax (excluding undistributed UITF 28 adjustment)
Income tax
Net income after tax
Total management expenses
Net amount distributable
Gross return to unitholders after recovery of income tax
(c) Interest payable
For the year ended
Interest paid
28
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2012
11. Current and deferred taxation
The Trust is not liable for corporation tax or capital gains tax but is liable for income tax on its gross
income at the basic rate of tax. Income tax deducted from distributions paid by the Trust is
recoverable by unitholders.
The tax charged to the Income and Expenditure Account and information concerning the deferred
taxation provision are detailed below:
(a) Taxation on net income before tax
(i) Analysis of charge for the year ended
31 March 2012
£’000
31 March 2011
£’000
10,941
(203)
10,738
203
10,941
11,476
(336)
11,140
336
11,476
Net income before tax
Tax on net income at basic rate of 20%
31 March 2012
£’000
54,705
10,941
31 March 2011
£’000
57,381
11,476
Effects of:
Permanent adjustments
Adjustments in respect of previous year
Current tax charge for the year
1
(203)
10,739
1
(336)
11,141
31 March 2012
£’000
(826)
(204)
(1,030)
31 March 2011
£’000
(490)
(336)
(826)
Notes
Current tax:
UK income tax on income for the year
Adjustments in respect of the previous year
Total current tax
Origination and reversal of timing difference
Tax on net income
11(b)
11(a)(ii)
(ii) Factors affecting tax charge for the year ended
Notes
11(a)(i)
(b) Provision for deferred tax
The amount of deferred taxation provided for in these Financial Statements is:
Notes
Opening provision
Deferred tax charge in Income and Expenditure Account
Closing provision
11(a)(i)
The deferred tax liability relates to the potential tax charge under Section 350 ICTA 1988 on the final
distribution for the year.
S942 ITA 2007 (Income Tax Act 2007) provides for an additional tax liability to arise where the tax
liability for any tax year would otherwise be lower than the basic rate of tax on the distributions paid
in that year. Because the distributions are paid in arrears, provision must be made for the liability that
would arise in the next tax year if there was no taxable income following the date of the Statement of
Net Assets. Relief can be taken against this liability for amounts by which any previous period’s
taxable income have exceeded the distributions paid in that year.
29
Notes to the Financial Statements (continued)
12. Reserves
Revaluation Reserve
Freehold
property
£’000
Deficit on
Property
Total Income and
Leasehold
related revaluation Expenditure
property Investments
reserve
Account
£’000
£’000
£’000
£’000
Realised
Realised
net profit/
net profit
Realised
(loss) on property
net profit
investment
related on property
property investments
equities
sold
sold
sold
£’000
£’000
£’000
Total
reserves
£’000
Opening balance
at 1 April 2011
27,232
(5,045)
(128,125)
(105,938)
(21,164)
288,012
172,840
(1,933)
331,817
Movement in revaluation reserve for retained:
Investment property
Sites in the course of development
Property related investments
Investment property sold
Property related investments sold
18,549
(4,004)
–
(10,596)
–
6,390
–
–
–
–
–
–
999
–
35,342
24,939
(4,004)
999
(10,596)
35,342
–
–
–
–
–
–
–
–
10,596
–
–
–
–
–
(35,342)
–
–
–
–
–
24,939
(4,004)
999
–
–
–
–
–
–
(3,390)
–
–
–
(3,390)
–
–
31,181
–
–
1,345
–
–
(91,784)
–
–
(59,258)
–
–
(24,554)
2,545
–
301,153
–
4,358
141,856
–
–
(1,933)
2,545
4,358
357,264
Deficit on Income and Expenditure Account
Realised net profit/(loss) on:
Investment property sold
Property related investments sold
Closing balance at 31 March 2012
13. Reconciliation of net property income to net
cash inflow from operating activities
For the year ended
Net property income
Income from property related investments
Income from subordinated convertible notes
Total management expenses
Net income available for distribution before interest payable and receivable and tax
Net increase in debtors
Net increase in creditors
Net cash inflow from operating activities
31 March 2012
£’000
34,319
19,156
794
(7,773)
46,496
31 March 2011
£’000
34,874
20,901
946
(7,244)
49,477
(12,304)
7,746
41,938
(5,805)
540
44,212
Net cash flow
£’000
(80,777)
(80,777)
31 March 2012
£’000
52,878
52,878
14. Reconciliation of movement in net cash flow
Cash at bank and on deposit
Net cash
1 April 2011
£’000
133,655
133,655
15. Capital commitments and contingent liabilities
At the year end the Trust had a commitment to invest £1.2 million in Teesland iDG Sutton Unit Trust
(31 March 2011: £1.2 million).
At 31 March 2012, the Trust is exposed to a dilution levy in relation to its holding in Bracknell
Property Unit Trust (BPUT), which is estimated to be £7.3 million (31 March 2011: £7.3 million). This
has no current impact on the Trust’s holding in BPUT or these Financial Statements.
30
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2012
16. Related party disclosures and material contracts
(a) Fees receivable by the Trustee
As Trustee, The Royal Bank of Scotland plc is entitled to a fee equivalent to 0.0224% per annum on
the first £500 million of the Trust’s Net Asset Value (NAV) and 0.0125% per annum on any excess
over £500 million of the Trust’s NAV.
(b) Fees receivable by the Manager and the Property Manager
Investment management and property management fees
The remuneration of the Manager and the Property Manager is set by the Supervisory Board. The
Manager is entitled to 0.3% of the total Net Asset Value of the Trust and the Property Manager is
entitled to 0.4% on Gross Value of direct holdings and capital cash. The Property Manager does not
receive a fee from the Trust on property held indirectly, unless specifically agreed by the Supervisory
Board.
Where the Trust invests in property related investments which are managed by an associate of the
Manager or the Property Manager, fees earned by the associate on the Trust’s net investment, are
not rebated to the Trust. These indirect managers levy their own fees which may include
performance fees.
The Manager’s and the Property Manager’s fees are charged in full to the Income and Expenditure
Account. 50% of such fees are allocated to capital and not deducted from distributions for the
purpose of determining the value of such distributions (see notes 1(k)).
Summary of fees receivable by the Manager, the Property Manager, and their associates
For the year ended
Notes
Manager’s and Property Manager’s fees (gross of rebates)
Irrecoverable VAT incurred by the Trust*
Total management fees charged to the Income and Expenditure Account
1(k)
Management fees earned by associates of the Manager from the Trust’s
investments in property related investments
Less irrecoverable VAT incurred by the Trust*
Total
*
31 March 2012
£’000
6,780
–
6,780
31 March 2011
£’000
6,330
1
6,331
1,303
–
8,083
619
(1)
6,949
Irrecoverable VAT incurred by the Trust does not represent fees receivable by the Manager, the
Property Manager, or their associates.
The total fees receivable by the Manager and the Property Manager and their associates from the
Trust’s and its investments, as a percentage of average net asset value of the Trust over the year to
31 March 2012 represented an annualised rate of approximately 0.6% (31 March 2011: 0.6%).
Secondary market commission
The Manager also earns commission from individual unitholders of the Trust which utilise its matched
bargain service. Such commission is not included in these Financial Statements.
31
Notes to the Financial Statements (continued)
16. Related party disclosures and material contracts (continued)
(c) Outstanding balances
Outstanding balances were due to the following which are considered to be related parties under
FRS 8:
31 March 2012
£’000
59
62
1,163
31 March 2011
£’000
59
32
645
BPUT
CGPUT
ChisPUT
CPSUT
31 March 2012
£’000
2,255
1,056
–
620
31 March 2011
£’000
3,145
63
3,121
575
HackUT
HUT
LSUT
MRLP
1,675
670
632
1,245
2,160
1,823
751
–
PTUT
SERPUT
WELPUT
1,950
4,437
1,427
2,203
2,768
1,339
The Royal Bank of Scotland plc (Trustee)
Supervisory Board
Schroder Property Investment Management Limited
(d) Distributions
Gross distributions were receivable in the year from the following property related investments which
are considered to be related parties under FRS 8, because they are managed or administered by
the Manager or an associate of the Manager:
For the year ended
32
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2012
17. Financial instruments
The primary financial instruments held by the Trust at 31 March 2012 were property related
investments, cash, short term assets and liabilities to be settled in cash. The Trust did not hold, and
was not a counterparty to, any derivative instruments either during the year or at the year end.
The Trust is not subject to currency risk since all of the financial instruments are denominated in
sterling.
The disclosure below excludes short term assets and liabilities as permitted by United Kingdom
Accounting Standards (FRS 13). All financial liabilities mature within one year of the date for the
Statement of Net Assets and all financial assets, with the exception of property related investments,
are held on demand.
(a) Interest rate profile
Floating rate financial assets
Non interest bearing financial assets
Subordinated Convertible Notes
31 March 2012
£’000
52,878
462,718
–
31 March 2011
£’000
133,655
457,801
9,462
Floating rate financial assets comprise cash at bank. Interest on floating rate bank deposits is based
on relevant inter bank rates. Non interest bearing financial assets comprise property related
investments.
(b) Liquidity risk
Liquidity risk is the risk that the Trust faces in being unable to meet all liabilities as and when they fall
due. The Trust is subject to liquidity risk insofar as unitholders may seek to redeem units held within
the Trust. Dependent upon the value and timing of the redemptions and given the illiquid nature of
the Trust’s investments, liquidity risk may be present. The Manager’s policy for managing this risk is
to:
(i) Operate a strict unit redemption policy such that unitholders may only serve notice to redeem
units at the end of each quarter.
(ii) Raise sufficient cash resources within the Trust to finance a limited number of redemptions.
(iii) Review the need for and maintain as appropriate a borrowing facility.
(iv) Reserve the right to defer payment of redemptions for a maximum of two years, from the date of
notice.
(c) Market price risk
The Trust’s exposure to market price risk is comprised mainly of movements in the value of its
investments in property related investments and the uncertainty surrounding future prices of such
investments. The Trust’s market price risk is managed through diversification and the Manager has
no reason to believe that the valuations used in calculating the value of the Trust are unreasonable.
18. Subsequent Events
The Manager intends to liquidate the Trust and transfer all assets and liabilities into a newly formed
authorised Open Ended Investment Company (OEIC), Schroder UK Property Fund, as referenced
within note 1, Accounting Policies. An EGM has been set for 16 July 2012 to seek approval from
unitholders for the conversion to the newly authorised OEIC, with a circular having been distributed
to unitholders on 6 June 2012.
33
Supervisory Board and
Key Service Providers
Supervisory Board
J A Scott OBE FCA* (Chairman)
James Scott is a former National Managing
Partner of Binder Hamlyn. He is currently a
non-executive Director of the Vestey Group
Limited. Joined the Supervisory Board in 1991.
Professor A E Baum PhD FRICS
Andrew Baum is Professor of Land Management
at the Henley Business School, University of
Reading, non-executive Chairman of the
investment committee for CBRE Investors Global
Multi-Manager and honorary Professor of Real
Estate Investment at the University of Cambridge.
Joined the Supervisory Board in 1999.
R R Foulkes*
Richard Foulkes was Vice Chairman of
Schroder Investment Management Limited
until his retirement in October 2005. He is a
non-executive Director of Schroder Pension
Trustee Limited and Credit Renaissance Fund; a
member of the Investment Committee of the
Royal Opera House Pension Scheme and of
Queens’ College, Cambridge. He is also the
Chairman of the Investment Committee of St
John Ambulance. Joined the Supervisory Board
in 2003.
C J Hunter FRICS
Charles Hunter was Head of Property at Insight
Investment (the investment management
subsidiary of HBOS plc) for nine years until
2004. Prior to that he was Property Director of
NM Fund Management. He is non-executive
Chairman of AXA Property Trust plc and is a
Council Member and Trustee of St Monica
Trust. Joined the Supervisory Board in 2006.
R I Moore MBE C Dip AF*
Roger Moore was previously Head of Property
Research at UBS Warburg. He was a founder
member of the BDO Stoy Hayward Property
Accounts Awards judging panel. Joined the
Supervisory Board in 2004.
Fund Manager and
Investment Committee
I D Mason MRICS
Ian Mason is Head of UK Property Fund
Management for Schroders and is Fund
Manager of the Trust. He has a BSc (Hons) in
Land Management, is a Member of the Royal
Institution of Chartered Surveyors, a board
member of the Association of Real Estate Funds
(AREF) and Chair of AREF’s Regulation SubCommittee. Ian joined Schroders in April 2008
after 23 years at BlackRock where he was
manager of the BlackRock UK Property Fund.
34
W A Hill MRICS C Dip AF
William Hill is Head of Property for Schroders
and Chairman of the Trust’s Investment
Committee. He has a BSc (Hons) in Land
Management and a Certified Diploma in
Accounting and Finance. He is a Member of the
Royal Institution of Chartered Surveyors and
past Chairman of the Association of Real Estate
Funds (AREF). Prior to joining Schroders in
1989, William worked for seven years with
Drivers Jonas. He is a member of Schroders
Global Investment Executive Committee.
M J Callender BA (Economics)
Mark Callender is Head of Property Research.
He joined Schroders in 2006. Before joining
Schroders he was Research Director for
sixteen years at IPD, the leading provider
of property market research and indices.
Between 1987-1990 he was Chief Economist at
the House Builders Federation. He is a member
of the Society of Property Researchers, the
Investment Property Forum and the
Pan-European Common Interest Group.
Dr N J Turner MRICS
Dr Neil Turner is Head of Property Fund
Management. He joined Schroders in 2005. He
was awarded the degree of Doctor of
Philosophy for work in relation to Property
Investment and Environmental Risk Analysis and
has a BSc (First Class Hons) in Urban Estate
Management. He is a board member of the
Investment Property Forum, a Chartered
Surveyor, CFA charter holder and a Visiting
Research Fellow within the Department of Real
Estate and Planning at the University of
Reading.
D Owen MRICS
Duncan Owen is the Head of Property Funds
for Schroders. He has a degree from Sheffield
Hallam University, is a qualified chartered
surveyor, an FSA Approved Person, has studied
at INSEAD business school in France and is a
member of the British Property Federation’s
Policy Committee. Prior to joining Schroders in
January 2012, he was the Chief Executive
Officer at Invista having led its creation and IPO
as a newly formed fund management business
listed in London. Prior to that he was a director
at LaSalle Investment Management and a
partner at Jones Lang Wootton.
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2012
Key Service Providers
Manager and Property Manager
Schroder Property Investment
Management Limited
31 Gresham Street
London EC2V 7QA
Authorised and regulated by
the Financial Services Authority.
Trustee
National Westminster Bank Plc
The Broadstone
50 South Gyle Crescent
Edinburgh
EH12 9UZ
Independent Auditor
PricewaterhouseCoopers LLP
7 More London Riverside
London
SE1 2RT
Independent Valuer
BNP Paribas Real Estate
Advisory and Property
Management UK Limited
5 Aldermanbury Square
London
EC2V 7BP
* R I Moore is the Chairman and R R Foulkes and J A Scott
are members of the Audit Committee.
Additional Unitholder Information
Gross Annual Distribution
Paid per Unit
Date
31 March 2012
31 March 2011
31 March 2010
31 March 2009
31 March 2008
31 March 2007
Gross Annual
Distribution
per unit1
£1.340935
£1.326611
£1.543322
£1.598533
£1.653633
£1.610234
Net Asset
Value
per unit
£32.69
£32.01
£30.30
£29.45
£44.19
£53.05
Yield2
Quarterly Volume of
Secondary Market Trades
(£ million)
Q1 2012
4.1%
4.1%
5.1%
5.4%
3.7%
3.1%
Source: Schroders, 31 March 2012
1 Distributions are gross of tax but net of expenses and fees. They are stated on a paid basis at the time of reporting.
2 The yield is calculated by dividing the annual distributions paid by net asset value per unit at the end of the period. The yield is
stated on a paid basis at the time of reporting.
12.0
Q4 2011
13.4
Q3 2011
15.5
9.8
Q2 2011
Q1 2011
Q4 2010
14.9
8.1
Q3 2010
10.2
31.6
Q2 2010
59.5
Q1 2010
Cash and Gearing
Date
31 March 2012
31 March 2011
31 March 2010
31 March 2009
31 March 2008
31 March 2007
15.7
Q4 2009
Amount in Cash (Capital)1
at the end of each year
£52.8 million4
£125.6 million3
£43.4 million
£5.9 million
£1.8 million
£4.1 million
Gearing2
(% of NAV)
6.1%
6.9%
16.3%
20.6%
18.2%
15.9%
Q3 2009
6.3
Q2 2009
1.4
Q1 2009
2.5
Source: Schroders, 31 March 2012
Source: Schroders, 31 March 2012
Investment and borrowing guidelines as follows:
1 Maximum uncommitted cash holding: 10% of NAV. All cash, other than income, held by the Trustee from time to time.
2 Maximum borrowing permitted under the Trust Deed (direct and indirect): 25% of NAV.
3 This sum includes £39.0 million of allocated capital for capital expenditure and purchases.
4 Includes cash held within SERPUT and CPUT, which are wholly owned by SEPUT.
35
Additional Unitholder Information (continued)
Monthly Unit Prices
Date
31 March 2012
28 February 2012
31 January 2012
31 December 2011
30 November 2011
31 October 2011
30 September 2011
31 August 2011
31 July 2011
30 June 2011
31 May 2011
30 April 2011
31 March 2011
Net Asset
Value
£32.69
£32.69
£32.71
£32.70
£32.54
£32.49
£32.45
£32.46
£32.36
£32.22
£32.18
£32.08
£32.01
Bid
Price
£32.10
£32.10
£32.12
£32.11
£31.95
£31.91
£31.87
£31.88
£31.78
£31.65
£31.60
£31.50
£31.44
Source: Schroders, 31 March 2012
36
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2012
Offer
Price
£34.25
£34.25
£34.27
£34.26
£34.09
£34.04
£34.00
£34.01
£33.90
£33.76
£33.71
£33.61
£33.54
Unitholder Breakdown
Number of
Unitholders
Corporate Pension Funds
Local Authority Pension Funds
Pooled Funds
Charities
Common Investment Funds
SIPPs
Total
187
35
2
104
3
5
336
Total %
Holding by
Units in Issue
57.8
29.7
3.4
6.3
2.8
0.0
100.0
Largest Investors by Ownership Band:
Less than 1% of units in issue
1% or greater but less than 2%
2% or greater but less than 4%
Total
308
25
3
336
55.4
34.5
10.1
100.0
–
–
–
–
3.8
10.1
13.9
22.0
Largest Investor
Largest Three Investors
Largest Five Investors
Largest Ten Investors
Source: Schroders, 31 March 2012
37
General Information
General Information
Purchase of Units
Schroder Exempt Property Unit Trust (the
“Trust”) is a collective investment scheme
within the meaning of the Financial Services
and Markets Act (“FSMA”). However, the Trust
is not an authorised unit trust scheme, OEIC
or recognised scheme within the meaning
of the FSMA and therefore constitutes an
unregulated collective investment scheme.
As an unregulated collective investment
scheme, the distribution and promotion of
Trust units are restricted, for the purposes
of sections 21 and 238 of the FSMA, to
persons who are themselves authorised
under the FSMA or who otherwise fall within
the categories or exceptions made under
sections 21 and 238 of the FSMA.
Offers of new units are normally made on the first
working day of each month. Payments for units
issued must be received by the Trustee by the
fifth working day of the same month. The offer
price is fixed by the Manager on the basis of the
valuation of the properties carried out at the last
working day of the month prior to the offer date.
Accordingly, the information in this document
is directed at eligible counterparties, authorised
persons, professional clients, existing investors
in the Trust and clients and newly accepted
clients of the Schroder Group, where reasonable
steps have been taken to ensure that investment
in the Trust is suitable. This material should
not be relied upon by persons of any other
description. In any case, a recipient who is in
any doubt about investment in the Trust should
consult an authorised person who specialises
in investments of this nature.
The Trust’s past performance is not a guide
to the future. The Trust invests in real property,
the value of which is generally a matter of a
valuer’s opinion. There is no recognised market
for units in the Trust and an investment in units
is not readily realisable. It may be difficult to
trade in the units or to sell them at a reasonable
price. The price of units and the income from
them may fluctuate upwards or downwards and
cannot be guaranteed.
Socially Responsible
Investment and
Sustainability
A full copy of the Schroder Property policy on
Responsible Property Investment is available on
request.
Units in the Trust are only available to UK tax
exempt investors. In general terms, exempt
investors are persons who are wholly exempt
from capital gains tax or corporation tax on
capital gains for reasons other than residence.
Redemption of Units
Redemption Notices must be received by the
Manager before 17.00 (GMT/BST) on a
Redemption Notice Date (the last working days
of March, June, September and December).
Notices must be in writing in the form provided
by the Manager.
The first date that a redemption can be paid is
the first Redemption Payment Date following the
relevant Redemption Notice Date (i.e. three
months after the Redemption Notice Date). If a
Redemption Notice is deferred (in whole or part)
the redemption may occur on one of the eight
Redemption Payment Dates following the first
Redemption Payment Date. Redemption
payments will ordinarily be made within five
Working Days of the relevant Redemption
Payment Date.
The Manager, with the prior written approval of
the Supervisory Board, may defer a redemption in
whole or part by giving Retiring Holders notice in
writing no later than seven working days before
an Applicable Redemption Payment Date. The
Manager, subject to the Supervisory Board’s
written approval, has the right to adjust the Net
Asset Value for the purposes of calculating the
Redemption Price, in certain circumstances.
Secondary Market
Information relating to units available on the
secondary market can be obtained from
Schroder Property Investment Management
Limited which seeks to introduce unitholders to
potential investors. Please contact Alice Wilcox
for Secondary Market availability.
Please note that Schroders can only accept
instructions to purchase or redeem units in line
with the signatory mandate held. We
recommended that clients provide regular
updates of their authorised signatories to Sam
Wightman, Fund Services to avoid any delays in
being able to purchase or redeem units in the
Schroder Exempt Property Unit Trust.
38
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2012
Manager Contacts
Distributions
For queries on secondary market availability:
The net income of the Trust, after deduction of all
expenses and liabilities (actual, estimated or
contingent) of the Trust including any deductions
in respect of taxes, is distributed to unitholders in
proportion to the number of units held by them.
Distributions are calculated on a monthly basis,
with the distributions paid to unitholders on the
fifteenth working day of the following month. A tax
voucher is sent with each distribution and
unitholders may make individual claims for
repayment of tax.
Alice Wilcox
Product Manager, SEPUT
alice.wilcox@schroders.com
Direct Line
+44 (0)20 7658 3552
Switchboard
+44 (0)20 7658 6000
For valuations, to place trades, tax reclaims,
dividend/distribution information:
Sam Wightman
Fund Services
SEPUT-clientadministration@schroders.com
Direct Line
+44 (0)20 7658 3694
Switchboard
+44 (0)20 7658 6000
For other related client queries (including
performance, quarterly investment reports, audit
requests):
Hanne Hooton
Client Executive
propertyqueries@schroders.com
Direct Line
+44 (0)20 7658 6787
Switchboard
+44 (0)20 7658 6000
Katie Nicholson
Client Executive
propertyqueries@schroders.com
Direct Line
+44 (0)20 7658 6562
Switchboard
+44 (0)20 7658 6000
Fund Codes
Code
Bloomberg
ISIN
Lipper Reuters
Sedol
SCEXPUT LN
000786612
60011163
0786612
Prices for the Schroder Exempt Property
Unit Trust can be obtained from
http://www.schroders.com/
ukinstitutional/funds/fund-prices.
Bid/Offer Spread
The bid/offer spread, which at 31 March 2012
stood at 6.25%, reflects the cost per unit of
buying and selling properties similar to those held
by the Trust.
Additional Information
The Trust may be suitable for UK tax exempt
pension funds and charities who wish to hold a
direct property portfolio but do not want to
commit the considerable executive time and
expertise necessary to organise and supervise
such a portfolio and/or are not of a sufficient size
to obtain a viable property portfolio with an
appropriate spread of risk. The property in the
Trust is professionally and actively managed by
chartered surveyors employed by the Property
Manager, Schroder Property Investment
Management Limited.
Schroder Investment Management Limited,
welcomes the opportunity to meet unitholders,
potential unitholders and their advisers to explain
more fully the strategy and progress of the Trust.
In this regard please contact Schroder Investment
Management Limited who can also provide
copies of the Trust Deed and supplemental
deeds, application forms and latest unit prices, at
the address below.
Further information can be found on the
website www.schroders.com/seput
Schroder Exempt Property Unit Trust
Schroder Property Investment
Management Limited
31 Gresham Street
London EC2V 7QA
Tel: +44 (0)20 7658 6000
Schroder Property Investment
Management Limited is authorised and
regulated by the Financial Services Authority.
39
158551 SEPUT Annual Report 2012 Cover_158551 SEPUT Annual Report 2012 Cover 25/06/2012 14:12 Page 3
Schroder Exempt Property Unit Trust (“SEPUT” or the “Trust”) was
established in 1971 as an open ended property unit trust under UK law.
The investment objective of the Trust is to achieve a blend of income and
capital growth for investors through investment in UK property. Risk is
diversified by the Trust holding a mixed portfolio of retail, office, industrial
and other property throughout the UK. The Trust may also hold land and
undertake developments as well as use moderate levels of gearing from
time to time.
Front cover: Mermaid Quay, Cardiff
Investment Objective and Policy
The Trust seeks to provide a return of 0.5% per annum (net of fees) above
its benchmark (Investment Property Databank UK Pooled Property Fund
Indices – All Balanced Funds Median) over rolling three year periods.
The Trust may be suitable for UK tax exempt pension funds and charities
who wish to hold a direct property portfolio without the commitment of
considerable trustee oversight and management expertise. The property
in the Trust is professionally and actively managed by chartered surveyors
employed by the Property Manager, Schroder Property Investment
Management Limited.
The Manager welcomes the opportunity to meet unitholders, potential
unitholders and their advisers to explain more fully the strategy and
progress of the Trust. Please see Manager Contacts on page 39.
Schroder Exempt Property Unit Trust
Schroder Property Investment Management Limited
31 Gresham Street
London EC2V 7QA
Tel: +44 (0)20 7658 6000
Further information can be found on the website
www.schroders.com/seput
www.schroders.com/seput
www.schroders.com/seput
158551 SEPUT Annual Report 2012 Cover_158551 SEPUT Annual Report 2012 Cover 25/06/2012 14:12 Page 2
31 March 2012
Schroder Exempt Property Unit Trust
ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS
31 March 2012
Schroders Exempt Property Unit Trust
31 Gresham Street, London EC2V 7QA
www.schroders.com/seput www.schroderproperty.com
Schroder Exempt
Property Unit Trust
Annual Report and Audited
Financial Statements