31 March 2011
Schroder Exempt Property Unit Trust
ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS
31 March 2011
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
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: Chiswick Park, London W4
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 Meeting and 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 £84.3 million, to £1,236.1
million at 31 March 2011 from £1,151.8 million at 31 March 2010. The Trust’s NAV per unit was
£32.01 at 31 March 2011, compared to £30.30 at 31 March 2010, an increase of 5.6%.
Active Management
Over the twelve months to 31 March 2011, 30 rent reviews were settled at an average of 8.1%
above the passing rent, and 4.7% above estimated rental value. 40 lettings were completed
over the last twelve months, contracting an additional £2.9 million of income.
Total Returns
Performance % to 31 March 2011
10.2
8.9
9.1
1 year (% per annum)
–5.8
–2.4
–3.9
3 years
-3.1
-0.6
-1.6
5 years
4.2
6.1
5.5
10 years
-35
-30
-25
-20
-15
-10
-5
0
5
10
15
20
25
30
35
25
30
35
Twelve month performance % to 31 March 2011
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
18.7
16.7
16.6
2007
-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 2011
Portfolio by Sector
At 31 March 2011
Overweight/underweight relative to benchmark*
Absolute Segment
SEPUT
-1.3%
-5.5%
-4.3%
0.0%
2.3%
2.9%
0.2%
9.4%
-6.0%
-0.8%
3.2%
-8
-6
-4
-2
0
Underweight
2
4
8
6
10
Benchmark*
Standard Retail – South East
5.6
6.9
Standard Retail – Rest of UK
2.6
8.2
Shopping Centres
1.9
6.2
Retail Warehouses
19.6
19.6
Offices – Central London
16.5
14.2
Offices – South East
11.0
8.2
Offices – Rest of UK
6.0
5.8
Industrial – South East
18.0
8.6
Industrial – Rest of UK
1.3
7.4
Other
7.7
8.6
Cash
9.6
6.4
12
Overweight
Source: IPD and Schroders, 31 March 2011
* 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 Structure
March 2011, % NAV*
Portfolio Structure
March 2010, % NAV*
At 31 March
2011
10.0%
5.8%**
Gearing (% NAV)*
23.4%
6.9%
16.3%
Average unexpired lease length 7.6 years
7.9 years
NAV*
13.4%
70.8%
Directly owned assets and cash
14.9%
Joint ventures
At 31 March
2010
£1,236.1m
£1,151.8m
61.7%
Indirect assets**
Source: Schroders 31 March 2011
* NAV: net asset value.
** Following the end of the financial year, 100% ownership of Schroder Emerging Retail Property Unit Trust was secured. At this point the 10 underlying assets effectively became directly owned.
03
Top Ten Holdings
31 March 2011
Holdings
Schroder Emerging Retail Property Unit Trust (SERPUT)**
Bracknell
Monks Cross Shopping Park, York
Acorn Industrial Estate, Crayford
Matrix, Park Royal, London NW10
Hercules Unit Trust
Fujitsu Office Complex, Central Park, Manchester
Parker Tower, London
Mermaid Quay, Cardiff
St William House, Cardiff
Sector
% NAV*
Standard Retail
Retail and Office
Retail Warehouse
Industrial
Industrial
Retail Warehouse
Office
Office
Leisure
Office
5.8
4.8
4.1
3.9
3.7
3.5
3.3
3.3
3.2
3.0
Source: Schroders, 31 March 2011
* NAV: net asset value
** Following the end of the financial year, 100% ownership of Schroder Emerging Retail Property Unit Trust was secured. At this point the 10 underlying assets effectively
became directly owned.
Top Ten Tenants
31 March 2011
Tenant
% Contracted Rent
Fujitsu Services Limited
QVC
British Telecommunications plc
Lloyds TSB Bank plc
Exel Ltd
B&Q plc
Sportsdirect.com Retail Limited
Homebase
DSG Retail Limited
Cable & Wireless UK
All other tenants
4.1
3.7
3.5
3.0
2.9
2.1
2.0
1.7
1.5
1.5
74.0
Source: Schroders, 31 March 2011
Void Profile
At 31 March 2011
SEPUT (%)
IPD (%)1
Void rate (as a % of estimated rental value
of total portfolio excluding developments)
At 31 March 2010
6.7
8.0
Void rate (as a % of estimated rental value
of total portfolio excluding developments)
8.5
8.2
Source: Schroders, IPD, 31 March 2011
1 IPD UK Pooled Property Funds weighted average.
04
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2011
Chairman’s Statement
Overview
After the sharp fall in yields during late
2009/early 2010, the UK property market
stabilised in the second half of the period under
review. The Trust has outperformed its
benchmark as the market recovered from its
lows and over the twelve months to 31 March
2011.
While the property investment market has seen
continued interest over the last twelve months,
with both institutional and retail property funds
recording strong net inflows, the occupational
market remains challenging. The improvement
in the economy and limited new supply coming
to the market has led to a slight fall in the level
of voids, but they remain above typical
equilibrium levels. The exception remains
central London offices and retail which have
seen a sustained fall in vacancy levels and
recorded rental growth thanks to the buoyancy
of global financial and business services and
international tourism.
Net Asset Value and
Performance
I am pleased to report that over the twelve
months to 31 March 2011 the Net Asset Value
(NAV) of the Trust has increased by £84.3
million to £1,236 million, from £1,152 million at
31 March 2010. The NAV per unit increased
during the twelve month period from £30.30 to
£32.01. The Trust outperformed its benchmark
over the same period, with a total return of
10.2% versus the benchmark return of 8.9%
(source: IPD). This continues the Trust’s outperformance since the market trough in June
2009, despite the transaction costs associated
with repositioning the portfolio.
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 maintained during the
period under review.
The Manager would be pleased to provide
details of the guidelines to unitholders on
request.
Gearing
Two years ago the Manager confirmed a
revised strategy of reducing exposure to
indirectly owned assets in favour of direct
holdings. Gearing within the Trust is entirely in
these indirect holdings. The Supervisory Board
limits the overall gearing to 25.0% of the NAV.
At 31 March 2011, gearing stood at 6.9% of
NAV, down from 16.3% a year before. The
current level of gearing is the lowest since 2001
and is now close to benchmark levels. The
chart below illustrates the recent movement in
gearing for the Trust.
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.
There has been no change to the membership
of the Supervisory Board.
Outlook
The Supervisory Board remains supportive of
the management team and its strategy for the
Trust. The Manager’s strategy of repositioning
the portfolio to reduce risk into an improving
investment market is now largely complete. The
reinvestment of the proceeds of sale from
generally low yielding assets into good quality
direct property has improved the risk profile of
the Trust. While challenges remain in the UK
economy, we believe the Trust’s structure and
its management should allow unitholders to
look forward to a continuation of the improved
relative returns in the year ahead.
James A. Scott
Chairman
Schroder Exempt
Property Unit Trust
Supervisory Board
15 June 2011
Historical Gearing (as % NAV)
30
25
20
15
Units in Issue and
Secondary Market
At 31 March 2011 the Trust had a total of
38,617,538 units in issue, an increase of
604,108 on a year earlier. During the year a
total of 617,948 new units were issued, while
13,840 units were redeemed.
10
5
0
March-01 March-02 March-03 March-04 March-05 March-06 March-07 March-08 March-09 March-10 March-11
Source: Schroders 31 March 2011
The secondary market was active with units
valued at £64.9 million traded between
investors over the twelve month period. This
represents 5.4% of the units in issue at the end
of the period.
05
Manager’s Statement
Performance
The Trust outperformed its benchmark over the
twelve months to 31 March 2011 as shown on
page 2. It is particularly pleasing to report this
above benchmark performance over a period
when we have repositioned the portfolio in line
with the strategy we have articulated in
previous reports. The chart below shows Trust
performance relative to its benchmark over
rolling twelve month periods. It also shows
improved consistency of returns quarter on
quarter. The Trust’s underperformance over its
three year performance measurement period
continues to be a disappointment, although we
hope to report better news this time next year.
–
Indirectly owned assets investing in central
London offices produced notably strong
performances. West End of London
Property Unit Trust (WELPUT) and
Chiswick Property Unit Trust (ChisPUT)
were the top performers, rising in value by
23.4% and 67.2% respectively. The
holding in ChisPUT was sold in March
2011, whilst half of the holding in WELPUT
was sold. These sales were in line with
strategy to reduce indirect holdings.
–
Several non-income producing sites were
sold at premiums to prior valuations.
Maritime Industrial Estate, Charlton SE7
reflected the marriage value to the
purchaser which owns the adjacent site.
Again, this was in line with strategy. We
hope to dispose of other such non-income
generating assets in the coming year.
–
Units in Hercules Unit Trust, a specialist
retail warehouse fund, were sold at a
discount to NAV and this detracted from
the total return for this investment. Again
this sale was in line with our strategy of
reducing risk, and the discount was
considered alongside the premium pricing
received on other disposals, to allow the
Trust to achieve overall outperformance.
–
In aggregate, the directly held assets
performed in line with the benchmark.
However, of the directly held income
producing assets, 68 Lombard Street,
London EC3 was the largest detractor from
relative returns. This was owing to the
impact on its valuation of the lease renewal
with the tenant, Regus, whereby the lease
was extended to 2025, but at a reduced
rent until 2015. This highlights the
challenges facing landlords in a difficult
economic environment.
The main contributors to performance relative
to benchmark over the past twelve months
were as follows:
–
The Trust’s sector positioning added 0.5%
to relative returns. The most important
decision was to be overweight to central
London offices and underweight to retail.
These positions were gradually moderated
relative to the benchmark over the period
and this has continued into the new
financial year.
Rolling twelve month fund and benchmark returns with relative
quarterly returns
Total return %
30
Repositioning strategy executed as
liquidity returned
20
10
0
-10
-20
-30
Relative return per quarter
12 mth SEPUT
12 mth IPD All Balanced Funds median
Source: Schroders 31 March 2011
06
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2011
Mar 11
Dec 10
Sep 10
Jun 10
Mar 10
Dec 09
Sep 09
Jun 09
Mar 09
Dec 08
Sep 08
Jun 08
Mar 08
Dec 07
Sep 07
Jun 07
Mar 07
Dec 06
Sep 06
Jun 06
-40
UK Property Market
Review and Outlook
The one main sector of the UK commercial
property market that has seen rental growth in
the past year has been central London offices.
This reflects strong demand from international
financial and business service companies.
Outside central London, tenant demand is still
generally tepid, vacancy rates are above
equilibrium levels and it appears that rents have
not yet bottomed out. On the high street, for
example, many long established multiple
retailers are being squeezed by a combination
of sluggish consumer spending, rising
commodity prices, the rapid growth of online
sales and the expansion of supermarkets into
clothing and other non-food items. There is
therefore a significant risk that 2011 will see a
new round of store closures and insolvencies
and that the fall in vacancy rates seen in the
retail sector in 2010 will go into reverse. Despite
this, the rental income on property portfolios
has held up remarkably well. According to
Investment Property Databank total net rental
income has only declined by 1.2% since its
peak in 2008, highlighting the extent to which
the upward only rent review clause on existing
leases protects landlords against falls in open
market rental values.
After a sharp fall in late 2009/early 2010, the all
property initial yield modestly declined from
6.7% at the beginning of the period, as we
expected last year. Over the past six months,
however, yields have stabilised at around 6.4%
(source: IPD). In keeping with the economy, the
last two years have seen a steady improvement
in liquidity. In total there were 1,900 commercial
property transactions in 2010, mid-way
between the record set in 2006 (2,500
transactions) and the trough reached in 2008
when half the number of properties were
transacted (source: Property Data). Foreign
investors and UK institutions have been the
major buyers in recent quarters, while the major
sellers have been private property companies
seeking to reduce gearing. There have been
relatively few distressed sales, despite the large
number of problem loans still held by the banks.
Strategy
Our strategy of repositioning the portfolio was
largely completed over the year and in the last
eighteen months we have successfully:
–
Reduced exposure to indirectly owned
assets and gearing levels. After the year
end the Trust bought the remaining units in
the Schroder Emerging Retail Property Unit
Trust, taking effective control of the
portfolio and thereby further reducing
exposure to indirect assets to 10.0% from
23.4% at the beginning of the year.
Gearing reduced to 6.9% from 16.3% of
NAV over the same period.
–
Improved the quality and duration of
income through the reinvestment of
proceeds from the sale of low yielding
indirectly owned assets into directly held
assets with stable income streams from
good covenants.
–
Sold non-income producing assets and
possible development sites at above prior
valuations.
The majority of the portfolio is now invested in
stable income producing direct property. Our
strategy is to balance income levels and
security with selected opportunities to meet the
Trust's performance objective. Looking ahead,
we seek to:
–
Ensure the Trust has a diversified, secure
and good quality income stream. With
income expected to be the principal driver
of property returns over the coming years,
this will be important for providing more
consistent returns.
–
Source, select and analyse new
opportunities carefully, using our property
research capabilities and extensive market
contacts to identify the most appropriate
properties in the context of the Trust’s
existing property portfolio.
–
Execute business plans for all assets in the
portfolio, determining how and when we
expect to generate value from each asset.
07
Manager’s Statement (continued)
Portfolio Activity
Transactions over the period have continued
with the strategy of reducing exposure to
indirectly owned assets, improving the quality
and duration of income, and selling existing
development opportunities. The completion of
various sales towards the end of the period led
to a temporarily higher cash weighting than the
benchmark. In the short term this may create a
minor drag on returns, but allows us to take
advantage of opportunities as they arise. Since
year end, a portfolio of car showrooms has
been added to the portfolio at a cost of
£25 million with an income yield of over 7.0%
and capped RPI uplifts.
The full list of purchases and sales is detailed
on page 10.
Purchases included:
Tower Industrial Estate, Crayford, London
A parade of five industrial units, the estate was
bought at an initial yield of 7.2% and is
adjacent to the Trust’s existing holding, the
Acorn Industrial Estate. In time, the enlarged
site provides the potential for better
configuration of units and improved access.
QVC Building (Building 8), Chiswick Park,
London
The site was bought from Chiswick Park Unit
Trust (ChisPUT) with a pre-let signed with QVC
for a term of 21 years and a construction
contract in place. On completion the building
provides 124,000 sq ft of modern office
accommodation and £5.1 million of
development profit for the Trust. The building
has already reached practical completion and
the occupier is currently fitting out. An
agreement allows ChisPUT to buy back the
QVC Building before July 2013 at a price which
would crystallise a further 10.5% profit.
Hall Road Retail Park, Norwich
With a net initial yield of 6.6%, these two
terraces of units are let to mostly lower risk
covenants with an average unexpired lease
length of 13 years. Planning permission is in
place for an additional 60,000 sq ft of future
development. No value was attributed to the
planning consent at the price paid and as such
can be viewed as genuine upside potential.
Schroder Emerging Retail Property Unit
Trust (SERPUT)
The Trust increased its holding in the SERPUT
to over 99.8% from 68.4% at 31 March 2010.
100.0% ownership of the Trust was secured
following the year end. The acquisition of
SERPUT effectively brings a total of ten direct
08
retail properties into the portfolio with an initial
yield of approximately 7.0%.
Sales included:
Maritime Industrial Estate, Charlton,
London & 403-433 Woolwich Road/
1 Gallions Road, Charlton, London
These properties were largely vacant with plans
drawn to redevelop the site whilst the Woolwich
Road site was an adjacent retail warehouse
unit. This was sold to an owner of an adjacent
retail warehouse site, at a price significantly
above valuation reflecting the marriage value
between the two ownerships.
97 Oxford Road, Uxbridge
A vacant office building, with planning
permission in place for a 70,000 sq ft
redevelopment, was sold at significantly above
its previous valuation. The sale was in line with
the Trust’s current policy of not undertaking
speculative development, and reducing
holdings of non-income producing assets.
Monks Cross Retail Park, York
Part of the Trust’s holding was sold to a new
(fourth) joint venture partner which allows the
Trust to reduce stock specific risk and realise a
valuation uplift. The Trust remains committed to
this investment.
Chiswick Park Unit Trust (ChisPUT)
A total of £56.4 million was received from the
sale of ChisPUT in March 2011. In the last year
of its ownership, the total return of ChisPUT
was 67.2%. This was driven by significant
letting activity, valuation improvement and
enhanced by Trust gearing.
Other Indirect Assets
During the period the sale of indirect assets
had been progressed significantly reducing the
risk and gearing profiles within the portfolio.
£37.0 million of units in the West End London
Property Unit Trust (WELPUT) and £27.0 million
units in the Hercules Unit Trust (HUT) were sold
during the period. In addition, the entire holding
in AH Medical plc, a listed property company,
was sold for £6.1 million.
Asset Management
Activities
The role which assets like the Bracknell
Regeneration project and Croydon Gateway
Site have performed in the portfolio should also
be regarded in a more optimistic light now that
the overall risk profile of the Trust has been
reduced.
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2011
Croydon Gateway, representing just 2.0% of
NAV, is subject to a revised planning
application due for decision in the third quarter
of 2011. The application reconfirms a master
plan for approximately 1 million sq ft of office
accommodation and approximately 500
residential units, based around a major
proposed upgrade of East Croydon station. At
a time when West End rents are approaching
£100 psf once again, the attractions of this
deliverable scheme, just 15 minutes from
Victoria are becoming more obvious to a
growing number of occupiers.
The existing shopping centre in Bracknell,
representing 4.8% of NAV, continues to provide
a gross income return of over 6.0% whilst plans
for the significant regeneration of other parts of
the town in the Trust’s ownership are finalised.
This year, the major letting of a 35,000 sq ft
supermarket to Waitrose as part of the town
centre was a major milestone for the proposed
scheme not only in terms of our intent, but
more importantly in terms of a mark of the
quality of retailing environment we (and Legal &
General our JV partner) are seeking to create.
While further phases will be dependent on
occupier demand, the stronger retailers seeking
to secure a pipeline of future store openings in
affluent South East locations have responded
positively to the announcement that Waitrose
are due to open in November 2011.
Summary
Our strategy of repositioning the Trust is now
largely complete, with a reduction in the levels
of indirect assets, gearing and risk within the
portfolio. Uncertainties remain over the outlook
for the UK economy and our central view is that
all property total returns in 2011 will be close to
the rate of income return of 6.0%. However,
sub-sectors of the market are likely to provide
some deviation from the average. Total returns
for central London offices could reach double
figures, reflecting an increase in capital values
as rental growth continues. In contrast, high
street retail and provincial office and industrials
are more likely to produce a total return of
3-4%, as open market rents and capital values
remain weak.
I D Mason
Fund Manager
15 June 2011
Rent Reviews, Lettings and
Lease Renewals
During the year ended 31 March 2011
Rent Reviews
In the directly held portfolio 30 rent reviews were settled over the year, adding an additional £260,000 to rental income per annum. This reflects
an uplift of 8.1% on the old rent and was 4.7% 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 2011).
Notable rent reviews
Old Rent
(per annum)
New Rent
(per annum)
ERV
(per annum)
Cineworld
368,600
427,308
368,600
Cardiff Bay Retail Park
Sportsdirect.com
138,750
164,934
142,900
Mermaid Quay, Cardiff
Pizza Express
76,500
109,000
92,700
Property
Tenant
West India Quay
Source: Schroders, 31 March 2011
New Lettings
In the directly held portfolio 40 new lettings were completed adding £2.9 million per annum to the rent roll (Source: Schroders, 31 March 2011).
Notable new lettings
Old Rent
(per annum)
New Rent
(per annum)
ERV
(per annum)
Lego Company Ltd
n/a
167,486
109,200
ADM Promotions UK Ltd
n/a
167,375
169,100
Hennes & Mauritz UK Ltd
n/a
176,960
176,960
Property
Tenant
Capital Point, Slough
Kensington Village, London W14
Monks Cross Retail Park, York
Source: Schroders, 31 March 2011
Lease Renewals
In the directly held portfolio 15 leases were renewed totalling £813,511 per annum, approximately 2.5% below estimated rental values (Source:
Schroders, 31 March 2011).
09
Purchases and Sales
During the year ended 31 March 2011
Purchases
Name
Sector
Type
Lot size
Tower Industrial Estate, Crayford, London (part purchase)
QVC, Building 8 Chiswick Park, London
Hall Road Retail Park, Norwich
Schroder Emerging Retail Property Unit Trust (SERPUT)
(part purchase)
Industrial
Rest of UK Offices
Retail Warehouse
Direct
Direct
Direct
Under £10m
Under £10m
Over £25m
Standard Retail
Direct
Between £10m and £25m
Total
£82.2 million
Sales
Name
Sector
Type
Lot size
Chiswick Property Unit Trust (ChisPUT)
West End of London Property Unit Trust (WELPUT) (part sale)
Hercules Unit Trust (HUT) (part sale)
Monks Cross Retail Park, York (part sale)
Maritime Industrial Estate, Charlton, London SE7
403/433 Woolwich Road, Charlton, London SE7
AH Medical plc
97 Oxford Road, Uxbridge
Residential Property Unit Trust (ResPUT)
Rest of UK Offices
Central London Offices
Retail Warehouse
Retail Warehouse
Industrial
Retail Warehouse
Other
Rest of UK Offices
Other
Indirect
Indirect
Indirect
JV
Direct
Direct
Indirect
Direct
Indirect
Over £25m
Over £25m
Over £25m
Between £10m and £25m
Between £10m and £25m
Under £10m
Under £10m
Under £10m
Under £10m
Total
£170.0 million
Source: Schroders, 31 March 2011
10
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2011
Portfolio Details
At 31 March 2011
Portfolio Holdings
Name
Lot size
Type
Schroder Emerging Retail Property Unit Trust (SERPUT)
Over £25m
Indirect
235-240 High Street, Exeter
Between £5m and £10m
Direct
Cardiff Bay Retail Park, Cardiff
Over £25m
JV
Hall Road Retail Park, Norwich
Over £25m
Direct
Hercules Unit Trust (HUT)
Over £25m
Indirect
Monks Cross Retail Park, York
Over £25m
JV
Hythe Riverside Park, Colchester
Between £10m and £25m
Direct
Henderson UK Retail Warehouse Fund (HRWF)
Between £10m and £25m
Indirect
Interchange Retail Park, Ipswich
Between £10m and £25m
Direct
Hercules Unit Trust (HUT) – 10% Convertible Bond
Between £5m and £10m
Indirect
Over £25m
JV
Parker Tower, London WC2
Over £25m
Direct
Kensington Village, London W14
Over £25m
Direct
West End of London Property Unit Trust (WELPUT)
Over £25m
Indirect
Palace House, 3 Cathedral Street, London SE1
Between £10m and £25m
Direct
81-82 Dean Street, London W1
Between £10m and £25m
Direct
68 Lombard Street, London EC3
Between £10m and £25m
Direct
Moorgate, London EC2
Between £10m and £25m
Direct
Mark Lane, London EC3
Between £10m and £25m
Direct
4-7 Chiswell Street, London EC1
Between £10m and £25m
Direct
11/12 Appold Street, London EC2
Between £5m and £10m
Direct
Fujitsu Office Complex, Central Park, Manchester
Over £25m
Direct
St William House, Cardiff
Over £25m
Direct
QVC, Building 8 Chiswick Park, London W4
Between £10m and £25m
Direct
Bracknell Beeches, Bracknell
Between £10m and £25m
Direct
Gateway Site, Croydon
Between £10m and £25m
Direct
AMP House, Croydon
Between £10m and £25m
Direct
New Century Place, Reading
Between £5m and £10m
Direct
Capital Point, Slough
Between £5m and £10m
Direct
Europa House, Bath Road, Cranford
Under £5m
Direct
Eagle House Limited, Bracknell
Under £5m
JV
Standard Retail
Retail Warehouse
Retail and Office
Bracknell Property Unit Trust (BPUT)
Central London Offices
Rest of UK Offices
11
Portfolio Details (continued)
Name
Lot size
Type
Matrix, Park Royal, London NW10
Over £25m
Direct
Acorn Industrial Estate, Crayford
Over £25m
Direct
Electra, Canning Town, London E16
Over £25m
Direct
Felnex Trading Estate, Hackbridge
Over £25m
Direct
Woking Business Park, Woking
Between £10m and £25m
Direct
Chiltern Park, Units A-D, Dunstable
Between £10m and £25m
Direct
Albany Park, Frimley
Between £10m and £25m
Direct
Rockware Avenue, Greenford
Between £10m and £25m
Direct
Deykin Avenue, Birmingham
Between £10m and £25m
Direct
Quadrant Park, Welwyn Garden City
Between £10m and £25m
Direct
The Arenson Centre, Dunstable
Between £5m and £10m
Direct
Livingston Limefields
Under £5m
Direct
Teesland iDG Sutton Unit Trust (TiDGSUT)
Under £5m
JV
Alexandra Court, James Street, York
Under £5m
Direct
Greenford, Land
Under £5m
Direct
Walkmill Lane, Cannock
Under £5m
Direct
Livingston Land
Under £5m
Direct
Mermaid Quay, Cardiff
Over £25m
Direct
West India Quay Unit Trust (WIQUT)
Over £25m
JV
UNITE UK Student Accommodation Fund (UNITE)
Between £10m and £25m
Indirect
Gresham Property Partners LP (Gresham)
Under £5m
Indirect
Jacksons Landing, Hartlepool
Under £5m
Direct
Industrial
Other
12
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2011
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 also
confirms that the Financial Statements have
been prepared on the going concern basis.
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
2011 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 2011
In our opinion the aggregate of the market
values of the 38 properties owned by the Trust
at 31 March 2011 is £643.87 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 2011
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 2011 which
comprise the 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. These financial statements have
been prepared under the accounting policies
set out therein.
Respective
responsibilities of the
Manager, Trustees
and Auditors
The Manager’s responsibilities for preparing the
annual report and financial statements in
accordance with applicable law and United
Kingdom Accounting Standards (United
Kingdom Generally Accepted Accounting
Practice) are set out in the statement of
Manager’s responsibilities.
Our responsibility is to audit the financial
statements in accordance with relevant legal
and regulatory requirements and International
Standards on Auditing (UK and Ireland). This
report, including the opinion, has been prepared
for and only for the Trust’s unitholders as a
body in accordance with the Trust Instrument
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.
We report to you our opinion as to whether the
financial statements give a true and fair view
and are properly prepared in accordance with
the Trust Instrument. We also report to you if, in
our opinion, proper accounting records for the
Trust have not been kept or if the financial
statements are not in agreement with those
records, if we have not received all the
information and explanations we require for our
audit, or if the information given in the
Manager’s report is not consistent with the
financial statements.
We read the other information contained in the
annual report and consider whether it is
consistent with the audited financial statements.
This other information comprises only the 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 Valuers
Report, Supervisory Board and Key Service
Providers, Additional Unitholder Information,
General Meeting and General Information. We
consider the implications for our report if we
become aware of any apparent misstatements
or material inconsistencies with the financial
statements. Our responsibilities do not extend
to any other information.
Basis of audit opinion
We conducted our audit in accordance with
International Standards on Auditing (UK and
Ireland) issued by the Auditing Practices Board.
An audit includes examination, on a test basis,
of evidence relevant to the amounts and
disclosures in the financial statements. It also
includes an assessment of the significant
estimates and judgements made by the
Manager in the preparation of the financial
statements, and of whether the accounting
policies are appropriate to the Fund’s
circumstances, consistently applied and
adequately disclosed.
Opinion
In our opinion the financial statements:
–
give a true and fair view, in accordance with
United Kingdom Generally Accepted
Accounting Practice, of the state of affairs
of the Trust as at 31 March 2011 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 the Trust Instrument.
PricewaterhouseCoopers LLP
Chartered Accountants
London
15 June 2011
We planned and performed our audit so as to
obtain all the information and explanations
which we considered necessary in order to
provide us with sufficient evidence to give
reasonable assurance that the financial
statements are free from material misstatement,
whether caused by fraud or other irregularity or
error. In forming our opinion we also evaluated
the overall adequacy of the presentation of
information in the financial statements.
15
Financial Statements
31 MARCH 2011
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 2011
Statement of Net Assets
At 31 March
2011
£’000
2010
£’000
493,374
108,954
470,153
102,973
2(a)
602,328
573,126
39,800
15,200
2(b)
39,800
15,200
2
642,128
588,326
–
6,476
4
9,462
9,462
5(b)
457,801
1,109,391
506,350
1,110,614
6
16
23,995
133,655
157,650
1,267,041
18,190
51,346
69,536
1,180,150
8
13
12(a)
19,861
6,920
4,134
30,915
19,321
6,371
2,652
28,344
9
1,236,126
1,151,806
£32.01
£30.30
Notes
Fixed assets
Investment property
Freehold property
Leasehold property
Development property
Sites in the course of development at valuation:
Freehold property
Total valuation of investment and development property
Investment in property equities
Investment in subordinated convertible notes
Property related investments
Total fixed assets
Current assets
Debtors
Cash at bank and on deposit
Total current assets
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 15 June 2011 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
2011
£’000
2010
£’000
38,392
82
5,641
9,241
36,259
196
6,098
9,312
Net rental income
34,874
33,241
Income from property related investments
20,901
23,379
946
275
803
143
268
238
660
30
57,381
56,925
Notes
Rents receivable
Other income
Service charge income
Less: property expenses
1(f)
1(f)
11
Income from subordinated convertible notes
Interest receivable on bank deposits
Less: finance costs: interest payable
1(h)
12(c)
Net interest income
Net income before tax
Less: income tax
13(a)(i)
11,476
11,385
45,905
45,540
127
197
6,331
216
90
12
271
145
186
4,896
140
85
68
286
7,244
5,806
12(a)
38,661
(41,479)
39,734
(42,182))
14
(2,818)
(2,448)
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
18(a)
18(b)
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 2011
Statement of Total Recognised
Gains and Losses
For the year ended 31 March
Notes
2011
£’000
2010
£’000
14
14
14
9,305
32,063
(410)
863
1,591
–
14
14
14
14
18,853
5,538
2,563
–
28,660
787
(323)
3,429
67,912
38,661
35,007
39,734
106,573
74,741
Realised profit/(loss) on:
Investment property sold
Property related investments sold
Property equities sold
Movement in revaluation reserve for retained:
Investment property
Sites in the course of development
Property related investments
Property equities
Capital surplus for the year
Net income available for distribution
Total recognised gains
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
Returns on investment and servicing of finance
Interest received
Interest paid
Distributions paid
Notes
2011
£’000
2010
£’000
15
44,212
49,917
12(c)
786
(143)
(39,998)
–––––––
Tax paid
160
(238)
(43,030)
–––––––
(39,355)
(43,108)
(10,835)
(8,231)
Capital expenditure and financial investment
Sale of investment property:
Freehold
Leasehold
40,429
–
55,917
9,185
Purchase of investment property:
Freehold
(34,312)
(133,153)
(6,985)
–
(40,936)
123,541
(10,128)
37,113
6,071
–
–
(9,462)
(18,747)
–––––––
(3,166)
–––––––
Purchase of development property:
Freehold
Property related investments:
Purchases
Sales
Property equities:
Sales
Subordinated convertible notes:
Purchase
Other capital expenditure
69,061
–––––––
63,083
Cash inflow before financing
Financing
Issue of units
Units redeemed
Loans repaid
Increase in cash
10
10
7
19,657
(431)
–
–––––––
16
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 2011
(53,694)
–––––––
(55,116)
105,133
(7,143)
(5,000)
–––––––
19,226
–––––––
82,309
–––––––
92,990
–––––––
37,874
–––––––
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 fixed
assets, property related investments and
property equities, as explained in notes 1(a),
1(b) and 1(d) 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 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) Property related investments are valued
at the net asset value as provided by the
relevant managers, in accordance with
industry practice.
(c) Investments in Subordinated Convertible
Notes are held at cost until conversion.
(d) Property equities are valued at bid price,
using the exchange price at the year end.
(e) 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.
(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.
(g) 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.
(h) Interest receivable and payable are
accounted for on an accruals basis.
(i) 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.
(j) In accordance with FRS 25, income
distributions are classified as finance costs
and are accounted for on an accruals basis.
(k) 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.
(l) 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.
(m) 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.
(n) 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.
(o) 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).
21
Notes to the Financial Statements (continued)
2. Fixed assets
Freehold
£’000
Leasehold
£’000
Total
£’000
(a) Investment property
Valuation at 1 April 2010
Additions to existing properties at cost
Cost of properties purchased
Value of properties sold
Movement in revaluation reserve
470,153
1,199
34,312
(25,556)
13,266
102,973
404
–
–
5,577
573,126
1,603
34,312
(25,556)
18,843
Valuation at 31 March 2011
493,374
108,954
602,328
(b) Development property
Valuation at 1 April 2010
Additions at cost
Cost of properties purchased
Value of properties sold
Movement in revaluation reserve
15,200
15,995
8,067
(5,000)
5,538
–
–
–
–
–
15,200
15,995
8,067
(5,000)
5,538
Valuation at 31 March 2011
39,800
–
39,800
Total valuation of investment and development property
533,174
108,954
642,128
Reconciliation to market valuation
Market valuation at 31 March 2011
Unamortised tenant incentives
534,150
(976)
109,720
(766)
643,870
(1,742)
Valuation at 31 March 2011
533,174
108,954
642,128
The valuation of investment and development property valued by the independent valuer, BNP Paribas Real Estate Advisory and Property Management
UK Limited, was £643.9 million at 31 March 2011 (£590.3 million at 31 March 2010).
The Trust purchased Building 8, Chiswick Park, in July 2010 from The Chiswick Park Unit Trust (ChisPUT). The purchase price was £6.5 million.
Simultaneous with the purchase, the Trust entered into an option agreement to sell back the building within a period of three years from the date of
completion. The terms of the option agreement state that the option is non-transferable (other than to a purchaser of all or a substantial part of the
Chiswick Park Estate) and that if exercised ChisPUT must pay the Trust for any uplift in value, therefore it has been determined that the risks and rewards
of ownership of the property have been assumed by the Trust and that it should be included within the assets of the Trust as a development property.
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
31 March 2011
£’000
31 March 2010
£’000
25,500
50,250
24,300
63,250
75,750
87,550
3. Investment in property equities
The Trust disposed of its entire interest in AH Medical Properties plc, a PLUS listed property investment company on 31 July 2010 for a sale price of
£6.1 million (32p per share), giving rise to a loss of £1.9 million.
22
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2011
4. Investment in subordinated convertible notes
Percentage
holding at
31 March 2011
%
Cost at
31 March 2011
£’000
4.7
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%; conversion of the Notes is
available at any time at the discretion of the noteholder. On conversion, the Notes will be
converted into a variable number of units equivalent to the face value of the Notes. The
conversion price will be set at the prevailing Net Asset Value of HUT, as adjusted for the
mark to market value of any hedging arrangements of the senior debt; the issuer has the
right to redeem any Notes in issue after 7 January 2012. Notes in issue will mature on
22 September 2020.
5. Property related investments
(a) Basis of valuation
The total value of property related investments at 31 March 2011 stood at £457.8 million
(31 March 2010: £506.4 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)
Bracknell Property Unit Trust*
Croydon Gateway Property Unit Trust*
City of London Office Unit Trust*
(iv)
(v)
(vi)
(vii)
Capital Point Slough Unit Trust*
City Property Unit Trust*
Gresham Property Partners, L.P.*
Hackbridge Unit Trust*
(viii)
(ix)
(x)
(xi)
Henderson UK Retail Warehouse Fund
Hercules Unit Trust*
Lombard Street Unit Trust*
Parker Tower Unit Trust*
(xii)
(xiii)
(xiv)
(xv)
(xvi)
(xvii)
Schroder Emerging Retail Property Unit Trust*
Teesland iDG Sutton Unit Trust
UNITE UK Student Accommodation Fund
West End of London Property Unit Trust*
West India Quay Unit Trust
Bracknell Eagle House Limited
(BPUT)
(CGPUT)
(CLOUT)
BNP Paribas Real Estate
BNP Paribas Real Estate
BNP Paribas Real Estate
(CPSUT)
(CPUT)
(Gresham)
(HackUT)
BNP Paribas Real Estate
BNP Paribas Real Estate
BNP Paribas Real Estate
BNP Paribas Real Estate
(HRWF)
(HUT)
(LSUT)
(PTUT)
CB Richard Ellis Limited
CB Richard Ellis Limited
BNP Paribas Real Estate
BNP Paribas Real Estate
(SERPUT)
(TiDGSUT)
(UNITE)
(WELPUT)
(WIQUT)
(BEH)
Allsop LLP
BNP Paribas Real Estate
CB Richard Ellis Limited
CB Richard Ellis Limited
Jones Lang LaSalle Limited
BNP Paribas Real Estate
* Schroder managed property funds
23
Notes to the Financial Statements (continued)
5. Property related investments (continued)
(b) Movements during the year
The Trust owned the following interests in property related investments:
BPUT
CGPUT
ChisPUT
CLOUT
Percentage
holding at
31 March 2011
%
49.6
97.3
0.0
26.8
Valuation at
1 April 2010
£’000
59,262
42,734
35,980
526
Additions
at cost
£’000
1,710
2,271
–
–
Cost of
investments
sold
£’000
–
–
(29,914)
(49)
Movement in
revaluation
reserve for
investments
sold
£’000
–
–
(6,066)
(33)
CPSUT
CPUT
Gresham
HackUT
100.0
95.9
19.5
100.0
7,606
29,409
1,390
30,930
1,603
8,954
–
–
–
–
–
–
–
–
–
–
94
1,835
(5)
(95)
9,303
40,198
1,385
30,835
HRWF
HUT
LSUT
PTUT
ResPUT
3.3
4.6
100.0
100.0
0.0
17,541
71,734
18,345
39,901
1,874
–
–
1,277
138
–
–
(22,542)
–
–
(1,885)
–
3,090
–
–
11
2,981
(8,729)
(987)
707
–
20,522
43,553
18,635
40,746
–
SERPUT
TiDGSUT
UNITE
WELPUT
WIQUT
99.8
50.0
2.7
6.5
50.0
48,591
2,999
13,484
61,968
21,300
23,331
–
–
(282)
(320)
–
–
–
(33,295)
–
–
–
–
(762)
–
210
170
900
4,683
5,420
72,132
3,169
14,384
32,312
26,400
AHUT
BSUT
BEH
26.8
26.8
50.0
294
115
367
506,350
–
–
1,651
40,333
–
–
–
(87,685)
–
–
–
(3,760)
–
17
(587)
2,563
294
132
1,431
457,801
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.
A provision has been made within the revaluation reserve, for the investment of HUT, for £0.6 million
(31 March 2010: £0.6 million). This reflects the dilution of ownership relating to the convertible price
of bonds when converted to units. These bonds will convert at the adjusted NAV (to include the
mark-to-market on any hedges in place at the conversion date).
At 31 March 2011, the Trust’s holding in each of HackUT, LSUT and PTUT stood at 100.0% and
the Trust’s holdings in CGPUT and CPUT at 31 March 2011 stood at 97.3% and 95.9%
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. Therefore, as
significant control cannot be exercised, these investments are not consolidated.
The Trust’s holding in CPSUT at 31 March 2011 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.
Although the Trust’s holding in SERPUT is in excess of 50.0%, the Trust’s voting rights are limited to
50.0% and therefore, because the Trust cannot control SERPUT’s financial and operating policies,
no controlling interest arises and the holding is not consolidated.
The Trust’s investment in Gresham of £1.4 million at 31 March 2011 (31 March 2010: £1.4 million)
included an accrual for carried interest payable of £0.8 million (31 March 2010: £0.8 million).
24
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2011
Movement in
revaluation
reserve for
retained
investments
£’000
(1,814)
(2,327)
–
90
Valuation at
31 March 2011
£’000
59,158
42,678
–
534
5. Property related investments (continued)
(c) Summary of financial information at 31 March 2011
The information detailed below contains information as provided by the relevant managers at 31 March 2011.
Debt
£’000
Other assets/
(liabilities)
£’000
Net asset
value
£’000
Adjustment to
fair value
debt*
£’000
120,100
42,600
–
700
9,500
–
–
–
–
–
–
1,216
–
1,295
(197)
120,100
43,816
–
1,995
9,303
–
–
–
–
–
95.9
19.5
100.0
3.3
4.6
38,740
7,103
30,700
995,105
1,588,348
–
–
–
(459,496)
(794,146)
3,200
–
135
91,047
158,578
41,940
7,103
30,835
626,656
952,780
–
–
–
(23,656)
(27,646)
LSUT
PTUT
ResPUT
SERPUT
TiDGSUT
UNITE**
100.0
100.0
0.0
99.8
50.0
2.7
17,200
40,700
–
67,180
11,400
1,231,500
–
–
–
–
(5,110)
(612,000)
1,435
46
–
5,084
48
(86,100)
18,635
40,746
–
72,264
6,338
533,400
–
–
–
–
–
(35,400)
WELPUT
WIQUT
AHUT
BSUT
BEH
6.5
50.0
26.8
26.8
50.0
707,250
52,800
–
–
6,100
(210,000)
–
–
–
(2,776)
(2,055)
–
1,112
492
(461)
495,195
52,800
1,112
492
2,863
(3,845)
–
–
–
–
4,967,026
(2,083,528)
174,875
3,058,373
(90,547)
524,942
(86,075)
18,934
457,801
(3,258)
Trust’s holding at
31 March 2011
%
Property
value
£’000
BPUT
CGPUT
ChisPUT
CLOUT
CPSUT
49.6
97.3
0.0
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. The relevant information on interest rate swaps for
HRWF is not available at the date of this report. Revaluation to fair value of the remaining swap
agreements at 31 March 2011 would give rise to a combined total deficit of £3.3 million
(31 March 2010: deficit £6.4 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 28 February 2011 and 31 December 2010
respectively.
25
Notes to the Financial Statements (continued)
6. Debtors
31 March 2011
£’000
31 March 2010
£’000
6,910
3,932
5,279
1,400
342
1,207
85
2,176
742
1,922
4,098
3,918
4,894
1,485
489
481
1,143
–
–
1,682
23,995
18,190
31 March 2011
£’000
31 March 2010
£’000
–
–
31 March 2011
£’000
31 March 2010
£’000
5,831
5,167
20
5,279
2,282
1,282
5,330
3,095
1,194
4,894
2,100
2,708
19,861
19,321
Notes
31 March 2011
£’000
31 March 2010
£’000
10
14
14
14
14
14
904,309
(105,938)
288,012
172,840
(1,933)
(21,164)
885,083
(127,715)
275,767
137,017
–
(18,346)
1,236,126
1,151,806
Rents receivable
Distributions due from property related investments
Tenant deposits
UITF 28 accrued rents receivable
UITF 28 unamortised tenant incentives
VAT recoverable
Amounts due from Eagle House Ltd
Amounts due from Bracknell Property Unit Trust
Amounts due from Hackbridge Ltd
Other debtors and prepayments
Total debtors
7. Bank loans
Counterparty
Lloyds TSB Bank plc
The Trust entered into an unsecured £100 million committed loan facility with Lloyds TSB Bank plc
on 17 December 2007 (31 March 2010: £100 million uncommitted loan facility). The facility expired
on 17 December 2010.
8. Creditors
Rents received in advance
Provision for doubtful debts
Trade creditors
Tenant deposits
Other creditors and accruals
Amounts due on properties
Total creditors
9. 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.
26
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2011
10. Amounts paid to Trustee for investment
No. of
Units
Value
£’000
Opening balance at 1 April 2010
Units issued during the year
Units redeemed during the year
38,013,430
617,948
(13,840)
885,083
19,657
(431)
Closing balance at 31 March 2011
38,617,538
904,309
31 March 2011
£’000
31 March 2010
£’000
Service charge expenses
Letting fees
Rates
Rent review fees
Other
6,163
336
775
91
1,876
6,858
186
394
220
1,654
Total property expenses
9,241
9,312
11. Property expenses
For the year ended
12. 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 2010
£’000
4,368
(874)
3,494
(341)
3,153
May 2010
£’000
4,788
(958)
3,830
(327)
3,503
June 2010
£’000
4,725
(945)
3,780
(296)
3,484
July 2010
£’000
4,618
(924)
3,694
(329)
3,365
August 2010
£’000
4,597
(919)
3,678
(350)
3,328
September 2010
£’000
4,678
(935)
3,743
(417)
3,326
4,027
4,461
4,429
4,289
4,247
4,261
October 2010
£’000
5,455
(1,091)
4,364
(569)
3,795
November 2010
£’000
4,583
(917)
3,666
(327)
3,339
December 2010
£’000
4,482
(896)
3,586
(399)
3,187
January 2011
£’000
4,722
(944)
3,778
(374)
3,404
February 2011
£’000
4,719
(944)
3,755
(313)
3,462
March 2011
£’000
5,646
(1,129)
4,517
(384)
4,133
4,886
4,256
4,083
4,348
4,406
5,262
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)
31 March 2011
£’000
57,381
(11,476)
45,905
(4,426)
41,479
52,955
31 March 2010
£’000
56,925
(11,385)
45,540
(3,358)
42,182
53,567
The balance of amounts accrued under UITF 28 for the year ended 31 March 2011 was a deficit of
£1,742,000 (31 March 2010: deficit of £1,974,000). 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)
12. 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 2010
pence
11.3445
(2.2689)
9.0756
(0.8860)
8.1896
May 2010
pence
12.3995
(2.4799)
9.9196
(0.8500)
9.0696
June 2010
pence
12.2324
(2.4465)
9.7859
(0.7660)
9.0199
July 2010
pence
11.9553
(2.3911)
9.5642
(0.8510)
8.7132
August 2010
pence
11.9023
(2.3805)
9.5218
(0.9050)
8.6168
September 2010
pence
12.1110
(2.4222)
9.6888
(1.0800)
8.6088
10.4585
11.5495
11.4664
11.1043
10.9973
11.0310
October 2010
pence
14.1216
(2.8243)
11.2973
(1.4740)
9.8233
November 2010
pence
11.8637
(2.3727)
9.4910
(0.8470)
8.6440
December 2010
pence
11.6018
(2.3204)
9.2814
(1.0330)
8.2484
January 2011
pence
12.2275
(2.4455)
9.7820
(0.9670)
8.8150
February 2011
pence
12.2207
(2.4441)
9.7766
(0.8080)
8.9686
March 2011
pence
14.6172
(2.9234)
11.6938
(0.9810)
10.7128
12.6476
11.0167
10.5688
11.2605
11.4127
13.6362
31 March 2011
pence
148.5975
(29.7195)
118.8780
(11.4480)
107.4300
137.1495
31 March 2010
pence
160.1232
(32.0248)
128.0984
(9.2970)
118.8014
150.8262
31 March 2011
£’000
143
31 March 2010
£’000
238
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 2011
13. 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 2011
£’000
31 March 2010
£’000
11,476
(336)
11,140
336
11,476
11,385
(461)
10,924
461
11,385
Net income before tax
Tax on net income at basic rate of 20%
31 March 2011
£’000
57,381
11,476
31 March 2010
£’000
56,925
11,385
Effects of:
Permanent adjustments
Adjustments in respect of previous year
Current tax charge for the year
1
(336)
11,141
1
(461)
10,925
31 March 2011
£’000
(490)
(336)
(826)
31 March 2010
£’000
(29)
(461)
(490)
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
13(b)
13(a)(ii)
(ii) Factors affecting tax charge for the year ended
Notes
13(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
13(a)(i)
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)
14. Reserves
Revaluation Reserve
Freehold
property
£’000
Opening balance
at 1 April 2010
Movement in revaluation
reserve for retained:
Investment property
Sites in the course
of development
Property related
investments
Investment property sold
Property related
investments sold
Sites in the course
of development sold
Property equities sold
Deficit on Income and
Expenditure Account
Realised net profit/(loss) on:
Investment property sold
Property related investments sold
Property equities sold
Closing balance at
31 March 2011
Property
Leasehold
related
property investments
£’000
£’000
Deficit on
Total Income and
Property revaluation Expenditure
equities
reserve
Account
£’000
£’000
£’000
Realised
Realised
net profit
Realised
net profit/
(loss) on property
net profit
investment
related on property
property investments
equities
sold
sold
sold
£’000
£’000
£’000
Total
reserves
£’000
11,247
(10,511)
(126,928)
(1,523)
(127,715)
(18,346)
275,767
137,017
–
266,723
13,387
5,466
–
–
18,853
–
–
–
–
18,853
5,538
–
–
–
5,538
–
–
–
–
5,538
–
(4,005)
–
–
2,563
–
–
–
2,563
(4,005)
–
–
–
4,005
–
–
–
–
2,563
–
–
–
(3,760)
–
(3,760)
–
–
3,760
–
–
1,065
–
–
–
–
–
–
1,523
1,065
1,523
–
–
(1,065)
–
–
–
–
(1,523)
–
–
–
–
–
–
–
(2,818)
–
–
–
(2,818)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
9,305
–
–
–
32,063
–
–
–
(410)
9,305
32,063
(410)
27,232
(5,045)
(128,125)
–
(105,938)
(21,164)
288,012
172,840
(1,933)
331,817
15. 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 convertible bonds
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 2011
£’000
34,874
20,901
946
(7,244)
49,477
31 March 2010
£’000
33,241
23,379
275
(5,806)
51,089
(5,805)
540
44,212
(4,222)
3,050
49,917
Net cash flow
£’000
82,309
82,309
31 March 2011
£’000
133,655
133,655
16. Reconciliation of movement in net cash flow
Cash at bank and on deposit
Net cash
30
1 April 2010
£’000
51,346
51,346
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2011
17. 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 2010: £1.2 million) and £12.8 million on Building 8, Chiswick Park, London.
At 31 March 2011, 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 2010: £7.3 million). This
has no current impact on the Trust’s holding in BPUT or these Financial Statements.
18. 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, with the exception of SERPUT, where the Trust receives a rebate of 0.3%
on SERPUT’s gross property value (based on the Trust’s holding). 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(g) and 12(b)).
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(g)
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 2011
£’000
6,330
1
6,331
31 March 2010
£’000
4,876
20
4,896
619
(1)
6,949
1,120
(20)
5,996
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 2011 represented an annualised rate of approximately 0.6% (31 March 2010: 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)
18. 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 2011
£’000
59
32
645
31 March 2010
£’000
59
36
569
BPUT
CGPUT
ChisPUT
CPSUT
31 March 2011
£’000
3,145
63
3,121
575
31 March 2010
£’000
3,485
1,342
2,373
29
HackUT
2,160
1,963
HUT
LSUT
PTUT
ResPUT
SERPUT
WELPUT
1,823
751
2,203
–
2,768
1,339
1,774
1,155
2,651
27
2,689
2,120
The Royal Bank of Scotland plc (Trustee)
Supervisory Board
Schroder Property Investment Management Limited
Outstanding balances were due from Bracknell Eagle House Limited, Bracknell Property Unit Trust
and Hackbridge Limited as set out within note 6, which are considered to be related parties under
FRS 8.
(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 2011
19. Financial instruments
The primary financial instruments held by the Trust at 31 March 2011 were property related
investments, Subordinated Convertible Notes, 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) Borrowing facility
The Trust’s revolving borrowing facility with Lloyds TSB Bank plc expired on 17 December 2010.
31 March 2011
31 March 2010
£’000
£’000
Expiry date – 17 December 2010 (committed)
–
100,000
(b) Interest rate profile
Floating rate financial assets
Non interest bearing financial assets
Subordinated Convertible Notes
31 March 2011
£’000
133,655
457,801
9,462
31 March 2010
£’000
51,346
505,983
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 and property equities. Fixed rate Subordinated Convertible Notes are held at a coupon
rate of 10%. Financial assets and liabilities held at cost are not materially different to their fair value.
(c) 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, as shown in the Redemption of Units note on page 38,
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) Reserve the right to defer payment of redemptions for a maximum of two years, from the date of
notice.
(d) 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 property equities 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.
20. Subsequent Events
At 28 April 2011 the Trust acquired an additional £0.2 million of units in the Schroder Emerging
Retail Property Unit Trust (SERPUT) to increase its holding to 100.0%. An Extraordinary General
Meeting was held by the Manager of SERPUT on 10 June 2011 at which an amendment to the
Trust Instrument was approved to reflect a change in voting rights post year end.
33
Supervisory Board and
Key Service Providers
Supervisory Board
Key Service Providers
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.
Manager and Property Manager
Schroder Property Investment
Management Limited
31 Gresham Street
London EC2V 7QA
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.
Authorised and regulated by
the Financial Services Authority.
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 Credit Renaissance
Structured Product Fund, Schroder Pension
Trustee Limited and Schroder 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.
A F Sykes
Andrew Sykes was a Director of Schroders plc
until March 2004. He is Chairman of Invista
Foundation Property Trust Limited, Chairman of
Absolute Return Trust Limited, a non-executive
Director of JP Morgan Asian Investment Trust
PLC, Smith and Williamson Holdings Limited,
Record plc, MBIA UK Insurance Limited,
Schroder Pension Trustee Limited, Gulf
International Bank UK Limited and SVG Capital
plc. Joined the Supervisory Board in 2004.
34
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.
N D Meredith MRICS
Neil Meredith is Head of UK Property Asset
Management for Schroders and works principally
on the Trust’s portfolio. He has a BSc in Land
Management and is a Member of the Royal
Institution of Chartered Surveyors. Neil joined
Schroders in October 2006. Before joining
Schroders, he worked for English Welsh and
Scottish Railways Limited as Head of Property
Services Group from 2004 to 2006. From 2003
to 2004 he was a Director of GVA Connect at
GVA Grimley. Prior to that he was a Partner at
Cushman & Wakefield, where his property
career started in 1982.
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.
W A Hill MRICS C Dip AF
William Hill is Head of Property for Schroders.
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.
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2011
T A Frost MRICS
Tamsin Frost is Client Director for Schroders, a
role she has had since 2000. She has over twenty
years of multi asset investment and client service
experience. Prior to joining the UK institutional
business she was a UK equity manager and
previously Deputy Head of Schroders UK
Research Department. She has a BSc (Hons) in
Land Management and is a Member of the Royal
Institution of Chartered Surveyors (MRICS).
She joined Schroders in 1986.
T Dorey
Tom Dorey is Head of UK Property Product for
Schroders. He has an MBA, BSc (Hons) in
Economics and holds an Investment
Management Certificate (IMC). He joined
Schroders in 1997 as a portfolio manager. He is
responsible for ensuring that selected property
portfolios are structured and managed to meet
clients’ needs and is the product manager to the
Trust.
Trustee
The Royal Bank of Scotland 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
90 Chancery Lane
London WC2A 1EU
* 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 2011
31 March 2010
31 March 2009
31 March 2008
31 March 2007
31 March 2006
Gross Annual
Distribution
per unit1
£1.326611
£1.543322
£1.598533
£1.653633
£1.610234
£1.581476
Net Asset
Value
per unit
£32.01
£30.30
£29.45
£44.19
£53.05
£46.17
Yield2
Q1 2011
4.1%
5.1%
5.4%
3.7%
3.1%
3.4%
Source: Schroders, 31 March 2011
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.
Cash and Gearing
Date
31 March 2011
31 March 2010
31 March 2009
31 March 2008
31 March 2007
31 March 2006
Amount in Cash (Capital)1
at the end of each year
£125.6 million3
£43.4 million
£5.9 million
£1.8 million
£4.1 million
£27.2 million
Quarterly Volume of
Secondary Market Trades
(£ million)
Gearing2
(% of NAV)
6.9%
16.3%
20.6%
18.2%
15.9%
18.2%
Q4 2010
14.9
8.1
Q3 2010
10.2
Q2 2010
31.6
Q1 2010
59.5
Q4 2009
Q3 2009
15.7
6.3
Q2 2009
1.4
Q1 2009
2.5
Q4 2008
1.8
Q3 2008
2.4
Q2 2008
6.7
Q1 2008
6.8
Source: Schroders, 31 March 2011
Source: Schroders, 31 March 2011
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.
35
Additional Unitholder Information (continued)
Monthly Unit Prices
Date
31 March 2011
28 February 2011
31 January 2011
31 December 2010
30 November 2010
31 October 2010
30 September 2010
31 August 2010
31 July 2010
30 June 2010
31 May 2010
30 April 2010
31 March 2010
Net Asset
Value
£32.01
£31.72
£31.68
£31.69
£31.31
£31.24
£31.25
£31.02
£30.99
£30.99
£30.71
£30.58
£30.30
Bid
Price
£31.44
£31.15
£31.11
£31.12
£30.75
£30.68
£30.69
£30.46
£30.44
£30.44
£30.15
£30.04
£29.75
Source: Schroders, 31 March 2011
36
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2011
Offer
Price
£33.54
£33.23
£33.19
£33.20
£32.80
£32.73
£32.74
£32.50
£32.47
£32.47
£32.17
£32.04
£31.74
Unitholder Breakdown
Number of
Unitholders
Corporate Pension Funds
Local Authority Pension Funds
Charities
Common Investment Funds
SIPPs
Total
219
37
120
3
7
386
Total %
Holding by
Units in Issue
61.3
29.6
6.5
2.6
–
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%
4% or greater
Total
358
25
3
–
386
56.4
33.7
9.9
–
100.0
–
–
–
–
3.7
9.9
13.4
21.2
Largest Investor
Largest Three Investors
Largest Five Investors
Largest Ten Investors
Source: Schroders, 31 March 2011
37
General Meeting and
General Information
General Information
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.
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.
General Meeting
Please note that the fortieth Annual
General Meeting of the unitholders will be held
at 31 Gresham Street London EC2V 7QA at
12.00pm on 22 September 2011. The
business of the meeting will include:
1
2
To receive the Annual Report and Audited
Financial Statements of the Trust and the
Report of the Independent Auditor for the
year ended 31 March 2011.
To re-elect J A Scott as a member of the
Supervisory Board who in accordance with
the Trust Deed, retires by rotation and offers
himself for re-election.
3
To re-elect A F Sykes as a member of the
Supervisory Board who in accordance with
the Trust Deed, retires by rotation and
offers himself for re-election.
4
To authorise the Manager to re-appoint,
and set the remuneration of the
Independent Auditors for the ensuing year.
By order of the Manager
Schroder Property Investment
Management Limited
31 Gresham Street
London EC2V 7QA
15 June 2011
A unitholder entitled to attend the Annual General
Meeting and vote, may appoint a proxy to attend and
on a poll, to vote in its stead. A unitholder being a
corporation may authorise any person to be its
representative at the meeting.
Socially Responsible
Investment and
Sustainability
A full copy of the Schroder Property policy on
Responsible Property Investment is available on
request.
Purchase of Units
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.
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 Tom Dorey 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 2011
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.
Tom Dorey
Head of UK Property Product
tom.dorey@schroders.com
Direct Line
+44 (0)20 7658 3020
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 2011
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
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: Chiswick Park, London W4
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
31 March 2011
Schroder Exempt Property Unit Trust
ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS
31 March 2011
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