130852 Annual Report 2010 Cover
15/6/10
6:06 pm
Page 2
31 March 2010
Schroder Exempt Property Unit Trust
ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS
31 March 2010
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
130852 Annual Report 2010 Cover
15/6/10
6:06 pm
Page 4
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 (including leisure and alternative investments such as
student accommodation) 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: York, Monks Cross Shopping Park
Investment Objective and Policy
The Trust incorporates a blend of direct and indirect investment
strategies. Indirect investments provide further diversification by
accessing distinct areas of the UK property market, such as fashion
parks, some larger properties, and specialist management associated
with the alternative sectors.
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 43.
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
07
10
11
12
14
15
16
FINANCIAL STATEMENTS
18
19
20
21
22
37
38
41
42
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
Debt Analysis
General Meeting and General Information
01
Trust Analysis
Size
During the year the net asset value of the Trust increased by £129.3 million, to £1,151.8 million
at 31 March 2010 from £1,022.5 million at 31 March 2009.
Distribution Yield
The Trust’s distribution yield was 5.1% at 31 March 2010 compared to 5.4% at 31 March 2009.
Net Asset Value per Unit
The Trust’s net asset value per unit was £30.30 at 31 March 2010, compared to £29.45 at
31 March 2009, an increase of 2.9%.
Rent Reviews
Over the twelve months to 31 March 2010, 36 rent reviews were settled at an average of 10.3%
above the passing rent, and marginally below estimated rental value.
Total Returns
Performance % to 31 March 2010
Q1 2010 (% per qtr)
Q4 2009
Q3 2009
Q2 2009
1 year (% per annum)
3 years
5 years
10 years
-40
-30
-20
-10
0
10
20
30
20
30
Twelve month performance % to 31 March
2010
2009
2008
2007
2006
-40
Trust
-30
-20
Benchmark*
-10
0
10
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 2010
Portfolio by Sector
At 31 March 2010
Overweight/underweight relative to benchmark*
Absolute Segment
SEPUT
Benchmark*
Standard Retail
6.9
13.2
Shopping Centres
Shopping Centres
1.9
6.4
Retail Warehouses
Retail Warehouses
22.0
19.8
Central London Offices
17.1
12.8
Rest of UK Offices
20.3
14.0
Industrial
19.2
16.2
Standard Retail
Central London Offices
Rest of UK Offices
Industrial
Other
Other
9.3
7.9
Cash
Cash
3.3
9.7
-8%
-6%
-4%
-2%
0%
Underweight
2%
4%
6%
8%
Overweight
Source: IPD and Schroders, 31 March 2010
* 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.
Portfolio Structure
March 2010, % NAV*
Portfolio Structure
March 2009, % NAV*
At 31 March
2010
Gearing (% NAV)*
26.1%
23.4%
16.3%
20.6%
(0.19%)
(0.52%)
Average unexpired lease length 7.9 years
7.6 years
Relative distribution yield**
NAV*
14.9%
61.7%
Directly owned assets and cash
16.3%
Joint ventures
At 31 March
2009
£1,151.8m
£1,022.5m
57.6%
Indirect assets
Source: Schroders 31 March 2010
* NAV: net asset value.
** Distribution yield relative to IPD Pooled Property Fund Indices – All Balanced Funds Weighted Average.
03
Portfolio Profile
At 31 March 2010
Top Ten Holdings
Holdings
Hercules Unit Trust
York, Monks Cross Shopping Park
West End of London Property Unit Trust
Bracknell
Schroder Emerging Retail Property Unit Trust
London NW10, Matrix, Park Royal
Crayford, Acorn Industrial Estate
London, Parker Tower
Manchester, Fujitsu Office Complex, Central Park
Cardiff, Mermaid Quay
Sector
% NAV*
Retail Warehouse
Retail Warehouse
Office
Retail and Office
Standard Retail
Industrial
Industrial
Office
Office
Leisure
6.2
5.5
5.4
5.1
4.2
3.9
3.7
3.5
3.4
3.2
Source: Schroders, 31 March 2010
* NAV: net asset value
Top Ten Tenants
Tenant
% Contracted Rent
Fujitsu Services Limited
British Telecommunications plc
Regus (UK) Limited
Exel Limited
Lloyds TSB Bank plc
B&Q plc
TBWA UK Group Limited
Sportsdirect.com Retail Limited
Marks & Spencer plc
DSG Retail Limited
All other tenants
3.7
3.1
2.4
2.2
2.2
1.9
1.9
1.8
1.6
1.4
77.8
Source: Schroders, 31 March 2010
New Lettings
41 lettings were completed over the last twelve months, contracting an additional £3.4 million of income.
Void Profile
From January 2010 onwards IPD have changed how they calculate void rates. The new calculation assumes where a tenant is in
administration and the lease has yet to be disclaimed, that this unit is “fully let”. The old calculation, and the Trust’s preference,
assumes they are vacant. The Trust’s void rate as shown below is on the new basis of calculation. The Trust’s void rate on the old
basis for 2010 was 10.7%.
At 31 March 2010
Void rate (as a % of estimated rental value
of total portfolio excluding developments)1
SEPUT (%)
IPD (%)2
8.5
8.2
At 31 March 2009
Void rate (as a % of estimated rental value
of total portfolio excluding developments)
8.0
Source: Schroders, IPD, 31 March 2010
1 Henderson and AH Medical at Q4 2009. UNITE is excluded.
2 IPD UK Pooled Property Funds weighted average.
04
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2010
9.3
Chairman’s Statement
The year to 31 March 2010 saw the end of the
most severe UK property bear market ever
recorded. The trough in market valuations was
reached in June 2009, 42.4% below its peak of
two years before (Source:IPD). Since then, the
market has recovered driven by increased
investor demand, attracted in particular by the
favourable relative pricing of property compared
to UK bonds and cash. The Trust’s
performance has also improved and there has
been demand for new units in the second half
of the period under review as well as an active
secondary market.
The Supervisory Board is aware of the
economic and political challenges facing the UK
in the coming months and the risk that there will
be a further deterioration in economic
conditions. While rental values have started to
stabilise, occupiers remain under pressure and
landlords are subject to potential increases in
void rates. Although income levels remain
relatively high, extracting returns from UK
property will require focus, dedication and skill.
Net Asset Value and
Performance
During the twelve months to 31 March 2010,
the net asset value per unit increased by 2.9%
to £30.30 from £29.45 and the total net asset
value of the Trust increased by £129.3 million
(12.7%), to £1,151.8 million from
£1,022.5 million.
The total return for the Trust for the twelve
months under review was 8.7% versus the
benchmark, the IPD UK Pooled Property Fund
Indices – All Balanced Fund Median, which
returned 13.2% while the weighted average
return of the same index was 11.7%.
Since the property market started to recover in
June 2009, the Trust has outperformed its
benchmark. However, over the past three years
(its performance measurement period), the Trust
has underperformed. Further detail on the
attribution of returns is provided in the
Manager’s Statement.
Units in Issue and
Secondary Market
At 31 March 2010 the Trust had a total of
38,013,430 units in issue, an increase of
3,284,710 on a year earlier. The high level of
demand for the Trust in the second half of the
period led to a restriction on the number of
units issued following the December 2009 and
January 2010 dealing dates. This was
necessary to protect the interests of existing
unitholders. From February 2010, however, I am
pleased to report that the Trust has once again
accepted subscriptions in full.
The secondary market was also active and units
valued at £82.8 million were traded between
investors over the twelve month period.
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
A year ago the Manager confirmed the revised
strategy of reducing exposure to indirect
holdings in favour of direct holdings. Gearing
within the Trust is entirely in the indirect
holdings. The Supervisory Board limits the
overall gearing to 25% of the net asset value.
Gearing fell to 16.3% of net asset value at
31 March 2010 from 20.6% a year before as
the strategy started to be implemented. Further
sales of geared indirect holdings since the
financial year end has seen the Trust’s gearing
fall further to 14.8% as at 31 May 2010.
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.
Supervisory Board
Mr van der Klugt retired as Chairman of the
Supervisory Board at year end. On behalf of the
Supervisory Board and unitholders I would like
to thank Mr van der Klugt for his tireless
services to the Trust over the past eight years
and we wish him continued success in the
future. I am pleased to have been invited to
take on his responsibilities as Chairman of the
Supervisory Board.
05
Chairman’s Statement (continued)
Outlook
The Supervisory Board has been supportive of
the management team and their efforts to
reposition the Trust following a period of
underperformance. We are pleased to note the
improved returns of the Trust compared with its
peer group. The Manager has made good
progress in implementing its stated strategy
within an enhanced risk control framework, and
although economic headwinds remain, we
believe that unitholders should be able to look
forward to improved and more predictable
relative returns in the coming year.
James A. Scott
Chairman
Schroder Exempt
Property Unit Trust
Supervisory Board
15 June 2010
06
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2010
Manager’s Statement
Performance
It is disappointing to report that the Trust
underperformed its benchmark over the
reporting period, and over its three year
performance measurement period. The relative
underperformance over the past year, however,
disguises a marked improvement since the
market trough in mid-2009. In the nine months
since 30 June 2009 the Trust generated a total
return of 17.1% against the benchmark of
16.0% (source: IPD). We believe this
improvement, as we execute our new
investment strategy, marks a turn in the Trust’s
fortunes. The significant positive and negative
drivers of relative return over the full year were
as follows:
•
The Trust’s sector positioning of assets
added 1.2% to relative returns over the
past year. The overweight to South East
Industrials and underweight to Rest of UK
Industrials was a significant positive
contributor while in the retail sector, the
underweight position to Shopping Centres
was similarly beneficial. The Trust’s
weightings in office sub sectors were
marginally accretive to returns.
•
Several of the sector specialist indirect
funds performed strongly. This was driven
by a combination of the prime nature of the
underlying assets and gearing. Hercules
Unit Trust’s total return was 22.5% in the
year to 31 March 2010, while the West End
of London Property Unit Trust returned
32.2% (source: IPD).
•
A number of individual assets such as the
largest, Monks Cross Shopping Park
(342,284 sq ft shopping park joint venture
accounting for 5.5% of NAV), saw strong
performance of 29.5% for the twelve
months. Performance for good quality
properties let on long leases such as this
have been in demand from investors.
•
As anticipated, the key detractors to
performance were the regeneration sites
such as SEPUT’s 50% ownership of
Bracknell town centre and land such as
Ruskin Square in Croydon. The City
development sites, and refurbishment
opportunities such as Parker Tower, have
underperformed the market. Although
Bracknell has a running yield of over 6%,
the lack of income generated by land which
at year end amounted to 6.5% of the
portfolio - at a time when investors are
focused on property’s income component detracted from relative, short term total
returns. For these assets, performance
should be driven by the recovery of the
occupier markets and asset management
initiatives, and a recovery in the occupier
market which has not yet been captured by
the Valuers in their valuations.
With the portfolio being repositioned in line with
stated strategy and with the latent potential of
these ‘value add’ strategies still to be realised, it
is pleasing to see the Trust ahead of its
benchmark over the past nine months of volatile
recovery.
UK Property Market
Review and Outlook
While it is premature to talk of recovery in the
occupier market, there are signs that parts of
the market are beginning to stabilise. According
to CBRE, the overall vacancy rate in central
London offices fell in the fourth quarter of 2009
and continued falling in quarter one 2010 as
occupiers withdrew space that they had
previously been trying to sublet. This resulted in
a stabilisation of prime rents in both the City
and West End and landlords were able to cut
incentives. Similarly, in the retail sector the rate
of insolvencies and pre-pack administrations
among major retailers has slowed in recent
months. According to IPD, the decline in
average rents has slackened markedly since
June 2009. There is now a clear distinction
between large shopping centres, where
vacancy rates are around 10% on average, and
smaller secondary centres where vacancy rates
are closer to 20% (source: Property Market
Analysis (PMA)). In keeping with these trends,
PMA’s latest property forecasts now suggest
that 2010 will mark the bottom of the current
rental cycle, rather than 2011 as previously
predicted.
The biggest uncertainty is the outlook for
property yields. The improvement in investor
sentiment towards property since mid 2009 has
been driven by its relatively high income yield
versus returns on cash and UK bonds. The
associated fall in yields has been the key factor
driving the recent revival in capital values and
total returns. There is also evidence of an
increased appetite from banks to lend against
commercial property. While the seminationalised UK banks are still looking to
contract their loan books, other UK banks and
German banks are more active. According to
IPD, the All Property initial yield fell from 7.7% in
June 2009 to 6.5% in March 2010 and capital
values rose by 14.5% over the same period
(although they remain 34% below their peak in
07
Manager’s Statement (continued)
June 2007). Compared with UK Government
bonds and cash, Schroders believes UK
property still looks a relatively attractive asset
class.
Strategy
With property remaining attractive compared
with other asset classes, cash balances are
being invested as prudently as possible and in
line with strategy. The careful management of
cash inflows remains of utmost importance to
protect the interests of existing unitholders. The
Manager is part way through rebalancing the
portfolio to ensure SEPUT has greater ability to
perform in line with its stated objective. Since
market liquidity improved in the second half of
2009, our investment strategy has been to:
•
•
•
Reduce exposure to indirectly owned
investments, particularly those with
gearing. The exposure to these assets has
reduced partly through cash inflows to the
Trust and partly through asset disposals.
Gearing has been accretive to performance
since the second half of 2009, sales of
further units have been completed since the
end of the reporting period at a sizeable
premium to the stated NAV.
Improve the quality and duration of
income. The focus of acquisitions has
been on long lease properties to strong
covenants which has resulted in an
improved average unexpired lease from 7.5
years in March 2009 to 7.9 years in March
2010, in line with its benchmark. We are
now considering a wider range of options
with greater asset management
opportunities.
Sell or manage out existing
development opportunities. We are
continuing negotiations with planning
authorities, joint venture partners and
potential tenants on several sites within the
portfolio. We believe that this may be the
most profitable means of extracting value,
and reducing risk, from these assets.
Our strategy is being implemented within an
enhanced risk management framework which
closely monitors risk against its peer group and
its investment parameters.
08
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2010
Portfolio Activity
Seven properties were bought during the year
to 31 March 2010, while two direct properties
were sold and part of our units in one indirect
plus proceeds from the liquidation of two
indirect vehicles were received. At the end of
the financial year, the cash balance was below
5% of the Trust’s net asset value. The common
theme of the majority of purchases was on
improving the duration and quality of the Trust’s
rental income, in line with strategy. Purchases
included:
•
Fujitsu Office Complex, Central Park,
Manchester. The property comprises
three office buildings which are let to Fujitsu
for a further 15 years with 2.5% pa fixed
rental uplifts. It was bought at an initial yield
of 6.8%.
•
St William House, Tresillian Terrace,
Cardiff. Adjacent to Cardiff central station,
the 140,000 sq ft building is let to Lloyds
TSB for a further 15 years and was bought
at an initial yield of 6.5%.
•
B&Q, Hythe Riverside Park,
Colchester. This 102,300 sq ft retail
warehouse had an unexpired lease term on
purchase of 17 years and is let to B&Q. It
was bought at an initial yield of 6.5%.
•
Interchange Retail Park, London Road,
Ipswich. This 60,700 sq ft retail park is in
an established retail destination with a
neighbouring Tesco Extra. It was bought at
an initial yield of 6.8%.
•
Albany Park, Frimley. With an initial yield
of 8.0% this retail warehouse/industrial park
comprises nine fully let units totalling 85,200
sq ft.
•
Quadrant Park, Welwyn Garden City.
This property was completed four years
ago and has excellent transport
connections. The 116,000 sq ft industrial
estate offers a number of asset
management possibilities and tenants
include Screwfix Direct Ltd and Univolt UK.
•
Parker Tower, London. A 20,600 sq ft
office adjacent to the existing holdings
totalling 72,900 sq ft at Parker Tower was
bought.
The following assets were sold:
•
10 Furnival Street, London EC4. This
mid town office building was sold at above
valuation to a private investor. The bulk of
income was subject to break clauses within
four years.
•
8-10 Exchange Street, Manchester.
Having refurbished and repositioned the
retail units in 2008, the Grade B offices
above it were seen as a threat. The
property was sold at above valuation.
•
Indirect Funds. A total of £26.4 million
was received from the liquidation of the
Residential Property Unit Trust (RESPUT)
and Gresham Property Partners LP. £7.5
million of units were also sold in the
Schroder Emerging Retail Property Unit
Trust (SERPUT) during the year. Sales
totalling £30 million have been made from
West End London Property Unit Trust
(WELPUT) following the period end at a
premium to NAV.
Summary
The Trust’s management team considers the
Trust is well positioned to benefit from the
continued improvement in the property market
owing to its current structure. Now that liquidity
has improved in the UK commercial property
market, the stated strategy of rebalancing the
portfolio more towards direct property holdings
is being implemented, but this will take time. In
the medium term, the improvement in the
quality and duration of the portfolio’s income,
coupled with a phased reduction in indirectly
owned assets (and also gearing), should benefit
unitholders in the Trust.
I D Mason
Fund Manager
15 June 2010
09
Rent Reviews, Lettings and
Lease Renewals
At 31 March 2010
Rent Reviews
In the directly held portfolio 36 rent reviews were settled over the year totalling £6.9 million per annum. This reflects
an uplift of 10.3% on the old rent but was -3.6% below the estimated rental value (ERV).
Notable rent reviews
Property
Tenant
Park Royal, London NW10
Maple Leaf Bakery UK Ltd
Old Rent
(per annum)
New Rent
(per annum)
ERV
(per annum)
£651,112
£725,000
£710,900
High Street, Exeter
Lloyds TSB Bank plc
£407,800
£461,000
£450,800
Monks Cross Shopping Park, York*
New Look Retailers Limited
£383,400
£429,408
£406,100
Old Rent
(per annum)
New Rent
(per annum)
ERV
(per annum)
New Lettings
In the directly held portfolio 41 new lettings were completed adding £3.4 million per annum to the rent roll.
Notable new lettings
Property
Tenant
Capital Point, Slough
Lego Company Ltd
n/a
£678,224
£442,300
Monks Cross Shopping Park, York*
Debenhams Properties Ltd
n/a
£491,328
£400,000
The Arenson Centre, Dunstable
Euroex Logistics Ltd
n/a
£97,320
£67,700
*The Trust holds 33.3% of the assets.
Lease Renewals
In the directly held portfolio 16 leases were renewed totalling £153,012 per annum, reflecting an uplift of 1.9% on the old rent and approximately 3.5%
below estimated rental values.
10
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2010
Purchases and Sales
At 31 March 2010
Purchases
Name
Sector
Type
Lot size
Cardiff, St William House
Manchester, Fujitsu Office Complex, Central Park
Colchester, Hythe Riverside Park
Frimley, Albany Park
Ipswich, Interchange Retail Park
Hercules Unit Trust (HUT) – 10% Convertible Bond
London WC2, Craven House, Parker Tower
Welwyn Garden City, Quadrant Park
Office
Office
Retail Warehouse
Industrial
Retail Warehouse
Retail Warehouse
Office
Industrial
Direct
Direct
Direct
Direct
Direct
Indirect
Direct
Direct
Over £25m
Over £25m
Between £10m and £25m
Between £10m and £25m
Between £10m and £25m
Under £10m
Under £10m
Under £10m
Total
£142.3m
Sales
Name
Sector
Type
Lot size
Chancery Exchange, 10 Furnival Street, London EC4
Manchester, 8-10 Exchange Street
Residential Property Unit Trust (in liquidation)
Exeter, 232-234 High Street
Gresham I (in liquidation)
UNITE UK Student Accommodation Fund
Schroder Emerging Retail Property Unit Trust (SERPUT)
Office
Standard Retail
Other
Standard Retail
Industrial
Other
Standard Retail
Direct
Direct
Indirect
Direct
Indirect
Indirect
Indirect
Over £25m
Between £10m and £25m
Between £10m and £25m
Under £10m
Under £10m
Under £10m
Under £10m
Total
£99.8m
Source: Schroders, 31 March 2010
11
Portfolio Details
At 31 March 2010
Portfolio Holdings
Name
Lot size
Type
Standard Retail
Schroder Emerging Retail Property Unit Trust (SERPUT)
Over £25m
Indirect
Exeter, 235-240 High Street
Between £5m and £10m
Direct
Over £25m
Indirect
Retail Warehouse
Hercules Unit Trust (HUT)
York, Monks Cross Shopping Park
Over £25m
JV
Cardiff, Cardiff Bay Retail Park
Between £10m and £25m
JV
Colchester, Hythe Riverside Park
Between £10m and £25m
Direct
Henderson UK Retail Warehouse Fund (HRWF)
Between £10m and £25m
Indirect
Ipswich, Interchange Retail Park
Between £10m and £25m
Direct
Hercules Unit Trust (HUT) – 10% Convertible Bond
Between £5m and £10m
Indirect
London SE7, 403/433 Woolwich Road
Between £5m and £10m
Direct
Over £25m
JV
Retail and Office
Bracknell Property Unit Trust (BPUT)
Central London Offices
West End of London Property Unit Trust (WELPUT)
Over £25m
Indirect
London, Parker Tower
Over £25m
Direct
London W14, Kensington Village
Over £25m
Direct
London SE1, Palace House, 3 Cathedral Street
Between £10m and £25m
Direct
London W1, 81-82 Dean Street
Between £10m and £25m
Direct
London EC3, 68 Lombard Street
Between £10m and £25m
Direct
London, Moorgate
Between £10m and £25m
Direct
London, Mark Lane
Between £10m and £25m
Direct
London EC1, 4-7 Chiswell Street
Between £10m and £25m
Direct
London EC2, 11/12 Appold Street
Between £5m and £10m
Direct
City of London Office Unit Trust (CLOUT)
Under £5m
Indirect
Manchester, Fujitsu Office Complex, Central Park
Over £25m
Direct
Cardiff, St William House
Over £25m
Direct
Chiswick Park Unit Trust (ChisPUT)
Over £25m
Indirect
Croydon, Gateway Site
Between £10m and £25m
Direct
Rest of UK Offices
Croydon, AMP House
Between £10m and £25m
Direct
Reading, New Century Place
Between £10m and £25m
Direct
Bracknell, Bracknell Beeches
Between £5m and £10m
Direct
Slough, Capital Point
Between £5m and £10m
Direct
Uxbridge, Oxford, Cambridge and Willowbank Houses
Under £5m
Direct
Cranford, Europa House, Bath Road
Under £5m
Direct
Bracknell, Eagle House Limited
Under £5m
JV
12
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2010
Name
Lot size
Type
London NW10, Matrix, Park Royal
Over £25m
Direct
Crayford, Acorn Industrial Estate
Over £25m
Direct
Industrial
London E16, Electra, Canning Town
Over £25m
Direct
Hackbridge, Felnex Trading Estate
Over £25m
Direct
Woking, Woking Business Park
Between £10m and £25m
Direct
Dunstable, Chiltern Park, Units A-D
Between £10m and £25m
Direct
Frimley, Albany Park
Between £10m and £25m
Direct
Greenford, Rockware Avenue
Between £10m and £25m
Direct
Birmingham, Deykin Avenue
Between £10m and £25m
Direct
Welwyn Garden City, Quadrant Park
Between £5m and £10m
Direct
Dunstable, The Arenson Centre
Between £5m and £10m
Direct
London SE7, Maritime Industrial Park
Between £5m and £10m
Direct
Teesland iDG Sutton Unit Trust (TiDGSUT)
Under £5m
JV
York, Alexandra Court, James Street
Under £5m
Direct
Greenford, Land
Under £5m
Direct
Cannock, Walkmill Lane
Under £5m
Direct
Livingston Land
Under £5m
Direct
Cardiff, Mermaid Quay
Over £25m
Direct
West India Quay Unit Trust (WIQUT)
Between £10m and £25m
JV
UNITE UK Student Accommodation Fund (UNITE)
Between £10m and £25m
Indirect
AH Medical Properties plc
Between £5m and £10m
Indirect
Gresham Property Partners LP (Gresham)
Under £5m
Indirect
Hartlepool, Jacksons Landing
Under £5m
Direct
The Residential Property Unit Trust (ResPUT)
Under £5m
Indirect
Other
13
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 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 for
the year ending 31 March 2010.
14
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2010
The Supervisory Board is responsible for
approving, on the Audit Committee’s
recommendation, the Financial Statements
prepared for each financial 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.
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
2010 in accordance with The Royal Institution
of Chartered Surveyors and International
Valuation Standards. The Manager has been
provided with a full valuation certificate and
report. The properties have been valued on the
basis of market value.
In our opinion the aggregate of the market
values of the 38 properties owned by the Trust
at 31 March 2010 is £590.3 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.
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.
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 2010
On 1 June 2009 BNP Paribas rebranded its global real estate business from Atisreal Limited to
BNP Paribas Real Estate Advisory and Property Management UK Limited, to be known as BNP
Paribas Real Estate.
15
Independent Auditor’s Report
To the Unitholders of Schroder Exempt Property Unit Trust
We have audited the Financial Statements of
Schroder Exempt Property Unit Trust (“the
Trust”) for the year ended 31 March 2010 which
comprise Statement of Net Assets, the Income
and Expense Account, the Statement of Total
Recognised Gains and Losses, the Cash Flow
Statement and the Notes to the Financial
Statements. These Financial Statements have
been prepared under the accounting policies
set out therein.
Respective
Responsibilities
of the Manager
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
Responsibilities of the Manager, Trustee and
Supervisory Board.
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 unitholders of the Trust as a
body in accordance with the Trust Deed and for
no other purpose. We do not, in giving this
opinion, accept or assume responsibility for any
other purpose or to any other person to whom
this report is shown or into whose hands it may
come save where expressly agreed by our prior
consent in writing.
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 Deed. 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 Statement is not consistent with the
Financial Statements.
16
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 Supervisory Board and Key Service
Providers, the Trust Analysis, the Chairman’s
Statement, the Manager’s Statement,
Purchases and Sales, Details of the Portfolio,
Rent Reviews, Lettings and Lease Renewals,
the Responsibilities of the Manager, Trustee and
Supervisory Board, the Independent Valuer’s
Report to the Unitholders, Additional Unitholder
Information, Debt Analysis and 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 (United
Kingdom 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
Trust’s circumstances, consistently applied and
adequately disclosed.
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.
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2010
Opinion
In our opinion the Financial Statements give a
true and fair view, in accordance with United
Kingdom Generally Accepted Accounting
Practice, of the financial position of the Trust at
31 March 2010 and of the net income and total
recognised gains of the Trust for the year then
ended and have been properly prepared in
accordance with the Trust Deed.
PricewaterhouseCoopers LLP
Chartered Accountants
London
15 June 2010
Financial Statements
31 MARCH 2010
18
19
20
21
22
Statement of Net Assets
Income and Expenditure Account
Statement of Total Recognised Gains and Losses
Cash Flow Statement
Notes to the Financial Statements
17
Statement of Net Assets
At 31 March
Notes
Fixed assets
Investment property
Freehold property
Leasehold property
2(a)
Development property
Sites in the course of development at valuation:
Freehold property
2010
£’000
2009
£’000
470,153
102,973
360,021
112,943
573,126
472,964
15,200
14,150
2(b)
15,200
14,150
Total valuation of investment and development property
2
588,326
487,114
Investment in property equities
3
6,476
3,047
Investment in subordinated convertible notes
4
9,462
–
5(b)
506,350
1,110,614
533,009
1,023,170
6
18,190
13,968
16
51,346
13,472
69,536
27,440
1,180,150
1,050,610
7
8
_
19,321
6,371
2,652
28,344
5,000
16,271
3,410
3,466
28,147
9
1,151,806
1,022,463
£30.30
£29.45
Property related investments
Total fixed assets
Current assets
Debtors
Cash at bank and on deposit:
Current accounts
Total current assets
Total assets
Current liabilities
Bank loans
Creditors
Taxation
Distributions payable
Total current liabilities
Net assets attributable to unitholders
Net asset value per unit
The Financial Statements on pages 18 to 36 were approved by the Manager, Schroder Property
Investment Management Limited, and the Supervisory Board on 15 June 2010 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 22 to 36 form part of these Financial Statements. The Independent Valuer’s
Report is shown on page 15. The Independent Auditor’s Report is shown on page 16.
18
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2010
Income and Expenditure Account
For the year ended 31 March
2010
£’000
2009
£’000
36,259
196
6,098
9,312
34,297
255
5,392
9,834
Net rental income
33,241
30,110
Income from property related investments
23,379
29,708
275
–
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)
268
764
12(d)
268
238
764
1,234
30
(470)
56,925
59,348
Net interest income
Net income before tax
Less: income tax
13(a)(i)
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)
11,385
11,870
45,540
47,478
145
186
4,896
140
85
68
286
145
196
5,580
165
84
57
664
Total management expenses
12(b)
5,806
6,891
Net income available for distribution
Finance costs: distributions
12(a)
39,734
(42,182)
40,587
(43,377)
14
(2,448)
(2,790)
Retained deficit for the period
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 22 to 36 form part of these Financial Statements. The Independent Valuer’s
Report is shown on page 15. The Independent Auditor’s Report is shown on page 16.
19
Statement of Total Recognised
Gains and Losses
For the year ended 31 March
Notes
2010
£’000
2009
£’000
14
14
863
1,591
(2,735)
7,163
14
14
14
14
28,660
787
(323)
3,429
(171,690)
(13,082)
(326,349)
(2,571)
Capital surplus/(deficit) for the year
Net income available for distribution
35,007
39,734
(509,264)
40,587
Total recognised gains/(losses)
74,741
(468,677)
Realised profit/(loss) on:
Investment property sold
Property related investments sold
Movement in revaluation reserve for retained:
Investment property
Sites in the course of development
Property related investments
Property equities
The notes on pages 22 to 36 form part of these Financial Statements. The Independent Valuer’s
Report is shown on page 15. The Independent Auditor’s Report is shown on page 16.
20
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2010
Cash Flow Statement
For the year ended 31 March
Net cash inflow from operating activities
Notes
2010
£’000
2009
£’000
15
49,917
58,423
Returns on investment and servicing of finance
Interest received
Interest paid
Distributions paid
160
(238)
(43,030)
–––––––
(43,108)
–––––––
(8,231)
Tax paid
Capital expenditure and financial investment
Sale of investment property:
Freehold
Leasehold
Purchase of investment property:
Freehold
Property related investments:
Purchases
Sales
Other capital expenditure
65,801
–
(133,153)
–
(10,128)
37,113
(6,912)
35,910
(9,462)
–
(3,166)
–––––––
(8,581)
–––––––
(53,694)
–––––––
(55,116)
Cash inflow before financing
Increase in cash
(44,163)
–––––––
(17,386)
55,917
9,185
Subordinated convertible notes:
Purchase
Financing
Issue of units
Units redeemed
Loans repaid
Loans received
769
(1,208)
(43,724)
–––––––
10
10
7
105,133
(7,143)
(5,000)
–
–––––––
16
86,218
–––––––
83,092
–
(2,262)
(90,000)
15,000
–––––––
92,990
–––––––
37,874
–––––––
(77,262)
–––––––
5,830
–––––––
The notes on pages 22 to 36 form part of these Financial Statements. The Independent Valuer’s
Report is shown on page 15. The Independent Auditor’s Report is shown on page 16.
21
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(c) below, and in accordance with
applicable United Kingdom Accounting
Standards and the Trust Deed. In accordance
with Financial Reporting Standard (FRS) 18, the
Trust’s accounting policies are reviewed annually
to confirm that they remain appropriate and are
in accordance with the requirements of
Accounting Standards, Urgent Issues Task
Force (UITF) abstracts and the Trust Deed.
The 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.
22
(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. Any remaining debtor
incentive balances in respect of property
disposed of are included in the calculation
of the profit or loss arising on disposal.
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2010
(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 twenty
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
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.
2. Fixed assets
Freehold
£’000
Leasehold
£’000
Total
£’000
(a) Investment property
Valuation at 1 April 2009
Additions to existing properties at cost
Cost of properties purchased
Value of properties sold
Movement in revaluation reserve
360,021
2,363
133,153
(55,750)
30,366
112,943
836
–
(9,100)
(1,706)
472,964
3,199
133,153
(64,850)
28,660
Valuation at 31 March 2010
470,153
102,973
573,126
(b) Development property
Valuation at 1 April 2009
Additions at cost
Revaluation reserve at 31 March 2010
14,150
263
787
–
–
–
14,150
263
787
Valuation at 31 March 2010
15,200
–
15,200
Total valuation of investment and development property
485,353
102,973
588,326
Reconciliation to market valuation
Market valuation at 31 March 2010
Unamortised tenant incentives
486,450
(1,097)
103,850
(877)
590,300
(1,974)
Valuation at 31 March 2010
485,353
102,973
588,326
The valuation of investment and development property valued by the independent valuer,
BNP Paribas Real Estate Advisory and Property Management UK Limited, was £590.3 million
at 31 March 2010.
23
Notes to the Financial Statements (continued)
2. Fixed assets (continued)
The following investments are included within the valuation of investment properties:
(c) Investments in trusts for land
Valuation at
31 March 2010
£’000
31 March 2009
£’000
24,300
63,250
19,100
51,000
87,550
70,100
The percentage ownerships below remain unchanged from the previous year end:
(i) 50.0% interest in a trust investing in Cardiff Bay Retail Park
(ii) 33.3% interest in a trust investing in properties in York
3. Investment in property equities
AH Medical Properties plc
Percentage
holding at
31 March
2010
%
Valuation at
1 April
2009
£’000
29.6
3,047
The Trust held a 29.6% (31 March 2009: 29.6%) interest in AH Medical Properties plc, a PLUS
listed property investment company. The valuation of the Trust’s holding at 31 March 2010 stood at
£6.5 million, 34.0 pence per share (31 March 2009: £3.0 million, 16.0 pence per share).
24
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2010
Addition
at cost
£’000
Movement in
revaluation
reserve for
retained
investments
£’000
Valuation at
31 March
2010
£’000
–
3,429
6,476
4. Investment in subordinated convertible notes
Percentage
holding at
31 March 2010
%
Addition at cost
£’000
Valuation at
31 March 2010
£’000
4.7
9,462
9,462
Hercules Unit Trust
The Trust acquired £9.5 million of Subordinated Convertible Notes on 15 December 2009
from the Hercules Unit Trust (HUT) at a fixed coupon of 10%; 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 2010 stood at £506.4 million
(31 March 2009: £533.0 million).
Properties held directly or indirectly within property related investments are independently valued
on a market value basis as follows:
Valued by:
(i)
(ii)
(iii)
(iv)
Bracknell Property Unit Trust
Croydon Gateway Property Unit Trust*
The Chiswick Park Unit Trust*
City of London Office Unit Trust
(BPUT)
(CGPUT)
(ChisPUT)
(CLOUT)
BNP Paribas Real Estate
BNP Paribas Real Estate
BNP Paribas Real Estate
BNP Paribas Real Estate
(v)
(vi)
(vii)
(viii)
Capital Point Slough Unit Trust
City Property Unit Trust
Gresham Property Partners, L.P.*
Hackbridge Unit Trust
(CPSUT)
(CPUT)
(Gresham)
(HackUT)
BNP Paribas Real Estate
BNP Paribas Real Estate
BNP Paribas Real Estate
BNP Paribas Real Estate
(ix)
(x)
(xi)
(xii)
(xiii)
Henderson UK Retail Warehouse Fund
Hercules Unit Trust*
Lombard Street Unit Trust
Parker Tower Unit Trust
Residential Property Unit Trust*
(HRWF)
(HUT)
(LSUT)
(PTUT)
(ResPUT)
CB Richard Ellis Limited
CB Richard Ellis Limited
BNP Paribas Real Estate
BNP Paribas Real Estate
Allsop LLP
(xiv)
(xv)
(xvi)
(xvii)
(xviii)
(xix)
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
(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
On 1 June 2009 BNP Paribas rebranded its global real estate business from Atisreal Limited
to BNP Paribas Real Estate Advisory and Property Management UK Limited, to be known
as BNP Paribas Real Estate.
25
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 2010
%
49.6
97.3
19.6
26.8
Valuation at
1 April 2009
£’000
71,127
57,019
42,439
526
Additions
at cost
£’000
807
–
–
–
Cost of
investments
sold
£’000
–
–
–
–
Movement in
revaluation
reserve for
investments
sold
£’000
–
–
–
–
CPSUT
CPUT
Gresham
HackUT
100.0
95.9
19.5
100.0
9,656
28,843
3,789
25,101
–
832
–
461
–
(982)
(1,038)
–
–
591
(1,761)
–
(2,050)
125
400
5,368
7,606
29,409
1,390
30,930
HRWF
HUT
LSUT
PTUT
ResPUT*
3.3
7.9
100.0
100.0
41.6
14,616
60,364
15,895
35,225
24,926
–
599
–
7,293
–
–
–
–
–
(19,244)
–
–
–
–
(4,409)
2,925
10,771
2,450
(2,617)
601
17,541
71,734
18,345
39,901
1,874
SERPUT
TiDGSUT
UNITE
WELPUT
WIQUT
68.4
50.0
2.7
15.0
50.0
52,568
3,754
15,735
48,838
20,850
–
161
–
–
(25)
(6,868)
–
(1,276)
–
–
(815)
–
280
–
–
3,706
(916)
(1,255)
13,130
475
48,591
2,999
13,484
61,968
21,300
AHUT
BSUT
BEH
26.8
26.8
50.0
294
163
1,281
533,009
–
–
(942)
9,186
–
–
–
(29,408)
–
–
–
(6,114)
–
(48)
28
(323)
294
115
367
506,350
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.
*
An Extraordinary General Meeting was held by the manager of ResPUT on 28 January 2009 at
which unitholders approved the liquidation of the Trust’s portfolio over a twelve month period.
A provision has been made within the revaluation reserve, for the investment of HUT, for £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 2010, 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 2010 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 within the first term
and five years of the date of appointment respectively, unless the Manager’s removal clause is
extended by unitholder resolution. Therefore, as significant control cannot be exercised, these
investments are not consolidated.
The Trust’s holding in CPSUT at 31 March 2010 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 2010 (31 March 2009: £3.8 million)
included an accrual for carried interest payable of £0.8 million (31 March 2009: £0.8 million).
26
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2010
Movement in
revaluation
reserve for
retained
investments
£’000
(12,672)
(14,285)
(6,459)
–
Valuation at
31 March 2010
£’000
59,262
42,734
35,980
526
5. Property related investments (continued)
(c) Summary of financial information at 31 March 2010
The information detailed below contains information as provided by the relevant managers at 31 March 2010.
Debt
£’000
Other assets/
(liabilities)
£’000
Net asset
value
£’000
Adjustment to
fair value
debt*
£’000
119,550
43,963
374,500
675
7,600
–
–
(192,500)
–
–
–
3
1,530
1,300
6
119,550
43,966
183,530
1,975
7,606
–
–
(93)
–
–
95.9
19.5
100.0
3.3
7.9
30,646
7,128
30,700
950,550
1,528,275
–
–
–
(471,143)
(794,266)
15
–
231
56,213
168,409
30,661
7,128
30,931
535,620
902,418
–
–
–
(28,244)
(42,286)
LSUT
PTUT
ResPUT
SERPUT
TiDGSUT
UNITE**
100.0
100.0
41.6
68.4
50.0
2.7
18,200
39,800
3,417
66,630
11,900
1,002,900
–
–
–
–
(5,490)
(480,600)
145
101
1,158
4,374
(413)
(22,645)
18,345
39,901
4,575
71,004
5,997
499,655
–
–
–
–
–
(32,500)
WELPUT
WIQUT
AHUT
BSUT
BEH
15.0
50.0
26.8
26.8
50.0
552,804
42,600
–
–
8,400
(184,500)
–
–
–
(3,652)
44,056
–
1,112
429
(4,013)
412,360
42,600
1,112
429
735
(8,466)
–
–
–
–
4,840,238
(2,132,151)
252,011
2,960,098
(111,589)
643,093
(161,247)
24,504
506,350
(6,438)
Trust’s holding at
31 March 2010
%
Property
value
£’000
BPUT
CGPUT
ChisPUT
CLOUT
CPSUT
49.6
97.3
19.6
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 2010 would give rise to a combined total deficit of £6.4 million
(31 March 2009: deficit £10.0 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 2010 and 31 December 2009 respectively.
27
Notes to the Financial Statements (continued)
6. Debtors
31 March 2010
£’000
31 March 2009
£’000
4,098
3,918
4,894
1,485
489
481
1,682
1,143
1,674
4,052
5,223
672
1,114
297
936
–
18,190
13,968
31 March 2010
£’000
31 March 2009
£’000
–
5,000
31 March 2010
£’000
31 March 2009
£’000
5,330
3,095
1,194
4,894
2,100
–
2,708
6,001
773
245
5,223
1,519
811
1,699
19,321
16,271
Notes
31 March 2010
£’000
31 March 2009
£’000
10
14
14
14
14
885,083
(127,715)
275,767
137,017
(18,346)
787,093
(171,924)
293,880
129,312
(15,898)
1,151,806
1,022,463
Rents receivable
Distributions due from property related investments
Tenant deposits
UITF 28 accrued rents receivable
UITF 28 unamortised tenant incentives
VAT recoverable
Other debtors and prepayments
Amounts due from Eagle House Ltd
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 2009: £100 million uncommitted loan facility). Loans drawn under
the facility are renewed and/or repayable on either a monthly or quarterly basis. Interest is charged at
LIBOR plus a margin of 0.65% (31 March 2009: 0.65%) plus mandatory costs. The facility expires
on 17 December 2010. However, due to the monthly and quarterly renewals, any loans are
classified as current liabilities in the Financial Statements.
8. Creditors
Rents received in advance
Provision for doubtful debts
Trade creditors
Tenant deposits
Other creditors and accruals
VAT payable
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
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.
28
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2010
10. Amounts paid to Trustee for investment
No. of
Units
Value
£’000
Opening balance at 1 April 2009
Units issued during the year
Units redeemed during the year
34,728,720
3,535,357
(250,647)
787,093
105,133
(7,143)
Closing balance at 31 March 2010
38,013,430
885,083
31 March 2010
£’000
31 March 2009
£’000
Service charge expenses
Letting fees
Rates
Rent review fees
Other
6,858
186
394
220
1,654
6,423
367
681
152
2,211
Total property outgoings
9,312
9,834
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
0Income tax
Net income after tax
Total management expenses
Net amount distributable
Gross return to unitholders
after recovery of income tax
April 2009
£’000
5,507
(1,101)
4,406
(233)
4,173
May 2009
£’000
6,870
(1,374)
5,496
(532)
4,964
June 2009
£’000
5,120
(1,024)
4,096
(8)
4,088
July 2009
£’000
4,869
(974)
3,895
(140)
3,755
August 2009
£’000
4,180
(836)
3,344
(187)
3,157
September 2009
£’000
4,361
(872)
3,489
(138)
3,351
5,274
6,338
5,112
4,729
3,993
4,223
October 2009
£’000
4,629
(926)
3,703
(274)
3,429
November 2009
£’000
4,260
(852)
3,408
(278)
3,130
December 2009
£’000
4,380
(876)
3,504
(286)
3,218
January 2010
£’000
4,530
(906)
3,624
(308)
3,316
February 2010
£’000
4,059
(812)
3,247
(299)
2,948
March 2010
£’000
4,160
(832)
3,328
(675)
2,653
4,355
3,982
4,094
4,222
3,760
3,485
For the year ended
Notes
Net income before tax (excluding undistributed UITF 28 adjustment)
Income tax
Net income after tax
Total management expenses
Net amount distributable
Gross return to unitholders after recovery of income tax
13(a)(i)
12(b)
31 March 2010
£’000
56,925
(11,385)
45,540
(3,358)
42,182
53,567
31 March 2009
£’000
59,348
(11,870)
47,478
(4,101)
43,377
55,247
The balance of amounts accrued under UITF 28 for the year ended 31 March 2010 was a deficit of
£1,974,000 (31 March 2009: deficit of £1,786,000). 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.
29
Notes to the Financial Statements (continued)
12. Finance costs: distributions (continued)
(b) Reconciliation of management expenses between distributions and Income and Expenditure Account
31 March 2010
Notes
£’000
Total management expenses for the period deducted from distributions
12(a)
3,358
Deficit on Income and Expenditure Account
14
2,448
Total management expenses per Income and Expenditure Account
5,806
31 March 2009
£’000
4,101
2,790
6,891
Management expenses allocated to capital and not deducted from distributions, in accordance with the
accounting policy as stated in note 1(f), represent the deficit on the Income and Expenditure Account.
(c) 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 2009
pence
15.8573
(3.1715)
12.6858
(0.6700)
12.0158
May 2009
pence
19.7814
(3.9563)
15.8251
(1.5330)
14.2921
June 2009
pence
14.7425
(2.9485)
11.7940
(0.0220)
11.7720
July 2009
pence
14.1229
(2.8246)
11.2983
(0.4050)
10.8933
August 2009
pence
12.1240
(2.4248)
9.6992
(0.5430)
9.1562
September 2009
pence
12.6485
(2.5297)
10.1188
(0.3980)
9.7208
15.1873
18.2484
14.7205
13.7179
11.5810
12.2505
October 2009
pence
13.4254
(2.6851)
10.7403
(0.7770)
9.9633
November 2009
pence
11.7984
(2.3597)
9.4387
(0.7700)
8.6687
December 2009
pence
11.7986
(2.3597)
9.4389
(0.7880)
8.6509
January 2010
pence
12.0680
(2.4136)
9.6544
(0.8190)
8.8354
February 2010
pence
10.8114
(2.1623)
8.6491
(0.7950)
7.8541
March 2010
pence
10.9448
(2.1890)
8.7558
(1.7770)
6.9788
12.6484
11.0284
11.0106
11.2490
10.0164
9.1678
31 March 2010
pence
160.1232
(32.0248)
128.0984
(9.2970)
118.8014
150.8262
31 March 2009
pence
170.8193
(34.1639)
136.6554
(11.8020)
124.8534
159.0173
31 March 2010
£’000
238
31 March 2009
£’000
1,234
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
(d) Interest payable
For the year ended
Interest payable
30
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2010
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 2010
£’000
31 March 2009
£’000
11,385
(461)
10,924
461
11,385
11,596
1,428
13,024
(1,154)
11,870
Net income before tax
Tax on net income at basic rate of 20%
31 March 2010
£’000
56,925
11,385
31 March 2009
£’000
59,348
11,870
Effects of:
Permanent adjustments
Adjustments in respect of previous year
Current tax charge for the year
1
(461)
10,925
(274)
1,428
13,024
31 March 2010
£’000
(29)
(461)
(490)
31 March 2009
£’000
(1,183)
1,154
(29)
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 credit/(charge) in Income and Expenditure Account
Closing provision
13(a)(i)
The deferred tax liability relates to a potential tax charge under Section 350 ICTA 1988 on the final
distribution for the year.
S942 ITA 2007 (Income Tax Act 2007) provides for an additional tax liability to arise where the tax
liability for any tax year would otherwise be lower than the basic rate of tax on the distributions paid
in that year. Because the distributions are paid in arrears, provision must be made for the liability that
would arise in the next tax year if there was no taxable income following the date of the Statement of
Net Assets. Relief can be taken against this liability for amounts by which any previous period’s
taxable income have exceeded the distributions paid in that year.
31
Notes to the Financial Statements (continued)
14. Reserves
Revaluation Reserve
Freehold
property
£’000
Opening balance
at 1 April 2009
Movement in revaluation
reserve for retained:
Investment property
Sites in the course
of development
Property related
investments
Property equities
Investment property sold
Property related
investments sold
Deficit on Income and
Expenditure Account
Property
Leasehold
related
property investments
£’000
£’000
Realised
Realised
net profit/
net profit
(loss) on on property
investment
related
property investments
sold
sold
£’000
£’000
Deficit on
Total Income and
Property revaluation Expenditure
equities
reserve
Account
£’000
£’000
£’000
Total
reserves
£’000
(38,882)
(7,599)
(120,491)
(4,952)
(171,924)
(15,898)
293,880
129,312
235,370
30,366
(1,706)
–
–
28,660
–
–
–
28,660
787
–
–
–
787
–
–
–
787
–
–
–
–
(323)
–
–
3,429
(323)
3,429
–
–
–
–
–
–
(323)
3,429
18,976
(1,206)
–
–
17,770
–
(18,976)
–
(1,206)
–
–
(6,114)
–
(6,114)
–
–
6,114
–
–
–
–
–
–
(2,448)
–
–
(2,448)
–
–
–
–
–
–
–
–
–
–
863
–
–
1,591
863
1,591
(10,511)
(126,928)
(1,523)
(127,715)
(18,346)
275,767
137,017
266,723
Realised net profit on:
Investment property sold
–
Property related investments sold –
Closing balance at
31 March 2010
11,247
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)/decrease in debtors
Net increase in creditors
Net cash inflow from operating activities
31 March 2010
£’000
33,241
23,379
275
(5,806)
51,089
31 March 2009
£’000
30,110
29,708
–
(6,891)
52,927
(4,222)
3,050
49,917
4,467
1,029
58,423
Net cash flow
£’000
37,874
5,000
42,874
31 March 2010
£’000
51,346
–
51,346
16. Reconciliation of movement in net cash flow
to movement in net (debt)/cash
Cash at bank
Loans due within one year
Net cash
32
1 April 2009
£’000
13,472
(5,000)
8,472
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2010
17. Capital
commitments and
contingent liabilities
18. Related party
disclosures and
material contracts
At the year end the Trust had a commitment
to invest £1.2 million in Teesland iDG Sutton
Unit Trust (31 March 2009: £1.2 million).
(a) Fees receivable by the Trustee
At 31 March 2010, 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 2009:
£7.3 million). This has no current impact on
the Trust’s holding in BPUT or these
Financial Statements.
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)).
33
Notes to the Financial Statements (continued)
18. Related party disclosures and material contracts (continued)
(b) Fees receivable by the Manager and the Property Manager (continued)
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
Performance fees earned by associates of the Manager from the
Trust’s investment in property related investments
Less irrecoverable VAT incurred by the Trust*
Total
*
31 March 2010
£’000
4,876
20
4,896
31 March 2009
£’000
5,561
19
5,580
1,120
1,165
–
(20)
5,996
69
(19)
6,795
31 March 2010
£’000
59
36
569
31 March 2009
£’000
46
36
457
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 investments, (as a percentage of average net asset value for the year to 31 March 2010) was
0.6% (31 March 2009: 0.7%).
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.
(c) Outstanding balances
Outstanding balances were due to the following which are considered to be related parties under
FRS 8:
The Royal Bank of Scotland plc (Trustee)
Supervisory Board
Schroder Property Investment Management Limited
Outstanding balances were due from Bracknell Eagle House Limited as set out within note 6, which
is considered to be a related party under FRS 8.
34
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2010
18. Related party disclosures and material contracts (continued)
(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
ACPUT
BPUT
CGPUT
ChisPUT
CPSUT
31 March 2010
£’000
–
3,485
1,342
2,373
29
31 March 2009
£’000
1,113
4,041
1,212
1,781
1,257
CPUT
CLOUT
GTUT
HackUT
–
–
–
1,963
433
1,541
2
1,848
HUT
LSUT
PTUT
ResPUT
SERPUT
WELPUT
1,774
1,155
2,651
27
2,689
2,120
3,696
1,158
2,630
1,027
3,545
1,296
19. Financial instruments
The primary financial instruments held by the Trust at 31 March 2010 were property related
investments, property equities, 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 on page 36 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.
35
Notes to the Financial Statements (continued)
19. Financial instruments (continued)
(a) Borrowing facility
The Trust has the following revolving borrowing facility with Lloyds TSB Bank plc. At 31 March 2010
£0.0 million (31 March 2009: £5.0 million) had been drawn down from the facility.
Expiry date – 17 December 2010 (committed)
31 March 2010
£’000
100,000
31 March 2009
£’000
100,000
31 March 2010
£’000
51,346
505,983
9,462
–
31 March 2009
£’000
13,472
531,728
–
5,000
(b) Interest rate profile
Floating rate financial assets
Non interest bearing financial assets
Subordinated Convertible Notes
Bank loan
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 43,
such that unitholders may only serve notice to redeem units at the end of each quarter.
(ii) To raise sufficient cash resources within the Trust to finance a limited number of redemptions.
(iii) Maintain an appropriate borrowing facility.
(iv) 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.
36
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2010
Supervisory Board and
Key Service Providers
Supervisory Board
J A Scott OBE FCA* (Chairman)
James Scott is a former National Managing
Partner of Binder Hamlyn. He is currently a
non-executive Director of the Vestey Group
Limited. Joined the Supervisory Board in 1991.
Professor A E Baum PhD FRICS
Andrew Baum is Professor of Land Management
at the Henley Business School, University of
Reading, non-executive Chairman of the
investment committee for CBRE Investors Global
Multi-Manager and honorary Professor of Real
Estate Investment at the University of Cambridge.
Joined the Supervisory Board in 1999.
R R Foulkes
Richard Foulkes was Vice Chairman of
Schroder Investment Management Limited
until his retirement in October 2005. He is a
non-executive Director of 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, is a
Council Member and Trustee of St Monica Trust
and is Chairman of the Investment Advisory
Committee of Sprefs Property Developers Fund.
Joined the Supervisory Board in 2006.
R I Moore MBE FCSI*
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
* R I Moore is the Chairman and R R Foulkes and J A Scott
are members of the Audit Committee.
** On 1 June 2009 BNP Paribas rebranded its global real estate
business from Atisreal Limited to BNP Paribas Real Estate
Advisory and Property Management UK Limited, to be known
as BNP Paribas Real Estate.
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.
Key Service Providers
Manager and Property Manager
Schroder Property Investment
Management Limited
31 Gresham Street
London EC2V 7QA
Authorised and regulated by
the Financial Services Authority.
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.
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.
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.
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
Hay’s Galleria
1 Hay’s Lane
London SE1 2RD
Independent Valuer**
BNP Paribas Real Estate
Advisory and Property
Management UK Limited
90 Chancery Lane
London WC2A 1EU
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
37
Additional Unitholder Information
Gross Annual Distribution
Paid per Unit
Date
31 March 2010
31 March 2009
31 March 2008
31 March 2007
31 March 2006
31 March 2005
Gross Annual
Distribution
per unit1
£1.543322
£1.598533
£1.653633
£1.610234
£1.581476
£1.411795
Net Asset
Value
per unit
£30.30
£29.45
£44.19
£53.05
£46.17
£39.15
Yield2
Quarterly Volume of
Secondary Market Trades
(£ million)
Q1 2010
5.1%
5.4%
3.7%
3.1%
3.4%
3.6%
59.5
Q4 2009
Q3 2009
15.7
6.3
Q2 2009
1.4
Q1 2009
2.5
Q4 2008
1.8
Source: Schroders, 31 March 2010
Q3 2008
2.4
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.
Q2 2008
6.7
Q1 2008
6.8
Cash and Gearing
Date
31 March 2010
31 March 2009
31 March 2008
31 March 2007
31 March 2006
31 March 2005
Gearing2
(% of NAV)
16.3%
20.6%
18.2%
15.9%
18.2%
27.0%
Source: Schroders, 31 March 2010
Investment and borrowing guidelines as follows:
1 Maximum 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.
38
16.0
Q4 2007
Amount in Cash (Capital)1
at the end of each year
£43.4 million
£5.9 million
£1.8 million
£4.1 million
£27.2 million
£0.9 million
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2010
Q3 2007
Q2 2007
Q1 2007
6.0
27.1
24.9
Source: Schroders, 31 March 2010
Monthly Unit Prices
Date
31 March 2010
28 February 2010
31 January 2010
31 December 2009
30 November 2009
31 October 2009
30 September 2009
31 August 2009
31 July 2009
30 June 2009
31 May 2009
30 April 2009
31 March 2009
Net Asset
Value
£30.30
£29.87
£29.59
£29.29
£28.49
£27.67
£27.09
£26.78
£26.81
£26.88
£27.59
£28.48
£29.45
Bid
Price
£29.75
£29.33
£29.06
£28.76
£27.97
£27.16
£26.60
£26.29
£26.32
£26.40
£27.09
£27.96
£28.91
Offer
Price
£31.74
£31.29
£31.00
£30.68
£29.84
£28.98
£28.38
£28.05
£28.08
£28.16
£28.90
£29.83
£30.84
Source: Schroders, 31 March 2010
39
Additional Unitholder Information (continued)
Unitholder Breakdown
Number of
Unitholders
Pension Funds
Local Authority Pension Funds
Charities
Common Investment Funds
SIPPs1
Total
234
36
148
3
7
428
Total %
Holding by
Units in Issue
62.5
28.4
7.1
1.9
0.1
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
402
23
3
–
428
93.9
5.4
0.7
–
100.0
–
–
–
–
3.6
9..2
12.6
20.5
Largest Investor
Largest Three Investors
Largest Five Investors
Largest Ten Investors
Source: Schroders, 31 March 2010
40
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2010
Debt Analysis
At 31 March 2010
Fund
Loan
Facility
Provider
Amount
of Loan
Facility
(Drawn)
£m
Maturity
Date
Fixed rate (F)
Variable margin (V)
Swap rate (S)
Current
LTV
(LTV
Covenant)
Interest Cover
Ratio (Interest
Cover
Covenant)
Direct
SEPUT
Lloyds TSB
100.0
(0.0)
December 2010
0.65(V)
n/a
n/a
Norwich
Union
(92.3)
between 2012
and 2028
between 5.0% (F)
and 5.8% (F)
88%1
(n/a)
128%1
n/a
Nationwide
4.4
(3.7)
October 2013
7.1% (F)
40%
(n/a)
414%
(125%)
Eurohypo AG
February 2012
2.6% (V)
ASAR International
(HVB and Heleba)
REC Retail
Parks Limited
192.5
(192.5)
496.1
(471.1)
900.0
(500.0)
December 2015
October 2012
0.9% (V)
5.1% (S)
4.4% (S)
53.8%
(65%)
43%
(55%)
39.9%
(65%)
384%
(150%)
265%
(120%)
318%
(140%)
Royal Bank of
Scotland plc
40.0
(0)
August 2010
n/a
0%
(65%)
0%
(125%)
Emerald Funding
(Gibralter) PLC2
Convertible Notes
100.0
(100.0)
200.0
(194.3)
5.5
(5.5)
280.0
(280.0)
July 2012
5.8% (S)
September 20204
10% (F)
33%
(35%)
n/a
207%
(155%)
n/a
September 2010
2.5% (V)
March 2014
5.0% (S)
50%
(60%)
59%
(n/a)
138%
(125%)
210%
(140%)
Indirect
AH Medical
Properties
Plc
Allied London
(Eagle House)
Limited
ChisPUT
HRWF
HUT
Teesland
UNITE
WELPUT
Bank of
Ireland
CMBS
Abbey/HSH
120.0
(85.6)
December 2013
3.5% (S)
52%
(65%)
250%
(140%)
Lloyds
115.0
(115.0)
279.0
(184.5)
December 2012
5.3% (S)
July 2011
4.8% (S)
56%
(60%)
35.3%
(70%)
200%
(130%)
198.9%
(115%)
HSBC Bank
Plc and
Eurohypo Plc
Source: Information obtained from the managers of the funds at 31 March 2010
Notes:
1 Weighted average for eight separate facilities.
2 Represents HUT’s 50.0% interest in the Gibraltar Limited Partnership, holder of the facility.
3 Notional LTV, as the LTV covenant is only tested annually at end December. Sales post the 31 March 2010 have reduced the
notional LTV below the 35% covenant.
4 From 2012 notes can be redeemed at the request of the Manager. Noteholders can redeem or convert at any time.
41
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. Reliable information about the
value of units in the Trust or the extent of
the risks to which they are exposed may not be
available (see Chairman’s Statement). 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 thirty-ninth Annual
General Meeting of the unitholders will be held
at 31 Gresham Street London EC2V 7QA at
12.00pm on 23 September 2010. 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 2010.
To re-elect R I Moore 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 R R Foulkes 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 2010
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 Lisa
Emmerson, Fund Services to avoid any delays in
being able to purchase or redeem units in the
Schroder Exempt Property Unit Trust.
42
Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2010
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:
Lisa Emmerson
Fund Services
SEPUT-clientadministration@schroders.com
Direct Line
+44 (0)20 7658 3889
Switchboard
+44 (0)20 7658 6000
For other related client queries (including
performance, quarterly investment reports, audit
requests):
Hanne Hooton
Client Executive
hanne.hooton@schroders.com
Direct Line
+44 (0)20 7658 6787
Switchboard
+44 (0)20 7658 6000
Katie Nicholson
Client Executive
katie.nicholson@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 2010
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.
The Manager, Schroder Property 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 Property 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. Please note the Manager
does not offer investment advice.
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.
43
130852 Annual Report 2010 Cover
15/6/10
6:06 pm
Page 4
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 (including leisure and alternative investments such as
student accommodation) 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: York, Monks Cross Shopping Park
Investment Objective and Policy
The Trust incorporates a blend of direct and indirect investment
strategies. Indirect investments provide further diversification by
accessing distinct areas of the UK property market, such as fashion
parks, some larger properties, and specialist management associated
with the alternative sectors.
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 43.
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
130852 Annual Report 2010 Cover
15/6/10
6:06 pm
Page 2
31 March 2010
Schroder Exempt Property Unit Trust
ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS
31 March 2010
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