130852 annual report 2010 cover - schroders130852 annual report 2010 cover 15/6/10 6:06 pm page 4 02...

31 March 2010

Schroder ExemptProperty Unit TrustAnnual Report and AuditedFinancial Statements

Schroders Exempt Property Unit Trust31 Gresham Street, London EC2V 7QAwww.schroders.com/seput www.schroderproperty.com

Schroder E

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31 March 2010

130852 Annual Report 2010 Cover 15/6/10 6:06 pm Page 2

www.schroders.com/seput

Investment Objective and PolicySchroder Exempt Property Unit Trust (“SEPUT” or the “Trust”) wasestablished 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 andcapital growth for investors through investment in UK property. Risk isdiversified by the Trust holding a mixed portfolio of retail, office, industrialand other property (including leisure and alternative investments such asstudent accommodation) throughout the UK. The Trust may also hold landand undertake developments as well as use moderate levels of gearingfrom time to time.

The Trust incorporates a blend of direct and indirect investmentstrategies. Indirect investments provide further diversification byaccessing distinct areas of the UK property market, such as fashionparks, some larger properties, and specialist management associatedwith the alternative sectors.

The Trust seeks to provide a return of 0.5% per annum (net of fees) aboveits benchmark (Investment Property Databank UK Pooled Property FundIndices – All Balanced Funds Median) over rolling three year periods.

The Trust may be suitable for UK tax exempt pension funds and charitieswho wish to hold a direct property portfolio without the commitment ofconsiderable trustee oversight and management expertise. The propertyin the Trust is professionally and actively managed by chartered surveyorsemployed by the Property Manager, Schroder Property InvestmentManagement Limited.

The Manager welcomes the opportunity to meet unitholders, potentialunitholders and their advisers to explain more fully the strategy andprogress of the Trust. Please see Manager Contacts on page 43.

Schroder Exempt Property Unit TrustSchroder Property Investment Management Limited31 Gresham StreetLondon EC2V 7QATel: +44 (0)20 7658 6000

Further information can be found on the websitewww.schroders.com/seput


Front cover:York, M

onks Cross S

hopping Park


02 Trust Analysis

05 Chairman’s Statement

07 Manager’s Statement

10 Rent Reviews, Lettings and Lease Renewals

11 Purchases and Sales

12 Portfolio Details

14 Responsibilities of the Manager, Trustee and Supervisory Board

15 Independent Valuer’s Report

16 Independent Auditor’s Report

18 Statement of Net Assets

19 Income and Expenditure Account

20 Statement of Total Recognised Gains and Losses

21 Cash Flow Statement

22 Notes to the Financial Statements

37 Supervisory Board and Key Service Providers

38 Additional Unitholder Information

41 Debt Analysis

42 General Meeting and General Information

Contents

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SizeDuring the year the net asset value of the Trust increased by £129.3 million, to £1,151.8 millionat 31 March 2010 from £1,022.5 million at 31 March 2009.

Distribution YieldThe Trust’s distribution yield was 5.1% at 31 March 2010 compared to 5.4% at 31 March 2009.

Net Asset Value per UnitThe Trust’s net asset value per unit was £30.30 at 31 March 2010, compared to £29.45 at31 March 2009, an increase of 2.9%.

Rent ReviewsOver 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

Source: Investment Property Databank (IPD) UK Pooled Property Fund Indices. Performance is calculated on a net assetvalue (NAV) to NAV price basis plus income distributions accrued for the relevant periods, compounded monthly, net of feesand based on an unrounded NAV per unit.

* Benchmark shown is the IPD UK Pooled Property Fund Indices – All Balanced Funds Index Median. The Trust benchmarkhas 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 asthe Median does not provide appropriate detail.

Trust Benchmark* IPD UK Pooled Property Fund Indices- All Balanced Funds Index Weighted Average

-40 -30 -20 -10 0 10 20 30

-40 -30 -20 -10 0 10 20 30

Q1 2010 (% per qtr)

2010

2009

2008

2007

2006

Q4 2009

Q3 2009

Q2 2009

1 year (% per annum)

3 years

5 years

10 years

Performance % to 31 March 2010

Twelve month performance % to 31 March

Trust Analysis

02 Schroder Exempt Property Unit Trust Annual Report and Audited Financial Statements 31 March 2010

Portfolio by SectorAt 31 March 2010

Overweight/underweight relative to benchmark* Absolute Segment

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 Portfolio StructureMarch 2010, % NAV* March 2009, % NAV*

Source: Schroders 31 March 2010

* NAV: net asset value.

** Distribution yield relative to IPD Pooled Property Fund Indices – All Balanced Funds Weighted Average.

At 31 March At 31 March2010 2009

Gearing (% NAV)* 16.3% 20.6%

Relative distribution yield** (0.19%) (0.52%)

Average unexpired lease length 7.9 years 7.6 years

NAV* £1,151.8m £1,022.5m61.7%

23.4%

14.9% 57.6%

26.1%

16.3%

Directly owned assets and cash Joint ventures Indirect assets

SEPUT Benchmark*

Standard Retail 6.9 13.2

Shopping Centres 1.9 6.4

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

Other 9.3 7.9

Cash 3.3 9.7

-8% -6% -4% -2% 0% 2% 4% 6% 8%

Cash

Other

Industrial

Rest of UK Offices

Central London Offices

Retail Warehouses

Shopping Centres

Standard Retail

Underweight Overweight

03


Portfolio ProfileAt 31 March 2010

Top Ten HoldingsHoldings Sector % NAV*

Hercules Unit Trust Retail Warehouse 6.2York, Monks Cross Shopping Park Retail Warehouse 5.5West End of London Property Unit Trust Office 5.4Bracknell Retail and Office 5.1Schroder Emerging Retail Property Unit Trust Standard Retail 4.2London NW10, Matrix, Park Royal Industrial 3.9Crayford, Acorn Industrial Estate Industrial 3.7London, Parker Tower Office 3.5Manchester, Fujitsu Office Complex, Central Park Office 3.4Cardiff, Mermaid Quay Leisure 3.2

Source: Schroders, 31 March 2010

* NAV: net asset value

Top Ten TenantsTenant % Contracted Rent

Fujitsu Services Limited 3.7British Telecommunications plc 3.1Regus (UK) Limited 2.4Exel Limited 2.2Lloyds TSB Bank plc 2.2B&Q plc 1.9TBWA UK Group Limited 1.9Sportsdirect.com Retail Limited 1.8Marks & Spencer plc 1.6DSG Retail Limited 1.4All other tenants 77.8


New Lettings41 lettings were completed over the last twelve months, contracting an additional £3.4 million of income.

Void ProfileFrom January 2010 onwards IPD have changed how they calculate void rates. The new calculation assumes where a tenant is inadministration 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 oldbasis for 2010 was 10.7%.

At 31 March 2010 SEPUT (%) IPD (%)2

Void rate (as a % of estimated rental value 8.5 8.2of total portfolio excluding developments)1

At 31 March 2009

Void rate (as a % of estimated rental value 8.0 9.3of total portfolio excluding developments)

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.

Chairman’s Statement

The year to 31 March 2010 saw the end of themost severe UK property bear market everrecorded. The trough in market valuations wasreached in June 2009, 42.4% below its peak oftwo years before (Source:IPD). Since then, themarket has recovered driven by increasedinvestor demand, attracted in particular by thefavourable relative pricing of property comparedto UK bonds and cash. The Trust’sperformance has also improved and there hasbeen demand for new units in the second halfof the period under review as well as an activesecondary market.

The Supervisory Board is aware of theeconomic and political challenges facing the UKin the coming months and the risk that there willbe a further deterioration in economicconditions. While rental values have started tostabilise, occupiers remain under pressure andlandlords are subject to potential increases invoid rates. Although income levels remainrelatively high, extracting returns from UKproperty will require focus, dedication and skill.

Net Asset Value andPerformanceDuring 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 assetvalue 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 twelvemonths under review was 8.7% versus thebenchmark, the IPD UK Pooled Property FundIndices – All Balanced Fund Median, whichreturned 13.2% while the weighted averagereturn of the same index was 11.7%.

Since the property market started to recover inJune 2009, the Trust has outperformed itsbenchmark. However, over the past three years(its performance measurement period), the Trusthas underperformed. Further detail on theattribution of returns is provided in theManager’s Statement.

Units in Issue andSecondary MarketAt 31 March 2010 the Trust had a total of38,013,430 units in issue, an increase of3,284,710 on a year earlier. The high level ofdemand for the Trust in the second half of theperiod led to a restriction on the number ofunits issued following the December 2009 andJanuary 2010 dealing dates. This was

necessary to protect the interests of existingunitholders. From February 2010, however, I ampleased to report that the Trust has once againaccepted subscriptions in full.

The secondary market was also active and unitsvalued at £82.8 million were traded betweeninvestors over the twelve month period.

Investment andBorrowing GuidelinesThe Supervisory Board is responsible forensuring that the Manager operates within theagreed investment and borrowing guidelines.The guidelines have been set in order to protectthe interests of unitholders and are reviewed ona regular basis. The guidelines were monitoredand maintained during the period under review.

The Manager would be pleased to providedetails of the guidelines to unitholders onrequest.

GearingA year ago the Manager confirmed the revisedstrategy of reducing exposure to indirectholdings in favour of direct holdings. Gearingwithin the Trust is entirely in the indirectholdings. The Supervisory Board limits theoverall gearing to 25% of the net asset value.Gearing fell to 16.3% of net asset value at31 March 2010 from 20.6% a year before asthe strategy started to be implemented. Furthersales of geared indirect holdings since thefinancial year end has seen the Trust’s gearingfall further to 14.8% as at 31 May 2010.

GovernanceThe Supervisory Board is satisfied that the Trusthas been managed in accordance with theTrust Deed and agreed guidelines and with dueregard to sound governance practice.

Supervisory BoardMr van der Klugt retired as Chairman of theSupervisory Board at year end. On behalf of theSupervisory Board and unitholders I would liketo thank Mr van der Klugt for his tirelessservices to the Trust over the past eight yearsand we wish him continued success in thefuture. I am pleased to have been invited totake on his responsibilities as Chairman of theSupervisory Board.

05

Chairman’s Statement (continued)


OutlookThe Supervisory Board has been supportive ofthe management team and their efforts toreposition the Trust following a period ofunderperformance. We are pleased to note theimproved returns of the Trust compared with itspeer group. The Manager has made goodprogress in implementing its stated strategywithin an enhanced risk control framework, andalthough economic headwinds remain, webelieve that unitholders should be able to lookforward to improved and more predictablerelative returns in the coming year.

James A. ScottChairmanSchroder ExemptProperty Unit TrustSupervisory Board15 June 2010

PerformanceIt is disappointing to report that the Trustunderperformed its benchmark over thereporting period, and over its three yearperformance measurement period. The relativeunderperformance over the past year, however,disguises a marked improvement since themarket trough in mid-2009. In the nine monthssince 30 June 2009 the Trust generated a totalreturn of 17.1% against the benchmark of16.0% (source: IPD). We believe thisimprovement, as we execute our newinvestment strategy, marks a turn in the Trust’sfortunes. The significant positive and negativedrivers of relative return over the full year wereas follows:

• The Trust’s sector positioning of assetsadded 1.2% to relative returns over thepast year. The overweight to South EastIndustrials and underweight to Rest of UKIndustrials was a significant positivecontributor while in the retail sector, theunderweight position to Shopping Centreswas similarly beneficial. The Trust’sweightings in office sub sectors weremarginally accretive to returns.

• Several of the sector specialist indirectfunds performed strongly. This was drivenby a combination of the prime nature of theunderlying assets and gearing. HerculesUnit Trust’s total return was 22.5% in theyear to 31 March 2010, while the West Endof London Property Unit Trust returned32.2% (source: IPD).

• A number of individual assets such as thelargest, Monks Cross Shopping Park(342,284 sq ft shopping park joint ventureaccounting for 5.5% of NAV), saw strongperformance of 29.5% for the twelvemonths. Performance for good qualityproperties let on long leases such as thishave been in demand from investors.

• As anticipated, the key detractors toperformance were the regeneration sitessuch as SEPUT’s 50% ownership ofBracknell town centre and land such asRuskin Square in Croydon. The Citydevelopment sites, and refurbishmentopportunities such as Parker Tower, haveunderperformed the market. AlthoughBracknell has a running yield of over 6%,the lack of income generated by land whichat year end amounted to 6.5% of theportfolio - at a time when investors arefocused on property’s income component -detracted from relative, short term total

returns. For these assets, performanceshould be driven by the recovery of theoccupier markets and asset managementinitiatives, and a recovery in the occupiermarket which has not yet been captured bythe Valuers in their valuations.

With the portfolio being repositioned in line withstated strategy and with the latent potential ofthese ‘value add’ strategies still to be realised, itis pleasing to see the Trust ahead of itsbenchmark over the past nine months of volatilerecovery.

UK Property MarketReview and OutlookWhile it is premature to talk of recovery in theoccupier market, there are signs that parts ofthe market are beginning to stabilise. Accordingto CBRE, the overall vacancy rate in centralLondon offices fell in the fourth quarter of 2009and continued falling in quarter one 2010 asoccupiers withdrew space that they hadpreviously been trying to sublet. This resulted ina stabilisation of prime rents in both the Cityand West End and landlords were able to cutincentives. Similarly, in the retail sector the rateof insolvencies and pre-pack administrationsamong major retailers has slowed in recentmonths. According to IPD, the decline inaverage rents has slackened markedly sinceJune 2009. There is now a clear distinctionbetween large shopping centres, wherevacancy rates are around 10% on average, andsmaller secondary centres where vacancy ratesare closer to 20% (source: Property MarketAnalysis (PMA)). In keeping with these trends,PMA’s latest property forecasts now suggestthat 2010 will mark the bottom of the currentrental cycle, rather than 2011 as previouslypredicted.

The biggest uncertainty is the outlook forproperty yields. The improvement in investorsentiment towards property since mid 2009 hasbeen driven by its relatively high income yieldversus returns on cash and UK bonds. Theassociated fall in yields has been the key factordriving the recent revival in capital values andtotal returns. There is also evidence of anincreased appetite from banks to lend againstcommercial property. While the semi-nationalised UK banks are still looking tocontract their loan books, other UK banks andGerman banks are more active. According toIPD, the All Property initial yield fell from 7.7% inJune 2009 to 6.5% in March 2010 and capitalvalues rose by 14.5% over the same period(although they remain 34% below their peak in

07

Manager’s Statement

June 2007). Compared with UK Governmentbonds and cash, Schroders believes UKproperty still looks a relatively attractive assetclass.

StrategyWith property remaining attractive comparedwith other asset classes, cash balances arebeing invested as prudently as possible and inline with strategy. The careful management ofcash inflows remains of utmost importance toprotect the interests of existing unitholders. TheManager is part way through rebalancing theportfolio to ensure SEPUT has greater ability toperform in line with its stated objective. Sincemarket liquidity improved in the second half of2009, our investment strategy has been to:

• Reduce exposure to indirectly ownedinvestments, particularly those withgearing. The exposure to these assets hasreduced partly through cash inflows to theTrust and partly through asset disposals.Gearing has been accretive to performancesince the second half of 2009, sales offurther units have been completed since theend of the reporting period at a sizeablepremium to the stated NAV.

• Improve the quality and duration ofincome. The focus of acquisitions hasbeen on long lease properties to strongcovenants which has resulted in animproved average unexpired lease from 7.5years in March 2009 to 7.9 years in March2010, in line with its benchmark. We arenow considering a wider range of optionswith greater asset managementopportunities.

• Sell or manage out existingdevelopment opportunities. We arecontinuing negotiations with planningauthorities, joint venture partners andpotential tenants on several sites within theportfolio. We believe that this may be themost profitable means of extracting value,and reducing risk, from these assets.

Our strategy is being implemented within anenhanced risk management framework whichclosely monitors risk against its peer group andits investment parameters.

Portfolio ActivitySeven properties were bought during the yearto 31 March 2010, while two direct propertieswere sold and part of our units in one indirectplus proceeds from the liquidation of twoindirect vehicles were received. At the end ofthe financial year, the cash balance was below5% of the Trust’s net asset value. The commontheme of the majority of purchases was onimproving the duration and quality of the Trust’srental income, in line with strategy. Purchasesincluded:

• Fujitsu Office Complex, Central Park,Manchester. The property comprisesthree office buildings which are let to Fujitsufor a further 15 years with 2.5% pa fixedrental uplifts. It was bought at an initial yieldof 6.8%.

• St William House, Tresillian Terrace,Cardiff. Adjacent to Cardiff central station,the 140,000 sq ft building is let to LloydsTSB for a further 15 years and was boughtat an initial yield of 6.5%.

• B&Q, Hythe Riverside Park,Colchester. This 102,300 sq ft retailwarehouse had an unexpired lease term onpurchase of 17 years and is let to B&Q. Itwas bought at an initial yield of 6.5%.

• Interchange Retail Park, London Road,Ipswich. This 60,700 sq ft retail park is inan established retail destination with aneighbouring Tesco Extra. It was bought atan initial yield of 6.8%.

• Albany Park, Frimley. With an initial yieldof 8.0% this retail warehouse/industrial parkcomprises nine fully let units totalling 85,200sq ft.

• Quadrant Park, Welwyn Garden City.This property was completed four yearsago and has excellent transportconnections. The 116,000 sq ft industrialestate offers a number of assetmanagement possibilities and tenantsinclude Screwfix Direct Ltd and Univolt UK.

• Parker Tower, London. A 20,600 sq ftoffice adjacent to the existing holdingstotalling 72,900 sq ft at Parker Tower wasbought.

Manager’s Statement (continued)


The following assets were sold:

• 10 Furnival Street, London EC4. Thismid town office building was sold at abovevaluation to a private investor. The bulk ofincome was subject to break clauses withinfour years.

• 8-10 Exchange Street, Manchester.Having refurbished and repositioned theretail units in 2008, the Grade B officesabove it were seen as a threat. Theproperty was sold at above valuation.

• Indirect Funds. A total of £26.4 millionwas received from the liquidation of theResidential Property Unit Trust (RESPUT)and Gresham Property Partners LP. £7.5million of units were also sold in theSchroder Emerging Retail Property UnitTrust (SERPUT) during the year. Salestotalling £30 million have been made fromWest End London Property Unit Trust(WELPUT) following the period end at apremium to NAV.

SummaryThe Trust’s management team considers theTrust is well positioned to benefit from thecontinued improvement in the property marketowing to its current structure. Now that liquidityhas improved in the UK commercial propertymarket, the stated strategy of rebalancing theportfolio more towards direct property holdingsis being implemented, but this will take time. Inthe medium term, the improvement in thequality and duration of the portfolio’s income,coupled with a phased reduction in indirectlyowned assets (and also gearing), should benefitunitholders in the Trust.

I D MasonFund Manager15 June 2010

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Rent Reviews, Lettings and Lease RenewalsAt 31 March 2010

Rent ReviewsIn the directly held portfolio 36 rent reviews were settled over the year totalling £6.9 million per annum. This reflectsan uplift of 10.3% on the old rent but was -3.6% below the estimated rental value (ERV).

Notable rent reviewsOld Rent New Rent ERV

Property Tenant (per annum) (per annum) (per annum)

Park Royal, London NW10 Maple Leaf Bakery UK Ltd £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

New LettingsIn the directly held portfolio 41 new lettings were completed adding £3.4 million per annum to the rent roll.

Notable new lettingsOld Rent New Rent ERV

Property Tenant (per annum) (per annum) (per annum)

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 RenewalsIn 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.


PurchasesName Sector Type Lot size

Cardiff, St William House Office Direct Over £25mManchester, Fujitsu Office Complex, Central Park Office Direct Over £25mColchester, Hythe Riverside Park Retail Warehouse Direct Between £10m and £25mFrimley, Albany Park Industrial Direct Between £10m and £25mIpswich, Interchange Retail Park Retail Warehouse Direct Between £10m and £25mHercules Unit Trust (HUT) – 10% Convertible Bond Retail Warehouse Indirect Under £10mLondon WC2, Craven House, Parker Tower Office Direct Under £10mWelwyn Garden City, Quadrant Park Industrial Direct Under £10m

Total £142.3m

SalesName Sector Type Lot size

Chancery Exchange, 10 Furnival Street, London EC4 Office Direct Over £25mManchester, 8-10 Exchange Street Standard Retail Direct Between £10m and £25mResidential Property Unit Trust (in liquidation) Other Indirect Between £10m and £25mExeter, 232-234 High Street Standard Retail Direct Under £10mGresham I (in liquidation) Industrial Indirect Under £10mUNITE UK Student Accommodation Fund Other Indirect Under £10mSchroder Emerging Retail Property Unit Trust (SERPUT) Standard Retail Indirect Under £10m

Total £99.8m


11

Purchases and SalesAt 31 March 2010

Portfolio HoldingsName 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

Retail Warehouse

Hercules Unit Trust (HUT) Over £25m Indirect

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

Retail and Office

Bracknell Property Unit Trust (BPUT) Over £25m JV

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

Rest of UK Offices

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

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


Portfolio DetailsAt 31 March 2010

Name Lot size Type

Industrial

London NW10, Matrix, Park Royal Over £25m Direct

Crayford, Acorn Industrial Estate Over £25m Direct

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

Other

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

13


Manager’s and Trustee’sResponsibilities for theFinancial StatementsThe Trust Deed requires the Manager to prepareFinancial Statements for each financial yeardetailing the state of affairs of the Trust as atthe end of the financial year and its income orloss for the financial year. The Manager isresponsible for keeping proper accountingrecords and, along with the Property Manager,for taking reasonable steps to safeguard theassets of the Trust and to prevent and detectfraud and other irregularities. The Trustee isrequired to hold the underlying property of theTrust for the unitholders and is responsible forthe safe custody of that property and anydocumentation relating to it.

The Manager confirms that suitable accountingpolicies and appropriate accounting standardshave been used and applied consistently andreasonable and prudent judgements andestimates have been made in the preparationof the Financial Statements. The Manager alsoconfirms that the Financial Statements havebeen prepared on the going concern basis forthe year ending 31 March 2010.

Supervisory Board’sResponsibilities for the FinancialStatementsThe Supervisory Board is responsible forapproving, on the Audit Committee’srecommendation, the Financial Statementsprepared for each financial year, including thecontent and the accounting policies adopted,and for reporting any corporate governanceissues relating to the Trust or other matters inconnection with the Financial Statements.

Responsibilities of the Manager,Trustee and Supervisory Board

15

As independent valuer for the Trust, we havevalued properties held by the Trust at 31 March2010 in accordance with The Royal Institutionof Chartered Surveyors and InternationalValuation Standards. The Manager has beenprovided with a full valuation certificate andreport. The properties have been valued on thebasis of market value.

Details of the nature and extent of theproperties, the tenure and tenancies, permitteduses, town planning consents and relatedmatters, have been supplied by the PropertyManager, Schroder Property InvestmentManagement Limited (SPrIM). The majorityof the properties form the subject of detailedreports from ourselves. We have seen copiesof all the leases but we have not examined thetitle documents and we have thereforeassumed that the Trust’s interests are notsubject to any onerous restrictions, to thepayment of any unusual outgoings or to anycharges, easements or rights of way, otherthan those to which we have referred in ourreports. We rely upon the Property Managerto keep us advised of any changes that mayoccur in the investments. We are not instructedto carry out structural surveys nor test anyof the service installations. Our valuationstherefore have regard only to the generalcondition of the properties evident fromour inspections. We have assumed that nomaterials have been used in the buildingswhich are deleterious, hazardous or likely tocause structural defects. We are notinstructed to carry out investigations intopollution hazards which might affect theproperties and our valuations assumethe properties are not adversely affectedby any form of pollution.

In our opinion the aggregate of the marketvalues of the 38 properties owned by the Trustat 31 March 2010 is £590.3 million. This figurerepresents the aggregate of the valuesattributable to the individual properties andshould not be regarded as a valuation of theportfolio as a whole in the context of a saleas a single lot.

In the case of the properties in the course ofdevelopment, our valuations reflect the stagereached in construction and the costs alreadyincurred at the date of valuation. We have hadregard to the contractual liabilities of the partiesinvolved in the developments and any costestimates which have been prepared byprofessional advisers.

No allowance is made in our valuations for thecosts of realisation, any liability for tax whichmight arise on the event of disposal or for anymortgage or similar financial encumbrance overthe property. Our valuations exclude VAT.

BNP Paribas Real Estate31 March 2010

Independent Valuer’s ReportTo the Unitholders of Schroder Exempt Property Unit Trust

On 1 June 2009 BNP Paribas rebranded its global real estate business from Atisreal Limited toBNP Paribas Real Estate Advisory and Property Management UK Limited, to be known as BNPParibas Real Estate.


We have audited the Financial Statements ofSchroder Exempt Property Unit Trust (“theTrust”) for the year ended 31 March 2010 whichcomprise Statement of Net Assets, the Incomeand Expense Account, the Statement of TotalRecognised Gains and Losses, the Cash FlowStatement and the Notes to the FinancialStatements. These Financial Statements havebeen prepared under the accounting policiesset out therein.

RespectiveResponsibilitiesof the Managerand AuditorsThe Manager’s responsibilities for preparing theAnnual Report and Financial Statements inaccordance with applicable law and UnitedKingdom Accounting Standards (UnitedKingdom Generally Accepted AccountingPractice) are set out in the Statement ofResponsibilities of the Manager, Trustee andSupervisory Board.

Our responsibility is to audit the FinancialStatements in accordance with relevant legaland regulatory requirements and InternationalStandards on Auditing (UK and Ireland). Thisreport, including the opinion, has been preparedfor and only for the unitholders of the Trust as abody in accordance with the Trust Deed and forno other purpose. We do not, in giving thisopinion, accept or assume responsibility for anyother purpose or to any other person to whomthis report is shown or into whose hands it maycome save where expressly agreed by our priorconsent in writing.

We report to you our opinion as to whether theFinancial Statements give a true and fair viewand are properly prepared in accordance withthe Trust Deed. We also report to you if, in ouropinion, proper accounting records for the Trusthave not been kept or if the FinancialStatements are not in agreement with thoserecords, if we have not received all theinformation and explanations we require for ouraudit, or if the information given in theManager’s Statement is not consistent with theFinancial Statements.

We read the other information contained in theAnnual Report and consider whether it isconsistent with the Audited FinancialStatements. This other information comprisesonly the Supervisory Board and Key ServiceProviders, the Trust Analysis, the Chairman’sStatement, the Manager’s Statement,Purchases and Sales, Details of the Portfolio,Rent Reviews, Lettings and Lease Renewals,the Responsibilities of the Manager, Trustee andSupervisory Board, the Independent Valuer’sReport to the Unitholders, Additional UnitholderInformation, Debt Analysis and General Meetingand General Information. We consider theimplications for our report if we become awareof any apparent misstatements or materialinconsistencies with the Financial Statements.Our responsibilities do not extend to any otherinformation.

Basis of Audit OpinionWe conducted our audit in accordance withInternational Standards on Auditing (UnitedKingdom and Ireland) issued by the AuditingPractices Board. An audit includes examination,on a test basis, of evidence relevant to theamounts and disclosures in the FinancialStatements. It also includes an assessment ofthe significant estimates and judgements madeby the Manager in the preparation of theFinancial Statements, and of whether theaccounting policies are appropriate to theTrust’s circumstances, consistently applied andadequately disclosed.

We planned and performed our audit so as toobtain all the information and explanationswhich we considered necessary in order toprovide us with sufficient evidence to givereasonable assurance that the FinancialStatements are free from material misstatement,whether caused by fraud or other irregularity orerror. In forming our opinion we also evaluatedthe overall adequacy of the presentation ofinformation in the Financial Statements.

OpinionIn our opinion the Financial Statements give atrue and fair view, in accordance with UnitedKingdom Generally Accepted AccountingPractice, of the financial position of the Trust at31 March 2010 and of the net income and totalrecognised gains of the Trust for the year thenended and have been properly prepared inaccordance with the Trust Deed.

PricewaterhouseCoopers LLPChartered AccountantsLondon15 June 2010

Independent Auditor’s ReportTo the Unitholders of Schroder Exempt Property Unit Trust

17

18 Statement of Net Assets

19 Income and Expenditure Account

20 Statement of Total Recognised Gains and Losses

21 Cash Flow Statement

22 Notes to the Financial Statements

Financial Statements

31 MA

RC

H 2010


At 31 March 2010 2009Notes £’000 £’000

Fixed assetsInvestment property

Freehold property 470,153 360,021Leasehold property 102,973 112,943

2(a) 573,126 472,964

Development propertySites in the course of development at valuation:

Freehold property 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 –

Property related investments 5(b) 506,350 533,009Total fixed assets 1,110,614 1,023,170

Current assetsDebtors 6 18,190 13,968Cash at bank and on deposit:

Current accounts 16 51,346 13,472

Total current assets 69,536 27,440

Total assets 1,180,150 1,050,610

Current liabilitiesBank loans 7 _ 5,000Creditors 8 19,321 16,271Taxation 6,371 3,410Distributions payable 2,652 3,466Total current liabilities 28,344 28,147

Net assets attributable to unitholders 9 1,151,806 1,022,463

Net asset value per unit £30.30 £29.45

The Financial Statements on pages 18 to 36 were approved by the Manager, Schroder PropertyInvestment Management Limited, and the Supervisory Board on 15 June 2010 and signed on their behalf by:

W A Hill, Director J A Scott, ChairmanOn behalf of the Manager On behalf of the Supervisory Board

The notes on pages 22 to 36 form part of these Financial Statements. The Independent Valuer’sReport is shown on page 15. The Independent Auditor’s Report is shown on page 16.

Statement of Net Assets

19

For the year ended 31 March 2010 2009Notes £’000 £’000

Rents receivable 1(f) 36,259 34,297Other income 1(f) 196 255Service charge income 6,098 5,392Less: property expenses 11 9,312 9,834

Net rental income 33,241 30,110

Income from property related investments 23,379 29,708

Income from subordinated convertible notes 275 –

Interest receivable on bank deposits 1(h) 268 764

268 764Less: finance costs: interest payable 12(d) 238 1,234

Net interest income 30 (470)

Net income before tax 56,925 59,348

Less: income tax 13(a)(i) 11,385 11,870

Net income after tax 45,540 47,478

Less: Management expensesSupervisory Board remuneration 145 145Trustee fee 18(a) 186 196Management fees 18(b) 4,896 5,580Valuation fee 140 165Audit fee 85 84Printing and stationery 68 57Legal and professional fees and other charges 286 664

Total management expenses 12(b) 5,806 6,891

Net income available for distribution 39,734 40,587Finance costs: distributions 12(a) (42,182) (43,377)

Retained deficit for the period 14 (2,448) (2,790)

There is no difference between the net income available for distribution as stated above and itshistorical cost equivalent. All items dealt with in arriving at the net income available for distributionrelate to continuing operations.


Income and Expenditure Account


Realised profit/(loss) on:Investment property sold 14 863 (2,735)Property related investments sold 14 1,591 7,163

Movement in revaluation reserve for retained:Investment property 14 28,660 (171,690)Sites in the course of development 14 787 (13,082)Property related investments 14 (323) (326,349)Property equities 14 3,429 (2,571)

Capital surplus/(deficit) for the year 35,007 (509,264)Net income available for distribution 39,734 40,587

Total recognised gains/(losses) 74,741 (468,677)



Statement of Total RecognisedGains and Losses


Net cash inflow from operating activities 15 49,917 58,423

Returns on investment and servicing of financeInterest received 160 769Interest paid (238) (1,208)Distributions paid (43,030) (43,724)

––––––– –––––––(43,108) (44,163)––––––– –––––––

Tax paid (8,231) (17,386)

Capital expenditure and financial investmentSale of investment property:

Freehold 55,917 65,801Leasehold 9,185 –

Purchase of investment property:Freehold (133,153) –

Property related investments:Purchases (10,128) (6,912)Sales 37,113 35,910

Subordinated convertible notes:Purchase (9,462) –

Other capital expenditure (3,166) (8,581)––––––– –––––––

(53,694) 86,218––––––– –––––––

Cash inflow before financing (55,116) 83,092

FinancingIssue of units 10 105,133 –Units redeemed 10 (7,143) (2,262)Loans repaid 7 (5,000) (90,000)Loans received – 15,000

––––––– –––––––92,990 (77,262)

––––––– –––––––Increase in cash 16 37,874 5,830––––––– –––––––The notes on pages 22 to 36 form part of these Financial Statements. The Independent Valuer’sReport is shown on page 15. The Independent Auditor’s Report is shown on page 16.

21

Cash Flow Statement


1. Accounting policiesThe Financial Statements have been prepared inaccordance with the historical cost convention,as modified by the revaluation of property fixedassets, property related investments andproperty equities, as explained in notes 1(a),1(b) and 1(c) below, and in accordance withapplicable United Kingdom AccountingStandards and the Trust Deed. In accordancewith Financial Reporting Standard (FRS) 18, theTrust’s accounting policies are reviewed annuallyto confirm that they remain appropriate and arein accordance with the requirements ofAccounting Standards, Urgent Issues TaskForce (UITF) abstracts and the Trust Deed.

The principal accounting policies adopted inthese Financial Statements, which have beenapplied consistently, are:

(a) Properties owned by the Trust, includinginvestments in properties owned throughpartnerships and trusts for land, areindependently valued on a market value basishaving regard to whether they are let or unletat the date of valuation. Development propertiesin the course of development are independentlyvalued having regard to the stage reached inthe construction and taking account of anyagreed letting and of any contractual liabilities toadvance further monies. Where legal completionof a purchase is not fully executed at the date ofthe Statement of Net Assets, but takes placesubsequently, or in the case of developmentproperties purchased for development where nowork has yet taken place, the property is shownat cost unless, in the opinion of the Manager,there may be a material difference between costand valuation on completion.

(b) Property related investments are valuedat the net asset value as provided by therelevant managers, in accordance withindustry practice.

(c) Investments in Subordinated ConvertibleNotes 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 todevelopers by reference to the stage ofcompletion reached on developments, intereston these advances is rolled up during the periodof development and is paid to the Trust oncompletion. This interest is credited to theIncome and Expenditure Account during theperiod of the development.

(f) Rental income and other income arerecognised in the Income and ExpenditureAccount on an accruals basis. Rental incomeincludes the Manager’s best estimates forunsettled rent reviews. Provisions are madewhere, in the opinion of the Manager, amountsare deemed likely to be irrecoverable. Incomefrom property related investments comprisesdistributions receivable gross of any relatedtax withheld and is accounted for on areceivable basis.

(g) Fees are recognised on an accrualsbasis and are charged in full to the Incomeand Expenditure Account. The Manager hasallocated 50% of the management fees toincome and the remaining 50% to capital for thecalculation of distributable income.

(h) Interest receivable and payable areaccounted for on an accruals basis.

(i) Benefits to lessees in the form of rent freeperiods and other incentives are treated as areduction in the overall return on the leases and,in accordance with UITF 28, ‘Operating LeaseIncentives’, are recognised on a straight linebasis over the shorter of the lease term or theperiod up to the initial rental review date. Thevaluation of investment property is reduced byall lease incentives. Any remaining debtorincentive balances in respect of propertydisposed of are included in the calculationof the profit or loss arising on disposal.

(j) In accordance with FRS 25, incomedistributions are classified as finance costsand are accounted for on an accruals basis.

(k) Unrealised surpluses less unrealised deficitson valuation of property fixed assets, propertyrelated investments and property equities arecredited directly to the revaluation reserve inaccordance with SSAP 19. Realised profits, lessrealised losses, determined by reference tocarrying value at the commencement of theaccounting period, are credited to the realisedprofit/loss on sale reserve and disclosed in theStatement of Total Recognised Gains andLosses. Realised prior period revaluations aretaken to the realised profit/loss on sale reserve,as a reserve transfer.

(l) In accordance with SSAP 19 no depreciationor amortisation is provided in respect of freeholdproperties or leasehold properties which haveunexpired lease terms in excess of twentyyears.

(m) Acquisitions and disposals of investmentproperties, property related investments andproperty equities are recognised where, by theend of the accounting period, there is a legallybinding, unconditional and irrevocable contract.Investments in property equities are recognisedon a trade date basis.

(n) Income tax is provided for on incometaxable in the period at the basic rate oftax. Deferred tax is accounted for on anundiscounted basis at expected tax rates onall timing differences. A deferred tax asset isonly recognised where it is more likely thannot that the asset will be recoverable in theforeseeable future out of suitable taxableincome from which the reversal of timingdifferences can be deducted.

(o) Profits or losses that arise on disposal ofunits in any property related investments orequities are calculated on a First In, FirstOut basis.

Notes to the Financial Statements

23

2. Fixed assetsFreehold Leasehold Total

£’000 £’000 £’000

(a) Investment propertyValuation at 1 April 2009 360,021 112,943 472,964Additions to existing properties at cost 2,363 836 3,199Cost of properties purchased 133,153 – 133,153Value of properties sold (55,750) (9,100) (64,850)Movement in revaluation reserve 30,366 (1,706) 28,660

Valuation at 31 March 2010 470,153 102,973 573,126

(b) Development propertyValuation at 1 April 2009 14,150 – 14,150Additions at cost 263 – 263Revaluation reserve at 31 March 2010 787 – 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 valuationMarket valuation at 31 March 2010 486,450 103,850 590,300Unamortised tenant incentives (1,097) (877) (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.

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 landValuation at 31 March 2010 31 March 2009

£’000 £’000

The percentage ownerships below remain unchanged from the previous year end:(i) 50.0% interest in a trust investing in Cardiff Bay Retail Park 24,300 19,100(ii) 33.3% interest in a trust investing in properties in York 63,250 51,000

87,550 70,100

3. Investment in property equitiesMovement in

Percentage revaluationholding at Valuation at reserve for Valuation at31 March 1 April Addition retained 31 March

2010 2009 at cost investments 2010% £’000 £’000 £’000 £’000

AH Medical Properties plc 29.6 3,047 – 3,429 6,476

The Trust held a 29.6% (31 March 2009: 29.6%) interest in AH Medical Properties plc, a PLUSlisted 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).

4. Investment in subordinated convertible notesPercentage

holding at Valuation at31 March 2010 Addition at cost 31 March 2010

% £’000 £’000

Hercules Unit Trust 4.7 9,462 9,462

The Trust acquired £9.5 million of Subordinated Convertible Notes on 15 December 2009from the Hercules Unit Trust (HUT) at a fixed coupon of 10%; conversion of the Notes isavailable at any time at the discretion of the noteholder. On conversion, the Notes will beconverted into a variable number of units equivalent to the face value of the Notes. Theconversion price will be set at the prevailing Net Asset Value of HUT, as adjusted for themark to market value of any hedging arrangements of the senior debt; the issuer has theright to redeem any Notes in issue after 7 January 2012. Notes in issue will mature on22 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 valuedon a market value basis as follows:

Valued by:

(i) Bracknell Property Unit Trust (BPUT) BNP Paribas Real Estate(ii) Croydon Gateway Property Unit Trust* (CGPUT) BNP Paribas Real Estate(iii) The Chiswick Park Unit Trust* (ChisPUT) BNP Paribas Real Estate(iv) City of London Office Unit Trust (CLOUT) BNP Paribas Real Estate

(v) Capital Point Slough Unit Trust (CPSUT) BNP Paribas Real Estate(vi) City Property Unit Trust (CPUT) BNP Paribas Real Estate(vii) Gresham Property Partners, L.P.* (Gresham) BNP Paribas Real Estate(viii) Hackbridge Unit Trust (HackUT) BNP Paribas Real Estate

(ix) Henderson UK Retail Warehouse Fund (HRWF) CB Richard Ellis Limited(x) Hercules Unit Trust* (HUT) CB Richard Ellis Limited(xi) Lombard Street Unit Trust (LSUT) BNP Paribas Real Estate(xii) Parker Tower Unit Trust (PTUT) BNP Paribas Real Estate(xiii) Residential Property Unit Trust* (ResPUT) Allsop LLP

(xiv) Schroder Emerging Retail Property Unit Trust* (SERPUT) Allsop LLP(xv) Teesland iDG Sutton Unit Trust (TiDGSUT) BNP Paribas Real Estate(xvi) UNITE UK Student Accommodation Fund (UNITE) CB Richard Ellis Limited(xvii) West End of London Property Unit Trust* (WELPUT) CB Richard Ellis Limited(xviii) West India Quay Unit Trust (WIQUT) Jones Lang LaSalle Limited(xix) Bracknell Eagle House Limited (BEH) BNP Paribas Real Estate

* Schroder Managed Property Funds

On 1 June 2009 BNP Paribas rebranded its global real estate business from Atisreal Limitedto BNP Paribas Real Estate Advisory and Property Management UK Limited, to be knownas BNP Paribas Real Estate.

25

5. Property related investments (continued)(b) Movements during the year

The Trust owned the following interests in property related investments:Movement in Movement in

revaluation revaluationPercentage Cost of reserve for reserve for

holding at Valuation at Additions investments investments retained Valuation at31 March 2010 1 April 2009 at cost sold sold investments 31 March 2010

% £’000 £’000 £’000 £’000 £’000 £’000BPUT 49.6 71,127 807 – – (12,672) 59,262CGPUT 97.3 57,019 – – – (14,285) 42,734ChisPUT 19.6 42,439 – – – (6,459) 35,980CLOUT 26.8 526 – – – – 526

CPSUT 100.0 9,656 – – – (2,050) 7,606CPUT 95.9 28,843 832 (982) 591 125 29,409Gresham 19.5 3,789 – (1,038) (1,761) 400 1,390HackUT 100.0 25,101 461 – – 5,368 30,930

HRWF 3.3 14,616 – – – 2,925 17,541HUT 7.9 60,364 599 – – 10,771 71,734LSUT 100.0 15,895 – – – 2,450 18,345PTUT 100.0 35,225 7,293 – – (2,617) 39,901ResPUT* 41.6 24,926 – (19,244) (4,409) 601 1,874

SERPUT 68.4 52,568 – (6,868) (815) 3,706 48,591TiDGSUT 50.0 3,754 161 – – (916) 2,999UNITE 2.7 15,735 – (1,276) 280 (1,255) 13,484WELPUT 15.0 48,838 – – – 13,130 61,968WIQUT 50.0 20,850 (25) – – 475 21,300

AHUT 26.8 294 – – – – 294BSUT 26.8 163 – – – (48) 115BEH 50.0 1,281 (942) – – 28 367

533,009 9,186 (29,408) (6,114) (323) 506,350

The realisable value of the Trust’s holding in property related investments may differ from the netasset value as provided by the relevant managers.

* An Extraordinary General Meeting was held by the manager of ResPUT on 28 January 2009 atwhich 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 tounits. These bonds will convert at the adjusted NAV (to include the mark-to-market on any hedges inplace at the conversion date).

At 31 March 2010, the Trust’s holding in each of HackUT, LSUT and PTUT stood at 100.0% andthe 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 asthe relevant trust instruments state that unitholders cannot remove the Manager within the first termand five years of the date of appointment respectively, unless the Manager’s removal clause isextended by unitholder resolution. Therefore, as significant control cannot be exercised, theseinvestments are not consolidated.

The Trust’s holding in CPSUT at 31 March 2010 stood at 100.0%. There would be no materialdifference to the net asset value of the Trust if this investment, which is controlled by the Trust, hadbeen consolidated at that date.

Although the Trust’s holding in SERPUT is in excess of 50.0%, the Trust’s voting rights are limited to50.0% 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).



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.

Adjustment toTrust’s holding at Property Other assets/ Net asset fair value

31 March 2010 value Debt (liabilities) value debt*% £’000 £’000 £’000 £’000 £’000

BPUT 49.6 119,550 – – 119,550 –CGPUT 97.3 43,963 – 3 43,966 –ChisPUT 19.6 374,500 (192,500) 1,530 183,530 (93)CLOUT 26.8 675 – 1,300 1,975 –CPSUT 100.0 7,600 – 6 7,606 –

CPUT 95.9 30,646 – 15 30,661 –Gresham 19.5 7,128 – – 7,128 –HackUT 100.0 30,700 – 231 30,931 –HRWF** 3.3 950,550 (471,143) 56,213 535,620 (28,244)HUT 7.9 1,528,275 (794,266) 168,409 902,418 (42,286)

LSUT 100.0 18,200 – 145 18,345 –PTUT 100.0 39,800 – 101 39,901 –ResPUT 41.6 3,417 – 1,158 4,575 –SERPUT 68.4 66,630 – 4,374 71,004 –TiDGSUT 50.0 11,900 (5,490) (413) 5,997 –UNITE** 2.7 1,002,900 (480,600) (22,645) 499,655 (32,500)

WELPUT 15.0 552,804 (184,500) 44,056 412,360 (8,466)WIQUT 50.0 42,600 – – 42,600 –AHUT 26.8 – – 1,112 1,112 –BSUT 26.8 – – 429 429 –BEH 50.0 8,400 (3,652) (4,013) 735 –

4,840,238 (2,132,151) 252,011 2,960,098 (111,589)

Total of Trust’s share 643,093 (161,247) 24,504 506,350 (6,438)

* A number of the property related investments shown above have entered into interest rate swapsin order to hedge their interest rate exposure. The relevant information on interest rate swaps forHRWF is not available at the date of this report. Revaluation to fair value of the remaining swapagreements 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 Trustaccount 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

6. Debtors31 March 2010 31 March 2009

£’000 £’000

Rents receivable 4,098 1,674Distributions due from property related investments 3,918 4,052Tenant deposits 4,894 5,223UITF 28 accrued rents receivable 1,485 672UITF 28 unamortised tenant incentives 489 1,114VAT recoverable 481 297Other debtors and prepayments 1,682 936Amounts due from Eagle House Ltd 1,143 –

Total debtors 18,190 13,968

7. Bank loansCounterparty 31 March 2010 31 March 2009

£’000 £’000

Lloyds TSB Bank plc – 5,000

The Trust entered into an unsecured £100 million committed loan facility with Lloyds TSB Bank plcon 17 December 2007 (31 March 2009: £100 million uncommitted loan facility). Loans drawn underthe facility are renewed and/or repayable on either a monthly or quarterly basis. Interest is charged atLIBOR plus a margin of 0.65% (31 March 2009: 0.65%) plus mandatory costs. The facility expireson 17 December 2010. However, due to the monthly and quarterly renewals, any loans areclassified as current liabilities in the Financial Statements.

8. Creditors31 March 2010 31 March 2009

£’000 £’000

Rents received in advance 5,330 6,001Provision for doubtful debts 3,095 773Trade creditors 1,194 245Tenant deposits 4,894 5,223Other creditors and accruals 2,100 1,519VAT payable – 811Amounts due on properties 2,708 1,699

Total creditors 19,321 16,271

9. Net assets attributable to unitholdersNet assets attributable to unitholders are represented as follows:

31 March 2010 31 March 2009Notes £’000 £’000

Amounts paid to Trustee for investment 10 885,083 787,093Revaluation reserve 14 (127,715) (171,924)Realised net profit on sale of investment property 14 275,767 293,880Realised net profit on sale of property related investments 14 137,017 129,312Deficit on Income and Expenditure Account 14 (18,346) (15,898)

Total net assets attributable to unitholders 1,151,806 1,022,463

Under FRS 25 the above amounts are deemed to be repayable to unitholders and are thereforepresented as liabilities of the Trust.



10. Amounts paid to Trustee for investmentNo. of ValueUnits £’000

Opening balance at 1 April 2009 34,728,720 787,093Units issued during the year 3,535,357 105,133Units redeemed during the year (250,647) (7,143)

Closing balance at 31 March 2010 38,013,430 885,083

11. Property expensesFor the year ended 31 March 2010 31 March 2009

£’000 £’000

Service charge expenses 6,858 6,423Letting fees 186 367Rates 394 681Rent review fees 220 152Other 1,654 2,211

Total property outgoings 9,312 9,834

12. Finance costs: distributions(a) Total distributions

Monthly distributions were payable in respect of the following periods:

April 2009 May 2009 June 2009 July 2009 August 2009 September 2009£’000 £’000 £’000 £’000 £’000 £’000

Net income before tax 5,507 6,870 5,120 4,869 4,180 4,361Income tax (1,101) (1,374) (1,024) (974) (836) (872)Net income after tax 4,406 5,496 4,096 3,895 3,344 3,489Total management expenses (233) (532) (8) (140) (187) (138)Net amount distributable 4,173 4,964 4,088 3,755 3,157 3,351Gross return to unitholdersafter recovery of income tax 5,274 6,338 5,112 4,729 3,993 4,223

October 2009 November 2009 December 2009 January 2010 February 2010 March 2010£’000 £’000 £’000 £’000 £’000 £’000

Net income before tax 4,629 4,260 4,380 4,530 4,059 4,1600Income tax (926) (852) (876) (906) (812) (832)Net income after tax 3,703 3,408 3,504 3,624 3,247 3,328Total management expenses (274) (278) (286) (308) (299) (675)Net amount distributable 3,429 3,130 3,218 3,316 2,948 2,653Gross return to unitholdersafter recovery of income tax 4,355 3,982 4,094 4,222 3,760 3,485

For the year ended 31 March 2010 31 March 2009Notes £’000 £’000

Net income before tax (excluding undistributed UITF 28 adjustment) 56,925 59,348Income tax 13(a)(i) (11,385) (11,870)Net income after tax 45,540 47,478Total management expenses 12(b) (3,358) (4,101)Net amount distributable 42,182 43,377Gross return to unitholders after recovery of income tax 53,567 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 UITF28 and the taxation provision thereon are recognised in the Income and Expenditure Account for theyear and distributed to unitholders.

29

12. Finance costs: distributions (continued)(b) Reconciliation of management expenses between distributions and Income and Expenditure Account


Total management expenses for the period deducted from distributions 12(a) 3,358 4,101Deficit on Income and Expenditure Account 14 2,448 2,790Total management expenses per Income and Expenditure Account 5,806 6,891

Management expenses allocated to capital and not deducted from distributions, in accordance with theaccounting policy as stated in note 1(f), represent the deficit on the Income and Expenditure Account.

(c) Distributions per unitApril 2009 May 2009 June 2009 July 2009 August 2009 September 2009

pence pence pence pence pence penceNet income before tax 15.8573 19.7814 14.7425 14.1229 12.1240 12.6485Income tax (3.1715) (3.9563) (2.9485) (2.8246) (2.4248) (2.5297)Net income after tax 12.6858 15.8251 11.7940 11.2983 9.6992 10.1188Total management expenses (0.6700) (1.5330) (0.0220) (0.4050) (0.5430) (0.3980)Net amount distributable 12.0158 14.2921 11.7720 10.8933 9.1562 9.7208Gross return to unitholdersafter recovery of income tax 15.1873 18.2484 14.7205 13.7179 11.5810 12.2505

October 2009 November 2009 December 2009 January 2010 February 2010 March 2010pence pence pence pence pence pence

Net income before tax 13.4254 11.7984 11.7986 12.0680 10.8114 10.9448Income tax (2.6851) (2.3597) (2.3597) (2.4136) (2.1623) (2.1890)Net income after tax 10.7403 9.4387 9.4389 9.6544 8.6491 8.7558Total management expenses (0.7770) (0.7700) (0.7880) (0.8190) (0.7950) (1.7770)Net amount distributable 9.9633 8.6687 8.6509 8.8354 7.8541 6.9788Gross return to unitholdersafter recovery of income tax 12.6484 11.0284 11.0106 11.2490 10.0164 9.1678

For the year ended 31 March 2010 31 March 2009pence pence

Net income before tax (excluding undistributed UITF 28 adjustment) 160.1232 170.8193Income tax (32.0248) (34.1639)Net income after tax 128.0984 136.6554Total management expenses (9.2970) (11.8020)Net amount distributable 118.8014 124.8534Gross return to unitholders after recovery of income tax 150.8262 159.0173

(d) Interest payableFor the year ended 31 March 2010 31 March 2009

£’000 £’000Interest payable 238 1,234



13. Current and deferred taxationThe Trust is not liable for corporation tax or capital gains tax but is liable for income tax on its grossincome at the basic rate of tax. Income tax deducted from distributions paid by the Trust isrecoverable by unitholders.

The tax charged to the Income and Expenditure Account and information concerning the deferredtaxation provision are detailed below:

(a) Taxation on net income before tax(i) Analysis of charge for the year ended 31 March 2010 31 March 2009

Notes £’000 £’000Current tax:UK income tax on income for the year 11,385 11,596Adjustments in respect of the previous year (461) 1,428Total current tax 10,924 13,024Origination and reversal of timing difference 13(b) 461 (1,154)Tax on net income 13(a)(ii) 11,385 11,870

(ii) Factors affecting tax charge for the year ended 31 March 2010 31 March 2009Notes £’000 £’000

Net income before tax 56,925 59,348Tax on net income at basic rate of 20% 11,385 11,870

Effects of:Permanent adjustments 1 (274)Adjustments in respect of previous year (461) 1,428Current tax charge for the year 13(a)(i) 10,925 13,024

(b) Provision for deferred tax

The amount of deferred taxation provided for in these Financial Statements is:


Opening provision (29) (1,183)Deferred tax credit/(charge) in Income and Expenditure Account 13(a)(i) (461) 1,154Closing provision (490) (29)

The deferred tax liability relates to a potential tax charge under Section 350 ICTA 1988 on the finaldistribution for the year.

S942 ITA 2007 (Income Tax Act 2007) provides for an additional tax liability to arise where the taxliability for any tax year would otherwise be lower than the basic rate of tax on the distributions paidin that year. Because the distributions are paid in arrears, provision must be made for the liability thatwould arise in the next tax year if there was no taxable income following the date of the Statement ofNet Assets. Relief can be taken against this liability for amounts by which any previous period’staxable income have exceeded the distributions paid in that year.

31

14. ReservesRevaluation Reserve

Realised Realisednet profit/ net profit

Deficit on (loss) on on propertyProperty Total Income and investment related

Freehold Leasehold related Property revaluation Expenditure property investments Totalproperty property investments equities reserve Account sold sold reserves

£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

Opening balanceat 1 April 2009 (38,882) (7,599) (120,491) (4,952) (171,924) (15,898) 293,880 129,312 235,370

Movement in revaluationreserve for retained:

Investment property 30,366 (1,706) – – 28,660 – – – 28,660Sites in the course

of development 787 – – – 787 – – – 787Property related

investments – – (323) – (323) – – – (323)Property equities – – – 3,429 3,429 – – – 3,429

Investment property sold 18,976 (1,206) – – 17,770 – (18,976) – (1,206)Property related

investments sold – – (6,114) – (6,114) – – 6,114 –

Deficit on Income andExpenditure Account – – – – – (2,448) – – (2,448)

Realised net profit on:Investment property sold – – – – – – 863 – 863Property related investments sold – – – – – – – 1,591 1,591

Closing balance at31 March 2010 11,247 (10,511) (126,928) (1,523) (127,715) (18,346) 275,767 137,017 266,723

15. Reconciliation of net property income to netcash inflow from operating activitiesFor the year ended 31 March 2010 31 March 2009

£’000 £’000Net property income 33,241 30,110Income from property related investments 23,379 29,708Income from convertible bonds 275 –Total management expenses (5,806) (6,891)Net income available for distribution before interest payable and receivable and tax 51,089 52,927

Net (increase)/decrease in debtors (4,222) 4,467Net increase in creditors 3,050 1,029Net cash inflow from operating activities 49,917 58,423

16. Reconciliation of movement in net cash flowto movement in net (debt)/cash

1 April 2009 Net cash flow 31 March 2010£’000 £’000 £’000

Cash at bank 13,472 37,874 51,346Loans due within one year (5,000) 5,000 –Net cash 8,472 42,874 51,346



33

17. Capitalcommitments andcontingent liabilitiesAt the year end the Trust had a commitmentto invest £1.2 million in Teesland iDG SuttonUnit Trust (31 March 2009: £1.2 million).

At 31 March 2010, the Trust is exposedto a dilution levy in relation to its holding inBracknell Property Unit Trust (BPUT), whichis estimated to be £7.3 million (31 March 2009:£7.3 million). This has no current impact onthe Trust’s holding in BPUT or theseFinancial Statements.

18. Related partydisclosures andmaterial contracts(a) Fees receivable by the Trustee

As Trustee, The Royal Bank of Scotland plc isentitled to a fee equivalent to 0.0224% perannum on the first £500 million of the Trust’sNet Asset Value (NAV) and 0.0125% per annumon any excess over £500 million of the Trust’sNAV.

(b) Fees receivable by the Manager andthe Property Manager

Investment management and propertymanagement feesThe remuneration of the Manager and theProperty Manager is set by the SupervisoryBoard. The Manager is entitled to 0.3% of thetotal Net Asset Value of the Trust and theProperty Manager is entitled to 0.4% on GrossValue of direct holdings and capital cash. TheProperty Manager does not receive a fee fromthe Trust on property held indirectly, unlessspecifically agreed by the Supervisory Board.

Where the Trust invests in property relatedinvestments which are managed by anassociate of the Manager or the PropertyManager, fees earned by the associate on theTrust’s net investment, are not rebated to theTrust, with the exception of SERPUT, wherethe Trust receives a rebate of 0.3% onSERPUT’s gross property value (based onthe Trust’s holding). These indirect managerslevy their own fees which may includeperformance fees.

The Manager’s and the Property Manager’sfees are charged in full to the Income andExpenditure Account. 50% of such fees areallocated to capital and not deducted fromdistributions for the purpose of determiningthe value of such distributions (see notes 1(g)and 12(b)).



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 31 March 2010 31 March 2009Notes £’000 £’000

Manager’s and Property Manager’s fees (gross of rebates) 4,876 5,561Irrecoverable VAT incurred by the Trust* 20 19Total management fees charged to the Income and Expenditure Account 1(g) 4,896 5,580

Management fees earned by associates of the Manager from the Trust’sinvestments in property related investments 1,120 1,165

Performance fees earned by associates of the Manager from theTrust’s investment in property related investments – 69

Less irrecoverable VAT incurred by the Trust* (20) (19)Total 5,996 6,795

* Irrecoverable VAT incurred by the Trust does not represent fees receivable by the Manager, theProperty Manager, or their associates.

The total fees receivable by the Manager and the Property Manager and their associates from theTrust’s investments, (as a percentage of average net asset value for the year to 31 March 2010) was0.6% (31 March 2009: 0.7%).

Secondary market commission

The Manager also earns commission from individual unitholders of the Trust which utilise its matchedbargain 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 underFRS 8:

31 March 2010 31 March 2009£’000 £’000

The Royal Bank of Scotland plc (Trustee) 59 46Supervisory Board 36 36Schroder Property Investment Management Limited 569 457

Outstanding balances were due from Bracknell Eagle House Limited as set out within note 6, whichis considered to be a related party under FRS 8.

35

18. Related party disclosures and material contracts (continued)(d) Distributions

Gross distributions were receivable in the year from the following property related investments whichare considered to be related parties under FRS 8, because they are managed or administered bythe Manager or an associate of the Manager:

For the year ended 31 March 2010 31 March 2009£’000 £’000

ACPUT – 1,113BPUT 3,485 4,041CGPUT 1,342 1,212ChisPUT 2,373 1,781CPSUT 29 1,257

CPUT – 433CLOUT – 1,541GTUT – 2HackUT 1,963 1,848

HUT 1,774 3,696LSUT 1,155 1,158PTUT 2,651 2,630ResPUT 27 1,027SERPUT 2,689 3,545WELPUT 2,120 1,296

19. Financial instrumentsThe primary financial instruments held by the Trust at 31 March 2010 were property relatedinvestments, property equities, Subordinated Convertible Notes, cash, short term assets andliabilities to be settled in cash. The Trust did not hold, and was not a counterparty to, any derivativeinstruments 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 insterling.

The disclosure on page 36 excludes short term assets and liabilities as permitted by UnitedKingdom Accounting Standards (FRS 13). All financial liabilities mature within one year of the date forthe Statement of Net Assets and all financial assets, with the exception of property relatedinvestments, are held on demand.



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.

31 March 2010 31 March 2009£’000 £’000

Expiry date – 17 December 2010 (committed) 100,000 100,000

(b) Interest rate profile31 March 2010 31 March 2009

£’000 £’000Floating rate financial assets 51,346 13,472Non interest bearing financial assets 505,983 531,728Subordinated Convertible Notes 9,462 –Bank loan – 5,000

Floating rate financial assets comprise cash at bank. Interest on floating rate bank deposits is basedon relevant inter bank rates. Non interest bearing financial assets comprise property relatedinvestments and property equities. Fixed rate Subordinated Convertible Notes are held at a couponrate 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 falldue. The Trust is subject to liquidity risk insofar as unitholders may seek to redeem units held withinthe Trust. Dependent upon the value and timing of the redemptions and given the illiquid nature of theTrust’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 itsinvestments in property related investments and property equities and the uncertainty surroundingfuture prices of such investments. The Trust’s market price risk is managed through diversification andthe Manager has no reason to believe that the valuations used in calculating the value of the Trust areunreasonable.

37

Supervisory BoardJ A Scott OBE FCA* (Chairman)James Scott is a former National ManagingPartner of Binder Hamlyn. He is currently anon-executive Director of the Vestey GroupLimited. Joined the Supervisory Board in 1991.

Professor A E Baum PhD FRICSAndrew Baum is Professor of Land Managementat the Henley Business School, University ofReading, non-executive Chairman of theinvestment committee for CBRE Investors GlobalMulti-Manager and honorary Professor of RealEstate Investment at the University of Cambridge.Joined the Supervisory Board in 1999.

R R FoulkesRichard Foulkes was Vice Chairman ofSchroder Investment Management Limiteduntil his retirement in October 2005. He is anon-executive Director of Credit RenaissanceStructured Product Fund, Schroder PensionTrustee Limited and Schroder CreditRenaissance Fund; a member of the InvestmentCommittee of the Royal Opera House PensionScheme and of Queens’ College, Cambridge.He is also the Chairman of the InvestmentCommittee of St John Ambulance. Joined theSupervisory Board in 2003.

C J Hunter FRICSCharles Hunter was Head of Property at InsightInvestment (the investment managementsubsidiary of HBOS plc) for nine years until2004. Prior to that he was Property Director ofNM Fund Management. He is non-executiveChairman of AXA Property Trust plc, is aCouncil Member and Trustee of St Monica Trustand is Chairman of the Investment AdvisoryCommittee of Sprefs Property Developers Fund.Joined the Supervisory Board in 2006.

R I Moore MBE FCSI*Roger Moore was previously Head of PropertyResearch at UBS Warburg. He was a foundermember of the BDO Stoy Hayward PropertyAccounts Awards judging panel. Joined theSupervisory Board in 2004.

A F SykesAndrew Sykes was a Director of Schroders plcuntil March 2004. He is Chairman of InvistaFoundation Property Trust Limited, Chairman ofAbsolute Return Trust Limited, a non-executive

Director of JP Morgan Asian Investment TrustPLC, Smith and Williamson Holdings Limited,Record plc, MBIA UK Insurance Limited,Schroder Pension Trustee Limited, GulfInternational Bank UK Limited and SVG Capitalplc. Joined the Supervisory Board in 2004.

Key Service ProvidersManager and Property ManagerSchroder Property InvestmentManagement Limited31 Gresham StreetLondon EC2V 7QA

Authorised and regulated bythe Financial Services Authority.

I D Mason MRICSIan Mason is Head of UK Property FundManagement for Schroders and is FundManager of the Trust. He has a BSc (Hons) inLand Management, is a Member of the RoyalInstitution of Chartered Surveyors, a boardmember of the Association of Real Estate Funds(AREF) and Chair of AREF’s Regulation Sub-Committee. Ian joined Schroders in April 2008after 23 years at BlackRock where he wasmanager of the BlackRock UK Property Fund.

N D Meredith MRICSNeil Meredith is Head of UK Property AssetManagement for Schroders and works principallyon the Trust’s portfolio. He has a BSc in LandManagement and is a Member of the RoyalInstitution of Chartered Surveyors. Neil joinedSchroders in October 2006. Before joiningSchroders, he worked for English Welsh andScottish Railways Limited as Head of PropertyServices Group from 2004 to 2006. From 2003to 2004 he was a Director of GVA Connect atGVA Grimley. Prior to that he was a Partner atCushman & Wakefield, where his propertycareer started in 1982.

M J Callender BA (Economics)Mark Callender is Head of Property Research.He joined Schroders in 2006. Before joiningSchroders he was Research Director forsixteen years at IPD, the leading providerof property market research and indices.1987-1990 he was Chief Economist at theHouse Builders Federation. He is a memberof the Society of Property Researchers, theInvestment Property Forum and thePan-European Common Interest Group.

W A Hill MRICS C Dip AFWilliam Hill is Head of Property for Schroders.He has a BSc (Hons) in Land Managementand a Certified Diploma in Accounting and

Finance. He is a Member of the RoyalInstitution of Chartered Surveyors and pastChairman of the Association of Real EstateFunds (AREF). Prior to joining Schroders in1989, William worked for seven years withDrivers Jonas. He is a member of SchrodersGlobal Investment Executive Committee.

T A Frost MRICSTamsin Frost is Client Director for Schroders, arole she has had since 2000. She has over twentyyears of multi asset investment and client serviceexperience. Prior to joining the UK institutionalbusiness she was a UK equity manager andpreviously Deputy Head of Schroders UKResearch Department. She has a BSc (Hons) inLand Management and is a Member of the RoyalInstitution of Chartered Surveyors (MRICS).She joined Schroders in 1986.

T DoreyTom Dorey is Head of UK Property Product forSchroders. He has an MBA, BSc (Hons) inEconomics and holds an InvestmentManagement Certificate (IMC). He joinedSchroders in 1997 as a portfolio manager. He isresponsible for ensuring that selected propertyportfolios are structured and managed to meetclients’ needs and is the product manager to theTrust.

TrusteeThe Royal Bank of Scotland plcThe Broadstone50 South Gyle CrescentEdinburgh EH12 9UZ

Independent AuditorPricewaterhouseCoopers LLPHay’s Galleria1 Hay’s LaneLondon SE1 2RD

Independent Valuer**BNP Paribas Real EstateAdvisory and PropertyManagement UK Limited90 Chancery LaneLondon WC2A 1EU

Supervisory Board and Key Service Providers

* R I Moore is the Chairman and R R Foulkes and J A Scottare members of the Audit Committee.

** On 1 June 2009 BNP Paribas rebranded its global real estatebusiness from Atisreal Limited to BNP Paribas Real EstateAdvisory and Property Management UK Limited, to be knownas BNP Paribas Real Estate.

Gross Annual DistributionPaid per UnitDate Gross Annual Net Asset Yield2

Distribution Valueper unit1 per unit

31 March 2010 £1.543322 £30.30 5.1%31 March 2009 £1.598533 £29.45 5.4%

31 March 2008 £1.653633 £44.19 3.7%

31 March 2007 £1.610234 £53.05 3.1%

31 March 2006 £1.581476 £46.17 3.4%

31 March 2005 £1.411795 £39.15 3.6%


1 Distributions are gross of tax but net of expenses and fees. They are stated on a paid basis at the time of reporting.2 The yield is calculated by dividing the annual distributions paid by net asset value per unit at the end of the period. The yield is

stated on a paid basis at the time of reporting.

Cash and GearingDate Amount in Cash (Capital)1 Gearing2

at the end of each year (% of NAV)31 March 2010 £43.4 million 16.3%31 March 2009 £5.9 million 20.6%

31 March 2008 £1.8 million 18.2%

31 March 2007 £4.1 million 15.9%

31 March 2006 £27.2 million 18.2%

31 March 2005 £0.9 million 27.0%


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.


Quarterly Volume ofSecondary Market Trades(£ million)

6.0

27.1

6.8

16.0

2.4

6.7

24.9

2.5

1.4

6.3

15.7

59.5

1.8


Q3 2009

Q2 2009

Q2 2007

Q3 2007

Q4 2009

Q1 2007

Q4 2007

Q1 2008

Q2 2008

Q3 2008

Q4 2008

Q1 2009

Q1 2010

Additional Unitholder Information

Monthly Unit PricesDate Net Asset Bid Offer

Value Price Price31 March 2010 £30.30 £29.75 £31.74

28 February 2010 £29.87 £29.33 £31.29

31 January 2010 £29.59 £29.06 £31.00

31 December 2009 £29.29 £28.76 £30.68

30 November 2009 £28.49 £27.97 £29.84

31 October 2009 £27.67 £27.16 £28.98

30 September 2009 £27.09 £26.60 £28.38

31 August 2009 £26.78 £26.29 £28.05

31 July 2009 £26.81 £26.32 £28.08

30 June 2009 £26.88 £26.40 £28.16

31 May 2009 £27.59 £27.09 £28.90

30 April 2009 £28.48 £27.96 £29.83

31 March 2009 £29.45 £28.91 £30.84


39

Unitholder BreakdownNumber of Total %

Unitholders Holding byUnits in Issue

Pension Funds 234 62.5

Local Authority Pension Funds 36 28.4

Charities 148 7.1

Common Investment Funds 3 1.9

SIPPs1 7 0.1

Total 428 100.0

Largest Investors by Ownership Band:

Less than 1% of units in issue 402 93.9

1% or greater but less than 2% 23 5.4

2% or greater but less than 4% 3 0.7

4% or greater – –

Total 428 100.0

Largest Investor – 3.6

Largest Three Investors – 9..2

Largest Five Investors – 12.6

Largest Ten Investors – 20.5



Additional Unitholder Information (continued)

Amountof Loan Current Interest Cover

Loan Facility Fixed rate (F) LTV Ratio (InterestFacility (Drawn) Maturity Variable margin (V) (LTV Cover

Fund Provider £m Date Swap rate (S) Covenant) Covenant)

DirectSEPUT Lloyds TSB 100.0 December 2010 0.65(V) n/a n/a

(0.0)

IndirectAH Medical Norwich (92.3) between 2012 between 5.0% (F) 88%1 128%1

Properties Union and 2028 and 5.8% (F) (n/a) n/aPlc

Allied London Nationwide 4.4 October 2013 7.1% (F) 40% 414%(Eagle House) (3.7) (n/a) (125%)

Limited

ChisPUT Eurohypo AG 192.5 February 2012 2.6% (V) 53.8% 384%(192.5) (65%) (150%)

HRWF ASAR International 496.1 December 2015 0.9% (V) 43% 265%(HVB and Heleba) (471.1) 5.1% (S) (55%) (120%)

HUT REC Retail 900.0 October 2012 4.4% (S) 39.9% 318%Parks Limited (500.0) (65%) (140%)

Royal Bank of 40.0 August 2010 n/a 0% 0%Scotland plc (0) (65%) (125%)

Emerald Funding 100.0 July 2012 5.8% (S) 33% 207%(Gibralter) PLC2 (100.0) (35%) (155%)

Convertible Notes 200.0 September 20204 10% (F) n/a n/a(194.3)

Teesland Bank of 5.5 September 2010 2.5% (V) 50% 138%Ireland (5.5) (60%) (125%)

UNITE CMBS 280.0 March 2014 5.0% (S) 59% 210%(280.0) (n/a) (140%)

Abbey/HSH 120.0 December 2013 3.5% (S) 52% 250%(85.6) (65%) (140%)

Lloyds 115.0 December 2012 5.3% (S) 56% 200%(115.0) (60%) (130%)

WELPUT HSBC Bank 279.0 July 2011 4.8% (S) 35.3% 198.9%Plc and (184.5) (70%) (115%)

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

Debt AnalysisAt 31 March 2010


General Meeting and GeneralInformation

General InformationSchroder Exempt Property Unit Trust (the“Trust”) is a collective investment schemewithin the meaning of the Financial Services andMarkets Act (“FSMA”). However, the Trust is notan authorised unit trust scheme, OEICor recognised scheme within the meaning of theFSMA and therefore constitutes an unregulatedcollective investment scheme. As anunregulated collective investment scheme, thedistribution and promotion of Trust units arerestricted, for the purposes of sections 21 and238 of the FSMA, to persons who arethemselves authorised under the FSMA or whootherwise fall within the categories or exceptionsmade under sections 21 and 238 of the FSMA.

Accordingly, the information in this documentis directed at eligible counterparties, authorisedpersons, professional clients, existing investorsin the Trust and clients and newly acceptedclients of the Schroder Group, where reasonablesteps have been taken to ensure that investmentin the Trust is suitable. This material shouldnot be relied upon by persons of any otherdescription. In any case, a recipient who is inany doubt about investment in the Trust shouldconsult an authorised person who specialisesin investments of this nature.

The Trust’s past performance is not a guideto the future. The Trust invests in real property,the value of which is generally a matter of avaluer’s opinion. Reliable information about thevalue of units in the Trust or the extent ofthe risks to which they are exposed may not beavailable (see Chairman’s Statement). There isno recognised market for units in the Trust andan investment in units is not readily realisable. Itmay be difficult to trade in the units or to sellthem at a reasonable price. The price of unitsand the income from them may fluctuate upwardsor downwards and cannot be guaranteed.

Socially ResponsibleInvestment andSustainabilityA full copy of the Schroder Property policy onResponsible Property Investment is available onrequest.

Purchase of UnitsOffers of new units are normally made on the firstworking day of each month. Payments for unitsissued must be received by the Trustee by the fifthworking day of the same month. The offer price isfixed by the Manager on the basis of the valuationof the properties carried out at the last workingday of the month prior to the offer date.

Units in the Trust are only available to UK taxexempt investors. In general terms, exemptinvestors are persons who are wholly exemptfrom capital gains tax or corporation tax oncapital gains for reasons other than residence.

Redemption of UnitsRedemption Notices must be received by theManager before 17.00 (GMT/BST) on aRedemption Notice Date (the last working days ofMarch, June, September and December). Noticesmust be in writing in the form provided by theManager.

The first date that a redemption can be paid isthe first Redemption Payment Date following therelevant Redemption Notice Date (i.e. threemonths after the Redemption Notice Date). If aRedemption Notice is deferred (in whole or part)the redemption may occur on one of the eightRedemption Payment Dates following the firstRedemption Payment Date. Redemptionpayments will ordinarily be made within fiveWorking Days of the relevant RedemptionPayment Date.

The Manager, with the prior written approval of theSupervisory Board, may defer a redemption inwhole or part by giving Retiring Holders notice inwriting no later than seven working days before anApplicable Redemption Payment Date. TheManager, subject to the Supervisory Board’swritten approval, has the right to adjust the NetAsset Value for the purposes of calculating theRedemption Price, in certain circumstances.

Secondary MarketInformation relating to units available on thesecondary market can be obtained fromSchroder Property Investment ManagementLimited which seeks to introduce unitholders topotential investors. Please contact Tom Dorey forSecondary Market availability.

Please note that Schroders can only acceptinstructions to purchase or redeem units in linewith the signatory mandate held. Werecommended that clients provide regularupdates of their authorised signatories to LisaEmmerson, Fund Services to avoid any delays inbeing able to purchase or redeem units in theSchroder Exempt Property Unit Trust.

General MeetingPlease note that the thirty-ninth AnnualGeneral Meeting of the unitholders will be heldat 31 Gresham Street London EC2V 7QA at12.00pm on 23 September 2010. Thebusiness of the meeting will include:

1 To receive the Annual Report and AuditedFinancial Statements of the Trust and theReport of the Independent Auditor for theyear ended 31 March 2010.

2 To re-elect R I Moore as a member of theSupervisory Board who in accordance withthe Trust Deed, retires by rotation and offershimself for re-election.

3 To re-elect R R Foulkes as a member ofthe Supervisory Board who in accordancewith the Trust Deed, retires by rotation andoffers himself for re-election.

4 To authorise the Manager to re-appoint,and set the remuneration of theIndependent Auditors for the ensuing year.

By order of the ManagerSchroder Property InvestmentManagement Limited31 Gresham StreetLondon EC2V 7QA15 June 2010

A unitholder entitled to attend the Annual GeneralMeeting and vote, may appoint a proxy to attend andon a poll, to vote in its stead. A unitholder being acorporation may authorise any person to be itsrepresentative at the meeting.

43

Manager ContactsFor queries on secondary market availability:

Tom DoreyHead of UK Property [email protected] Line+44 (0)20 7658 3020Switchboard+44 (0)20 7658 6000

For valuations, to place trades, tax reclaims,dividend/distribution information:

Lisa EmmersonFund [email protected] Line+44 (0)20 7658 3889Switchboard+44 (0)20 7658 6000

For other related client queries (includingperformance, quarterly investment reports, auditrequests):

Hanne HootonClient [email protected] Line+44 (0)20 7658 6787Switchboard+44 (0)20 7658 6000

Katie NicholsonClient [email protected] Line+44 (0)20 7658 6562Switchboard+44 (0)20 7658 6000

Fund CodesCodeBloomberg SCEXPUT LNISIN 000786612Lipper Reuters 60011163Sedol 0786612

Prices for the Schroder Exempt PropertyUnit Trust can be obtained fromhttp://www.schroders.com/ukinstitutional/funds/fund-prices.

DistributionsThe net income of the Trust, after deduction ofall expenses and liabilities (actual, estimated orcontingent) of the Trust including any deductionsin respect of taxes, is distributed to unitholdersin proportion to the number of units held bythem. Distributions are calculated on a monthlybasis, with the distributions paid to unitholderson the fifteenth working day of the followingmonth. A tax voucher is sent with eachdistribution and unitholders may make individualclaims for repayment of tax.

Bid/Offer SpreadThe bid/offer spread, which at 31 March 2010stood at 6.25%, reflects the cost per unit ofbuying and selling properties similar to thoseheld by the Trust.

Additional InformationThe Trust may be suitable for UK tax exemptpension funds and charities who wish to hold adirect property portfolio but do not want tocommit the considerable executive time andexpertise necessary to organise and supervisesuch a portfolio and/or are not of a sufficient sizeto obtain a viable property portfolio with anappropriate spread of risk. The property in theTrust is professionally and actively managed bychartered surveyors employed by the PropertyManager, Schroder Property InvestmentManagement Limited.

The Manager, Schroder Property InvestmentManagement Limited, welcomes the opportunityto meet unitholders, potential unitholders andtheir advisers to explain more fully the strategyand progress of the Trust. In this regard pleasecontact Schroder Property InvestmentManagement Limited who can also providecopies of the Trust Deed and supplementaldeeds, application forms and latest unit prices,at the address below. Please note the Managerdoes not offer investment advice.

Further information can be found on thewebsite www.schroders.com/seput

Schroder Exempt Property Unit Trust Schroder Property InvestmentManagement Limited31 Gresham StreetLondon EC2V 7QATel: +44 (0)20 7658 6000

Schroder Property InvestmentManagement Limited is authorised andregulated by the Financial Services Authority.


Investment Objective and PolicySchroder Exempt Property Unit Trust (“SEPUT” or the “Trust”) wasestablished 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 andcapital growth for investors through investment in UK property. Risk isdiversified by the Trust holding a mixed portfolio of retail, office, industrialand other property (including leisure and alternative investments such asstudent accommodation) throughout the UK. The Trust may also hold landand undertake developments as well as use moderate levels of gearingfrom time to time.

The Trust incorporates a blend of direct and indirect investmentstrategies. Indirect investments provide further diversification byaccessing distinct areas of the UK property market, such as fashionparks, some larger properties, and specialist management associatedwith the alternative sectors.

The Trust seeks to provide a return of 0.5% per annum (net of fees) aboveits benchmark (Investment Property Databank UK Pooled Property FundIndices – All Balanced Funds Median) over rolling three year periods.

The Trust may be suitable for UK tax exempt pension funds and charitieswho wish to hold a direct property portfolio without the commitment ofconsiderable trustee oversight and management expertise. The propertyin the Trust is professionally and actively managed by chartered surveyorsemployed by the Property Manager, Schroder Property InvestmentManagement Limited.

The Manager welcomes the opportunity to meet unitholders, potentialunitholders and their advisers to explain more fully the strategy andprogress of the Trust. Please see Manager Contacts on page 43.

Schroder Exempt Property Unit TrustSchroder Property Investment Management Limited31 Gresham StreetLondon EC2V 7QATel: +44 (0)20 7658 6000

Further information can be found on the websitewww.schroders.com/seput


Front cover:York, M

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31 March 2010

Schroder ExemptProperty Unit TrustAnnual Report and AuditedFinancial Statements

Schroders Exempt Property Unit Trust31 Gresham Street, London EC2V 7QAwww.schroders.com/seput www.schroderproperty.com

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