Annual Report. Standard Life Investments UK Real Estate Trust

Transcription

1 Annual Report Standard Life Investments UK Real Estate Trust For the year ended 31 December 2017

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3 Contents 1 Trust Information* 3 Statement of Manager s Responsibilities 4 Manager s Statement* 5 Statement of Trustee s Responsibilities & Report of the Trustee to the Unitholders 6 Independent Auditor s Report to the Unitholders 8 The Registrar of the Trust 9 Accounting and Distribution Policies 10 Standard Life Investments UK Real Estate Accumulation Feeder Fund# 37 Standard Life Investments UK Real Estate Income Feeder Fund+ 59 Alternative Investment Fund Disclosures * These items comprise the Manager s Report for the purposes of the rules contained in the Collective Investment Schemes sourcebook ( the Sourcebook ). # The Standard Life Investments UK Real Estate Accumulation Feeder Fund was previously known as the Standard Life Investments Ignis UK Property Accumulation Feeder Fund. + The Standard Life Investments UK Real Estate Income Feeder Fund was previously known as The Standard Life Investments Ignis UK Property Income Feeder Fund.

4 Trust Information General Standard Life Investments UK Real Estate Feeder Trust (the Trust ) is an authorised unit trust in umbrella form and is authorised by the Financial Conduct Authority with effect from 6 March Funds There are are curently two sub-funds (Funds) in the Trust, the Standard Life Investments UK Real Estate Accumulation Feeder Fund ( the Accumulation Feeder ) and the Standard Life Investments UK Real Estate Income Feeder Fund ( the income Feeder ), both of which are wholly invested in the relevant Share Class of the Standard Life UK Real Estate Fund ( the PAIF ). All sub-funds are non-ucits. Previously the PAIF was known as the Standard Life Investments Ignis UK Property Fund ( Ignis PAIF ) and changed its name on its takeover of the Standard Life Investments UK Property Fund ( SLI PAIF ). Investment background It is intended that the active sub-funds will be feeders of the PAIF at all times, investing solely in the PAIF ( the Master fund ), as such, its investment objective is to carry on Property Investment Business and to manage cash raised for investment in the Property Investment Business. Merger of Aberdeen Asset Management and Standard Life Prior to 14 August 2017, the manager, Standard Life Investments (Mutual Funds) Limited and the Investment Adviser, Standard Life Investments Limited, were subsidiaries of Standard Life Plc. On 14 August 2017, Standard Life Plc and Aberdeen Asset Management Plc, completed a merger to form Standard Life Aberdeen Plc. Reporting dates Interim Annual Record dates Interim Annual Payment dates Interim Annual 30 June 31 December Last day of each month 31 December Last day of each month 15 February Objective The objective of the active sub-fund is to invest primarily in UK commercial property through the PAIF to provide a combination of income and capital growth over the long term. Fund Changes Investors should be aware of the following risk factors observed in the Master Fund: (a) Investment property is less liquid than other asset classes such as bonds or equities. Selling property can be a lengthy process so investors in the PAIF should be aware that they may not be able to sell their investment when they want to; (b) Investment property transaction charges are higher than those which apply in other asset classes. Investors should be aware that a high volume of transactions would have a material impact on the PAIF returns; and (c) Property valuation is a matter of judgement by an independent valuer and is therefore a matter of the valuer s opinion rather than fact. 1 Standard Life Investments UK Real Estate Trust

5 Trust Information (Continued) Standard Life Investments UK Real Estate Trust Manager Directors of the Manager Secretary of the ACD Trustee Standard Life Investments (Mutual Funds) Limited 1 George Street Edinburgh EH2 2LL A.S. Acheson S.A. Fitzgerald, BA (Hons), ACA S. Campbell, MA ACA J. Lowe L. Scott BSC (Hons) FFA D.E. Thomas BSc (Hons), FFA S.R. Wemyss H.S. Kidd, ACIS Citibank Europe plc UK Branch 1 North Wall Quay Dublin 1 Independent Auditor Registrar Investment Adviser Standing Independent Valuers* KPMG LLP Saltire Court 20 Castle Terrace Edinburgh EH1 2EG Standard Life Investments (Mutual Funds) Limited 1 George Street Edinburgh EH2 2LL Standard Life Investments Limited 1 George Street Edinburgh EH2 2LL CBRE Limited St Martin s Court 10 Paternoster Row London EC4M 7HP * Prior to 1 January 2017 the Independent Auditor was PricewaterhouseCoopers LLP. Jones Lang Lasalle Limited 30 Warwick Street London W1B 5NH * For the property investment held within the Master Fund Standard Life Investments UK Real Estate Fund, the PAIF. Standard Life Investments UK Real Estate Trust 2

6 Statement of the Manager s responsibilities The Collective Investment Schemes sourcebook published by the FCA, ( the COLL Rules ) require the Manager to prepare financial statements for each annual accounting period which give a true and fair view of the financial position of the Trust and of the net income and net capital gains on the property of the Trust for the period. In preparing the financial statements the Manager is responsible for: selecting suitable accounting policies and then apply them consistently; making judgements and estimates that are reasonable and prudent; following UK accounting standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland; complying with the disclosure requirements of the Statement of Recommended Practice for UK Authorised Funds issued by the Investment Management Association in May 2014; keeping proper accounting records which enable it to demonstrate that the financial statements as prepared comply with the above requirements; assessing the Trust s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; using the going concern basis of accounting unless they either intend to liquidate the Trust or to cease operations, or have no realistic alternative but to do so; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; and taking reasonable steps for the prevention and detection of fraud and irregularities. The Manager is responsible for the management of the Trust in accordance with its Trust Deed, the Prospectus and the COLL Rules. 3 Standard Life Investments UK Real Estate Trust

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8 Statement of the Trustee s Responsibilities in Respect of the Scheme and Report of the Trustee to the Unitholders of the Standard Life Investments UK Real Estate Trust ( the Trust ) for the year ended 31 December 2017 The Trustee is responsible for the safekeeping of all property of the Trust which is entrusted to it and ensuring proper registration of tangible moveable property, and for the collection of income arising from all such scheme property. It is the duty of the Trustee to take reasonable care to ensure that the Trust is managed and operated in accordance with the Financial Conduct Authority Collective Investment Schemes Sourcebook ( the Sourcebook ), the Financial Services and Markets Act 2000, as amended, and the Trust Deed and the Prospectus of the Trust, concerning: the pricing of and dealing in Trust Units; the application of income of the scheme; and the Trust investment portfolio and borrowing activities. Having carried out procedures and enquiries considered duly necessary to discharge our responsibilities as Trustee of the scheme, based on information and explanations provided to us, we believe that, in all material respects, the Manager: (i) (ii) has carried out the issue, sale, redemption and cancellation, and calculation of the price of the scheme s units and the application of the scheme s income in accordance with the Sourcebook, the Trust Deed and Prospectus; has observed the investment and borrowing powers and restrictions applicable to the scheme; and (iii) has, otherwise, ensured the proper operation of the Trust. Citibank Europe plc UK Branch, London 30 April Standard Life Investments UK Real Estate Trust

9 Independent Auditor s Report to the Unitholders of Standard Life Investments UK Real Estate Trust Report on the financial statements Our opinion We have audited the financial statements of the Trust for the year ended 31 December 2017 which comprise the Statements of Total Return, the Statements of Changes in Net Assets Attributable to Unitholders, the Balance Sheets, the Related Notes and Distribution Tables for each of the Trust s sub-funds on pages 21 to 36 and 45 to 58 and the accounting policies set out on page 9. In our opinion the financial statements: give a true and fair view, in accordance with UK accounting standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland, of the financial position of the Trust comprising each of the sub-funds as at 31 December 2017 and of the net revenue and the net capital gains on the property of the Trust and each of the sub funds for the year then ended; and have been properly prepared in accordance with the Trust Deed, the Statement of Recommended Practice relating to Authorised Funds, and the COLL Rules. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) ( ISAs (UK) ) and applicable law. Our responsibilities are described below. We have fulfilled our ethical responsibilities under, and are independent of the Trust in accordance with, UK ethical requirements including the FRC Ethical Standard. We have received all the information and explanations which we consider necessary for the purposes of our audit and we believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion. Going concern We are required to report to you if we have concluded that the use of the going concern basis of accounting is inappropriate or there is an undisclosed material uncertainty that may cast significant doubt over the use of that basis for a period of at least twelve months from the date of approval of the financial statements. We have nothing to report in these respects. Other information The Manager is responsible for the other information presented in the Annual Report together with the financial statements. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except as explicitly stated below, any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work: we have not identified material misstatements in the other information; and in our opinion the information given in the Manager s Report for the financial year is consistent with the financial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where under the COLL Rules we are required to report to you if, in our opinion: proper accounting records for the Trust have not been kept; or the financial statements are not in agreement with the accounting records. Manager s responsibilities As explained more fully in their statement set out on page 3, the Manager is responsible for: the preparation of financial statements that give a true and fair view; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Trust s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Trust or its sub-funds or to cease operations, or have no realistic alternative but to do so. Auditor s responsibilities Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue our opinion in an auditor s report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. A fuller description of our responsibilities is provided on the FRC s website at Standard Life Investments UK Real Estate Trust 6

10 Independent Auditor s Report to the Unitholders of Standard Life Investments UK Real Estate Trust (Continued) The purpose of our audit work and to whom we owe our responsibilities This report is made solely to the Trust s unitholders, as a body, in accordance with Rule of the Collective Investment Schemes sourcebook ( the COLL Rules ) issued by the Financial Conduct Authority under section 247 of the Financial Services and Markets Act Our audit work has been undertaken so that we might state to the Trust s unitholders those matters we are required to state to them in an auditor s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Trust and the Trust s unitholders as a body, for our audit work, for this report, or for the opinions we have formed. Hugh Harvie (Senior Statutory Auditor) for and on behalf of KPMG LLP, Statutory Auditor Chartered Accountants Saltire Court 20 Castle Terrace Edinburgh EH1 2EG 30 April Standard Life Investments UK Real Estate Trust

11 The Registrar of the Trust The Manager is the Registrar of the Standard Life Investments UK Real Estate Feeder Trust. The Manager has delegated certain aspects of the registrar s operational duties to DST Financial Services International Limited ("DST Limited"). Prior to 14 August 2017, DST Limited were known as International Financial Data Services Limited ( IFDS Limited ). The Registrar is responsible to the Trustee for the maintenance of a register of shareholders in the Trust. The register can be inspected free of charge at the offices of DST Limited at DST House, St Nicholas Lane, Basildon, Essex, SS15 5FS. Standard Life Investments UK Real Estate Trust 8

12 Accounting and Distribution Policies 1 Accounting Policies for all sub-funds (a) Basis of Preparation I. The financial statements of Standard Life Investments UK Real Estate Accumulation Feeder Fund and Standard Life Investments UK Real Estate Income Feeder Fund have been prepared on a going concern basis. II. The financial statements have been prepared under the historical cost basis, as modified by the revaluation of investments, and in accordance with FRS102 and the Statement of Recommended Practice for Authorised Funds (SORP) issued by the IMA in May 2014 and UK Generally Accepted Accounting Practice (UK GAAP). (b) Valuation of Investments The Standard Life Investments UK Real Estate Accumulation Feeder Trust invests all or substantially all of its capital in the feeder accumulation units of the Standard Life Investments UK Real Estate Fund PAIF. The Standard Life Investments UK Real Estate Income Feeder Trust invests substantially all of its capital in the feeder income units of the Standard Life Investments UK Real Estate Fund PAIF. The Investments in the PAIF reflect the underlying value of the respective feeder classes NAV shown in the PAIF current report for the same date. (c) Revenue Income from the PAIF investment is recognised on an accruals basis, net of attributable tax credits, by reference to the amount of distributable income in the underlying investment and treated as revenue. Income received in respect of purchases of the investment during the accounting period will include an element of equalisation which represents the average amount of distributable income included in the price paid for the units. The equalisation element of the distribution received from the Master fund, the PAIF and the equalisation component of the price of shares bought and sold in the master fund are both treated as return on capital and is included in the distributable income. (d) Expenses The Manager s periodic charge and registrar fees are charged to the capital property of the Trust. Handling charges are borne by the capital property of the Trust for distribution purposes. (e) Taxation Provision for Corporation Tax is based at the current rate, as appropriate, on the excess of taxable revenue over allowable expenses. Income received from the fund is taxed depending on the income stream. Property Income Distributions (PID) are taxed at 20%, interest distributions are taxed at 20%, and dividend distributions at 0%. Deferred tax is provided for on all timing differences that have originated but not reversed by the balance sheet date. Deferred tax is not recognised on permanent differences. Deferred tax assets are only recognised where it is more likely than not that there will be suitable taxable profits against which the future reversal of underlying timing differences can be deducted. (f) Unit Class Allocation Revenue and non-unit class specific expenses are allocated daily, pro rata to the net asset value of assets attributable to each unit class. Unit class specific expenses are allocated based on the rates as stated in the Prospectus; the Ongoing Charges Figure disclosed within this annual report and financial statements shows the impact of the different rates of unit class specific expenses. Tax is calculated daily at a unit class level; where one unit class is in a tax paying position but the Trust as a whole is not, a transfer is made to the other classes to compensate for this. (g) Unitholders rights All unit classes have the same rights on winding-up. 2 Distribution Policies for all sub-funds (a) Basis of distribution I. The distribution is calculated at a unit class level as per the unit class allocation accounting policy. All of the net revenue available for distribution at the end of the year will be distributed or reinvested in the Trust. II. Where the Manager has discretion about the extent to which revenue and expenses are recognised within the distributable income property of the Trust, the approach adopted, at all times, will be governed by the aim of maximising the total return to unitholders through limiting avoidable taxation costs. (b) Equalisation In order that each unitholder in the same unit class shall receive the same rate of distribution per unit the buying price of each unit contains an amount called equalisation. This is equivalent to the net of distributable income less expenses accrued in the Trust at the time of purchase, these purchased shares are known as Group 2. As part of the distribution payment the average amount of this equalisation is returned to Group 2 unitholders. The equalisation element of the distribution to Group 2 unitholders is treated as a repayment of capital and is therefore not liable to income tax. This amount should, however, be deducted from the cost of the units for capital gains tax purposes. 9 Standard Life Investments UK Real Estate Trust

13 Accumulation Feeder Fund Manager s Report Fund Information Trust Manager Investment objective The investment objective of the Sub-fund is to achieve income and capital growth through investment in shares of the Standard Life Investments UK Real Estate Fund. Investment policy The Sub-fund will invest all or substantially all of its assets in the feeder accumulation shares of the Standard Life Investments UK Real Estate Fund. To the extent that the Sub-fund is not fully invested in the Standard Life Investments UK Real Estate Fund, the Sub-fund will hold its remaining assets in cash. Standard Life Investments UK Real Estate Accumulation Feeder Fund is a Feeder as defined by COLL 11.1 and holds shares in the PAIF. The Investment report of the PAIF ( the Master fund ) has been provided below. Copies of the Report and Accounts are available online at standardlifeinvestments.com. Risk Profile George Shaw Launch Date 16 March 2016 Investors should be aware of the following risk factors: (a) The sole investment of the sub-fund is shares in the relevant share class of the PAIF. If the value of the investment in the PAIF declines, or is otherwise adversely affected, this will have an adverse effect on the value of the sub-fund. Past performance is no guide to the future; (b) Where an initial charge or redemption charge is imposed, an investor who realises his units after a short period may not (even in the absence of a fall in the value of the relevant investments) realise the amount originally invested. In particular, where a redemption charge is payable, investors should note that the percentage rate at which the redemption charge is calculated is based on the market value rather than the initial value of the units. If the market value of the units has increased the redemption charge will show a corresponding increase. The units therefore should be viewed as medium to long term investments; (c) Investors are reminded that in certain circumstances their right to redeem units (including a redemption by way of switching) may be suspended. In exceptional circumstances, the Manager may (following consultation with the Trustee) suspend the issue, cancellation, sale and redemption of units in any and all sub-funds (or classes). In particular, if the issue, cancellation, sale and redemption of shares in the relevant class of the PAIF should be suspended, then the Manager will suspend the issue, cancellation, sale or redemption of units to reflect the position in the relevant class of the PAIF. (d) Inflation will, over time, reduce the value of investments in real terms. (e) The sub-fund may employ leverage that will magnify gains and losses and result in greater volatility in the value of Scheme Property as a result of market movements. Performance The UK Real Estate Fund returned 7.06% over the period, compared with a total return of 7.71% from the IA Commercial Property Funds peer group.** The Fund s underlying direct property assets provided a total return of 1.4% over 2017, compared to the Authorised Property Unit Trust ( APUT )/Property Authorised Investment Fund ( PAIF ) MSCI Benchmark total return of 10.9%. The Fund remains ahead of this benchmark over one, three and five years. In line with the market, the Fund s industrial assets provided the strongest performance, with performance in South East industrials particularly robust. Investment Background UK commercial real estate recorded positive returns during 2017, which were stronger than many analysts originally anticipated at the start of the year. Supported by a relatively robust domestic economy, UK real estate recorded a total return of 11.2%* for the year. There was a positive backdrop for real estate at the start of the year, including better-than-expected economic data and improved trading volumes in the commercial real estate market. Overseas investors were particularly active, enticed by a combination of weaker sterling and relative pricing in comparative markets. At an all property level, capital growth increased quarter-on-quarter. However, there were significant variations between the main sectors, with industrial assets gaining significantly more than the office and retail sectors. Income returns remained robust supported by healthy occupational demand. Performance in the industrial sector was driven by favourable supply/demand dynamics and an improved manufacturing environment, as well as the ongoing structural shift to online retailing increasing the demand for distribution hubs. The retail sector continued to experience a period of change and Christmas 2017 trading figures further illustrated a polarisation within the sector. Serviced office providers expanded over the period, partly illustrating occupiers desire for flexible leasing solutions. *Source: MSCI s IPD UK Monthly Property Index **Source: IA/Morningstar/Standard Life Investments; based on UK Real Estate Fund (PAIF) Platform 1 shareclass; Peer Group comprises of nine comparable UK commercial property funds in the IA Property Sector. Standard Life Investments UK Real Estate Trust 10

14 Accumulation Feeder Fund Manager s Report (Continued) Investment Activity Given continued economic and political uncertainty we maintained an enhanced liquidity buffer during the reporting period. We undertook select acquisitions and disposals aimed at enhancing the portfolio composition. Actively managing existing assets remained a key focus, as we sought to implement initiatives focused on income and value enhancement. Purchases during the year included adding to the Fund s existing holding at the IO Centre, Sutton, by acquiring three adjoining tradecounter units for 4.3 million, which represented a net initial yield of 5.5%. We also bought 10 Cygnet Street, Shoreditch, London, for 12.2 million, which represented a net initial yield of 5.25%. The Cygnet Street asset is located adjacent to the Fund s existing Shoreditch holding and the purchase added a further two units, let to Pure Gym and Tri-Yoga. Over 50% of the long let income benefits from upwards-only rent reviews linked to inflation. Currently, around 80% of the Fund s assets by value are within the Neutral to Very Heavy classification on our real estate research team s three-year House View. We continue to analyse new investment opportunities that provide an attractive blend of highquality income and asset management initiatives. Finally, we will continue to implement asset management strategies in order to enhance income and capital growth. Cautionary note It should be remembered that past performance is not a guide to future performance. The value of investments may go down as well as up and, therefore, investors may not get back the amount originally invested. In terms of sales, in line with the aforementioned strategy, we sold: a Q Park car park in Sheffield for 19.1 million a Tesco on Church Street, Tiptree, for 14.3 million a BMW dealership in Stockport, Greater Manchester, for 8.8 million Church Way, Doncaster, for 2.2 million Chartist Tower, Newport, for 6.45 million 85 Gray s Inn Road, London for 25.6 million. The disposal of Gray s Inn Road reduced the Fund s West End/Mid Town office exposure in line with our House View. Outlook UK real estate continues to provide an elevated yield compared with other asset classes and market values are now ahead of the level they attained before the Brexit upheaval in Furthermore, lending to the asset class remains prudent and liquidity is reasonable. In the current environment, real estate s steady and secure income should be the key driver of returns. Sentiment is also likely to drive the market in the short term, as the political and economic impact associated with the UK s withdrawal from the European Union evolves. The retail sector continues to face a series of headwinds that may hold back recovery in weaker locations. Given the backdrop of ongoing heightened economic uncertainty, investors are becoming more risk averse and better-quality assets are once again broadly outperforming poorer-quality assets. Prime/good quality assets with stronger tenants are likely to provide the best opportunities in the weaker economic environment we anticipate further into Standard Life Investments UK Real Estate Trust

15 Accumulation Feeder Fund Comparative Tables pence per unit pence per unit Retail accumulation Change in net assets per unit Opening net asset value per unit ## Return before operating charges* (0.31) Operating charges** (1.97) (1.46)^ Property charges # ~ (0.41) (0.32)^ Return after operating charges* 9.71 (2.09) Distributions (4.99) (4.06) Retained distributions on accumulation unit Closing net asset value per unit * after direct transaction costs of: ***# Performance + Return after charges 6.78% (1.44%) Other information Closing net asset value ( 000) 103, ,380 Closing number of units 67,880,855 91,038,565 Operating charges**** 1.31% 1.31% Property expense ratio # ~ 0.31% 0.29% Real Estate Expense Ratio 1.62% 1.60% Direct transaction costs*** # 0.00% 0.16% Prices Highest unit price Lowest unit price ~ Property expenses are separate from fund operating charges. They represent the costs associated with property assets. The figure for property expenses should be combined with the operating charges to create a Real Estate Expense Ratio (REER) when comparing property funds. ** The operating charges include all costs borne by the Trust, except for direct transaction costs. The direct transaction costs are made up of; fees and commissions paid to agents, advisers, brokers and dealers, levies by regulatory agencies and securities exchanges as well as transfer taxes and duties. Direct transaction costs are stated after the proportion of the amounts collected from dilution adjustments in relation to direct transaction costs. **** The operating charges percentage shows the annualised operating expenses of the share class as a percentage of the average net asset value of the class over the same period. + The performance figures are calculated by taking the value of the share class per the financial statements compared to the value per the financial statements in the prior year. This figure may differ from the performance figure quoted in the Investment Report. The Investment Report performance figure for this report has been calculated based on the property assets of the PAIF. # Property expense ratio and transaction costs in the Accumulation Feeder Fund relate to the underlying class in the PAIF. ## Launched at an inspecie value equivalent to the mid value of the underlying investment in order to retain continuity with the equivalent class in the Feeder Fund on the 18 March ^ The pence per unit values relate to the period from 18 March to 31 December 2016 reflecting a partial year. Standard Life Investments UK Real Estate Trust 12

16 Accumulation Feeder Fund Comparative Tables (Continued) pence per unit pence per unit Institutional accumulation Change in net assets per unit Opening net asset value per unit ## Return before operating charges* (0.34) Operating charges** (1.11) (0.81)^ Property charges # ~ (0.35) (0.28)^ Return after operating charges* 8.90 (1.43) Distributions (4.20) (3.41) Retained distributions on accumulation unit Closing net asset value per unit * after direct transaction costs of: ***# Performance + Return after charges 7.19% (1.14%) Other information Closing net asset value ( 000) 801, ,815 Closing number of units 603,754, ,511,514 Operating charges**** 0.84% 0.84% Property expense ratio # ~ 0.31% 0.29% Real Estate Expense Ratio 1.15% 1.13% Direct transaction costs***# 0.00% 0.16% Prices Highest unit price Lowest unit price ~ Property expenses are separate from fund operating charges. They represent the costs associated with property assets. The figure for property expenses should be combined with the operating charges to create a Real Estate Expense Ratio (REER) when comparing property funds. ** The operating charges include all costs borne by the Trust, except for direct transaction costs. The direct transaction costs are made up of; fees and commissions paid to agents, advisers, brokers and dealers, levies by regulatory agencies and securities exchanges as well as transfer taxes and duties. Direct transaction costs are stated after the proportion of the amounts collected from dilution adjustments in relation to direct transaction costs. **** The operating charges percentage shows the annualised operating expenses of the share class as a percentage of the average net asset value of the class over the same period. + The performance figures are calculated by taking the value of the share class per the financial statements compared to the value per the financial statements in the prior year. This figure may differ from the performance figure quoted in the Investment Report. The Investment Report performance figure for this report has been calculated based on the property assets of the PAIF. # Property expense ratio and transaction costs in the Accumulation Feeder Fund relate to the underlying class in the PAIF. ## Launched at an inspecie value equivalent to the mid value of the underlying investment in order to retain continuity with the equivalent class in the Feeder Fund on the 18 March ^ The pence per unit values relate to the period from 18 March to 31 December 2016 reflecting a partial year. 13 Standard Life Investments UK Real Estate Trust

17 Accumulation Feeder Fund Comparative Tables (Continued) pence per unit pence per unit Standard Life accumulation Change in net assets per unit Opening net asset value per unit ## Return before operating charges* 4.09 (0.21) Operating charges** (0.06) (0.03)^ Property charges # ~ (0.14) (0.11)^ Return after operating charges* 3.89 (0.35) Distributions (1.61) (1.30) Retained distributions on accumulation unit Closing net asset value per unit * after direct transaction costs of: ***# Performance + Return after charges 7.83% (0.70%) Other information Closing net asset value ( 000) 22,300 22,893 Closing number of units 41,648,862 46,105,044 Operating charges**** 0.09% 0.09% Property expense ratio # ~ 0.31% 0.29% Real Estate Expense Ratio 0.40% 0.38% Direct transaction costs***# 0.00% 0.16% Prices Highest unit price Lowest unit price ~ Property expenses are separate from fund operating charges. They represent the costs associated with property assets. The figure for property expenses should be combined with the operating charges to create a Real Estate Expense Ratio (REER) when comparing property funds. ** The operating charges include all costs borne by the Trust, except for direct transaction costs. The direct transaction costs are made up of; fees and commissions paid to agents, advisers, brokers and dealers, levies by regulatory agencies and securities exchanges as well as transfer taxes and duties. Direct transaction costs are stated after the proportion of the amounts collected from dilution adjustments in relation to direct transaction costs. **** The operating charges percentage shows the annualised operating expenses of the share class as a percentage of the average net asset value of the class over the same period. + The performance figures are calculated by taking the value of the share class per the financial statements compared to the value per the financial statements in the prior year. This figure may differ from the performance figure quoted in the Investment Report. The Investment Report performance figure for this report has been calculated based on the property assets of the PAIF. # Property expense ratio and transaction costs in the Accumulation Feeder Fund relate to the underlying class in the PAIF. ## Launched at an inspecie value equivalent to the mid value of the underlying investment in order to retain continuity with the equivalent class in the Feeder Fund on the 18 March ^ The pence per unit values relate to the period from 18 March to 31 December 2016 reflecting a partial year. Standard Life Investments UK Real Estate Trust 14

18 Accumulation Feeder Fund Comparative Tables (Continued) pence per unit pence per unit Standard Life B accumulation Change in net assets per unit Opening net asset value per unit ## Return before operating charges* 4.07 (0.21) Operating charges** (0.02) ^ Property charges # ~ (0.14) (0.11)^ Return after operating charges* 3.91 (0.32) Distributions (1.60) (1.29) Retained distributions on accumulation unit Closing net asset value per unit * after direct transaction costs of: ***# Performance + Return after charges 7.87% (0.64%) Other information Closing net asset value ( 000) 411, ,769 Closing number of units 767,895, ,979,081 Operating charges**** 0.01% 0.01% Property expense ratio # ~ 0.31% 0.29% Real Estate Expense Ratio 0.32% 0.29% Direct transaction costs***# 0.00% 0.16% Prices Highest unit price Lowest unit price ~ Property expenses are separate from fund operating charges. They represent the costs associated with property assets. The figure for property expenses should be combined with the operating charges to create a Real Estate Expense Ratio (REER) when comparing property funds. ** The operating charges include all costs borne by the Trust, except for direct transaction costs. The direct transaction costs are made up of; fees and commissions paid to agents, advisers, brokers and dealers, levies by regulatory agencies and securities exchanges as well as transfer taxes and duties. Direct transaction costs are stated after the proportion of the amounts collected from dilution adjustments in relation to direct transaction costs. **** The operating charges percentage shows the annualised operating expenses of the share class as a percentage of the average net asset value of the class over the same period. + The performance figures are calculated by taking the value of the share class per the financial statements compared to the value per the financial statements in the prior year. This figure may differ from the performance figure quoted in the Investment Report. The Investment Report performance figure for this report has been calculated based on the property assets of the PAIF. # Property expense ratio and transaction costs in the Accumulation Feeder Fund relate to the underlying class in the PAIF. ## Launched at an inspecie value equivalent to the mid value of the underlying investment in order to retain continuity with the equivalent class in the Feeder Fund on the 18 March ^ The pence per unit values relate to the period from 18 March to 31 December 2016 reflecting a partial year. 15 Standard Life Investments UK Real Estate Trust

19 Accumulation Feeder Fund Comparative Tables (Continued) pence per unit pence per unit Standard Life A accumulation Change in net assets per unit Opening net asset value per unit ## Return before operating charges* 4.05 (0.21) Operating charges** (0.02) ^ Property charges # ~ (0.14) (0.11)^ Return after operating charges* 3.89 (0.32) Distributions (1.57) (1.30) Retained distributions on accumulation unit Closing net asset value per unit * after direct transaction costs of: ***# Performance + Return after charges 7.83% (0.64%) Other information Closing net asset value ( 000) 1 1 Closing number of units 2,200 2,200 Operating charges**** 0.01% 0.01% Property expense ratio # ~ 0.31% 0.29% Real Estate Expense Ratio 0.35% 0.30% Direct transaction costs***# 0.00% 0.16% Prices Highest unit price Lowest unit price ~ Property expenses are separate from fund operating charges. They represent the costs associated with property assets. The figure for property expenses should be combined with the operating charges to create a Real Estate Expense Ratio (REER) when comparing property funds. ** The operating charges include all costs borne by the Trust, except for direct transaction costs. The direct transaction costs are made up of; fees and commissions paid to agents, advisers, brokers and dealers, levies by regulatory agencies and securities exchanges as well as transfer taxes and duties. Direct transaction costs are stated after the proportion of the amounts collected from dilution adjustments in relation to direct transaction costs. **** The operating charges percentage shows the annualised operating expenses of the share class as a percentage of the average net asset value of the class over the same period. + The performance figures are calculated by taking the value of the share class per the financial statements compared to the value per the financial statements in the prior year. This figure may differ from the performance figure quoted in the Investment Report. The Investment Report performance figure for this report has been calculated based on the property assets of the PAIF. # Property expense ratio and transaction costs in the Accumulation Feeder Fund relate to the underlying class in the PAIF. ## Launched at an inspecie value equivalent to the mid value of the underlying investment in order to retain continuity with the equivalent class in the Feeder Fund on the 18 March ^ The pence per unit values relate to the period from 18 March to 31 December 2016 reflecting a partial year. Standard Life Investments UK Real Estate Trust 16

20 Accumulation Feeder Fund Comparative Tables (Continued) pence per unit pence per unit Platform 1 accumulation Change in net assets per unit Opening net asset value per unit ## Return before operating charges* 4.12 (0.12) Operating charges** (0.47) (0.35)^ Property charges # ~ (0.14) (0.11)^ Return after operating charges* 3.51 (0.58) Distributions (1.68) (1.36) Retained distributions on accumulation unit Closing net asset value per unit * after direct transaction costs of: ***# Performance + Return after charges 7.10% (1.16%) Other information Closing net asset value ( 000) 139, ,193 Closing number of units 262,715, ,605,071 Operating charges**** 0.89% 0.89% Property expense ratio # ~ 0.31% 0.29% Real Estate Expense Ratio 1.20% 1.18% Direct transaction costs***# 0.00% 0.16% Prices Highest unit price Lowest unit price ~ Property expenses are separate from fund operating charges. They represent the costs associated with property assets. The figure for property expenses should be combined with the operating charges to create a Real Estate Expense Ratio (REER) when comparing property funds. ** The operating charges include all costs borne by the Trust, except for direct transaction costs. The direct transaction costs are made up of; fees and commissions paid to agents, advisers, brokers and dealers, levies by regulatory agencies and securities exchanges as well as transfer taxes and duties. Direct transaction costs are stated after the proportion of the amounts collected from dilution adjustments in relation to direct transaction costs. **** The operating charges percentage shows the annualised operating expenses of the share class as a percentage of the average net asset value of the class over the same period. + The performance figures are calculated by taking the value of the share class per the financial statements compared to the value per the financial statements in the prior year. This figure may differ from the performance figure quoted in the Investment Report. The Investment Report performance figure for this report has been calculated based on the property assets of the PAIF. # Property expense ratio and transaction costs in the Accumulation Feeder Fund relate to the underlying class in the PAIF. ## Launched at an inspecie value equivalent to the mid value of the underlying investment in order to retain continuity with the equivalent class in the Feeder Fund on the 18 March ^ The pence per unit values relate to the period from 18 March to 31 December 2016 reflecting a partial year. 17 Standard Life Investments UK Real Estate Trust

21 Accumulation Feeder Fund Comparative Tables (Continued) pence per unit pence per unit Institutional S accumulation Change in net assets per unit Opening net asset value per unit ^^ Return before operating charges* Operating charges** (0.39) (0.02)^^^ Property charges # ~ (0.15) (0.01)^^^ Return after operating charges* Distributions (1.68) (0.06) Retained distributions on accumulation unit Closing net asset value per unit * after direct transaction costs of: ***# Performance + Return after charges 7.28% 0.56% Other information Closing net asset value ( 000) Closing number of units 277,045 2,200 Operating charges**** 0.72% 0.72% Property expense ratio # ~ 0.31% 0.29% Real Estate Expense Ratio 1.03% 1.01% Direct transaction costs***# 0.00% 0.16% Prices Highest unit price Lowest unit price ~ Property expenses are separate from fund operating charges. They represent the costs associated with property assets. The figure for property expenses should be combined with the operating charges to create a Real Estate Expense Ratio (REER) when comparing property funds. ** The operating charges include all costs borne by the Trust, except for direct transaction costs. The direct transaction costs are made up of; fees and commissions paid to agents, advisers, brokers and dealers, levies by regulatory agencies and securities exchanges as well as transfer taxes and duties. Direct transaction costs are stated after the proportion of the amounts collected from dilution adjustments in relation to direct transaction costs. **** The operating charges percentage shows the annualised operating expenses of the share class as a percentage of the average net asset value of the class over the same period. + The performance figures are calculated by taking the value of the share class per the financial statements compared to the value per the financial statements in the prior year. This figure may differ from the performance figure quoted in the Investment Report. The Investment Report performance figure for this report has been calculated based on the property assets of the PAIF. # Property expense ratio and transaction costs in the Accumulation Feeder Fund relate to the underlying class in the PAIF. ^^ Launched at 50p on 15 December ^^^ The pence per unit values relate to the period from the 15 December to 31 December 2016 reflecting a partial year. Standard Life Investments UK Real Estate Trust 18

22 Accumulation Feeder Fund Comparative Tables (Continued) pence per unit pence per unit Institutional A accumulation Change in net assets per unit Opening net asset value per unit ## Return before operating charges* Operating charges** (0.80) (0.61)^ Property charges # ~ (0.14) (0.11)^ Return after operating charges* 3.06 (0.68) Distributions (1.70) (1.41) Retained distributions on accumulation unit Closing net asset value per unit * after direct transaction costs of: ***# Performance + Return after charges 6.20% (1.36%) Other information Closing net asset value ( 000) 1 1 Closing number of units 2,398 2,398 Operating charges**** 1.56% 1.59% Property expense ratio # ~ 0.31% 0.29% Real Estate Expense Ratio 1.87% 1.88% Direct transaction costs***# 0.00% 0.16% Prices Highest unit price Lowest unit price ** Property expenses are separate from fund operating charges. They represent the costs associated with property assets. The figure for property expenses should be combined with the operating charges to create a Real Estate Expense Ratio (REER) when comparing property funds. The direct transaction costs are made up of; fees and commissions paid to agents, advisers, brokers and dealers, levies by regulatory agencies and securities exchanges as well as transfer taxes and duties. Direct transaction costs are stated after the proportion of the amounts collected from dilution adjustments in relation to direct transaction costs. **** The operating charges percentage shows the annualised operating expenses of the share class as a percentage of the average net asset value of the class over the same period. + The performance figures are calculated by taking the value of the share class per the financial statements compared to the value per the financial statements in the prior year. This figure may differ from the performance figure quoted in the Investment Report. The Investment Report performance figure for this report has been calculated based on the property assets of the PAIF. # Property expense ratio and transaction costs in the Accumulation Feeder Fund relate to the underlying class in the PAIF. ## Launched at an inspecie value equivalent to the mid value of the underlying investment in order to retain continuity with the equivalent class in the Feeder Fund on the 18 March ^ The pence per unit values relate to the period from 18 March to 31 December 2016 reflecting a partial year. 19 Standard Life Investments UK Real Estate Trust

23 Accumulation Feeder Fund Portfolio Statement as at 31 December 2017 Market Percentage value of total Holding 000 net assets Collective Investment Schemes (99.82%) 1,475, ,200,398,164 Standard Life Investments UK Real Estate Fund (Feeder Accumulation Shares) 1,475, Total investment assets 1,475, Net other assets 2, Total Net Assets 1,478, All investments are in a regulated collective investment schemes within the meaning of the FCA rules unless otherwise stated. The percentage figures in brackets show the comparative holding as at 31 December Purchases, Sales and Transaction Costs There are no transaction costs associated with the purchases or sales of collective investments during the year, or in the prior year. Collective investments operate within the terms of the offer document or prospectus aside from initial charges not normally borne by other funds. The underlying price contains an estimation of cost known as a dilution levy which is applied from time to time. During the year the total purchases and sales across different major asset classes are as per below table Purchases Collective investment schemes 32, ,491 Inspecie transfers from the SLI Accumulation Feeder fund 0 1,036,433 Inspecie transfers from the Feeder fund 0 776,197 Sales Collective investment schemes 282, ,272 The Trust suffers a number of explicit costs as disclosed in the notes and Trust history. The Trust also suffers implicit costs - an example is market spread. The spread represents the costs of providing liquidity in a market. It therefore is subject to change based on volume - active markets have a lower spread the difference between bid (the price you receive) and offer (the price you pay). At the balance sheet date the average portfolio dealing spread (i.e. the spread between bid and offer prices expressed as a percentage of the offer price) was 6.00% (2016: 5.40%), this is representative of the average spread on the assets held during the year. Standard Life Investments UK Real Estate Trust 20