Schroder Exempt Property Unit Trust Quarter Progress Report

Transcription

1 31 March 2009 For professional investors only. Not suitable for retail clients. Schroder Exempt Property Unit Trust Quarter Progress Report Schroder Property Investment Management Limited 1 31 Gresham Street, London EC2V 7QA. Registered No England Authorised and regulated by the Financial Services Authority

2 Contents Page Executive Summary 3 UK Property Market Review 5 Activity and Strategy 9 Portfolio Analysis 10 Commentary on Performance Attribution 13 Databank 14 Risk Warning 16 Hanne Hooton Product Executive Switchboard: +44 (0) Direct Phone +44 (0) Fax +44 (0) hanne.hooton@schroders.com 2

3 Executive Summary Investment Objective The investment objective of the Trust is to achieve a blend of capital and income growth for investors through investment in commercial property. Risk is diversified by the Trust holding a mixed portfolio of retail, office, industrial and other property (including residential and leisure) throughout the UK. The Trust seeks to provide a return of 0.5% (net of fees) per annum above its benchmark (the IPD UK Pooled Property Fund Indices - All Balanced Funds Median) over rolling three year periods. Performance: commentary on performance attribution analysis is provided on page 13. Schroder Exempt Property Unit Trust: Total Returns Q (%) Q (%) Q (%) Q (%) Six months to 31/3/2009 (%) Nine months to 31/3/2009 (%) 1 yr to 31/3/2009 (%) Schroder Exempt Property Unit Trust Benchmark yrs to 31/3/2009 (% pa) 5 yrs to 31/3/2009 (% pa) 10 yrs to 31/3/2009 (% pa) Schroder Exempt Property Unit Trust Benchmark Source: IPD UK Pooled Property Fund Indices, 31 March 2009; Performance is calculated on a net asset value (NAV) to NAV price basis plus income distributions accrued for the relevant periods, compounded monthly, net of fees. This has been provided in accordance with the methodology adopted by the IPD UK Pooled Property Fund Indices which accounts for the declared income at the time of reporting and an unrounded net asset value per unit 1 Benchmark shown is the IPD UK Pooled Property Fund Indices All Balanced Funds Median. The Fund benchmark has changed over time and a composite for 3, 5 and 10 years is available upon request UK Property Market Commentary The table below shows that the total returns from property for the past three and twelve months was -7.1% and -25.5% respectively with a gap emerging between the retail and industrial sectors. The total decline in values from the peak in the market (June 2007) to March 2009 has been -41.4% which has been predominantly driven by a rise in yields rather than rental value falls. Although the property market continues to fall, the rate of decline has slowed in recent months. In the first three months of 2009 capital values fell by 8.9%, compared with 15.0% in the last three months of 2008 (source IPD). Rental values, however, are declining and are anticipated to fall further due to weaker occupier demand and some tenant bankruptcies increasing the supply of space. Total returns by property sector and asset class Sector Q (%) Q (%) 12 months to end March 2009 (%) 3 Years to end March 2009 (% pa) Retail Property Office Property Industrial Property All Property Year Gilts UK Equities (FTSE All Share Index) UK Real Estate Equities Source: Investment Property Databank 1 FTSE All Share real estate index 3

4 31 March 2009 For professional investors only. Not suitable for retail clients. UK Property Investment Market The recession in the UK has intensified since our last quarterly review. UK unemployment has now risen above two million for the first time since 1997, and we now expect UK GDP to fall by 3-4% in Given these dynamics, the government has increased its efforts to stimulate the economy: during the quarter, a quantitative easing policy was introduced along with the Asset Protection Scheme, and a number of measures were announced by the G20 to tackle the global downturn. The economic picture is being reflected in the UK property investment market. The level of property market voids has risen from 10.4% of income in December 2008 to 11.7% at the end of the first quarter (Source: IPD Monthly Index). Transactional activity also remains weak, reflecting in part the lack of liquidity in the system and the very limited funding available to debt-backed buyers. There is, however, some evidence that some parts of the market are beginning to revive. As well as some UK institutions and cash buyers, overseas investors have been buying, encouraged by the depreciation of sterling versus the US dollar and euro as well as the sharp correction in values. The latter have accounted for 1.5 billion worth of transactions so far in 2009 (Source: Property Data) representing 42% of all deals done. The main focus of activity has been narrow and focused on quasi-bond type properties let to blue chip tenants on long leases for lot sizes of up to 50 million. There is evidence of yields hardening since Q for this type of asset. Activity and Strategy As the UK economic recession deepens the main focus of the Fund s 1 activity has been, where possible, to protect and enhance the income stream There have been no changes to asset allocation in the third quarter or any significant rent reviews to report There are a number of asset management initiatives to realise longer term latent potential in the portfolio as well as to position the Schroder Exempt Property Unit Trust to benefit from market recovery (see page 9 for further details) 4 1 The words Fund and Trust are used interchangeably throughout

5 31 March 2009 For professional investors only. Not suitable for retail clients. UK Property Market Review Economic Background The recession in the UK economy has intensified markedly since our last quarterly review for the fourth quarter of This is against a background of a rapid and significant decline in global GDP both in the OECD and, more markedly, in the emerging markets. UK unemployment rose above two million in February 2009 for the first time since 1997 (Source: Office of National Statistics). Schroders has therefore recently revised its UK economic forecasts. We now expect UK GDP to fall by 3-4% in 2009 and next year may see only a very modest upturn. There is unlikely to be a meaningful economic recovery until However, there is still considerable uncertainty over the outlook and forecasts for the UK and global economies. Schroders revised UK economic forecasts rest on the assumption that the combination of very low interest rates, fiscal stimulus and the current quantitative easing, will be sufficient to lift the economy out of recession in In theory quantitative easing, whereby the Bank of England buys existing gilts from banks, should be beneficial. This is because it should encourage banks to increase lending. The risk is, however, that the banks decide instead to hoard the proceeds from selling gilts and build up their reserves. The UK government s Asset Protection Scheme should however help provide an opportunity to free up risk weighted assets to assist with stimulating credit creation. In addition the G20 summit leaders have recently pledged a US$1,100 billion package of measures to help tackle the global downturn, although there may be some overlap with previously announced initiatives. Schroders Property Market Forecasts The recent rapid decline in the UK economy has in turn fed through to revisions to Schroders property forecasts. We anticipate open market rental values may fall by 12% this year and by 8% in 2010 due to weaker occupier demand and some corporate bankruptcies increasing the supply of space. So far the property market correction has been driven predominantly by a rise in yields as investors have re-priced risk. Rental values only started to decline in the fourth quarter of On a cumulative basis this would equate to a total fall in open market rental values from their peak in mid-2007, to their anticipated trough in 2011, of nearly 25%. We believe offices are likely to suffer the biggest hit, with a cumulative fall in open market rental values of 32% from peak to trough, compared with a total decline of around 18% in both the retail and industrial sectors. Rental value falls will be mitigated by reversions and upwards only rent review clauses While there may be falling rental values, we still expect, as we reported last quarter, that the decline in capital values may stabilise in 2009 for two reasons. Firstly, not all of the fall in rental values will immediately impact upon capital values. This is partly because some leases are reversionary, in other words the current rent paid by the tenant is below the open market rental value. According to IPD, the potential uplift on reversionary leases was equal to 7% of current income at the end of Secondly, the features of UK leases and, in particular, the upward only rent review clause, means that the rental income on existing leases is insulated in the short term from falls in open market rental values. While the majority of existing leases may become over-rented during the next 2-3 years (i.e. the open market rental value will fall below the current rent), it will only be when those leases expire, or a tenant becomes insolvent, that landlords will actually suffer a drop in rent. Although UK leases have gradually shortened over the last two decades, the average unexpired term at the end of 2008 was still nine years (source: IPD). As a result, Schroders estimate that the fall in rental income in 2009 and 2010 may be limited to between 7-10% and that capital values will only reflect around 60% of the downturn in open market rental values. 5

6 Property offers an increasingly attractive income yield? The third reason why we believe that the fall in capital values will slow in 2009 is due to the increasingly attractive valuation of UK property versus many other assets. The All Property initial yield rose to 7.7% in March 2009 compared to long bond yields of 3.5% (Source: IPD Monthly Index). The gap has widened to an unprecedented 4.0% approximately. Over the long term the yield gap has averaged 1%. Of course, to some extent this large gap is symptomatic of the strains in the financial system, as investors have taken refuge in the gilts market. Nevertheless, even if we assume that the equilibrium level for gilt yields is 4.25% rather than 3.5%, property still looks good value relative to UK government bonds. Further analysis of the yield gaps against other assets suggests that property is also attractively priced relative to cash and index-linked bonds. Property appears to be fair value relative to equities but expensive relative to corporate bonds. There is, of course, a risk that the yield advantage could be eroded by tenant failures and falling rents. Figure 1: Yield gap between property and long gilts % differential 5 4 Relatively cheap yield differential average + 1 std dev - 1 std dev Relatively expensive Source: Datastream, IPD, Schroders, March 2009 Note: Long term average yield gap calculated over 15 years. If the gap is more than one standard deviation above the long term average gap, then property is relatively cheap. If the gap is more than one standard deviation below the long term average gap then property is relatively expensive. The UK commercial property investment market is experiencing some pick up in activity In accordance with our view that property has become good value relative to its long term averages and in particular versus gilts and cash, there is growing evidence that the prime end of the investment market is starting to revive. A number of UK institutions and private investors who are not reliant on debt have returned to the market this year. In addition overseas buyers have been encouraged, not only by the correction in property values, but also by the depreciation of sterling, i.e. a double correction for them in UK commercial property values (Source: Property Data). The main focus of investor attention has been quasi bond type properties, let to blue-chip tenants on long leases and at a price of up to 50 million. In particular there has been strong demand for offices let to Government agencies and for distribution warehouses let to the major supermarkets. 6

7 Figure 2: The foreign investor s perspective - UK capital values in different currencies 1987 = $ Source: Datastream, IPD, Schroders, December 2008 Figure 3: Transaction volumes signs of life? Number of deals Month Moving Average Jan-07 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan-08 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan-09 Feb Mar Source: Property Databank, Schroders, March 2009 As a result, although Schroders anticipate that the All Property initial yield may rise from 7.1% at the end of December 2008 to 8.3% at the end of December 2009, we expect that most of this increase will be at the secondary end of the market and that prime yields may stabilise. (We expect equivalent yields, which take into account reversionary potential, may rise from 8.5% at the end of December 2008 to 9.4% at the end of December 2009). The main risk to the yield forecasts is that banks trigger a wave of forced sales onto the investment market. However, for the reasons discussed in our previous quarterly commentary (January 2009), on balance we believe that most banks will hold back any sales until the recovery builds momentum. This is because rental income should often cover interest payments. 7

8 The current weakening economic picture is being reflected in the UK property investment market. The level of property market voids has risen from 10.4% of income in December 2008 to 11.7% at the end of the first quarter (Source: IPD). Transactional activity also remains weak, reflecting in part the lack of liquidity in the system and the very limited funding available to debt-backed buyers. There is, however, some evidence that some parts of the market are beginning to revive. As well as some UK institutions and cash buyers, overseas investors have been buying encouraged by the depreciation of sterling versus the US dollar and euro, as well as the sharp correction in values. The latter have accounted for 1.5 billion worth of transactions so far in 2009 (Source: Property Data) representing 42% of all deals done. The main focus of activity has been narrow and focused on quasi-bond type properties let to blue chip tenants on long leases for lot sizes up to 50 million. There is evidence of yields hardening since Q for this type of asset. We may have seen the worst in the fall in UK property capital values and recovery may start to gather momentum in 2010 barring the UK economy going into a prolonged slump The current high level of property yields and the strong income protection afforded by many UK leases means that although open market rental values may fall, we consider we may already have seen the worst of the fall in capital values, especially for prime property. Capital values have now fallen by around 41% since the peak in the UK property market in June 2007 (source: IPD Monthly Index, March 2009). We may still see further falls in the short term as valuers and the property market indices catch up with actual investment market activity, which has typically been trading at discounts to valuations. Looking forward, however, we anticipate that as the impact of the major actions taken by UK and international governments to stimulate economic growth and kick start the credit markets become clearer, investor appetite for UK property should begin to broaden and activity pick up. This could ultimately result in a favourable downward shift in yields when sentiment improves. The fall in property yields following the end of the mid 1970s recession, and again after the early 1990s recession, provides interesting precedents, with investors receiving attractive returns before the occupational markets started to recover. The lesson learnt from these periods, also, is that it may pay to take early advantage of attractively valued UK property assets, rather than wait for a momentum of investment activity as recovery gathers pace. 8

9 31 March 2009 For professional investors only. Not suitable for retail clients. Activity and Strategy The main current focus of the Schroder Exempt Property Unit Trust s management strategy, as the UK recession deepens, is to protect and enhance the income stream where possible. There have been no significant changes to asset allocation or any significant rent reviews during the first quarter of 2009 to report. The management team are regularly engaging with occupiers and there are a number of ongoing initiatives with existing and prospective tenants to meet their specific needs. For example at the Fund s industrial estate in Crayford, Kent we are currently offering industrial units to let on flexible and all inclusive rental terms. There are good indications of tenant interest. This industrial estate investment currently has an equivalent yield of 7.5%. We are continuing to receive rent from the industrial distribution property at Greenford but the tenant, Entertainment UK (part of Woolworths), has gone into administration. Rental income is around 1.35 million per annum. We will seek to re-let this well located property on the M40 in due course but the UK recession is dampening tenant demand. The management team continues to seek to realise attractive longer term latent potential in the portfolio and position the Schroder Exempt Property Unit Trust to benefit from market recovery. For example they are working up a number of proposals for changes in use, refurbishments and potential development opportunities. We are submitting a proposal for a one million sq ft mixed use office, residential and industrial employment scheme on the Fund s 19 acre, well located, multi-let industrial estate site at Hackbridge in the London Borough of Sutton. This is adjacent to Hackbridge railway station with good services to central London. The estate is close to Junction 7 of the M23 and Junction 8 of the M25. In the meantime the investment benefits from an income yield at the end of March 2009 of 8.3%. A positive development is that the manager is now working closely with Croydon Council. They previously had opposed Schroders planning proposals for a 1.5 million sq ft office, residential and retail scheme on the Fund s 8.5 acre urban regeneration site by Croydon railway station. A preletting campaign is underway based on its attractive, relatively low cost location for offices, 15 minutes from Victoria in central London. 9

10 Portfolio Analysis Sector weightings including cash relative to benchmark (% GAV): 31 March 2009 There were no significant changes to the sector positioning over Q Standard Retail - South Eastern Standard Retail - Rest of UK Shopping Centres 18.8 Retail Warehouses SEPUT Offices - City Offices - West End & Mid Town Offices - Rest of South Eastern Benchmark Offices - Rest of UK Industrials - South Eastern Industrials - Rest of UK Other Property Listed Investments Cash Sector weightings at 31 March 2009 compared to the IPD UK Pooled Property Fund Indices All Balanced Funds Weighted Average. Data quoted to one decimal place and therefore subject to rounding. 10

11 Portfolio Construction Holding Sector % of NAV as at 31/3/2009 Target (%) Gearing (%) 1 Number of properties 2 Direct Portfolio Various sectors 57.7 > Joint Ownerships Various sectors West India Quay; Kimpton Industrial Estate (Sutton); Bracknell; Monks Cross Shopping Park (York) Indirect Strategies Hercules Unit Trust Fashion Parks Schroder Emerging Retail Property Unit Trust West End of London Property Unit Trust The Chiswick Park Unit Trust The Residential Property Unit Trust UNITE UK Student Accommodation Fund Henderson UK Retail Warehouse Fund Gresham Property Partners, LP Active Retail West End Offices Office Park Residential Lettings Student Accommodation Retail Warehousing Special Situations AH Medical Properties Plc GP Surgeries Total (Indirect Strategies) Total (all strategies) Source: Schroders, 31 March For the joint and indirect ownerships this represents the Trust s exposure to gearing 2 Number of properties for AH Medical Properties Plc, UNITE UK Student Accommodation Fund and Henderson UK Retail Warehouse Fund as at Q Data rounded to one decimal place and therefore subject to rounding. Lease Profile (assuming break options are exercised 1 ) 14.3% 5.1% 1.4% Less than 5 years 5-10 years years 19.2% 60.0% years More than 20 years 1 Source: Schroders, 31 March 2009; Calculated as a percentage of rent passing. Includes exposure to rent passing of all indirects. Data for the Henderson UK Retail Warehouse Fund, Unite UK Student Accommodation Fund and AH Medical Properties Plc as at Q Data rounded to one decimal place and therefore subject to rounding. 11

12 Top Ten Holdings Holding Sector % of Portfolio Value Bracknell Property Unit Trust Retail and Office 6.9 The Hercules Unit Trust Retail Warehouse 5.9 Schroder Emerging Retail Property Unit Trust Standard Retail Monks Cross Shopping Park, York Retail Warehouse 5.0 West End of London Property Unit Trust Office 4.8 Acorn Industrial Estate, Crayford Industrial 4.2 The Chiswick Park Unit Trust Office 4.1 Cardiff, Mermaid Quay Other 3.8 Matrix, Park Royal, London NW10 Industrial 3.8 Croydon Gateway site Office 3.6 Source: Schroders, 31 March Top Ten Tenants by Rent 1 Holding Net Rent Passing (%) British Telecommunications PLC 2.8 Exel Plc 2.7 Regus (UK) Limited 2.2 Lego Company Limited 1.7 TBWA UK Group Limited 1.7 Entertainment UK Boots The Chemist Plc 1.3 Sports World International Ltd 1.3 Marks & Spencer Plc 1.3 Arcadis AYH Plc 1.2 Source: Schroders, 31 March Includes exposure to the tenants/rent of all indirects excluding The Residential Property Unit Trust and UNITE UK Student Accommodation Fund. Data for the Henderson UK Retail Warehouse Fund and AH Medical Properties Plc are included one quarter in arrears due to data availability 2 In administration but continues to pay rent currently 12

13 Commentary on Performance Attribution Detailed performance attribution analysis for the Schroder Exempt Property Unit Trust for the year to 31 March 2009 is not yet available. However, early analysis indicates the direct portfolio may have outperformed the benchmark overall, whilst indirect third party holdings underperformed (in part due to gearing within some of the funds). Attribution for the year to 31 March 2009 will be available seven weeks following the quarter end. Over the twelve months to the 31 December 2008 the following were some of the main factors which influenced the Fund s relative returns (Source: Schroders/IPD Analysis, 31 December 2008) Sector allocation (structure) was slightly detrimental. The Fund was underweight City of London offices, overweight South Eastern industrials and alternatives which were beneficial. However this was offset by the overweight position in West End offices Asset allocation added to performance over 3 years Superior rental and income growth from the standing portfolio over the year was positive This reflected asset management initiatives and the focus of the standing portfolio on multi-let properties with occupier appeal The Fund s focus overall is on prime property. Prime property was written down more than secondary property (due to greater liquidity) There was a negative impact from an average of 15% gearing (all within indirect third party holdings) Development sites were significant detractors despite good locations, but we believe offer attractive longer term potential e.g. Croydon and Bracknell and two sites in the City of London Some geared indirect holdings were marked down significantly e.g. Hercules Property Unit Trust (fashion parks) and the West End of London Property Unit Trust (West End offices) These have provided access to larger lot sizes and distinct areas of the property market 13

14 Databank Fund Information 31 March 2009 Offer price per unit Mid price per unit Bid price per unit NAV per unit Distribution yield 1 5.4% Bid-offer spread 6.25% 1 Distributions paid in the twelve months to 31 March 2009 as a percentage of the 31 March 2009 net asset value per unit Property Portfolio 31 March 2009 Investment Property Databank 2 Net Asset Value (NAV) 1,022,462,647 n/a Gross Asset Value (GAV) 1,218,343,582 n/a Cash at bank 5,896,370 n/a Debt (on balance sheet as a % NAV) 0.5% n/a Debt (off balance sheet as a % NAV) 20.1% n/a Property value (including indirect investments) 1,024,955,673 n/a Net initial yield (direct portfolio) 1 7.3% 7.7% Equivalent yield (direct portfolio) 1 8.0% 9.2% Net reversionary yield (direct portfolio) 1 8.3% n/a Void rate (as a % of estimated rental value of direct portfolio only including developments) 1 Void rate (as a % of estimated rental value of total portfolio including developments) 3 Number of holdings (total portfolio) 55 n/a Number of tenants (total portfolio) n/a 1 Direct Portfolio includes the joint ownerships as defined on page 11 (Portfolio Construction) 2 IPD Monthly Index, March 2009, All Property. Voids shown are the rental value voids as a % of total rental value 3 Data for Henderson, AH Medical and UNITE as at Q Includes total exposure to all tenants excluding ResPUT and UNITE. Data for Henderson and AH Medical as at Q Unitholder Information 31 March 2009 Number of units in issue 34,728,720 Number of units redeemed over the quarter Nil Number of units issued over the quarter Nil Number of units matched over the quarter 89,691 Value of units matched over the quarter 2,522,003 Secondary Market Units in the Schroder Exempt Property Unit Trust are available to purchase on the secondary market. Information relating to units available on the secondary market can be obtained from Schroder Property Investment Management Limited which seeks to introduce unitholders to potential investors. Full details of the secondary market trades are available on the Fund website at Please contact Hanne Hooton or Lee O Neill for further information. Hanne Hooton hanne.hooton@schroders.com (Switchboard) (Direct Line) Lee O Neill Lee.oneill@schroders.com (Switchboard) (Direct Line) 14

15 Costs and fees Schroder Property Investment Management Limited s (SPrIM) management fee: SPrIM receives a Manager s fee of 0.30% per annum on the net asset value of the Trust SPrIM receives a Property Manager s fee of 0.40% per annum of the gross asset value of directly held property and capital cash only The Property Manager's fee is not charged on any holdings in indirect funds The total expense ratio was 1% as a percentage of net asset value (at 31 March 2009) based on methodology of the European Association for Investors in Non-listed Real Estate Vehicles (INREV) and the Association of Real Estate Funds (AREF) Indirect holdings The Property Manager does not receive a fee from the Trust on property held indirectly, unless specifically agreed by the Supervisory Board There are no fee rebates of fees charged in those funds, with the exception of the Schroder Emerging Retail Property Unit Trust All fees earned by Schroders relating to investment by the Trust in Schroder funds require Supervisory Board approval prior to investment Other Costs paid by the Trust Third party transactions costs Third party asset management fees such as those relating to rent reviews and lettings Other management expenses such as valuers, trustees and the Trust s Supervisory Board fees Treatment of fees 50% of Manager s and Property Manager s fees are capitalised and not deducted from income 15

16 Risk Warning Schroder Exempt Property Unit Trust (the Trust) is a collective investment scheme within the meaning of Section 235 of the Financial Services and Markets Act 2000 ( FSMA ). The Trust is not an authorised unit trust scheme, OEIC or recognised scheme within the meaning of the FSMA and therefore constitutes an unregulated collective investment scheme. As an unregulated collective investment scheme, the distribution and promotion of units are restricted, for the purposes of Sections 21 and 238 of the FSMA, to persons who are themselves authorised under the FSMA or who otherwise fall within the categories or exceptions made under Sections 21 and 238. Accordingly, this material is directed at market counterparties and authorised persons; intermediate customers; existing investors in this or a substantially similar fund; and existing clients and newly accepted clients of the Schroder Group where reasonable steps have been taken to ensure that investment in the Trust is suitable. This material should not be relied upon by persons of any other description. Investment in the Trust is only available to Exempt Funds. In general terms an Exempt Fund is a person wholly exempt from capital gains tax or corporation tax on capital gains. Investment will only be accepted following the completion of a Form of Authority for the Trust which contains certain warranties and indemnities provided by the potential investor, particularly regarding the exempt status of the investor and confirmation from HM Revenue & Customs that the potential investor is an Exempt Fund. Investors and potential investors should be aware that past performance is not a guide to future returns. No warranty is given, in whole or in part, regarding the performance of the Trust and there is no guarantee that the investment objectives of the Trust will be achieved. The price of units and the income from them may fluctuate upwards or downwards and cannot be guaranteed. Property-based pooled vehicles, such as the Trust, invest in real property, the value of which is generally a matter of a valuer's opinion. It may be difficult to deal in the units of the Trust or to sell them at a reasonable price because the underlying property may not be readily saleable, thus creating liquidity risk. There is no recognised market for units in the Trust and, as a result, reliable information about the value of units in the Trust or the extent of the risks to which they are exposed may not be readily available. Neither this document / presentation nor any other statement (oral or otherwise) made at any time in connection herewith constitutes an offer to sell or exchange units in the Trust or any other fund or product and is not soliciting an offer to buy or exchange and does not constitute an invitation to subscribe for, buy or exchange any units in the Trust or any other fund or product in any jurisdiction where the offer, sale or exchange is not permitted. Potential investors are advised to obtain and review independent professional advice and draw their own conclusions regarding the economic benefits and risks of investment in the Trust as well as the legal, regulatory, tax and accounting aspects in relation to their particular circumstances. Any investment in the Trust must be based solely on the prospectus, or any other document issued from time to time by the Manager of the Trust in accordance with applicable laws. The opinions, beliefs expectations or intentions, unless otherwise stated, are those of Schroder Property Investment Management Limited (SPrIM). All information and opinions contained in this document/presentation have been obtained from sources we consider to be reliable. No responsibility can be accepted for errors of fact or opinion. Reliance should not be placed on the views and information in this document/presentation when taking individual investment and/or strategic decisions. 16

17 A potential conflict with the Manager s duty to the unitholder may arise where a transaction is effected for the Trust in the units of another fund(s) managed by the same Manager or an Associate of the Manager. However the Manager will ensure that such transactions are effected on terms which are not materially less favourable than if the potential conflict had not existed. The forecasts included in this document/presentation should not be relied upon, are not guaranteed and are provided only as at the date of issue. Our forecasts are based on our own assumptions which may change. We accept no responsibility for any errors of fact or opinion and assume no obligation to provide you with any changes to our assumptions or forecasts. Forecasts and assumptions may be affected by external economic or other factors. This document/presentation is intended for the use of the addressee or recipient only and may not be reproduced, redistributed, passed on or published, in whole or in part, for any purpose, without the prior written consent of SPrIM. For the purposes of the Data Protection Act 1998, the data controller in respect of any personal data you supply is SPrIM. Personal information you supply may be processed for the purposes of investment administration by the Schroder Group which may include the transfer of data outside of the European Economic Area. SPrIM may also use such information for marketing activities unless you notify it otherwise in writing. Schroder Property Investment Management Limited 31 Gresham Street London EC2V 7QA Registered No England. Schroder Property Investment Management Limited is authorised and regulated by the Financial Services Authority. 17