TM Hearthstone UK Residential Feeder Fund (Retail)-Unbundled
Authorised Unit Trust Feeder- Retail (Unbundled) Fund Fact Sheet : 30 September 2013 The TM Hearthstone UK Residential Feeder Fund is the Authorised Unit Trust Feeder for UK's first FSA regulated residential Property Authorised Investment Fund (PAIF) This factsheet is for information only. It is not designed to provide advice on the suitability of an investment for your personal financial situation. If you have any questions regarding the information included in this factsheet, you are recommended to speak to a financial adviser.
Investment Objective The Fund invests in private rented sector housing across the mainland UK regions and aims to outperform the capital benchmark, LSL Acadametrics House Price Index, plus providing an additional income return. The property investment manager, Hearthstone Asset Management, uses quantitative asset allocation methods and qualitative regional stock selection to build a portfolio of assets reflecting the distribution of UK mainland housing stock. These properties are let under assured shorthold tenancy agreements and corporate lets. Investment returns comprise capital growth and rental income.
Fund Performance Daily Share Class Performance Since Inception (Cumulative)
102.0
Cumulative Performance Hearthstone UK Residential
101.0
UT Property Sector
103.0
100.0
Index
99.0
Discrete 12mth period Hearthstone UK Residential* UT Property Sector
98.0 97.0
1m 0.0%
3m 0.79%
6m
0.84%
1.22%
0.86%
-
1y -
3y -
5.26%
5y -
11.31%
6.70%
Launch to 36mth0m-12m* 12m-24m 24m-36m 48m-60m YTD 48mth 1.79% (0.27%) 5.26% 6.21% (0.43%) 11.37% (13.93%) *September 12-September 13, benchmark full 12mth period
96.0 95.0
Discrete calendar year Hearthstone UK Residential UT Property Sector
94.0
Hearthstone UK Residential
UT Property Sector
Source: FE
2012* 6.74%
2011 (2.48%)
2010 10.60%
2009 2008 2007 8.62% (30.12%) (14.60%)
*launch to 31st December, benchmark full year
Asset Class Performance 40.0%
Total Return by Asset Class
30.0%
50.0% 40.0%
20.0%
30.0% 10.0%
Index
20.0% 10.0%
0.0%
0.0%
Q4 2012 - Q4 2011
-10.0%
Q42011 - Q4 2010
Q42010 - Q4 2009
Q4 2009 - Q4 2008
Q4 2008 - Q4 2007
-10.0%
-20.0% -20.0%
-30.0% -40.0% 10-08 01-09 04-09 07-09 10-09 01-10 04-10 07-10 10-10 01-11 04-11 07-11 10-11 01-12 04-12 07-12 10-12 01-13 04-13 07-13 10-13
-30.0% -40.0%
LSL Acadametrics *
UK equities
Gilts
UK Equities
Gilts
Cash
Cash
LSL Acad + Income Source: FE, LSL Acadametrics and IPD
Source: FE, LSL Acadametrics, IPD Residential Income Return
Cumulative LSL Acadametrics * UK equities Gilts Cash
1m
3m
0.72% 0.57% 1.19% 0.05%
2.07% 3.60% 3.86% 0.12%
6m
2.94% 13.19% 2.10% 0.25%
1y
6.95% 16.53% 6.22% 0.65%
3y
16.88% 29.11% 29.03% 2.39%
5y
Discrete
Q42012Q42011
Q42011Q42010
Q42010Q42009
Q42009Q42008
29.7% 27.58% 47.09% 7.65%
LSL Acadametrics * UK equities Gilts Cash
5.7% 10.19% 2.90% 0.84%
8.4% (1.83%) 16.64% 0.87%
1.5% 12.18% 7.62% 0.70%
14.0% (7.6%) 27.59% (28.48%) (0.70%) 12.38% 1.22% 5.65%
Q4 2008142007
* includes IPD Residential Index income return
Fund Risk Profile
Detailed Fund Information Fund Name: Sector: Fund launch date: Unit launch date: Underlying FUM Primary asset class: Structure: Price Bid Price @ 30 September 2013 Offer Price @ 30 September 2013
TM Hearthstone UK Residential Feeder Fund (Retail)-Unbundled IMA Property 24 July 2012 29 April 2013 GBP 28,026,163 UK Residential Property Authorised Unit Trust GBX 102.20 GBX 105.60
0
Awarded a DT3 rating by the independent risk rating company Distribution Technology.
TM Hearthstone UK Residential Feeder Fund (Retail)-Unbundled Fund Fact sheet: 30th September 2013 Asset 30.9.13
Asset Allocation %
Target
Target Holdings
Current Holdings
85% 10% 5%
84.6% 7.7% 7.8%
Physical Property Cash Liquid Instruments
85.00%
% Current
10.00%
84.55%
75%
5.00%
7.68%
80%
85%
Property
.
7.76%
90%
Uninvested Cash (£)
95%
100%
Shares /Liquid Instruments (£)
The fund currently has a 84.6% allocation to physical property with a target of 85%.
Property Portfolio Regional Weightings Deviation from LSL Regional Weightings -0.05
0
0.05
0.1
0.15
0.2
North West
Fund
LSL %
Deviation
North
3.6%
7.2%
-3.5%
0.8%
Yorkshire & Humber
South East South West Wales Scotland East Anglia
East Midlands West Midlands
London
3.1%
-2.3%
4.0%
5.9%
-1.9%
23.2%
25.7%
-2.5%
10.8%
9.8%
1.0%
0.9%
3.2%
-2.3%
5.9%
7.3%
-1.4%
1.6%
3.7%
-2.1%
5.9%
5.6%
5.1%
6.3%
-1.2%
38.2%
22.2%
16.0%
The regional weightings of the portfolio are shown in the chart alongside the regional allocations of property by the LSL Acadametric Index. The regions where the portfolio is overweight against the index are London, the East Midlands & the South West. 38.1% of the portfolio is located in London, mainly in Wembley. 23.1% of the portfolio is situated in the South East in locations including Milton Keynes, Bedford and Sittingbourne.
0.3%
Property Type Breakdown
Potential Gross Yield 0.08
Property Type
0.07 0.06 0.05
23.51%
24.43%
Detached Semi Detached
6.18%
0.04 0.03
Flat
0.02
Terraced
0.01 0
47.46%
North West
North
Yorkshire & South East Humber
South West
Wales
Scotland
East Anglia
East Midlands
West Midlands
London
Since the launch of the fund over £23.3million of property has been acquired. The property acquired has been from housebuilders & developers and the initial properties acquired from July 2012 to February 2013 were on an inspecie basis in exchange for units in the fund. The housebuilders have simultaneously entered into agreements to lease back the properties and pay a rent/fee on a full repairing and insuring basis. Since March 2013 the fund has acquired 20 new build properties with vacant possession from 3 different housebuilders to be rented out on standard AST tenancy agreements. The length of tenancy varies across the portfolio but the average is 15.3 months to expiry. The type of property acquired is based on the Land Registry Property categories of; Detached, Semi Detached, Flats & Terraced property. The gross rental yield of the Fund property portfolio as at 30th September is 5.9%.
Portfolio Regional Breakdown by Investment Value & Rental Income Portfolio as a % of Value by Region 3.64% 0.76%
4.14%
Potential Gross Rental Income as a % by Region North West
4.15%
0.86%
North West
3.92%
North
North
Yorkshire & Humber
38.23%
23.07%
Yorkshire & Humber
35.23%
South East
25.14%
South West
South West
Wales
10.79% 5.07%
Wales
Scotland
5.88%
Scotland
5.66%
East Anglia
5.92%
11.65% 6.12%
4.60%
East Midlands
West Midlands
London
0.87%
1.68%
0.99%
Portfolio Tenancy Types Tenancy Type
Property Tenure
4.50%
RENT LOST AS A %
8.0% 7.0%
6.0% 5.0% 22.52%
4.0%
42.34% 57.66%
72.97%
3.0% 2.0% 1.0% 0.0%
AST
London
Portfolio Characteristics 9.0%
Licence/Leaseback
East Anglia East Midlands
West Midlands
1.63%
South East
vacant
Freehold
Leasehold
01/13
02/13
03/13
04/13
% of Rent lost Due to Voids
05/13
06/13
07/13
08/13
09/13
Average length of tenancy Average rent (p.a.)
15.3 £12,699
Average value of property Number of properties
£213,482 111
Vacancy rate (income) Gross Yield
2.7%
Max Target Void rate
The portfolio currently has 111 properties. 85 of these are currently let on Licence and Leaseback agreements to housebuilders and developers and 21 properties are let on AST agreements. There are 5 properties that are currently vacant at the end of September equating to a 4.5% void rate on a unit basis and 2.7% in terms of rental income at 30th September. Of the 5 vacant properties , 4 have been reserved for letting and 1 continues to be marketed. 1 further notice has been received to terminate a showhome licence on the 30th December 2013.
6%
TM Hearthstone UK Residential Feeder Fund (Retail)-Unbundled Fund Fact sheet: 30th September 2013 0.04
Property Portfolio Performance Property Gross- Net Yield Adjustment
8.00%
VP vs Acadametrics Month on Month Movement
0.035 0.03 0.025
7.00% 6.00%
0.02
5.00%
0.015
4.00%
0.01
3.00%
0.005
2.00%
0
1.00%
-0.005
0.00% Jul 12 Aug 12 Sep 12 Oct 12 Nov 12 Dec 12 Jan 13 Feb 13 Mar 13 Apr 13 May 13 Jun 13 Jul 13 Aug 13 Sep 13
Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13
-0.01 Cumulative VP Growth
Cumulative Acadametrics
Cumulative IV
*The gross yield GROSS is based on daily income voids, rather IPD thanBenchmark Gross Potential rent.return @ 31.12.12 YIELD* Netdemanded, Yield ( afteradjusted property for costs) Net Income
The gross yield adjusted for voids at 30th September is 5.9%. After all property related costs the net yield is currently 5.0%, comparing favourably to the current IPD Residential Property yield of 2.8%. The property portfolio is valued by the Standing Independent Valuer on a monthly basis and this month the portfolio decreased by 0.28% in terms of Investment Value "IV" due to movements in the portfolio with showhomes becoming vacant, then relet on AST tenancy agreements. Since launch, this brings the change in IV to 1.27% increase and on a Vacant Possession basis "VP" to 3% increase compared to 3.8% annual house price movement reported by LSL Acadametrics in September 2013 since launch of the fund.
Property Investment Advisor Fund Update In the near term the Fund will be targeting an increase in the largest underweight regions of the South East and North West such that the overall portfolio more closely reflects the Acadametrics regional weightings and to continue to allocate fund subscriptions to property. We continue to receive notice of vacation on the housebuilder showhomes for Q3. At the end of the licence period the properties will be relet on AST tenancies by Touchstone, the Fund Property Manager.
Portfolio Activity Acquisitions & Disposals We are continuing to review further strategic acquisitions from various sources. No property acquisitions or disposals were made in September.
Property Market Outlook According to LSL, September 2013 recorded a monthly increase of 0.5% in the average price paid for a house, with the average house price now £235,534. The average house price has increased this month by £1,127. LSL report that with banks easing criteria on mortgages, new buyers have increased with first time buyers returning to the market. First time buyers though are still short of the historic level. On an annual basis house prices have increased by 3.8% since September 2012, compared to the RPI Index of 3.3% for August 2012 therefore in real terms house prices have increasd by 0.5% over the year. Regionally, potential buyers in northern regions are still struggling to obtain a mortgage to get on the housing ladder, whereas in the south east the market has more equity rich buyers with London a target for property investors. Help to Buy schemes are making the market more accessible to many, with the whole country able to benefit from the scheme, in the South it is required as house prices are high, in the north, prices are lower but so are income and salary growth. Regionally the South East has now joined London and set a record new record house price of £278,620. In terms of recovery in prices the establised pattern of the ripple effect out from London appears to be evident with recovery in Greater London and the South East and East Anglia likely to be next. Wales is the only region where prices continue to fall on an annual basis. Housing transactions in July and August exceeded 70,000 transactions, the first time since November/December 2007 that sales over two consective months have exceeded this level. LSL estimate that 2013 sales show an increase of 12% over the number of properties sold in 2012. In their most current release of their Buy to Let Index (September 2013) LSL Property Services reported a 0.7% monthly increase in the average rent in the UK in August 2013, with the average monthly rent being £743 per month, and average gross yields holding at 5.3%. On an annual basis, this leaves rental levels 1.3% higher than a year ago, and only £1 behind the record high set in October 2012. Regional variations in rental level growth remain with London recording 4.8% growth, Wales reporting 2.3% growth over 12 months, however Yorkshire & the North West regions reported rental level falls over the last year of 1.6% and 1.5% respectively.
Additional Fund Information Investment and Charges Initial Charge Annual Charge Minimum Initial Investment Minimum Additional Investment Monthly Investment
Prospectus ^ Currently discounted to 0.00% n/a 1.00% 1.00% GBP 1,000 GBP 1,000 GBP 500
GBP 500
GBP 50
GBP 50
Dates Distribution pay dates: Income / Accumulation: Subscription Frequency Pricing Frequency
Annual: 31/10 Interim: 28/2, 31/5, 30/11 Accumulation Daily Daily
Redemption Frequency
Daily
Fund codes Authorised Unit Trust Feeder- Retail (Unbundled) Sedol: ISIN: Citicode: B95V2K4 GB00B95V2K41 I3HN
^ Minimums may not apply when applying through a Platform
Additional Expenses Annual Management Charge: 1.00% Ongoing Charges 1.98% * figure is based on estimated annual expenses. This may vary year to year Platform availability Nucleus, 7iM Nominees, AJ Bell, TD Waterhouse, Aviva, Axa Elevate, Aegon, Co Funds.Instit, Co.Funds Retail Currently
MEXID: 8TRESD
Management & administration Fund manager: Hearthstone - David Gibbins ACD: Thesis Unit Trust Management Administrator: Northern Trust Depository: Natwest TDS UK Legal Advisor: Eversheds Independent Valuer: Jones Lang LaSalle / DTZ
available:
Contacts Property Investment Adviser: Hearthstone Asset Management Plc Martin House 5 Martin Lane, London EC4R 0DP, Tel: 0203 301 1300
Investment Adviser Thesis Unit Trust Management Limited Exchange Building, St Johns Street, Chichester, West Sussex, PO19 1UP Tel: 01243 531234 (Authorised and regulated by The Financial Conduct Authority)
Auditor: Grant Thornton UK LLP Depositary: National Westminster Bank plc
Important information You may get back less than the amount invested. Information on past performance is not necessarily a guide to future performance. The value of investments in the fund can go down, and there can be no assurance that any appreciation in the value of investments will occur. Residential property values are affected by factors such as interest rates, economic growth, fluctuations in property yields and tenant default. Property investments are relatively illiquid compared to bonds and equities, and can take a significant amount of time to trade. Hearthstone Investments PLC is the parent company of the Hearthstone Investments Group. Regulated business is carried out by Hearthstone Asset Management Limited. Hearthstone Asset Management Limited is an appointed representative of Thesis Asset Management PLC which is authorised and regulated by the Financial Conduct Authority (114354). Hearthstone Investments PLC (06379066) and Hearthstone Asset Management Limited (07458920) are both registered in England and Wales. The registered office for both companies is Martin House, 5 Martin Lane, London EC4R 0DP.