For professional investors and advisers only
Schroder UK Property Fund
Short Form Report
For the Year Ended 31 March 2014
Schroder UK Property Fund
Short Form Report
Chenies Street, London WC1
SCHRODERS GROUP
Schroders is a global asset management company with
£268.0 billion under management at 31 March 2014.
Our clients include corporations, insurance companies,
public authorities, charities, pension funds, high net worth
individuals and retail investors.
Our aim is to apply specialist asset management skills
in serving the needs of our clients worldwide. With one
of the largest networks of offices of any dedicated asset
management company and over 300 portfolio managers and
analysts covering investment markets, we offer our clients a
comprehensive range of products and services.
SCHRODER PROPERTY
INVESTMENT MANAGEMENT
Schroders has managed property funds since 1971 and
had £11.0 billion under management at 31 March 2014.
Schroder Property Investment Management Limited is the
Investment Manager of the Schroder UK Property Fund.
Our property team operates from six offices across Europe.
We manage a broad range of open and closed ended
property funds offering investors exposure to both diversified
and sector focused portfolios.
Schroder UK Property Fund
Short Form Report
KEY INFORMATION
SUMMARY
The Schroder UK Property Fund (SPF or the Fund) is
Schroders’ flagship property fund launched in 1971.
It provides investors with diversified exposure to
£1.5 billion of UK commercial property and is managed
by our highly experienced property team.
SPF seeks to provide investors with a blend of income
and capital growth through investment in UK property.
Its aim is to return 0.5% per annum (net of fees) above its
benchmark1 over rolling three year periods. It is currently
outperforming over one, three and five years.
The Fund is available to a broad range of domestic and
international professional investors seeking to benefit
from Schroders’ expertise.
PERFORMANCE
Fund performance to 31 March 2014
12 month performance to 31 March
% Net of Fees
% Net of Fees
15
15
13.1
13.1
11.9
12
12
9
6
0.3
10.2
8.8
8.7
7.5
7.0
6.0
11.5
9
8.0
7.3
11.9
1.8
6.4
5.7
5.3
6
4.2
4.2
3
3
0
0
1.8
0.3
Schroder UK Property Fund
Source: Schroders/AREF/IPD UK Quarterly Property Fund Index, 31 March 2014
Past performance is not a guide to future returns.
1 Benchmark is the AREF/IPD UK Quarterly Property Fund Index – All Balanced Property Fund Index Weighted Average.
Benchmark 1
10
Benchmark 1
20
11
20
12
20
13
20
14
)
a.
p.
)
a.
p.
)
a.
p.
)
a.
p.
(%
(%
(%
(%
s
ar
s
s
ar
ar
ye
ye
ye
20
10
5
3
s
ar
ye
ar
ye
2
1
Schroder UK Property Fund
Schroder UK Property Fund
Short Form Report
REVIEW OF INVESTMENT
ACTIVITIES
In the twelve months to end March 2014, SPF outperformed its benchmark, All Balanced
Funds in the IPD UK Pooled Fund Indices, by 1.2%. It was also ahead of benchmark over
the last three and five years. The below diagram provides a summary of performance
attribution over the twelve months to March 2014.
Components of SPF’s property total return:
Trust Total Return
SPF:
Benchmark:
Relative:
Income Return
SPF:
Benchmark:
Relative:
6.0
5.9
0.1
Rental Value Growth
SPF:
Benchmark:
Relative:
2.3
1.3
1.0
Held
SPF:
1.4
Property Total Return
13.1
11.9
1.2
SPF:
Benchmark:
Relative:
Capital Growth
SPF:
Benchmark:
Relative:
8.4
6.7
1.7
14.8
13.0
1.8
Attribution Relative
Return:
Structure Score
SPF:
0.9
Attribution Relative
Return:
Property Score
SPF:
0.7
Yield Impact
SPF:
Benchmark:
Relative:
Purchased
SPF:
-0.7
7.8
6.8
1.0
Development
SPF:
-0.7
Sold
SPF:
1.4
Indirect
SPF:
0.4
Source: IPD, 31 March 2014. Numbers have been rounded to one decimal place.
Income: For some time now our strategy has been to improve SPF’s distribution yield.
Though this has been below the benchmark, the portfolio rotation over the last twelve
months – selling lower yielding ‘prime’ assets and rotating into higher yielding assets – has
been accretive to the fund’s income.
Rental Growth: Capital and rental growth have increased, reflecting improving investor and
occupational demand. This has been most evident in office and industrial assets in London
and the South East, reflecting the capital’s early recovery. In office space, Chiswell Street
and Appold Street have been notable beneficiaries along with Davidson House in Reading.
Fringe markets such as Old Street (Shepherdess Walk) have also been notable beneficiaries
as these become more core locations. In the industrial sector, Electra (London E14) and the
Arenson Centre in Dunstable have seen most growth.
Yield movement: SPF yields fell more than those in the benchmark as the fund has sold
some of its ‘prime’ South East exposure. Instead, as investors’ risk appetite increases, the
fund has benefitted from yield compression of more ‘secondary’ regional assets.
Schroder UK Property Fund
Short Form Report
Attribution of SPF’s property total return %
SPF benefitted from a positive score for both structure (sector allocations) and stock
selection (property). The positive structure score was down to our overweight position to
office and industrial assets and our underweight to retail. From a stock selection point of
view, top performers were Building 8, Chiswick Park and Dean Street where we crystallised
profit from past asset management activities. Our retail warehouse exposure through Monks
Cross, York underperformed the benchmark as did the developments at Bracknell and
Croydon which have lagged in the rising market but which we believe will be important to
future outperformance.
Property
Structure
2.5
2
1.5
1
0.5
0
Hartlebury Trading Estate, Worcestershire
All property
Other – Commercial
Industrials – Rest of UK
Industrials – South East
Offices – Rest of UK
Offices – South East
Offices – West End
Offices – City
Retail Warehouses
Shopping Centres
St Retails – Rest of UK
-1
St Retails – South East
-0.5
Schroder UK Property Fund
Short Form Report
KEY INFORMATION
Portfolio Profile
For the year to 31 March 2014, the Fund had two share classes: net and gross. These
classes have price parity and the summary information in the table below applies to both
class of shares.
As at/For the
year to
31 March 2014
As at/For the
period to
31 March 2013
Gross Asset Value (GAV)
£ 1,514.4m
£1,285.0m
Net Asset Value (NAV)
£1,489.5m
£1,228.0m
£34.68
£31.99
42,954,451.32
38,389,736.00
£1.575009
£1.278533
4.1%
4.0%
Financial Information
NAV per share
Number of shares in issue
Gross annual distribution per share
Distribution yield
Total NAV of scheme property
£1,432.7m
£1,153.9m
Highest price per share in the year
£34.68
£32.48
Lowest price per share in the year
£32.36
£31.99
2.8%
5.0%
Portfolio Details
Gearing (% NAV)
Average unexpired lease length
6.6 Years
7.1 Years
Void rate
7.3%
8.5%
Benchmark – void rate
7.3%
9.1%
Net initial yield
5.7%
5.6%
Reversionary yield
6.7%
6.8%
Annual Total Return
13.1%
1.8%
Benchmark Total Return
11.9%
0.3%
0.81%
0.86%
Performance
Fund Total Expense Ratio
Total Expense Ratio
Liquidity
Annual number of shares subscription
Annual value of subscriptions
Annual number of shares redeemed
Annual value of shares redeemed
Annual number of shares matched on the secondary market
Annual value of shares matched on the secondary market
4,564,724
203,772
£158,190,836
£6,856,246
0
0
£0
£0
5,105,510
3,334,793
£169,520,500
£100,604,373
Schroder UK Property Fund
Short Form Report
Battersea Studios, Battersea
Schroder
UK
Property
Fund
Schroder
UK
Property
Fund
Short
FormConsolidated
Report
Audited
Financial Statements 31 March 2013
PORTFOLIO STATEMENT
Direct Properties
Sector
Market Value
£’000 at
31 March 2014
Total Net
assets %
Market Value
£’000 at
31 March 2013
Total Net
assets %
157,675
10.6%
127,815
10.4%
287,089
19.3%
212,340
17.3%
Direct Properties up to £10m
Bristol – Maggs House
Standard Retail
Stanmore – Buckingham House, The Broadway
Standard Retail
Shipley – 20-40 Market Square
Standard Retail
Loughton – 195-200 High Road
Standard Retail
Woodley – 81-107 Crockhamwell Road
Standard Retail
London W1 – Dean Street
Standard Retail
London SW14 – 270-282 Upper Richmond Road,
East Sheen
Standard Retail
Dunfermline – Duloch Park District Centre
Standard Retail
Birmingham – 42-60 High Street, Harborne
Standard Retail
Enfield – 30-38 London Road
Standard Retail
Kingston Upon Thames – 167/181 Clarence Street
Standard Retail
Bracknell – Bracknell Beeches
South East Office
Reading – New Century Place
South East Office
Dunstable – Arenson Centre
Industrial
Dunstable – Chiltern Park
Industrial
Sutton – Kimpton Industrial Estate
Industrial
London UB6 – Greenford
Industrial
Sutton – Teesland Site B
Industrial
Birmingham – Deykin Avenue
Industrial
Livingston – Limefields, land site
Industrial
York – Alexandra Court, James Street
Industrial
London UB6 – Greenford, land site
Industrial
Cannock – Walkmill Lane, land site
Industrial
Livingston – Limefields, 2nd land site
Industrial
Ipswich – Asterbury Place
Other – care homes
Great Heath – Mildenhall
Other – care homes
Lowestoft – Roman Hill
Other – care homes
Haverhill – Chalkstone
Other – care homes
Framlingham – Mills Meadow
Other – care homes
Croydon – Car Park
Other – car park
Total Market Value up to £10m
Direct Properties between £10m and £25m
Loughton – 202-226 High Road
Standard Retail
Southsea – 2-42 Palmerston Road
Standard Retail
Exeter – 232–240 High Street
Standard Retail
Spalding – Retail Parks
Retail Warehouse
Colchester – Turner Rise
Retail Warehouse
Colchester – Hythe Riverside Park
Retail Warehouse
Chelmsford – Meadows Retail Park
Retail Warehouse
Ipswich – Interchange Retail Park
Retail Warehouse
Croydon – AMP House
South East Office
London EC3 – Lombard Street
Central London Office
London EC1 – 4-7 Chiswell Street
Central London Office
London WC2 – Craven House, 117-123 Kingsway
Central London Office
London – Jubilee House
Central London Office
London EC2 – 11/12 Appold Street
Central London Office
London WC2 – 53 Parker Street
Central London Office
Frimley – Albany Park
Industrial
Welwyn Garden City – Quadrant Park
Industrial
Chatham – Maritime
Total Market Value between £10m and £25m
Other – leisure
Industrial
Schroder UK Property Fund
Short Form
Report Financial Statements 31 March 2013
Audited
Consolidated
PORTFOLIO STATEMENT
Direct Properties
Sector
(continued)
Market Value
£’000 at
31 March 2014
Total Net
assets %
Market Value
£’000 at
31 March 2013
Total Net
assets %
614,075
41.2%
517,400
42.1%
Direct Properties between £25m and £50m
York – Monks Cross
Truro – Lemon Quay
Standard Retail
Standard Retail
Norwich – Hall Road Retail Park
Retail Warehouse
Reading – Davidson house
South East Office
London SE1 – Palace House
South East Office
Croydon – Gateway Site
South East Office
London W14 – Kensington Village
Central London Office
London – Battersea
Central London Office
London – Chenies St
Central London Office
London N1 – Shepherdess Walk
Central London Office
Manchester – Fujitsu, Central Park
Rest of UK Office
Cardiff – St William House
Rest of UK Office
London NW10, Matrix, Park Royal
Industrial
Wolverhampton, Steel Park
Industrial
London E16 – Electra, Canning Town
Industrial
Hackbridge – Felnex Trading Estate
Industrial
Woking – Woking Business Park
Industrial
Total Market Value between £25m and £50m
Direct Properties greater than £50m
Crayford – Acorn Industrial Estate
Hartlebury – Trading Estate
Cardiff – Mermaid Quay
Industrial
Industrial
Other – leisure
Total Market Value greater than £50m
Total Direct Properties
159,625
10.7%
60,675
4.9%
1,218,464
81.8%
918,230
74.8%
Joint Ventures
Motor Retail LP
Bracknell Regeneration Partnership
Bracknell – Eagle House
Sutton – Kimpton Industrial Estate
London E14 – West India Quay
Standard retail
27,791
1.9%
24,926
Retail
67,721
4.5%
63,796
1,536
Office
–
–
Industrial
–
–
1,378
Other – leisure
29,900
2.0%
29,000
125,412
8.4%
120,636
Total Joint Ventures
9.8%
Collective Investment Schemes
Hercules Unit Trust (HUT)
Retail Warehouse
–
–
27,804
Henderson UK Retail Warehouse Fund (HRWF)
Retail Warehouse
14,327
1.0%
13,634
West End of London Property Unit Trust (WELPUT)
Central London Office
49,873
3.3%
39,259
City of London Office Unit Trust (CLOUT)
Central London Office
238
0.1%
545
Austral House Unit Trust (AHUT)
Central London Office
–
–
294
Basinghall Street Unit Trust (BSUT)
Central London Office
–
–
84
Other – student
accommodation
18,424
1.2%
16,748
UNITE UK Student Accommodation Fund
Total Collective Investment Schemes
Portfolio of investments
Net other assets (including cash)
Net Assets
82,862
5.6%
98,368
8.0%
1,426,738
95.8%
1,137,234
92.6%
62,722
4.2%
90,810
7.4%
1,489,460
100.0%
1,228,044
100.0%
Schroder UK Property Fund
Short Form Report
INVESTMENT
OBJECTIVE &
POLICY
The investment objective of the Fund
is to carry on Property Investment
Business and to manage cash raised
from investors for investment in the
Property Investment Business, with the
intention of achieving a blend of income
and capital growth. The Fund’s target
return is to achieve 0.5 per cent per
annum (net of all fees and expenses)
above the benchmark over rolling
three year periods. The Fund will seek
to diversify risk by holding a mixed
portfolio of retail, office, industrial and
other property throughout the UK.
RISK PROFILE
(a)Market risk and valuations
of property
The exposure to market risk arising
from the prevailing general economic
conditions and market sentiment, may
affect the balance sheet and total return
of the Fund. Immovable property and
immovable property-related assets
are inherently difficult to value due to
the individual nature of each property.
As a result, valuations are subject to
uncertainty and are a matter of an
independent valuers’ opinion. There
is no assurance that the estimates
resulting from the valuation process will
reflect the actual sales price even where
a sale occurs shortly after the valuation
date.
Market risk is minimised through
holding a geographically diversified
portfolio that invests across various
property sectors. The Manager adheres
to the investment guidelines and
investment and borrowing powers
established in the Prospectus, scheme
particulars and in the rules governing
the operation of open ended investment
companies.
(b) Credit and liquidity risk
The Fund can be exposed to credit risk
arising from the possibility that another
party fails to fulfil its obligations and
liquidity risk surrounding its capacity to
meet its liabilities.
REPORT &
ACCOUNTS
This document is a short report for
the Schroder UK Property fund for the
year ended 31 March 2014. The long
form Report & Accounts for the fund
are available on our website www.
schroders.co.uk/spf or uponrequest to
the Investment Manager
Investments in immovable property are
relatively illiquid and more difficult to
realise than most equities or bonds. If
an asset cannot be liquidated in a timely
manner then it may be harder to attain
a reasonable price. The liquidity risk,
derived from the liability to shareholders,
Authorised Corporate Director
is minimised through holding cash
Schroder Unit Trusts Limited
which can meet the usual requirements
31 Gresham Street
of share redemptions.
London
The Investment Manager’s policy for
EC2V 7QA
managing this risk is to:
Investment Manager
1.Operate a strict share redemption
Schroder Property Investment
policy such that shareholders may
Management Limited
only serve notice to redeem at the
31 Gresham Street
end of each quarter.
London
EC2V 7QA
2.Raise sufficient cash resources
within
Schroder Unit Trusts Limited and
the Fund to finance a limited
Schroder Property Investment
number of redemptions.
Management are authorised and
regulated by the FCA.
3.Review the need for and maintain
as appropriate a borrowing facility.
KEY SERVICE
PROVIDERS
4.Reserve the right to defer payment
of redemptions.
(c)Currency risk
All financial assets and financial liabilities
of the Fund are in Sterling, thus the
Fund has no exposure to currency risk
at the balance sheet date.
(d) Interest rate risk
The Fund has the ability to access
debt facilities, but did not have any
debt facilities during the period. The
Fund held £80.9 million of consolidated
cash at the end of the period and this is
exposed to interest rate risk.
Schroder UK Property Fund
Short Form Report
London WC1, Chenies Street
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Issued in April 2013 by Schroder Investment Management Limited,
31 Gresham Street, London EC2V 7QA which is authorised and
regulated by the Financial Conduct Authority. w45710
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