For professional investors and advisers only
Schroder UK Property Fund
Report and Audited Consolidated
Financial Statements
For the Year Ended 31 March 2014
Schroder UK Property Fund
Report for the Year Ended 31 March 2014
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
Report for the Year Ended 31 March 2014
CONTENTS
03
07
Key Information Summary*
F
und Manager’s Report*
Market Overview
Performance Analysis
Investment Strategy
Review of Portfolio Activity
24
R
eport of the Authorised Corporate Director and statement of
responsibilities*
25
26
28
30
32
34
34
35
35
36
46
50
Investment Manager’s Statement of Responsibility
Independent Property Valuers’ Reports
Depositary’s Report and Statement of Responsibilities
Portfolio Statement*
Independent Auditors’ Report
Statement of Total Return
Statement of Change in Net Assets Attributable to Shareholders
Balance Sheet
Cash Flow Statement
Notes to the Financial Statements
Unaudited General Information
Key Service Providers*
*Collectively these comprise the Authorised Corporate Director’s Report
1
Schroder UK Property Fund
2
Report for the Year Ended 31 March 2014
Battersea Studios, Battersea
Schroder UK Property Fund
3
Report for the Year Ended 31 March 2014
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.
1Benchmark 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
4
Report for the Year Ended 31 March 2014
KEY INFORMATION SUMMARY
(continued)
A PORTFOLIO DIVERSIFIED ACROSS THE UK 1
Retail – 28.4% GAV
Offices – 35.0% GAV
Industrial – 23.1% GAV
Other property and cash – 13.6% GAV
Scotland
North East
Greattte London
Greater
Yorkshire and
mbersi
Humberside
North
st
West
West Midlands
East
M
s
Midlands
East Anglia
Wales
South West
South Eastt
1Map shows location of assets, both directly owned and those invested in via collective investment schemes. Marker is not
proportionate to asset values. GAV: gross asset value.
Schroder UK Property Fund
5
Report for the Year Ended 31 March 2014
Diversified tenant base
Diversified sector and regional allocation
Tenant profile % (contracted rent)1
Segment % GAV1
Tata Steel UK Ltd
3.8%
Standard Retail – South East
6.8%
Fujitsu Services Limited
3.1%
Standard Retail – Rest of UK
6.3%
Lloyds TSB Bank Plc
3.0%
Shopping Centres
1.4%
Universal Music Operations Ltd
2.3%
Retail Warehouses
13.8%
Regus Ltd
2.3%
Offices – Central London
16.5%
B&Q Plc
2.0%
Offices – South East
13.6%
Pendragon Property Holdings Ltd
1.8%
Offices – Rest of UK
4.9%
Sungard Availability Services (Uk) Ltd 1.5%
Industrial – South East
16.5%
Marks & Spencer Plc
1.4%
Industrial – Rest of UK
6.6%
Homebase Ltd
1.3%
Other
9.7%
77.5%
Cash
3.9%
866 other tenants 1
High quality and diversified assets
Top 10 largest holdings
Holding
Bracknell Regeneration Partnership
2
Crayford, Acorn Industrial Estate
Hartlebury, Trading Estate
Sector
NAV %
Retail and Office
4.5%
Industrial
3.7%
Industrial
3.7%
Other: Leisure
3.4%
West End of London Property Unit Trust (WELPUT)3
Offices
3.3%
London W14, Kensington Village
Offices
3.3%
Reading, Davidson house
Offices
3.3%
Industrial
3.3%
York, Monks Cross
Retail Warehouse
3.0%
Truro, Lemon Quay
Standard Retail
2.7%
N/A
65.8%
Cardiff, Mermaid Quay
London NW10, Matrix Park Royal
Other assets and cash
1 Look through analysis
2 50:50 joint venture with Legal & General
3 Schroder in house fund
Data subject to rounding.
Source: Schroders, IPD, 31 March 2014
6
Schroder UK Property Fund
Report for the Year Ended 31 March 2014
KEY INFORMATION SUMMARY
(continued)
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
Report for the Year Ended 31 March 2014
FUND MANAGER’S
REPORT
James Lass
Fund Manager
SPF’s performance track record in recent years is evidence of
an investment process which is capable of adapting to changing
circumstances. During the past year we have recycled capital
from prime assets to good quality secondary as evidence of an
improving economy fed through to increased occupier demand.
This should enable us to increase portfolio income and benefit
from capital appreciation as yields fall. One area where we do not
compromise is on the fundamentals of our property investments
which should remain relevant and appealing to tenants. Investor
demand may affect property pricing in the short term, but good
occupational demand provides the bedrock of a growing stream
of rental income which underpins property valuations over the
long term.
Investor demand for SPF picked up strongly from the second half
of 2013, since when we have seen the benefit of its conversion
to a Property Authorised Investment Fund. We are pleased to
welcome insurance companies, private wealth managers and
international investors to our shareholder register alongside
longstanding UK pension fund and charity clients.
The prospects for the year ahead look encouraging. Prospective
market returns look more attractive than for many years, and
the Investment Property Forum is forecasting annualised returns
of 8.2% pa over the next five years. Meanwhile SPF has a well
balanced portfolio that is designed to provide a good balance of
income and capital growth opportunities.
7
Schroder UK Property Fund
8
Report for the Year Ended 31 March 2014
FUND MANAGER’S REPORT
(continued)
MARKET OVERVIEW
Over the last year the recovery in the UK economy has gathered pace. A period that started
with fears of a triple dip recession, ended with growing signs that a more entrenched
economic recovery has taken hold. Employment continues to strengthen, business surveys
remain positive and a resurging housing market is boosting consumer confidence.
Despite the improvement in the economic outlook, the Monetary Policy Committee (MPC)
has been at pains to talk down the prospect of a short term rise in interest rates. One of the
first actions of the new Governor of the Bank of England, Mark Carney, was to introduce
‘forward guidance’, looking firstly at employment but more recently at wider measures, to
dampen expectations of imminent rate rises.
Investment Market
The revival in the UK commercial property investment market has led to rising valuations.
Where in the early stages of the recovery there was a narrow focus towards core income
producing assets with long leases; over the last 6 months this trend has reversed with a
notable strengthening in demand for higher-yielding assets. This is starting to be reflected in
valuations, with CBRE reporting that the prime/secondary yield gap narrowed from 5.9% to
5.6% between September 2013 and March 2014.
Matrix Park, Park Royal, London
International capital continues to dominate some markets, with foreign investors accounting
for around 75% of all London transactions in the first quarter of 2014. In particular, cash
from Asia and the Middle East is being placed in London because of its perceived status as
a safe haven. Whilst the London recovery is at a more advanced stage, with capital values
now around 17% below their peak, capital values in the rest of the UK still remain 35%
below 2007 levels (source: IPD, March 2014). Amongst domestic investors, allocations to
real estate are increasing with the ‘search for yield’. An income return of around 6% looks
attractive when compared to the pricing of other financial assets.
Schroder UK Property Fund
Report for the Year Ended 31 March 2014
Occupational Market
The UK economy continues to improve. Unemployment at below 7% is the lowest level for 5
years. In the property market we are seeing the impact of this with tenants becoming more
confident about committing to new space which is supporting values and putting upward
pressure on rents.
London has led the revival, not just in traditional core markets of the City and West End but
also in fringe markets such as Farringdon, Holborn and Shoreditch as Technology, Media
and Telecommunications (TMT) as well as business service companies have led the demand.
Recent evidence indicates that regional markets are now seeing improved occupier demand,
particularly those towns and cities with differentiated industries, constrained supply and a
good match between skilled jobs and an appropriately qualified staff base.
Take up in the industrial and logistics market has improved over the last year as retailers reorganise supply chains to meet the demands of online retailing. We are seeing increasing
evidence of logistics operators taking space on the edge of city centres to service them
directly and to provide next day (and sometimes same day) delivery. With very little recent
development this has led to a sharp fall in the vacancy rate, particularly in London and the
South-East where available space is already limited.
Regional office markets have been subdued since the onset of the financial crisis in 2007,
although we are now seeing signs of a nascent recovery. According to research by GVA
Grimley, in 2013, the ‘big 9’ regional office markets recorded the highest level of annual office
take-up for five years. A lack of new development means some markets are suffering from a
shortage of Grade A supply and this is putting upward pressure on rents.
Occupational demand in high streets and shopping centres remains relatively subdued
although we have seen positive trends in consumer expenditure elsewhere. According to the
Society of Motor Manufacturers and Traders, UK car sales in 2013 recorded their best year
since 2007. Convenience retailers are also performing strongly, as consumers are taking a
‘little and often’ approach to their grocery shopping as lifestyles change.
Market Outlook
Looking forward to 2014, Schroders anticipates that the UK economy will record the
strongest rate of growth since 2007. In these circumstances, we expect returns of 8-10%
pa over the next three years, based upon income returns of 5-6% and rising rents across
commercial property sectors. The risks in the short-term are now firmly skewed to the
upside and given the momentum in the investment market there is a possibility that we
may see yields fall more than originally forecast in 2014 and 2015. Whilst this would boost
performance in the short-term, returns could be more moderate from 2016. London is
expected to continue to record the strongest rental growth in 2014, although we believe
higher yielding assets in the regions are well positioned to deliver good returns over the next
three to five years.
9
10
Schroder UK Property Fund
Report for the Year Ended 31 March 2014
FUND MANAGER’S REPORT
(continued)
PERFORMANCE ANALYSIS
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:
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
SPF:
Benchmark:
Relative:
13.1
11.9
1.2
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
11
Report for the Year Ended 31 March 2014
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
12
Schroder UK Property Fund
Report for the Year Ended 31 March 2014
FUND MANAGER’S REPORT
(continued)
REVIEW OF PORTFOLIO ACTIVITY
The role of asset management
Careful stock selection is not just about the investments we buy, but as much about the
investments we choose to hold in the portfolio. Every investment is held for its ability to
contribute to the overall strategy and objective of the Fund, be that income, to capture rental
growth or to be able to add value through active asset management at some stage through
the performance cycle. SPF is a core fund, but our strategy does not preclude active asset
management from being central to our investment approach. We drive performance through
a highly focused approach to the delivery of annual business plans which form the basis of
performance objectives for each investment manager.
Such a strategy has been key to driving the outperformance we have achieved over the
last five years. This has involved both refurbishment and development as an important (but
measured) part of the Fund’s strategy. Looking forward, a key feature of the SPF portfolio is
the ability to continue to invest to create “tomorrow’s core” investments. At a time when the
investment market rally suggests increased competition, and therefore pricing risk, the ability
to invest equity into opportunities such as the care home portfolio, Bracknell and evolving
opportunities in Croydon, gives SPF a competitive edge.
Tactical sector allocations as at 31 March 2014
Sector weightings relative to benchmark1
% gross asset value
Underweight
0.1%
Standard Retail – South East
-0.9%
Standard Retail – Rest of UK
Shopping Centres
Retail Warehouses
Overweight
-3.9%
-4.5%
2.8%
Offices – City
0.2%
Offices – West End
4.5%
Offices – South East
-0.3%
Offices – Rest of UK
-5.0%
Industrials – South East
-1.1%
Industrials – Rest of UK
0.9%
Other
Cash
1
-2.9%
Benchmark is the AREF/IPD UK Quarterly Property Fund Index – All Balanced Property Fund Index Weighted Average.
Schroder UK Property Fund
13
Report for the Year Ended 31 March 2014
Purchases and Sales
During the year ended 31 March 2014
Purchases
London SW8, Battersea Studios
London WC1, Chenies St
Truro, Lemon Quay
Wolverhampton, Steelpark
Worcestershire, Hartlebury Trading Estate
Sector
Holding
Lot size
South East Office
Direct
Between £25m and £50m
Central London Office
Direct
Between £25m and £50m
Standard Retail
Direct
Between £25m and £50m
Industrial
Direct
Between £25m and £50m
Industrial
Direct
Between £25m and £50m
Other – leisure
Direct
Between £10m and £25m
Chelmsford, Meadows Retail Park
Retail Warehouse
Direct
Between £10m and £25m
London E14, Jubilee House
South East Office
Direct
Between £10m and £25m
Chatham Maritime, Chatham
Spalding Retail Parks, Spalding
Retail Warehouse
Direct
Between £10m and £25m
Framlingham, Mills Meadow
Other – care home
Direct
Under £10m
Haverhill, Chalkstone
Other – care home
Direct
Under £10m
Ipswich, Asterbury Place
Other – care home
Direct
Under £10m
Standard Retail
Direct
Under £10m
Lowestoft, Roman Hill
Other – care home
Direct
Under £10m
Mildenhall, Great Heath
Other – care home
Direct
Under £10m
Industrial
JV
Under £10m
Sector
Holding
Lot size
Loughton, Centric Parade
Sutton, Kimpton Industrial Estate
Sales
London W4, Building 8 Chiswick Park
South East Office
Direct
Over £50m
Hercules Unit Trust
Retail Warehouse
Indirect
Between £25m and £50m
London W1, 81 Dean Street
Central London Office
Direct
Between £10m and £25m
London W1, 82 Dean Street
Central London Office
Direct
Between £10m and £25m
South East Offices
Direct
Under £10m
Other
Direct
Under £10m
Cranford, Europa House
Hartlepool, Jacksons Landing
Portfolio Turnover Ratio (PTR)
The AREF Code of Practice requires the publication of the PTR which indicates how much
of the turnover of the portfolio has been driven by investment in and withdrawals from the
Fund. For the 12 month period to 31 March 2014 the PTR is 27%.
Schroder UK Property Fund
14
Report for the Year Ended 31 March 2014
Lemon Quay, Truro
Schroder UK Property Fund
Report for the Year Ended 31 March 2014
15
16
Schroder UK Property Fund
Report for the Year Ended 31 March 2014
FUND MANAGER’S REPORT
(continued)
RETAIL
SPF’s overweight/underweight retail positions relative to benchmark
2013
2014
25
20.5
20
18.3
16.3
13.8
15
10
6.7
6.4
5
7.4
6.0
6.8
6.3
7.2
5.3
3.7
1.6
0
6.8
SPF
1.4
Benchmark
SPF
Standard Retail – South East
Shopping Centres
Standard Retail – Rest of UK
Retail Warehouses
Benchmark
Source: IPD UK PFI Indices
Today’s shoppers have increasingly different expectations regarding product, service, value
and experience of what and how they buy. In what is now a multi-channel environment, the
increasing prominence of virtual spending calls into question the value and role of traditional
stores. This trend has seen high streets under pressure for some years, but our view is that
the high street is not dead. We are a nation of consumers but how and what we spend
disposable income on is changing. Shoppers are increasingly gravitating to larger schemes,
convenience locations and online.
Within retail we continue to hold a structural underweight position although we see
significant differentiation in performance and outlook between towns and between asset
types. We favour schemes in convenient locations, with ample parking and large or affluent
catchments. Recent acquisitions in Truro, Spalding and Chelmsford are in line with this
strategy and offer attractive yields, affordable rents and strong trading performance.
Lemon Quay: Truro is one of Cornwall’s primary retail destinations – supported by strong
tourist trade and a lack of big city competition. This in-town scheme provides retailers with a
large prospective catchment area as well as affordable rents while for consumers it provides
a convenient destination with one of the town’s main car parks. It hosts the town’s two main
anchors, Marks and Spencer and Debenhams who both trade well. It was acquired on a net
initial yield of 6.7% and the business plan for the asset includes regearing leases, attracting
new fashion retailers to the site and reconfiguring certain store layouts.
Schroder UK Property Fund
17
Report for the Year Ended 31 March 2014
Meadows Retail Park in Chelmsford acquired in Q1 2014 for a net initial yield of 6.0%, is
a scheme similarly suited to retailers’ and consumers’ current and future needs. The park is
conveniently located on the edge of the town centre and benefits from a large car park. Units
are well configured and flexible, tenant demand is strong and current incumbents trade well.
The Maplin store is in the top 10% of the company’s portfolio with performance driven, in
large part, by click and collect shopping.
Our sale of the Hercules Unit Trust reflects our strategy of reducing exposure to
indirect investments.
Retail Portfolio at 31 March 2014
Holding
Sector
Lot Size
JV
Shopping Centre and
Over £50m
Norwich, Hall Road Retail Park
Direct
Retail Warehouse
Between £25 and £50m
Truro, Lemon Quay
Direct
Standard Retail
Between £25 and £50m
York, Monks Cross
JV
Retail Warehouse
Between £25 and £50m
Chelmsford, Meadows Retail Park
Direct
Retail Warehouse
Between £10m and £25m
Colchester, Hythe Riverside Park
Direct
Retail Warehouse
Between £10m and £25m
Colchester, Turner Rise
Direct
Retail Warehouse
Between £10m and £25m
Exeter, 232-240 High Street
Direct
Standard Retail
Between £10m and £25m
Frimley, Albany Park
Direct
Retail Warehouse
Between £10m and £25m
Bracknell Regeneration Partnership
Standard Retail
Henderson UK Retail Warehouse Fund (HRWF)
Indirect
Retail Warehouse
Between £10m and £25m
Ipswich, Interchange Retail Park
Direct
Retail Warehouse
Between £10m and £25m
Loughton, 202-226 High Road
Direct
Standard Retail
Between £10m and £25m
JV
(Other) – Standard Retail
Between £10m and £25m
Motor Retail LP
Southsea, 2-42 Palmerston Road
Direct
Standard Retail
Between £10m and £25m
Spalding Retail Parks
Direct
Retail Warehouse
Between £10m and £25m
Bristol, Maggs House
Direct
Standard Retail
Between £5m and £10m
Kingston Upon Thames, 167/181 Clarence Street
Direct
Standard Retail
Between £5m and £10m
London W1, St. Anne's Court, Dean Street
Direct
Standard Retail
Between £5m and £10m
Loughton, 195-200 High Road
Direct
Standard Retail
Between £5m and £10m
Shipley, 20-40 Market Square
Direct
Standard Retail
Between £5m and £10m
Stanmore, Buckingham House, The Broadway
Direct
Standard Retail
Between £5m and £10m
Woodley, 81-107 Crockhamwell Road
Direct
Standard Retail
Between £5m and £10m
Birmingham, 42-60 High Street, Harborne
Direct
Standard Retail
Under £5m
Dunfermline, Duloch Park District Centre
Direct
Standard Retail
Under £5m
Enfield, 30-38 London Road
Direct
Standard Retail
Under £5m
London SW14, 270-282 Upper Richmond Road, East Sheen
Direct
Standard Retail
Under £5m
18
Schroder UK Property Fund
Report for the Year Ended 31 March 2014
FUND MANAGER’S REPORT
(continued)
OFFICE
SPF’s overweight/underweight office positions relative to benchmark
2013
2014
20
16.5
16.5
16.6
15
13.9
10
13.6
9.1
8.9
5.6
SPF
4.9
4.5
5
0
13.4
Benchmark
Offices – Central London
SPF
Offices – South East
5.2
Benchmark
Offices – Rest of UK
Source: IPD UK PFI Indices
We continue to hold an overweight position to office markets, particularly in London and the
South East.
London’s status as a global city as well as occupiers’ ongoing demand for space, have
seen the capital lead the recovery in UK commercial property. We have actively rotated
some of our exposures here, realizing the capital gains created from asset management
initiatives in ‘prime’ London buildings and investing the proceeds into emerging areas of the
London office market where rents are affordable and which are benefitting from infrastructure
investment.
Sales in 2013 have included Building 8, Chiswick Park as well as 81 and 82 Dean
Street. The former was an asset that had been developed in previous years but where we
took profit (IRR of 25% p.a.), selling at a net initial yield of 3.4% and capitalising on investor
demand for prime long lease income. The latter were buildings we had refurbished and
where investor demand for West End of London property was such that we sold for a 29%
premium above the prior month’s valuation.
Purchases in Stratford (Jubilee House) and Battersea Studios are reflective of
occupational trends which are seeing tenants, priced out of their more traditional and central
locations, moving to new areas. This same dynamic has, in the previous decade, driven the
emergence of London Bridge and Old Street Roundabout as office markets, and we believe
will drive the growth of new areas in the next decade. Battersea Studios in SW8 is supported
Schroder UK Property Fund
19
Report for the Year Ended 31 March 2014
by the relocation to the area of the American Embassy, the redevelopment of the Battersea
Power Station site, and London Underground’s Northern Line extension. It was purchased in
Q1 2014 for £35m and offers tenants affordable rents (£21.50 per sq ft) as well as increasing
accessibility. Stratford offers a similar dynamic, having benefitted from regeneration and
investment associated with the Olympic Games. Jubilee House was bought in Q3 2013 for
£11.9m at a net initial yield of 7.8%. It is currently let to a government tenant and offers asset
management flexibility in an increasingly popular market - since the start of the year both
Transport for London (TfL) and the Financial Conduct Authority (FCA) have announced that
their headquarters will be moving to E14.
Office Portfolio at 31 March 2014
Holding
Sector
Lot Size
Cardiff, St. William House
Direct
Rest of UK Office
Between £25m and £50m
London N1, Shepherdess Walk
Direct
Central London Office
Between £25m and £50m
London SE1, Palace House
Direct
South East Office
Between £25m and £50m
London SW8, Battersea Studios
Direct
South East Office
Between £25m and £50m
London W14, Kensington Village
Direct
Central London Office
Between £25m and £50m
London WC1, Chenies Street
Direct
Central London Office
Between £25m and £50m
Manchester, Fujitsu Office Complex, Central Park
Direct
Rest of UK Office
Between £25m and £50m
Reading, Davidson House
Direct
South East Office
Between £25m and £50m
Indirect
Central London Office
Between £25m and £50m
Croydon, AMP House
Direct
South East Office
Between £10m and £25m
Croydon, Gateway Site
Direct
South East Office
Between £10m and £25m
London E14, Jubilee House
Direct
South East Office
Between £10m and £25m
London EC1, 4-7 Chiswell Street
Direct
Central London Office
Between £10m and £25m
London EC2, 11/12 Appold Street
Direct
Central London Office
Between £10m and £25m
London EC23, Lombard Street
Direct
Central London Office
Between £10m and £25m
London WC2, Craven House, 117-123 Kingsway
Direct
Central London Office
Between £10m and £25m
London WC2, 53 Parker Street
Direct
Central London Office
Between £10m and £25m
Bracknell, Bracknell Beeches
Direct
South East Office
Between £5m and £10m
Reading, New Century Place
Direct
South East Office
Between £5m and £10m
Slough, Capital Point, 33 Bath Road
Direct
South East Office
Between £5m and £10m
Indirect
Central London Office
Under £5m
West End of London Property Unit Trust (WELPUT)
City of London Office Unit Trust (CLOUT)
20
Schroder UK Property Fund
Report for the Year Ended 31 March 2014
FUND MANAGER’S REPORT
(continued)
INDUSTRIAL
SPF’s overweight/underweight industrial positions relative to benchmark
2013
2014
20
16.9
16.5
15
11.4
9.6
10
7.7
6.7
6.6
5
0.7
0
SPF
Benchmark
Industrial – South East
SPF
Benchmark
Industrial – Rest of UK
Source: IPD UK PFI Indices
We continue to hold an overweight to industrial property which looks set to benefit from the
improving economic environment as well as the structural shifts in consumer demand. While
the growth in online shopping may be diverting sales away from the high street, it is creating
additional demand from online retailers for logistics units in an already capacity constrained
area of the market.
To complement our existing portfolio of industrial estates, a number of which are located
in prime south-east markets, the fund has been investing in previously overlooked regional
opportunities. These benefit from a yield arbitrage over similar properties in the South East
market and are also enjoying strengthening occupational demand.
In April 2013, the fund bought Hartlebury Trading Estate in Worcestershire For £46.2m at
a net initial yield of 10.2%. The property is a large industrial estate with a diversified tenant
base (largest tenant 11% of rents). The property has a range of unit sizes providing scope
for tenants to grow their businesses, it offers a high level of security, and has achieved high
tenant retention (c 90% over the past five years) based off attractively low rental levels.
Market timing and asset management are driving significant outperformance. The acquisition
of Steelpark in Wolverhampton in Q1 2014 added to our regional exposure. This is Tata
Steel’s main manufacturing and distribution hub in the UK. It is further accretive to the
fund’s income with a net initial yield of 9.0%. Both assets offer strong fundamentals and
exposure to a part of the commercial property market where new and good quality supply is
constrained but demand is strong.
Schroder UK Property Fund
21
Report for the Year Ended 31 March 2014
Industrial Portfolio at 31 March 2014
Holding
Sector
Lot Size
Crayford, Acorn Industrial Estate
Direct
South East Industrial
Over £50m
Worcestershire, Hartlebury Trading Estate
Direct
Rest of UK Industrial
Over £50m
Hackbridge, Felnex Trading Estate
Direct
South East Industrial
Between £25m and £50m
London E16, Electra, Canning Town
Direct
South East Industrial
Between £25m and £50m
London NW10, Matrix, Park Royal
Direct
South East Industrial
Between £25m and £50m
Woking, Woking Business Park
Direct
South East Industrial
Between £25m and £50m
Wolverhampton, Steelpark
Direct
Rest of UK Industrial
Between £25m and £50m
Sutton, Kimpton Industrial Estate
Direct
South East Industrial
Between £10m and £25m
Welwyn Garden City, Quadrant Park
Direct
South East Industrial
Between £10m and £25m
Dunstable, Arenson Centre
Direct
South East Industrial
Between £5m and £10m
Dunstable, Chiltern Park
Direct
South East Industrial
Between £5m and £10m
London UB6, Greenford
Direct
South East Industrial
Between £5m and £10m
Birmingham, Deykin Avenue
Direct
Rest of UK Industrial
Under £5m
Cannock, Walkmill Lane, land site
Direct
Rest of UK Industrial
Under £5m
Livingston, Limefields
Direct
Rest of UK Industrial
Under £5m
London UB6, Greenford, land site
Direct
South East Industrial
Under £5m
York, Alexandra Court, James Street
Direct
Rest of UK Industrial
Under £5m
22
Schroder UK Property Fund
Report for the Year Ended 31 March 2014
FUND MANAGER’S REPORT
(continued)
ALTERNATIVE SECTORS
SPF’s overweight/underweight other positions relative to benchmark
2013
10
9.1
9.6
2014
8.8
8.7
8
6
4
2
0
SPF
Benchmark
SPF
Benchmark
Source: IPD UK PFI Indices
The Fund has maintained its overweight exposure to alternative sectors over the last 12
months. These diversifying assets offer resilient rental growth that is less correlated with
the economic cycle and which is benefitting from long-term structural change (e.g. student
accommodation, care homes).
In terms of recent activity, in Q2 2013 the fund bought a leisure scheme in Chatham. Leisure
spend has been resilient throughout the downturn (2007-2011), when total household
spending contracted by 0.2% per annum and spending on recreational and cultural services
rose by 0.2% per annum, and it is poised to grow over the next few years. Chatham
Maritime is anchored by an Odeon cinema which occupies 57% of the scheme by rental
income and which is let on a 25 year RPI-linked lease The purchase price reflected a net
initial yield of 8.1% and provides good asset management possibilities. Elsewhere, the
fund has embarked on the construction of five Suffolk care homes let to Care UK, the
outsourced provider of Suffolk County Council’s elderly care provision. These provide
inflation-linked income for a term of 30 years with an initial yield of over 7%.
Schroder UK Property Fund
23
Report for the Year Ended 31 March 2014
Turner Rise
Alternatives Portfolio at 31 March 2014
Holding
Sector
Lot Size
Direct
Other – leisure
Over £50m
London E14, West India Quay
JV
Other – leisure
Between £25 and £50m
Chatham, Chatham Maritime
Direct
Other – leisure
Between £10m and £25m
Indirect
Other – student
accommodation
Between £10m and £25m
Ipswich, Asterbury Place
Direct
Other – care homes
Between £5m and £10m
Croydon, Car Park
Direct
Other – car park
Under £5m
Framlingham, Mills Meadow
Direct
Other – care homes
Under £5m
Haverhill, Chalkstone
Direct
Other – care homes
Under £5m
Lowestoft, Roman Hill
Direct
Other – care homes
Under £5m
Mildenhall, Great Heath
Direct
Other – care homes
Under £5m
Cardiff, Mermaid Quay
UNITE UK Student Accommodation Fund
Turner Rise, Colchester
Schroder UK Property Fund
24
Audited Consolidated Financial Statements
for the Year Ended 31 March 2014
REPORT OF THE AUTHORISED
CORPORATE DIRECTOR AND
STATEMENT OF RESPONSIBILITIES
The Financial Statements
Authorised Status
We are pleased to present the Audited
Consolidated Financial Statements of
the Schroder UK Property Fund for the
year ended 31 March 2014.
From 31 July 2012 the Fund was
authorised as an Open-Ended
Investment Fund under Regulation
12 of the Open-Ended Investment
Companies Regulations 2001.
The Fund
Schroder UK Property Fund (the
“Fund”) is an investment Fund with
variable capital incorporated in England
and Wales under registered number
IC000945 and authorised by the FCA
with effect from 31 July 2012. The
Fund has an unlimited duration. The
shareholders are not liable for any debts
of the Fund.
The investment objective of the Fund
is to undertake 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 (the
AREF/IPD UK Quarterly Property Fund
Index – All Balanced Property Fund
Index Weighted Average) 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.
The policy for achieving these
objectives is that the Fund will invest
in UK properties. The Fund may also
invest in transferable securities
(including REITs, government bonds
and unquoted companies), units in
collective investment schemes, units
in unregulated collective investment
schemes (which may include
unauthorised property unit trusts
and limited partnerships), money
market instruments, deposits, cash
and cash equivalents.
The ACD is responsible for the
management of the fund in accordance
with its Trust Deed, Prospectus and
COLL and for taking reasonable steps
for the prevention and detection of
fraud, error and non-compliance with
law or regulations.
Annual General Meetings
The ACD’s report and accounts for
The Fund will not be holding any Annual the year ended 31 March 2014 were
signed on 15 July 2014 on behalf of the
General Meetings.
ACD by:
Statement of Responsibilities
C.E. Helmstetter The Financial Conduct Authority’s
Collective Investment Schemes
Sourcebook (COLL) requires the
Authorised Corporate Director (ACD)
P. Wallace
to prepare accounts for each annual
and half yearly accounting period,
in accordance with United Kingdom
Generally Accepted Accounting
Practice, which give a true and fair view
of the financial position of the fund and
Schroder Unit Trusts Limited
of its net revenue and the net capital
gains on the property of the fund for the 15 July 2014
year. In preparing the accounts the ACD
is required to:
–select suitable accounting policies
and then apply them consistently;
– comply with the disclosure
requirements of the Statement
of Recommended Practice for
Authorised Funds issued by the IMA
in October 2010;
–follow generally accepted
accounting principles and applicable
accounting standards;
–prepare the accounts on the
basis that the fund will continue in
operation unless it is inappropriate
to do so; and,
–keep proper accounting records
which enable it to demonstrate that
the accounts as prepared comply
with the above requirements.
Schroder UK Property Fund
Audited Consolidated Financial Statements
for the Year Ended 31 March 2014
INVESTMENT MANAGER’S
STATEMENT OF RESPONSIBILITY
The ACD has delegated to the
Investment Manager the function
of managing the investment and
reinvestment of the assets of
the Fund.
On 31 July 2012, the ACD appointed
Schroder Property Investment
Management Limited (“Schroder
Property”) to provide investment
management, property management
and advisory services to the ACD.
Schroder Property is a member of
the same Group (Schroders plc) as
the ACD.
The Investment Manager has
discretionary responsibility for
implementing investment policy and
is responsible to investors for the
performance of the Fund. Adherence
to such policies is monitored
quarterly through reporting by the
Investment Manager to the Property
Investment Risk Committee which
is an integral part of the Schroders
Investment Risk Framework (SIRF).
The Investment Manager is also
responsible for marketing the Fund,
pricing and accounting for the Fund,
providing all relevant information to
valuers, managing agents and for
providing performance information to
IPD (Investment Property Databank).
All delegated appointments by the
Investment Manager are on an
advisory basis.
Subject to the investment objectives
and restrictions contained in the OEIC
Regulations and COLL (Collective
Investment Schemes Sourcebook)
and the investment and borrowing
guidelines contained in the Prospectus,
the Investment Manager has discretion
to take decisions in relation to the
management of the Fund, without prior
reference to the ACD. As required by
COLL, the Investment Manager must
obtain the consent of the Depositary for
the acquisition or disposal of immovable
property.
Legal and product limits
The prospectus, which has been
approved by the FCA, sets out the
nature of permitted investments and
the broad parameters within which the
fund must be managed. If one of these
is breached, depending on the nature
of the breach, they are reportable to the
FCA and subject to agreed remedies.
These are shown as legal limits in the
table below.
The Investment Manager confirms that
these limits have not been breached in
the year to 31 March 2014.
Other risk controls such as Product
Limits shown in the table below
are also monitored as part of SIRF
which is a Group-wide control
process designed to ensure that
products and portfolios are managed
in a manner that is consistent with
their performance objectives and
corresponding risk profiles.
From time to time the Investment
Manager may propose revisions to the
Product limits in order to better control
the risks which may impact the Fund’s
ability to achieve its objectives. Any
changes will require the approval of
SIRF and the ACD.
From the beginning of 2014 the
Investment Manager will change
the way in which sector exposure is
managed. The new approach, which
analyses the aggregate weighting to
13 market segments, will replace the
current four sector risk control.
Legal limits
Product limits
Minimum 60% its assets (NAV) must form part of its Property Investment
Business
Sector exposure: Maximum absolute load difference +/- 50% vs benchmark.
Maximum divergence of central London +/- 10%. Maximum divergence in
alternatives +/- 10%.
Minimum 60% its income must come from the Property Investment Business
Maximum aggregate investment in indirect vehicles: 40% NAV
Maximum 15% of the NAV invested in a single asset
Maximum 20% of the NAV committed to development (on/off balance sheet)
Investment in a single indirect vehicle: 15% NAV
Aggregate investment in indirect vehicles: 35% NAV
Aggregate investment in joint ventures: 35% NAV
Maximum borrowing (on/off balance sheet): 25% NAV
Investment in UK property related listed securities: aggregate 10% NAV –
individual 2.5% NAV
Investment on and off balance sheet in shorter/medium term leaseholds (less
than 50 years): 20% NAV
Maximum investment in undeveloped and non income producing land: 10%
NAV
Maximum speculative development: 15% NAV
Maximum on and off balance sheet percentage income from non government
tenant: 10%
Investment in undeveloped and non income producing land: 10% NAV
Maximum on balance sheet uncommitted cash: 10% NAV
Maximum on and off balance sheet debt: 25% NAV
25
Schroder UK Property Fund
26
Audited
Consolidated
Financial
Statements
Audited Consolidated
Financial
Statements
31 March 2013
for the Year Ended 31 March 2014
INDEPENDENT PROPERTY
VALUERS’ REPORTS
BNP Paribas Real Estate
instructed to carry out investigations
As Standing Independent Valuer for the into pollution hazards which might
Fund, we have valued immovables held affect the properties and our valuations
assume the properties are not adversely
by the Fund as at 31 March 2014 in
accordance with The Royal Institution of affected by any form of pollution.
Chartered Surveyors and International
In our opinion the aggregate of the
Valuation Standards (RICS) and in
market values of the 48 immovables
accordance with the COLL 8.4.13R
owned by the Fund as at 31 March
of the Collective Investment Schemes
2014 was £1,017.28 million. This figure
Sourcebook. Schroder Unit Trusts
represents the aggregate of the values
Limited, as ACD of the Fund, has been attributable to the individual immovables
provided with a full valuation certificate
and should not be regarded as a
and report. The immovables have
valuation of the portfolio as a whole in
been valued on the basis of Market
the context of a sale as a single lot.
Value as defined by the RICS Valuation
In the case of the immovables in the
Standards subject to existing leases.
course of development, our valuations
Details of the nature and extent of
reflect the stage reached in construction
the immovables, the tenure and
and the costs already incurred at the
tenancies, permitted uses, town
date of valuation. We have had regard
planning consents and related matters, to the contractual liabilities of the parties
have been supplied by the Investment
involved in the developments and
Manager Schroder Property Investment any cost estimates which have been
Management Limited (SPrIM). The
prepared by professional advisers.
majority of the properties form the
No allowance is made in our valuations
subject of detailed reports from
for the costs of realisation, any liability
ourselves. We have seen copies of all
for tax which might arise on the event
the leases but we have not examined
of disposal or for any mortgage or
the title documents and we have
similar financial encumbrance over the
therefore assumed that the Fund’s
property. Our valuations exclude VAT.
interests are not subject to any onerous
restrictions, to the payment of any
BNP Paribas Real Estate
unusual outgoings or to any charges,
31 March 2014
easements or rights of way, other than
Allsops LLP
those to which we have referred in our
reports. We rely upon the Investment
As Independent Valuer for the Fund,
Manager to keep us advised of
we have valued immovables held
any changes that may occur in the
by the Fund as at 31 March 2014 in
investments. We are not instructed
accordance with The Royal Institution of
to carry out structural surveys nor
Chartered Surveyors and International
test any of the service installations.
Valuation Standards (RICS) and in
Our valuations therefore have regard
accordance with the COLL 8.4.13R
only to the general condition of the
of the Collective Investment Schemes
properties evident from our inspections. Sourcebook. Schroder Unit Trusts
We have assumed that no materials
Limited, as ACD of the Fund, has been
have been used in the buildings which
provided with a full valuation certificate
are deleterious, hazardous or likely to
and report. The immovables have
cause structural defects. We are not
been valued on the basis of Market
Value as defined by the RICS Valuation
Standards subject to existing leases.
We have been provided with
information from the relevant Property
Managers including tenancy schedules
and floor areas and assumed that the
Fund’s interests are not subject to any
onerous restrictions, to the payment
of any unusual outgoings or to any
charges, easements or rights of way,
other than those to which we have
referred in our reports. We rely upon the
Property Manager to keep us advised
of any changes that may occur in the
investments. We are not instructed
to carry out structural surveys nor
test any of the service installations.
Our valuations therefore have regard
only to the general condition of the
properties evident from our inspections.
We have assumed that no materials
have been used in the buildings which
are deleterious, hazardous or likely to
cause structural defects. We are not
instructed to carry out investigations
into pollution hazards which might
affect the properties and our valuations
assume the properties are not adversely
affected by any form of pollution.
In our opinion the aggregate of the
market values of the 11 immovables
owned by the Fund as at 31 March
2014 is £75.38 million. This figure
represents the aggregate of the values
attributable to the individual immovables
and should not be regarded as a
valuation of the portfolio as a whole in
the context of a sale as a single lot.
In the case of the immovables in the
course of development, our valuations
reflect the stage reached in construction
and the costs already incurred at the
date of valuation. We have had regard
to the contractual liabilities of the parties
involved in the developments and
any cost estimates which have been
prepared by professional advisers.
Schroder UK Property Fund
Audited Consolidated Financial Statements
for the Year Ended 31 March 2014
No allowance is made in our valuations
for the costs of realisation, any liability
for tax which might arise on the event
of disposal or for any mortgage or
similar financial encumbrance over the
property. Our valuations exclude VAT.
instructed to carry out investigations
into pollution hazards which might
affect the properties and our valuations
assume the properties are not adversely
affected by any form of pollution.
In our opinion the aggregate of the
market values of the 5 immovables
owned by the Fund as at 31 March
2014 is £16.21 million. This figure
Knight Frank
represents the aggregate of the values
attributable to the individual immovables
As Independent Valuer for the Fund,
and should not be regarded as a
we have valued immovables held
valuation of the portfolio as a whole in
by the Fund as at 31 March 2014 in
accordance with The Royal Institution of the context of a sale as a single lot.
Chartered Surveyors and International
In the case of the immovables in the
Valuation Standards (RICS) and in
course of development, our valuations
accordance with the COLL 8.4.13R
reflect the stage reached in construction
of the Collective Investment Schemes
and the costs already incurred at the
Sourcebook. Schroder Unit Trusts
date of valuation. We have had regard
Limited, as ACD of the Fund, has been to the contractual liabilities of the parties
provided with a full valuation certificate
involved in the developments and
and report. The immovables have
any cost estimates which have been
been valued on the basis of Market
prepared by professional advisers.
Value as defined by the RICS Valuation
No allowance is made in our valuations
Standards subject to existing leases.
for the costs of realisation, any liability
We have been provided with
for tax which might arise on the event
information from the relevant Property
of disposal or for any mortgage or
Managers including tenancy schedules similar financial encumbrance over the
and floor areas and assumed that the
property. Our valuations exclude VAT.
Fund’s interests are not subject to any
Knight Frank
onerous restrictions, to the payment
31 March 2014
of any unusual outgoings or to any
charges, easements or rights of way,
other than those to which we have
referred in our reports. We rely upon the
Property Manager to keep us advised
of any changes that may occur in the
investments. We are not instructed
to carry out structural surveys nor
test any of the service installations.
Our valuations therefore have regard
only to the general condition of the
properties evident from our inspections.
We have assumed that no materials
have been used in the buildings which
are deleterious, hazardous or likely to
cause structural defects. We are not
Allsops LLP
31 March 2014
27
28
Schroder UK Property Fund
Audited Consolidated Financial Statements
for the Year Ended 31 March 2014
DEPOSITARY’S REPORT AND
STATEMENT OF RESPONSIBILITIES
Statement of Responsibilities
Depositary’s Report
The depositary is responsible for the
safekeeping of all of the property of the
Fund (other than tangible moveable
property) which is entrusted to it and
for the collection of revenue that arises
from that property.
Having carried out such procedures as
we consider necessary to discharge
our responsibilities as depositary of
the Fund, it is our opinion, based on
the information available to us and
the explanations provided, that in all
material respects the Fund, acting
through the ACD:
It is the duty of the depositary to take
reasonable care to ensure that the Fund
is managed in accordance with the
(i)has carried out the issue, sale,
FCA’s Collective Investment Schemes
redemption and cancellation, and
Sourcebook (COLL), as amended, the
calculation of the price of the Fund’s
Open-Ended Investment Companies
shares and the application of the
Regulations 2001 (SI 2001/1228), as
Fund’s revenue in accordance with
amended (‘the OEIC Regulations’), the
COLL and, where applicable, the
Fund’s instrument of incorporation and
OEIC Regulations, the instrument of
prospectus, in relation to the pricing of,
incorporation and prospectus of the
and dealings in, shares in the Fund; the
Fund, and
application of revenue of the Fund; and
(ii)has observed the investment and
the investment and borrowing powers
borrowing powers and restrictions
applicable to the Fund.
applicable to the Fund.
Natwest PLC
15 July 2014
Hartlebury Trading Estate, Worcestershire
Schroder UK Property Fund
Audited Consolidated Financial Statements
for the Year Ended 31 March 2014
29
Schroder UK Property Fund
30
Audited Consolidated Financial Statements
for the Year Ended 31 March 2014
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
Schroder
UK
Property
Fund
31
Audited
Consolidated
Statements31 March 2013
Audited
ConsolidatedFinancial
Financial Statements
for the Year Ended 31 March 2014
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
32
Audited
Consolidated
Financial
Statements
Audited Consolidated
Financial
Statements
31 March 2013
for the Year Ended 31 March 2014
INDEPENDENT AUDITORS’ REPORT
To the Shareholders of Schroder UK Property Fund
Report on the financial
statements
Our opinion In our opinion the financial statements,
defined below:
–– give a true and fair view of the
financial position of the Fund as
at 31 March 2014 and of the net
revenue and the net capital gains
of the scheme property of the Fund
for the year then ended; and
–– have been properly prepared in
accordance with United Kingdom
Generally Accepted Accounting
Practice, the Statement of
Recommended Practice for
Authorised Funds, the Collective
Investment Schemes sourcebook
and the Fund Deed.
This opinion is to be read in the
context of what we say in the
remainder of this report.
What we have audited
The financial statements of Schroder
UK Property Fund (the “Fund”), which
are prepared by Schroder Unit Trusts
Limited (the “Authorised Corporate
Director”), comprised:
–– the balance sheet of the Fund as at
31 March 2014;
–– the statement of total return of the
Fund for the year then ended;
–– the statement of change in net
assets attributable to shareholders
of the Fund for the year then
ended;
–– the notes to the Fund’s financial
statements, which include a
summary of significant accounting
policies and other explanatory
information; and
–– the distribution table.
The financial reporting framework
that has been applied in their
preparation is applicable law and
United Kingdom Accounting Standards
(United Kingdom Generally Accepted
Accounting Practice), the Statement
of Recommended Practice ‘Financial
Statements of Authorised Funds’
issued by the Investment Management
Association (the “Statement of
Recommended Practice for Authorised
Funds”), the Collective Investment
Schemes sourcebook and the
Instrument of Incorporation.
In applying the financial reporting
framework, the Authorised Corporate
Director has made a number of
subjective judgements, for example
in respect of significant accounting
estimates. In making such estimates,
they have made assumptions and
considered future events.
What an audit of financial
statements involves
caused by fraud or error. This includes
an assessment of:
–– whether the accounting policies
are appropriate to the Fund’s
circumstances and have been
consistently applied and adequately
disclosed;
–– the reasonableness of significant
accounting estimates made by the
Authorised Corporate Director; and
–– the overall presentation of the
financial statements.
In addition, we read all the financial
and non-financial information in
the Report and Audited Financial
Statements (the “Annual Report”)
to identify material inconsistencies
with the audited financial statements
and to identify any information that
is apparently materially incorrect
based on, or materially inconsistent
with, the knowledge acquired by
us in the course of performing the
audit. If we become aware of any
apparent material misstatements
or inconsistencies we consider the
implications for our report.
Opinions on matters prescribed
by the Collective Investment
Schemes sourcebook
We conducted our audit in accordance In our opinion:
with International Standards on
Auditing (UK and Ireland) (“ISAs (UK & –– we have obtained all the
information and explanations
Ireland)”). An audit involves obtaining
we consider necessary for the
evidence about the amounts and
purposes of the audit; and
disclosures in the financial statements
sufficient to give reasonable assurance –– the information given in the
that the financial statements are free
Authorised Corporate Director’s
from material misstatement, whether
Schroder UK Property Fund
Audited Consolidated Financial Statements
for the Year Ended 31 March 2014
Report for the financial year for
which the financial statements are
prepared is consistent with the
financial statements.
Other matters on which we are
required to report by exception
Propriety of accounting
records and information and
explanations received
Under the Collective Investment
Schemes sourcebook we are required
to report to you if, in our opinion:
–– proper accounting records have
not been kept; or
–– the financial statements are not
in agreement with the accounting
records and returns.
statements in accordance with
applicable law and ISAs (UK & Ireland).
Those standards require us to comply
with the Auditing Practices Board’s
Ethical Standards for Auditors.
This report, including the opinions,
has been prepared for and only for
the Fund’s shareholders as a body in
accordance with paragraph 4.5.12 of
the Collective Investment Schemes
sourcebook and for no other purpose.
We do not, in giving these opinions,
accept or assume responsibility for
any other purpose or to any other
person to whom this report is shown
or into whose hands it may come save
where expressly agreed by our prior
consent in writing.
We have no exceptions to report
arising from this responsibility.
Responsibilities for the
financial statements and the
audit
Our responsibilities and those
of the Authorised Corporate
Director
As explained more fully in the Report
of the Authorised Corporate Director
and statement of responsibilities,
the Authorised Corporate Director is
responsible for the preparation of the
financial statements and for being
satisfied that they give a true and fair
view.
Our responsibility is to audit and
express an opinion on the financial
PricewaterhouseCoopers LLP
Chartered Accountants
and Statutory Auditors
London
15 July 2014
Notes:
(a)The maintenance and integrity of the Schroder
UK Property Fund website is the responsibility
of the Authorised Corporate Director; the work
carried out by the auditors does not involve
consideration of these matters and, accordingly,
the auditors accept no responsibility for any
changes that may have occurred to the financial
statements since they were initially presented on
the website.
(b)Legislation in the United Kingdom governing b)
Legislation in the United Kingdom governing
the preparation and dissemination of financial
statements may differ from legislation in other
jurisdictions.
33
Schroder UK Property Fund
34
Audited Consolidated Financial Statements
for the Year Ended 31 March 2014
STATEMENT OF TOTAL
RETURN
Notes
Consolidated
Year Ended
31 March 2014
£’000
Schroder UK
Property Fund
Year Ended
31 March 2014
£’000
Consolidated
Period from
1 August 2012 to
31 March 2013
£’000
Schroder UK
Property Fund
Period from
1 August 2012 to
31 March 2013
£’000
Net capital gains / (losses)
4
107,262
107,262
(17,235)
(16,748)
Revenue
5
Income
Gain attributable to minority
interest
Expenses
6
80,409
77,078
48,279
43,942
3
–
4
–
(26,056)
(22,722)
(17,428)
(14,462)
Net revenue before taxation
54,356
54,356
30,855
29,480
Taxation
–
–
–
–
Net revenue after taxation
Total return before distribution
Finance costs: distributions
5(b)
Change in net assets
attributable to shareholders
from investment activities
54,356
54,356
30,855
29,480
161,618
161,618
13,620
12,732
(58,392)
(58,392)
(33,254)
(31,880)
103,226
103,226
(19,634)
(19,148)
STATEMENT OF CHANGE IN
NET ASSETS ATTRIBUTABLE
TO SHAREHOLDERS
Consolidated
Year Ended
31 March 2014
£’000
Schroder UK
Property Fund
Year Ended
31 March 2014
£’000
Consolidated
Period from
1 August 2012 to
31 March 2013
£’000
Schroder UK
Property Fund
Period from
1 August 2012 to
31 March 2013
£’000
1,228,044
1,228,044
–
–
–
–
1,240,822
1,240,336
Amounts receivable on
creation of shares
158,190
158,190
6,856
6,856
Change in net assets
attributable to shareholders
from investment activities
103,226
103,226
(19,634)
(19,148)
1,489,460
1,489,460
1,228,044
1,228,044
Notes
Opening net assets
attributable to shareholders
Amounts receivable on
creation of shares on 1 August
2012
Closing net assets
attributable to shareholders
Schroder UK Property Fund
35
Audited Consolidated Financial Statements
for the Year Ended 31 March 2014
BALANCE SHEET
Notes
Consolidated
As at 31 March 2014
£’000
Schroder UK
Property Fund
As at 31 March 2014
£’000
1,218,464
1,104,279
918,230
814,594
82,862
82,862
98,368
98,368
Consolidated
As at 31 March 2013
£’000
Schroder UK
Property Fund
As at 31 March 2013
£’000
ASSETS
Investment Assets
Investment Property
Investment in Collective Investment Schemes
Investment in Subsidiaries
9
Investment in Joint Ventures
Total Investment Assets
Debtors
10
Cash and bank balances
11
Total other assets
Total assets
–
115,880
125,412
125,412
120,636
–
120,636
109,407
1,426,738
1,428,433
1,137,234
1,143,005
22,074
21,366
29,195
27,862
80,898
73,547
90,875
83,626
102,972
94,913
120,070
111,488
1,529,710
1,523,346
1,257,304
1,254,493
29,960
28,235
24,034
22,489
5,651
5,651
4,240
3,960
939
–
986
LIABILITIES
Creditors
12
Distribution payable
Net assets attributable to third party
minority investors
Long term liabilities – Loans
13
Total liabilities
Net assets attributable to shareholders
3,700
–
–
–
–
40,250
33,886
29,260
26,449
1,489,460
1,489,460
1,228,044
1,228,044
CASH FLOW STATEMENT
Notes
Consolidated
Year Ended
31 March 2014
£’000
Schroder UK
Property Fund
Year Ended
31 March 2014
£’000
16
71,102
66,598
30,269
29,909
(56,795)
(56,795)
(29,211)
(27,920)
253
230
305
290
(56,542)
(56,565)
(28,906)
(27,630)
(279,084)
(284,754)
(7,886)
(9,951)
Sales of investments
136,763
136,763
22,504
29,903
Capital expenditure
(40,406)
(30,311)
(9,289)
(7,609)
(182,727)
(178,302)
5,329
12,343
158,190
158,190
6,856
6,856
Net cash inflow from operating activities
Consolidated
Period Ended
31 March 2013
£’000
Schroder UK
Property Fund
Period Ended
31 March 2013
£’000
Servicing of finance
Distributions paid
Interest received
Total cash outflow from servicing of finance
Financial investments
Purchases of investments
Total cash (outflow)/inflow from financial
investments
Financing
Amounts received on issue of shares
Amounts paid on cancellation of shares
–
–
158,190
158,190
6,856
6,856
(9,977)
(10,079)
13,548
21,478
Net cash at the start of the year/period
90,875
83,626
77,327
62,148
Net cash at the end of the year/period
80,898
73,547
90,875
83,626
Total cash inflow from financing
(Decrease)/increase in cash in the year/period
–
–
Schroder UK Property Fund
36
Audited Consolidated Financial Statements
for the Year Ended 31 March 2014
NOTES TO THE FINANCIAL
STATEMENTS
1. Accounting Policies
no work has yet taken place, the
property is shown at cost unless,
in the opinion of the Manager,
there may be a material difference
between cost and valuation on
completion.
(a)Basis of accounting
All of the financial statements have
been prepared under the historical cost
basis, as modified by the revaluation
of investments, and in accordance
with the Statement of Recommended
(ii)Collective Investment Schemes are
Practice for Authorised Funds issued by
valued at the net asset value as
the IMA in October 2010 (SORP 2010).
provided by the relevant managers,
The principle accounting policies,
in accordance with industry
which have been applied consistently
practice.
throughout the year are set out below.
(d)Property purchases and sales
(b)Consolidation
Acquisitions and disposals of
Consolidated Financial Statements
investment properties and collective
have been prepared in accordance
investment schemes are recognised
with FRS 2 ‘Accounting for Subsidiary
where, by the end of the accounting
Undertakings’. The Consolidated
period, there is a legally binding,
Statement of Total Return, Consolidated unconditional and irrevocable contract.
Statement of Change in Net Assets
(e)Recognition of revenue
attributable to Shareholders’,
Rental revenue, deposit interest, and
Consolidated Balance Sheet and
other revenue is accounted for on an
Consolidated Cash Flow Statement
accruals basis. The cost of any up front
include the financial statements of
lease incentives offered is recognised
each sub-fund and its subsidiary
as a reduction in rental income and
undertakings. Intra-group transactions
allocated over the shorter of the lease
are eliminated fully on consolidation.
term or the period until the first rent
(c)Basis of valuation of
review date in accordance with UITF28.
investments
Service charge income and expenses
(i)Properties owned by the Fund,
are included in rental revenue and
including investments in properties
other property operating expenses
owned through partnerships and
respectively. Interest receivable and
trusts for land, are independently
payable are accounted for on an
valued on a market value basis in
accruals basis.
accordance with Royal Institute
(f) Treatment of management
of Chartered Surveyors guidance.
expenses
Development properties in the
Fees are recognised on an accruals
course of development are
basis and are charged in full to the
independently valued having
Statement of Total Return. The
regard to the stage reached in the
Manager has allocated 50% of the
construction and taking account
management fees to income and
of any agreed letting and of any
the remaining 50% to capital for the
contractual liabilities to advance
calculation of distributable income.
further monies. Where legal
completion of a purchase is not
(g)Treatment of development and
fully executed at the date of the
acquisition expenses
Consolidated balance sheet, but
In accordance with Generally
takes place subsequently, or in the
Accepted Accounting Practice in the
case of development properties
UK, development and acquisition
purchased for development where
expenses have been treated as costs
of purchasing property investments and
are accordingly treated as capital.
(h)Cash flow statement
In accordance with the requirements of
FRS 1 (Revised) and the IMA SORP
2010, a consolidated cash flow
statement has been provided.
(i)Tax
The Fund qualifies as a Property
Authorised Investment Fund (PAIF) for
tax purposes. Accordingly, the income
generated by its property investment
business will be exempt from tax. Any
dividend income it receives from United
Kingdom companies or, in general, from
non-United Kingdom companies will
also be exempt from tax.
The Fund would, however, be subject
to corporation tax in the event that
there should be a net balance of other
income, which will generally consist of
interest but could include other property
income, less deductible expenses
(including interest distributions).
Under the PAIF regulations, the Fund
make distributions gross to the sole
share class in an issue during the
period.
2. Distribution Policies
(a)Basis of distribution
Revenue is generated by the Fund’s
investments during each accounting
period. Where revenue exceeds
expenses, the net income of the
Fund is available to be distributed to
shareholders. All income is distributed,
at share class level, to the shareholders
in accordance with the Fund’s
prospectus on a monthly basis.
Revenue attributable to accumulation
shareholders is retained at the end of
the distribution period and represents a
reinvestment of revenue.
Schroder UK Property Fund
Audited Consolidated Financial Statements
for the Year Ended 31 March 2014
NOTES TO THE FINANCIAL STATEMENTS
(b)Apportionment to multiple
share classes
The allocation of revenue and
expenses to each share class is based
on the proportion of the Fund’s assets
attributable to each share class on
the day the revenue is earned or the
expenses are suffered.
(c)Expenses
In determining the net revenue available
for distribution, expenses related to
the purchase and sale of investments
are capitalised and do not reduce
distributions.
3. Risk Management Policies
(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
(continued)
liquidity risk surrounding its capacity to
meet its liabilities.
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, is minimised through
holding cash which can meet the usual
requirements of share redemptions.
The Investment Manager’s policy for
managing this risk is to:
1.Operate a strict share redemption
policy such that shareholders may
only serve notice to redeem at the
end of each quarter;
2.Raise sufficient cash resources
within the Fund to finance a limited
number of redemptions;
3.Review the need for and maintain
as appropriate a borrowing facility;
and,
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 year. The Fund
held £80.9 million of consolidated cash
at the end of the period and this is
exposed to interest rate risk.
37
38
Schroder UK Property Fund
Audited Consolidated Financial Statements
for the Year Ended 31 March 2014
NOTES TO THE FINANCIAL STATEMENTS
(continued)
4. Net capital gains/(losses)
Consolidated
Year Ended
31 March 2014
£’000
Schroder UK
Property Fund
Year Ended
31 March 2014
£’000
Consolidated
Period from
1 August 2012 to
31 March 2013
£’000
Schroder UK
Property Fund
Period from
1 August 2012 to
31 March 2013
£’000
Gains/losses for the year/period on
direct properties
87,354
85,110
(4,139)
(2,173)
Gains/losses for the year/period on
Collective Investment Schemes
12,086
14,330
(2,023)
(3,502)
Gains/losses for the year/period on
Joint ventures
7,822
7,822
(11,073)
(11,073)
Net gains/(losses) for the year/
period
107,262
107,262
(17,235)
(16,748)
Consolidated
Year Ended
31 March 2014
£’000
Schroder UK
Property Fund
Year Ended
31 March 2014
£’000
Consolidated
Period from
1 August 2012 to
31 March 2013
£’000
Schroder UK
Property Fund
Period from
1 August 2012 to
31 March 2013
£’000
5.Revenue
Bank and deposit interest
253
230
327
299
Rental revenue
60,426
57,224
34,997
30,746
Income from collective
investment schemes
11,779
12,637
7,825
8,084
Service charge income
7,328
6,389
4,919
4,635
623
598
211
178
80,409
77,078
48,279
43,942
Consolidated
Year Ended
31 March 2014
£’000
Schroder UK
Property Fund
Year Ended
31 March 2014
£’000
Consolidated
Period from
1 August 2012 to
31 March 2013
£’000
Schroder UK
Property Fund
Period from
1 August 2012 to
31 March 2013
£’000
8,377
8,072
5,125
4,800
215
215
174
136
Valuers fee
372
340
189
154
Audit fee
195
150
150
150
Service charge expense
8,759
7,421
5,723
4,852
Other company level expenses
1,002
358
262
168
Other property operating expenses
7,136
6,166
5,805
4,202
26,056
22,722
17,428
14,462
Other income
Total revenue
6.Expenses
Investment Management Fees
Depositary fee
Total expenses
Schroder UK Property Fund
39
Audited Consolidated Financial Statements
for the Year Ended 31 March 2014
7. Finance Costs: distributions
Schroder UK
Property Fund
Period from
1 August 2012 to
31 March 2013
£’000
Consolidated
Year Ended
31 March 2014
£’000
Schroder UK
Property Fund
Year Ended
31 March 2014
£’000
Consolidated
Period from
1 August 2012 to
31 March 2013
£’000
April
4,285
4,285
–
–
May
4,526
4,526
–
–
June
4,553
4,553
–
–
July
5,118
5,118
–
–
August
4,539
4,539
4,066
4,066
September
4,755
4,755
4,767
4,011
October
4,756
4,756
3,901
3,901
November
4,800
4,800
4,512
3,864
December
5,070
5,070
3,813
3,926
January
5,129
5,129
4,042
4,042
February
5,179
5,179
4,110
4,110
March
5,682
5,682
4,043
3,960
58,392
58,392
33,254
31,880
Gross distribution for the year/
period
Difference between net revenue after taxation and the distribution paid is analysed as follows:
Net revenue after taxation for the
year/period
Expenses charged to capital
Gross distribution
Consolidated
Year Ended
31 March 2014
£’000
Schroder UK
Property Fund
Year Ended
31 March 2014
£’000
Consolidated
Period from
1 August 2012 to
31 March 2013
£’000
Schroder UK
Property Fund
Period from
1 August 2012 to
31 March 2013
£’000
54,356
54,356
30,854
29,480
4,036
4,036
2,400
2,400
58,392
58,392
33,254
31,880
8.Taxation
The Fund qualifies as a Property Authorised Investment Fund (PAIF) for tax purposes.
Accordingly, the income generated by its property investment business will be exempt from
tax. Any dividend income it receives from United Kingdom companies or, in general, from
non-United Kingdom companies will also be exempt from tax.
The Fund would, however, be subject to corporation tax in the event that there should be a
net balance of other income, which will generally consist of interest but could include other
property income, less deductible expenses (including interest distributions).
Under the PAIF regulations, the Fund makes property income distributions and interest
distributions net of basic rate income tax except where the investor is entitled to gross
payment. As at 31 March 2014 the Fund had two authorised share classes: the gross share
class on which distributions were made without deduction of income tax, and the net share
class of which distributions were made with deduction of income tax.
40
Schroder UK Property Fund
Audited Consolidated Financial Statements
for the Year Ended 31 March 2014
NOTES TO THE FINANCIAL STATEMENTS
(continued)
Consolidated
Year Ended
31 March 2014
£’000
Schroder UK
Property Fund
Year Ended
31 March 2014
£’000
Consolidated
Period from
1 August 2012 to
31 March 2013
£’000
Schroder UK
Property Fund
Period from
1 August 2012 to
31 March 2013
£’000
Corporation tax at 20%
–
–
–
–
Current tax charge
–
–
–
–
(a) Analysis of charge in period
(b) Factors affecting the current tax charge for the period
Taxable income is charged at the standard rate of corporation tax for authorised funds
(20%). The reconciliation of the income statement tax charge to the standard rate on profits
before tax is set out below:
Schroder UK
Property Fund
Period from
1 August 2012 to
31 March 2013
£’000
Consolidated
Year Ended
31 March 2014
£’000
Schroder UK
Property Fund
Year Ended
31 March 2014
£’000
Consolidated
Period from
1 August 2012 to
31 March 2013
£’000
161,618
161,618
13,620
12,732
32,324
32,324
2,724
2,546
(32,324)
(32,324)
(2,724)
(2,546)
Total return before distribution
Corporation tax at 20%
Effects of:
Revenue not subject to taxation
Current tax charge for the year
(note 8a)
–
–
–
–
(c) Provision for deferred tax
There was no provision required for deferred tax at the balance sheet date.
9. Investment in subsidiaries
Percentage
ownership
by SPF at 31 Valuation at
Capital
Capital
March 2014 1 April 2013 contributions distributions
Croydon Gateway Unit Trust
98.0
47,297
2,109
–
20
–
(20)
–
–
Schroder Emerging Retail
Unit Trust
–
9
–
(9)
–
–
Hackbridge Unit Trust
99.0
30,827
3,533
–
(954)
33,406
Lombard Street Unit Trust
99.0
20,282
–
–
4,731
25,013
Capital Point Slough Unit
Trust
99.0
9,301
–
–
(39)
9,262
–
391
–
100.0
1,280
–
Hackbridge Limited
109,407
5,642
(391)
(1,067)
(1,487)
(1,493)
Valuation at
31 March
2014
Parker Tower Unit Trust
City Property Unit Trust
–
Net capital
gains /
(losses)
47,913
–
–
73
286
2,318
115,880
At 31 March 2014, SPF’s holding in each of Hackbridge Unit Trust (HackUT), Lombard Street Unit Trust (LSUT) and Capital
Point Slough Unit Trust (CPSUT) stood at 99.0%. The Fund owns two shares in Hackbridge Limited representing 100.0%
of the shares in issue. Hackbridge Limited is a Jersey registered limited Company incorporated on 1 May 2005. Hackbridge
Limited holds the remaining 1.0% interests in HackUT LSUT and CPSUT. The Fund’s holding in Croydon Gateway Unit Trust
stood at 98.0%, with a minority interest of 2.0% held by an external investor.
Schroder UK Property Fund
41
Audited Consolidated Financial Statements
for the Year Ended 31 March 2014
10. Debtors
Consolidated
As at
31 March 2014
£’000
Schroder UK
Property Fund
As at
31 March 2014
£’000
Consolidated
As at
31 March 2013
£’000
Schroder UK
Property Fund
As at
31 March 2013
£’000
Rent receivable net of provision
for doubtful debts
2,286
2,215
979
900
Distributions due from property
related investments
2,238
2,470
2,419
2,700
Tenant deposits
6,352
6,352
4,580
4,580
UITF 28 accrued rents receivable
3,436
3,436
6,998
5,734
UITF 28 unamortised
lease incentives
1,881
1,155
6,482
6,482
Monies due from
managing agents
2,616
2,658
5,066
5,030
Other debtors and prepayments
3,265
3,080
2,671
2,436
22,074
21,366
29,195
27,862
Consolidated
As at
31 March 2014
£’000
Schroder UK
Property Fund
As at
31 March 2014
£’000
Consolidated
As at
31 March 2013
£’000
Schroder UK
Property Fund
As at
31 March 2013
£’000
Total Debtors
11. Cash and bank balances
Cash and bank balances
30,898
23,547
48,875
41,626
Deposits
50,000
50,000
42,000
42,000
Total Cash and bank balances
80,898
73,547
90,875
83,626
Consolidated
As at
31 March 2014
£’000
Schroder UK
Property Fund
As at
31 March 2014
£’000
Consolidated
As at
31 March 2013
£’000
12. Creditors
Trade creditors
Deferred Rental Income
Tenant deposits
Schroder UK
Property Fund
As at
31 March 2013
£’000
33
33
171
108
12,515
12,515
9,647
9,029
6,352
6,352
4,580
4,580
VAT payable
1,546
1,546
1,931
1,679
Amounts due on properties
2,925
2,502
2,165
2,165
723
723
1,110
1,110
Accrued SPF investment
management fee
Other creditors and accruals
Total Creditors
5,866
4,564
4,430
3,818
29,960
28,235
24,034
22,489
42
Schroder UK Property Fund
Audited Consolidated Financial Statements
for the Year Ended 31 March 2014
NOTES TO THE FINANCIAL STATEMENTS
(continued)
13. Long term liabilities – loan
Home and Communities Agency Loan:
As at 31 March 2014 Croydon Gateway LP had drawn an amount of £3,700,000 under
a Development Facility agreement with Homes and Communities Agency. The initial draw
down on the facility took place in May 2013, with the facility having been entered into
in March 2013. The facility expires on the earlier of 31 March 2018 or 20 business days
from the date that the last dwelling is disposed of at the proposed Ruskin Square Phase 2
housing construction. The Guarantor for this loan is Schroder UK Property Fund. The interest
under the Development Facility agreement is calculated as the EC (European Commission)
reference rate plus 1%.
14. Contingent liabilities and commitments
As at 31 March 2014, the Fund had committed £26.8 million to the development of a series
of Care Homes, with £13.0 million having been spent to date. As at 31 March 2013 nil had
been spent.
15. Reconciliation of movement in net cash
Schroder UK
Property Fund
year to
31 March 2014
£’000
Consolidated
year to
31 March 2014
£’000
Cash and cash equivalents
As at 1 April 2013
Cashflows
Net cash inflow from operating activities for the year/period
90,875
83,626
(9,977)
(10,079)
80,898
73,547
16. Reconciliation of net revenue before taxation to net cash inflow
from operating activities
Consolidated
Year ended
31 March 2014
£’000
SPF
Year ended
31 March 2014
£’000
Consolidated
Period Ended
31 March 2013
£’000
54,356
54,356
30,855
29,480
Increase/(decrease) in debtors
7,122
6,496
(593)
(1,925)
Increase in creditors
9,624
5,746
7
2,354
71,102
66,598
30,269
29,909
Net revenue before taxation
As at 31 March 2014
SPF
Year ended
31 March 2013
£’000
17. Related parties
(a) Fees receivable by the Depositary
As depositary, Natwest plc is entitled to a fee equivalent to 0.0224% per annum on the
first £500 million of the Fund’s Net Asset Value (NAV) and 0.0125% per annum on any
excess over £500 million of the Fund’s NAV.
(b) Fees receivable by the ACD and the Investment Manager
The remuneration of the ACD and the Investment Manager is set out within the Company
Prospectus. These fees are charged in full to the Statement of Total Return. 50% of
such fees are allocated to capital and not deducted from distributions for the purpose of
determining the value of such distributions.
Schroder UK Property Fund
43
Audited Consolidated Financial Statements
for the Year Ended 31 March 2014
The Investment Manager also earns commission from individual shareholders of the
Company which utilise its matched bargain service. Such commission is not included in
these financial statements.
(c) Outstanding balances were due to the following which are considered to be
related parties under FRS8:
Schroder UK
Property Fund as at
31 March 2014
£’000
Schroder UK
Property Fund as at
31 March 2013
£’000
35
36
Schroder Property Investment Management Ltd
723
1,110
Schroder Unit Trusts Limited
162
154
Natwest plc
(d) Distributions: gross distributions were receivable in the period from the following
investments which are considered related under FRS8 as they are managed or administered
by an associate of the ACD.
Bracknell Property Unit Trust
Croydon Gateway Property Unit Trust
Motor Retail Limited Partnership
Schroder UK
Property Fund Year to
31 March 2014
£’000
Schroder UK
Property Fund Period
From 1 August 2012 to
31 March 2013
£’000
816
1,704
–
484
1,513
1,421
Lombard Street Unit Trust
212
328
Capital Point Slough Unit Trust
626
793
West End of London Property Unit Trust
731
1,022
–
2,432
Schroder Emerging Retail Property Unit Trust
(e) Schroder UK Property Fund Feeder Trust
The Manager of the Schroder UK Property Fund Feeder Trust, which invests solely into
the Schroder UK Property Fund, is part of the same group as the ACD of the Schroder UK
Property Fund. During the year to 31 March 2014, the Schroder UK Property Fund Feeder
Trust was paid gross distributions totalling £1.4 million.
18. Financial instruments
The primary financial instruments held by the Fund at 31 March 2014 were property related
investments, cash, short term assets and liabilities to be settled in cash. The Fund did not
hold, and was not a counterparty to, any derivative instruments either during the year or at
the year end.
The policies applied to the management of the financial instruments are set out in note 3.
The fair values of the Fund’s assets and liabilities are represented by the values shown
in the balance sheet on page 35. There is no material difference between the value of the
financial assets and liabilities, as shown in the balance sheet, and their fair value.
Schroder UK Property Fund
44
Audited Consolidated Financial Statements
for the Year Ended 31 March 2014
NOTES TO THE FINANCIAL STATEMENTS
(continued)
19. Portfolio transaction costs
For the year ended
31 March 2014
£’000
For the period ended
31 March 2013
£’000
260,311
7,886
Stamp Duty
9,157
–
Legal Fees
1,108
–
Agents Fees
2,130
–
599
–
Analysis of total purchase costs
Purchases in year/period before
transaction costs
Other Fees
Total purchase costs
12,994
–
Gross purchase total
273,305
7,886
For the year ended
31 March 2014
£’000
For the period ended
31 March 2013
£’000
137,435
29,903
191
32
1,009
63
Analysis of total sales costs
Gross sales in year/period before
transaction costs
Legal Fees
Agents Fees
Other Fees
Total sales costs
Total sales net of transaction costs
36
–
1,236
95
136,199
29,808
Schroder UK Property Fund
45
Audited Consolidated Financial Statements
for the Year Ended 31 March 2014
DISTRIBUTION TABLE
Monthly distributions payable for the year ended 31 March 2014 in pence per unit. There
were two share classes at 31 March 2014, a gross share class and a net share class.
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
11.153200
11.772781
11.834773
13.295122
11.679898
11.843153
Gross Income Shares
Gross revenue
Income tax
–
–
–
–
–
–
Net revenue
11.153200
11.772781
11.834773
13.295122
11.679898
11.843153
Final distribution payable
11.153200
11.772781
11.834773
13.295122
11.679898
11.843153
Oct-13
Nov-13
Dec-13
Jan-14
Feb-14
Mar-14
11.833733
11.854498
12.267069
12.363131
12.102352
13.225275
Gross Income Shares
Gross revenue
Income tax
–
–
–
–
–
–
Net revenue
11.833733
11.854498
12.267069
12.363131
12.102352
13.225275
Final distribution payable
11.833733
11.854498
12.267069
12.363131
12.102352
13.225275
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Net Income Shares
Gross revenue
–
11.772781
11.834773
13.295122
11.679898
11.843153
Income tax
–
(2.270170)
(2.283191)
(2.572803)
(2.185172)
(2.258660)
Net revenue
–
9.502611
9.551582
10.722319
9.494726
9.584493
Final distribution payable
–
9.502611
9.551582
10.722319
9.494726
9.584493
Oct-13
Nov-13
Dec-13
Jan-14
Feb-14
Mar-14
Net Income Shares
Gross revenue
11.833733
11.854498
12.267069
12.363131
12.102352
13.225275
Income tax
(2.228599)
(2.223903)
(2.293418)
(2.295616)
(2.260388)
(1.603545)
Net revenue
9.605134
9.630595
9.973651
10.067515
9.841964
11.621730
Final distribution payable
9.605134
9.630595
9.973651
10.067515
9.841964
11.621730
Schroder UK Property Fund
46
Report for the Year Ended 31 March 2014
UNAUDITED GENERAL
INFORMATION
General Information
responsible investment programme
SCHRODER UK PROPERTY FUND (the should deliver enhanced returns
“Fund”) is an investment company with to investors, improved business
variable capital incorporated in England performance to tenants and tangible
benefits to local communities and wider
and Wales under registered number
society. A copy of Schroders RPI Policy
IC000945 and authorised by the FSA
with effect from 31 July 2012. The Fund can be found at www.schroders.com/
has an unlimited duration. Shareholders property
are not liable for the debts of the Fund. Purchase of Shares
Accordingly, the information in this
document is directed at eligible
counterparties, authorised persons,
professional clients, existing investors
in the Fund and clients and newly
accepted clients of other firms within
the Schroder Group, where appropriate
steps have been taken to ensure that
investment in the Fund is suitable, where
necessary. This material should not be
relied upon by persons of any other
description. In any case, a recipient
who is in any doubt about investment in
the Fund should consult an authorised
person who specialises in investments of
this nature.
The Fund’s past performance is not a
guide to the future.
Liquidity
The Fund invests in real property, the
value of which is generally a matter of a
valuer’s opinion. There is no recognised
market for shares in the Fund and an
investment is not readily realisable. It
may be difficult to trade in the shares
or to sell them at a reasonable price.
The price of shares and the income
from them may fluctuate upwards or
downwards and cannot be guaranteed.
Socially Responsible Investment
and Sustainability
Responsible Property Investment
(RPI) is at the heart of our investment
philosophy. We believe that a successful
Investment Manager has the power to
limit the creation of new shares having
regard to the amount of unallocated
cash being held in the Fund from time to
time.
Details of the investor’s waiting list is
to be found in the SPF prospectus in
section 2.1 and has been summarised
below:
Applicants may be placed on a waiting
list prior to the issue of Shares. The
ACD may elect to limit the number
of shares issued on any dealing day
for subscription, and if so, shares will
be allocated to valid applicants pro
rata to the number of shares applied
for. Where applicants do not receive
shares to satisfy their full application the
unallocated application will be carried
forward to the next dealing day for
subscription at which shares are issued.
Where the issue of shares is limited
at any dealing day for subscriptions
applicants may instruct the ACD to
seek to arrange for the shortfall in the
application to be met on the secondary
The Dealing Day for subscription for
market for such time until the next
shares is the first business day of each dealing day for subscription. If the
month. Application forms, top-up forms shortfall in shares applied for is not met
and cleared funds must be received by on the secondary market, shares will be
the Registrar before the cut-off point
issued in line with the allocation made at
for subscriptions. Forms received after the dealing day for subscription on which
this time will be carried forward to the
shares are issued, with orders carried
following dealing day for subscription.
over from previous dealing days taking
Applicants may amend or withdraw an priority.
application form or a top up form at
There were no redemption notices
any time up until the cut-off point for
received at 31 March 2014 that
subscriptions. Thereafter, applicants
were not settled. Further, there were
have no right to amend or withdraw
no suspension of valuations and/or
their application. Settlement is due by
midday on the business day before the redemptions at 31 March 2014.
relevant dealing day for subscription.
Applicants are required to transfer funds Redemption of Shares
via CHAPS or another form of electronic Redemption forms must be received by
payment unless the Registrar agrees to the Registrar before the relevant cut‑off
an alternative method of payment. The point for redemptions, that is midday on
Shares can be purchased in the
Schroder UK Property Fund through
the primary or secondary market.
Depending on the type of investor, the
purchase of shares will be through
either the Schroder UK Property
Fund or the Schroder UK Property
Fund Feeder Trust. Corporate bodies
(excluding nominees acquiring shares)
may only invest in the Schroder UK
Property Fund indirectly through the
Feeder Fund. Shares in the Schroder
UK Property Fund can be transferred
between corporate and non corporate
bodies through the Feeder Fund on the
secondary market.
Schroder UK Property Fund
47
Report for the Year Ended 31 March 2014
the date falling three months prior to
the business day before the relevant
dealing day for redemption. Once a
redemption form has been received,
this can be settled either by cancelling
shares or placing on the secondary
market. Either way, redeeming
shareholders will only receive the
prevailing bid price. Valid instructions
will be processed by the Registrar at
the bid price on the relevant dealing
day for redemption (that falls three
months after the relevant cut-off point
for redemption), except in the case
where dealing has been suspended
as set out in section 2.21 of the
Prospectus.
Where the ACD considers it to be in
the best interests of the shareholders,
the ACD may defer redemptions on
a dealing day to any one or more of
the subsequent eight dealing days for
redemption i.e. the deferral period is
a maximum of 24 months from the
original dealing day for redemption. A
redemption will be deferred within this
timeline to a dealing day for redemption
when the Fund has sufficient liquidity
to enable it to meet the redemption,
providing it is in the best interests of
the shareholders to do so.
The ACD can, in extreme market
circumstances, as set out within
section 6.5 of the Prospectus, fair
value any assets within the Fund to a
realisable value.
Secondary Market
The ACD has appointed the Secondary
Market Facilitator, SMF (Schroder
Property Investment Management
Limited) to facilitate transfers of
shares on the secondary market in
accordance with the following:
–– Shareholders or potential investors
wishing to buy shares on the
secondary market should complete
an application form (potential
investors) or top-up form (existing
shareholders), detailing their
secondary market requirement in
the investment details section;
–– Shareholders wishing to sell shares
should complete a redemption form
specifying they wish to sell via the
secondary market. All completed
forms should be provided to the
SMF via the Registrar; and,
–– Potential investors should
also provide the Registrar with
any documents required for
anti-money laundering purposes.
The forms are available from
www.schroders.com/spf or from
the Investment Manager.
The SMF will not charge a redeeming
shareholder commission, but the
redeeming Shareholder will be
responsible for costs in connection with
the transfer of its shares such as the
preparation and execution of relevant
documentation and any taxation. The
SMF, at its discretion, has the right
to charge the buyer commission at a
rate of 0.20 per cent applied to the net
consideration, subject to a minimum of
£50 for each and every trade. Where
applicable, stamp duty reserve tax
is payable by the buyer on the net
consideration at the prevailing rate.
The SMF operates a share matching
service between sellers and buyers
of shares. A waiting list of sellers and
buyers is kept and matching operated
on the following basis:
a. First, price: shares available from
sellers seeking the lowest price per
share will be offered to buyers by order
of the date of receipt of the relevant
form.
b. Secondly, notification date: Where
there are multiple sellers looking to sell
for any given price, preference will be
given to sellers by order of the date of
receipt of the relevant form.
Where there are multiple buyers looking
to buy at the same price, for which
relevant forms were received on the
same date, matching will be allocated
pro rata to the number of shares
applied for. In all cases matching will be
allocated subject to any minimum trade
requirements stipulated by a party.
The SMF, when matching shares may
apply a minimum economic trade at its
discretion which is shares to the value
of £50,000 or such other amount as
the SMF determines from time to time.
The SMF will arrange the exchange
of shares between sellers and buyers
in the first 12 business days of every
month. The SMF will contact the seller
and buyer to obtain confirmation that
the terms of the arrangement are
acceptable before proceeding with the
transaction. The seller and buyer are
required to confirm acceptance of the
terms by return email within 24 hours.
Investers may wish to note that other
matching services are provided by third
party brokers. All trades are however
subject to registration on the terms set
out above.
Fund Codes
Code
Bloomberg
ISIN Sedol SCEXPUT LN
GB00B8215Z66
B8215Z6
Prices for the Schroder UK Property
Fund can be obtained from
http://www.schroders.com/spf.
Distributions
The income of the Fund, after
deduction of all expenses and liabilities
(actual, estimated or contingent) of
the Fund including any deductions
in respect of taxes, is distributed to
shareholders in proportion to the
number of shares held by them.
48
Schroder UK Property Fund
Report for the Year Ended 31 March 2014
UNAUDITED GENERAL INFORMATION
Distributions are calculated on a
monthly basis, with the distributions
paid to shareholders on the last
working day of the following month.
During the period all distributions were
paid gross. The prospectus does not
provide the ability for either the ACD
or Investment Manager to defer or
suspend distributions.
Schroder UK Property Fund
Feeder Trust
The Schroder UK Property Fund
Feeder Trust is an umbrella unit
Trust whose objective is to achieve a
blend of income and capital growth
by investing solely in the Schroder
UK Property Fund. Investors into
the Feeder Trust receive monthly
distributions. The Feeder Trust is
subject to corporation tax on property
and interest distributions it receives
from the Schroder UK Property Fund at
a rate of 20%.
Management fees and other
expenses
Details of fees and expenses incurred
by the Fund are set out within Section
5 of the Fund Prospectus and further in
notes 6 and 16 of the audited Report
and Financial Statements. In summary:
The Annual Management Charge is
0.30% of NAV and 0.40% of the Gross
Asset Value (GAV) of directly held
property and capital monies (made up
of 0.05% of NAV payable to the ACD
and 0.25% of NAV and 0.40% of GAV
payable to the Investment Manager.
The annual management charge is
allocated 50% to income and 50% to
capital.
The Depositary receives 0.0224% per
annum of the first £500m of NAV and
0.0125% of the balance.
The Standing Independent Valuer
will receive an initial fee of 0.03%
of the first valuation of a property
on purchase, capped at £20,000
(continued)
and thereafter a fee of 0.03% of the
valuation per annum.
The Registrar is paid a transaction
based fee subject to a minimum of
£75,000 per annum.
The Investment Manager bears the
cost of employing managing agents
to collect rents and perform the
usual property manager’s duties as
delegated by the Investment Manager.
Bid/Offer spreads
As at 31 March 2014, the offer spread
was 3.99% premium to NAV. The
bid spread was 1.39% discount to
NAV. Our key principles when setting
bid and offer prices are to review
prices regularly, to treat shareholders
equitably and to adopt a consistent
approach.
Our assumption, when calculating
the offer price, is that new money
will be invested in line with strategy,
principally into direct property at full
purchase cost. We make an allowance
for capital expenditure to maintain the
existing portfolio. Capital expenditure
may vary but in normal circumstances
is considered to be a minimum of
10% of new money. The bid price
assumes full sale costs are incurred on
direct assets, while indirect assets are
marked to market. Cash is priced at a
zero spread.
Valuation and Pricing policy
A detailed explanation of our pricing
methodology is contained within the
Prospectus and further information
is available upon request from the
Investment Manager. The Fund
Prospectus, along with the notes to the
financial statements, sets out:
–the methodology used to value the
properties and other investments of
the Fund and
–the valuation of direct properties
having to be undertaken monthly.
It should further be noted that the
Fund’s investment in the Henderson
UK Retail Warehouse Fund is held at
a stale price one month in arrears on
account of the receipt of the NAV of
this investment being received after the
valuation date of the Fund.
For the valuation of the Fund’s
investment in Hercules Unit Trust
and WELPUT, an unadjusted price
is used in accordance with market
practice. For the valuation of the Fund’s
investment in UNITE a capital only
price is taken which is issued by the
UNITE Fund Manager.
AREF Code of Practice
The Fund is a member of the
Association of Real Estate Funds
(AREF). The aim of the Code of
Practice is to achieve high standards of
transparency across the unlisted sector
and promote consistency of reporting
to allow investors to compare different
funds. The Fund completes the AREF/
IPD Pooled Property Questionnaire
each quarter, which is made available
to all investors and which forms the
basis of its entry in IPD Property Fund
Vision handbook. SPF’s page on the
AREF website can be found at http://
www.aref.org.uk/funds/schroder-ukproperty-fund
The Investment Manager believes that
these Report and Financial Statements,
together within supporting documents
referred to herein, achieves the AREF
standard of Best Practice for reporting.
Fund documentation
A copy of all Fund documentation
including the prospectus and regular
reports is available at www.schroders.
com/spf or available from the
Investment Manager upon request.
A copy of Schroders AAF controls
report which has been externally
audited is available from the Investment
Manager upon request.
Schroder UK Property Fund
Report for the Year Ended 31 March 2014
Conflicts of interest
The Investment Manager is responsible
for identifying all conflicts of interest
and for referring such matters to
Schroder Group Compliance or such
other parties in accordance with the
Group’s conflict of interest policy.
Insurance and service charge
rebates
Service charge remuneration employed
by the Investment Manager earned
by the managing agents forms part of
their overall remuneration. Insurance
commission rebates are calculated on
an annual basis and rebates (if any) are
distributed to shareholders.
Disaster recovery
Schroder Group has a disaster
recovery plan which is audited,
externally, on an annual basis as part of
the AAF controls report.
Additional Information
The Fund may be suitable for
professional investors who wish to
hold a direct property portfolio but do
not want to commit the considerable
executive time and expertise necessary
to organise and supervise such a
portfolio and/or are not of a sufficient
size to obtain a viable property portfolio
with an appropriate spread of risk. The
property in the Fund is professionally
and actively managed by chartered
surveyors employed by the Investment
Manager, Schroder Property
Investment Management Limited.
We welcome the opportunity to meet
shareholders, potential shareholders
and their advisers to explain more fully
the strategy and progress of the Fund.
Please contact the Investment
Manager who can also provide copies
of the Prospectus, application forms
and latest share prices, at the address
below.
Schroder UK Property Fund
Schroder Property Investment
Management Limited
31 Gresham Street
London EC2V 7QA
Tel: +44 (0)20 7658 6000
Schroder Property Investment
Management Limited is authorised and
regulated by the Financial Services Authority
Manager Contacts
For general information and queries on
secondary market availability, please
contact:
Olivia Pember
Product Manager
olivia.pember@schroders.com
+44 (0)20 7658 3552
James Lass
Fund Manager
james.lass@schroders.com
+44 (0)20 7658 3980
For valuations, to place trades,
tax reclaims, dividend/distribution
information, please contact the
Registrar:
Northern Trust Global Services Ltd.
Schroder Unit Trusts Limited –
Schroder UK Property Fund PO BOX
3733 Wootton Bassett Swindon
SN4 4BG
Tel: +44 (0) 870 870 8059
Fax: +44 (0) 20 7643 3892
Email: schrodersenquiries@ntrs.com
49
Schroder UK Property Fund
50
Report for the Year Ended 31 March 2014
KEY SERVICE PROVIDERS
Authorised Corporate Director
Schroder Unit Trusts Limited
31 Gresham Street
London
EC2V 7QA
Depositary
National Westminster Bank plc
135 Bishopsgate
London
EC2M 3UR
Investment Manager
Schroder Property Investment
Management Limited
31 Gresham Street
London
EC2V 7QA
Standing Independent Valuers
BNP Paribas Real Estate Advisory
& Property Management Limited
90 Chancery Lane
London
WC2A 1EU
Schroder Unit Trusts Limited and Schroder Property
Investment Management are authorised and
regulated by the FCA.
Allsops LLP
33 Wigmore Street
London
W1U 1BZ
Registrar
Northern Trust Global Services Limited
50 Bank Street
Canary Wharf
E14 5NT
Knight Frank LLP
55 Baker Street
London
W1U 8AN
Legal Adviser
Eversheds LLP
One Wood Street
London
EC2V 7WS
Independent Auditors
PricewaterhouseCoopers LLP
7 More London Riverside
London
SE1 2RT
Property Managers
Jones Lang LaSalle
40 Berkeley Square
Bristol
BS8 1HU
Deloitte Real Estate
Asset and Property Management
Abbots House
Abbey Street
Reading
RG1 3BD
Changes to key service
providers during the year
There were no changes to key service
providers during the year.
The terms of all appointments including
remuneration and termination
provisions can be made available
upon request.
London WC1, Chenies Street
Turner Rise, Colchester
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Authorised and regulated by the Financial Conduct Authority. w45361
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