For professional investors and advisers only
Schroder UK Property Fund
Short Form Report
For the Period Ended 31 March 2013
Schroder UK Property Fund
Short Form Report
Photography: Monks Cross, York
Schroders Group
Schroders is a global asset management company with
£236.5 (€279.7/US$359.2) billion under management at
31 March 2013. Our clients include corporations, insurance
companies, local and 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 £10.5 (€12.4/US$15.9) billion under management
at 31 March 2013. Schroder Property Investment
Management Limited is the Investment Manager of the
Schroder UK Property Fund.
Our property team employs around 100 people across nine
European offices. We manage a broad range of open and
closed ended property funds offering investors exposure to
both diversified and sector focused portfolios.
Schroder UK Property Fund
Short Form Report
Key InformatIon
Summary
The Schroder UK Property Fund (SPF or the Fund) is
Schroders’ flagship property fund launched in 19711. It
provides investors with diversified exposure to over £1.2
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
benchmark2 over rolling three year periods. It is currently
outperforming over one, two and three years.
For the first time in its 42 year history1 it is available to a
broad range of domestic and international professional
investors seeking to benefit from Schroders’ expertise.
performance
Fund performance to 31 March 2013
12 month performance to 31 March
% Net of Fees
% Net of Fees
7
15
6.1
6
5
4.7
5
4.1
4
0
2.8
3
2
10.2 8.8
10
1.8
8.7
11.5
5.3
0.3
-5
1.8
1
6.4
-10
-15
0.3
0
-20
-1
-25
-1.4
-2
-27.3
-30
-2.0
-3
-30.4
-35
09
20
10
20
11
20
3
13
a
ye
rs
rs
a
ye
12
20
20
5
3
rs
a
ye
3
ar
ye
2
1
(%
(%
(%
a.
)
)
)
Benchmark 2
p.
a.
p.
a.
p.
Schroder UK Property Fund
Schroder UK Property Fund
Benchmark 2
Source: Schroders/AREF/IPD UK Quarterly Property Fund Index, 31 March 2013
Past performance is not a guide to future returns.
1 Prior to the fund’s conversion to a Property Authorised Investment Fund (PAIF) on 31 July 2012, the Fund was known as the Schroder Exempt Property Unit Trust.
2 Benchmark shown is the AREF/IPD UK Quarterly Property Fund Index – All Balanced Property Fund Index Weighted Average, The Fund benchmark has changed
over time and a composite for 10 years is available upon request. Performance is calculated on a net asset value (NAV) to NAV price basis plus income distributed,
compounded monthly, net of fees and based on an unrounded NAV per share.
3 From 31 March 2012 to 31 July 2012 Schroder Exempt Property Unit Trust returned 0.7%. From 1 August 2012 to 31 March 2013 Schroder UK Property Fund
returned 1.1%. The composite return of these two time periods before and after conversion to a PAIF is 1.8%, which is the quoted annual return for the Fund to end
March 2013.
Schroder UK Property Fund
Short Form Report
Review of Investment
Activities
In the twelve months to end March 2013 SPF outperformed its benchmark, All Balanced
Funds in the IPD UK Pooled Fund Indices, by +1.4%. It was also ahead of benchmark
over the last two and three year periods. Performance can be broken down and analysed
in a variety of ways and the following performance tree, produced independently by IPD,
summarises each of these:
Components of SPF’s property total return
Trust Total Return
SPF:
Benchmark:
Relative:
Income Return
SPF:
Benchmark:
Relative:
SPF:
Benchmark:
Relative:
Rental Value Growth
-0.6
-0.7
0.2
Held
SPF:
SPF:
Benchmark:
Relative:
Capital Growth
5.5
6.0
-0.5
SPF:
Benchmark:
Relative:
Property Total Return
1.8
0.3
1.4
1.5
3.6
1.4
2.1
Attribution Relative
Return:
Structure Score
-1.8
-4.3
2.6
SPF:
Attribution Relative
Return:
Property Score
SPF:
0.9
1.1
Yield Impact
SPF:
Benchmark:
Relative:
-1.3
-3.3
2.1
Purchased
Development
SPF:
n/a
SPF:
-0.1
Sold
SPF:
0.5
Indirect
SPF:
0.2
Source: IPD, 31 March 2013
Components of property total return: SPF vs Benchmark %
15.0
10.0
5.0
0.0
-5.0
-10.0
SPF
Bmk
SPF
Retail
Income Return
Source: IPD, 31 March 2013
Bmk
SPF
Office
Bmk
SPF
Industrial
Rental Growth
Yield Impact
Bmk
Other
SPF
Bmk
All Property
Total Return
Schroder UK Property Fund
Short Form Report
Income: SPF’s income return was below benchmark by 0.5%, the initial yield is also similarly
below benchmark. Segments where the Fund are significantly below benchmark are South
East offices and rest of UK industrials. During the year one of the vacant industrial units at
Deykin avenue was sold; after year end Hartlebury Industrial Estate was purchased yielding
circa 10% which should re-align this segment with benchmark. South East offices are
skewed by the QVC building on Chiswick Park, which is in a “half rent” rent free period and
yields 3.8%. The total return of this asset has, however, compensated for the low income
return.
Rental Growth: On average SPF rents fell marginally over the year, however, they fell less
than benchmark. They were held up by stronger than average rental growth in City offices, in
particular, Shepherdess Walk benefitted from the strong market of “Silicon Roundabout.” The
rest of UK office rental values held firm, compared to falls in the benchmark. Other also saw
stronger than average rental growth, this was due to the re-letting and rent review activity at
Mermaid Quay, Cardiff which resulted in a re-rating across the scheme.
Yield movement: SPF yields rose less than those in the benchmark, due to the Fund
having more prime assets than average, yields on prime assets having risen (values fallen)
less than more secondary assets. SPF’s structural skew to Central London and South East
offices and industrial is proving to be defensive. As at March 2013 SPF’s equivalent yield was
6.7% compared to 7.6% in the benchmark.
Attribution of SPF’s property total return %
Property
Structure
2.5
2
1.5
1
0.5
0
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
SPF benefitted from a positive score for both structure and stock selection (property). The
positive structure score was almost entirely down to our under weight position to shopping
centres, the worst performing segment of the market. From a stock selection point of
view our retail warehouses under performed the rest of the Fund, due to the fashion park
exposure through Monks Cross, York and the indirect investments in Hercules Unit Trust and
the Henderson Retail Warehouse Fund. The other retail warehouses performed well, but not
strong enough to out weigh the fashion park effect.
Overall, positive contributions to outperformance from both structure and property
demonstrates an effective investment process with both Top Down research and Bottom Up
stock selection and asset management dovetailing well over the last 12 months.
Schroder UK Property Fund
Short Form Report
Key Information
Portfolio Profile
Performance numbers prior to 1 August 2012 relate to the Schroder Exempt Property Unit
Trust which was converted to Schroder UK Property Fund.
As at/For the
period to
31 March 2013
As at/For the
period to
31 March 2012
Gross Asset Value (GAV)
£1,285.0m
£1,321.7m
Net Asset Value (NAV)
£1,228.0m
£1,248.2m
£31.99
£32.69
Number of shares/units in issue
38,389,736
38,185,964
Gross annual distribution per share/unit1
£1.278533
£1.340935
Financial Information
NAV per share/unit
Distribution yield2
4.0%
4.1%
£1,153.9m
£1,207.8m
Highest price per unit in the period 1 August 2012 to 31 March 2013
£32.48
n/a
Lowest price per unit in the period 1 August 2012 to 31 March 2013
£31.99
n/a
5.0%
6.1%
Total Net asset value of scheme property3
Portfolio Details
Gearing (% NAV)4
Average unexpired lease length
7.1 Years
7.4 Years
Void rate6
8.5%
7.6%
Benchmark – void rate6
9.1%
7.8%
Net initial yield7
5.6%
5.4%
Reversionary yield7
6.8%
6.8%
Annual Total Return8
1.8%
6.4%
Benchmark Total Return
0.3%
5.3%
0.86%
0.81%
5
Performance
Fund total expense ratio
Total Expense Ratio9
Liquidity
Annual number of shares/unit subscriptions10
Annual value of subscriptions10
Annual number of shares/units redeemed11
Annual value of shares/units redeemed11
Annual number of shares/units matched on the secondary market12
Annual value of shares/units matched on the secondary market
12
1For the 8 month period to 31 March 2013, the gross distribution per share
was £0.837070.
2Total distributions paid per share over last 12 months, divided by latest NAV
per share. Calculated gross of tax and net of all fees, expenses and liabilities
(actual, estimated or contingent). For the 8 month period to 31 March 2013
the annualised distribution yield was 3.9%
3The net asset value of the scheme property represents the valuations as
provided by the independent standing valuers and does not include rent
incentive adjustments.
4Gearing is reported on a look through basis during the period under review. All
debt was held in indirect investments during the period.
5To first break or expiry, whichever is sooner.
6Expressed as a % of open market rental value.
7Includes all directly held properties, all joint ventures plus the quoted initial
yield on the indirect funds. Excludes land and development.
203,772
96,766
£6,856,246
£3,309,437
0
528,340
£0
£16,597,516
3,334,793
1,601,732
£100,604,373
£50,665,773
8From 31 March 2012 to 31 July 2012 Schroder Exempt Property Unit Trust
returned 0.7%. From 1 August 2012 to 31 March 2013 Schroder UK Property
Fund returned 1.1%. The composite return of these two time periods before
and after conversion to a PAIF is 1.8%, which is the quoted annual return for
the Fund to end March 2013.
9Total Expense Ratio, as defined by the Association of Real Estate Funds, as %
NAV. For the 8 month period to 31 March 2013, the TER was 0.86%.
10For the 8 month period to 31 March 2013 the number of share subscriptions
was 203,772 with a value of £6.9m.
11For the 8 month period to 31 March 2013 the number of shares redeemed was
nil with a nil value.
12For the 8 month period to 31 March 2013 the number of shares matched on
the secondary market was 2,658,650 with a value of £79.2m.
Schroder UK Property Fund
Short Form Report
Davidson House, Reading.
Schroder
UK
Property
Fund
Schroder
UK
Property
Fund
Short
FormConsolidated
Report
Audited
Financial Statements 31 March 2013
Portfolio statement
Direct Properties
Sector
Market
Value
£’000 at
31 March
2013
Total net
assets
%
127,815
10.4%
212,340
17.3%
Direct properties up to £10m
Exeter – 232–240 High Street
Standard Retail
Bristol – Maggs House*
Standard Retail
Shipley – 20-40 Market Square*
Standard Retail
Stanmore – Buckingham House, The Broadway*
Standard Retail
Woodley – 81-107 Crockhamwell Road*
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
London SW14 – 270-282 Upper Richmond Road,
East Sheen*
Standard Retail
Bracknell – Bracknell Beeches
South East Office
Reading – New Century Place
South East Office
Slough – Capital Point, 33 Bath Road
South East Office
Cranford – Europa House, Bath Road
London WC2 – 53 Parker Street
South East Office
Central London Office
Dunstable – Chiltern Park
Industrial
Dunstable – Arenson Centre
Industrial
Birmingham – Deykin Avenue
Industrial
Cannock – Walkmill Lane, land site
Industrial
Livingston – Limefields, land sites
Industrial
London UB6 – Greenford, land site
Industrial
York – Alexandra Court, James Street
Industrial
Hartlepool – Jacksons Landing, land site
Other – leisure
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
Ipswich – Interchange Retail Park
Retail Warehouse
Colchester – Hythe Riverside Park
Retail Warehouse
Colchester – Turner Rise
Retail Warehouse
Croydon – AMP House
South East Office
London WC2 – Craven House, 117-123 Kingsway
Central London Office
London EC1 – 4-7 Chiswell Street
Central London Office
London EC2 – 11/12 Appold Street
Central London Office
London EC3 – Lombard Street
Central London Office
London N1 – Shepherdess Walk
Central London Office
Frimley – Albany Park
Retail Warehouse
London UB6 – Greenford
Industrial
Woking – Woking Business Park
Industrial
Welwyn Garden City – Quadrant Park
Industrial
Total Market Value between £10m and £25m
*Properties valued by Allsop LLP
All direct properties not asterixed are valued by BNP Paribas Real Estate.
Schroder UK Property Fund
Short Form
Report Financial Statements 31 March 2013
Audited
Consolidated
Portfolio statement
(continued)
Direct Properties
Sector
Market
Value
£’000 at
31 March
2013
Total net
assets
%
517,400
42.1%
60,675
4.9%
918,230
74.8%
Direct properties between £25m and £50m
Norwich – Hall Road Retail Park
Retail Warehouse
York – Monks Cross
Retail Warehouse
Cardiff – St William House
Rest of UK Office
Croydon – Gateway Site
South East Office
Manchester – Fujitsu Office Complex
Rest of UK Office
Reading – Davidson house
South East Office
London SE1 – Palace House
South East Office
London W14 – Kensington Village
Central London Office
London W1 – 81-82 Dean Street
Central London Office
Crayford – Acorn Industrial Estate
Industrial
Hackbridge – Felnex Trading Estate
Industrial
London E16 – Electra, Canning Town
Industrial
London NW10 – Matrix, Park Royal
Cardiff – Mermaid Quay
Industrial
Other – leisure
Total Market Value between £25m and £50m
Direct properties greater than £50m
London W4 – Building 8, Chiswick Park
Total Market Value greater than £50m
South East Office
Total Direct Properties
Joint Ventures
Bracknell Regeneration Partnership
Retail
63,796
London E14 – West India Quay
Other – leisure
29,000
Motor Retail LP
Standard retail
24,926
Office
1,536
Bracknell – Eagle House1
Sutton – Kimpton Industrial Estate
Industrial
Total Joint Ventures
1,378
120,636
9.8%
Collective Investment Schemes
West End of London Property Unit Trust (WELPUT)
Central London Office
39,259
Retail Warehouse
Other – student
accommodation
Retail Warehouse
27,804
13,634
City of London Office Unit Trust (CLOUT)
Central London Office
545
Austral House Unit Trust (AHUT)1
Central London Office
294
Basinghall Street Unit Trust (BSUT)1
Central London Office
Hercules Unit Trust (HUT)
UNITE UK Student Accommodation Fund
Henderson UK Retail Warehouse Fund (HRWF)
Total Collective Investment Schemes
Portfolio of investments
Net other assets (including cash)
Net Assets
1 These investments are in the process of being wound up.
16,748
84
98,368
8.0%
1,137,234
92.6%
90,810
7.4%
1,228,044
100.0%
Schroder UK Property Fund
Short Form Report
Investment
Objective &
Policy
The investment objective of the Fund
is to carry on Property Investment
Business and to manage cash raised
from investors for investment in the
Property Investment Business, with the
intention of achieving a blend of income
and capital growth. The Fund’s target
return is to achieve 0.5 per cent per
annum (net of all fees and expenses)
above the benchmark over rolling
three year periods. The Fund will seek
to diversify risk by holding a mixed
portfolio of retail, office, industrial and
other property throughout the UK.
Risk Profile
(a)Market risk and valuations
of property
The exposure to market risk arising
from the prevailing general economic
conditions and market sentiment, may
affect the balance sheet and total return
of the Fund. Immovable property and
immovable property-related assets
are inherently difficult to value due to
the individual nature of each property.
As a result, valuations are subject to
uncertainty and are a matter of an
independent valuers’ opinion. There
is no assurance that the estimates
resulting from the valuation process will
reflect the actual sales price even where
a sale occurs shortly after the valuation
date.
Market risk is minimised through
holding a geographically diversified
portfolio that invests across various
property sectors. The Manager adheres
to the investment guidelines and
investment and borrowing powers
established in the Prospectus, scheme
particulars and in the rules governing
the operation of open ended investment
companies.
(b) Credit and liquidity risk
The Fund can be exposed to credit risk
arising from the possibility that another
party fails to fulfil its obligations and
liquidity risk surrounding its capacity to
meet its liabilities.
Report &
Accounts
This document is a short report for
the Schroder UK Property fund for the
period ended 31 March 2013. The
long form Report & Accounts for the
fund are available on our website www.
schroders.co.uk/spf or uponrequest to
the Investment Manager
Investments in immovable property are
relatively illiquid and more difficult to
realise than most equities or bonds. If
an asset cannot be liquidated in a timely
manner then it may be harder to attain
a reasonable price. The liquidity risk,
derived from the liability to shareholders,
Authorised Corporate Director
is minimised through holding cash
Schroder Unit Trusts Limited
which can meet the usual requirements
31 Gresham Street
of share redemptions.
London
The Investment Manager’s policy for
EC2V 7QA
managing this risk is to:
Investment Manager
1.Operate a strict share redemption
Schroder Property Investment
policy such that shareholders may
Management Limited
only serve notice to redeem at the
31 Gresham Street
end of each quarter.
London
EC2V 7QA
2.Raise sufficient cash resources
within
Schroder Unit Trusts Limited and
the Fund to finance a limited
Schroder Property Investment
number of redemptions.
Management are authorised and
regulated by the FCA.
3.Review the need for and maintain
as appropriate a borrowing facility.
Key Service
providers
4.Reserve the right to defer payment
of redemptions.
(c)Currency risk
All financial assets and financial liabilities
of the Fund are in Sterling, thus the
Fund has no exposure to currency risk
at the balance sheet date.
(d) Interest rate risk
The Fund has the ability to access
debt facilities, but did not have any
debt facilities during the period. The
Fund held £90.9 million of consolidated
cash at the end of the period and this is
exposed to interest rate risk.
Schroder UK Property Fund
Short Form Report
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