For professional investors and advisers only. Schroder UK Property Fund Short Form Report. For the Year Ended 31 March 2014

Transcription

1 For professional investors and advisers only For the Year Ended 31 March 2014

2 Chenies Street, London WC1 SCHRODERS GROUP Schroders is a global asset management company with billion under management at 31 March 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 Schroder Property Investment Management Limited is the Investment Manager of the. 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.

3 KEY INFORMATION SUMMARY The (SPF or the Fund) is Schroders flagship property fund launched in 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 benchmark 1 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 month performance to 31 March % Net of Fees % Net of Fees year 2 years (% p.a.) 3 years (% p.a.) 5 years (% p.a.) 10 years (% p.a.) Benchmark 1 Benchmark 1 Source: Schroders/AREF/IPD UK Quarterly Property Fund Index, 31 March 2014 Past performance is not a guide to future returns. 1 Benchmark is the AREF/IPD UK Quarterly Property Fund Index All Balanced Property Fund Index Weighted Average.

4 REVIEW OF INVESTMENT ACTIVITIES In the twelve months to end March 2014, SPF outperformed its benchmark, All Balanced Funds in the IPD UK Pooled Fund Indices, by 1.2%. It was also ahead of benchmark over the last three and five years. The below diagram provides a summary of performance attribution over the twelve months to March Components of SPF s property total return: Trust Total Return SPF: 13.1 Benchmark: 11.9 Relative: 1.2 Property Total Return SPF: 14.8 Benchmark: 13.0 Relative: 1.8 Income Return SPF: 6.0 Benchmark: 5.9 Relative: 0.1 Capital Growth SPF: 8.4 Benchmark: 6.7 Relative: 1.7 Attribution Relative Return: Structure Score SPF: 0.9 Attribution Relative Return: Property Score SPF: 0.7 Rental Value Growth SPF: 2.3 Benchmark: 1.3 Relative: 1.0 Yield Impact SPF: 7.8 Benchmark: 6.8 Relative: 1.0 Held SPF: 1.4 Purchased SPF: -0.7 Development Sold SPF: 1.4 Indirect SPF: 0.4 SPF: -0.7 Source: IPD, 31 March 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.

5 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. 2.5 Property Structure St Retails South East St Retails Rest of UK Shopping Centres Retail Warehouses Offices City Offices West End Offices South East Offices Rest of UK s South East s Rest of UK Other Commercial All property Hartlebury Trading Estate, Worcestershire

6 KEY INFORMATION Portfolio Profile For the year to 31 March 2014, the Fund had two share classes: net and gross. These classes have price parity and the summary information in the table below applies to both class of shares. As at/for the year to 31 March 2014 As at/for the period to 31 March 2013 Financial Information Gross Asset Value (GAV) 1,514.4m 1,285.0m Net Asset Value (NAV) 1,489.5m 1,228.0m NAV per share Number of shares in issue 42,954, ,389, Gross annual distribution per share Distribution yield 4.1% 4.0% Total NAV of scheme property 1,432.7m 1,153.9m Highest price per share in the year Lowest price per share in the year Portfolio Details Gearing (% NAV) 2.8% 5.0% 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% Performance Annual Total Return 13.1% 1.8% Benchmark Total Return 11.9% 0.3% Fund Total Expense Ratio Total Expense Ratio 0.81% 0.86% Liquidity Annual number of shares subscription 4,564, ,772 Annual value of subscriptions 158,190,836 6,856,246 Annual number of shares redeemed 0 0 Annual value of shares redeemed 0 0 Annual number of shares matched on the secondary market 5,105,510 3,334,793 Annual value of shares matched on the secondary market 169,520, ,604,373

7 Battersea Studios, Battersea

8 Schroder UK UK Property Fund Fund Short Audited Form Consolidated Report Financial Statements 31 March 2013 PORTFOLIO STATEMENT Direct Properties Direct Properties up to 10m Bristol Maggs House Stanmore Buckingham House, The Broadway Shipley Market Square Loughton High Road Woodley Crockhamwell Road London W1 Dean Street London SW Upper Richmond Road, East Sheen Dunfermline Duloch Park District Centre Birmingham High Street, Harborne Enfield London Road Kingston Upon Thames 167/181 Clarence Street Bracknell Bracknell Beeches Reading New Century Place Dunstable Arenson Centre Dunstable Chiltern Park Sutton Kimpton Estate London UB6 Greenford Sutton Teesland Site B Birmingham Deykin Avenue Livingston Limefields, land site York Alexandra Court, James Street London UB6 Greenford, land site Cannock Walkmill Lane, land site Livingston Limefields, 2nd land site Ipswich Asterbury Place Great Heath Mildenhall Lowestoft Roman Hill Haverhill Chalkstone Framlingham Mills Meadow Croydon Car Park Sector South East Office South East Office Other care homes Other care homes Other care homes Other care homes Other care homes Other car park Market Value 000 at 31 March 2014 Total Net assets % Market Value 000 at 31 March 2013 Total Net assets % Total Market Value up to 10m 157, % 127, % Direct Properties between 10m and 25m Loughton High Road Southsea 2-42 Palmerston Road Exeter High Street 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 London EC1 4-7 Chiswell Street London WC2 Craven House, Kingsway London Jubilee House London EC2 11/12 Appold Street London WC2 53 Parker Street Frimley Albany Park Welwyn Garden City Quadrant Park Chatham Maritime Other leisure Total Market Value between 10m and 25m 287, % 212, %

9 Audited Short Form Consolidated Report Financial Statements 31 March 2013 PORTFOLIO STATEMENT (continued) Direct Properties Sector Market Value 000 at 31 March 2014 Total Net assets % Market Value 000 at 31 March 2013 Total Net assets % Direct Properties between 25m and 50m York Monks Cross Truro Lemon Quay 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 London Battersea London Chenies St London N1 Shepherdess Walk Manchester Fujitsu, Central Park Rest of UK Office Cardiff St William House Rest of UK Office London NW10, Matrix, Park Royal Wolverhampton, Steel Park London E16 Electra, Canning Town Hackbridge Felnex Trading Estate Woking Woking Business Park Total Market Value between 25m and 50m 614, % 517, % Direct Properties greater than 50m Crayford Acorn Estate Hartlebury Trading Estate Cardiff Mermaid Quay Other leisure Total Market Value greater than 50m 159, % 60, % Total Direct Properties 1,218, % 918, % Joint Ventures Motor Retail LP Standard retail 27, % 24,926 Bracknell Regeneration Partnership Retail 67, % 63,796 Bracknell Eagle House Office 1,536 Sutton Kimpton Estate 1,378 London E14 West India Quay Other leisure 29, % 29,000 Total Joint Ventures 125, % 120, % Collective Investment Schemes Hercules Unit Trust (HUT) Retail Warehouse 27,804 Henderson UK Retail Warehouse Fund (HRWF) Retail Warehouse 14, % 13,634 West End of London Property Unit Trust (WELPUT) 49, % 39,259 City of London Office Unit Trust (CLOUT) % 545 Austral House Unit Trust (AHUT) 294 Basinghall Street Unit Trust (BSUT) 84 UNITE UK Student Accommodation Fund Other student accommodation 18, % 16,748 Total Collective Investment Schemes 82, % 98, % Portfolio of investments 1,426, % 1,137, % Net other assets (including cash) 62, % 90, % Net Assets 1,489, % 1,228, %

10 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. 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. 4. Reserve the right to defer payment of redemptions. (c) Currency risk All financial assets and financial liabilities of the Fund are in Sterling, thus the Fund has no exposure to currency risk at the balance sheet date. (d) Interest rate risk The Fund has the ability to access debt facilities, but did not have any debt facilities during the period. The Fund held 80.9 million of consolidated cash at the end of the period and this is exposed to interest rate risk. REPORT & ACCOUNTS This document is a short report for the Schroder UK Property fund for the year ended 31 March The long form Report & Accounts for the fund are available on our website www. schroders.co.uk/spf or uponrequest to the Investment Manager KEY SERVICE PROVIDERS Authorised Corporate Director Schroder Unit Trusts Limited 31 Gresham Street London EC2V 7QA Investment Manager Schroder Property Investment Management Limited 31 Gresham Street London EC2V 7QA Schroder Unit Trusts Limited and Schroder Property Investment Management are authorised and regulated by the FCA.

11 London WC1, Chenies Street

12 S C H R O D E R U K P R O P E R T Y F U N D Issued in April 2013 by Schroder Investment Management Limited, 31 Gresham Street, London EC2V 7QA which is authorised and regulated by the Financial Conduct Authority. w45710