For professional investors and advisers only. Schroder UK Property Fund Short Form Report. For the Period Ended 31 March 2013

Transcription

1 For professional investors and advisers only Schroder UK Property Fund For the Period Ended 31 March 2013

2 Photography: Monks Cross, York Schroders Group Schroders is a global asset management company with ( 279.7/US$359.2) billion under management at 31 March 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 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.

3 Key InformatIon Summary The Schroder UK Property Fund (SPF or the Fund) is Schroders flagship property fund launched in 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 benchmark 2 over rolling three year periods. It is currently outperforming over one, two and three years. For the first time in its 42 year history 1 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 % Net of Fees month performance to 31 March % Net of Fees year years (% p.a.) 3 years (% p.a.) 5 years (% p.a.) 3 Schroder UK Property Fund Benchmark 2 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.

4 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: 1.8 Benchmark: 0.3 Relative: 1.4 Property Total Return SPF: 3.6 Benchmark: 1.4 Relative: 2.1 Income Return SPF: 5.5 Benchmark: 6.0 Relative: -0.5 Capital Growth SPF: -1.8 Benchmark: -4.3 Relative: 2.6 Attribution Relative Return: Structure Score SPF: 0.9 Attribution Relative Return: Property Score SPF: 1.1 Rental Value Growth Yield Impact SPF: -0.6 Benchmark: -0.7 Relative: 0.2 SPF: -1.3 Benchmark: -3.3 Relative: 2.1 Held Purchased Development Sold Indirect SPF: 1.5 SPF: n/a SPF: -0.1 SPF: 0.5 SPF: 0.2 Source: IPD, 31 March 2013 Components of property total return: SPF vs Benchmark % SPF Bmk SPF Bmk SPF Bmk SPF Bmk SPF Bmk Retail Office Other All Property Income Return Rental Growth Yield Impact Total Return Source: IPD, 31 March 2013

5 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 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 % 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 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.

6 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 Financial Information Gross Asset Value (GAV) 1,285.0m 1,321.7m Net Asset Value (NAV) 1,228.0m 1,248.2m NAV per share/unit Number of shares/units in issue 38,389,736 38,185,964 Gross annual distribution per share/unit Distribution yield 2 4.0% 4.1% Total Net asset value of scheme property 3 1,153.9m 1,207.8m Highest price per unit in the period 1 August 2012 to 31 March n/a Lowest price per unit in the period 1 August 2012 to 31 March n/a Portfolio Details Gearing (% NAV) 4 5.0% 6.1% Average unexpired lease length Years 7.4 Years Void rate 6 8.5% 7.6% Benchmark void rate 6 9.1% 7.8% Net initial yield 7 5.6% 5.4% Reversionary yield 7 6.8% 6.8% Performance Annual Total Return 8 1.8% 6.4% Benchmark Total Return 0.3% 5.3% Fund total expense ratio Total Expense Ratio % 0.81% Liquidity Annual number of shares/unit subscriptions ,772 96,766 Annual value of subscriptions 10 6,856,246 3,309,437 Annual number of shares/units redeemed ,340 Annual value of shares/units redeemed ,597,516 Annual number of shares/units matched on the secondary market 12 3,334,793 1,601,732 Annual value of shares/units matched on the secondary market ,604,373 50,665,773 1 For the 8 month period to 31 March 2013, the gross distribution per share was Total 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% 3 The net asset value of the scheme property represents the valuations as provided by the independent standing valuers and does not include rent incentive adjustments. 4 Gearing is reported on a look through basis during the period under review. All debt was held in indirect investments during the period. 5 To first break or expiry, whichever is sooner. 6 Expressed as a % of open market rental value. 7 Includes all directly held properties, all joint ventures plus the quoted initial yield on the indirect funds. Excludes land and development. 8 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 Total 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%. 10 For the 8 month period to 31 March 2013 the number of share subscriptions was 203,772 with a value of 6.9m. 11 For the 8 month period to 31 March 2013 the number of shares redeemed was nil with a nil value. 12 For 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.

7 Schroder UK Property Fund Davidson House, Reading.

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 Exeter High Street Bristol Maggs House* Shipley Market Square* Stanmore Buckingham House, The Broadway* Woodley Crockhamwell Road* Dunfermline Duloch Park District Centre* Birmingham High Street, Harborne* Enfield London Road* Kingston Upon Thames 167/181 Clarence Street Sector Market Value 000 at 31 March 2013 Total net assets % London SW Upper Richmond Road, East Sheen* Bracknell Bracknell Beeches Reading New Century Place Slough Capital Point, 33 Bath Road Cranford Europa House, Bath Road London WC2 53 Parker Street Dunstable Chiltern Park Dunstable Arenson Centre Birmingham Deykin Avenue Cannock Walkmill Lane, land site Livingston Limefields, land sites London UB6 Greenford, land site York Alexandra Court, James Street Hartlepool Jacksons Landing, land site Other leisure Croydon Car Park Other car park Total Market Value up to 10m 127, % Direct properties between 10m and 25m Loughton High Road* Southsea 2-42 Palmerston Road* Ipswich Interchange Retail Park Retail Warehouse Colchester Hythe Riverside Park Retail Warehouse Colchester Turner Rise Retail Warehouse Croydon AMP House London WC2 Craven House, Kingsway London EC1 4-7 Chiswell Street London EC2 11/12 Appold Street London EC3 Lombard Street London N1 Shepherdess Walk Frimley Albany Park Retail Warehouse London UB6 Greenford Woking Woking Business Park Welwyn Garden City Quadrant Park Total Market Value between 10m and 25m 212, % *Properties valued by Allsop LLP All direct properties not asterixed are valued by BNP Paribas Real Estate.

9 Audited Short Form Consolidated Report Financial Statements 31 March 2013 Portfolio statement (continued) Direct Properties Sector Market Value 000 at 31 March 2013 Total net assets % 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 Manchester Fujitsu Office Complex Rest of UK Office Reading Davidson house London SE1 Palace House London W14 Kensington Village London W Dean Street Crayford Acorn Estate Hackbridge Felnex Trading Estate London E16 Electra, Canning Town London NW10 Matrix, Park Royal Cardiff Mermaid Quay Other leisure Total Market Value between 25m and 50m 517, % Direct properties greater than 50m London W4 Building 8, Chiswick Park Total Market Value greater than 50m 60, % Total Direct Properties 918, % Joint Ventures Bracknell Regeneration Partnership Retail 63,796 London E14 West India Quay Other leisure 29,000 Motor Retail LP Standard retail 24,926 Bracknell Eagle House 1 Office 1,536 Sutton Kimpton Estate 1,378 Total Joint Ventures 120, % Collective Investment Schemes West End of London Property Unit Trust (WELPUT) 39,259 Hercules Unit Trust (HUT) Retail Warehouse 27,804 UNITE UK Student Accommodation Fund Other student accommodation 16,748 Henderson UK Retail Warehouse Fund (HRWF) Retail Warehouse 13,634 City of London Office Unit Trust (CLOUT) 545 Austral House Unit Trust (AHUT) Basinghall Street Unit Trust (BSUT) 1 84 Total Collective Investment Schemes 98, % Portfolio of investments 1,137, % Net other assets (including cash) 90, % Net Assets 1,228, % 1 These investments are in the process of being wound up.

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 90.9 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 period 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 Schroder UK Property Fund West India Quay, London.

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. w43814