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For professional investors and advisers only

Schroder UK Property Fund

Short Form Report

For the Year Ended 31 March 2014

SCHRODERS GROUPSchroders 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 MANAGEMENTSchroders 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.

Chenies Street, London WC1

Schroder UK Property FundShort Form Report

KEY INFORMATION SUMMARY

The Schroder UK Property Fund (SPF or the Fund) is Schroders’ fl agship property fund launched in 1971. It provides investors with diversifi ed 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 fi ve years.

The Fund is available to a broad range of domestic and international professional investors seeking to benefi t from Schroders’ expertise.

Schroder UK Property Fund Benchmark1

0

3

6

9

12

15

5 years (% p.a.)

10 years (% p.a.)

3 years (% p.a.)

2 years (% p.a.)

1 year

% Net of Fees

13.1

11.9

7.3

6.07.0

5.7

8.07.5

4.2 4.2

BenchmarkSchroder UK Property Fund 1

% Net of Fees

1.80.3

13.1

11.9

1.8

0.3

6.45.3

10.2

8.8 8.7

11.5

20142013

20122011

2010

0

3

6

9

12

15

Source: Schroders/AREF/IPD UK Quarterly Property Fund Index, 31 March 2014Past 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.

Fund performance to 31 March 2014 12 month performance to 31 March

PERFORMANCE


REVIEW OF INVESTMENT ACTIVITIES

In the twelve months to end March 2014, SPF outperformed its benchmark, All Balanced Funds in the IPD UK Pooled Fund Indices, by 1.2%. It was also ahead of benchmark over the last three and five years. The below diagram provides a summary of performance attribution over the twelve months to March 2014.

Components of SPF’s property total return:

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.

Trust Total Return

SPF: 13.1Benchmark: 11.9Relative: 1.2

Income Return


Rental Value Growth


Yield Impact


Held

SPF: 1.4

Purchased

SPF: -0.7

Development

SPF: -0.7

Sold

SPF: 1.4

Indirect

SPF: 0.4

Capital Growth


Attribution RelativeReturn:

Structure Score

SPF: 0.9

Attribution RelativeReturn:

Property Score

SPF: 0.7

Property Total Return


Source: IPD, 31 March 2014. Numbers have been rounded to one decimal place.


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.

StructureProperty

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1.5

1

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– C

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Offi

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– W

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Offi

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– S

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– R

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f UK

Indu

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All

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Hartlebury Trading Estate, Worcestershire


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 £34.68 £31.99

Number of shares in issue 42,954,451.32 38,389,736.00

Gross annual distribution per share £1.575009 £1.278533

Distribution yield 4.1% 4.0%

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

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 4,564,724 203,772

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 £169,520,500 £100,604,373


Battersea Studios, Battersea


Schroder UK Property FundAudited Consolidated Financial Statements 31 March 2013

PORTFOLIO STATEMENT

Direct Properties Sector

Market Value £’000 at

31 March 2014Total Net assets %



Direct Properties up to £10mBristol – 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 157,675 10.6% 127,815 10.4%

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 Other – leisure

Total Market Value between £10m and £25m Industrial 287,089 19.3% 212,340 17.3%


Schroder UK Property FundAudited Consolidated Financial Statements 31 March 2013

Direct Properties Sector





Direct Properties between £25m and £50m

York – Monks Cross Standard Retail

Truro – Lemon Quay 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 614,075 41.2% 517,400 42.1%

Direct Properties greater than £50m

Crayford – Acorn Industrial Estate Industrial

Hartlebury – Trading Estate Industrial

Cardiff – Mermaid Quay Other – leisure

Total Market Value greater than £50m 159,625 10.7% 60,675 4.9%

Total Direct Properties 1,218,464 81.8% 918,230 74.8%

Joint Ventures

Motor Retail LP Standard retail 27,791 1.9% 24,926

Bracknell Regeneration Partnership Retail 67,721 4.5% 63,796

Bracknell – Eagle House Office – – 1,536

Sutton – Kimpton Industrial Estate Industrial – – 1,378

London E14 – West India Quay Other – leisure 29,900 2.0% 29,000

Total Joint Ventures 125,412 8.4% 120,636 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

UNITE UK Student Accommodation FundOther – student

accommodation18,424 1.2% 16,748

Total Collective Investment Schemes 82,862 5.6% 98,368 8.0%

Portfolio of investments 1,426,738 95.8% 1,137,234 92.6%

Net other assets (including cash) 62,722 4.2% 90,810 7.4%

Net Assets 1,489,460 100.0% 1,228,044 100.0%

PORTFOLIO STATEMENT (continued)


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 & ACCOUNTSThis document is a short report for the Schroder UK Property fund for the year ended 31 March 2014. The long form Report & Accounts for the fund are available on our website www.schroders.co.uk/spf or uponrequest to the Investment Manager

KEY SERVICE PROVIDERSAuthorised Corporate DirectorSchroder Unit Trusts Limited 31 Gresham Street London EC2V 7QA

Investment ManagerSchroder 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.


London WC1, Chenies Street


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

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