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For professional investors and advisers only

Schroder UK Property Fund

Report and Audited Consolidated Financial StatementsFor 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 FundReport for the Year Ended 31 March 2014

1

CONTENTS

03 Key Information Summary*

07 Fund Manager’s Report* Market Overview Performance Analysis Investment Strategy Review of Portfolio Activity

24 Report of the Authorised Corporate Director and statement of responsibilities*

25 Investment Manager’s Statement of Responsibility

26 Independent Property Valuers’ Reports

28 Depositary’s Report and Statement of Responsibilities

30 Portfolio Statement*

32 Independent Auditors’ Report

34 Statement of Total Return

34 Statement of Change in Net Assets Attributable to Shareholders

35 Balance Sheet

35 Cash Flow Statement

36 Notes to the Financial Statements

46 Unaudited General Information

50 Key Service Providers*

*Collectively these comprise the Authorised Corporate Director’s Report


2

Battersea Studios, Battersea


3

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.

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


4

Scotland

North East

Yorkshire andHumberside

NorthWest

Wales

EastMidlands

South EastSouth West

Greater London

Retail – 28.4% GAV

Offices – 35.0% GAV

Industrial – 23.1% GAV

Other property and cash – 13.6% GAV

t

st

MMMMMMMMM

mbersi

sWest Midlands

East Anglia

tetGreatt

A PORTFOLIO DIVERSIFIED ACROSS THE UK1

1 Map 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.

KEY INFORMATION SUMMARY (continued)


5

High quality and diversified assets

Top 10 largest holdings

Holding Sector NAV %

Bracknell Regeneration Partnership2 Retail and Office 4.5%

Crayford, Acorn Industrial Estate Industrial 3.7%

Hartlebury, Trading Estate Industrial 3.7%

Cardiff, Mermaid Quay 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%

London NW10, Matrix Park Royal Industrial 3.3%

York, Monks Cross Retail Warehouse 3.0%

Truro, Lemon Quay Standard Retail 2.7%

Other assets and cash N/A 65.8%

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

3.8%

3.1%

3.0%

2.3%

2.3%

2.0%

1.8%

1.5%

1.4%

1.3%

77.5%

Pendragon Property Holdings Ltd

Sungard Availability Services (Uk) Ltd

Marks & Spencer Plc

Homebase Ltd

866 other tenants

Tata Steel UK Ltd

Fujitsu Services Limited

Lloyds TSB Bank Plc

Universal Music Operations Ltd

Regus Ltd

B&Q Plc

1

6.8%

6.3%

1.4%

13.8%

16.5%

13.6%

4.9%

16.5%

6.6%

9.7%

3.9%

Offices – Rest of UK

Industrial – South East

Industrial – Rest of UK

Other

Cash

Standard Retail – South East

Standard Retail – Rest of UK

Shopping Centres

Retail Warehouses

Offices – Central London

Offices – South East

Diversified tenant base

Tenant profile % (contracted rent)1

Diversified sector and regional allocation

Segment % GAV1


6

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

KEY INFORMATION SUMMARY (continued)


7

FUND MANAGER’S REPORT

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.

James Lass Fund Manager


8

MARKET OVERVIEWOver 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 MarketThe 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.

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.

FUND MANAGER’S REPORT (continued)

Matrix Park, Park Royal, London


9

Occupational MarketThe 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 re-organise 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 OutlookLooking 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.


10

PERFORMANCE ANALYSISIn 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.


11

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

2.5

2

1.5

1

0.5

0

-0.5

-1

St R

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Sou

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St R

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Sho

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Ret

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Offi

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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

outh

Eas

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Offi

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– R

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f UK

Indu

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Sou

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Indu

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All

prop

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Hartlebury Trading Estate, Worcestershire


12

REVIEW OF PORTFOLIO ACTIVITYThe role of asset managementCareful 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

Cash

Other

Industrials – Rest of UK

Industrials – South East

Offices – Rest of UK

Offices – South East

Offices – West End

Offices – City

Retail Warehouses

Shopping Centres


Standard Retail – South East 0.1%

% gross asset value Underweight Overweight

-0.9%

-3.9%

-4.5%

2.8%

0.2%

4.5%

-0.3%

-5.0%

-1.1%

0.9%

-2.9%


1 Benchmark is the AREF/IPD UK Quarterly Property Fund Index – All Balanced Property Fund Index Weighted Average.


13

Purchases and Sales During the year ended 31 March 2014Purchases

Sector Holding Lot size

London SW8, Battersea Studios South East Office Direct Between £25m and £50m

London WC1, Chenies St Central London Office Direct Between £25m and £50m

Truro, Lemon Quay Standard Retail Direct Between £25m and £50m

Wolverhampton, Steelpark Industrial Direct Between £25m and £50m

Worcestershire, Hartlebury Trading Estate Industrial Direct Between £25m and £50m

Chatham Maritime, Chatham 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

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

Loughton, Centric Parade Standard Retail Direct Under £10m

Lowestoft, Roman Hill Other – care home Direct Under £10m

Mildenhall, Great Heath Other – care home Direct Under £10m

Sutton, Kimpton Industrial Estate Industrial JV Under £10m

SalesSector Holding Lot size

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

Cranford, Europa House South East Offices Direct Under £10m

Hartlepool, Jacksons Landing Other Direct Under £10m

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%.


14

Lemon Quay, Truro


15Schroder UK Property FundReport for the Year Ended 31 March 2014

16

RETAILSPF’s overweight/underweight retail positions relative to benchmark

Standard Retail – South East


Shopping Centres

Retail Warehouses

0

5

10

15

20

25

6.4

3.7

1.6

16.3

6.77.4

6.0

20.5

6.8 6.3

1.4

6.8

13.8

7.2

5.3

18.3

SPF Benchmark SPF Benchmark

2013 2014

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.



17

Holding Sector Lot Size

Bracknell Regeneration Partnership JV Shopping Centre and

Standard Retail

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

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

Motor Retail LP JV (Other) – Standard Retail Between £10m and £25m

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

Retail Portfolio at 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.


18

OFFICESPF’s overweight/underweight office positions relative to benchmark

Offices – South EastOffices – Central London Offices – Rest of UK

0

5

10

15

20

16.5 16.6

5.6

13.9

8.9

4.5

16.5

13.6

4.9

13.4

9.1

5.2


2013 2014


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



19


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

West End of London Property Unit Trust (WELPUT) 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

City of London Office Unit Trust (CLOUT) Indirect Central London Office Under £5m

Office Portfolio at 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.


20

INDUSTRIALSPF’s overweight/underweight industrial positions relative to benchmark

Industrial – Rest of UKIndustrial – South East

0

5

10

15

20

16.9

0.7

9.6

6.7

16.5

6.6

11.4

7.7


2013 2014


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.



21


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

Industrial Portfolio at 31 March 2014


22


ALTERNATIVE SECTORSSPF’s overweight/underweight other positions relative to benchmark


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%.

0

2

4

6

8

109.1

8.7

9.6

8.8


2013 2014


23


Cardiff, Mermaid Quay 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

UNITE UK Student Accommodation Fund 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

Alternatives Portfolio at 31 March 2014

Turner Rise

Turner Rise, Colchester


24

The Financial StatementsWe are pleased to present the Audited Consolidated Financial Statements of the Schroder UK Property Fund for the year ended 31 March 2014.

The FundSchroder 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.

Authorised StatusFrom 31 July 2012 the Fund was authorised as an Open-Ended Investment Fund under Regulation 12 of the Open-Ended Investment Companies Regulations 2001.

Annual General MeetingsThe Fund will not be holding any Annual General Meetings.

Statement of ResponsibilitiesThe Financial Conduct Authority’s Collective Investment Schemes Sourcebook (COLL) requires the Authorised Corporate Director (ACD) 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 of its net revenue and the net capital gains on the property of the fund for the 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.

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.

The ACD’s report and accounts for the year ended 31 March 2014 were signed on 15 July 2014 on behalf of the ACD by:

C.E. Helmstetter

P. Wallace

Schroder Unit Trusts Limited 15 July 2014

REPORT OF THE AUTHORISED CORPORATE DIRECTOR AND STATEMENT OF RESPONSIBILITIES

Schroder UK Property FundAudited Consolidated Financial Statements for the Year Ended 31 March 2014

25

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 limitsThe 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.

INVESTMENT MANAGER’S STATEMENT OF RESPONSIBILITY

Legal limits

Minimum 60% its assets (NAV) must form part of its Property Investment Business

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)

Maximum borrowing (on/off balance sheet): 25% NAV

Investment on and off balance sheet in shorter/medium term leaseholds (less than 50 years): 20% NAV

Maximum speculative development: 15% NAV

Product limits

Sector exposure: Maximum absolute load difference +/- 50% vs benchmark. Maximum divergence of central London +/- 10%. Maximum divergence in alternatives +/- 10%.

Investment in a single indirect vehicle: 15% NAV

Aggregate investment in indirect vehicles: 35% NAV

Aggregate investment in joint ventures: 35% NAV

Investment in UK property related listed securities: aggregate 10% NAV – individual 2.5% NAV

Maximum investment in undeveloped and non income producing land: 10% 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


Schroder UK Property FundAudited Consolidated Financial Statements 31 March 2013

BNP Paribas Real EstateAs Standing Independent Valuer for the Fund, we have valued immovables held by the Fund as at 31 March 2014 in accordance with The Royal Institution of Chartered Surveyors and International Valuation Standards (RICS) and in accordance with the COLL 8.4.13R of the Collective Investment Schemes Sourcebook. Schroder Unit Trusts Limited, as ACD of the Fund, has been provided with a full valuation certificate and report. The immovables have been valued on the basis of Market Value as defined by the RICS Valuation Standards subject to existing leases.

Details of the nature and extent of the immovables, the tenure and tenancies, permitted uses, town planning consents and related matters, have been supplied by the Investment Manager Schroder Property Investment Management Limited (SPrIM). The majority of the properties form the subject of detailed reports from ourselves. We have seen copies of all the leases but we have not examined the title documents and we have therefore 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 Investment 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 48 immovables owned by the Fund as at 31 March 2014 was £1,017.28 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.

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.

BNP Paribas Real Estate 31 March 2014Allsops LLPAs Independent Valuer for the Fund, we have valued immovables held by the Fund as at 31 March 2014 in accordance with The Royal Institution of Chartered Surveyors and International Valuation Standards (RICS) and in accordance with the COLL 8.4.13R of the Collective Investment Schemes Sourcebook. Schroder Unit Trusts Limited, as ACD of the Fund, has been provided with a full valuation certificate and report. The immovables have 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.


INDEPENDENT PROPERTY VALUERS’ REPORTS

26Schroder UK Property FundAudited Consolidated Financial Statements for the Year Ended 31 March 2014


Allsops LLP 31 March 2014

Knight FrankAs Independent Valuer for the Fund, we have valued immovables held by the Fund as at 31 March 2014 in accordance with The Royal Institution of Chartered Surveyors and International Valuation Standards (RICS) and in accordance with the COLL 8.4.13R of the Collective Investment Schemes Sourcebook. Schroder Unit Trusts Limited, as ACD of the Fund, has been provided with a full valuation certificate and report. The immovables have 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 5 immovables owned by the Fund as at 31 March 2014 is £16.21 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.



Knight Frank 31 March 2014


Statement of ResponsibilitiesThe 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.

It is the duty of the depositary to take reasonable care to ensure that the Fund is managed in accordance with the FCA’s Collective Investment Schemes Sourcebook (COLL), as amended, the Open-Ended Investment Companies Regulations 2001 (SI 2001/1228), as amended (‘the OEIC Regulations’), the Fund’s instrument of incorporation and prospectus, in relation to the pricing of, and dealings in, shares in the Fund; the application of revenue of the Fund; and the investment and borrowing powers applicable to the Fund.

Depositary’s ReportHaving 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:

(i) has carried out the issue, sale, redemption and cancellation, and calculation of the price of the Fund’s shares and the application of the Fund’s revenue in accordance with COLL and, where applicable, the OEIC Regulations, the instrument of incorporation and prospectus of the Fund, and

(ii) has observed the investment and borrowing powers and restrictions applicable to the Fund.

Natwest PLC 15 July 2014

DEPOSITARY’S REPORT AND STATEMENT OF RESPONSIBILITIES

28



29



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%



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)



Report on the financial statementsOur 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 auditedThe 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 We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) (“ISAs (UK & Ireland)”). An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether

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 sourcebookIn our opinion:

– we have obtained all the information and explanations we consider necessary for the purposes of the audit; and

– the information given in the Authorised Corporate Director’s

INDEPENDENT AUDITORS’ REPORTTo the Shareholders of Schroder UK Property Fund


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 exceptionPropriety of accounting records and information and explanations receivedUnder 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.

We have no exceptions to report arising from this responsibility.

Responsibilities for the financial statements and the auditOur responsibilities and those of the Authorised Corporate DirectorAs 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

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.

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.


Notes

Consolidated Year Ended

31 March 2014£’000


Year Ended 31 March 2014

£’000

Consolidated Period from

1 August 2012 to 31 March 2013

£’000


Period from 1 August 2012 to

31 March 2013 £’000

Income

Net capital gains / (losses) 4 107,262 107,262 (17,235) (16,748)

Revenue 5 80,409 77,078 48,279 43,942

Gain attributable to minority interest

3 – 4 –

Expenses 6 (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 54,356 54,356 30,855 29,480

Total return before distribution 161,618 161,618 13,620 12,732

Finance costs: distributions 5(b) (58,392) (58,392) (33,254) (31,880)

Change in net assets attributable to shareholders from investment activities

103,226 103,226 (19,634) (19,148)

STATEMENT OF CHANGE IN NET ASSETS ATTRIBUTABLE TO SHAREHOLDERS

Notes


31 March 2014£’000



£’000



£’000



31 March 2013 £’000

Opening net assets attributable to shareholders

1,228,044 1,228,044 – –

Amounts receivable on creation of shares on 1 August 2012

– – 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)

Closing net assets attributable to shareholders

1,489,460 1,489,460 1,228,044 1,228,044

STATEMENT OF TOTAL RETURN


Notes

Consolidated

As at 31 March 2014£’000


As at 31 March 2014£’000

Consolidated

As at 31 March 2013 £’000


As at 31 March 2013 £’000

ASSETS

Investment Assets

Investment Property 1,218,464 1,104,279 918,230 814,594

Investment in Collective Investment Schemes 82,862 82,862 98,368 98,368

Investment in Subsidiaries 9 – 115,880 – 109,407

Investment in Joint Ventures 125,412 125,412 120,636 120,636

Total Investment Assets 1,426,738 1,428,433 1,137,234 1,143,005

Debtors 10 22,074 21,366 29,195 27,862

Cash and bank balances 11 80,898 73,547 90,875 83,626

Total other assets 102,972 94,913 120,070 111,488

Total assets 1,529,710 1,523,346 1,257,304 1,254,493

LIABILITIES

Creditors 12 29,960 28,235 24,034 22,489

Distribution payable 5,651 5,651 4,240 3,960

Net assets attributable to third party

minority investors939 – 986 –

Long term liabilities – Loans 13 3,700 – – –

Total liabilities 40,250 33,886 29,260 26,449

Net assets attributable to shareholders 1,489,460 1,489,460 1,228,044 1,228,044

CASH FLOW STATEMENT

Notes


31 March 2014 £’000



£’000

Consolidated Period Ended

31 March 2013 £’000

Schroder UK Property Fund Period Ended

31 March 2013 £’000

Net cash inflow from operating activities 16 71,102 66,598 30,269 29,909

Servicing of finance

Distributions paid (56,795) (56,795) (29,211) (27,920)

Interest received 253 230 305 290

Total cash outflow from servicing of finance (56,542) (56,565) (28,906) (27,630)

Financial investments

Purchases of investments (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)

Total cash (outflow)/inflow from financial investments

(182,727) (178,302) 5,329 12,343

Financing

Amounts received on issue of shares 158,190 158,190 6,856 6,856

Amounts paid on cancellation of shares – – – –

Total cash inflow from financing 158,190 158,190 6,856 6,856

(Decrease)/increase in cash in the year/period (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

BALANCE SHEET


1. Accounting Policies(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 Practice for Authorised Funds issued by the IMA in October 2010 (SORP 2010). The principle accounting policies, which have been applied consistently throughout the year are set out below.

(b) Consolidation Consolidated Financial Statements have been prepared in accordance with FRS 2 ‘Accounting for Subsidiary Undertakings’. The Consolidated Statement of Total Return, Consolidated Statement of Change in Net Assets attributable to Shareholders’, Consolidated Balance Sheet and Consolidated Cash Flow Statement include the financial statements of each sub-fund and its subsidiary undertakings. Intra-group transactions are eliminated fully on consolidation.

(c) Basis of valuation of investments (i) Properties owned by the Fund,

including investments in properties owned through partnerships and trusts for land, are independently valued on a market value basis in accordance with Royal Institute of Chartered Surveyors guidance. Development properties in the course of development are independently valued having regard to the stage reached in the construction and taking account of any agreed letting and of any contractual liabilities to advance further monies. Where legal completion of a purchase is not fully executed at the date of the Consolidated balance sheet, but takes place subsequently, or in the case of development properties purchased for development where

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.

(ii) Collective Investment Schemes are valued at the net asset value as provided by the relevant managers, in accordance with industry practice.

(d) Property purchases and sales Acquisitions and disposals of investment properties and collective investment schemes are recognised where, by the end of the accounting period, there is a legally binding, unconditional and irrevocable contract.

(e) Recognition of revenue Rental revenue, deposit interest, and other revenue is accounted for on an accruals basis. The cost of any up front lease incentives offered is recognised as a reduction in rental income and allocated over the shorter of the lease term or the period until the first rent review date in accordance with UITF28. Service charge income and expenses are included in rental revenue and other property operating expenses respectively. Interest receivable and payable are accounted for on an accruals basis.

(f) Treatment of management expenses Fees are recognised on an accruals basis and are charged in full to the Statement of Total Return. The Manager has allocated 50% of the management fees to income and the remaining 50% to capital for the calculation of distributable income.

(g) Treatment of development and acquisition expenses In accordance with Generally Accepted Accounting Practice in the UK, development and acquisition 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.

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

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.

NOTES TO THE FINANCIAL STATEMENTS (continued)


4. Net capital gains/(losses)


31 March 2014£’000



£’000



£’000



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)

5. Revenue


31 March 2014£’000



£’000



£’000



31 March 2013 £’000

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

Other income 623 598 211 178

Total revenue 80,409 77,078 48,279 43,942

6. Expenses


31 March 2014£’000



£’000



£’000



31 March 2013 £’000

Investment Management Fees 8,377 8,072 5,125 4,800

Depositary fee 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

Total expenses 26,056 22,722 17,428 14,462



7. Finance Costs: distributions


31 March 2014£’000



£’000



£’000



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

Gross distribution for the year/period

58,392 58,392 33,254 31,880

Difference between net revenue after taxation and the distribution paid is analysed as follows:


31 March 2014£’000



£’000



£’000



31 March 2013 £’000

Net revenue after taxation for the year/period

54,356 54,356 30,854 29,480

Expenses charged to capital 4,036 4,036 2,400 2,400

Gross distribution 58,392 58,392 33,254 31,880

8. TaxationThe 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.



31 March 2014£’000



£’000



£’000



31 March 2013 £’000

(a) Analysis of charge in period

Corporation tax at 20% – – – –

Current tax charge – – – –

(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:


31 March 2014£’000



£’000



£’000



31 March 2013 £’000

Total return before distribution 161,618 161,618 13,620 12,732

Corporation tax at 20% 32,324 32,324 2,724 2,546

Effects of:

Revenue not subject to taxation (32,324) (32,324) (2,724) (2,546)

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 subsidiariesPercentage ownership

by SPF at 31 March 2014

Valuation at 1 April 2013

Capital contributions

Capital distributions

Net capital gains /

(losses)

Valuation at 31 March

2014

Croydon Gateway Unit Trust 98.0 47,297 2,109 – (1,493) 47,913

Parker Tower Unit Trust – 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

City Property Unit Trust – 391 – (391) – –

Hackbridge Limited 100.0 1,280 – (1,067) 73 286

109,407 5,642 (1,487) 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.



10. Debtors

Consolidated As at

31 March 2014£’000


As at 31 March 2014

£’000

Consolidated

As at 31 March 2013

£’000


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

Total Debtors 22,074 21,366 29,195 27,862

11. Cash and bank balances

ConsolidatedAs at

31 March 2014£’000


As at 31 March 2014

£’000

Consolidated As at

31 March 2013 £’000


As at 31 March 2013

£’000

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

12. Creditors

ConsolidatedAs at

31 March 2014£’000


As at 31 March 2014

£’000

Consolidated As at

31 March 2013 £’000


As at 31 March 2013

£’000

Trade creditors 33 33 171 108

Deferred Rental Income 12,515 12,515 9,647 9,029

Tenant deposits 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

Accrued SPF investment management fee

723 723 1,110 1,110

Other creditors and accruals 5,866 4,564 4,430 3,818

Total Creditors 29,960 28,235 24,034 22,489


13. Long term liabilities – loanHome 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 commitmentsAs 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

Consolidated year to

31 March 2014 £’000


year to 31 March 2014

£’000

Cash and cash equivalents

As at 1 April 2013 90,875 83,626

Cashflows (9,977) (10,079)

Net cash inflow from operating activities for the year/period 80,898 73,547

16. Reconciliation of net revenue before taxation to net cash inflow from operating activities

ConsolidatedYear ended

31 March 2014£’000

SPFYear ended

31 March 2014£’000

Consolidated Period Ended 31 March 2013

£’000

SPFYear ended

31 March 2013£’000

Net revenue before taxation 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

As at 31 March 2014 71,102 66,598 30,269 29,909

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.



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

Natwest plc 35 36

Schroder Property Investment Management Ltd 723 1,110

Schroder Unit Trusts Limited 162 154

(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.

Schroder UK Property Fund Year to

31 March 2014 £’000

Schroder UK Property Fund Period

From 1 August 2012 to 31 March 2013

£’000

Bracknell Property Unit Trust 816 1,704

Croydon Gateway Property Unit Trust – 484

Motor Retail Limited Partnership 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

Schroder Emerging Retail Property Unit Trust – 2,432

(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 instrumentsThe 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.


19. Portfolio transaction costsFor the year ended

31 March 2014 £’000

For the period ended 31 March 2013

£’000

Analysis of total purchase costs

Purchases in year/period before transaction costs

260,311 7,886

Stamp Duty 9,157 –

Legal Fees 1,108 –

Agents Fees 2,130 –

Other Fees 599 –

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

Analysis of total sales costs

Gross sales in year/period before transaction costs

137,435 29,903

Legal Fees 191 32

Agents Fees 1,009 63

Other Fees 36 –

Total sales costs 1,236 95

Total sales net of transaction costs 136,199 29,808



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

Gross Income Shares

Gross revenue 11.153200 11.772781 11.834773 13.295122 11.679898 11.843153

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

Gross Income Shares

Gross revenue 11.833733 11.854498 12.267069 12.363131 12.102352 13.225275

Income tax – – – – – –

Net revenue 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


DISTRIBUTION TABLE


General InformationSCHRODER UK PROPERTY FUND (the “Fund”) is an investment company with variable capital incorporated in England and Wales under registered number IC000945 and authorised by the FSA with effect from 31 July 2012. The Fund has an unlimited duration. Shareholders are not liable for the debts of the Fund.

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.

LiquidityThe 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 SustainabilityResponsible Property Investment (RPI) is at the heart of our investment philosophy. We believe that a successful

responsible investment programme should deliver enhanced returns to investors, improved business performance to tenants and tangible benefits to local communities and wider society. A copy of Schroders RPI Policy can be found at www.schroders.com/property

Purchase of SharesShares 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.

The Dealing Day for subscription for shares is the first business day of each month. Application forms, top-up forms and cleared funds must be received by the Registrar before the cut-off point for subscriptions. Forms received after this time will be carried forward to the following dealing day for subscription. Applicants may amend or withdraw an application form or a top up form at any time up until the cut-off point for subscriptions. Thereafter, applicants have no right to amend or withdraw their application. Settlement is due by midday on the business day before the relevant dealing day for subscription. Applicants are required to transfer funds via CHAPS or another form of electronic payment unless the Registrar agrees to an alternative method of payment. The

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 market for such time until the next dealing day for subscription. If the shortfall in shares applied for is not met on the secondary market, shares will be issued in line with the allocation made at the dealing day for subscription on which shares are issued, with orders carried over from previous dealing days taking priority.

There were no redemption notices received at 31 March 2014 that were not settled. Further, there were no suspension of valuations and/or redemptions at 31 March 2014.

Redemption of SharesRedemption forms must be received by the Registrar before the relevant cut-off point for redemptions, that is midday on

UNAUDITED GENERAL INFORMATION


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 MarketThe 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 CodesCode

Bloomberg SCEXPUT LN ISIN GB00B8215Z66 Sedol B8215Z6

Prices for the Schroder UK Property Fund can be obtained from http://www.schroders.com/spf.

DistributionsThe 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.


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 TrustThe 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 expensesDetails 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

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 spreadsAs 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 policyA 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 PracticeThe 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-uk-property-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 documentationA 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.

UNAUDITED GENERAL INFORMATION (continued)


Conflicts of interestThe 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 rebatesService 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 recoverySchroder Group has a disaster recovery plan which is audited, externally, on an annual basis as part of the AAF controls report.

Additional InformationThe 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 ContactsFor general information and queries on secondary market availability, please contact:

Olivia Pember Product Manager [email protected] +44 (0)20 7658 3552

James LassFund [email protected] +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 4BGTel: +44 (0) 870 870 8059 Fax: +44 (0) 20 7643 3892 Email: [email protected]


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.

Registrar Northern Trust Global Services Limited 50 Bank Street Canary Wharf E14 5NT

Depositary National Westminster Bank plc 135 Bishopsgate London EC2M 3UR

Standing Independent Valuers BNP Paribas Real Estate Advisory & Property Management Limited 90 Chancery Lane London WC2A 1EU

Allsops LLP 33 Wigmore Street London W1U 1BZ

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 yearThere 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.

KEY SERVICE PROVIDERS


London WC1, Chenies Street

Turner Rise, Colchester

S C H R O D E R U K P R O P E R T Y F U N D

Issued in July 2014 by Schroder Unit Trusts Limited, 31 Gresham Street, London, EC2V 7QA. Registered Number 4191730 England.

Authorised and regulated by the Financial Conduct Authority. w45361

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