S UK Ra Ea F Annual Report and Consolidated Financial ......Key Service Providers* 66 Overview Fund...

Schroder UK Real Estate Fund

Annual Report and

Consolidated Financial Statements

For the Year Ended

31 March 2016

CONTENTSSchroder UK Real Estate Fund Annual Report and Consolidated Financial Statements for the year ended 31 March 2016

OVERVIEW*

Key Information Summary: 31 March 2016 2

Highlights for the year ended 31 March 2016 3

Portfolio Map 4

Portfolio Profile 5

Investment Approach 6

FUND MANAGER’S REPORT*

Fund Manager’s Statement 7

Market Overview 8

Performance Analysis 9

Portfolio Strategy 12

Property Portfolio 14

Portfolio Statement 16

Transactions and Asset Management 19

Purchases and Sales 26

Responsible Investment and Sustainability 27

GOVERNANCE

Report of the Authorised Corporate Director

and Statement of Responsibilities* 29

AIFM Employee Remuneration Disclosure 31

Investment Manager’s Statement of Responsibility 32

Independent Property Valuer’s Report 34

Depositary’s Report and Statement of Responsibilities 37

FINANCIAL STATEMENTS

Independent Auditor’s Report 38

Statement of Total Return 41

Statement of Change in Net Assets Attributable

to Shareholders 41

Balance Sheet 42

Cash Flow Statement 43

Notes to the Financial Statements 44

Distribution Table 57

Unaudited General Information 59

Key Service Providers* 66

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*Collectively these comprise the Authorised Corporate Director’s Report

2 Schroder UK Real Estate Fund

OVERVIEWKey Information Summary: 31 March 2016

The Schroder UK Real Estate Fund (SREF or the Fund), is Schroders’flagship real estate fund launched in 1971. It provides investors withdiversified exposure to £2.2 billion of UK commercial real estate and ismanaged by our highly experienced team.

SREF seeks to provide investors with a

blend of income and capital growth through

investment in UK real estate. Its aim is to

return 0.5% per annum (net of fees) above

its benchmark1 over rolling three year

periods. SREF has outperformed its

benchmark and delivered top quartile

returns 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.

Fund Summary

The Schroder UK Real Estate Fund (the

‘Company’) is an open ended investment

company which is a Property Authorised

Investment Fund (PAIF) and is authorised by the

Financial Conduct Authority. The Company is a

Qualified Investor Scheme (QIS) open to Eligible

Investors. The Company is an Alternative

Investment Fund for the purposes of the AIFMD.

In September 2015, the fund was granted an

international marketing passport to 10 European

countries: Belgium, Denmark, Finland, France,

Ireland, Italy, Netherlands, Norway, Spain and

Sweden; in addition to the marketing passport it

was granted to Germany in September 2014.

This follows strong interest and investment from

international institutions. Since the conversion of

the fund to a PAIF in 2012, the investor base has

become increasingly diversified across

institutional types and geographies. The granting

of this marketing passport allows further investor

and asset diversification and enhanced liquidity of

the Fund.

1 AREF/Investment Property Databank (“IPD”) UK Pooled Property Fund Indices – All Balanced Funds Index Weighted Average;

Total return of

11.5%

Underlying portfolio valued at

£2.2bn

Distribution yield

3.4%*

assets in the portfolio

73

£86.4mmatched on secondary market

*gross share class

£147.0mnew shares issued

Outperformance of

+0.9%over AREF/IPD UK Quarterly Property Fund Index – All Balanced Property Fund Index Weighted Average

Reversionary yield

6.4%

Annual Report and Consolidated Financial Statements for the year ended 31 March 2016 3

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OVERVIEWHighlights for the year ended 31 March 2016

OVERVIEWA portfolio diversified across the UK1


Retail: 25.3%

Offi ces: 42.9%

Industrial: 19.9%

Other commercial: 11.9%

London

Bristol

Birmingham

Manchester

Newcastle

Edinburgh

Glasgow

Leeds

Greater London

1 Map show location of assets, both directly owned and those invested in via collective investment schemes. Marker is not

proportionate to asset values.


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For the year to 31 March 2016, 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.

OVERVIEWPortfolio Profile

As at/For the As at/For the As at/For the year to year to year to 31 March 2016 31 March 2015 31 March 2014

Financial Information.................................................................................................................................................................................................................................................................................................................................................................

Gross Asset Value (GAV) £2,237.5m £1,954.6m £1,514.4m.................................................................................................................................................................................................................................................................................................................................................................

Net Asset Value (NAV) £2,228.6m £1,936.3m £1,489.5m.................................................................................................................................................................................................................................................................................................................................................................

NAV per share £42.26 £39.26 £34.68.................................................................................................................................................................................................................................................................................................................................................................

Number of shares in issue 52,730,448.89 49,315,567.53 42,954,451.32.................................................................................................................................................................................................................................................................................................................................................................

Gross annual distribution per share £1.440055 £1.509496 £1.575009.................................................................................................................................................................................................................................................................................................................................................................

Distribution yield 3.4% 3.9% 4.1%.................................................................................................................................................................................................................................................................................................................................................................

Total NAV of scheme property £2,119.0m £1,767.1m £1,432.7m.................................................................................................................................................................................................................................................................................................................................................................

Highest price per share in the year £42.51 £39.26 £34.68.................................................................................................................................................................................................................................................................................................................................................................

Lowest price per share in the year £39.59 £34.90 £32.36.................................................................................................................................................................................................................................................................................................................................................................

Portfolio Details.................................................................................................................................................................................................................................................................................................................................................................

Gearing (% NAV) 1.3% 1.8% 2.8%.................................................................................................................................................................................................................................................................................................................................................................

Average unexpired lease length 6.2 Years 7.2 Years 6.6 Years.................................................................................................................................................................................................................................................................................................................................................................

Void rate 5.6% 3.4% 7.3%.................................................................................................................................................................................................................................................................................................................................................................

Benchmark – void rate 6.7% 6.1% 7.3%.................................................................................................................................................................................................................................................................................................................................................................

Net initial yield 4.7% 5.0% 5.7%.................................................................................................................................................................................................................................................................................................................................................................

Reversionary yield 6.4% 6.3% 6.7%.................................................................................................................................................................................................................................................................................................................................................................

Portfolio Turnover Ratio 13.0% 11.0% 27.0%.................................................................................................................................................................................................................................................................................................................................................................

Performance.................................................................................................................................................................................................................................................................................................................................................................

Annual Total Return 11.5% 17.9% 13.1%.................................................................................................................................................................................................................................................................................................................................................................

Benchmark Total Return 10.6% 16.6% 11.9%.................................................................................................................................................................................................................................................................................................................................................................

Total Expense Ratio 0.84% 0.77% 0.81%.................................................................................................................................................................................................................................................................................................................................................................

Liquidity.................................................................................................................................................................................................................................................................................................................................................................

Annual number of shares subscribed for 3,414,880 6,362,349 4,564,724.................................................................................................................................................................................................................................................................................................................................................................

Annual value of subscriptions £146,987,949 £242,694,697 £158,190,836.................................................................................................................................................................................................................................................................................................................................................................

Annual number of shares redeemed 0 0 0.................................................................................................................................................................................................................................................................................................................................................................

Annual value of shares redeemed £0 £0 £0.................................................................................................................................................................................................................................................................................................................................................................

Annual number of shares matched on the secondary market 2,096,214 2,517,271 5,105,510.................................................................................................................................................................................................................................................................................................................................................................

Annual value of shares matched on the secondary market £86,400,058 £97,052,711 £169,520,500


Through the cycle approximately 60-80% of the

portfolio will be invested in property offering

secure income characteristics by having an

above average lease length and tenant credit

quality. The core portfolio will comprise property

offering strong fundamentals in locations where

rental growth is expected to be realised at rent

review, or have contracted rental increases

throughout the lease term. Properties offering

these characteristics are likely to be where asset

business plans have been completed but where

the forecast future returns remain attractive.

These core properties balance portfolio risk and

support the Fund’s income and consistency of

returns.

OVERVIEWInvestment Approach

1. Core income

20-40% of the portfolio is likely to be invested in

properties offering enhanced potential returns

from more comprehensive asset management

initiatives. Typical examples of this would include

lease extensions with tenants, letting up vacant

space or repositioning assets through

refurbishment and partial redevelopment. The

delivery of specific initiatives can create core

assets and attractive returns. At certain points in

the cycle, more intensive asset management and

development may be undertaken in order to

maximise capital values, to create modern core

assets and deliver sustainable income streams.

2. Asset management

Research is used to inform strategy and identify

areas of mis-pricing across the market. Cities and

towns are analysed to identify differentiated

factors that could support growth. These include

factors such as the local economy benefiting

from being globally facing; a wealth effect from

higher value businesses, industries or housing;

population and jobs growth; regeneration,

infrastructural investment or tourism and

amenities such as a Russell Group university. The

acquisition strategy then focuses on

complementary property-types in locations that

have all, or a blend of, these characteristics.

3. Research led approach

annual�report�and�Consolidated�Financial�statements�for�the�year�ended�31�March�2016 7

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I am�delighted�to�report�another�year�of

strong�absolute�and�relative�returns�for

investors�in�sreF.�the�application�of�our

consistent�investment�process,�based�on�a

detailed�understanding�of�occupier�needs

and�investment�markets,�is�as�important�as

our�experienced�team’s�execution�of

strategy.

over�the�past�twelve�months�we�have

invested�£80�million�into�the�portfolio,

upgrading�and�selectively�developing

properties�to�meet�occupier�requirements.

this�approach�has�generated�strong�rental

growth�and�is�expected�to�contribute�to�a

substantial�increase�in�rental�income�in�the

coming�years.�In�a�competitive�investment

market�(and�from�March�2016�higher

transaction�costs�following�increased�stamp

duty�charges),�it�is�also�an�efficient�use�of�the

capital�received�from�new�investor

subscriptions�and�the�sale�of�smaller�assets.

I�believe�that�the�portfolio�is�well�positioned

to�continue�to�deliver�on�its�performance

objectives�in�the�coming�year,

notwithstanding the�vote�to�leave�the

european�union.�We�have�been�unlocking

the�reversionary�potential�of�the�fund�during

2016�and�this is�expected�to be�a�strong

contributor�to�the�fund’s�performance in�the

future, especially in�an�environment�where

returns�will�be�increasingly�driven�by

income.”James Lass,�Fund�Manager�– schroder�uK�real

estate�Fund

Fund�Manager’s reportFund Manager’s Statement

“

Fund�Manager’s�reportMarket Overview

according�to�the�MsCI�(formerly�Ipd) all�property

Index,�average�uK�commercial�real�estate

produced�a�total�return�of�11.1%�over�the�year�to

31 March�2016, of�which�4.9% was�from�income.

rental�growth�was�the�major�driver�of�capital

appreciation,�with�moderating�investor�demand

feeding�through�to�lower�yield�compression�than

in�the�previous�financial�year.�Between�the

sectors,�an�above�average�income�return�and

increasing�rental�growth�led�the�industrial�and

office�sectors�to�produce�the�strongest�total

returns�over�the�year�at�14.5%�and�14.4%

respectively,�with�retail�lagging�at�7.6%.

Central�London�office�markets led�returns�over

the�year,�with�strong�rental�growth�compensating

for�a�low�income�return.�the�demand�for�offices

in�stronger�regional�cities�also�remains�healthy,

evidenced�by�a�higher�level�of�leasing�activity

across�the�portfolio,�notably�at�City�tower�in

Manchester.�In�addition�to�low�levels�of�new

development,�changes�to�the�planning�system�to

facilitate�residential�conversions�have�resulted�in�a

significant�loss�of�older�office�space.

the�growth�in�online�retail�sales�is�leading�to

reduced�demand�for�physical�stores�and�some

high�profile�business�failures.�this�led�to�low

levels�of�rental�growth�outside�of�south�east�retail

locations.�Changing�social,�demographic�and

technological�trends�mean�that�retail�must

increasingly�provide�the�consumer�with�a�retail

and�leisure�‘experience’�or,�alternatively,�offer

convenience�in�terms�of�location.�this�is�leading

to�a�polarised�market�where�we�expect�dominant

shopping�centres�to�perform�well�alongside�well

located,�convenience�retail�in�densely�populated

urban�centres.

the�industrial�sector�is�benefiting�from�the�growth

of�online�retail,�with�increased�take�up�of�large

logistics�warehouses�being�driven�by�retailers.

demand�for�smaller�industrial�estates�around�big

cities�is�also�increasing�as�on-line�parcel�volumes

grow�and�internet�retailers�offer�same�day

delivery.�We�favour�multi-let�industrial�estates�in

higher�growth�areas�benefiting�from�limited�new

development�and�the�cyclical�recovery�in�small

and�medium�sized�enterprises.�though�favouring

an�overweight�position,�we�are�sensitive�to�sector

pricing�and�have�taken�profit�in�two�schemes

over�the�last�year,�where�asset�management�was

complete.

subsequent�to�the�financial�year�end,�the�uK

voted�to�leave�the�eu.�this�has�clouded�the

outlook�for�the�uK�commercial�real�estate.�While

it�is�too�early�to�say�what�the�impact�will�be�on

the�occupational�and�investment�markets, the�uK

investment�market�is�very�transparent�and�prices

tend�to�adjust�and�find�a�new�equilibrium�fairly

quickly.�the�market�is�better�placed�today�to

withstand�a�shock�compared�to�the�downturn�in

2007.�Vacancy�levels�in�most�office�and�industrial

markets�are�low. real�estate�has�a�large�yield

premium over�10�year�gilts�and the�level�of�debt

in�the�market�is�moderate.



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Fund�Manager’s�reportPerformance Analysis

over�the�12�month�period�covered�in�this�report,�the�principal�drivers�and�detractors�of�performance

are�illustrated�below.

source:�Ipd�Quarterly�report�March�2016.�noted:�Fund�refers�to�property�level�returns.�relative�returns�are�multiplicative.

SREF total return p.a. (%) MSCI Index total return p.a. (%) Relative p.a. (%)

Period 12 Three Five 12 Three Five 12 Three Fivemonths years years months years years months years years

retail 5.3 7.4 5.5 7.0 9.6 6.6 (1.6) (2.0) (1.0).................................................................................................................................................................................................................................................................................................................................................................

office 16.2 20.2 15.1 15.1 18.5 13.0 0.9 1.4 1.8.................................................................................................................................................................................................................................................................................................................................................................

Industrial 19.1 20.0 13.3 15.5 17.7 12.5 3.2 1.9 0.7.................................................................................................................................................................................................................................................................................................................................................................

other 11.9 15.1 14.7 9.6 11.4 9.5 2.1 3.3 4.7.................................................................................................................................................................................................................................................................................................................................................................

unattributed�indirects 12.8 20.0 13.2

Total 13.4 15.9 11.8 11.7 14.2 9.9 1.5 1.5 1.7

Portfolio Return

Fund 13.4Benchmark 11.7Relative 1.5

Income Return

Fund 4.7Benchmark 5.0Relative (0.2)

Rental Growth


Yield Impact


Income Residual

Fund (3.2)Benchmark (2.1)Relative (1.1)

Capital Growth


Structure

1.0

Property

0.5

Components of Return Attribution of Relative Return

Sources of relative return – last 12 months as at March 2016.


Performance Analysis continued

over�the�last�12�months�the�fund’s

outperformance�versus�its�benchmark�has�been

driven�by�capital�appreciation.�this�reflects�a

higher�level�of�rental�growth�achieved�in�the

portfolio�than�the�benchmark,�as�a�result�of

investment�in�higher�growth�locations�and

sectors.

at�3.4%,�the�income�return�of�the�fund�over�the

last�12�months�has�been�marginally�lower�than

the�benchmark.�the�fund�is�currently�bringing

forward�a�couple�of�larger�development

opportunities�which,�being�non�income

producing,�have�detracted�from�the�yield�of�the

fund. today�these�projects�are�nearing

completion�and�we�expect�them�to�become

income�producing�over�the�next�12�months.

these�assets�are�expected�to�drive�a�significant

increase�in�the�distribution�yield�of�the�fund.

at�a�sector�level,�south�east�Industrial�assets

delivered�the�strongest�contribution�towards�the

fund’s�annual�performance,�followed�by�offices�in

emerging�London�submarkets.�these�areas�have

benefitted�from�appreciating�capital�values�as�well

as�rental�growth. the�largest�detractor�to

performance�came�from�the�retail�portfolio,�which

is�consistent�with�market�movements�and

difficulties�faced�by�retailers�as�consumer

shopping�habits�and�channels�evolve.

at�a�property�level�the�assets�which�delivered�the

strongest�return�were�Chenies�street,

Bloomsbury;�the�Felnex trading estate,

Hackbridge;�department�W,�Whitechapel�and

Matrix,�park�royal.�Further�detail�on�asset

management�initiatives�at�Hackbridge�and

Whitechapel�is�provided�in�the�portfolio�case

studies�on�pages�23�and�19�respectively.�assets

at�Chenies�street,�Bloomsbury�and�park�royal,

are�well-located,�good�quality�properties,�let�at

relatively�low�rental�levels�where�notable�capital

growth�over�the�last�year�has�reflected�investor

demand�as�well�as�strong�rental�growth.

the�assets�which�have�reduced�the�fund’s�return

over�the�last�12�months�include�the�Croydon

development�site�at�ruskin�square�and�the�retail

parade�at�Lemon�Quay�in�truro.�non�income

producing�land�and�development�has�not�seen

the�same�quantum�of�capital�appreciation�as

standing�properties, whilst�rental�growth�in�the

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

Property

Structure

St R

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Sou

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ast

St R

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Res

t of U

K

Sho

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entr

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Ret

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areh

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s

Offi

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– C

ity

Offi

ces

– W

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Offi

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– S

outh

Eas

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Offi

ces

– R

est o

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Indu

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Sou

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Indu

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Res

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Oth

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Com

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All

prop

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-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6


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Performance Analysis continued

retail�sector�lagged�other�parts�of�the�market.

However,�at�ruskin�square,�both�the�first�office

building�and�the�first�phase�of�residential

development�will�complete�in�the�second�half�of

2016.�this�should�result�in�the�site�being�a�key

contributor�to�performance�over�the�coming�year.

Further�details�are�provided�in�the�case�study�on

page�20.�at�Lemon�Quay,�£3.0�million�has�been

invested�over�the�last�12�months,�converting�4

shop�units�into�primark’s�flagship�Cornish�store

which�is�due�to�open�later�this�year.�We�expect

strong�performance�to�result,�both�from�the

income�generated�and�from�subsequent

competing�tenant�demand�for�other�units.


Asset Allocation

We consider the�relative�attractiveness�of�sectors

and�geographies�within�the�uK�commercial�real

estate�market.�the�Fund’s�portfolio�weightings

versus�the�benchmark�are�shown�in�the�table�on

page 14.

the�investment�themes�underpinning�the�strategy

continue�to�focus�on�sectors�where�yields�are

accretive�to�the�fund’s�income�profile�(above�5%)

and�where�occupational�demand�is�supportive�of

rental�growth.�geographically,�we�are�investors�in

‘winning’�areas�with�strong�economies,

developed�or�improving�infrastructure,�and�an

attractive�environment.�these�are�expected�to

capture�increasing�demand�from�growing

companies�and�populations,�generating�more

attractive�long-term�returns. portfolio�themes

include:

– office�and�industrial�allocations�in�and�around

London�and�the�south�east�where�we

continue�to�see�strong�tenant�demand�and�low

levels�of�good�quality�supply.�this�has�resulted

in�a�higher�level�of�rental�growth�across�the

portfolio�and�a�growing�pipeline�of�asset

management�initiatives, where�capital

expenditure�can�be�invested�to�generate

attractive�income�and�total�returns.

– Within�our�office�portfolio,�sub�markets�outside

the�core�City�and�West�end,�in�areas�such�as

Battersea,�stratford�and�Whitechapel.�these

locations�are�benefitting�from�the�growth�of�the

Capital,�the�strain�on�existing�core�locations

and�the�rising�occupancy�costs�of�these

established�locations.�our�strategy�of�investing

in�growing�London�submarkets�offering

affordability�and�accessibility�has�been�a�strong

contributor�to�positive�performance�for�several

years�and�based�on�asset�management

initiatives�it�is�anticipated�that�this�will�continue

to�be�the�case.�We�expect�to�crystallise�profits

through�strategic�disposals,�moderating�this

overweight�position�in�the�coming�12 months.

We�may�also�undertake�a�number�of�joint

ventures�in�these�markets�in�order�to�maintain

a�diversified�exposure�to�this�theme�but�at�a

reduced�overall�concentration.

– alternative�assets�such�as�student

accommodation,�care�homes�and�serviced

apartments�offer�attractive�yields�and�potential

diversification�benefits.�returns�are�typically

underpinned by�demographic�and�structural

trends�rather�than�economic�growth.

We�are�underweight�to�retail�and�are�cautious

about�the�continuing�impact�from�internet

shopping�on�the�type�and�size�of�occupier

requirements.

Asset Management

the�investments�completed�during�the�year�are

consistent�with�the�strategy�of�targeting�assets

offering�strong�fundamentals�in�higher�growth

locations.�the�first�acquisition�comprised�a

portfolio�of�office,�retail�and�parking�in

Hammersmith;�the�second�was�a�block�of

serviced�apartments�in�Hayes.�Both�are�located

in�West�London.�Further�detail�is�provided�in�the

portfolio�case�studies on�pages�24�and�25

respectively.

the�strategy�to�crystallise�performance�where

business�plans�have�been�completed, where

assets�are�smaller�or�are�forecast�to

underperform, has�also�continued:

– nine properties�were�sold�over�the�year

totalling�£157.8 million.

– these�disposals�reflected�an�average�net�initial

yield�of�4.1%.

– and�were�realised�at�a�16%�premium

compared�with�the�apportioned�value�at

31 March�2015.

Fund�Manager’s reportPortfolio Strategy


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over�the�same�period�key�management

initiatives,�directed�at�adding�rental�income�and

maximising�the�capital�potential�of�assets,�have

been�progressed.�Letting�activity�across�the�fund

has�been�broad�based:

– over�the�last�12�months�112�lease�events

have�occurred�in�the�portfolio.

– these�have�enabled�the�fund�to�capture

double�the�level�of�rental�growth�of�the�market.

the�prospects�for�future�rental�growth�are�good

given�the�highly�reversionary�nature�of�the

portfolio�as�well�as�the�tactical�voids�created�or

acquired�over�the�last�12�months.�the�latter

provide�potential�refurbish�opportunities�which

can�re-let�at�higher�rents. For�example,�at�the

newly�acquired�office�in�Hammersmith,�current

rents�are�£16�per�sq�ft�and�contracts�have�been

exchanged,�subject�to�refurbishment,�on�a

20 year�lease�at�£50�per�sq ft.

In�addition�to�driving�rental�growth,�asset

management�is�helping to�position�the�portfolio

for�the�coming�years.�£80 million�of�capital

expenditure�has�been�invested�in�the�portfolio

over�the�reporting�period,�with�a�further

£115 million�expected�to�be�allocated�over�the

next�12 months. the�fund�has�sufficient�liquidity

to�meet�these�obligations�through�its�existing

cash�reserves�and�sales�pipeline.�a�revolving

credit�facility�is�also�available�if�required. the

principal�obligations�are in�relation to the long

held�projects�at�Bracknell�and�Croydon�where

construction�will�complete�in�2016. Further�detail

is�provided�in�the�portfolio�case�studies�below.

the�transformation�of�these�opportunities�into

high�quality,�income�producing�assets�is�the�final

element�in�the�repositioning�of�the�fund�which

began�more�than�five�years�ago.�their�completion

will�reduce�the�fund’s�exposure�to�land�and

development�and�will�increase�materially�the

distribution�yield.

Income�maximisation�is�the�guiding�consideration

behind�the�fund’s�strategy�and�asset

management:�capturing�the�rental�growth�of�the

market,�transforming�non-income�producing

assets�into�long-term�sustainable�income�streams

and,�where�transacting,�to�favour�defensive

higher�yielding�sectors.�successful�execution�of

the�fund�strategy�should�increase�net�yield�and

support�valuations�over�the�coming�years.

Debt

as�at�31 March�2016,�the�Fund�held�no�on

balance�sheet�debt�and�no�debt�was�drawn

during�the�course�of�the�financial�year.�Looking

through�the�4.3%�held�in external�Collective

Investment�schemes,�there�was�1.3% of�off

balance�sheet debt.�the�average�level�of�gearing

in�the�fund’s�benchmark�was�1.2%�at�year�end.

In�the�third�quarter�2015�a�£100 million�rolling

credit�facility�was�arranged�with royal�Bank�of

scotland.�the�facility�was�set�up�to�assist�with

the�management�of�liquidity�and�capital

expenditure.�the�arrangement�fee�for�facility�was

0.25%�and�the�non�utilisation�fee�is�0.35%.�If

drawn,�the�borrowing�rate�is�LIBor�+�0.95%.

Portfolio Strategy continued�


Property portfolio

Fund�Manager’s reportProperty Portfolio

as�at�31 March�2016,�the�property�portfolio

comprised�73 properties�independently�valued�at

£2,119.0 million.�this�includes�the�share�of�joint

venture�properties�including�Bracknell�town

Centre;�City�tower,�Manchester,�a�car�showroom

portfolio,�West�India�Quay;�Monks�Cross,�York

and�the�university�of�Law�Campus,�Bloomsbury.

the�portfolio�produces�a�rent�of�£100 million�per

annum,�reflecting�a�net�initial�yield�of�4.7%.�the

independent�valuers�estimate�that�the�current

estimated�rental�value�of�the�portfolio�is

£139 million�per�annum,�reflecting�a�reversionary

yield�of�6.4%.�

the�below�tables�summarises�the�portfolio�information�and�top�ten�properties�as�at�31�March�2016.

Weighting (%)

Sector weightings by value SREF Benchmark

standard�retail�–�south�east ��5.2 ��5.9.................................................................................................................................................................................................................................................................................................................................................................

standard�retail�–�rest�of�uK ��5.0 ��5.4.................................................................................................................................................................................................................................................................................................................................................................

shopping�centres ��4.6 ��4.8.................................................................................................................................................................................................................................................................................................................................................................

retail�warehouses ��9.4 ��16.3.................................................................................................................................................................................................................................................................................................................................................................

offices�–�Central�London ��16.8 ��15.5.................................................................................................................................................................................................................................................................................................................................................................

offices�–�south�east ��18.6 ��11.9.................................................................................................................................................................................................................................................................................................................................................................

offices�–�rest�of�uK ��5.5 ��6.6.................................................................................................................................................................................................................................................................................................................................................................

Industrial�–�south�east��14.1 ��12.4.................................................................................................................................................................................................................................................................................................................................................................

Industrial�–�rest�of�uK��4.9 ��8.4.................................................................................................................................................................................................................................................................................................................................................................

other ��11.4 ��8.8.................................................................................................................................................................................................................................................................................................................................................................

Cash��4.6 ��4.2

Top ten properties Sector NAV %

1 Bracknell ��retail�and�office ��4.5.................................................................................................................................................................................................................................................................................................................................................................

2 Croydon�–�ruskin�square��offices ��4.2.................................................................................................................................................................................................................................................................................................................................................................

3 Mp�Kings�retail,�Hammersmith ��shopping�Centre ��3.9.................................................................................................................................................................................................................................................................................................................................................................

4 City�tower,�Manchester ��offices ��3.8.................................................................................................................................................................................................................................................................................................................................................................

5 Matrix,�park�royal,�London�nW10 ��Industrial ��3.0.................................................................................................................................................................................................................................................................................................................................................................

6 acorn�Industrial�estate,�Crayford��Industrial ��2.9.................................................................................................................................................................................................................................................................................................................................................................

7 Hartlebury�trading�estate ��Industrial ��2.8.................................................................................................................................................................................................................................................................................................................................................................

8 Kensington�Village,�London�W14��offices ��2.8.................................................................................................................................................................................................................................................................................................................................................................

9 davidson�House,�Forbury�square,�reading��offices ��2.8.................................................................................................................................................................................................................................................................................................................................................................

10 Mermaid�Quay,�Cardiff��other:�Leisure ��2.7.................................................................................................................................................................................................................................................................................................................................................................

top�ten�properties ��33


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the�tables�below�set�out�the�top�ten�tenants�and�lease�expiry�profile.�

Top ten tenants % of portfolio

1 regus��3.9.................................................................................................................................................................................................................................................................................................................................................................

2 tata�steel ��3.2.................................................................................................................................................................................................................................................................................................................................................................

3 Lloyds�tsB�Bank��2.7.................................................................................................................................................................................................................................................................................................................................................................

4 the�secretary�of�state��2.4.................................................................................................................................................................................................................................................................................................................................................................

5 universal�Music ��2.1.................................................................................................................................................................................................................................................................................................................................................................

6 Care�uK ��2.0.................................................................................................................................................................................................................................................................................................................................................................

7 stay�City��1.9.................................................................................................................................................................................................................................................................................................................................................................

8 B�&�Q ��1.7.................................................................................................................................................................................................................................................................................................................................................................

9 pendragon�plc��1.7.................................................................................................................................................................................................................................................................................................................................................................

10 university�of�Law ��1.6.................................................................................................................................................................................................................................................................................................................................................................

915�other�tenants ��76.8

Property Portfolio continued

a�combination�of�selling�fully�let�properties�on

completion�of�asset�management,�lease�expiries

over�the�year�and�the�Hammersmith�acquisition,

has�seen�the�portfolio�void�rate�rise�from�3.4%�to

5.6%.�this�remains�below�the�benchmark

average�of�6.7%�and�allows�the�manager�to

capture�further�rental�growth,�supporting�income

and�capital�values.

the�average�unexpired�lease�term,�assuming�all

tenants�break�at�the�earliest�opportunity,�reduced

from�7.2�to�6.2 years�over�the�year.�this�was

largely�a�result�of�acquiring�the�Hammersmith

portfolio�where�the�vendor�had�inserted�landlord

breaks�into�leases�in�order�to�facilitate�a�planned

redevelopment. this provides significant�asset

management�opportunities to�capture�rental

growth,�increase�lease�lengths�and�reduce�void.

all�of�which�will�enable�the�asset�to�be�a�strong

contributor�to�performance�going�forward.

% of rent passing

SREF Benchmark

up�to�five�years ��56.1 ��48.7.................................................................................................................................................................................................................................................................................................................................................................

Five�to�10�years ��24.4 ��26.6.................................................................................................................................................................................................................................................................................................................................................................

10�to�15�years ��9.6 ��13.4.................................................................................................................................................................................................................................................................................................................................................................

15�to�20�years ��3.0 ��5.1.................................................................................................................................................................................................................................................................................................................................................................

over�20�years��6.8 ��6.2


Market Market Value Value £’000 at £’000 at 31 March Total Net 31 March Total NetDirect Properties Sector 2016 assets % 2015 assets %

Direct Properties up to £10m.................................................................................................................................................................................................................................................................................................................................................................

Bristol�–�Maggs�House ��standard�retail��.................................................................................................................................................................................................................................................................................................................................................................

shipley�–�20/40�Market�square ��standard�retail��.................................................................................................................................................................................................................................................................................................................................................................

Loughton�–�195-200�High�road ��standard�retail��.................................................................................................................................................................................................................................................................................................................................................................

Woodley�–�81/129,�Crockhamwell�road,�reading��standard�retail��.................................................................................................................................................................................................................................................................................................................................................................

reading�–�new�Century�place ��south�east�offices��.................................................................................................................................................................................................................................................................................................................................................................

Ipswich�–�asterbury�place��other�–�Care�Homes ��.................................................................................................................................................................................................................................................................................................................................................................

Lowestoft�–�roman�Hill��other�–�Care�Homes ��.................................................................................................................................................................................................................................................................................................................................................................

Mildenhall�great�Heath ��other�–�Care�Homes ��.................................................................................................................................................................................................................................................................................................................................................................

Haverhill�–�Chalkstone ��other�–�Care�Homes ��.................................................................................................................................................................................................................................................................................................................................................................

Framlingham�–�Mills�Meadow��other�–�Care�Homes ��.................................................................................................................................................................................................................................................................................................................................................................

Croydon�–�Car�park��other�–�car�park ��.................................................................................................................................................................................................................................................................................................................................................................

Livingston�Limefields�(Land) ��Industrial��.................................................................................................................................................................................................................................................................................................................................................................

York�–�alexandra�Court��Industrial��.................................................................................................................................................................................................................................................................................................................................................................

greenford�–�Land�at�rockware�ave. ��Industrial��.................................................................................................................................................................................................................................................................................................................................................................

Cannock�–�Land�at�Walkmill�Lane��Industrial��.................................................................................................................................................................................................................................................................................................................................................................

Livingston�XL�(Land) ��Industrial��

Total Market Value up to £10m 90,665 4.1% 110,580 5.7%

Direct Properties between £10m and £25m

Loughton�–�202-226�High�road ��standard�retail��.................................................................................................................................................................................................................................................................................................................................................................

southsea�–�2-42�palmerston�road��standard�retail��.................................................................................................................................................................................................................................................................................................................................................................

exeter�–�pearl�assurance�House,�High�street ��standard�retail��.................................................................................................................................................................................................................................................................................................................................................................

Bracknell�–�Bracknell�Beeches��south�east�offices��.................................................................................................................................................................................................................................................................................................................................................................

slough�–�Capital�point,�33�Bath�road ��south�east�offices��.................................................................................................................................................................................................................................................................................................................................................................

spalding�–�retail�parks��retail�Warehouse��.................................................................................................................................................................................................................................................................................................................................................................

Chelmsford�–�Meadows�retail�park ��retail�Warehouse��.................................................................................................................................................................................................................................................................................................................................................................

Colchester�–�Hythe�riverside�park��retail�Warehouse��.................................................................................................................................................................................................................................................................................................................................................................

Frimley�–�albany�park ��retail�Warehouse��.................................................................................................................................................................................................................................................................................................................................................................

Chatham�–�Maritime ��other�–�leisure ��.................................................................................................................................................................................................................................................................................................................................................................

greenford�–�tetris ��Industrial��.................................................................................................................................................................................................................................................................................................................................................................

dunstable�–�Chiltern�park ��Industrial��.................................................................................................................................................................................................................................................................................................................................................................

dunstable�–�arenson�Centre ��Industrial��.................................................................................................................................................................................................................................................................................................................................................................

London�W6�–�Kings�Mall�Carpark ��other�–�carpark.................................................................................................................................................................................................................................................................................................................................................................

Croydon�–�ruskin�square�residential ��residential�.................................................................................................................................................................................................................................................................................................................................................................

London�WC2�–�Craven�House,�117-123�Kingsway��Central�London�offices��.................................................................................................................................................................................................................................................................................................................................................................

London�eC15�–�Jubilee�House ��Central�London�offices��.................................................................................................................................................................................................................................................................................................................................................................

London�eC2�–�appold�street��Central�London�offices��.................................................................................................................................................................................................................................................................................................................................................................

London�WC2�–�53�parker�street��Central�London�offices��

Total Market Value between £10m and £25m 292,405 13.1% 327,725 16.9%

Fund�Manager’s reportPortfolio Statement


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Direct Properties between £25m and £50m.................................................................................................................................................................................................................................................................................................................................................................

York�–�Monks�Cross ��standard�retail��.................................................................................................................................................................................................................................................................................................................................................................

truro�–�Lemon�Quay ��standard�retail.................................................................................................................................................................................................................................................................................................................................................................

London�n1�–�shepherdess�Walk ��south�east�offices.................................................................................................................................................................................................................................................................................................................................................................

Croydon�–�aMp�House��south�east�offices.................................................................................................................................................................................................................................................................................................................................................................

London�se1�–�palace�House��south�east�offices.................................................................................................................................................................................................................................................................................................................................................................

norwich�–�Hall�road�retail�park ��retail�Warehouse.................................................................................................................................................................................................................................................................................................................................................................

Colchester�–�turner�rise��retail�Warehouse.................................................................................................................................................................................................................................................................................................................................................................

Cardiff�–�st�William�House ��rest�of�uK�offices.................................................................................................................................................................................................................................................................................................................................................................

London�e16�–�electra�Industrial�estate ��Industrial.................................................................................................................................................................................................................................................................................................................................................................

Wolverhampton�–�steelpark��Industrial.................................................................................................................................................................................................................................................................................................................................................................

Woking�–�Woking�Business�park ��Industrial.................................................................................................................................................................................................................................................................................................................................................................

London�WC1�–�Chenies�street ��Central�London�offices.................................................................................................................................................................................................................................................................................................................................................................

London�e1�–�Mile�end�road��Central�London�offices.................................................................................................................................................................................................................................................................................................................................................................

Hayes�–�stayCity ��other�–�Hotel.................................................................................................................................................................................................................................................................................................................................................................

London�eC3�68�–�Lombard�street��Central�London�offices.................................................................................................................................................................................................................................................................................................................................................................

London�eC1�–�Chiswell�street ��Central�London�offices

Total Market Value between £25m and £50m 609,400 27.3% 622,375 32.1%

Direct Properties greater than £50m.................................................................................................................................................................................................................................................................................................................................................................

reading�–�davidson�House ��south�east�offices.................................................................................................................................................................................................................................................................................................................................................................

Cardiff�–�Mermaid�Quay ��other�–�leisure.................................................................................................................................................................................................................................................................................................................................................................

London�W6�–�Kings�Mall��retail.................................................................................................................................................................................................................................................................................................................................................................

Croydon�–�ruskin�square ��south�east�offices.................................................................................................................................................................................................................................................................................................................................................................

London�sW8�–�Battersea�studios��south�east�offices.................................................................................................................................................................................................................................................................................................................................................................

London�W6�–�one�Lyric ��south�east�offices.................................................................................................................................................................................................................................................................................................................................................................

Worcestershire�–�Hartlebury�trading�estate� ��Industrial.................................................................................................................................................................................................................................................................................................................................................................

London�nW10�–�Matrix�park,�park�royal� ��Industrial.................................................................................................................................................................................................................................................................................................................................................................

Crayford�–�acorn�Industrial�estate ��Industrial.................................................................................................................................................................................................................................................................................................................................................................

London�W14�–�Kensington�Village ��Central�London�offices

Total Market Value greater than £50m 656,765 29.5% 350,100 18.1%

Total Direct Properties 1,649,235 74.0% 1,410,780 72.9%.................................................................................................................................................................................................................................................................................................................................................................

Joint Ventures.................................................................................................................................................................................................................................................................................................................................................................

gilbran�property�unit�trust��standard�retail��.................................................................................................................................................................................................................................................................................................................................................................

Motor�retail�Lp��standard�retail��.................................................................................................................................................................................................................................................................................................................................................................

Bracknell�put��retail ��.................................................................................................................................................................................................................................................................................................................................................................

City�tower�unit�trust��office��.................................................................................................................................................................................................................................................................................................................................................................

ruskin�sq�LLp��residential��.................................................................................................................................................................................................................................................................................................................................................................

West�India�Quay�ut��other�–�leisure ��.................................................................................................................................................................................................................................................................................................................................................................

store�unit�trust��Central�London�office��.................................................................................................................................................................................................................................................................................................................................................................

Total Joint Ventures 307,994 13.7% 261,173 13.5%

Portfolio Statement continued



Collective Investment Schemes.................................................................................................................................................................................................................................................................................................................................................................

Henderson�uK�retail�Warehouse��retail�Warehouse��.................................................................................................................................................................................................................................................................................................................................................................

unIte�uK�student�accommodation�Fund ��other�–�student��accommodation ��

.................................................................................................................................................................................................................................................................................................................................................................

City�of�London�office�ut ��Central�London�office��.................................................................................................................................................................................................................................................................................................................................................................

WeLput��Central�London�office��

Total Collective Investment Schemes 98,252 4.3% 95,166 4.9%

Portfolio of investments 2,055,451 92.9% 1,767,119 91.3%Net other assets (including cash) 173,103 7.1% 169,148 8.7%

Net Assets 2,228,584 100.0% 1,936,267 100.0%

Portfolio Statement continued


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department�W�is�an�iconic�office�building�in

Whitechapel,�providing�87,400�sq�ft�of�office,

retail�and�leisure�accommodation.�Whitechapel�is

an�emerging�digital�hub�in�east�London,

neighbouring�old�street�and�shoreditch.�the

asset�was�acquired�in�Q4�2014�for�£27.8 million,

reflecting�a�net�initial�yield�of�2.6%.�at�acquisition

the�scheme�was�let�off�very�low�base�rents�and

offered�good�income�growth�prospects with�a

reversionary�yield�of�7.2%.

In�Q4�2015,�planning�approval�was�received�to

refurbish�and�extend�the�asset�to�create�a

modern,�mixed�use�development.�the�approval

allows�for�an�additional�12.000�sq�ft�of�net�floor

area.�It�also�allows�for�change�of�use�of�the

second�floor�to�offices,�to�facilitate�further�activity.

asset�management�has�contributed�to�strong

performance,�with�the�property�valued�at

£37.7 million�as�at�31�March�2016,�representing

an�annualised�total�return�of�23%�since

acquisition.

Fund�Manager’s report�Transactions and Asset Management

Department W, Whitechapel


ruskin�square�is�a�mixed�use�8.5�acre

development�site�adjacent�to�east�Croydon

station.

the�first�phase�of�offices�(180,000�sq�ft)�and�the

first�phase�of�residential�(161�units)�is�under

construction�and�is�due�to�complete�later�in

2016.�to�date,�we�have�sold�the�majority�of

residential�units�at�a�premium�to�valuation.�We

are�in�advanced�talks�with�various�parties�to

complete�a�pre-let�for�this�first�office�building.

In�the�third�quarter�2015,�terms�were�agreed�with

BoXparK,�the�“world’s�first�pop-up�shopping

mall”�which�opened�in�London’s�shoreditch�in

2011,�to�open�its�second�scheme�at�ruskin

square�in�the�coming�year.�It�will�comprise�80

containers�and�20,000�sq�ft�of�space,�principally

focused�on�food�and�beverage�operators.

Importantly,�it�will�start�to�challenge�perceptions

of�Croydon�as�a�retail�and�office�destination.

In�the�first�quarter�2016,�planning�permission�was

obtained�for�a�second�office�building�at�the

ruskin�square�development�in�Croydon.�the

consent�allows�for�250,000�sq�ft�over�13�storeys,

offering�200,000�sq�ft�of�office�space�with�shops

and�restaurants�on�the�ground�floor.

the�ruskin�square�development�is�expected�to

be�accretive�to�returns�over�the�coming�quarters

and�years.

Transactions and Asset Management continued

Ruskin Square, Croydon


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the�fund�owns the freehold�of�the�98�acre�town

centre�at�Bracknell,�in�a�joint�venture�with�Legal

& general.�Bracknell�is�located�in�one�of�the�most

affluent�areas�of�south�east�england.

the�joint�venture�redevelopment�of�the�town

centre�is�progressing�on�time�and�on�budget�and

is�due�to�complete�in�spring�2017.�over�the�last

year�a�further�10%�of�the�scheme�was�pre-let,

taking�lettings�to�date�to�60% of�floor�area.

Following�the�signing�of�anchor�tenants,

Fenwicks�and�Marks�&�spencer,�deals�have�been

concluded�with�river�Island,�Footlocker,

Chimichanga,�Jones�and�Vodafone�over�the�last

12�months.

the�transformation�of�Bracknell�from�a

development site into�a�core�asset�within�the

portfolio�is�a�final�step�in�the�fund’s�remodelling

which�began�more�than�five�years�ago.�Its

conversion�from�a�non�income�producing

development�site�into�a�modern,�core,�appealing

destination�for�tenants�and�consumers�should

add�to�capital�and�income�returns�as�well�as�de-

risking�the�fund�portfolio.


Bracknell Town Centre


City�tower�is�a�615,429�sq�ft�office,�retail,�leisure

and�hotel�investment�on�a�three�acre�island�site�in

Manchester�city�centre.�a�50%�interest�was

acquired�alongside�two�schroder-managed�funds

in�June�2014�for�£132 million,�with�the

apportioned�price�of�£66 million�reflecting�a�net

initial�yield�of�7%.�the�strategy�was�to�refurbish

the�reception,�mall�area,�common�parts�and

vacant�offices�in�order�to�capitalise�on�a�shortage

of�good�quality�refurbished�space�in�Manchester

city�centre.�since�acquisition�the�following

progress�has�been�made,�with�the�statistics

reflecting�the�Company’s�50%�ownership:

– refurbishment�works�completed�in�May�at�a

total�cost�to�the�Fund�of�£1,600,000

– Latest�office�letting�at�£22.50�per�sq�ft

compares�with�independent�rental�value�as�at

31 March�2016�of�£21.50�per�sq�ft,�providing

scope�for�further�income�and�capital�growth

– Lease�expiry�of�two�lower�floors�in�June

creates�an�opportunity�to�refurbish�and

re-let above�the�current�rental�value�of

£25.00 per sq ft

– re-positioning�retail�to�improve�the�tenant�mix

and�support�the�3,000�people�working�in City

tower

this�activity�has�contributed�to�strong

performance�with�the fund’s�share�of�the property

valued�at�£84.7 million�as�at�31 March�2016�and

an�annualised�total�return�of�19.6%�since

acquisition.


Manchester, Piccadilly Gardens, City Tower


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the�Felnex�Industrial�estate�is�a�19�acre

development�site�in�the�London�Borough�of

sutton.�over�the�last�6�years�the�fund�has�been

preparing�the�site�for�a�residential�scheme�and�in

2012�a�detailed�consent�was�obtained�including

a�residential�scheme�of�725�units.�the�outline

consent�for�the�scheme�is�due�to�expire�in�2017

and�accordingly�a�development�and�disposal

agreement�was�concluded�with�a�residential

developer,�Barratt�david�Wilson�to�take�this

forward.

the�agreement�allows�for�a�minimum�land�value

of�£59 million,�paid�in�tranches�over�the�next

8 years�and�containing�provisions�for�the�fund�to

benefit�from�future�capital�and�rental�growth.�the

deal�crystallised�strong�asset�management�return

versus�its�previous�year�end�valuation�of

£40.5 million.

the�conclusion�of�a�disposal�and�development

agreement�has�de-risked�the�asset�for�the�fund,

reducing�its�exposure�to�land�and�development�in

line�with�its�strategy�to�focus�on�maximising

income�producing�assets.�Barrett�david�Wilson

has�a�strong�track�record�with�a�recognised

brand.�they�have�taken�on�all�planning,

construction�costs�and�liability�risk.

Felnex Industrial Estate, Hackbridge



In�the�second�quarter�2015,�the�fund�acquired�a

portfolio�of�assets�at�Hammersmith�for

£153 million�reflecting�a�net�initial�yield�of�4.6%.

the�acquisition�comprised�the�following:

Kings Mall Shopping Centre, W6: a�340,000

sq ft�freehold�shopping�centre�located�close�to

Hammersmith�underground�station

One Lyric Square, W6: a�87,950�sq�ft�office

building�that�adjoins�Kings�Mall

Glenthorne Road Car Park, W6: a�200�space

car�park�(increasing�to�750�spaces�in�2018)

the�purchase�is�in�line�with�the�fund’s�strategy�of

capitalising�on�London’s�strong�growth�outside�of

its�traditional�core�and�investing�in�properties�with

asset�management�potential.�the�Hammersmith

market has�seen�extremely�strong�rental�growth

and�occupier�demand�with vacancy�rates at�historic

lows.�this�asset�benefits�from�good�transport�links

and�offers�attractive�amenities�to�occupiers.�Current

rents�are�low�and�provide�significant�and�near-term

opportunity�for�adding�income�and�value.

the�vendor�had�positioned�the�asset�for�total

redevelopment�and�conversion�into�residential,

with�short-term�leases�and�landlord�breaks.�this

had�resulted�in�a�high�level�of�vacancy�as�well�as

suppressed�rents�and�unexpired�terms.�prior�to

acquisition�we�undertook�significant�background

work�with�both�existing�occupiers�and�potential

new�tenants.�our�resulting�strategy�is�to�increase

occupancy, reshape�the�tenant�mix�and�maximise

the�income�of�the�asset.�during�the�year�the

following�progress�has�been�made:

– at�Kings�Mall,�letting�concluded�with�Kiko,�an

Italian�cosmetics�company�for�10 years.

– at�one�Lyric�square,�in�advance�of�a�planned

refurbishment�later�this�year,�contracts�have

been�exchanged�on�an�agreement�for�lease

with�a�serviced�office�provider.�the�lease�is�for

70%�of�the�space,�for�twenty�years�at�a�rent

equating�to�£50�per sq ft�compared�to�the

current�level�of�£16 per sq ft.

proactive�asset�management�offers�the�potential

to�capture�significant�rental�growth�in�the�short

term�which�we�expect�to�drive�outperformance

from�this�asset�in�the�coming�year.

Hammersmith Portfolio, London W1


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the�asset�comprises�two�blocks�of�serviced

apartments�in�Hayes,�West�London�which�were

bought�for�£32.4 million�in�the�first�quarter�2016.

the�buildings�are�let�to�staycity,�one�of�the

leading�serviced�apartment�providers�in�europe,

for�a�term�of�25 years.�the�purchase�price

reflects�an�initial�yield�of�5.5%,�which�is�accretive

to�sreF’s�income�distribution.

the�serviced�apartment�sector�is benefiting�from

growing�demand�from�business�travellers�as�well

as�changing�consumer�preferences�as tourists

look�for�additional�space�and�amenity.�the

acquisition�combines�two�elements�of�the�fund’s

strategy�of�investing�in�London’s�‘emerging’�hubs

and�seeking�value�in�the�alternative�sectors.�the

properties�benefit�from�excellent�transport�links,

which�are�set�to�improve�further�with�the�opening

of�Crossrail�from�2019.

It�is�noteworthy�that�the�purchase�price�equating

to�£275�per�sq�ft�is�heavily�underpinned�by�the

vacant�possession�value�which�is�in�excess�of

£400 per sq ft.

Staycity Serviced Apartments, Hayes

During the year ended 31 March 2016

Quarter Purchases Sector Price in £ Yield

Q2�2015 Kings�Mall�shopping�Centre,�London�W6 retail 90.0 million 4.6%*.................................................................................................................................................................................................................................................................................................................................................................

Q2�2015 one�Lyric�square,�London�W6 office 52.5 million 4.6%*.................................................................................................................................................................................................................................................................................................................................................................

Q2�2015 glenthorne�road�Car�park,�W6 other 10.5 million 4.6%*.................................................................................................................................................................................................................................................................................................................................................................

Q4�2015 Car�showroom�portfolio�(within�gilbran�property�unit�trust) other 4.6 million 6.4%.................................................................................................................................................................................................................................................................................................................................................................

Q1�2016 staycity�serviced�apartments,�Hayes other 32.4 million 5.5%

*Initial�yield�of�4.6%�for�£153 million�asset�portfolio

Quarter Disposals Sector Price in £ Yield

Q2�2015 42-60�High�street,�Harborne,�Birmingham retail 3.4 million 7.3%.................................................................................................................................................................................................................................................................................................................................................................

Q2�2015 Buckingham�House,�the�Broadway,�stanmore retail 9.3 million 5.0%.................................................................................................................................................................................................................................................................................................................................................................

Q3�2015 Interchange�retail�park,�Ipswich retail 15.1 million 6.2%.................................................................................................................................................................................................................................................................................................................................................................

Q3�2015 units�1-11�duloch�park,�dunfermline retail 4.5 million 7.4%.................................................................................................................................................................................................................................................................................................................................................................

Q3�2015 Quadrant�park,�Welwyn�garden�City Industrial 16.8 million 5.0%.................................................................................................................................................................................................................................................................................................................................................................

Q3�2015 West�end�of�London�property�unit�trust office 10.0 million 2.3%.................................................................................................................................................................................................................................................................................................................................................................

Q4�2015 161-181�Clarence�street,�Kingston retail 5.6 million 6.1%.................................................................................................................................................................................................................................................................................................................................................................

Q4�2015 Kimpton�Industrial�estate,�sutton Industrial 34.1 million 1.8%.................................................................................................................................................................................................................................................................................................................................................................

Q4�2015 Felnex�Industrial�estate,�Hackbridge Industrial 59.0 million* n/a�(development)

*£59.0�million�is�guaranteed�minimum�payment�under�the�Building�Licence�agreement

Fund�Manager’s reportPurchases and Sales


Fund�Manager’s reportResponsible Investment and Sustainability

responsible�real�estate�Investment�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.

the�changes�in�markets�as�a�consequence�of

environmental�and�social�issues�are�simply

investment�risks�that�schroders�must�understand

to�protect�our�clients’�assets�from�depreciation.

offering�occupiers�resource-efficient�and�flexible

space�is�critical�to�ensure�our�investments�are�fit

for�purpose�and�sustain�their�value�over�the�long

term.�as�a�landlord,�we�have�the�opportunity�to

help�reduce�running�costs�for�our�occupiers,

increase�employee�productivity�and�well-being,

and�contribute�to�the�prosperity�of�a�location

through�building�design�and�management.�If�we

ignored�such�issues�when�considering�asset

management�and�investments,�we�would�risk�the

erosion�of�income�and�value�as�well�as�missing

opportunities�to�enhance�investment�returns.

through�its�construction,�use�and�demolition,�the

built�environment�accounts�for�more�than�one-

third�of�global�energy�use�and�is�the�single�largest

source�of�greenhouse�gas�emissions�in�many

countries.

the�industry’s�potential�to�cost-efficiently�reduce

emissions�and�the�consumption�of�depleting

resources,�combined�with�the�political�imperative

to�tackle�issues�such�as�climate�change,�means

the�property�sector�will�remain�a�prime�target�for

policy�action.�this�presents�new�challenges�and

opportunities�for�the�property�industry�with

profound�implications�for�both�owners�and

occupiers.

a�good�investment�strategy�must�incorporate

environmental�and�social�issues�alongside

traditional�economic�considerations.�at�schroders

we�believe�a�complete�approach�should�be

rewarded�by�improved�investment�decisions�and

performance.

a�copy�of�schroders�responsible�real�estate

Investment�strategy�can�be�found�at

www.schroders.com/en/uk/realestate.

Environmental Management System

over�2015�we�have�continued�to�work�with

sustainable�Commercial�solutions�(‘sCs’)�to

develop�our�environmental�Management�system

(‘eMs’)�which�is�aligned�with�Iso14001.�the

eMs�supports�our�responsible�investment

approach�at�all�stages�of�real�estate�investment

from�acquisition�through�to�disposal.�sCs

working�with�sreF’s�principal�managing�agents,

JLL�and�Knight�Frank,�has�developed�the

monitoring�of�portfolio�sustainability�data.�this

includes�energy�usage�and�efficiency,�as�well�as

water�and�waste�management,�with�regular

reporting�and�analysis.�this�analysis�enables�an

understanding�of�each�asset’s�sustainability

credentials�and�identifies�the�potential�for

improvement�opportunities.

the�Investment�Manager�sets�a�sustainability

policy�annually�which�confirms�the�commitments

and�targets�for�the�year.�the�2016�policy

introduces�an�energy�reduction�target�of�6%�over

two�years�from�a�2015/16�reporting�year�baseline

for�uK�managed�assets�where�the�landlord�is

responsible�for�the�supply.�the�Investment

Manager�continues�to�work�with�sCs�and�the

property�managers�to�achieve�reductions�for�the

Fund’s�assets�ensuring�the�Investment�Manager’s

sustainability�policy�and�requirements�are�met

and�on�a�cost�effective�basis.

the�Fund�was�in�scope�of�the�energy�savings

opportunity�scheme�and�a�completed

notification�was�submitted.�the�audits�required

under�the�scheme�are�being�used�as�part�of�our

programme�to�implement�improvement�initiatives

across�the�portfolio.

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Responsible Investment and Sustainability continued

the�status�of�assets’�energy�performance

Certificates�(“epC”)�is�under�regular�review�and

consideration�in�light�of�the�2015�Minimum

energy�efficiency�standards�(england�and�Wales)

legislation�which�takes�effect�for�non-domestic

buildings�in�2018.�the�legislation�brings�in�a

minimum�epC�standard�of�an�“e”�for�new�leases

from�2018�and�applies�to�all�leases�from�2023.

the�Fund�qualified�for�phase�II�of�the�CrC

energy�efficiency�scheme�and�the�purchase�of

allowances.�the�Fund�complies�with�the�CrC

scheme�requirements�and�a�submission�for�the

2015/16�reporting�year�will�be�made.�It�was

announced�in�the�March�2016�Budget�that�the

CrC�scheme�will�not�continue�beyond�phase�II

which�ends�31 March�2019.

the�Investment�Manager�monitors�policy�and

legislation�relating�to�environmental�social�and

governance�issues�to�develop�its�eMs�and

manage�risk�and�compliance.

Global Real Estate Sustainability

Benchmark (‘GRESB’)

the�Fund�has�participated�in�gresB�since�2013.

We�are�pleased�to�report�that�in�2015�the�Fund

again�improved�its�score�on�previous�years�and

outperformed�its�peer�average.�sreF�was

awarded�a�‘green�star’�for�the�first�time�in

recognition�of�the�management�and

implementation�of�our�sustainability�policy.�a

submission�has�been�made�for�the�2016�gresB

survey�for�which�results�are�due�in�september

2016.

the�global�real�estate�sustainability�Benchmark

(gresB)�is�sponsored�by�institutional�investors�to

improve�sustainability�transparency�and�has

become�the�leading�industry�benchmark.



Govern

ance

The Financial Statements

We are pleased to present the Audited

Consolidated Financial Statements of the

Schroder UK Real Estate Fund for the year

ended 31 March 2016.

The Fund

Schroder UK Real Estate (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 Real Estate Investment Business and

to manage cash raised from investors for

investment in the Real Estate 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 real

estate throughout the UK.

The policy for achieving these objectives is that

the Fund will invest in UK real estate. 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 Status

From 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 Meetings

The Fund will not be holding any Annual General

Meetings.

Statement of Responsibilities

The 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 UK

Authorised Funds issued by the IMA in May

2014;

– 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 Instrument of

Incorporation, Prospectus and COLL and for

taking reasonable steps for the prevention and

detection of fraud, error and non- compliance

with law or regulations.

GOVERNANCEReport of the Authorised Corporate Director and


Report of the Authorised Corporate Director and

Statement of Responsibilities continued

The ACD’s report and accounts for the year ended 31 March 2016 were signed on 21 July 2016 on

behalf of the ACD by:

J. Walker-Hazell,

P. Chislett – Schroder Unit Trusts Limited, 21 July 2016



Govern

ance

The following disclosures are required under the

Alternative Investment Fund Managers Directive

(AIFMD).

These disclosures should be read in conjunction

with the Schroders Remuneration Report on

pages 68 to 86 of the 2015 Annual Report &

Accounts (available on the Group’s website –

www.schroders.com/ir), which provides more

information on the activities of our Remuneration

Committee and our remuneration principles and

policies.

Details of the AIFM Remuneration Code can be

found at www.fca.org.uk, in the Senior

Management Arrangements, Systems and

Controls Sourcebook (SYSC 19B).

The Remuneration Committee of Schroders plc

has established an AIFM Remuneration Policy to

ensure the requirements of the AIFM

Remuneration Code are met proportionately for

all AIFM Remuneration Code Staff. You can get

details of the latest remuneration policy at

www.schroders.com/Remuneration-disclosures.

The total amount of remuneration paid by SUTL

to its staff is nil as SUTL has no employees. AIFM

Remuneration Code Staff of SUTL are employed

and paid by other Schroders group companies.

Employees who serve as Directors of SUTL

receive no additional fees in respect of their role

on the Board of SUTL.

SUTL manages a total of £42,989 million assets

under management, £16,753 million of which are

in Alternative Investment Funds (AIFs).

SUTL’s Code Staff are individuals in roles which

can materially affect the risk of SUTL or any AIF it

manages. These individuals are employed by and

provide services to other companies in, and

clients of, the Schroders Group. As a result, only

a portion of remuneration for those individuals is

included in the aggregate remuneration figures

that follow, based on an objective apportionment

to reflect the balance of each role. The aggregate

total remuneration paid to the 140 AIFM

Remuneration Code Staff of SUTL is

£11,548,623, of which £3,891,982 is paid to

Senior Management and £7,656,641 is paid to

other AIFM Remuneration Code Staff.

GOVERNANCEAlternative Investment Fund Managers (AIFM) Remuneration

Disclosures for Schroder Unit Trust Limited (SUTL) as at

31 December 2015


The 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 2016.

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.

GOVERNANCEInvestment Manager’s Statement of Responsibility

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 to

provide investment management, property

management and advisory services to the ACD.

On 24 November 2014, Schroder Property

Investment Management Limited was renamed to

Schroder Real Estate Investment Management

Limited (“Schroder Real Estate”). Schroder Real

Estate 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 Real Estate

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 limits


Govern

ance

Investment Manager’s Statement of Responsibility continued

Legal limits Product limits

Minimum 60% its assets (NAV) must form part of its Sector exposure: Maximum absolute load difference +/- 50%Property Investment Business vs benchmark. Maximum divergence of central London +/- 10%. Maximum divergence in alternatives +/- 10%.

.................................................................................................................................................................................................................................................................................................................................................................

Minimum 60% its income must come from the Investment in a single indirect vehicle: 15% NAVProperty Investment Business

.................................................................................................................................................................................................................................................................................................................................................................

Maximum aggregate investment in indirect vehicles: Aggregate investment in indirect vehicles: 35% NAV40% NAV

.................................................................................................................................................................................................................................................................................................................................................................

Maximum 15% of the NAV invested in a single asset Aggregate investment in joint ventures: 35% NAV.................................................................................................................................................................................................................................................................................................................................................................

Maximum 20% of the NAV committed to development Investment in UK property related listed securities: aggregate(on/off balance sheet) 10% NAV – individual 2.5% NAV

.................................................................................................................................................................................................................................................................................................................................................................

Maximum borrowing (on/off balance sheet): 25% NAV Maximum investment in undeveloped and non income producing land: 10% NAV

.................................................................................................................................................................................................................................................................................................................................................................

Investment on and off balance sheet in shorter/medium Maximum on and off balance sheet percentage income from nonterm leaseholds (less than 50 years): 20% NAV government tenant: 10%

.................................................................................................................................................................................................................................................................................................................................................................

Maximum speculative development: 15% NAV 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


BNP Paribas Real Estate

As Standing Independent Valuer for the Fund, we

have valued immovables held by the Fund as at

31 March 2016 in accordance with The RICS

Valuation – Professional Standards and in

accordance with the COLL 8.4.13R of the

Collective Investment Schemes Sourcebook.

Schroder Unit Trusts Limited, as Authorised

Corporate Director 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 Real Estate Investment

Management Limited (SREIM). We have generally

been provided with copies of 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 42 immovables owned by the Fund as at

31 March 2016 is £1,249,130,000. 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 2016

Allsops LLP

As Independent Valuer for the Fund, we have

valued immovables held by the Fund as at

31 March 2016 in accordance with The Royal

Institution of Chartered Surveyors and

International Valuation Standards (RICS) and in



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

GOVERNANCEIndependent Property Valuers’ Report


Govern

ance

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.



31 March 2016 is £56,615,000. This figure





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.

Allsops LLP – 31 March 2016

Knight Frank

As Independent Valuer for the Fund, we have

valued immovables held by the Fund as at

31 March 2016 in accordance with The Royal

Institution of Chartered Surveyors and

International Valuation Standards (RICS) and in



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.

Independent Property Valuers’ Report continued




31 March 2016 is £35.5 million. This figure





single lot.

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.

Knight Frank – 31 March 2016

Independent Property Valuers’ Report continued


Govern

ance


GOVERNANCEDepositary’s Report and Statement of Responsibilities

Statement of the Depositary’s

Responsibilities and Report of the

Depositary to the Shareholders of

Schroder UK Real Estate Fund (“the

Company”) for the Period Ended 31

March 2016.

The Depositary must ensure that the Company is

managed in accordance with the Financial

Conduct Authority’s Collective Investment

Schemes Sourcebook, the Investment Funds

Sourcebook, the Open-Ended Investment

Companies Regulations 2001 (SI 2001/1228) (the

OEIC Regulations), as amended, the Financial

Services and Markets Act 2000, as amended,

(together “the Regulations”), the Company’s

Instrument of Incorporation and Prospectus

(together “the Scheme documents”) as detailed

below.

The Depositary must in the context of its role act

honestly, fairly, professionally, Independently and

in the interests of the Company and its investors.

The Depositary is responsible for the safekeeping

of all custodial assets and maintaining a record of

all other assets of the Company in accordance

with the Regulations.

The Depositary must ensure that:

– the Company’s cash flows are properly

monitored and that cash of the Company is

booked into the cash accounts in accordance

with the Regulations;

– the sale, issue, redemption and cancellation of

shares are carried out in accordance with the

Regulations;

– the value of shares of the Company are

calculated in accordance with the Regulations;

– any consideration relating to transactions in

the Company’s assets is remitted to the

Company within the usual time limits;

– the Company’s income is applied in

accordance with the Regulations; and

– the Instructions of the Alternative Investment

Fund Manager (“the AIFM”) are carried out

(unless they conflict with the Regulations).

The Depositary also has a duty to take

reasonable care to ensure that the Company is

managed in accordance with the Scheme

documents and the Regulations in relation to the

investment and borrowing powers applicable to

the Company.

Having carried out such procedures as we

consider necessary to discharge our

responsibilities as Depositary of the Company, it

is our opinion, based on the information available

to us and the explanations provided, that in all

material respects the Company, acting through

the AIFM:

(i) has carried out the issue, sale, redemption and

cancellation, and calculation of the price of the

Company’s shares and the application of the

Company’s income in accordance with the

Regulations and the Scheme documents of

the Company, and

(ii) has observed the investment and borrowing

powers and restrictions applicable to the

Company.

Natwest PLC – 21 July 2016


Report on the financial statements

Our opinion

In our opinion the consolidated financial

statements, defined below:

– give a true and fair view of the financial

position of the Group and the Fund as at

31 March 2016 and of the net revenue, the net

capital gains on the scheme property and the

cash flows of the Group and 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 Instrument of

Incorporation.

This opinion is to be read in the context of what

we say in the remainder of this report.

What we have audited

The consolidated financial statements of

Schroder UK Real Estate Fund (the “Fund”),

which are prepared by Schroder Unit Trusts

Limited (the “Authorised Corporate Director”),

included within the Annual Report and

Consolidated Financial Statements comprise:

– the consolidated and Fund balance sheet as at

31 March 2016;

– the consolidated and Fund statement of total

return for the year then ended;

– the consolidated and Fund statement of

change in net assets attributable to

shareholders for the year then ended;

– the consolidated and Fund cash flow

statement for the year then ended;

– the notes to the Fund’s consolidated 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 the preparation of the consolidated

financial statements is United Kingdom

Accounting Standards, comprising FRS 102 “The

Financial Reporting Standard applicable in the UK

and Republic of Ireland”, and applicable law

(United Kingdom Generally Accepted Accounting

Practice), the Statement of Recommended

Practice ‘Financial Statements of UK 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.

Opinion on matters prescribed by the

Collective Investment Schemes

sourcebook

In 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 Report for the financial

year for which the consolidated financial

statements are prepared is consistent with the

consolidated financial statements.

FINANCIAL STATEMENTSIndependent Auditor’s Report to the Shareholders of



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Other matters on which we are

required to report by exception

Propriety of accounting records and

information and explanations received

Under 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.

We have no exceptions to report arising from this

responsibility.

Responsibilities for the financial

statements and the audit

Our responsibilities and those of the

Authorised Corporate Director

As explained more fully in the Authorised

Corporate Director’s Responsibilities Statement

set out on page 29, 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 International Standards

on Auditing (UK and Ireland) (“ISAs (UK &

Ireland)”). Those standards require us to comply

with the Auditing Practices Board’s Ethical

Standards for Auditors.

This report, including the opinion, 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 as required by paragraph 67(2) of

the Open-Ended Investment Companies

Regulations 2001 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.

What an audit of financial statements

involves

We conducted our audit in accordance with 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 Group’s and 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.

We primarily focus our work in these areas by

assessing the Authorised Corporate Director’s

judgements against available evidence, forming

our own judgements, and evaluating the

disclosures in the financial statements.

We test and examine information, using sampling

and other auditing techniques, to the extent we

consider necessary to provide a reasonable basis

for us to draw conclusions. We obtain audit

evidence through testing the effectiveness of

controls, substantive procedures or a

combination of both.

In addition, we read all the financial and non-

financial information in 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

Independent Auditor’s Report to the Shareholders of

Schroder UK Real Estate Fund continued


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.

PricewaterhouseCoopers LLP

Chartered Accountants and Statutory Auditors

London

21 July 2016

Notes:

a) The maintenance and integrity of the Schroder

UK Real Estate Fund website is the

responsibility of the directors; 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

the preparation and dissemination of financial

statements may differ from legislation in other

jurisdictions.

Independent Auditor’s Report to the Shareholders of

Schroder UK Real Estate Fund continued


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FINANCIAL STATEMENTSStatement of Total Return

Schroder UK Schroder UK

Real Estate Real Estate

Consolidated Fund Consolidated Fund

Year Ended Year Ended Year Ended Year Ended

31 March 31 March 31 March 31 March

2016 2016 2015 2015

Notes £’000 £’000 £’000 £’000

Income.................................................................................................................................................................................................................................................................................................................................................................

Net capital gains 4 152,165 152,165 209,350 209,350.................................................................................................................................................................................

Revenue 5 104,359 96,263 94,402 92,020.................................................................................................................................................................................................................................................................................................................................................................

Gain attributable to minority interest 7 – 5 –.................................................................................................................................................................................................................................................................................................................................................................

Expenses 6 (38,412) (30,309) (29,324) (26,937)

Net revenue before taxation 65,954 65,954 65,083 65,083

Taxation – – – –.................................................................................................................................................................................................................................................................................................................................................................

Net revenue after taxation 65,954 65,954 65,083 65,083

Total return before distribution 218,119 218,119 274,433 274,433

Finance costs: distributions 7 (72,790) (72,790) (70,321) (70,321)

Change in net assets attributable to

shareholders from investment activities 145,329 145,329 204,112 204,112

Statement of Change in Net Assets Attributable to Shareholders






2016 2016 2015 2015

Notes £’000 £’000 £’000 £’000

Opening net assets attributable to shareholders 1,936,267 1,936,267 1,489,460 1,489,460.................................................................................................................................................................................................................................................................................................................................................................

Amounts receivable on creation of shares 146,988 146,988 242,695 242,695.................................................................................................................................................................................................................................................................................................................................................................

Change in net assets attributable to shareholders

from investment activities 145,329 145,329 204,112 204,112

Closing net assets attributable to shareholders 2,228,584 2,228,584 1,936,267 1,936,267


Balance Sheet

Schroder Schroder

UK Real UK Real

Consolidated Estate Fund Consolidated Estate Fund

Year Ended Year Ended Year Ended as at


2016 2016 2015 2015

Notes £’000 £’000 £’000 £’000

ASSETS.................................................................................................................................................................................................................................................................................................................................................................

Investment Assets.................................................................................................................................................................................................................................................................................................................................................................

Investment Property 10 1,643,096 1,335,386 1,410,780 1,263,965.................................................................................................................................................................................................................................................................................................................................................................

Building Licence Agreement 20 46,794 – – –.................................................................................................................................................................................................................................................................................................................................................................

Investment in Collective Investment Schemes 98,252 98,252 95,166 95,166.................................................................................................................................................................................................................................................................................................................................................................

Investment in Subsidiaries 9 – 301,381 – 172,114.................................................................................................................................................................................................................................................................................................................................................................

Investment in Joint Ventures 307,994 307,340 261,173 260,490

Total Investment Assets 2,096,136 2,042,359 1,767,119 1,791,735

Debtors 11 58,164 139,240 34,033 25,750.................................................................................................................................................................................................................................................................................................................................................................

Cash and bank balances 12 117,709 78,879 169,628 150,126

Total other assets 175,873 218,119 203,661 175,876

Total assets 2,272,009 2,260,478 1,970,780 1,967,611

LIABILITIES.................................................................................................................................................................................................................................................................................................................................................................

Creditors 13 36,540 26,086 27,168 25,130.................................................................................................................................................................................................................................................................................................................................................................

Distribution payable 5,808 5,808 6,214 6,214.................................................................................................................................................................................................................................................................................................................................................................

Net assets attributable to third party minority investors 1,077 – 1,131 –

Total liabilities 43,425 31,894 34,513 31,344

Net assets attributable to shareholders 2,228,584 2,228,584 1,936,267 1,936,267


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Cashflow Statement






2016 2016 2015 2015

Notes £’000 £’000 £’000 £’000

Net cash inflow/(outflow) from operating

activities 17 51,195 (46,581) 50,332 57,595.................................................................................................................................................................................................................................................................................................................................................................

Interest received 248 3,682 165 129.................................................................................................................................................................................................................................................................................................................................................................

Net cash generated/(used) from operating

activities 51,443 (42,899) 50,497 57,724

Investing activities.................................................................................................................................................................................................................................................................................................................................................................

Purchases of investments (219,017) (172,885) (158,557) (189,572).................................................................................................................................................................................................................................................................................................................................................................

Sales of investments 98,583 88,705 62,560 62,560.................................................................................................................................................................................................................................................................................................................................................................

Capital expenditure (56,746) (17,986) (38,758) (27,121).................................................................................................................................................................................................................................................................................................................................................................

Net cash used in investing activities (177,180) (102,166) (182,727) (134,755)

Financing activities.................................................................................................................................................................................................................................................................................................................................................................

Amounts received on issue of shares 146,988 146,988 242,695 242,695.................................................................................................................................................................................................................................................................................................................................................................

Distributions paid (73,170) (73,170) (69,707) (69,707).................................................................................................................................................................................................................................................................................................................................................................

Net cash inflow from financing activities 73,818 73,818 242,695 242,695

(Decrease)/increase in cash in the year (51,919) (71,247) 88,730 76,579

Net cash at the start of the year 169,628 150,126 80,898 73,547

Net cash at the end of the year 117,709 78,879 169,628 150,126


FINANCIAL STATEMENTSNotes to the Financial Statements

1. Accounting Policies

(a) Basis of accounting

The accounts have been prepared under the

historical cost basis, as modified by the

revaluation of investments, and in accordance

with the SORP for UK Authorised Funds issued

by the IMA in May 2014, which supersedes the

SORP issued by the IMA in October 2010 and in

accordance with United Kingdom Generally

Accepted Accounting Practice, including

Financial Reporting Standard 102 (The Financial

reporting Standard Applicable in the UK and

Republic of Ireland (FRS 102)). Both of which

became effective for the accounting periods

commencing on or after 1 January 2015. There

were no adjustments arising on transition of the

prior year balances to FRS102. In adopting

FRS 102, the Fund has adopted the provisions of

‘Amendments to FRS 102, The Financial

Reporting Standard applicable in the UK and

Republic of Ireland – Fair value hierarchy

disclosures (March 2016)’ early.

(b) Consolidation

Consolidated Financial Statements have been

prepared in accordance with FRS 102

‘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 bid price as provided by the relevant

managers, in accordance with industry

practice.

(iii) Subsidiaries and joint ventures are valued at

the NAV price as provided by the relevant

managers, which is the best estimate of fair

value in accordance with industry practice.

(iv) Building Licence Agreements are fair valued

using a discounted cash flow, based on

valuations provided by the pricing risk

department internally, and approved by the

Real Estate Local pricing Committee.

(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, income from

collective investment schemes 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 lease term. Service charge

income and expenses are included in revenue

and other property operating expenses

respectively. Interest receivable and payable are

accounted for on an accruals basis. Provisions


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Notes to the Financial Statements continued

for doubtful debts are taken as a reduction to

rental revenue and recognised where debts are

outstanding for greater than six months.

(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 102

(Revised) and the IMA SORP 2014, 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. Income

equalisation will not apply to the Fund. Revenue

attributable to accumulation shareholders is

retained at the end of the distribution period and

represents a reinvestment of revenue.

(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 reduced through holding a

geographically diversified portfolio that invests


4. Net capital gains

Schroder Schroder UK Real UK Real Consolidated Estate Fund Consolidated Estate Fund Year Ended Year Ended Year Ended Year Ended 31 March 31 March 31 March 31 March 2016 2016 2015 2015 £’000 £’000 £’000 £’000

Gains for the year on direct properties 128,096 106,248 191,805 167,136.................................................................................................................................................................................................................................................................................................................................................................

Gains for the year on Collective Investment Schemes 13,061 35,562 12,340 37,693.................................................................................................................................................................................................................................................................................................................................................................

Gains for the year on Joint ventures 11,008 10,355 5,205 4,521

Net gains on investment properties 152,165 152,165 209,350 209,350

For the Fund year ended 31 March 2016, £18.2 million out of £152.1 million net gains were realised

and £133.9 million net gains were unrealised gains, and for the group £33.8 million out of

£152.1 million net gains were realised gains, and £118.3 million net gains were unrealised gains (2015

Fund and Group: £5.5 million out of £209.4 million were realised gains and £203.9 million unrealised).

Where realised gains include amounts arising in previous periods, a corresponding loss/gain is

included in unrealised gains.


across various property sectors. The Manager

adheres to the investment guidelines and

investment and borrowing powers established in

the Prospectus, Scheme Particulars and in the

rules governing the operation of open ended

investment companies.

(b) Credit and liquidity risk

The Fund can be exposed to credit risk arising

from the possibility that another party fails to fulfil

its obligations and liquidity risk surrounding its

capacity to meet its liabilities.

Investments in immovable property are relatively

illiquid and more difficult to realise than most

equities or bonds. If an asset cannot be

liquidated in a timely manner then it may be

harder to attain a reasonable price. The liquidity

risk, derived from the liability to shareholders, is

minimised through holding cash which can meet

the usual requirements of share redemptions.

The Investment Manager’s policy for managing

this risk is to:

1. Operate a strict share redemption policy such

that shareholders may only serve notice to

redeem at the end of each quarter;

2. Raise sufficient cash resources within the

Fund to finance a limited number of

redemptions;

3. Review the need for and maintain as

appropriate a borrowing facility;

4. Reserve the right to defer payment of

redemptions; and

5. Review the liquidity of the fund under review

following the vote to leave the EU on

23rd June 2016.

(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 £117.7 million of group cash

at the end of the year and this is exposed to

interest rate risk.

There were no changes to the risk management

policies during the year to 31 March 2016.


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5. Revenue


Rental revenue 71,298 61,449 70,166 66,594.................................................................................................................................................................................................................................................................................................................................................................

Bank deposit and loan interest 247 3,682 165 129.................................................................................................................................................................................................................................................................................................................................................................

Income from collective investment schemes 19,651 21,635 14,855 16,442.................................................................................................................................................................................................................................................................................................................................................................

Service charge income 12,913 9,262 9,072 8,751.................................................................................................................................................................................................................................................................................................................................................................

Other income 250 235 144 104

Total revenue 104,359 96,263 94,402 92,020

6. Expenses


Authorised Corporate Director and associates.................................................................................................................................................................................................................................................................................................................................................................

Investment Management Fees 14,087 13,597 10,836 10,475.................................................................................................................................................................................................................................................................................................................................................................

Depositary.................................................................................................................................................................................................................................................................................................................................................................

Depositary fee 315 315 266 266.................................................................................................................................................................................................................................................................................................................................................................

Other.................................................................................................................................................................................................................................................................................................................................................................

Valuers fee 504 454 436 397.................................................................................................................................................................................................................................................................................................................................................................

Audit fee 202 153 180 137.................................................................................................................................................................................................................................................................................................................................................................

Service charge expense 15,093 10,424 10,691 9,908.................................................................................................................................................................................................................................................................................................................................................................

Other company level expenses 2,770 1,228 1,419 773.................................................................................................................................................................................................................................................................................................................................................................

Other property operating expenses 5,441 4,138 5,496 4,981

Total Other 24,010 16,397 18,222 16,196

Total expenses 38,412 30,309 29,324 26,937

The audit fee for the Schroder UK Real Estate Fund Feeder Trust is borne by Schroder UK Real Estate Fund. For the year

to 31 March 2016 this was £18,430 (2015: £15,950). PWC costs other than audit fees amounted to £30,725 for the year to

31 March 2016 ( 2015: £68,450)


The Fund qualifies as a Property Authorised

Investment Fund (PAIF) for tax purposes.

Accordingly, the income generated by its real

estate 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 real estate income, less deductible

expenses.

Under the PAIF regulations, the Fund makes real

estate income distributions and interest

distributions net of basic rate income tax except

where the investor is entitled to gross payment.

As at 31 March 2016 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.


7. Finance Costs


April 6,101 6,101 5,785 5,785.................................................................................................................................................................................................................................................................................................................................................................

May 5,794 5,794 5,774 5,774.................................................................................................................................................................................................................................................................................................................................................................

June 5,389 5,389 5,856 5,856.................................................................................................................................................................................................................................................................................................................................................................

July 6,448 6,448 5,622 5,622.................................................................................................................................................................................................................................................................................................................................................................

August 6,693 6,693 5,735 5,735.................................................................................................................................................................................................................................................................................................................................................................

September 6,125 6,125 5,719 5,719.................................................................................................................................................................................................................................................................................................................................................................

October 5,767 5,767 5,695 5,695.................................................................................................................................................................................................................................................................................................................................................................

November 5,330 5,330 5,732 5,732.................................................................................................................................................................................................................................................................................................................................................................

December 6,133 6,133 5,620 5,620.................................................................................................................................................................................................................................................................................................................................................................

January 6,648 6,648 6,007 6,007.................................................................................................................................................................................................................................................................................................................................................................

February 6,444 6,444 6,477 6,477.................................................................................................................................................................................................................................................................................................................................................................

March 5,918 5,918 6,299 6,299

Gross distribution for the year 72,790 72,790 70,321 70,321

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


Net revenue after taxation for the year 65,954 65,954 65,083 65,083.................................................................................................................................................................................................................................................................................................................................................................

Expenses offset in capital 6,836 6,836 5,238 5,238

Gross distribution 72,790 72,790 70,321 70,321

8. Taxation


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Total return before distribution 218,119 218,119 274,433 274,434.................................................................................................................................................................................................................................................................................................................................................................

Corporation tax at 20% 43,624 43,624 54,887 54,887.................................................................................................................................................................................................................................................................................................................................................................

Effects of:.................................................................................................................................................................................................................................................................................................................................................................

Revenue not subject to taxation (43,624) (43,624) (54,887) (54,887).................................................................................................................................................................................................................................................................................................................................................................

Current tax charge – – – –

(c) Provision for deferred tax

There was no provision required for deferred tax at the balance sheet date.


(a) Analysis of charge in year


Analysis of charge in year – –

Corporation tax at 20% – – – –

Current tax charge – – – –

(b) Factors affecting the current tax charge for the year

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:

9. Investment in subsidiaries

Ownership

by SREF at Valuation at Valuation at

31 March 1 April Capital Capital Net capital 31 March

2016 2015 contributions distributions gains/(losses) 2016

% £’000 £’000 £’000 £’000 £’000

Croydon Gateway Unit Trust 99.3 92,734 59,804 (9,878) 7,205 149,865.................................................................................................................................................................................................................................................................................................................................................................

Hackbridge Unit Trust 99.0 40,672 1,346 – 11,721 53,739.................................................................................................................................................................................................................................................................................................................................................................

Lombard Street Unit Trust 99.0 29,294 – (1,131) 4,700 32,863.................................................................................................................................................................................................................................................................................................................................................................

Capital Point Slough Unit Trust 99.0 9,262 200 – 810 10,272.................................................................................................................................................................................................................................................................................................................................................................

Hackbridge Limited 100.0 152 157 – – 309.................................................................................................................................................................................................................................................................................................................................................................

MP Kings Lyric Sarl 100.0 – 32,290 – (542) 31,748.................................................................................................................................................................................................................................................................................................................................................................

MP Kings Retail Sarl 100.0 – 13,628 – (4,438) 9,190.................................................................................................................................................................................................................................................................................................................................................................

MP W6 Car Parks Ltd 100.0 – 10,609 – 2,786 13,395

172,114 118,034 (11,009) 22,242 301,381


At 31 March 2016, SREF’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 99.3%, with a minority interest of

0.7% held by an external investor. The Fund holds 100% of the shares

in MP Kings Lyric Sarl and MP Kings Lyric Sarl, which are Luxembourg

registered companies, and 100% of the shares in MP W6 Car Parks

Ltd which is a UK Registered company. The West India Quay joint

venture is held within the West India Quay Unit Trust. West India Quay

Ltd, which is jointly controlled by Schroder UK Real Estate Fund and

Leisure II (West India Quay LP) Shareholder Limited owns 0.10% of the

West India Quay Unit Trust.


11. Debtors

Schroder Schroder UK Real UK Real Consolidated Estate Fund Consolidated Estate Fund Year Ended Year Ended Year Ended as at 31 March 31 March 31 March 31 March 2016 2016 2015 2015 £’000 £’000 £’000 £’000

Rent receivable net of provision for doubtful debts 3,816 2,915 2,937 2,683.................................................................................................................................................................................................................................................................................................................................................................

Distributions due from property related investments 3,900 5,924 3,643 4,050.................................................................................................................................................................................................................................................................................................................................................................

Tenant deposits 5,707 5,693 6,460 6,445.................................................................................................................................................................................................................................................................................................................................................................

Accrued rents receivable 4,678 4,101 5,929 5,468.................................................................................................................................................................................................................................................................................................................................................................

Unamortised lease incentives 1,458 1,458 922 821.................................................................................................................................................................................................................................................................................................................................................................

Monies due from managing agents 9,798 8,101 3,459 3,311.................................................................................................................................................................................................................................................................................................................................................................

Intercompany Loans and interest receivable – 101,880 – –.................................................................................................................................................................................................................................................................................................................................................................

VAT Receivable 259 – – –.................................................................................................................................................................................................................................................................................................................................................................

Monies due from associates 19,281 – 7,428 –.................................................................................................................................................................................................................................................................................................................................................................

Other debtors and prepayments 9,267 9,168 3,255 2,972

Total Debtors 58,164 139,240 34,033 25,750

Monies due from associates relates to loans between Croydon Gateway Limited Partnership and

Ruskin Square Phase One LLP. Intercompany Loans and Interest Receivable relate to loans between

MP Kings Retail Sarl and MP Kings Lyric Sarl, and Schroder UK Real Estate Fund.

10. Movement schedule – Investment properties

Schroder UK Real Estate Group Fund £’000 £’000

Opening Balance as at 1 April 2015 1,410,780 1,263,965.................................................................................................................................................................................................................................................................................................................................................................

Purchases 190,383 34,039.................................................................................................................................................................................................................................................................................................................................................................

Disposals at Cost (106,204) (70,475).................................................................................................................................................................................................................................................................................................................................................................

Additions to existing property 53,860 19,839.................................................................................................................................................................................................................................................................................................................................................................

Revaluation Reserve 94,277 88,018

Ending Balance as at 31 March 2016 1,643,096 1,335,386

Unamortised tenant incentives 6,139 5,559

Market Valuation as at 31 March 2016 1,649,235 1,340,945


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The fund has a £100 million loan facility with Royal Bank of Scotland. As at 31 March 2016 it has not

drawn down any of this facility.

13. Creditors


Trade creditors – – 37 37.................................................................................................................................................................................................................................................................................................................................................................

Deferred Rental Income 14,733 12,767 13,153 12,545.................................................................................................................................................................................................................................................................................................................................................................

Tenant deposits 5,707 5,693 6,460 6,445.................................................................................................................................................................................................................................................................................................................................................................

VAT payable – 876 1,770 2,054.................................................................................................................................................................................................................................................................................................................................................................

Amounts due on properties 8,706 682 1,932 1,070.................................................................................................................................................................................................................................................................................................................................................................

Accrued SREF investment management fee 2,419 2,419 981 981.................................................................................................................................................................................................................................................................................................................................................................

Other creditors and accruals 4,975 3,649 2,835 1,999

Total Creditors 36,540 26,086 27,168 25,130

14. Long term liabilities – loans


15. Contingent liabilities and commitments

As at 31 March 2016, the Fund had paid all of its commitments for the development of a series of

Care Homes. As at 31 March 2015 £25.8 million had been spent, and the committed balance was

£26.8 million.

12. Cash and bank balances


Cash and bank balances 62,709 23,879 44,628 25,126.................................................................................................................................................................................................................................................................................................................................................................

Deposits 55,000 55,000 125,000 125,000

Total Cash and bank balances 117,709 78,879 169,628 150,126


17. Reconciliation of net revenue before taxation to net cash inflow from

operating activities


Net revenue before taxation 65,954 65,954 65,083 65,084.................................................................................................................................................................................................................................................................................................................................................................

Increase in debtors (24,131) (113,490) (11,960) (4,384).................................................................................................................................................................................................................................................................................................................................................................

Increase/(decrease) in creditors 9,372 955 (2,792) (3,104)

As at 31 March 51,195 (46,581) 50,331 57,595

18. 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 (2015: no change from 2016).

(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.

16. Reconciliation of movement in net cash

Schroder

UK Real Estate

Consolidated Fund Year

Year Ended Ended

31 March 31 March

2016 2016

£’000 £’000

Cash and cash equivalents.................................................................................................................................................................................................................................................................................................................................................................

As at 1 April 2015 169,628 150,126.................................................................................................................................................................................................................................................................................................................................................................

Cashflows (51,919) (71,247)

As at 31 March 2016 117,709 78,879


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Fund Year to Fund Year to

31 March 2016 31 March 2015

£’000 £’000

Bracknell Property Unit Trust 2,537 1,419.................................................................................................................................................................................................................................................................................................................................................................

Croydon Gateway Property Unit Trust 845 –.................................................................................................................................................................................................................................................................................................................................................................

Motor Retail Limited Partnership 1,773 1,722.................................................................................................................................................................................................................................................................................................................................................................

Lombard Street Unit Trust 882 322.................................................................................................................................................................................................................................................................................................................................................................

Capital Point Slough Unit Trust 696 713.................................................................................................................................................................................................................................................................................................................................................................

West End of London Property Unit Trust 797 986.................................................................................................................................................................................................................................................................................................................................................................

City Tower Unit Trust 3,996 2,451.................................................................................................................................................................................................................................................................................................................................................................

Store Unit Trust 1,275 25.................................................................................................................................................................................................................................................................................................................................................................

Gilbran Property Unit Trust 1,391 637.................................................................................................................................................................................................................................................................................................................................................................

Hercules Unit Trust – 221

(e) Schroder UK Real Estate Fund Feeder Trust

The Manager of the Schroder UK Real Estate

Fund Feeder Trust, which invests solely into the

Schroder UK Real Estate Fund, is part of the

same group as the ACD of the Schroder UK Real

Estate Fund. During the year to 31 March 2016,

the Schroder UK Real Estate Fund Feeder Trust

was paid gross distributions totalling £3.8 million

(2015: £2.8 million). The Schroder UK Real Estate

Fund Feeder Trust incurred an audit fee during

the year to 31 March 2016 of £15,450

(2015: £15,450), which is borne in full by the

Schroder UK Real Estate Fund.

(c) Outstanding balances were due to the following which are considered to be related

parties:

There is no difference between the Fund and the Group level.



Fund as at Fund as at

31 March 2016 31 March 2015

£’000 £’000

National Westminster Bank plc 79 23.................................................................................................................................................................................................................................................................................................................................................................

Schroder Real Estate Investment Management Ltd 2,062 899.................................................................................................................................................................................................................................................................................................................................................................

Schroder Unit Trusts Limited 356 82

(d) Distributions:

Gross distributions were receivable in the year

from the following investments which are

considered related under FRS 102 as they are

managed or administered by an associate of the

ACD. There is no difference between the Fund

and the Group level.



19. Financial instruments

The primary financial instruments held by the

Fund and at a Group level at 31 March 2016

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 and the Group’s assets

and liabilities are represented by the values

shown in the balance sheet on page 43. There is

no material difference between the value of the

financial assets and liabilities, as shown in the

balance sheet, and their fair value.

20. Fair value hierarchy

2016 2015 Financial Financial Financial Financial Assets Liabilities Assets Liabilities £’000 £’000 £’000 £’000

Level 1 58,164 36,540 34,033 27,168 .................................................................................................................................................................................................................................................................................................................................................................

Level 3 2,096,136 – 1,767,119 –

Total 2,154,300 36,540 1,801,152 27,168

Fair value measurement

The fair values of financial assets and liabilities

are not materially different from their carrying

values in the financial statements.

The fair value hierarchy levels are as follows:

Level 1 – quoted prices (unadjusted) in active

markets for identical assets and liabilities

Level 2 – inputs other than quoted prices

included within level 1 that are observable for the

asset or liability, either directly (i.e. as prices) or

indirectly (i.e. derived from prices); and

Level 3 – inputs for the assets or liability that are

not based on observable market data

(unobservable inputs).

Investment Property – level 3

Fair value is based on valuations provided by an

independent firm of chartered surveyors and

registered appraisers. These values were

determined after having taken into consideration

recent market transactions for similar properties

in similar locations to the investment properties

held by the Trust. The fair value hierarchy of

investment property is level 3.

Property Related Investments – level 3

The inputs for the values of the assets are not

based on observable market data and are

estimated using valuation techniques. These

techniques rely on the underlying property

valuations received from the independent valuers

and the audited financial statements of the

underlying funds. The fair value hierarchy of

property related investments is level 3.

Building Licence Agreement – level 3

Fair value is based on valuations provided by the

pricing risk department within Schroders, and

approved by the Real Estate Local Pricing

Committee. These values were determined after

having taken into consideration the future value of

capital and the interest rate and credit risk

associated with the building licence. The fair

value hierarchy of investment property is level 3.

Trade Receivables and Trade Payables

All receivables and payables are deemed to be

due within one year and as such the notional

amount is considered to reflect the fair value.

There are no overdue or impaired trade

receivables in the year to 31 March 2016.

21. Portfolio transaction costs Fund Percentage Fund Percentage Year Ended amount of Year Ended amount of 31 March purchase 31 March purchase 2016 costs 2015 costs £’000 % £’000 %

Analysis of total direct purchase costs.................................................................................................................................................................................................................................................................................................................................................................

Purchase in the year before transaction costs 32,430 189,572.................................................................................................................................................................................................................................................................................................................................................................

Stamp Duty 1,297 3.81% 1,110 0.58%.................................................................................................................................................................................................................................................................................................................................................................

Legal Fees 76 0.22% 111 0.06%.................................................................................................................................................................................................................................................................................................................................................................

Agents Fees 211 0.62% 278 0.15%.................................................................................................................................................................................................................................................................................................................................................................

Other Fees 25 0.07% 32 0.02%.................................................................................................................................................................................................................................................................................................................................................................

Total Purchase costs 1,609 1,531

Gross purchase total 34,039 191,103

Fund Percentage Fund Percentage Year Ended amount of Year Ended amount of 31 March sales 31 March sales 2016 costs 2015 costs £’000 % £’000 %

Analysis of total direct sales costs.................................................................................................................................................................................................................................................................................................................................................................

Gross sales in the year before transaction costs 88,705 62,560.................................................................................................................................................................................................................................................................................................................................................................

Legal Fees 217 0.25% 210 0.34%.................................................................................................................................................................................................................................................................................................................................................................

Agents Fees 859 0.98% 463 0.75%.................................................................................................................................................................................................................................................................................................................................................................

Other Fees 1 0.00% –.................................................................................................................................................................................................................................................................................................................................................................

Total sales costs 1,077 673

Total sales net of transaction costs 87,628 61,887

Consolidated Percentage Consolidated Percentage Year Ended amount of Year Ended amount of 31 March purchase 31 March purchase 2016 costs 2015 costs £’000 % £’000 %

Analysis of total direct purchase costs.................................................................................................................................................................................................................................................................................................................................................................

Purchase in the year before transaction costs 185,430 189,572 .................................................................................................................................................................................................................................................................................................................................................................

Stamp Duty 1,802 0.97% 1,110 0.59%.................................................................................................................................................................................................................................................................................................................................................................

Legal Fees 413 0.22% 111 0.06%.................................................................................................................................................................................................................................................................................................................................................................

Agents Fees 1,386 0.75% 278 0.15%.................................................................................................................................................................................................................................................................................................................................................................

Other Fees 827 0.45% 32 0.02%.................................................................................................................................................................................................................................................................................................................................................................

Total purchase costs 4,428 1,531

Gross purchase total 189,858 191,103


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Consolidated Consolidated Year Ended Percentage Year Ended Percentage 31 March amount of 31 March amount of 2016 sales costs 2015 sales costs £’000 % £’000 %

Analysis of total direct sales costs.................................................................................................................................................................................................................................................................................................................................................................

Gross sales in the year before transaction costs 88,705 62,560 .................................................................................................................................................................................................................................................................................................................................................................

Legal Fees 217 0.25% 210 0.34%.................................................................................................................................................................................................................................................................................................................................................................

Agents Fees 859 0.98% 463 0.75%.................................................................................................................................................................................................................................................................................................................................................................

Other Fees 1 0% – .................................................................................................................................................................................................................................................................................................................................................................

Total sales costs 1,077 673

Total sales net of transaction costs 87,628 61,887

Total direct transaction costs as a percentage of the funds NAV is as follows:.................................................................................................................................................................................................................................................................................................................................................................

Consolidated year ending 31 March 2016: 0.247%.................................................................................................................................................................................................................................................................................................................................................................

Schroder UK Real Estate Fund year ending 31 March 2016: 0.121%.................................................................................................................................................................................................................................................................................................................................................................

Consolidated year ending 31 March 2015: 0.114%.................................................................................................................................................................................................................................................................................................................................................................

Schroder UK Real Estate Fund year ending 31 March 2015: 0.114%.................................................................................................................................................................................................................................................................................................................................................................

No transaction costs were incurred on purchase or sales of CIS & Joint Ventures.

As at the balance sheet date the average portfolio dealing spread was 0.05% (2015: 0.04%)



EU Referendum On 23 June 2016 the UK

electorate voted to leave the European Union.

This decision commences a process that is likely

to take a minimum of two years to complete, and

during this time the UK remains a member of the

European Union. There will be a resulting period

of uncertainty for the UK economy and real

estate markets, with increased volatility expected

in financial markets. This does not impact the fair

value of assets and liabilities, including

investment property, reported at the balance

sheet date of 31 March 2016.

22. Post balance sheet event


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Monthly distributions payable for the year ended 31 March 2016 in pence per unit. There were two

share classes at 31 March 2016, a gross share class and a net share class.

Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15

Gross Income Shares.................................................................................................................................................................................................................................................................................................................................................................

Gross revenue 12.318982 11.676426 10.756518 12.857452 13.299126 12.138699.................................................................................................................................................................................................................................................................................................................................................................

Income tax – – – – – –.................................................................................................................................................................................................................................................................................................................................................................

Net revenue 12.318982 11.676426 10.756518 12.857452 13.299126 12.138699.................................................................................................................................................................................................................................................................................................................................................................

Final distribution payable 12.318982 11.676426 10.756518 12.857452 13.299126 12.138699

Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16


Gross revenue 11.220989 10.267091 11.754401 12.715765 12.231601 11.221344.................................................................................................................................................................................................................................................................................................................................................................

Income tax – – – – – –.................................................................................................................................................................................................................................................................................................................................................................

Net revenue 11.220989 10.267091 11.754401 12.715765 12.231601 11.221344.................................................................................................................................................................................................................................................................................................................................................................



Net Income Shares.................................................................................................................................................................................................................................................................................................................................................................

Gross revenue 12.318982 11.676426 10.756518 12.857452 13.299126 12.138699.................................................................................................................................................................................................................................................................................................................................................................

Income tax (2.253345) (2.109679) (1.964304) (2.101827) (2.334582) (1.951986).................................................................................................................................................................................................................................................................................................................................................................

Net revenue 10.065637 9.566747 8.792214 10.755265 10.964544 10.186712.................................................................................................................................................................................................................................................................................................................................................................




Gross revenue 11.220989 10.267091 11.754401 12.715765 12.231601 11.221344.................................................................................................................................................................................................................................................................................................................................................................

Income tax (1.793077) (1.679705) (1.966339) (2.164121) (2.025906) (2.244269).................................................................................................................................................................................................................................................................................................................................................................

Net revenue 9.427912 8.587386 9.788061 10.551644 10.205695 8.977075.................................................................................................................................................................................................................................................................................................................................................................


FINANCIAL STATEMENTSDistribution Table


Distribution Table continued

Monthly distributions payable for the year ended 31 March 2015 in pence per unit. There were two

share classes at 31 March 2015, a gross share class and a net share class.



Gross revenue 13.280518 13.195050 13.009631 12.185308 12.306445 12.260089.................................................................................................................................................................................................................................................................................................................................................................

Income tax – – – – – –.................................................................................................................................................................................................................................................................................................................................................................

Net revenue 13.280518 13.195050 13.009631 12.185308 12.306445 12.260089.................................................................................................................................................................................................................................................................................................................................................................




Gross revenue 12.036931 12.056387 11.804000 12.539145 13.507647 12.768422.................................................................................................................................................................................................................................................................................................................................................................

Income tax – – – – – –.................................................................................................................................................................................................................................................................................................................................................................

Net revenue 12.036931 12.056387 11.804000 12.539145 13.507647 12.768422.................................................................................................................................................................................................................................................................................................................................................................




Gross revenue 13.280518 13.195050 13.009631 12.185308 12.306445 12.260089.................................................................................................................................................................................................................................................................................................................................................................

Income tax (2.656104) (2.639010) (2.601926) (2.437062) (2.461289) (2.452018).................................................................................................................................................................................................................................................................................................................................................................

Net revenue 10.624414 10.556040 10.407705 9.748246 9.845156 9.808071.................................................................................................................................................................................................................................................................................................................................................................




Gross revenue 12.036931 12.056387 11.804000 12.539145 13.507647 12.768422.................................................................................................................................................................................................................................................................................................................................................................

Income tax (2.407386) (2.411277) (2.360800) (2.507829) (2.701529) (2.553684).................................................................................................................................................................................................................................................................................................................................................................

Net revenue 9.629545 9.645110 9.443200 10.031316 10.806118 10.214738.................................................................................................................................................................................................................................................................................................................................................................



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General Information

SCHRODER UK REAL ESTATE FUND (the

“Fund”) is an investment company 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. 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

FINANCIAL STATEMENTSUnaudited General Information

Net Share ClassChange in net assets per unit 2016 2015 2014

Opening net asset value per unit £39.26 £34.68 £31.99.................................................................................................................................................................................................................................................................................................................................................................

Return before operating charges* £4.78 £6.36 £4.51.................................................................................................................................................................................................................................................................................................................................................................

Operating charges -£0.34 -£0.27 -£0.24.................................................................................................................................................................................................................................................................................................................................................................

Return after operating charges* £4.44 £6.09 £4.27.................................................................................................................................................................................................................................................................................................................................................................

Distribution on income units -£1.44 -£1.51 -£1.58.................................................................................................................................................................................................................................................................................................................................................................

Closing net asset value per unit £42.26 £39.26 £34.68.................................................................................................................................................................................................................................................................................................................................................................

Retained distributions on accumulation units.................................................................................................................................................................................................................................................................................................................................................................

* after direct transaction costs of £0.10 £0.04 £0.33.................................................................................................................................................................................................................................................................................................................................................................

Performance.................................................................................................................................................................................................................................................................................................................................................................

Return after charges 11.5% 17.9% 13.1%.................................................................................................................................................................................................................................................................................................................................................................

Other Information.................................................................................................................................................................................................................................................................................................................................................................

Closing net asset value £204,818,796 £159,301,533 £63,702,923.................................................................................................................................................................................................................................................................................................................................................................

Closing number of units 4,846,288.68 4,057,230.57 1,836,695.26.................................................................................................................................................................................................................................................................................................................................................................

Operating charges 0.80% 0.68% 0.68%.................................................................................................................................................................................................................................................................................................................................................................

Direct transaction costs 0.25% 0.11% 0.96%.................................................................................................................................................................................................................................................................................................................................................................

Prices.................................................................................................................................................................................................................................................................................................................................................................

Highest unit price £42.51 £39.26 £34.68.................................................................................................................................................................................................................................................................................................................................................................

Lowest unit price £39.59 £34.90 £32.36.................................................................................................................................................................................................................................................................................................................................................................

Gross Share ClassChange in net assets per unit 2016 2015 2014

Opening net asset value per unit £39.26 £34.68 £31.99.................................................................................................................................................................................................................................................................................................................................................................

Return before operating charges* £4.78 £6.36 £4.51.................................................................................................................................................................................................................................................................................................................................................................

Operating charges -£0.34 -£0.27 -£0.24.................................................................................................................................................................................................................................................................................................................................................................

Return after operating charges* £4.44 £6.09 £4.27.................................................................................................................................................................................................................................................................................................................................................................

Distribution on income units -£1.44 -£1.51 -£1.58.................................................................................................................................................................................................................................................................................................................................................................

Closing net asset value per unit £42.26 £39.26 £34.68.................................................................................................................................................................................................................................................................................................................................................................

Retained distributions on accumulation units.................................................................................................................................................................................................................................................................................................................................................................

* after direct transaction costs of £0.10 £0.04 £0.33.................................................................................................................................................................................................................................................................................................................................................................

Performance.................................................................................................................................................................................................................................................................................................................................................................

Return after charges 11.5% 17.9% 13.1%.................................................................................................................................................................................................................................................................................................................................................................

Other Information.................................................................................................................................................................................................................................................................................................................................................................

Closing net asset value £2,023,729,178 £1,777,005,851 £1,426,105,517.................................................................................................................................................................................................................................................................................................................................................................

Closing number of units 47,884,159.21 45,258,336.96 41,117,756.06.................................................................................................................................................................................................................................................................................................................................................................

Operating charges 0.80% 0.68% 0.68%.................................................................................................................................................................................................................................................................................................................................................................

Direct transaction costs 0.25% 0.11% 0.96%.................................................................................................................................................................................................................................................................................................................................................................

Prices.................................................................................................................................................................................................................................................................................................................................................................

Highest unit price £42.51 £39.26 £34.68.................................................................................................................................................................................................................................................................................................................................................................

Lowest unit price £39.59 £34.90 £32.36.................................................................................................................................................................................................................................................................................................................................................................


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.

Liquidity

The Fund invests in real estate, 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.

Purchase of Shares

Shares can be purchased in the Fund through

the primary or secondary market. Depending on

the type of investor, the purchase of shares will

be through either the Schroder UK Real Estate

Fund or the Schroder UK Real Estate Fund

Feeder Trust. Corporate bodies (excluding

nominees acquiring shares) may only invest in the

Schroder UK Real Estate Fund indirectly through

the Feeder Fund. Shares in the Schroder UK Real

Estate 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 SREF 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.

Unaudited General Information continued


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Redemption of Shares

Redemption forms must be received by the

Registrar before the relevant cut-off point for

redemptions, that is midday on 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.

There were no redemption notices received at

31 March 2016 that were not settled. Further,

there were no suspension of valuations and/or

redemptions at 31 March 2016.

Secondary Market

The ACD has appointed the Secondary Market

Facilitator, SMF (Schroder Real Estate 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/sref 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.

Investors 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.

Secondary market activity

On the secondary market, units valued at

£86.4 million were traded between investors over

the 12 month period. This represents 4.0% of the

shares in issue at the end of the period under

review.

Source: Schroders March 2016

Fund Codes

Code

Bloomberg SCEXPUT LN

ISIN GB00B8215Z66

Sedol B8215Z6

Prices for the Schroder UK Real Estate Fund can

be obtained from http://www.schroders.com/sref.

Distributions

The 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.

Q2 2015

Q1 2015

Q3 2015

Q4 2015

Q1 2016

Q4 2014

Q3 2014

Q2 2014

Q1 2014

Q4 2013

Q3 2013

Q2 2013

Q1 2013

Q4 2012

Q3 2012

Q2 2012

Q1 2012

Q4 2011

Q3 2011

Q2 2011

0 10 20 30 40 50 60 70 80



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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.


Feeder Trust

The Schroder UK Real Estate 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 Real Estate

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

Real Estate Fund at a rate of 20%.

Management fees and other

expenses

Details of fees and expenses incurred by the

Fund are set out within Section 5 of the Fund

Prospectus and further in notes 6 and 18 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 spreads

As at 31 March 2016, the offer spread was

4.64% premium to NAV. The bid spread was

1.49% 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 policy

A 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

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 Practice

The 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. SREF’s page on the AREF website

can be found at http://www.aref.org.uk/funds/

schroder-uk-realestate-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 documentation

A copy of all Fund documentation including the

prospectus and regular reports is available at

www.schroders. com/sref 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.

Conflicts of interest

The 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.

Disaster recovery

Schroder Group has a disaster recovery plan

which is audited, externally, on an annual basis

as part of the AAF controls report.

Additional Information

The 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 Real Estate 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 Real Estate Investment

Management Limited

31 Gresham Street

London EC2V 7QA

Tel: +44 (0)20 7658 6000

Schroder Real Estate Investment Management Limited

is authorised and regulated by the Financial Services Authority

Manager Contacts

For general information and queries on secondary

market availability, please contact:

Olivia Pember

Product Manager

[email protected]

+44 (0)20 7658 3552

James Lass

Fund Manager

[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 –


PO BOX 3733

Wootton Bassett

Swindon

SN4 4BG

Tel: +44 (0) 870 870 8059

Fax: +44 (0) 20 7643 3892

Email: [email protected]


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Authorised Corporate Director

Schroder Unit Trusts Limited

31 Gresham Street

London

EC2V 7QA

Investment Manager

Schroder Real Estate Investment

Management Limited

31 Gresham Street

London

EC2V 7QA

Schroder Unit Trusts Limited and Schroder Real Estate 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

Real Estate Managers

Jones Lang LaSalle

Austin House

St Crispens Road

Norwich

NR3 1YF

Knight Frank

55 Baker Street

London

W1U 8AN

The terms of all appointments including

remuneration and termination provisions can be

made available upon request.

FINANCIAL STATEMENTSKey Service providers


www.schroders.com/sref

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