Absolute Return Fund Company

Transcription

1 Schroder Absolute Return Fund Company Interim Report and Accounts March 2016

2 Contents Schroder Absolute Return Fund Company Schroder Absolute Return Fund Company Company Information General information Principle activities Liabilities of the company Statement of the Authorised Corporate Director s Responsibilities Statement of Cross Holdings Basis of preparation Accounting policies Schroder Absolute UK Dynamic Fund Fund Information Investment objective and policy Financial highlights Fund information Ongoing charges figure Total purchases and sales Review of Investment Activities Risk Profile Risk and reward indicator Specific risks Net Asset Value and Comparative Tables Share price range Net revenue Net asset value Fund performance Non-statutory Portfolio Statement Portfolio Statement Summary of Portfolio Transactions Largest purchases Largest sales Statement of Total Return (unaudited) Statement of Change in Net Assets Attributable to Shareholders (unaudited) Balance Sheet (unaudited) Notes to the Accounts (unaudited) Accounting policies Schroder European Absolute Target Fund Fund Information Investment objective and policy Financial highlights Fund information Ongoing charges figure Total purchases and sales Review of Investment Activities Risk Profile Risk and reward indicator Specific risks

3 Contents (continued) Schroder Absolute Return Fund Company Net Asset Value and Comparative Tables Share price range Net revenue Net asset value Fund performance Non-statutory Portfolio Statement Portfolio Statement Summary of Portfolio Transactions Largest purchases Largest sales Statement of Total Return (unaudited) Statement of Change in Net Assets Attributable to Shareholders (unaudited) Balance Sheet (unaudited) Notes to the Accounts (unaudited) Accounting policies General Information Authorisation Other information European Union Savings Directive Collectively these comprise the Authorised Corporate Director s report.

4 Schroder Absolute Return Fund Company Schroder Absolute Return Fund Company Company Information General information Principle activities Liabilities of the company Schroder Absolute Return Fund Company (SARFCo or the company) is an umbrella company comprising two sub funds which have their own investment objectives and policies. At 31 March 2016 SARFCo had the following sub funds: Schroder Absolute UK Dynamic Fund Schroder European Absolute Target Fund The company s principle activity is to carry on business as an Open Ended Investment Company (OEIC). The company is structured as an umbrella company and different sub funds may be established by the Authorised Corporate Director (ACD) from time to time with the agreement of the Depositary and approval from the Financial Conduct Authority (FCA). The sub funds are operated separately and the assets of each sub fund are managed in accordance with the investment objective and policy applicable to that sub fund. The sub funds are segregated portfolios of assets and, accordingly, the assets of each sub fund belong exclusively to that sub fund and shall not be used to discharge directly or indirectly the liabilities of, or claims against, any other person or body, including the company, or any other sub fund, and shall not be available for any such purpose. Subject to the above, each sub fund will be charged with the liabilities, expenses, costs and charges attributable to that sub fund and within each sub fund charges will be allocated as far as possible according to the net asset value of that particular share class. Any assets, liabilities, expenses, costs or charges not attributable to a particular sub fund may be allocated by the ACD in a manner which it believes is fair to the shareholders generally. This will normally be pro rata to the net asset value of the relevant sub funds. Shareholders are not liable for the debts of the company. Shareholders are not liable to make any further payments to the company after they have paid the purchase price of the share. 4

5 Schroder Absolute Return Fund Company Statement of the Authorised Corporate Director s Responsibilities The FCA s Collective Investment Schemes sourcebook (COLL) requires the 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 company and of its net expenses and the net capital losses on the property of the company for the period. 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 (SORP) for UK Authorised Funds issued by the Investment Management Association (IMA (now the Investment Association (IA))) in May 2014; follow generally accepted accounting principles and applicable accounting standards; prepare the accounts on the basis that the company will continue in operation unless it is inappropriate to do so; keep proper accounting records which enable it to demonstrate that the accounts as prepared comply with the above requirements; make judgements and estimates that are prudent and reasonable. The ACD is responsible for the management of the company in accordance with the OEIC Regulations 2001, the Prospectus and the COLL and for taking reasonable steps for the prevention and detection of fraud, error and noncompliance with law or regulations. The ACD s report and accounts for the period ended 31 March 2016 were signed on 20 May 2016 on behalf of the ACD by: J.A. Walker-Hazell Directors P.C. Wallace 5

6 Schroder Absolute Return Fund Company Statement of Cross Holdings There are no cross holdings as at the company s period end. 6

7 Schroder Absolute Return Fund Company Basis of preparation 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 (SORP 2014), which supersedes the SORP issued by the IMA in October 2010 (SORP 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 1 January There have been no changes to the financial position or financial performance the company as a result of the above, however, as a result of the changes certain comparative items have been restated in the Report and Accounts. Refer to the individual sub fund Notes to the Accounts for the details of any restated items. Accounting policies Except as described below, the accounting policies applied are consistent with those of the annual accounts for the year ended 30 September 2015 and are described in those annual accounts. Dilution adjustment In certain circumstances the ACD may apply a dilution adjustment on subscriptions and redemptions of shares. If applied, the dilution adjustment is paid to the company. See Prospectus for further details. For the periods ended 31 March 2016 and 31 March 2015 the Dilution adjustments are shown separately in the Statement of Change in Net Assets Attributable to Shareholders, previously they were included within Amounts receivable on issue of shares and Amounts payable on cancellation of shares in the Statement of Change in Net Assets Attributable to Shareholders. This is a change in presentation, there have been no changes to the financial position or financial performance of the company as a result of the above. The amounts for each sub fund are detailed below: Schroder Absolute UK Dynamic Fund: 316,451 ( ,040) Schroder European Absolute Target Fund: 25,311 ( ,402) 7

8 Schroder Absolute UK Dynamic Fund Schroder Absolute UK Dynamic Fund Fund Information Investment objective and policy The objective of the fund is to achieve absolute returns through targeted investment strategies independent of UK market conditions or indices. The fund will aim typically to deliver absolute (more than zero) returns over a rolling three year period, although an absolute return performance is not guaranteed over this or longer periods of time and it may not achieve this objective. There is a risk to an investor s capital. Investors may not get back the amount originally invested. The ACD will seek to achieve its investment objective by investing in a concentrated portfolio of companies (usually between 30 to 60 companies both on the long side and the short side of the portfolio) predominantly incorporated in the UK or in companies which derive a significant proportion of their revenues or profits from this country or which are primarily operating in this jurisdiction. Investments will be made primarily in companies and other securities which are constituents of the FTSE All Share Index with a bias towards medium sized and smaller companies. The fund may also invest in securities listed on the Alternative Investment Market and in equity related transferable securities, such as preferred shares, debentures, warrants (warrants may not exceed more than 5 per cent of the total assets of the fund) and convertible securities or in derivatives thereof. As the fund has an absolute return objective it will not be managed against any index. Whilst the fund will mainly invest in equities, it may also invest in debt securities (such as bonds and notes of any maturity which are transferable securities), where this is deemed appropriate in the market conditions prevailing at that time. Any such securities will be rated investment grade by Moody s or S&P, or if not rated, deemed by the Investment Manager to have at least an equivalent rating and will be issued by the UK government or companies incorporated in the UK or in companies which derive a predominant proportion of their revenues or profits from this country or which are principally operating in that jurisdiction. The fund may also invest in short term securities which are rated investment grade (such as certificates of deposit, bankers acceptances and commercial paper) for temporary defensive purposes. The fund will seek to achieve its investment objective and policy through the use of various investment strategies including the use of derivatives to obtain long and synthetic short positions principally through contracts for difference. The fund may also use forward foreign exchange transactions, interest rate and government bond futures, and other exchange traded and off exchange traded derivative contracts for the purposes of efficient portfolio management and/or meeting the investment objectives of the fund. Such derivative contracts have the potential to significantly increase the fund s risk profile. The ACD employs a risk management process that seeks to control the volatility of fund returns. The fund may at any time have substantial holdings in ancillary liquid assets. 8 On 23 October 2015 Appendix II (Investment Powers and Restrictions) of the Prospectus was amended to draw attention to the ACD s general power under Chapter 5 of the COLL to enter into underwriting or sub-underwriting agreements.

9 Schroder Absolute UK Dynamic Fund Fund Information (continued) Financial highlights Dealing price % change P1 Accumulation shares p p (5.32) P2 Accumulation shares p p (5.18) P1 Euro Hedged Accumulation shares (5.79) P2 Euro Hedged Accumulation shares (5.76) 1 The fund prices quoted relate to the accounting date on , they are not dealing prices as the fund deals weekly each Thursday. The performance of hedged share classes may differ from other share classes of the fund because the return on unhedged share classes is based on both the performance of the fund s investments and the performance of the portfolio currencies relative to sterling whereas the return on a hedged share class is based only on the performance of the fund s investments. Fund information Launch date 7 September 2009 Launch price p per P1 Accumulation share p per P2 Accumulation share Launch date 7 June 2011 Launch price per P1 Euro Hedged Accumulation share Launch date 6 April 2011 Launch price per P2 EUR Hedged Accumulation share Interim Final Accounting dates 31 March 30 September Revenue allocation date 30 November 9

10 Schroder Absolute UK Dynamic Fund Fund Information (continued) Ongoing charges figure For the period For the period For the year to from to P1 Accumulation shares 1.67% % % P2 Accumulation shares 1.17% % % P1 Euro Hedged Accumulation shares 1.67% % % P2 Euro Hedged Accumulation shares 1.17% % % 1 The Ongoing charges figure is annualised based on the fees incurred during the accounting period. 2 The Ongoing charges figure is a projected figure based on the latest expenses of the share class. Total purchases and sales For the period For the year to to s 000 s Total purchases 155, ,311 Total sales 125, ,285 10

11 Schroder Absolute UK Dynamic Fund Review of Investment Activities From 30 September 2015 to 31 March 2016, the price of P1 Accumulation shares fell 5.32%. UK equities experienced pronounced volatility over the period. Having initially staged a strong recovery at its very start, they struggled to make further progress as calendar 2015 drew to a close, amid uncertainty around the likely consequences of a US interest rate hike, which was confirmed in December. Risk appetite then returned again in mid February as markets welcomed new stimulus from some of the world s major central banks. The portfolio s long positions generated negative returns. Chain maker Renold performed poorly as global industrials became more challenged culminating in February s profit warning. A weak oil price backcloth weighed on Gulf Marine Services, which operators support vessels used to maintain offshore oil and gas platforms. UK personal injury (PI) marketing specialist NAHL Group also detracted from performance after the Chancellor of the Exchequer used his Autumn Statement to propose restricting the ability of those with minor injuries to make PI claims. All three of these companies look oversold, and in NAHL Group s case a dividend yield in excess of 7% 1 sees us paid to wait for the recovery. On the positive side, mixers group Fevertree Drinks performed strongly as its finals underlined robust UK and overseas growth. Metering services group Smart Metering Systems recovered well towards the end of the period as it secured the first contract wins in the potentially very large domestic smart meter market, which is not yet reflected in the company s valuation. On the Beach Group performed well too after delivering a very solid set of maiden full year results, which were in line with expectations despite the significant disruption caused by the terror attacks in Sharm el-sheik. Our short book detracted from performance as our index shorts performed poorly during the pronounced large cap led rallies seen in the period. Co-Fund Manager: Paul Marriage Paul is Head of the UK Dynamic Team Paul joined Schroders on the acquisition of Cazenove Capital. Prior to this Paul was Head of UK Small Cap investments at Insight Investment and an analyst at GH Asset Management Paul graduated from University College, Oxford with a degree in Modern History He is a member of ASIP and has eighteen years investment experience 1 Source: Thomson Reuters Datastream. Please remember that past performance is not a guide to future performance and it might not be repeated. The value of investments and the revenue from them may go down as well as up and investors may not get back the amount originally invested. Because of this, you are not certain to make a profit on your investments and you may lose money. Co-Fund Manager: John Warren John is a member of UK Dynamic Team John joined Schroders on the acquisition of Cazenove Capital. He has over sixteen years investment experience, having previously been at UBS and Investec Bank. John graduated from Loughborough University with a degree in Economics and Accountancy. He holds the ACA and SFA 11

12 Schroder Absolute UK Dynamic Fund Risk Profile Risk and reward indicator The risk category is based upon the fund s risk target and there is no guarantee that the fund will achieve it. The fund is in this category because it can take higher risks in search of higher rewards and its price may rise and fall accordingly. The fund s risk category is not guaranteed to remain fixed and may change over time. A fund in the lowest category does not mean a risk free investment. Specific risks The fund invests in assets which are exposed to currencies other than sterling. Exchange rates may cause the value of overseas investments and the revenue from them to rise or fall. For non-hedged share classes exchange rates may cause the value of overseas investments and the revenue from them to rise or fall. There is no guarantee that the hedging strategy applied in hedged share classes will entirely eliminate the adverse effects of changes in exchange rates between the base currency and the portfolio currencies. In addition, it should be noted that hedging transactions will be entered into whether or not the currency of a hedged share class is declining or increasing in value in relation to the base currency or portfolio currencies. Hedged share classes aim to provide investors with a return correlated to the portfolio currencies performance of the fund by reducing the effect of exchange rate fluctuations between the base currency and the portfolio currencies. As it is not possible to legally segregate share classes liabilities from those of other share classes in the fund, there is a risk that, in certain limited circumstances, the hedging transactions undertaken in relation to a hedged share class could result in liabilities which might affect the net asset value of the other share classes in the fund. The fund is index unconstrained and has the potential for greater volatility. The fund invests in smaller companies which may be less liquid than larger companies and price swings may therefore be greater than in larger company funds. More than 35% of the property of the fund may be invested in Government securities. 12

13 Schroder Absolute UK Dynamic Fund Risk Profile (continued) The fund may invest in higher yielding bonds (non-investment grade). The risk of default is higher with non-investment grade bonds than with investment grade bonds. Higher yielding bonds may also have an increased potential to erode your capital sum than lower yielding bonds. The fund may invest in a wide range of derivatives and alternative investments (including commodities, hedge funds, real estate funds and private equity) in order to meet its investment objectives. One of the aims of the ACD is to achieve volatility targets for the portfolio and in order to do this leverage will be used. The use of leverage can increase gains as well as losses and expose the fund to increased risk. Whilst it is intended that the additional risk that leverage exposes the fund to is controlled by value at risk methodology, there can be no guarantee that this risk control may be achieved especially under extreme or changing market conditions. For these reasons, the purchase of shares should not normally be regarded as a short term investment. 13

14 Schroder Absolute UK Dynamic Fund Net Asset Value and Comparative Tables Share price range Financial year to P1 Accumulation P2 Accumulation 30 September shares shares Highest Lowest Highest Lowest dealing dealing dealing dealing p p p p Financial period to 31 March Financial year to P1 Euro Hedged P2 Euro Hedged 30 September Accumulation shares Accumulation shares Highest Lowest Highest Lowest dealing dealing dealing dealing Financial period to 31 March Net revenue Financial year to P1 Accumulation shares P2 Accumulation shares 30 September pence per share pence per share 2013 Nil Nil 2014 Nil Nil 2015 Nil Nil Financial period to 31 March 2016 Nil Nil The P1 Euro Hedged Accumulation shares and P2 Euro Hedged Accumulation shares have made no distributions to date. 14

15 Schroder Absolute UK Dynamic Fund Net Asset Value and Comparative Tables (continued) Net asset value Net asset Net asset value value per share Number of As at 30 September 000 s p shares in issue 2013 P1 Accumulation shares 149, ,717,241 P2 Accumulation shares 92, ,312,619 P1 Euro Hedged Accumulation shares 4, ,058,456 P2 Euro Hedged Accumulation shares 121, ,396, P1 Accumulation shares 128, ,760,990 P2 Accumulation shares 101, ,488,862 P1 Euro Hedged Accumulation shares 2, ,065,043 P2 Euro Hedged Accumulation shares 58, ,605, P1 Accumulation shares 121, ,288,186 P2 Accumulation shares 86, ,888,998 P1 Euro Hedged Accumulation shares 2, ,634,209 P2 Euro Hedged Accumulation shares 22, ,928, at 31 March P1 Accumulation shares 115, ,498,044 P2 Accumulation shares 91, ,601,990 P1 Euro Hedged Accumulation shares 2, ,300,247 P2 Euro Hedged Accumulation shares 38, ,981,984 15

16 Schroder Absolute UK Dynamic Fund Net Asset Value and Comparative Tables (continued) Fund performance Net asset Net asset value per share value per share p p as at as at % change P1 Accumulation shares (5.23) P2 Accumulation shares (5.00) P1 Euro Hedged Accumulation shares P2 Euro Hedged Accumulation shares Please remember that past performance is not a guide to future performance and it might not be repeated. The value of investments and the revenue from them may go down as well as up and investors may not get back the amount originally invested. Because of this, you are not certain to make a profit on your investments and you may lose money. 16

17 Schroder Absolute UK Dynamic Fund Non-statutory Portfolio Statement The following portfolio statement has been provided to show the investment exposure of the portfolio, by investment. It differs from the statutory portfolio statement in that only the equity exposure is shown. Long positions Aerospace & Defense Holding at Market Value % of net s assets Ultra Electronics 194,628 3, , Banks Virgin Money Holdings 1 650,000 2, , Beverages Fevertree Drinks 1 1,168,287 7, Nichols 87,001 1, Nichols 1 341,247 4, , Construction & Materials Low & Bonar 1,944,637 1, Low & Bonar 1 2,319,132 1, Michelmersh Brick Holdings 1 2,585,545 2, , Electronic & Electrical Equipment Gooch & Housego 27, Gooch & Housego 1 714,206 6, Xaar 42, Xaar 1 1,242,026 6, , Financial Services Arrow Global Group 1,382,182 3, Arrow Global Group 1 553,548 1, , General Industrials British Polythene Industries 1 877,297 6, ,

18 Schroder Absolute UK Dynamic Fund Non-statutory Portfolio Statement (continued) General Retailers Holding at Market Value % of net s assets Just Eat 1 301,176 1, Mothercare 1 992,290 1, , Health Care Equipment & Services Kromek Group 1 9,411,731 2, Spire Healthcare Group 1 1,127,795 4, , Household Goods & Home Construction McBride 1 1,848,920 2, McBride Non Cum Preference 1 14,772, Telford Homes 1 881,625 2, Walker Greenbank 1 1,987,688 3, Watkin Jones 1 3,356,000 3, , Industrial Engineering Renold 1 9,630,452 3, , Life Insurance St James s Place 279,769 2, , Media Ascential 1 1,032,993 2, , Oil Equipment, Services & Distribution Gulf Marine Services 1 4,671,844 3, , Personal Goods Jimmy Choo 991,839 1, , Pharmaceuticals & Biotechnology Clinigen Group 1 753,754 4,

19 Schroder Absolute UK Dynamic Fund Non-statutory Portfolio Statement (continued) Pharmaceuticals & Biotechnology (continued) Holding at Market Value % of net s assets GlaxoSmithKline 279,311 3, Skyepharma 800,000 3, , Real Estate Investment & Services Palace Capital 1 1,105,457 3, , Real Estate Investment Trusts Hansteen Holdings 300, Secure Income REIT 1 1,499,720 3, Workspace Group 350,000 2, , Software & Computer Services Bango 1 2,168, Blue Prism Group 1 2,280,564 2, WANdisco 1 1,053,040 1, , Support Services Electrocomponents 946,233 2, Johnson Service Group 1 5,514,957 5, Robert Walters 101, Robert Walters 1 974,819 3, Smart Metering Systems 1 1,771,417 7, Staffline Group 1 171,026 2, , Technology Hardware & Equipment Quixant 1 70, Sepura 2,985,475 5, , Travel & Leisure Eclectic Bar Group 1 1,959,660 1, Elegant Hotels Group 1 2,194,420 2, International Consolidated Airline 683,198 3, On the Beach Group 1 1,601,051 4,

20 Schroder Absolute UK Dynamic Fund Non-statutory Portfolio Statement (continued) Travel & Leisure (continued) Holding at Market Value % of net s assets Revolution Bars Group 1 1,775,330 2, Young & Co s Brewery 1 278,046 2, Young & Co s Brewery A 1 239,833 2, , Total long positions 156, Short positions Chemicals Elementis (1,605,992) (3,845) (1.55) (3,845) (1.55) Financial Services Hargreaves Lansdown (160,728) (2,160) (0.87) (2,160) (0.87) Futures FTSE 250 Index (1,939) (32,820) (13.23) (32,820) (13.23) General Industrials DS Smith (830,000) (3,386) (1.37) (3,386) (1.37) General Retailers B&M European Value Retail (868,139) (2,304) (0.93) Kingfisher (900,000) (3,390) (1.36) (5,694) (2.29) Household Goods & Home Construction Countryside Properties (1,022,024) (2,402) (0.97) Persimmon (150,000) (3,128) (1.26) (5,530) (2.23) Industrial Engineering Spirax-Sarco Engineering (93,943) (3,420) (1.38) (3,420) (1.38) 20

21 Schroder Absolute UK Dynamic Fund Non-statutory Portfolio Statement (continued) Support Services Holding at Market Value % of net s assets Bunzl (168,544) (3,410) (1.37) Mitie Group (975,200) (2,506) (1.01) (5,916) (2.38) Travel & Leisure Paddy Power Betfair (22,750) (2,208) (0.89) Patisserie Holdings (349,392) (1,276) (0.51) Whitbread (79,000) (3,128) (1.26) William Hill (302,171) (988) (0.40) (7,600) (3.06) Total short positions (70,371) (28.36) Net long exposure 86, Net investment exposure 86, All holdings are Contracts For Difference (CFDs) unless otherwise stated. 1 Direct equity investments. 21

22 Schroder Absolute UK Dynamic Fund Portfolio Statement Equities 54.04% ( %) Holding at Market Value % of net s assets Banks 0.97% ( %) Virgin Money Holdings 650,000 2, , Beverages 4.86% ( %) Fevertree Drinks 1,168,287 7, Nichols 341,247 4, , Construction & Materials 1.41% ( %) Low & Bonar 2,319,132 1, Michelmersh Brick Holdings 2,585,545 2, , Electronic & Electrical Equipment 4.99% ( %) Gooch & Housego 714,206 6, Xaar 1,242,026 6, , Equity Investment Instruments 5.64% ( %) Schroder Special Situations Sterling Liquidity Plus Fund I Accumulation ,200 13, , Financial Services 0.56% ( %) Arrow Global Group 553,548 1, , Food Producers 0.00% ( %) 22

23 Schroder Absolute UK Dynamic Fund Portfolio Statement (continued) Holding at Market Value % of net s assets General Industrials 2.46% ( %) British Polythene Industries 877,297 6, , General Retailers 1.19% ( %) Just Eat 301,176 1, Mothercare 992,290 1, , Health Care Equipment & Services 2.80% ( %) Kromek Group 9,411,731 2, Spire Healthcare Group 1,127,795 4, , Household Goods & Home Construction 5.38% ( %) McBride 1,848,920 2, McBride Non Cum Preference 14,772, Telford Homes 881,625 2, Walker Greenbank 1,987,688 3, Watkin Jones 3,356,000 3, , Industrial Engineering 1.29% ( %) Renold 9,630,452 3, , Industrial Transportation 0.00% ( %) Media 0.96% ( %) Ascential 1,032,993 2, ,

24 Schroder Absolute UK Dynamic Fund Portfolio Statement (continued) Holding at Market Value % of net s assets Oil Equipment, Services & Distribution 1.21% ( %) Gulf Marine Services 4,671,844 3, , Pharmaceuticals & Biotechnology 1.77% ( %) Clinigen Group 753,754 4, , Real Estate Investment & Services 1.49% ( %) Palace Capital 1,105,457 3, , Real Estate Investment Trusts 1.60% ( %) Secure Income REIT 1,499,720 3, , Software & Computer Services 2.18% ( %) Bango 2,168, Blue Prism Group 2,280,564 2, WANdisco 1,053,040 1, , Support Services 7.07% ( %) Johnson Service Group 5,514,957 5, Robert Walters 974,819 3, Smart Metering Systems 1,771,417 7, Staffline Group 171,026 2, , Technology Hardware & Equipment 0.06% ( %) Quixant 70,

25 Schroder Absolute UK Dynamic Fund Portfolio Statement (continued) Holding at Market Value % of net s assets Travel & Leisure 6.15% ( %) Eclectic Bar Group 1,959,660 1, Elegant Hotels Group 2,194,420 2, On the Beach Group 1,601,051 4, Revolution Bars Group 1,775,330 2, Young & Co s Brewery 278,046 2, Young & Co s Brewery A 239,833 2, , Fixed Interest 37.76% ( %) UK Government Bonds 37.76% ( %) Treasury 0% Stock ,000,000 12, Treasury 0% Stock ,000,000 5, Treasury 0% Stock ,000,000 18, Treasury 0% Stock ,800,000 20, Treasury 0% Stock ,000,000 9, Treasury 0% Stock ,000,000 5, Treasury 0% Stock ,000,000 18, , Derivatives 0.46% ( %) CFDs Long Positions 0.74% ( %) Aerospace & Defense 0.00% ( (0.02)%) Ultra Electronics 194,628 (5) 0.00 (5) 0.00 Beverages (0.01)% ( %) Nichols 87,001 (36) (0.01) (36) (0.01) 25

26 Schroder Absolute UK Dynamic Fund Portfolio Statement (continued) Chemicals 0.00% ( %) Holding at Market Value % of net s assets Construction & Materials (0.04)% ( %) Low & Bonar 1,944,637 (102) (0.04) (102) (0.04) Electronic & Electrical Equipment 0.00% ( %) Gooch & Housego 27, Xaar 42, Financial Services 0.03% ( %) Arrow Global Group 1,382, Food & Drug Retailers 0.00% ( %) General Industrials 0.00% ( %) General Retailers 0.00% ( (0.19)%) Health Care Equipment & Services 0.00% ( %) Industrial Engineering 0.00% ( (0.02)%) Life Insurance 0.05% ( (0.05)%) St James s Place 279,

27 Schroder Absolute UK Dynamic Fund Portfolio Statement (continued) Media 0.00% ( (0.43)%) Holding at Market Value % of net s assets Mining 0.00% ( (0.25)%) Nonlife Insurance 0.00% ( %) Personal Goods (0.02)% ( (0.03)%) Jimmy Choo 991,839 (53) (0.02) (53) (0.02) Pharmaceuticals & Biotechnology 0.16% ( (0.10)%) GlaxoSmithKline 279, Skyepharma 800, Real Estate Investment Trusts 0.07% ( %) Hansteen Holdings 300,495 (38) (0.02) Workspace Group 350, Support Services 0.09% ( (0.18)%) Electrocomponents 946, Robert Walters 101,989 (66) (0.03) Technology Hardware & Equipment 0.31% ( %) Sepura 2,985,

28 Schroder Absolute UK Dynamic Fund Portfolio Statement (continued) Travel & Leisure 0.10% ( (0.25)%) Holding at Market Value % of net s assets International Consolidated Airlines Group 683, CFDs Short Positions (0.51)% ( %) Chemicals (0.02)% ( %) Elementis (1,605,992) (62) (0.02) (62) (0.02) Electronic & Electrical Equipment 0.00% ( (0.08)%) Financial Services 0.04% ( (0.02)%) Hargreaves Lansdown (160,728) Futures (0.49)% ( %) FTSE 250 Index (1,939) (1,213) (0.49) (1,213) (0.49) Gas, Water & Multiutilities 0.00% ( %) General Industrials 0.00% ( %) DS Smith (830,000) General Retailers (0.06)% ( %) B&M European Value (868,139) Kingfisher (900,000) (332) (0.13) (153) (0.06) 28

29 Schroder Absolute UK Dynamic Fund Portfolio Statement (continued) Holding at Market Value % of net s assets Household Goods & Home Construction 0.04% ( %) Countryside Properties (1,022,024) (47) (0.02) Persimmon (150,000) Industrial Engineering (0.26)% ( %) Spirax-Sarco Engineering (93,943) (648) (0.26) (648) (0.26) Industrial Transportation 0.00% ( %) Personal Goods 0.00% ( %) Support Services 0.16% ( (0.08)%) Bunzl (168,544) (209) (0.08) Mitie Group (975,200) Travel & Leisure 0.08% ( %) Paddy Power Betfair (22,750) Patisserie Holdings (349,392) (30) (0.01) Whitbread (79,000) (82) (0.03) William Hill (302,171) Other Derivative Positions 0.23% ( %) Euro Denominated Derivatives 0.08% ( %) Forward to buy 52,915,509 for 41,613,391 52,915,

30 Schroder Absolute UK Dynamic Fund Portfolio Statement (continued) Holding at Market Value % of net s assets Sterling Denominated Derivatives 0.27% ( %) FTSE 100 PUT 5800 June US Dollar Denominated Derivatives (0.12)% ( %) CBOE VIX Non Equity Index Futures June (307) (0.12) (307) (0.12) Portfolio of investments 3 228, Net other assets 19, Net assets attributable to shareholders 248, Unless otherwise stated the above securities are ordinary shares or common stock and admitted to official stock exchange listings. 1 Collective investment scheme permitted under the FCA s COLL, not listed on any exchange. 2 A related party to the fund. 3 Including derivative liabilities. 30

31 Schroder Absolute UK Dynamic Fund Summary of Portfolio Transactions Largest purchases Largest sales For the six months ended 31 March 2016 Cost 000 s Treasury 0% Stock ,746 Treasury 0% Stock ,978 Treasury 0% Stock ,955 Treasury 0% Stock ,949 Treasury 0% Stock ,985 Treasury 0% Stock ,974 Treasury 0% Stock ,993 Treasury 0% Stock ,985 Equinti Group 3,960 Secure Income REIT 3,833 For the six months ended 31 March 2016 Proceeds 000 s Treasury 0% Stock ,000 Treasury 0% Stock ,863 Treasury 0% Stock ,000 Schroder Special Situations Sterling Liquidity Plus Fund I Accumulation 1 8,399 Sophos Group 5,063 Equinti Group 3,876 FDM Group Holdings 3,803 Johnson Service Group 3,763 Clipper Logistics 3,236 Fevertree Drinks 3,066 1 A related party to the fund. 31

32 Schroder Absolute UK Dynamic Fund Statement of Total Return (unaudited) For the six months ended 31 March 2016 Restated s 000 s 000 s 000 s Income Net capital losses (9,423) (8,741) Revenue 950 1,196 Expenses (1,699) (1,481) Interest payable and similar charges (430) (576) Net expense before taxation (1,179) (861) Taxation 0 0 Net expense after taxation (1,179) (861) Total return before distributions (10,602) (9,602) Distributions 0 (3) Change in net assets attributable to shareholders from investment activities (10,602) (9,605) Statement of Change in Net Assets Attributable to Shareholders (unaudited) For the six months ended 31 March 2016 Restated s 000 s 000 s 000 s Opening net assets attributable to shareholders 232, ,935 Amounts receivable on issue of shares 45,053 4,150 Amounts payable on cancellation of shares (19,116) (74,067) 25,937 (69,917) Dilution adjustment Change in net assets attributable to shareholders from investment activities (10,602) (9,605) Closing net assets attributable to shareholders 248, , Refer to the Notes to the Accounts on page Refer to the Notes to the Accounts on page The Opening net assets attributable to shareholders for the current period do not equal the Closing net assets attributable to shareholders for the comparative period as they are not consecutive periods.

33 Schroder Absolute UK Dynamic Fund Balance Sheet (unaudited) As at 31 March s 000 s Assets Investments 232, ,328 Current assets Debtors 2,287 2,617 Cash and bank balances 18,015 20,944 Total assets 252, ,889 Liabilities Investment liabilities (3,230) (4,484) Creditors Other creditors (1,103) (4,928) Total liabilities (4,333) (9,412) Net assets attributable to shareholders 248, ,477 33

34 Schroder Absolute UK Dynamic Fund Notes to the Accounts (unaudited) 1 Accounting policies The applicable accounting policies adopted by Schroder Absolute UK Dynamic Fund are disclosed on page 7. As a result of changes to the Basis of preparation disclosed on page 7, certain comparative items have been restated in the Report and Accounts of the fund as described below: Statement of Total Return For the periods ended 31 March 2016 and 31 March 2015 the Dividends payable on short positions of 238,436 and 518,678, respectively, are now included within Interest payable and similar charges, under SORP 2010 they were included within Revenue. For the periods ended 31 March 2016 and 31 March 2015 Interest payable of 191,392 and 57,352, respectively, is now included within Interest payable and similar charges, under SORP 2010 it was disclosed under Finance costs: Interest payable now renamed Distributions under SORP

35 Schroder European Absolute Target Fund Schroder European Absolute Target Fund Fund Information Investment objective and policy The fund aims to achieve positive returns (greater than zero) over a rolling three year period in all market conditions. Positive returns are not guaranteed over this or longer periods of time and the fund may not achieve this objective. There is a risk to an investor s capital. Investors may not get back the amount originally invested. The fund seeks to take advantage of investment opportunities created by the fluctuations in economic activity in the European market. It will invest directly, or indirectly through derivatives, in the shares of large and medium sized companies that have their registered office in Europe, or derive a significant proportion of their revenue from, or are predominantly operating from, within this geographic region. This does not, however, preclude investment in a limited way in smaller companies. The fund may also invest in bonds and other fixed income securities. The fund may use derivatives for the purposes of efficient portfolio management or meeting the investment objectives of the fund. The fund may have long and short positions (principally through contracts for difference) and may be net long or short when long and short positions are combined. The fund may also use forward foreign exchange transactions, interest rate and government bond futures, and other exchange traded and off exchange traded derivative contracts. Such derivative contracts have the potential to significantly increase the fund s risk profile. The fund may at any time have substantial holdings in cash and near cash. The ACD employs a risk management process that seeks to control the volatility of fund returns. On 23 October 2015 Appendix II (Investment Powers and Restrictions) of the Prospectus was amended to draw attention to the ACD s general power under Chapter 5 of the COLL to enter into underwriting or sub-underwriting agreements. 35

36 Schroder European Absolute Target Fund Fund Information (continued) Financial highlights Dealing price % change P1 GBP Hedged Accumulation shares p p (0.98) P2 GBP Hedged Accumulation shares p p (0.71) P1 Euro Accumulation shares (1.20) P2 Euro Accumulation shares (1.03) Distribution per P2 GBP Hedged Accumulation shares Nil Nil The performance of hedged share classes may differ from other share classes of the fund because the return on unhedged share classes is based on both the performance of the fund s investments and the performance of the portfolio currencies relative to sterling whereas the return on a hedged share class is based only on the performance of the fund s investments. Fund information Launch date 18 July 2008 Launch price p per P1 GBP Hedged Accumulation share p per P2 GBP Hedged Accumulation share Launch date 17 November 2008 Launch price per P1 Euro Accumulation share per P2 Euro Accumulation share Interim Final Accounting dates 31 March 30 September Revenue allocation dates 31 May 30 November 36

37 Schroder European Absolute Target Fund Fund Information (continued) Ongoing charges figure For the period For the period/year to Date to Date A/I/X Income (Gross) units For the period For 0.00% the 1 period For the 0.00% year 3 A/I/X Accumulation (Gross) units 2 to from % 1 to % 3 P1 GBP Hedged Accumulation shares 1.42% % % 1 The Total expense ratio is annualised based on the fees suffered during the P2 GBP Hedged Accumulation accounting period. shares 0.92% % % 2 P1 The Euro Manager s Accumulation periodic charge for X Accumulation (Gross) units is invoiced shares 1.42% directly to unitholders and is therefore not 1.43% included in the 1.35% Total expense ratio P2 Euro Accumulation for that unit class. shares 0.92% % % 3 The Total expense ratio includes VAT recoverable on registrar s fees. 1 The Ongoing charges figure is annualised based on the fees incurred during the accounting period. 2 The Ongoing charges figure is a projected figure based on the latest expenses of the share class. Total purchases and sales For the period For the year to to s 000 s Total purchases 222, ,893 Total sales 247, ,605 37

38 Schroder European Absolute Target Fund Review of Investment Activities From 30 September 2015 to 31 March 2016, the price of P2 GBP Hedged Accumulation shares on a dealing price to dealing price basis fell 0.71%. Slow global growth and concerns over the banking sector weighed on equities during the period under review. However, markets recovered somewhat from mid February. The European Central Bank (ECB) expanded its quantitative easing programme in March The portfolio registered a slightly negative return for the six months. Positioning within financial services weighed on returns, with the short position in UK group Hargreaves Lansdowne proving a drag on fund performance. Certain long positions within Italian financials also detracted from performance. These included asset manager Anima Holding and banking group Credito Valtellinese as worries over non-performing loans held by Italian banks weighed on even the better capitalised institutions. Software & computer services made the greatest positive contribution to performance, thanks to the long positions in Micro Focus International and Sage Group. The former benefited from strong earnings and the latter from a well received investor day. Cairn Energy was the top individual long contributor amid recovery in the oil price and an encouraging update on a drilling programme in Senegal. Credit markets in the US have stabilised but are still on a negative trend while European corporate credit will be supported by the ECB now. We remain long financials as a result, but not via banks, only insurers, who will see asset value support from the ECB, and real estate, who also are beneficiaries of the lower cost of debt. We have taken a long position in industrials amid some better US data. We are now short in commodities again and even shorter in growth stocks which rallied hard in March. Fund Manager: Steve Cordell Steve has twenty years investment experience and is a senior member of the pan-european equity team at Schroders Steve joined Schroders from Cazenove Capital Prior to this he worked at HSBC Asset Management (Europe) Ltd He graduated from Trinity College, Oxford with a First Class (Hons) in Modern Languages Please remember that past performance is not a guide to future performance and it might not be repeated. The value of investments and the revenue from them may go down as well as up and investors may not get back the amount originally invested. Because of this, you are not certain to make a profit on your investments and you may lose money. 38

39 Schroder European Absolute Target Fund Risk Profile Risk and reward indicator The risk category is based upon the fund s risk target and there is no guarantee that the fund will achieve it. The fund is in this category because it can take higher risks in search of higher rewards and its price may rise and fall accordingly. The fund s risk category is not guaranteed to remain fixed and may change over time. A fund in the lowest category does not mean a risk free investment. Specific risks The fund invests in assets which are exposed to currencies other than sterling. Exchange rates may cause the value of overseas investments and the revenue from them to rise or fall. For non-hedged share classes exchange rates may cause the value of overseas investments and the revenue from them to rise or fall. There is no guarantee that the hedging strategy applied in hedged share classes will entirely eliminate the adverse effects of changes in exchange rates between the base currency and the portfolio currencies. In addition, it should be noted that hedging transactions will be entered into whether or not the currency of a hedged share class is declining or increasing in value in relation to the base currency or portfolio currencies. Hedged share classes aim to provide investors with a return correlated to the portfolio currencies performance of the fund by reducing the effect of exchange rate fluctuations between the base currency and the portfolio currencies. As it is not possible to legally segregate share classes liabilities from those of other share classes in the fund, there is a risk that, in certain limited circumstances, the hedging transactions undertaken in relation to a hedged share class could result in liabilities which might affect the net asset value of the other share classes in the fund. The fund is index unconstrained and has the potential for greater volatility. More than 35% of the property of the fund may be invested in Government securities. The fund may invest in higher yielding bonds (non-investment grade). The risk of default is higher with non-investment grade bonds than with investment grade bonds. Higher yielding bonds may also have an increased potential to erode your capital sum than lower yielding bonds. 39