Schroder UK Mid 250 Fund Interim Report and Accounts January 2018
Contents Schroder UK Mid 250 Fund Fund Information 1...............................................3 Investment objective and policy......................................3 Financial highlights................................................3 Fund information..................................................3 Ongoing charges figure.............................................4 Total purchases and sales...........................................4 Review of Investment Activities 1...................................5 Risk Profile 1....................................................6 Risk and reward indicator...........................................6 Specific risks.....................................................6 Net Asset Value and Comparative Tables 1...........................7 Unit price range..................................................7 Net revenue.....................................................7 Net asset value...................................................8 Fund performance................................................9 Portfolio Statement 1............................................10 Summary of Portfolio Transactions 1...............................13 Largest purchases...............................................13 Largest sales...................................................13 Statement of the Manager s Responsibilities........................14 Statement of Total Return (unaudited)..............................15 Statement of Change in Net Assets Attributable to Unitholders (unaudited)..........................................15 Balance Sheet (unaudited).......................................16 Notes to the Accounts (unaudited)................................17 Basis of preparation..............................................17 Accounting policies...............................................17 General Information 1............................................18 Authorisation....................................................18 Other information................................................18 1 Collectively these comprise the Manager s report.
Fund Information Investment objective and policy The Schroder UK Mid 250 Fund s (the fund ) investment objective is to provide long term capital growth by investing in equity and equity related securities of companies listed in the FTSE 250 Index. The fund invests at least 80% of its assets in equity and equity related securities of UK companies listed in the FTSE 250 ex Investment Companies Index. The Manager believes that these investments can potentially offer faster rates of profit and dividend growth and higher long term returns than their larger counterparts. The fund may also invest in former components of, or expected entrants into, that index if the Manager believes it may be advantageous to do so. The fund may also invest in collective investment schemes, warrants and money market instruments, and hold cash. The fund may use derivatives with the aim of reducing risk or managing the fund more efficiently. Financial highlights Selling price 31.1.18 31.7.17 % change A Income units 232.10p 220.70p 5.17 A Accumulation units 277.10p 260.80p 6.25 L Income units 67.68p 64.58p 4.80 L Accumulation units 71.89p 67.38p 6.69 Z Income units 114.10p 108.80p 4.87 Z Accumulation units 124.00p 116.20p 6.71 Fund information Launch date 25 October 1999 Launch price 50.00p per A Income unit 50.00p per A Accumulation unit Launch date 8 November 2011 Launch price 50.00p per Z Income unit 50.00p per Z Accumulation unit Launch date 1 October 2013 Launch price 50.00p per L Income unit 50.00p per L Accumulation unit Interim Final Accounting dates 31 January 31 July Revenue allocation date 30 September 3
Fund Information (continued) Ongoing charges figure For the period For the year to 31.1.18 to 31.7.17 A Income units 1.66% 1 1.66% A Accumulation units 1.66% 1 1.66% L Income units 0.83% 1 0.83% L Accumulation units 0.83% 1 0.83% Z Income units 0.91% 1 0.91% Z Accumulation units 0.91% 1 0.91% 1 The Ongoing charges figure is annualised based on the fees incurred during the accounting period. Total purchases and sales For the period For the year to 31.1.18 to 31.7.17 000 s 000 s Total purchases 139,577 186,398 Total sales 190,263 384,497 4
Review of Investment Activities From 31 July 2017 to 31 January 2018, the price of A Accumulation units on a selling price to selling price basis rose 6.25%. In comparison, the FTSE 1 250 ex Investment Trust Index generated a total return of 3.63% 2. The FTSE 1 All Share Index generated a total return of 3.92% over the same period. UK equities rose over the period against a backdrop of synchronised global growth. This led the US Federal Reserve to announce its third short term interest rate rise within a year while the Bank of England also raised base rates for the first time in more than a decade. Mid caps outperformed as a number of domestic areas of the market bounced back, in line with the recovery in sterling and as corporate results were generally better than feared. International veterinary products business Dechra Pharmaceuticals was our top contributor following robust full year results and a well received European acquisition. Millennium & Copthorne Hotels performed well due to a bid from its Asian based majority owner although the minority investors rejected the offer the share price remained significantly above its undisturbed level. Challenger bank Aldermore Group also generated double digit share price returns after agreeing terms of a cash offer from South African bank FirstRand. Investment manager Man Group was another top contributer following strong third quarter inflows and robust fund performance. E-commerce, direct mail operator and schools equipment supplier Findel rallied on the back of reassuring interim results. On the negative side, support services group Capita fell sharply following a profit warning. Shares in TalkTalk Telecom Group were weak after a decision to write down the value of its mobile business weighed on the interim results. Car retailer Pendragon performed poorly following a profit warning due to a weak new UK car market. Fund Manager: Andrew Brough Andrew is Head of our Pan European Small and Mid Cap Team His investment career commenced in 1987 when he joined Schroders as a UK equity fund manager, becoming Co-Head of our UK Small Cap Team in 2002 He joined Price Waterhouse in 1985, where he qualified as a Chartered Accountant Degree in Economics We used share price strength in the wake of the bid to exit Aldermore Group and continued to take profits in our housebuilding and housing related stocks, including Bovis Homes Group, Crest Nicholson Holdings (complete exit), Redrow and Grainger. We sold out of electronic components maker Laird. We initiated new holdings in Royal Mail, low cost airline Wizz Air Holdings, gaming groups Ladbrokes Coral Group and Playtech, as well as oil and gas equipment firm Petrofac. We will continue to seek out high quality companies those with organic growth, pricing power and strong management teams and avoid those with too much debt to support their business model. 1 FTSE International Limited ( FTSE ) FTSE. FTSE is a trade mark of London Stock Exchange plc and The Financial Times Limited and is used by FTSE International Limited under licence. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE's express written consent. 2 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. 5
Risk Profile Risk and reward indicator The risk and reward indicator changed from 6 to 5 with effect from 2 November 2017. The risk category was calculated using historical performance data and may not be a reliable indicator of the fund s future risk profile. 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. The fund invests predominantly in the securities of a particular country. There may be a greater risk than investing in funds that hold securities in a range of countries. 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. The fund may invest in a wide range of derivatives in order to meet its investment objectives. For these reasons, the purchase of units should not normally be regarded as a short term investment. 6
Net Asset Value and Comparative Tables Financial year to 31 July A Income units A Accumulation units Unit price range Highest Lowest Highest Lowest buying selling buying selling p p p p 2015 213.80 168.50 249.00 196.20 2016 209.00 163.50 244.90 191.70 2017 224.40 176.90 265.30 209.10 Financial period to 31 January 2018 241.70 216.90 288.60 259.00 Financial year to 31 July L Income units L Accumulation units Highest Lowest Highest Lowest buying selling buying selling p p p p 2015 62.48 48.98 63.17 49.52 2016 60.68 47.84 62.24 49.07 2017 65.58 51.36 68.42 53.58 Financial period to 31 January 2018 70.45 63.01 74.84 66.93 Financial year to 31 July Z Income units Z Accumulation units Highest Lowest Highest Lowest buying selling buying selling p p p p 2015 105.30 82.60 109.20 85.62 2016 102.30 80.64 107.50 84.72 2017 110.50 86.62 118.10 92.51 Financial period to 31 January 2018 118.80 106.30 129.10 115.50 Net revenue A Income units A Accumulation units Financial year to 31 July pence per unit pence per unit 2015 1.3485 1.5715 2016 1.5395 1.8060 2017 2.2641 2.6821 Financial period to 31 January 2018 Nil Nil 7
Net Asset Value and Comparative Tables (continued) L Income units L Accumulation units Financial year to 31 July pence per unit pence per unit 2015 0.8568 0.8672 2016 0.9002 0.9233 2017 1.1534 1.2033 Financial period to 31 January 2018 Nil Nil Z Income units Z Accumulation units Financial year to 31 July pence per unit pence per unit 2015 1.3735 1.4246 2016 1.4483 1.5225 2017 1.8683 1.9964 Financial period to 31 January 2018 Nil Nil Net asset value Net asset Net asset value value per unit Number of As at 31 July 000 s p units in issue 2015 A Income units 186,327 206.25 90,340,905 A Accumulation units 1,009,737 241.71 417,745,904 L Income units 13,345 59.88 22,287,575 L Accumulation units 53,179 61.41 86,598,267 Z Income units 71,592 100.99 70,888,927 Z Accumulation units 155,979 106.10 147,006,208 2016 A Income units 100,805 180.67 55,796,511 A Accumulation units 639,455 213.54 299,449,990 L Income units 33,996 52.43 64,835,406 L Accumulation units 87,734 54.70 160,379,935 Z Income units 73,724 88.44 83,357,659 Z Accumulation units 224,780 94.45 237,995,535 2017 A Income units 101,732 218.94 46,466,607 A Accumulation units 655,255 261.47 250,604,477 L Income units 36,050 63.58 56,697,426 L Accumulation units 89,601 67.54 132,657,463 Z Income units 74,468 107.24 69,439,684 Z Accumulation units 235,264 116.53 201,898,188 8
Net Asset Value and Comparative Tables (continued) Net asset Net asset value value per unit Number of As at 31 July 000 s p units in issue 2018 at 31 January A Income units 99,001 231.27 42,806,716 A Accumulation units 652,031 276.20 236,075,593 L Income units 36,342 67.45 53,881,591 L Accumulation units 89,917 71.64 125,503,142 Z Income units 75,390 113.72 66,296,890 Z Accumulation units 238,595 123.55 193,108,570 Fund performance Net asset Net asset value per unit value per unit p p as at 31.1.18 as at 31.7.17 % change A Income units 231.27 218.94 5.63 A Accumulation units 276.20 261.47 5.63 L Income units 67.45 63.58 6.09 L Accumulation units 71.64 67.54 6.07 Z Income units 113.72 107.24 6.04 Z Accumulation units 123.55 116.53 6.02 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. 9
Portfolio Statement Equities 98.95% (97.91%) Holding at Market Value % of net 31.1.18 000 s assets Oil & Gas 3.69% (2.15%) Cairn Energy 9,100,000 18,819 1.58 Lamprell 13,481,527 10,650 0.89 Petrofac 2,400,000 12,711 1.07 PV Crystalox Solar 9,000,000 1,800 0.15 43,980 3.69 Basic Materials 4.94% (4.27%) Elementis 6,800,000 19,638 1.65 Synthomer 2,750,000 13,008 1.09 Victrex 1,025,000 26,158 2.20 58,804 4.94 Industrials 23.67% (21.92%) Bodycote 3,475,000 33,430 2.81 Capita 3,737,574 6,821 0.57 Coats Group 5,800,000 4,553 0.38 CPP Group # 48,879,374 6,354 0.53 HomeServe 3,150,000 24,633 2.07 James Fisher & Sons 2,273,500 34,284 2.88 Keller Group 2,075,000 20,584 1.73 Northgate 6,750,000 27,405 2.30 PayPoint 1,300,000 11,544 0.97 Polypipe Group 1,035,744 4,093 0.34 QinetiQ Group 7,900,000 16,266 1.37 Renishaw 460,000 22,853 1.92 Royal Mail 3,400,000 15,956 1.34 Senior 4,800,000 13,037 1.09 Spectris 1,125,000 29,329 2.46 Speedy Hire 20,000,000 10,800 0.91 281,942 23.67 Consumer Goods 7.98% (10.96%) Bovis Homes Group 3,400,000 37,247 3.13 Photo-Me International 15,975,000 29,011 2.44 Redrow 4,800,000 28,704 2.41 94,962 7.98 10
Portfolio Statement (continued) Holding at Market Value % of net 31.1.18 000 s assets Health Care 6.41% (5.45%) BTG 2,950,000 21,933 1.84 Dechra Pharmaceuticals 1,586,673 38,081 3.19 Indivior 4,071,812 16,397 1.38 76,411 6.41 Consumer Services 22.65% (22.99%) Findel 10,180,783 23,212 1.94 Halfords Group 2,200,000 7,489 0.63 Inchcape 3,850,000 27,893 2.34 JD Sports Fashion 2,450,000 8,967 0.75 Ladbrokes Coral Group 9,771,620 16,612 1.39 Lookers 2,034,050 1,859 0.16 Millennium & Copthorne Hotels 202,711 1,085 0.09 N Brown Group 1,400,000 2,817 0.24 Pendragon 50,750,000 11,520 0.97 Pets at Home Group 7,700,000 13,760 1.16 Playtech 1,353,000 10,713 0.90 Rank Group 5,400,000 12,150 1.02 Restaurant Group 3,166,130 8,036 0.67 Sports Direct International 9,925,000 36,930 3.09 SSP Group 6,575,000 40,041 3.36 Thomas Cook Group 27,000,000 34,073 2.86 Wizz Air Holdings 371,295 12,858 1.08 270,015 22.65 Telecommunications 3.77% (3.88%) TalkTalk Telecom Group 8,000,000 9,512 0.80 Telecom Plus 3,050,000 35,380 2.97 44,892 3.77 Financials 25.84% (25.44%) Brewin Dolphin Holdings 953,526 3,557 0.30 CLS Holdings 1,512,410 3,562 0.30 CMC Markets 9,000,000 14,274 1.20 Grainger 20,000,000 57,681 4.84 Intermediate Capital Group 1,750,000 20,265 1.70 International Personal Finance 13,600,000 26,955 2.26 Investec 6,700,000 36,528 3.07 Just Group 11,400,000 16,712 1.40 11
Portfolio Statement (continued) Holding at Market Value % of net 31.1.18 000 s assets Financials (continued) Man Group 18,000,000 39,043 3.28 NEX Group 2,400,000 14,220 1.19 Paragon Banking Group 5,100,000 25,143 2.11 Raven Russia 25,220,205 12,156 1.02 Safestore Holdings, REIT 903,835 4,508 0.38 St Modwen Properties 1,880,343 7,724 0.65 TBC Bank Group 473,000 7,757 0.65 TP ICAP 2,017,630 10,697 0.90 Virgin Money Holdings UK 2,500,000 6,983 0.59 307,765 25.84 Technology 0.00% (0.85%) Equities total 1,178,771 98.95 Portfolio of investments 1,178,771 98.95 Net other assets 12,505 1.05 Net assets attributable to unitholders 1,191,276 100.00 Unless otherwise stated, all securities are admitted to official stock exchange listings. The comparative percentage figures in brackets are as at 31 July 2017. #Security traded on another regulated market 12
Summary of Portfolio Transactions Largest purchases Largest sales Cost For the six months ended 31 January 2018 000 s Royal Mail 15,244 Ladbrokes Coral Group 12,764 Wizz Air Holdings 11,665 Petrofac 10,970 Playtech 10,829 Indivior 7,655 Sports Direct International 7,427 Cairn Energy 6,595 Spectris 6,537 Man Group 6,301 Proceeds For the six months ended 31 January 2018 000 s Millennium & Copthorne Hotels 33,973 Halma 31,012 Grainger 20,069 Bovis Homes Group 16,640 Aldermore Group 14,610 Dechra Pharmaceuticals 13,924 Redrow 11,459 Laird 9,881 Photo-Me International 8,758 Crest Nicholson Holdings 8,500 13
Statement of the Manager s Responsibilities The Financial Conduct Authority s Collective Investment Schemes sourcebook (COLL) requires the Manager 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 period. In preparing the accounts the Manager 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 fund 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 Manager is responsible for the management of the fund in accordance with its Trust Deed, the Prospectus and the COLL, and for taking reasonable steps for the prevention and detection of fraud, error and non-compliance with law or regulations. The Manager s report and accounts for the period ended 31 January 2018 were signed on 22 March 2018 on behalf of the Manager by: J.A. Walker-Hazell Directors R.E. Stoakley 14
Statement of Total Return (unaudited) For the six months ended 31 January 2018 31.1.18 31.1.17 000 s 000 s 000 s 000 s Income Net capital gains 62,054 93,649 Revenue 14,226 16,011 Expenses (8,410) (8,277) Net revenue before taxation 5,816 7,734 Taxation 0 0 Net revenue after taxation 5,816 7,734 Total return before distributions 67,870 101,383 Distributions (231) (429) Change in net assets attributable to unitholders from investment activities 67,639 100,954 Statement of Change in Net Assets Attributable to Unitholders (unaudited) For the six months ended 31 January 2018 31.1.18 31.1.17 000 s 000 s 000 s 000 s Opening net assets attributable to unitholders 1,192,370 1 1,160,494 Amounts receivable on issue of units 3,366 3,410 Amounts payable on cancellation of units (72,442) (107,184) (69,076) (103,774) Dilution adjustment 340 405 Change in net assets attributable to unitholders from investment activities 67,639 100,954 Unclaimed distributions 3 2 Closing net assets attributable to unitholders 1,191,276 1,158,081 1 1 The Opening net assets attributable to unitholders for the current period do not equal the Closing net assets attributable to unitholders for the comparative period as they are not consecutive periods. 15
Balance Sheet (unaudited) As at 31 January 2018 31.1.18 31.7.17 000 s 000 s Assets Investments 1,178,771 1,167,399 Current assets Debtors 3,483 1,926 Cash and bank balances 12,116 35,506 Total assets 1,194,370 1,204,831 Liabilities Creditors Distributions payable 0 (3,003) Other creditors (3,094) (9,458) Total liabilities (3,094) (12,461) Net assets attributable to unitholders 1,191,276 1,192,370 16
Notes to the Accounts (unaudited) 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 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)). Accounting policies The accounting policies applied are consistent with those of the annual accounts for the year ended 31 July 2017 and are described in those annual accounts. 17
General Information Manager Schroder Unit Trusts Limited 31 Gresham Street London EC2V 7QA Authorised and regulated by the Financial Conduct Authority Registrar Schroder Unit Trusts Limited 31 Gresham Street London EC2V 7QA Authorised and regulated by the Financial Conduct Authority Investment Adviser Schroder Investment Management Limited 31 Gresham Street London EC2V 7QA Authorised and regulated by the Financial Conduct Authority Trustee J.P. Morgan Europe Limited Chaseside Bournemouth BH7 7DA Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation Authority Administration Details Schroders FREEPOST RLTZ-CHSY-HBUT PO Box 1102 Chelmsford Essex CM99 2XX Investor Services 0800 718 777 investorservices@schroders.com Dealing 0800 718 788 Fax 0870 043 4080 Independent Auditors PricewaterhouseCoopers LLP Atria One 144 Morrison Street Edinburgh EH3 8EX Authorisation Other information The fund is an authorised unit trust and is constituted pursuant to the COLL and is structured as a trust. The fund is a UCITS scheme for the purpose of the categorisation of the COLL. The Prospectus, the Key Investor Information Document and details of investment charges and costs are available on request or can be downloaded from our website www.schroders.co.uk. 18
For further literature please contact Schroder Investor Services on 0800 718 777 or at investorservices@schroders.com, or visit our website at www.schroders.co.uk. Issued in March 2018 by Schroder Unit Trusts Limited, 31 Gresham Street, London EC2V 7QA. Registered No: 04191730 England. Authorised and regulated by the Financial Conduct Authority. w35641