Schroder Diversified Growth Fund Interim Short Report 6 March 2016 to 5 September 2016
Review of Investment Activities From 4 March 2016 to 5 September 2016, the price of I Accumulation units on a dealing price to dealing price basis rose 6.18%. In comparison, our Global Equity Composite Index, represented by 60% FTSE* All Share Index and 40% FTSE* World ex UK Sterling Hedged Index, generated a total return of 10.89% 1 in sterling terms. From 29 February 2016 to 31 August 2016 (the closest dates to the reporting period for which the fund s return target of Retail Price Index (RPI) +5% is available) the price of I Accumulation units on a dealing price to dealing price basis rose 7.43%. In comparison, RPI +5% increased 4.21% 2 and our Global Equity Composite Index generated a total return of 12.49% 2 in sterling terms. 1 Source: FTSE*. 2 Source: Office for National Statistics. In this period investment grade bonds and high yield debt delivered strong contributions to returns. Global equities helped performance, whilst Japanese equities detracted. Our alternatives, particularly absolute return and infrastructure, have been effective diversifiers this year. Within equities, our core global equity exposure is now entirely in value stocks through the Schroder ISF QEP Global Active Value portfolio, as we sold the remainder of our Schroder ISF QEP Global Quality position in April. As central bank influence on global markets diminishes, we expect increasing investor focus on stock fundamentals to help unlock the value of these under owned stocks. In July we added exposure to emerging equities with a strategic position in the Schroder QEP Global Emerging Markets Fund. In a low growth, low inflation world, we expect demand for income to drift to markets still offering an attractive yield. To this end, in June we introduced the Quality Yield equity basket which favours high dividend yielding companies with strong balance sheets, while in August we added a position in Australian equities based on attractive valuations owing to high dividend yields. Within fixed income, investment grade bonds and high yield debt contributed positively as credit spreads tightened in the risk on environment. Emerging market debt added value as investors sought the attractive risk adjusted yields on offer, with accommodative policies beneficial for the asset class. Within government bonds, we took the opportunity to lock in the outperformance of gilts against their global counterparts by switching duration into US Treasuries. After the UK s Brexit vote, we took profits on all long held duration positions as global government bond yields fell to new cycle lows. Co-Fund Manager: Johanna Kyrklund Co-Fund Manager: Remi Olu-Pitan
Fund Information Interim Final Accounting dates 5 September 5 March Revenue allocation date 5 May For the period For the period For the year Ongoing charges figure from 6.9.16 to 5.9.16 to 5.3.16 I Accumulation units 0.71% 0.79% 1 2 0.81% 1 The Ongoing charges figure is annualised based on the fees incurred during the accounting period. 2 With effect from 1 August 2016, the Annual management charge was reduced from 0.75% to 0.65%. Performance Record Net Asset Net Asset Value as at Value as at Net Asset 5.9.16 5.3.16 Value Fund performance pence per unit pence per unit % change I Accumulation units 86.18 80.97 6.43 3 months 6 months 5 years Schroder Diversified Growth Fund 3.57% 6.18% 28.15% RPI +5% 1 2.14% 4.21% 42.18% Global Equity Composite Idex 23 6.50% 12.49% 64.94% Fund Source: I Accumulation units on a dealing price to dealing price basis to 5.9.16. Indices Source: 1 Office for National Statistics, price index to 5.9.16. 2 FTSE*, total return in sterling terms to 5.9.16. 3 Represented by 60% FTSE* All Share Index and 40% FTSE* World ex UK Sterling Hedged Index. * 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. Unit price range I Accumulation units Highest Lowest Financial year to dealing dealing 5 March p p 2014 80.54 73.11 2015 87.90 78.61 2016 89.65 77.23 Financial period to 5 September 2016 87.02 80.87
Performance Record (continued) Net revenue Financial year to I Accumulation units 5 March pence per unit 2014 0.5806 2015 0.7516 2016 1.2248 Financial period to 5 September 2016 Nil 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. Portfolio Information % of net % of net assets assets Spread of as at as at investments 5.9.16 5.3.16 Absolute Return Funds 14.62 13.53 Commodities 3.92 0.26 Emerging Markets Funds 3.90 0.00 Infrastructure 4.74 4.64 Private Equity Funds 0.87 0.88 Global Fixed Interest Funds 6.29 5.75 Australia 0.76 0.56 Austria 0.05 0.02 Belgium 0.06 0.11 Bermuda 0.25 0.20 Brazil 0.16 0.14 Canada 0.76 0.23 Cayman Islands 0.18 0.19 Chile 0.01 0.01 China 0.31 0.14 Columbia 0.01 0.01 Curaçao 0.21 0.00 Denmark 0.00 0.03 Finland 0.15 0.19 France 1.13 0.63 Germany 0.63 0.29 % of net % of net assets assets as at as at 5.9.16 5.3.16 Greece 0.02 0.01 Guernsey 0.04 0.08 Hong Kong 0.66 0.37 Hungary 0.02 0.03 India 0.04 0.02 Indonesia 0.04 0.07 Ireland 0.12 0.06 Isle of Man 0.01 0.01 Israel 0.25 0.24 Italy 0.23 0.08 Japan 2.78 5.44 Jersey 0.01 0.06 Luxembourg 0.15 0.06 Malaysia 0.01 0.02 Marshall Islands 0.01 0.01 Mexico 0.04 0.03 Netherlands 0.37 0.22 New Zealand 0.01 0.01 Norway 0.43 0.25 Panama 0.00 0.02 Papua New Guinea 0.06 0.00 Peru 0.00 0.01 Philippines 0.00 0.01 Poland 0.09 0.05
Portfolio Information (continued) % of net % of net assets assets Spread of as at as at investments 5.9.16 5.3.16 Portugal 0.05 0.00 Russia 0.23 0.17 Singapore 0.23 0.17 South Africa 0.33 0.40 South Korea 0.50 0.26 Spain 0.06 0.04 Sweden 0.33 0.39 Switzerland 1.23 0.75 Taiwan 0.60 0.48 Thailand 0.21 0.13 Turkey 0.05 0.08 United Kingdom 2.12 1.70 United States 11.93 12.05 Sterling Certificates of Deposit 4.06 10.59 Sterling Commercial Papers 3.52 9.53 Euro Fixed Rate Notes 0.90 0.88 Euro Floating Rate Notes 0.51 0.42 Sterling Fixed Rate Notes 2.92 0.24 Sterling Floating Rate Notes 4.71 7.62 US Dollar Fixed Rate Notes 10.47 11.69 US Dollar Floating Rate Notes 1.10 0.75 Australian Dollar Derivatives (0.17) 0.09 % of net % of net assets assets as at as at 5.9.16 5.3.16 Brazilian Real Derivatives 0.00 0.07 Canadian Dollar Derivatives (0.01) (0.05) Euro Derivatives (0.01) (0.20) Indian Rupee Derivatives 0.00 0.05 Japanese Yen Derivatives 0.02 (0.07) Russian Ruble Derivatives 0.01 0.00 South African Rand Derivatives 0.01 (0.01) Sterling Derivatives 0.43 0.19 Swiss Franc Derivatives (0.01) (0.10) Taiwan Dollar Derivatives (0.02) 0.00 US Dollar Derivatives 0.61 (0.54) Net other assets 8.68 7.26
Portfolio Information (continued) % of net assets as at Major holdings 5.9.16 Schroder International Selection SICAV Emerging Markets Debt Absolute Return Fund I Accumulation USD 7.77 ishares USD Corporate Bond UCITS ETF 3.98 SPDR Gold Shares ETP 3.39 Schroder QEP Global Emerging Markets Fund X Accumulation 3.37 Schroder GAIA SICAV Sirios US Equity Fund C Accumulation USD 2.84 RWC Global Convertibles Fund B Accumulation GBP Hedged 2.31 RWC Europe Absolute Alpha Fund B Accumulation 1.96 Treasury Bill 0% 19.9.16 1.76 John Laing Infrastructure Fund 1.73 Henderson Gartmore United Kingdom Absolute Return Fund G Accumulation 1.30 % of net assets as at 5.3.16 Schroder International Selection SICAV Emerging Markets Debt Absolute Return Fund I Accumulation USD 5.56 ishares USD Corporate Bond UCITS ETF 3.52 SPDR Gold Shares ETP 3.43 Schroder GAIA SICAV Sirios US Equity Fund C Accumulation USD 2.65 US Treasury 0.625% Notes 2024 2.25 RWC Global Convertibles Fund B Accumulation GBP Hedged 2.23 US Treasury 0.25% Notes 2025 2.17 RWC Europe Absolute Alpha Fund B Accumulation 1.88 John Laing Infrastructure Fund 1.60 International Public Partnerships 1.45 Investment Objective & Policy The fund s investment objective is to achieve long term capital growth and income through investment in collective investment schemes as well as directly held transferable securities, derivatives, cash, deposits, warrants and money market instruments. The fund may gain exposure to alternative asset classes including but not limited to property, commodities, hedge funds and private equity directly where permitted or through investment in transferable securities and other permitted assets which themselves invest in these asset classes. Risk Profile Risk and reward indicator Lower risk Potentially lower reward Higher risk Potentially higher reward 1 2 3 4 5 6 7
Risk Profile (continued) 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 is authorised as a non-ucits retail scheme. The investment and borrowing powers of these types of scheme are wider than those for UCITS funds whilst still aiming to provide a prudent spread of risk. 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 in less developed markets which are generally less well regulated than the UK. They may be less liquid and may have less reliable custody arrangements. The fund invests in emerging markets and the Far East. This involves a high degree of risk and should be seen as long term in nature. 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. The fund invests in unregulated collective investment schemes, which involves a higher degree of risk as they are not regulated by the Financial Conduct Authority. The funds may not be readily realisable and priced less frequently than listed shares or authorised unit trusts, and therefore price swings may be more volatile. The fund invests 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 will invest in a wide range of derivatives and alternative investments (including commodities, hedge funds, property funds and private equity) in order to meet its investment objectives. One of the aims of the Manager 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 units should not normally be regarded as a short term investment.
Report & Accounts This document is a short report for Schroder Diversified Growth Fund for the period ended 5 September 2016. The long form Report & Accounts for the fund are available on our website www.schroders.co.uk or upon written request to Schroders, FREEPOST, RLTZ-CHSY-HBUT, PO Box 1102, Chelmsford, Essex CM99 2XX. Other Information The information contained in this report is designed to enable unitholders to make an informed judgement on the activities of the fund during the period it covers and the results of those activities at the end of the period. For more information about the activities and performance of the fund during this and previous periods, please contact the Manager. Schroders is required by the European Union Savings Directive to report payments to HM Revenue and Customs that are made by the fund to investors living in other European Union member states. 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. For investors security, calls to Schroder Investor Services may be recorded. Manager: Schroder Unit Trusts Limited, 31 Gresham Street, London EC2V 7QA. Authorised and regulated by the Financial Conduct Authority. Investment Adviser: Schroder Investment Management Limited [see Prospectus], 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. Independent Auditors: PricewaterhouseCoopers LLP, Atria One, 144 Morrison Street, Edinburgh EH3 8EX. 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 November 2016 by Schroder Unit Trusts Limited, 31 Gresham Street, London EC2V 7QA. Registered No: 04191730 England. Authorised and regulated by the Financial Conduct Authority. w35659 MR042BI16