Schroder Managed Wealth Portfolio Interim Report and Accounts July 2017
Contents Schroder Managed Wealth Portfolio Fund Information 1...............................................3 Investment objective and policy......................................3 Financial highlights................................................4 Fund information..................................................4 Ongoing charges figure.............................................4 Total purchases and sales...........................................5 Review of Investment Activities 1...................................6 Risk Profile 1....................................................7 Risk and reward indicator...........................................7 Specific risks.....................................................7 Net Asset Value and Comparative Tables 1...........................8 Unit price range..................................................8 Net revenue.....................................................8 Net asset value...................................................9 Fund performance...............................................10 Portfolio Statement 1............................................11 Summary of Portfolio Transactions 1...............................14 Largest purchases...............................................14 Largest sales...................................................14 Statement of the Manager s Responsibilities........................15 Statement of Total Return (unaudited)..............................16 Statement of Change in Net Assets Attributable to Unitholders (unaudited).............................16 Balance Sheet (unaudited).......................................17 Notes to the Accounts (unaudited)................................18 Basis of preparation..............................................18 Accounting policies...............................................18 General Information 1............................................19 Authorisation....................................................19 Other information................................................19 1 Collectively these comprise the Manager s report.
Fund Information Investment objective and policy The Schroder Managed Wealth Portfolio (the fund ) aims to provide capital growth and income by investing in equity and equity related securities, fixed and floating rate securities and alternative assets worldwide. The fund aims to achieve a return in excess of cash over the long term (with an emphasis on managing risk) but this cannot be guaranteed and your capital is at risk. The fund invests at least 80% of its assets (directly (or indirectly) through collective investment schemes, exchange traded funds, real estate investment trusts or closed ended funds) in equity and equity related securities, fixed and floating rate securities and alternative assets worldwide. As the fund is index unconstrained it is managed without reference to an index. The fund may invest indirectly through collective investment schemes, exchange traded funds, real estate investment trusts or closed ended funds in alternative assets including hedge funds strategies, property, private equity and commodities. The fund seeks to generate sustainable returns over the long-term by blending a diversified range of assets, managers and strategies. The fund may invest up to 100% of its assets in collective investment schemes managed by the Manager or an associate of the Manager. The fund may also invest in warrants and money market instruments, and hold cash. The fund may use derivatives with the aim of achieving investment gains, reducing risk or managing the fund more efficiently. With effect from 5 April 2017 the fund s Investment objective and policy changed, previously it was: The fund s investment objective is to provide a total return primarily through investment in collective investment schemes as well as directly held transferable securities, derivatives, cash, deposits, warrants and money market instruments. The fund may also gain exposure to alternatives including hedge funds, private equity and property through investment in transferable securities which themselves invest in these asset classes. 3
Fund Information (continued) Financial highlights Selling price 31.7.17 31.1.17 % change A Income units 185.60p 179.70p 3.28 A Accumulation units 241.90p 233.90p 3.42 S Income units 59.73p 58.17p 2.68 S Accumulation units 61.51p 59.21p 3.88 Z Income units 67.65p 65.80p 2.81 Z Accumulation units 70.19p 67.63p 3.79 Fund information Launch date 20 August 1990 Launch price 50.00p per A Income unit 50.00p per A Accumulation unit Launch date 13 August 2012 Launch price 50.00p per Z Income unit 50.00p per Z Accumulation unit Launch date 14 November 2014 Launch price 50.00p per S Income unit 50.00p per S Accumulation unit Interim Final Accounting dates 31 July 31 January Revenue allocation date 31 March Ongoing charges figure For the period For the year to 31.7.17 to 31.1.17 A Income units 1.89% 1 1.88% A Accumulation units 1.89% 1 1.88% S Income units 0.89% 1 0.89% S Accumulation units 0.89% 1 0.89% Z Income units 1.14% 1 1.13% Z Accumulation units 1.14% 1 1.13% 1 The Ongoing charges figure is annualised based on the fees incurred during the accounting period. 4
Fund Information (continued) Total purchases and sales For the period For the year to 31.7.17 to 31.1.17 000 s 000 s Total purchases 137,005 75,413 Total sales 89,290 31,396 5
Review of Investment Activities From 31 January 2017 to 31 July 2017, the price of Z Accumulation units on a selling price to selling price basis rose 3.79%. In comparison, the FTSE 1 All Share Index, the MSCI World Index in sterling terms, the FTSE 1 British Government Fixed All Stocks Index and the UK Interbank Seven Day Index generated total returns of 7.09% 2, 5.93% 2, 2.40% 2 and 0.12% 2 respectively. There have been two prominent global market factors over the six month period. The first is that equity markets remain high. The second is that equity market volatility has been extremely low. We continue to steer a fairly steady path, mindful of the potential risks ahead. A more defensive outlook has been reflected in several equity transactions. In North America, we switched the Vanguard S&P 500 UCITS ETF into our preferred active manager, Findlay Park American Fund. Similarly, the UBS MSCI Japan ETF, which was purchased in March, was sold in late June in favour of the unhedged Man GLG Japan CoreAlpha Equity Fund. Our UK equity funds collectively have lagged the FTSE All Share Index which rose higher. Aberforth Smaller Companies Trust has been the best performer which was added to in April. We remain positive on the alternative investment vehicles and participated in three infrastructure capital raises during the period. We have, however, been taking profits from some of the listed investment companies on premiums, notably the private equity given we are now late cycle. A stand out performer over the period was Syncona, representing a 2% position within the portfolio. Syncona is transitioning from a fund of funds to a life sciences portfolio. A new addition to the fund is the Aberdeen Diversified Income and Growth Trust. The investment company offers genuine diversification across a range of alternative real assets with an attractive dividend yield. There has been little change to our fixed income positioning with the asset class continuing to look overvalued. Treasury 0.125% Index Linked Stock 2029 was sold in June. Fund Manager: Charles Armstrong Charles Armstrong joined Cazenove Capital in 2001 having started his career with Buchler Phillips, Corporate Recovery & Restructuring specialists He is a Portfolio Director with responsibility for managing UK private client portfolios, private OEIC s and inflation plus mandates which also includes the Schroder Managed Wealth Portfolio Fund He is a member of the Asset Allocation Committee, Stock Selection Committee and the Private Equity Committee Charles is a Fellow of the Chartered Institute for Securities & Investment and has 16 years investment experience 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. 6
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. 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 may invest in unregulated collective investment schemes, which involves a higher degree of risk as they are not regulated by the Financial Conduct Authority (FCA). 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 may invest in a wide range of derivatives in order to meet its investment objectives and for leverage. The use of leverage can increase gains as well as losses and expose the fund to increased risk. The fund may invest in derivatives and in alternative investments (including commodities, hedge funds, property funds and private equity) which involves a higher degree of risk and can be more volatile. They should only be considered as a long term investment. For these reasons, the purchase of units should not normally be regarded as a short term investment. 7
Net Asset Value and Comparative Tables Financial year to 31 January A Income units A Accumulation units Unit price range Highest Lowest Highest Lowest buying selling buying selling p p p p 2015 159.90 148.20 207.50 192.10 2016 164.10 152.50 213.50 198.50 2017 183.00 150.40 238.10 195.70 Financial period to 31 July 2017 187.70 179.00 244.80 233.30 Financial year to 31 January S Income units S Accumulation units Highest Lowest Highest Lowest buying selling buying selling p p p p 2015 51.50 49.45 51.50 49.45 2016 53.11 49.75 53.11 49.75 2017 59.18 48.19 60.24 49.07 Financial period to 31 July 2017 60.40 57.33 62.20 59.04 Financial year to 31 January Z Income units Z Accumulation units Highest Lowest Highest Lowest buying selling buying selling p p p p 2015 58.36 53.64 59.08 54.43 2016 59.55 55.69 60.90 56.95 2017 66.95 54.65 68.82 56.17 Financial period to 31 July 2017 68.42 65.00 70.98 67.44 Net revenue A Income units A Accumulation units Financial year to 31 January pence per unit pence per unit 2015 0.4878 0.6307 2016 Nil Nil 2017 0.3463 0.4932 Financial period to 31 July 2017 Nil Nil S Income units S Accumulation units Financial year to 31 January pence per unit pence per unit 2015 Nil 1 0.5460 2016 0.9081 0.3608 2017 0.6677 0.6730 Financial period to 31 July 2017 Nil Nil 8
Net Asset Value and Comparative Tables (continued) Z Income units Z Accumulation units Financial year to 31 January pence per unit pence per unit 2015 0.5904 0.5970 2016 0.2881 0.2884 2017 0.6059 0.6257 Financial period to 31 July 2017 Nil Nil 1 There was no distribution as the total amount distributable was below de minimis. Net asset value Net asset Net asset value value per unit Number of As at 31 January 000 s p units in issue 2015 A Income units 17,742 158.45 11,197,049 A Accumulation units 26,836 206.18 13,015,973 S Income units 1 51.19 2,000 S Accumulation units 519 51.19 1,014,215 Z Income units 10,928 57.41 19,033,513 Z Accumulation units 7,199 58.72 12,258,694 2016 A Income units 5,060 155.28 3,258,614 A Accumulation units 20,169 202.07 9,981,343 S Income units 17,976 49.75 36,134,582 S Accumulation units 7,652 50.65 15,107,273 Z Income units 1,447 56.41 2,564,284 Z Accumulation units 6,372 57.99 10,987,794 2017 A Income units 4,381 179.25 2,444,296 A Accumulation units 20,985 233.74 8,977,922 S Income units 24,313 57.46 42,311,532 S Accumulation units 21,425 59.18 36,205,880 Z Income units 9,380 65.15 14,397,594 Z Accumulation units 35,072 67.59 51,886,930 2017 at 31 July A Income units 4,249 185.67 2,288,279 A Accumulation units 21,238 241.95 8,778,111 S Income units 35,448 59.74 59,341,054 S Accumulation units 44,505 61.52 72,346,629 Z Income units 12,936 67.66 19,119,825 Z Accumulation units 49,485 70.19 70,496,548 9
Net Asset Value and Comparative Tables (continued) Fund performance Net asset Net asset value per unit value per unit p p as at 31.7.17 as at 31.1.17 % change A Income units 185.67 179.25 3.58 A Accumulation units 241.95 233.74 3.51 S Income units 59.74 57.46 3.97 S Accumulation units 61.52 59.18 3.95 Z Income units 67.66 65.15 3.85 Z Accumulation units 70.19 67.59 3.85 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. 10
Portfolio Statement Bermuda 2.26% (31.1.17 1.86%) Holding at Market Value % of net 31.7.17 000 s assets Blue Capital Alternative Income Fund USD 3,143,051 2,455 1.46 Catco Reinsurance Opportunities Fund USD 1,309,162 1,336 0.80 3,791 2.26 Guernsey 7.23% (31.1.17 8.65%) HICL Infrastructure 3,116,000 4,983 2.97 International Public Partnerships 1,215,103 1,955 1.17 John Laing Infrastructure Fund 1,240,391 1,683 1.00 NB Private Equity Partners USD 113,446 1,159 0.69 Riverstone Energy 174,063 2,357 1.40 12,137 7.23 Ireland 16.02% (31.1.17 22.25%) BlackRock Institutional Sterling Liquidity Fund Heritage Distribution 1 999,888 1,000 0.59 CG Portfolio Dollar Fund D Income 22,201 3,392 2.02 ishares Physical Gold ETC USD 103,420 1,959 1.17 Majedie Tortoise Fund Z Income 4,751,053 5,016 2.99 Man GLG Japan CoreAlpha Equity Fund I Accumulation 19,513 3,774 2.25 Ocean Dial Gateway to India Fund G Income 26,910 3,622 2.16 Polar Capital Global Insurance Fund E Distribution 861,329 4,199 2.50 SPDR Barclays U.S. TIPS UCITS ETF USD 168,022 3,938 2.34 26,900 16.02 Jersey 0.00% (31.1.17 2.80%) Luxembourg 2.98% (31.1.17 1.73%) BlackRock Global Asian Dragon Fund D4RF Income 1 81,803 2,515 1.50 11
Portfolio Statement (continued) Luxembourg (continued) Holding at Market Value % of net 31.7.17 000 s assets Schroder International Selection SICAV Asian Total Return Fund S Distribution 1 2 7,045 2,487 1.48 5,002 2.98 United Kingdom 56.18% (31.1.17 45.66%) Aberdeen Diversified Income and Growth Trust 2,755,565 3,265 1.94 Aberforth Smaller Companies Trust 59,271 774 0.46 CF Ruffer Total Return Fund I Income 1 715,373 2,226 1.33 Civitas Social Housing 2,000,000 2,195 1.31 Fidelity Institutional Emerging Markets Fund W Accumulation 1 1,521,412 2,262 1.35 Ground Rents Income Fund 3,480,000 4,124 2.46 HgCapital Trust 176,587 2,988 1.78 Impact Healthcare Reit 2,607,000 2,685 1.60 Jupiter European Special Situations Fund I Income 1 588,127 2,523 1.50 Majedie UK Equity Fund X Income 1 3,770,591 5,920 3.53 Pantheon International 30,000 532 0.32 PCGH ZDP 5,000,000 5,075 3.02 Polar Capital Global Healthcare Trust 1,578,349 3,220 1.92 Residential Secure Income 3,035,668 3,043 1.81 RIT Capital Partners 96,160 1,861 1.11 S&W Kennox Strategic Value Fund A Income 1 3,900,586 5,055 3.01 Schroder European Alpha Income Fund Z Income GBP Hedged 1 2 2,011,562 4,243 2.53 Schroder Private Equity Fund of Funds B Accumulation EUR 2 1,697,177 2,918 1.74 Schroder QEP Global Core Fund I Income 1 2 678,148 2,068 1.23 Schroder Strategic Credit Fund S Income 1 2 22,642,308 11,246 6.70 Schroder UK Dynamic Absolute Return Fund P2 Accumulation 1 2 2,727,497 4,999 2.98 Syncona 1,967,140 3,374 2.01 Trojan Income Fund O Income 1 2,796,788 5,336 3.18 Vanguard FTSE U.K. All Share Index Unit Trust Institutional Plus Income 1 108,802 12,364 7.36 94,296 56.18 12
Portfolio Statement (continued) Holding at Market Value % of net 31.7.17 000 s assets United States 4.90% (31.1.17 3.03%) Findlay Park American Fund USD 109,064 8,223 4.90 8,223 4.90 Sterling Denominated Short Term Bonds 3.93% (31.1.17 3.03%) Treasury 0% Bill 21.8.17 2,300,000 2,300 1.37 Treasury 0% Bill 30.10.17 2,000,000 2,000 1.19 Treasury 0% Bill 27.11.17 2,300,000 2,299 1.37 6,599 3.93 Sterling Denominated Medium Term Bonds 2.48% (31.1.17 5.53%) Treasury 0.125% Index Linked Stock 2024 3,216,040 4,157 2.48 4,157 2.48 Portfolio of investments 161,105 95.98 Net other assets 6,756 4.02 Net assets attributable to unitholders 167,861 100.00 Asset class Bonds 10,756 6.41 Equities 54,961 32.74 Funds 95,388 56.83 Total portfolio of investments 161,105 95.98 Unless otherwise stated the above securities are admitted to official stock exchange listings or traded on a regulated market, or are collective investment schemes permitted under the FCA s COLL. 1 Collective investment scheme permitted under the FCA s COLL, not listed on any exchange. 2 A related party to the fund. 13
Summary of Portfolio Transactions Largest purchases Largest sales For the period ended 31 July 2017 Cost 000 s Vanguard FTSE U.K. All Share Index Unit Trust Institutional Plus Accumulation 10,638 BlackRock Institutional Sterling Liquidity Fund Heritage Distribution 9,700 HICL Infrastructure 5,684 Schroder Strategic Credit Fund S Income 1 5,221 PCGH ZDP 5,000 Ground Rents Income Fund 4,747 Findlay Park American Fund USD 4,608 Schroder European Alpha Income Fund Z Income GBP Hedged 1 3,963 Man GLG Japan CoreAlpha Equity Fund I Accumulation 3,809 Aberdeen Diversified Income and Growth Trust 3,215 For the period ended 31 July 2017 Proceeds 000 s BlackRock Institutional Sterling Liquidity Fund Heritage Distribution 16,416 JOHCM UK Opportunities Fund A Distribution 5,346 Treasury 0.125% Index Linked Stock 2029 4,178 Schroder QEP Global Core Fund I Income 1 3,554 Man GLG Japan CoreAlpha Equity Fund I H Distribution 2,863 HICL Infrastructure 2,535 Vanguard FTSE U.K. All Share Index Unit Trust Institutional Plus Income 2,530 Treasury 0% Bill 2.5.17 2,500 Vanguard S&P 500 UCITS ETF 2,408 Trojan Fund O Accumulation 2,354 1 A related party to the fund. 14
Statement of the Manager s Responsibilities The FCA s 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 July 2017 were signed on 12 September 2017 on behalf of the Manager by: J.A. Walker-Hazell Directors J.M. Cardew 15
Statement of Total Return (unaudited) For the six months ended 31 July 2017 31.7.17 31.7.16 000 s 000 s 000 s 000 s Income Net capital gains 4,469 6,682 Revenue 1,046 481 Expenses (588) (335) Net revenue before taxation 458 146 Taxation (38) (42) Net revenue after taxation 420 104 Total return before distributions 4,889 6,786 Distributions 84 30 Change in net assets attributable to unitholders from investment activities 4,973 6,816 Statement of Change in Net Assets Attributable to Unitholders (unaudited) For the six months ended 31 July 2017 31.7.17 31.7.16 000 s 000 s 000 s 000 s Opening net assets attributable to unitholders 115,556 1 58,676 Amounts receivable on issue of units 51,519 23,263 Amounts payable on cancellation of units (4,323) (3,228) 47,196 20,035 Dilution adjustment 136 35 Change in net assets attributable to unitholders from investment activities 4,973 6,816 Unclaimed distributions 0 1 Closing net assets attributable to unitholders 167,861 85,563 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. 16
Balance Sheet (unaudited) As at 31 July 2017 31.7.17 31.1.17 000 s 000 s Assets Investments 161,105 109,249 Current assets Debtors 909 939 Cash and bank balances 6,760 6,277 Total assets 168,774 116,465 Liabilities Provisions for liabilities (349) (317) Creditors Distribution payable 0 (378) Other creditors (564) (214) Total liabilities (913) (909) Net assets attributable to unitholders 167,861 115,556 17
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 January 2017 and are described in those annual accounts. 18
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 Sub Investment Adviser Schroder & Co. Limited 31 Gresham Street London EC2V 7QA Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation 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. 19
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 September 2017 by Schroder Unit Trusts Limited, 31 Gresham Street, London EC2V 7QA. Registered No: 04191730 England. Authorised and regulated by the Financial Conduct Authority. w35641