Schroder UK Alpha Plus Fund Final Short Report 1 June 2015 to 31 May 2016
Review of Investment Activities From 29 May 2015 to 31 May 2016, the price of A Accumulation units on selling price to selling price basis fell 6.89%. In comparison, the FTSE* All Share Index generated a negative total return of 6.31% 1. 1 Source: Thomson Reuters Datastream. The past twelve months have been a difficult and volatile period for UK equities as a number of global uncertainties weighed on markets. Initial concerns surrounding negotiations between Greece and its international creditors and a potential exit from the EU were supplanted by fears about emerging markets, the outlook for China and latterly the durability of US growth. This occurred amid uncertainty around the consequences of the US Federal Reserve s decision to increase interest rates by 0.25% in December, the first rise in nearly a decade. The accompanying dollar strength and uncertain global growth outlook weighed heavily on commodities with supply side factors further negatively impacting crude oil prices. Commodities rebounded at the period end as dollar strength unwound in line with the deferral in expectations for further rises in US rates. Our overweight in the software and computer services sector was the standout performer over the period, with accounting software company Sage Group, trading software provider Fidessa Group, internet hosting specialist iomart Group and IT infrastructure services group Computacenter all performing well. Our media holdings also positively contributed, including business information group RELX and business to business publisher Informa whose restructuring plan is progressing faster than expected. We continue to be attracted to the high return on capital and cash generation offered by the sector. On the negative side, our exposure to banks was a notable detractor. Whilst the portfolio benefited from being underweight Standard Chartered and HSBC Holdings, this was more than offset by our holdings in Royal Bank of Scotland Group and Barclays. We continue to believe the sector offers long term value and the value leakage from increased regulatory capital requirements, as well as conduct fines and litigation is reaching an endpoint. Our investment approach forces a constant re-evaluation of where the best combination of value and quality lies in the market as well as seeking to invest in companies which appear cheap in a cyclical context. We believe this combination produces a portfolio capable of generating decent and sustainable returns on capital and ultimately cash returns to unitholders over the medium term. Against a backdrop of low nominal growth and weak profits delivery the market has placed certain companies, whose earning streams appear relatively resilient or are able to deliver strong organic growth, on high valuations. This has been exacerbated further by the recent Brexit vote. Given the possibility that the UK economy now faces a recession in the face of current political and economic uncertainty, we are paying close attention to the extent to which earnings may fall from here and balance sheets are positioned to cope with this change. Fund Manager: Philip Matthews
Fund Information Interim Final Accounting dates 30 November 31 May Revenue allocation date 31 July For the year For the year Ongoing charges figure to 31.5.16 to 31.5.15 A Income units 1.66% 1.66% A Accumulation units 1.66% 1.66% L Income units 0.84% 0.83% L Accumulation units 0.84% 0.83% S Income units 0.54% 0.53% S Accumulation units 0.54% 0.53% Z Income units 0.91% 0.91% Z Accumulation units 0.91% 0.91% Performance Record Net Asset Net Asset Value as at Value as at Net Asset 31.5.16 31.5.15 Value Fund performance pence per unit pence per unit % change A Income units 152.66 165.67 (7.85) A Accumulation units 180.85 193.04 (6.31) L Income units 51.21 55.58 (7.86) L Accumulation units 54.78 57.99 (5.54) S Income units 48.82 52.99 (7.87) S Accumulation units 53.02 55.96 (5.25) Z Income units 64.08 69.54 (7.85) Z Accumulation units 71.07 75.29 (5.60) 3 months 1 year 5 years Schroder UK Alpha Plus Fund 3.72% (6.89)% 39.06% FTSE* All Share Index 3.81% (6.31)% 31.21% Fund Source: A Accumulation units on a selling price to selling price basis to 31.5.16. Index Source: Thomson Reuters Datastream, total return to 31.5.16. * 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.
Comparative Tables A Income units 2016 2015 2014 Financial year to 31 May p per unit p per unit p per unit Change in net asset value Opening net asset value 165.67 159.04 144.41 Return before operating charges (7.88) 12.37 19.36 Operating charges (2.55) (2.61) (2.53) Return after operating charges* (10.43) 9.76 16.83 Distributions 1 (2.58) (3.13) (2.20) Closing net asset value 152.66 165.67 159.04 *after direct transaction costs of (0.25) (0.14) (0.52) Performance Return after charges (%) (6.30) 6.14 11.65 Other information Closing net asset value ( 000 s) 181,180 241,389 334,590 Closing number of units 118,684,108 145,708,251 210,377,370 Operating charges (%) 1.66 1.66 1.66 Direct transaction costs (%)** 0.16 0.09 0.34 Prices Highest buying price (p) 166.70 171.90 164.20 Lowest selling price (p) 136.50 141.30 133.50
Comparative Tables (continued) A Accumulation units 2016 2015 2014 Financial year to 31 May p per unit p per unit p per unit Change in net asset value Opening net asset value 193.04 181.88 162.91 Return before operating charges (9.22) 14.16 21.82 Operating charges (2.97) (3.00) (2.85) Return after operating charges* (12.19) 11.16 18.97 Closing net asset value 180.85 193.04 181.88 Retained distributions 1 3.00 3.59 2.49 *after direct transaction costs of (0.29) (0.16) (0.58) Performance Return after charges (%) (6.31) 6.14 11.64 Other information Closing net asset value ( 000 s) 456,552 723,822 975,328 Closing number of units 252,442,199 374,963,875 536,237,226 Operating charges (%) 1.66 1.66 1.66 Direct transaction costs (%)** 0.16 0.09 0.34 Prices Highest buying price (p) 194.20 196.60 185.20 Lowest selling price (p) 159.00 161.60 150.70
Comparative Tables (continued) L Income units 2016 2015 2014 Financial year to 31 May p per unit p per unit p per unit Change in net asset value Opening net asset value 55.58 53.34 50.00 Return before operating charges (2.64) 4.18 4.52 Operating charges (0.43) (0.44) (0.32) Return after operating charges* (3.07) 3.74 4.20 Distributions 1 (1.30) (1.50) (0.86) Closing net asset value 51.21 55.58 53.34 *after direct transaction costs of (0.08) (0.05) (0.18) Performance Return after charges (%) (5.52) 7.01 8.40 Other information Closing net asset value ( 000 s) 13,622 12,167 3,395 Closing number of units 26,598,385 21,890,915 6,364,692 Operating charges (%) 0.84 0.83 0.60 Direct transaction costs (%)** 0.16 0.09 0.34 Prices Highest buying price (p) 55.94 58.11 55.07 Lowest selling price (p) 46.05 47.53 49.20 The unit class was launched on 1 October 2013.
Comparative Tables (continued) L Accumulation units 2016 2015 2014 Financial year to 31 May p per unit p per unit p per unit Change in net asset value Opening net asset value 57.99 54.19 50.00 Return before operating charges (2.76) 4.25 4.52 Operating charges (0.45) (0.45) (0.33) Return after operating charges* (3.21) 3.80 4.19 Closing net asset value 54.78 57.99 54.19 Retained distributions 1 1.36 1.52 0.85 *after direct transaction costs of (0.09) (0.05) (0.18) Performance Return after charges (%) (5.54) 7.01 8.38 Other information Closing net asset value ( 000 s) 74,158 56,864 33,102 Closing number of units 135,371,924 98,059,091 61,083,350 Operating charges (%) 0.84 0.83 0.60 Direct transaction costs (%)** 0.16 0.09 0.34 Prices Highest buying price (p) 58.35 59.04 55.07 Lowest selling price (p) 48.04 48.28 49.20 The unit class was launched on 1 October 2013.
Comparative Tables (continued) S Income units 2016 2015 2014 Financial year to 31 May p per unit p per unit p per unit Change in net asset value Opening net asset value 52.99 50.86 50.00 Return before operating charges (2.51) 3.98 2.28 Operating charges (0.27) (0.27) (0.14) Return after operating charges* (2.78) 3.71 2.14 Distributions 1 (1.39) (1.58) (1.28) Closing net asset value 48.82 52.99 50.86 *after direct transaction costs of (0.08) (0.05) (0.17) Performance Return after charges (%) (5.25) 7.29 4.28 Other information Closing net asset value ( 000 s) 33,426 40,576 57,849 Closing number of units 68,464,301 76,579,628 113,742,678 Operating charges (%) 0.54 0.53 0.28 Direct transaction costs (%)** 0.16 0.09 0.34 Prices Highest buying price (p) 53.33 55.55 52.95 Lowest selling price (p) 43.99 45.35 49.20 The unit class was launched on 31 January 2014.
Comparative Tables (continued) S Accumulation units 2016 2015 2014 Financial year to 31 May p per unit p per unit p per unit Change in net asset value Opening net asset value 55.96 52.14 50.00 Return before operating charges (2.66) 4.09 2.28 Operating charges (0.28) (0.27) (0.14) Return after operating charges* (2.94) 3.82 2.14 Closing net asset value 53.02 55.96 52.14 Retained distributions 1 1.47 1.62 1.29 *after direct transaction costs of (0.08) (0.05) (0.17) Performance Return after charges (%) (5.25) 7.33 4.28 Other information Closing net asset value ( 000 s) 9,852 16,019 20,045 Closing number of units 18,582,996 28,629,024 38,443,365 Operating charges (%) 0.54 0.53 0.28 Direct transaction costs (%)** 0.16 0.09 0.34 Prices Highest buying price (p) 56.30 56.97 52.95 Lowest selling price (p) 46.45 46.50 49.20 The unit class was launched on 31 January 2014.
Comparative Tables (continued) Z Income units 2016 2015 2014 Financial year to 31 May p per unit p per unit p per unit Change in net asset value Opening net asset value 69.54 66.74 60.59 Return before operating charges (3.29) 5.23 8.15 Operating charges (0.59) (0.61) (0.58) Return after operating charges* (3.88) 4.62 7.57 Distributions 1 (1.58) (1.82) (1.42) Closing net asset value 64.08 69.54 66.74 *after direct transaction costs of (0.10) (0.06) (0.22) Performance Return after charges (%) (5.58) 6.92 12.49 Other information Closing net asset value ( 000 s) 50,189 108,489 106,292 Closing number of units 78,325,556 156,006,168 159,271,620 Operating charges (%) 0.91 0.91 0.91 Direct transaction costs (%)** 0.16 0.09 0.34 Prices Highest buying price (p) 69.99 72.66 69.27 Lowest selling price (p) 57.59 59.45 56.05
Comparative Tables (continued) Z Accumulation units 2016 2015 2014 Financial year to 31 May p per unit p per unit p per unit Change in net asset value Opening net asset value 75.29 70.41 62.59 Return before operating charges (3.58) 5.52 8.43 Operating charges (0.64) (0.64) (0.61) Return after operating charges* (4.22) 4.88 7.82 Closing net asset value 71.07 75.29 70.41 Retained distributions 1 1.71 1.92 1.47 *after direct transaction costs of (0.11) (0.06) (0.23) Performance Return after charges (%) (5.60) 6.93 12.49 Other information Closing net asset value ( 000 s) 218,076 178,769 153,511 Closing number of units 306,843,223 237,438,912 218,021,487 Operating charges (%) 0.91 0.91 0.91 Direct transaction costs (%)** 0.16 0.09 0.34 Prices Highest buying price (p) 75.76 76.66 71.57 Lowest selling price (p) 62.34 62.72 57.90 1 These figures have been rounded to 2 decimal places. ** Direct transaction costs have been stated after deducting the proportion of the amounts collected from dilution adjustments. The Operating charges are calculated on an ex-post basis and as such may differ from the Ongoing charges figure where the Ongoing charges figure has been annualised for a unit class that has not been in existence for a full year. 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 as at as at Spread of investments 31.5.16 31.5.15 Oil & Gas 11.05 13.14 Basic Materials 0.49 3.33 Industrials 11.45 7.46 Consumer Goods 6.78 11.62 Health Care 13.07 12.51 Consumer Services 15.92 15.41 Telecommunications 5.62 4.23 Utilities 1.78 3.18 Financials 22.31 22.16 Technology 11.34 7.08 Net other assets/(liabilities) 0.19 (0.12) % of net assets as at Major holdings 31.5.16 Royal Dutch Shell B 7.43 GlaxoSmithKline 5.76 Lloyds Banking Group 4.67 AstraZeneca 4.01 Aviva 3.77 Sage Group 3.68 British American Tobacco 3.57 Balfour Beatty 3.48 BP 3.46 Vodafone Group 3.25 % of net assets as at 31.5.15 GlaxoSmithKline 5.77 HSBC Holdings 5.58 BP 4.98 Barclays 4.97 Royal Dutch Shell B 4.64 BT Group 4.23 AstraZeneca 4.16 Imperial Brands 3.94 British American Tobacco 3.73 Aviva 3.44
Investment Objective & Policy The fund s investment objective is to provide capital growth through investment in UK and other companies. In order to achieve the objective the Manager will invest in a focused portfolio of securities. The emphasis of the fund will be investment in UK companies. The fund may also invest in companies headquartered or quoted outside the UK where those companies have material or critical operations within, or derive significant business from, the UK. Fixed interest securities may be included in the portfolio. Investment will be in directly held transferable securities. The fund may also invest in collective investment schemes, warrants and money market instruments. Risk Profile Risk and reward indicator Lower risk Potentially lower reward Higher risk Potentially higher reward 1 2 3 4 5 6 7 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.
Risk Profile (continued) Specific risks The fund is index unconstrained and has the potential for greater volatility. The fund invests solely 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 a smaller number of stocks. This carries more risk than funds spread across a larger number of companies. 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 UK Alpha Plus Fund for the year ended 31 May 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. 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. 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, 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 July 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 MR071BF16