Schroder Institutional Growth Fund Interim Report and Accounts December 2017
Contents Schroder Institutional Growth Fund Fund Information 1...............................................3 Investment objective and policy......................................3 Financial highlights................................................3 Fund information..................................................3 Ongoing charges figure.............................................3 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...................................................7 Fund performance................................................7 Portfolio Statement 1.............................................8 Summary of Portfolio Transactions 1...............................10 Largest purchases...............................................10 Largest sales...................................................10 Statement of the Manager s Responsibilities........................11 Statement of Total Return (unaudited)..............................12 Statement of Change in Unitholders Funds (unaudited)...............12 Balance Sheet (unaudited).......................................13 Notes to the Accounts (unaudited)................................14 Basis of preparation..............................................14 Accounting policies...............................................14 Distribution Table (unaudited).....................................15 Interim distribution for the six months ended 31 December 2017............15 General Information 1............................................16 Authorisation....................................................16 Initial management charge.........................................16 1 Collectively these comprise the Manager s report.
Fund Information Investment objective and policy The Schroder Institutional Growth Fund (the fund ) aims to provide capital growth by investing in a broad range of asset classes and strategies worldwide. 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 asset worldwide. As the fund is index unconstrained it is managed without reference to an index. The fund may invest indirectly through collective investment schemes or closed ended funds in alternative assets including hedge fund strategies, real estate, private equity and commodities. 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. Financial highlights Dealing price 29.12.17 30.6.17 % change I Accumulation units 193.00p 195.50p (1.28) 28.2.18 28.2.17 Interim distribution per I Accumulation unit Nil Nil Fund information Launch date 24 November 1994 Launch price 100.00p per I Accumulation unit Interim Final Accounting dates 31 December 30 June Revenue allocation dates 28 February 31 August Ongoing charges figure For the period For the year to 31.12.17 to 30.6.17 I Accumulation units 1.19% 1 1.20% 1 The Ongoing charges figure is annualised based on the fees incurred during the accounting period. 3
Fund Information (continued) Total purchases and sales For the period For the year to 31.12.17 to 30.6.17 000 s 000 s Total purchases 6,917 7,125 Total sales 5,210 6,682 4
Review of Investment Activities From 30 June 2017 to 29 December 2017, the price of I Accumulation units on a dealing price to dealing price basis fell 1.28%. World growth was modestly stronger in 2017 and the global economy is now growing at its fastest pace since 2011. Despite this positive economic growth in developed and emerging economies, we have seen poor growth in productivity. Although this has led to much greater job creation than expected in the US, Germany and the UK, for the average working person it has meant low real income growth. This year we would like to see a pickup in productivity enhancing capital investment. We topped up our position in the Jupiter Absolute Return Fund and added a new investment in the LF Ruffer Total Return Fund, both managers have an absolute return and defensive approach to running their funds which aligns to the mandate s objectives. We have switched the DB Platinum IV Systematic Alpha Fund into the Winton Diversified Fund. We purchased the Schroder European Alpha Income Fund to gain a pure long only equity exposure and sold the long/short RWC Europe Absolute Alpha Fund, the outlook at the start of 2017 for Europe having improved materially. Overall cash has been reduced. We remain cautious on the outlook for government bonds as interest rates and yield curves rise. With the exception of our exposure to Europe ex UK and Japanese equities, our two favoured equity markets, our focus continues to absolute return fund managers who should provide resilience if global equity markets are disrupted and volatility picks up. 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. Fund Manager: Kate Leppard Having gained a BSc in Human Environmental Sciences from King s College, University of London, Kate commenced her investment career in 1987 at Quilter Goodison. She joined Schroders in 1990, and now leads the team of client directors that manages our core discretionary investment management business in London. She completed the London Business School Investment Management Programme, the Investment Management Certificate and holds the Securities & Investment Institute Diploma. She is a senior member of the private banking Investment Committee 5
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 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. 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. The fund may use derivatives for specific investment purposes. This involves a higher degree of risk and may lead to a higher volatility in the unit prices of the fund. For these reasons, the purchase of units should not normally be regarded as a short term investment. 6
Net Asset Value and Comparative Tables Unit price range Financial year to 30 June I Accumulation units Highest Lowest dealing dealing p p 2015 200.70 179.60 2016 196.70 191.60 2017 201.20 194.90 Financial period to 31 December 2017 195.90 191.70 Net revenue Net asset value Financial year to 30 June I Accumulation units pence per unit 2015 0.0486 2016 Nil 2017 Nil Financial period to 31 December 2017 Net asset Net asset value value per unit Number of As at 30 June 000 s p units in issue 2015 I Accumulation units 36,164 193.69 18,671,145 2016 I Accumulation units 36,630 196.13 18,676,074 2017 I Accumulation units 36,490 195.44 18,671,145 2017 at 31 December I Accumulation units 36,011 192.87 18,671,145 Nil Fund performance Net asset Net asset value per unit value per unit p p as at 31.12.17 as at 30.6.17 % change I Accumulation units 192.87 195.44 (1.31) 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. 7
Portfolio Statement Collective Investment Schemes 97.10% (92.33%) Absolute Return Funds 5.54% (0.00%) Holding Market Value % of net 31.12.17 000 s assets LF Ruffer Total Return Fund I Income ^ 632,540 1,999 5.54 1,999 5.54 Cash Funds 17.94% (21.04%) JPMorgan Sterling Liquidity Institutional Fund Distribution ^ 6,092,530 6,092 16.91 JPMorgan US Dollar Liquidity Fund R Distribution ^ 500,000 370 1.03 6,462 17.94 Commodity Funds 15.07% (15.02%) BH Global 114,316 1,538 4.27 ETFS Agriculture AIGA USD 397,255 1,357 3.77 ETFS GBP Daily Hedged Physical Gold 98,000 761 2.11 Investec Global Gold Fund IX Income USD ^ 20,445 195 0.54 ishares Physical Gold ETC USD 83,670 1,577 4.38 5,428 15.07 Equity Funds 4.33% (4.98%) db x-trackers S&P 500 Inverse Daily UCITS ETF 1C Accumulation USD 138,050 1,561 4.33 1,561 4.33 Europe ex UK Equity Funds 4.13% (0.00%) Schroder European Alpha Income Fund S Income 2,000,000 1,487 4.13 1,487 4.13 Global Funds 5.47% (5.42%) BMO Investments (Ireland) Pyrford Global Return Funds C Accumulation ^ 175,902 1,970 5.47 1,970 5.47 Hedge Funds 39.99% (41.83%) Janus Henderson United Kingdom Absolute Return Fund G Distribution ^ 396,144 2,345 6.52 Jupiter Absolute Return Fund Retail Accumulation ^ 3,515,387 1,907 5.30 8
Portfolio Statement (continued) Hedge Funds (continued) Holding Market Value % of net 31.12.17 000 s assets Majedie Asset Management Tortoise Fund Z Income 2,930,000 2,983 8.29 Man Newsmith UK Equity Alternative Fund Institutional A Accumulation ^ 17,977 2,099 5.83 Odey Swan Fund IIncome ^ 12,212 530 1.47 Schroder GAIA SICAV Paulson Merger Arbitrage Fund C Distribution GBP Hedged ^ 10,245 568 1.58 Threadneedle UK Absolute Alpha Fund Z Accumulation ^ 1,070,607 1,339 3.72 Winton Diversified Fund I2 Distribution ^ 24,600 2,623 7.28 14,394 39.99 Japanese Equity Funds 4.63% (4.04%) Man GLG Japan CoreAlpha Equity Fund I Accumulation GBP Hedged ^ 8,065 1,666 4.63 1,666 4.63 Collective Investment Schemes total 34,967 97.10 Portfolio of investments 34,967 97.10 Net other assets 1,044 2.90 Net assets attributable to unitholders 36,011 100.00 The comparative percentage figures in brackets are as at 30 June 2016. ^ Unlisted, suspended or delisted security. A related party to the fund. Closed ended fund. 9
Summary of Portfolio Transactions Largest purchases Largest sales Cost For the six months ended 31 December 2017 000 s Winton Diversified Fund I2 Distribution 2,513 LF Ruffer Total Return Fund I Income 2,000 Schroder European Alpha Income Fund S Income 1,503 Jupiter Absolute Return Fund Retail Accumulation 878 Man GLG Japan CoreAlpha Equity Fund I Accumulation GBP Hedged 19 RWC Europe Absolute Alpha Fund B GBP Hedged 4 Proceeds For the six months ended 31 December 2017 000 s DB Platinum IV Systematic Alpha Fund I1C-G Accumulation 2,440 RWC Europe Absolute Alpha Fund B GBP Hedged 1,570 JPM Sterling Liquidity Institutional Fund Distribution 1,200 A related party to the fund. 10
Statement of the Manager s Responsibilities The FCA 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 expense and the net capital losses 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 December 2017 were signed on 23 February 2018 on behalf of the Manager by: J.A. Walker-Hazell Directors R.E. Stoakley 11
Statement of Total Return (unaudited) For the six months ended 31 December 2017 31.12.17 31.12.16 000 s 000 s 000 s 000 s Income Net capital (losses)/gains (429) 624 Revenue 38 21 Expenses (88) (89) Net expense before taxation (50) (68) Taxation 0 0 Net expense after taxation (50) (68) Total return before distributions (479) 556 Distributions 0 0 Change in unitholders funds from investment activities (479) 556 Statement of Change in Unitholders Funds (unaudited) For the six months ended 31 December 2017 31.12.17 31.12.16 000 s 000 s 000 s 000 s Opening net assets 36,490 36,630 Amounts receivable on issue of units 0 1 Amounts payable on cancellation of units 0 (11) 0 (10) Change in unitholders funds from investment activities (479) 556 Closing net assets 36,011 37,176 1 1 The Opening net assets for the current period do not equal the Closing net assets for the comparative period as they are not consecutive periods. 12
Balance Sheet (unaudited) As at 31 December 2017 31.12.17 30.6.17 000 s 000 s Assets Investments 34,967 33,691 Current assets Debtors 2 1 Cash and bank balances 1,062 2,824 Total assets 36,031 36,516 Liabilities Creditors Other creditors (20) (26) Total liabilities (20) (26) Unitholders funds 36,011 36,490 13
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 30 June 2017 and are described in those annual accounts. 14
Distribution Table (unaudited) Interim distribution for the six months ended 31 December 2017 Group 1 Units purchased prior to 1 July 2017 Group 2 Units purchased on or after 1 July 2017 I Accumulation units Net Distribution Distribution revenue Equalisation payable paid 2017 2017 28.2.18 28.2.17 p per unit p per unit p per unit p per unit Group 1 0.0000 0.0000 0.0000 Group 2 0.0000 0.0000 0.0000 0.0000 15
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 & 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 Authorisation Initial management charge 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 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 issue price of Accumulation units reflects an initial management charge of 6% of the dealing price. This is retained by the Manager. 16
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 February 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