Schroder
MM Diversity Income Fund
Final Report and Accounts
February 2017
Contents
Schroder
MM Diversity Income Fund
Fund Information1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Investment objective and policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Alternative Investment Fund Managers Directive (AIFMD) . . . . . . . . . . . . . . . . . . .3
Financial highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Fund information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Ongoing charges figure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Review of Investment Activities1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Risk Profile1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Risk and reward indicator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Specific risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Statement of the Manager’s Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . .8
Report of the Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Independent Auditors’ Report to the Unitholders
of Schroder MM Diversity Income Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Comparative Tables1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Portfolio Statement1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Summary of Portfolio Transactions1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
Largest purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
Largest sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
Statement of Total Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
Statement of Change in Net Assets Attributable to Unitholders . . . . . . . .22
Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
Notes to the Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
1 Accounting policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
2 Net capital gains/(losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
3 Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
4 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
5 Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
6 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
7 Fair value hierarchy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
8 Debtors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
9 Other creditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
10 Contingent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
11 Related party transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
12 Unit classes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
13 Derivative and other financial instruments . . . . . . . . . . . . . . . . . . . . . . . . . . .31
14 Direct transaction costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
15 Units in issue reconciliation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
Remuneration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
Distribution Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
Quarterly distribution for the three months ended 31 May 2016 . . . . . . . . . . . . .37
Corporate unitholders (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
Interim distribution for the three months ended 31 August 2016 . . . . . . . . . . . . .38
Corporate unitholders (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
Quarterly distribution for the three months ended 30 November 2016 . . . . . . . .39
Corporate unitholders (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
Final Distribution for the three months ended 28 February 2017 . . . . . . . . . . . . .40
Corporate unitholders (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
Equalisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
General Information1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
Authorisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
Other information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
1 Collectively these comprise the Authorised Fund Manager’s report.
Schroder MM Diversity Income Fund
Fund Information
Investment objective
and policy
The fund seeks to deliver a capital return over a rolling five year period that is in
line with, or above, the consumer price index while also aiming to provide an
income distribution of 4 per cent per annum. There is no guarantee that this
objective will be met. There is a risk to an investor’s capital. Investors may not get
back the amount originally invested.
The fund will invest across a broad range of asset classes which are intended to
provide consistent rates of return with lower risk than more traditional
approaches to portfolio management which tend to be largely dependent on the
performance of equities.
The fund will invest in global markets through a diversified portfolio of collective
investment schemes and exchange traded funds. Additional investment
diversification will be obtained through collective investment schemes that invest
in alternative asset classes including private equity, property and commodities.
Investment may also be made in approved money market funds.
Although the investment policy of the fund is to invest mainly in collective
investment schemes, the fund may also invest in closed ended funds, individual
transferable securities, money market instruments, deposits and cash or near
cash.
The fund may utilise derivatives and forward transactions for the purposes of
efficient portfolio management.
Alternative
Investment Fund
Managers Directive
(AIFMD)
The AIFMD, as implemented in the UK by the Alternative Investment Fund
Managers (AIFMs) Regulations 2013, establishes an EU wide harmonised
framework for monitoring and supervising risks posed by AIFMs and the
alternative investment funds (AIFs) they manage.
The fund is an AIF and Schroder Unit Trusts Limited (the Manager) was authorised
by the Financial Conduct Authority (FCA) to act as an AIFM on 2 July 2014.
The AIFMD requires certain information to be disclosed to unitholders. It is
intended that any such information will in future be provided in the report and
accounts, unless such information is required to be disclosed without delay, in
which case it will be made via the Schroders website at:
www.schroders.com/en/uk/private-investor/fund-centre/changes-to-funds/
3
Schroder MM Diversity Income Fund
Fund Information (continued)
Financial
highlights
Dealing price
28.2.17
26.2.16
% change
A Income units
117.40p
111.50p
5.29
A Accumulation units
141.50p
129.80p
9.01
51.76p
48.88p
5.89
S Income units
S Accumulation units
54.15p
49.43p
9.55
Z Income units
120.50p
114.00p
5.70
Z Accumulation units
144.90p
132.40p
9.44
1.11.16 to
30.4.17
1.11.15 to
30.4.16
1.8840p
2.0125p
Final distribution per
Z Income unit
Fund information
Launch date
15 December 2010
Launch price
100.00p per A Income unit
100.00p per A Accumulation unit
100.00p per Z Income unit
100.00p per Z Accumulation unit
Ongoing charges
figure
4
Launch date
1 November 2013
Launch price
50.00p per S Income unit
Launch date
6 March 2015
Launch price
50.00p per S Accumulation unit
Quarterly
Interim
Quarterly
Final
Accounting dates
31 May
31 August
30 November
28 February
Revenue allocation
dates
31 July
31 October
31 January
30 April
For the year
to 28.2.17
For the year
to 28.2.16
A Income units
1.77%
1.78%
A Accumulation units
1.77%
1.78%
S Income units
1.07%
1.08%
S Accumulation units
1.07%
1.08%
Z Income units
1.27%
1.28%
Z Accumulation units
1.27%
1.28%
Schroder MM Diversity Income Fund
Review of Investment Activities
From 26 February 2016 to 28 February 2017, the price of Z Accumulation
units on dealing price to dealing price basis rose 9.44%. In comparison,
the Consumer Price Index increased by 2.30%1.
1 Source: Thomson Reuters Datastream.
Risk assets ended 2016 on a high note with equities rallying, particularly cyclical
markets, where the election of Donald Trump lifted reflation hopes. By contrast,
government bond yields climbed to give away most of the year’s returns.
The fund’s best performing holdings over the period were Man GLG Japan
CoreAlpha Equity Fund, BlackRock Gold and General Fund and Schroder
European Alpha Income Fund. The worst performer was Morgan Stanley
Diversified Alpha Plus Fund, which posted a loss.
Our current market view is reflected in a ‘barbell’ portfolio – combining selective
areas of value across equity markets alongside higher levels of short term
liquidity/cash. That is, we would rather take risk in equity than bonds, but only
selectively and in moderation.
The growing threat of inflation should signal an end to this bull market in the
beneficiaries of deflation (‘safety,’ quality and income). Whilst we can become
more positive for the prospects of inflation related areas, we are cognisant that
sectors like materials (which typically benefit from higher inflation) are also
vulnerable in an economic slowdown. A prospect we cannot discount at this
juncture.
Co-Fund Manager:
Marcus Brookes
Joined Schroders in July 2013 following the
acquisition of Cazenove Capital
Previous to the acquisition he was the Head
of Multi Manager at Cazenove Capital, which
he joined in January 2008
Prior to this Marcus was the Deputy Head
of Multi Manager at Gartmore, a position he
held from November 2004
Up to this time he spent 3.5 years from May
2001 as the Co-Manager of Multi Manager,
at Rothschild Asset Management
Marcus began his career on 28 September
1994 when he joined Friends, Ivory & Sime,
where he became the Multi Manager Fund
Manager
Marcus qualified from University of Stirling
with MSc. Investment Analysis
Our short term liquidity/cash holding offers a counterbalance to this more cyclical
risk, particularly at a time where bond markets and equity markets often move in
tandem and are not necessarily providing investors with the diversification
benefits they have offered historically.
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.
Co-Fund Manager:
Robin McDonald
Joined Schroders in July 2013 following the
acquisition of Cazenove Capital
Previous to the acquisition he was a Fund
Manager at Cazenove Capital, which he joined
in October 2007, responsible for co-managing
the multi manager fund range as well as a few
segregated mandates
Prior to this Robin was a Multi Manager
Analyst at Gartmore, a position he held from
September 2003
Up to this time he worked as a Multi
Manager Analyst for Insight Investment
Management, following its acquisition of
Rothschild Asset Management in 2003,
whom he joined in 2001
Robin began his career in September 1999
when he joined Bank of New York (Europe)
Limited as a Client Relationship Executive
Robin is a CFA charterholder
5
Schroder MM Diversity Income Fund
Risk Profile
Risk and reward
indicator
Lower risk
Potentially lower reward
1
2
Higher risk
Potentially higher reward
33
4
5
6
7
The risk and reward indicator changed from 4 to 3 with effect from 17 February
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 seeks to provide rewards whilst limiting
price volatility.
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 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 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 invest in a wide range of derivatives and in alternative investments
(including commodities, hedge funds, real estate 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.
6
Schroder MM Diversity Income Fund
Risk Profile (continued)
The fund may invest in derivatives and in alternative investments (including
commodities, hedge funds, real estate 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.
As a result of the expenses being charged wholly to capital, the distributable
revenue of the fund may be higher, but the capital value of the fund may be
eroded which may affect future performance.
For these reasons, the purchase of units should not normally be regarded as a
short term investment.
7
Schroder MM Diversity Income Fund
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
revenue and the net capital gains on the property of the fund for the year. 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 year ended 28 February 2017 were
signed on 27 April 2017 on behalf of the Manager by:
J.M. Cardew
Directors
8
P. Chislett
Schroder MM Diversity Income Fund
Report of the Trustee
Statement of the Trustee’s responsibilities in relation to the accounts
of the Scheme
The Trustee is responsible for the safekeeping of all of the property of the
Scheme (other than tangible moveable property) which is entrusted to it and for
the collection of revenue that arises from that property.
It is the duty of the Trustee to take reasonable care to ensure that the Scheme
is managed by the Authorised Fund Manager in accordance with the Financial
Conduct Authority’s Collective Investment Schemes Sourcebook (COLL) and
the Scheme’s Trust Deed and Prospectus, as appropriate, in relation to the
pricing of, and dealings in, units in the Scheme; the application of revenue
of the Scheme; and the investment and borrowing powers of the Scheme.
Report of the Trustee for the accounting period from 29 February 2016
to 28 February 2017
Schroder MM Diversity Income Fund (“the Scheme”)
Having carried out such procedures as we consider necessary to discharge
our responsibilities as Trustee of the Scheme, it is our opinion, based on the
information available to us and the explanations provided, that in all material
respects the Authorised Fund Manager:
(i) has carried out the issue, sale, redemption and cancellation, and calculation
of the price of the Scheme’s units and the application of the Scheme’s
revenue in accordance with the COLL as appropriate, and, where
applicable, the Scheme’s Trust Deed and Prospectus; and
(ii) has observed the investment and borrowing powers and restrictions
applicable to the Scheme.
J.P. Morgan Europe Limited
Trustee
Bournemouth
23 March 2017
9
Schroder MM Diversity Income Fund
Independent Auditors’ Report to the
Unitholders of Schroder MM Diversity
Income Fund
Report on the financial statements
Our opinion
In our opinion, Schroder MM Diversity Income Fund’s financial statements,
(the ‘financial statements’):
– give a true and fair view of the financial position of the fund as at 28 February
2017 and of the net revenue and the net capital gains of its scheme property
for the year then ended; and
– have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice, the Statement of Recommended Practice for
UK Authorised Funds, the Collective Investment Schemes sourcebook and
the Trust Deed.
What we have audited
The financial statements, included within the Final Report and Accounts, which
are prepared by Schroder Unit Trusts Limited (the ‘Authorised Fund Manager’),
comprise:
– the balance sheet as at 28 February 2017;
– the statement of total return for the year then ended;
– the statement of change in net assets attributable to unitholders for the year
then ended;
– the notes to the financial statements, which include a summary of significant
accounting policies and other explanatory information; and
– the distribution table.
The financial reporting framework that has been applied in their preparation is
United Kingdom Generally Accepted Accounting Practice (United Kingdom
Accounting Standards, comprising FRS 102 ‘The Financial Reporting Standard
applicable in the UK and Republic of Ireland’ and applicable law), the Statement
of Recommended Practice ‘Financial Statements of UK Authorised Funds’
issued by the Investment Management Association (the ‘Statement of
Recommended Practice for UK Authorised Funds’), the Collective Investment
Schemes sourcebook and the Trust Deed.
In applying the financial reporting framework, the Authorised Fund Manager has
made judgements where appropriate, for example in respect of substantive
accounting estimates. In preparing such estimates, they have considered future
events and related assumptions.
10
Schroder MM Diversity Income Fund
Independent Auditors’ Report to the
Unitholders of Schroder MM Diversity
Income Fund (continued)
Opinions on matters prescribed by the
Collective Investment Schemes sourcebook
In our opinion:
– we have obtained all the information and explanations we consider necessary
for the purposes of the audit; and
– the information given in the Authorised Fund Manager’s Report for the financial
year for which the financial statements are prepared is consistent with the
financial statements.
Other matters on which we are required
to report by exception
Propriety of accounting records and information and explanations
received
Under the Collective Investment Schemes sourcebook we are required to report
to you if, in our opinion:
– proper accounting records have not been kept; or
– the financial statements are not in agreement with the accounting records and
returns.
We have no exceptions to report arising from this responsibility.
Responsibilities for the financial statements
and the audit
Our responsibilities and those of the Authorised Fund Manager
As explained more fully in the Authorised Fund Manager’s Responsibilities
Statement set out on page 8, the Authorised Fund Manager is responsible for
the preparation of the financial statements and for being satisfied that they give a
true and fair view.
Our responsibility is to audit and express an opinion on the financial statements
in accordance with applicable law and International Standards on Auditing (UK
and Ireland) (‘ISAs (UK & Ireland)’). Those standards require us to comply with
the Auditing Practices Board’s Ethical Standards for Auditors.
This report, including the opinions, has been prepared for and only for the fund’s
unitholders as a body in accordance with paragraph 4.5.12 of the Collective
Investment Schemes sourcebook and for no other purpose.
We do not, in giving these opinions, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown or into whose
hands it may come save where expressly agreed by our prior consent in writing.
11
Schroder MM Diversity Income Fund
Independent Auditors’ Report to the
Unitholders of Schroder MM Diversity
Income Fund (continued)
What an audit of financial statements involves
We conducted our audit in accordance with ISAs (UK & Ireland). An audit
involves obtaining evidence about the amounts and disclosures in the financial
statements sufficient to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or error. This
includes an assessment of:
– whether the accounting policies are appropriate to the fund’s circumstances
and have been consistently applied and adequately disclosed;
– the reasonableness of significant accounting estimates made by the
Authorised Fund Manager; and
– the overall presentation of the financial statements.
We primarily focus our work in these areas by assessing the Authorised Fund
Manager’s judgements against available evidence, forming our own judgements,
and evaluating the disclosures in the financial statements.
We test and examine information, using sampling and other auditing techniques,
to the extent we consider necessary to provide a reasonable basis for us to draw
conclusions. We obtain audit evidence through testing the effectiveness of
controls, substantive procedures or a combination of both.
In addition, we read all the financial and non-financial information in the Final
Report and Accounts (the ‘Annual Report’) to identify material inconsistencies
with the audited financial statements and to identify any information that is
apparently materially incorrect based on, or materially inconsistent with, the
knowledge acquired by us in the course of performing the audit. If we become
aware of any apparent material misstatements or inconsistencies we consider
the implications for our report.
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Edinburgh
27 April 2017
(a) The maintenance and integrity of the Schroders website is the responsibility
of the Authorised Fund Manager; the work carried out by the auditors does
not involve consideration of these matters and, accordingly, the auditors
accept no responsibility for any changes that may have occurred to the
financial statements since they were initially presented on the website.
(b) Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation in other
jurisdictions.
12
Schroder MM Diversity Income Fund
Comparative Tables
A Income units
2017
p per unit
2016
p per unit
2015
p per unit
110.92
115.89
116.26
11.33
0.79
5.10
Operating charges
(2.03)
(2.01)
(2.06)
Return after operating charges*
9.30
(1.22)
3.04
Financial year to 28 February
Change in net asset value
Opening net asset value
Return before operating charges
1
Distributions
Closing net asset value
*after direct transaction costs of
(3.84)
(3.75)
(3.41)
116.38
110.92
115.89
0.00
0.00
0.00
8.38
(1.05)
2.61
Performance
Return after charges (%)
Other information
Closing net asset value (£000’s)
23,614
28,993
43,066
20,291,075
26,139,903
37,162,574
1.77
1.78
1.79
Highest dealing price (p)
117.90
118.30
117.40
Lowest dealing price (p)
110.30
108.50
112.20
Closing number of units
Operating charges (%)
Prices
13
Schroder MM Diversity Income Fund
Comparative Tables (continued)
A Accumulation units
2017
p per unit
2016
p per unit
2015
p per unit
130.36
131.72
128.30
13.51
0.95
5.71
(2.42)
(2.31)
(2.29)
11.09
(1.36)
3.42
Distributions
(4.57)
(4.32)
(3.81)
Retained distributions1
4.57
4.32
3.81
141.45
130.36
131.72
0.00
0.00
0.00
8.51
(1.03)
2.67
18,619
22,730
44,378
13,163,203
17,435,805
33,690,824
1.77
1.78
1.79
Highest dealing price (p)
141.90
134.40
132.50
Lowest dealing price (p)
130.10
126.40
125.70
Financial year to 28 February
Change in net asset value
Opening net asset value
Return before operating charges
Operating charges
Return after operating charges*
1
Closing net asset value
*after direct transaction costs of
Performance
Return after charges (%)
Other information
Closing net asset value (£000’s)
Closing number of units
Operating charges (%)
Prices
14
Schroder MM Diversity Income Fund
Comparative Tables (continued)
S Income units
Financial year to 28 February
2017
p per unit
2016
p per unit
2015
p per unit
Change in net asset value
Opening net asset value
48.63
50.52
50.33
Return before operating charges
4.91
0.27
2.13
Operating charges
(0.54)
(0.52)
(0.54)
Return after operating charges*
4.37
(0.25)
1.59
1
Distributions
Closing net asset value
*after direct transaction costs of
(1.68)
(1.64)
(1.40)
51.32
48.63
50.52
0.00
0.00
0.00
8.99
(0.49)
3.16
Performance
Return after charges (%)
Other information
Closing net asset value (£000’s)
1,959
1,443
218
3,816,818
2,968,581
432,478
1.07
1.08
1.09
Highest dealing price (p)
51.93
51.60
51.19
Lowest dealing price (p)
48.42
47.56
48.79
Closing number of units
Operating charges (%)
Prices
15
Schroder MM Diversity Income Fund
Comparative Tables (continued)
S Accumulation units
Financial year to 28 February
2017
p per unit
2016
p per unit
Change in net asset value
Opening net asset value
49.63
50.00
Return before operating charges
5.08
0.15
Operating charges
(0.56)
(0.52)
Return after operating charges*
4.52
(0.37)
Distributions
(1.74)
(1.64)
Retained distributions1
1.74
1.64
54.15
49.63
0.00
0.00
9.11
(0.74)
354
143
653,154
287,952
1.07
1.08
Highest dealing price (p)
54.33
50.94
Lowest dealing price (p)
49.59
48.09
1
Closing net asset value
*after direct transaction costs of
Performance
Return after charges (%)
Other information
Closing net asset value (£000’s)
Closing number of units
Operating charges (%)
Prices
The unit class was launched on 6 March 2015.
16
Schroder MM Diversity Income Fund
Comparative Tables (continued)
Z Income units
Financial year to 28 February
2017
p per unit
2016
p per unit
2015
p per unit
113.37
117.97
117.88
11.50
0.69
5.02
(1.49)
(1.47)
(1.51)
10.01
(0.78)
3.51
Change in net asset value
Opening net asset value
Return before operating charges
Operating charges
Return after operating charges*
1
Distributions
Closing net asset value
*after direct transaction costs of
(3.93)
(3.82)
(3.42)
119.45
113.37
117.97
0.00
0.00
0.00
8.83
(0.66)
2.98
Performance
Return after charges (%)
Other information
Closing net asset value (£000’s)
50,159
54,556
52,411
41,993,113
48,120,780
44,425,572
1.27
1.28
1.29
Highest dealing price (p)
120.90
120.50
119.50
Lowest dealing price (p)
112.80
110.90
114.00
Closing number of units
Operating charges (%)
Prices
17
Schroder MM Diversity Income Fund
Comparative Tables (continued)
Z Accumulation units
2017
p per unit
2016
p per unit
2015
p per unit
132.98
133.83
129.89
13.66
0.84
5.63
(1.77)
(1.69)
(1.69)
11.89
(0.85)
3.94
Distributions
(4.68)
(4.39)
(3.82)
Retained distributions1
4.68
4.39
3.82
144.87
132.98
133.83
0.00
0.00
0.00
8.94
(0.64)
3.03
69,605
72,846
73,644
48,047,652
54,780,809
55,027,356
1.27
1.28
1.29
Highest dealing price (p)
145.40
136.70
134.60
Lowest dealing price (p)
132.80
128.90
127.60
Financial year to 28 February
Change in net asset value
Opening net asset value
Return before operating charges
Operating charges
Return after operating charges*
1
Closing net asset value
*after direct transaction costs of
Performance
Return after charges (%)
Other information
Closing net asset value (£000’s)
Closing number of units
Operating charges (%)
Prices
1 These figures have been rounded to 2 decimal places.
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 longer than a
year.
For Accumulation classes, prior years’ figures have been updated in line with the
Investment Association circular, issued on 6 October 2016.
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.
18
Schroder MM Diversity Income Fund
Portfolio Statement
Holding at Market Value
28.2.17
£000’s
% of net
assets
Cash Funds 18.57%
(2016 – 16.75%)
Schroder Special Situations Fund
SICAV Sterling Liquidity Plus
I Distribution 1 2 3
289,819
30,518
18.57
30,518
18.57
2,691
1.64
2,691
1.64
3,347
2.04
3,347
2.04
Commodity Funds 1.64%
(2016 – 0.00%)
iShares Physical Gold ETC USD
135,000
European Equity Funds 2.04%
(2016 – 5.19%)
Schroder European Alpha
Income Fund Z Income 1 2
1,700,000
Global Equity Funds 15.22%
(2016 – 17.90%)
BlackRock Gold and General
Fund A Accumulation 1
370,000
3,848
2.34
RWC Global Enhanced Dividend
Fund B Distribution 1
205,850
21,162
12.88
25,010
15.22
5,700,000
11,282
6.87
205,000
5,672
3.45
4,134,283
3,713
2.26
20,667
12.58
4,049
2.46
4,049
2.46
Hedge Funds 12.58%
(2016 – 11.09%)
Majedie Tortoise Fund G Accumulation
Morgan Stanley Diversified Alpha
Plus Fund ZH Accumulation 1
TM Sanditon European Select
Fund F Accumulation 1
Japanese Equity Funds 2.46%
(2016 – 2.13%)
Man GLG Japan CoreAlpha
Equity Fund I H Accumulation
22,350
19
Schroder MM Diversity Income Fund
Portfolio Statement (continued)
Holding at Market Value
28.2.17
£000’s
% of net
assets
UK Equity Funds 33.28%
(2016 – 27.53%)
Majedie UK Income Fund X Income 1
3,250,000
4,987
3.04
395,500
33,828
20.59
Schroder Income Maximiser
Fund Z Income 1
25,800,000
14,100
8.58
Treligga Ardevora UK Income
Fund C Distribution 1
1,150,409
1,762
1.07
54,677
33.28
1,545,000
3,350
2.04
375,000
4,175
2.54
RWC Enhanced Income
Fund B Distribution 1
Global Fixed Income Funds 9.63%
(2016 – 9.80%)
Invesco Perpetual Monthly
Income Plus Fund Z Income 1
Kames High Yield Global Bond
Fund B Income GBP Hedged
Schroder Strategic Credit
Fund L Income 1
8,470,000
8,297
5.05
15,822
9.63
4,153
2.53
4,153
2.53
160,934
97.95
3,376
2.05
164,310
100.00
UK Fixed Income Funds 2.53%
(2016 – 5.03%)
PIMCO Select UK Income Bond
Fund Institutional Income 1
Portfolio of investments 4
Net other assets
Net assets attributable to unitholders
380,000
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 FCA’s COLL, not listed on any
exchange.
2 A related party to the fund (Note 11).
3 Cash equivalents.
4 Including cash equivalents.
20
Schroder MM Diversity Income Fund
Summary of Portfolio Transactions
Largest purchases
Cost
£000’s
For the year ended 28 February 2017
Schroder Income Maximiser Fund Z Income 1
9,719
Kames High Yield Global Bond Fund B Income GBP Hedged
5,660
Schroder Strategic Credit Fund L Income
1
5,203
Schroder Special Situations Fund SICAV Sterling Liquidity Plus I Distribution 1
4,053
Man GLG Japan CoreAlpha Equity Fund I H Accumulation
3,602
BlackRock Gold and General Fund A Accumulation
3,201
iShares Physical Gold ETC USD
2,692
ETFS Physical Gold USD
2,685
Majedie Tortoise Fund G Accumulation
1,435
PIMCO Select UK Income Bond Fund Institutional Income
Largest sales
Proceeds
£000’s
For the year ended 28 February 2017
RWC Global Enhanced Dividend Fund B Distribution
Schroder European Alpha Income Fund Z Income
121
1
9,520
7,292
Invesco Perpetual Monthly Income Plus Fund Z Income
6,347
Kames High Yield Global Bond Fund B Income USD
4,880
M&G Optimal Income Fund I Income
4,864
Man GLG Japan CoreAlpha Fund D Income
4,039
RWC Enhanced Income Fund B Distribution
3,815
BlackRock Gold and General Fund A Accumulation
3,627
ETFS Physical Gold USD
2,697
Majedie UK Income Fund X Income
2,210
1 A related party to the fund (Note 11).
21
Schroder MM Diversity Income Fund
Statement of Total Return
For the year ended 28 February 2017
2017
Notes
£000’s
2016
£000’s
£000’s
£000’s
Income
Net capital gains/(losses)
2
Revenue
3
6,304
7,102
4
(1,450)
(1,711)
4,854
5,391
Expenses
Net revenue before taxation
Taxation
5
10,181
(72)
(102)
Net revenue after taxation
Total return before
distributions
Distributions
(7,209)
6
Change in net assets
attributable to unitholders
from investment activities
4,782
5,289
14,963
(1,920)
(5,973)
(6,468)
8,990
(8,388)
Statement of Change in Net Assets
Attributable to Unitholders
For the year ended 28 February 2017
2017
£000’s
Opening net assets
attributable to unitholders
£000’s
180,711
£000’s
213,717
Amounts receivable
on issue of units
11,930
18,966
Amounts payable on
cancellation of units
(40,451)
(46,977)
(28,521)
(28,011)
4
10
Change in net assets
attributable to unitholders
from investment activities
8,990
(8,388)
Retained distribution on
Accumulation units
3,126
3,381
Unclaimed distributions
0
2
164,310
180,711
Dilution adjustment
Closing net assets
attributable to unitholders
22
2016
£000’s
Schroder MM Diversity Income Fund
Balance Sheet
As at 28 February 2017
Notes
2017
2016
£000’s
£000’s
130,416
144,042
1,506
1,031
3,406
8,441
Assets
Investments
Current assets
Debtors
8
Cash and bank balances
Cash equivalents
Total assets
30,518
28,390
165,846
181,904
(653)
(790)
(883)
(403)
(1,536)
(1,193)
164,310
180,711
Liabilities
Creditors
Distributions payable
Other creditors
Total liabilities
Net assets attributable
to unitholders
9
23
Schroder MM Diversity Income Fund
Notes to the Accounts
1 Accounting
policies
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)).
Revenue
Distributions receivable from authorised unit trusts and other collective investment
schemes are recognised net of attributable tax credits and are credited to
revenue when they are first quoted ex-dividend. Interest receivable from bank
balances is accounted for on an accruals basis.
The Annual management charge and Administration charge in respect of the
Schroder funds in which the fund invests are rebated to the fund so that no
double charging occurs. The rebates received from other investment managers
are also receipted to the fund. All rebates are treated as revenue or capital based
on the underlying fund’s treatment.
Special dividends
Special dividends are treated as revenue or capital depending on the facts of
each particular case.
Equalisation
Equalisation on distributions received by the fund is deducted from the cost of
investments. As such the equalisation on distributions received by the fund does
not form part of the fund’s distributions.
Expenses
Costs associated with the purchase and sale of investments are allocated to the
capital of the fund. All other expenses are initially charged to revenue but
ultimately borne by the capital of the fund.
Taxation
Corporation tax is provided for on the revenue liable to corporation tax less
deductible expenses. The tax effect of different items of revenue or expenses is
allocated between revenue and capital using the marginal basis.
Deferred taxation is provided for on all timing differences that have originated but
not reversed by the balance sheet date, other than those differences regarded as
permanent. Any liability to deferred taxation is provided for at the average rate of
taxation expected to apply. Deferred tax assets and liabilities are not discounted
to reflect the time value of money.
24
Schroder MM Diversity Income Fund
Notes to the Accounts (continued)
Distributions
The revenue available for distribution is the total revenue earned by the fund,
less deductible expenses and taxation charged to revenue. This revenue is
distributed annually on 30 April to Income unitholders. An interim distribution
and two quarterly distributions, based on available revenue are distributed on
31 October, 31 January and 31 July respectively to Income unitholders. For
Accumulation units this revenue is not distributed but automatically reinvested in
the fund and is reflected in the value of these units.
Distributions which have remained unclaimed by unitholders for more than six
years are credited to the capital property of the fund.
Dilution adjustment
In certain circumstances the Manager may apply a dilution adjustment on
subscriptions and redemptions of units. If applied, the dilution adjustment is paid
to the fund. See Prospectus for further details.
Valuation
Listed investments of the fund have been valued at market value, dual priced
authorised unit trusts have been valued at cancellation price, single priced
authorised unit trusts have been valued at the dealing price and open ended
investment companies have been valued at the latest available bid price at 18:00
on the balance sheet date, net of any accrued interest which is included in the
balance sheet as a revenue related item. Market value is defined by the SORP as
fair value which generally is the bid value of each security.
Cash equivalents
In accordance with the AIFMD requirements, the fund has treated some
investments in the Portfolio Statement as Cash equivalents for the purposes of
the Balance Sheet disclosure. Investments are regarded as Cash equivalents if
they meet all of the following criteria:
– highly liquid investments held in sterling that are readily convertible to a known
amount of cash;
– are subject to an insignificant risk of change in value; and
– provide a return no greater than the rate of a three month high quality
government bond.
Forward foreign exchange contracts
Net realised and unrealised gains are reflected under Net capital gains/(losses) in
the Notes to the Accounts.
25
Schroder MM Diversity Income Fund
Notes to the Accounts (continued)
Foreign currencies
Transactions in foreign currencies are translated into sterling at the exchange rate
prevailing on the date of the transaction. Assets and liabilities valued in foreign
currencies have been translated into sterling at the exchange rates prevailing at
the balance sheet date and the net gains are reflected under Net capital
gains/(losses) in the Notes to the Accounts.
2 Net capital
gains/(losses)
The net capital gains/(losses) during the year comprise:
Non-derivative securities
Forward foreign exchange contracts
Foreign currency gains
Transaction costs
Annual management charge rebates
Administration charge rebates
Net capital gains/(losses)
2017
£000’s
2016
£000’s
9,969
(7,527)
0
39
57
9
(4)
(4)
134
249
25
25
10,181
(7,209)
The non-derivatives securities, forward foreign exchange contracts and foreign
currency gains above includes:
Realised gains
Unrealised gains/(losses)
Total gains/(losses)
2017
£000’s
2016
£000’s
3,864
1,437
6,162
(8,916)
10,026
(7,479)
Total realised gains for the year were £3,864,411 (2016 – £1,436,622) and the
movement in unrealised gains/(losses) was £6,161,863 (2016 – £8,915,523).
Included in realised gains for the year were unrealised gains recognised in
previous years.
26
Schroder MM Diversity Income Fund
Notes to the Accounts (continued)
3 Revenue
Franked distributions
Unfranked distributions
Interest distributions
Bank interest
Annual management charge rebates
Administration charge rebates
Total revenue
2017
£000’s
2016
£000’s
4,655
5,155
87
2791
1,386
1,5221
12
23
157
114
7
9
6,304
7,102
1 These revenue amounts include a reallocation adjustment of £702,250
between unfranked distributions and interest distributions.
2017
£000’s
2016
£000’s
1,124
1,344
268
293
1,392
1,637
Trustee’s fees
19
21
Safe custody fees
24
32
0
9
43
62
4 Expenses
Payable to the Manager, associates of the
Manager and agents of either of them:
Annual management charge
Administration charge
Payable to the Trustee, associates of the
Trustee and agents of either of them:
Interest payable
Other expenses:
Audit fee
Total expenses
5 Taxation
15
12
1,450
1,711
2017
£000’s
2016
£000’s
(a) Analysis of the tax charge for the year
Corporation tax
72
102
Total current tax (Note 5(b))
72
102
Corporation tax has been provided for at a rate of 20% (2016 – 20%).
27
Schroder MM Diversity Income Fund
Notes to the Accounts (continued)
(b) Factors affecting the current tax charge for the year
The tax assessed for the year is different from that calculated when the standard
rate of corporation tax for authorised unit trusts of 20% (2016 – 20%) is applied
to the net revenue before taxation. The differences are explained below.
2017
£000’s
2016
£000’s
4,854
5,391
971
1,078
(931)
(1,031)
Tax on capital items
32
55
Current tax charge for the year (Note 5(a))
72
102
Net revenue before taxation
Net revenue for the year before taxation multiplied
by the standard rate of corporation tax
Effects of:
Revenue not subject to corporation tax
6 Distributions
Distributions
The distributions take account of revenue received on the issue of units and
revenue deducted on the cancellation of units, and comprise:
2017
£000’s
2016
£000’s
Quarterly Dividend distribution
1,268
1,304
Interim Dividend distribution
1,855
1,786
Quarterly Dividend distribution
1,250
1,566
Final Dividend distribution
1,414
1,671
5,787
6,327
237
235
(51)
(94)
Distributions
5,973
6,468
Net revenue after taxation
4,782
5,289
Expenses taken to capital
1,450
1,397
(259)
(216)
0
(2)
5,973
6,468
Add: Revenue deducted on cancellation of units
Deduct: Revenue received on issue of units
Tax on capital items
Equalisation on conversions
Distributions
Details of the distributions per unit are set out in the Distribution Table on
pages 37 to 40.
28
Schroder MM Diversity Income Fund
Notes to the Accounts (continued)
7 Fair value
hierarchy
Valuation technique
2017
Assets
£000’s
2016
Assets
£000’s
Quoted prices for identical
instruments in active markets
2,691
0
Valuation techniques using
observable market data
158,243
172,432
Total
160,934
172,432
8 Debtors
2017
£000’s
2016
£000’s
Amounts receivable for issue of units
0
144
1,255
0
Accrued franked distributions
13
426
Accrued interest distributions
60
80
Sales awaiting settlement
Accrued bank interest
0
1
Amounts to be transferred from other funds
0
158
69
139
3
5
Accrued Annual management charge rebates
Accrued Administration charge rebates
Income tax recoverable
Total debtors
2017
9 Other creditors
£000’s
Amounts payable for cancellation of units
106
78
1,506
1,031
2016
£000’s
£000’s
763
£000’s
279
Accrued expenses
Manager and Agents
Annual management charge
80
82
Administration charge
19
22
99
104
Trustee and Agents
Trustee’s fees
3
3
Safe custody fees
4
4
Transaction costs
1
1
8
Other accrued expenses
Total other creditors
8
13
12
883
403
29
Schroder MM Diversity Income Fund
Notes to the Accounts (continued)
10 Contingent
liabilities
There were no contingent liabilities at the balance sheet date (2016 – Nil).
11 Related party
transactions
The Manager exercises control over the fund and is therefore a related party by
virtue of its controlling influence.
Amounts paid during the year or due to the Manager at the balance sheet date
are disclosed under Expenses and Other creditors in the Notes to the Accounts.
Annual management charge rebates received or receivable from the Manager of
£117,441 (2016 – £124,652) are disclosed under Net capital gains/(losses) and
Revenue in the Notes to the Accounts. Amounts due from the Manager at the
balance sheet date of £26,436 (2016 – £19,654) are disclosed under Debtors in
the Notes to the Accounts.
Administration charge rebates received or receivable from the Manager of
£31,895 (2016 – £33,249) are disclosed under Net capital gains/(losses) and
Revenue in the Notes to the Accounts. Amounts due from the Manager at the
balance sheet date of £3,070 (2016 – £5,064) are disclosed under Debtors in
the Notes to the Accounts.
The Manager acts as principal on all transactions of units in the fund. The
aggregate monies received through the issue and cancellation of units are
disclosed in the Statement of Change in Net Assets Attributable to Unitholders
and Distributions in the Notes to the Accounts. Amounts due from or to the
Manager in respect of unit transactions at the balance sheet date are disclosed
under Debtors and Other creditors in the Notes to the Accounts.
Units held or managed by the Manager or associates of the Manager as a
percentage of the fund’s net asset value at the balance sheet date were 23.20%
(2016 – 29.95%).
Related party holdings are disclosed in the Portfolio Statement, with any
significant purchases and sales disclosed in Summary of Portfolio Transactions.
The revenue earned from these investments of £799,225 (2016 – £815,139) is
included under Revenue in the Notes to the Accounts. Amounts receivable at
the balance sheet date of Nil (2016 – £251,353) are included under in Debtors in
the Notes to the Accounts.
30
Schroder MM Diversity Income Fund
Notes to the Accounts (continued)
12 Unit classes
The fund currently has six unit classes: A Income units, A Accumulation units,
S Income units, S Accumulation units, Z Income units and Z Accumulation units.
The Annual management charge is based on the average value of the fund,
calculated on a daily basis, and covers the remuneration of the Manager, the
Investment Adviser and their overhead expenses and for each unit class is as
follows:
A Income units
A Accumulation units
S Income units
S Accumulation units
Z Income units
Z Accumulation units
1.00%
1.00%
0.30%
0.30%
0.50%
0.50%
The closing net asset value of each unit class, the closing net asset value per
unit and the closing number of units in issue are given in the Comparative Tables
on pages 13 to 18. The distributions per unit class are given in the Distribution
Table on pages 37 to 40. All classes have the same rights on winding up.
13 Derivative and
other financial
instruments
In accordance with the investment objective, the fund may hold certain financial
instruments. These comprise:
– securities held in accordance with the investment objective and policy;
– cash and short term debtors and creditors arising directly from operations.
Under normal circumstances, the Manager would expect substantially all of
the assets of the fund to be invested in securities appropriate to the fund’s
investment objective. The fund may invest in deposits, only with an approved
bank and which are repayable on demand or has the right to withdraw and
maturing in no more than twelve months. Cash and near cash may only be held
in order to enable the pursuit of the fund’s investment objective or to assist in the
redemption of units, the efficient management of the fund or purposes regarded
as ancillary to the fund. The fund may hold a large cash position to provide a
suitable level of collateral for derivative positions held.
The main risks arising from the fund’s financial instruments are market price,
foreign currency, liquidity, credit and interest rate risks. The Manager’s policies for
managing these risks are summarised below and have been applied throughout
the year and the prior year.
31
Schroder MM Diversity Income Fund
Notes to the Accounts (continued)
Market price risk
The fund’s investment portfolio is exposed to market price fluctuations which are
monitored by the Manager in pursuance of the investment objective and policy.
Adherence to investment guidelines and to investment and borrowing powers set
out in the Trust Deed, the Prospectus and in the COLL mitigates the risk of
excessive exposure to any particular type of security or issuer.
Foreign currency risk
Collective investment schemes valued in foreign currencies and underlying funds
investing in overseas securities may cause the balance sheet to be significantly
affected by movements in foreign exchange rates.
Revenue received in other currencies is translated to sterling on or near the
date of receipt. The fund does not hedge or otherwise seek to avoid currency
movement risk on accrued revenue.
Currency risk profile
The currency risk profile of the fund’s net assets at the balance sheet date was
as follows:
Monetary
exposure
£000’s
Non-monetary
exposure
£000’s
Total
£000’s
2017
33,131
130,416
163,547
2016
35,925
137,322
173,247
2017
763
0
763
2016
744
6,720
7,464
Currency
Sterling
US dollar
Liquidity risk
The primary source of this risk to the fund is the liability to unitholders for any
cancellation of units. This risk is minimised by holding cash, readily realisable
securities and access to overdraft facilities up to the amount prescribed by the
COLL.
Credit risk
Some underlying funds invest in debt securities. The debt securities are exposed
to credit risk which reflects the ability of the issuer to meet its obligations.
32
Schroder MM Diversity Income Fund
Notes to the Accounts (continued)
Interest rate risk
Some underlying funds invests in debt securities. The revenue of the fund may be
affected by changes to interest rates relevant to particular securities or as a result
of the Manager being unable to secure similar returns on the expiry of contracts
or sale of securities. The value of debt securities may be affected by interest rate
movements or the expectation of such movements in the future.
Interest receivable on bank balances will be affected by fluctuations in interest
rates.
Interest rate risk profile of financial assets and financial liabilities
The interest rate risk profile of financial assets and liabilities at the balance sheet
date was as follows:
Floating rate
financial assets
£000’s
Financial assets
not carrying
interest
£000’s
Total
£000’s
2017
33,161
131,922
165,083
2016
36,151
138,289
174,440
2017
763
0
763
2016
680
6,784
7,464
Financial
liabilities not
carrying interest
£000’s
Total
£000’s
2017
1,536
1,536
2016
1,193
1,193
Currency
Sterling
US dollar
Currency
Sterling
There are no material amounts of non-interest bearing financial assets, other than
collective investment schemes, which do not have a maturity date.
Floating rate financial assets and financial liabilities
Sterling denominated bank balances bear interest at rates based on the Sterling
Overnight Index Average rate. Foreign currency bank balances bear interest at
rates based on the London Interbank Offer Rate or its international equivalent.
Fair value of financial assets and financial liabilities
There is no material difference between the value of the financial assets and
liabilities, as shown in the balance sheet, and their fair value.
33
Schroder MM Diversity Income Fund
Notes to the Accounts (continued)
Leverage
Information on the limit usage and level of leverage
The fund uses a risk management process that allows the Manager to monitor
the risk to ensure they are being managed in line with their investment policy and
risk profile.
Leverage ratios are important risk metrics to represent the current risk profile of
the fund and are monitored on a daily basis. Leverage is a way for the fund to
increase its exposure through the use of financial derivative instruments and/or
borrowing of cash or securities where applicable it is expressed as a ratio
between the exposure of the fund and its Net Asset Value. The leverage ratio is
calculated in accordance with two methodologies for calculating the exposure of
the fund, the Gross method and the Commitment method.
There were no new arrangements for managing the liquidity and no changes to
the maximum ratio level of leverage occurred during the year.
In accordance with AIFM rules, the leverage details as at the balance sheet date
where as follows:
Leverage
Commitment
ratio limit
Commitment
ratio level
Commitment
utilised
2017
1.20
0.98
81.65%
20161
1.20
0.96
79.93%
Gross ratio
limit
Gross ratio
level
Gross
utilised
1.20
0.98
81.65%
1.20
0.96
79.93%
As at 28 February
As at 28 February
2017
1
2016
1 As at 29 February 2016.
14 Direct
transaction
costs
34
In the case of shares, broker commissions and transfer taxes/stamp duty are paid
by the fund on each transaction. In addition, there is a dealing spread between
buying and selling prices of the underlying investments. Unlike shares, other types
of investments (such as bonds, money market instruments, derivatives) have no
separately identifiable transaction costs; these costs form part of the dealing
spread. Dealing spreads vary considerably depending on the transaction value
and market sentiment.
Schroder MM Diversity Income Fund
Notes to the Accounts (continued)
2017
Principal
£000’s
Commissions
£000’s
Total cost
£000’s
Commissions
% of
principal
38,342
2
38,344
0.01
59,805
0
59,805
0.00
Purchases
Funds
Sales
Funds
Total cost of the
fund’s average
net asset value (%)
2016
0.00
Principal
£000’s
Commissions
£000’s
Total cost
£000’s
Commissions
% of
principal
133,886
3
133,889
0.00
191,615
0
191,615
0.00
Purchases
Funds
Sales
Funds
Total cost of the
fund’s average
net asset value (%)
0.00
Average portfolio dealing spread
As at the balance sheet date the average portfolio dealing spread was 0.07%
(2016 – 0.01%).
This spread represents the difference between the values determined
respectively by reference to the bid and offer prices of investments expressed as
a percentage of the value determined by reference to the offer price.
15 Units in issue
reconciliation
Number
of units
in issue as
at 28.2.16
Number
of units
issued
Number
of units
cancelled
Number
of units
converted
Number
of units
in issue as
at 28.2.17
A Income units
26,139,903
755,098 (6,354,226)
A Accumulation units
17,435,805
550,309 (3,740,698) (1,082,213) 13,163,203
S Income units
S Accumulation units
2,968,581
278,442
(142,349)
287,952
13,062
(8,284)
(249,700) 20,291,075
712,144 3,816,818
360,424
653,154
Z Income units
48,120,780 3,730,244 (7,634,544) (2,223,367) 41,993,113
Z Accumulation units
54,780,809 4,225,115 (13,710,967) 2,752,695 48,047,652
35
Schroder MM Diversity Income Fund
Remuneration
Alternative Investment Fund Managers (AIFM) Remuneration Disclosures
for Schroder Unit Trusts Limited (SUTL) as at 31 December 2015
The following disclosures are required under the Alternative Investment Fund
Managers Directive (AIFMD).
These disclosures should be read in conjunction with the Schroders
Remuneration Report on pages 68 to 86 of the 2015 Annual Report & Accounts
(available on the Group’s website – www.schroders.com/ir), which provides more
information on the activities of our Remuneration Committee and our
remuneration principles and policies.
Details of the AIFM Remuneration Code can be found at www.fca.org.uk, in the
Senior Management Arrangements, Systems and Controls Sourcebook
(SYSC 19B).
The Remuneration Committee of Schroders plc has established an AIFM
Remuneration Policy to ensure the requirements of the AIFM Remuneration Code
are met proportionately for all AIFM Remuneration Code Staff.
Details of the latest remuneration policy can be downloaded from
www.schroders.com/Remuneration-disclosures.
The total amount of remuneration paid by SUTL to its staff is nil as SUTL has no
employees. AIFM Remuneration Code Staff of SUTL are employed and paid by
other Schroders group companies. Employees who serve as Directors of SUTL
receive no additional fees in respect of their role on the Board of SUTL.
SUTL manages a total of £42,989 million assets under management,
£16,753 million of which are in Alternative Investment Funds (AIFs).
SUTL’s Code Staff are individuals in roles which can materially affect the risk of
SUTL or any AIF it manages. These individuals are employed by and provide
services to other companies in, and clients of, the Schroders Group. As a result,
only a portion of remuneration for those individuals is included in the aggregate
remuneration figures that follow, based on an objective apportionment to reflect
the balance of each role. The aggregate total remuneration paid to the 140 AIFM
Remuneration Code Staff of SUTL is £11,548,623, of which £3,891,982 is paid
to Senior Management and £7,656,641 is paid to other AIFM Remuneration
Code Staff.
36
Schroder MM Diversity Income Fund
Distribution Table
Quarterly distribution
for the three
months ended
31 May 2016
Group 1 Units purchased prior to 29 February 2016
Group 2 Units purchased on or after 29 February 2016
Net
revenue
2016
p per unit
Equalisation
2016
p per unit
Distribution
paid
31.7.16
p per unit
Distribution
paid
31.7.15
p per unit
Group 1
0.8110
–
0.8110
0.7209
Group 2
0.3560
0.4550
0.8110
0.7209
Group 1
0.9539
–
0.9539
0.8194
Group 2
0.5331
0.4208
0.9539
0.8194
A Income units
A Accumulation units
S Income units
Group 1
0.3485
–
0.3485
0.3083
Group 2
0.1332
0.2153
0.3485
0.3083
Group 1
0.3557
–
0.3557
0.3032
Group 2
0.1181
0.2376
0.3557
0.3032
Group 1
0.8123
–
0.8123
0.7199
Group 2
0.3529
0.4594
0.8123
0.7199
Group 1
0.9527
–
0.9527
0.8168
Group 2
0.4825
0.4702
0.9527
0.8168
S Accumulation units
Z Income units
Z Accumulation units
Corporate
unitholders
(unaudited)
Corporate unitholders receive the dividend distribution payments as detailed below:
100.00%
of the total distribution is received as franked investment income.
37
Schroder MM Diversity Income Fund
Distribution Table (continued)
Interim distribution
for the three
months ended
31 August 2016
Group 1 Units purchased prior to 1 June 2016
Group 2 Units purchased on or after 1 June 2016
Net
revenue
2016
p per unit
Equalisation
2016
p per unit
Distribution
paid
31.10.16
p per unit
Distribution
paid
31.10.15
p per unit
Group 1
1.2002
–
1.2002
1.0645
Group 2
0.3963
0.8039
1.2002
1.0645
Group 1
1.4210
–
1.4210
1.2175
Group 2
0.5128
0.9082
1.4210
1.2175
Group 1
0.5298
–
0.5298
0.4662
Group 2
0.4850
0.0448
0.5298
0.4662
A Income units
A Accumulation units
S Income units
S Accumulation units
Group 1
0.5446
–
0.5446
0.4632
Group 2
0.2732
0.2714
0.5446
0.4632
Group 1
1.2344
–
1.2344
1.0882
Group 2
0.4505
0.7839
1.2344
1.0882
Group 1
1.4585
–
1.4585
1.2419
Group 2
0.5157
0.9428
1.4585
1.2419
Z Income units
Z Accumulation units
Corporate
unitholders
(unaudited)
38
Corporate unitholders receive the dividend distribution payments as detailed below:
94.28%
of the total distribution is received as franked investment income.
5.72%
of the distribution is deemed to be an annual payment (non-foreign
element) received after deduction of income tax at the lower rate and
is liable to corporation tax. It is not franked investment income.
Schroder MM Diversity Income Fund
Distribution Table (continued)
Quarterly distribution
for the three
months ended
30 November 2016
Group 1 Units purchased prior to 1 September 2016
Group 2 Units purchased on or after 1 September 2016
Net
revenue
2017
p per unit
Equalisation
2017
p per unit
Distribution
paid
31.1.17
p per unit
Distribution
paid
31.1.16
p per unit
Group 1
0.8377
–
0.8377
0.9322
Group 2
0.4600
0.3777
0.8377
0.9322
Group 1
1.0021
–
1.0021
1.0764
Group 2
0.2043
0.7978
1.0021
1.0764
Group 1
0.3648
–
0.3648
0.4122
Group 2
0.3648
0.0000
0.3648
0.4122
A Income units
A Accumulation units
S Income units
S Accumulation units
Group 1
0.3789
–
0.3789
0.4130
Group 2
0.1248
0.2541
0.3789
0.4130
Group 1
0.8498
–
0.8498
0.9612
Group 2
0.1763
0.6735
0.8498
0.9612
Group 1
1.0144
–
1.0144
1.1076
Group 2
0.7158
0.2986
1.0144
1.1076
Z Income units
Z Accumulation units
Corporate
unitholders
(unaudited)
Corporate unitholders receive the dividend distribution payments as detailed below:
100.00%
of the total distribution is received as franked investment income.
39
Schroder MM Diversity Income Fund
Distribution Table (continued)
Final Distribution
for the three
months ended
28 February 2017
Group 1 Units purchased prior to 1 December 2016
Group 2 Units purchased on or after 1 December 2016
Net
revenue
2017
p per unit
Equalisation
2017
p per unit
Distribution
payable
30.4.17
p per unit
Distribution
paid
30.4.16
p per unit
Group 1
0.9951
–
0.9951
1.0367
Group 2
0.4998
0.4953
0.9951
1.0367
Group 1
1.1968
–
1.1968
1.2076
Group 2
0.4470
0.7498
1.1968
1.2076
Group 1
0.4327
–
0.4327
0.4508
Group 2
0.0640
0.3687
0.4327
0.4508
A Income units
A Accumulation units
S Income units
S Accumulation units
Group 1
0.4585
–
0.4585
0.4559
Group 2
0.0722
0.3863
0.4585
0.4559
Group 1
1.0342
–
1.0342
1.0513
Group 2
0.3965
0.6377
1.0342
1.0513
Group 1
1.2503
–
1.2503
1.2218
Group 2
0.4518
0.7985
1.2503
1.2218
Z Income units
Z Accumulation units
Corporate
unitholders
(unaudited)
Equalisation
Corporate unitholders receive the dividend distribution payments as detailed below:
97.96%
of the total distribution is received as franked investment income.
2.04%
of the distribution is deemed to be an annual payment (non-foreign
element) received after deduction of income tax at the lower rate and
is liable to corporation tax. It is not franked investment income.
Equalisation applies to units purchased during the distribution period (Group 2
units). It is the average amount of revenue included in the purchase price of
Group 2 units and is refunded to the holders of these units as a return of capital.
Being capital it is not liable to income tax but must be deducted from the cost of
units for capital gains tax purposes.
40
Schroder MM Diversity Income Fund
General Information
Manager
Schroder Unit Trusts Limited
31 Gresham Street
London EC2V 7QA
Authorised and regulated by
the Financial Conduct Authority
Registrar1
International Financial Data Services Limited
IFDS House
St Nicholas Lane
Basildon
Essex SS15 5FS
Investment Adviser
Schroder Investment Management Limited
31 Gresham Street
London EC2V 7QA
Authorised and regulated by
the Financial Conduct Authority
Administration Details
Schroders
FREEPOST
RLTZ-CHSY-HBUT
PO Box 1102
Chelmsford
Essex CM99 2XX
Investor Services
0800 718 777
[email protected]
Dealing 0800 718 788
Fax 0870 043 4080
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
1 The Manager has delegated the function of Registrar to International Financial Data Services Limited.
Authorisation
The fund is an authorised unit trust and is constituted pursuant to the COLL
and is structured as a trust. The fund is a non-UCITS retail scheme for the
purpose of the categorisation of the COLL.
Other information
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.
41
For further literature please contact Schroder Investor Services
on 0800 718 777 or at [email protected], or visit
our website at www.schroders.co.uk.
Issued in April 2017 by Schroder Unit Trusts Limited, 31 Gresham Street, London EC2V 7QA.
Registered No: 04191730 England. Authorised and regulated by the Financial Conduct Authority. w34377