Schroder
Absolute Return Fund Company
Final Report and Accounts
September 2015
Contents
Schroder
Absolute Return Fund Company
Schroder Absolute Return Fund Company . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Company Information1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Principle activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Liabilities of the company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Significant events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Statement of the Authorised Corporate Director’s Responsibilities . . . . . .6
Report of the Depositary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Independent Auditors’ Report to the Shareholders
of Schroder Absolute Return Fund Company . . . . . . . . . . . . . . . . . . . . . . . . .8
Aggregated Statement of Total Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Aggregated Statement of Change in Net
Assets Attributable to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Aggregated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Notes to the Aggregated Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
1 Accounting policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
2 Net capital gains/(losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
3 Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
4 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
5 Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
6 Finance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
7 Debtors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
8 Cash and bank balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
9 Creditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
10 Bank overdrafts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
11 Contingent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
12 Related party transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
13 Post balance sheet events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Schroder Absolute UK Dynamic Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Fund Information1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Investment objective and policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Financial highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
Fund information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
Ongoing charges figure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
Review of Investment Activities1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
Risk Profile1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
Risk and reward indicator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
Specific risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
Net Asset Value and Comparative Tables1 . . . . . . . . . . . . . . . . . . . . . . . . . .26
Share price range . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
Net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
Net asset value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
Non-statutory Portfolio Statement (unaudited) . . . . . . . . . . . . . . . . . . . . . .28
Portfolio Statement1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
Summary of Portfolio Transactions1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
Largest purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
Largest sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
Statement of Total Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45
Contents (continued)
Schroder
Absolute Return Fund Company
Statement of Change in Net Assets Attributable to Shareholders . . . . . . .45
Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
Notes to the Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
1 Accounting policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
2 Net capital gains/(losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
3 Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
4 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48
5 Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48
6 Finance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
7 Debtors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
8 Cash and bank balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
9 Creditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50
10 Contingent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50
11 Related party transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50
12 Performance fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51
13 Share classes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51
14 Derivative and other financial instruments . . . . . . . . . . . . . . . . . . . . . . . . . . .52
15 Portfolio transaction costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55
Counterparty Exposure1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56
Schroder European Absolute Target Fund . . . . . . . . . . . . . . . . . . . . . . . . . .57
Fund Information1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57
Investment objective and policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57
Financial highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59
Fund information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59
Ongoing charges figure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .60
Review of Investment Activities1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61
Risk Profile1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62
Risk and reward indicator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62
Specific risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62
Net Asset Value and Comparative Tables1 . . . . . . . . . . . . . . . . . . . . . . . . . .64
Share price range . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64
Net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64
Net asset value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65
Non-statutory Portfolio Statement (unaudited) . . . . . . . . . . . . . . . . . . . . . .66
Portfolio Statement1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .73
Summary of Portfolio Transactions1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .83
Largest purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .83
Largest sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .83
Statement of Total Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .84
Statement of Change in Net Assets Attributable to Shareholders . . . . . . .84
Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .85
Notes to the Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .86
1 Accounting policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .86
2 Net capital gains/(losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .86
3 Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .86
4 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .87
5 Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .87
6 Finance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .88
Contents (continued)
Schroder
Absolute Return Fund Company
7 Debtors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .88
8 Cash and bank balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .88
9 Creditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .89
10 Bank overdrafts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .89
11 Contingent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .89
12 Related party transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .89
13 Performance fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .90
14 Share classes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .90
15 Derivative and other financial instruments . . . . . . . . . . . . . . . . . . . . . . . . . . .91
16 Portfolio transaction costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .95
Counterparty Exposure1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .96
General Information1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .97
Authorisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .97
Other information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .97
European Union Savings Directive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .97
1 Collectively these comprise the Authorised Corporate Director’s report.
Schroder Absolute Return Fund Company
Schroder Absolute Return Fund Company
Company Information
General information
Schroder Absolute Return Fund Company (SARFCo or the company) is an
umbrella company comprising two sub funds which have their own investment
objectives and policies. At 30 September 2015 SARFCo had the following
sub funds:
Schroder Absolute UK Dynamic Fund
Schroder European Absolute Target Fund
The document has been designed to show the aggregated results of the sub
funds followed by their individual financial statements and other information.
Principle activities
The company’s principle activity is to carry on business as an Open Ended
Investment Company (OEIC). The company is structured as an umbrella
company and different sub funds may be established by the Authorised
Corporate Director (ACD) from time to time with the agreement of the Depositary
and approval from the Financial Conduct Authority (FCA).
The sub funds are operated separately and the assets of each sub fund are
managed in accordance with the investment objective and policy applicable to
that sub fund.
Liabilities of the
company
The sub funds are segregated portfolios of assets and, accordingly, the assets of
each sub fund belong exclusively to that sub fund and shall not be used to
discharge directly or indirectly the liabilities of, or claims against, any other person
or body, including the company, or any other sub fund, and shall not be available
for any such purpose. Subject to the above, each sub fund will be charged with
the liabilities, expenses, costs and charges attributable to that sub fund and within
each sub fund charges will be allocated as far as possible according to the net
asset value of that particular share class. Any assets, liabilities, expenses, costs or
charges not attributable to a particular sub fund may be allocated by the ACD in a
manner which it believes is fair to the shareholders generally. This will normally be
pro rata to the net asset value of the relevant sub funds.
Shareholders are not liable for the debts of the company.
Shareholders are not liable to make any further payments to the company after
they have paid the purchase price of the share.
Significant events
With effect from 1 April 2015, Schroder UK Absolute Target Fund, a sub fund of
Schroder Absolute Return Fund Company, changed its name to Schroder
European Absolute Target Fund.
The fund’s Investment objective and policy also was also changed, this is
disclosed under Investment objective and policy.
As a result of the change to the Investment objective and policy the share class
hedging strategy and share class names also changed (e.g. P1 Accumulation
shares for Schroder European Absolute Target were renamed as P1 GBP
Hedged Accumulation shares). For further information on how the share classes
were named please see the schedule in the investors’ letter to shareholders.
There was also a change to the Performance fee, this is disclosed under
Performance fee in the Notes to the Accounts.
5
Schroder Absolute Return Fund Company
Statement of the Authorised Corporate
Director’s Responsibilities
The FCA’s Collective Investment Schemes sourcebook (COLL) requires the ACD
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 company and of its
net expenses and the net capital gains on the property of the company for the
year. In preparing the accounts the ACD 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 Authorised Funds issued by the Investment Management
Association (IMA (now the Investment Association (IA))) in October 2010;
– follow generally accepted accounting principles and applicable
accounting standards;
– prepare the accounts on the basis that the company 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.
The ACD is responsible for the management of the company in accordance with
the Open Ended Investment Company (OEIC) Regulations 2001, 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 ACD’s report and accounts for the year ended 30 September 2015 were
signed on 25 November 2015 on behalf of the ACD by:
J.A. Walker-Hazell
Directors
6
J.M. Cardew
Schroder Absolute Return Fund Company
Report of the Depositary
Statement of the Depositary’s responsibilities in relation to the accounts
of the Company
The Depositary is responsible for the safekeeping of all of the property of the
Company (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 Depositary to take reasonable care to ensure that the
Company is managed by the ACD in accordance with the Financial Conduct
Authority’s Collective Investment Schemes Sourcebook (COLL) and the OEIC
Regulations 2001, the Company’s Instrument of Incorporation and Prospectus,
as appropriate, in relation to the pricing of, and dealings in, shares in the
Company; the application of revenue of the Company; and the investment and
borrowing powers of the Company.
Report of the Depositary for the accounting period from 1 October 2014
to 30 September 2015
Schroder Absolute Return Fund Company (“the Company”)
Having carried out such procedures as we consider necessary to discharge our
responsibilities as Depositary of the Company, it is our opinion, based on the
information available to us and the explanations provided, that in all material
respects the ACD:
(i) has carried out the issue, sale, redemption and cancellation, and calculation
of the price of the company’s shares and the application of the company’s
revenue in accordance with the COLL as appropriate, and, where applicable,
the OEIC Regulations and the Company’s Instrument of Incorporation and
Prospectus; and
(ii) has observed the investment and borrowing powers and restrictions
applicable to the Company. See note 13.
J.P. Morgan Europe Limited
Depositary
Bournemouth
23 November 2015
7
Schroder Absolute Return Fund Company
Independent Auditors’ Report to the
Shareholders of Schroder Absolute
Return Fund Company
Report on the financial statements
Our opinion
In our opinion the financial statements, defined below:
– give a true and fair view of the financial position of the company and each of
the sub-funds as at 30 September 2015 and of the net expenses and the net
capital gains of the scheme property of the company and each of the
sub-funds 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
Authorised Funds, the Collective Investment Schemes sourcebook and the
Instrument of Incorporation.
This opinion is to be read in the context of what we say in the remainder of this report.
What we have audited
The financial statements of the Schroder Absolute Return Fund Company (the
“company”), which are prepared by Schroder Unit Trusts Limited (the “Authorised
Corporate Director (ACD)”), comprise:
– the aggregated balance sheet of the company as at 30 September 2015;
– the aggregated statement of total return of the company for the year then ended;
– the aggregated statement of change in net assets attributable to shareholders
of the company for the year then ended;
– the balance sheets as at 30 September 2015 together with the statements of
total return and statements of changes in net assets attributable to
shareholders of each of the company’s sub-funds;
– the notes to the company’s financial statements and each of the company’s
sub-funds’, 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
applicable law and United Kingdom Accounting Standards (United Kingdom
Generally Accepted Accounting Practice), the Statement of Recommended
Practice ‘Financial Statements of Authorised Funds’ issued by the Investment
Management Association (the “Statement of Recommended Practice for
Authorised Funds”), the Collective Investment Schemes sourcebook and the
Instrument of Incorporation.
In applying the financial reporting framework, the ACD 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.
8
Schroder Absolute Return Fund Company
Independent Auditors’ Report to the
Shareholders of Schroder Absolute
Return Fund Company (continued)
What an audit of financial statements involves
We conducted our audit in accordance with International Standards on Auditing
(UK and Ireland) (“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 company’s
circumstances and have been consistently applied and adequately disclosed;
– the reasonableness of significant accounting estimates made by the ACD; and
– the overall presentation of the financial statements.
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.
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 ACD’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.
9
Schroder Absolute Return Fund Company
Independent Auditors’ Report to the
Shareholders of Schroder Absolute
Return Fund Company (continued)
Responsibilities for the financial statements
and the audit
Our responsibilities and those of the ACD
As explained more fully in the ACD’s Responsibilities Statement set out on
page 6, the ACD 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 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
company’s 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.
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Edinburgh
25 November 2015
(a) The maintenance and integrity of the Schroder website is the responsibility
of the ACD; 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.
10
Schroder Absolute Return Fund Company
Aggregated Statement of Total Return
For the year ended 30 September 2015
2015
Notes
£000’s
2014
£000’s
£000’s
£000’s
Income
Net capital gains/(losses)
2
Revenue
3
3,923
28,375
4,263
Expenses
4
(10,926)
(10,309)
Finance costs: Interest
6
(2,042)
(1,140)
(9,045)
(7,186)
0
0
Net expense before taxation
Taxation
5
Net expense after taxation
Total return before
distributions
Finance costs: Distributions
6
Change in net assets
attributable to shareholders
from investment activities
(33,665)
(9,045)
(7,186)
19,330
(40,851)
(3)
4
19,327
(40,847)
Aggregated Statement of Change in
Net Assets Attributable to Shareholders
For the year ended 30 September 2015
2015
£000’s
Opening net assets
attributable to shareholders
2014
£000’s
£000’s
664,965
730,934
Amounts receivable
on creation of shares
35,581
304,364
Amounts payable on
cancellation of shares
(249,977)
(329,261)
Stamp duty reserve tax
Change in net assets
attributable to shareholders
from investment activities
Closing net assets
attributable to shareholders
£000’s
(214,396)
(24,897)
0
(225)
19,327
(40,847)
469,896
664,965
11
Schroder Absolute Return Fund Company
Aggregated Balance Sheet
As at 30 September 2015
2015
2014
Notes
£000’s
£000’s
£000’s
Debtors
7
4,610
1,091
Cash and bank balances
8
41,402
49,962
£000’s
Assets
Investment assets
457,837
Total other assets
Total assets
635,316
46,012
51,053
503,849
686,369
(21,745)
(7,306)
Liabilities
Investment liabilities
Creditors
Bank overdrafts
12
9
(8,440)
(14,091)
10
(3,768)
(7)
Total other liabilities
(12,208)
(14,098)
Total liabilities
(33,953)
(21,404)
Net assets attributable
to shareholders
469,896
664,965
Schroder Absolute Return Fund Company
Notes to the Aggregated Accounts
1 Accounting
policies
Basis of accounting
The accounts have been prepared under the historical cost basis, as
modified by the revaluation of investments, and in accordance with the
SORP for Authorised Funds issued by the IMA in October 2010.
Revenue
Dividends and property income distributions receivable from equity investments
and 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 and futures clearing houses and brokers are accounted for on an accrual
basis. Interest receivable from debt securities is accounted for on an effective yield
basis. Underwriting commissions are included in revenue when received except
where the company is required to take up shares. In these cases commission is
deducted from the capital cost of those shares on a proportional basis. The net
dividend equivalent values on contracts for difference (CFD) paid on short positions
and received on long positions are recognized when the underlying securities are
quoted ex-dividend. These are included in Revenue as Net revenue return from
derivative contracts.
The administration charge in respect of the Schroder funds in which the
company invests is rebated to the company so that no double charging occurs.
The rebates received from other investment managers are also receipted to the
company. 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 the distributions received by the company is deducted from the
cost of investments.
Interest on debt securities bought or sold
Interest on debt securities bought or sold is excluded from the capital cost of
securities, and is dealt with as part of the revenue of the company.
Expenses
Expenses of the company are charged against revenue except for Stamp duty
reserve tax and costs associated with the purchase and sale of investments
which are allocated to the capital of the company. All other expenses are
charged to revenue.
The costs of establishing and maintaining the hedging programme for the hedged
unit classes, the liabilities, expenses and charges directly attributable to a hedged
unit class will be allocated to the capital of that specific hedged unit class.
13
Schroder Absolute Return Fund Company
Notes to the Aggregated Accounts
(continued)
Interest on CFD’s is recognised on an earned basis and is included in Finance
costs as Finance costs: Interest payable.
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.
Distributions
The revenue available for distribution is the total revenue earned by the company,
less deductible expenses and taxation charged to revenue. This revenue is
distributed annually on 30 November to shareholders. An interim distribution,
based on available revenue at the half year, is distributed on 31 May to
shareholders.
Valuation
Listed investments of the company have been valued at market value, 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. Market value is defined by the SORP as fair
value which generally is the bid value of each security.
Forward currency contracts
Open forward currency contracts are shown in the Portfolio Statement at market
value and the net losses are reflected under Net capital gains/(losses) in
the Notes to the Accounts and relate to the hedged share classes only.
Contracts for difference
Open CFD’s are shown in the Portfolio Statement and are priced at fair value
using valuation models and data sourced from market data providers. The
upfront fees received on a mark to market basis are split between capital and
revenue as appropriate. The capital element is reflected within Derivative
contracts under Net capital gains/(losses) in the Notes to the
Accounts and the revenue element is reflected within Net revenue return from
derivative contracts under Revenue in the Notes to the Accounts. Net
gains/(losses) are reflected within Derivative contracts under Net capital
gains/(losses) in the Notes to the Accounts.
14
Schroder Absolute Return Fund Company
Notes to the Aggregated Accounts
(continued)
Options contracts
Open option contracts are shown in the Portfolio Statement and are priced at fair
value using valuation models and data sourced from market data providers. Net
gains/(losses) are reflected within Derivative contracts under Net capital
gains/(losses) in the Notes to the Accounts.
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.
Euro and GBP hedged share classes
Hedged share classes allow the ACD to use currency hedging transactions to
seek to minimise the effect of exchange rate fluctuations between the base
currency and the portfolio currency of the company. Currency hedging
transactions include entering into over the counter currency forward contracts
and foreign exchange agreements.
Where undertaken, the effect of hedging will be reflected in the net asset value
and therefore, in the performance of the relevant hedged share class. Any
benefits or losses of the hedging transactions will accrue to shareholders in that
hedged share class only.
The ACD will aim to hedge the currency exposure of the net asset value
attributable to a hedged share class, however, the hedge may not always be at
100%. This is to avoid the transaction costs of making small and frequent
adjusting transactions. The ACD will review the relevant hedging positions daily
and, if appropriate, adjust the hedge to reflect any change in currency exposure
and the flow of shareholder creation and cancellation of share.
2 Net capital
gains/(losses)
The net capital gains/(losses) during the year comprise:
Non-derivative securities
2015
£000’s
2014
£000’s
23,840
(16,314)
Derivative contracts
13,900
(204)
Forward currency contracts
(14,031)
(17,633)
4,675
492
(9)
(6)
28,375
(33,665)
Currency gains
Transaction charges
Net capital gains/(losses)
15
Schroder Absolute Return Fund Company
Notes to the Aggregated Accounts
(continued)
3 Revenue
UK dividends
Overseas dividends
Property income distributions
Interest distributions
Interest on debt securities
Bank interest
Underwriting commission
Net revenue return from derivative contracts
Administration charge rebates
Total revenue
4 Expenses
2015
£000’s
2014
£000’s
2,442
3,058
55
267
0
2
266
0
1,254
1,052
67
976
0
59
(168)
(1,151)
7
0
3,923
4,263
2015
£000’s
2014
£000’s
5,519
8,760
Payable to the ACD, associates of the
ACD and agents of either of them:
ACD fee
Administration fees
Fund accounting fees
Performance fee
Transfer agency fees
692
789
1
42
(149)1
316
(15)
4,984
0
11,031
9,907
Depositary’s fees
45
103
Safe custody fees
3
5
48
108
Payable to the Depositary, associates of the
Depositary and agents of either of them:
Other expenses:
Audit fee
Professional fee
Total expenses
1 These expenses reflect prior period adjustments.
16
26
26
1
(179)
268
(153)
294
10,926
10,309
Schroder Absolute Return Fund Company
Notes to the Aggregated Accounts
(continued)
5 Taxation
Corporation tax has not been provided for as expenses exceed the revenue
liable to corporation tax.
(a) 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 an open ended investment company of 20%
(2014 – 20%) is applied to the net expenses before taxation. The differences are
explained below.
2015
£000’s
2014
£000’s
Net expense before taxation
(9,045)
(7,186)
Net expense for the year before taxation multiplied
by the standard rate of corporation tax
(1,809)
(1,437)
(499)
(665)
2,308
2,102
0
0
Effects of:
Revenue not subject to corporation tax
Movement in excess management expenses
Current tax charge for the year
(b) Factors that may affect future tax charges
At the balance sheet date, there is a potential deferred tax asset of £12,481,214
(2014 – £10,172,831) in respect of unutilised management expenses. It is
unlikely the company will generate sufficient taxable profits in the future to utilise
this amount and therefore no deferred tax asset has been recognised in the year
or prior year.
6 Finance costs
Distributions and interest payable
The distributions take account of revenue received on the creation of shares and
revenue deducted on the cancellation of shares, and comprise:
2015
£000’s
2014
£000’s
Revenue deducted on cancellation of shares
3
0
Revenue received on creation of shares
0
(4)
Finance costs: Distributions
3
(4)
Finance costs: Interest
2,042
1,140
Total finance costs
2,045
1,136
Net expense after taxation
(9,045)
(7,186)
Deficit taken to capital
9,048
7,182
3
(4)
Finance costs: Distributions
17
Schroder Absolute Return Fund Company
Notes to the Aggregated Accounts
(continued)
7 Debtors
2015
£000’s
2014
£000’s
60
510
1,228
276
Accrued UK dividends
95
301
Accrued bank interest
4
4
Revenue receivable from derivative contracts
3,223
0
Total debtors
4,610
1,091
2015
£000’s
2014
£000’s
39,036
49,092
2,366
870
41,402
49,962
Amounts receivable for creation of shares
Sales awaiting settlement
8 Cash and bank
balances
Cash and bank balances
Amounts held at futures clearing houses and brokers
Total cash and bank balances
2015
9 Creditors
£000’s
2014
£000’s
Amounts payable for cancellation of shares
Purchases awaiting settlement
Amounts payable on derivative contracts
£000’s
£000’s
694
11,484
2,103
0
139
1,187
Accrued expenses
ACD and Agents
ACD fee
Administration fees
Performance fee
423
596
59
261
4,984
0
5,466
857
Depositary and Agents
Depositary’s fees
8
30
Safe custody fees
0
4
Transaction charges
2
2
Interest payable
2
0
12
Other accrued expenses
Total creditors
26
527
8,440
14,091
2015
£000’s
2014
£000’s
Amounts overdrawn at futures clearing houses and brokers
3,768
7
Total bank overdrafts
3,768
7
10 Bank overdrafts
18
36
Schroder Absolute Return Fund Company
Notes to the Aggregated Accounts
(continued)
11 Contingent
liabilities
There were no contingent liabilities at the balance sheet date (2014 – Nil).
12 Related party
transactions
The ACD actively co-operates to exercise control over the company and is
therefore a related party by virtue of is controlling influence.
Amounts paid during the year or due to the ACD at the balance sheet date are
disclosed under Expenses and Creditors in the Notes to the Accounts.
The ACD acts as principal on all transactions of shares in the company. The
aggregate monies received through the creation and cancellation of shares are
disclosed in the Statement of Change in Net Assets Attributable to Shareholders.
Details of the shares held or managed by the ACD or associates of the ACD are
given for each sub fund in Note 11 and Note 12 on pages 50 and 90 respectively.
13 Post balance
sheet events
Subsequent to the year end, a pricing error was discovered which may be
material to shareholders in one or more share classes of the company. This is
being investigated and remediated and compensation will be paid to the affected
shareholders if required. This has no material impact on the financial statements.
19
Schroder Absolute UK Dynamic Fund
Schroder Absolute UK Dynamic Fund
Fund Information
Investment objective
and policy
The objective of the fund is to achieve absolute returns through targeted
investment strategies independent of UK market conditions or indices. The fund
will aim typically to deliver absolute (more than zero) returns over a rolling three
year period, although an absolute return performance is not guaranteed over this
or longer periods of time and it may not achieve this objective. There is a risk to
an investor’s capital. Investors may not get back the amount originally invested.
The ACD will seek to achieve its investment objective by investing in a
concentrated portfolio of companies (usually between 30 to 60 companies both
on the long side and the short side of the portfolio) predominantly incorporated in
the UK or in companies which derive a significant proportion of their revenues or
profits from this country or which are primarily operating in this jurisdiction.
Investments will be made primarily in companies and other securities which are
constituents of the FTSE All Share Index with a bias towards medium sized and
smaller companies. The fund may also invest in securities listed on the
Alternative Investment Market and in equity related transferable securities, such
as preferred shares, debentures, warrants (warrants may not exceed more than
5 per cent of the total assets of the fund) and convertible securities or in
derivatives thereof. As the fund has an absolute return objective it will not be
managed against any index.
Whilst the fund will mainly invest in equities, it may also invest in debt securities
(such as bonds and notes of any maturity which are transferable securities),
where this is deemed appropriate in the market conditions prevailing at that time.
Any such securities will be rated investment grade by Moody’s or S&P, or if not
rated, deemed by the Investment Manager to have at least an equivalent rating
and will be issued by the UK government or companies incorporated in the UK
or in companies which derive a predominant proportion of their revenues or
profits from this country or which are principally operating in that jurisdiction. The
fund may also invest in short term securities which are rated investment grade
(such as certificates of deposit, bankers’ acceptances and commercial paper) for
temporary defensive purposes.
The fund will seek to achieve its investment objective and policy through the use
of various investment strategies including the use of derivatives to obtain long
and synthetic short positions principally through contracts for difference. The
fund may also use forward foreign exchange transactions, interest rate and
government bond futures, and other exchange traded and off exchange traded
derivative contracts for the purposes of efficient portfolio management and/or
meeting the investment objectives of the fund. Such derivative contracts have
the potential to significantly increase the fund’s risk profile.
The ACD employs a risk management process that seeks to control the volatility
of fund returns.
The fund may at any time have substantial holdings in ancillary liquid assets.
20
Schroder Absolute UK Dynamic Fund
Fund Information (continued)
Financial
highlights
Dealing price
30.9.151
30.9.14
P1 Accumulation shares
157.80p
143.70p
9.81
P2 Accumulation shares
162.10p
147.20p
10.12
P1 Euro Hedged
Accumulation shares
172.70¢
157.30¢
9.79
P2 Euro Hedged
Accumulation shares
180.60¢
164.70¢
9.65
30.11.15
30.11.14
Nil
Nil
Distribution per P1
Accumulation shares
% change
1 The fund prices quoted relate to the accounting date on 30.9.15, these
are not dealing prices as the fund deals weekly each Thursday.
The performance of a hedged share classes may differ from other share
classes of the fund because the return on unhedged share classes is
based on both the performance of the fund’s investments and the
performance of the portfolio currencies relative to sterling whereas the
return on a hedged share classes is based only on the performance of the
fund’s investments.
Fund information
Launch date
Launch price
7 September 2009
100.00p per P1 Accumulation share
100.00p per P2 Accumulation share
Launch date
7 June 2011
Launch price
129.04¢ per P1 Euro Hedged
Accumulation share
Launch date
6 April 2011
Launch price
126.59¢ per P2 EUR Hedged
Accumulation share
Accounting dates
Revenue allocation date
Interim
Final
31 March
30 September
30 November
With effect from 23 April 2015, the fund changed from daily to weekly
dealing, with each Thursday being the dealing day.
21
Schroder Absolute UK Dynamic Fund
Fund Information (continued)
Ongoing charges
figure
For the period
from 1.10.15
For the year
to 30.9.15
For the year
to 30.9.14
P1 Accumulation shares
1.67%1 2
1.58%
1.69%
P2 Accumulation shares
12
1.17%
1.08%
1.19%
P1 Euro Hedged
Accumulation shares
1.67%1 2
1.58%
1.70%
P2 Euro Hedged
Accumulation shares
1.17%1 2
1.08%
1.20%
1 The Ongoing charges figure is a projected figure based on the latest
expenses of the share class.
2 The Ongoing charges figures is annualised based on the fees incurred
during the accounting period.
22
Schroder Absolute UK Dynamic Fund
Review of Investment Activities
From 30 September 2014 to 30 September 2015, the price of
P1 Accumulation shares rose 9.81%.
The period began and ended with pronounced volatility with monetary tightening
by the US Federal Reserve dominating sentiment, and reflected in global growth
fears and a sharp decline in commodity prices. The more domestically orientated
small and mid caps bucked a weak wider market, as the outlook for the British
consumer improved, while the resource heavy large caps lagged. The fund
generated a positive return as its long positions performed strongly, more than
offsetting losses from the short book. In the former, beverage challengers
Fevertree Drinks and Nichols performed well as their results underlined strong
growth in their respective markets of mixers and soft drinks, where overseas
revenue prospects are particularly strong. Textile services specialist Johnson
Service Group performed well following robust results, and a well received
acquisition. The market also responded well to Clinigen Group’s purchase of its
chief competitor in the supply and clinical trials management area, and against
the backdrop of increased merger and acquisition activity in the mid cap pharma
space. On the negative side, Stock Spirits Group corrected sharply after warning
of a likely earnings miss due to Polish vodka tax increases, despite having
reassured on this issue only shortly before. The overall shape of the market was
painful for our short book, where our largest position was in the FTSE1 250,
which has relatively much less oil and gas exposure than the FTSE1 100. And,
while we did not have any major single disappointments, too many of our
preferred individual stock exposures proved to be good places to hide as the
wider market fell. On the positive, our FTSE1 100 put options protected the fund
well in the sharp market sell off of August.
Co-Fund Manager:
Paul Marriage
Paul is Head of the UK Dynamic Team
Paul joined Schroders on the
acquisition of Cazenove Capital. Prior
to this Paul was Head of UK Small Cap
investments at Insight Investment and
an analyst at GH Asset Management
Paul graduated from University
College, Oxford with a degree in
Modern History
He is a member of ASIP and has
eighteen years’ investment experience
1 FTSE International Limited (“FTSE”) © FTSE. “FTSE®” is a trade mark of London Stock Exchange Plc and The
Financial Times Limited and is used by FTSE International Limited under licence. All rights in the FTSE indices
and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any
errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE
Data is permitted without FTSE's express written consent.
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:
John Warren
John is a member of UK Dynamic
Team
John joined Schroders on the
acquisition of Cazenove Capital. He
has over fifteen years’ investment
experience, having previously been at
UBS and Investec Bank.
John graduated from Loughborough
University with a degree in Economics
and Accountancy. He holds the ACA
and SFA
23
Schroder Absolute UK Dynamic Fund
Risk Profile
Risk and reward
indicator
Lower risk
Potentially lower reward
1
2
Higher risk
Potentially higher reward
3
4
5
6
77
The risk and reward indicator changed from 6 to 7 with effect from
8 October 2014.
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. For non-hedged share classes exchange rates may cause
the value of overseas investments and the revenue from them to rise or fall.
There is no guarantee that the hedging strategy applied in hedged share classes
will entirely eliminate the adverse effects of changes in exchange rates between
the base currency and the portfolio currencies.
In addition, it should be noted that hedging transactions will be entered into
whether or not the currency of a hedged share class is declining or increasing in
value in relation to the base currency or portfolio currencies. Hedged share
classes aim to provide investors with a return correlated to the portfolio
currencies performance of the fund by reducing the effect of exchange rate
fluctuations between the base currency and the portfolio currencies.
As it is not possible to legally segregate share classes’ liabilities from those of
other share classes in the fund, there is a risk that, in certain limited
circumstances, the hedging transactions undertaken in relation to a hedged share
class could result in liabilities which might affect the net asset value of the other
share classes in the fund.
The fund is index unconstrained and has the potential for greater volatility.
The fund invests in smaller companies which may be less liquid than larger
companies and price swings may therefore be greater than in larger company
funds.
24
Schroder Absolute UK Dynamic Fund
Risk Profile (continued)
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 alternative investments
(including commodities, hedge funds, property funds and private equity) in order
to meet its investment objectives. One of the aims of the ACD is to achieve
volatility targets for the portfolio and in order to do this leverage will be used. The
use of leverage can increase gains as well as losses and expose the fund to
increased risk. Whilst it is intended that the additional risk that leverage exposes
the fund to is controlled by value at risk methodology, there can be no guarantee
that this risk control may be achieved especially under extreme or changing
market conditions.
For these reasons, the purchase of shares should not normally be regarded as a
short term investment.
25
Schroder Absolute UK Dynamic Fund
Net Asset Value and Comparative Tables
Share price range
Year to 31 December
P1 Accumulation
shares
Highest
dealing
p
Lowest
dealing
p
Highest
dealing
p
Lowest
dealing
p
2010
105.54
91.56
106.00
91.87
2011
121.35
105.75
122.40
106.23
2012
129.55
115.07
131.42
116.46
2013
154.55
128.49
157.67
130.50
2014
156.13
137.50
159.41
140.90
2015 to 30 September
158.60
136.00
162.90
139.50
Year to 31 December
P1 Euro Hedged
Accumulation shares
Highest
dealing
¢
Net revenue
P2 Accumulation
shares
Lowest
dealing
¢
P2 Euro Hedged
Accumulation shares
Highest
dealing
¢
Lowest
dealing
¢
2010
–
–
–
–
2011
135.98
126.36
139.80
127.34
2012
143.49
128.21
148.36
131.93
2013
170.13
141.83
176.93
146.97
2014
171.78
150.60
178.83
157.70
2015 to 30 September
173.50
148.40
181.60
155.80
P1 Accumulation shares
pence per share
P2 Accumulation shares
pence per share
2010
0.4160
0.8225
2011
Nil
Nil
2012
Nil
Nil
2013
Nil
Nil
2014
Nil
Nil
2015 to 30 September
Nil
Nil
Year to 31 December
These figures have been rounded down to 4 decimal places.
The P1 Euro Hedged Accumulation shares and P2 Euro Hedged Accumulation
shares have made no distributions to date.
26
Schroder Absolute UK Dynamic Fund
Net Asset Value and Comparative Tables
(continued)
Net asset value
Net asset value
£000’s
Net asset
value per share
p
Number of
shares in issue
P1 Accumulation shares
149,861
147.33
101,717,241
P2 Accumulation shares
92,069
150.16
61,312,619
P1 Euro Hedged
Accumulation shares
4,151
135.71
3,058,456
P2 Euro Hedged
Accumulation shares
121,804
140.98
86,396,989
P1 Accumulation shares
128,410
143.06
89,760,990
P2 Accumulation shares
As at 30 September
2013
2014
101,806
146.51
69,488,862
P1 Euro Hedged
Accumulation shares
2,517
121.91
2,065,043
P2 Euro Hedged
Accumulation shares
58,202
127.62
45,605,597
P1 Accumulation shares
121,244
156.87
77,288,186
P2 Accumulation shares
86,782
161.04
53,888,998
P1 Euro Hedged
Accumulation shares
2,070
126.67
1,634,209
P2 Euro Hedged
Accumulation shares
22,381
132.21
16,928,695
2015
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.
27
Schroder Absolute UK Dynamic Fund
Non-statutory Portfolio Statement
(unaudited)
The following portfolio structure has been provided to show the investment
exposure of the portfolio, by investment. It differs from the statutory portfolio
statement in that only the investment exposure is shown.
Holding at Market Value
30.9.15
£000’s
% of net
assets
Long Positions
Aerospace & Defense
Ultra Electronics
146,500
2,510
1.08
2,510
1.08
1,559,538
6,722
2.89
48,231
685
0.30
341,247
4,822
2.08
65,391
2,444
1.04
Beverages
Fevertree Drinks 1
Nichols
Nichols
1
SABMiller
Stock Spirits Group
1
1,736,615
3,217
1.38
17,890
7.69
1,678,467
3,206
1.38
188,692
3,344
1.44
6,550
2.82
1,944,637
1,269
0.55
2,319,132
1,513
0.65
2,720,400
2,720
1.17
Chemicals
Scapa Group
Victrex
Construction & Materials
Low & Bonar
Low & Bonar
1
Michelmersh Brick Holdings
1
Polypipe Group
997,400
3,289
1.41
8,791
3.78
Electronic & Electrical Equipment
Gooch & Housego
Gooch & Housego 1
Xaar
Xaar
28
1
4,419
37
0.02
714,206
5,949
2.56
4,603
26
0.01
1,121,928
6,260
2.69
12,272
5.28
Schroder Absolute UK Dynamic Fund
Non-statutory Portfolio Statement
(unaudited) (continued)
Holding at Market Value
30.9.15
£000’s
% of net
assets
Financial Services
Arrow Global Group
Arrow Global Group
1
1,218,203
3,411
1.46
1,553,548
4,319
1.86
7,730
3.32
Food & Drug Retailers
Booker Group
3,461,234
6,400
2.75
6,400
2.75
523
0.22
523
0.22
Food Producers
Premier Foods 1
1,647,632
General Industrials
British Polythene Industries
British Polythene Industries 1
130,541
953
0.41
1,021,272
7,455
3.21
8,408
3.62
892,416
3,662
1.58
1,021,286
2,260
0.97
870,696
2,438
1.05
8,360
3.60
1,315,606
3,703
1.59
9,567,991
2,392
1.03
211,900
2,443
1.05
1,102,600
3,966
1.71
12,504
5.38
877,394
3,615
1.56
1,898,672
3,816
1.64
7,431
3.20
903,308
2,387
1.03
8,380,342
5,950
2.56
8,337
3.59
General Retailers
Just Eat
Mothercare
1
Poundland Group
Health Care Equipment & Services
Cambian Group 1
Kromek Group
1
Smith & Nephew
Spire Healthcare Group
1
Household Goods & Home Construction
Telford Homes 1
Walker Greenbank
1
Industrial Engineering
Melrose Industries
Renold
1
29
Schroder Absolute UK Dynamic Fund
Non-statutory Portfolio Statement
(unaudited) (continued)
Holding at Market Value
30.9.15
£000’s
% of net
assets
Industrial Transportation
Clipper Logistics 1
1,275,367
3,507
1.51
3,507
1.51
2,285
0.99
Life Insurance
Phoenix Group
279,553
St James’s Place
255,000
2,168
0.93
4,453
1.92
1,427,241
3,540
1.52
857,152
3,257
1.40
6,797
2.92
2,791
1.20
2,791
1.20
2,303
0.99
2,303
0.99
4,782
2.06
4,782
2.06
1,264
0.54
1,264
0.54
Media
Entertainment One
NAHL Group 1
Mining
Rio Tinto
126,300
Nonlife Insurance
Direct Line Insurance Group
614,220
Oil Equipment, Services & Distribution
Gulf Marine Services 1
4,167,497
Personal Goods
Jimmy Choo
912,024
Pharmaceuticals & Biotechnology
Clinigen Group 1
1,028,273
7,023
3.02
GlaxoSmithKline
255,847
3,239
1.39
10,262
4.41
3,586
1.54
3,586
1.54
Real Estate Investment & Services
Palace Capital 1
30
982,546
Schroder Absolute UK Dynamic Fund
Non-statutory Portfolio Statement
(unaudited) (continued)
Holding at Market Value
30.9.15
£000’s
% of net
assets
Real Estate Investment Trusts
Hansteen Holdings
Hansteen Holdings
4,244,281
1
310,217
5,123
2.20
374
0.16
5,497
2.36
2,504,957
2,054
0.89
690,783
3,330
1.43
1,488,435
3,468
1.49
928,535
1,161
0.50
10,013
4.31
9,753,807
8,486
3.65
518,800
2,355
1.01
4,838
20
0.01
974,819
4,007
1.73
2,602,301
8,770
3.77
Software & Computer Services
Bango 1
FDM Group Holdings 1
Sophos Group
WANdisco
1
1
Support Services
Johnson Service Group 1
Northgate
Robert Walters
Robert Walters 1
Smart Metering Systems
Staffline Group
1
1
236,304
3,632
1.56
27,270
11.73
2,900,143
5,075
2.18
661,719
1,155
0.50
6,230
2.68
1,875,800
1,182
0.51
2,494,380
2,669
1.15
134,738
3,077
1.32
Technology Hardware & Equipment
Sepura
Sepura 1
Travel & Leisure
Eclectic Bar Group 1
Elegant Hotels Group
1
InterContinental Hotels Group
Merlin Entertainments
1
On the Beach Group 1
Revolution Bars Group 1
Young & Co’s Brewery A
Young & Co’s Brewery
Total long positions
1
1
520,681
1,934
0.83
1,555,716
3,360
1.45
1,508,440
2,821
1.21
232,500
2,737
1.18
269,600
2,319
1.00
20,099
8.65
216,560
93.15
31
Schroder Absolute UK Dynamic Fund
Non-statutory Portfolio Statement
(unaudited) (continued)
Holding at Market Value
30.9.15
£000’s
% of net
assets
Short Positions
Electronic & Electrical Equipment
Halma
(312,175)
(2,252)
(0.97)
Morgan Advanced Materials
(641,268)
(1,810)
(0.78)
(84,708)
(1,708)
(0.73)
(243,637)
(324)
(0.14)
(6,094)
(2.62)
(3,156)
(1.36)
(3,156)
(1.36)
(16,917)
(7.28)
(16,917)
(7.28)
(2,610)
(1.12)
(2,610)
(1.12)
(2,267)
(0.97)
Renishaw
TT Electronics
Financial Services
Hargreaves Lansdown
(261,515)
Futures
FTSE 250 Index
(1,014)
Gas, Water & Multiutilities
Centrica
(1,138,736)
General Retailers
Kingfisher
(632,101)
Marks & Spencer
(518,800)
(2,599)
(1.12)
(40,000)
(3,044)
(1.31)
(7,910)
(3.40)
(2,280)
(0.98)
(2,280)
(0.98)
Next
Household Goods & Home Construction
Persimmon
(113,533)
Industrial Engineering
Bodycote
(306,901)
(1,691)
(0.73)
IMI
(236,519)
(2,243)
(0.96)
(85,322)
(2,390)
(1.03)
(6,324)
(2.72)
(2,420)
(1.04)
(2,420)
(1.04)
Spirax-Sarco Engineering
Industrial Transportation
Royal Mail
32
(527,550)
Schroder Absolute UK Dynamic Fund
Non-statutory Portfolio Statement
(unaudited) (continued)
Holding at Market Value
30.9.15
£000’s
% of net
assets
Personal Goods
Burberry
(178,695)
(2,445)
(1.05)
(2,445)
(1.05)
(4,289)
(1.85)
Support Services
Mitie Group
Travis Perkins Group
(1,405,200)
(135,000)
(2,654)
(1.14)
(6,943)
(2.99)
Travel & Leisure
Whitbread
(48,368)
(2,258)
(0.97)
(2,258)
(0.97)
Total short positions
(59,357)
(25.53)
Net long exposure
157,203
67.62
Net investment exposure
157,203
67.62
All holdings are CFD’s unless otherwise stated.
1 Direct equity investments.
33
Schroder Absolute UK Dynamic Fund
Portfolio Statement
Holding at Market Value
30.9.15
£000’s
% of net
assets
Equities 71.05%
(2014 – 79.02%)
Banks 0.00%
(2014 – 1.13%)
Beverages 6.35%
(2014 – 5.48%)
Fevertree Drinks
Nichols
Stock Spirits Group
1,559,538
6,722
2.89
341,247
4,822
2.08
1,736,615
3,217
1.38
14,761
6.35
Chemicals 0.00%
(2014 – 0.10%)
Construction & Materials 1.82%
(2014 – 4.02%)
Low & Bonar
2,319,132
1,513
0.65
Michelmersh Brick Holdings
2,720,400
2,721
1.17
4,234
1.82
714,206
5,949
2.56
1,121,928
6,261
2.69
12,210
5.25
20,333
8.75
20,333
8.75
4,319
1.86
4,319
1.86
Electronic & Electrical Equipment 5.25%
(2014 – 7.34%)
Gooch & Housego
Xaar
Equity Investment Instruments 8.75%
(2014 – 5.52%)
Schroder Special Situations
Sterling Liquidity Plus Fund I
Accumulation 1 2
172,300
Financial Services 1.86%
(2014 – 2.29%)
Arrow Global
34
1,553,548
Schroder Absolute UK Dynamic Fund
Portfolio Statement (continued)
Holding at Market Value
30.9.15
£000’s
% of net
assets
Food Producers 0.22%
(2014 – 1.91%)
Premier Foods
1,647,632
523
0.22
523
0.22
7,455
3.21
7,455
3.21
2,260
0.97
2,260
0.97
General Industrials 3.21%
(2014 – 2.25%)
British Polythene Industries
1,021,272
General Retailers 0.97%
(2014 – 4.55%)
Mothercare
1,021,286
Health Care Equipment & Services 4.33%
(2014 – 4.86%)
Cambian Group
1,315,606
3,704
1.59
Kromek Group
9,567,991
2,392
1.03
Spire Healthcare Group
1,102,600
3,966
1.71
10,062
4.33
877,394
3,615
1.56
1,898,672
3,816
1.64
7,431
3.20
5,950
2.56
5,950
2.56
3,507
1.51
3,507
1.51
Household Goods & Home Construction 3.20%
(2014 – 4.03%)
Telford Homes
Walker Greenbank
Industrial Engineering 2.56%
(2014 – 2.58%)
Renold
8,380,342
Industrial Transportation 1.51%
(2014 – 2.86%)
Clipper Logistics
1,275,367
35
Schroder Absolute UK Dynamic Fund
Portfolio Statement (continued)
Holding at Market Value
30.9.15
£000’s
% of net
assets
Media 1.40%
(2014 – 2.20%)
NAHL Group
857,152
3,257
1.40
3,257
1.40
4,782
2.06
4,782
2.06
7,023
3.02
7,023
3.02
3,586
1.54
3,586
1.54
Oil Equipment, Services & Distribution 2.06%
(2014 – 1.68%)
Gulf Marine Services
4,167,497
Pharmaceuticals & Biotechnology 3.02%
(2014 – 3.33%)
Clinigen Group
1,028,273
Real Estate Investment & Services 1.54%
(2014 – 1.28%)
Palace Capital
982,546
Real Estate Investment Trusts 0.16%
(2014 – 0.00%)
Hansteen Holdings
310,217
374
0.16
374
0.16
2,504,957
2,054
0.89
690,783
3,329
1.43
1,488,435
3,468
1.49
Software & Computer Services 4.31%
(2014 – 3.72%)
Bango
FDM Group Holdings
Sophos Group
WANdisco
928,535
1,161
0.50
10,012
4.31
9,753,807
8,486
3.65
974,819
4,006
1.72
2,602,301
8,770
3.78
Support Services 10.71%
(2014 – 12.23%)
Johnson Service Group
Robert Walters
Smart Metering Systems
Staffline Group
36
236,304
3,632
1.56
24,894
10.71
Schroder Absolute UK Dynamic Fund
Portfolio Statement (continued)
Holding at Market Value
30.9.15
£000’s
% of net
assets
Technology Hardware & Equipment 0.50%
(2014 – 0.31%)
Sepura
661,719
1,155
0.50
1,155
0.50
Travel & Leisure 7.32%
(2014 – 5.35%)
Eclectic Bar Group
1,875,800
1,182
0.51
Elegant Hotels Group
2,494,380
2,669
1.15
Merlin Entertainments
520,681
1,934
0.83
On the Beach Group
1,555,716
3,360
1.44
Revolution Bars Group
1,508,440
2,821
1.21
Young & Co’s Brewery A
232,500
2,736
1.18
Young & Co’s Brewery
269,600
2,319
1.00
17,021
7.32
20,983
9.03
Fixed Interest 17.99%
(2014 – 15.44%)
UK Government Bonds 17.99%
(2014 – 15.44%)
Treasury 0% Stock 23.11.15
£21,000,000
Treasury 0% Stock 7.12.15
£20,863,200
20,842
8.96
41,825
17.99
(57)
(0.02)
(57)
(0.02)
Derivatives 2.95%
(2014 – 1.28%)
CFD Long Positions 1.22%
(2014 – (0.04)%)
Aerospace & Defense (0.02)%
(2014 – 0.00%)
Ultra Electronics
146,500
Beverages 0.05%
(2014 – 0.00%)
Nichols
48,231
111
0.05
SABMiller
65,391
7
0.00
118
0.05
37
Schroder Absolute UK Dynamic Fund
Portfolio Statement (continued)
Holding at Market Value
30.9.15
£000’s
% of net
assets
Chemicals 0.33%
(2014 – (0.06)%)
Scapa Group
Victrex
1,678,467
806
0.35
188,692
(49)
(0.02)
757
0.33
1,944,637
125
0.05
997,400
782
0.34
907
0.39
Construction & Materials 0.39%
(2014 – 0.00%)
Low & Bonar
Polypipe Group
Electronic & Electrical Equipment 0.00%
(2014 – 0.00%)
Gooch & Housego
4,419
(3)
0.00
Xaar
4,603
2
0.00
(1)
0.00
370
0.16
370
0.16
2,231
0.96
2,231
0.96
66
0.03
66
0.03
Financial Services 0.16%
(2014 – 0.03%)
Arrow Global Group
1,218,203
Food & Drug Retailers 0.96%
(2014 – 0.08%)
Booker Group
3,461,234
General Industrials 0.03%
(2014 – 0.00%)
British Polythene Industries
130,541
General Retailers (0.19)%
(2014 – (0.09)%)
38
Just Eat
892,416
99
0.04
Poundland Group
870,696
(546)
(0.23)
(447)
(0.19)
Schroder Absolute UK Dynamic Fund
Portfolio Statement (continued)
Holding at Market Value
30.9.15
£000’s
% of net
assets
Health Care Equipment & Services 0.04%
(2014 – 0.00%)
Smith & Nephew
211,900
100
0.04
100
0.04
(40)
(0.02)
(40)
(0.02)
Industrial Engineering (0.02)%
(2014 – 0.00%)
Melrose Industries
903,308
Life Insurance (0.05)%
(2014 – 0.00%)
St James’s Place
255,000
(320)
(0.14)
Phoenix Group
279,553
211
0.09
(109)
(0.05)
Media (0.43)%
(2014 – (0.05)%)
Entertainment One
1,427,241
(1,010)
(0.43)
(1,010)
(0.43)
(589)
(0.25)
(589)
(0.25)
24
0.01
24
0.01
(69)
(0.03)
(69)
(0.03)
Mining (0.25)%
(2014 – 0.00%)
Rio Tinto
126,300
Nonlife Insurance 0.01%
(2014 – 0.00%)
Direct Line Insurance Group
614,220
Personal Goods (0.03)%
(2014 – 0.00%)
Jimmy Choo
912,024
Pharmaceuticals & Biotechnology (0.10)%
(2014 – 0.00%)
GlaxoSmithKline
255,847
(239)
(0.10)
(239)
(0.10)
39
Schroder Absolute UK Dynamic Fund
Portfolio Statement (continued)
Holding at Market Value
30.9.15
£000’s
% of net
assets
Real Estate Investment Trusts 0.35%
(2014 – 0.05%)
Hansteen Holdings
4,244,281
814
0.35
814
0.35
4,838
(2)
0.00
518,800
(408)
(0.18)
(410)
(0.18)
970
0.42
970
0.42
Support Services (0.18)%
(2014 – 0.00%)
Robert Walters
Northgate
Technology Hardware & Equipment 0.42%
(2014 – 0.08%)
Sepura
2,900,143
Travel & Leisure (0.25)%
(2014 – (0.08)%)
InterContinental Hotels Group
134,738
(570)
(0.25)
(570)
(0.25)
CFD Short Positions 1.02%
(2014 – 1.13%)
Beverages 0.00%
(2014 – 0.05%)
Chemicals 0.00%
(2014 – 0.15%)
Electronic & Electrical Equipment (0.08)%
(2014 – 0.14%)
Halma
(312,175)
(283)
(0.12)
Morgan Advanced Materials
(641,268)
120
0.05
(84,708)
(17)
(0.01)
(243,637)
4
0.00
(176)
(0.08)
Renishaw
TT Electronics
40
Schroder Absolute UK Dynamic Fund
Portfolio Statement (continued)
Holding at Market Value
30.9.15
£000’s
% of net
assets
Financial Services (0.02)%
(2014 – 0.10%)
Hargreaves Lansdown
(261,515)
(45)
(0.02)
(45)
(0.02)
Food Producers 0.00%
(2014 – (0.02)%)
Futures 0.18%
(2014 – 0.23%)
FTSE 250 Index
(1,014)
419
0.18
419
0.18
448
0.19
448
0.19
Gas, Water & Multiutilities 0.19%
(2014 – 0.00%)
Centrica
(1,138,736)
General Retailers 0.16%
(2014 – 0.00%)
Kingfisher
(632,101)
24
0.01
Marks & Spencer
(518,800)
348
0.15
Next
(40,000)
3
0.00
375
0.16
56
0.02
56
0.02
Household Goods & Home Construction 0.02%
(2014 – 0.00%)
Persimmon
(113,533)
Industrial Engineering 0.43%
(2014 – 0.02%)
Bodycote
(306,901)
382
0.16
IMI
(236,519)
223
0.10
Spirax-Sarco Engineering
(85,322)
392
0.17
997
0.43
41
Schroder Absolute UK Dynamic Fund
Portfolio Statement (continued)
Holding at Market Value
30.9.15
£000’s
% of net
assets
Industrial Transportation 0.10%
(2014 – 0.00%)
Royal Mail
(527,550)
242
0.10
242
0.10
47
0.02
47
0.02
(183)
(0.08)
(183)
(0.08)
(1,405,200)
(54)
(0.02)
(135,000)
278
0.12
224
0.10
67
0.03
67
0.03
Media 0.00%
(2014 – 0.02%)
Nonlife Insurance 0.00%
(2014 – (0.02)%)
Personal Goods 0.02%
(2014 – 0.17%)
Burberry
(178,695)
Real Estate Investment Trusts 0.00%
(2014 – 0.06%)
Support Services (0.08)%
(2014 – 0.23%)
Whitbread
(48,368)
Travel & Leisure 0.10%
(2014 – 0.00%)
Mitie Group
Travis Perkins
Other derivative positions 0.71%
(2014 – 0.19%)
Euro Denominated Derivatives 0.03%
(2014 – (0.07)%)
Forward to buy €33,398,353
for £24,591,942
42
€33,398,353
Schroder Absolute UK Dynamic Fund
Portfolio Statement (continued)
Holding at Market Value
30.9.15
£000’s
% of net
assets
Sterling Denominated Derivatives 0.68%
(2014 – 0.20%)
FTSE 100 PUT 5600 December 2015
865
969
0.42
FTSE 100 PUT 5700 December 2015
460
614
0.26
1,583
0.68
213,844
91.99
US Denominated Derivatives 0.00%
(2014 – 0.06%)
Portfolio of investments 3
Net other assets
Net assets attributable to shareholders
18,633
8.01
232,477
100.00
Unless otherwise stated the above securities are ordinary shares or common
stock and admitted to official stock exchange listings.
1 Collective investment scheme permitted under the FCA’s COLL, not listed on
any exchange.
2 A related party to the fund (Note 11).
3 Including derivative liabilities.
43
Schroder Absolute UK Dynamic Fund
Summary of Portfolio Transactions
Largest purchases
Largest sales
For the year ended 30 September 2015
Cost
£000’s
Treasury 0% Stock 7.9.15
21,974
Treasury 0% Stock 23.11.15
20,976
Treasury 0% Stock 7.12.15
20,839
Treasury 0% Stock 24.8.15
14,995
Treasury 0% Stock 8.6.15
13,986
Treasury 0% Stock 27.4.15
13,490
Treasury 0% Stock 27.7.15
10,989
Schroder Special Situations Sterling Liquidity Plus Fund I Accumulation 1
7,112
GKN
5,501
Gamma Communications
5,188
For the year ended 30 September 2015
Treasury 0% Stock 9.3.15
24,998
Treasury 0% Stock 7.9.15
22,000
Treasury 0% Stock 29.12.14
19,985
Treasury 0% Stock 24.8.15
15,000
Treasury 0% Stock 8.6.15
14,000
Treasury 0% Stock 27.4.15
13,500
Treasury 0% Stock 27.7.15
11,000
Clinigen Group
8,788
HellermannTyton Group
8,135
Gamma Communications
6,622
1 A related party to the fund (Note 11).
44
Proceeds
£000’s
Schroder Absolute UK Dynamic Fund
Statement of Total Return
For the year ended 30 September 2015
2015
Notes
£000’s
2014
£000’s
£000’s
£000’s
Income
Net capital gains/(losses)
2
Revenue
3
2,958
21,750
2,661
Expenses
4
(7,377)
(5,376)
Finance costs: Interest
6
(518)
(369)
(4,937)
(3,084)
0
0
Net expense before taxation
Taxation
5
Net expense after taxation
Total return before
distributions
Finance costs: Distributions
6
Change in net assets
attributable to shareholders
from investment activities
(14,960)
(4,937)
(3,084)
16,813
(18,044)
(3)
0
16,810
(18,044)
Statement of Change in Net Assets
Attributable to Shareholders
For the year ended 30 September 2015
2015
£000’s
Opening net assets
attributable to shareholders
13,892
Amounts payable on
cancellation of shares
(89,160)
Change in net assets
attributable to shareholders
from investment activities
Closing net assets
attributable to shareholders
£000’s
£000’s
290,935
Amounts receivable
on creation of shares
Stamp duty reserve tax
2014
£000’s
367,885
70,223
(129,040)
(75,268)
(58,817)
0
(89)
16,810
(18,044)
232,477
290,935
45
Schroder Absolute UK Dynamic Fund
Balance Sheet
As at 30 September 2015
2015
2014
Notes
£000’s
£000’s
£000’s
Debtors
7
2,617
565
Cash and bank balances
8
20,944
20,585
£000’s
Assets
Investment assets
218,328
Total other assets
Total assets
279,982
23,561
21,150
241,889
301,132
(4,484)
(1,442)
Liabilities
Investment liabilities
Creditors
(4,928)
(8,755)
(4,928)
(8,755)
Total liabilities
(9,412)
(10,197)
232,477
290,935
Net assets attributable
to shareholders
46
9
Total other liabilities
Schroder Absolute UK Dynamic Fund
Notes to the Accounts
1 Accounting
policies
The applicable accounting policies adopted by the Schroder Absolute UK Dynamic
Fund are included in the Notes to the Aggregated Accounts on pages 13 to 15.
2 Net capital
gains/(losses)
The net capital gains/(losses) during the year comprise:
Non-derivative securities
Derivative contracts
2015
£000’s
2014
£000’s
22,934
(11,910)
679
5,685
(1,169)
(9,177)
(689)
445
(5)
(3)
21,750
(14,960)
2015
£000’s
2014
£000’s
2,420
2,974
55
13
0
2
Interest distributions
123
0
Interest on debt securities
138
225
55
311
0
6
164
(870)
Forward currency contracts
Currency (losses)/gains
Transaction charges
Net capital gains/(losses)
3 Revenue
UK dividends
Overseas dividends
Property income distributions
Bank interest
Underwriting commission
Net revenue return from derivative contracts
Administration charge rebates
Total revenue
3
0
2,958
2,661
47
Schroder Absolute UK Dynamic Fund
Notes to the Accounts (continued)
4 Expenses
2015
£000’s
2014
£000’s
2,936
4,667
Payable to the ACD, associates of the
ACD and agents of either of them:
ACD fee
Administration fees
Fund accounting fees
Performance fee
Transfer agency fees
311
359
1
(3)
16
4,276
0
1
(65)
138
7,455
5,180
Depositary’s fees
19
49
Safe custody fees
1
3
20
52
Payable to the Depositary, associates of the
Depositary and agents of either of them:
Other expenses:
Audit fee
Professional fee
Total expenses
13
13
(111)1
131
(98)
144
7,377
5,376
1 These expenses reflect prior period adjustments.
5 Taxation
Corporation tax has not been provided for as expenses exceed the revenue
liable to corporation tax.
(a) 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 an open ended investment company of 20%
(2014 – 20%) is applied to the net expenses before taxation. The differences are
explained below.
Net expense before taxation
Net expense for the year before taxation multiplied
by the standard rate of corporation tax
2015
£000’s
2014
£000’s
(4,937)
(3,084)
(987)
(617)
Effects of:
Revenue not subject to corporation tax
Movement in excess management expenses
Current tax charge for the year
48
(495)
(597)
1,482
1,214
0
0
Schroder Absolute UK Dynamic Fund
Notes to the Accounts (continued)
(b) Factors that may affect future tax charges
At the balance sheet date, there is a potential deferred tax asset of £8,144,261
(2014 – £6,662,004) in respect of unutilised management expenses. It is unlikely
the fund will generate sufficient taxable profits in the future to utilise this amount
and therefore no deferred tax asset has been recognised in the year or prior year.
6 Finance costs
Distributions and interest payable
The distributions take account of revenue deducted on the cancellation of shares,
and comprise:
Revenue deducted on cancellation of shares
Finance costs: Distributions
2014
£000’s
3
0
3
0
Finance costs: Interest
518
369
Total finance costs
521
369
Net expense after taxation
(4,937)
(3,084)
Deficit taken to capital
4,940
3,084
3
0
2015
£000’s
2014
£000’s
1,228
276
95
285
Finance costs: Distributions
7 Debtors
Sales awaiting settlement
Accrued UK dividends
Accrued bank interest
8 Cash and bank
balances
2015
£000’s
4
4
Revenue receivable from derivative contracts
1,290
0
Total debtors
2,617
565
2015
£000’s
2014
£000’s
19,684
19,715
1,260
870
20,944
20,585
Cash and bank balances
Amounts held at futures clearing houses and brokers
Total cash and bank balances
49
Schroder Absolute UK Dynamic Fund
Notes to the Accounts (continued)
2015
9 Creditors
£000’s
Amounts payable for cancellation of shares
Purchases awaiting settlement
Amounts payable on derivative contracts
2014
£000’s
£000’s
£000’s
0
7,319
334
0
24
721
Accrued expenses
ACD and Agents
ACD fee
Administration fees
Performance fee
247
308
29
121
4,276
0
4,552
429
Depositary and Agents
Depositary’s fees
4
14
Safe custody fees
0
1
Transaction charges
1
1
5
Other accrued expenses
Total creditors
16
13
270
4,928
8,755
10 Contingent
liabilities
There were no contingent liabilities at the balance sheet date (2014 – Nil).
11 Related party
transactions
The ACD 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 ACD at the balance sheet date are
disclosed under Expenses and Creditors in the Notes to the Accounts.
Administration charge rebates received or receivable from the ACD of £3,359
(2014 – Nil) are disclosed under Revenue in the Notes to the Accounts.
The ACD acts as principal on all transactions of shares in the fund. The
aggregate monies received through the creation and cancellation of shares are
disclosed in the Statement of Change in Net Assets Attributable to Shareholders
and Finance costs in the Notes to the Accounts. Amounts due to the ACD in
respect of share transactions at the balance sheet date are disclosed under
Creditors in the Notes to the Accounts.
Shares held or managed by the ACD or associates of the ACD as a percentage
of the fund’s net asset value at the balance sheet date were 42.92%
(2014 – 32.06%).
50
Schroder Absolute UK Dynamic Fund
Notes to the Accounts (continued)
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 £123,421 (2014 – Nil) is included
under Revenue in the Notes to the Accounts.
12 Performance fee
The ACD is entitled to receive out of the assets of each share class of the fund a
performance related management fee (Performance fee) equal to 20% of the
increase in the net asset value per share of each class (after adding back any
distributions made if applicable) of the fund outstanding in respect of each
performance period less any carry forward per share of such class. The
Performance fee is payable in arrears in respect of each performance period.
Each performance period shall be twelve months. A fuller explanation of the
calculation of the Performance fee can be found in the Prospectus.
If a shareholder redeems or switches all or part of their shares before the end of
a performance period, any accrued Performance fee with respect to such shares
will crystallise on that business day and will then become payable to the ACD.
The Performance fee received by the ACD is disclosed under Expenses in the
Notes to the Accounts.
13 Share classes
The fund currently has four share classes: P1 Accumulation shares,
P2 Accumulation shares, P1 Euro Hedged Accumulation shares and P2 Euro
Hedged Accumulation shares. The ACD charge is based on the average value of
the fund, calculated on a daily basis, and covers the remuneration of the ACD,
the Investment Adviser and their overhead expenses and for each share class is
as follows:
P1 Accumulation shares
P2 Accumulation shares
P1 Euro Hedged Accumulation shares
P2 Euro Hedged Accumulation shares
1.50%
1.00%
1.50%
1.00%
The net asset value of the share class, the net asset value per share and the
number of shares in issue in each class are given in the Net Asset Value and
Comparative Tables on page 27.
51
Schroder Absolute UK Dynamic Fund
Notes to the Accounts (continued)
14 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 ACD 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 without limitation, 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 assit in the redemption of shares, the efficient management of the share
or purpose 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,
derivative, foreign currency, liquidity, credit and interest rate risks. The ACD’s
policies for managing these risks are summarised below and have been applied
throughout the year and the prior year.
Market price risk
The fund’s investment portfolio is exposed to market price fluctuations which are
monitored by the ACD in pursuance of the investment objective and policy.
Adherence to investment guidelines and to investment and borrowing powers set
out in the Instrument of Incorporation, the Prospectus and in the COLL mitigates
the risk of excessive exposure to any particular type of security or issuer.
Derivative risk
The fund trades in a high volume of derivatives to achieve it’s investment
objective and for efficient management. This involves a higher degree of risk and
may lead to a higher volatility in the share prices of the fund. The ACD employs a
risk management process to allow the ACD to measure derivative and forward
positions and their contribution to the overall risk profile of the fund. As part of
this risk management process the ACD conducts daily value at risk analysis of
the fund and performs both stress and back testing of the fund.
Foreign currency risk
The fund invests in overseas securities valued in foreign currencies may cause
the balance sheet to be significantly affected by movements in foreign exchange
rates. The Euro Hedged share classes, ACD seeks to manage exposure to
currency movements by using forward currency contracts.
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.
52
Schroder Absolute UK Dynamic Fund
Notes to the Accounts (continued)
Currency risk profile
The currency risk profile of the company's net assets and liabilities at the balance
sheet date was as follows:
Monetary
exposure
£000’s
Non-monetary
exposure
£000’s
Total
£000’s
2015
1
0
1
2014
1
0
1
2015
24,750
0
24,750
2014
61,291
0
61,291
2015
(7,158)
213,777
206,619
2014
(49,826)
278,573
228,747
2015
1
0
1
2014
2
0
2
Currency
Danish krone
Euro
Sterling
Swiss franc
US dollar
2015
1,106
0
1,106
2014
719
175
894
Liquidity risk
The primary source of this risk to the fund is the liability to shareholders for any
cancellation of shares. 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
The debt securities are exposed to credit risk which reflects the ability of the
issuer to meet its obligations. The majority of debt securities in which the fund
invests are investment grade listed bonds or government securities which are
lower risk. The fund can invest in the full spectrum of available securities, which
include non-investment grade securities (known as high yield). The ACD
monitors credit weightings on a regular basis as well as reviewing individual
issuers and respective bonds at risk of default.
Interest rate risk
The fund 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
ACD 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. The ACD
monitors and controls the sensitivity of the portfolio to fluctuations of interest
53
Schroder Absolute UK Dynamic Fund
Notes to the Accounts (continued)
rates (duration) to best match the return of revenue gains/losses with potential
losses/gains of capital value. 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
Fixed rate
financial assets
£000’s
Financial assets
not carrying
interest
£000’s
Total
£000’s
2015
1
0
0
1
2014
1
0
0
1
2015
91
0
24,659
24,750
2014
99
0
67,260
67,359
2015
19,745
41,825
179,053
240,623
2014
19,763
44,914
240,318
304,995
2015
1
0
0
1
2014
2
0
0
2
2015
1,106
0
0
1,106
2014
719
0
175
894
Financial
liabilities not
carrying interest
£000’s
Total
£000’s
Currency
Danish krone
Euro
Sterling
Swiss franc
US dollar
Currency
Euro
2015
0
0
2014
6,068
6,068
2015
34,004
34,004
2014
76,248
76,248
Sterling
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.
54
Schroder Absolute UK Dynamic Fund
Notes to the Accounts (continued)
Derivatives
During the year the fund entered into derivative contracts for specific investment
purposes in addition to being used for efficient management. The aim of any
derivative or forward used for specific investment purposes is not to materially
alter the risk profile of the fund, rather their use is to assist the ACD in meeting
the investment objective of the fund.
Contracts for difference
CFD’s are shown in the Portfolio Statement and are priced at fair value using
valuation models and data sourced from market data providers. The up front
fees received on a mark to market basis are split between capital and revenue as
appropriate. The capital element is reflected within Derivative contracts under
Net capital gains/(losses) in the Notes to the Accounts and the revenue element
is reflected within Net revenue return from derivative contracts under Revenue in
the Notes to the Accounts. Net gains are reflected within Derivative contracts
under Net capital gains/(losses) in the Notes to the Accounts.
Value at risk
The ACD assesses the market risk of the fund’s investments, including any
derivative exposure, using a value at risk methodology. This process provides the
ACD with an estimate of the maximum potential loss that could be expected to
occur as a result of changes in market prices over a given period of time in all
but a given percentage of circumstances.
The value at risk is calculated on a 99% confidence interval with a one month
holding period. As at the balance sheet date, the fund’s value at risk is 4.13%
(2014 – 3.25%).
15 Portfolio
transaction
costs
2015
£000’s
2014
£000’s
£000’s
£000’s
Analysis of total purchase costs
Purchases in year before transaction costs
181,186
408,851
Commissions
38
51
Taxes
87
284
Total purchase costs
Gross purchase total
125
335
181,311
409,186
272,577
303,212
Analysis of total sales costs
Gross sales in year before transaction costs
Commissions
Taxes
Total sales costs
Total sales net of transaction costs
(291)
(151)
(1)
0
(292)
(151)
272,285
303,061
55
Schroder Absolute UK Dynamic Fund
Counterparty Exposure
The types of derivatives held at the balance sheet date were forward currency
contracts, option contracts and CFD’s. Details of individual contracts are
disclosed in the Portfolio Statement and the value of the exposure is shown in
the Non Statutory Portfolio Statement.
Counterparty
Forward
currency
contracts
£000’s
Option
contracts
£000’s
Contracts
for
difference
£000’s
Total
£000’s
67
0
0
67
0
0
12,385
12,385
0
1,583
0
1,583
JPMorgan
2015
Bank of America Merrill Lynch
2015
UBS
2015
The collateral held by the fund on behalf of the counterparties at the balance
sheet date was as follows:
JPMorgan
£000’s
2015
56
150
Schroder European Absolute Target Fund
Schroder European Absolute Target Fund
Fund Information
Investment objective
and policy
The fund aims to achieve positive returns (greater than zero) over a rolling three
year period in all market conditions. Positive returns are not guaranteed over this
or longer periods of time and the fund may not achieve this objective. There is a
risk to an investor’s capital. Investors may not get back the amount originally
invested.
The fund seeks to take advantage of investment opportunities created by the
fluctuations in economic activity in the European market. It will invest directly, or
indirectly through derivatives, in the shares of large and medium sized companies
that have their registered office in Europe, or derive a significant proportion of
their revenue from, or are predominantly operating from, within this geographic
region. This does not, however, preclude investment in a limited way in smaller
companies. The fund may also invest in bonds and other fixed income securities.
The fund may use derivatives for the purposes of efficient portfolio management
or meeting the investment objectives of the fund. The fund may have long and
short positions (principally through contracts for difference) and may be net long
or short when long and short positions are combined. The fund may also use
forward foreign exchange transactions, interest rate and government bond
futures, and other exchange traded and off exchange traded derivative
contracts. Such derivative contracts have the potential to significantly increase
the fund’s risk profile.
The fund may at any time have substantial holdings in cash and near cash.
The ACD employs a risk management process that seeks to control the volatility
of fund returns.
With effect from 1 April 2015 the fund’s Investment objective and policy changed,
previously it was:
The fund’s investment objective is to achieve absolute returns through targeted
investment strategies independent of UK market conditions or indices. The fund
will aim typically to deliver absolute (more than zero) returns over a rolling three
year period, although an absolute return performance is not guaranteed over this
or longer periods of time and it may not achieve this objective. There is a risk to
an investor’s capital. Investors may not get back the amount originally invested.
The ACD will seek to achieve its investment objective by investing predominantly
in companies incorporated in the UK or in companies which derive a significant
proportion of their revenues or profits from this country or which are primarily
operating in this jurisdiction. Investments will be made predominantly in the
equities of large or mid sized companies and other equity related transferable
securities, such as preferred shares, debentures, warrants (not exceeding 5 per
cent of the total assets of the fund) and convertible securities or in derivatives
thereof. This does not, however, preclude investment in a limited way in smaller
companies. As the fund has an absolute return objective it will not be managed
against any index.
57
Schroder European Absolute Target Fund
Fund Information (continued)
Whilst the fund will mainly invest in equities, it may also invest in debt securities
(such as bonds and notes of any maturity which are transferable securities),
where this is deemed appropriate in the market conditions prevailing at that time.
Any such securities will be rated investment grade by Moody’s or S&P, or if not
rated, deemed by the Investment Manager to have at least an equivalent rating
and will be issued by the UK government or companies incorporated in the UK
or in companies which derive a predominant proportion of their revenues or
profits from this country or which are principally operating in that jurisdiction. The
fund may also invest in short term securities which are rated investment grade
(such as certificates of deposit, bankers’ acceptances and commercial paper) for
temporary defensive purposes.
The fund will seek to achieve its investment objective and policy through the use
of various investment strategies including the use of derivatives to obtain long
and synthetic short positions principally through contracts for difference. The
fund may also use forward foreign exchange transactions, interest rate and
government bond futures, and other exchange traded and off exchange traded
derivative contracts for the purposes of efficient portfolio management and/or
meeting the investment objectives of the fund. Such derivative contracts have
the potential to significantly increase the fund’s risk profile.
The ACD employs a risk management process that seeks to control the volatility
of fund returns.
The fund may at any time have substantial holdings in ancillary liquid assets.
58
Schroder European Absolute Target Fund
Fund Information (continued)
[Insert text.]
Financial
highlights
Dealing price
30.9.15
30.9.14
% change
P1 GBP Hedged
Accumulation shares
122.70p
119.30p
2.85
P2 GBP Hedged
Accumulation shares
126.30p
122.50p
3.10
P1 Euro Accumulation shares
116.50¢
112.90¢
3.19
P2 Euro Accumulation shares
116.40¢
114.00¢
2.11
30.11.15
30.11.14
Nil
Nil
••.••.••
••.••.••
Distribution per P2 GBP
Hedged Accumulation shares
Financial
highlights
Dealing/selling price
% change
The performance of hedged share classes may differ from other share
A/I/X Income (Gross) units
0000.00p xd
0000.00p xd
0
classes of the fund because the return on unhedged share classes is
A/I/X Accumulation (Gross) units 0000.00p
0000.00p
0
based on both the performance of the fund’s investments and the
••.••.••
••.••.••
performance of the portfolio currencies relative to sterling whereas the
Quarterly distribution
return on hedged share classes is based only on the performance of the
Interiminvestments.
distribution per
fund’s
Quarterly distribution
Fund information
Fund information
Final distribution per
A/I/X
Income
Launch
date (Gross) unit
Launch price
100.00p per P1 GBP Hedged
Accumulation share
••.••.••
100.00p per P2 GBP Hedged
00.00p
per A/I/X
Income (Gross) unit
Accumulation
share
00.00p
per A/I/X
Income (Gross) unit
17 November
2008
Launch date
Launch price
Launch date
00.00p
Income (Gross) unit
100.00¢per
perA/I/X
P1 Euro
Accumulation share
Launch price
Accounting dates
Revenue allocation date
Accounting dates
Accounting dates
Quarterly
Revenue allocation dates
Day Month
Revenue
Allocation dates
0000.00p
18 July 2008 0000.00p
100.00¢ per P2
Euro
Interim
Accumulation share
Day Month
Day Month
Day Month
Interim
Day Month
Final
Final
31 March
30 September
Interim
Quarterly
Final
31 May
30 November
Day Month
Day Month
Day Month
Quarterly
Interim
Quarterly
Final
Day Month
Day Month
Day Month
Day Month
59
Schroder European Absolute Target Fund
Fund Information (continued)
For the period
to Date
Ongoing charges
figure
A/I/X Income (Gross) units
A/I/X Accumulation (Gross) units2
P1 GBP Hedged
Accumulation shares
For the period/year
to Date
For the period
from 1.10.15
1
For the
year
0.00%
to 30.9.15
1
0.00%
For the
year3
0.00%
to 30.9.143
0.00%
1.43%1 2
1.35%
1.44%
1P2
The
Total expense ratio is annualised based on the fees suffered during the
GBP Hedged
accounting period.
Accumulation
shares
0.93%1 2
0.85%
0.94%
Euro
Accumulation
2P1
The
Manager’s
periodic charge for X Accumulation (Gross) units is invoiced
shares
1.43%1 2
1.35%
1.45%
directly to unitholders and is therefore not included in the Total expense ratio
P2 Euro Accumulation
for that unit class.
12
shares
0.93%
0.85%
0.95%
3 The Total expense ratio includes VAT recoverable on registrar’s fees.
1 The Ongoing charges figure is a projected figure based on the latest
expenses of the share class.
2 The Ongoing charges figures is annualised based on the fees incurred
during the accounting period.
60
Schroder European Absolute Target Fund
Review of Investment Activities
From 30 September 2014 to 30 September 2015, the price of
P2 GBP Hedged Accumulation shares on a dealing price to dealing price
basis rose 3.10%.
The fund changed its name and investment objective and policy on 1 April 2015.
The fund now invests on a pan-European basis rather than investing
predominately in UK companies.
In the markets, optimism over the launch of quantitative easing in the eurozone in
early 2015 gave way in summer 2015 to worries over the global growth outlook,
particularly a slowdown in China. Uncertainty over US monetary policy also
caused volatility.
The fund delivered positive returns for the period. A leading contributor to
performance was the short position in oil equipment, services & distribution, as
oil related companies came under pressure due to a decline in oil prices. Our
long position in Imperial Tobacco Group supported fund performance; the group
benefited from the acquisition of certain US brands during the period. Other long
positions contributing to fund returns included jewellery retailer Pandora, which
has continued to execute well on its expansion strategy, and healthcare group
Shire. We have subsequently sold the latter to reduce our growth exposure.
Shire’s share price recovered after the aborted bid by Abbvie and the group is
proposing its own big acquisition in the US, which is unlikely to create much
value in the short term.
Fund Manager:
Steve Cordell
Steve has twenty years’ investment
experience and is a senior member of
the pan-European equity team at
Schroders
Steve joined Schroders from Cazenove
Capital
Prior to this he worked at HSBC Asset
Management (Europe) Ltd
He graduated from Trinity College,
Oxford with a First Class (Hons) in
Modern Languages
We have moved to a net long position in growth defensives as the global
slowdown continues. Fundamentally, economies slowing should support growth
and defensive shares, although these areas of the market have already been very
strong. We also moved net long oil, as the oil price showed signs of support
around the US$45 mark per barrel.
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.
61
Schroder European Absolute Target Fund
Risk Profile
Risk and reward
indicator
Lower risk
Potentially lower reward
1
2
Higher risk
Potentially higher reward
3
4
5
6
77
The risk and reward indicator changed from 5 to 7 with effect from
8 October 2014.
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. For non-hedged share classes exchange rates may cause
the value of overseas investments and the revenue from them to rise or fall.
There is no guarantee that the hedging strategy applied in hedged share classes
will entirely eliminate the adverse effects of changes in exchange rates between
the base currency and the portfolio currencies.
In addition, it should be noted that hedging transactions will be entered into
whether or not the currency of a hedged share class is declining or increasing in
value in relation to the base currency or portfolio currencies. Hedged share
classes aim to provide investors with a return correlated to the portfolio
currencies performance of the fund by reducing the effect of exchange rate
fluctuations between the base currency and the portfolio currencies.
As it is not possible to legally segregate share classes’ liabilities from those of
other share classes in the fund, there is a risk that, in certain limited
circumstances, the hedging transactions undertaken in relation to a hedged
share class could result in liabilities which might affect the net asset value of the
other share classes in the fund.
The fund is index unconstrained and has the potential for greater volatility.
More than 35% of the property of the fund may be invested in Government
securities.
62
Schroder European Absolute Target Fund
Risk Profile (continued)
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 alternative investments
(including commodities, hedge funds, property funds and private equity) in order
to meet its investment objectives. One of the aims of the ACD is to achieve
volatility targets for the portfolio and in order to do this leverage will be used. The
use of leverage can increase gains as well as losses and expose the fund to
increased risk. Whilst it is intended that the additional risk that leverage exposes
the fund to is controlled by value at risk methodology, there can be no guarantee
that this risk control may be achieved especially under extreme or changing
market conditions.
For these reasons, the purchase of shares should not normally be regarded as a
short term investment.
63
Schroder European Absolute Target Fund
Net Asset Value and Comparative Tables
Share price range
Year to 31 December
P1 GBP Hedged
Accumulation shares
P2 GBP Hedged
Accumulation shares
Highest
dealing
p
Lowest
dealing
p
Highest
dealing
p
Lowest
dealing
p
2010
107.47
96.85
108.32
97.91
2011
107.70
96.86
109.41
97.96
2012
112.34
107.47
114.36
109.18
2013
123.28
111.97
126.00
114.08
2014
123.85
115.80
126.78
118.80
2015 to 30 September
124.00
116.70
127.70
120.20
Year to 31 December
P1 Euro
Accumulation shares1
P2 Euro
Accumulation shares
Highest
dealing
¢
Lowest
dealing
¢
Highest
dealing
¢
Lowest
dealing
¢
2010
103.51
92.82
102.79
92.59
2011
100.07
92.83
103.45
92.61
2012
–
–
107.64
103.18
2013
117.78
115.42
117.84
107.23
2014
117.94
109.90
118.45
110.70
2015 to 30 September
117.80
109.00
117.60
110.90
1 The share class was dormant with the final pricing point being
4 November 2011 and was reactivated on 16 July 2013.
Net revenue
P1 GBP Hedged
Accumulation shares
pence per share
P2 GBP Hedged
Accumulation shares
pence per share
2010
0.0466
0.5529
2011
Nil
0.1594
2012
Nil
Nil
2013
Nil
Nil
2014
Nil
Nil
2015 to 30 September
Nil
Nil
Year to 31 December
64
Schroder European Absolute Target Fund
Net Asset Value and Comparative Tables
(continued)
P2 Euro
Accumulation shares
cent per share
Year to 31 December
2010
0.5370
2011
0.1109
2012
Nil
2013
Nil
2014
Nil
2015 to 30 September
Nil
These figures have been rounded to 4 decimal places.
The P1 Euro Accumulation shares have made no distributions to date.
Net asset value
Net asset value
£000’s
Net asset
value per share
p
Number of
shares in issue
P1 GBP Hedged
Accumulation shares
143,891
122.10
117,850,427
P2 GBP Hedged
Accumulation shares
116,261
124.83
93,138,823
P1 Euro Accumulation shares
7,746
97.33
7,958,191
P2 Euro Accumulation shares
95,151
97.61
97,484,411
P1 GBP Hedged
Accumulation shares
131,358
119.24
110,163,228
P2 GBP Hedged
Accumulation shares
As at 30 September
2013
2014
164,000
122.39
133,994,028
P1 Euro Accumulation shares
751
87.87
855,540
P2 Euro Accumulation shares
77,921
88.72
87,829,217
P1 GBP Hedged
Accumulation shares
69,005
122.49
56,336,667
P2 GBP Hedged
Accumulation shares
105,729
126.10
83,842,119
P1 Euro Accumulation shares
549
85.88
639,263
P2 Euro Accumulation shares
62,136
85.76
72,449,356
2015
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.
65
Schroder European Absolute Target Fund
Non-statutory Portfolio Statement
(unaudited)
The following portfolio structure has been provided to show the investment
exposure of the portfolio, by investment. It differs from the statutory portfolio
statement in that only the equity exposure is shown.
Holding at Market Value
30.9.15
£000’s
% of net
assets
Long Positions
Aerospace & Defense
Thales
182,330
8,365
3.53
8,365
3.53
70,000
3,306
1.39
114,008
4,602
1.94
7,908
3.33
5,025,000
3,274
1.38
55,004
2,142
0.90
4,425,420
3,775
1.59
9,191
3.87
7,474
3.15
7,474
3.15
44,000
3,677
1.55
250,000
4,353
1.83
8,030
3.38
Automobiles & Parts
Renault
Rheinmetall 1
Banks
Banca Popolare di Milano
Cembra Money Bank
Credito Valtellinese
Beverages
SABMiller
200,000
Construction & Materials
Cie d’ Enterprises
CRH
Financial Services
3i Group
736,196
3,433
1.45
Anima Holding
552,688
3,185
1.34
6,618
2.79
1,050,000
4,406
1.86
532,256
2,922
1.23
3,500,000
2,355
0.99
9,683
4.08
Fixed Line Telecommunications
BT Group
Com Hem Holding
Telecom Italia
66
1
Schroder European Absolute Target Fund
Non-statutory Portfolio Statement
(unaudited) (continued)
Holding at Market Value
30.9.15
£000’s
% of net
assets
Food & Drug Retailers
Casino Guichard Perrachon
68,467
Delhaize Group
40,000
2,400
1.02
2,335
0.98
4,735
2.00
General Retailers
XXL
360,746
2,327
0.98
2,327
0.98
Health Care Equipment & Services
Smith & Nephew
250,000
2,883
1.22
2,883
1.22
Household Goods & Home Construction
SEB
39,500
2,402
1.01
2,402
1.01
Industrial Engineering
Alstom
70,000
1,426
0.60
1,426
0.60
Industrial Transportation
D/S Norden
190,000
2,767
1.17
2,767
1.17
Life Insurance
Aviva
1,306,240
5,904
2.49
5,904
2.49
419,493
3,519
1.48
2,003,520
4,929
2.08
8,448
3.56
105,054
4,449
1.88
60,000
2,317
0.97
6,766
2.85
Media
Atresmedia Corp de Medios
de Communication
ITV
Mining
Imerys
Randgold Resources
67
Schroder European Absolute Target Fund
Non-statutory Portfolio Statement
(unaudited) (continued)
Holding at Market Value
30.9.15
£000’s
% of net
assets
Nonlife Insurance
esure Group
700,000
1,736
0.73
1,736
0.73
225,000
2,139
0.90
3,152,680
4,414
1.86
6,553
2.76
Oil & Gas Producers
BG Group
Cairn Energy
Personal Goods
Moncler
245,068
2,893
1.22
Pandora
33,000
2,543
1.07
5,436
2.29
2,110
0.89
2,110
0.89
7,851
3.31
7,851
3.31
200,000
2,518
1.06
1,025,000
8,055
3.40
10,573
4.46
Pharmaceuticals & Biotechnology
Bavarian Nordic
80,807
Real Estate Investment & Services
Nexity
276,239
Real Estate Investment Trusts
Land Securities Group
Merlin Properties Socimi
Software & Computer Services
Indra Sistemas 1
350,000
2,391
1.01
Micro Focus International
491,024
5,907
2.48
1,015,338
5,071
2.14
171,103
5,715
2.42
19,084
8.05
Sage Group
United Internet
Support Services
G4S
1,000,000
2,307
0.97
Premier Farnell
2,463,996
2,581
1.09
Rentokil Initial
4,310,900
6,341
2.67
1,698
0.72
12,927
5.45
USG People
68
188,794
Schroder European Absolute Target Fund
Non-statutory Portfolio Statement
(unaudited) (continued)
Holding at Market Value
30.9.15
£000’s
% of net
assets
Tobacco
Imperial Tobacco Group
216,410
7,386
3.11
7,386
3.11
75,000
2,567
1.08
420,000
3,480
1.47
1,445,083
1,672
0.70
7,719
3.25
176,302
74.31
Travel & Leisure
Carnival
Playtech
Thomas Cook Group
Total long positions
Short Positions
Banks
Banco Bilbao Vizcaya Argentaria
(450,000)
(2,517)
(1.06)
Banco Popular Espanol
(1,650,000)
(3,968)
(1.68)
Banco Popular Espanol Rights 2015
(1,650,000)
(28)
(0.01)
(500,000)
(4,705)
(1.98)
(11,218)
(4.73)
(4,134)
(1.74)
(4,134)
(1.74)
(2,260)
(0.95)
(2,260)
(0.95)
(5,486)
(2.31)
(5,486)
(2.31)
(3,875)
(1.63)
(3,875)
(1.63)
(1,898)
(0.80)
Svenska Handelsbanken A
Chemicals
BASF
(82,000)
Construction & Materials
HeidelbergCement
(50,000)
Electricity
Energias de Portugal
(2,272,914)
Electronic & Electrical Equipment
Schneider Electric
(105,000)
Financial Services
Aberdeen Asset Management
(640,000)
Ashmore Group
(450,000)
(1,109)
(0.47)
Azimut Holding
(200,000)
(2,831)
(1.19)
69
Schroder European Absolute Target Fund
Non-statutory Portfolio Statement
(unaudited) (continued)
Holding at Market Value
30.9.15
£000’s
% of net
assets
Financial Services (continued)
Hargreaves Lansdown
(600,000)
(7,242)
(3.05)
(13,080)
(5.51)
(15,534)
(494)
(0.21)
Distribuidora Internacional
de Alimentacion
(542,274)
(2,162)
(0.91)
Ocado
(500,000)
(1,600)
(0.67)
(4,256)
(1.79)
(2,841)
(1.20)
(2,841)
(1.20)
(2,766)
(1.17)
(2,766)
(1.17)
(1,296)
(0.55)
(1,296)
(0.55)
(1,347)
(0.57)
(1,347)
(0.57)
(3,039)
(1.28)
(3,039)
(1.28)
(90,000)
(2,261)
(0.95)
(250,000)
(2,371)
(1.00)
(4,632)
(1.95)
(1,013)
(0.43)
Food & Drug Retailers
Colruyt
Food Producers
Marine Harvest
(337,311)
Forestry & Paper
Mondi
(200,000)
General Industrials
Bekaert
(74,647)
General Retailers
AO World
(800,000)
Health Care Equipment & Services
Coloplast B
(65,000)
Industrial Engineering
GEA Group
IMI
Industrial Transportation
70
Aeroports de Paris
(13,546)
Kuehne & Nagel International
(28,000)
(2,370)
(1.00)
(3,383)
(1.43)
Schroder European Absolute Target Fund
Non-statutory Portfolio Statement
(unaudited) (continued)
Holding at Market Value
30.9.15
£000’s
% of net
assets
Media
Schibsted A
Schibsted B
(64,500)
(1,446)
(0.61)
(64,500)
(1,348)
(0.57)
SES
(120,000)
(2,495)
(1.05)
WPP
(173,000)
(2,375)
(1.00)
(7,664)
(3.23)
(2,365)
(1.00)
(2,365)
(1.00)
Mobile Telecommunications
Tele2 AB B
(370,000)
Oil Equipment, Services & Distribution
Saipem
(800,000)
(4,230)
(1.78)
Seadrill
(283,333)
(1,093)
(0.46)
(5,323)
(2.24)
(1,236)
(0.52)
Personal Goods
Lvmh Moet Hennessy Louis Vuitton
Salvatore Ferragamo
(11,000)
(130,000)
(2,286)
(0.96)
(3,522)
(1.48)
Real Estate Investment & Services
Foxtons Group
(1,000,000)
(2,372)
(1.00)
(2,372)
(1.00)
Support Services
Aggreko
(72,215)
(687)
(0.29)
(1,000,000)
(1,791)
(0.75)
Experian
(202,610)
(2,144)
(0.91)
HomeServe
(927,616)
(3,764)
(1.59)
Intertek Group
(100,000)
Electrocomponents
(2,431)
(1.02)
(10,817)
(4.56)
Travel & Leisure
Accor
(150,000)
(4,622)
(1.95)
Compass Group
(430,000)
(4,528)
(1.91)
J D Wetherspoon
(418,386)
(3,079)
(1.30)
Norwegian Air Shuttle
(100,000)
(2,588)
(1.09)
(14,817)
(6.25)
71
Schroder European Absolute Target Fund
Non-statutory Portfolio Statement
(unaudited) (continued)
Market Value
£000’s
% of net
assets
(110,493)
(46.57)
Net long exposure
65,809
27.74
Net investment exposure
65,809
27.74
Total short positions
All holdings are CFD’s unless otherwise stated.
1 Direct equity investments.
72
Schroder European Absolute Target Fund
Portfolio Statement
Holding at Market Value
30.9.15
£000’s
% of net
assets
Equities 13.05%
(2014 – 10.64%)
Automobiles & Parts 1.94%
(2014 – 0.00%)
Rheinmetall
114,008
4,602
1.94
4,602
1.94
21,631
9.11
21,631
9.11
Banks 0.00%
(2014 – 0.65%)
Electronic & Electrical Equipment 0.00%
(2014 – 0.47%)
Equity Funds 9.11%
(2014 – 7.12%)
Schroder International Selection EURO
Liquidity Fund I Accumulation 1 2
225,260
Fixed Line Telecommunications 0.99%
(2014 – 0.00%)
Telecom Italia
3,500,000
2,355
0.99
2,355
0.99
2,391
1.01
2,391
1.01
Software & Computer Services 1.01%
(2014 – 0.00%)
Indra Sistemas
350,000
Travel & Leisure 0.00%
(2014 – 2.40%)
Fixed Interest 80.77%
(2014 – 81.96%)
UK Government Bonds 80.77%
(2014 – 81.96%)
Treasury 0% Stock 12.10.15
£28,000,000
27,996
11.79
Treasury 0% Stock 9.11.15
£15,000,000
14,991
6.31
Treasury 0% Stock 7.12.15
£22,000,000
21,977
9.26
73
Schroder European Absolute Target Fund
Portfolio Statement (continued)
Holding at Market Value
30.9.15
£000’s
% of net
assets
UK Government Bonds (continued)
Treasury 0% Stock 14.12.15
£21,000,000
20,976
8.84
Treasury 0% Stock 4.1.16
£18,400,000
18,373
7.74
Treasury 0% Stock 7.3.16
£30,000,000
29,917
12.60
Treasury 0% Stock 14.3.16
£26,000,000
25,925
10.92
Treasury 0% Stock 29.3.16
£31,700,000
31,615
13.31
191,770
80.77
727
0.31
727
0.31
(711)
(0.30)
(711)
(0.30)
5,025,000
(412)
(0.17)
55,004
(59)
(0.02)
4,425,420
(542)
(0.24)
(1,013)
(0.43)
634
0.27
634
0.27
Derivatives (0.21)%
(2014 – 0.83%)
CFD Long Positions (5.15)%
(2014 – (0.36)%)
Aerospace & Defense 0.31%
(2014 – 0.00%)
Thales
182,330
Automobiles & Parts (0.30)%
(2014 – 0.04%)
Renault
70,000
Banks (0.43)%
(2014 – (0.01)%)
Banca Popolare di Milano
Cembra Money Bank
Credito Valtellinese
Beverages 0.27%
(2014 – (0.17)%)
SABMiller
200,000
Construction & Materials (0.28)%
(2014 – 0.00%)
Cie d’ Enterprises
CRH
74
44,000
(263)
(0.11)
250,000
(395)
(0.17)
(658)
(0.28)
Schroder European Absolute Target Fund
Portfolio Statement (continued)
Holding at Market Value
30.9.15
£000’s
% of net
assets
Financial Services (0.49)%
(2014 – 0.03%)
3i Group
736,196
(704)
(0.30)
Anima Holding
552,688
(459)
(0.19)
(1,163)
(0.49)
1,050,000
(464)
(0.19)
532,256
(326)
(0.14)
(790)
(0.33)
Fixed Line Telecommunications (0.33)%
(2014 – (0.04)%)
BT Group
Com Hem Holding
Food & Drug Retailers (0.02)%
(2014 – 0.00%)
Casino Guichard Perrachon
68,467
(5)
0.00
Delhaize Group
40,000
(31)
(0.02)
(36)
(0.02)
(105)
(0.04)
(105)
(0.04)
30
0.01
30
0.01
General Retailers (0.04)%
(2014 – 0.00%)
XXL
360,746
Healthcare Equipment & Services 0.01%
(2014 – (0.05)%)
Smith & Nephew
250,000
Household Goods & Home Construction (0.09)%
(2014 – 0.00%)
SEB
39,500
(213)
(0.09)
(213)
(0.09)
35
0.01
35
0.01
Industrial Engineering 0.01%
(2014 – (0.01)%)
Alstom
70,000
75
Schroder European Absolute Target Fund
Portfolio Statement (continued)
Holding at Market Value
30.9.15
£000’s
% of net
assets
Industrial Transportation (0.28)%
(2014 – 0.00%)
D/S Norden
190,000
(673)
(0.28)
(673)
(0.28)
(986)
(0.42)
(986)
(0.42)
(1,155)
(0.48)
Life Insurance (0.42)%
(2014 – (0.01)%)
Aviva
1,306,240
Media (0.68)%
(2014 – (0.04)%)
Atresmedia Corp de Medios
de Communication
ITV
419,493
2,003,520
(467)
(0.20)
(1,622)
(0.68)
105,054
(883)
(0.37)
60,000
(213)
(0.09)
(1,096)
(0.46)
(157)
(0.07)
(157)
(0.07)
Mining (0.46)%
(2014 – 0.00%)
Imerys
Randgold Resources
Nonlife Insurance (0.07)%
(2014 – 0.00%)
esure Group
700,000
Oil & Gas Producers (0.45)%
(2014 – (0.04)%)
BG Group
Cairn Energy
225,000
(315)
(0.13)
3,152,680
(757)
(0.32)
(1,072)
(0.45)
Personal Goods (0.12)%
(2014 – 0.08%)
76
Moncler
245,068
(266)
(0.11)
Pandora
33,000
(13)
(0.01)
(279)
(0.12)
Schroder European Absolute Target Fund
Portfolio Statement (continued)
Holding at Market Value
30.9.15
£000’s
% of net
assets
Pharmaceuticals & Biotechnology (0.25)%
(2014 – (0.03)%)
Bavarian Nordic
80,807
(592)
(0.25)
(592)
(0.25)
116
0.05
116
0.05
200,000
(52)
(0.02)
1,025,000
1,157
0.49
1,105
0.47
Real Estate Investment & Services 0.05%
(2014 – 0.00%)
Nexity
276,239
Real Estate Investment Trusts 0.47%
(2014 – 0.07%)
Land Securities Group
Merlin Properties Socimi
Software & Computer Services (0.63)%
(2014 – 0.08%)
Micro Focus International
Sage Group
United Internet
491,024
(987)
(0.42)
1,015,338
(448)
(0.19)
171,103
(50)
(0.02)
(1,485)
(0.63)
Support Services (0.90)%
(2014 – (0.04)%)
G4S
1,000,000
(369)
(0.15)
Premier Farnell
2,463,996
(1,534)
(0.65)
Rentokil Initial
4,310,900
13
0.01
188,794
(258)
(0.11)
(2,148)
(0.90)
236
0.10
236
0.10
USG People
Tobacco 0.10%
(2014 – (0.05)%)
Imperial Tobacco Group
216,410
Travel & Leisure (0.13)%
(2014 – (0.09)%)
Carnival
75,000
215
0.09
Playtech
420,000
(326)
(0.14)
77
Schroder European Absolute Target Fund
Portfolio Statement (continued)
Holding at Market Value
30.9.15
£000’s
% of net
assets
Travel & Leisure (continued)
Thomas Cook Group
1,445,083
(195)
(0.08)
(306)
(0.13)
(450,000)
186
0.08
Banco Popular Espanol
(1,650,000)
956
0.40
Banco Popular Espanol
Rights 2015
(1,650,000)
(28)
(0.01)
(500,000)
(70)
(0.03)
1,044
0.44
CFD Short Positions 3.91%
(2014 – 1.26%)
Bank 0.44%
(2014 – (0.03)%)
Banco Bilbao Vizcaya Argentaria
Svenska Handelsbanken A
Chemicals 0.22%
(2014 – 0.16%)
BASF
(82,000)
521
0.22
521
0.22
338
0.14
338
0.14
530
0.22
530
0.22
1,085
0.46
1,085
0.46
Construction & Materials 0.14%
(2014 – 0.00%)
HeidelbergCement
(50,000)
Electricity 0.22%
(2014 – (0.08)%)
Energias de Portugal
(2,272,914)
Electronic & Electrical Equipment 0.46%
(2014 – 0.00%)
Schneider Electric
(105,000)
Financial Services 0.51%
(2014 – 0.14%)
78
Aberdeen Asset Management
(640,000)
465
0.20
Ashmore Group
(450,000)
145
0.06
Azimut Holding
(200,000)
665
0.28
Schroder European Absolute Target Fund
Portfolio Statement (continued)
Holding at Market Value
30.9.15
£000’s
% of net
assets
Financial Services (continued)
Hargreaves Lansdown
(600,000)
(60)
(0.03)
1,215
0.51
Food & Drug Retailers 0.43%
(2014 – 0.25%)
Colruyt
(15,534)
13
0.01
Distribuidora Internacional
de Alimentacion
(542,274)
494
0.20
Ocado Group
(500,000)
516
0.22
1,023
0.43
Food Producers (0.08)%
(2014 – 0.00%)
Marine Harvest
(337,311)
(199)
(0.08)
(199)
(0.08)
111
0.05
111
0.05
101
0.04
101
0.04
(315)
(0.13)
(315)
(0.13)
Forestry & Paper 0.05%
(2014 – 0.00%)
Mondi
(200,000)
Futures 0.00%
(2014 – 0.11%)
Gas, Water & Multiutilities 0.00%
(2014 – 0.05%)
General Industrials 0.04%
(2014 – 0.00%)
Bekaert
(74,647)
General Retailers (0.13)%
(2014 – 0.16%)
AO World
(800,000)
79
Schroder European Absolute Target Fund
Portfolio Statement (continued)
Holding at Market Value
30.9.15
£000’s
% of net
assets
Health Care Equipment & Services 0.02%
(2014 – 0.00%)
Coloplast B
(65,000)
52
0.02
52
0.02
(90,000)
306
0.13
(250,000)
247
0.10
553
0.23
62
0.03
Industrial Engineering 0.23%
(2014 – 0.00%)
GEA Group
IMI
Industrial Transportation 0.07%
(2014 – 0.08%)
Aeroports de Paris
(13,546)
Kuehne & Nagel International
(28,000)
106
0.04
168
0.07
Media 0.05%
(2014 – 0.07%)
Schibsted A
(64,500)
(34)
(0.01)
Schibsted B
(64,500)
(5)
0.00
SES
(120,000)
40
0.02
WPP
(173,000)
123
0.04
124
0.05
156
0.07
156
0.07
Mobile Telecommunications 0.07%
(2014 – 0.00%)
Tele2 AB B
Mining 0.00%
(2014 – 0.06%)
Nonlife Insurance 0.00%
(2014 – (0.03)%)
Oil & Gas Producers 0.00%
(2014 – (0.09)%)
80
(370,000)
Schroder European Absolute Target Fund
Portfolio Statement (continued)
Holding at Market Value
30.9.15
£000’s
% of net
assets
Oil Equipment, Services & Distribution 0.52%
(2014 – 0.12%)
Saipem
(800,000)
700
0.29
Seadrill
(283,333)
535
0.23
1,235
0.52
(11,000)
142
0.06
(130,000)
451
0.19
593
0.25
Personal Goods 0.25%
(2014 – 0.08%)
Lvmh Moet Hennessy Louis Vuitton
Salvatore Ferragamo
Real Estate Investment & Services (0.01)%
(2014 – 0.13%)
Foxtons Group
(1,000,000)
(28)
(0.01)
(28)
(0.01)
(72,215)
346
0.15
(1,000,000)
303
0.13
(202,610)
255
0.11
HomeServe
(927,616)
224
0.09
Intertek Group
(100,000)
(61)
(0.03)
1,067
0.45
Support Services 0.45%
(2014 – 0.34%)
Aggreko
Electrocomponents
Experian
Travel & Leisure (0.04)%
(2014 – (0.26)%)
Accor
(150,000)
(67)
(0.03)
Compass Group
(430,000)
(67)
(0.03)
J D Wetherspoon
(418,386)
(88)
(0.04)
Norwegian Air Shuttle
(100,000)
132
0.06
(90)
(0.04)
Other derivative positions 1.03%
(2014 – (0.07)%)
81
Schroder European Absolute Target Fund
Portfolio Statement (continued)
Holding at Market Value
30.9.15
£000’s
% of net
assets
Euro Denominated Derivatives 1.03%
(2014 – (0.07)%)
Forward to buy €21,170,891
for £15,000,000
€21,170,891
635
0.27
Forward to buy €107,877,075
for £79,000,000
€107,877,075
622
0.26
Forward to buy €25,702,237
for £18,400,000
€25,702,237
606
0.26
Forward to buy €28,979,107
for £21,000,000
€28,979,107
419
0.18
Forward to buy €40,832,715
for £30,000,000
€40,832,715
244
0.10
Forward to buy €35,422,629
for £26,000,000
€35,422,629
242
0.10
Forward to buy €30,082,056
for £22,000,000
€30,082,056
230
0.10
Forward to buy €42,916,836
for £31,700,000
€42,916,836
105
0.04
Forward to buy €26,984
for £19,856
€26,984
0
0.00
Forward to buy €660,005
for £488,414
€660,005
(1)
0.00
Forward to sell €69,511,206
for £51,000,000
€(69,511,206)
(305)
(0.13)
Forward to sell €240,710,232
for £177,240,225
€(240,710,232)
(485)
(0.20)
DAX Index Future
December 2015 EUR
(32)
(63)
(0.03)
EURO Stoxx 50 Future
December 2015
(455)
188
0.08
2,437
1.03
222,248
93.61
15,171
6.39
237,419
100.00
Portfolio of investments 3
Net other assets
Net assets attributable to shareholders
Unless otherwise stated the above securities are ordinary shares or common
stock and admitted to official stock exchange listings.
1 A related party to the fund (Note 12).
2 Collective investment scheme permitted under the FCA’s COLL, not listed on
any exchange.
3 Including derivative liabilities.
82
Schroder European Absolute Target Fund
Summary of Portfolio Transactions
Largest purchases
Largest sales
For the year ended 30 September 2015
Cost
£000’s
Schroder International Selection EURO Liquidity Fund I Accumulation 1
42,693
Treasury 0% Stock 12.10.15
39,908
Treasury 0% Stock 13.4.15
39,896
Treasury 0% Stock 6.7.15
37,910
Treasury 0% Stock 15.6.15
34,915
Treasury 0% Stock 29.3.16
31,613
Treasury 0% Stock 7.9.15
29,934
Treasury 0% Stock 7.3.16
29,918
Treasury 0% Stock 28.9.15
27,937
Treasury 0% Stock 14.3.16
25,930
For the year ended 30 September 2015
Proceeds
£000’s
Treasury 0% Stock 15.12.14
65,994
Treasury 0% Stock 13.10.14
43,000
Treasury 0% Stock 5.1.15
43,000
Treasury 0% Stock 30.3.15
40,000
Treasury 0% Stock 13.4.15
40,000
Treasury 0% Stock 8.12.14
39,999
Treasury 0% Stock 16.3.15
39,991
Treasury 0% Stock 6.7.15
38,000
Treasury 0% Stock 9.3.15
35,000
Treasury 0% Stock 15.6.15
35,000
1 A related party to the fund (Note 12).
83
Schroder European Absolute Target Fund
Statement of Total Return
For the year ended 30 September 2015
2015
Notes
£000’s
2014
£000’s
£000’s
£000’s
Income
Net capital gains/(losses)
2
Revenue
3
965
6,625
1,602
Expenses
4
(3,549)
(4,933)
Finance costs: Interest
6
(1,524)
(771)
(4,108)
(4,102)
0
0
Net expense before taxation
Taxation
5
Net expense after taxation
Total return before
distributions
Finance costs: Distributions
6
Change in net assets
attributable to shareholders
from investment activities
(18,705)
(4,108)
(4,102)
2,517
(22,807)
0
4
2,517
(22,803)
Statement of Change in Net Assets
Attributable to Shareholders
For the year ended 30 September 2015
2015
£000’s
Opening net assets
attributable to shareholders
£000’s
£000’s
374,030
21,689
234,141
Amounts payable on
cancellation of shares
(160,817)
(200,221)
Change in net assets
attributable to shareholders
from investment activities
Closing net assets
attributable to shareholders
£000’s
363,049
Amounts receivable
on creation of shares
Stamp duty reserve tax
84
2014
(139,128)
33,920
0
(136)
2,517
(22,803)
237,419
374,030
Schroder European Absolute Target Fund
Balance Sheet
As at 30 September 2015
2015
2014
Notes
£000’s
£000’s
£000’s
Debtors
7
1,993
526
Cash and bank balances
8
20,458
29,377
£000’s
Assets
Investment assets
239,509
Total other assets
Total assets
355,334
22,451
29,903
261,960
385,237
(17,261)
(5,864)
Liabilities
Investment liabilities
Creditors
Bank overdrafts
Total other liabilities
9
(3,512)
(5,336)
10
(3,768)
(7)
(7,280)
(5,343)
Total liabilities
(24,541)
(11,207)
Net assets attributable
to shareholders
237,419
374,030
85
Schroder European Absolute Target Fund
Notes to the Accounts
1 Accounting
policies
The applicable accounting policies adopted by the Schroder European Absolute
Target Fund are included in the Notes to the Aggregated Accounts on pages 13
to 15.
2 Net capital
gains/(losses)
The net capital gains/(losses) during the year comprise:
2015
£000’s
2014
£000’s
906
(4,404)
Derivative contracts
13,221
(5,889)
Forward currency contracts
(12,862)
(8,456)
5,364
47
(4)
(3)
6,625
(18,705)
2015
£000’s
2014
£000’s
Non-derivative securities
Currency gains
Transaction charges
Net capital gains/(losses)
3 Revenue
UK dividends
22
84
Overseas dividends
0
254
Interest distributions
143
0
1,116
827
12
665
0
53
(332)
(281)
4
0
965
1,602
Interest on debt securities
Bank interest
Underwriting commission
Net revenue return from derivative contracts
Administration charge rebates
Total revenue
86
Schroder European Absolute Target Fund
Notes to the Accounts (continued)
4 Expenses
2015
£000’s
2014
£000’s
2,583
4,093
Payable to the ACD, associates of the
ACD and agents of either of them:
ACD fee
Administration fees
Fund accounting fees
Performance fee
Transfer agency fees
381
430
1
(12)
26
708
0
1
(84)
178
3,576
4,727
Depositary’s fees
26
54
Safe custody fees
2
2
28
56
Payable to the Depositary, associates of the
Depositary and agents of either of them:
Other expenses:
Audit fee
13
13
Professional fee
(68)1
137
(55)
150
3,549
4,933
Total expenses
1 These expenses reflect prior period adjustments.
5 Taxation
Corporation tax has not been provided for as expenses exceed the revenue
liable to corporation tax.
(a) 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 an open ended investment company of 20%
(2014 – 20%) is applied to the net revenue before taxation. The differences
are explained below.
Net expense before taxation
Net expense for the year before taxation multiplied
by the standard rate of corporation tax
2015
£000’s
2014
£000’s
(4,108)
(4,102)
(822)
(820)
Effects of:
Revenue not subject to corporation tax
Movement in excess management expenses
Current tax charge for the year
(4)
(68)
826
888
0
0
87
Schroder European Absolute Target Fund
Notes to the Accounts (continued)
(b) Factors that may affect future tax charges
At the balance sheet date, there is a potential deferred tax asset of £4,336,953
(2014 – £3,510,827) in respect of unutilised management expenses. It is unlikely
the fund will generate sufficient taxable profits in the future to utilise this amount
and therefore no deferred tax asset has been recognised in the year or prior year.
6 Finance costs
Distributions and interest payable
The distributions take account of revenue received on the creation of shares and
comprise:
Revenue received on creation of shares
Finance costs: Distributions
0
(4)
0
(4)
1,524
771
Total finance costs
1,524
767
Net expense after taxation
(4,108)
(4,102)
Deficit taken to capital
4,108
4,098
0
(4)
2015
£000’s
2014
£000’s
60
510
0
16
7 Debtors
Amounts receivable for creation of shares
Accrued UK dividends
Revenue receivable from derivative contracts
1,933
0
Total debtors
1,993
526
2015
£000’s
2014
£000’s
19,352
29,377
1,106
0
20,458
29,377
Cash and bank balances
Amounts held at futures clearing houses and brokers
Total cash and bank balances
88
2014
£000’s
Finance costs: Interest
Finance costs: Distributions
8 Cash and bank
balances
2015
£000’s
Schroder European Absolute Target Fund
Notes to the Accounts (continued)
2015
9 Creditors
£000’s
2014
£000’s
Amounts payable for cancellation of shares
Purchases awaiting settlement
Amounts payable on derivative contracts
£000’s
£000’s
694
4,165
1,769
0
115
466
Accrued expenses
ACD and Agents
ACD fee
Administration fees
Performance fee
176
288
30
140
708
0
914
428
Depositary and Agents
Depositary’s fees
4
16
Safe custody fees
0
3
Transaction charges
1
1
Interest payable
2
0
Other accrued expenses
Total creditors
10 Bank overdrafts
7
20
13
257
3,512
5,336
2015
£000’s
2014
£000’s
Amounts overdrawn at futures clearing houses and brokers
3,768
7
Total bank overdrafts
3,768
7
11 Contingent
liabilities
There were no contingent liabilities at the balance sheet date (2014 – Nil).
12 Related party
transactions
The ACD 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 ACD at the balance sheet date are
disclosed under Expenses and Creditors in the Notes to the Accounts.
Administration charge rebates received or receivable from the ACD of £3,598
(2014 – Nil) are disclosed under Revenue in the Notes to the Accounts.
The ACD acts as principal on all transactions of shares in the fund. The
aggregate monies received through the creation and cancellation of shares are
disclosed in the Statement of Change in Net Assets Attributable to Shareholders
and Finance costs in the Notes to the Accounts. Amounts due from or to the
89
Schroder European Absolute Target Fund
Notes to the Accounts (continued)
ACD in respect of share transactions at the balance sheet date are disclosed
under Debtors and Creditors in the Notes to the Accounts.
Shares held or managed by the ACD or associates of the ACD as a percentage
of the fund’s net asset value at the balance sheet date were 35.20%
(2014 – 27.94%).
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 £142,879 (2014 – Nil) is included
under Revenue in the Notes to the Accounts.
13 Performance fee
The ACD is entitled to receive out of the assets of each share class of the fund a
performance related management fee (Performance fee) equal to 20% of the
increase in the net asset value per share of each class (after adding back any
distributions made if applicable) of the fund outstanding in respect of each
performance period less any carry forward per share of such class. The
Performance fee is payable in arrears in respect of each performance period.
Each performance period shall be twelve months. For the Performance fee to be
payable in a performance period any previous underperformance needs to have
been made good during the course of that performance period.
From 1 October 2014, a Hurdle Rate was added to the methodology for
calculating the Performance fee which requires the fund to achieve a specific
minimum return above any increase in the share price before the Performance fee
is paid. As such, the fund is required to outperform the 3 Month London Interbank
Offer Rate (LIBOR) over the relevant twelve month performance period before the
Performance fee becomes payable. For the share classes which are denominated
in Euros the Hurdle Rate will be the 3 Month Euro LIBOR. A fuller explanation of
the calculation of the Performance fee can be found in the Prospectus.
If a shareholder redeems or switches all or part of their shares before the end of
a performance period, any accrued Performance fee with respect to such shares
will crystallise on that business day and will then become payable to the ACD.
The Performance fee received by the ACD is disclosed under Expenses in the
Notes to the Accounts.
14 Share classes
The fund currently has four share classes: P1 GBP Hedged Accumulation
shares, P2 GBP Hedged Accumulation shares, P1 Euro Accumulation shares
and P2 Euro Accumulation shares. The ACD charge is based on the average
value of the fund, calculated on a daily basis, and covers the remuneration of the
ACD, the Investment Adviser and their overhead expenses and for each share
class is as follows:
P1 GBP Hedged Accumulation shares
P2 GBP Hedged Accumulation shares
90
1.25%
0.75%
Schroder European Absolute Target Fund
Notes to the Accounts (continued)
P1 Euro Accumulation shares
P2 Euro Accumulation shares
1.25%
0.75%
The net asset value of the share class, the net asset value per share and the
number of shares in issue in each class are given in the Net Asset Value and
Comparative Tables on page 65.
15 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 ACD 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 without limitation, 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
assit in the redemption of shares, the efficient management of the share or
purpose 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,
derivative, foreign currency, liquidity, credit and interest rate risks. The ACD’s
policies for managing these risks are summarised below and have been applied
throughout the year and the prior year.
Market price risk
The fund’s investment portfolio is exposed to market price fluctuations which are
monitored by the ACD in pursuance of the investment objective and policy.
Adherence to investment guidelines and to investment and borrowing powers set
out in the fund’s Instrument of Incorporation, the Prospectus and in the COLL
mitigates the risk of excessive exposure to any particular type of security or issuer.
Derivative risk
The fund trades in a high volume of derivatives to achieve it’s investment
objective and for efficient management. This involves a higher degree of risk and
may lead to a higher volatility in the share prices of the fund. The ACD employs a
risk management process to allow the ACD to measure derivative and forward
positions and their contribution to the overall risk profile of the fund. As part of
this risk management process the ACD conducts daily value at risk analysis of
the fund and performs both stress and back testing of the fund.
91
Schroder European Absolute Target Fund
Notes to the Accounts (continued)
Foreign currency risk
The fund invests in overseas securities and collective investment schemes
valued in foreign currencies 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 company's net assets and liabilities at the balance
sheet date was as follows:
Monetary
exposure
£000’s
Non-monetary
exposure
£000’s
Total
£000’s
2015
168
(1,225)
(1,057)
2014
2,172
291
2,463
2015
27,775
34,386
62,161
2014
80,102
9,133
89,235
2015
(269)
325
56
2014
641
436
1,077
2015
(11,119)
186,644
175,525
2014
(58,629)
337,465
278,836
2015
810
(240)
570
2014
0
0
0
Currency
Danish krone
Euro
Norwegian krone
Sterling
Swedish krona
Swiss franc
2015
118
46
164
2014
0
2,419
2,419
Liquidity risk
The primary source of this risk to the fund is the liability to shareholders for any
cancellation of shares. 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
The debt securities are exposed to credit risk which reflects the ability of the
issuer to meet its obligations. The majority of debt securities in which the fund
invests are investment grade listed bonds or government securities which are
lower risk. The fund can invest in the full spectrum of available securities, which
92
Schroder European Absolute Target Fund
Notes to the Accounts (continued)
include non-investment grade securities (known as high yield). The ACD
monitors credit weightings on a regular basis as well as reviewing individual
issuers and respective bonds at risk of default.
Interest rate risk
The fund 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
ACD 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. The ACD
monitors and controls the sensitivity of the portfolio to fluctuations of interest
rates (duration) to best match the return of revenue gains/losses with potential
gains/losses of capital value.
Interest receivable on bank balances or payable on amounts held or overdrawn
at futures clearing houses and brokers 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
Fixed rate
financial assets
£000’s
Financial assets
not carrying
interest
£000’s
Total
£000’s
2015
0
0
223
223
2014
2,174
0
292
2,466
2015
12,810
0
286,177
298,987
2014
2,068
0
87,335
89,403
2015
0
0
567
567
2014
760
0
436
1,196
2015
8,180
191,770
233,536
433,487
2014
24,375
306,542
31,447
362,364
2015
0
0
970
970
2014
0
0
0
0
2015
118
0
106
224
2014
0
0
2,419
2,419
Currency
Danish krone
Euro
Norwegian krone
Sterling
Swedish krona
Swiss franc
93
Schroder European Absolute Target Fund
Notes to the Accounts (continued)
Floating rate
financial
liabilities
£000’s
Fixed rate
financial
liabilities
£000’s
Financial
liabilities not
carrying interest
£000’s
Total
£000’s
2015
0
0
1,280
1,280
2014
0
0
3
3
2015
590
0
236,236
236,826
2014
7
0
161
168
2015
159
0
352
511
2014
0
0
119
119
2015
3,669
0
254,293
257,962
2014
0
0
83,528
83,528
2015
0
0
400
400
2014
0
0
0
0
2015
0
0
60
60
2014
0
0
0
0
Currency
Danish krone
Euro
Norwegian krone
Sterling
Swedish krona
Swiss franc
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.
Derivatives
During the year the fund entered into derivative contracts for specific investment
purposes in addition to being used for efficient management. The aim of any
derivative or forward used for specific investment purposes is not to materially
alter the risk profile of the fund, rather their use is to assist the ACD in meeting
the investment objective of the fund.
Contracts for difference
CFD’s are shown in the Portfolio Statement and are priced at fair value using
valuation models and data sourced from market data providers. The up front
fees received on a mark to market basis are split between capital and revenue as
appropriate. The capital element is reflected within Derivative contracts under
Net capital gains/(losses) in the Notes to the Accounts and the revenue element
is reflected within Net revenue return from derivative contracts under Revenue in
the Notes to the Accounts. Net gains/(losses) are reflected within Derivative
contracts under Net capital gains/(losses) in the Notes to the Accounts.
94
Schroder European Absolute Target Fund
Notes to the Accounts (continued)
Value at risk
The ACD assesses the market risk of the fund’s investments, including any
derivative exposure, using a value at risk methodology. This process provides the
ACD with an estimate of the maximum potential loss that could be expected to
occur as a result of changes in market prices over a given period of time in all
but a given percentage of circumstances.
The value at risk is calculated on a 99% confidence interval with a one month
holding period. As at the balance sheet date, the fund’s value at risk is 2.63%
(2014 – 1.83%).
16 Portfolio
transaction
costs
2015
£000’s
2014
£000’s
£000’s
£000’s
Analysis of total purchase costs
Purchases in year before transaction costs
Commissions
Taxes
512,750
1,037,552
120
15
23
29
Total purchase costs
Gross purchase total
143
44
512,893
1,037,596
638,618
706,349
Analysis of total sales costs
Gross sales in year before transaction costs
Commissions
Taxes
Total sales costs
Total sales net of transaction costs
(13)
(35)
0
0
(13)
(35)
638,605
706,314
95
Schroder European Absolute Target Fund
Counterparty Exposure
The types of derivatives held at the balance sheet date were forward currency
contracts, futures contracts and CFD’s. Details of individual contracts are
disclosed in the Portfolio Statement and the value of the exposure is shown in
the Non Statutory Portfolio Statement.
Counterparty
Forward
currency
contracts
£000’s
Futures
contracts
£000’s
Contracts
for
difference
£000’s
Total
£000’s
230
0
0
230
866
0
0
866
637
0
0
637
(445)
0
0
(445)
0
0
56,461
56,461
(1)
0
0
(1)
1,026
0
0
1,026
0
124
0
124
Barclays
2015
BNP Paribas
2015
Goldman Sachs
2015
JPMorgan
2015
Bank of America Merrill Lynch
2015
Royal Bank of Scotland
2015
State Street
2015
UBS
2015
At the balance sheet date no collateral was held by the fund or on behalf of the
counterparties in respect of the above.
96
Schroder Absolute Return Fund Company
General Information
Authorised Corporate Director
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
Directors
J. Troiano (Chairman)
J. M. Cardew
J. W. Stewart
R. E. Stoakley
C. Trabattoni
J. Walker-Hazell
P. C. Wallace
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
Investment Adviser
Schroder Investment Management Limited
31 Gresham Street
London EC2V 7QA
Authorised and regulated by
the Financial Conduct Authority
Depositary
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 ACD has delegated the function of Registrar to International Financial Data Services Limited.
Authorisation
The company is an investment company with variable capital under Regulation 12
of the OEIC Regulations, incorporated with limited liability in England and Wales
and authorised by the FCA under Regulation 14 of the OEIC Regulations. The
company is a UCITS 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.
European Union
Savings Directive
Schroders is required by the European Union Savings Directive to report
payments to HM Revenue & Customs that are made by the company to
investors living in other European Union member states.
97
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 November 2015 by Schroder Unit Trusts Limited, 31 Gresham Street, London EC2V 7QA.
Registered No: 04191730 England. Authorised and regulated by the Financial Conduct Authority. w34377