The Charity Multi-Asset Fund. Final Report and Accounts March 2016

Transcription

1 Final Report and Accounts March 2016

2 Contents The Charity Multi-Asset Fund Fund Information Investment objective and policy Alternative Investment Fund Managers Directive (AIFMD) Financial highlights Fund information Ongoing charges figure Participation Management charges Investment Adviser Supervisory Board Review of Investment Activities Risk Profile Specific risks Statement of the Manager s Responsibilities Report of the Trustee Independent Auditors Report to the Trustees of The Charity Multi-Asset Fund Comparative Tables Portfolio Statement Summary of Portfolio Transactions Largest purchases Largest sales Statement of Total Return Statement of Change in Net Assets Attributable to Unitholders Balance Sheet Notes to the Accounts Accounting policies Net capital (losses)/gains Revenue Expenses Taxation Distributions Fair value hierarchy Debtors Other creditors Contingent liabilities Related party transactions Unit classes Derivative and other financial instruments Direct transaction costs Units in issue reconciliation Remuneration Distribution Table Quarterly distribution for the three months ended 30 June Interim distribution for the three months ended 30 September Quarterly distribution for the three months ended 31 December Final distribution for the three months ended 31 March Equalisation Transactional Revenue General Information Collectively these comprise the Fund Manager s report.

3 Fund Information Investment objective and policy The Charity Multi-Asset Fund aims to at least maintain the real value of capital whilst generating a sustainable and reliable distribution through investment in collective investment schemes as well as directly held transferable securities, derivatives, cash, deposits and money market instruments. Alternative Investment Fund Managers Directive (AIFMD) The AIFMD, as implemented in the UK by the Alternative Investment Fund Managers (AIFMs) Regulations 2013, establishes an EU wide harmonised framework for monitoring and supervising risks posed by AIFMs and the alternative investment funds (AIFs) they manage. The fund is an AIF and Schroder Unit Trust Limited (the Manager) was authorised by the Financial Conduct Authority (FCA) to act as an AIFM on 2 July The AIFMD requires certain information to be disclosed to unitholders. It is intended that any such information will in future be provided in the report and accounts, unless such information is required to be disclosed without delay, in which case it will be made via the Schroders website at: Financial highlights Selling price % change A Distribution units 47.97p 51.16p (6.24) A Accumulation units 67.42p 69.07p (2.39) S Distribution units 49.37p 52.65p (6.23) S Accumulation units 52.07p 53.19p (2.11) to to Distributions per A Distribution unit p p Fund information Launch date 29 June 2007 Launch price 50.00p per A Distribution unit 50.00p per A Accumulation unit Launch date 1 October 2014 Launch price 50.00p per S Distribution unit 50.00p per S Accumulation unit Quarterly Interim Quarterly Final Accounting dates 30 June 30 September 31 December 31 March Distribution allocation dates 31 August 30 November 28 February 31 May 3

4 Fund Information (continued) Ongoing charges figure For the year For the year to to A Distribution units 1.29% 1.29% 1 A Accumulation units 1.29% 1.29% 1 S Distribution units 0.99% 1.00% 1 2 S Accumulation units 0.99% 1.00% The Annual management charge has been based on the daily net asset value of the fund from 1 October Previously, for A Distribution units and S Accumulation units it was based on the net asset value of the fund on the first business day of each month. 2 The Ongoing charges figure is annualised based on the fees incurred during the accounting period. 4

5 Fund Information (continued) Participation Charities in England and Wales (and every appropriate body in Scotland and Northern Ireland) may participate in the fund unless specifically precluded by their deeds or other governing instrument. For A Distribution units and A Accumulation units the minimum initial investment is 1,000 and, for subsequent purchases 500. Applications for subscriptions into the S Distribution units and S Accumulation units are accepted at the Manager s discretion. There is no maximum limit on the amount which may be invested. The fund can issue both Distribution and Accumulation units. Distribution unitholders receive regular quarterly distributions, while accumulation unitholders benefit from the reinvestment of their income into the fund. Management charges There is no preliminary charge. The Annual management charge is 0.65% (plus VAT) of the value of the fund for A Distribution units and A Accumulation units and 0.40% (plus VAT) for S Distribution units and S Accumulation units and is charged to the capital of the fund. The Annual management charge in respect of Schroder funds in which the fund invests is rebated to the fund so that no double charging occurs. Investment Adviser The Manager has delegated the function of Investment Adviser to Schroder Investment Management Limited. The Investment Adviser has appointed Schroder & Co Limited as its delegated sub-investment adviser. Supervisory Board The duties and responsibilities of the Supervisory Board are set out in the Scheme rules. These include the determination of the criteria and methods for evaluating the performance of the fund, making and revising a written statement of the investment objectives of the fund and an obligation to inform the Charity Commissioners promptly should the Supervisory Board not be satisfied at any time as to the compliance with the Scheme Particulars by the Trustee or the Manager. 5

6 Review of Investment Activities From 31 March 2015 to 31 March 2016, the price of A Accumulation units on a selling price to selling price basis fell 2.39%. In comparison, the FTSE 1 All Share Index generated a negative total return of 3.92% 2 and the FTSE 1 British Government Fixed All Stocks Index generated a total return of 3.25% 2. The muted overall market returns of 2015 have continued into 2016 with UK and global equities struggling to make significant headway. In this environment the fund has protected against the worst of the falls, but has still delivered a negative return, falling 2% over the last 12 months, taking our 5 year return to 5% per annum. This is slightly lower than our anticipated long term average return reflecting the later stage of the cycle. The flat equity returns so far this year mask considerable volatility. Concerns over US growth, Chinese currency depreciation and oil price weakness created panic in February and UK equities were down over 10%. However, robust economic data, reassuring central bank activity and a stabilisation of the oil price provided the catalyst for a bounce back in risk assets in March. We have also seen significant market rotation, with large caps outperforming mid caps, value outperforming growth and emerging markets outperforming developed markets. In this environment we continue to value diversification, between and within asset classes, and remain invested in alternative assets such as property, infrastructure and absolute return. Although we are fully invested in equities we are becoming a little more cautious, reflecting the perceived greater risks at this stage of the cycle. The bond market remains vulnerable in our view and we retain a near zero exposure. We seek to use cash to take advantage of volatile markets, despite the poor returns on offer. Co-Fund Manager: Kate Rogers Kate has thirteen years investment experience, specialising in investment on behalf of charities, endowments and foundations and joined Schroders Charities in 2005 after four years with Kleinwort Benson Private Bank Charity team She is a CFA charterholder and has a BSc (Hons) in natural sciences from the University of Durham, is Chair of her local community foundation, and governor of her local primary school She is also Chair of the Charity Investors Group, which is a membership organisation providing a forum for investment debate 1 FTSE International Limited ( FTSE ) FTSE. FTSE is a trade mark of London Stock Exchange Plc and The Financial Times Limited and is used by FTSE International Limited under licence. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE's express written consent. 2 Source: Thomson Reuters Datastream. Please remember that past performance is not a guide to future performance and it might not be repeated. The value of investments and the revenue from them may go down as well as up and investors may not get back the amount originally invested. Because of this, you are not certain to make a profit on your investments and you may lose money. 6 Co-Fund Manager: Tom Montagu-Pollock Tom joined Schroders and began his investment career in 2005 after graduating from Newcastle University with a BA (Hons) in Business Management He co-manages the Charity Multi- Asset Fund having been involved in its running since launch in 2007 Tom is a full member (MCSI) of the Chartered Institute for Securities and Investment He has also completed the London Business School Foundation and Endowment Asset Management Course

7 Risk Profile Specific risks The fund invests in assets which are exposed to currencies other than sterling. Exchange rates may cause the value of overseas investments and the revenue from them to rise or fall. The fund invests in emerging markets and the Far East. This involves a high degree of risk and should be seen as long term in nature. The fund may invest in unregulated collective investment schemes, which involves a higher degree of risk as they are not regulated by the FCA. The funds may not be readily realisable and priced less frequently than listed shares or authorised unit trusts, and therefore price swings may be more volatile. The fund invests in alternative investments (including commodities, hedge funds, real estate funds and private equity) which involves a higher degree of risk and can be more volatile. They should only be considered as a long term investment. As a result of the Annual management charges being charged wholly to capital, the distributable revenue of the fund may be higher, but the capital value of the fund may be eroded which may affect future performance. For these reasons, the purchase of units should not normally be regarded as a short term investment. 7

8 Statement of the Manager s Responsibilities The Manager is required by the Charities Act 2011 to prepare accounts for each annual and half yearly accounting period, in accordance with United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), which give a true and fair view of the financial position of the fund and of its net revenue and the net capital losses on the property of the fund for the year. In preparing the accounts the Manager is required to: select suitable accounting policies and then apply them consistently; comply with the requirements of the Charities Act 2011 and Regulation 6 of The Charities (Accounts and Reports) Regulations 2008; follow generally accepted accounting principles and applicable accounting standards; prepare the accounts on the basis that the fund will continue in operation unless it is inappropriate to do so; keep proper accounting records which enable it to demonstrate that the accounts as prepared comply with the above requirements; make judgements and estimates that are prudent and reasonable. The Manager is responsible for the management of the fund which was created by a Scheme of the Charity Commissioners under section 24 of the Charities Act 1993, in accordance with the Scheme Particulars and the Scheme made by the Charity Commissioners on 11 June 2007 and for taking reasonable steps for the prevention and detection of fraud, error and non-compliance with law or regulations. In accordance with the Scheme, Part 8 of the Charities Act 2011 and The Charities (Accounts and Reports) Regulations 2008 the Manager is deemed to be the Charity Trustee of the fund. In the opinion of the Manager, the Investment Adviser has complied with the terms of the Scheme, and the investment management agreement for the year from 1 April 2015 to 31 March The Manager s report and accounts for the year ended 31 March 2016 were signed on 18 May 2016 on behalf of the Manager by: J.A. Walker-Hazell Directors P.C. Wallace 8

9 Report of the Trustee Statement of the Trustee s responsibilities in relation to the accounts of the Scheme The Trustee is under a duty to take into custody or under its control all of the property of the Scheme and to hold it in trust for the holders of units. Under Clause 9 of the Scheme it is also the duty of the Trustee to enquire into the conduct of the Manager in the management of the Scheme in each annual accounting period and to report thereon to unitholders in a report which shall contain the matters prescribed in Clause 9. A copy of the Trustee s report is set out below. Report of the Trustee for the accounting period from 1 April 2015 to 31 March 2016 The Charity Multi-Asset Fund ( the fund ) Report under Clause 9(h) of the Scheme As Trustee of the above fund we hereby report that, for the year ended 31 March 2016 and having made such enquiries as we think appropriate, we have discharged our responsibilities for those aspects of the administration and management of the fund and its property which are specified in Clause 9 of the Scheme and, in respect of the supervision and oversight of the Manager s compliance with the Scheme of the Charity Commissioners and the Scheme Particulars, and that the Manager has not exceeded the powers conferred on it and is maintaining adequate and proper records, that we have maintained custody and control of the property of the fund and that all revenue which is due to the fund has been collected. J.P. Morgan Europe Limited Trustee Bournemouth 21 April

10 Independent Auditors Report to the Trustees of The Charity Multi-Asset Fund Report on the financial statements Our opinion In our opinion The Charity Multi-Asset Fund s financial statements (the financial statements ): give a true and fair view of the state of the charity s affairs as at 31 March 2016 and of its net revenue, net capital losses and movement in net assets for the year then ended; have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and have been prepared in accordance with the requirements of the Charities Act 2011 and Regulation 6 of The Charities (Accounts and Reports) Regulations What we have audited The financial statements comprise: the balance sheet as at 31 March 2016; the statement of total return for the year then ended; the statement of changes in net assets attributable to unitholders for the year then ended; the accounting policies; and the notes and distribution table to the financial statements, which include a summary of significant accounting policies and other explanatory information. The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). In applying the financial reporting framework, the Manager has made judgements where appropriate, for example in respect of substantive accounting estimates. In preparing such estimates, they have considered future events and related assumptions. 10

11 Independent Auditors Report to the Trustees of The Charity Multi-Asset Fund (continued) Other matters on which we are required to report by exception Sufficiency of accounting records and information and explanations received Under the Charities Act 2011 we are required to report to you if, in our opinion: we have not received all the information and explanations we require for our audit; or sufficient 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. Other information in the Manager s Report Under the Charities Act 2011 we are required to report to you if, in our opinion the information given in the Manager s Report is inconsistent in any material respect with the financial statements. We have no exceptions to report arising from this responsibility. Responsibilities for the financial statements and the audit Our responsibilities and those of the trustees As explained more fully in the Manager s Responsibilities Statement set out on page 8, the Manager is responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and 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 charity s trustees as a body in accordance with section 144 of the Charities Act 2011 and regulations made under section 154 of that Act (Regulation 24 of The Charities (Accounts and Reports) Regulations 2008) and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. 11

12 Independent Auditors Report to the Trustees of The Charity Multi-Asset Fund (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 charity s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Manager; and the overall presentation of the financial statements. We primarily focus our work in these areas by assessing the Manager s judgements against available evidence, forming our own judgements, and evaluating the disclosures in the financial statements. We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide a reasonable basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive procedures or a combination of both. In addition, we read all the financial and non-financial information in the Final Report and Accounts (the Annual Report ) to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Edinburgh 18 May 2016 PricewaterhouseCoopers LLP is eligible to act, and has been appointed, as auditor under section 144(2) of the Charities Act (a) The maintenance and integrity of the Schroders website is the responsibility of the Manager; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website. (b) Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. 12

13 Comparative Tables A Distribution units Financial year to 31 March p per unit p per unit p per unit Change in net asset value Opening net asset value Return before operating charges (0.69) Operating charges (0.63) (0.64) (0.62) Return after operating charges* (1.32) Distributions 1 (1.96) (1.90) (1.84) Closing net asset value *after direct transaction costs of (0.01) Performance Return after charges (%) (2.59) Other information Closing net asset value ( 000 s) 17,898 21, ,539 Closing number of units 37,610,433 41,409, ,701,644 Operating charges (%) Direct transaction costs (%)** 0.00 (0.09) Prices Highest buying price (p) Lowest selling price (p)

14 Comparative Tables (continued) A Accumulation units Financial year to 31 March p per unit p per unit p per unit Change in net asset value Opening net asset value Return before operating charges (0.89) Operating charges (0.87) (0.85) (0.79) Return after operating charges* (1.76) Closing net asset value Retained distributions *after direct transaction costs of (0.02) Performance Return after charges (%) (2.54) Other information Closing net asset value ( 000 s) 7,292 7,066 74,447 Closing number of units 10,792,831 10,191, ,709,904 Operating charges (%) Direct transaction costs (%)** 0.00 (0.09) Prices Highest buying price (p) Lowest selling price (p)

15 Comparative Tables (continued) S Distribution units Financial year to 31 March p per unit p per unit Change in net asset value Opening net asset value Return before operating charges (0.69) 3.96 Operating charges (0.49) (0.62) Return after operating charges* (1.18) 3.34 Distributions 1 (2.15) (1.07) Closing net asset value *after direct transaction costs of Performance Return after charges (%) (2.26) 6.68 Other information Closing net asset value ( 000 s) 285, ,983 Closing number of units 584,035, ,315,291 Operating charges (%) Direct transaction costs (%)** 0.00 (0.09) 2 Prices Highest buying price (p) Lowest selling price (p) The unit class was launched on 1 October

16 Comparative Tables (continued) S Accumulation units Financial year to 31 March p per unit p per unit Change in net asset value Opening net asset value Return before operating charges (0.80) 3.66 Operating charges (0.51) (0.17) Return after operating charges* (1.31) 3.49 Closing net asset value Retained distributions *after direct transaction costs of Performance Return after charges (%) (2.45) 6.98 Other information Closing net asset value ( 000 s) 105,466 77,728 Closing number of units 202,100, ,308,518 Operating charges (%) Direct transaction costs (%)** 0.00 (0.09) 2 Prices Highest buying price (p) Lowest selling price (p) The unit class was launched on 1 October These figures have been rounded to 2 decimal places. 2 The amount received from dilution adjustments, that relate to direct transaction costs, is greater than the direct transaction costs incurred by the fund within the year/period. ** Direct transaction costs have been stated after deducting the proportion of the amounts collected from dilution adjustments. The Operating charges are calculated on an ex-post basis and as such may differ from the Ongoing charges figure where the Ongoing charges figure has been annualised for a unit class that has not been in existence for a full year. Please remember that past performance is not a guide to future performance and it might not be repeated. The value of investments and the revenue from them may go down as well as up and investors may not get back the amount originally invested. Because of this, you are not certain to make a profit on your investments and you may lose money. 16

17 Portfolio Statement Absolute Return Funds 16.13% ( %) Holding at Market Value % of net s assets CF Ruffer Total Return Fund I Income 1 5,368,738 15, Henderson Gartmore United Kingdom Absolute Return Fund G Income 1 2,263,767 12, Majedie Tortoise Fund Z Income 10,612,518 10, Schroder International Selection Fund Emerging Markets Debt Absolute Return C Distribution GBP Hedged ,137 11, Trojan Fund S Income 1 7,446,318 16, , Asia Pacific ex Japan Equity Funds 3.55% ( %) Schroder Asian Alpha Plus Fund A Income ,979,722 14, , Commercial Property Funds 10.57% ( %) Henderson UK Property Fund A Income 1 18,479,245 18, Ignis UK Property Fund A Income 1 6,530,621 6, Mayfair Capital Property Income Trust for Charities 1 22,146,999 18, , Commodity Funds 1.73% ( %) Guinness Global Energy Fund X Accumulation 1 281,619 2, Schroder Alternative Solutions Commodity Fund I Hedged Accumulation ,321 5, , Emerging Markets Equity Funds 4.70% ( %) Schroder Global Emerging Markets Fund A Income ,692,879 19, ,

18 Portfolio Statement (continued) European Equity Funds 5.90% ( %) Holding at Market Value % of net s assets FP Argonaut European Alpha Fund I Institutional Income 1 5,303,222 8, Jupiter European Special Situations Fund I Income 1 2,494,764 8, Schroder European Alpha Income Fund A Income 1 2 5,286,627 8, , Global Funds 6.34% ( %) Schroder QEP Global Core Fund I Income ,362,525 26, , Infrastructure 2.77% ( %) 3i Infrastructure 1,128,843 1, HICL Infrastructure 2,652,588 4, International Public Partnerships 3,718,041 5, , Japanese Equity Funds 3.86% ( %) Schroder Tokyo Fund A Income 1 2 6,635,619 16, , UK Equity Funds 34.11% ( %) Aberdeen Foundation Growth Fund B Income 1 10,413,651 12, Artemis UK Special Situations Fund R Accumulation 1 3,978,121 20, Majedie UK Equity Fund X Income 1 19,626,769 25, Old Mutual UK Alpha Fund U2 Income 1 25,503,675 25, The Charity Equity Fund A Income 1 2 6,331,980 21, The Equity Income Trust for Charities A Income ,662,852 16, Trojan Income Fund S Income 1 11,720,649 21, ,

19 Portfolio Statement (continued) Holding at Market Value % of net s assets US Equity Funds 4.49% ( %) Vanguard S&P 500 UCITS ETF 686,448 18, , US Fixed Interest Funds 1.79% ( %) AXA US Short Duration High Yield Fund ZI Income 1 7,786,718 7, , Portfolio of investments 399, Net other assets 16, Net assets attributable to unitholders 416, Unless otherwise stated the above securities are ordinary shares or common stock and admitted to official stock exchange listings or collective investment schemes permitted under the FCA s Collective Investment Schemes sourcebook (COLL). 1 Collective investment scheme permitted under the FCA s COLL, not listed on any exchange. 2 A related party to the fund (Note 11). 19

20 Summary of Portfolio Transactions Largest purchases Largest sales For the year ended 31 March 2016 Cost 000 s Schroder QEP Global Core Fund I Income 1 25,595 The Equity Income Trust for Charities A Income 1 16,531 Henderson Gartmore United Kingdom Absolute Return Fund G Income 12,337 Vanguard FTSE 250 UCITS ETF 8,048 Old Mutual UK Alpha Fund U2 Income 7,909 Vanguard S&P 500 UCITS ETF 7,164 Aberdeen Foundation Growth Fund B Income 6,984 Artemis UK Special Situations Fund R Accumulation 6,393 Vanguard FTSE 100 UCITS ETF 6,032 Majedie UK Equity Fund X Income 5,025 For the year ended 31 March 2016 Proceeds 000 s Aberdeen Foundation Growth Fund B Income 16,535 Schroder QEP Global Active Value Fund I Income 1 13,701 Schroder International Selection QEP Global Quality Fund I Distribution 1 9,819 Schroder International Selection Fund Emerging Markets Debt Absolute Return C Distribution GBP Hedged 1 9,155 Vanguard FTSE 250 UCITS ETF 7,669 Old Mutual UK Alpha Fund U2 Income 6,588 Vanguard FTSE 100 UCITS ETF 6,107 AXA US Short Duration High Yield Fund ZI Income 4,964 Majedie UK Equity Fund X Income 4,595 Schroder European Alpha Income Fund A Income 1 4,242 1 A related party to the fund (Note 11). 20

21 Statement of Total Return For the year ended 31 March 2016 Income Notes 000 s 000 s 000 s 000 s Net capital (losses)/gains 2 (17,059) 20,650 Revenue 3 9,904 9,397 Expenses 4 (2,093) (2,338) Net revenue before taxation 7,811 7,059 Taxation Net revenue after taxation 7,811 7,059 Total return before distributions (9,248) 27,709 Distributions 6 (17,209) (14,322) Change in net assets attributable to unitholders from investment activities (26,457) 13,387 Statement of Change in Net Assets Attributable to Unitholders For the year ended 31 March 2016 Restated s 000 s 000 s 000 s Opening net assets attributable to unitholders 389, ,986 Amounts receivable on issue of units 68,439 60,849 Amounts payable on cancellation of units (19,803) (12,600) 48,636 48,249 Dilution adjustment Change in net assets attributable to unitholders from investment activities (26,457) 13,387 Retained distribution on Accumulation units 4,212 3,033 Closing net assets attributable to unitholders 416, ,843 1 Refer to the Notes to the Accounts on page

22 Balance Sheet As at 31 March Notes 000 s 000 s Assets Investments 399, ,202 Current assets Debtors 8 23,874 19,695 Cash and bank balances 6,153 12,068 Total assets 429, ,965 Liabilities Creditors Distributions payable (3,327) (3,209) Other creditors 9 (9,811) (19,913) Total liabilities (13,138) (23,122) Net assets attributable to unitholders 416, ,843 22

23 Notes to the Accounts 1 Accounting policies Basis of preparation The accounts have been prepared under the historical cost basis, as modified by the revaluation of investments, and in accordance with applicable law and the Charities Act 2011, the Charities (Accounts and Reports) Regulations 2008, the Scheme of the Charity Commissioners of 11 June 2007 and the disclosure requirements of the Statement of Recommended Practice (SORP) for Financial Statements of UK Authorised Funds issued by the Investment Management Association (IMA (now The Investment Association)) in May 2014, which supersedes the SORP issued by the IMA in October 2010, and in accordance with United Kingdom Generally Accepted Accounting Practice, including Financial Reporting Standard 102 (The Financial Reporting Standard Applicable in the UK and Republic of Ireland (FRS 102)). Both of which became effective for the periods beginning on or after 1 January The accounts are exempt from complying with the Accounting and Reporting by Charities: SORP (2015) under paragraph 22 of that document. There have been no changes to the financial position or financial performance of the fund as a result of the above. Revenue Dividends 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 is accounted for on an accruals basis. Interest receivable from debt securities is accounted for on an effective yield basis. The Annual management charge in respect of the Schroder funds in which the fund invests is rebated to the fund so that no double charging occurs. The rebates received from other investment managers are also receipted to the fund. All rebates are treated as revenue or capital based on the underlying fund s treatment. Special dividends Special dividends are treated as revenue or capital depending on the facts of each particular case. Equalisation Equalisation on distributions received by the fund is deducted from the cost of investments. As such the equalisation on distributions received by the fund does not form part of the fund s distribution. 23

24 Notes to the Accounts (continued) 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 fund. Expenses Expenses of the fund are charged against revenue except for costs associated with the purchase and sale of investments which are allocated to the capital of the fund. The Annual management charge is initially charged to revenue but ultimately borne by the capital of the fund. Distributions Quarterly distributions are made on 31 August, 30 November, 28 February and 31 May. The revenue is distributed to Distribution unitholders. For Accumulation units this revenue is not distributed but automatically reinvested in the fund and is reflected in the value of these units. Such distributions are based on the target distribution rate of 4.00% per annum and can be funded from both revenue and capital. Dilution adjustment In certain circumstances the Manager may apply a dilution adjustment on subscriptions and redemptions of units. If applied, the dilution adjustment is paid to the fund. See Scheme particulars for further details. For the year ended 31 March 2016 and 31 March 2015 the dilution adjustments of 259,582 and 187,811, respectively, have been shown separately in the Statement of Change in Net Assets Attributable to Unitholders, previously they were included within Amounts receivable on issue of units and Amounts payable on cancellation of units in the Statement of Change in Net Assets Attributable to Unitholders. This is a change in presentation, there have been no changes to the financial position or financial performance of the fund as a result of the above. Valuation Listed investments of the fund have been valued at market value, dual priced authorised unit trusts have been valued at cancellation price, single priced authorised unit trusts have been valued at the dealing price and open ended investment companies have been valued at the latest available bid price at 18:00 on the balance sheet date. Market value is defined by the SORP as fair value which generally is the bid value of each security. 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/(losses) are reflected under Net capital (losses)/gains in the Notes to the Accounts. 24

25 Notes to the Accounts (continued) 2 Net capital (losses)/gains The net capital (losses)/gains during the year comprise: s 000 s Non-derivative securities (17,476) 20,527 Foreign currency gains/(losses) 4 (39) Transaction costs (1) (2) Annual management charge rebates Net capital (losses)/gains (17,059) 20,650 The non-derivatives securities and foreign currency gains/(losses) above includes: s 000 s Realised gains 1,912 16,813 Unrealised (losses)/gains (19,384) 3,675 Total (losses)/gains (17,472) 20,488 Total realised gains for the year were 1,911,573 ( ,813,027) and the movement in unrealised (losses)/gains was (19,383,813) (2015 3,675,037). Included in realised gains for the year were unrealised gains recognised in previous years. 3 Revenue s 000 s Overseas dividends Franked distributions 6,740 5,384 Unfranked distributions Interest distributions 701 1,700 Interest on debt securities 0 1 Bank interest Annual management charge rebates 1,167 1,336 Total revenue 9,904 9,397 25

26 Notes to the Accounts (continued) 4 Expenses Payable to the Manager, associates of the Manager and agents of either of them: s 000 s Annual management charge 2,032 2,285 Payable to the Trustee, associates of the Trustee and agents of either of them: Trustee s fees Safe custody fees 5 3 Other expenses: Audit fee Total expenses 2,093 2,338 5 Taxation The Charity Multi-Asset Fund is a registered charity and its unitholders are restricted to those with charitable status in England and Wales. Investment policy is set in recognition of the charitable restrictions and accordingly the revenue and the net capital gains are exempt from direct taxation in the United Kingdom. Indirect taxation suffered is included in the expenditure to which it relates. The Trustee, J.P.Morgan Europe Limited, arranges for the reclaim of tax on revenue received by the fund. However, it may not always be possible for overseas tax to be reclaimed. Quarterly distributions are paid without deduction of tax. 26

27 Notes to the Accounts (continued) 6 Distributions Distributions The distributions take account of revenue received on the issue of units and revenue deducted on the cancellation of units, and comprise: s 000 s Quarterly Dividend distribution 4,052 3,280 Interim Dividend distribution 4,451 3,399 Quarterly Dividend distribution 4,470 3,724 Final Dividend distribution 4,481 4,097 17,454 14,500 Add: Revenue deducted on cancellation of units Deduct: Revenue received on issue of units (330) (231) Distributions 17,209 14,322 Net revenue after taxation 7,811 7,059 Annual management charge taken to capital 2,032 2,285 Movement in undistributed revenue 16 1 Distribution paid from capital 7,350 4,990 Equalisation on conversions 0 (13) Distributions 17,209 14,322 Details of the distributions per unit are set out in the Distribution Table on pages 35 and Fair value hierarchy Assets Assets Valuation technique 000 s 000 s Quoted prices for identical instruments in active markets 30,205 19,434 Valuation techniques using observable market data 369, ,768 Total 399, ,202 27

28 Notes to the Accounts (continued) 8 Debtors s 000 s Amounts receivable for issue of units Sales awaiting settlement 22,533 18,237 Accrued franked distributions Accrued bank interest 1 1 Accrued Annual management charge rebates Income tax recoverable Total debtors 23,874 19,695 9 Other creditors s 000 s 000 s 000 s Amounts payable for cancellation of units 0 5 Purchases awaiting settlement 9,332 19,674 Accrued expenses Manager and Agents Annual management charge Trustee and Agents Trustee s fees 8 7 Safe custody fees Other accrued expenses Total others creditors 9,811 19, Contingent liabilities There were no contingent liabilities at the balance sheet date (2015 Nil). 11 Related party transactions The Manager exercises control over the fund and is therefore a related party by virtue of its controlling influence. Amounts paid during the year or due to the Manager at the balance sheet date are disclosed under Expenses and Other creditors in the Notes to the Accounts. Annual management charge rebates received or receivable from the Manager of 1,177,083 (2015 1,090,280) are disclosed under Net capital (losses)/gains and Revenue in the Notes to the Accounts. Amounts due from the Manager at the balance sheet date of 108,120 ( ,083) are disclosed under Debtors in the Notes to the Accounts. 28

29 Notes to the Accounts (continued) The Manager acts as principal on all transactions of units in the fund. The aggregate monies received through the issue and cancellation of units are disclosed in the Statement of Change in Net Assets Attributable to Unitholders and Distributions in the Notes to the Accounts. Amounts due from or to the Manager in respect of unit transactions at the balance sheet date are disclosed under Debtors and Other creditors in the Notes to the Accounts. Units held or managed by the Manager or associates of the Manager as a percentage of the fund s net asset value at the balance sheet date were 95.89% ( %). 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 1,830,044 (2015 2,147,785) is disclosed in Revenue in the Notes to the Accounts. Amounts receivable at the balance sheet date of 48,473 ( ,379) are disclosed in Debtors in the Notes to the Accounts. 12 Unit classes The fund currently has four unit classes: A Distribution units, A Accumulation units, S Distribution units and S Accumulation units. The Annual management charge (plus VAT) is based on the average value of the fund, calculated on a monthly basis, and covers the remuneration of the Manager, the Investment Adviser and their overhead expenses and for each unit class is as follows: A Distribution units 0.65% A Accumulation units 0.65% S Distribution units 0.40% S Accumulation units 0.40% The closing net asset value of each unit class, the closing net asset value per unit and the closing number of units in issue are given in the Comparative Tables on page 13 to 16. The distributions per unit class are given in the Distribution Table on pages 35 and 36. All classes have the same rights on winding up. 13 Derivative and other financial instruments In accordance with the investment objective, the fund may hold certain financial instruments. These comprise: securities held in accordance with the investment objective and policy; cash and short term debtors and creditors arising directly from operations. The main risks arising from the fund s financial instruments are market price, foreign currency, liquidity, credit and interest rate risks. The Manager s policies for managing these risks are summarised below and have been applied throughout the year and the prior year. 29

30 Notes to the Accounts (continued) Market price risk The fund s investment portfolio is exposed to market price fluctuations which are monitored by the Manager in pursuance of the investment objective and policy. Adherence to investment guidelines and to investment and borrowing powers set out in the Scheme made by the Charity Commissioners on 11 June 2007 and the Scheme Particulars mitigates the risk of excessive exposure to any particular type of security or issuer. Foreign currency risk The fund can invest in overseas securities and the balance sheet can be significantly affected by movements in foreign exchange rates. The Manager seeks to manage exposure to currency movements by using forward foreign exchange 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. Currency risk profile The currency risk profile of the fund s net assets at the balance sheet date was as follows: Monetary Non-monetary exposure exposure Total Currency 000 s 000 s 000 s Sterling , , , , , ,843 US dollar Liquidity risk The primary source of this risk to the fund is the liability to unitholders for any cancellation of units. This risk is minimised by holding cash, readily realisable securities and access to overdraft facilities up to the amount prescribed by the COLL. Credit risk Some underlying funds invest in debt securities. The debt securities are exposed to credit risk which reflects the ability of the issuer to meet its obligations. 30

31 Notes to the Accounts (continued) Interest rate risk Some underlying funds invests in debt securities. The revenue of the fund may be affected by changes to interest rates relevant to particular securities or as a result of the Manager being unable to secure similar returns on the expiry of contracts or sale of securities. The value of debt securities may be affected by interest rate movements or the expectation of such movements in the future. Interest receivable on bank balances will be affected by fluctuations in interest rates. Interest rate risk profile of financial assets and financial liabilities The interest rate risk profile of financial assets and liabilities at the balance sheet date was as follows: Financial assets Floating rate not carrying financial assets interest Total Currency 000 s 000 s 000 s Sterling , , , , , ,546 US dollar ,419 11,419 Financial liabilities not carrying interest Total Currency 000 s 000 s Sterling ,138 13, ,122 23,122 There are no material amounts of non-interest bearing financial assets, other than equities and collective investment schemes, which do not have a maturity date. Floating rate financial assets and financial liabilities Sterling denominated bank balances bear interest at rates based on the Sterling Overnight Index Average rate. 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. 31

32 Notes to the Accounts (continued) 14 Direct transaction costs In the case of shares, broker commissions and transfer taxes/stamp duty are paid by the fund on each transaction. In addition, there is a dealing spread between buying and selling prices of the underlying investments. Unlike shares, other types of investments (such as bonds, money market instruments, derivatives) have no separately identifiable transaction costs; these costs form part of the dealing spread. Dealing spreads vary considerably depending on the transaction value and market sentiment. Commissions Taxes Principal Commissions Taxes Total cost % of % of s 000 s 000 s 000 s principal principal Purchases Purchases 1 : Equities 16, , Funds 127, , In-specie purchases: Equities Funds Corporate actions purchases: Equities , ,976 Sales Equities 14,798 (8) 0 14,790 (0.05) 0.00 Funds 94, , ,104 (8) 0 109,096 Total cost of the fund s average net asset value (%) Excluding in-specie transfers and corporate actions. 32

33 Notes to the Accounts (continued) Commissions Taxes Principal Commissions Taxes Total cost % of % of s 000 s 000 s 000 s principal principal Purchases Purchases 1 : Equities 26, , Funds 168, , In-specie purchases: Equities 3, , Funds 3, , , ,114 Sales Sales 1 : Equities 27,150 (16) 0 27,134 (0.06) 0.00 Funds 125, , In-specie sales: Equities 2, , ,025 (16) 0 156,009 Total cost of the fund s average net asset value (%) Excluding in-specie transfers. Average portfolio dealing spread As at the balance sheet date the average portfolio dealing spread was 0.57% ( %, based on close of business prices). This spread represents the difference between the values determined respectively by reference to the bid and offer prices of investments expressed as a percentage of the value determined by reference to the offer price. 15 Units in issue reconciliation Number Number of units Number Number Number of units in issue as of units of units of units in issue as at issued cancelled converted at A Distribution units 41,409,611 8,647,616 (12,446,794) 0 37,610,433 A Accumulation units 10,191,096 1,026,932 (425,197) 0 10,792,831 S Distribution units 543,315,291 57,577,120 (19,137,390) 2,280, ,035,408 S Accumulation units 145,308,518 66,988,278 (7,962,465) (2,233,799) 202,100,532 33