Institutional Pacific Fund

Transcription

1 Schroder Institutional Pacific Fund Final Report and Accounts October 2016

2 Contents Schroder Institutional Pacific Fund Fund Information Investment objective and policy Financial highlights Fund information Ongoing charges figure Review of Investment Activities Risk Profile Risk and reward indicator Specific risks Statement of the Manager s Responsibilities Report of the Trustee Independent Auditors Report to the Unitholders of Schroder Institutional Pacific 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 gains/(losses) 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 Final distribution for the year ended 15 October Corporate unitholders (unaudited) Equalisation General Information Authorisation Collectively these comprise the Authorised Fund Manager s report.

3 Fund Information Investment objective and policy The fund s investment objective is to achieve capital growth. Income will be minimal. The fund will follow a highly active investment policy in all economic sectors in the Pacific region, excluding Japan and including, but not limited to, Australia, Hong Kong, Indonesia, Korea, Malaysia, New Zealand, Philippines, Singapore, Taiwan and Thailand. It is intended that the fund may also participate in other Asian stock markets which are not currently open to outside investors. The fund will invest in equities, warrants and convertibles of quoted companies with greater focus on the larger capitalised and better quality companies. The fund may also invest in a wide range of investments including transferable securities, collective investment schemes, warrants and money market instruments. Financial highlights Dealing price % change I Income units p p I Accumulation units 1,311.00p p S Income units 65.88p 50.00p X Accumulation units 61.47p Final distribution per I Income unit p p Fund information Launch date 24 May 1989 Launch price p per I Income unit p per I Accumulation unit Launch date 25 August 2011 Launch price 50.00p per X Accumulation unit Launch date 31 January 2014 Launch price 50.00p per S Income unit X Accumulation units were redeemed during the year. Interim Final Accounting dates 15 April 15 October Revenue allocation date 15 December 3

4 Fund Information (continued) Ongoing charges figure For the year For the year to to I Income units 0.53% 0.53% I Accumulation units 0.53% 0.53% S Income units 0.48% 0.48% X Accumulation units % 0.03% 1 The Annual management charge for X Accumulation units is invoiced directly to unitholders and is therefore not included in the Ongoing charges figure for that unit class. 4

5 Review of Investment Activities From 15 October 2015 to 14 October 2016, the price of I Accumulation units on a dealing price to dealing price basis rose 36.55%. In comparison, the MSCI Pacific ex Japan Index generated a total return of 38.74% 1 in sterling terms. 1 Source: Thomson Reuters Datastream. Pacific ex Japan equities delivered positive returns over the period as a weaker pound, following the shock UK Brexit vote in mid 2016, boosted returns for sterling investors. Within Asia, returns were positive on the broader global monetary easing while expectations of further stimulus from Chinese authorities, in a bid to support growth, also buoyed share prices. One of the fund s leading contributors over the period was Australian listed supply chain logistics group Brambles. Its share price gains over the quarter were mainly reflective of an ongoing exodus of capital from materials and energy stocks rather than any one company specific catalyst. Meanwhile, among the fund s leading detractors was property developer and landlord Hongkong Land Holdings. Its shares declined over the quarter as the company reported lower financial year 2015 earnings on sluggish residential sales, particularly in Hong Kong where the market was weak. Incitec Pivot, an Australia listed fertiliser and explosives chemicals manufacturer, also weighed on performance. Looking ahead, against this backdrop where global growth is subdued, a protracted period of uncertainty and volatility can be expected. We maintain our disciplined bottom up stock selection process with a focus on companies with sound fundamentals, strong cash flows, growing earnings and sustainable dividends. Please remember that past performance is not a guide to future performance and it might not be repeated. The value of investments and the revenue from them may go down as well as up and investors may not get back the amount originally invested. Because of this, you are not certain to make a profit on your investments and you may lose money. Fund Manager: King Fuei Lee Investment career commenced upon joining Schroders in 1999 Transferred from the Global Equities Team in the London office to the Asian Equities Team in Singapore in December Promoted to Head of Asian Equities in Singapore in March 2011 Currently the Head of Asian Equities (Singapore) and a fund manager responsible for managing Developed Pacific ex-japan, Asian Total Return and Asian Yield mandates. Based in Singapore CFA charterholder, Member of CFA Institute. Investment Management Certificate (IMC) M.Phil in Economics, Cambridge University. BSc in Economics (First Class Honours), London School of Economics 5

6 Risk Profile Risk and reward indicator The risk category was calculated using historical performance data and may not be a reliable indicator of the fund s future risk profile. The fund is in this category because it can take higher risks in search of higher rewards and its price may rise and fall accordingly. The fund s risk category is not guaranteed to remain fixed and may change over time. A fund in the lowest category does not mean a risk free investment. 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 less developed markets which are generally less well regulated than the UK. They may be less liquid and may have less reliable custody arrangements. 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. For these reasons, the purchase of units should not normally be regarded as a short term investment. 6

7 Statement of the Manager s Responsibilities The Financial Conduct Authority s Collective Investment Schemes sourcebook (COLL) requires the Manager to prepare accounts for each annual and half yearly accounting period, in accordance with United Kingdom Generally Accepted Accounting Practice, which give a true and fair view of the financial position of the fund and of its net revenue and the net capital gains on the property of the fund for the year. In preparing the accounts the Manager is required to: select suitable accounting policies and then apply them consistently; comply with the disclosure requirements of the Statement of Recommended Practice (SORP) for UK Authorised Funds issued by the Investment Management Association (IMA (now the Investment Association (IA))) in May 2014; follow generally accepted accounting principles and applicable accounting standards; prepare the accounts on the basis that the fund will continue in operation unless it is inappropriate to do so; keep proper accounting records which enable it to demonstrate that the accounts as prepared comply with the above requirements; make judgements and estimates that are prudent and reasonable. The Manager is responsible for the management of the fund in accordance with its Trust Deed, the Prospectus and the COLL and for taking reasonable steps for the prevention and detection of fraud, error and non-compliance with law or regulations. The Manager s report and accounts for the year ended 15 October 2016 were signed on 2 December 2016 on behalf of the Manager by: J.A. Walker-Hazell Directors P. Chislett 7

8 Report of the Trustee Statement of the Trustee s responsibilities in relation to the accounts of the Scheme The Trustee is responsible for the safekeeping of all of the property of the Scheme (other than tangible moveable property) which is entrusted to it and for the collection of revenue that arises from that property. It is the duty of the Trustee to take reasonable care to ensure that the Scheme is managed by the Authorised Fund Manager in accordance with the Financial Conduct Authority s Collective Investment Schemes Sourcebook (COLL) and the Scheme s Trust Deed and Prospectus, as appropriate, in relation to the pricing of, and dealings in, units in the Scheme; the application of revenue of the Scheme; and the investment and borrowing powers of the Scheme. Report of the Trustee for the accounting period from 16 October 2015 to 15 October 2016 Schroder Institutional Pacific Fund ( the Scheme ) Having carried out such procedures as we consider necessary to discharge our responsibilities as Trustee of the Scheme, it is our opinion, based on the information available to us and the explanations provided, that in all material respects the Authorised Fund Manager: (i) has carried out the issue, sale, redemption and cancellation, and calculation of the price of the Scheme s units and the application of the Scheme s revenue in accordance with the COLL as appropriate, and, where applicable, the Scheme s Trust Deed and Prospectus; and (ii) has observed the investment and borrowing powers and restrictions applicable to the Scheme. J.P. Morgan Europe Limited Trustee Bournemouth 7 November

9 Independent Auditors Report to the Unitholders of Schroder Institutional Pacific Fund Report on the financial statements Our opinion In our opinion, Schroder Institutional Pacific Fund s financial statements, (the financial statements ): give a true and fair view of the financial position of the fund at 15 October 2016 and of the net revenue and the net capital gains of its scheme property for the year then ended; and have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice, the Statement of Recommended Practice for UK Authorised Funds, the Collective Investment Schemes sourcebook and the Trust Deed. What we have audited The financial statements of the Schroder Institutional Pacific Fund (the fund ), which are prepared by Schroder Unit Trusts Limited (the Authorised Fund Manager ), comprise: the balance sheet of the fund as at 15 October 2016; the statement of total return of the fund for the year then ended; the statement of change in net assets attributable to unitholders of the fund for the year then ended; the notes to the fund s financial statements, which include a summary of significant accounting policies and other explanatory information; and the distribution table. The financial reporting framework that has been applied in the preparation of the financial statements is United Kingdom Accounting Standards, comprising FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland, and applicable law (United Kingdom Generally Accepted Accounting Practice), the Statement of Recommended Practice Financial Statements of UK Authorised Funds issued by the Investment Management Association (the Statement of Recommended Practice for Authorised Funds ), the Collective Investment Schemes sourcebook and the Trust Deed. In applying the financial reporting framework, the Authorised Fund Manager has made judgements where appropriate, for example in respect of substantive accounting estimates. In preparing such estimates, they have considered future events and related assumptions. 9

10 Independent Auditors Report to the Unitholders of Schroder Institutional Pacific Fund (continued) Opinions on matters prescribed by the Collective Investment Schemes sourcebook In our opinion: we have obtained all the information and explanations we consider necessary for the purposes of the audit; and the information given in the Authorised Fund Manager s Report for the financial year for which the financial statements are prepared is consistent with the financial statements. Other matters on which we are required to report by exception Propriety of accounting records and information and explanations received Under the Collective Investment Schemes sourcebook we are required to report to you if, in our opinion: proper accounting records have not been kept; or the financial statements are not in agreement with the accounting records and returns. We have no exceptions to report arising from this responsibility. Responsibilities for the financial statements and the audit Our responsibilities and those of the Authorised Fund Manager As explained more fully in the Authorised Fund Manager s Responsibilities Statement set out on page 7, the Authorised Fund Manager is responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and ISAs (UK & Ireland). Those standards require us to comply with the Auditing Practices Board s Ethical Standards for Auditors. This report, including the opinions, has been prepared for and only for the fund s unitholders as a body in accordance with paragraph of the Collective Investment Schemes sourcebook and for no other purpose. 10 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 Independent Auditors Report to the Unitholders of Schroder Institutional Pacific 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 fund s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Authorised Fund Manager; and the overall presentation of the financial statements. We primarily focus our work in these areas by assessing the Authorised Fund Manager s judgements against available evidence, forming our own judgements, and evaluating the disclosures in the financial statements. We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide a reasonable basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive procedures or a combination of both. In addition, we read all the financial and non-financial information in the Final Report and Accounts (the Annual Report ) to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Edinburgh 2 December 2016 (a) The maintenance and integrity of the Schroders website is the responsibility of the Authorised Fund Manager; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website. (b) Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. 11

12 Comparative Tables I Income units Financial year to 15 October p per unit p per unit p per unit Change in net asset value Opening net asset value Return before operating charges (31.48) (2.70) Operating charges (3.14) (3.25) (3.25) Return after operating charges* (34.73) (5.95) Distributions 1 (19.74) (19.69) (19.68) Closing net asset value *after direct transaction costs of (0.18) (0.25) (0.12) Performance Return after charges (%) (5.79) (0.95) Other information Closing net asset value ( 000 s) 289, , ,364 Closing number of units 39,887,413 40,825,895 51,243,402 Operating charges (%) Direct transaction costs (%)** Prices Highest dealing price (p) Lowest dealing price (p)

13 Comparative Tables (continued) I Accumulation units Financial year to 15 October p per unit p per unit p per unit Change in net asset value Opening net asset value , , Return before operating charges (53.48) (4.61) Operating charges (5.51) (5.47) (5.32) Return after operating charges* (58.95) (9.93) Closing net asset value 1, , Retained distributions *after direct transaction costs of (0.31) (0.41) (0.20) Performance Return after charges (%) (5.79) (0.97) Other information Closing net asset value ( 000 s) 138, , ,101 Closing number of units 10,593,438 12,927,288 11,992,190 Operating charges (%) Direct transaction costs (%)** Prices Highest dealing price (p) 1, , , Lowest dealing price (p)

14 Comparative Tables (continued) S Income units Financial year to 15 October p per unit p per unit p per unit Change in net asset value Opening net asset value Return before operating charges (2.78) 4.91 Operating charges (0.25) (0.26) (0.12) Return after operating charges* (3.04) 4.79 Distributions 1 (1.77) (1.77) (1.79) Closing net asset value *after direct transaction costs of (0.02) (0.02) (0.01) Performance Return after charges (%) (5.74) 9.58 Other information Closing net asset value ( 000 s) 2,332 1,833 2,043 Closing number of units 3,639,307 3,803,919 3,854,402 Operating charges (%) Direct transaction costs (%)** Prices Highest dealing price (p) Lowest dealing price (p) The unit class was launched on 31 January

15 Comparative Tables (continued) X Accumulation units Financial year to 15 October p per unit p per unit p per unit Change in net asset value Opening net asset value Return before operating charges (61.39) (3.44) (0.29) Operating charges (0.02) (0.01) (0.02) Return after operating charges* (61.41) (3.45) (0.31) Closing net asset value Retained distributions 1 Nil *after direct transaction costs of (0.02) (0.01) (0.01) Performance Return after charges (%) N/A 2 (5.32) (0.48) Other information Closing net asset value ( 000 s) 87,460 92,377 Closing number of units 142,417, ,417,505 Operating charges (%) Direct transaction costs (%)** Prices Highest dealing price (p) Lowest dealing price (p) These figures have been rounded to 2 decimal places. 2 The unit class was redeemed during the year. ** 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. 15

16 Portfolio Statement Australia 56.28% ( %) Holding at Market Value % of net s assets AGL Energy 757,175 9, ASX 319,661 9, Australia & New Zealand Banking Group 843,797 14, BHP Billiton 1,626,662 22, Brambles 2,415,639 18, Commonwealth Bank of Australia 403,268 18, Computershare 818,358 5, CSL 248,618 16, DuluxGroup 1,269,043 5, Incitec Pivot 4,326,635 7, LendLease Group 866,452 7, Medibank 3,734,817 6, National Australia Bank 1,296,915 22, Orica 491,704 4, QBE Insurance Group 881,738 5, Rio Tinto 355,496 11, Telstra 2,381,053 7, Wesfarmers 468,856 13, Westpac Banking 890,514 16, Woodside Petroleum 388,048 7, Woolworths 739,065 11, , Bermuda 5.55% ( %) Hongkong Land Holdings 1,747,740 9, Jardine Strategic Holdings 378,471 10, Kerry Properties 1,480,020 3, , Cayman Islands 3.63% ( %) CK Hutchison Holdings 945,578 9, Tencent Holdings 268,100 5, ,

17 Portfolio Statement (continued) Holding at Market Value % of net s assets Hong Kong/China 18.80% ( %) AIA Group 5,726,000 31, BOC Hong Kong Holdings 2,699,500 7, China Pacific Insurance Group 1,510,400 4, Galaxy Entertainment Group 2,567,000 8, HKT Trust & HKT 6,327,000 7, Sun Hung Kai Properties 566,000 6, Swire Properties 2,896,204 6, Techtronic Industries 2,504,500 8, , Ireland 2.49% ( %) James Hardie Industries 844,649 10, , Singapore 9.55% ( %) City Developments 1,042,900 5, ComfortDelGro 4,141,500 6, DBS Group Holdings 296,538 2, Singapore Telecommunications 5,408,300 12, United Overseas Bank 743,901 8, Venture 1,090,400 6, , United Kingdom 0.98% ( %) HSBC Holdings 686,073 4, , United States 1.86% ( %) ResMed 1,508,420 7, ,

18 Portfolio Statement (continued) Market Value % of net 000 s assets Portfolio of investments 426, Net other assets 3, Net assets attributable to unitholders 430, Unless otherwise stated the above securities are ordinary shares or common stock and admitted to official stock exchange listings. 18

19 Summary of Portfolio Transactions Largest purchases Largest sales Cost For the year ended 15 October s Sun Hung Kai Properties 7,999 Tencent Holdings 4,534 City Developments 3,975 Incitec Pivot 3,783 LendLease Group 3,388 Galaxy Entertainment Group 2,882 DuluxGroup 2,783 BHP Billiton 2,313 Swire Properties 2,229 HKT Trust & HKT 2,228 Proceeds For the year ended 15 October s Iron Mountain 9,886 AIA Group 9,871 Swire Pacific 9,627 CSL 9,408 Cheung Kong Property Holdings 9,090 Commonwealth Bank of Australia 7,287 BHP Billiton 6,900 James Hardie Industries 6,863 National Australia Bank 6,693 Australia & New Zealand Banking Group 6,416 19

20 Statement of Total Return For the year ended 15 October 2016 Income Notes 000 s 000 s 000 s 000 s Net capital gains/(losses) 2 128,562 (41,612) Revenue 3 17,828 19,436 Expenses 4 (1,961) (2,247) Net revenue before taxation 15,867 17,189 Taxation 5 (62) (38) Net revenue after taxation 15,805 17,151 Total return before distributions 144,367 (24,461) Distributions 6 (15,833) (17,152) Change in net assets attributable to unitholders from investment activities 128,534 (41,613) Statement of Change in Net Assets Attributable to Unitholders For the year ended 15 October 2016 Restated s 000 s 000 s 000 s Opening net assets attributable to unitholders 435, ,885 Amounts receivable on issue of units 17,439 14,748 Amounts payable on cancellation of units (155,533) (68,922) (138,094) (54,174) Dilution adjustment Stamp duty reserve tax 0 (2) Change in net assets attributable to unitholders from investment activities 128,534 (41,613) Retained distribution on Accumulation units 3,677 7,838 Closing net assets attributable to unitholders 430, ,955 1 Refer to the Notes to the Accounts on page

21 Balance Sheet As at 15 October Notes 000 s 000 s Assets Investments 7 426, ,626 Current assets Debtors ,417 Cash and bank balances 11,899 11,584 Total assets 438, ,627 Liabilities Creditors Distributions payable (7,940) (8,108) Other creditors 9 (334) (1,564) Total liabilities (8,274) (9,672) Net assets attributable to unitholders 430, ,955 21

22 Notes to the Accounts 1 Accounting policies Basis of preparation The accounts have been prepared under the historical cost basis, as modified by the revaluation of investments, and in accordance with the SORP for UK Authorised Funds issued by the IMA in May 2014 and in accordance with United Kingdom Generally Accepted Accounting Practice, including Financial Reporting Standard 102 (The Financial Reporting Standard Applicable in the UK and Republic of Ireland (FRS 102)). Revenue Dividends receivable from equity investments 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. Special dividends Special dividends are treated as revenue or capital depending on the facts of each particular case. Expenses Expenses of the fund 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 fund. For I Income units, I Accumulation units and S Income units the Annual management charge is charged against revenue and is accrued within the unit price. This charge is invoiced directly to X Accumulation unitholders. Taxation Corporation tax is provided for on the revenue liable to corporation tax less deductible expenses. 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 fund, less deductible expenses and taxation charged to revenue. The revenue is distributed annually on 15 December to Income unitholders. For Accumulation units this revenue is not distributed but automatically reinvested in the fund and is reflected in the value of these units. 22

23 Notes to the Accounts (continued) Dilution adjustment In certain circumstances the Manager may apply a dilution adjustment on subscriptions and redemptions of units. If applied, the dilution adjustment is paid to the fund. See Prospectus for further details. For the years ended 15 October 2016 and 15 October 2015 the Dilution adjustments of 260,310 and 20,778, respectively, are 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 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 losses are reflected under Net capital gains/(losses) in the Notes to the Accounts. 2 Net capital gains/(losses) The net capital gains/(losses) during the year comprise: s 000 s Non-derivative securities 128,743 (41,512) Foreign currency losses (178) (95) Transaction costs (3) (5) Net capital gains/(losses) 128,562 (41,612) 3 Revenue s 000 s UK dividends Overseas dividends 17,517 19,134 Bank interest Total revenue 17,828 19,436 23

24 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 1,830 2,126 Administration charge 3 3 Payable to the Trustee, associates of the Trustee and agents of either of them: 1,833 2,129 Trustee s fees Safe custody fees Other expenses: Audit fee Professional fee Total expenses 1,961 2,247 5 Taxation (a) Analysis of the tax charge for the year s 000 s Overseas withholding tax Total current tax (Note 5(b)) Corporation tax has not been provided for as expenses exceed the revenue liable to corporation tax. (b) Factors affecting the current tax charge for the year The tax assessed for the year is different from that calculated when the standard rate of corporation tax for authorised unit trusts of 20% ( %) is applied to the net revenue before taxation. The differences are explained below s 000 s Net revenue before taxation 15,867 17,189 Net revenue for the year before taxation multiplied by the standard rate of corporation tax 3,173 3,438 Effects of: Revenue not subject to corporation tax (3,560) (3,880) Expenses not deductible for tax purposes 5 0 Movement in excess management expenses Irrecoverable overseas withholding tax Current tax charge for the year (Note 5(a))

25 Notes to the Accounts (continued) (c) Factors that may affect future tax charges At the balance sheet date, there is a potential deferred tax asset of 3,742,652 (2015 3,360,900) 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 Distributions Distributions The distribution takes account of revenue received on the issue of units and revenue deducted on the cancellation of units, and comprises: s 000 s Final Dividend distribution 11,617 15,946 Add: Revenue deducted on cancellation of units 4,484 1,389 Deduct: Revenue received on issue of units (268) (183) Distributions 15,833 17,152 Net revenue after taxation 15,805 17,151 Expenses taken to capital 28 1 Distributions 15,833 17,152 Details of the distribution per unit are set out in the Distribution Table on page Fair value hierarchy Assets Assets Valuation technique 000 s 000 s Quoted prices for identical instruments in active markets 426, ,626 Total 426, ,626 8 Debtors s 000 s Amounts receivable for issue of units Sales awaiting settlement 0 3,097 Accrued overseas dividends Accrued bank interest 0 1 Total debtors 58 3,417 25

26 Notes to the Accounts (continued) 9 Other creditors s 000 s 000 s 000 s Amounts payable for cancellation of shares 60 0 Purchases awaiting settlement 0 1,337 Accrued expenses Manager and Agents Annual management charge Trustee and Agents Trustee s fees 6 6 Safe custody fees 8 6 Transaction charges Other accrued expenses Total other creditors 334 1, 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. 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 25.57% ( %). 26

27 Notes to the Accounts (continued) 12 Unit classes The fund currently has three unit classes: I Income units, I Accumulation units and S Income units. The Annual management charge is based on the average value of the fund, calculated on a daily basis, and covers the remuneration of the Manager, the Investment Adviser and their overhead expenses and for each unit class is as follows: I Income units 0.50% I Accumulation units 0.50% S Income units 0.30% The closing net asset value of each unit class, the closing net asset value per unit and the closing number of units in issue are given in the Comparative Tables on pages 12 to 15. The distribution per unit class is given in the Distribution Table on page 33. All classes have the same rights on winding up. 13 Derivative and other financial instruments In accordance with the investment objective, the fund may hold certain financial instruments. These comprise: securities held in accordance with the investment objective and policy; cash and short term debtors and creditors arising directly from operations. Under normal circumstances, the Manager would expect substantially all of the assets of the fund to be invested in securities appropriate to the fund s investment objective. Cash and near cash may only be held in order to assist in the redemption of units, the efficient management of the fund or purposes regarded as ancillary to the fund. The fund has little exposure to credit risk. The main risks arising from the fund s financial instruments are market price, foreign currency, liquidity 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. Market price risk The fund s investment portfolio is exposed to market price fluctuations which are monitored by the Manager in pursuance of the investment objective and policy. Adherence to investment guidelines and to investment and borrowing powers set out in the Trust Deed, the Prospectus and in the COLL mitigates the risk of excessive exposure to any particular type of security or issuer. Foreign currency risk The fund invests 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. 27

28 Notes to the Accounts (continued) 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 Australian dollar , , , ,001 Hong Kong dollar , , , ,336 Singapore dollar ,105 41, ,417 44,417 Sterling , , , ,227 US dollar ,112 20, ,974 22,974 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. Interest rate risk Interest receivable on bank balances will be affected by fluctuations in interest rates. 28

29 Notes to the Accounts (continued) 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 Australian dollar , , , , ,436 Hong Kong dollar , , , ,336 Singapore dollar ,105 41, ,417 44,417 Sterling , , , ,900 US dollar ,112 20, ,974 22,974 Financial liabilities Floating rate not carrying financial liabilities interest Total Currency 000 s 000 s 000 s Australian dollar ,097 1,338 4,435 Sterling ,274 8, ,339 8,334 9,673 There are no material amounts of non-interest bearing financial assets, other than equities, 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. 29

30 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 Equities 60, , Sales Equities 193,111 (139) (73) 192,899 (0.07) (0.04) Total cost of the fund s average net asset value (%) Commissions Taxes Principal Commissions Taxes Total cost % of % of s 000 s 000 s 000 s principal principal Purchases Equities 71, , Sales Sales 1 : Equities 86,492 (84) (34) 86,374 (0.10) (0.04) In-specie sales: Equities 41, , ,629 (84) (34) 127,511 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 0.14% ( %, 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. 30

31 Notes to the Accounts (continued) 15 Units in issue reconciliation Number Number of units Number Number of units in issue as of units of units in issue as at issued cancelled at I Income units 40,825,895 1,136,414 (2,074,896) 39,887,413 I Accumulation units 12,927,288 1,034,829 (3,368,679) 10,593,438 S Income units 3,803,919 0 (164,612) 3,639,307 X Accumulation units 142,417,505 0 (142,417,505) 0 31

32 Remuneration Quantitative Remuneration Disclosures Quantitative remuneration disclosures required under the UCITS Directive will be available from Q1 2018, following the conclusion of this performance period, as prior to that date the information available will not provide materially relevant and clear information to investors about how the remuneration policy of Schroder Unit Trusts Limited (the Manager) operates in line with the requirements of the UCITS Directive. 32

33 Distribution Table Final distribution for the year ended 15 October 2016 Group 1 Units purchased prior to 16 October 2015 Group 2 Units purchased on or after 16 October 2015 Net Distribution Distribution revenue Equalisation payable paid p per unit p per unit p per unit p per unit I Income units Group Group I Accumulation units Group Group S Income units Group Group X Accumulation units 1 Group Group X Accumulation units were redeemed during the year. Corporate unitholders (unaudited) Corporate unitholders receive the dividend distribution payments as detailed below: % of the total distribution is received as franked investment income. Equalisation Equalisation applies to units purchased during the distribution period (Group 2 units). It is the average amount of revenue included in the purchase price of Group 2 units and is refunded to the holders of these units as a return of capital. Being capital it is not liable to income tax but must be deducted from the cost of units for capital gains tax purposes. 33

34 General Information Manager Schroder Unit Trusts Limited 31 Gresham Street London EC2V 7QA Authorised and regulated by the Financial Conduct Authority Registrar 1 International Financial Data Services Limited IFDS House St Nicholas Lane Basildon Essex SS15 5FS Investment Adviser Schroder Investment Management (Singapore) Limited 138 Market Street #23-01 CapitaGreen Singapore Authorised to carry on investment business by the Monetary Authority of Singapore Schroder Investment Management (Hong Kong) Limited Suites 3301 Level 33, Two Pacific Place 88 Queensway Hong Kong Authorised to carry on investment business by the Securities and Futures Commission of Hong Kong Trustee J.P. Morgan Europe Limited Chaseside Bournemouth BH7 7DA Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation Authority Administration details Schroders FREEPOST RLTZ-CHSY-HBUT PO Box 1102 Chelmsford Essex CM99 2XX Investor Services investorservices@schroders.com Dealing Fax Independent Auditors PricewaterhouseCoopers LLP Atria One 144 Morrison Street Edinburgh EH3 8EX 1 The Manager has delegated the function of Registrar to International Financial Data Services Limited. Authorisation The fund is an authorised unit trust and is constituted pursuant to the COLL and is structured as a trust. The fund is a UCITS scheme for the purpose of the categorisation of the COLL. 34

35 For further literature please contact Schroder Investor Services on or at or visit our website at Issued in December 2016 by Schroder Unit Trusts Limited, 31 Gresham Street, London EC2V 7QA. Registered No: England. Authorised and regulated by the Financial Conduct Authority. w34377