NOTE 1 — ORGANIZATION
Schroder Global Series Trust (“SGST”) is an open-end series management investment company registered under the Investment Company Act of 1940, as amended (the “Investment Company Act”). SGST was organized as a business trust under the laws of The Commonwealth of Massachusetts on May 27, 2003. SGST has an unlimited number of authorized shares, which consists of one diversified series: Schroder North American Equity Fund (the “SGST Fund” or a “Fund”). The Schroder North American Equity Fund seeks long-term capital growth.
Schroder Series Trust (“SST”) is an open-end series management investment company registered under the Investment Company Act. SST was organized as a business trust under the laws of The Commonwealth of Massachusetts on May 6, 1993. SST has an unlimited number of authorized shares, which are divided into five separate series. Included in this report are Schroder Emerging Markets Small Cap Fund, Schroder Core Bond Fund, Schroder Long Duration Investment-Grade Bond Fund, Schroder Short Duration Bond Fund and Schroder Total Return Fixed Income Fund (each a “Fund,” collectively, the “SST Funds,” and together with the SGST Fund, the “Funds” or “Trusts”), all of which are diversified funds. The Schroder Emerging Markets Small Cap Fund seeks long-term capital appreciation. The Schroder Core Bond Fund and Schroder Short Duration Bond Fund seek long-term total return consistent with the preservation of capital. The Schroder Total Return Fixed Income Fund seeks a high level of total return. The Schroder Long Duration Investment-Grade Bond Fund seeks to achieve a total return that exceeds that of the Fund’s benchmark, the Bloomberg Barclays U.S. Long Government/Credit Bond Index.
Schroder Core Bond Fund commenced operations January 31, 2018.
NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES
The Funds are investment companies that apply the accounting and reporting guidance issued in Topic 946 by the U.S. Financial Accounting Standards Board. The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates, and those differences could be material.
The following is a summary of significant accounting policies followed by the Funds, which are in conformity with U.S. GAAP:
SECURITY VALUATION: Securities listed on a securities exchange, market or automated quotation system for which quotations are readily available (except for securities traded on NASDAQ), including securities traded over the counter, are valued at the last quoted sale price on an exchange or market (foreign or domestic) on which they are traded on valuation date (or at approximately 4:00 pm ET if a security’s primary exchange is normally open at that time), or, if there is no such reported sale on the valuation date, at the most recent quoted bid price. For securities traded on NASDAQ, the NASDAQ Official Closing Price will be used. If available, debt securities are priced based upon valuations provided by independent, third-party pricing agents. Such values generally reflect the last reported sales price if the security is actively traded. The third-party pricing agents may also value debt securities at an evaluated bid price by employing methodologies that utilize actual market transactions, broker-supplied valuations, or other methodologies designed to identify the market value for such securities. Such methodologies generally consider such factors as security prices, yields, maturities, call features, ratings and developments relating to specific securities in arriving at valuations. On the first day a new debt security purchase is recorded, if a price is not available on the automated pricing feeds from our primary and secondary pricing vendors nor is it available from an independent broker, the security may be valued at its purchase price. Each day thereafter, the debt security will be valued according to the Trusts’ fair value procedures until an independent source can be secured. Debt obligations with remaining maturities of sixty days or less may be valued at their amortized
Notes to Financial Statements (continued)
April 30, 2019 (unaudited)
cost, provided that it is determined the amortized cost continues to approximate fair value. Should existing credit, liquidity or interest rate conditions in the relevant markets and issuer specific circumstances suggest that amortized cost does not approximate fair value, then the amortized cost method may not be used. The prices for foreign securities are reported in local currency and converted to U.S. dollars using currency exchange rates.
Securities for which market prices are not “readily available” are valued in accordance with fair value procedures established by the Funds’ Board of Trustees (the “Board”). The Funds’ fair value procedures are implemented through a fair value committee (the “Committee”) designated by the Board. Some of the more common reasons that may necessitate that a security be valued using fair value procedures include: the security’s trading has been halted or suspended; the security has been de-listed from a national exchange; the security’s primary trading market is temporarily closed at a time when under normal conditions it would be open; the security has not been traded for an extended period of time; the security’s primary pricing source is not able or willing to provide a price; or trading of the security is subject to local government-imposed restrictions. When a security is valued in accordance with the fair value procedures, the Committee will determine the value after taking into consideration relevant information reasonably available to the Committee.
Swaps are marked-to-market daily based upon quotations from market makers and the resulting changes in market values, if any, are recorded as an unrealized gain or loss in the Statements of Operations.
Futures contracts that are traded on an exchange are valued at their last reported sales price as of the valuation date.
Options for which the primary market is a national securities exchange are valued at the last sale price on the exchange on which they are traded, or, in the absence of any sale, at the closing bid price for long positions and at the closing ask price for written options. Options not traded on a national securities exchange are valued at the last quoted bid price.
For securities that principally trade on a foreign market or exchange, a significant gap in time can exist between the time of a particular security’s last trade and the time at which the Fund calculates its net asset value. The closing prices of such securities may no longer reflect their market value at the time the Fund calculates net asset value if an event that could materially affect the value of those securities (a “Significant Event”) has occurred between the time of the security’s last close and the time that the Fund calculates net asset value. A Significant Event may relate to a single issuer or to an entire market sector. If SIMNA (the “Adviser”) of the Funds becomes aware of a Significant Event that has occurred with respect to a security or group of securities after the closing of the exchange or market on which the security or securities principally trade, but before the time at which the Fund calculates net asset value, it may request that a Committee meeting be called. In addition, SEI Investments Global Funds Services (the “Administrator”), a wholly owned subsidiary of SEI Investments Company, monitors price movements among certain selected indices, securities and/or baskets of securities that may be an indicator that the closing prices received earlier from foreign exchanges or markets may not reflect market value at the time a Fund calculates net asset value. If price movements in a monitored index or security exceed levels established by the Administrator, the Administrator notifies the Adviser if a Fund is holding a relevant security that such limits have been exceeded. In such event, the Adviser makes the determination whether a Committee meeting should be called based on the information provided.
Schroder Emerging Markets Small Cap Fund uses MarkIt Fair Value (“MarkIt”) as a third party fair valuation vendor. MarkIt provides a fair value for foreign securities in the Fund based on certain factors and methodologies (involving, generally, tracking valuation correlations between the U.S. market and each non-U.S. security) applied by MarkIt in the event that there is a movement in the U.S. markets that exceeds a specific threshold established by the Committee. The Committee establishes a “confidence interval” which is used to determine the level of correlation between the value of a foreign security and movements
Notes to Financial Statements (continued)
April 30, 2019 (unaudited)
in the U.S. market before a particular security is fair valued when the threshold is exceeded. In the event that the threshold established by the Committee is exceeded on a specific day, the Fund values its non-U.S. securities that exceed the applicable “confidence interval” based upon the fair values provided by MarkIt. In such event, it is not necessary to hold a Committee meeting. In the event that the Adviser believes that the fair values provided by MarkIt are not reliable, the Adviser contacts the Administrator and can request that a meeting of the Committee be held.
If a local market in which the Fund owns securities is closed for one or more days, the Fund shall value all securities held in that corresponding currency based on the fair value prices provided by MarkIt using the predetermined confidence interval discussed above.
In accordance with the authoritative guidance on fair value measurements and disclosure under U.S. GAAP, the Funds disclose the fair value of their investments in a hierarchy that prioritizes the inputs to valuation techniques used to measure the fair value. The objective of a fair value measurement is to determine the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). Accordingly, the fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
| • | Level 1 — Unadjusted quoted prices in active markets for identical, unrestricted assets or liabilities that the Funds have the ability to access at the measurement date |
| • | Level 2 — Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, referenced indices, quoted prices in inactive markets, adjusted quoted prices in active markets,etc.) |
| • | Level 3 — Prices, inputs or proprietary modeling techniques which are both significant to the fair value measurement and unobservable (supported by little or no market activity). |
Investments are classified within the level of the lowest significant input considered in determining fair value. Investments classified within Level 3 whose fair value measurement considers several inputs may include Level 1 or Level 2 inputs as components of the overall fair value measurement.
For the period ended April 30, 2019, there have been no significant changes to the Funds’ fair valuation methodologies. Fair value measurement classifications are summarized in each Fund’s Schedule of Investments.
FEDERAL INCOME TAXES: It is the intention of each Fund to qualify, or continue to qualify, as a “regulated investment company” by complying with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended. If a Fund qualifies as a regulated investment company that is accorded special tax treatment, the Fund will not be subject to Federal income taxes to the extent that, among other things, it distributes substantially all of its taxable income, including realized capital gains, for the fiscal year in a timely manner, to its shareholders in the form of dividends. In addition, as a result of distributing substantially all of their net investment income during each calendar year, capital gains and certain other amounts, if any, the Funds will not be subject to a Federal excise tax. The Funds evaluate tax positions taken or expected to be taken in the course of preparing the Funds’ tax returns to determine whether it is “more-likely than-not” (i.e., greater than 50%) that each tax position will be sustained upon examination by a taxing authority based on the technical merits of the position. Tax positions deemed to meet the more-likely-than-not threshold are recorded as a tax benefit or expense in the current year. The Funds did not record any tax provision in the current period. However, management’s conclusions regarding tax positions may be subject to review and adjustment at a later date based on factors including, but not limited to, examination by tax authorities (i.e., the last three tax year ends, as applicable), on-going analysis of and changes to tax laws, regulations and interpretations thereof.
Notes to Financial Statements (continued)
April 30, 2019 (unaudited)
As of, and during the period ended April 30, 2019, the Funds did not have a liability for any unrecognized tax benefits. The Funds recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. During the period, the Funds did not incur any tax-related interest or penalties.
FOREIGN TAXES: The Emerging Markets Small Cap Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on either income or gains earned or repatriated. The Emerging Markets Small Cap Fund accrues and applies such taxes to net investment income, net realized gains and net unrealized gains as income and/or capital gains are earned. The Emerging Markets Small Cap Fund has accrued foreign tax in the amount of $129 presented on the Statement of Assets and Liabilities.
INVESTMENT TRANSACTIONS: Investment security transactions are recorded as of trade date. Realized gains and losses on sales of investments are determined on the basis of identified cost. Capital gain taxes on securities in certain foreign countries are accrued on unrealized appreciation and are due when realized.
INVESTMENT INCOME: Dividend income is recorded on the ex-dividend date. Interest income and expense is recorded on an accrual basis. Discounts and premiums on fixed income securities are accreted and amortized using the effective interest method. Realized gains (losses) on paydowns of mortgage-backed and asset-backed securities are recorded as an adjustment to interest income.
EXPENSES: Expenses are recorded on an accrual basis. Many of the expenses of the Funds can be directly attributable to a specific Fund. Expenses not directly attributable to a specific Fund are allocated among the Funds based on relative average net assets or another appropriate methodology. Class specific expenses are borne by that class. Fund expenses are pro-rated to the respective classes based on relative net assets.
CLASSES OF SHARES: Income, realized and unrealized gains and losses of a Fund are prorated to the respective classes of shares based on relative net assets.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Dividends and distributions to shareholders from net investment income are declared and distributed at least annually for North American Equity Fund and Emerging Markets Small Cap Fund, and monthly for Schroder Core Bond Fund, Schroder Short Duration Bond Fund and Schroder Long Duration Investment-Grade Bond Fund. Schroder Total Return Fixed Income Fund declares dividends to shareholders from net investment income daily and distributes these dividends monthly. Distributions to shareholders from net realized capital gains, if any, are declared and distributed at least annually for each of the Funds.
FOREIGN CURRENCY: Foreign currency amounts are translated into U.S. dollars at the mean of the bid and asked prices of such currencies against U.S. dollars as follows: (i) assets and liabilities at the rate of exchange at the end of the respective period; and (ii) purchases and sales of securities and income and expenses at the rate of exchange prevailing on the dates of such transactions. Each Fund generally bifurcates that portion of realized gains (losses) on investments in debt securities which is attributed to changes in foreign exchange rates from that which is due to changes in market prices of debt securities. That portion of gains (losses) is included in the “Statements of Operations” under “Net realized gain (loss) on foreign currencies.” For foreign equity securities, these changes are included in the “Statements of Operations” under “Net realized and unrealized gain (loss) on investments.” Each Fund reports certain foreign currency related transactions as components of realized gains (losses) for financial reporting purposes, whereas such components are treated as ordinary income (loss) for federal income tax purposes. Certain Funds may enter into forward foreign currency contracts to protect the U.S. dollar value of the underlying portfolio of securities against the effect of possible adverse movements in foreign exchange rates. Certain Funds may also seek to gain currency exposure or otherwise attempt to increase a Fund’s total return by holding such forward foreign currency contracts. Principal risks associated with such transactions include the movement in value of the foreign currency relative to the U.S. dollar and the ability of the counterparty to perform. Fluctuations in the value of such forward foreign currency transactions are recorded daily as unrealized gain or loss;
Notes to Financial Statements (continued)
April 30, 2019 (unaudited)
realized gain or loss includes net gain or loss on transactions that have terminated by settlement or by the Funds entering into offsetting commitments.
WHEN-ISSUED SECURITIES: Certain Funds may purchase securities on a when-issued, delayed delivery, or forward commitment basis, including TBAs, during the period covered by this report. These transactions involve a commitment by the Fund to purchase a security for a predetermined price or yield, with payments and delivery taking place more than seven days in the future, or after a period longer than the customary settlement period for that type of security. These transactions may increase the overall investment exposure for a Fund (and so may create investment leverage) and involve a risk of loss if the value of the securities declines prior to the settlement date.
CONVERTIBLE SECURITIES: Certain Funds may invest in securities that are convertible into preferred and common stocks, and so subject to the risks of investments in both debt and equity securities. The market value of convertible securities tends to decline as interest rates increase and, conversely, tends to increase as interest rates decline. In addition, because of the conversion feature, the market value of convertible securities tends to vary with fluctuations in the market value of the underlying preferred and common stocks and, therefore, also will react to variations in the general market for equity securities.
FUTURES: Financial futures contracts are valued based upon their quoted daily settlement prices; changes in initial settlement value (represented by cash paid to or received from brokers as “variation margin”) are accounted for as unrealized appreciation (depreciation). When futures contracts are closed, the difference between the opening value at the date of purchase and the value at closing is recorded as realized gain or loss in the Statements of Operations.
Futures contracts are generally utilized in order to hedge against unfavorable changes in the value of securities or otherwise to attempt to increase a Fund’s total return. Futures contracts involve leverage and are subject to market risk that may exceed the amounts recognized in the Statements of Assets and Liabilities. Risks arise from the possible significant movements in prices. The change in value of futures contracts primarily corresponds to the value of the securities or other index or amount underlying the contracts, but may not precisely correlate with the change in value of such securities or other index or amount. In addition, there is the risk that a Fund may not be able to enter into a closing transaction because of an illiquid secondary market.
OPTION/SWAPTION TRANSACTIONS: Certain Funds may purchase and write call and put options on securities, securities indices, swaps (“swaptions”) and foreign currencies, provided such options/swaptions are traded on a national securities exchange or an over-the-counter market. When any of the Funds writes or purchases a covered call or put option/swaption, an amount equal to the premium received is included in that Fund’s statement of assets and liabilities as a liability. The amount of the liability is subsequently marked-to-market to reflect the current market value of the option/swaption. If an option/swaption expires on its stipulated expiration date or if the Fund enters into a closing purchase transaction, a gain or loss is realized. If a written call option/swaption is exercised, a gain or loss is realized for the sale of the underlying security and the proceeds from the sale are increased by the premium originally received. If a written put option/swaption is exercised, the cost of the security acquired is decreased by the premium originally received. As writer of an option/swaption, the Fund has no control over whether the underlying securities are subsequently sold (call) or purchased (put) and, as a result, bears the market risk of an unfavorable change in the price of the security or index underlying the written option/swaption. When any of the Funds purchases a call or put option/swaption, an amount equal to the premium paid is included in that Fund’s statement of assets and liabilities as an investment, and is subsequently marked-to-market to reflect the current market value of the option/swaption. If an option/swaption expires on the stipulated expiration date or if a Fund enters into a closing sale transaction, a gain or loss is realized. If a Fund exercises a call, the cost of the security acquired is increased by the premium paid for the call. If a Fund exercises a put option/swaption, a gain or loss is realized from the sale of the underlying security, and the proceeds from such sale are decreased by the premium originally paid. Written and purchased options/swaptions are non-income
Notes to Financial Statements (continued)
April 30, 2019 (unaudited)
producing securities. The option/swaption techniques utilized are generally to hedge against changes in interest rates, foreign currency exchange rates or securities prices in order to establish more definitely the effective return on securities or currencies held or intended to be acquired by a Fund, to reduce the volatility of the currency exposure associated with an investment in non-U.S. securities, or as an efficient means of adjusting exposure to the bond, equity and currency markets.
Refer to each Fund’s Schedule of Investments for details regarding open option/swaption contracts as of April 30, 2019, if applicable.
SWAP AGREEMENTS: Certain Funds may enter into swap agreements, including credit default swaps and interest rate swaps and other types of exchange-traded or over-the-counter transactions with broker-dealers or other financial institutions. Depending on their structures, swap agreements may increase or decrease a Fund’s exposure to long- or short-term interest rates (in the United States or abroad), foreign currency values, mortgage securities, corporate borrowing rates, or other factors such as security prices or inflation rates. The value of a Fund’s swap positions would increase or decrease depending on the changes in value of the underlying rates, currency values, or other indices or measures. Swap agreements are privately negotiated in the over-the counter market (“OTC swaps”) or may be executed in a multilateral or other trade facility platform, such as a registered commodities exchange (“centrally cleared swaps”).
In a “credit default” swap transaction, one party pays what is, in effect, an insurance premium through a stream of payments to another party in exchange for the right to receive a specified return in an event of default (or similar events) by a third party on its obligations. Therefore, in a credit default swap, a Fund may pay a premium and, in return, have the right to put certain bonds or loans to the counterparty upon default by the issuer of such bonds or loans (or similar events) and to receive in return the par value of such bonds or loans (or another agreed upon amount). A Fund could also receive the premium referenced above, and be obligated to pay a counterparty the par value of certain bonds or loans upon a default (or similar event) by the issuer. A Fund’s ability to realize a profit from such transactions will depend on the ability of the financial institutions with which it enters into the transactions to meet their obligations to the Fund. Under certain circumstances, suitable transactions may not be available to a Fund, or a Fund may be unable to close out its position under such transactions at the same time, or at the same price, as if it had purchased comparable publicly traded securities.
“Interest rate” swaps involve the exchange by a Fund with another party of their respective commitments to pay or receive interest (e.g., an exchange of floating rate payments for fixed rate payments) with respect to a notional amount of principal. “Inflation- linked” swaps are used to transfer inflation risk from one party to another through an exchange of cash flows. In an inflation-linked swap, one party pays a fixed rate on a notional principal amount, while the other party pays a floating rate linked to an inflation index, such as the Consumer Price Index. The Funds could be exposed to credit or market risk due to unfavorable changes in the fluctuation of interest rates or if the counterparty defaults on its obligation to perform. A Fund’s ability to engage in certain swap transactions may be limited by tax considerations.
Swaps are marked-to-market daily and the resulting changes in market values, if any, are recorded as an unrealized gain or loss in the Statement of Operations. Net payments of interest are recorded as realized gains or losses. Daily changes in valuation of centrally cleared swaps, if any, are recorded as a receivable or payable for the change in value as appropriate (“variation margin”) on the Statements of Assets and Liabilities.
Legislative and regulatory reforms, including the Dodd-Frank Wall Street Reform and Consumer Protection Act, have resulted in new regulation of swap agreements, including clearing, margin, reporting, recordkeeping and registration requirements. New regulations could, among other things, restrict a Fund’s ability to engage in swap transactions (for example, by making certain types of swap transactions no longer available to a Fund) and/or increase the costs of such swap transactions (for example, by increasing margin or capital requirements), and a Fund may as a result be unable to execute its investment strategies in a manner the Fund might otherwise choose.
Notes to Financial Statements (continued)
April 30, 2019 (unaudited)
CUSTODY OFFSET: The Funds have an arrangement with the custodian whereby interest earned on uninvested cash balances is used to offset a portion of the custodian fees. The amounts are included in custodian fees and custody offset on the Statements of Operations.
OFFERING COSTS: During the period ended October 31, 2018, the Schroder Core Bond Fund commenced operations and incurred offering costs, which were amortized to expense over a twelve month period. As of April 30, 2019, the offering costs have been fully amortized.
NOTE 3 — INVESTMENT ADVISORY FEES, ADMINISTRATION AGREEMENTS AND DISTRIBUTION PLANS
The Funds have entered into investment advisory agreements with SIMNA. Under these agreements, SIMNA provides investment management services and is entitled to receive compensation for its services, payable monthly for the SGST Fund and the SST Funds, at the following annual rates based on average daily net assets of each Fund taken separately. No changes to the management fee rates the Funds pay to SIMNA occurred due to the Transition. In order to limit the expenses of the R6 and Investor Shares of certain Funds, as applicable, SIMNA has contractually agreed to waive management fees, pay and/or reimburse the applicable Fund for expenses through February 28, 2020, to the extent that the total annual fund operating expenses of a Fund (other than acquired fund fees and expenses, other indirect acquired fund expenses, interest, taxes, and extraordinary expenses) allocable to each share class exceed the following annual rates (based on the average daily net assets attributable to each share class):
| | | |
| | |
|
| | | |
| | | | | |
|
Schroder North American Equity Fund | | | 0.25% |
| | | N/A | | | | 0.33% |
|
Schroder Emerging Markets Small Cap Fund(1) | | | 1.15% |
| | | 1.35% |
| | | 1.50% |
|
Schroder Core Bond Fund | | | 0.25% |
| | | 0.32% |
| | | N/A |
|
Schroder Long Duration Investment-Grade Bond Fund(2) | | | 0.25% |
| | | N/A |
| | | 0.32% |
|
Schroder Short Duration Bond Fund(3) | | | 0.25% |
| | | 0.32% |
| | | 0.47% |
|
Schroder Total Return Fixed Income Fund | | | 0.25% |
| | | N/A | | | | 0.40% |
|
| (1) | Prior to July 1, 2017, the management fee was 1.25%, and the expense limitations were 1.50% for R6 Shares and 1.65% for Investor Shares. |
| (2) | Prior to April 1, 2018, the management fee was 0.33%. Prior to February 28, 2018, the expense limitation was 0.39% for Investor Shares |
| (3) | Prior to April 1, 2018, the management fee was 0.29%. Prior to February 28, 2018, the expense limitations were 0.39% for R6 Shares and 0.54% for Investor Shares. |
N/A — Fund is not currently subject to the expense limitation agreement or Share Class is not currently offered
SIMNA has retained its affiliate Schroder Investment Management North America Limited (“SIMNA Ltd.”) to serve as sub-adviser responsible for the portfolio management of Schroder North American Equity Fund and Schroder Emerging Markets Small Cap Fund. During the reporting period, SIMNA paid SIMNA Ltd. the following percentage of the investment advisory fees it received from Schroder North American Equity Fund and Schroder Emerging Markets Small Cap Fund, after waivers, as set forth below.
Effective October 16, 2017:
| Fund | | Percentage of Fees
Paid to SIMNA Ltd. | |
Schroder North American Equity Fund | | | 58.5% |
|
Schroder Emerging Markets Small Cap Fund | | | 58.5% |
|
Notes to Financial Statements (continued)
April 30, 2019 (unaudited)
Each Trust has entered into an administration agreement with SEI Investments Global Funds Services (“SEI” or the “Administrator”), under which the Administrator provides administrative services to the Trust. For these services, the Administrator is paid a fee, which varies based on the average daily net assets of each Fund, subject to certain minimums.
Each Trust and SEI Investments Distribution Co., (“SIDCO”), a wholly-owned subsidiary of SEI Investments, and an affiliate of the Administrator, are parties to a distribution agreement (the “Distribution Agreement”), whereby SIDCO acts as principal underwriter for the Trusts’ shares.
Each Fund has adopted a shareholder servicing plan under which a shareholder servicing fee of up to 0.15% of average daily net assets of Investor Shares of the Funds will be paid to financial intermediaries.
SIMNA or its affiliates may, from time to time, also make payments to financial intermediaries for sub-administration, sub-transfer agency, or other shareholder services or distribution, out of their own resources.
NOTE 4 — DERIVATIVE CONTRACTS
Derivative instruments and hedging activities require enhanced disclosures about the Funds’ derivative and hedging activities, including how such activities are accounted for and their effect on the Funds’ financial position, performance, and cash flows.
The fair value of derivative instruments as of April 30, 2019, was as follows:
| Fund | Statement of Assets and Liabilities Location | | Asset
Derivatives | | | Liability
Derivatives | |
| Schroder North American Equity Fund | | | | | | | |
| Equity contracts | | | | | | | |
| Futures contracts | Unrealized appreciation/(depreciation)
on futures contracts | | $ | 1,599,353 | | | $ | — | |
| Foreign exchange contracts | | | | | | | | | |
| Forward contracts | Unrealized appreciation/(depreciation)
on forward foreign currency contracts | | | | | | | | |
| | | | | | | | | | |
| Schroder Short Duration Bond Fund | | | | | | | |
| Interest rate contracts | | | | | | | |
| Futures contracts | Unrealized appreciation/(depreciation)
on futures contracts | | | | | | | | |
| | | | | | | | | | |
| Schroder Total Return Fixed Income Fund | | | | | | | | | |
| Interest rate contracts | | | | | | | | | |
| Futures contracts | Unrealized appreciation/(depreciation)
on futures contracts | | $ | 49,876 | | | $ | — | |
| Credit contracts | | | | | | | | | |
| Centrally cleared swap contracts | Unrealized appreciation/(depreciation)
on swap contracts | | | | | | | | |
| | | | | | | | | | |
Notes to Financial Statements (continued)
April 30, 2019 (unaudited)
The effect of derivative instruments on the Statement of Operations for the period ended April 30, 2019, was as follows:
The amount of net realized gain (loss) and change in unrealized appreciation (depreciation) on derivatives:
| Fund | | Net Realized
Gain/(Loss)* | | | Change in Unrealized
Appreciation
(Depreciation)** | | | Total | |
| Schroder North American Equity Fund | | | | | | | | | |
| Equity contracts | | | | | | | | | |
| Futures contracts | | $ | 303,596 | | | $ | 3,210,317 | | | $ | 3,513,913 | |
| Foreign exchange contracts | | | | | | | | | | | | |
| Forward contracts | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Schroder Short Duration Bond Fund | | | | | | | | | | | | |
| Interest rate contracts | | | | | | | | | | | | |
| Futures contracts | | | | | | | | | | | | |
| Schroder Total Return Fixed Income Fund | | | | | | | | | | | | |
| Interest rate contracts | | | | | | | | | | | | |
| Futures contracts | | $ | (10,547 | ) | | $ | 190,788 | | | $ | 180,241 | |
| Foreign exchange contracts | | | | | | | | | | | | |
| Forward contracts | | | (66,075 | ) | | | 57,333 | | | | (8,742 | ) |
| Credit contracts | | | | | | | | | | | | |
| Swap contracts | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| * | Futures contracts are included in net realized gain (loss) on futures, forward contracts are included in net realized gain (loss) on forward foreign currency contracts, swap contracts are included in net realized loss on swap contracts. |
| ** | Futures contracts are included in change in unrealized depreciation on futures, forward contracts are included in change in unrealized appreciation (depreciation) on forward foreign currency contracts and swap contracts are included in change in unrealized appreciation on swap contracts. |
The following table discloses the volume of the futures contracts, forward foreign currency contracts, options contracts and swap contracts during the period ended April 30, 2019:
| | | Schroder
North American Equity Fund | | | Schroder
Short Duration Bond Fund | | | Schroder Total Return Fixed Income Fund | |
| Futures Contracts: | | | | | | | | | |
| Average Monthly Market Value Balance Long | | $ | 43,138,000 | | | $ | 3,113,202 | | | $ | 15,632,254 | |
| Average Monthly Market Value Balance Short | | $ | — | | | $ | (865,711 | ) | | $ | (10,197,766 | ) |
| Forward Foreign Currency Contracts: | | | | | | | | | | | | |
| Average Monthly Notional Contracts Purchased | | $ | 3,163,794 | | | $ | — | | | $ | 65,292 | |
| Average Monthly Notional Contracts Sold | | $ | (16,026,308 | ) | | $ | — | | | $ | (187,253 | ) |
| Swap Contracts: | | | | | | | | | | | | |
| Average Monthly Market Value of Centrally Cleared Swaps | | $ | — | | | $ | 33,364 | | | $ | — | |
Notes to Financial Statements (continued)
April 30, 2019 (unaudited)
In accordance with the authoritative guidance under U.S. GAAP, “Disclosures about Offsetting Assets and Liabilities” entities are required to disclose information about financial instruments and derivative instruments that have been offset or that are subject to enforceable master netting agreements. The Funds do not offset such instruments on the Statement of Assets and Liabilities, rather such instruments are presented on a gross basis.
The following is a summary by derivative type of the market value of over the counter (“OTC”) financial derivative instruments and collateral (received)/pledged by counterparty as of April 30, 2019:
| | | Gross Assets- Recognized in the Statement of Assets and Liabilities | | | Gross Liabilities- Recognized in the Statement of Assets and Liabilities | | | Net
Amount Available to
be Offset | | | Cash
Collateral Pledged or (Received)† | | | | |
| Schroder North American Equity Fund | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Canadian Imperial Bank of Commerce | | $ | — | | | $ | (1,436 | ) | | $ | (1,436 | ) | | $ | — | | | $ | (1,436 | ) |
| RBC | | | | | | | | | | | | | | | | | | | | |
| Total | | | | | | | | | | | | | | | | | | | | |
| Schroder Emerging Markets Small Cap Fund | | | | | | | | | | | | | | | | | | | | |
| | | Forward Contracts | | | Forward Contracts | | | | | | | | | | | | | |
| JPMorgan Chase Bank | | | | | | | | | | | | | | | | | | | | |
| † | Collateral pledged is limited to the net outstanding amount due to/from an individual counterparty. The actual collateral amounts pledged may exceed these amounts and may fluctuate in value. |
| ‡ | Net amount represents the net receivable/(payable) that would be due from/to the counterparty in the event of default. Exposure from OTC financial derivative instruments can only be netted across transactions governed under the same master agreement with the same legal entity. |
NOTE 5 — REDEMPTION FEES
Schroder Emerging Markets Small Cap Fund generally imposes a 2.00% redemption fee on shares redeemed (including in connection with an exchange) two months or less from their date of purchase. These fees, which are not sales charges, are retained by the Fund and not paid to SIDCO or any other entity. The redemption fees are included in the Statements of Changes in Net Assets under “Redemption fees,” and are included as part of “Capital paid-in” on the Statements of Assets and Liabilities. There were no redemption fees retained for the period ended April 30, 2019.
NOTE 6 — INVESTMENT TRANSACTIONS
Purchases and proceeds from sales and maturities of investments, excluding short-term and U.S. Government securities for each Fund, for the period ended April 30, 2019 were as follows:
| | | | | | | |
Schroder North American Equity Fund | | $ | 202,021,859 | | | $ | 230,709,052 | |
Schroder Emerging Markets Small Cap Fund | | | 249,909 | | | | 227,839 | |
Schroder Core Bond Fund | | | 9,054,536 | | | | 5,063,148 | |
| Schroder Long Duration Investment-Grade Bond Fund | | | 26,183,336 | | | | 6,408,775 | |
Schroder Short Duration Bond Fund | | | 719,824 | | | | 3,343,410 | |
Schroder Total Return Fixed Income Fund | | | 2,814,503 | | | | 7,521,117 | |
Notes to Financial Statements (continued)
April 30, 2019 (unaudited)
Purchases and proceeds from sales and maturities of U.S. Government securities for the period ended April 30, 2019 were as follows:
| | | | | | | |
Schroder Core Bond Fund | | $ | 40,569,272 | | | $ | 33,984,417 | |
| Schroder Long Duration Investment-Grade Bond Fund | | | 51,607,060 | | | | 24,003,847 | |
Schroder Short Duration Bond Fund | | | 6,831,803 | | | | 3,637,319 | |
Schroder Total Return Fixed Income Fund | | | 15,658,124 | | | | 11,758,418 | |
NOTE 7 — FEDERAL INCOME TAXES
Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. GAAP. These book/tax differences are either temporary or permanent in nature. Any permanent differences, which may result in distribution reclassifications, are primarily due to differing treatments for gains resulting from investments in passive foreign investment companies, equalization distribution, reclassifications of long-term capital gain distributions on real estate investment trust securities, partnership investments, foreign currency transactions and paydowns. Distributions from short-term gains and from gains on foreign currency transactions are treated as distributions from ordinary income for tax purposes.
At October 31, 2018, the Funds reclassified the following permanent amounts between capital paid-in, undistributed net investment income and accumulated realized gain (loss):
| | | Distributable Earnings (Loss)* | | | | |
| | | Increase
(Decrease)
Undistributed
Net Investment
Income | | | Increase
(Decrease)
Accumulated
Realized Gain
(Loss) | | | Increase
(Decrease)
Capital Paid-in | |
Schroder North American Equity Fund | | $ | 364,978 | | | $ | (364,930 | ) | | $ | (48 | ) |
Schroder Emerging Markets Small Cap Fund | | | 17,259 | | | | (17,259 | ) | | | — | |
Schroder Core Bond Fund | | | 995 | | | | (995 | ) | | | — | |
| Schroder Long Duration Investment-Grade Bond Fund | | | — | | | | — | | | | — | |
Schroder Short Duration Bond Fund | | | 3,474 | | | | (3,474 | ) | | | — | |
Schroder Total Return Fixed Income Fund | | | (240,979 | ) | | | 240,979 | | | | — | |
| * | The reporting simplification amendments to Regulation S-X simplifies the reporting requirements for Registered Investment Companies by combining the components of net assets attributable to Undistributed Net Investment Income, Accumulated Net Realized Gain/Loss, and Unrealized Gain/Loss to one line item “Total Distributable Earnings (Loss)”. The table above provides the tax characteristics of distributable earnings (loss) which are included in Total distributable earnings (loss). |
Notes to Financial Statements (continued)
April 30, 2019 (unaudited)
The tax character of dividends and distributions declared during the years or periods ended October 31, 2018 and October 31, 2017, was as follows:
| | | | | | | | | | | | | |
| Schroder North American Equity Fund | | | | | | | | | | | | |
2018 | | $ | 32,669,411 | | | $ | 24,894,979 | | | $ | — | | | $ | 57,564,390 | |
2017 | | | 24,298,359 | | | | 27,381,132 | | | | — | | | | 51,679,491 | |
| Schroder Emerging Markets Small Cap Fund | | | | | | | | | | | | | | | | |
2018 | | | 45,427 | | | | 314,600 | | | | — | | | | 360,027 | |
2017 | | | 578,111 | | | | 102,320 | | | | — | | | | 680,431 | |
| Schroder Core Bond Fund | | | | | | | | | | | | | | | | |
2018 | | | 573,056 | | | | — | | | | — | | | | 573,056 | |
| Schroder Long Duration Investment-Grade Bond Fund | | | | | | | | | | | | | | | | |
2018 | | | 2,902,410 | | | | — | | | | — | | | | 2,902,410 | |
2017 | | | 4,130,015 | | | | 501,764 | | | | — | | | | 4,631,779 | |
| Schroder Short Duration Bond Fund | | | | | | | | | | | | | | | | |
2018 | | | 343,185 | | | | — | | | | — | | | | 343,185 | |
2017 | | | 270,060 | | | | — | | | | — | | | | 270,060 | |
| Schroder Total Return Fixed Income Fund | | | | | | | | | | | | | | | | |
2018 | | | 1,417,244 | | | | — | | | | 379,779 | | | | 1,797,023 | |
2017 | | | 1,503,800 | | | | — | | | | 397,236 | | | | 1,901,036 | |
As of October 31, 2018, the components of distributable earnings (accumulated losses) on a tax basis were as follows:
| | | Undistributed Ordinary Income | | | Undistributed Long-Term Capital Gain | | | Capital Loss Carryforwards | | | Unrealized Appreciation (Depreciation) | | | Other
Temporary Differences | | | Total Distributable Earnings (Accumulated Losses) | |
Schroder North American
Equity Fund | | $ | 26,359,809 | | | $ | 64,733,192 | | | $ | — | | | $ | 298,746,191 | | | $ | (33 | ) | | $ | 389,839,159 | |
Schroder Emerging Markets
Small Cap Fund | | | 39,986 | | | | 67,552 | | | | — | | | | 51,886 | | | | (49 | ) | | | 159,375 | |
| Schroder Core Bond Fund | | | 5,962 | | | | — | | | | (71,021 | ) | | | (934,306 | ) | | | — | | | | (999,365 | ) |
Schroder Long Duration Investment-Grade
Bond Fund | | | 19,520 | | | | — | | | | (1,001,417 | ) | | | (7,096,518 | ) | | | — | | | | (8,078,415 | ) |
Schroder Short Duration
Bond Fund | | | 2,011 | | | | — | | | | (139,535 | ) | | | (184,699 | ) | | | — | | | | (322,223 | ) |
Schroder Total Return
Fixed Income Fund | | | — | | | | — | | | | (4,657,546 | ) | | | (1,161,467 | ) | | | (119,147 | ) | | | (5,938,160 | ) |
Notes to Financial Statements (continued)
April 30, 2019 (unaudited)
Each Fund may use its tax basis capital loss carryforwards listed above to offset taxable capital gains realized in subsequent years for federal income tax purposes. If a Fund incurs or has incurred net capital losses in taxable years beginning after December 22, 2010 (“post-RIC Mod losses”), those losses will be carried forward to one or more subsequent taxable years without expiration; any such carryforward losses will retain their character as short-term or long-term.
The Funds listed below have the following post-RIC Mod losses, which do not expire:
| | | | | | | | | | |
Schroder Core Bond Fund | | $ | 53,069 | | | $ | 17,952 | | | $ | 71,021 | |
| Schroder Long Duration Investment-Grade Bond Fund | | | 920,761 | | | | 80,656 | | | | 1,001,417 | |
Schroder Short Duration Bond Fund | | | 67,106 | | | | 72,429 | | | | 139,535 | |
Schroder Total Return Fixed Income Fund | | | 1,321,742 | | | | 3,335,804 | | | | 4,657,546 | |
For Federal income tax purposes, the difference between Federal tax cost and book cost primarily relates to the timing of recognition of gains and losses on investments for tax and book purposes, investments in publicly traded partnerships and wash sales.
At April 30, 2019, the identified cost for Federal income tax purposes of investments owned by each Fund and their respective gross unrealized appreciation and depreciation were as follows:
| | | | | | Gross
Unrealized Appreciation | | | Gross
Unrealized (Depreciation) | | | Net Unrealized Appreciation (Depreciation) | |
Schroder North American Equity Fund | | $ | 607,614,888 | | | $ | 376,394,472 | | | $ | (18,883,318 | ) | | $ | 357,511,154 | |
Schroder Emerging Markets Small Cap Fund | | | 1,745,161 | | | | 490,332 | | | | (127,908 | ) | | | 362,424 | |
Schroder Core Bond Fund | | | 49,562,165 | | | | 885,676 | | | | (69,368 | ) | | | 816,308 | |
| Schroder Long Duration Investment-Grade Bond Fund | | | 152,067,472 | | | | 4,988,877 | | | | (411,719 | ) | | | 4,577,158 | |
Schroder Short Duration Bond Fund | | | 15,395,544 | | | | 51,097 | | | | (48,082 | ) | | | 3,015 | |
Schroder Total Return Fixed Income Fund | | | 39,823,373 | | | | 530,807 | | | | (235,869 | ) | | | 294,938 | |
NOTE 8 — IN-KIND TRANSFERS
On January 31, 2018, the Schroder Core Bond Fund issued shares for an in-kind subscription.
| | | | | | | | | | | | | |
Schroder Core Bond Fund | | | 2,005,476 | | | $ | 19,836,159 | | | $ | 218,606 | | | $ | 20,054,765 | |
On June 5, 2018, the Schroder Core Bond Fund and Schroder Long Duration Investment-Grade Bond Fund issued shares for an in-kind subscription.
| | | | | | | | | | | | | |
Schroder Core Bond Fund | | | 1,004,476 | | | $ | 9,466,972 | | | $ | 396,987 | | | $ | 9,863,959 | |
| Schroder Long Duration Investment-Grade Bond Fund | | | 3,334,002 | | | | 27,804,628 | | | | 267,666 | | | | 28,072,294 | |
During the period ended April 30, 2019, there were no in-kind transactions.
Notes to Financial Statements (continued)
April 30, 2019 (unaudited)
NOTE 9 — PORTFOLIO INVESTMENT RISKS
Below are summaries of some, but not all, of the principal risks of investing in one or more of the Funds, each of which could adversely affect a Fund’s NAV, yield and total return. Each risk listed below does not necessarily apply to each Fund, and you should read each Fund’s prospectus carefully for a description of the principal risks associated with investing in a particular Fund.
Schroder Emerging Markets Small Cap Fund has a relatively large portion of its assets invested in companies or issuers domiciled in particular foreign countries, including emerging markets. The Fund may be more susceptible to political, social and economic events adversely affecting those countries and such issuers.
Schroder Emerging Markets Small Cap Fund may invest more than 25% of its total assets in issuers located in any one country or group of countries. When a Fund invests in a foreign country, it is susceptible to a range of factors that could adversely affect its holdings in issuers of that country, including political and economic developments and foreign exchange-rate fluctuations. As a result of investing substantially in a single country, the value of the Fund’s assets may fluctuate more widely than the value of shares of a comparable fund with a lesser degree of geographic concentration. The Funds may invest in countries with limited or developing capital markets. Investments in these markets may involve greater risk than investments in more developed markets.
Schroder Core Bond Fund, Schroder Short Duration Bond Fund and Schroder Total Return Fixed Income Fund invest a portion of their assets in securities of issuers that hold mortgage securities, including subprime mortgage securities. The value of these securities is sensitive to changes in economic conditions, including delinquencies and/or defaults, and may be adversely affected by shifts in the market’s perception of the issuers and changes in interest rates.
Schroder Core Bond Fund, Schroder Long Duration Investment-Grade Bond Fund and Schroder Short Duration Bond Fund invest a portion of their assets in municipal bonds. Municipal bonds are investments of any maturity issued by states, public authorities or political subdivisions to raise money for public purposes; they include, for example, general obligations of a state or other government entity supported by its taxing powers to acquire and construct public facilities, or to provide temporary financing in anticipation of the receipt of taxes and other revenue. They also include obligations of states, public authorities or political subdivisions to finance privately owned or operated facilities or public facilities financed solely by enterprise revenues. The values of municipal obligations that depend on a specific revenue source to fund their payment obligations may fluctuate as a result of changes in the cash flows generated by the revenue source or changes in the priority of the municipal obligation to receive the cash flows generated by the revenue source. Changes in law or adverse determinations by the Internal Revenue Service or a state tax authority could make the income from some of these obligations taxable.
The yields on municipal bonds depend on a variety of factors, including general money market conditions, effective marginal tax rates, the financial condition of the issuer, general conditions of the municipal bond market, the size of a particular offering, the maturity of the obligation and the rating of the issue. The ratings of nationally recognized securities rating agencies represent their opinions as to the credit quality of the municipal bonds.
A Fund may enter into derivative transactions including futures contracts, options, and swap contracts. Derivatives are financial contracts whose values depend on, or derive from, the value of an underlying asset, reference rate, or index. A Fund’s use of derivative instruments involves risks different from, and possibly greater than, the risks associated with investing directly in securities and other traditional investments. Derivatives are subject to liquidity risk, interest rate risk, and credit risk, and the risk that a derivative transaction may not have the effect the Funds’ adviser anticipated. Derivatives also involve the risk of mispricing or improper valuation and the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset, rate, or index. Derivative transactions typically involve leverage and
Notes to Financial Statements (continued)
April 30, 2019 (unaudited)
may be highly volatile. Use of derivatives other than for hedging purposes may be considered speculative and may have the effect of creating investment leverage, and when a Fund invests in a derivative instrument it could lose more than the principal amount invested. Also, suitable derivative transactions may not be available in all circumstances and there can be no assurance that a Fund will engage in these transactions when that would be beneficial. Additional principal risks for the Funds can be found in the prospectus.
NOTE 10 — BENEFICIAL INTEREST
The following table shows the number of shareholders each owning of record, or to the knowledge of the Funds beneficially, 5% or more of shares of a Fund outstanding as of April 30, 2019 and the total percentage of shares of the Fund held by such shareholders. The table includes omnibus accounts that hold shares on behalf of many shareholders.
| | | 5% or Greater Shareholders | |
| | | | | | | |
Schroder North American Equity Fund, Investor Shares | | | 2 | | | | 98.53% |
|
Schroder Emerging Markets Small Cap Fund, R6 Shares | | | 1 | | | | 100.00 | |
Schroder Emerging Markets Small Cap Fund, Investor Shares | | | 1 | | | | 99.95 | |
Schroder Core Bond Fund, R6 Shares | | | 2 | | | | 99.99 | |
| Schroder Long Duration Investment-Grade Bond Fund, Investor Shares | | | 4 | | | | 96.72 | |
Schroder Short Duration Bond Fund, R6 Shares | | | 1 | | | | 98.15 | |
Schroder Short Duration Bond Fund, Investor Shares | | | 1 | | | | 99.99 | |
Schroder Total Return Fixed Income Fund, Investor Shares | | | 5 | | | | 80.55 | |
One account shown above holding 100.00% of the Schroder Emerging Markets Small Cap Fund R6 Shares, 99.95% of the Schroder Emerging Markets Small Cap Fund Investor Shares, 98.15% of the Schroder Short Duration Bond Fund R6 Shares and 99.99% of the Schroder Short Duration Bond Fund Investor Shares is owned by an affiliate of SIMNA.
NOTE 11 — LINE OF CREDIT
The Funds entered into a credit agreement on October 6, 2008, as amended from time to time, that enables them to participate in a $12.5 million committed revolving line of credit with JPMorgan Chase Bank, N.A. Any advance under the line of credit is contemplated primarily for temporary or emergency purposes, or to finance the redemption of the shares of a shareholder of the borrower. Interest is charged to the Funds based on their borrowings at the current reference rate. The Funds pay their pro rata portion of an annual commitment fee of 0.20% on the total amount of the credit facility. There were no borrowings under the line of credit for the period ended April 30, 2019.
Notes to Financial Statements (continued)
April 30, 2019 (unaudited)
NOTE 12 — CAPITAL SHARE TRANSACTIONS
Capital share transactions for the period ended April 30, 2019 (unaudited) and the year or period ended October 31, 2018 were as follows:
| | | North American
Equity Fund | | | Emerging Markets
Small Cap Fund | | | | |
| | | | | | | | | | | | | | | | | | | |
| R6 Shares: | | | | | | | | | | | | | | | | | | |
Sales of shares | | | N/A | | | | N/A | | | | — | | | | — | | | | 2,150,487 | | | | 1,034,494 | |
Reinvestment of distributions | | | N/A | | | | N/A | | | | 11,779 | | | | 30,920 | | | | 64,007 | | | | 45,037 | |
| Issued in connection with in-kind transfer | | | N/A | | | | N/A | | | | — | | | | — | | | | — | | | | 3,009,952 | |
Redemption of shares | | | | | | | | | | | | | | | | | | | | | | | | |
Net increase in R6 Shares | | | | | | | | | | | | | | | | | | | | | | | | |
| Investor Shares: | | | | | | | | | | | | | | | | | | | | | | | | |
Sales of shares | | | 18,888 | | | | 623,817 | | | | — | | | | — | | | | N/A | | | | N/A | |
Reinvestment of distributions | | | 5,881,701 | | | | 3,407,792 | | | | 148 | | | | 386 | | | | N/A | | | | N/A | |
Redemption of shares | | | | | | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) in
Investor Shares | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Long Duration Investment-Grade Bond Fund | | | | | | Total Return
Fixed Income Fund | |
| | | | | | | | | | | | | | | | | | | |
| R6 Shares: | | | | | | | | | | | | | | | | | | |
Sales of shares | | | N/A | | | | N/A | | | | 27,286 | | | | 61,437 | | | | N/A | | | | N/A | |
Reinvestment of distributions | | | N/A | | | | N/A | | | | 19,989 | | | | 34,612 | | | | N/A | | | | N/A | |
Redemption of shares | | | N/A | | | | N/A | | | | (34,051 | ) | | | (155,999 | ) | | | N/A | | | | N/A | |
| Net increase (decrease) in R6 Shares | | | | | | | | | | | | | | | | | | | | | | | | |
| Investor Shares: | | | | | | | | | | | | | | | | | | | | | | | | |
Sales of shares | | | 5,919,606 | | | | 1,085,179 | | | | — | | | | — | | | | 179,895 | | | | 736,428 | |
Reinvestment of distributions | | | 241,278 | | | | 336,570 | | | | 133 | | | | 224 | | | | 55,244 | | | | 159,492 | |
| Issued in connection with in-kind transfer | | | — | | | | 3,334,002 | | | | — | | | | — | | | | — | | | | — | |
Redemption of shares | | | | | | | | | | | | | | | | | | | | | | | | |
Net increase (decrease) in
Investor Shares | | | | | | | | | | | | | | | | | | | | | | | | |
| (a) | Fund commenced investment activities on January 31, 2018. |
N/A — R6 or Investor Shares currently not offered.
Notes to Financial Statements (concluded)
April 30, 2019 (unaudited)
NOTE 13 — REGULATORY MATTERS
On August 17, 2018, the SEC adopted amendments to Regulation S-X. These changes are effective for periods after November 5, 2018. The updates to Registered Investment Companies were mainly focused on simplifying the presentation of distributable earnings by eliminating the need to present the components of distributable earnings on a book basis in the Statement of Assets & Liabilities. The update also impacted the presentation of undistributed net investment income and distribution to shareholders on the Statement of Changes in Net Assets. The amounts presented in the current Statement of Changes in Net Assets represent the aggregated total distributions of net investment income and realized capital gains, except for distributions classified as return of capital which are still presented separately.
NOTE 14 — NEW ACCOUNTING PRONOUNCEMENT
In August 2018, the FASB issued Accounting Standards Update 2018-13, Fair Value Measurement (Topic 820). The new guidance includes additions and modifications to disclosures requirements for fair value measurements. For public entities, the amendments are effective for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. At this time, management is currently evaluating the impact of this new guidance on the financial statements and disclosures.
NOTE 15 — SUBSEQUENT EVENTS
The Funds have evaluated the need for disclosures and/or adjustments resulting from subsequent events through the date the financial statements were available to be issued. Based on this evaluation, no adjustments were required to the financial statements as of April 30, 2019.
Dislosure of Fund Expenses (unaudited)
We believe it is important for you to understand the impact of fees regarding your investment. All mutual funds have operating expenses. As a shareholder of a Schroder Mutual Fund, you incur ongoing costs, which include, among others, costs for portfolio management, administrative services, and shareholder reports (like this one), and in the case of Advisor Shares, distribution (12b-1) fees. Operating expenses, which are deducted from a fund’s gross income, directly reduce the investment return of the fund. A fund’s expenses are expressed as a percentage of its average net assets. This figure is known as the expense ratio. The following examples are intended to help you understand the ongoing costs (in dollars) of investing in your Fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period (November 1, 2018 to April 30, 2019).
The table below illustrates your Fund’s costs in two ways.
| • | Actual expenses. This section helps you to estimate the actual expenses after fee waivers, if applicable, that you paid over the period. The “Ending Account Value” shown is derived from the Fund’s actual return, and the fourth column shows the dollar amount that would have been paid by an investor who started with $1,000 in the Fund. You may use the information here, together with the amount you invested, to estimate the expenses that you paid over the period. To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your Fund under the heading “Expenses Paid During Period.” |
| • | Hypothetical example for comparison purposes. This section is intended to help you compare your Fund’s costs with those of other mutual funds. It assumes that the Fund had a return of 5% before expenses during the year, and that it incurred expenses at the rate of which it in the past did incur expenses. In this case, because the return used is not the Fund’s actual return, the results may not be used to estimate the actual ending balance of an account in the Fund over the period or expenses you actually paid. The example is useful in making comparisons because the Securities and Exchange Commission requires all mutual funds to calculate expenses in this table based on a 5% return. You can assess your Fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds. |
Please note that the expenses shown in the table are meant to highlight and help you compare ongoing costs only and do not reflect any transactional costs such as redemption fees, which are described in the Prospectus. If this fee were applied to your account, your costs would be higher.
Disclosure of Fund Expenses (unaudited) – (concluded)
| | | Beginning
Account Value
11/1/18 | | | Ending
Account
Value
4/30/19 | | | Net
Annualized
Expense
Ratios | | | Expenses
Paid
During
Period * | |
| Schroder North American Equity Fund | | | | | | | | | | | | |
| Actual Expenses | | | | | | | | | | | | |
| Investor Shares | | $ | 1,000.00 | | | $ | 1,088.50 | | | | 0.33 | % | | $ | 1.71 | |
| Hypothetical Example for Comparison Purposes | | | | | | | | | | | | | | | | |
| Investor Shares | | $ | 1,000.00 | | | $ | 1,023.20 | | | | 0.33 | % | | $ | 1.66 | |
| Schroder Emerging Markets Small Cap Fund | | | | | | | | | | | | | | | | |
| Actual Expenses | | | | | | | | | | | | | | | | |
| R6 Shares | | $ | 1,000.00 | | | $ | 1,171.60 | | | | 1.35 | % | | $ | 7.27 | |
| Investor Shares | | | 1,000.00 | | | | 1,171.70 | | | | 1.35 | | | | 7.27 | |
| Hypothetical Example for Comparison Purposes | | | | | | | | | | | | | | | | |
| R6 Shares | | $ | 1,000.00 | | | $ | 1,018.10 | | | | 1.35 | | | $ | 6.76 | |
| Investor Shares | | | 1,000.00 | | | | 1,018.10 | | | | 1.35 | | | | 6.76 | |
| Schroder Core Bond Fund | | | | | | | | | | | | | | | | |
| Actual Expenses | | | | | | | | | | | | | | | | |
| R6 Shares | | $ | 1,000.00 | | | $ | 1,054.00 | | | | 0.32 | % | | $ | 1.63 | |
| Hypothetical Example for Comparison Purposes | | | | | | | | | | | | | | | | |
| R6 Shares | | $ | 1,000.00 | | | $ | 1,023.20 | | | | 0.32 | | | $ | 1.61 | |
| Schroder Long Duration Investment-Grade Bond Fund | | | | | | | | | | | | | | | | |
| Actual Expenses | | | | | | | | | | | | | | | | |
| Investor Shares | | $ | 1,000.00 | | | $ | 1,102.40 | | | | 0.32 | % | | $ | 1.67 | |
| Hypothetical Example for Comparison Purposes | | | | | | | | | | | | | | | | |
| Investor Shares | | $ | 1,000.00 | | | $ | 1,023.20 | | | | 0.32 | | | $ | 1.61 | |
| Schroder Short Duration Bond Fund | | | | | | | | | | | | | | | | |
| Actual Expenses | | | | | | | | | | | | | | | | |
| R6 Shares | | $ | 1,000.00 | | | $ | 1,027.30 | | | | 0.32 | % | | $ | 1.61 | |
| Investor Shares | | | 1,000.00 | | | | 1,026.20 | | | | 0.32 | | | | 1.61 | |
| Hypothetical Example for Comparison Purposes | | | | | | | | | | | | | | | | |
| R6 Shares | | $ | 1,000.00 | | | $ | 1,023.20 | | | | 0.32 | | | $ | 1.61 | |
| Investor Shares | | | 1,000.00 | | | | 1,023.20 | | | | 0.32 | | | | 1.61 | |
| Schroder Total Return Fixed Income Fund | | | | | | | | | | | | | | | | |
| Actual Expenses | | | | | | | | | | | | | | | | |
| Investor Shares | | $ | 1,000.00 | | | $ | 1,051.10 | | | | 0.40 | % | | $ | 2.03 | |
| Hypothetical Example for Comparison Purposes | | | | | | | | | | | | | | | | |
| Investor Shares | | $ | 1,000.00 | | | $ | 1,022.80 | | | | 0.40 | | | $ | 2.01 | |
| * | Expenses are equal to the Fund’s annualized expense ratio multiplied by the average account value over the account period, multiplied by 181/365 (to reflect the one-half year period). |
| Facts | What does Schroders do with your personal information? |
| Why? | Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do. |
| What? | The types of personal information we collect and share depend on the product or service you have with us.
This information can include: • Social Security number and income • account balances and account transactions • assets and investment experience When you are no longer our customer, we continue to share your information as described in this notice. |
| How? | All financial companies need to share clients’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their clients’ personal information; the reasons Schroders chooses to share; and whether you can limit this sharing. |
| Reasons we can share your personal information | Does Schroders share? | Can you limit
this sharing? |
For our everyday business purposes — such as to process your transactions, maintain your account(s), or respond to court orders and legal investigations | Yes | No |
For our marketing purposes — to offer our products and services to you | Yes | No |
| For joint marketing with other financial companies | No | We Don’t Share |
For our affiliates’ everyday business purposes — information about your transactions and experiences | Yes | No |
For our affiliates’ everyday business purposes — information about your creditworthiness | No | We Don’t Share |
| For nonaffiliates to market to you | No | We Don’t Share |
| Questions? | For Schroder Mutual Funds, call DST AMS at (800) 464-3108. For other inquiries, call Institutional Client Service at (212) 641-3800 or email clientserviceny@us.schroders.com |
| Who we are | |
| Who is providing this notice? | Schroder Investment Management North America Inc. Schroder Mutual Funds Schroder Fund Advisors LLC |
| What we do | |
| How does Schroders protect my personal information? | To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include computer safeguards and secured files and buildings.
Access to personal information is limited to employees who need it to perform their jobs. Our policies restrict employee use of customer information; requiring it be held in strict confidence. |
| How does Schroders collect my personal information? | We collect your personal information, for example, when you • open an account and provide account information • give us your contact information • show your driver’s license or government issued ID • enter into an investment advisory contract • make a wire transfer |
| Why can’t I limit all sharing? | Federal law gives you the right to limit only • sharing for affiliates’ everyday business purposes—information about your creditworthiness • affiliates from using your information to market to you • sharing for nonaffiliates to market to you State laws and individual companies may give you additional rights to limit sharing. |
| Definitions | |
| Affiliates | Companies related by common ownership or control. They can be financial and nonfinancial companies. • Our affiliates include companies with the Schroder name; financial companies such as Schroder Investment Management North America Limited and Schroder Investment Management Limited; and others, such as the parent, holding company, Schroders plc. |
| Nonaffiliates | Companies not related by common ownership or control. They can be financial and nonfinancial companies. • Nonaffiliates we share with can include companies that help us maintain, process or service your transactions or account(s) or financial products, including companies that perform administrative, accounting, transfer agency, custodial, brokerage or proxy solicitation services, or that assist us in marketing. |
| Joint marketing | A formal agreement between nonaffiliated financial companies that together market financial products or services to you. • Schroders doesn’t jointly market. |
| Investment Adviser | | Schroder Investment Management North America Inc. 7 Bryant Park New York, NY 10018-3706 |
| Trustees | | William M. Doran Jon C. Hunt Thomas P. Lemke Randall S. Yanker Jay C. Nadel |
| Distributor | | SEI Investments Distribution Co. 1 Freedom Valley Drive Oaks, Pennsylvania 19456 |
Transfer & Shareholder
Servicing Agent | | DST Asset Manager Solutions, Inc. |
| Custodian | | JPMorgan Chase Bank |
| Counsel | | Morgan, Lewis & Bockius LLP |
| Independent Registered Public Accounting Firm | | PricewaterhouseCoopers LLP |
| | | This report is transmitted to shareholders only. It is not authorized for use as an offer of sale or a solicitation of an offer to buy shares of a Fund unless accompanied or preceded by that Fund’s current prospectus. Past performance results shown in this report should not be considered a representation of future performance. Investment returns and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Statements and other information herein are as dated and are subject to change. |
| | | Schroder Series Trust Schroder Global Series Trust P.O. Box 219360 Kansas City, MO 64121-9360 (800) 464-3108 |
Item 2. Code of Ethics.
Not applicable for semi-annual report.
Item 3. Audit Committee Financial Expert.
Not applicable for semi-annual report.
Item 4. Principal Accountant Fees and Services.
Not applicable for semi-annual report.
Item 5. Audit Committee of Listed Registrants.
Not applicable to open-end management investment companies.
Item 6. Schedule of Investments.
Schedule of Investments is included as part of the Report to Shareholders filed under Item 1 of this form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable to open-end management investment companies.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable. Effective for closed-end management investment companies for fiscal years ending on or after December 31, 2005.
Item 9. Purchases of Equity Securities by Closed-End Management Company and Affiliated Purchasers.
Not applicable to open-end management investment companies.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no changes to the procedures by which shareholders may recommend nominees to the Registrant’s Board of Trustees during the period covered by this report.
Item 11. Controls and Procedures.
(a) The Registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Act (17 CFR 270.30a-3(c))) as of a date within 90 days of the filing date of the report, are effective based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Exchange Act (17 CFR 240.13a-15(b) or 240.15d-15(b)).
(b) There has been no change in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d)) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting.
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
Not applicable.
Item 13. Exhibits.
(a)(1) Not applicable for semi-annual report.
(a)(2) A separate certification for the principal executive officer and the principal financial officer of the Registrant as required by Rule 30a-2(a) under the Investment Company Act of 1940, as amended (17 CFR 270.30a-2(a)), are filed herewith.
(b) Officer certifications as required by Rule 30a-2(b) under the Investment Company Act of 1940, as amended (17 CFR 270.30a-2(b)) also accompany this filing as an exhibit.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| (Registrant) | Schroder Series Trust | |
| | | |
| By (Signature and Title) | /s/ Michael Beattie | |
| | Michael Beattie | |
| | President |
Date: July 8, 2019
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| By (Signature and Title) | /s/ Michael Beattie | |
| | Michael Beattie | |
| | President | |
| Date: July 8, 2019 | | |
| | | |
| By (Signature and Title) | /s/ Stephen Connors | |
| | Stephen Connors | |
| | Treasurer, Controller & CFO | |
| Date: July 8, 2019 |
