UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________
FORM N-CSR
________
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
INVESTMENT COMPANY ACT FILE NUMBER 811-21364
SCHRODER GLOBAL SERIES TRUST
(Exact name of registrant as specified in charter)
________
SEI Investments
One Freedom Valley Drive
Oaks, PA 19456
(Address of principal executive offices) (Zip code)
Michael Beattie
C/O SEI Investments
One Freedom Valley Drive
Oaks, PA 19456
(Name and address of agent for service)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 1-800-464-3108
DATE OF FISCAL YEAR END: OCTOBER 31, 2017
DATE OF REPORTING PERIOD: OCTOBER 31, 2017
ITEM 1. REPORTS TO STOCKHOLDERS.
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SCHRODER MUTUAL FUNDS
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OCTOBER 31, 2017 ANNUAL REPORT
DOMESTIC EQUITY
Schroder North American Equity Fund
INTERNATIONAL EQUITY
Schroder Emerging Markets Small Cap Fund
FIXED INCOME
Schroder Short Duration Bond Fund
Schroder Total Return Fixed Income Fund
Schroder Long Duration Investment-Grade Bond Fund
SCHRODERS
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SCHRODER MUTUAL FUNDS
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TABLE OF CONTENTS
Management Discussion and Analysis............................................ 1
Schedules of Investments
North American Equity Fund ............................................ 16
Emerging Markets Small Cap Fund ....................................... 21
Short Duration Bond Fund .............................................. 24
Total Return Fixed Income Fund ........................................ 28
Long Duration Investment-Grade Bond Fund .............................. 36
Statements of Assets and Liabilities ....................................... 40
Statements of Operations ................................................... 42
Statements of Changes in Net Assets ........................................ 44
Financial Highlights ....................................................... 48
Notes to Financial Statements .............................................. 52
Report of Independent Registered Public Accounting Firm .................... 69
Information Regarding Review and Approval of Investment Advisory Contracts . 70
Disclosure of Fund Expenses ................................................ 73
Trustees and Officers ...................................................... 75
Notice to Shareholders ..................................................... 78
Shareholder Voting Results ................................................. 80
PROXY VOTING (UNAUDITED)
A description of the Funds' proxy voting policies and procedures is
available upon request, without charge, by visiting the Securities and
Exchange Commission's ("SEC") website at http://www.sec.gov, or by
calling 1-800-464-3108 and requesting a copy of the applicable Fund's
Statement of Additional Information or on the Schroder Funds website at
http://www.schroderfunds.com, by downloading the Funds' Statement of Additional
Information. Information regarding how the Funds voted proxies related to
portfolio securities during the most recent 12-month period ended June 30 is
available without charge, upon request by calling 1-800-464-3108 and on the
SEC's website at http://www.sec.gov.
FORM N-Q (UNAUDITED)
The Funds file their complete schedules of portfolio holdings with the SEC for
the first and third quarters of each fiscal year on Form N-Q. The Funds' Form
N-Q is available on the SEC's website at http://www.sec. gov, and may be
reviewed and copied at the SEC's Public Reference Room in Washington, DC.
Information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330.
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SCHRODER MUTUAL FUNDS
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IMPORTANT INFORMATION CONCERNING MANAGEMENT DISCUSSION AND ANALYSIS AND
PERFORMANCE
Except as otherwise specifically stated, all information and investment team
commentary, including portfolio security positions, is as of October 31, 2017.
The views expressed in the Management Discussion and Analysis sections (the
"MD&As") are those of the respective Fund's portfolio manager(s) and are
subject to change without notice. They do not necessarily represent the views
of Schroder Investment Management North America Inc. ("SIMNA"). The MD&As
contain some forward-looking statements providing current expectations or
forecasts of future events; they do not necessarily relate to historical or
current facts. There can be no guarantee that any forward-looking statement
will be realized. We undertake no obligation to publicly update forward-looking
statements, whether as a result of new information, future events, or
otherwise. Any discussions of specific securities should not be considered a
recommendation to buy or sell those securities. A Fund may buy, sell, or hold
any security discussed herein, on the basis of factors described herein or the
basis of other factors or other considerations. Fund holdings will change.
Performance quoted represents past performance and does not guarantee or predict
future results Investment return and principal value will fluctuate, so shares,
when redeemed, may be worth more or less than their original cost. Please keep
in mind that any double digit returns are highly unusual and cannot be
sustained. Fees and expenses are factored into the net asset value of your
shares and any performance numbers we release. Total return figures reflect
expense limitations in effect during the periods shown; without such
limitations, the performance shown would have been lower. Performance results
assume the reinvestment of dividends and capital gains. The return figures shown
do not reflect the deduction of taxes that a shareholder may pay on Fund
distributions or the redemption of Fund shares. Current and month-end
performance and other information, which may be lower or higher than that cited,
is available by contacting SIMNA at (212) 641-3800 and is periodically updated
on our website: www.schroderfunds.com.
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1
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SCHRODER NORTH AMERICAN EQUITY FUND
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MANAGEMENT DISCUSSION AND ANALYSIS (As of December 1, 2017)
PERFORMANCE
For the twelve-month period ended October 31, 2017, the Schroder North American
Equity Fund (the "Fund") gained 21.96% (Investor Shares), compared to the S&P
500 Index (the "Index"), a market index based on the market capitalizations of
500 large companies having common stock listed on the NYSE or NASDAQ, which
rose 23.63% during the same period.
MARKET BACKGROUND
The early part of the reporting period was dominated by the U.S. presidential
election in November 2016 and the unexpected victory for Donald Trump. After a
brief initial shock, investors embraced the potential for tax cuts, stimulus
measures and lighter regulation under President Trump and a Republican-
controlled Congress. The Federal Reserve (the "Fed") increased interest rates,
in line with expectations, as macroeconomic data remained supportive.
In style terms, value did well in late 2016 on the back of increasing investor
confidence. The OPEC oil production deal in November was positive for investor
sentiment. Together with a subsequent agreement between non-OPEC producers to
cut supply in December, this helped deliver a boost to oil prices.
However, as 2017 got under way, the strong performance of value in late 2016
began to unwind and growth was resurgent. The failure of the Trump
administration to pass revisions to healthcare legislation cast doubts on the
administration's ability to implement other policies. The Fed increased
interest rates again in March and June 2017 although inflation remained softer
than expected. Investors' preference for a narrow cohort of growth stocks drove
the market's performance.
The latter part of the period under review was characterized by similar themes,
with the strong performance of growth and momentum stocks once again
dominating. This eased slightly towards the end of the period with a rotation
into commodity-focused industries.
PORTFOLIO REVIEW
Against this backdrop, the Fund posted strong positive returns, but lagged the
benchmark Index. The market environment proved difficult for our diversified,
valuation-aware approach. The principal detractors from relative performance
were the information technology and consumer discretionary sectors, where our
preference for better-quality and more attractively-valued names (for example,
IBM) was not rewarded.
The Fund's holdings in healthcare, currently one of our favored sectors due to
a combination of valuation and business quality, weighed on returns as the
sector suffered during the period, most notably our position in
MEDNAX. Positive influences included our long-standing underweight to the real
estate sector, which we view as expensive. The underweight to utilities was
also positive; anticipation of tightening monetary policy made these "yield
proxies" less attractive to investors. Our positioning in the energy sector
also added value.
OUTLOOK
The positioning of the Fund continues to reflect our goal of finding the best
trade-off between valuation and business quality. The Fund's most significant
overweight positions remain in healthcare and information technology.
Within healthcare, we see a broad range of attractive opportunities throughout
pharmaceuticals and healthcare providers. In technology, our preferred areas
remain high quality "boring" companies with strong balance sheets and rising
dividends and overlooked software developers.
Within telecoms, our exposure has taken a particular focus on integrated
providers. We have also taken further advantage of weaker prices to selectively
add to positions in consumer staples leading to our now overweight position in
the sector.
We maintain our long-standing underweights in real estate and utilities. We
have recently continued to increase our underweight exposure to the consumer
discretionary sector, most notably in media and auto makers.
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2
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SCHRODER NORTH AMERICAN EQUITY FUND
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COMPARISON OF CHANGE IN THE VALUE OF A $10,000
INVESTMENT IN THE SCHRODER NORTH AMERICAN EQUITY FUND INVESTOR
SHARES VS. THE STANDARD & POOR'S (S&P) 500 INDEX.
[LINE GRAPH OMITTED - PLOT POINTS AS FOLLOWS]
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10/31/07 10/31/08 10/31/09 10/31/10 10/31/11 10/31/12 10/31/13
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SCHRODER NORTH AMERICAN EQUITY FUND,
INVESTOR SHARES $10,000 $6,519 $7,210 $8,340 $8,982 $10,204 $12,934
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S&P 500 INDEX $10,000 $6,390 $7,017 $8,176 $8,837 $10,181 $12,948
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10/31/14 10/31/15 10/31/16 10/31/17
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SCHRODER NORTH AMERICAN EQUITY FUND,
INVESTOR SHARES $14,971 $15,535 $16,187 $19,742
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S&P 500 INDEX $15,183 $15,973 $16,693 $20,638
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The S&P 500 INDEX is a market capitalization value weighted composite index of
500 large capitalization U.S. companies and reflects the reinvestment of
dividends.
PERFORMANCE INFORMATION
ONE YEAR ENDED FIVE YEARS ENDED TEN YEARS ENDED
OCTOBER 31, 2017 OCTOBER 31, 2017 (A) OCTOBER 31, 2017 (A)
SCHRODER NORTH AMERICAN EQUITY FUND
Investor Shares 21.96% 14.11% 7.04%
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S&P 500 Index 23.63% 15.18% 7.51%
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(a) Average annual total returns.
"TOTAL RETURN" IS CALCULATED INCLUDING REINVESTMENT OF ALL DIVIDENDS AND
DISTRIBUTIONS. RESULTS DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER
WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. RETURNS FOR
CERTAIN PERIODS REFLECT FEE WAIVERS AND/OR REIMBURSEMENTS IN EFFECT FOR THAT
PERIOD; ABSENT FEE WAIVERS AND REIMBURSEMENTS, PERFORMANCE WOULD HAVE BEEN
LOWER. RESULTS REPRESENT PAST PERFORMANCE AND DO NOT INDICATE FUTURE RESULTS.
THE VALUE OF AN INVESTMENT IN THE FUND AND THE RETURN ON INVESTMENT BOTH WILL
FLUCTUATE AND REDEMPTION PROCEEDS MAY BE HIGHER OR LOWER THAN AN INVESTOR'S
ORIGINAL COST.
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TOP 5 HOLDINGS SECTOR ALLOCATION
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SECURITY % OF NET ASSETS SECTOR % OF NET ASSETS
Apple 4.3% Information Technology 25.4%
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Microsoft 3.2 Financials 16.0
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Johnson & Johnson 2.0 Healthcare 14.7
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JPMorgan Chase 1.9 Consumer Discretionary 11.0
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Amazon.com 1.7 Industrials 10.7
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Consumer Staples 8.4
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Energy 5.5
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Telecommunication Services 2.5
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Materials 1.8
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Utilities 1.1
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Real Estate 0.9
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Other Assets less Liabilities 2.0
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3
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SCHRODER EMERGING MARKETS SMALL CAP FUND
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MANAGEMENT DISCUSSION AND ANALYSIS (As of December 1, 2017)
PERFORMANCE
For the twelve-month period ended October 31, 2017, the Schroder Emerging
Markets Small Cap Fund (the "Fund") gained 18.09% (R6 Shares) and 18.12%
(Investor Shares), compared to the Morgan Stanley Capital International (MSCI)
Emerging Markets Small Cap Index (the "Index") (a broad-based basket of emerging
market stocks covering 1,829 securities across 24 markets), which rose 20.71%.
MARKET BACKDROP
Global equities registered strong gains over the twelve-month period as global
growth accelerated. The election of Donald Trump as U.S. President in November
2016 led financial markets to price in a reflation trade. This was in
anticipation that the new administration's plan for U.S. fiscal stimulus would
lead to stronger U.S. growth. However, expectations for the scale and timing of
fiscal expansion were subsequently reduced Combined with an easing in trade
policy concerns and a decreasing risk of more aggressive monetary policy
tightening, the U.S. dollar reversed part of its strong post-election gains. The
U.S. Federal Reserve (the "Fed") continued to gradually normalize its monetary
policy, raising its headline rate by a total of 75 basis points over the period
to 1.25% . It also announced plans for quantitative tightening (QT) in September
2017. Other major global central banks maintained accommodative monetary policy,
albeit the European Central Bank announced a reduction in the scale of its
quantitative easing program at the end of the period. U.S. dollar weakness and a
synchronous pickup in global growth were supportive of emerging markets
equities. The Index delivered a robust return of 20.71% (in USD terms) but
underperformed the MSCI World Index, which increased by 22.77% (in USD terms).
Emerging European equities were among the best performing markets. A pick-up in
global growth combined with the election of centrist leaders in France, the
Netherlands and Germany all proved supportive Taiwan also benefited from faster
global growth, with technology stocks, in particular semiconductor
manufacturers, underpinning gains.
China outperformed as macroeconomic data stabilized and concern over U. S.
protectionist measures eased. GDP growth modestly increased and was 6.8%
year-on-year in the third quarter of 2017, showing minimal impact from the
authorities' moves to selectively tighten credit and tackle financial sector
risks. Measures to tighten short-term interest rates, coupled with U.S. dollar
weakness, also served to ease pressure on the capital account. In India,
despite some deceleration in GDP growth, owing to the impact of demonetization
and the Goods and Services Tax (GST), the country posted a strong gain.
Inflation remained within the target range and the central bank lowered
interest rates by a total of 75 basis points over the period. Strong
performance from the ruling Bharatiya Janata Party in state elections also
supported sentiment and the outlook for reforms.
A recovery in commodity prices, supported in part by stronger growth in China,
was beneficial for a number of Latin American markets; notably Brazil and Chile.
In Brazil, macroeconomic data recovered from depressed levels and the economy
exited recession in the first quarter of 2017. Inflation maintained a downward
path and the central bank materially reduced its headline interest rate from 14%
to 7.5%. In Chile, the market was also boosted by opinion polls that indicated a
lead for centre-right candidate, Sebastian Pinera, ahead of a presidential
election in November 2017.
In contrast, South Korea recorded a strong gain but modestly underperformed.
Increased tensions with North Korea, notably over deployment of its missile
defense program, weighed on trade with China Concern over the new government's
policies also acted as a headwind to the market. Those markets most sensitive to
global liquidity tightening underperformed. This was in part given declines at
the end of the period when the Fed confirmed plans for QT and the dollar
appreciated. Turkey, South Africa, Indonesia and Malaysia all lagged. Mexico
posted a negative return amid concern over U.S. trade policy under the Trump
administration, in particular the future of NAFTA, and due to domestic politics.
This led to some volatility in the peso.
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4
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SCHRODER EMERGING MARKETS SMALL CAP FUND
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PORTFOLIO REVIEW
The Fund lagged the Index over the reporting period.
Stock selection in Taiwan and India were the key headwinds. In Taiwan, Apple
component suppliers, which we do not generally favor due to their single
product/single customer focus, rallied sharply ahead of the company's latest
product release. Meanwhile, several of our positions in exporters were
negatively impacted by Taiwanese dollar strength. This included bicycle
manufacturer MERIDA. In India, a number of our more defensive holdings
underperformed the strong market return. This included APOLLO HOSPITALS and
PFIZER. In contrast, stock selection in China was positive, in particular the
overweight to hotel operator CHINA LODGING GROUP.
OUTLOOK
The strategic case for an investment in emerging market smaller companies
continues to be compelling, in large part due to their rich opportunity set and
their generally under researched nature relative to larger capitalization
companies. The outlook is supported by an improving economic and earnings
profile. Valuations are reasonably attractive and we continue to find
compelling investment opportunities in well managed smaller companies given the
breadth of the universe.
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5
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SCHRODER EMERGING MARKETS SMALL CAP FUND
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COMPARISON OF CHANGE IN THE VALUE OF A $250,000
INVESTMENT IN THE SCHRODER EMERGING MARKETS SMALL CAP FUND -- R6 AND
INVESTOR SHARES VS. THE MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) EMERGING
MARKETS SMALL CAP INDEX.
[LINE GRAPH OMITTED - PLOT POINTS AS FOLLOWS]
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8/26/15 10/31/15 10/31/16 10/31/17
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SCHRODER EMERGING MARKETS SMALL CAP FUND, R6 SHARES $250,000 $263,000 $301,750 $356,346
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SCHRODER EMERGING MARKETS SMALL CAP FUND, INVESTOR SHARES $250,000 $263,000 $301,500 $356,122
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MSCI EMERGING MARKETS SMALL CAP INDEX $250,000 $273,669 $286,755 $346,148
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The MSCI EMERGING MARKETS SMALL CAP INDEX includes small cap representation
across 24 emerging market countries. With 1,829 constituents, the index covers
approximately 14% of the free float-adjusted market capitalization in each
country. The small cap segment tends to capture more local economic and sector
characteristics relative to larger emerging market capitalization segments.
PERFORMANCE INFORMATION
ONE YEAR ENDED ANNUALIZED
OCTOBER 31, 2017 SINCE INCEPTION (A)
SCHRODER EMERGING MARKETS SMALL CAP FUND
R6 Shares 18.09% 17.65%
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Investor Shares 18.12% 17.62%
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MSCI Emerging Markets Small Cap Index 20.71% 16.07%
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(a) From commencement of fund operations on August 26, 2015.
"TOTAL RETURN" IS CALCULATED INCLUDING REINVESTMENT OF ALL DIVIDENDS AND
DISTRIBUTIONS. RESULTS DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER
WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. RETURNS FOR
CERTAIN PERIODS REFLECT FEE WAIVERS AND/OR REIMBURSEMENTS IN EFFECT FOR THAT
PERIOD; ABSENT FEE WAIVERS AND REIMBURSEMENTS, PERFORMANCE WOULD HAVE BEEN
LOWER. RESULTS REPRESENT PAST PERFORMANCE AND DO NOT INDICATE FUTURE RESULTS.
THE VALUE OF AN INVESTMENT IN THE FUND AND THE RETURN ON INVESTMENT BOTH WILL
FLUCTUATE AND REDEMPTION PROCEEDS MAY BE HIGHER OR LOWER THAN AN INVESTOR'S
ORIGINAL COST.
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TOP 5 HOLDINGS GEOGRAPHIC ALLOCATION
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SECURITY % OF NET ASSETS % OF NET ASSETS
Mando 2.7% Asia/Far East 64.5%
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TCS Group Holding GDR 2.6 Europe 11.8
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Chroma ATE 2.4 Latin America 11.1
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Aramex PJSC 2.2 Middle East 6.8
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Arvind 2.2 Africa 1.0
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Other Assets less Liabilities 4.8
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6
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SCHRODER SHORT DURATION BOND FUND
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MANAGEMENT DISCUSSION AND ANALYSIS (As of December 1, 2017)
PERFORMANCE
For the twelve-month period ended October 31, 2017, the Schroder Short Duration
Bond Fund (the "Fund") gained 0.77% (R6 Shares) and 0.77% (Investor Shares),
compared to the Intercontinental Exchange (ICE) BofAML 1-3 Year Treasury Index
(the "Index"), a widely used short-term bond proxy, which rose 0.24% during the
same period.
MARKET BACKDROP
A positive global growth backdrop combined with the expectation of the new U. S.
administration's favorable policy agenda drove risk assets and sentiment higher
towards the end of 2016 and in the early part of 2017. However, investors took
pause when the bill to repeal and replace the Affordable Care Act was pulled
from the House floor in March. The failure to execute on the first major
initiative called into question President Trump's ability to deliver on his wide
range of pro-growth economic promises. However, despite the slight reprieve in
March, it did not take long for the markets to find support as economic data
continued to be strong. U.S. GDP grew at a respectable 2.1%, personal
consumption expenditure (PCE), the U.S. Federal Reserve's (the "Fed") preferred
inflation measure, rose to 2.1% in February, non-farm payrolls increased by
235,000, ahead of consensus estimate of 200,000, and the U.S. consumer
confidence index reached a 16-year high for March. In monetary policy, the Fed
took another step towards the normalization of interest rates by raising its
target range for the Fed Funds rate by 25 basis points (bps) to 0.75% to 1%.
This was only the third rate hike since December 2015, but the second in three
months and marked a notable departure from the glacial pace of previous rate
hikes. The move had been fully anticipated by markets, with Fed Funds futures
priced above a 90% probability of a rate hike, following strong signals from Fed
speakers in the weeks prior to the announcement. After two years of one hike
each, the Fed appeared to be testing market sentiment moving away from an
exceptionally accommodative monetary policy.
Financial markets continued to operate in an orderly fashion in the second
quarter of 2017, reaching new highs despite a greater level of uncertainty and
risk. Positive economic data, particularly the synchronized upswing in global
growth, subdued inflation and positive sentiment provided a healthy backdrop for
bonds over the quarter. Investors faced an avalanche of political noise; not
only in the U.S. with Trump's twitter feed and healthcare legislation, but also
in Europe with the French and UK snap election. Despite the uncertainty from the
geopolitical environment, investors took the political noise in stride and
maintained a positive disposition to risk markets. The VIX Index, often referred
to as the "fear gauge," touched 25-year lows, which was particularly surprising
given that the Fed hiked rates for the second time in 2017 and signaled another
move in the second half of the year as well as a tapering of the Fed's balance
sheet. Fed tightening has generally been associated with increased, rather than
decreased, volatility; for example, the VIX Index spiked after the first move in
Fed Funds in December 2015 and again during the taper tantrum of 2013, when the
Fed signaled an end to quantitative easing.
Markets continued to deliver strong returns in the third quarter with the focus
on improving economic fundamentals as opposed to political headwinds. The
economic data pointed towards a healthy global economy with rising global
growth, improving corporate profitability, and strong employment numbers across
the world. U.S. manufacturing activity hit a 13-year high and consumer
confidence, in the U.S. and Europe, reached the highest levels in 10 years.
Markets were able to filter out the relentless barrage of political noise in
Washington, the rising tensions in North Korea, German political elections and
recent violence in Catalonia The Fed announced that it would start the process
of quantitative tightening in October, as expected, and more surprisingly
suggested that the rate hiking cycle is not on hold. At the meeting in
September, the European Central Bank (the "ECB") decided to keep interest rates
unchanged and provided no details on the future of its quantitative easing
program. However, in October, Mario Draghi announced that the ECB will continue
to purchase EUR 60 billion a month through year end, but that the monthly
purchases will be reduced to EUR 30 billion starting in January 2018. The
policy shift suggested an acknowledgement of the solid growth that is apparent
in the region, but also keeps the door open for a further extension.
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7
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SCHRODER SHORT DURATION BOND FUND
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PORTFOLIO REVIEW
The Fund beat the Index for the twelve-month period. Sector selection was the
main factor benchmark with a positive impact from the Fund's allocations to
financials and industrials. The corporate sector was able to shrug off most of
the noise out of Washington and was boosted by strong corporate earnings, with
financials in particular benefitting from liability-driven demand and higher
interest rates, while industrials were supported by commodity price stability
in the second half of the period. The corporate allocation is focused on
shorter maturity bonds with less sensitivity to spread risk, as measured by
duration times spread, than the corporate component of the Index. Throughout
the period we have reduced the Fund's overall corporate exposure by selling
longer-dated credits to reduce market value exposure and spread risk. The
allocation to asset-backed securities ("ABS") and tax-exempt municipals were
also positive contributors with ABS providing a carry advantage versus
Treasuries and municipals performing particularly well for most of 2017. Issue
selection is not a factor against the Index since it is an all-Treasury
benchmark. Duration was also not a material factor.
OUTLOOK
Our view on risk assets remains a cautious one. While both economic and
corporate fundamentals look healthy, markets have been driven by central bank
liquidity for the past several years, which has resulted in significant
financial asset performance as investor demand for bonds is met with lower
available supply. Risk assets, in particular, have benefitted as investors have
moved further out on the risk spectrum in search of yield. Central banks now
seem to have embarked on a globally coordinated policy course that will
ultimately lead to higher interest rates. They have adopted the view that
global growth is robust enough and financial conditions are easy enough for
them to move away from their ultra-accommodative stances. Inflation has
recently turned upwards in most developed economies. This is supporting the
view that central bankers are close to achieving their mandates. For a while,
our belief has been that the markets will need to learn how to operate without
extreme central bank liquidity and that asset prices will need to adjust
accordingly. If decreasing supply and increasing demand has driven asset prices
higher, it stands to reason that increasing supply and decreasing demand will
have the opposite impact. Given that valuations in investment grade credit are
now roughly at this cycle's tightest levels from 2014, we prefer holding
liquidity to allow the Fund to take advantage of opportunities as they arise.
It is our expectation that the Fed will raise rates once more this year and
taper its reinvestment program. The front-end of the U.S. Treasury market is
assigning a very high probability to one more rate hike this year and has
nearly two hikes discounted between today and June 2019. It is our expectation
that yields will continue to rise moderately over the course of the year as
central banks' confidence in the improved global growth backdrop increases. The
market reaction will likely stem from the areas that are benefitting the most
from central bank policy. We believe that European markets remain vulnerable,
as expensive valuations have been supported by continued quantitative easing.
While record low interest rates abroad have driven foreign investors into
higher-yielding U.S. credit, rising yields overseas and increased costs of
hedging dollar-exposure should make the U.S. market less compelling to
non-domestic investors. This is a marked change in the technical backdrop, as
non-domestic investors now own over 40% of the U.S. credit market. The credit
market in aggregate has also tripled in size since the financial crisis. Our
sector preference remains in financials, which should benefit from less
regulatory burdens and higher interest rates. However, we have reduced
lower-rated bank exposure and rotated into shorter maturity financials as
credit curves have flattened.
Going forward, we expect markets to be characterized by increasing volatility
as central banks step away from the markets. Although the growth outlook
remains healthy, the valuation backdrop in many sectors is far less compelling
than it was twelve months ago. This is reflected in the low level of overall
risk in the Fund. The Fund has significant dry powder to take advantage of
increased volatility which may result as central banks pass the baton and take
a step away from markets.
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8
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SCHRODER SHORT DURATION BOND FUND
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COMPARISON OF CHANGE IN THE VALUE OF A $250,000 INVESTMENT
IN THE SCHRODER SHORT DURATION BOND FUND --R6 AND
INVESTOR SHARES VS. THE ICE BOFAML 1-3 YEAR TREASURY INDEX.
[LINE GRAPH OMITTED - PLOT POINTS AS FOLLOWS]
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8/26/15 10/31/15 10/31/16 10/31/17
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SCHRODER SHORT DURATION BOND FUND, R6 SHARES $250,000 $250,623 $255,557 $257,520
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SCHRODER SHORT DURATION BOND FUND, INVESTOR SHARES $250,000 $250,558 $255,233 $257,193
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ICE BOFAML 1-3 YEAR TREASURY INDEX $250,000 $250,233 $252,522 $253,137
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ICE BOFAML 1-3 YEAR TREASURY INDEX is an unmanaged index that tracks the
performance of the direct sovereign debt of the U.S. Government having a
maturity of at least one year and less than three years.
PERFORMANCE INFORMATION
ONE YEAR ENDED ANNUALIZED
OCTOBER 31, 2017 SINCE INCEPTION (A)
SCHRODER SHORT DURATION BOND FUND
R6 Shares 0.77% 1.37%
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Investor Shares 0.77% 1.31%
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ICE BofAML 1-3 Year Treasury Index 0.24% 0.57%
-----------------------------------------------------------------------------------------------
(a) From commencement of fund operations on August 26, 2015.
"TOTAL RETURN" IS CALCULATED INCLUDING REINVESTMENT OF ALL DIVIDENDS AND
DISTRIBUTIONS. RESULTS DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER
WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. RETURNS FOR
CERTAIN PERIODS REFLECT FEE WAIVERS AND/OR REIMBURSEMENTS IN EFFECT FOR THAT
PERIOD; ABSENT FEE WAIVERS AND REIMBURSEMENTS, PERFORMANCE WOULD HAVE BEEN
LOWER. RESULTS REPRESENT PAST PERFORMANCE AND DO NOT INDICATE FUTURE RESULTS.
THE VALUE OF AN INVESTMENT IN THE FUND AND THE RETURN ON INVESTMENT BOTH WILL
FLUCTUATE AND REDEMPTION PROCEEDS MAY BE HIGHER OR LOWER THAN AN INVESTOR'S
ORIGINAL COST.
--------------------------------------------------------------- --------------------------------------------------------
TOP 5 HOLDINGS SECTOR ALLOCATION
--------------------------------------------------------------- --------------------------------------------------------
SECURITY % OF NET ASSETS SECTOR % OF NET ASSETS
United States Treasury Note 1.125%, 02/28/19 5.9% Corporate Obligations 77.6%
--------------------------------------------------------------- --------------------------------------------------------
AT&T 2.450%, 06/30/20 2.5 U.S. Treasury Obligations 11.3
--------------------------------------------------------------- --------------------------------------------------------
Standard Chartered 2.400%, 09/08/19 2.3 Asset-Backed Securities 3.3
--------------------------------------------------------------- --------------------------------------------------------
Reynolds American 2.300%, 06/12/18 2.3 Collateralized Mortgage Obligations 2.8
--------------------------------------------------------------- --------------------------------------------------------
Microsoft 2.000%, 11/03/20 2.3 Tax-Exempt Municipal Bonds 2.1
--------------------------------------------------------------- --------------------------------------------------------
Other Assets less Liabilities 2.9
--------------------------------------------------------
--------------------------------------------------------------------------------
9
--------------------------------------------------------------------------------
SCHRODER TOTAL RETURN FIXED INCOME FUND
--------------------------------------------------------------------------------
MANAGEMENT DISCUSSION AND ANALYSIS (As of December 1, 2017)
PERFORMANCE
For the twelve-month period ended October 31, 2017, the Schroder Total Return
Fixed Income Fund (the "Fund") gained 1.65% (Investor Shares), compared to the
Bloomberg Barclays U.S. Aggregate Bond Index (the "Index"), a broad-based
basket of debt securities, which rose 0.90% during the same period.
MARKET BACKGROUND
A positive global growth backdrop combined with the expectation of the new U.S.
administration's favorable policy agenda drove risk assets and sentiment higher
in the early part of 2017. However, investors took pause when the bill to repeal
and replace the Affordable Care Act was pulled from the House floor in March.
The failure to execute on the first major initiative called into question
President Trump's ability to deliver on his wide range of pro-growth economic
promises. However, despite the slight reprieve in March, it did not take long
for the markets to find support as economic data continued to be strong. U.S.
GDP grew at a respectable 2.1%, personal consumption expenditure (PCE), U.S.
Federal Reserve's (the "Fed") preferred inflation measure, rose to 2.1% in
February, nonfarm payrolls increased by 235,000, ahead of consensus estimate of
200,000, and the U.S. consumer confidence index reached a 16-year high for
March. In monetary policy, the Fed took another step towards the normalization
of interest rates by raising its target range for the Fed Funds rate by 25 basis
points (bps) to 0.75% to 1%. This was only the third rate hike since December
2015, but the second in three months and marked a notable departure from the
glacial pace of previous rate hikes. The move had been fully anticipated by
markets, with Fed Funds futures priced above a 90% probability of a rate hike,
following strong signals from Fed speakers in the weeks prior to the
announcement. After two years of one hike each, the Fed appeared to be testing
market sentiment on moving away from an exceptionally accommodative monetary
policy.
Financial markets continued to operate in an orderly fashion in the second
quarter of 2017, reaching new highs despite a greater level of uncertainty and
risk. Positive economic data, particularly the synchronized upswing in global
growth, subdued inflation and positive sentiment provided a healthy backdrop for
bonds over the quarter. Investors faced an avalanche of political noise; not
only in the U.S. with Trump's twitter feed and healthcare legislation, but also
in Europe with the French and UK snap election. Despite the uncertainty from the
geopolitical environment, investors took the political noise in stride and
maintained a positive disposition to risk markets. The VIX Index, often referred
to as the "fear gauge," touched 25-year lows, which was particularly surprising
given that the Fed hiked rates for the second time in 2017 and signalled another
move in the second half of the year as well as a tapering of the Fed's balance
sheet. Fed tightening has generally been associated with increased, rather than
decreased, volatility; for example, the VIX index spiked after the first move in
Fed Funds in December 2015 and again during the taper tantrum of 2013, when the
Fed signalled an end to quantitative easing.
Markets delivered strong returns in the third quarter with the focus on
improving economic fundamentals as opposed to political headwinds. The economic
data pointed towards a healthy global economy with rising global growth,
improving corporate profitability, and strong employment numbers across the
world. U.S. manufacturing activity hit a 13-year high and consumer confidence,
in the U.S. and Europe, reached the highest levels in 10 years. Markets were
able to filter out the relentless barrage of political noise in Washington, the
rising tensions in North Korea, German political elections and recent violence
in Catalonia. The Fed announced that it would start the process of quantitative
tightening in October, as expected, and more surprisingly suggested that the
rate hiking cycle is not on hold. At the meeting in September, the European
Central Bank (the "ECB") decided to keep interest rates unchanged and provided
no details on the future of its quantitative easing program. However, in
October, Mario Draghi announced that the ECB will continue to purchase EUR 60
billion a month through year end, but that the monthly purchases will be
reduced to EUR 30 billion starting in January 2018. The policy shift suggested
an acknowledgement of the solid growth that is apparent in the region, but also
keeps the door open for a further extension.
PORTFOLIO REVIEW
The Fund beat the Index for the twelve-month period ended October 31, 2017.
The Fund's overweight to, and security selection within, investment-grade
corporates was a primary contributor to returns, with both financials and
industrials contributing. The sector was able to shrug off most of the noise
out of Washington and was boosted by strong corporate earnings, with financials
in particular benefitting from liability-driven demand and higher interest
rates, while industrials were supported by commodity price stability
--------------------------------------------------------------------------------
10
--------------------------------------------------------------------------------
SCHRODER TOTAL RETURN FIXED INCOME FUND
--------------------------------------------------------------------------------
in the second half of the period. The Fund is positioned with a market value
overweight in corporates; however, the allocation is focused on shorter
maturity bonds with less sensitivity to spread risk, as measured by duration
times spread, than the corporate component of the Index. Throughout the period
we have reduced the overall corporate exposure by selling longer-dated credits
to reduce market value exposure and spread risk. Corporate spreads are now at
their most expensive levels since the global financial crisis and we will
continue to reduce corporate spread risk if valuations continue to richen.
Emerging markets were also a contributor, as a persistently weak U.S. Dollar
throughout most of 2017 boosted local currency denominated assets. In addition,
the space enjoyed strong inflows as investors sought higher real yields than
those available in developed markets.
The Fund's interest rate strategies overall added to excess returns. In
September, the Fund entered into a long Canada and short GILTs trade. The
Canadian markets had moved quickly to price in further tightening from the Bank
of Canada while the UK market had been reticent to price in hawkish
communication from the Monetary Policy Committee in England. The spread between
the interest rate differential compressed throughout September and October and,
as a result, we closed out the Fund's position at the end of the period. Our
tactical Fed Futures trade in late February was also a contributor, as we
correctly estimated that the market was underpricing the probability of a March
rate hike; we covered the Fund's position in the beginning of March as the odds
of a rate hike dramatically increased from 30% to 80%. The Fund's short
positioning in European bonds was a detractor for the period as German and
Italian yields fell as near-term political fears faded and the ECB retained its
dovish policy preference. The allocation in TIPs (Treasury Inflation Protected
Securities) contributed to returns despite giving up some performance in the
second half of 2017 as the markets questioned the ability of the Trump
administration to pass pro-growth policies, CPI inflation prints came in above
consensus expectations and pro-reflation conditions came back into the market.
OUTLOOK
Our view on risk assets remains a cautious one. While both economic and
corporate fundamentals look healthy, markets have been driven by central bank
liquidity for the past several years, which has resulted in significant
financial asset performance as investor demand for bonds is met with lower
available supply. Risk assets, in particular, have benefitted as investors have
moved further out on the risk spectrum in search of yield. Central banks now
seem to have embarked on a globally coordinated policy course that will
ultimately lead to higher interest rates. They have adopted the view that
global growth is robust enough and financial conditions are easy enough for
them to move away from their ultra-accommodative stances. Inflation has
recently turned upwards in most developed economies This is supporting the view
that central bankers are close to achieving their mandates. For a while, our
belief has been that the markets will need to learn how to operate without
extreme central bank liquidity and that asset prices will need to adjust
accordingly. If decreasing supply and increasing demand has driven asset prices
higher, it stands to reason that increasing supply and decreasing demand will
have the opposite impact. Given that valuations in investment grade credit are
now roughly at this cycle's tightest levels from 2014, we prefer holding
liquidity to allow the Fund to take advantage of opportunities as they arise.
It is our expectation that the Fed will raise rates once more this year and
taper its reinvestment program. The front-end of the U.S. Treasury market is
assigning a very high probability to one more rate hike this year and has
nearly two hikes discounted between today and June 2019. It is our expectation
that yields will continue to rise moderately over the course of the year as
central banks' confidence in the improved global growth backdrop increases. The
market reaction will likely stem from the areas that are benefitting the most
from central bank policy. We believe that European markets remain vulnerable,
as expensive valuations have been supported by continued quantitative easing.
While record low interest rates abroad have driven foreign investors into
higher-yielding U.S. credit, rising yields overseas and increased costs of
hedging dollar-exposure should make the U.S. market less compelling to
non-domestic investors. This is a marked change in the technical backdrop, as
non-domestic investors now own over 40% of the U.S. credit market. The credit
market in aggregate has also tripled in size since the financial crisis. Our
sector preference remains in financials, which should benefit from less
regulatory burdens and higher interest rates. However, we have reduced
lower-rated bank exposure and rotated into shorter maturity financials as
credit curves have flattened. While U.S. high yield is less impacted by foreign
demand, valuations are expensive and we maintain exposure only to idiosyncratic
issuers with positive momentum.
Going forward we expect markets to be characterized by increasing volatility as
central banks step away from the markets. Although the growth outlook remains
healthy, the valuation backdrop in many sectors is far less compelling than it
was twelve months ago. This is reflected in the reduced level of overall risk
in the Fund. The Fund has significant dry powder to take advantage of increased
volatility which may result as central banks pass the baton and take a step
away from markets.
--------------------------------------------------------------------------------
11
--------------------------------------------------------------------------------
SCHRODER TOTAL RETURN FIXED INCOME FUND
--------------------------------------------------------------------------------
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT
IN THE SCHRODER TOTAL RETURN FIXED INCOME FUND INVESTOR SHARES VS.
THE BLOOMBERG BARCLAYS U.S. AGGREGATE BOND INDEX.
[LINE GRAPH OMITTED - PLOT POINTS AS FOLLOWS]
------------------------------------------------------------------------------------------------------------------------------------
10/31/07 10/31/08 10/31/09 10/31/10 10/31/11 10/31/12 10/31/13
------------------------------------------------------------------------------------------------------------------------------------
SCHRODER TOTAL RETURN FIXED INCOME FUND,
INVESTOR SHARES $10,000 $10,193 $11,700 $12,764 $13,352 $14,392 $14,215
------------------------------------------------------------------------------------------------------------------------------------
BLOOMBERG BARCLAYS U.S. AGGREGATE BOND INDEX $10,000 $10,030 $11,414 $12,328 $12,945 $13,625 $13,477
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
10/31/14 10/31/15 10/31/16 10/31/17
------------------------------------------------------------------------------------------------------------------------------------
SCHRODER TOTAL RETURN FIXED INCOME FUND,
INVESTOR SHARES $14,921 $14,965 $15,529 $15,786
------------------------------------------------------------------------------------------------------------------------------------
BLOOMBERG BARCLAYS U.S. AGGREGATE BOND INDEX $14,035 $14,309 $14,935 $15,070
------------------------------------------------------------------------------------------------------------------------------------
The BLOOMBERG BARCLAYS U.S. AGGREGATE BOND INDEX provides a measure of the
performance of the U.S. investment grade bonds market, which includes
investment grade U.S. Government bonds, investment grade corporate bonds,
mortgage pass-through securities and asset-backed securities that are publicly
offered for sale in the United States. The securities in the Index must have a
least one year remaining to maturity. The Index is not managed.
PERFORMANCE INFORMATION
ONE YEAR ENDED FIVE YEARS ENDED TEN YEARS ENDED
OCTOBER 31, 2017 OCTOBER 31, 2017 (A) OCTOBER 31, 2017 (A)
SCHRODER TOTAL RETURN FIXED INCOME FUND
Investor Shares 1.65% 1.87% 4.67%
--------------------------------------------------------------------------------------------------------------
Bloomberg Barclays U.S. Aggregate Bond Index 0.90% 2.04% 4.19%
--------------------------------------------------------------------------------------------------------------
(a) Average annual total return.
"TOTAL RETURN" IS CALCULATED INCLUDING REINVESTMENT OF ALL DIVIDENDS AND
DISTRIBUTIONS. RESULTS DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER
WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. RETURNS FOR
CERTAIN PERIODS REFLECT FEE WAIVERS AND/OR REIMBURSEMENTS IN EFFECT FOR THAT
PERIOD; ABSENT FEE WAIVERS AND REIMBURSEMENTS, PERFORMANCE WOULD HAVE BEEN
LOWER. RESULTS REPRESENT PAST PERFORMANCE AND DO NOT INDICATE FUTURE RESULTS.
THE VALUE OF AN INVESTMENT IN THE FUND AND THE RETURN ON INVESTMENT BOTH WILL
FLUCTUATE AND REDEMPTION PROCEEDS MAY BE HIGHER OR LOWER THAN AN INVESTOR'S
ORIGINAL COST.
------------------------------------------------------------ -----------------------------------------------------------
TOP 5 HOLDINGS SECTOR ALLOCATION
------------------------------------------------------------ -----------------------------------------------------------
SECURITY % OF NET ASSETS SECTOR % OF NET ASSETS
FNMA 4.000%, 03/01/47 3.1% Corporate Obligations 43.6%
------------------------------------------------------------ -----------------------------------------------------------
FHLMC 4.000%, 04/01/47 3.1 U.S. Treasury Obligations 19.8
------------------------------------------------------------ -----------------------------------------------------------
United States Treasury Note 1.625%, 05/15/26 1.6 Asset-Backed Securities 13.4
------------------------------------------------------------ -----------------------------------------------------------
Sparebank 1 Boligkreditt 1.750%, 11/15/19 1.5 U.S. Government Mortgage-Backed Obligations 8.9
------------------------------------------------------------ -----------------------------------------------------------
United States Treasury Note 2.250%, 11/15/25 1.4 Collateralized Mortgage Obligations 6.7
------------------------------------------------------------ -----------------------------------------------------------
Sovereign Governments 4.2
-----------------------------------------------------------
Tax-Exempt Municipal Bonds 1.9
-----------------------------------------------------------
Commercial Mortgage-Backed Obligations 0.7
-----------------------------------------------------------
Exchange Traded Purchased Option 0.0
-----------------------------------------------------------
Other Assets less Liabilities 0.8
-----------------------------------------------------------
--------------------------------------------------------------------------------
12
--------------------------------------------------------------------------------
SCHRODER LONG DURATION INVESTMENT-GRADE BOND FUND
--------------------------------------------------------------------------------
MANAGEMENT DISCUSSION AND ANALYSIS (As of December 1, 2017)
PERFORMANCE
For the twelve-month period ended October 31, 2017, the Schroder Long Duration
Investment-Grade Bond Fund (the "Fund") gained 1.79% (Investor Shares),
compared to the Bloomberg Barclays U.S. Long Government/Credit Bond Index (the
"Index"), a broad-based basket of debt securities, which rose 2.52% during the
same period.
MARKET BACKGROUND
A positive global growth backdrop combined with the expectation of the new U.S.
administration's favorable policy agenda drove risk assets and sentiment higher
towards the end of 2016 and in the early part of 2017. However, investors took
pause when the bill to repeal and replace the Affordable Care Act was pulled
from the House floor in March. The failure to execute on the first major
initiative called into question President Trump's ability to deliver on his wide
range of pro-growth economic promises. However, despite the slight reprieve in
March, it did not take long for the markets to find support as economic data
continued to be strong. U.S. GDP grew at a respectable 2.1%, personal
consumption expenditure (PCE), the U.S. Federal Reserve's (the "Fed") preferred
inflation measure, rose to 2.1% in February, non-farm payrolls increased by
235,000, ahead of consensus estimate of 200,000, and the U.S. consumer
confidence index reached a 16-year high for March. In monetary policy, the Fed
took another step towards the normalization of interest rates by raising its
target range for the Fed Funds rate by 25 basis points (bps) to 0.75% to 1%.
This was only the third rate hike since December 2015, but the second in three
months and marked a notable departure from the glacial pace of previous rate
hikes. The move had been fully anticipated by markets, with Fed Funds futures
priced above a 90% probability of a rate hike, following strong signals from Fed
speakers in the weeks prior to the announcement. After two years of one hike
each, the Fed appeared to be testing market sentiment moving away from an
exceptionally accommodative monetary policy.
Financial markets continued to operate in an orderly fashion in the second
quarter of 2017, reaching new highs despite a greater level of uncertainty and
risk. Positive economic data, particularly the synchronized upswing in global
growth, subdued inflation and positive sentiment provided a healthy backdrop for
bonds over the quarter. Investors faced an avalanche of political noise; not
only in the U.S. with Trump's twitter feed and healthcare legislation, but also
in Europe with the French and UK snap election. Despite the uncertainty from the
geopolitical environment, investors took the political noise in stride and
maintained a positive disposition to risk markets. The VIX Index, often referred
to as the "fear gauge," touched 25-year lows, which was particularly surprising
given that the Fed hiked rates for the second time in 2017 and signaled another
move in the second half of the year as well as a tapering of the Fed's balance
sheet. Fed tightening has generally been associated with increased, rather than
decreased, volatility; for example, the VIX Index spiked after the first move in
Fed Funds in December 2015 and again during the taper tantrum of 2013, when the
Fed signaled an end to quantitative easing.
Markets continued to deliver strong returns in the third quarter with the focus
on improving economic fundamentals as opposed to political headwinds. The
economic data pointed towards a healthy global economy with rising global
growth, improving corporate profitability, and strong employment numbers across
the world. U.S. manufacturing activity hit a 13-year high and consumer
confidence, in the U.S. and Europe, reached the highest levels in 10 years.
Markets were able to filter out the relentless barrage of political noise in
Washington, the rising tensions in North Korea, German political elections and
recent violence in Catalonia The Fed announced that it would start the process
of quantitative tightening in October, as expected, and more surprisingly
suggested that the rate hiking cycle is not on hold. At the meeting in
September, the European Central Bank (ECB) decided to keep interest rates
unchanged and provided no details on the future of its quantitative easing
program. However, in October, Mario Draghi announced that the ECB will continue
to purchase EUR 60 billion a month through year end, but that the monthly
purchases will be reduced to EUR 30 billion starting in January 2018. The
policy shift suggested an acknowledgement of the solid growth that is apparent
in the region, but also keeps the door open for a further extension.
--------------------------------------------------------------------------------
13
--------------------------------------------------------------------------------
SCHRODER LONG DURATION INVESTMENT-GRADE BOND FUND
--------------------------------------------------------------------------------
PORTFOLIO REVIEW
The Fund underperformed the Index for the twelve-month period. Sector selection
was the main factor with a negative impact as overweight Treasuries and the
modest underweight to industrials detracted from excess returns. The overweight
to financials had a large positive impact, but not enough to offset the
underperformance from Treasuries and industrials. The corporate sector was able
to shrug off most of the noise out of Washington and was boosted by strong
corporate earnings, with financials in particular benefitting from
liability-driven demand and higher interest rates, while industrials were
supported by commodity price stability in the second half of the period. The
Fund is positioned with a market value neutral in corporates; however, the
allocation is focused on shorter maturity bonds with less sensitivity to spread
risk, as measured by duration times spread, than the corporate component of the
Index. Throughout the period, we have reduced the Fund's overall corporate
exposure by selling longer-dated credits to reduce market value exposure and
spread risk. Issue selection was positive due mostly to select industrials
beating the broader credit indices, with select taxable municipals also having
a positive impact. Yield curve and duration were not material factors.
OUTLOOK
Our view on risk assets remains a cautious one. While both economic and
corporate fundamentals look healthy, markets have been driven by central bank
liquidity for the past several years, which has resulted in significant
financial asset performance as investor demand for bonds is met with lower
available supply. Risk assets, in particular, have benefitted as investors have
moved further out on the risk spectrum in search of yield. Central banks now
seem to have embarked on a globally coordinated policy course that will
ultimately lead to higher interest rates. They have adopted the view that
global growth is robust enough and financial conditions are easy enough for
them to move away from their ultra-accommodative stances. Inflation has
recently turned upwards in most developed economies. This is supporting the
view that central bankers are close to achieving their mandates. For a while,
our belief has been that the markets will need to learn how to operate without
extreme central bank liquidity and that asset prices will need to adjust
accordingly. If decreasing supply and increasing demand has driven asset prices
higher, it stands to reason that increasing supply and decreasing demand will
have the opposite impact. Given that valuations in investment grade credit are
now roughly at this cycle's tightest levels from 2014, we prefer holding
liquidity to allow the Fund to take advantage of opportunities as they arise.
It is our expectation that the Fed will raise rates once more this year and
taper its reinvestment program. The front-end of the U.S. Treasury market is
assigning a very high probability to one more rate hike this year and has
nearly two hikes discounted between today and June 2019. It is our expectation
that yields will continue to rise moderately over the course of the year as
central banks' confidence in the improved global growth backdrop increases. The
market reaction will likely stem from the areas that are benefitting the most
from central bank policy. We believe that European markets remain vulnerable,
as expensive valuations have been supported by continued quantitative easing.
While record low interest rates abroad have driven foreign investors into
higher-yielding U.S. credit, rising yields overseas and increased costs of
hedging dollar-exposure should make the U.S. market less compelling to
non-domestic investors. This is a marked change in the technical backdrop, as
non-domestic investors now own over 40% of the U.S. credit market. The credit
market in aggregate has also tripled in size since the financial crisis. Our
sector preference remains in financials, which should benefit from less
regulatory burdens and higher interest rates. However, we have reduced
lower-rated bank exposure and rotated into shorter maturity financials as
credit curves have flattened.
Going forward, we expect markets to be characterized by increasing volatility
as central banks step away from the markets. Although the growth outlook
remains healthy, the valuation backdrop in many sectors is far less compelling
than it was twelve months ago. This is reflected in the low level of overall
risk in the Fund. The Fund has significant dry powder to take advantage of
increased volatility, which may result as central banks pass the baton and take
a step away from markets.
--------------------------------------------------------------------------------
14
--------------------------------------------------------------------------------
SCHRODER LONG DURATION INVESTMENT-GRADE BOND FUND
--------------------------------------------------------------------------------
COMPARISON OF CHANGE IN THE VALUE OF A $250,000 INVESTMENT
IN THE SCHRODER LONG DURATION INVESTMENT-GRADE BOND FUND
INVESTOR SHARES VS. THE BLOOMBERG BARCLAYS
U.S. LONG GOVERNMENT/CREDIT BOND INDEX
[LINE GRAPH OMITTED - PLOT POINTS AS FOLLOWS]
------------------------------------------------------------------------------------------------------------------------------------
10/03/11 07/31/12 07/31/13 10/31/13 10/31/14
------------------------------------------------------------------------------------------------------------------------------------
SCHRODER LONG DURATION INVESTMENT-GRADE BOND FUND,
INVESTOR SHARES $250,000 $255,307 $299,515 $281,984 $325,712
------------------------------------------------------------------------------------------------------------------------------------
BLOOMBERG BARCLAYS U.S. LONG GOVERNMENT/CREDIT BOND INDEX $250,000 $244,010 $276,044 $255,160 $288,386
------------------------------------------------------------------------------------------------------------------------------------
10/31/15 10/31/16 10/31/17
------------------------------------------------------------------------------------------------------------------------------------
SCHRODER LONG DURATION INVESTMENT-GRADE BOND FUND,
INVESTOR SHARES $328,788 $361,019 $367,481
------------------------------------------------------------------------------------------------------------------------------------
BLOOMBERG BARCLAYS U.S. LONG GOVERNMENT/CREDIT BOND INDEX $292,090 $324,075 $332,250
------------------------------------------------------------------------------------------------------------------------------------
The BLOOMBERG BARCLAYS U.S. LONG GOVERNMENT/CREDIT BOND INDEX is a bond market
index covering the U.S. investment-grade fixed corporate and government bond
market. The index consists of publicly issued corporate, U.S. government and
specified foreign debentures and secured notes. All securities must have at
least ten years to maturity and be rated investment-grade by at least two of
the following ratings agencies: Moody's, S&P and Fitch, and be
dollar-denominated, fixed rate and nonconvertible.
PERFORMANCE INFORMATION
ONE YEAR ENDED FIVE YEARS ENDED ANNUALIZED
OCTOBER 31, 2017 OCTOBER 31, 2017 (A) SINCE INCEPTION (B)
SCHRODER LONG DURATION INVESTMENT-GRADE BOND FUND
Investor Shares 1.79% 4.17% 6.55%
--------------------------------------------------------------------------------------------------------------------------
Bloomberg Barclays U.S. Long Government/Credit Bond Index 2.52% 3.78% 4.79%
--------------------------------------------------------------------------------------------------------------------------
(a) Average annual total returns.
(b) From commencement of fund operations on October 3, 2011.
"TOTAL RETURN" IS CALCULATED INCLUDING REINVESTMENT OF ALL DIVIDENDS AND
DISTRIBUTIONS. RESULTS DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER
WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. RETURNS FOR
CERTAIN PERIODS REFLECT FEE WAIVERS AND/OR REIMBURSEMENTS IN EFFECT FOR THAT
PERIOD; ABSENT FEE WAIVERS AND REIMBURSEMENTS, PERFORMANCE WOULD HAVE BEEN
LOWER. RESULTS REPRESENT PAST PERFORMANCE AND DO NOT INDICATE FUTURE RESULTS.
THE VALUE OF AN INVESTMENT IN THE FUND AND THE RETURN ON INVESTMENT BOTH WILL
FLUCTUATE AND REDEMPTION PROCEEDS MAY BE HIGHER OR LOWER THAN AN INVESTOR'S
ORIGINAL COST.
----------------------------------------------------------- --------------------------------------------------------
TOP 5 HOLDINGS SECTOR ALLOCATION
----------------------------------------------------------- --------------------------------------------------------
SECURITY % OF NET ASSETS SECTOR % OF NET ASSETS
United States Treasury Bond 4.375%, 05/15/40 19.4% Corporate Obligations 50.2%
----------------------------------------------------------- --------------------------------------------------------
United States Treasury Bond 4.625%, 02/15/40 8.4 U.S. Treasury Obligations 48.0
----------------------------------------------------------- --------------------------------------------------------
United States Treasury Bond 2.750%, 08/15/47 6.3 Taxable Municipal Bond 0.6
----------------------------------------------------------- --------------------------------------------------------
United States Treasury Bond 3.000%, 05/15/47 4.5 Tax-Exempt Municipal Bond 0.2
----------------------------------------------------------- --------------------------------------------------------
United States Treasury Note 2.250%, 08/15/27 3.4 Other Assets less Liabilities 1.0
----------------------------------------------------------- --------------------------------------------------------
--------------------------------------------------------------------------------
15
--------------------------------------------------------------------------------
SCHRODER NORTH AMERICAN EQUITY FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2017
SHARES VALUE $
---------- ----------
COMMON STOCK -- 98.0%
BERMUDA -- 0.8%
41,700 Assured Guaranty 1,547,070
12,811 Everest Re Group 3,041,972
3,220 RenaissanceRe Holdings 445,519
52,200 Validus Holdings 2,718,576
----------
7,753,137
CANADA -- 1.6%
391,300 Athabasca Oil (1) 351,839
108,500 Baytex Energy Trust (1) 298,562
68,400 BCE 3,158,351
154,200 Birchcliff Energy 627,509
102,800 Bonavista Energy 218,333
103,300 Cameco 839,147
39,700 Centerra Gold 269,570
43,900 CGI Group Class A (1) 2,332,645
34,400 CI Financial 764,741
87,300 Crescent Point Energy 717,970
134,800 Crew Energy (1) 456,613
118,800 Eldorado Gold 149,179
20,300 Enbridge Income Fund Holdings 473,158
23,300 Genworth MI Canada 724,050
24,300 Goldcorp 317,383
37,300 Husky Energy (1) 483,417
125,200 MEG Energy (1) 556,078
24,700 Nevsun Resources 58,203
133,800 Spartan Energy (1) 708,359
27,300 Sun Life Financial 1,063,348
200,600 Surge Energy 335,862
17,700 Teck Resources Class B 361,656
43,900 Tourmaline Oil (1) 803,410
----------
16,069,383
ISRAEL -- 0.1%
11,300 Check Point Software Technologies (1) 1,330,123
----------
PANAMA -- 0.0%
4,200 Copa Holdings Class A 517,398
----------
UNITED KINGDOM -- 0.2%
151,500 Noble (1) 630,240
93,400 Rowan Class A (1) 1,338,422
----------
1,968,662
UNITED STATES -- 95.3%
CONSUMER DISCRETIONARY -- 10.9%
16,106 Amazon.com (1) 17,801,640
13,500 AMC Networks Class A (1) 686,880
40,300 American Eagle Outfitters 524,706
51,100 Bed Bath & Beyond 1,016,890
23,800 Best Buy 1,332,324
14,000 Big Lots 718,340
12,300 Brinker International 377,856
SHARES VALUE $
---------- ----------
57,500 Buckle 945,875
12,000 Carter's 1,160,760
14,100 Cato Class A 181,326
4,700 Charter Communications Class A (1) 1,570,599
137,700 Comcast Class A 4,961,331
3,200 Cooper-Standard Holdings (1) 356,736
5,000 Cracker Barrel Old Country Store 780,650
16,300 Darden Restaurants 1,341,001
32,900 Delphi Automotive 3,269,602
17,100 Foot Locker 514,368
28,800 Ford Motor 353,376
26,100 GameStop Class A 487,809
73,100 Gannett 635,970
33,500 Gap 870,665
28,200 Garmin 1,596,402
149,500 Gentex 2,901,795
14,800 Hasbro 1,370,332
28,800 Hillenbrand 1,139,040
51,093 Home Depot 8,470,197
18,700 John Wiley & Sons Class A 1,021,955
25,200 Kohl's 1,052,352
27,000 L Brands 1,162,080
8,900 Lear 1,562,751
17,800 Lowe's 1,423,110
44,681 McDonald's 7,457,706
20,800 Meredith 1,102,400
21,700 Michael Kors Holdings (1) 1,059,177
1,800 Netflix (1) 353,574
14,400 New Media Investment Group 229,968
29,100 Nike Class B 1,600,209
54,000 Omnicom Group 3,628,260
16,800 PetMed Express 594,048
2,288 Priceline Group (1) 4,374,564
8,600 Ralph Lauren Class A 769,098
54,000 Regal Entertainment Group Class A 882,900
21,800 Ross Stores 1,384,082
5,700 Sherwin-Williams 2,252,355
188,100 Sirius XM Holdings 1,023,264
33,500 Starbucks 1,837,140
14,400 Steven Madden (1) 561,600
25,400 Tapestry 1,040,130
39,000 Target 2,302,560
4,600 Tenneco 267,306
39,600 TJX 2,764,080
24,100 Tupperware Brands 1,415,875
46,100 Urban Outfitters (1) 1,130,372
33,500 VF 2,333,275
53,400 Viacom Class B 1,283,202
67,272 Walt Disney 6,579,874
35,200 Williams-Sonoma 1,816,320
-----------
111,632,057
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 16
--------------------------------------------------------------------------------
SCHRODER NORTH AMERICAN EQUITY FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2017
SHARES VALUE $
--------- ----------
CONSUMER STAPLES -- 8.5%
107,300 Altria Group 6,890,806
16,100 Archer-Daniels-Midland 658,007
61,900 Campbell Soup 2,932,203
208,116 Coca-Cola 9,569,174
35,782 Colgate-Palmolive 2,520,842
22,317 CVS Health 1,529,384
23,300 Dr. Pepper Snapple Group 1,995,878
12,200 Energizer Holdings 524,478
100,200 General Mills 5,202,384
18,800 Ingredion 2,356,580
29,800 JM Smucker 3,160,290
47,900 Kellogg 2,995,187
43,600 Kimberly-Clark 4,905,436
8,300 Medifast 517,920
14,700 Monster Beverage (1) 851,571
25,900 Nu Skin Enterprises Class A 1,647,499
59,524 PepsiCo 6,561,330
98,091 Philip Morris International 10,264,242
132,711 Procter & Gamble 11,458,268
6,400 Sanderson Farms 957,248
16,200 Universal 929,070
21,200 USANA Health Sciences (1) 1,392,840
37,341 Walgreens Boots Alliance 2,474,588
46,423 Wal-Mart Stores 4,053,192
----------
86,348,417
ENERGY -- 4.7%
36,300 Antero Resources (1) 704,220
54,300 Approach Resources (1) 126,519
86,300 Bill Barrett (1) 425,459
18,200 Bristow Group 171,808
25,200 CARBO Ceramics (1) 208,656
99,063 Chevron 11,480,411
34,700 ConocoPhillips 1,774,905
52,400 Diamond Offshore Drilling (1) 876,652
97,100 Ensco Class A 523,369
212,590 ExxonMobil 17,719,377
84,600 Gulfport Energy (1) 1,159,020
5,600 Halliburton 239,344
42,700 Hornbeck Offshore Services (1) 159,271
9,400 International Seaways (1) 189,316
200,000 Marathon Oil 2,844,000
16,400 Marathon Petroleum 979,736
19,600 Murphy Oil 524,300
3,000 National Oilwell Varco 102,570
7,679 Phillips 66 699,403
49,572 Schlumberger 3,172,608
35,200 Smart Sand (1) 253,088
101,000 Transocean (1) 1,060,500
32,300 Valero Energy 2,548,147
75,600 Whiting Petroleum (1) 454,356
----------
48,397,035
SHARES VALUE $
---------- ----------
FINANCIALS -- 14.9%
8,600 Affiliated Managers Group 1,603,900
55,500 Aflac 4,655,895
3,000 Alliance Data Systems 671,190
60,127 American Express 5,743,331
10,800 American Financial Group 1,139,292
1,400 American National Insurance 170,422
18,200 Ameriprise Financial 2,849,028
25,300 Artisan Partners Asset Management Class A 870,320
498,750 Bank of America 13,660,763
70,200 Berkshire Hathaway Class B (1) 13,123,188
2,736 Brighthouse Financial (1) 170,125
41,700 Capital One Financial 3,843,906
20,700 Chubb 3,121,974
178,242 Citigroup 13,100,787
8,800 CNA Financial 476,344
2,700 Credit Acceptance (1) 774,171
67,418 Discover Financial Services 4,485,319
4,900 Equifax 531,797
62,544 Essent Group (1) 2,665,625
27,500 Evercore Class A 2,202,750
3,900 FactSet Research Systems 740,493
8,944 FBL Financial Group Class A 691,818
27,600 Federated Investors Class B 857,532
29,500 First American Financial 1,605,390
45,300 Franklin Resources 1,908,489
33,304 Goldman Sachs Group 8,075,554
46,000 H&R Block 1,138,040
8,300 HCI Group 310,918
195,363 JPMorgan Chase 19,655,471
98,100 KeyCorp 1,790,325
9,000 MetLife 482,220
128,400 Morgan Stanley 6,420,000
1,200 National Western Life Group Class A 429,096
31,900 Paychex 2,034,901
11,500 PNC Financial Services Group 1,573,085
44,900 Principal Financial Group 2,956,665
8,500 Public Storage REIT 1,761,625
11,900 Regions Financial 184,212
75,400 Synchrony Financial 2,459,548
11,200 T. Rowe Price Group 1,040,480
20,500 TD Ameritrade Holding 1,024,795
13,151 U.S. Bancorp 715,151
27,203 Universal Insurance Holdings 648,792
25,200 Voya Financial 1,012,032
93,500 Waddell & Reed Financial Class A 1,747,515
275,772 Wells Fargo 15,481,840
-----------
152,606,114
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 17
--------------------------------------------------------------------------------
SCHRODER NORTH AMERICAN EQUITY FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2017
SHARES VALUE $
---------- ----------
HEALTHCARE -- 14.7%
12,300 Abbott Laboratories 667,029
91,381 AbbVie 8,247,135
20,116 Aetna 3,420,324
1,700 Align Technology (1) 406,266
58,217 Amgen 10,200,783
7,100 Anthem 1,485,391
14,862 Biogen (1) 4,631,891
3,381 Bioverativ (1) 191,027
37,671 Bristol-Myers Squibb 2,322,794
22,000 Celgene (1) 2,221,340
3,714 Centene (1) 347,890
19,600 Cerner (1) 1,323,392
1,700 CIGNA 335,274
30,000 DaVita (1) 1,822,200
13,200 Edwards Lifesciences (1) 1,349,436
54,361 Eli Lilly 4,454,340
85,224 Express Scripts Holding (1) 5,223,379
115,704 Gilead Sciences 8,673,172
3,500 HCA Healthcare (1) 264,775
2,700 Idexx Laboratories (1) 448,659
6,300 Intuitive Surgical (1) 2,364,768
19,800 Jazz Pharmaceuticals (1) 2,802,294
144,684 Johnson & Johnson 20,170,396
9,350 Laboratory Corp. of America Holdings (1) 1,437,189
6,400 Magellan Health (1) 545,920
19,500 McKesson 2,688,660
70,300 MEDNAX (1) 3,078,437
98,569 Medtronic 7,936,776
171,107 Merck 9,426,285
1,500 Mettler-Toledo International (1) 1,023,945
12,500 Molina Healthcare (1) 847,875
83,300 Mylan (1) 2,974,643
393,647 Pfizer 13,801,264
18,021 Quest Diagnostics 1,690,009
14,199 Stryker 2,198,999
10,500 Taro Pharmaceutical Industries (1) 1,180,410
2,600 Thermo Fisher Scientific 503,958
27,900 United Therapeutics (1) 3,308,661
48,300 UnitedHealth Group 10,153,626
9,508 Waters (1) 1,864,043
3,100 WellCare Health Plans (1) 612,994
23,100 Zoetis Class A 1,474,242
-----------
150,121,891
INDUSTRIALS -- 10.6%
24,335 3M 5,601,674
15,800 Alaska Air Group 1,043,274
19,700 AMETEK 1,329,553
23,100 Applied Materials 1,303,533
6,200 Argan 426,250
10,300 Barnes Group 670,427
SHARES VALUE $
---------- ----------
34,400 Boeing 8,874,512
23,700 Carlisle 2,602,971
68,700 CSX 3,464,541
20,200 Cummins 3,572,976
16,500 Curtiss-Wright 1,951,125
26,400 Danaher 2,435,928
20,500 Delta Air Lines 1,025,615
32,800 Deluxe 2,284,520
2,300 Dover 219,627
20,094 Dun & Bradstreet 2,347,582
77,600 Eaton 6,209,552
15,450 Fortive 1,116,417
5,600 General Dynamics 1,136,688
261,289 General Electric 5,267,586
11,000 Graco 1,449,690
13,600 Greenbrier 709,920
5,375 HEICO 487,405
41,191 Honeywell International 5,938,094
11,600 Hubbell Class B 1,459,512
13,800 Huntington Ingalls Industries 3,213,054
13,700 IDEX 1,756,477
8,800 Illinois Tool Works 1,377,376
10,800 JetBlue Airways (1) 206,820
6,600 Kansas City Southern 687,852
25,100 Kla-Tencor 2,733,139
26,000 Lam Research 5,422,820
14,800 Lockheed Martin 4,560,768
9,400 Nordson 1,190,886
6,600 Northrop Grumman 1,950,498
12,200 Parker Hannifin 2,227,842
85,200 Pitney Bowes 1,170,648
6,400 Raytheon 1,153,280
4,200 Roper Technologies 1,084,314
22,000 Snap-on 3,471,160
21,900 Southwest Airlines 1,179,534
42,500 Stericycle (1) 3,011,125
14,400 Toro 905,040
38,300 Union Pacific 4,434,757
22,595 United Technologies 2,705,977
6,300 Verisk Analytics Class A (1) 535,815
2,200 WW Grainger 434,940
-----------
108,343,094
INFORMATION TECHNOLOGY -- 25.0%
28,752 Accenture Class A 4,093,135
27,100 Activision Blizzard 1,774,779
24,800 Adobe Systems (1) 4,343,968
13,649 Alphabet Class A (1) 14,099,963
13,994 Alphabet Class C (1) 14,226,860
258,773 Apple 43,742,988
2,700 Automatic Data Processing 313,902
11,100 Broadcom 2,929,401
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 18
--------------------------------------------------------------------------------
SCHRODER NORTH AMERICAN EQUITY FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2017
SHARES VALUE $
---------- ----------
93,600 CA 3,030,768
294,685 Cisco Systems 10,063,493
9,200 Citrix Systems (1) 760,012
50,100 Cognizant Technology Solutions Class A 3,791,067
1,460 DXC Technology 133,619
104,200 eBay (1) 3,922,088
11,100 F5 Networks (1) 1,346,097
96,500 Facebook Class A (1) 17,375,790
142,900 Hewlett Packard Enterprise 1,989,168
122,300 HP 2,635,565
337,774 Intel 15,365,339
8,200 InterDigital 601,470
66,794 International Business Machines 10,290,284
6,300 Intuit 951,426
17,500 j2 Global 1,297,450
45,900 Mastercard Class A 6,828,543
390,450 Microsoft 32,477,631
101,100 NetApp 4,490,862
28,100 NVIDIA 5,811,361
194,681 Oracle 9,909,263
29,100 PayPal Holdings (1) 2,111,496
84,177 QUALCOMM 4,293,869
3,600 salesforce.com (1) 368,424
34,400 Seagate Technology 1,271,768
28,500 Skyworks Solutions 3,245,010
5,200 Symantec 169,000
43,322 Texas Instruments 4,188,804
11,400 Total System Services 821,370
90,100 Visa Class A 9,909,198
10,400 VMware Class A (1) 1,244,776
57,000 Western Digital 5,088,390
138,600 Western Union 2,752,596
44,700 Xerox 1,354,857
-----------
255,415,850
MATERIALS -- 1.8%
21,600 Bemis 972,432
10,200 Celanese Class A 1,063,962
1,900 Chase 225,625
41,500 DowDuPont 3,000,865
6,900 Eagle Materials 728,433
2,200 Eastman Chemical 199,782
10,800 FMC 1,002,888
45,200 LyondellBasell Industries Class A 4,679,556
101,400 Mosaic 2,265,276
13,900 Packaging Corp. of America 1,616,153
16,800 Rayonier Advanced Materials 241,416
11,400 Schweitzer-Mauduit International 481,422
23,100 Sonoco Products 1,196,349
3,400 Terra Nitrogen LP 260,780
-----------
17,934,939
SHARES VALUE $
---------- ----------
REAL ESTATE -- 0.9%
800 American Tower Class A REIT 114,936
26,054 Chesapeake Lodging Trust REIT 726,907
2,900 CoreSite Realty REIT 321,175
7,900 Getty Realty REIT 224,439
18,800 Hospitality Properties Trust REIT 537,304
51,900 Kimco Realty REIT 942,504
17,700 LaSalle Hotel Properties REIT 499,317
13,600 LTC Properties REIT 632,536
9,600 National Health Investors REIT 731,424
29,000 Park Hotels & Resorts REIT 834,910
21,900 Pebblebrook Hotel Trust REIT 780,954
34,640 Quality Care Properties REIT (1) 548,351
26,900 RLJ Lodging Trust REIT 582,654
47,000 Summit Hotel Properties REIT 743,070
9,600 Welltower REIT 642,816
16,400 Xenia Hotels & Resorts REIT 356,864
--------------
9,220,161
TELECOMMUNICATION SERVICES -- 2.2%
355,627 AT&T 11,966,849
222,330 Verizon Communications 10,642,937
--------------
22,609,786
UTILITIES -- 1.1%
2,900 Ameren 179,771
50,271 Emerson Electric 3,240,469
1,900 Entergy 163,894
27,500 Exelon 1,105,775
31,200 NextEra Energy 4,838,184
32,200 UGI 1,541,092
--------------
11,069,185
--------------
Total United States 973,698,529
--------------
TOTAL COMMON STOCK
(Cost $684,679,825) 1,001,337,232
--------------
TOTAL INVESTMENTS IN
SECURITIES -- 98.0%
(Cost $684,679,825) 1,001,337,232
--------------
OTHER ASSETS LESS
LIABILITIES -- 2.0% 20,130,826
--------------
NET ASSETS -- 100% $1,021,468,058
==============
(1) Denotes non-income producing security.
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 19
--------------------------------------------------------------------------------
SCHRODER NORTH AMERICAN EQUITY FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONCLUDED)
OCTOBER 31, 2017
The open futures contracts held by the Fund at October 31, 2017, are as follows:
UNREALIZED
NUMBER OF EXPIRATION NOTIONAL APPRECIATION
TYPE OF CONTRACT CONTRACTS LONG DATE AMOUNT VALUE (DEPRECIATION)
--------------------------------------------------------------------------------------------
S&P 500 Index E-MINI 68 Dec-2017 $8,376,907 $8,747,180 $370,273
========== ========== ========
A summary of the outstanding forward foreign currency contracts held by the
Fund at October 31, 2017, is as follows:
UNREALIZED
SETTLEMENT CURRENCY TO CURRENCY TO APPRECIATION
COUNTERPARTY DATE DELIVER RECEIVE (DEPRECIATION)
------------------------------------------------------------------------------------------
Royal Bank of Canada 11/22/17 CAD 14,879,235 USD 11,886,699 $351,204
========
CAD -- Canadian Dollar
LP -- Limited Partnership
REIT -- Real Estate Investment Trust
S&P -- Standard & Poor's
USD -- United States Dollar
The following is a summary of the inputs used as of October 31, 2017, in
valuing the Fund's investments carried at value:
INVESTMENTS IN SECURITIES (1) LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
-------------- --------- --------- --------------
Common Stock (2) $1,001,337,232 $ -- $ -- $1,001,337,232
-------------- --------- --------- --------------
Total Investments in Securities $1,001,337,232 $ -- $ -- $1,001,337,232
============== ========= ========= ==============
OTHER FINANCIAL INSTRUMENTS LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
-------------- --------- --------- --------------
Futures -- Unrealized Appreciation $ 370,273 $ -- $ -- $ 370,273
Forwards -- Unrealized Appreciation -- 351,204 -- 351,204
-------------- --------- --------- --------------
Total Other Financial Instruments $ 370,273 $ 351,204 $ -- $ 721,4770
============== ========= ========= ==============
(1) There were no transfers between levels during the reporting period, based
on the input levels assigned under the hierarchy at the end of the
reporting period.
(2) All securities in this category are Level 1 securities. For a detailed
break-out by classification, please refer to the Schedule of Investments.
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 20
--------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS SMALL CAP FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2017
SHARES VALUE $
---------- ----------
COMMON STOCK -- 91.5%
BRAZIL -- 3.7%
4,800 Energisa SA - Units 36,125
4,500 Odontoprev 21,597
9,200 QGEP Participacoes 23,624
--------
81,346
CHINA -- 12.3%
7,500 Anhui Gujing Distillery Class B 42,214
120,000 China Dongxiang Group 22,304
335 China Lodging Group ADR (1) 44,852
15,000 China Shineway Pharmaceutical Group 14,055
9,000 Haitian International Holdings 26,937
1,093 Hollysys Automation Technologies 24,538
29,000 Li Ning (1) 25,315
19,000 Nexteer Automotive Group 37,165
5,700 Suofeiya Home Collection Class A 33,457
--------
270,837
EGYPT -- 1.2%
11,338 Credit Agricole Egypt 27,052
--------
GEORGIA -- 1.2%
1,123 TBC Bank Group 25,535
--------
GREECE -- 1.3%
1,784 JUMBO 28,678
--------
HONG KONG -- 1.7%
2,600 ASM Pacific Technology 37,827
--------
INDIA -- 11.2%
1,630 Apollo Hospitals Enterprise 26,136
7,807 Arvind 48,339
10,673 City Union Bank 26,620
1,914 Container of India 40,849
40 Eicher Motors 19,906
6,317 Gateway Distriparks 25,811
1,248 Indraprastha Gas 30,542
1,741 Supreme Industries 30,400
--------
248,603
INDONESIA -- 2.3%
98,300 Aneka Gas Industri (1) 4,240
9,800 United Tractors 25,055
87,625 XL Axiata (1) 21,838
--------
51,133
MALAYSIA -- 1.0%
9,700 Bursa Malaysia 22,890
--------
SHARES VALUE $
---------- ----------
MEXICO -- 3.7%
7,936 Alsea 24,017
2,545 Grupo Aeroportuario del Pacifico Class B 24,198
3,488 Grupo Cementos de Chihuahua 16,560
8,335 Organizacion Soriana Class B (1) 17,477
--------
82,252
PAKISTAN -- 0.7%
10,700 Habib Bank 16,303
--------
PHILIPPINES -- 2.7%
149,900 D&L Industries 30,148
13,890 International Container Terminal Services 28,560
--------
58,708
POLAND -- 2.4%
273 CCC 20,472
1,684 Dino Polska (1)(2) 31,700
--------
52,172
RUSSIA -- 5.6%
2,577 Globaltrans Investment GDR 23,811
2,355 MegaFon OAO GDR 24,610
1,634 Polymetal International 18,978
3,111 TCS Group Holding GDR 56,776
--------
124,175
SINGAPORE -- 1.6%
25,100 First Resources 36,275
--------
SOUTH AFRICA -- 1.1%
2,452 Foschini Group 23,499
--------
SOUTH KOREA -- 14.6%
1,175 Hyundai Livart Furniture 25,066
574 Koh Young Technology 39,348
580 Korea Kolmar 42,865
659 LEENO Industrial 30,116
208 Mando 60,616
94 Medy-Tox 35,533
533 S-1 43,578
826 Seegene (1) 20,975
765 WONIK IPS (1) 24,752
--------
322,849
SPAIN -- 1.4%
9,495 Prosegur Cash (1)(2) 30,969
--------
SRI LANKA -- 1.2%
25,919 John Keells Holdings 26,927
--------
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 21
--------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS SMALL CAP FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2017
SHARES VALUE $
---------- ----------
TAIWAN -- 15.8%
32,147 Aerospace Industrial Development 36,454
11,000 Chroma ATE 53,614
24,000 CTCI 37,202
2,040 Eclat Textile 24,384
3,310 Gourmet Master 37,973
3,000 King Slide Works 40,137
7,000 Merida Industry 32,610
4,000 Nien Made Enterprises 41,645
2,618 PChome Online 15,148
2,314 Posiflex Technology 10,243
8,000 Toung Loong Textile Manufacturing 20,982
----------
350,392
TURKEY -- 2.6%
5,739 DP Eurasia (1) (2) 17,531
3,238 Migros Ticaret (1) 22,278
2,177 Tofas Turk Otomobil Fabrikasi 17,721
----------
57,530
UNITED ARAB EMIRATES -- 2.2%
35,398 Aramex PJSC 49,348
----------
TOTAL COMMON STOCK
(Cost $1,502,137) 2,025,300
----------
PREFERRED STOCK -- 3.7%
BRAZIL -- 2.7%
7,300 Alpargatas, 2.050% 38,941
1,300 Cia Energetica do Ceara Class A, 1.476% 20,891
----------
59,832
COLOMBIA -- 1.0%
52,940 Grupo Aval Acciones y Valores, 4.558% 22,014
----------
TOTAL PREFERRED STOCK
(Cost $55,773) 81,846
----------
TOTAL INVESTMENTS IN
SECURITIES -- 95.2%
(Cost $1,557,910) 2,107,146
----------
OTHER ASSETS LESS
LIABILITIES -- 4.8% 105,595
----------
NET ASSETS -- 100% $2,212,741
==========
(1) Denotes non-income producing security.
(2) Security exempt from registration under Rule 144A of the Securities Act of
1933. This security may be resold in transactions exempt from registration
normally to qualified institutions. On October 31, 2017, the value of these
securities amounted to $80,200, representing 3.6% of the net assets of the
Fund.
ADR -- American Depositary Receipt
GDR -- Global Depositary Receipt
PJSC -- Private Joint Stock Company
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 22
--------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS SMALL CAP FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONCLUDED)
OCTOBER 31, 2017
The following is a summary of the inputs used as of October 31, 2017, in
valuing the Fund's investments carried at value:
INVESTMENTS IN SECURITIES (1) LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
---------- ------- ------- ----------
Common Stock
Brazil $ 81,346 $ -- $ -- $ 81,346
China 270,837 -- -- 270,837
Egypt 27,052 -- -- 27,052
Georgia 25,535 -- -- 25,535
Greece 28,678 -- -- 28,678
Hong Kong 37,827 -- -- 37,827
India 248,603 -- -- 248,603
Indonesia 51,133 -- -- 51,133
Malaysia 22,890 -- -- 22,890
Mexico 82,252 -- -- 82,252
Pakistan 16,303 -- -- 16,303
Philippines -- 58,708 -- 58,708
Poland 52,172 -- -- 52,172
Russia 124,175 -- -- 124,175
Singapore 36,275 -- -- 36,275
South Africa 23,499 -- -- 23,499
South Korea 322,849 -- -- 322,849
Spain 30,969 -- -- 30,969
Sri Lanka 26,927 -- -- 26,927
Taiwan 350,392 -- -- 350,392
Turkey 57,530 -- -- 57,530
United Arab Emirates 49,348 -- -- 49,348
---------- ------- ------- ----------
Total Common Stock 1,966,592 58,708 -- 2,025,300
---------- ------- ------- ----------
Preferred Stock
Brazil 59,832 -- -- 59,832
Colombia 22,014 -- -- 22,014
---------- ------- ------- ----------
Total Preferred Stock 81,846 -- -- 81,846
---------- ------- ------- ----------
Total Investments in Securities $2,048,438 $58,708 $ -- $2,107,146
========== ======= ======= ==========
(1) Transfers between investment levels may occur as markets fluctuate and/or
the availability of data used in an investment's valuation changes. The
Fund generally recognizes transfers between the levels as of the end of the
reporting period. As of October 31, 2017, securities with a total value of
$161,040 transferred from Level 2 to Level 1, primarily due to the
valuation changes at the prior year end. For the year ended October 31,
2017, there were no transfers between Level 1 and Level 2 investments. For
the year ended October 31, 2017, there were no transfers between Level 2
and Level 3 investments. For the year ended October 31, 2017, there were no
Level 3 securities.
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 23
--------------------------------------------------------------------------------
SCHRODER SHORT DURATION BOND FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2017
PRINCIPAL
AMOUNT ($) VALUE $
----------- ---------
CORPORATE OBLIGATIONS -- 77.6%
CONSUMER DISCRETIONARY -- 4.7%
Discovery Communications LLC
57,000 2.200%, 09/20/19 57,069
Ford Motor Credit LLC
2.290%, VAR ICE LIBOR USD 3
300,000 Month+0.940%, 01/09/18 300,380
McDonald's MTN
84,000 2.100%, 12/07/18 84,384
Newell Brands
14,000 2.600%, 03/29/19 14,108
Toyota Motor Credit MTN
1.677%, VAR ICE LIBOR USD 3
300,000 Month+0.320%, 01/12/18 300,172
---------
756,113
---------
CONSUMER STAPLES -- 14.9%
Anheuser-Busch InBev Finance
145,000 1.900%, 02/01/19 145,142
BAT Capital (1)
153,000 2.297%, 08/14/20 153,055
CVS Health
150,000 1.900%, 07/20/18 150,199
Danone (1)
314,000 1.691%, 10/30/19 311,584
Kraft Heinz Foods
245,000 2.800%, 07/02/20 248,164
200,000 2.000%, 07/02/18 200,254
Kroger
127,000 2.000%, 01/15/19 127,111
Molson Coors Brewing
104,000 2.100%, 07/15/21 102,753
80,000 1.900%, 03/15/19 (1) 79,816
Mondelez International Holdings
Netherlands BV (1)
200,000 1.625%, 10/28/19 198,013
Philip Morris International
180,000 1.625%, 02/21/19 179,625
Reynolds American
375,000 2.300%, 06/12/18 376,063
Tyson Foods
150,000 2.650%, 08/15/19 151,531
---------
2,423,310
---------
ENERGY -- 6.4%
Energy Transfer Partners
58,000 2.500%, 06/15/18 58,226
Enterprise Products Operating LLC
78,000 6.500%, 01/31/19 82,241
PRINCIPAL
AMOUNT ($) VALUE $
----------- ---------
EOG Resources
105,000 5.625%, 06/01/19 110,923
EQT
163,000 2.500%, 10/01/20 162,934
Kinder Morgan
150,000 3.050%, 12/01/19 152,703
Phillips 66 (1)
2.109%, VAR ICE LIBOR USD 3
50,000 Month+0.750%, 04/15/20 50,097
Shell International Finance BV
1.660%, VAR ICE LIBOR USD 3
154,000 Month+0.350%, 09/12/19 154,857
TransCanada PipeLines
265,000 1.625%, 11/09/17 265,011
---------
1,036,992
---------
FINANCIALS -- 27.3%
American Express Credit
31,000 2.125%, 03/18/19 31,115
American Express Credit MTN
40,000 2.200%, 03/03/20 40,118
150,000 1.800%, 07/31/18 150,107
American International Group
91,000 3.300%, 03/01/21 93,684
Bank of America MTN
2.369%, VAR ICE LIBOR USD 3
180,000 Month+0.660%, 07/21/21 179,820
Branch Banking & Trust
250,000 2.100%, 01/15/20 250,721
Capital One
250,000 2.400%, 09/05/19 250,920
Capital One Financial
20,000 2.500%, 05/12/20 20,073
Citigroup
268,000 2.650%, 10/26/20 270,289
Cooperatieve Rabobank UA
250,000 1.700%, 03/19/18 250,147
Discover Bank
250,000 2.600%, 11/13/18 251,642
Goldman Sachs Group
235,000 2.750%, 09/15/20 237,529
24,000 2.000%, 04/25/19 23,986
47,000 1.950%, 07/23/19 46,884
HSBC Bank (1)
1.955%, VAR ICE LIBOR USD 3
250,000 Month+0.640%, 05/15/18 250,747
HSBC USA
125,000 2.000%, 08/07/18 125,294
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 24
--------------------------------------------------------------------------------
SCHRODER SHORT DURATION BOND FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2017
PRINCIPAL
AMOUNT ($) VALUE $
----------- ---------
JPMorgan Chase MTN
230,000 1.700%, 03/01/18 230,095
Metropolitan Life Global Funding I MTN (1)
222,000 1.750%, 12/19/18 221,754
Morgan Stanley
2.109%, VAR ICE LIBOR USD 3
310,000 Month+0.800%, 02/14/20 311,404
Prudential Financial MTN
75,000 2.350%, 08/15/19 75,352
Standard Chartered (1)
379,000 2.400%, 09/08/19 379,741
SunTrust Bank
153,000 2.250%, 01/31/20 153,642
UBS MTN (1)
200,000 2.200%, 06/08/20 200,169
Wells Fargo MTN
1.993%, VAR ICE LIBOR USD 3
140,000 Month+0.630%, 04/23/18 140,372
Wells Fargo Bank MTN
261,000 1.800%, 11/28/18 261,184
---------
4,446,789
---------
HEALTHCARE -- 7.2%
Abbott Laboratories
75,000 2.350%, 11/22/19 75,463
AbbVie
300,000 1.800%, 05/14/18 300,186
Aetna
96,000 1.700%, 06/07/18 95,977
Allergan Funding SCS
150,000 3.000%, 03/12/20 152,279
Cardinal Health
150,000 1.948%, 06/14/19 149,692
Gilead Sciences
172,000 1.850%, 09/20/19 171,806
Medtronic
150,000 1.500%, 03/15/18 150,024
UnitedHealth Group
75,000 1.900%, 07/16/18 75,158
---------
1,170,585
---------
INDUSTRIALS -- 3.3%
General Electric Capital MTN
90,000 4.375%, 09/16/20 95,867
Northrop Grumman
155,000 2.080%, 10/15/20 155,003
Rockwell Collins
42,000 1.950%, 07/15/19 42,011
PRINCIPAL
AMOUNT ($) VALUE $
----------- ---------
Siemens Financieringsmaatschappij (1)
250,000 2.200%, 03/16/20 251,273
----------
544,154
----------
INFORMATION TECHNOLOGY -- 6.1%
Apple
153,000 1.900%, 02/07/20 153,221
Cisco Systems
1.665%, VAR ICE LIBOR USD 3
152,000 Month+0.340%, 09/20/19 152,865
Dell International LLC (1)
118,000 3.480%, 06/01/19 120,116
Hewlett Packard Enterprise (1)
107,000 2.100%, 10/04/19 106,866
Microsoft
372,000 2.000%, 11/03/20 372,757
QUALCOMM
91,000 2.100%, 05/20/20 91,224
----------
997,049
----------
MATERIALS -- 1.9%
Rio Tinto Finance USA
2,000 2.875%, 08/21/22 2,030
Sherwin-Williams
311,000 2.250%, 05/15/20 311,736
----------
313,766
----------
REAL ESTATE -- 0.5%
Crown Castle International REIT
45,000 3.400%, 02/15/21 46,255
Digital Realty Trust REIT
32,000 2.750%, 02/01/23 31,945
----------
78,200
----------
TELECOMMUNICATION SERVICES -- 3.5%
AT&T
398,000 2.450%, 06/30/20 401,742
Verizon Communications
168,000 2.946%, 03/15/22 170,627
----------
572,369
----------
UTILITIES -- 1.8%
Dominion Energy
20,000 1.600%, 08/15/19 19,876
NextEra Energy Capital Holdings
70,000 1.649%, 09/01/18 69,903
Southern
209,000 1.550%, 07/01/18 208,797
----------
298,576
----------
TOTAL CORPORATE OBLIGATIONS
(Cost $12,596,050) 12,637,903
==========
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 25
--------------------------------------------------------------------------------
SCHRODER SHORT DURATION BOND FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2017
PRINCIPAL
AMOUNT ($) VALUE $
----------- ---------
U.S. TREASURY OBLIGATIONS -- 11.3%
United States Treasury Notes
48,000 1.375%, 09/30/19 47,809
221,000 1.250%, 05/31/19 219,990
289,000 1.250%, 06/30/19 287,499
967,000 1.125%, 02/28/19 962,013
320,000 0.750%, 01/31/18 319,643
---------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $1,840,557) 1,836,954
---------
ASSET-BACKED SECURITIES -- 3.3%
CLI Funding V LLC, Series 2013-2A (1)
172,553 3.220%, 06/18/28 171,816
Harley-Davidson Motorcycle Trust,
Series 2014-1, Class A3
45,151 1.100%, 09/15/19 45,134
SoFi Professional Loan Program LLC,
Series 2015-C, Class A1 (1)
2.287%, VAR ICE LIBOR USD 1
228,179 Month+1.050%, 08/27/35 230,082
Towd Point Mortgage Trust, Series 2017-3,
Class A1 (1) (2)
95,572 2.750%, 07/25/57 95,902
---------
TOTAL ASSET-BACKED SECURITIES
(Cost $541,916) 542,934
---------
COLLATERALIZED MORTGAGE
OBLIGATIONS (1) (2) -- 2.8%
Flagstar Mortgage Trust, Series 2017-2,
Class A5 (3) (4)
148,234 3.500%, 10/25/47 150,643
JPMorgan Mortgage Trust, Series 2017-1,
Class A5
108,868 3.500%, 01/25/47 111,122
JPMorgan Mortgage Trust, Series 2017-4,
Class A5
195,000 3.500%, 11/25/47 198,747
---------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS
(Cost $460,318) 460,512
---------
TAX-EXEMPT MUNICIPAL BONDS -- 2.1%
FLORIDA -- 0.9%
State Board of Administration Finance RB,
Series A
145,000 2.163%, 07/01/19 145,368
---------
MASSACHUSETTS -- 0.9%
State Water Resources Authority RB,
Series Sub A-1 (5)
150,000 0.940%, 08/01/37 150,000
---------
PRINCIPAL
AMOUNT ($) VALUE $
----------- ---------
NEW JERSEY -- 0.3%
State Transportation Trust Fund
Authority RB
40,000 5.000%, 06/15/19 41,889
-----------
TOTAL MUNICIPAL BONDS
(Cost $336,812) 337,257
-----------
TOTAL INVESTMENTS IN
SECURITIES -- 97.1%
(Cost $15,775,653) 15,815,560
-----------
OTHER ASSETS LESS
LIABILITIES -- 2.9% 475,672
-----------
NET ASSETS -- 100% $16,291,232
===========
(1) Security exempt from registration under Rule 144A of the Securities Act of
1933. This security may be resold in transactions exempt from registration
normally to qualified institutions. On October 31, 2017, the value of these
securities amounted to $3,281,543, representing 20.1% of the net assets of
the Fund.
(2) Variable or floating rate security, the interest rate of which adjusts
periodically based on changes in current interest rates and prepayments on
the underlying pool of assets.
(3) Level 3 security in accordance with fair value hierarchy.
(4) Security is fair valued using methods determined in good faith by the Fair
Value Committee of the Board of Trustees. The total value of such
securities as of October 31, 2017, was $150,643 and represented 0.9% of net
assets.
(5) Variable or floating rate security, the interest rate of which adjusts
periodically based on prevailing interest rates.
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 26
--------------------------------------------------------------------------------
SCHRODER SHORT DURATION BOND FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONCLUDED)
OCTOBER 31, 2017
The open futures contracts held by the Fund at October 31, 2017, are as follows:
NUMBER OF UNREALIZED
CONTRACTS NOTIONAL APPRECIATION
TYPE OF CONTRACT LONG (SHORT) EXPIRATION DATE AMOUNT VALUE (DEPRECIATION)
-------------------------------------------------------------------------------------------------------------
U.S. 2-Year Treasury Note 18 Jan-2018 $3,889,967 $3,876,469 $(13,498)
U.S. 5-Year Treasury Note (3) Dec-2017 (354,909) (351,563) 3,346
---------- --------- --------
$3,535,058 $3,524,906 $(10,152)
========== ========== ========
ICE -- Intercontinental Exchange
LIBOR -- London Interbank Offered Rate
LLC -- Limited Liability Company
MTN -- Medium Term Note
RB -- Revenue Bond
REIT -- Real Estate Investment Trust
USD -- United States Dollar
VAR -- Variable Rate
The following is a summary of the inputs used as of October 31, 2017, in
valuing the Fund's investments carried at value:
INVESTMENTS IN SECURITIES LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
-------- ---------- -------- -----------
Corporate Obligations $ -- $12,637,903 $ -- $12,637,903
U.S. Treasury Obligations -- 1,836,954 -- 1,836,954
Asset-Backed Securities -- 542,934 -- 542,934
Collateralized Mortgage Obligations -- 309,869 150,643 460,512
Tax-Exempt Municipal Bonds -- 337,257 -- 337,257
-------- ----------- -------- -----------
Total Investments in Securities $ -- $15,664,917 $150,643 $15,815,560
======== =========== ======== ===========
OTHER FINANCIAL INSTRUMENTS LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
-------- ----------- -------- -----------
Futures -- Unrealized Appreciation $ 3,346 $ -- $ -- $ 3,346
Futures -- Unrealized Depreciation (13,498) -- -- (13,498)
-------- ----------- -------- -----------
Total Other Financial Instruments $(10,152) $ -- $ -- $ (10,152)
======== =========== ======== ===========
The following is a reconciliation of the investments in which significant
unobservable inputs (Level 3) were used in determining value:
COLLATERALIZED MORTGAGE OBLIGATIONS
Beginning balance as of November 1, 2016 $ --
Realized gain/(loss) --
Change in unrealized appreciation/(depreciation) 185
Purchases 150,458
Sales --
Transfer into Level 3 --
Transfer out of Level 3 --
--------
Ending balance as of October 31, 2017 $150,643
========
For the year ended October 31, 2017, there have been no transfers between Level
1, Level 2 and Level 3 investments. The Fund generally recognizes transfers
between the levels as of the end of the reporting period.
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 27
--------------------------------------------------------------------------------
SCHRODER TOTAL RETURN FIXED INCOME FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2017
PRINCIPAL
AMOUNT + VALUE $
------------ ---------
CORPORATE OBLIGATIONS -- 43.6%
CONSUMER DISCRETIONARY -- 5.5%
Amazon.com (1)
830,000 3.150%, 08/22/27 834,967
Charter Communications Operating LLC
150,000 4.908%, 07/23/25 159,573
Discovery Communications LLC
255,000 2.950%, 03/20/23 253,836
Ford Motor Credit LLC
260,000 5.000%, 05/15/18 264,431
470,000 2.425%, 06/12/20 471,277
2.290%, VAR ICE LIBOR USD 3
200,000 Month+0.940%, 01/09/18 200,253
General Motors Financial
5.750%, VAR ICE LIBOR USD 3
195,000 Month+3.598%, 03/30/66 203,775
315,000 3.700%, 11/24/20 326,624
George Washington University
205,000 3.485%, 09/15/22 211,664
L Brands
205,000 6.875%, 11/01/35 203,463
Newell Brands
190,000 3.850%, 04/01/23 199,335
Scientific Games International (1)
125,000 7.000%, 01/01/22 132,188
VTR Finance BV (1)
200,000 6.875%, 01/15/24 212,050
---------
3,673,436
---------
CONSUMER STAPLES -- 1.8%
BAT Capital (1)
635,000 2.764%, 08/15/22 635,603
Smithfield Foods (1)
150,000 2.700%, 01/31/20 150,419
Tyson Foods
445,000 3.550%, 06/02/27 453,629
---------
1,239,651
---------
ENERGY -- 7.4%
Cenovus Energy (1)
327,000 4.250%, 04/15/27 328,114
Crestwood Midstream Partners
275,000 6.250%, 04/01/23 286,000
Enbridge
6.000%, VAR ICE LIBOR USD 3
490,000 Month+3.890%, 01/15/77 524,369
Energy Transfer Partners
615,000 4.150%, 10/01/20 642,102
PRINCIPAL
AMOUNT + VALUE $
------------ ---------
Ensco
220,000 5.750%, 10/01/44 150,150
EQT
405,000 3.900%, 10/01/27 402,504
Noble Energy
550,000 4.150%, 12/15/21 580,205
Petrobras Global Finance BV
290,000 7.375%, 01/17/27 322,045
Petroleos Mexicanos
579,000 5.625%, 01/23/46 524,951
400,000 3.500%, 01/30/23 390,520
Targa Resources Partners
200,000 6.750%, 03/15/24 215,500
Valero Energy
230,000 3.400%, 09/15/26 229,993
Williams Partners
340,000 4.300%, 03/04/24 360,077
---------
4,956,530
---------
FINANCIALS -- 17.1%
American Express
34,000 8.125%, 05/20/19 37,175
American International Group
350,000 3.300%, 03/01/21 360,322
Bank of America
85,000 7.625%, 06/01/19 92,193
Bank of America MTN
275,000 5.625%, 07/01/20 298,418
295,000 3.875%, 08/01/25 309,343
2.369%, VAR ICE LIBOR USD 3
650,000 Month+0.660%, 07/21/21 649,350
Banque Federative du Credit Mutuel
MTN (1)
410,000 2.700%, 07/20/22 410,446
Barclays Bank (1)
600,000 10.179%, 06/12/21 740,937
BBVA Banco Continental (1)
240,000 3.250%, 04/08/18 240,168
Capital One Financial
175,000 2.500%, 05/12/20 175,636
Citigroup
295,000 3.200%, 10/21/26 291,414
675,000 2.750%, 04/25/22 677,133
Credit Suisse Group (1)
2.997%, VAR ICE LIBOR USD 3
265,000 Month+1.200%, 12/14/23 264,329
Credit Suisse Group Funding Guernsey
365,000 3.450%, 04/16/21 375,190
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 28
--------------------------------------------------------------------------------
SCHRODER TOTAL RETURN FIXED INCOME FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2017
PRINCIPAL
AMOUNT + VALUE $
------------ ---------
Fidelity & Guaranty Life Holdings (1)
410,000 6.375%, 04/01/21 422,300
Goldman Sachs Group
5.000%, VAR ICE LIBOR USD 3
680,000 Month+2.874%, 05/10/66 680,850
65,000 2.875%, 02/25/21 65,838
HSBC Bank USA
350,000 4.875%, 08/24/20 374,872
JPMorgan Chase
3.220%, VAR ICE LIBOR USD 3
660,000 Month+1.155%, 03/01/25 666,898
195,000 2.700%, 05/18/23 194,659
Manufacturers & Traders Trust
355,000 6.625%, 12/04/17 356,561
MetLife
169,000 7.717%, 02/15/19 181,668
Moody's
136,000 5.500%, 09/01/20 147,855
Morgan Stanley MTN
300,000 3.750%, 02/25/23 313,708
Norddeutsche Landesbank Girozentrale (1)
400,000 2.000%, 02/05/19 400,082
Prudential Financial
37,000 7.375%, 06/15/19 40,180
10,000 6.000%, 12/01/17 10,036
4.500%, VAR ICE LIBOR USD 3
490,000 Month+2.380%, 09/15/47 495,206
Regions Bank
420,000 2.250%, 09/14/18 421,266
Royal Bank of Scotland Group
560,000 3.875%, 09/12/23 574,359
Sparebank 1 Boligkreditt (1)
1,000,000 1.750%, 11/15/19 991,560
Wells Fargo
215,000 3.069%, 01/24/23 217,876
----------
11,477,828
----------
HEALTHCARE -- 1.8%
Becton Dickinson
500,000 3.363%, 06/06/24 504,160
Cardinal Health
130,000 3.079%, 06/15/24 129,140
Shire Acquisitions Investments Ireland DAC
395,000 2.400%, 09/23/21 392,349
Tenet Healthcare (1)
170,000 4.625%, 07/15/24 167,238
----------
1,192,887
----------
PRINCIPAL
AMOUNT + VALUE $
------------ ---------
INDUSTRIALS -- 1.1%
Barrick North America Finance LLC
19,000 4.400%, 05/30/21 20,335
Fly Leasing
430,000 6.375%, 10/15/21 448,812
Rockwell Collins
270,000 3.200%, 03/15/24 275,254
---------
744,401
---------
INFORMATION TECHNOLOGY -- 1.5%
Apple
95,000 4.250%, 02/09/47 101,866
215,000 3.000%, 06/20/27 214,949
Hewlett Packard Enterprise (1)
435,000 2.100%, 10/04/19 434,454
VMware
250,000 2.300%, 08/21/20 249,472
---------
1,000,741
---------
MATERIALS -- 0.7%
Sherwin-Williams
505,000 3.125%, 06/01/24 511,065
---------
REAL ESTATE -- 1.7%
American Tower REIT
600,000 2.800%, 06/01/20 608,426
Crown Castle International REIT
135,000 3.200%, 09/01/24 134,150
Digital Realty Trust REIT
400,000 2.750%, 02/01/23 399,312
---------
1,141,888
---------
TELECOMMUNICATION SERVICES -- 3.1%
AT&T
300,000 5.250%, 03/01/37 313,808
730,000 3.900%, 08/14/27 727,080
390,000 3.400%, 05/15/25 385,072
Verizon Communications
500,000 4.125%, 03/16/27 521,767
155,000 2.946%, 03/15/22 157,423
---------
2,105,150
---------
UTILITIES -- 1.9%
Dynegy
130,000 7.625%, 11/01/24 142,025
70,000 7.375%, 11/01/22 75,163
Fermaca Enterprises S de RL (1)
296,960 6.375%, 03/30/38 323,686
Mexico Generadora de Energia (1)
183,324 5.500%, 12/06/32 194,094
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 29
--------------------------------------------------------------------------------
SCHRODER TOTAL RETURN FIXED INCOME FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2017
PRINCIPAL
AMOUNT + VALUE $
------------ ---------
Southern
250,000 2.950%, 07/01/23 251,278
Suburban Propane Partners
300,000 5.750%, 03/01/25 300,750
----------
1,286,996
----------
TOTAL CORPORATE OBLIGATIONS
(Cost $28,915,292) 29,330,573
----------
U.S. TREASURY OBLIGATIONS (2) -- 19.8%
United States Treasury Bonds
290,000 3.000%, 02/15/47 297,261
200,000 3.000%, 05/15/47 205,023
340,000 2.875%, 11/15/46 340,000
820,600 2.500%, 02/15/46 760,946
935,000 2.500%, 05/15/46 866,153
790,000 2.250%, 08/15/46 692,639
United States Treasury Inflation
Indexed Bonds
939,099 1.000%, 02/15/46 954,696
614,562 0.125%, 07/15/26 597,200
United States Treasury Notes
620,000 2.375%, 05/15/27 620,291
977,400 2.250%, 11/15/25 973,582
295,000 2.250%, 08/15/27 291,750
275,000 2.000%, 10/31/21 276,085
455,000 2.000%, 12/31/21 456,404
330,000 2.000%, 11/15/26 320,487
460,000 1.875%, 02/28/22 458,670
335,000 1.875%, 03/31/22 333,770
185,000 1.875%, 04/30/22 184,234
770,000 1.875%, 07/31/22 765,548
315,000 1.750%, 11/30/21 313,044
535,000 1.750%, 05/31/22 529,692
570,000 1.625%, 08/31/19 570,356
1,125,000 1.625%, 05/15/26 1,063,389
720,000 1.500%, 08/15/20 715,950
100,000 1.375%, 07/31/19 99,652
600,000 0.750%, 01/31/18 599,331
----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $13,524,596) 13,286,153
----------
ASSET-BACKED SECURITIES -- 13.4%
AmeriCredit Automobile Receivables Trust,
Series 2013-5, Class C
355,061 2.290%, 11/08/19 355,282
Barclays Dryrock Issuance Trust,
Series 2014-3, Class A
151,000 2.410%, 07/15/22 152,412
PRINCIPAL
AMOUNT + VALUE $
------------ ---------
CAL Funding III, Series 2017-1A,
Class A (1)
399,233 3.620%, 06/25/42 400,595
Carlyle Global Market Strategies,
Series 2017-1A, Class A1A (1)
2.663%, VAR ICE LIBOR USD 3
605,000 Month+1.300%, 04/20/31 612,017
Cedar Funding VI CLO, Series 2016-6A,
Class A1 (1)
2.777%, VAR ICE LIBOR USD 3
645,000 Month+1.470%, 10/20/28 653,682
Credit-Based Asset Servicing and
Securitization LLC,
Series 2003-CB4, Class AF1
19,158 5.000%, 03/25/31 18,604
Cronos Containers Program,
Series 2013-1A, Class A (1)
137,500 3.080%, 04/18/28 137,256
Flagship Credit Auto Trust,
Series 2014-1, Class B (1)
51,287 2.550%, 02/18/20 51,354
Flagship Credit Auto Trust,
Series 2015-2, Class A (1)
282,639 1.980%, 10/15/20 282,919
Goldentree Loan Management,
Series 2017-2A, Class A (1)
2.724%, VAR ICE LIBOR USD 3
606,000 Month+1.150%, 11/28/30 606,000
Madison Park Funding XXVI,
Series 2017-26A, Class AR (1)
2.523%, VAR ICE LIBOR USD 3
600,000 Month+1.200%, 07/29/30 603,154
Octagon Investment Partners 30,
Series 2017-1A, Class A1 (1)
2.683%, VAR ICE LIBOR USD 3
250,000 Month+1.320%, 03/17/30 253,924
OneMain Financial Issuance Trust,
Series 2014-2A, Class A (1)
41,125 2.470%, 09/18/24 41,154
Santander Drive Auto Receivables Trust,
Series 2013-5, Class C
91,145 2.250%, 06/17/19 91,206
Santander Drive Auto Receivables Trust,
Series 2014-1, Class C
177,176 2.360%, 04/15/20 177,362
Santander Drive Auto Receivables Trust,
Series 2014-2, Class C
223,149 2.330%, 11/15/19 223,636
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 30
--------------------------------------------------------------------------------
SCHRODER TOTAL RETURN FIXED INCOME FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2017
PRINCIPAL
AMOUNT + VALUE $
------------ ---------
SpringCastle America Funding LLC,
Series 2016-AA, Class A (1)
256,983 3.050%, 04/25/29 258,792
Springleaf Funding Trust, Series
2015-AA, Class A (1)
850,000 3.160%, 11/15/24 854,819
Synchrony Credit Card Master Note
Trust, Series 2012-2, Class A
200,000 2.220%, 01/15/22 200,948
Textainer Marine Containers,
Series 2017-2A, Class A
218,278 3.520%, 06/20/42 216,653
Textainer Marine Containers V,
Series 2017-1A, Class A (1)
95,409 3.720%, 05/20/42 96,548
THL Credit Wind River,
Series 2017-2A, Class A (1)
2.544%, VAR ICE LIBOR USD 3
640,000 Month+1.230%, 07/20/30 643,005
Towd Point Mortgage Trust,
Series 2015-6, Class A1
66,940 3.500%, 04/25/55 68,407
Towd Point Mortgage Trust,
Series 2017-2, Class A1 (1) (3)
207,887 2.750%, 04/25/57 208,962
Towd Point Mortgage Trust,
Series 2017-3, Class A1 (1) (3)
384,201 2.750%, 07/25/57 385,524
Towd Point Mortgage Trust,
Series 2017-4, Class A1
189,968 2.750%, 06/25/57 190,495
Towd Point Mortgage Trust,
Series 2017-5, Class A1 (1)
1.842%, VAR ICE LIBOR USD 1
655,000 Month+0.600%, 02/25/57 654,957
Voya CLO, Series 2017-2A,
Class A1R (1)
2.603%, VAR ICE LIBOR USD 3
595,000 Month+1.250%, 04/17/30 597,189
---------
TOTAL ASSET-BACKED SECURITIES
(Cost $9,012,546) 9,036,856
---------
U.S. GOVERNMENT MORTGAGE-BACKED
OBLIGATIONS -- 8.9%
FEDERAL HOME LOAN MORTGAGE
CORPORATION-- 4.2%
FHLMC
1,958,083 4.000%, 04/01/47 2,055,307
512,540 3.500%, 05/01/46 527,254
PRINCIPAL
AMOUNT + VALUE $
------------ ---------
FHLMC Gold
65,073 4.500%, 10/01/24 66,323
154,730 3.000%, 01/01/43 155,783
FHLMC IO REMIC
1046.972%, VAR LIBOR USD 1
1 Month+1199.99%, 01/15/22 6
---------
2,804,673
---------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION -- 4.2%
FNMA
44,729 5.000%, 10/01/29 48,549
1,982,653 4.000%, 03/01/47 2,082,511
3.230%, VAR ICE LIBOR USD 12
158,506 Month+1.752%, 06/01/42 163,197
96,970 3.000%, 05/01/43 97,552
300,743 3.000%, 06/01/43 302,545
116,777 3.000%, 07/01/43 117,465
---------
2,811,819
---------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION -- 0.5%
GNMA
232,469 2.598%, 04/16/54 (3) 237,579
GNMA IO
2,259,680 0.851%, 12/16/51 (3) 117,868
---------
355,447
---------
TOTAL U.S. GOVERNMENT MORTGAGE-
BACKED OBLIGATIONS
(Cost $5,989,713) 5,971,939
---------
COLLATERALIZED MORTGAGE
OBLIGATIONS -- 6.7%
Flagstar Mortgage Trust,
Series 2017-2, Class A5 (1) (3) (5) (6)
925,000 3.500%, 10/25/47 940,031
Impac Secured Assets Trust,
Series 2006-1, Class 2A2
1.642%, VAR ICE LIBOR USD 1
107,350 Month+0.410%, 05/25/36 105,115
Impac Secured Assets Trust,
Series 2006-2, Class 2M1
1.738%, VAR ICE LIBOR USD 1
130,000 Month+0.500%, 08/25/36 119,715
JPMorgan Mortgage Trust,
Series 2015-3, Class A5 (1) (3)
117,180 3.500%, 05/25/45 119,679
JPMorgan Mortgage Trust,
Series 2016-3, Class 1A3 (1) (3)
580,379 3.500%, 10/25/46 592,758
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 31
--------------------------------------------------------------------------------
SCHRODER TOTAL RETURN FIXED INCOME FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2017
PRINCIPAL
AMOUNT + VALUE $
------------ ---------
JPMorgan Mortgage Trust,
Series 2017-1, Class A4 (1) (3)
123,381 3.500%, 01/25/47 125,936
JPMorgan Mortgage Trust,
Series 2017-3, Class 1A5 (1) (3)
613,332 3.500%, 08/25/47 628,503
JPMorgan Mortgage Trust,
Series 2017-4, Class A5 (1) (3)
502,000 3.500%, 11/25/47 511,648
One Market Plaza Trust,
Series 2017-1, Class E
195,000 4.142%, 02/10/24 192,807
Sequoia Mortgage Trust,
Series 2015-2, Class A10 (1) (3)
267,338 3.500%, 05/25/45 272,872
Sequoia Mortgage Trust,
Series 2015-3, Class A4 (1) (3)
326,789 3.500%, 07/25/45 333,555
Sequoia Mortgage Trust,
Series 2017-2, Class A4 (1) (3)
534,805 3.500%, 03/25/47 545,543
---------
TOTAL COLLATERALIZED
MORTGAGE OBLIGATIONS
(Cost $4,483,853) 4,488,162
---------
SOVEREIGN GOVERNMENTS -- 4.2%
Brazil Notas do Tesouro Nacional
Serie F
BRL 1,400,000 10.000%, 01/01/27 431,499
Costa Rica Government International
Bond (4)
520,000 4.250%, 01/26/23 514,150
Ecuador Government International
Bond (1)
295,000 10.750%, 03/28/22 333,350
Mexican Bonos
MXN 15,400,000 6.500%, 06/09/22 785,738
Province of Manitoba Canada
185,000 9.625%, 12/01/18 199,878
Republic of South Africa Government
International Bond
555,000 4.850%, 09/27/27 541,747
---------
TOTAL SOVEREIGN GOVERNMENTS
(Cost $2,858,771) 2,806,362
---------
TAX-EXEMPT MUNICIPAL BONDS -- 1.9%
FLORIDA -- 1.0%
Hurricane Catastrophe Fund
Finance RB, Series A
630,000 2.995%, 07/01/20 640,905
---------
PRINCIPAL
AMOUNT + VALUE $
------------ ---------
NEW JERSEY -- 0.3%
State Economic Development
Authority RB, Series A, NATL
90,000 7.425%, 02/15/29 111,865
State Transportation Trust Fund
Authority RB, Series C
90,000 5.754%, 12/15/28 103,496
-------------
215,361
-------------
OHIO -- 0.1%
American Municipal Power RB,
Series B
40,000 8.084%, 02/15/50 66,915
-------------
PENNSYLVANIA -- 0.5%
Philadelphia Authority for Industrial
Development RB
350,000 3.964%, 04/15/26 355,789
-------------
TOTAL MUNICIPAL BONDS
(Cost $1,254,167) 1,278,970
-------------
COMMERCIAL MORTGAGE-
BACKED OBLIGATIONS -- 0.7%
Cold Storage Trust, Series 2017-ICE3,
Class D (1)
3.334%, VAR LIBOR USD 1
240,000 Month+2.100%, 04/15/36 241,352
LSTAR Commercial Mortgage Trust,
Series 2014-2, Class B (1) (3)
205,000 4.205%, 01/20/41 205,012
-------------
TOTAL COMMERCIAL MORTGAGE-
BACKED OBLIGATIONS
(Cost $445,080) 446,364
-------------
PURCHASED OPTIONS (7) -- 0.0%
TOTAL PURCHASED OPTIONS (8)
(Cost $5,108) 4,062
-------------
TOTAL INVESTMENTS IN
SECURITIES -- 99.2%
(Cost $66,489,126) 66,649,441
-------------
OTHER ASSETS LESS
LIABILITIES -- 0.8% 549,745
-------------
NET ASSETS -- 100% $ 67,199,186
=============
+ In U.S. Dollars unless otherwise indicated.
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 32
--------------------------------------------------------------------------------
SCHRODER TOTAL RETURN FIXED INCOME FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2017
(1) Security exempt from registration under Rule 144A of the Securities Act of
1933. This security may be resold in transactions exempt from registration
normally to qualified institutions. On October 31, 2017, the value of these
securities amounted to $19,074,725, representing 28.4% of the net assets of
the Fund.
(2) Security, or a portion of this security, has been pledged as collateral on
open derivative positions and mortgage dollar rolls.
(3) Variable or floating rate security, the interest rate of which adjusts
periodically based on changes in current interest rates and prepayments on
the underlying pool of assets.
(4) Security exempt from registration under Regulation S of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration normally to qualified institutions. On October 31, 2017, the
value of these securities amounted to $514,150, representing 0.8% of the
net assets of the Fund.
(5) Level 3 security in accordance with fair value hierarchy.
(6) Security is fair valued using methods determined in good faith by the Fair
Value Committee of the Board of Trustees. The total value of such
securities as of October 31, 2017, was $940,031 and represented 1.4% of net
assets.
(7) Non-income producing security.
(8) Refer to table below for details on Options Contracts.
A list of the open exchange traded options contracts for the Fund at October 31,
2017, is as follows:
NUMBER OF NOTIONAL EXERCISE EXPIRATION
DESCRIPTION CONTRACTS AMOUNT PRICE DATE VALUE
--------------------------------------------------------------------------------------------------
PURCHASED OPTION -- 0.0%
PUT OPTIONS
U.S. 10-Year Treasury Future Put 13 $5,108 $124.50 11/24/17 $4,062
------ ------
Total Purchased Options $5,108 $4,062
====== ======
The open futures contracts held by the Fund at October 31, 2017, is as follows:
NUMBER OF UNREALIZED
CONTRACTS EXPIRATION NOTIONAL APPRECIATION
TYPE OF CONTRACT LONG (SHORT) DATE AMOUNT VALUE (DEPRECIATION)
-----------------------------------------------------------------------------------------------------------------
Canadian 10-Year Bond 9 Dec-2017 $ 1,013,953 $ 958,740 $ 1,750
Euro-BTP (18) Dec-2017 (2,919,204) (2,926,824) (72,729)
Euro-Bund (2) Dec-2017 (388,121) (379,159) 221
Long Gilt 10-Year Bond (6) Dec-2017 (999,740) (990,769) 25,589
U.S. 2-Year Treasury Note (2) Dec-2017 (432,715) (430,719) 1,996
U.S. 5-Year Treasury Note 23 Dec-2017 2,718,501 2,695,313 (23,188)
U.S. 10-Year Treasury Note 29 Dec-2017 3,657,334 3,623,188 (34,146)
U.S. Long Treasury Bond (4) Dec-2017 (617,149) (609,875) 7,274
U.S. Ultra Long Treasury Bond 8 Dec-2017 1,345,112 1,318,250 (26,862)
----------- ---------- ----------
$ 3,377,971 $3,258,145 $ (120,095)
=========== ========== ==========
A summary of the outstanding forward foreign currency contracts held by the Fund
at October 31, 2017, is as follows:
UNREALIZED
SETTLEMENT CURRENCY TO CURRENCY TO APPRECIATION
COUNTERPARTY DATE DELIVER RECEIVE (DEPRECIATION)
--------------------------------------------------------------------------------
Morgan Stanley 12/15/17 MXN 15,250,000 USD 849,727 $ 60,619
========
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 33
--------------------------------------------------------------------------------
SCHRODER TOTAL RETURN FIXED INCOME FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2017
A list of the open centrally cleared swap agreements held by the Fund at
October 31, 2017 is as follows:
CREDIT DEFAULT SWAPS
NET
(PAYS)/ UPFRONT UNREALIZED
BUY/SELL RECEIVES PAYMENT TERMINATION NOTIONAL PAYMENTS/ APPRECIATION
REFERENCE ENTITY PROTECTION RATE FREQUENCY DATE AMOUNT VALUE RECEIPTS (DEPRECIATION)
------------------------------------------------------------------------------------------------------------------------------
CDX High Yield S27 Buy (5.00)% Quarterly 12/20/2021 $1,176,000 $(104,613) $(34,340) $(70,273)
========== ========= ========= ========
BRL -- Brazilian Real
CDX -- Credit Derivatives Index
CLO -- Collateralized Loan Obligation
FHLMC -- Federal Home Loan Mortgage Corporation
FNMA -- Federal National Mortgage Association
GNMA -- Government National Mortgage Association
ICE -- Intercontinental Exchange
IO -- Interest Only
LIBOR -- London Interbank Offered Rate
LLC -- Limited Liability Company
MTN -- Medium Term Note
MXN -- Mexican Peso
NATL -- National Public Finance Guarantee Corporation
RB -- Revenue Bond
REIT -- Real Estate Investment Trust
REMIC -- Real Estate Mortgage Investment Conduit
USD -- United States Dollar
VAR -- Variable Rate
The following is a summary of the inputs used as of October 31, 2017, in
valuing the Fund's investments carried at value:
INVESTMENTS IN SECURITIES LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
--------- ------------ --------- -----------
Corporate Obligations $ -- $ 29,330,573 $ -- $ 29,330,573
U.S. Treasury Obligations -- 13,286,153 -- 13,286,153
Asset-Backed Securities -- 9,036,856 -- 9,036,856
U.S. Government Mortgage-Backed Obligations -- 5,971,939 -- 5,971,939
Collateralized Mortgage Obligations -- 3,548,131 940,031 4,488,162
Sovereign Governments -- 2,806,362 -- 2,806,362
Tax-Exempt Municipal Bonds -- 1,278,970 -- 1,278,970
Commercial Mortgage-Backed Obligations -- 446,364 -- 446,364
Exchange Traded Purchased Option 4,062 -- -- 4,062
--------- ------------ --------- -----------
Total Investments in Securities $ 4,062 $ 65,705,348 $ 940,031 $ 66,649,441
========== ============ ========= ============
OTHER FINANCIAL INSTRUMENTS LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
--------- ------------ --------- -----------
Futures -- Unrealized Appreciation $ 36,830 $ -- $ -- $ 36,830
Futures -- Unrealized Depreciation (156,925) -- -- (156,925)
Forwards -- Unrealized Appreciation -- 60,619 -- 60,619
Credit Default Swaps -- Unrealized Depreciation -- (70,273) -- (70,273)
--------- ------------ --------- -----------
Total Other Financial Instruments $(120,095) $ (9,654) $ -- $ (129,749)
========== ============ ========= ============
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 34
--------------------------------------------------------------------------------
SCHRODER TOTAL RETURN FIXED INCOME FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONCLUDED)
OCTOBER 31, 2017
The following is a reconciliation of the investments in which significant
unobservable inputs (Level 3) were used in determining value:
COLLATERALIZED MORTGAGE OBLIGATIONS
Beginning balance as of November 1, 2016 $ --
Realized gain/(loss) --
Change in unrealized appreciation/(depreciation) 1,156
Purchases 938,875
Sales --
Transfer into Level 3 --
Transfer out of Level 3 --
---------
Ending balance as of October 31, 2017 $ 940,031
=========
For the year ended October 31, 2017, there have been no transfers between Level
1, Level 2 and Level 3 investments. The Fund generally recognizes transfers
between the levels as of the end of the reporting period.
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 35
--------------------------------------------------------------------------------
SCHRODER LONG DURATION INVESTMENT-GRADE BOND FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2017
PRINCIPAL
AMOUNT ($) VALUE $
----------- ---------
CORPORATE OBLIGATIONS -- 50.2%
CONSUMER DISCRETIONARY -- 3.1%
21st Century Fox America
308,000 4.750%, 09/15/44 328,357
Amazon.com (1)
560,000 3.875%, 08/22/37 580,480
Cox Communications (1)
113,000 4.600%, 08/15/47 112,185
Discovery Communications
517,000 5.000%, 09/20/37 533,004
McDonald's MTN
327,000 4.875%, 12/09/45 372,358
Newell Brands
400,000 5.375%, 04/01/36 465,868
---------
2,392,252
---------
CONSUMER STAPLES -- 7.3%
Altria Group
800,000 5.375%, 01/31/44 959,539
Anheuser-Busch InBev Finance
665,000 4.900%, 02/01/46 747,865
BAT Capital (1)
511,000 4.540%, 08/15/47 525,954
CVS Health
652,000 5.125%, 07/20/45 728,564
Kraft Heinz Foods
390,000 6.500%, 02/09/40 489,023
404,000 5.200%, 07/15/45 440,532
Molson Coors Brewing
289,000 4.200%, 07/15/46 284,830
Reynolds American
191,000 8.125%, 05/01/40 283,931
646,000 5.850%, 08/15/45 793,993
Tyson Foods
185,000 4.550%, 06/02/47 198,004
Wal-Mart Stores
139,000 3.625%, 12/15/47 142,086
---------
5,594,321
---------
ENERGY -- 5.2%
Enbridge
232,000 5.500%, 12/01/46 273,136
Energy Transfer Partners
400,000 5.150%, 03/15/45 390,611
Ensco
93,000 5.750%, 10/01/44 63,473
Enterprise Products Operating LLC
505,000 5.100%, 02/15/45 570,742
PRINCIPAL
AMOUNT ($) VALUE $
----------- ---------
Marathon Petroleum
250,000 4.750%, 09/15/44 254,134
Noble Energy
400,000 5.050%, 11/15/44 420,487
Petroleos Mexicanos
607,000 5.625%, 01/23/46 550,337
Phillips 66 Partners
257,000 4.680%, 02/15/45 259,211
Shell International Finance BV
400,000 4.000%, 05/10/46 408,761
TransCanada PipeLines
541,000 7.625%, 01/15/39 810,298
---------
4,001,190
---------
FINANCIALS -- 13.9%
Aflac
144,000 6.450%, 08/15/40 191,896
American International Group
359,000 4.375%, 01/15/55 355,307
168,000 3.900%, 04/01/26 174,113
Bank of America
824,000 6.000%, 10/15/36 1,054,897
Bank of America MTN
300,000 5.000%, 01/21/44 348,686
822,000 3.500%, 04/19/26 836,761
Citigroup
4.281%, VAR ICE LIBOR USD 3
386,000 Month+1.839%, 04/24/48 405,633
789,000 3.200%, 10/21/26 779,410
Cooperatieve Rabobank UA
250,000 3.750%, 07/21/26 254,501
Cooperatieve Rabobank UA MTN
348,000 5.250%, 05/24/41 432,477
940,000 3.375%, 05/21/25 968,365
Goldman Sachs Group
1,471,000 3.500%, 11/16/26 1,473,066
JPMorgan Chase
4.260%, VAR ICE LIBOR USD 3
295,000 Month+1.580%, 02/22/48 310,492
MetLife
495,000 5.875%, 02/06/41 638,827
Morgan Stanley MTN
475,000 4.300%, 01/27/45 500,882
Prudential Financial MTN
476,000 6.200%, 11/15/40 624,606
Unum Group
693,000 5.750%, 08/15/42 833,105
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 36
--------------------------------------------------------------------------------
SCHRODER LONG DURATION INVESTMENT-GRADE BOND FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2017
PRINCIPAL
AMOUNT ($) VALUE $
----------- ---------
Wells Fargo
453,000 3.900%, 05/01/45 455,814
----------
10,638,838
----------
HEALTHCARE -- 4.3%
Abbott Laboratories
425,000 4.900%, 11/30/46 477,235
AbbVie
451,000 4.700%, 05/14/45 489,303
Allergan Funding SCS
489,000 4.550%, 03/15/35 514,246
Anthem
925,000 4.625%, 05/15/42 996,199
Medtronic
713,000 4.625%, 03/15/45 807,796
----------
3,284,779
----------
INDUSTRIALS -- 4.0%
Burlington Northern Santa Fe
700,000 4.150%, 04/01/45 745,222
Johnson Controls International
70,000 4.500%, 02/15/47 73,587
Lockheed Martin
480,000 4.700%, 05/15/46 541,334
Rockwell Collins
362,000 4.350%, 04/15/47 388,127
Siemens Financieringsmaatschappij (1)
618,000 4.200%, 03/16/47 665,889
Union Pacific
630,000 4.150%, 01/15/45 667,745
----------
3,081,904
----------
INFORMATION TECHNOLOGY -- 3.4%
Apple
277,000 4.375%, 05/13/45 304,446
106,000 4.250%, 02/09/47 113,661
169,000 3.850%, 08/04/46 170,918
Microsoft
624,000 4.500%, 02/06/57 705,322
236,000 4.450%, 11/03/45 268,767
275,000 3.700%, 08/08/46 276,102
Visa
738,000 4.300%, 12/14/45 817,174
----------
2,656,390
----------
MATERIALS -- 2.5%
Barrick North America Finance LLC
317,000 5.700%, 05/30/41 387,921
Dow Chemical
182,000 9.400%, 05/15/39 306,120
PRINCIPAL
AMOUNT ($) VALUE $
----------- ---------
International Paper
600,000 4.800%, 06/15/44 653,594
Monsanto
172,000 4.700%, 07/15/64 175,259
Sherwin-Williams
352,000 4.500%, 06/01/47 373,561
----------
1,896,455
----------
TELECOMMUNICATION SERVICES -- 4.9%
AT&T
850,000 5.150%, 02/14/50 837,912
917,000 4.500%, 05/15/35 893,827
640,000 4.350%, 06/15/45 571,516
Verizon Communications
439,000 5.250%, 03/16/37 479,717
1,040,000 4.672%, 03/15/55 988,352
----------
3,771,324
----------
UTILITIES -- 1.6%
Sempra Energy
393,000 6.000%, 10/15/39 498,849
Southern
670,000 4.400%, 07/01/46 705,049
----------
1,203,898
----------
TOTAL CORPORATE OBLIGATIONS
(Cost $35,887,536) 38,521,351
----------
U.S. TREASURY OBLIGATIONS -- 48.0%
United States Treasury Bonds
4,914,000 4.625%, 02/15/40 6,446,554
1,352,000 4.500%, 02/15/36 1,730,930
11,716,500 4.375%, 05/15/40 14,888,193
2,027,000 3.000%, 02/15/47 2,077,754
3,349,000 3.000%, 05/15/47 3,433,117
875,200 2.875%, 11/15/46 875,200
4,954,000 2.750%, 08/15/47 4,829,763
United States Treasury Note
2,611,000 2.250%, 08/15/27 2,582,238
----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $37,676,150) 36,863,749
----------
TAXABLE MUNICIPAL BOND -- 0.6%
CALIFORNIA -- 0.6%
University of California RB, Series AD
400,000 4.858%, 05/15/2112
(Cost $397,109) 435,340
----------
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 37
--------------------------------------------------------------------------------
SCHRODER LONG DURATION INVESTMENT-GRADE BOND FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONCLUDED)
OCTOBER 31, 2017
PRINCIPAL
AMOUNT ($) VALUE $
----------- ---------
TAX-EXEMPT MUNICIPAL BOND -- 0.2%
NEW JERSEY -- 0.2%
State Transportation Trust Fund Authority
RB, Series B
105,000 6.561%, 12/15/40
(Cost $125,713) 135,355
-------------
TOTAL INVESTMENTS IN
SECURITIES -- 99.0%
(Cost $74,086,508) 75,955,795
-------------
OTHER ASSETS LESS
LIABILITIES -- 1.0% 770,366
-------------
NET ASSETS -- 100% $ 76,726,161
=============
(1) Security exempt from registration under Rule 144A of the Securities Act of
1933. This security may be resold in transactions exempt from registration
normally to qualified institutions. On October 31, 2017, the value of these
securities amounted to $1,884,508, representing 2.5% of the net assets of
the Fund.
ICE -- Intercontinental Exchange
LIBOR -- London Interbank Offered Rate
LLC -- Limited Liability Company
MTN -- Medium Term Note
RB -- Revenue Bond
USD -- United States Dollar
VAR -- Variable Rate
The following is a summary of the inputs used as of October 31, 2017, in
valuing the Fund's investments carried at value:
INVESTMENTS IN SECURITIES (1) LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
------- ------------ --------- ------------
Corporate Obligations $ -- $ 38,521,351 $ -- $ 38,521,351
U.S. Treasury Obligations -- 36,863,749 -- 36,863,749
Taxable Municipal Bond -- 435,340 -- 435,340
Tax-Exempt Municipal Bond -- 135,355 -- 135,355
------- ------------ --------- ------------
Total Investments in Securities $ -- $ 75,955,795 $ -- $ 75,955,795
======= ============ ========= ============
(1) There were no transfers between levels during the reporting period, based
on the input levels assigned under the hierarchy at the end of the
reporting period.
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 38
[This Page Intentionally Left Blank]
--------------------------------------------------------------------------------
39
--------------------------------------------------------------------------------
SCHRODER MUTUAL FUNDS
--------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
OCTOBER 31, 2017
NORTH AMERICAN EMERGING MARKETS SHORT DURATION
EQUITY FUND SMALL CAP FUND BOND FUND
--------------- ---------------- --------------
ASSETS
Investments in securities, at value -- Note 2 ......... $ 1,001,337,232 $ 2,107,146 $ 15,815,560
Cash .................................................. 19,472,902 102,044 394,579
Foreign currency ...................................... 1 2,671 --
Receivable for Fund shares sold ....................... 3,248 -- 503
Receivable for securities sold ........................ -- 2,284 --
Due from Investment Adviser -- Note 3 ................. -- 18,606 5,998
Unrealized appreciation on forward foreign
currency contracts .................................. 351,204 -- --
Initial margin for futures contracts .................. 336,600 -- 6,734
Initial margin for centrally cleared swap contracts ... -- -- --
Dividend and Interest receivable ...................... 860,301 1,134 78,090
Variation margin receivable for centrally cleared
swap contracts ...................................... -- -- --
Receivable from Transfer Agent ........................ 16,794 33,928 33,919
Variation margin receivable for futures contracts ..... 15,300 -- --
Prepaid expenses ...................................... 27,483 15,336 15,958
--------------- ----------- ------------
TOTAL ASSETS ..................................... 1,022,421,065 2,283,149 16,351,341
LIABILITIES
Payable for securities purchased ...................... -- 1,609 --
Obligation to return cash collateral .................. 600,000 -- --
Variation margin payable for futures contracts ........ -- -- 1,195
Income distributions payable .......................... -- -- --
Accrued foreign capital gains tax ..................... -- 3,433 --
Unrealized depreciation on spot foreign
currency contracts .................................. -- 3 --
Payable for Fund shares redeemed ...................... -- -- --
Investment Advisory fees payable -- Note 3 ............ 214,893 -- --
Sub-administration fees payable -- Note 3 ............. 42,980 10,617 10,617
Audit and tax fees payable ............................ 18,165 19,317 20,365
Trustees' fees payable ................................ 7,354 1,398 1,482
Legal fees payable .................................... 7,238 1,376 1,458
Shareholder Servicing Fees, Investor Class --
Note 3 .............................................. -- -- --
Accrued expenses and other liabilities ................ 62,377 32,655 24,992
--------------- ----------- ------------
TOTAL LIABILITIES ................................ 953,007 70,408 60,109
--------------- ----------- ------------
NET ASSETS ............................................ $ 1,021,468,058 $ 2,212,741 $ 16,291,232
=============== =========== ============
Cost of securities .................................... $ 684,679,825 $ 1,557,910 $ 15,775,653
Cost of foreign currency .............................. $ 1 $ 2,638 $ --
TOTAL RETURN LONG DURATION
FIXED INCOME INVESTMENT-GRADE
FUND BOND FUND
------------ ---------------
ASSETS
Investments in securities, at value -- Note 2 ......... $ 66,649,441 $ 75,955,795
Cash .................................................. 1,102,922 493,467
Foreign currency ...................................... 111,519 --
Receivable for Fund shares sold ....................... 3,385 1,487
Receivable for securities sold ........................ -- --
Due from Investment Adviser -- Note 3 ................. -- --
Unrealized appreciation on forward foreign
currency contracts .................................. 60,619 --
Initial margin for futures contracts .................. 150,805 --
Initial margin for centrally cleared swap contracts ... 31,830 --
Dividend and Interest receivable ...................... 457,831 874,038
Variation margin receivable for centrally cleared
swap contracts ...................................... 709 --
Receivable from Transfer Agent ........................ 16,713 16,854
Variation margin receivable for futures contracts ..... 2,634 --
Prepaid expenses ...................................... 19,619 18,582
------------ ------------
TOTAL ASSETS ..................................... 68,608,027 77,360,223
LIABILITIES
Payable for securities purchased ...................... 1,271,915 326,803
Obligation to return cash collateral .................. -- --
Variation margin payable for futures contracts ........ 9,543 --
Income distributions payable .......................... 19,520 --
Accrued foreign capital gains tax ..................... -- --
Unrealized depreciation on spot foreign
currency contracts .................................. -- --
Payable for Fund shares redeemed ...................... 8,374 225,239
Investment Advisory fees payable -- Note 3 ............ 4,109 7,758
Sub-administration fees payable -- Note 3 ............. 10,617 10,617
Audit and tax fees payable ............................ 17,765 17,765
Trustees' fees payable ................................ 1,782 1,839
Legal fees payable .................................... 1,754 1,810
Shareholder Servicing Fees, Investor Class --
Note 3 .............................................. 33,178 24,154
Accrued expenses and other liabilities ................ 30,284 18,077
------------ ------------
TOTAL LIABILITIES ................................ 1,408,841 634,062
------------ ------------
NET ASSETS ............................................ $ 67,199,186 $ 76,726,161
============ ============
Cost of securities .................................... $ 66,489,126 $ 74,086,508
Cost of foreign currency .............................. $ 113,596 $ --
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 40
--------------------------------------------------------------------------------
SCHRODER MUTUAL FUNDS
--------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
OCTOBER 31, 2017
NORTH AMERICAN EMERGING MARKETS SHORT DURATION
EQUITY FUND SMALL CAP FUND BOND FUND
-------------- ---------------- -------------
NET ASSETS
Capital paid-in .................................... $ 654,253,007 $ 1,328,929 $ 16,289,167
Undistributed (distributions in excess of) net
investment income ................................ 12,914,945 (10,945) 3,348
Accumulated net realized gain (loss) on
investments, futures, purchased options, swap
contracts, forward foreign currency contracts and
foreign currency transactions .................... 36,921,272 348,946 (31,038)
Accumulated foreign capital gains tax on
appreciated securities ........................... -- (3,433) --
Net unrealized appreciation on investments and
purchased options ................................ 316,657,407 549,236 39,907
Net unrealized appreciation (depreciation) on
futures, swap contracts, forward foreign currency
contracts and foreign currency transactions and
translations ..................................... 721,427 8 (10,152)
--------------- ----------- ------------
NET ASSETS .......................................... $ 1,021,468,058 $ 2,212,741 $ 16,291,232
=============== =========== ============
NET ASSETS:
R6 ................................................. $ N/A $ 2,185,435 $ 16,189,483
Investor 1,021,468,058 27,306 101,749
TOTAL SHARES OUTSTANDING END OF PERIOD: ............
R6 ................................................. N/A 160,129 1,620,280
Investor ........................................... 60,000,148 2,001 10,181
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SHARE (NET ASSETS SHARES OUTSTANDING)
R6 ................................................. $ N/A $ 13.65 $ 9.99
Investor ........................................... 17.02 13.65 9.99
TOTAL RETURN LONG DURATION
FIXED INCOME INVESTMENT-GRADE
FUND BOND FUND
----------- ---------------
NET ASSETS
Capital paid-in .................................... $ 70,113,273 $ 75,508,791
Undistributed (distributions in excess of) net
investment income ................................ (219,159) 25,138
Accumulated net realized gain (loss) on
investments, futures, purchased options, swap
contracts, forward foreign currency contracts and
foreign currency transactions .................... (2,724,282) (677,055)
Accumulated foreign capital gains tax on
appreciated securities ........................... -- --
Net unrealized appreciation on investments and
purchased options ................................ 160,315 1,869,287
Net unrealized appreciation (depreciation) on
futures, swap contracts, forward foreign currency
contracts and foreign currency transactions and
translations ..................................... (130,961) --
------------ -------------
NET ASSETS .......................................... $ 67,199,186 $ 76,726,161
============ =============
NET ASSETS:
R6 ................................................. $ N/A $ N/A
Investor 67,199,186 76,726,161
TOTAL SHARES OUTSTANDING END OF PERIOD: ............
R6 ................................................. N/A N/A
Investor ........................................... 6,779,971 8,636,140
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SHARE (NET ASSETS SHARES OUTSTANDING)
R6 ................................................. $ N/A $ N/A
Investor ........................................... 9.91 8.88
N/A -- R6 Shares currently not offered.
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 41
--------------------------------------------------------------------------------
SCHRODER MUTUAL FUNDS
--------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 2017
NORTH AMERICAN EMERGING MARKETS
EQUITY FUND SMALL CAP FUND
-------------- ----------------
INVESTMENT INCOME
Dividend income ...................................................... $ 20,656,008 $ 145,003
Interest income ...................................................... 1,179 216
Foreign taxes withheld ............................................... (42,558) (9,157)
------------ ----------
TOTAL INCOME ......................................................... 20,614,629 136,062
------------ ----------
EXPENSES
Investment Advisory fees -- Note 3 ................................... 2,382,365 110,701
Sub-administration fees -- Note 3 .................................... 380,228 99,265
Trustees fees and expenses ........................................... 57,627 11,280
Distribution fees, Advisor Shares* ................................... 34 --
Shareholder Service fees, Investor Shares -- Note 3 .................. -- --
Shareholder Service fees, Advisor Shares* ............................ -- --
Transfer agent fees .................................................. 93,300 67,716
Legal fees ........................................................... 49,816 8,337
Printing ............................................................. 40,161 11,611
Registration fees .................................................... 39,802 22,736
Audit and tax fees ................................................... 27,410 43,424
Insurance ............................................................ 21,681 4,449
Custodian fees ....................................................... 38,486 35,206
Pricing fees ......................................................... 8,052 5,396
Other ................................................................ 52,696 9,168
------------ ----------
TOTAL EXPENSES ................................................... 3,191,658 429,289
------------ ----------
Expenses waived by Investment Adviser -- Note 3 ...................... -- (110,701)
Reimbursement from Investment Adviser ................................ -- (185,563)
Custody Offset -- Note 2 ............................................. (28,971) (624)
------------ ----------
NET EXPENSES ..................................................... 3,162,687 132,401
------------ ----------
NET INVESTMENT INCOME ............................................ 17,451,942 3,661
------------ ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES,
PURCHASED OPTIONS, SWAP CONTRACTS, FORWARD FOREIGN CURRENCY
CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS AND TRANSLATIONS
Net realized gain (loss) on investments sold ......................... 40,081,029 2,751,384**
Net realized gain (loss) on futures .................................. 609,767 --
Net realized loss on purchased options ............................... -- --
Net realized loss on swap contracts .................................. -- --
Net realized loss on forward foreign currency contracts and
foreign currency transactions ....................................... (534,576) (10,795)
------------ ----------
Net realized gain (loss) on investments, futures, purchased
options, swap contracts, forward foreign currency
contracts and foreign currency transactions ..................... 40,156,220 2,740,589
------------ ----------
Change in unrealized appreciation (depreciation) on investments ...... 129,980,068 (1,263,516)
Change in unrealized appreciation (depreciation) on futures .......... 409,486 --
Change in unrealized appreciation purchased options .................. -- --
Change in unrealized depreciation on swap contracts .................. -- --
Change in accrued foreign capital gains tax on appreciated securities -- 8,735
Change in unrealized appreciation (depreciation) on forward
foreign currency contracts and foreign currency transactions and
translations ...................................................... 145,761 (558)
------------ ----------
Net change in unrealized appreciation (depreciation) on
investments, futures, purchased options, swap
contracts, accrued foreign capital gains tax on
appreciated securities, forward foreign currency contracts
and foreign currency transactions and translations .......... 130,535,315 (1,255,339)
------------ ----------
NET REALIZED AND UNREALIZED GAIN (LOSS) .............................. 170,691,535 1,485,250
------------ ----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .................. $188,143,477 $1,488,911
============ ==========
* Advisor Shares were terminated December 20, 2016.
** Netted with foreign capital gain tax of $16,477.
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 42
--------------------------------------------------------------------------------
SCHRODER MUTUAL FUNDS
--------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 2017
LONG DURATION
SHORT DURATION TOTAL RETURN FIXED INVESTMENT-GRADE
BOND FUND INCOME FUND BOND FUND
-------------- ------------------ ----------------
INVESTMENT INCOME
Dividend income ...................................................... $ -- $ -- $ --
Interest income ...................................................... 334,029 2,220,551 2,637,060
Foreign taxes withheld ............................................... -- (1,098) --
---------- ----------- -----------
TOTAL INCOME ......................................................... 334,029 2,219,453 2,637,060
---------- ----------- -----------
EXPENSES
Investment Advisory fees -- Note 3 ................................... 51,479 165,611 244,573
Sub-administration fees -- Note 3 .................................... 102,923 131,034 132,174
Trustees fees and expenses ........................................... 11,744 14,904 14,602
Distribution fees, Advisor Shares* ................................... -- 195 --
Shareholder Service fees, Investor Shares -- Note 3 .................. -- 52,856 37,058
Shareholder Service fees, Advisor Shares* ............................ -- 138 --
Transfer agent fees .................................................. 68,159 48,597 40,310
Legal fees ........................................................... 8,758 10,293 11,258
Printing ............................................................. 10,582 16,885 12,149
Registration fees .................................................... 23,215 37,735 19,111
Audit and tax fees ................................................... 28,110 24,510 30,710
Insurance ............................................................ 4,604 6,092 5,379
Custodian fees ....................................................... 3,495 15,597 4,279
Pricing fees ......................................................... 8,114 24,057 6,544
Other ................................................................ 10,867 13,223 14,411
---------- ----------- -----------
TOTAL EXPENSES ................................................... 322,050 561,727 572,558
---------- ----------- -----------
Expenses waived by Investment Adviser -- Note 3 ...................... (51,479) (165,611) (244,573)
Reimbursement from Investment Adviser ................................ (210,622) (126,830) (38,075)
Custody Offset -- Note 2 ............................................. (864) (4,700) (1,546)
---------- ----------- -----------
NET EXPENSES ..................................................... 69,085 264,586 288,364
---------- ----------- -----------
NET INVESTMENT INCOME ............................................ 264,944 1,954,867 2,348,696
---------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FUTURES,
PURCHASED OPTIONS, SWAP CONTRACTS, FORWARD FOREIGN CURRENCY
CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS AND TRANSLATIONS
Net realized gain (loss) on investments sold ......................... (26,274) (1,208,291) (576,662)
Net realized gain (loss) on futures .................................. (5,228) (665,330) --
Net realized loss on purchased options ............................... -- (12,463) --
Net realized loss on swap contracts .................................. -- (105,783) --
Net realized loss on forward foreign currency contracts and
foreign currency transactions ....................................... -- (388,873) --
---------- ----------- -----------
Net realized gain (loss) on investments, futures, purchased
options, swap contracts, forward foreign currency
contracts and foreign currency transactions ..................... (31,502) (2,380,740) (576,662)
---------- ----------- -----------
Change in unrealized appreciation (depreciation) on investments ...... (117,327) 383,597 (256,949)
Change in unrealized appreciation (depreciation) on futures .......... (10,152) 194,889 --
Change in unrealized appreciation purchased options .................. -- 7,954 --
Change in unrealized depreciation on swap contracts .................. -- (73,124) --
Change in accrued foreign capital gains tax on appreciated securities -- -- --
Change in unrealized appreciation (depreciation) on forward
foreign currency contracts and foreign currency transactions and
translations ...................................................... -- 66,071 --
---------- ----------- -----------
Net change in unrealized appreciation (depreciation) on
investments, futures, purchased options, swap
contracts, accrued foreign capital gains tax on
appreciated securities, forward foreign currency contracts
and foreign currency transactions and translations .......... (127,479) 579,387 (256,949)
---------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS) .............................. (158,981) (1,801,353) (833,611)
---------- ----------- -----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .................. $ 105,963 $ 153,514 $ 1,515,085
========== =========== ===========
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 43
--------------------------------------------------------------------------------
SCHRODER MUTUAL FUNDS
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED OCTOBER 31
NORTH AMERICAN EQUITY FUND
-------------------------------
2017 2016
------------- ------------
INCREASE IN NET ASSETS
FROM OPERATIONS:
Net investment income ......................................... $ 17,451,942 $ 15,708,697
Net realized gain on investments sold, futures, forward
foreign currency contracts and foreign currency transactions . 40,156,220 35,467,881
Net change in unrealized appreciation (depreciation) on
investments, futures, accrued foreign capital gains tax on
appreciated securities, forward foreign currency contracts
and foreign currency transactions and translations ........... 130,535,315 (15,146,245)
-------------- -------------
Net increase in net assets resulting from operations ......... 188,143,477 36,030,333
-------------- -------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
R6 Shares .................................................... N/A N/A
Investor Shares .............................................. (17,040,884) (16,583,526)
Advisor Shares* .............................................. (2,399) (6,217)
Net realized gains:
R6 Shares .................................................... N/A N/A
Investor Shares .............................................. (34,629,983) (30,235,544)
Advisor Shares* .............................................. (6,225) (13,345)
-------------- -------------
Total dividends and distributions ............................ (51,679,491) (46,838,632)
-------------- -------------
SHARE TRANSACTIONS:
R6 SHARES:
Sales of shares ............................................... N/A N/A
Reinvestment of distributions ................................. N/A N/A
Redemption of shares .......................................... N/A N/A
-------------- -------------
Total increase (decrease) from R6 Share transactions .......... N/A N/A
-------------- -------------
INVESTOR SHARES:
Sales of shares ............................................... 24,120,420 210,684,241
Reinvestment of distributions ................................. 51,436,832 42,402,839
Redemption of shares .......................................... (79,948,808) (112,770,686)
-------------- -------------
Total increase (decrease) from Investor Share transactions ... (4,391,556) 140,316,394
-------------- -------------
ADVISOR SHARES*:
Sales of shares ............................................... 339 11,661
Reinvestment of distributions ................................. 7,955 18,015
Redemption of shares .......................................... (183,795) (177,760)
-------------- -------------
Total decrease from Advisor Share transactions ............... (175,501) (148,084)
-------------- -------------
Net increase (decrease) in net assets from share transactions (4,567,057) 140,168,310
-------------- -------------
Total increase (decrease) in net assets ...................... 131,896,929 129,360,011
NET ASSETS
Beginning of year ............................................. 889,571,129 760,211,118
-------------- -------------
End of year ................................................... $1,021,468,058 $ 889,571,129
============== =============
Undistributed (distributions in excess of) net investment
income ....................................................... $ 12,914,945 $ 12,987,946
============== =============
* Advisor Shares were terminated on December 20, 2016.
N/A -- R6 Shares currently not offered. Advisor Shares were not offered by
these funds.
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 44
--------------------------------------------------------------------------------
SCHRODER MUTUAL FUNDS
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED OCTOBER 31
EMERGING MARKETS SMALL CAP FUND
-------------------------------
2017 2016
------------- ------------
INCREASE IN NET ASSETS
FROM OPERATIONS:
Net investment income ......................................... $ 3,661 $ 131,102
Net realized gain on investments sold, futures, forward
foreign currency contracts and foreign currency transactions . 2,740,589 594,865
Net change in unrealized appreciation (depreciation) on
investments, futures, accrued foreign capital gains tax on
appreciated securities, forward foreign currency contracts
and foreign currency transactions and translations ........... (1,255,339) 1,120,390
-------------- -------------
Net increase in net assets resulting from operations ......... 1,488,911 1,846,357
-------------- -------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
R6 Shares .................................................... (128,224) --
Investor Shares .............................................. (172) --
Advisor Shares* .............................................. N/A N/A
Net realized gains:
R6 Shares .................................................... (551,226) --
Investor Shares .............................................. (809) --
Advisor Shares* .............................................. N/A N/A
-------------- -------------
Total dividends and distributions ............................ (680,431) --
-------------- -------------
SHARE TRANSACTIONS:
R6 SHARES:
Sales of shares ............................................... 3,503,306 1,814,823
Reinvestment of distributions ................................. 679,450 --
Redemption of shares .......................................... (18,563,469) --
-------------- -------------
Total increase (decrease) from R6 Share transactions .......... (14,380,713) 1,814,823
-------------- -------------
INVESTOR SHARES:
Sales of shares ............................................... -- --
Reinvestment of distributions ................................. -- --
Redemption of shares .......................................... -- --
-------------- -------------
Total increase (decrease) from Investor Share transactions ... -- --
-------------- -------------
ADVISOR SHARES*:
Sales of shares ............................................... N/A N/A
Reinvestment of distributions ................................. N/A N/A
Redemption of shares .......................................... N/A N/A
-------------- -------------
Total decrease from Advisor Share transactions ............... N/A N/A
-------------- -------------
Net increase (decrease) in net assets from share transactions (14,380,713) 1,814,823
-------------- -------------
Total increase (decrease) in net assets ...................... (13,572,233) 3,661,180
NET ASSETS
Beginning of year ............................................. 15,784,974 12,123,794
-------------- -------------
End of year ................................................... $ 2,212,741 $ 15,784,974
============== =============
Undistributed (distributions in excess of) net investment
income ....................................................... $ (10,945) $ 114,788
============== =============
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 45
--------------------------------------------------------------------------------
SCHRODER MUTUAL FUNDS
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED OCTOBER 31
SHORT DURATION BOND FUND
------------------------------
2017 2016
------------ ------------
FROM OPERATIONS:
Net investment income .............................................. $ 264,944 $ 330,592
Net realized gain (loss) on investments, futures, purchased
options, swap contracts, forward foreign currency contracts
and foreign currency transactions ................................. (31,502) 8,032
Net change in unrealized appreciation (depreciation) on
investments, futures, purchased options, swap contracts,
forward foreign currency contracts and foreign currency
transactions and translations ..................................... (127,479) 142,642
------------ ------------
Net increase in net assets resulting from operations .............. 105,963 481,266
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
R6 Shares ......................................................... (261,791) (319,264)
Investor Shares ................................................... (3,712) (12,250)
Advisor Shares* ................................................... N/A N/A
Net realized gains:
R6 Shares ......................................................... (4,377) (7,440)
Investor Shares ................................................... (180) (310)
Advisor Shares* ................................................... N/A N/A
Return of Capital:
Investor Shares ................................................... -- --
Advisor Shares* ................................................... N/A N/A
------------ ------------
Total dividends and distributions ................................. (270,060) (339,264)
------------ ------------
SHARE TRANSACTIONS:
R6 SHARES:
Sales of shares .................................................... 1,247,465 546,598
Reinvestment of distributions ...................................... 9,599 1,024
Redemption of shares ............................................... (9,325,310) (290,229)
------------ ------------
Total increase (decrease) from R6 Share transactions .............. (8,068,246) 257,393
------------ ------------
INVESTOR SHARES:
Sales of shares .................................................... -- --
Reinvestment of distributions ...................................... -- --
Redemption of shares ............................................... (900,000) --
------------ ------------
Total increase (decrease) from Investor Share transactions ........ (900,000) --
------------ ------------
ADVISOR SHARES*:
Sales of shares .................................................... N/A N/A
Reinvestment of distributions ...................................... N/A N/A
Redemption of shares ............................................... N/A N/A
------------ ------------
Total decrease from Advisor Share transactions .................... N/A N/A
------------ ------------
Net increase (decrease) in net assets from share transactions ..... (8,968,246) 257,393
------------ ------------
Total increase (decrease) in net assets ........................... (9,132,343) 399,395
NET ASSETS
Beginning of year .................................................. 25,423,575 25,024,180
------------ ------------
End of year ........................................................ $ 16,291,232 $ 25,423,575
============ ============
Undistributed (distributions in excess of) net investment income ... $ 3,348 $ 4,385
============ ============
* Advisor Shares were terminated on December 20, 2016.
N/A -- R6 Shares currently not offered. Advisor Shares were not offered by
these funds.
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 46
--------------------------------------------------------------------------------
SCHRODER MUTUAL FUNDS
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED OCTOBER 31
LONG DURATION
TOTAL RETURN FIXED INCOME FUND INVESTMENT-GRADE BOND FUND
------------------------------ --------------------------
2017 2016 2017 2016
------------ ------------ ----------- ------------
FROM OPERATIONS:
Net investment income .............................................. $ 1,954,867 $ 3,771,444 $ 2,348,696 $ 2,004,066
Net realized gain (loss) on investments, futures, purchased
options, swap contracts, forward foreign currency contracts
and foreign currency transactions ................................. (2,380,740) (1,343,158) (576,662) 2,220,672
Net change in unrealized appreciation (depreciation) on
investments, futures, purchased options, swap contracts,
forward foreign currency contracts and foreign currency
transactions and translations ..................................... 579,387 2,272,798 (256,949) 1,639,432
------------ ------------ ------------ ------------
Net increase in net assets resulting from operations .............. 153,514 4,701,084 1,515,085 5,864,170
------------ ------------ ------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
R6 Shares ......................................................... N/A N/A N/A N/A
Investor Shares ................................................... (1,497,110) (3,514,532) (2,352,791) (1,983,704)
Advisor Shares* ................................................... (6,690) (33,223) N/A N/A
Net realized gains:
R6 Shares ......................................................... N/A N/A N/A N/A
Investor Shares ................................................... -- (677,828) (2,278,988) (655,687)
Advisor Shares* ................................................... -- (5,501) -- --
Return of Capital:
Investor Shares ................................................... (397,236) (127,906) -- --
Advisor Shares* ................................................... -- (1,209) N/A N/A
------------ ------------ ------------ ------------
Total dividends and distributions ................................. (1,901,036) (4,360,199) (4,631,779) (2,639,391)
------------ ------------ ------------ ------------
SHARE TRANSACTIONS:
R6 SHARES:
Sales of shares .................................................... N/A N/A N/A N/A
Reinvestment of distributions ...................................... N/A N/A N/A N/A
Redemption of shares ............................................... N/A N/A N/A N/A
------------ ------------ ------------ ------------
Total increase (decrease) from R6 Share transactions .............. N/A N/A N/A N/A
------------ ------------ ------------ ------------
INVESTOR SHARES:
Sales of shares .................................................... 11,599,389 3,480,558 4,810,316 59,374,107
Reinvestment of distributions ...................................... 1,580,853 3,942,179 4,566,592 2,553,019
Redemption of shares ............................................... (41,976,983) (93,198,871) (3,766,397) (12,002,053)
------------ ------------ ------------ ------------
Total increase (decrease) from Investor Share transactions ........ (28,796,741) (85,776,134) 5,610,511 49,925,073
------------ ------------ ------------ ------------
ADVISOR SHARES*:
Sales of shares .................................................... -- 15,782 N/A N/A
Reinvestment of distributions ...................................... 2,8731 39,078 N/A N/A
Redemption of shares ............................................... (1,264,850) (273,063) N/A N/A
------------ ------------ ------------ ------------
Total decrease from Advisor Share transactions .................... (1,262,019) (218,203) N/A N/A
------------ ------------ ------------ ------------
Net increase (decrease) in net assets from share transactions ..... (30,058,760) (85,994,337) 5,610,511 49,925,073
------------ ------------ ------------ ------------
Total increase (decrease) in net assets ........................... (31,806,282) (85,653,452) 2,493,817 53,149,852
NET ASSETS
Beginning of year .................................................. 99,005,468 184,658,920 74,232,344 21,082,492
------------ ------------ ------------ ------------
End of year ........................................................ $ 67,199,186 $ 99,005,468 $ 76,726,161 $ 74,232,344
============ ============ ============ ============
Undistributed (distributions in excess of) net investment income ... $ (219,159) $ (229,347) $ 25,138 $ 30,224
============ ============ ============ ============
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 47
--------------------------------------------------------------------------------
SCHRODER MUTUAL FUNDS
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR THE YEARS OR PERIOD ENDED OCTOBER 31,
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
OR PERIOD
NET ASSET NET NET REALIZED DIVIDENDS DISTRIBUTIONS
VALUE, INVESTMENT AND TOTAL FROM FROM NET FROM NET
BEGINNING INCOME UNREALIZED INVESTMENT INVESTMENT REALIZED TOTAL
OF PERIOD (LOSS) GAINS OPERATIONS INCOME GAIN DISTRIBUTIONS
--------- ---------- ------------- ---------- ---------- ------------- -------------
NORTH AMERICAN EQUITY FUND
Investor Shares
2017 ......................... $ 14.79 $ 0.30 $ 2.83 $ 3.13 $ (0.30) $ (0.60) $ (0.90)
2016 ......................... 15.14 0.27 0.31 0.58 (0.33) (0.60) (0.93)
2015 ......................... 15.42 0.34 0.21 0.55 (0.29) (0.54) (0.83)
2014 ......................... 13.57 0.27 1.83 2.10 (0.25) -- (0.25)
2013 ......................... 10.92 0.24 2.63 2.87 (0.22) -- (0.22)
EMERGING MARKETS SMALL CAP FUND
R6 Shares
2017 ......................... $ 12.07 $ --(1)(2) $ 2.07 $ 2.07 $ (0.09) $ (0.40) $ (0.49)
2016 ......................... 10.52 0.11(1) 1.44 1.55 -- -- --
2015(b) ...................... 10.00 (0.01)(1) 0.53 0.52 -- -- --
Investor Shares
2017 ......................... $ 12.06 $ 0.10(1) $ 1.98 $ 2.08 $ (0.09) $ (0.40) $ (0.49)
2016 ......................... 10.52 0.10(1) 1.44 1.54 -- -- --
2015(b) ...................... 10.00 (0.01)(1) 0.53 0.52 -- -- --
(1) Per share net investment income (loss) calculated using average shares.
(2) Amount was less than $0.01 per share.
(3) Ratios reflect the impact of low level of average net assets. Under normal
asset levels, ratios would have been 1.45% and 1.60%.
(a) Total returns would have been lower had certain Fund expenses not been
waived or reimbursed, as applicable, during the periods shown (See Note 3).
Total return calculations for a period of less than one year are not
annualized.
(b) Commenced operations on August 26, 2015. All ratios for the period have
been annualized, except for the Total Return and Portfolio Turnover Rate.
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 48
RATIO OF NET
RATIO OF EXPENSES RATIO OF EXPENSES INVESTMENT
TO AVERAGE TO AVERAGE INCOME (LOSS) TO
NET ASSETS NET ASSETS AVERAGE NET ASSETS
NET ASSET NET ASSETS, (INCLUDING WAIVERS (EXCLUDING WAIVERS, (INCLUDING WAIVERS,
VALUE, TOTAL END OF PERIOD AND REIMBURSEMENTS, REIMBURSEMENTS REIMBURSEMENTS PORTFOLIO
END OF PERIOD RETURN(A) (000) EXCLUDING OFFSETS) AND OFFSETS) AND OFFSETS) TURNOVER RATE
------------- --------- ------------- -------------------- ------------------ ------------------- ------------
NORTH AMERICAN EQUITY FUND
Investor Shares
2017 $ 17.02 21.96% $1,021,468 0.33% 0.33% 1.83% 46%
2016 14.79 4.20 889,400 0.32 0.32 2.03 70
2015 15.14 3.77 759,878 0.32 0.32 1.91 57
2014 15.42 15.75 805,906 0.31 0.31 1.80 48
2013 13.57 26.76 693,207 0.33 0.33 1.96 31
EMERGING MARKETS SMALL CAP FUND
R6 Shares
2017 $ 13.65 18.09% $ 2,185 1.48%(3) 4.80% 0.04% 42%
2016 12.07 14.73 15,761 1.50 3.01 0.98 41
2015(b) 10.52 5.20 12,103 1.50 6.52 (0.57) 5
Investor Shares
2017 $ 13.65 18.12% $ 27 1.46%(3) 10.31% 0.82% 42%
2016 12.06 14.64 24 1.60 3.10 0.91 41
2015(b) 10.52 5.20 21 1.65 6.67 (0.72) 5
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 49
--------------------------------------------------------------------------------
SCHRODER MUTUAL FUNDS
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR THE YEARS OR PERIOD ENDED OCTOBER 31 (UNLESS OTHERWISE INDICATED),
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT
EACH YEAR OR PERIOD
NET REALIZED
NET ASSET AND DIVIDENDS DISTRIBUTIONS
VALUE, NET UNREALIZED TOTAL FROM FROM NET FROM NET
BEGINNING OF INVESTMENT GAINS INVESTMENT INVESTMENT REALIZED RETURN OF
PERIOD INCOME (LOSSES) OPERATIONS INCOME GAIN CAPITAL
----------- ---------- ------------ ---------- ---------- ----------- ---------
SHORT DURATION BOND FUND
R6 Shares
2017 ................................ $ 10.07 $ 0.15(1) $ (0.08) $ 0.07 $ (0.15) $ --(2) $ --
2016 ................................ 10.01 0.13(1) 0.06 0.19 (0.13) --(2) --
2015(b) ............................. 10.00 0.02(1) 0.00(2) 0.02 (0.01) -- --
Investor Shares
2017 ................................ $ 10.07 $ 0.14(1) $(0.07) $ 0.07 $ (0.15) $ --(2) $ --
2016 ................................ 10.01 0.12(1) 0.06 0.18 (0.12) --(2) --
2015(b) ............................. 10.00 0.01(1) 0.01 0.02 (0.01) -- --
TOTAL RETURN FIXED INCOME FUND
Investor Shares
2017 ................................ $ 10.03 $ 0.27 $(0.11) $ 0.16 $ (0.22) $ -- $(0.06)
2016 ................................ 9.97 0.25 0.12 0.37 (0.26) (0.04) (0.01)
2015 ................................ 10.20 0.26 (0.23) 0.03 (0.26) -- --
2014 ................................ 9.97 0.27 0.22 0.49 (0.26) -- --
2013 ................................ 10.73 0.22 (0.34) (0.12) (0.23) (0.41) --
LONG DURATION INVESTMENT-
GRADE BOND FUND
Investor Shares
2017 ................................ $ 9.31 $ 0.28(1) $(0.14) $ 0.14 $ (0.28) $(0.29) $ --
2016 ................................ 8.99 0.32(1) 0.53 0.85 (0.34) (0.19) --
2015 ................................ 10.53 0.36(1) (0.24) 0.12 (0.36) (1.30) --
2014 ................................ 9.96 0.44(1) 1.00 1.44 (0.45) (0.42) --
2013+ ............................... 9.85 0.12(1) 0.11 0.23 (0.12) -- --
2013++ .............................. 11.11 0.46(1) (1.05) (0.59) (0.46) (0.21) --
+ August 1, 2013 to October 31, 2013 (See Note 1).
++ For the year ended July 31, 2013.
(1) Per share net investment income (loss) calculated using average shares.
(2) Amount was less than $0.01 per share.
(a) Total returns would have been lower had certain Fund expenses not been
waived or reimbursed, as applicable, during the periods shown (See Note 3).
Total return calculations for a period of less than one year are not
annualized.
(b) Commenced operations on August 26, 2015. All ratios for the period have
been annualized, except for the Total Return and Portfolio Turnover Rate.
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 50
NET ASSETS,
NET ASSET END OF
TOTAL VALUE, END TOTAL PERIOD
DISTRIBUTIONS OF PERIOD RETURN(a) (000)
------------- ---------- --------- -----------
SHORT DURATION BOND FUND
R6 SHARES
2017 .................... $ (0.15) $ 9.99 0.77% $ 16,189
2016 .................... (0.13) 10.07 1.97 24,417
2015(b) ................. (0.01) 10.01 0.25 24,023
INVESTOR SHARES
2017 .................... $ (0.15) $ 9.99 0.77% $ 102
2016 .................... (0.12) 10.07 1.87 1,007
2015(b) ................. (0.01) 10.01 0.22 1,001
TOTAL RETURN FIXED INCOME FUND
INVESTOR SHARES
2017 .................... $ (0.28) $ 9.91 1.65% $ 67,199
2016 .................... (0.31) 10.03 3.77 97,695
2015 .................... (0.26) 9.97 0.30 183,138
2014 .................... (0.26) 10.20 4.97 153,951
2013 .................... (0.64) 9.97 (1.23) 141,390
LONG DURATION INVESTMENT-GRADE BOND FUND
INVESTOR SHARES
2017 .................... $ (0.57) $ 8.88 1.79% $ 76,726
2016 .................... (0.53) 9.31 9.80 74,232
2015 .................... (1.66) 8.99 0.94 21,082
2014 .................... (0.87) 10.53 15.51 24,797
2013+ ................... (0.12) 9.96 2.32 44,782
2013++ .................. (0.67) 9.85 (5.68) 44,354
RATIO OF NET
RATIO OF EXPENSES RATIO OF EXPENSES INVESTMENT INCOME
TO AVERAGE NET TO AVERAGE NET (LOSS) TO AVERAGE
ASSETS (INCLUDING ASSETS (EXCLUDING NET ASSETS
WAIVERS AND WAIVERS, (INCLUDING WAIVERS, PORTFOLIO
REIMBURSEMENTS, REIMBURSEMENTS REIMBURSEMENTS TURNOVER
EXCLUDING OFFSETS) AND OFFSETS) AND OFFSETS) RATE
------------------ ------------------ ------------------- ---------
SHORT DURATION BOND FUND
R6 SHARES
2017 ...................... 0.39% 1.88% 1.49% 81%
2016 ...................... 0.39 1.10 1.32 59
2015(b) ................... 0.39 2.51 0.88 22
INVESTOR SHARES
2017 ...................... 0.39% 1.40% 1.39% 81%
2016 ...................... 0.49 1.20 1.22 59
2015(b) ................... 0.54 2.66 0.73 22
TOTAL RETURN FIXED INCOME FUND
INVESTOR SHARES
2017 ...................... 0.40% 0.85% 2.95% 93%
2016 ...................... 0.40 0.61 2.80 72
2015 ...................... 0.40 0.56 2.58 93
2014 ...................... 0.40 0.53 2.65 319
2013 ...................... 0.40 0.59 2.09 388
LONG DURATION INVESTMENT-GRADE BOND FUND
INVESTOR SHARES
2017 ...................... 0.39% 0.77% 3.17% 62%
2016 ...................... 0.39 0.75 3.48 160
2015 ...................... 0.40 1.05 3.80 126
2014 ...................... 0.46 0.83 4.38 53
2013+ ..................... 0.46 1.05 4.75 20
2013++ .................... 0.46 0.84 4.29 62
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements. 51
--------------------------------------------------------------------------------
SCHRODER MUTUAL FUNDS
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2017
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
four separate series. Included in this report are Schroder Emerging Markets
Small Cap Fund, Schroder Short Duration Bond Fund, Schroder Total Return Fixed
Income Fund and Schroder Long Duration Investment-Grade Bond 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 Short
Duration Bond Fund seeks 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 Long Duration Investment-Grade Bond Fund commenced operations on
October 3, 2011 as a separate series of The Advisors Inner Circle Fund II
(formerly known as STW Long Duration Investment-Grade Bond Fund, the
"Predecessor Fund") and was advised by STW Fixed Income Management LLC ("STW").
On April 2, 2013, Schroder U.S. Holdings Inc., the parent company of Schroder
Investment Management North America Inc. ("SIMNA"), acquired all outstanding
interests in STW. Effective June 24, 2013, all assets and liabilities of the
STW Long Duration Investment-Grade Bond Fund were acquired by Schroder Long
Duration Investment-Grade Bond Fund pursuant to an Agreement and Plan of
Reorganization dated May 3, 2013 (the "Fund Merger"). In the Fund Merger,
shareholders of the Predecessor Fund received Investor Shares of the Schroder
Long Duration Investment-Grade Bond Fund in exchange for their Institutional
Class Shares of the Predecessor Fund. Because the Schroder Long Duration
Investment-Grade Bond Fund had no investment operations prior to the closing of
the Fund Merger, and based on the similarity of the Fund to the Predecessor
Fund, the Predecessor Fund is treated as the survivor of the Fund Merger for
accounting and performance reporting purposes Accordingly, all performance and
other information shown for the Schroder Long Duration Investment-Grade Bond
Fund for periods prior to June 24, 2013 is that of the Predecessor Fund.
The Schroder Emerging Markets Multi-Cap Equity Fund was liquidated following
the close of business on December 20, 2016. Advisor Shares of the Schroder
North American Equity Fund and Schroder Total Return Fixed Income Fund were
terminated following the close of business on December 20, 2016.
At a meeting held on February 2, 2017, as part of the transition of the Funds to
the SEI Advisors' Inner Circle mutual fund platform (the "Transition"),
shareholders of the Funds approved the election of the Trustees of Schroder
Global Series Trust and Schroder Series Trust. At a meeting held on February 10,
2017, the Trustees approved the Transition, and overall responsibility to
oversee the administration of the Funds transitioned to SEI Investments Global
Funds Services and its affiliates. The Transition took place following the close
of business on February 10, 2017.
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
--------------------------------------------------------------------------------
52
--------------------------------------------------------------------------------
SCHRODER MUTUAL FUNDS
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 2017
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 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.
--------------------------------------------------------------------------------
53
--------------------------------------------------------------------------------
SCHRODER MUTUAL FUNDS
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 2017
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 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:
o 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
o 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.)
o 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).
--------------------------------------------------------------------------------
54
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SCHRODER MUTUAL FUNDS
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 2017
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 year ended October 31, 2017, 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.
The following table summarizes the quantitative inputs and assumptions used for
items categorized as material Level 3 investments as of October 31, 2017 The
disclosures below also include qualitative information on the sensitivity of
the fair value measurements to changes in the significant unobservable inputs.
SCHRODER SHORT DURATION BOND FUND
FAIR VALUE AT UNOBSERVABLE RANGE
ASSETS 10/31/2017 VALUATION TECHNIQUE(S) INPUT (WEIGHTED AVERAGE)
------ ------------- --------------------------- ------------ ------------------
Collateralized Mortgage Obligations $150,643 Broker Quote as of 10/31/17 Broker Quote $101.625
SCHRODER TOTAL RETURN FIXED INCOME FUND
FAIR VALUE AT UNOBSERVABLE RANGE
ASSETS 10/31/2017 VALUATION TECHNIQUE(S) INPUT (WEIGHTED AVERAGE)
------ ------------- --------------------------- ------------ ------------------
Collateralized Mortgage Obligations $940,031 Broker Quote as of 10/31/17 Broker Quote $101.625
The unobservable input used to determine fair value of the Level 3 asset may
have similar or diverging impacts on valuation. Significant increases and
decreases in this input could result in signifi cantly higher or lower fair
value measurement.
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.
As of, and during the year ended October 31, 2017, 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 year, the Funds did not incur any
tax-related interest or penalties.
--------------------------------------------------------------------------------
55
--------------------------------------------------------------------------------
SCHRODER MUTUAL FUNDS
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 2017
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 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; 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.
--------------------------------------------------------------------------------
56
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SCHRODER MUTUAL FUNDS
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 2017
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 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 October 31, 2017, if applicable.
--------------------------------------------------------------------------------
57
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SCHRODER MUTUAL FUNDS
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 2017
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.
Recent 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.
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.
--------------------------------------------------------------------------------
58
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SCHRODER MUTUAL FUNDS
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 2017
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, 2019, 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):
EFFECTIVE JULY 1, 2017:
EXPENSE LIMITATION
-----------------------------
MANAGEMENT FEE R6 SHARES INVESTOR SHARES
-------------- --------- ---------------
Schroder Emerging Markets Small Cap Fund ............ 1.15% 1.35% 1.50%
PRIOR TO JULY 1, 2017:
EXPENSE LIMITATION
-----------------------------
MANAGEMENT FEE R6 SHARES INVESTOR SHARES
-------------- --------- ---------------
Schroder North American Equity Fund ................ 0.25% N/A N/A
Schroder Emerging Markets Small Cap Fund ........... 1.25% 1.50% 1.65%
Schroder Short Duration Bond Fund .................. 0.29% 0.39% 0.54%
Schroder Total Return Fixed Income Fund ............ 0.25% N/A 0.40%
Schroder Long Duration Investment-Grade Bond Fund .. 0.33% N/A 0.39%
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:
PERCENTAGE OF FEES
FUND PAID TO SIMNA LTD.
---- ------------------
Schroder North American Equity Fund 58.5%
Schroder Emerging Markets Small Cap Fund 58.5%
PRIOR TO OCTOBER 16, 2017
PERCENTAGE OF FEES
FUND PAID TO SIMNA LTD.
---- ------------------
Schroder North American Equity Fund 49.5%
Schroder Emerging Markets Small Cap Fund 49.5%
--------------------------------------------------------------------------------
59
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SCHRODER MUTUAL FUNDS
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 2017
Effective February 11, 2017, under an amended administration and accounting
agreement with SEI Investments Global Funds Services ("SEI" or the
"Administrator"), the SST Funds pay fees to SEI based on the aggregate average
daily net assets of all the SST Funds, according to the following annual rates:
0.100% on the first $500 million of such assets; 0.080% on the next $500
million of such assets; 0.070% on assets in excess of $1.0 billion, subject to
a per Fund minimum fee.
Prior to the Transition on February 10, 2017, under an amended administration
and accounting agreement with SEI, the SST Funds paid fees to SEI based on the
aggregate average daily net assets of all the SST Funds, according to the
following annual rates: 0.0875% on the first $1 billion of such assets; 0.0700%
on the next $2 billion of such assets; 0.0600% on the next $1.5 billion of such
assets; and 0.0575% on assets in excess of $4.5 billion. The cumulative minimum
annual fee for all the SST Funds was $400,000. Each Fund paid its pro rata
portion of such fees.
Effective February 11, 2017, Schroder North American Equity Fund pays SEI a
fee, computed and paid monthly, at an annual rate of 0.050% of the Schroder
North American Equity Fund's average daily net assets, subject to a minimum
fee. Prior to the Transition on February 10, 2017, under a sub-administration
and accounting agreement with SEI, Schroder North American Equity Fund paid SEI
a fee, computed and paid monthly, at an annual rate of 0.013% of the Schroder
North American Equity Fund's average daily net assets up to $1 billion and
0.005% of Schroder North American Equity Fund's average daily net assets over
$1 billion. Prior to the Transition on February 10, 2017, Schroder Fund
Advisors LLC ("SFA"), a wholly-owned subsidiary of SIMNA, provided
administrative services to the SGST Fund. SFA received no compensation for its
services for the SGST Fund.
Effective March 13, 2017, each Trust and SEI Investments Distribution Co ,
("SIDCO"), a wholly-owned subsidiary of SEI Investments, and an affiliate of the
Administrator, entered into a distribution agreement (the "Distribution
Agreement"), whereby SIDCO acts as principal underwriter for the Trusts' shares.
Prior to March 13, 2017, SFA, a subsidiary of SIMNA, served as the Funds'
distributor. Although SFA has been replaced by SIDCO as the Funds' distributor,
SFA continues to be involved in the distribution of shares of the Funds through
an agreement between SIDCO and SFA, SIMNA and their affiliates continue to
provide shareholder services.
Effective February 11, 2017, 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.
Prior to the Transition on February 10, 2017, each Fund had adopted a
shareholder service plan (the "Prior Plan") with respect to its Investor Shares.
Under the Prior Plan, each Fund, except Schroder North American Equity Fund,
could make payments out of the assets attributable to its Investor Shares to
SIMNA, SFA, the Funds' prior distributor, and such other entities as may from
time to time act as the shareholder servicer of such class for providing
services and/or incurring expenses directly or indirectly supporting or relating
to the shareholder servicing function for Investor Shares as compensation for
such services and expenses. Payments under the Prior Plan were made at an annual
rate of up to 0.15% of a Fund's average daily net assets attributable to the
applicable share class; payments under the Prior Plan were not made for
distribution services or expenses.
--------------------------------------------------------------------------------
60
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SCHRODER MUTUAL FUNDS
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 2017
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 October 31, 2017, was as
follows:
ASSET LIABILITY
FUND STATEMENT OF ASSETS AND LIABILITIES LOCATION DERIVATIVES DERIVATIVES
----------------------------------------------------------------------------------------------------------------
SCHRODER NORTH AMERICAN EQUITY FUND
Equity contracts
Futures contracts Unrealized appreciation/(depreciation)
on futures contracts $ 370,273 $ --
Foreign exchange contracts
Forward contracts Unrealized appreciation/(depreciation)
on forward foreign currency contracts 351,204 --
--------- ----------
$ 721,477 $ --
========= ==========
SCHRODER SHORT DURATION BOND FUND
Interest rate contracts
Futures contracts Unrealized appreciation/(depreciation)
on futures contracts $ 3,346 $ (13,498)
--------- ----------
$ 3,346 $ (13,498)
========= ==========
SCHRODER TOTAL RETURN FIXED INCOME FUND
Interest rate contracts
Futures contracts Unrealized appreciation/(depreciation)
on futures contracts $ 36,830 $ (156,925)
Foreign exchange contracts
Forward contracts Unrealized appreciation/(depreciation)
on forward foreign currency contracts 60,619 --
Credit contracts
Centrally cleared swap contracts Unrealized appreciation/(depreciation)
on swap contracts -- (70,273)
--------- ----------
$ 97,449 $ (227,198)
========= ==========
The effect of derivative instruments on the Statement of Operations for the
year ended October 31, 2017, was as follows:
The amount of net realized gain (loss) and change in unrealized appreciation
(depreciation) on derivatives:
CHANGE IN
UNREALIZED
NET REALIZED APPRECIATION
FUND GAIN/(LOSS)* (DEPRECIATION)** TOTAL
--------------------------------------------------------------------------------------
SCHRODER NORTH AMERICAN EQUITY FUND
Equity contracts
Futures contracts $ 609,767 $ 409,486 $ 1,019,253
Foreign exchange contracts
Forward contracts (496,873) 101,117 (395,756)
--------- --------- -----------
$ 112,894 $ 510,603 $ 623,497
========= ========= ===========
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61
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SCHRODER MUTUAL FUNDS
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 2017
CHANGE IN
UNREALIZED
NET REALIZED APPRECIATION
FUND GAIN/(LOSS)* (DEPRECIATION)** TOTAL
---------------------------------------------------------------------------------------------
SCHRODER SHORT DURATION BOND FUND
Interest rate contracts
Futures contracts $ (5,228) $ (10,152) $ (15,380)
========= ========= ==========
SCHRODER TOTAL RETURN FIXED INCOME FUND
Interest rate contracts
Futures contracts $(665,330) $ 194,889 $ (470,441)
Purchased options contracts (12,463) 7,954 (4,509)
Foreign exchange contracts
Forward contracts (52,208) 62,440 10,232
Credit contracts
Swap contracts (105,783) (73,124) (178,907)
--------- --------- ----------
$(835,784) $ 192,159 $ (643,625)
========= ========= ==========
* 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 and foreign currency transactions, swap
contracts are included in net realized loss on swap contracts, options are
included in net realized loss on purchased options.
** Futures contracts are included in change in unrealized appreciation
(depreciation) on futures, forward contracts are included in change in
unrealized appreciation (depreciation) on forward foreign currency
contracts and foreign currency transactions and translations, options are
included in change in unrealized appreciation on purchased options and swap
contracts are included in change in unrealized depreciation on swap
contracts.
The following table discloses the volume of the futures contracts, forward
foreign currency contracts, options contracts and swap contracts during the
year ended October 31, 2017:
SCHRODER SCHRODER SCHRODER TOTAL
NORTH AMERICAN SHORT DURATION RETURN FIXED
EQUITY FUND BOND FUND INCOME FUND
-------------- --------------- -------------
FUTURES CONTRACTS:
Average Monthly Market Value Balance Long $ 5,388,706 $ 2,287,788 $ 14,523,562
Average Monthly Market Value Balance Short -- (442,586) (11,650,334)
FORWARD FOREIGN CURRENCY CONTRACTS:
Average Monthly Notional Contracts Purchased $(11,105,170) $ -- $ (424,278)
Average Monthly Notional Contracts Sold 10,999,504 -- 465,786
OPTIONS CONTRACTS:
Average Monthly Market Value of Options $ -- $ -- $ 5,017
SWAP CONTRACTS:
Average Monthly Market Value of Centrally Cleared Swaps $ -- $ -- $ (118,295)
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.
--------------------------------------------------------------------------------
62
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SCHRODER MUTUAL FUNDS
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 2017
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 October 31, 2017:
GROSS ASSETS- GROSS LIABILITIES- NET CASH
RECOGNIZED IN THE RECOGNIZED IN THE AMOUNT COLLATERAL
STATEMENT OF ASSETS STATEMENT OF ASSETS AVAILABLE TO PLEDGED OR
AND LIABILITIES AND LIABILITIES BE OFFSET (RECEIVED)+ NET AMOUNT++
----------------------------------------------------------------------------------------------------------------------------
SCHRODER NORTH AMERICAN EQUITY FUND
FORWARD CONTRACTS FORWARD CONTRACTS
----------------- -----------------
Royal Bank of Canada $ 351,204 $ -- $ 351,204 $ (290,000) $ 61,204
========= ========== ========= ========== ========
SCHRODER TOTAL RETURN FIXED INCOME FUND
FORWARD CONTRACTS FORWARD CONTRACTS
----------------- -----------------
Morgan Stanley $ 60,619 $ -- $ 60,619 $ -- $ 60,619
========= ========== ========= ========== ========
+ 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 year
October 31, 2017.
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 year ended
October 31, 2017 were as follows:
SALES AND
PURCHASES MATURITIES
------------- -------------
Schroder North American Equity Fund ................. $ 435,413,071 $ 480,502,710
Schroder Emerging Markets Small Cap Fund ............ 3,682,506 18,479,954
Schroder Short Duration Bond Fund ................... 4,793,567 10,588,047
Schroder Total Return Fixed Income Fund ............. 30,628,050 46,953,893
Schroder Long Duration Investment-Grade Bond Fund ... 14,302,852 15,447,544
Purchases and proceeds from sales and maturities of U.S Government securities
for the year ended October 31, 2017 were as follows:
SALES AND
PURCHASES MATURITIES
------------- -------------
Schroder Short Duration Bond Fund ................... $ 7,124,836 $ 9,178,950
Schroder Total Return Fixed Income Fund ............. 23,484,418 31,439,580
Schroder Long Duration Investment-Grade Bond Fund ... 33,714,191 29,921,139
--------------------------------------------------------------------------------
63
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SCHRODER MUTUAL FUNDS
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 2017
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, swap adjustment, reclass of
distributions, reclassification of foreign capital gain tax 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, 2017, the Funds reclassified the following permanent amounts
between capital paid-in, undistributed net investment income and accumulated
realized gain (loss):
INCREASE INCREASE
(DECREASE) (DECREASE)
UNDISTRIBUTED ACCUMULATED INCREASE
NET INVESTMENT REALIZED GAIN (DECREASE)
INCOME (LOSS) CAPITAL PAID-IN
--------------- ------------- ---------------
Schroder North American Equity Fund ................ $ (481,660) $ 481,810 $ (150)
Schroder Emerging Markets Small Cap Fund ........... (998) (2,383,789) 2,384,787
Schroder Short Duration Bond Fund .................. (478) 478 --
Schroder Total Return Fixed Income Fund ............ (440,879) 440,879 --
Schroder Long Duration Investment-Grade Bond Fund .. (991) 991 --
The tax character of dividends and distributions declared during the years or
periods ended October 31, 2017 and October 31, 2016, was as follows:
ORDINARY LONG-TERM RETURN OF
INCOME CAPITAL GAIN CAPITAL TOTAL
------------ ------------ --------- ------------
Schroder North American Equity Fund
2017 ....................................... $ 24,298,359 $ 27,381,132 $ -- $ 51,679,491
2016 ....................................... 20,753,720 26,084,912 -- 46,838,632
Schroder Emerging Markets Small Cap Fund
2017 ....................................... 578,111 102,320 -- 680,431
Schroder Short Duration Bond Fund
2017 ....................................... 270,060 -- -- 270,060
2016 ....................................... 339,264 -- -- 339,264
Schroder Total Return Fixed Income Fund
2017 ....................................... 1,503,800 -- 397,236 1,901,036
2016 ....................................... 4,231,084 -- 129,115 4,360,199
Schroder Long Duration Investment-Grade Bond Fund
2017 ....................................... 4,130,015 501,764 -- 4,631,779
2016 ....................................... 1,983,704 655,687 -- 2,639,391
--------------------------------------------------------------------------------
64
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SCHRODER MUTUAL FUNDS
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 2017
As of October 31, 2017, the components of distributable earnings (accumulated
losses) on a tax basis were as follows:
UNDISTRIBUTED UNDISTRIBUTED
ORDINARY LONG-TERM CAPITAL LOSS
INCOME CAPITAL GAIN CARRYFORWARDS
------------- ------------- -------------
Schroder North American Equity Fund .............. $ 29,237,303 $ 24,894,861 $ --
Schroder Emerging Markets Small Cap Fund ......... 45,407 314,600 --
Schroder Short Duration Bond Fund ................ 3,348 -- (41,060)
Schroder Total Return Fixed Income Fund .......... -- -- (2,703,306)
Schroder Long Duration Investment-Grade Bond Fund 25,137 -- (558,928)
TOTAL
DISTRIBUTABLE
UNREALIZED OTHER EARNINGS
APPRECIATION TEMPORARY (ACCUMULATED
(DEPRECIATION) DIFFERENCES LOSSES)
-------------- ----------- -------------
Schroder North American Equity Fund .............. $ 313,082,910 $ (23) $ 367,215,051
Schroder Emerging Markets Small Cap Fund ......... 523,852 (47) 883,812
Schroder Short Duration Bond Fund ................ 39,907 (130) 2,065
Schroder Total Return Fixed Income Fund .......... 33,016 (243,797) (2,914,087)
Schroder Long Duration Investment-Grade Bond Fund 1,751,161 -- 1,217,370
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:
SHORT-TERM LOSS LONG-TERM LOSS TOTAL
--------------- -------------- ----------
Schroder Short Duration Bond Fund .................... $ 27,982 $ 13,078 $ 41,060
Schroder Total Return Fixed Income Fund .............. 388,904 2,314,402 2,703,306
Schroder Long Duration Investment-Grade Bond Fund .... 558,928 -- 558,928
At October 31, 2017, 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 GROSS NET UNREALIZED
IDENTIFIED UNREALIZED UNREALIZED APPRECIATION
TAX COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
------------- ------------ -------------- --------------
Schroder North American Equity Fund ................ $ 697,352,656 $ 331,719,831 $ (18,636,871) $ 313,082,960
Schroder Emerging Markets Small Cap Fund ........... 1,579,868 553,469 (29,624) 523,845
Schroder Short Duration Bond Fund .................. 19,300,559 54,193 (14,286) 39,907
Schroder Total Return Fixed Income Fund ............ 69,863,699 697,643 (664,221) 33,422
Schroder Long Duration Investment-Grade Bond Fund .. 74,204,634 2,828,114 (1,076,953) 1,751,161
NOTE 8 -- 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.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 2017
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 Total Return Fixed Income Fund and Schroder Short Duration Bond 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 Short Duration Bond Fund and Schroder Long Duration Investment-Grade
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.
Schroder North American Equity Fund, Schroder Emerging Markets Small Cap Fund,
Schroder Short Duration Bond Fund and Schroder Total Return Fixed Income 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 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.
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 2017
NOTE 9 -- 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 October 31, 2017 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
----------------------------
NUMBER % OF FUND HELD
------ --------------
Schroder North American Equity Fund, Investor Shares ................. 2 98.41%
Schroder Emerging Markets Small Cap Fund, R6 Shares .................. 1 100.00
Schroder Emerging Markets Small Cap Fund, Investor Shares ............ 1 99.95
Schroder Short Duration Bond Fund, R6 Shares ......................... 2 100.00
Schroder Short Duration Bond Fund, Investor Shares ................... 1 99.99
Schroder Total Return Fixed Income Fund, Investor Shares ............. 6 80.05
Schroder Long Duration Investment-Grade Bond Fund, Investor Shares ... 2 92.12
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, 92.07% 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 10 -- 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
outstanding under the line of credit as of October 31, 2017.
NOTE 11 -- CAPITAL SHARE TRANSACTIONS
Capital share transactions for the year ended October 31, 2017 and the year
ended October 31, 2016, were as follows:
NORTH AMERICAN EMERGING MARKETS
EQUITY FUND SMALL CAP FUND
------------------------------------------------
2017 2016 2017 2016
------------------------------------------------
R6 SHARES:
Sales of shares ............................ N/A N/A 293,005 155,552
Reinvestment of distributions .............. N/A N/A 60,342 --
Redemption of shares ....................... N/A N/A (1,498,891) --
--------- ----------- ---------- -------
Net increase (decrease) in R6 Shares ..... N/A N/A (1,145,544) 155,552
========= =========== ========== =======
INVESTOR SHARES:
Sales of shares ............................ 1,602,051 14,715,604 -- --
Reinvestment of distributions .............. 3,435,994 3,017,996 -- --
Redemption of shares ....................... (5,188,404) (7,775,170) -- --
--------- ----------- ---------- -------
Net increase (decrease) in Investor Shares (150,359) 9,958,430 -- --
========= =========== ========== =======
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NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
OCTOBER 31, 2017
NORTH AMERICAN EMERGING MARKETS
EQUITY FUND SMALL CAP FUND
---------------------------------------------
2017 2016 2017 2016
----------------------------------------------
ADVISOR SHARES*:
Sales of shares ......................... 23 800 N/A N/A
Reinvestment of distributions ........... 532 1,285 N/A N/A
Redemption of shares .................... (12,200) (12,519) N/A N/A
------- ------- -------- -------
Net (decrease) in Advisor Shares ...... (11,645) (10,434) N/A N/A
======= ======= ======== =======
SHORT DURATION TOTAL RETURN FIXED LONG DURATION INVESTMENT-
BOND FUND INCOME FUND GRADE BOND FUND
--------------------------------------------------------------------------------
2017 2016 2017 2016 2017 2016
--------------------------------------------------------------------------------
R6 SHARES:
Sales of shares ............................... 124,503 54,160 N/A N/A N/A N/A
Reinvestment of distributions ................. 959 102 N/A N/A N/A N/A
Redemption of shares .......................... (930,673) (28,772) N/A N/A N/A N/A
--------- ------ ---------- ---------- --------- ----------
Net increase (decrease) in R6 Shares ........ (805,211) 25,490 N/A N/A N/A N/A
========= ====== ========== ========== ========= ==========
INVESTOR SHARES:
Sales of shares ............................... -- -- 1,176,006 348,372 557,088 6,666,846
Reinvestment of distributions ................. -- -- 160,191 398,322 532,720 281,108
Redemption of shares .......................... (89,820) -- (4,292,710) (9,382,160) (428,522) (1,318,706)
--------- ------ ---------- ---------- --------- ----------
Net increase (decrease) in Investor Shares .. (89,820) -- (2,956,513) (8,635,466) 661,286 5,629,248
========= ====== ========== ========== ========= ==========
ADVISOR SHARES*:
Sales of shares ............................... N/A N/A -- 1,574 N/A N/A
Reinvestment of distributions ................. N/A N/A 290 3,936 N/A N/A
Redemption of shares .......................... N/A N/A (130,726) (27,537) N/A N/A
--------- ------ ---------- ---------- --------- ----------
Net (decrease) in Advisor Shares ............ N/A N/A (130,436) (22,027) N/A N/A
========= ====== ========== ========== ========= ==========
* Advisor Shares terminated on December 20, 2016.
N/A -- R6 Shares currently not offered. Advisor Shares were not offered by
these funds.
NOTE 12 -- REGULATORY MATTERS
In October 2016, the U.S. Securities and Exchange Commission adopted new rules
and amended existing rules (together, final rules) intended to modernize the
reporting and disclosure of information by registered investment companies. In
part, the final rules amended Regulation S-X and require standardized, enhanced
disclosures about derivatives in investment company financial statements, as
well as other amendments. As of August 1, 2017, the Funds have implemented the
amendments to Regulation S-X, which did not have a material impact on the Fund's
financial statements and related disclosures or impact the Fund's net assets or
results of operations.
NOTE 13 -- 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 October 31, 2017.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of
Schroder Global Series Trust and Schroder Series Trust
and Shareholders of
Schroder North American Equity Fund
Schroder Emerging Markets Small Cap Fund
Schroder Short Duration Bond Fund
Schroder Total Return Fixed Income Fund
Schroder Long Duration Investment-Grade Bond Fund
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Schroder North American Equity Fund
(constituting Schroder Global Series Trust), Schroder Emerging Markets Small Cap
Fund, Schroder Short Duration Bond Fund, Schroder Total Return Fixed Income Fund
and Schroder Long Duration Investment-Grade Bond Fund (the four series
constituting Schroder Series Trust) (collectively referred to as the "Funds") as
of October 31, 2017, the results of each of their operations for the year then
ended, the changes in each of their net assets for each of the two years in the
period then ended and the financial highlights for each of the periods
indicated, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Funds' management. Our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities as of
October 31, 2017 by correspondence with the custodian and brokers and the
application of alternative auditing procedures where securities purchased
confirmations had not been received, provide a reasonable basis for our
opinions.
/s/ PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
December 26, 2017
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INFORMATION REGARDING REVIEW AND APPROVAL OF INVESTMENT ADVISORY CONTRACTS
(UNAUDITED)
RENEWAL OF INVESTMENT ADVISORY AGREEMENTS FOR THE SCHRODER MUTUAL FUNDS
Pursuant to Section 15 of the Investment Company Act of 1940 (the "1940 Act"),
the Funds' advisory and sub-advisory agreements must be renewed after their
initial two-year term: (i) by the vote of the Board of Trustees (the "Board" or
the "Trustees") of Schroder Series Trust and Schroder Global Series Trust or by
a vote of a majority of the shareholders of the Funds; and (ii) by the vote of a
majority of the Trustees who are not parties to the agreements or "interested
persons" of any party thereto, as defined in the 1940 Act (the "Independent
Trustees"), cast in person at a meeting called for the purpose of voting on such
renewal.
A Board meeting was held on June 22, 2017 to decide whether to renew the
following agreements (the "Agreements") for additional one-year terms:
o the management contract between Schroder Investment Management North
America Inc (the "Adviser") and Schroder Series Trust, on behalf of
the Schroder Emerging Markets Small Cap Fund and Schroder Short
Duration Bond Fund;
o the management contract between the Adviser and Schroder Series
Trust, on behalf of the Schroder Long Duration Investment-Grade Bond
Fund;
o the management contract between the Adviser and Schroder Series
Trust, on behalf of the Schroder Total Return Fixed Income Fund;
o the investment advisory agreement between the Adviser and Schroder
Global Series Trust, on behalf of the Schroder North American Equity
Fund;
o the sub-advisory agreement between the Adviser, Schroder Investment
Management North America Ltd. (the "Sub-Adviser") and Schroder Series
Trust, on behalf of the Schroder Emerging Markets Small Cap Fund; and
o the sub-advisory agreement between the Adviser, the Sub-Adviser and
Schroder Global Series Trust, on behalf of the Schroder North American
Equity Fund.
In preparation for the meeting, the Trustees requested that the Adviser and the
Sub-Adviser furnish information necessary to evaluate the terms of the
Agreements. Prior to the meeting, the Independent Trustees of the Funds met to
review and discuss the information provided and submitted a request for
additional information to the Adviser and the Sub-Adviser, and information was
provided in response to this request. The Trustees used this information, as
well as other information that the Adviser, the Sub-Adviser and other service
providers of the Funds presented or submitted to the Board at the meeting and
other meetings held during the prior year, to help them decide whether to renew
the Agreements for an additional year.
Specifically, the Board requested and received written materials from the
Adviser, the Sub-Adviser and other service providers of the Funds regarding: (i)
the nature, extent and quality of the Adviser's and the Sub-Adviser's services;
(ii) the Adviser's and the Sub-Adviser's investment management personnel; (iii)
the Adviser's and the Sub-Adviser's operations and financial condition; (iv) the
Adviser's and the Sub-Adviser's brokerage practices (including any soft dollar
arrangements) and investment strategies; (v) the Funds' advisory fees paid to
the Adviser and the Sub-Adviser and overall fees and operating expenses compared
with peer groups of mutual funds; (vi) the level of the Adviser's and the
Sub-Adviser's profitability from their relationships with the Funds, including
both direct and indirect benefits accruing to the Adviser and the Sub-Adviser
and their affiliates; (vii) the Adviser's and the Sub-Adviser's potential
economies of scale; (viii) the Adviser's and the Sub-Adviser's compliance
programs, including a description of material compliance matters and material
compliance violations; (ix) the Adviser's and the Sub-Adviser's policies on and
compliance procedures for personal securities transactions; and (x) the Funds'
performance compared with peer groups of mutual funds and the Funds' benchmark
indices.
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INFORMATION REGARDING REVIEW AND APPROVAL OF INVESTMENT ADVISORY CONTRACTS
(UNAUDITED)
Representatives from the Adviser and the Sub-Adviser, along with other Fund
service providers, presented additional information and participated in
question and answer sessions at the Board meeting to help the Trustees evaluate
the Adviser's and the Sub-Adviser's services, fees and other aspects of the
Agreements. The Independent Trustees received advice from independent counsel
and met in executive sessions outside the presence of Fund management, the
Adviser and the Sub-Adviser.
At the Board meeting, the Trustees, including all of the Independent Trustees,
based on their evaluation of the information provided by the Adviser, the
Sub-Adviser and other service providers of the Funds, renewed the Agreements. In
considering the renewal of the Agreements, the Board considered various factors
that they determined were relevant, including: (i) the nature, extent and
quality of the services provided by the Adviser and the Sub-Adviser; (ii) the
investment performance of the Funds and the Adviser and the Sub- Adviser; (iii)
the costs of the services provided and profits realized by the Adviser and the
Sub-Adviser from their relationships with the Funds, including both direct and
indirect benefits accruing to the Adviser and the Sub-Adviser and their
affiliates; (iv) the extent to which economies of scale are being realized by
the Adviser and the Sub-Adviser; and (v) whether fee levels reflect such
economies of scale for the benefit of Fund investors, as discussed in further
detail below.
NATURE, EXTENT AND QUALITY OF SERVICES PROVIDED BY THE ADVISER AND THE
SUB-ADVISER
In considering the nature, extent and quality of the services provided by the
Adviser and the Sub-Adviser, the Board reviewed the portfolio management
services provided by the Adviser and the Sub-Adviser to the Funds, including
the quality and continuity of the Adviser's and the Sub-Adviser's portfolio
management personnel, the resources of the Adviser and the Sub-Adviser, and the
Adviser's and the Sub-Adviser's compliance histories and compliance programs.
The Trustees reviewed the terms of the Agreements. The Trustees also reviewed
the Adviser's and the Sub-Adviser's investment and risk management approaches
for the Funds. The Trustees considered that the Adviser supervises and monitors
the performance of the Sub-Adviser The most recent investment adviser
registration forms ("Form ADV") for the Adviser and the Sub-Adviser were
provided to the Board, as were the responses of the Adviser and the Sub-Adviser
to a detailed series of questions which included, among other things,
information about the investment advisory services provided by the Adviser and
the Sub-Adviser to the Funds.
The Trustees also considered other services provided to the Funds by the
Adviser and the Sub-Adviser such as selecting broker-dealers for executing
portfolio transactions, monitoring adherence to the Funds' investment
restrictions, and monitoring compliance with various Fund policies and
procedures and with applicable securities laws and regulations. Based on the
factors above, as well as those discussed below, the Board concluded, within
the context of its full deliberations, that the nature, extent and quality of
the services provided to the Funds by the Adviser and the Sub-Adviser were
sufficient to support renewal of the Agreements.
INVESTMENT PERFORMANCE OF THE FUNDS, THE ADVISER AND THE SUB-ADVISER
The Board was provided with regular reports regarding the Funds' performance
over various time periods, including since their inception, and information
regarding the Funds' performance since the Agreements were last renewed. The
Trustees also reviewed reports prepared by the Funds' administrator comparing
the Funds' performance to their benchmark indices and peer groups of mutual
funds as classified by Lipper, an independent provider of investment company
data, over various periods of time. Representatives from the Adviser and the
Sub-Adviser provided information regarding and led discussions of factors
impacting the performance of the Funds, outlining current market conditions and
explaining their expectations and strategies for the future. The Trustees
determined that the Funds' performance was satisfactory, or, where the Funds'
performance was materially below their benchmarks and/or peer groups, the
Trustees were satisfied by the reasons for the underperformance and/or the steps
taken by the Adviser and the Sub-Adviser in an effort to improve the performance
of the Funds. Based on this information, the Board concluded, within the context
of its full deliberations, that the investment results that the Adviser and the
Sub-Adviser had been able to achieve for the Funds were sufficient to support
renewal of the Agreements.
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INFORMATION REGARDING REVIEW AND APPROVAL OF INVESTMENT ADVISORY CONTRACTS
(UNAUDITED)
COSTS OF ADVISORY SERVICES, PROFITABILITY AND ECONOMIES OF SCALE
In considering the advisory fees payable by the Funds to the Adviser, as well
as the fees payable by the Adviser to the Sub-Adviser, the Trustees reviewed,
among other things, a report of the advisory fees paid to the Adviser and the
Sub-Adviser. The Trustees also reviewed reports prepared by the Funds'
administrator comparing the Funds' net and gross expense ratios and advisory
fees to those paid by peer groups of mutual funds as classified by Lipper. The
Trustees reviewed the management fees charged by the Adviser to other clients
with comparable mandates. The Trustees considered any differences in management
fees and took into account the respective demands, resources and complexity
associated with the Funds and other client accounts as well as the extensive
regulatory, compliance and tax regimes to which the Funds are subject. The
Trustees also considered that the Adviser, not the Schroder Emerging Markets
Small Cap Fund and the Schroder North American Equity Fund, paid the
Sub-Adviser pursuant to the sub-advisory agreement. The Trustees evaluated both
the fees under the sub-advisory agreement and the portion of the fees under the
advisory agreement retained by the Adviser. The Board concluded, within the
context of its full deliberations, that the advisory fees were reasonable in
light of the nature and quality of the services rendered by the Adviser and the
Sub-Adviser.
The Trustees reviewed the costs of services provided by and the profits
realized by the Adviser and the Sub-Adviser from their relationship with the
Funds, including both direct benefits and indirect benefits, such as research
and brokerage services received under soft dollar arrangements, accruing to the
Adviser and the Sub-Adviser and their affiliates. The Trustees considered how
the Adviser's and the Sub-Adviser's profitability was affected by factors such
as their organizational structures and methods for allocating expenses. The
Trustees concluded that the profit margins of the Adviser and the Sub-Adviser
with respect to the management of the Funds were not unreasonable. The Board
also considered the Adviser's and the Sub-Adviser's commitment to managing the
Funds and the Adviser's willingness to continue its expense limitation and fee
waiver arrangements with the Schroder Emerging Markets Small Cap Fund, the
Schroder Long Duration Investment-Grade Bond Fund, the Schroder Short Duration
Bond Fund, and the Schroder Total Return Fixed Income Fund.
The Trustees considered the Adviser's and Sub-Adviser's views relating to
economies of scale in connection with the Funds as Fund assets grow and the
extent to which the benefits of any such economies of scale are shared with the
Funds and Fund shareholders. The Board considered the existence of any
economies of scale and whether those were passed along to the Funds'
shareholders through a graduated advisory fee schedule or other means,
including fee waivers. The Trustees recognized that economies of scale are
difficult to identify and quantify and are rarely identifiable on a
fund-by-fund basis. Based on this evaluation, the Board concluded that the
advisory fees were reasonable in light of the information that was provided to
the Trustees by the Adviser and the Sub-Adviser with respect to economies of
scale.
RENEWAL OF THE AGREEMENTS
Based on the Board's deliberations and its evaluation of the information
described above and other factors and information it believed relevant in the
exercise of its reasonable business judgment, the Board, including all of the
Independent Trustees, with the assistance of Fund counsel and Independent
Trustees' counsel, unanimously concluded that the terms of the Agreements,
including the fees payable thereunder, were fair and reasonable and agreed to
renew the Agreements for another year. In its deliberations, the Board did not
identify any absence of information as material to its decision, or any
particular factor (or conclusion with respect thereto) or single piece of
information that was all-important, controlling or determinative of its
decision, but considered all of the factors together, and each Trustee may have
attributed different weights to the various factors (and conclusions with
respect thereto) and information.
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DISCLOSURE 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 (May 1, 2017 to
October 31, 2017).
The table below illustrates your Fund's costs in two ways.
o 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."
o 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.
--------------------------------------------------------------------------------
73
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SCHRODER MUTUAL FUNDS
--------------------------------------------------------------------------------
DISCLOSURE OF FUND EXPENSES (UNAUDITED) -- (CONCLUDED)
BEGINNING ENDING NET EXPENSES
ACCOUNT ACCOUNT ANNUALIZED PAID
VALUE VALUE EXPENSE DURING
5/1/17 10/31/17 RATIOS PERIOD*
--------------------------------------------------------------------------------------------------------
SCHRODER NORTH AMERICAN EQUITY FUND
--------------------------------------------------------------------------------------------------------
Actual Expenses
Investor Shares $1,000.00 $1,080.60 0.34% $1.78
Hypothetical Example for Comparison Purposes
Investor Shares $1,000.00 $1,023.49 0.34% $1.73
--------------------------------------------------------------------------------------------------------
SCHRODER EMERGING MARKETS SMALL CAP FUND
--------------------------------------------------------------------------------------------------------
Actual Expenses
R6 Shares $1,000.00 $1,079.10 1.40% $7.34
Investor Shares 1,000.00 1,079.10 1.40 7.34
Hypothetical Example for Comparison Purposes
R6 Shares $1,000.00 $1,018.15 1.40 $7.12
Investor Shares 1,000.00 1,018.15 1.40 7.12
--------------------------------------------------------------------------------------------------------
SCHRODER SHORT DURATION BOND FUND
--------------------------------------------------------------------------------------------------------
Actual Expenses
R6 Shares $1,000.00 $1,006.80 0.39% $1.97
Investor Shares 1,000.00 1,006.80 0.39 1.97
Hypothetical Example for Comparison Purposes
R6 Shares $1,000.00 $1,023.24 0.39 $1.99
Investor Shares 1,000.00 1,023.24 0.39 1.99
--------------------------------------------------------------------------------------------------------
SCHRODER TOTAL RETURN FIXED INCOME FUND
--------------------------------------------------------------------------------------------------------
Actual Expenses
Investor Shares $1,000.00 $1,015.60 0.40% $2.03
Hypothetical Example for Comparison Purposes
Investor Shares $1,000.00 $1,023.19 0.40 $2.04
--------------------------------------------------------------------------------------------------------
SCHRODER LONG DURATION INVESTMENT-GRADE BOND FUND
--------------------------------------------------------------------------------------------------------
Actual Expenses
Investor Shares $1,000.00 $1,043.90 0.39% $2.01
Hypothetical Example for Comparison Purposes
Investor Shares $1,000.00 $1,023.24 0.39 $1.99
* Expenses are equal to the Fund's annualized expense ratio multiplied by
the average account value over the account period, multiplied by 184/365
(to reflect the one-half year period).
--------------------------------------------------------------------------------
74
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SCHRODER MUTUAL FUNDS
--------------------------------------------------------------------------------
TRUSTEES AND OFFICERS (UNAUDITED)
Set forth below are the names, years of birth, positions with the Trust, length
of term of office, and the principal occupations for the last five years of each
of the persons currently serving as Trustees and Officers of the Trust. Unless
otherwise noted, the business address of each Trustee is SEI Investments
Company, 1 Freedom Valley Drive, Oaks, Pennsylvania 19456. Trustees who are
deemed not to be "interested persons" of the Trust are referred to as
"Independent Trustees." Mr. Doran is a Trustee who may be deemed to be
"interested" persons of the Trust as that term is defined in the 1940 Act by
virtue of his affiliation with the Trust's Distributor. The Trust's Statement of
Additional Information ("SAI") includes additional information about the
Trustees and Officers. The SAI may be obtained without charge by calling
1-800-464-3108. The following chart lists Trustees and Officers as of October
31, 2017.
POSITION WITH
NAME AND TRUST AND LENGTH PRINCIPAL OCCUPATIONS
YEAR OF BIRTH OF TIME SERVED(1) IN THE PAST 5 YEARS OTHER DIRECTORSHIPS HELD IN THE PAST 5 YEARS(4)
------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE(2,3)
------------------------------------------------------------------------------------------------------------------------------------
WILLIAM M. Trustee Self-Employed Consultant since Current Directorships: Trustee of The Advisors' Inner
DORAN (Since 2017) 2003. Partner at Morgan, Lewis & Circle Fund, The Advisors' Inner Circle Fund II, The
(Born: 1940) Bockius LLP (law firm) from 1976 Advisors' Inner Circle Fund III, Bishop Street Funds,
to 2003. Counsel to each trust on The KP Funds, Winton Diversified Opportunities Fund
the SEI Platform, SEI Investments, (closed-end investment company), Gallery Trust, SEI
SEI Investments Management Daily Income Trust, SEI Institutional International
Corporation, SEI Investments Global Trust, SEI Institutional Investments Trust, SEI
Funds Services and SEI Investments Institutional Managed Trust, SEI Asset Allocation
Distribution Co. Secretary of SEI Trust, SEI Tax Exempt Trust, Adviser Managed Trust,
Investments since 1978. New Covenant Funds, SEI Insurance Products Trust and
SEI Catholic Values Trust. Director of SEI Investments,
SEI Investments(Europe), Limited, SEI Investments--
Global Funds Services, Limited, SEI Investments Global,
Limited, SEI Investments (Asia), Limited, SEI Global
Nominee Ltd., SEI Investments -- Unit Trust Management
(UK) Limited and SEI Investments Co. Director of SEI
Investments Distribution Co.
Former Directorships: Director of SEI Alpha Strategy
Portfolios, LP to 2013. Trustee of O'Connor EQUUS
(closed-end investment company) to 2016. Trustee of
SEI Liquid Asset Trust to 2016. Trustee of Winton
Series Trust to 2017.
------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES(3)
------------------------------- ----------------------------------- ----------------------------------------------------------------
JOHN C. HUNT Trustee Retired since 2013. Consultant to Current Directorships: Trustee of City National
(Born: 1951) (Since 2017) Management, Convergent Capital Rochdale Funds, The Advisors' Inner Circle Fund III,
Management, LLC ("CCM") from Winton Diversified Opportunities Fund (closed-end
2012 to 2013. Managing Director and investment company) and Gallery Trust. Member of
Chief Operating Officer, CCM from Independent Committee of Nuveen Commodities Asset
1998 to 2012. Management.
Former Directorship: Trustee of O'Connor EQUUS
(closed-end investment company). Trustee of Winton
Series Trust to 2017.
------------------------------------------------------------------------------------------------------------------------------------
(1) Each Trustee shall hold office during the lifetime of this Trust until the
election and qualification of his or her successor, or until he or she
sooner dies, resigns, or is removed in accordance with the
Trust'sDeclaration of Trust.
(2) Denotes Trustees who may be deemed to be "interested" persons of the Fund
as that term is defined in the 1940 Act by virtue of their affiliation with
the Distributor and/or its affiliates.
(3) Trustees oversee 5 funds in fund complex of Schroder Series Trust and
Schroder Global Series Trust.
(4) Directorships of Companies required to report to the Securities and
Exchange Commission under the Securities Exchange Act of 1934 (i.e.,
"public companies") or other investment companies under the 1940 Act.
--------------------------------------------------------------------------------
75
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SCHRODER MUTUAL FUNDS
--------------------------------------------------------------------------------
TRUSTEES AND OFFICERS (UNAUDITED)
POSITION WITH
NAME AND TRUST AND LENGTH PRINCIPAL OCCUPATIONS
YEAR OF BIRTH OF TIME SERVED(1) IN THE PAST 5 YEARS OTHER DIRECTORSHIPS HELD IN THE PAST 5 YEARS(3)
------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES(2)
------------------------------------------------------------------------------------------------------------------------------------
THOMAS P. Trustee Retired since 2013. Executive Vice Current Directorships: Trustee of AXA Premier VIP Trust,
LEMKE (Since 2017) President and General Counsel, The Advisors' Inner Circle Fund III, Winton Diversified
(Born: 1954) Legg Mason, Inc. from 2005 to 2013. Opportunities Fund (closed-end investment company),
Gallery Trust and JP Morgan Active ETFs.
Former Directorships: Trustee of Munder Funds to 2014.
Director of Victory Funds to 2015. Trustee of O'Connor
EQUUS (closed end investment company) to 2016. Trustee
of Winton Series Trust to 2017.
------------------------------------------------------------------------------------------------------------------------------------
JAY C. NADEL Trustee Self-Employed Consultant since Current Directorships: Trustee of City National Rochdale
(Born: 1958) (Since 2017) 2004. Funds, The Advisors' Inner Circle Fund III, Winton
Diversified Opportunities Trust (closed-end investment
company) and Gallery Trust. Director of Lapolla
Industries, Inc.
Former Directorships: Trustee of Rochdale Investment
Trust to 2013. Trustee of Winton Series Trust to 2017.
------------------------------------------------------------------------------------------------------------------------------------
RANDALL S. Trustee Co-Founder and Senior Partner, Current Directorships: The Advisors' Inner Circle Fund
YANKER (Since 2017) Alternative Asset Managers, L.P. III, Trustee of Winton Diversified Opportunities Fund
(Born: 1960) since 2004. (closed-end investment company) and Gallery Trust.
Independent Non-Executive Director of HFA Holdings
Limited.
Former Directorship: Trustee of O'Connor EQUUS (closed-
end investment company) to 2016. Trustee of Winton
Series Trust to 2017.
------------------------------------------------------------------------------------------------------------------------------------
OFFICERS
------------------------------------------------------------------------------------------------------------------------------------
MICHAEL President Director of Client Service, SEI None.
BEATTIE (Since 2017) Investments Company, since 2004.
(Born: 1965)
------------------------------------------------------------------------------------------------------------------------------------
JOHN Assistant Fund Accounting Manager, SEI None.
BOURGEOIS Treasurer Investments, since 2000.
(Born: 1973) (Since 2017)
------------------------------------------------------------------------------------------------------------------------------------
(1) Each Trustee shall hold office during the lifetime of this Trust until the
election and qualification of his or her successor, or until he or she
sooner dies, resigns, or is removed in accordance with the
Trust'sDeclaration of Trust.
(2) Trustees oversee 5 funds in fund complex of Schroder Series Trust and
Schroder Global Series Trust.
(3) Directorships of Companies required to report to the Securities and
Exchange Commission under the Securities Exchange Act of 1934 (i.e.,
"public companies") or other investment companies under the 1940 Act.
--------------------------------------------------------------------------------
76
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SCHRODER MUTUAL FUNDS
--------------------------------------------------------------------------------
TRUSTEES AND OFFICERS (UNAUDITED)
POSITION WITH
NAME AND TRUST AND LENGTH PRINCIPAL OCCUPATIONS OTHER DIRECTORSHIPS
YEAR OF BIRTH OF TIME SERVED IN PAST 5 YEARS HELD BY OFFICER
------------------------------------------------------------------------------------------------------------------------------------
OFFICERS
------------------------------------------------------------------------------------------------------------------------------------
STEPHEN CONNORS Treasurer, Controller Director, SEI Investments, Fund Accounting since December None.
(Born: 1984) and Chief Financial 2014. Audit Manager, Deloitte & Touche LLP, from 2011 to
Officer 2014. Audit Supervisor, BBD, LLP (formerly Briggs, Bunting &
(Since 2017) Dougherty, LLP), from 2007 to 2011.
------------------------------------------------------------------------------------------------------------------------------------
DIANNE M. Vice President and Counsel at SEI Investments since 2010. None.
DESCOTEAUX Secretary
(Born: 1977) (Since 2017)
------------------------------------------------------------------------------------------------------------------------------------
RUSSELL EMERY Chief Compliance Chief Compliance Officer of SEI Structured Credit Fund, None.
(Born: 1962) Officer LP since June 2007. Chief Compliance Officer of SEI Alpha
(Since 2017) Strategy Portfolios, LP from June 2007 to September 2013.
Chief Compliance Officer of The Advisors' Inner Circle Fund,
The Advisors' Inner Circle Fund II, Bishop Street Funds, The KP
Funds, The Advisors' Inner Circle Fund III, Winton Diversified
Opportunities Fund (closed-end investment company), Gallery
Trust, SEI Institutional Managed Trust, SEI Asset Allocation
Trust, SEI Institutional International Trust, SEI Institutional
Investments Trust, SEI Daily Income Trust, SEI Tax Exempt
Trust, Adviser Managed Trust, New Covenant Funds, SEI
Insurance Products Trust and SEI Catholic Values Trust. Chief
Compliance Officer of O'Connor EQUUS (closed-end investment
company) to 2016. Chief Compliance Officer of SEI Liquid Asset
Trust to 2016.Chief Compliance Officer of Winton Series Trust
to 2017.
------------------------------------------------------------------------------------------------------------------------------------
ROBERT MORROW Vice President Account Manager, SEI Investments, since 2007. None.
(Born: 1968) (Since 2017)
------------------------------------------------------------------------------------------------------------------------------------
ROBERT A. NESHER Vice Chairman SEI employee 1974 to present; currently performs various None.
(Born: 1946) (Since 2017) services on behalf of SEI Investments for which Mr. Nesher is
compensated.
------------------------------------------------------------------------------------------------------------------------------------
BRIDGET E. SUDALL Anti-Money Laundering Anti-Money Laundering Compliance Officer and Privacy Officer None.
(Born: 1980) Compliance Officer and since 2015. Senior Associate and AML Officer, Morgan Stanley
Privacy Officer Alternative Investment Partners (2011-2015). Investor Services
(Since 2017) Team Lead, Morgan Stanley Alternative Investment Partners
(2007-2011).
------------------------------------------------------------------------------------------------------------------------------------
LISA WHITTAKER Vice President and Attorney, SEI Investments Company (2012-present). Associate None.
(Born: 1978) Assistant Secretary Counsel and Compliance Officer, The Glenmede Trust Company,
(Since 2017) N.A. (2011-2012).
------------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------
77
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SCHRODER MUTUAL FUNDS
--------------------------------------------------------------------------------
NOTICE TO SHAREHOLDERS (UNAUDITED)
For shareholders that do not have an October 31, 2017 tax year end, this notice
is for informational purposes only. For shareholders with an October 31, 2017
tax year end, please consult your tax advisor as to the pertinence of this
notice. For the fiscal year ended October 31, 2017, each Fund has designated
the following items with regard to distributions paid during the year.
QUALIFYING
LONG TERM FOR CORPORATE
RETURN CAPITAL ORDINARY DIVIDENDS
OF GAIN INCOME TOTAL REC.
CAPITAL DISTRIBUTION DISTRIBUTIONS DISTRIBUTIONS DEDUCTIONS(1)
------- ------------ ------------- -------------- -------------
Schroder North American Equity Fund 0.00% 52.98% 47.02% 100.00% 71.63%
Schroder Emerging Markets Small Cap Fund (a) (b) 0.00% 66.87% 33.13% 100.00% 0.04%
Schroder Short Duration Bond Fund 0.00% 0.00% 100.00% 100.00% 0.00%
Schroder Total Return Fixed Income 20.15% 0.00% 79.85% 100.00% 0.00%
Schroder Long Duration Investment-Grade Bond Fund 0.00% 10.83% 89.17% 100.00% 0.00%
QUALIFYING U.S. INTEREST SHORT-TERM FOREIGN
DIVIDEND GOVERNMENT RELATED CAPITAL GAIN TAX
INCOME(2) INTEREST(3) DIVIDENDS(4) DIVIDENDS(5) CREDIT
---------- ----------- ------------ ------------ --------
Schroder North American Equity Fund 73.01% 0.00% 0.08% 100.00% 0.00%
Schroder Emerging Markets Small Cap Fund (a) (b) 23.22% 0.00% 0.02% 100.00% 0.40%
Schroder Short Duration Bond Fund 0.00% 9.76% 94.36% 100.00% 0.00%
Schroder Total Return Fixed Income 0.00% 11.72% 67.99% 0.00% 0.00%
Schroder Long Duration Investment-Grade Bond Fund 0.00% 19.00% 75.03% 100.00% 0.00%
(1) Qualifying dividends represent dividends which qualify for the corporate
dividend received deduction and is reflected as a percentage of "Ordinary
Income Distributions".
(2) The percentage in this column represents the amount of "Qualifying
Dividend Income" as created by the Jobs and Growth Tax Relief
Reconciliation Act of 2003 and is reflected as a percentage of "Ordinary
Income Distributions". It is the intention of each of the aforementioned
funds to designate the maximum amount permitted by law.
(3) "U.S. Government Interest" represents the amount of interest that was
derived from direct U.S. Government obligations and distributed during the
fiscal year. This amount is reflected as a percentage of ordinary income.
Generally, interest from direct U.S. Government obligations is exempt from
state income tax. However, for shareholders who are residents of
California, Connecticut and New York, the statutory threshold requirements
were not satisfied to permit exemption of these amounts from state income.
(4) The percentage in this column represents the amount of "Interest Related
Dividends" as created by the American Jobs Creation Act of 2004 and is
reflected as a percentage of net investment income distributions that are
exempt from U.S. withholding tax when paid to foreign investors.
(5) The percentage in this column represents the amount of "Short-Term Capital
Gain Dividends" as created by the American Job Creation Act of 2004 and is
reflected as a percentage of short-term capital gain distributions that are
exempt from U.S. withholding tax when paid to foreign investors.
(a) The Fund intends to pass through a foreign tax credit to shareholders. For
fiscal year ended 2017, the total amount of foreign source gross income is
$139,615. The total amount of foreign tax to be paid is $12,158. Your
allocable share of the foreign tax credit will be reported on Form 1099
DIV.
(b) The Fund is designating a portion of the redemption proceeds as taxable
net investment income and/or realized capital gain for dividend paid
deduction purposes (equalization debits). This designation has no impact on
shareholders' income tax reporting. For shareholders' income tax reporting,
the amount of ordinary income and/or long-term gain, if any, will be
designated on Form 1099-DIV.
--------------------------------------------------------------------------------
78
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SCHRODER MUTUAL FUNDS
--------------------------------------------------------------------------------
NOTICE TO SHAREHOLDERS (UNAUDITED)
On December 12, 2017, the following Funds made per share short-term and
long-term capital gain distributions to the shareholders of record as of
December 11, 2017:
SHORT-TERM LONG-TERM
CAPITAL GAINS CAPITAL GAINS
------------- -------------
Schroder North American Equity Fund
Investor Shares ............................. $ 0.2663 $ 0.4150
Schroder Emerging Markets Small Cap Fund
R6 Shares ................................... 0.2801 1.9405
Investor Shares ............................. 0.2801 1.9405
--------------------------------------------------------------------------------
79
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SCHRODER MUTUAL FUNDS
--------------------------------------------------------------------------------
SHAREHOLDER VOTING RESULTS (UNAUDITED)
A Joint Special Meeting of Shareholders of the Schroder Emerging Markets Small
Cap Fund was held February 2, 2017 for the purpose of electing Trustees of the
Schroder Series Trust, the motion was approved with the following voting
results:
% OF OUTSTANDING
TOTAL SHARES VOTED SHARES VOTED % OF SHARES VOTED
--------------------------------------------------------------------------------
Affirmative 1,500,891 99.99% 100.00%
Against 0 0 0
Abstain 0 0 0
--------------------------------------------------------------------------------
Total 1,500,891 99.99% 100.00%
--------------------------------------------------------------------------------
A Joint Special Meeting of Shareholders of the Schroder Emerging Markets Small
Cap Fund February 2, 2017 for the purpose of approving an amended and restated
management contract Schroder Investment Management North America Inc. ("SIMNA")
and Schroder Series Trust on Schroder Emerging Markets Small Cap Fund, the
motion was approved with the following voting voting results:
% OF OUTSTANDING
TOTAL SHARES VOTED SHARES VOTED % OF SHARES VOTED
--------------------------------------------------------------------------------
Affirmative 1,500,891 99.99% 100.00%
Against 0 0 0
Abstain/Broker Non Vote 0 0 0
--------------------------------------------------------------------------------
Total 1,500,891 99.99% 100.00%
--------------------------------------------------------------------------------
A Joint Special Meeting of Shareholders of the Schroder Long Duration
Investment-Grade Bond Fund held February 2, 2017 for the purpose of electing
Trustees of the Schroder Series Trust, the motion approved with the following
voting results:
% OF OUTSTANDING
TOTAL SHARES VOTED SHARES VOTED % OF SHARES VOTED
--------------------------------------------------------------------------------
Affirmative 5,009,668 59.88% 100.00%
Against 0 0 0
Abstain 0 0 0
--------------------------------------------------------------------------------
Total 5,009,668 59.88% 100.00%
--------------------------------------------------------------------------------
A Joint Special Meeting of Shareholders of the Schroder Long Duration
Investment-Grade Bond Fund was held February 2, 2017 for the purpose of
approving an amended and restated management contract between SIMNA and
Schroder Series Trust on behalf of the Schroder Long Duration Investment-Grade
Bond Fund, the motion was approved with the following voting results:
% OF OUTSTANDING
TOTAL SHARES VOTED SHARES VOTED % OF SHARES VOTED
--------------------------------------------------------------------------------
Affirmative 5,000,113 59.77% 99.81%
Against 0 0 0
Abstain/Broker Non Vote 9,555 0.11% 0.19%
--------------------------------------------------------------------------------
Total 5,009,668 59.88% 100.00%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
80
--------------------------------------------------------------------------------
SCHRODER MUTUAL FUNDS
--------------------------------------------------------------------------------
SHAREHOLDER VOTING RESULTS (UNAUDITED)
A Joint Special Meeting of Shareholders of the Schroder North American Equity
Fund was held February 2, 2017 for the purpose of electing Trustees of the
Schroder Global Series Trust, the motion was approved with the following voting
results:
% OF OUTSTANDING
TOTAL SHARES VOTED SHARES VOTED % OF SHARES VOTED
--------------------------------------------------------------------------------
Affirmative 59,308,938 98.34% 100.00%
Against 0 0 0
Abstain 0 0 0
--------------------------------------------------------------------------------
Total 59,308,938 98.34% 100.00%
--------------------------------------------------------------------------------
A Joint Special Meeting of Shareholders of the Schroder Short Duration Bond Fund
was held February 2, 2017 for the purpose of electing Trustees of the Schroder
Series Trust, the motion was approved with the following voting results:
% OF OUTSTANDING
TOTAL SHARES VOTED SHARES VOTED % OF SHARES VOTED
--------------------------------------------------------------------------------
Affirmative 2,507,894 99.07% 100.00%
Against 0 0 0
Abstain 0 0 0
--------------------------------------------------------------------------------
Total 2,507,894 99.07% 100.00%
--------------------------------------------------------------------------------
A Joint Special Meeting of Shareholders of the Schroder Short Duration Bond Fund
was held February 2, 2017 for the purpose of approving an amended and restated
management contract between SIMNA and Schroder Series Trust on behalf of the
Schroder Short Duration Bond Fund, the motion was approved with the following
voting results:
% OF OUTSTANDING
TOTAL SHARES VOTED SHARES VOTED % OF SHARES VOTED
--------------------------------------------------------------------------------
Affirmative 2,507,894 99.07% 100.00%
Against 0 0 0
Abstain/Broker Non Vote 0 0 0
--------------------------------------------------------------------------------
Total 2,507,894 99.07% 100.00%
--------------------------------------------------------------------------------
A Joint Special Meeting of Shareholders of the Schroder Total Return Fixed
Income Fund was held February 2, 2017 for the purpose of electing Trustees of
the Schroder Global Series Trust, the motion was approved with the following
voting results:
% OF OUTSTANDING
TOTAL SHARES VOTED SHARES VOTED % OF SHARES VOTED
--------------------------------------------------------------------------------
Affirmative 2,293,431 38.89% 100.00%
Against 0 0 0
Abstain 0 0 0
--------------------------------------------------------------------------------
Total 2,293,431 38.89% 100.00%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
81
--------------------------------------------------------------------------------
NOTES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
82
--------------------------------------------------------------------------------
NOTES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
83
--------------------------------------------------------------------------------
PRIVACY STATEMENT
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
FACTS WHAT DOES SCHRODERS DO WITH YOUR PERSONAL INFORMATION?
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Financial companies choose how they share your personal information.
Federal law gives consumers the right to limit some but not all
WHY? 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.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
The types of personal information we collect and share depend on
the product or service you have with us. This information can
include:
o Social Security number and income
WHAT? o account balances and account transactions
o assets and investment experience
When you are NO LONGER our customer, we continue to share your
information as described in this notice.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
All financial companies need to share clients' personal information
to run their everyday business. In the section below, we list the
HOW? 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 CAN YOU LIMIT
SHARE? THIS SHARING?
--------------------------------------------------------------------------------------------------------------------
FOR OUR EVERYDAY BUSINESS PURPOSES -- such as to process your transactions, Yes No
maintain your account(s), or respond to court orders and legal investigations
--------------------------------------------------------------------------------------------------------------------
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 Yes No
transactions and experiences
--------------------------------------------------------------------------------------------------------------------
FOR OUR AFFILIATES' EVERYDAY BUSINESS PURPOSES -- information about your No We Don't Share
creditworthiness
--------------------------------------------------------------------------------------------------------------------
FOR NONAFFILIATES TO MARKET TO YOU No We Don't Share
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------
QUESTIONS? For Schroder Mutual Funds, call BFDS at (800) 464-3108.
For other inquiries, call Institutional Client Service at
(212) 641-3800 or email clientserviceny@us.schroders.com
--------------------------------------------------------------------------------
SCHRODERS [LOGO]
--------------------------------------------------------------------------------
PRIVACY STATEMENT
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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 To protect your personal information from
MY PERSONAL INFORMATION? 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 We collect your personal information, for
MY PERSONAL INFORMATION? example, when you
o open an account and provide account
information
o give us your contact information
o show your driver's license or government
issued ID
o enter into an investment advisory contract
o make a wire transfer
--------------------------------------------------------------------------------
WHY CAN'T I LIMIT ALL SHARING? Federal law gives you the right to limit only
o sharing for affiliates' everyday business
purposes--information about your
creditworthiness
o affiliates from using your information to
market to you
o 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.
o 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.
o 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.
o Schroders doesn't jointly market.
--------------------------------------------------------------------------------
INVESTMENT ADVISOR 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 Boston Financial Data Services, Inc.
SERVICING AGENT
CUSTODIAN JPMorgan Chase Bank
COUNSEL Morgan, Lewis & Bockius LLP
INDEPENDENT REGISTERED PUBLIC PricewaterhouseCoopers LLP
ACCOUNTING FIRM
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 55260
Boston, MA 02205-5260
(800) 464-3108
SCHRODERS [LOGO]
SCH-AR-001-0100
ITEM 2. CODE OF ETHICS.
The Registrant has adopted a code of ethics that applies to the Registrant's
principal executive officer, principal financial officer, controller or
principal accounting officer, and any person who performs a similar function.
There have been no amendments to or waivers granted to this code of ethics.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a)(1) The Registrant's board of trustees has determined that the Registrant has
at least one audit committee financial expert serving on the audit committee.
(a) (2) The Registrant's audit committee financial experts are Thomas Lemke and
Jay Nadel, and each of Mr. Lemke and Mr. Nadel is "independent" as that term is
defined in Form N-CSR Item 3 (a)(2).
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Fees billed by PricewaterhouseCoopers LLP ("PwC") related to the Schroder Global
Series Trust (the "Trust").
PwC billed the Trust aggregate fees for services rendered to the Trust for the
last two fiscal years as follows:
------------------------------------------------------------------------------------------------------------------------------------
Fiscal Year 2017 Fiscal Year 2016
------------------------------------------------------------------------------------------------------------------------------------
All fees and All fees and All other All fees and All fees and All other
services to services to fees and services to services to fees and
the Trust service services to the Trust service services to
that were affiliates that service that were affiliates that service
pre- were pre- affiliates that pre- were pre- affiliates that
approved approved did not require approved approved did not require
pre-approval pre-approval
------------------------------------------------------------------------------------------------------------------------------------
(a) Audit Fees (1) $23,900 N/A $0 $28,100 N/A $0
------------------------------------------------------------------------------------------------------------------------------------
(b) Audit-Related Fees $0 $0 $390,000 $0 $0 $0
------------------------------------------------------------------------------------------------------------------------------------
(c) Tax Fees $0 $0 $9,000(3) $7,085(2) $0 $185,000(3)
------------------------------------------------------------------------------------------------------------------------------------
(d) All Other Fees $0 $0 $27,300 $0 $0 $0
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Notes:
(1) Audit fees include amounts related to the audit of the Registrant's
annual financial statements and services normally provided by the
accountant in connection with statutory and regulatory filings.
(2) Tax return preparation fees.
(3) Tax compliance services provided to service affiliates of the Funds.
(e)(1) The Trust's Audit Committee has adopted and the Board of Trustees has
ratified an Audit and Non-Audit Services Pre-Approval Policy (the "Policy"),
which sets forth the procedures and the conditions pursuant to which services
proposed to be performed by the independent auditor of the Funds may be
pre-approved.
The Policy provides that all requests or applications for proposed services to
be provided by the independent auditor must be submitted to the Registrant's
Chief Financial Officer ("CFO") and must include a detailed description of the
services proposed to be rendered. The CFO will determine whether such services:
(1) require specific pre-approval; (2) are included within the list of services
that have received the general pre-approval of the Audit Committee pursuant to
the Policy; or (3) have been previously pre-approved in connection with the
independent auditor's annual engagement letter for the applicable year or
otherwise. In any instance where services require pre-approval, the Audit
Committee will consider whether such services are consistent with SEC's rules
and whether the provision of such services would impair the auditor's
independence.
Requests or applications to provide services that require specific pre-approval
by the Audit Committee will be submitted to the Audit Committee by the CFO. The
Audit Committee will be informed by the CFO on a quarterly basis of all services
rendered by the independent auditor. The Audit Committee has delegated specific
pre-approval authority to either the Audit Committee Chair or financial expert;
provided, that the estimated fee for any such proposed pre-approved service does
not exceed $100,000 and any pre-approval decisions are reported to the Audit
Committee at its next regularly scheduled meeting.
Services that have received the general pre-approval of the Audit Committee are
identified and described in the Policy. In addition, the Policy sets forth a
maximum fee per engagement with respect to each identified service that has
received general pre-approval.
All services to be provided by the independent auditor shall be provided
pursuant to a signed written engagement letter with the Registrant, the
investment adviser, or applicable control affiliate (except that matters as to
which an engagement letter would be impractical because of timing issues or
because the matter is small may not be the subject of an engagement letter) that
sets forth both the services to be provided by the independent auditor and the
total fees to be paid to the independent auditor for those services.
In addition, the Audit Committee has determined to take additional measures on
an annual basis to meet its responsibility to oversee the work of the
independent auditor and to assure the auditor's independence from the
Registrant, such as reviewing a formal written statement from the independent
auditor delineating all relationships between the independent auditor and the
Registrant, and discussing with the independent auditor its methods and
procedures for ensuring independence.
(e)(2) Percentage of fees billed by PwC applicable to non-audit services
pursuant to the "de minimis" exception of Rule 2-01(c)(7)(i)(C) were as follows:
--------------------------------------------------------------------------------
2017 2016
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Audit-Related Fees N/A N/A
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Tax Fees 0% 0%
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All Other Fees N/A N/A
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(f) Not applicable.
(g) The aggregate non-audit fees and services billed by PwC for services
rendered to the Registrant, and rendered to the Registrant's investment adviser
(not including any sub-adviser whose role is primarily portfolio management and
is subcontracted with or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the adviser that
provides ongoing services to the Registrant for the last two fiscal years were
$426,300 and $192,085 for 2017 and 2016, respectively.
(h) During the past fiscal year, all non-audit services provided by the
Registrant's principal accountant to either the Registrant's investment adviser
or to any entity controlling, controlled by, or under common control with the
Registrant's investment adviser that provides ongoing services to Registrant
were pre-approved by the Audit Committee of the Registrant's Board of Trustees.
Included in the Audit Committee's pre-approval was the review and consideration
as to whether the provision of these non-audit services is compatible with
maintaining the principal accountant's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
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 270.30a-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 (17CFR 270.3a-3(d)) that
occurred during the last 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.
ITEMS 12. EXHIBITS.
(a)(1) Code of Ethics attached hereto.
(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)), is 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 Global Series Trust
By (Signature and Title) /s/ Michael Beattie
--------------------------
Michael Beattie
President
Date: January 9, 2018
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: January 9, 2018
By (Signature and Title) /s/ Stephen Connors
--------------------------
Stephen Connors
Treasurer, Controller, and
Chief Financial Officer
Date: January 9, 2018